Welcome Stockaholics to the trading week of March 25th! 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: T.B.A.
Bank Bloodbath Brings Down 'Bull Market' As Yield Curve Crashes Bonds, Bullion, & The Greenback are all higher since The Fed threw in the towel... stocks are lower... And despite the desperate efforts to talk up the economy, SHTF today... Chinese stocks managed gains on the week, thanks to three big liftathons... European markets were ugly all week... US equity markets had their worst day since Jan 3rd - all ending the week lower... Dow futures fell 500 points from the overnight highs... And the S&P 500 fell all the way to stop dead on 2800... Marking the sixth refusal at that magical level... As Bloomberg noted, you know things have gone a bit pear-shaped when utilities and tech are the top gainers, comfortably outperforming the broader market. But they took quite divergent paths to get there. It appears the squeezers ran out of ammo... Buybacks had a good week - until Friday, as the blackout window looms... Big bank stocks have bloodbath'd this week (worst week of the year) as the hopes of higher rates and steeper curve evaporate... But Regional banks were clubbed like a baby seal... the biggest weekly drop since Sept 2011 - after the USA downgrade And bank CDS have started to creep higher... Tesla had an ugly week... Credit and equity protection costs surged on the week... Yields collapsed around the world this week, with 10Y bunds going negative once again... Global average sovereign yields plunged to lowest since April 2018... US Treasury yields crashed this week... this is the biggest weekly drop in 5Y, 7Y, and 10Y yields since April 2017 For the first time since 2007, the spreads between 3m and 10y yields inverted - flashing the most-effective recession indicator since WW2... And inflation breakevens plunged, despite a lack of oil confirmation... The yield curve is now inverted to Fed Funds out to almost 10Y... Notably, The Fed is now priced to be easier than The ECB in 2019... The dollar index ended the week very marginally higher thanks to serious buying-panic in the last two days since The Fed... The relative stability expected from an easing Fed has prompted a run into carry trades and USD remains a big player. The Turkish Lira collapsed today as a surprise tightening by the Turkish central bank failed to stem a rout in the wake of an unexplained drop in official reserves. “Today the unsustainable nature of state-owned banks being the only sellers of [US dollars in exchange for lira] over recent weeks became evident,” said Roger Hallam, chief investment officer for currencies at JPMorgan Asset Management. Bitcoin managed gains on the week but Bitcoin Cash outperformed... Copper ended the week lower as China growth questions continued but WTI and PMs managed to hold on to gains despite the dollar ending higher... Gold rallied for the 3rd week in a row... WTI topped $60 intraweek, but ended back below $59... Finally, we refer to Knowledge Leaders Capital Bryce Coward's analysis of what happens next... We’ve cataloged all 20 uninterrupted 15% declines in the post-war period and documented what has happened afterward, as well as the type of market environment in which those declines have taken place. By uninterrupted decline, we mean a waterfall decline of at least 15% without an intermediate counter-trend rally of at least 5%. Some bullet points describing the rallies following those declines are below: The average counter-trend rally following a 15% waterfall decline is 11.9% (11% median) and it takes place over 21 trading days on average (median 11 days). The rallies end up retracing 57% of the decline on average (median 52%). Waterfall declines of at least 15% have only taken place in bear markets. The average of those bear markets have a peak-to-trough decline of 33% (median 29%) The duration of those bear markets is 284 trading days on average (median 139 days) In 16 of 19 instances (excluding the decline we just witnessed), a recession was associated with the bear market 100% of the time the low resulting from the waterfall decline was retested, and in 15 of 19 cases a new lower lower was made. It's different this time though...
