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The Morning Hammer: The Deutsche Bounce
Deutsche Bank (DB) is bouncing this morning after agreeing to sell its UK insurance unit. But more importantly, CEO John Cryan said the bank will not require a capital raise. DB is facing a $14 billion bill from the US Department of Justice, which has raised fears about liquidity problems. But for now, traders are taking the worst-case scenario off the table, which is helping European stocks. The DAX is up 1.0% with German banks up 1.4%. ECB President Mario Draghi is expected to speak to reporters around 4:00 p.m., and he’s likely to comment on monetary policy and the European economy. Crude oil is turning higher today after Saudi Arabia may compromise with Iran on a future supply agreement. OPEC is meeting in Algiers so odds are we’ll see fresh oil headlines in the near future. Nike (NKE) beat on earnings but reported weak future orders and missed on gross margins. Odds are this is a competitive issue rather than an economic one, since Adidas beat and UnderArmour (UA) is also coming on strong. We could be in for a big 3 days. Traders are split 50-50 as to whether the Fed moves in December. We’ve seen a big slide down in US economic data strength since late June, and we’ve got some big numbers coming out through the end of the week: Today: Durable Goods, plus Fed Chair Yellen testifies before a House Panel Thursday: GDP, Pending Home Sales Friday: Personal Income/Spending, PCE Deflator, Chicago PMI Now if we see a string of misses, we could see big rips in gold and US Treasuries, because traders may assume the Fed will have to continue to back off. But keep in mind that the converse is true: if we see some big beats, maybe traders will seriously buy into rate hikes. Again, the market is split 50-50 on December. So while the talking heads insist the Fed is hawkish, the market is not exactly full of true believers. SPX futures are basically flat… hopefully not for long.
Continue Reading -->T3’s Take 3: Stocks Drop Ahead of Epic Trump vs. Clinton Showdown
A Unique Way to Trade Options… My buddy Doug Robertson is hosting a FREE options trading webinar this Thursday. Doug’s going to be teaching his unique method for creating income with options, so I suggest you check it out. ********* 1) Disney for Twitter? Seriously? Twitter (TWTR) shares got a huge lift on record options volume Friday on rumors that the company could be acquired by Google (GOOGL) or Salesforce.com (CRM). Today, a host of analysts and commentators threw water on the rumors, and the stock was even downgraded by Oppenheimer, driving some profit-taking. But this afternoon, Bloomberg reported that Disney (DIS) is working with an adviser on a potential Twitter bid, sending the stock up all over again. Presumably, Twitter’s real-time news and data feeds could be integrated into Disney media properties like ABC and ESPN. However, a T3 Twitter poll indicates that trader still think Google (GOOGL) is the most likely buyer, assuming it happens at all: 2) Bank Scare Drives Downside German Chancellor Angela Merkel ruled out state assistance for Deutsche Bank (DB) before next year’s national election, which hit the stock hard. Deutsche has been fined $14 billion by the US Department of Justice for its mortgage-backed securities practices, which could cause liquidity problems for the bank. That sent European equities down this morning, setting the tone for the US. The S&P 500 fell -0.9% to 2146.10, with the Nasdaq Composite and Russell 2000 making similar moves. US bank stocks led the decliners’ column, following their European counterparts. Gold mining stocks fell after precious metals slipped in the afternoon. On the plus side, crude oil and energy stocks pushed higher on continued chatter about a possible OPEC output freeze. 