Week of Oct 14 2016 Weekly Recap & The Week Ahead

October 17th, 2016

“Novice Traders trade 5 to 10 times too big. They are taking 5 to 10% risks on a trade they should be taking 1 to 2 percent risks.” – Bruce Kovner.

1. U.S. Treasury Issues Final “Tax Inversion” Rules — the U.S. Treasury has issued final inversion amendment rules in its effort to tackle “earnings stripping” – a common tax-reduction technique employed by multinationals. The new rules also provide some exemptions for short-term loans and cash pools, and signal further business tax reforms are to come.
2. New Zika Zone Identified in Miami — florida officials have announced a new area of Zika transmission in Miami, which has already infected five individuals, and called on the federal government for funding to help fight the virus. It’s the third established outbreak in the city, a hot zone for Zika because it has both the Aedes mosquitoes that transmit the disease and an influx of travelers from other areas where the virus is spreading.
3. Fed September Meeting Minutes Show Split On Rate Hike — minutes from the September FOMC meeting show a split among many members thought raising rates would be warranted “relatively soon” if the U.S. economy continued to strengthen, but internal divisions remained over the timing of the next move. A few participants also raised concerns that waiting too long could trigger a recession, while more dovish officials wanted more evidence that inflation is firming before hiking interest rates.
4. OPEC Production Hits Record Highs — OPEC’s oil production rose to record highs in September, rising by 160K barrels to 33.6M bpd, underscoring the challenges the group faces as it seeks to curtail output. “At this stage, it is difficult to assess how the OPEC supply cut, if enforced, will affect market balances,” the IEA said in its latest monthly report. Yesterday, WTI pushed above $51/bbl after Vladimir Putin said Russia was ready to join an output freeze, but not one world producer has willingly taken one solitary barrel off the table this fall.

The week ahead — Economic data from

Week of Oct 7 2016 Weekly Recap & The Week Ahead

October 7th, 2016

“The market does not know if you are long or short and could not care less. You are the only one emotionally involved with your position. The market is just reacting to supply and demand and if you are cheering it one way, there is always somebody else cheering it just as hard that it will go the other way” – Marty Schwartz

1. Pilot Program Tests Nickel Trading Increments 15 years After Decimalization — fifteen years after the decimalization of stock trading, a pilot program will widen “tick sizes” to five-cent increments rather than pennies for some stocks. The move is a bid to increase trading in those stocks, and could benefit small investors but raise trading costs, as market makers tend to profit from wider spreads.
2. UK’s Pound Hits 31-year Low on Brexit Anxiety — the pound is down to a 31-year low as concerns over Brexit continue to weigh on investors. The sterling fell to a post-Brexit vote low of $1.2749 earlier in the day. Economists expect more volatility as the complexity of an exit from the European Union plays out.
3. Fitch Sets Stage for Wells Fargo Credit Rating Cut — Fitch has cut the outlook on Wells Fargo’s (NYSE:WFC) credit ratings to Negative, but affirmed the bank’s existing rating of AA-, which is investment-grade. In an announcement, Fitch cited “potential reputational damage from the recent regulatory actions and fines,” as well as a belief that the lender could face “earnings pressure.”
4. U.K. Delivers Landmark Ruling on Fracking — the U.K. government has approved a horizontal fracking permit at a Cuadrilla site in Lancashire, northern England, in a ruling that could have far-reaching consequences for the shale gas industry. It means, for the first time, British shale rock will be fracked horizontally, which is expected to yield more gas. A ban on fracking in the U.K. was lifted in 2012.
5. Annual Fall Meetings for the IMF and World Bank — finance officials and central bankers from around the world are gathering in Washington for the annual fall meetings of the IMF and World Bank. The talks will take up issues including weak global growth trends, the increase of anti-trade measures and concerns that many have expressed about the financial health of European banks.

