Welcome Stockaholics to the trading week of January 16th! This past week saw the following moves in the S&P: Major Indices End of Week: N/A. Bird's Eye view of the Major Markets on Friday: Economic Calendar for the Week Ahead: Sector Performance WTD, MTD, YTD: What to Watch in the Week Ahead: Monday Martin Luther King holiday Tuesday Earnings: Morgan Stanley, UnitedHealth, Comerica, CSX, Interactive Brokers 8:30 a.m. Empire State manufacturing 8:45 a.m. New York Fed President William Dudley 6:00 p.m. San Francisco Fed President John Williams Wednesday Earnings: Citigroup, Goldman Sachs, US Bancorp, Canadian Pacific Railway, Charles Schwab, Northern Trust, TD Ameritrade, Netflix, Commerce Bancshares, Fastenal 8:30 a.m. CPI 8:30 a.m. Business leaders survey 9:15 a.m. Industrial production 10:00 a.m. NAHB 11:00 a.m. Minneapolis Fed President Neel Kashkari 2:00 p.m. Beige book 3:00 p.m. Fed Chair Janet Yellen speaks to Commonwealth Club of San Francisco 4:00 p.m. TIC data Thursday Earnings: Union Pacific, Bank of NY Mellon, American Express, IBM, Skyworks Solution, Check Point Software, KeyCorp, People's United Financial 7:45 a.m. European Central Bank rate decision 8:30 a.m. Initial claims 8:30a .m. Housing starts 8:30 a.m. Philadelphia Fed survey 3:45 p.m. San Francisco Fed's Williams 4:00 p.m. Boston Fed President Eric Rosengren Friday Inauguration Day Earnings: General Electric, Kansas City Southern, SunTrust, Schlumberger, Rockwell Collins, Synchrony 9:00 a.m. Philadelphia Fed President Patrick Harker 1:00 p.m. San Francisco Fed's Williams
Dow 20k Disappoints For Fourth Straight Week As Banks Pump'n'Dump "I was promised Dow 20k, where's my Dow 20k?!!" It's been a month since Bob Pisani said that Dow 20k was "inevitable"... Gold leads in 2017 and bonds are beating stocks as crude lags... Stocks were desperately pushed higher into the close today to ensure the S&P closed green on the week.. but failed... Energy stocks (black) were the worst on the week, Tech (blue) best, and Financials (red) unch... VIX flash-crashed to a 10-handle early on this morning as stocks ramped at the open... Banks pumped-and-dumped after earnings... And no - NIM didn't explode - this is why!! The Yield curve has NOT steepened!!! No matter how many times the media claims it has... "Most Shorted" stocks ended the week unchanged after a yuuge squeeze on Thursday... Apparel stocks plunged to its lowest since Nov 2012... Breadth remains anything but supportive... And SVXY Puts exploded to record highs relative to calls (SVXY is the inverse VIX ETF, thus SVXY Puts ~ VIX Calls ~ Bearish stocks) A lot of vol in bond markets the last two days (echoing the dollar and yuan) but bonds ended the week higher in price, lower in yield with little curve effect... The USD Index tumbled by the most since the week before the election, erasing the post-Fed-rate-hike gains...NOTE - The Dollar Index has fallen back to unchanged year-over-year It's deja vu all over again in The Dollar Index... (one year lagged) With AUD and JPY the strongest on the week (and Cable weakest)... Copper was the week's biggest gainer in commodity-land (best week since Thanksgiving) but gold is now up 3 weeks in a row (the best run since June)... Crude ended the week down almost 3% - the worst week since before the election... Gold back at $1200... Finally, a silver lining... Global economic surprise indices are at their highest since 2010 - having risen in the last 3 months - post-Trump - by the most since the bounce off 2009's lows... Only trouble is - this series is majorly mean-reverting as expectations follow trend...