3) Trump vs. Clinton The first Presidential debate between Donald Trump and Hillary Clinton will be held tonight. Aside from the general market fallout, traders will especially be interested in how health care and drug stocks perform tomorrow. One major reason biotech (IBB) has rallied in recent weeks was Hillary Clinton’s pneumonia diagnosis. Since she has been an outspoken critic of rising drug prices — specifically targeting Mylan’s (MYL) Epipen — she is seen as an enemy of biotech and big pharma. Her illness boosted Trump in the polls, which in turn gave biotech a reprieve. So if Clinton scores a clear victory, drug and biotech stocks are likely to fall. And obviously, the reverse is likely to be true if Trump wins. Tuesday’s Trading Calendar US Economics (Time Zone: EDT) 09:00 S&P CoreLogic CS US HPI MoM SA (Jul): prior 0.21% 09:00 S&P CoreLogic CS 20-City NSA Index (Jul): prior 189.87 09:00 S&P CoreLogic CS 20-City MoM SA (Jul): exp. 0.00%, prior -0.07% 09:00 S&P CoreLogic CS 20-City YoY NSA (Jul): exp. 5.10%, prior 5.13% 09:00 S&P CoreLogic CS US HPI NSA Index (Jul): prior 182.42 09:00 S&P CoreLogic CS US HPI YoY NSA (Jul): prior 5.07% 09:45 Markit US Services PMI (Sep P): exp. 51.2, prior 51 09:45 Markit US Composite PMI (Sep P): prior 51.5 10:00 Consumer Confidence Index (Sep): exp. 99, prior 101.1 10:00 Richmond Fed Manufact. Index (Sep): exp. -2, prior -11 11:15 Fed Vice Chair Fischer Discusses Why Study Economics? Global Economics 04:00 EUR M3 Money Supply 20:20 AUD RBA Assist Gov Edey Speaks Earnings Before Open: None of significance After Close: Cintas (CTAS) Nike (NKE)
Continue Reading -->T3’s Take 3: Apple Shines in Mixed Markets
Interested in a Prop Trading Career? Click here to take our short quiz. 1) Mixed Markets After 3 days of big ups and downs, the S&P 500 stayed stuck in first gear today by falling just -0.1% to 2125.77. However, there was plenty of action below the surface. For example, the Nasdaq Biotech ETF (IBB) rose 1.2% on Allergan’s (AGN) acquisition of Vitae (VTAE). Meanwhile, energy stocks got slammed on a decline in crude oil. We also saw weakness in banks ahead of tomorrow’s big batch of economic numbers. US economic data has been deteriorating since late July, and if the streak continues tomorrow, traders will continue backing off their rate hike bets. Fed Funds futures now imply a 53% chance of a December rate hike, down from 60% last week. 2) Options Traders Go Gaga for Apple Despite the middling broader action, Apple (AAPL) rallied another 3.5% today on continued optimism regarding iPhone 7 sales. However, the big action was was in Apple options. Over 1.4 million Apple call options traded today — over 4 times the 10-day average. And typically, 1.5 Apple calls trade for each put. Today, 2.5 Apple calls traded for each put. It’s safe to say that traders are feeling incredibly optimistic about Apple’s prospects, but beware: the danger of a sell-the-news reaction is growing. 3) Jeff Cooper on HES Just before the close, T3’s Jeff Cooper initiated a short of Hess Corp. (HES), saying the following: We should already be short as HES triggered a Rule of 4 Sell last week. It backtested its 200 day and looks like it’s in a runaway downside move. We are going short here at the market using a 1.50 stop. P.S. Don’t forget to take our prop trading quiz. Thursday’s Trading Calendar US Economics (Time Zone: EDT) 08:30 Empire Manufacturing (Sep): exp. -1, prior -4.21 08:30 Current Account Balance (2Q): exp. -$121.0b, prior -$124.7b 08:30 Retail Sales Advance MoM (Aug): exp. -0.10%, prior 0.00% 08:30 Retail Sales Ex Auto MoM (Aug): exp. 0.20%, prior -0.30% 08:30 Retail Sales Ex Auto and Gas (Aug): exp. 0.30%, prior -0.10% 08:30 Retail Sales Control Group (Aug): exp. 0.40%, prior 0.00% 08:30 Initial Jobless Claims (9/10): exp. 265k, prior 259k 08:30 Continuing Claims (9/3): exp. 2150k, prior 2144k 08:30 PPI Final Demand MoM (Aug): exp. 0.10%, prior -0.40% 08:30 PPI Ex Food and Energy MoM (Aug): exp. 0.10%, prior -0.30% 08:30 PPI Ex Food, Energy, Trade MoM (Aug): exp. 0.10%, prior 0.00% 08:30 PPI Final Demand YoY (Aug): exp. 0.10%, prior -0.20% 08:30 PPI Ex Food and Energy YoY (Aug): exp. 1.00%, prior 0.70% 08:30 PPI Ex Food, Energy, Trade