The week ahead — Economic data from

Week of Sept 30 2016 Weekly Recap & The Week Ahead

October 3rd, 2016

“One of the rarest traits on Wall Street is patience, yet patience is one of the biggest secrets of successful investing” — R.W. McNell’s book Beating The Stock Market

1. Deutsche Bank (NYSE:DB) Slumps On Capital Concerns — Germany’s Angela Merkel ruled out any state assistance for the lender, according to a report from Focus Magazine. Merkel also declined to intervene in Deutsche’s (NYSE:DB) legal battle with the U.S. Justice Department, which earlier this month announced it may seek up to $14B from the bank to resolve investigations into crisis-era mortgage securities.
2. Wells Fargo (WFC) Launches Probe – CEO Stumpf & Tolstedt Giving Up Pay & Bonuses — independent directors are launching a probe into the bank’s practices, and the two executives, Carrie Tolstedt, the former retail banking chief and CEO John Stumpf, will forfeit some awards. Stumpf will lose about $41M in unvested equity and temporarily forgo his salary, while Tolstedt, the former retail banking chief, will leave the company without severance payments.
3. OPEC Agrees to First Oil Output Cut in Eight Years — OPEC agreed to a preliminary deal that will cut production for the first time in eight years. Oil prices gained more than 6 percent as Saudi Arabia and Iran surprised traders who expected a continuation of the pump-at-will policy the group adopted in 2014. The group agreed to drop production to a range of 32.5 to 33 million barrels per day, said Iran’s Oil Minister Bijan Namdar Zanganeh, following a meeting in Algiers. While some members of OPEC will have to cut output, Iran won’t have to freeze production.
4. India-Pakistan Tensions Escalate — tensions between India and Pakistan are escalating, with investors responding by selling assets in both countries. Following Indian “surgical strikes” on suspected militants preparing to infiltrate from Kashmir, Pakistani Defense Minister Mohammad Khwaja threatened to use “tactical” nuclear weapons to “destroy” India.
5. Sector Performance Quarter And Month To Date –courtesy of BIG, the chart below shows S&P 500 sector performance so far in Q3. Of the eleven sectors, just two are outperforming the S&P 500 (Technology and Financials).

For the month of September, the S&P 500 is down 0.5%, given that September has historically been the cruelest month for equities.

The week ahead — Economic data from

Week of Sept 23 2016 Weekly Recap & The Week Ahead

September 26th, 2016

“A person who never made a mistake never tried anything new.” — Albert Einstein

1. OPEC and Non-OPEC Producers Are Close to Reaching an Output Deal — OPEC and non-OPEC producers are close to reaching an output stabilizing deal, Venezuelan President Nicolas Maduro declared, a day after Iran welcomed any move aimed at market stability. OPEC members may even call an extraordinary meeting to discuss oil prices if they reach consensus at an informal gathering in Algiers this month, OPEC Secretary-General Mohammed Barkindo said during a visit to Algeria.
2. U.K. Prime Minister Theresa May Visits Wall Street Over Brexit — UL Prime Minister May landed in New York to consult with some of America’s largest firms over how her country should proceed with Brexit. The prime minister held two gatherings: a roundtable discussion with big investors in the U.K. including Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), BlackRock (NYSE:BLK), IBM, and Amazon (NASDAQ:AMZN). She then hosted a reception for about 60 American executives, as well as British businesses that invest in the U.S.
3. S&P Real Estate Sector Draws Interest – the official launch of the S&P 500 real estate sector – the first subdivision to be added since 1999. This sector is made up of 28 components. Below is a chart of the new sector courtesy of WSJ.

4. FOMC Sept Meeting — the Federal Reserve kept interest rates unchanged, but Chairwoman Janet Yellen said one increase is “appropriate” this year barring any major new risks to the economy. Janet Yellen gave a fairly strong indication that a hike will happen before 2016 is over. She said the labor market is strengthening and “risks to the outlook have become roughly balanced.” The FOMC has two more meetings — in November, shortly before the presidential election, and December, where Yellen gives her final post-meeting news conference of the year.
5. AAII sentiment survey — according to this week’s sentiment survey, bullish sentiment fell to 24.83% down from 27.94%. That’s the lowest weekly reading since late June, the 47th straight week that bullish sentiment was below 40%, and the 81st time in the last 82 weeks that we have seen sub-40% readings. Charts below courtesy of BIG.