Here are the percentage changes for the major indices for WTD, MTD, QTD & YTD in 2019- S&P sectors for the past week-
Watch Out For End of March/Q1 Weakness March markets have been rather turbulent in recent years with weakness historically later in the month, taking some mean end-of-quarter hits as fund managers often partake in quarterly window dressing and portfolio restructuring. After the big gains we logged in January and February choppy market action is not surprising, especially with the backdrop of the ongoing China trade and Brexit deal delays and what appears to be the end of the Fed tightening cycle for now. Boeing’s woes and U.S. political infighting have not helped either. But as you can see in the chart of the recent history of typical March trading patterns with 2019 performance overlaid in dotted lines, action so far this month has not been all that unusual. With that in mind we are ever leery of another end-of-March hit. April Almanac: DJIA’s Best Month April marks the end of our “Best Six Months” for DJIA and the S&P 500. On April 1st, we will begin looking for our seasonal MACD sell signal and corresponding early signs of seasonal weakness. Even in historically strong pre-election years the “Worst Six Months” have been lackluster on average. April 1999 was the first month to gain 1000 DJIA points. However, from 2000 to 2005, “Tax” month was hit, declining in four of six years. Since 2006, April has been up thirteen years in a row with an average gain of 2.3% to reclaim its position as the best DJIA month since 1950. April is third best for S&P and fourth best for NASDAQ (since 1971). The first half of April used to outperform the second half, but since 1994 that has no longer been the case. The effect of April 15 Tax Deadline appears to be diminished with numerous bullish days present on either side of the day. Traders and investors are clearly focused on first quarter earnings and guidance during April. Exceptional Q1 earnings and positive surprises tend to be anticipated with stocks and the market moving up in advance of the announcements and consolidating or correcting afterwards. Typical pre-election year strength does bolster April’s performance since 1950. April is DJIA’s best month in pre-election years (+4.0%), second best for S&P 500 (+3.5%) and third best for NASDAQ (+3.5%). Small caps measured by the Russell 2000 also perform well with gains (+2.8%) in seven of ten pre-election year April’s since 1979. Russell Falls Apart Mar 22, 2019 While the rest of the market was rallying and holding up, the Russell has been struggling for close to a month now. After peaking above its 50-DMA back on 2/25, the Russell has had a hard time holding onto any gains lately. Earlier this week it made a lower high when the rest of the market was making higher highs, and to close out the week, it declined 3.6% for its worst day of 2019, making a lower low. Not a pretty chart at all. The Russell’s underperformance can really be seen in the ratio of the Nasdaq to the Russell 2000. This week, the ratio between the two really become unglued, topping 5 for the first time since February 2001. On a longer-term basis, the only time the Nasdaq has been outperforming the Russell 2000 by such a wide margin was during the period from November 1998 through February 2001. And if you think the ratio is extreme now, during that period it got as high as 8.64 on March 28, 2000. In order for the ratio to get to that sort of extreme now, the Nasdaq would need to top 13,000 (assuming the Russell remained at the same level). Yield Curve, Yield Curve, Yield Curve Mar 22, 2019 If you are anything else besides the yield curve today, the market doesn’t care. After inverting for the first time since 2007 earlier today, the spread between the yields on the 10-year and 3-month US Treasuries has sucked up all the oxygen in the room as investors, traders, and their algos fret over the ominous economic signal that an inverted yield curve historically implies. Who cares whether the onset of a recession usually comes several months or even a couple of years after the curve first inverts; investors are using this as an excuse to take profits, and take profits is what they’re doing. Just to illustrate how captivating the yield curve has been to the equity market, check out an intraday chart of S&P 500 futures versus the yield curve since very early this morning. Moves in the yield curve are clearly leading equities. When the curve started flattening early this morning, equities started heading south with the pace of selling accelerating when the curve inverted. Then, as the curve made its intraday low right after noon, the low in equities followed less than 40 minutes later. It’s like the school playground, where the yield curve is the ‘cool kid’ and equities are the followers. STIRs Carried Away Mar 