Welcome Stockaholics to the trading week of Septebmer 3rd! This past week saw the following moves in the S&P: Major Indices End of Week: Bird's Eye view of the 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.
Nasdaq Surges To Best August Since 2000, Bonds Bid As EM Collapses The US stock market seems distracted from bonds, FX, the yield curve, macro data, and geopolitics... so here is a distraction for the distraction watchers... It seems August was "buy all the things" month as bonds and stocks both rallied notably... and once again it was all about China... Especially buy US stocks - because US data has been so awesome!! (US Macro Surprize index is down 6 of the 8 months of this year) Chinese Stocks did not have a great August... European Stocks were lower but only Italy was really ugly... US Stocks just went upper-er and upper-er... This was the Nasdaq's best August since the peak of the DotCom bubble... (Dow/S&P best August since 2014) Tech stocks led the way, massively outperforming financials... FANG Stocks soared in August - second best month since January's meltup... Some context here from CLSA - FANG stocks have doubled on average in 23 months and tripled in 43 months It's even more concentrated than that. AAPL (the biggest market cap company in the world) is up a shocking 20% in August, and AMZN is up 13% - Combined they account for 25% of the entire Nasdaq gain in August. Treasury yields tumbled across the entire curve in August, with the long-end outperforming... Biggest drop in 10Y yields this month since March 2018 (and dropped to the lowest monthly close since March 2018)... The yield curve tumbled in August - flattening for the 6th month in a row (with a small rebound today)... The Dollar managed modest gains on the month - but was only bid early and late in August (highest monthly close since June 2017) with a big roundtrip in the middle triggered by China... Despite China's intervention, the Yuan ended lower on the month... the 5th month of Yuan devaluation in a row The biggest headlines were from the emerging market space where currencies collapsed... While The Rand, Real, and Ruble were rough; Argentina and Turkey Collapsed... Emerging Market FX is now at its weakest on record... In fact, EM FX volatility is now at a record high relative to G7 volatility... Cryptos had another ugly month with Ethereum down almost 35%. Bitcoin was best... only down 8.5%! WTI Crude managed modest gains on the month but across the board commodities were weaker - from PMs to Softs... Gold managed to stay above $1200 but completed August with its fifth straight month of declines as the record run in U.S. stocks and rising rates boost demand for the dollar. As Bloomberg note, throw in trade-war fears and the greenback's quasi-haven status, and it just doesn't look good for the yellow metal. In fact, it's looking like a fool's errand to try to call a bottom in gold. It basically boils down to the Fed and rates. Advocates of rate hikes cite preventing asset bubbles and controlling the money flow into the financial. For the doves, wages may be stagnant, but that does nothing to overshadow the more important number, the unemployment rate, which says keep hiking. The Fed is going to keep chasing its vision of what the economy should be, and gold's going to keep getting crushed under the wheels. In a month where stocks were panic bid, we note that VIX was unchanged on the month... Spot The Odd One Out!! US Tech stocks (green), Global Central Bank Balance Sheet (blue), Emerging Market Stocks (red), or Global Systemically Important Banks (orange)...?