Bearish sentiment also increased from 35.92% up to 38.28%. This is the first week that bearish sentiment has been higher than both bullish and neutral sentiment as well as the highest weekly reading since the February market lows.

6. Leon Cooperman, legendary trader, Indicted by the SEC on insider trading charges –Billionaire investor Leon Cooperman said he will fight the SEC’s insider trading charges against him after the agency accused his hedge fund, Omega Advisors, of trading Atlas Pipeline Partners (now part of NGLS) on private information six years ago.

The week ahead — Economic data from

Week of Sept 16 2016 Weekly Recap & The Week Ahead

September 19th, 2016

“OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks. The other are July, January, September, April, November, May, March, June, December, August, and February.” — Mark Twain

1. NYSE Set to Eliminate ‘Rule 48′ — the New York Stock Exchange (NYSE:ICE) is instituting new procedures today that would eliminate “Rule 48,” which allows market makers to delay opening a stock when markets are volatile. Under the changes, NYSE (NYSE:ICE) pre-open price indications will be simplified and adjust for volatility. Values will also be published on both proprietary and other feeds under all market conditions.
2. IEA Cuts Global Oil Demand Forecast — according to the International Energy Agency, global oil demand growth is slowing at a faster pace than first thought. “For 2016, a gain of 1.3M bpd is expected,” the IEA said in its latest market update, equating to a downgrade of 100K bpd from its previous forecast. The prediction will be worrying for oil markets at a time when a delicate rebalancing of supply and demand was thought to be taking place.
3. Walmart Working On a Self-Driving Shopping Cart – Walmart (WMT) claimed that customers would be able to hail an Uber (Private:UBER) like shopping cart that possibly through a smartphone app. Not only has the retailer filed a patent for a cart that has a motor and video cameras, but it would be able to return itself from customers’ cars to the store. The system may also help Walmart (NYSE:WMT) manage inventory by scanning store shelves to ensure products are there.
4. Initial Quantities Of iPhone 7 Plus Sold Out — Apple has confirmed initial quantities of the new iPhone 7 Plus have sold out in all colors. The brand new jet black shade of the smaller iPhone 7 has also sold out around the world. Speculation over strong sales out of the gate and impressive initial reviews sent shares in the tech titan sharply higher.
5. Federal Prosecutors In Early Stages of Wells Fargo(NYSE:WFC) Probe — Federal prosecutors are in the early stages of a Wells Fargo (NYSE:WFC) investigation, WSJ reports. The probe is focusing on figuring out whether higher level executives directed employees to fraudulently open accounts or if poorly-performing employees were just “trying to save their jobs.” Whether prosecutors decide they have a case, or whether that may be criminal or civil is still a ways off.
6. Tesla Using Its Own Vision System Replacing Mobileye (MBLY)– Tesla (NASDAQ:TSLA) will be using its own vision system in upcoming versions of Autopilot. TSLA accused Mobileye (MBLY) “attempted to force Tesla to discontinue this development, pay them more and use their products in future hardware,” .