YoY (Aug): prior 0.80% 08:30 Philadelphia Fed Business Outlook (Sep): exp. 1, prior 2 09:15 Industrial Production MoM (Aug): exp. -0.20%, prior 0.70% 09:15 Capacity Utilization (Aug): exp. 75.70%, prior 75.90% 09:15 Manufacturing (SIC) Production (Aug): exp. -0.30%, prior 0.50% 09:45 Bloomberg Consumer Comfort (9/11): prior 44 10:00 Business Inventories (Jul): exp. 0.10%, prior 0.20% 10:30 EIA Natural Gas Storage Change (Sep 9): exp. 55, prior 36 10:30 EIA Working Natural Gas Implied Flow (Sep 9): exp. 55, prior 36 Global Economics 03:30 CHF Libor Rate 04:30 GBP Retail Sales m/m 07:00 GBP Official Bank Rate Earnings Before Open: None of Significance After Close: Oracle Corp (ORCL)
Continue Reading -->Why I’m Still Cautious About This Market
Yesterday’s big rally came as quite a surprise to just about everyone I talked to. It’s pretty funny how the market likes to confuse as many traders as it can. Yesterday we still had plenty of warning signs to keep us from getting back in. 1) The market couldn’t regain the 50 day moving average and stalled out just below. 2) If the bulls wanted to negate that nasty down day Friday, they needed to get into Friday’s gap, which they couldn’t. 3) Small caps remained much weaker on their bounce attempt, showing beta wasn’t as good of a place to be. All this being said, I am still waiting for SPY to get into the $211-ish range. It got very close on Friday, and I am still holding out for that.
Continue Reading -->How to Lose At Trading Like a Winner
There is no opportunity without risk; thus, learning to truly accept risk is the first step to trading freedom. We teach that once we are in a trade, we employ “trade management” strategies for purposes of taking profits or protective stops. Trading involves speculation, which, by definition, involves risk; therefore, accepting “loss” is a necessary part of trading. Our objective is to help you approach the market in a disciplined, objective manner with a high focus on managing risk (and loss), to help you overcome the tremendous hurdles during your quest to become a profitable self directed trader. A trader refusing to accept loss is as ridiculous as a pilot not accepting turbulence during flight. Any winning strategy necessitates the ability to lose properly. It is the ability to deal with, and “make good” of, one’s losses that enables winning traders to keep a positive mental attitude. It also enables them to progress and effectively maintain their winning ways. Losing properly is not easy and therefore requires great skill. You need to be able to learn from your mistakes. Ask yourself if the trade actually met the criteria of your trading plan. If it did, then could you have averted the loss, or was it a good setup, consistent with your strategies? If it was a trade where an error in judgement was made, make sure you learn from it. The discipline involved with losing properly has to do with taking the loss at the right time. Did you sell at an intelligent time, with your stop placed just beneath support? Or, did you not take your “intelligently” placed stop and sell at a lower price than you should have? Discipline is also necessary when preparing for the potential loss. Make sure that your stop allows for a level of risk that you can stomach, and is compatible with your strategy. This will help you to be comfortable with “losing” properly. Seasoning has a lot to do with maintaining a positive mental attitude. Seasoned traders do not let their losses “get them down.” They understand that the loss may actually be a “friend,” as it creates an opportunity to learn from. They apply the knowledge and use it to improve their trading and maintain a winning attitude while accepting and brushing off the loss.
Continue Reading -->What’s Moving in the Forex Market
Kurt Capra, of T3 Live, talks about the USDJPY and where he sees it going over the next couple of weeks and even into the end of the year. In this episode, Kurt talks about why he believes the USDJPY is going to collapse.