Spoiler: Weekend Reading: Are Emerging Markets Sending A Signal Authored by Lance Roberts via RealInvestmentAdvice.com, I have been, and remain, bearish on emerging markets for three reasons: As discussed yesterday, the U.S. is closer to the next economic downturn than not. When the U.S. enters a recession, emerging markets are hurt considerably more given their dependence on the U.S. International risks in countries like Turkey, Greece, Spain, France, Italy, etc. A strong dollar from flows into U.S. Treasury bonds for a “safe haven.” I recommended in January of this year to remove all international and emerging market exposure from portfolios and have been updating that position since each week in the newsletter: “Emerging and International Markets were removed in January from portfolios on the basis that “trade wars” and “rising rates” were not good for these groups. With the addition of the “Turkey Crisis,” ongoing tariffs, and trade wars, there is simply no reason to add “drag” to a portfolio currently. These two markets are likely to get much worse before they get better. Put stops on all positions.” This has been the right call, despite the plethora of articles suggesting the opposite. For example, in January, Rob Arnott stated: “Look at value in emerging markets. In the U.S., value is trading about 25% cheap relative to the market. In emerging markets, it’s close to 40% cheap. That’s pretty cool. If you can buy half the world’s GDP for nine times earnings or buy the U.S. for 32 times earnings, I know where I’m going to put my money.” Now, I am not arguing Rob’s point. But, my position is simply that the economic dependency of emerging markets on the U.S. is extremely high. Therefore, when the U.S. gets a “cold,” emerging markets get the “flu.” Over the last 25-years, this has remained a constant. In 2000, 2007 and 2012, emerging markets warned of an impending recessionary drag in the U.S. (While 2012 wasn’t recognized as a recession, there were many economic similarities to one.) Currently, emerging markets have once again diverged from the S&P 500 suggesting economic growth may not be as robust as many believe. While a 2-quarter divergence certainly isn’t suggesting a “financial crisis” is upon us, it does suggest that something isn’t quite right with the global economic backdrop. Lisa Abramowicz recently noted the problem with EM default risk in some of the emerging markets. While the markets are currently dismissing Turkey, Brazil, China and Russia as non-events, the problem is the issue of funding needs for these countries. “The second, more salient point is that a key reason for the solid growth across emerging markets in recent years, has been the constant inflow of foreign capital, resulting in a significant external funding requirement for continued growth, especially for Turkey as discussed previously. But what happens if this outside capital inflow stops, or worse, reverses? This is where things get dicey. To answer that question, Morgan Stanley has created its own calculation of Emerging Market external funding needs, and defined it as an ‘external coverage ratio.’ It is calculated be dividing a country’s reserves by its 12-month external funding needs, which in turn are the sum of the i) current account, ii) short-term external debt and iii) the next 12 months amortizations from long-term external debt.” Given the ongoing pressures of “tariffs,” trade wars and rising geopolitical tensions, the risk of something going “wrong” has become increasingly elevated. Yet, market participants are ignoring the risk simply because prices are rising. As Doug Kass noted yesterday: “There is nothing like stock price advances to change sentiment. Just like fear dominates politics these days, the opposite is occurring in the markets as greed has emerged as a byproduct of sharply rising prices (which have desensitized investors to risks, doubt, and fear). Besides growing economic ambiguities, the most notable lack of criticism is the unusual nature of the last decade, in which interest rates sustained themselves around the world at generational low levels. To presume that foundation to be sound in the future (particularly when a pivot of global monetary restraint has already started), is to congratulate Lance Armstrong for his Tour de France wins without noting his use of illegal drugs. T.I.N.A. (‘there is no alternative’) is no longer a present condition as 1-month, 3-month, 6-month and 1-year Treasury yields are now at their highest levels in 10 years: There is now an alternative.” “The magnitude of the market’s rise in the month of August is almost certainly borrowing from future returns. In the extreme, a more durable and significant top may be forming.” Higher borrowing costs on the short-end reduces consumption and the demand for imported goods. Emerging