The week ahead — Economic data from

Week of Sept 9 2016 Weekly Recap & The Week Ahead

September 12th, 2016

“Move on, understand what happened in the past but do not have an emotional attachment to it.” — unknown

1. G20 Meeting Communique From China — the heads of the world’s top economies declared in a joint communique following a summit in Hangzhou, China that “We are determined to use all policy tools – monetary, fiscal and structural – individually and collectively to achieve our goal of strong, sustainable, balanced and inclusive growth,”. G20 leaders also reiterated their support for “international tax cooperation, a transparent financial system, environmentally sustainable growth strategies, energy collaboration, and opposition to protectionism on trade and investment in all its forms.”
2. Chinese Trade Improves in August — China logged stronger-than-expected trade data in August as imports unexpectedly climbed for the first time in nearly two years and the slump in exports abated. In U.S. dollar terms, imports rose 1.5% compared to a year ago, a significant improvement from the 12.5% decline in July, while exports fell 2.8% on-year, following last month’s 4.4% drop. That brought a trade surplus to a seven-month high of $52.05B, slightly below July’s $52.31B.
3. Senate Panel To Probe EpiPen Pricing — the U.S. Senate’s permanent subcommittee on investigations will be the next to probe Mylan’s (NASDAQ:MYL) pricing of the EpiPen, describing the review as a “preliminary inquiry.” Despite heat over the allergy auto-injector’s cost, EpiPen sales recorded a 32% increase in the first three weeks of August compared to the same period of 2015.
4. North Korea Conducts Fifth Nuclear Test — just hours after multiple global agencies detected a magnitude 5.3 earthquake near North Korea’s nuclear test site, Pyongyang declared it had conducted its fifth nuclear test and was now able to produce miniaturized nuclear warheads. South Korea’s vice finance minister said the government will closely monitor financial markets and guard against geopolitical risks linked to the North’s actions.
5. American Association of Individual Investors (AAII) Latest Sentiment Survey – In the latest survey from AAII, bullish sentiment increased from 28.6% up to 29.75%. This week’s sub-30 reading also represents the 45th straight week where bullish sentiment was under 40%. below 30%, it is generally a sign of pessimism.

The latest survey also showed that bearish sentiment declined from 31.52% to 28.48%. With that decline, bearish sentiment is now once again lower than bullish sentiment for the first time in three weeks.

The week ahead — Economic data from

Week of Aug 26 2016 Weekly Recap & The Week Ahead

September 8th, 2016

Two rules for investing/trading:
Rule number one : most things will prove to be cyclical
Rule number two : some of the greatest opportunities for gain and loss come when other people forget rule number one
— Howard Marks

1. US New Home Sales Race To Near 9-Year High in July — the Commerce Department reported new home sales surged 12.4 percent to a seasonally adjusted annual rate of 654,000 units last month, the highest level since October 2007. Residential construction was a minor drag on economic growth in the second quarter. Housing market strength, marked by rising home values which are boosting household wealth, is helping to buoy consumer spending, cushioning the blow on the economy from a downturn in business spending as well an inventory correction.
2. Delphi Automotive and Mobileye to Partner In Self-Driving Car Push — key driving partnership between Delphi Automotive (NYSE:DLPH) and Mobileye (NYSE:MBLY) to be a leader in Self-Driving Car. The two auto suppliers want to pool investment and execution risk amid the rapidly developing self-driving car push in the industry.
3. Senate Judiciary Committee To Hold Hearing on Ag-Chemical Merger Deals — the U.S. Senate Judiciary Committee plans to hold a hearing in late September to discuss the merger of Dow Chemical (NYSE:DOW) and DuPont (NYSE:DD), and ChemChina’s purchase of Syngenta (NYSE:SYT). Committee Chair Senator Grassley of Iowa has expressed concern that the deals would result in farmers paying more for seeds, pesticides and herbicides, and reduce the companies’ incentive to innovate. However, the committee has no formal say over whether the deals can go forward; the Justice Department is reviewing the Dow-DuPont merger, while the FTC is looking at ChemChina’s purchase of Syngenta.
4. House Republican To Propose New Tax Rule for Internet Commerce — a leading House Republican plans to introduce a proposal over how to tax inter-state Internet transactions. Bob Goodlatte wants the rules affecting a transaction to be based on where the retailer is located but the tax rate to be set by the consumer’s state. For example, an Ohio company selling a pair of trousers to a buyer in Maryland would use Ohio’s regulations for taxing clothing and Maryland’s tax rate. This contrasts with the current rules in which a sale is taxed only if the seller has a physical presence in the shopper’s state.
5. Fed’s Yellen Sees Stronger Case for Interest-Rate Rise — Federal Reserve Chairwoman Janet Yellen said the case for another interest-rate hike is strengthening, sending a strong signal the U.S. central bank is preparing to increase rates as soon as next month. She stated “In light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal-funds rate has strengthened in recent months,”.