Spoiler: Weekend Reading: Anticipation (CLICK TO SHOW!) Submitted by Lance Roberts via RealInvestmentAdvice.com, Over the past couple of weeks, the market has continued to remain overbought, extended and exuberant on “hopes” that Trump’s policies will be the ointment to cure the economy’s ills. As noted yesterday, exuberance has exploded in everything from consumer to investor to business optimism. The explosion of optimism is interesting given the consistent diatribe over the last few years about how well the economy was performing under the previous administration. This is the equivalent of a company’s stock price surging when the previous CEO is replaced which doesn’t speak well of his “legacy of performance.” The question now is whether or not “hopes” will translate into “reality.” Interestingly, since the beginning of the year, the rush to pile into “Trump Trades” has quickly evaporated as transaction volumes have plunged as “anticipation” has turned into “wait and see.” It is worth noting that previous, when transaction volumes have plunged to such low levels, the markets were generally at an inflection point of a correctionary process. With the markets currently extremely overbought and extended, the reality of a “sell the inauguration” trade is possible. In the end, “anticipation” of better outcomes is one thing when it comes to the financial markets and your money, however, “reality” is quite another. Here is what I am reading this weekend. Fed, Economy & Trump Yellen-Trump & The Coming Recession by James Rickards via Daily Reckoning Slow Fade Of Jobs Growth by James Picerno via Capital Spectator Goldman Sachs: 3 Things To Wreck The Economy by Lucinda Shen via Fortune A Case For Trump’s Import Tariff by Stephen Moore via The Washington Times Trump Should Embrace Free Trade by Robert Zoellick via Washington Post Trump’s Job Jawing: Good Politics, Bad Policy by Robert Samuelson via RCM Krugman Turns Hawkish W/GOP In “Da House” by Kevin Williamson via National Review Growing Economy & Deficits by Paul Krugman via NYT Infrastructure Spending May Not Boost Growth by Mihir Sharma via Bloomberg Don’t Expect Bond Vigilantes To Do Fed’s Work by Caroline Baum via MarketWatch Trump Can’t Repeal Economic Laws by Joseph Stiglitz via Project Syndicate Trump’s Protectionist Plan Nothing New by Alexia Campbell via The Atlantic Wall Street, Fed Have Stacked The Deck by David Smick via American Conservative Markets Corporate Bond Market: Binge Borrowingby Danielle DiMartino-Booth via Money Strong Nomi Prins: More Corporate Defaults In 2017 by Craig Wilson via Daily Reckoning Trump Oil Trade & $100/bbl Oil by Kirk Spano via MarketWatch Wall Street Hates “Volcker Rule,” Will Trump Kill It by Matt Egan via CNBC Will Inauguration Mark A Top? by William Watts via MarketWatch Bull-Turned-Bear – Lee See Trump Danger by Jeff Cox via CNBC 4-Reasons Trump Rally Has No Legs by Jake Weber via Forbes Prudent Things For Investors To Do by Nigam Arora via MarketWatch Why You Should Be Wary Of Junk Bonds by John Coumarianos via WSJ Why 2.6% Is More Important Than 20,000 by Bill Gross via Janus Capital If You Bought Trump Rumor, Sell The News by Mark Hulbert via MarketWatch The Case For Remaining Invested by Goldman Sachs The Invisible Stock Market Correction by Michael Kahn via Barron’s Interesting Reads Financial Stress Rings In New Year by Center For Retirement Research Death Spiral Of Sears To Bankruptcy’s Edge by Hayley Peterson via BI American’s Blowing It With Debt by John Pelletier via USA Today Fair Share? Top 400 vs Bottom 50% by Mark Perry via AEI 7 Ages Of Retirement That Matter by Matt Carey via Forbes How Trump Could Create A Financial Crisis by Matt O’Brien via Wonkblog Why Millennials Aren’t Afraid Of Socialism via Julia Mead via The Nation Facts Every Retiree Should Know About Annuities by Matthew Frankel via Motley Fool Suddenly, Homes Sale Agreements Are Falling Apart by Patrick Clark via Bloomberg Trump Makes Jobs Error During Presser by Steve Liesman via CNBC What Really Caused The Housing Crisis by Mark Thoma via CBS MoneyWatch Animal Spirits by Ed Yardeni via Yardeni Research BofA Warns Consumer Spending Tumbled by Tyler Durden via ZeroHedge 4-Reasons Fiscal Policy Won’t Restart Business Cycle by Tyler Durden via ZeroHedge Why Home Builders Can’t Meet Demand by Aaron Layman via AaronLayman.com Economic Risk Of Ignoring Arithmetic by John Hussman via Hussman Funds Are Oil Speculators About To Get Lit Up Again by Dana Lyons via Tumblr Might Want To Prepare Your Portfolio by Jesse Felder via The Felder Report “Stock market bubbles don’t appear out of thin air. They have a basis in reality. But that reality is distorted by misconception” ? George Soros
