Welcome Stockaholics to the trading week of November 4th! This past week saw the following moves in the S&P: Major Indices End of Week: Major Futures Markets on Friday: Economic Calendar for the Week Ahead: Sector Performance WTD, MTD, YTD: What to Watch in the Week Ahead: Monday Earnings: Occidental Petroleum, Uber, Prudential Financial, Shake Shack, Tenet Healthcare, Marriott, Consolidated Edison, Bausch Health, Groupon, Ryanair, Hertz Global, Tenet Healthcare, Under Armour 10:00 a.m. Factory orders 2:00 p.m. Senior loan officer survey Tuesday Earnings: Allergan, Becton Dickinson, Regeneron, Mylan, Arconic, Tapestry, Ratler Midstream, Hersha Hospitality, Caesars, MBIA, WW International, Whiting Petroleum, Assurant, Devon Energy, Virtu Financial, Diamondback Energy, Microchip Tech, Match Group 8:00 a.m. Richmond Fed President Thomas Barkin 8:30 a.m. International trade 9:45 a.m. Services PMI 10:00 a.m. ISM nonmanufacturing 10:00 a.m. JOLTS 12:40 p.m. Dallas Fed President Rob Kaplan 6:00 p.m. Minneapolis Fed President Neal Kashkari Wednesday Earnings: Qualcomm, CVS Health, Baidu, Wendy’s, Humana, Capri Holdings, Expedia, Adidas, Softbank, TripAdvisor, Square, Hostess Brands, Valvoline, Elanco Animal Health, Liberty Global, AXA Equitable, IAC/Interactive, Papa John’s 8:00 a.m. Chicago Fed President Charles Evans 8:30 a.m. Productivity and costs 9:30 a.m. New York Fed President John Williams 3:15 p.m. Philadelphia Fed President Patrick Harker Thursday Earnings: Disney, News Corp., Activision Blizzard, Zillow, Monster Beverage, Booking Holdings, Toyota, Air Products, AmerisourceBergen, Cardinal Health, Johnson Controls, Keurig Dr. Pepper, Teva Pharma, Norwegian Cruise Line, Discovery, NRG Energy, Ralph Lauren, Zoetis, Tradeweb Markets, Sturm Ruger, Cloudfare, Dropbox 8:30 a.m. Initial claims 1:05 p.m. Dallas Fed President Kaplan 3:00 p.m. Consumer credit 7:10 p.m. Atlanta Fed President Raphael Bostic Friday Earnings: Allianz, Ameren, Duke Energy, Honda 10:00 a.m. Consumer sentiment 10:00 a.m. Wholesale trade 11:45 a.m. San Francisco Fed President Mary Daly 8:30 p.m. Fed Governor Lael Brainard
"Extreme Greed" Trigger'd - Gold, Bonds, & Stocks Rally As Dollar Dives Thanks to a melt-up today, US equities (apart from Trannies) ended the week higher... But today's gains were farcically driven by a full court press of jawboning (5 Fed Speakers, Mnuchin, and Kudlow) to open the US equity markets... 0830ET Jobs Beat - Dow +100 0915ET Fed's Kashkari dovish: "we're not at maximum employment.. in free lunch zone" - Dow +20 0920ET Mnuchin: "constructive talks, working hard" - Dow +30 0930ET Fed's Rosengren hawkish: further monetary accommodation not needed - Dow unch 0935ET Fed's Clarida neutral: "we will be data-dependent, economy/consumer in good place" - Dow unch 0936ET Fed's Kaplan dovish: "growth in US is decelerating, need skills-based immigration" 0937ET Kudlow: White House wants tax cuts for middle class, Trump optimistic on trade deal - Dow unch 0945ET Kudlow: "enormous progress on IP theft" - Dow +30. 0950ET Record high for S&P and Nasdaq 0955ET Kudlow: "US-China trade call may be happening now, Ag & FX parts virtually completed" - Dow +20 1000ET ISM Manufacturing MISS, 3rd month of contraction (bad news is good news) - Dow +50 1050ET Mission Accomplished - Dow futs take out post-Powell high stops 1215ET Dow futs stops run and fade begins into EU close 1255ET USTR: "constructive trade talks today" - Dow unch 1300ET Fed's Quarles dovish: current policy stance "likely to remain appropriate... unless data weakens" - Dow unch 1310ET MOFCOM: "constructive trade talks today, achieved consensus" - Dow +20 1325ET Fed's Daly neutral/hawkish: "annual wage growth of about 3% is good news" - Dow unch 1450ET Fed's Williams neutral/hawkish: "economy is in a very good place, it is strong" - Dow -10 1600ET RECORD CLOSE FOR S&P AND NASDAQ And the headlines seemed perfectly times to rejuvenate a stalled short-squeeze... Source: Bloomberg So what did we learn on Friday? As Bloomberg noted, the labor market remains pretty resilient, which suggests that the angel of economic death isn’t particularly close to knocking on the door. The ISM survey continued to point toward a manufacturing contraction, but there are at least a few pockets of hope from new orders and (believe it or not) exports. And the vice chairman of the Fed gave a nod that an easing bias remains in place by suggesting that economic risks remain skewed to