markets are likely already signaling there is an issue from the Federal Reserve’s actions, and the consequence historically has not been good. But, as I quoted yesterday: “Unfortunately, Powell left the unsettling feeling that monetary policy can be summarized as ‘We plan to keep hiking until something breaks.’” – Tim Duy Just something to think about as you catch up on your weekend reading list. Economy & Fed A New Path For Powell by Tate Lacey via Alt-M Trumps Exasperating Ignorance On Trade by Caroline Baum via MarketWatch US Overdue For Another Economic Disaster by George Will via National Review If Fed “Paused” It Would Be A Good Thing by Conor Sen via Bloomberg CBO’s Long-Term View Is Dire by Maya McGuinness via CNN NAFTA – The No Deal, Deal by Macromon via Global Macro Monitor Tax Cuts And The Electoral Impact by Vanessa Williamson via Brookings Keep Hiking Until It Breaks by Tim Duy via Fed Watch The Fed Is About To Make A Mistake by Jim Bianco and Ben Breitholtz via Bloomberg My Family Escaped Socialism, Now Dems Want It by Giancarlo Sopo via USA Today The Depth Of The Next Recession by Jeffrey Frankel via Project Syndicate High Prices & Stagnant Wages Workers Turn To Debt by Patrick Hill via The Progressive Ensign Markets Emerging Market Crisis Is Growing by Tyler Durden via Zerohedge The Trend Divergence Between S&P 500 And The VIX by Sue Chang via MarketWatch If Market Reporters Were “Totally Honest?” by Shawn Langlois via MarketWatch Has The Market Reached Its “Now What” Moment by Michael Santoli via CNBC Bears Punished In August by Mark DeCambre via MarketWatch Mid-caps Breaking Out? by Dana Lyons via The Lyons Share What’s Next For The Market by Martin Feldstein via Project Syndicate Uncertainty Surrounds Aramco Deal by Simon Constable via Middle East Eye GS: Powell Not As Dovish As Markets Believe by Greg Robb via MarketWatch Excessive Optimism A Reason To Be Cautious by Ryan Vlastelica via MarketWatch “Tug Of War” In The Bond Market Could Sends Yields Tumbling by Sunny Oh via MarketWatch How Does This Bull Market End? by Gillian White via The Atlantic Most Read On RIA Should You Ignore John C. Bogle by Lance Roberts Running On Empty by Michael Lebowitz The Bull Market Resumes…For Now by Lance Roberts Why U.S. Stocks Hit A Record by Jesse Colombo Don’t Worry About Trump, Worry About Earnings by John Coumarianos As Good As It Gets by Lance Roberts Research / Interesting Reads One Policy To Boost Your Currency & Weaken Exports by Paul Kasriel via The Econotrarian Top Market Predictions From Camp Kotok by John Mauldin via The Market Oracle Don’t Believe That GDP Number by Justin Fox via Bloomberg 10-Reasons It’s Hard To Be An Intelligent Investor by Justin Carbonneau via Validea.com Was The Financial Crisis Wasted? by Howard Davies via Project Syndicate How An Investment Legend Is Trying To Beat Yale by Amy Whyte via Institutional Investor What Does The Slope Of The Yield Curve Tell Us? by Raphael Bostic via Fed Reserve Bank of Atlanta Protectionism Enables Cronyism & Corruption by Dan Mitchell via International Liberty Student Debt Is Worse Than Imagined by Ben Miller via NYT More Fraud In China’s “Cooked” Economic Data by Tyler Durden via ZeroHedge Proof Negative – The Advisor’s Real Job by Robert Seawright via Above The Market “Stay humble…or the market will do it for you.” – Anonymous
Here are the percentage changes for the major indices for WTD, MTD, QTD & YTD in 2018- S&P sectors for the past week-
September Almanac: Rank improves,but performance slips in midterm years Since 1950, September is the worst performing month of the year for DJIA, S&P 500, NASDAQ (since 1971), Russell 1000 and Russell 2000 (since 1979). September was creamed four years straight from 1999-2002 after four solid years from 1995-1998 during the dot.com bubble madness. Although September’s overall rank improves modestly in midterm years going back to 1950, average losses widen for DJIA (–1.0%), NASDAQ (–0.8%), Russell 1000 (–1.1%) and Russell 2000 (–0.6%). S&P 500’s average September loss improves slightly from –0.5% to –0.4% in midterm years. Although September 2002 does influence the average declines, the fact remains DJIA has declined in 11 of the last 17 midterm-year Septembers. The month has opened strong in 14 of the last 23 years (a fading trend as S&P 500 has been down five of the last seven first trading days), but as tans begin to fade and the new school year commences, fund managers tend to clean house as the end of the third quarter approaches, causing some nasty selloffs near month-end over the years. Recent substantial declines occurred following the terrorist attacks in 2001 (DJIA: –11.1%), 2002 (DJIA –12.4%), the collapse of Lehman Brothers in 2008 (DJIA: –6.0%) and U.S. debt ceiling debacle in 2011 (DJIA –6.0%). August a Continuation of Trend