January Expiration Week Turbulent Last 18 Years Over the past thirty-four years, since 1983, the S&P 500’s performance during January’s option expiration week has been essentially a mixed bag. Friday has been up 18 and down 16, and the entire week has been down roughly three times for every two times it has been up. However, in the past eighteen years (1999-2016), the S&P 500’s performance has taken a turn for the worse with expiration day falling ten times with an average loss of .21% and the full-week declining 13 times with an average loss of 1.06%. DJIA and NASDAQ have similar track records since 1999. Market mixed around Martin Luther King Jr. Day This year will be the 20th year that the stock market is closed to honor Dr. King and his contributions to the world and civil rights. Martin Luther King, Jr. Day has only been observed since 1998 and market behavior around this holiday has not been added to the Stock Trader’s Almanac yet. So I wanted to share with you the history of market performance around this holiday. Overall the market has been more positive, on average, on the Friday before MLK day and weaker the Tuesday after. Though trading is rather mixed with a relatively even split of ups and downs on the day before and the day after. This mixed and choppy performance is possibly due to the fact that MLK day can either land in options expiration week or the week after. Both weeks have been rather volatile and weak since 1999. Top image: http://events.worldbeatcenter.org/ January Indicator Trifecta Now Two-for-Two Even though today turned out to be a mixed day for the market (DJIA and S&P 500 down, NASDAQ up), S&P 500 is still positive year-to-date and thus our First Five Day (FFD) early warning system is also positive. Combined with last week’s positive Santa Claus Rally (SCR), our January Trifecta is now two for two. The January Trifecta could be satisfied with a positive reading from our January Barometer (JB) at month’s end. When all three indicators, SCR, FFD and JB, are positive this has been the most bullish scenario for the next eleven months and the full year. In 28 previous Trifecta occurrences since 1950, S&P 500 advanced 89.3% of the time during the subsequent eleven months and 92.9% of the time for the full year. However, a January Indicator Trifecta does not guarantee the year will be bear free. The three losing “Last 11 Mon” years, shaded in grey, experienced short duration bear markets. Is S&P 500 setting up for a January break? Despite New Year bullishness from our early January indicators and our expectation for full-month January Barometer gains that will support our modestly bullish 2017 Forecast, a mid-January break in equities is looking increasingly likely. Since 1996 this January break has been more pronounced and more consistent. This trade, last featured in the Commodity Trader’s Almanac 2013, is beginning to set up nicely right now. The stock market has demonstrated a tendency to retreat after the first of the New Year, especially when there has been a strong fourth quarter gain. Once the New Year begins we often see a profit taking correction. Investors tend to sell stocks to lock in profits in order to defer taxes from capital gains after the New Year begins. Even though the best time to be long the overall equity markets lasts from October through late April, this January break can certainly give short-term, nimble traders a nice return. With stocks struggling to move higher this week this trade is setting up a little later this year. The table below of the “big” S&P 500 contract shows the typical January break. Since 1996 shorting the March contract on or about the second trading day of the New Year and holding for twelve trading days has produced gains 12 of the last 21 years for a success rate of 57.1% and a cumulative gain of $81,538 (based upon trading a single contract excluding fees and taxes). The results in the above table are based upon specific entry and exit dates with no further analysis being applied. This trade potentially could have been successful in 18 of the last 21 January’s with the application of technical indicators. The average decline from the high close in the first seven trading days in January to the low close in the last seven trading days in January has been 3.6% since 1996 using the same “big” S&P 500 contract.