The week ahead — Economic data from

Week of Aug 19 2016 Weekly Recap & The Week Ahead

August 22nd, 2016

“Markets are never wrong – opinions often are.” — Jesse Livermore.

1. Ford’s Push for 100% Self-Driving Car By 2021 — a major announcement from Ford that it will develop a 100% autonomous vehicle by 2021 could have far-reaching effects in a variety of sectors. “The first application of the fully autonomous vehicle will be commercial applications, whether it’s ride-hailing or parcel delivery,” Ford (NYSE:F) CEO Mark Fields told Recode. Companies that could be eyeing purchasing self-driving car fleets include FedEx (NYSE:FDX), Amazon (NASDAQ:AMZN), UPS (NYSE:UPS), Domino’s Pizza (NYSE:DPZ), Papa John’s (NASDAQ:PZZA), Avis (NASDAQ:CAR) and Hertz (NYSE:HTZ).
2. Federal Reserve’s July Meeting Minutes — Fed officials were divided over the urgency to raise interest rates in July meeting Minutes. A gauge of the greenback struggled to extend its rally from a three-month low as the chance of a Fed rate increase before the year is out fell back below 50 percent, according to futures prices tracked by Bloomberg. Fed’s Williams wants a rate hike as Williams isn’t a voter on the FOMC this year.
3. U.K. Financial Sector Targets Swiss-Style EU Deal — the City of London has relinquished hopes the U.K. will retain full access to the European single market for goods and services, according to the FT. Officials from the financial sector have concluded that a Norway-style deal is untenable, and are now looking to imitate and build on Switzerland’s deal with the EU, where only some industries have full access to the single market.
4. Dept Of Justice (DOJ) To End Use of Private Prisons — the Justice Department announced plans to phase out its use of privately operated prisons, calling them less safe and a poor substitute for government-run facilities. Shares of the two leading U.S. private prison companies plummeted on the announcement: GEO Group (NYSE:GEO) ended down 39%, while Corrections Corp. of America (NYSE:CXW) sank 35%. The greater impact of the DOJ decision may be its trickle-down effect on state prison systems, which house the majority of U.S. prisoners.

The week ahead — Economic data from

Week of Aug 12 2016 Weekly Recap & The Week Ahead

August 16th, 2016

“When you come to a fork in the road, take it!” – Yogi Bera

1. Marc Faber Calls For Ugly Stock Market Crash — the legendary bearish investor, Marc Faber, is forecasting a 50% crash in the S&P that would reverse all gains from the past five years. He’s unconvinced by the recent run-up in equities and warned central bank actions would increase volatility despite U.S. stock markets reaching fresh intraday highs and the Nasdaq just posting a new record close.
2. Wall Street Bonuses Expected To Decline — Wall Street bonuses are expected to decline this year for both bankers and traders as new regulations on trading and capital curb profits. Year-end compensation will be down 5-15% for investment bankers that advise on M&A, according to a widely followed report by Johnson Associates. Bankers who help companies raise equity and debt could see their compensation drop as much as 25%, while stock and bond traders could see a fall of as much as 15%.
3. Valeant (NYSE:VRX) Under Criminal Probe For Allegedly Defrauding Insurers Over Philidor — Federal prosecutors are investigating whether Valeant Pharmaceuticals (NYSE:VRX) defrauded insurers by shrouding its ties to the Philidor mail-order pharmacy that boosted sales of its drugs. The relationship between the two has been under scrutiny since last October; However, Dow Jones reports the new criminal probe is based on an unusual legal theory and could lead to criminal charges against former Philidor executives and Valeant as a company.
4. US Retail Sales Flat In July vs. 0.4% Increase Expected — the Commerce Department reported the unchanged reading last month followed an upwardly revised 0.8 percent increase in June. Retail sales in June were previously reported to have increased 0.6 percent. Sales rose 2.3 percent from a year ago. Excluding automobiles, gasoline, building materials and food services, retail sales were also unchanged last month after an unrevised 0.5 percent increase in June.
5. China Data Offers More Evidence Of Slowdown — a number of readings on China’s economy decelerated in July, offering further evidence of a slowdown in the mainland. Retail sales and industrial production rose but were below expectations, while fixed asset investment fell to its slowest rate in more than 16 years. The data sharpens the dilemma facing the nation’s policy makers – boost growth with cheap credit that risks undermining financial stability, or curb debt expansion even if that slows the economy.