Aug 31, 2018 Below we show our decile analysis of S&P 500 gains in August. To construct these analyses, we show how each 10% bucket of stocks in the S&P 500 (50 per bucket) by a given metric performs. In this example, we’ve broken the S&P 500 into deciles based on their percentage change in the first 7 months of the year through July. Over the course of August, performance in the other 7 months was highly correlated to performance this month. As shown in the chart below, the 50 best performing stocks YTD through July were up almost 5% in August, with the 2nd through 5th deciles also performing quite well. The bottom half of the market in terms of YTD performance through July generally didn’t do as well in August. That was most true for the 50 stocks that performed the worst through July, which dropped on average 2.2% in the month of August. Owning winners is often derided by contrarians as a way to underperform, but the decile analysis below is one example of momentum begetting more momentum in financial markets. Consumers See A Rosy Future, Driven By Income Gains Aug 31, 2018 As we noted earlier, University of Michigan Consumer Confidence beat expectations but fell sequentially, further retreating from the highs set back in March. While the underlying index has drawn down a bit, some underlying details were extremely strong. As shown in the chart below, a rising share of consumers report buying conditions are good because they believe there are prosperous times ahead. It’s easy to understand why when we also look at the median expectation for income growth in the next year: 2.4% and rising quickly. We note that both of these indicators look very different from the last expansion, when income growth expectations slowly trended lower and a much lower share of households reported good buying conditions thanks to expectations of prosperity. The Surprise Bull Move Continues Posted by lplresearch The incredible summer rally continues, as the S&P 500 Index is only two days away from possibly notching a fifth consecutive monthly gain. Not to be outdone, the usually tricky month of August is looking to potentially post one of its best returns going back to 2000. But wait, there’s more: Since 1950, no month has had fewer all-time highs than the month of August, but with two days to go, it has reached new all-time highs for four consecutive days. That hasn’t happened in August since 1987. “This summer rally has caught many investors flat footed, but they may want to consider that more strength could be coming, if history is any guide. Here’s why, as only five times since 1950 has the S&P 500 been higher each month from April until August. In those years, the final four months were higher every single time with some really strong returns,” explains LPL Senior Market Strategist Ryan Detrick. As our LPL Chart of the Day shows, when the S&P 500 is up each month from April until August, September—which is historically weak—is much stronger, and the final four months of the year have done much better than average as well. For more on our thoughts on this bull market, be sure to listen to our new podcast series Market Signals, where Chief Investment Strategist John Lynch and Senior Market Strategist Ryan Detrick address earnings, the Fed, new highs and many other timely investment questions. Key Takeaways From An Excellent Earnings Season Posted by lplresearch It has been an outstanding earnings season by many measures. Second quarter numbers were strong, even without the boost from the new tax law. With just a small handful of companies left to report, S&P 500 Index earnings are up about 25% year over year, or 18-19% without the boost from corporate tax cuts. A record 80% of S&P 500 companies exceeded quarterly earnings targets, according to data from Thomson Reuters, while index earnings have now beaten expectations 37 straight quarters. “Strong revenue growth and strong operating cash flows, in addition to tax cuts, are driving overall profit growth,” noted LPL Chief Investment Strategist John Lynch. We were particularly impressed by the increase in 12-month forward earnings estimates, highlighted in our LPL Chart of the Day. Remember, estimates typically fall as companies report. See our latest Weekly Market Commentary for more takeaways from this earnings season, including what we heard from management teams about trade policy and potential opportunities for higher profit margins. These results more than support our 2018 earnings growth forecasts for the S&P 500 Index of $155 per share, which may prove conservative with the impact of tax cuts still cycling through (consensus estimates from various sources are over $160 per share). Even as the S&P 500 sits near the low end of our year-end target range of 2900-3000, we do not believe this is a time for investors to sell stocks.