106 Weeks and Counting Jan 12, 2017 The streak goes on. Despite new all-time highs in the major equity benchmarks and the DJIA getting within half a point of 20,000, individual investors still can’t get to a majority in the bullish camp. According to this week’s survey from AAII, bullish sentiment dropped by about two and a half points in the latest week, falling from 46.20% down to 43.64%. That’s actually the lowest level since early December and shows that just like the overall consolidation we have seen in the market in the last several weeks, sentiment has also taken a breather. For the sake of reference, if bullish sentiment goes another five weeks without reaching 50%, it will be the longest streak of sub-50% readings in the history of the survey. Although bulls aren’t in the majority, they do have a clear plurality. As shown in the charts below, bearish sentiment remains relatively low at 26.97%, while neutral sentiment is still under 30%. We would also note that this is a big change from the first half of 2016, when neutral sentiment was the leader with weekly readings routinely above 40%. Do The First Five Days Of The Year Matter? Posted by lplresearch The first five days of 2017 are in the books, and the S&P was up 1.3%, the best start to a year since 2013. This is a far cry from the 6% drop last year, which was actually the worst start to the year ever. This time of year we hear a lot about how the first five days of the year can accurately predict the full year. After all, a big start in 2013 signaled a big move that year, while a big dip to start 2008 was a warning of more trouble to come. Then again, after the worst start to a year ever last year, the S&P rebounded to close the year up 9.5%—so this sure isn’t foolproof. Going back 20 years, when the S&P 500 was higher in the first five days, the full year was up 12.9%, whereas when those first five days were in the red, the full year was actually down nearly 1% on average. Taking things back to 1950,* the results have been even more impressive. Per Ryan Detrick, Senior Market Strategist, “Although the first five days of the year as an indicator for the full year might sound rather random, there appears to be some truth to it. When those first five days were higher, then the full year was up nearly 14% on average versus when those days were lower, the return was only 1.0%. The real eye-opening stat is when those first five days were up more than 1% (like this year), then the full year finished higher more than 88% of the time.” There have been 26 times when the S&P 500 was up at least 1% in the first five days of the year and only three times did the full year close lower. Two of those times were 1973 and 2002, both years that saw recessions, while 2011 was the other year and the S&P 500 was only fractionally lower on the year then. As we discussed in Outlook 2017: Gauging Market Milestones, the odds of a recession in 2017 are rather low, which helps support the chances that the S&P 500 finishes higher this year; this study only further supports that outlook. *Please note: The modern design of the S&P 500 stock index was first launched in 1957. Performance back to 1950 incorporates the performance of predecessor index, the S&P 90. Could There Be A Post-Inauguration Sell-Off? Posted by lplresearch “Buy the rumor, sell the news.” Quoted by investors for decades. That is one of the oldest trading axioms, and it is also one we’ve been hearing a lot lately regarding the U.S. presidential election and upcoming inauguration. We’ve seen the buying; now could selling take place once the inauguration is official? For starters, going back to the 1952 election and the January 1953 inauguration of President Eisenhower, there seems to have been some near-term strength after the inauguration, but one month later, some weakness has been perfectly normal. Here’s the catch: a closer look above shows there has tended to be more weakness after a Republican is inaugurated. Sure enough, the results have been weaker across the board. What about post-election years? Per Ryan Detrick, Senior Market Strategist, “Post-election years have tended to see a bounce in the near term after the inauguration, but then there’s February. Looking at all post-election years going back to 1950, February has been down 1.8% on average—making it the worst month of the year. It might be the shortest month of the year, but be on the lookout for any banana peels this year.” Here’s what the average post-election year for the S&P 500 has looked like: Last, here’s a chart we’ve shared before and want to share it once again, as it has been in the news and social media during the past few days. The Economic Policy Uncertainty Index in November spiked to one of its highest levels ever. This index measures levels of