the downside. This isn’t a Goldilocks economy by any stretch, because the caution in the business sector remains very real. Then again, perhaps it doesn’t need to be for risky assets to rally if familiar FOMO themes start coming into play. And the equity gains happened as US macro data disappointed notably... Source: Bloomberg However, since Powell's dovish promise on raising rates without major inflation, gold is the leader... US equities bucked the trend of weaker economic data and declining earnings expectations thanks to one simple thing - liquidity... Source: Bloomberg Chinese markets ended the week in a buying panic... Source: Bloomberg Europe ended more mixed with Spain worst and Italy best... Source: Bloomberg European bank stocks and credit have dramatically decoupled (thanks to Draghi's idiotic schemes) Source: Bloomberg Momo ended the week lower... Source: Bloomberg As cyclicals were panic bid today.... Source: Bloomberg As the odds of a trade deal surged back today after TSY, USTR, MOFCOM, and Kudlow comments... Source: Bloomberg Stocks are notably decoupled from the relative hawkishness priced into fed fund futures... Source: Bloomberg Treasury yields ended the week lower (down between 6 and 8bps)... Source: Bloomberg 30Y Yields fell notably on the week (first drop in yields for 4 weeks)... Source: Bloomberg And global negative-yielding debt jumped most since August... Source: Bloomberg The yield curve steepened (today's surge drove the week's performance) bringing the market closer to recession... Source: Bloomberg Bond vol collapsed this week... (this is the biggest 2-week drop in bond vol since Summer 2013's temper tantrum reaction) Source: Bloomberg The Dollar dumped lower on the week after Powell's dovish comments (lowest weekly close since July)... Source: Bloomberg Source: Bloomberg Cryptos were mixed on the week with Bitcoin and Bictoin Cash outperforming... Source: Bloomberg Bitcoin managed to get back above $9,000 and traded among extremely technical levels... Source: Bloomberg Gold gained the most on the week and today's surge in oil made it look less disastrous... Source: Bloomberg WTI scrambled back above $56 today (after testing a $53 handle)... Gold surged after The Fed, back above $1500 to the top of the recent range... Finally, we note that Elizabeth Warren is sliding in the money-odds (not polls) and Hillary is rising... Source: Bloomberg We also note that all the worry about the impeachment inquiry (odds of an impeachment now 79%) is apparently dismissed by the Senate as the odds of Trump completing his first term are 70%... Source: Bloomberg But, US long-term profits growth forecasts have collapsed... As markets surge to 'Extreme Greed'... hasn't ended well before! Source: CNN And with Greed at its peak, fear is at a record nadir (VIX Specs have never been more short volatility)... Source: Bloomberg
Here are the percentage changes for the major indices for WTD, MTD, QTD & YTD in 2019- S&P sectors for the past week-
Typical November Trading: First Month of “Best Months” November’s long-term track record has been stellar. It is the number one month of the year for S&P 500 since 1950 with an average gain of 1.6%, up 47 times in 69 years. DJIA’s record matches S&P 500, up 47 of 69 with an average gain of 1.6% although November is DJIA’s second best month. NASDAQ also averages a 1.6% gain in November (second best), up 33 times in 48 years (since 1971). Over the more recent 21-year period, 1998 to 2018, November’s average performance has remained solid. November has opened well with gains during the first four or five trading days depending on index. From there trading has become rather choppy with gains receding through mid-month before a low around the fourteenth trading day. At which point bullish holiday spirit has kicked in around Thanksgiving propelling all indexes to a strong rally to finish the month. Next Week's Economic Indicators - 11/1/19 Fri, Nov 1, 2019 It was an extremely busy week for economic data with over 40 releases on the calendar. A vast majority came in either inline or worse relative to expectations or the previous period, while only 27% of releases came in stronger than expected or above the prior reading. The Chicago Fed’s National Activity Index was the first release of the week, turning back into negative territory in September. The Dallas Fed’s Manufacturing Activity index was also released on Monday and also missed estimates while shifting