22, 2019 With regards to the outlook for the rest of the year, there’s no other way to describe the current STIRs market other than “getting carried away.” As shown below, the Fed Funds Futures market has moved from pricing a greater than 90% chance of no hikes in 2019 to a more than 50% chance that we will see a rate cut by the end of the year! For context, as recently as mid-October the odds of either one hike, two hikes, or three-plus hikes were all around 1-in-4. While rate hikes being taken off the table for this year makes sense given the Fed’s extremely dovish shift since financial markets collapsed and global data gave up the ghost late in 2018, markets are going considerably further. Stocks Feeling Sensitive Mar 22, 2019 Investors are wondering what the right number is for the market as stocks leg lower on bad global data to close the week. Without taking a view on what the “right” price for the S&P 500 is, below we show a way to organize thinking about valuation in the short-term. In the table below we show a range of EPS growth rates relative to 2018 and a range of multiples on the resulting EPS numbers. The result is where the S&P 500 should trade given hypothetical earnings and how those are valued. For example, if you estimate EPS will fall 2% in both 2019 and 2020, and you value those EPS at a multiple of 15.0x, the S&P 500 is almost 700 points above where it should be! Alternatively, if you think EPS will be stable but should be valued at a relatively aggressive 19.0x, the S&P 500 should be trading near 3100. In the grid below, we’ve highlighted ~2800 values (roughly where the S&P 500 sits right now) to show the implicit EPS growth and multiple assumptions embedded in the price. Again, we don’t know the “right” combination of multiples and EPS growth, but if you’re extremely beared up with the Friday drop or think stocks are set to surge thanks to a dovish Fed, this analysis can help you see what sort of assumptions would need to play out for that to happen. The Fed on Reserve Posted by lplresearch The Federal Reserve (Fed) has doubled down on its patient stance. Policymakers signaled a complete pause in policy at the conclusion of the Fed’s March meeting, with a nod to a slowing pace of growth and global uncertainty. As shown in the LPL Chart of the Day, Fed voting members projected (via the latest “dot plot”) unchanged to slightly lower interest rates this year, with one more rate hike in 2020 or later to lift the long-term rate to 2.75%. Policymakers also lowered their gross domestic product growth projections to 2.1% for 2019 and 1.9% for 2020, while Fed Chair Jerome Powell acknowledged that global weakness could be a notable headwind to the U.S. economy. Still, Powell conveyed significant faith in U.S. economic fundamentals, noting in his press conference that “it’s a great time to be patient,” as the labor market remains strong, confidence has improved back to encouraging levels, and the outlook remains positive. “Powell and the Fed delivered a balanced message to U.S. investors, indicating that the lack of clarity warrants a patient stance,” said LPL Research Chief Investment Strategist John Lynch. “We side with the Fed here in thinking that underlying economic conditions remain solid, with evidence of a slowdown at the beginning of this year from near-term temporary headwinds.” Powell hinted that interest rates are in the “broad range” of neutral, or the point where policy is neither accommodative nor restrictive to output. That doesn’t mean that rates have hit a short-term ceiling, though. We wouldn’t be surprised if stabilizing U.S. growth and higher inflation lead to a rate hike in the second half of 2019. The Fed’s current projections give few indications of that happening, likely because of policymakers’ hesitance to pass judgment on the U.S. economy amid mixed signals from data. Because of this, we expect the Fed to carefully communicate any change in stance to investors. The Fed also announced it would start reducing the pace of its balance-sheet runoff in May, and end the runoff entirely in September. Powell reiterated that interest rate changes are the Fed’s primary policy tool, but a larger balance sheet could help buoy risk assets and capital investments.
Here are the current major indices pullback/correction levels from ATHs as of week ending 3.22.19- Here is also the pullback/correction levels from current prices- ...and here are the rally levels from current prices-
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 (3/25) <-- click there to cast your daily market vote and stock pick! Stockaholics Weekly Stock Picking Contest & SPX Sentiment Poll (3/25-3/29) <-- click there to cast your weekly market vote and stock picks! Stockaholics Weekly T/A Charting Challenge (3/25-3/29) <-- 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!