uncertainty by focusing on newspapers and tax code data, among other macroeconomic variables. With the incoming Trump presidency increasing uncertainty on exactly what his policies will be, it isn’t a surprise economic uncertainty has been very high. Why this matters is during previous times of high uncertainty, the CBOE Volatility Index (VIX) has usually spiked. That makes sense, as volatitly spikes during times of uncertainty. Well, this time we’ve seen a big spike in uncertainty, yet the VIX hasn’t even budged. Instead, it is near multiyear lows. This is one potential clue that higher volatility could be coming and should that happen, it could produce downward pressure on equities right in time for the historically weak February timeframe. Do You Have Triskaidekaphobia? Posted by lplresearch Tomorrow is Friday the 13th; so what does it mean? Well, if you have triskaidekaphobia then you might not want to leave the house, as that is the fear of the number 13. A fear of the actual day of Friday the 13th is called paraskevidekatriaphobia or friggatriskaidekaphobia. Those are some big words, but again, what does it mean? First let’s take a breakdown of how each day of the week did from 1928* to 2016. This officially proves that no one likes Monday, as it is by far the worst day of the week for the S&P 500. Speaking of days of the week, did you know that the S&P 500 hasn’t dropped on a Tuesday the past 10 Tuesdays? It was exactly flat this week, but it still wasn’t lower. This is the longest streak without a red Tuesday since early 2013, when we saw 10 in a row. In fact, the S&P 500 hasn’t gone 11 in a row without a red Tuesday since a streak of 13 in a row in early 1972. Getting to it, the last Friday the 13th was in May 2016, and the S&P 500 lost 0.8%. In fact, the past three Friday the 13ths have all been lower. Per Ryan Detrick, Senior Market Strategist, “First things first, we’d like to stress in no way are we suggesting you invest around any one single day, unless of course you break a mirror and see a black cat going to work tomorrow morning. But sure enough, Friday the 13th historically is weaker than the average Friday, and the results are skewed by some large dips.” It is worth noting that Friday the 13th is up 57.0% of the time, above the average Friday though. Last, breaking things down by months, tomorrow will be the 14th occurrence of Friday the 13th in January since 1928. This month doesn’t stick out much, as the returns on Friday the 13th in January are fairly flat. The best months for Friday the 13th are June and August, while the worst are November and to no one’s surprise October. Please remember not to take any of this seriously; we don’t. Everyone have a great Friday the 13th and long holiday weekend if you get Monday off work. Oh, and avoid any mirrors or black cats. The Breakout No One Is Talking About Posted by lplresearch “If a tree falls in the forest and no one is around to hear it, does it make a sound?” Along the same lines as above, what happens when an equity market breaks out to new highs and no one notices? Quick—how has the London FTSE 100 done since the Brexit vote? Would you believe it is one of the top-performing global stock markets in the world? Also it has broken out of a 17-year basing pattern. I’m guessing not too many people saw that happening on the night of June 23. A month ago in Is Europe Finally On The Mend? we noted many European markets were improving technically and more strength could be possible. Since then Europe has done very well, but the FTSE 100 is the true rock star. As of Thursday, it was up a record 13 days in a row and incredibly made new highs 11 days in a row. Per Ryan Detrick, Senior Market Strategist, “One of the better looking long-term breakouts you will ever see is the FTSE 100, yet no one is talking about it. After lagging for years, it is completing what is called a bullish cup-and-handle pattern*. This could be a great sign for British equities, possibly European equities, and potentially global equities—as it is yet another market breaking out to new highs, further confirming the global bull market.”
Stockaholics come join us in our weekly market poll and vote where you think the markets will end this upcoming week ahead!- Weekly SPX Poll - Sentiment (1/16-1/20) <-- click there to open! In addition we have our weekly stock picking contest now up and running as well!- Stockaholics Weekly Stock Picking Contest for the Week of (1/16-1/20) <-- click there to open! We also now have a daily stock picking & market direction guessing challenge running here!- Stockaholics Daily Stock Pick Challenge & SPX Sentiment Poll for Tuesday (1/17) <-- click there to open! It would be pretty awesome to see some of you join us and participate on these. Have a fantastic weekend everyone!