negative. The Conference Board’s reading on consumer confidence also softened unexpectedly as the spread between present conditions and expectations widened further. Housing data was somewhat mixed as prices slowed slightly, but pending home sales was much better than expected. Wednesday’s GDP release also came in stronger than expected with solid personal consumption. Core PCE and other inflation indicators like the Employment Cost Index were inline with expectations. Finally, Wednesday also saw the FOMC rate decision which resulted in rated cut another 25 bps, as expected. ADP’s stronger than expected employment data, preceded a solid NFP Report on Friday. Nonfarm Payrolls were expected to show 85K added jobs in the month of October which would have been a substantially weaker number than the 136K increase the prior month. Instead, actual results showed 128K added jobs, which was better than all but the highest of estimates (140K). Another focus on Friday was the Markit and ISM readings on manufacturing. Both were expected to improve from the prior month which they in fact did but by less than estimates were calling for. Markit's preliminary PMI was originally showing a stronger reading of 51.5. Instead, the final reading came in at 51.3 which was still the highest reading since April so the report wasn't entirely bad. Meanwhile, the ISM index ticked up off of last month's reading of 47.8, its lowest levels since June of 2009. This was in part thanks to the readings on new orders and employment improving. Aside from these improvements, ISM's indices—unlike Markit—are still showing contraction in the manufacturing space. The economic calendar slows down next week with around half as many releases as this week. Final durable and capital goods data and factory orders will take up the entirety of Monday’s reports. Durable goods orders are not expected to show any change from the preliminary readings, but factory orders are expected to show moderation in September. On Tuesday, we will get the services counterparts to today’s ISM and Markit manufacturing gauges. While both manufacturing readings missed, ISM’s Non-Manufacturing index is anticipated to rise to 53.5. Quarterly mortgage delinquencies and foreclose data will also be out on Tuesday. Wednesday will see more quarterly data with the Q3 preliminary releases of Nonfarm Productivity and Unit Labor costs. Following this week’s weaker Confidence report from the Conference Board, next Friday we will get further clarification on sentiment with the University of Michigan’s preliminary November data. Price-to-Earnings Around the Globe Wed, Oct 30, 2019 Every Wednesday, we release our Global Macro Dashboard, which tracks major data economic and market data points from 23 of the largest global economies. One stat we include is each country's P/E ratio for their respective equity markets. India continues to have the highest valuation with a P/E of 26.9. That compares to the US which is now valued at 20.1x earnings and the fifth-highest of the countries tracked. This is also higher than the average P/E for all of these countries which is 17.02. Other countries with notably high valuations include Norway, Germany, and Switzerland. Russia, on the other hand, has by far the lowest valuation of just 6.41, the only country with a P/E in the single digits. Compared to where things stood six months and one year ago, valuations around the globe have collectively risen. The world average now stands at 17.0 versus 16.4 at the end of April and 15.1 last October. While the average multiple has increased, only 60% of the countries tracked have seen valuations increase over the last 6 months while 74% have risen over the past year. Germany's P/E has actually risen the most of these having jumped to the third-highest P/E of all countries (22.6). Six months and one year ago, Germany (EWG) actually had a below-average P/E. Multiple expansion can come in the form of higher prices and/or lower earnings, and in the case of Germany, the culprit has been weaker earnings. Even though it currently continues to hold the number one spot on the list, multiples in India (INDA) have actually fallen over the past six months from 30.4 down to the current level of 26.9. Given INDA has fallen over 2.5%, this lower valuation makes better sense than the jump in Germany. Similarly, in regards to the US, the ratio rising to over 20 from 19.28 comes is a result of the S&P 500's 3% gain as