* We think this bull market—now the longest ever—still has legs, though the ongoing trade dispute with China and midterm elections may be sources of near-term volatility. Massive Net Short Position in Treasury Futures Market Could Lead to Declining Rates Posted by lplresearch In May and June, speculative traders of Treasury futures were taking large short positions, believing that rates would move higher and the short positions would reap a profit. Since then, that net short position has increased by almost 50%, building to the largest short position—by a wide margin—in the history of the Treasury futures market. When speculative traders initiate short positions, they hope that rates rise, leading to a potential profit (if the trader buys a futures contract in order to close out their short position and realize that profit). However, if rates move against these traders and fall from their current levels, the 10-year Treasury could be in for a “short squeeze,” when traders on the wrong side of a trade get squeezed into closing out their positions to limit losses. Traders in these contracts could see losses and buy Treasury futures contracts in an attempt to limit the damage, which would push prices up, weigh on yields and could lead to more traders buying futures to close out their positions. As shown in the LPL Chart of the Day, massive short positions have generally led to declines in rates, and large long positions have generally led to increases in rates. “Investors may intuitively hear about the record short position and believe that it may push rates higher,” notes John Lynch LPL Chief Investment Strategist, “but in reality, the opposite may occur, as traders closing out their positions could create downward pressure on yields.” If a catalyst pushes yields meaningfully below 2.8%, the bottom of the range for the 10-year Treasury yield over the last six months, a short squeeze could push yields lower and fuel the snowball effect of a short squeeze. We estimate yields could fall 20 to 40 basis points (0.2% to 0.4%) as Treasury futures revert back to neutral positioning from current levels, based on historical rate moves during similar changes in positioning. Even amid this extreme positioning, we maintain that the 10-year Treasury yield will end 2018 between 2.75% to 3.25%, reflecting stronger levels of growth and slowly increasing inflation levels.** Futures and forward trading is speculative, includes a high degree of risk, and is not be suitable for all investors. Finally Posted by lplresearch It took nearly seven months, but the S&P 500 Index finally closed at a new all-time high on Friday. Many clues along the way suggested new highs could eventually come, like strong overall market breadth and excellent earnings growth. Still, the big question now is, what happens next? “Investors have been patiently waiting for new highs in the S&P 500, even while small caps and technology have been making new highs for months now. Here’s the good news: When the S&P 500 has gone at least six months without a new high, the index has been higher a year after the next new high in 17 out of the past 18 instances, going back to 1950,” explained Senior Market Strategist Ryan Detrick. As our LPL Chart of the Day shows, long waits between new highs tend to foreshadow strong outperformance in the subsequent year. Could Friday’s new high be another sign that the bull market is alive and well? It very well could be. Two big reasons we see continued equity strength and an extension of this economic cycle are strong earnings and an accommodative Federal Reserve (Fed). Later today in our Weekly Market Commentary we take a look at second quarter earnings, and in our Weekly Economic Commentary we break down the Fed minutes from the most recent meeting and last week’s Fed Economic Policy Symposium in Jackson Hole. Be on the lookout for both. Market Historically Stronger After Labor Day than Before Historically, the Friday before the long weekend was stronger than the day after, but that is no longer the situation. Over the last 21 years, Tuesday has been stronger than Friday based upon average gain. Tuesday will also be the first trading day of September and first trading days also have a solid historical track record of gains. Septembers’ first trading day is not one of the strongest when compared to the other eleven months (page 86, Stock Trader’s Almanac 2018).
Stock Market Analysis Video for August 31st, 2018 Video from AlphaTrends Brian Shannon (VIDEO NOT YET UP!) ShadowTrader Video Weekly 9.2.18 - A wolf in sheep's clothing? Video from ShadowTrader Peter Reznicek