Here are the most anticipated ERs for this upcoming week ahead (I'll also have the earnings chart posted in here as well once it's ready) ***Check mark next to the stock symbols denotes confirmed earnings release date & time*** Tuesday 1.17.17 Before Market Open: Tuesday 1.17.17 After Market Close: Wednesday 1.18.17 Before Market Open: Wednesday 1.18.17 After Market Close: Thursday 1.19.17 Before Market Open: Thursday 1.19.17 After Market Close: Friday 1.20.17 Before Market Open:
And lastly, as I'm sure this will get asked at some point over the weekend...but yes the cash markets are indeed closed this coming Monday the 16th in observance of Martin Luther King, Jr. Day. Here is the CME Globex holiday schedule for this Monday. Globex futures open at their normal 6pm eastern time open on Sunday, Jan 15th then go all the way until 1pm eastern time where there will be a halt. Then the re-open will again be on Monday, Jan 16th at 6pm eastern time and we'll be back to our regularly scheduled market again from there... Have a great weekend everyone!
ShadowTrader Video Weekly 1.15.17 - Poised for a breakout, but don't hold your breath Video from ShadowTrader Peter Reznicek
As promised here is EW's most anticipated ERs for this upcoming week ahead: ($NFLX $GS $UNH $C $MS $GE $IBM $CMA $OZRK $USB $CSX $SWKS $WTR $EDU $SNV $INFO $ASML $FAST $UAL $RF) And in my quote below are all of those ERs with the date/time and estimates-
Key Earnings Reports Next Week Below is a list of the 25 largest companies reporting earnings next week, with some of our key earnings statistics included (shaded color-coded columns). This data covers all quarterly earnings reports for each company going back to 2001. Sixty percent of next week’s key reports come from the Financial sector. 15 of the 25 largest stocks set to report are Financials. Given how well the sector has performed since the election, we think the expectations bar is going to be set high. Any misses or negative guidance will see stock prices fall more than they normally would. On Tuesday (Monday is a holiday), we hear from Morgan Stanley (MS) and UnitedHealth (UNH), then we hear from Citigroup (C) and Goldman Sachs (GS) on Wednesday morning. Netflix (NFLX) is going to be watched closely when it reports Wednesday after the close. On Thursday, American Express (AXP) and IBM are the biggest reports (both after the close), and then General Electric (GE) rounds out the week on Friday morning. Of the stocks shown, UNH, GS, NFLX, UNP, and SYF have historically beaten earnings estimates the most often. Goldman has also beaten revenue estimates the most often out of all stocks listed. Historically, stocks like MS, CSX, USB, KEY, and SYF have reacted the most positively on their earnings reaction days, while Netflix (NFLX) is by far the most volatile stock on earnings out of the names listed. You can view a full list of the most volatile stocks on earnings in this post we did last week.
^^ hmm that is interesting ... i always thought spot currencies open at 5pm eastern on sunday's? how much of a dive on cable/dollar are you seeing right now @stock1234? wonder if we're challenging the flash crash low from oct. 7th
@Cy McCaffrey Cy, I was just looking at the CNBC APP on my phone. The sterling is now trading at 1.1987 against the dollar, down about 1.5%
Pound Drops Below $1.20 as May Reported to Seek Hard Brexit https://www.bloomberg.com/news/arti...month-low-as-may-reported-to-seek-hard-brexit While it sounds like a bad news, weaker currency might actually push FTSE higher yet again
So the past couple weeks I've been pretty hard on the RUT -- mainly out of personal frustration! While I am still remaining neutral on the RUT overall, most of my ramblings have been suggesting the Bears will steal the RUT out of this chop. Today, I'll make a brief case for the Bulls to retain control. For starters, since the RUT went into the chop zone back in mid-Dec, the RSI has been cooling significantly, from a high of around 80 to almost at the middle of the range @ 55. None of the fits or blips the RUT put up so far whilst in this chop have really registered all that much on the RSI...just a steady cool down. Similarly, the MACD Histogram began to reverse itself following that big green candle, spanning basically the entire floor-to-ceiling of the chop box. While the RUT continues to bounce around, the MACD Histogram is showing a clear reversal, and possibly acceleration, in bullish sentiment. And finally, there is that pierce of the chop box intraday, with a close right back in the box. I really (I mean REALLY) was hoping to see a decision made, some kind of continuation, but no...at least no decision to the downside. But maybe the decision was made? We'll see...