earnings have been pretty flat. Compared to one year ago, it is a similar story. As is the case now, Russia and Hong Kong have had the lowest valuations over the past six months and one year, although they have risen in that time. The valuation for most countries have risen over the past year. Summarizing in the table below, there is a bit of a mixed picture in regards to how P/E ratios have changed with performance over the past half-year and year. One would expect the ratio to increase as equities rise, but that has not necessarily been the universal case. For countries like Norway (ENOR) and Germany (EWG), valuations have risen the most in spite of equity markets that have experienced declines over the past six months (Norway's declines being the fourth-worst of the 23 countries) and only modest gains in the past year. On the other hand, Russia (RSX) has the lowest valuation of all countries despite having outperformed dramatically over the last six to twelve months. RSX has also not seen any major surge in valuation in that time as earnings have kept up with prices. Meanwhile, other countries like India (INDA), Switzerland (EWL), Taiwan (EWT) and the US (SPY) have seen this dynamic react more in line with what could be expected. Guidance Trends Lower Wed, Oct 30, 2019 Our good friend (and a former boss) Laszlo Birinyi used to hammer home that "it's all about the guidance!" when it comes to earnings reports for specific companies. That is indeed very true as investors discount stocks based on forward projections more than what they've done in the past. On the subject of guidance, this season we've been seeing a lot more companies lower guidance than raise guidance, which has resulted in a pretty big tick lower in our guidance spread reading on our Earnings Explorer page (available to Bespoke Institutional members). Our guidance spread reading shows the difference between the percentage of companies that have raised guidance and lowered guidance over the last three months on a rolling basis. A positive reading means more companies have raised guidance than lowered guidance over the last three months and vice versa for a negative reading. As you can see, the reading is currently at -6.48 percentage points, which is well below the historical average of -2.97. (It's notable that historically the average guidance spread has been negative, which tells us that in general companies like to under-promise and over-deliver.) The guidance spread completely tanked in the first quarter of 2019 before stabilizing and rallying back during the summer. While it hasn't been in positive territory all year, the spread did briefly get above its historical average during the Q2 reporting period in July. A negative guidance reading means companies are less optimistic about the future than they could be, but it's not necessarily a bearish sign for the stock market. If anything, it gives companies an easier chance at beating estimates going forward as long as the economy doesn't completely fall off a cliff. As you can see in the second chart below that extends our guidance spread reading all the way back to 2003, the current reading is hardly a negative outlier to be concerned about. The only time the spread really collapsed was in mid to late 2008 in the midst of the Financial Crisis. Want to see Bespoke's best analysis? The U.S. Economy Chugs Along October 30, 2019 Gross domestic product (GDP) growth slowed for a third quarter, but the U.S. economy is still chugging along at an average pace. GDP grew 1.9% in the third quarter, its slowest pace of growth since the fourth quarter of 2018, as shown in the LPL Chart of the Day. Still, GDP increased 2% year over year last quarter, slightly below 2.1% year-over-year average growth since the cycle started in July 2009. The composition of growth last quarter showed U.S. consumers pulled the economy along once again. Consumer spending contributed 1.9 percentage points to the GDP increase during the quarter, while government spending added 0.4 percentage points. Housing contributed 0.2 percentage points, a nice surprise after residential investment dragged on growth for six straight quarters. Business spending reduced overall GDP growth by 0.4 percentage points, its biggest drag on growth since the fourth quarter of 2015. Growth in capital expenditures (capex) has stalled as U.S. companies have shelved expansion plans amid a surge in global uncertainty. “The economy continues to muddle through at an average pace of growth,” said LPL Financial Senior Market Strategist Ryan Detrick. “While we’re not surprised to see another dull quarter for capex, we’d like to see business spending eventually pick up this late in the cycle. Higher business spending could provide a boost to productivity, and higher productivity could jumpstart GDP growth.” Unfortunately, we don’t expect to see a material increase in capex growth until the United States and China make more significant progress on the trade front. The U.S.