The week ahead — Economic data from

Week of Aug 5 2016 Weekly Recap & The Week Ahead

August 8th, 2016

“If you want to catch a wave you need to grab a board and get in the water!” — strategist Stan Salvigsen

1. Japan Cabinet Approves $130 Billion In Fiscal Steps As Part Of Stimulus — Japanese Prime Minister Shinzo Abe’s cabinet approved 13.5 trillion yen ($132.04 billion) in fiscal measures as part of efforts to revive the flagging economy. The stimulus package ranks among Japan’s biggest since the global financial crisis, and to increase GDP by 1.4%, include childcare benefits, provide $150 handouts to 22M low income people, loan ¥10.7T for infrastructure and provide ¥7.5T for direct fiscal spending.
2. New Zika Cases Prompt Miami Travel Warning — Federal health officials have advised pregnant women to avoid a Miami neighborhood – marking the first time the CDC has warned against travel to any area within the continental U.S. – as a Zika outbreak led to 10 more local cases. CDC Director Tom Frieden said that extensive spraying of insecticides in the area over the past several weeks has not reduced the local population of mosquitoes capable of transmitting the virus.
3. BOE Cuts Key Rate For The First Time In Over Seven Years to 0.25% — the central Bank Of England has made its biggest quarterly downgrade of growth forecasts, reducing expectations for 2017 growth from 2.3 percent to 0.8 percent, citing “substantial uncertainty” after the referendum on the U.K.’s membership of the European Union (EU) in June. The bank also slashed growth forecasts and launched a new monetary policy weapon in the battle to stop a post-Brexit slump in the U.K.
4. US Created 255,000 Jobs In July vs. 180,000 Jobs Expected — the economy added 255,000 positions, according to the Labor Department. The headline unemployment rate held steady at 4.9 percent, though a more encompassing measure that includes those not actively looking for work and those working part-time for economic reasons moved up a notch to 9.7 percent. Economists had been looking for an increase of 180,000 and a decline of the unemployment rate to 4.8 percent.
5. S&P 500 Index Traded To New All-Time Highs — chart below shows the index breaking out to the upside of a reverse head-and-shoulders bottoming formation. In the process it has traced out a bullish “flag” formation in the charts.

The week ahead — Economic data from

October 2016
« Sep    
The information provided by The EGS Blog is based on sources believed to be reliable, but it is not guaranteed to be accurate. There is no guarantee that the recommendations of The EGS Blog will be profitable or will not be subject to losses. The information provided by The EGS Blog is not a recommendation or a solicitation that any particular investor should purchase or sell any particular security in any amount, or at all. The investments discussed or recommended herein may be unsuitable for investors depending on their specific investment objectives and financial position. At any time EGS LLC and its principals may maintain positions that are contrary to positions announced within the subscription service. In no event will The EGS Blog be liable to you or anyone else for any incidental, consequential, special, or indirect damage (including but not limited to lost profits or trading losses). PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS

© Copyright 2016 Market Outlook All Rights Reserved
Design by EGS Sponsored by Equity Guidance LLC