Continue Reading -->T3’s Take: Oil and Biotech Scream but Fail to Start a Party
1) Oil Blasts Into Orbit Today, we saw the biggest decline in US crude inventories since January 1999. The Energy Information Administration said US crude stocks fell -14.5 million barrels last week. Traders were expecting a 905K increase, so needless to say, the market was taken by surprise. WTI crude rose 4.2% to $47.41, and in turn, energy stocks led the market. Oil service names were especially strong. However, we still see a lot of conflicting headlines regarding possible changes in OPEC policy, so stay on your toes. 2) Biotech Rips on More Deal Hopes Yesterday, biotech caught a bid into the close after Reuters reported that GW Pharmaceuticals (GWPH) hired advisers after being approached for a takeover. Today, Gilead (GILD) added to the positivity by saying at an investor conference that it “feels an urgency” to do deals, noting an interest in cancer drugs. Traders immediately looked at cancer treatment specialists Tesaro (TSRO) and Clovis Oncology (CLVS) as potential targets, and both stocks rose sharply today. The Nasdaq Biotech Index ETF (IBB) rose 0.7% to $288.03, vastly outperforming the major indices. 3) Stocks Grind Gears Even with crude oil and biotechnology rocking hard, the S&P 500 couldn’t drive any upside, and it declined -0.2% to 2181. That felt a bit odd, since typically, stocks perform well when oil and biotech rally. Apple (AAPL) sank -2.6% on a downgrade from Wells Fargo, which weighed on the Nasdaq. Gold took a hit today as the dollar rose sharply against the yen, which sent gold miners (GDX) sharply lower. We also saw weakness in US Treasuries, retailers, and real estate names. Friday’s Economic Calendar US Economics (Time Zone: EDT) 08:15 Fed’s Rosengren to Deliver Economic Forecast in Boston 09:30 Fed’s Kaplan Speaks in Austin, Texas 10:00 Wholesale Inventories MoM (Jul F): exp. 0.10%, prior 0.00% 10:00 Wholesale Trade Sales MoM (Jul): exp. 0.20%, prior 1.90% 13:00 Baker Hughes U.S. Rig Count (9/9): prior 497 13:00 Baker Hughes U.S. Rotary Gas Rigs (9/9): prior 88 13:00 Baker Hughes U.S. Rotary Oil Rigs (9/9): prior 407 Global Economics 04:30 GBP Goods Trade Balance 08:30 CAD Unemployment Rate Earnings Before Open: Hovnanian Enterprises (HOV) Kroger (KR) Mattress Firm Holding (MFRM) After Close: None of Significance
Continue Reading -->The Morning Hammer: More of the Same Yawns…
Crude oil is dipping below $46 on the American Petroleum Institute’s inventory report, which said US crude stocks rose 942K barrels last week. Remember, we get EIA data today at 10:30 a.m. ET. Traders are looking for a 1300K build. It should be interesting. Two weeks ago, we saw a massive beat, but last week was a huge miss. We’ve also got the ADP Employment Change, Chicago PMI, and Pending Home Sales on the calendar, but folks are really waiting for Friday’s big jobs report. SPX futures are flat, which shouldn’t be a surprise to anyone given the past 2 months of basically no volatility. The dollar is up as the hawk trade is still raging, though gold is down only fractionally. The miners got destroyed yesterday and I’m curious to see if there are any dip buyers there. In deal news, cloud software name Interactive Intelligence (ININ) is being acquired by Genesys for $60.50 a share, or $1.4 billion. ININ had been rumored to be exploring a sale. Overnight, European markets are mostly positive. EU inflation beat expectations in August, which extends the streak of better-than-expected post-Brexit economic data. German and Italian unemployment, and UK house prices were also solid. Irish airline Ryanair warned that it may reduce earnings guidance if ticket prices continue to drop. Looking out today, crude oil is obviously important, but I’m closely watching biotech. The major indices are holding up well, but IBB has been deteriorating over the past week or so, implying profit taking. I’d also watch the hot new issues like Acacia (ACIA), Twilio (TWLO), and Line Corp (LN). They’re all over the place as a group, but if they start declining in concert, that could be a sign of trouble. But for now, the bull is holding things together pretty well. Maybe Friday’s jobs report will be a catalyst for volatility, but that feels like wishful thinking after a horribly boring August.