-China limited trade deal could provide some lift as tensions thaw, but we think companies may need to see more evidence of a larger compromise before feeling confident enough to spend. Will The Fed Go Three For Three? October 29, 2019 The Federal Reserve Bank (Fed) is widely expected to cut interest rates on Wednesday, October 30, which would be the third cut this year after nine consecutive hikes. The current fed funds rate target is 1.75–2%, with a 25 basis point cut likely happening this week. As discussed in Market Tricks and Treats, we think there will be only one more rate cut this year, and we don’t expect the Fed to take its policy rate below 1.5%, even in 2020. It is important to note that the Fed started new cycles of rate cuts in 2001 and 2007 with 50 basis point cuts, implying they were more worried than they were letting on. Seeing that this cycle has had cuts of only 25 basis points so far, the cuts are being viewed more as “insurance” rather than warding off an impending recession. “We’ve seen periods of economic slowdowns that had three consecutive 25 basis point cuts, most recently in the mid- and late 1990s,” explained LPL Financial Senior Market Strategist Ryan Detrick. “The good news is the economy accelerated after the slowdowns and stocks did quite as well.” As the LPL Chart of the Day shows, stocks delivered impressive results after three initial 25 basis point cuts in 1975, 1996, and 1998, with the S&P 500 Index up more than 10% six months later and 20% a year later. As history shows, we don’t have to fear more Fed rate cuts, instead they just might have bulls smiling. Three and Done October 31, 2019 The Federal Reserve (Fed) could be three and done with interest rate cuts. On October 30, the Fed reduced interest rates by 25 basis points (0.25%) in its third rate cut of the economic cycle. While the headline decision was dovish, the Fed signaled this could be the last rate cut for a while. The clearest hint was policymakers’ removal of language stating they would “act as appropriate to sustain the expansion.” Going forward, the Fed will now “assess the appropriate path of the target range for the federal funds rate.” Fed Chair Jerome Powell doubled down on this notion in his post-meeting press conference. He kicked off his comments by saying that “monetary policy is in a good place” and that the current state of monetary policy is likely to remain appropriate as long as the economic outlook stays favorable. Powell didn’t drop the Fed’s commitment to flexibility, but he did note that downside risks had subsided. We’ve agreed with the Fed’s characterization of recent rate cuts as a “mid-cycle adjustment” in response to global headwinds, rather than an attempt to fend off a serious recession threat. We also anticipated that the series of rate cuts wouldn’t last long, and that the Fed wouldn’t take the fed funds rate close to zero. “Given the U.S. economy’s resilience and the already low policy rate, we do not expect the Fed to take rates much lower,” said LPL Financial Senior Market Strategist Ryan Detrick. “Policymakers clearly view these cuts as a risk management tool, and they want to ensure enough wiggle room to adjust rates further when a recession appears more likely.” As shown in the LPL Chart of the Day, if this last phase of rate cuts is indeed over, it would largely mirror the Fed’s other two “mid-cycle adjustments” since 1990. Wall Street’s favorite analogy for the current environment is the mid-1990s, and we see several parallels between then and now. If the pattern from the 1990s holds, the three rate cuts may be enough to extend the cycle. The Fed’s next challenge may be steering markets away from further rate cut expectations, while promoting policy flexibility in case conditions turn again. Powell was able to navigate markets successfully in Wednesday’s decision, and we have faith he can guide investors through another U-turn in policy.