Stock Market Analysis Video for March 22nd, 2019 Video from AlphaTrends Brian Shannon ShadowTrader Video Weekly 3.24.19 - Yield Curve Inversion, Germany, Mueller Report Video from ShadowTrader Peter Reznicek
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 3.25.19 Before Market Open: Spoiler: CLICK HERE TO VIEW MONDAY'S AM EARNINGS TIMES & ESTIMATES! Monday 3.25.19 After Market Close: Spoiler: CLICK HERE TO VIEW MONDAY'S PM EARNINGS TIMES & ESTIMATES! Tuesday 3.26.19 Before Market Open: Spoiler: CLICK HERE TO VIEW TUESDAY'S AM EARNINGS TIMES & ESTIMATES! Tuesday 3.26.19 After Market Close: Spoiler: CLICK HERE TO VIEW TUESDAY'S PM EARNINGS TIMES & ESTIMATES! Wednesday 3.27.19 Before Market Open: Spoiler: CLICK HERE TO VIEW WEDNESDAY'S AM EARNINGS TIMES & ESTIMATES! Wednesday 3.27.19 After Market Close: Spoiler: CLICK HERE TO VIEW WEDNESDAY'S PM EARNINGS TIMES & ESTIMATES! Thursday 3.28.19 Before Market Open: Spoiler: CLICK HERE TO VIEW THURSDAY'S AM EARNINGS TIMES & ESTIMATES! Thursday 3.28.19 After Market Close: Spoiler: CLICK HERE TO VIEW THURSDAY'S PM EARNINGS TIMES & ESTIMATES! Friday 3.29.19 Before Market Open: Spoiler: CLICK HERE TO VIEW FRIDAY'S AM EARNINGS TIMES & ESTIMATES! Friday 3.29.19 After Market Close: Spoiler: CLICK HERE TO VIEW FRIDAY'S PM EARNINGS TIMES & ESTIMATES! NONE.
And as promised here is the most anticipated earnings calendar for this upcoming trading week ahead- ($CRON $NBEV $LULU $BB $FIVE $WGO $RH $RHT $AEYE $PAYX $YRD $CCL $ICLK $MDWD $KMX $ARCO $ACN $INFO $LEN $ORN $HOME $OLLI $MKC $AKAO $SCVL $SNX $TITN $FDS $CONN $NEOG $SGH $ONTX $HYRE $SCWX $PVH $EVLV $LIFE $SNES $BOXL $UNF $EAST) If you guys want to view the full earnings post please see this thread here- Most Anticipated Earnings Releases for the week beginning March 25th, 2019 <-- click there to view!
A couple of my favorite charts The Atlanta fed doubled the 1st quarter estimated on the inventory and housing numbers to 1.2% Everybody went long after Thursday's rally The Summation index peaked around March 1st and has been deteriorating
Everyone's looking at different interest rate spreads One guy says 90m/30y spread needs to invert. One guy says 2y/10y spread needs to invert, and that hasn't happened yet. Although everything shorter than the 2y has exceeded the 10y. I'm waiting for the 2y/10y inversion. And even if/when that does invert, the stock market can rise after it (by what this guy says http://fat-pitch.blogspot.com/2017/11/the-flattening-yield-curve-is-not.html) So...we don't have a real inversion yet, so none of the above is in play yet (i.e. don't worry about market tending to rise after inversion). But bigbear0083 shared this nice data (https://blog.knowledgeleaderscapital.com/?p=16080)...if the market does drop in the short term, it's not because of interest rates.
Mueller did not find enough evidence that Trump obstructed justice or conspired with Russia: AG Barr https://www.cnbc.com/2019/03/24/att...to-release-mueller-russia-probe-findings.html Dow futures up around 100 points at the open
Good Monday morning to all. Here is this morning's pre-market news thread for those of you wanting to get a quick read before today's open- <-- click there to read! Hope everyone has a great trading day and week ahead.
Morning Lineup – Moving On Mar 25, 2019 The weekend’s release of the Meuller Report did not have the kind of fireworks that some were looking for but that markets can’t stand. From a political perspective, we’re probably far from the end of hearing about Russia, the elections, and any obstruction, but based on the market’s complete lack of any reaction this morning, it has already moved on. Market’s will also be trying to move on from Friday’s sharp declines after the yield curve (10y/3m) inverted for the first time in over a decade, and with the curve back in positive territory this morning, that should help stabilize things for now. Don’t forget, though, that there are just six days left in the quarter, and shortly after that Q1 earnings season kicks off, so that should be, at a very minimum, an interesting period for equities. Following in the heels of Friday’s sharp declines, Asian equities were hit hard overnight. For China, that meant that its streak of 1% gains to kick off the week ended at six. That was still enough to be the longest such streak of 1%+ gains in over a decade. From a technical perspective, though, China’s rally is still intact. While the Shanghai Composite has been consolidating gains over the last two to three weeks, the short-term uptrend that has been in place since it broke out in late February remains intact.