Continue Reading -->The Morning Hammer: Let’s Eat Some Dove Soup
Traders are buying into the Fed’s hawkish narrative. On Friday, FOMC Chair Janet Yellen very clearly put rate hikes on the table, and market are buying in. Fed Funds futures now imply a 65% chance of a December rate hike, up from 47% a week ago. And September is up to 42% This has gold and silver slightly offf and the dollar up huge Overnight, Italian business manufacturing missed expectations, as did Greek GDP, Swedish retail sales, and Hong Kong retail sales. Australian home sales were also weak. European equity markets are red, while SPX futures are flat. We’ve got some important economic data today, with personal income/spending, PCE deflator, and Dallas Fed numbers on tap. Even though the Fed’s signalling pretty hard that rate hikes are en route, folks will be watching the PCE deflator closely since it’s the Fed’s preferred inflation indicator. If it’s strong, I’d assume folks push those rate hike odds up even more, and we could probably see an intraday selloff in US Treasuries (which are up fractionally in the early going). Beyond that, it looks like we’re going to close out August the way we came in — quietly. The VIX has been ticking up after putting in what looks like a major low on August 8, but we’re still not seeing much actual movement. We haven’t had a 1% down day in SPX since June 27. And it feel slike the more people look for one, the less likely it is to happen. Volatility is mean reverting. Things go crazy, and then they get quiet. And things get quiet, and then they go crazy. This quiet period today though, it’s one for the ages. I just wanna wake up, you know?
Continue Reading -->The Morning Hammer: The Bears Are Long F.O.M.O.
Get a Quant Edge in Today’s Markets Tomorrow after the close, Rob Smith is hosting a FREE webinar on his unique Quant Edge Trading Strategy. Read all about it The waiting game continues. We’ve now gone 32 trading days without a 1% up move, and 40 days without a 1% down move. It’s been a beautiful ride for the bulls becuase they’ve been enjoying a picture-perfect grind up. But it’s been hell for bears, particularly those buying put options. The slow upward movement and declining volatility slowly kills the value of those puts a penny at a time. I always think it’s far better to lose fast, because at least you get it over with. Now it seems like a lot of bears are tempted to capitulate to stop the slow bleed. But at the same time, there’s a big FOMO (fear or missing out) element. What if you cover just ahead of what seems like an inevitable market drop? I’m long VIX calls (which is basically a highly leveraged SPX short), so that’s the boat I’m in. I’m down about 9%, which isn’t the end of the world on an options positions, but I admit I’m growing restless. SPX futures are up fractionally following a decent up day in Europe. The stalemate looks set to continue ahead of FOMC Chair Janet Yellen’s Jackson Hole speech this Friday. It seems like traders are starting to buy into the recent hawkish trend in Fedspeak. Fed fund futures now imply a 53% chance of a December rate hike, up from 45% a month ago and 9% post-Brexit on June 27. That has gold and Treasuries sagging a bit. Crude oil is off a little on the American Petroleum Institute inventory report. The API said we had a 4.5 million barrel build in US crude stocks last week, which was a surprise. We get EIA data today at 10:30 a.m. ET. The current consensus calls for an -850K decline in inventories. However, remember that oil has been moving on chatter about the September OPEC meeting. We’re seeing a lot of conflicting news reports about whether OPEC will institute an output freeze or cut, so it’s getting hard to gauge the importance of data. I’m long oil (through the KYN and BGR closed-end funds), but I’m not going to hazard a guess as to what OPEC’s going to do. We’ve also got Existing Home Sales and the FHFA House Price Index on tap today. Housing stocks were up huge on yesterday’s big New Home Sales numbers, so maybe there’s action there again today. But I think biotech (IBB) may tell the tale for now. That group’s been pretty strong the past couple of days, and recent history shows that when biotech does well, the bears tend to fail. Good luck out there. P.S. Don’t forget to sign up for Rob Smith’s FREE webinar.
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