Here are the current major indices pullback/correction levels from ATHs as of week ending 11.1.19- Here is also the pullback/correction levels from current prices- ...and here are the rally levels from current prices-
Stock Market Analysis Video for November 1st, 2019 Video from AlphaTrends Brian Shannon ShadowTrader Video Weekly 11.3.19 Video from ShadowTrader Peter Reznicek (VIDEO NOT YET POSTED!)
Stockaholics come join us on our stock market competitions for this upcoming trading week ahead!- ======================================================================================================== Stockaholics Daily Stock Pick Challenge & SPX Sentiment Poll for Monday (11/4) <-- click there to cast your daily market vote and stock pick! Stockaholics Weekly Stock Picking Contest & SPX Sentiment Poll (11/4-11/8) <-- click there to cast your weekly market vote and stock picks! Stockaholics Weekly T/A Charting Challenge (11/4-11/8) <-- click there to participate! ======================================================================================================== It would be pretty sweet to see some of you join us and participate on these! I hope you all have a fantastic weekend ahead!
Here is a look at this upcoming week's Global Economic & Policy Calendar- (GLOBAL ECONOMIC AND POLICY CALENDAR NOT YET POSTED!)
Here are the most anticipated Earnings Releases for this upcoming trading week ahead. ***Check mark next to the stock symbols denotes confirmed earnings release date & time*** Monday 11.4.19 Before Market Open: Spoiler: CLICK HERE TO VIEW MONDAY'S AM EARNINGS TIMES & ESTIMATES! Monday 11.4.19 After Market Close: Spoiler: CLICK HERE TO VIEW MONDAY'S PM EARNINGS TIMES & ESTIMATES! Tuesday 11.5.19 Before Market Open: Spoiler: CLICK HERE TO VIEW TUESDAY'S AM EARNINGS TIMES & ESTIMATES! Tuesday 11.5.19 After Market Close: Spoiler: CLICK HERE TO VIEW TUESDAY'S PM EARNINGS TIMES & ESTIMATES! Wednesday 11.6.19 Before Market Open: Spoiler: CLICK HERE TO VIEW WEDNESDAY'S AM EARNINGS TIMES & ESTIMATES! Wednesday 11.6.19 After Market Close: Spoiler: CLICK HERE TO VIEW WEDNESDAY'S PM EARNINGS TIMES & ESTIMATES! Thursday 11.7.19 Before Market Open: Spoiler: CLICK HERE TO VIEW THURSDAY'S AM EARNINGS TIMES & ESTIMATES! Thursday 11.7.19 After Market Close: Spoiler: CLICK HERE TO VIEW THURSDAY'S PM EARNINGS TIMES & ESTIMATES! Friday 11.8.19 Before Market Open: Spoiler: CLICK HERE TO VIEW FRIDAY'S AM EARNINGS TIMES & ESTIMATES! Friday 11.8.19 After Market Close: Spoiler: CLICK HERE TO VIEW FRIDAY'S PM EARNINGS TIMES & ESTIMATES! NONE.
And finally here is the most anticipated earnings calendar for this upcoming trading week ahead- ($ROKU $SQ $DIS $CVS $UAA $CHK $AMRN $UBER $TTD $SYY $ATVI $BHC $RACE $GWPH $S $BIDU $NSP $QCOM $SHAK $KPTI $REGN $TEVA $CYBR $NSSC $OXY $EOLS $APPS $TNDM $PLUG $COHU $FIT $GOLD $IQ $FE $HUM $RNG $CHGG $SPNS $KL $SEDG $SOGO $WW $CNTY $WEN) If you guys want to view the full earnings post please see this thread here- Most Anticipated Earnings Releases for the week beginning November 4th, 2019 <-- click there to view!
The high PE and no profit companies continue to underperform values like banks and energy outperforming
Yup, big time underperformance. The interesting thing is that IVW itself has been moving up (just not as fast as IVE), but the really big growers (but 0 profit) like SaaS/cloud stocks are taking big hits (TWLO r.i.p). But now IVW is facing a 2x top resistance.