Here are the current major indices pullback/correction levels from ATHs as of week ending 8.31.18- 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 Tuesday (9/4) <-- click there to cast your daily market vote and stock pick! Stockaholics Weekly Stock Picking Contest & SPX Sentiment Poll (9/3-9/7) <-- click there to cast your weekly market vote and stock picks! Stockaholics September 2018 Stock Picking Contest & SPX Sentiment Poll <-- click there to cast your monthly market vote and stock picks for September! ======================================================================================================== 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 are the most anticipated ERs for this upcoming week ahead (I'll also have the weekly earnings calendar posted in here as well once it's out) ***Check mark next to the stock symbols denotes confirmed earnings release date & time*** Monday 9.3.18 Before Market Open: Spoiler: CLICK HERE TO VIEW MONDAY'S AM EARNINGS TIMES & ESTIMATES! NONE. (MARKETS CLOSED IN OBSERVANCE OF THE LABOR DAY HOLIDAY) Monday 9.3.18 After Market Close: Spoiler: CLICK HERE TO VIEW MONDAY'S PM EARNINGS TIMES & ESTIMATES! NONE. (MARKETS CLOSED IN OBSERVANCE OF THE LABOR DAY HOLIDAY) Tuesday 9.4.18 Before Market Open: Spoiler: CLICK HERE TO VIEW TUESDAY'S AM EARNINGS TIMES & ESTIMATES! Tuesday 9.4.18 After Market Close: Spoiler: CLICK HERE TO VIEW TUESDAY'S PM EARNINGS TIMES & ESTIMATES! Wednesday 9.5.18 Before Market Open: Spoiler: CLICK HERE TO VIEW WEDNESDAY'S AM EARNINGS TIMES & ESTIMATES! Wednesday 9.5.18 After Market Close: Spoiler: CLICK HERE TO VIEW WEDNESDAY'S PM EARNINGS TIMES & ESTIMATES! Thursday 9.6.18 Before Market Open: Spoiler: CLICK HERE TO VIEW THURSDAY'S AM EARNINGS TIMES & ESTIMATES! Thursday 9.6.18 After Market Close: Spoiler: CLICK HERE TO VIEW THURSDAY'S PM EARNINGS TIMES & ESTIMATES! Friday 9.7.18 Before Market Open: Spoiler: CLICK HERE TO VIEW FRIDAY'S AM EARNINGS TIMES & ESTIMATES! Friday 9.7.18 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- ($AVGO $RH $WDAY $CONN $FIVE $PANW $OKTA $DLTH $HDS $DOCU $GME $COUP $VRA $NAV $MRVL $KNOP $OLLI $FCEL $ZS $CLDR $HQY $FGN $AMS $CTRP $CSWX $BKS $SMAR $EGAN $MDB $CAL $MBUU $CBK $DVMT $AVAV $ZUMZ $GWRE $LE $FNSR $GIII $GCO $DCI) If you guys want to view the full earnings post please see this thread here- Most Anticipated Earnings Releases for the week beginning September 3rd, 2018 <-- click there to view!
REMINDER: U.S. MARKETS ARE CLOSED ON MONDAY, SEPTEMBER 3RD, 2018 FOR THE LABOR DAY HOLIDAY Here is the CME Globex futures holiday schedule for the upcoming Labor Day holiday- Have a wonderful long weekend everyone!
whoo! nothin' like a fresh start to a brand new trading month. schools back in session, and people returning from their summer vacations. hopefully most everyone will be back at their trading desks from this week.
crazy good ism # this morning ... think i heard it was like the 2nd highest read ever? someone correct me if i am wrong on this, don't have any sources in front of me atm.
^^ yep looks like the best read since 2004 ... just narrowly missing it from being an ATH the internals within the report were pretty robust as well with beats essentially across the board
The Worst Month of the Year Well, here it comes—September. It’s widely considered the worst month of the year for equities for good reason, since it has historically performed the worst. Per Ryan Detrick, senior market strategist, “September is the banana peel month, as some of the largest slips tend to take place during this month. Although the economy is still quite strong, and stocks are marking hew highs, this doesn’t mean some usual September volatility is out of the question—in fact, we’d be surprised if volatility didn’t pick up given midterm years tend to see big moves in the months leading up to the November election.” Here’s some data to consider as September approaches: Since 1950, no month sports a lower average return than September, with the S&P 500 Index down 0.47% on average. June and August are the only other months that are generally in the negative, while November and December tend to be the strongest months of the year. In the past 20 years, September has been the second-worst month, with only August fairing worse. More recently, over the past 10 years, it’s still down on average but comes in at the fifth-worst month. The worst September ever for the S&P 500 was a 30% drop in 1931. In fact, no other month has had more 10% drops than September, at seven. Interestingly, January is the only month that has never been down 10% or more. Since 1950, if the S&P 500 starts September above its 200-day moving average (like 2018 will), it tends to do much better, as it is up 0.4% on average versus down 2.7% if it starts the month below the 200-day moving average. Last, as we shared last week, when the S&P 500 is up in the five months heading into September (like 2018), the month has historically done quite well, up 2.3% on average and higher four out of five times since 1950.
