Welcome Stockaholics to the trading week of October 3rd! This past week saw the following moves in the S&P: Major Indices End of Week: 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 9:45 a.m.: Markit manufacturing PMI 10 a.m.: ISM manufacturing 10 a.m.: Construction spending Auto sales Tuesday Earnings: Darden, Micron 8:05 a.m.: Richmond Fed President Jeffrey Lacker speaks on the economic outlook 7:40 p.m.: Chicago Fed President Charles Evans speaks on monetary policy and the economy Wednesday Earnings: Yum Brands, Constellation Brands, Monsanto, RPM International 8:15 a.m.: ADP payrolls 8:30 a.m.: Trade deficit 9:30 a.m.: Minneapolis Fed President Neel Kashkari gives welcoming remarks at an event on "Early Childhood Development in Indian Country" 9:45 a.m.: Markit services PMI 10 a.m.: ISM non-manufacturing 10 a.m.: Factory orders 1 p.m. & 5 p.m.: Richmond Fed President Jeffrey Lacker speaks on "Does Federal Reserve Governance Need Reform?" Thursday Earnings: Helen of Troy, International Speedway, Ruby Tuesday 8:30 a.m.: Jobless claims 2 p.m.: Atlanta Fed live webcast on search process for new bank president and answer questions from the public Friday 8:30 a.m.: Employment report 10 a.m.: Wholesale trade 10:30 a.m.: Federal Reserve Vice Chairman Stanley Fischer speaks on the economy and financial regulation 12:45 p.m.: Cleveland Fed President Loretta Mester speaks on Fed communications 3 p.m.: Consumer credit 3:40 p.m.: San Francisco Senior Vice President Mary Daly speaks on the U.S. economic outlook and the role of education in supporting the American dream 4 p.m.: Federal Reserve Governor Lael Brainard speaks on blockchain technology
Rumor Rescues Deutsche From Banking Bloodbath But Gold Tops Stocks In September Seriously... Let's get this Deutsche Bank debacle out of the way first. A rumor - started by Jim Cramer, expanded by a number of twitterati, picked up by Bloomberg, then reported by AFP somehow managed to create a short squeeze rip higher in Deutsche ADRs... Some context for the 'recovery' But the yield curve wasn't supportive... And CDS wasn't buying it... And that was enough to spark a buying panic is US equities... And just in case you didn't think th emachines were in charge...S&P futures tumbled into the close to perfectly end at VWAP... So, let's get back to the rest of the markets (and wait for the DOJ denial) * * * For Q3 Overall, Silver & Stocks lead Q3 performance as oil lags (but overall it was a subdued quarter)... Nasdaq was the quarter's big winner, The Dow and S&P lagged... Even as rate-hike odds soared... Treasury yields were all up on the quarter, but we note a 14bps bear flattening in the curve... The USD Index ended Q3 down very modestly (-0.4%) with Yen strength offset by cable weakness... Oil actually legged on the quarter with silver best... * * * For September, crude led but PMs outperformed stocks and bonds lagged... Notably The Dow was red on the month and the S&P scrambled to try and breakeven but failed as Trannies soared in September... Energy stocks outperformed in September as homebuilders and financials lagged... Intersstingly, while the curve flattened markedly on the quarter, it steepened dramatically in September... The USD Index drifted notably on the month, once again as cable weakness was trumped by Yen strength... Copper and Crude outperformed in September, gold lagged... * * * Finally, on the week, today's bounce pulled most stocks into the green but Small Caps lagged (even though they outperformed today)...UGLY CLOSE Futures show just how crazy this week was... Banks managed to scramble back to unchanged on the week... Nothing was stopping stocks today not even a giant 8k block... which as @RockHowse explains was absorbed like a champ... On the week, Treasuries were mixed with 2Y 1bps higher and 30Y 3bps lower... The flatness of 2Y yields is reflected in the perfectly unchanged close of the USD index on the week... (mostly driven by DB's recovery and exodus from USD safe haven) WTI Crude had a massive week - best in 2 months - gold and silver pumped and dumped today and copper ended the week green... Jones Trading sums up the week... US Equities are poised to close a touch higher on the week while Asia and Europe were generally lower. It was a decent week in terms of catalysts – we had OPEC’s “consultation” that yielded a production cap starting in November, a Presidential debate that yielded several memes and sound-bites, Deutsche Bank made headlines as impending fines by the US DoJ created questions around liquidity and capital. In the end – it all amounts to the S&P500 closing higher by 20bps – and flat for the month of September. It wasn’t really a macro-narrative shifting week – economic data continued to fall in-line and Central Bank speak didn’t do much to wow investors either. As we highlighted in the past, most market participants appear to be poised for a pull-back, yet this tape continues to move higher. It won’t be the first or last time that we prescribe to the idea that this market will continue on the path of most pain. In terms of technical – this market did struggle to break and hold above the 50-day MA this week. As we are writing this on Friday afternoon, the S&P500 is a couple of points above the 50-day MA – which is 2168. A few weeks ago we noted that we could likely find ourselves right back between 2150 and 2200 in short-order; this range will likely continue to hold. Translated - no matter WTF happens, stocks inch higher or are rescued... because "wealth creation" and "election" Charts: Bloomberg Bonus Chart: Do you believe in 2016 GDP growth miracles?
Spoiler: Weekend Reading: Back Where We Started Submitted by Lance Roberts via RealInvestmentAdvice.com, In last weekend’s newsletter, I discussed the “round-trip” move of the market following the Fed’s latest announcement to NOT hike rates. “It is not surprising the Fed once again failed to take action as their expectations for economic growth were once again lowered. In fact, as I have noted previously, the Federal Reserve are the worst economic forecasters on the planet. As shown in the table/chart below, not only are the expectations for economic growth now the lowest on record, the Fed has given up on 2% growth for the economy with the long-run economic projections now at just 1.9%.” “This should surprise no one. The Federal Reserve has continued to hope for the last several years that extremely ‘accommodative’ monetary policy, and near zero interest rates, would spark stronger levels of economic activity leading to a rise in broad-based inflationary pressures. Unfortunately, this has yet to be the case. With the Fed holding still on hiking rates, with a promise to now hike in December (**cough****bullshit****cough), traders came rushing back into the market pushing prices right back into the trading range of the last month.” The chart below shows the “round-trip” from complacency, to panic, and back to complacency. Importantly, with the markets testing resistance below the bottom of the trading range in August, the issue becomes whether this bounce is a “sucker’s rally” or the beginning of the next leg higher. I continue to suspect the former as the deviation between prices and fundamentals continue to widen. This idea is further supported by the following note from BofAML (via Zerohedge): “As BofA’s Savita Subramanian reports, over the last several years, we have observed an accelerating trend of flows out of active funds and into passive vehicles. Price sensitivity of investors to fees, coupled with poor performance trends, have conspired against active funds, and year-to-date flows out of active have reached a post-crisis high.“ “The current year outflows from active funds have now surpassed a record $200 billion, with the bulk of cash outflows shifting to much cheaper (and better performing) passive funds, though as BofA notes, flows have slowed since last year suggesting that there may be a broader cash outflow from the equity asset class, as increasingly more Americans retire and pull out of the market entirely.” The last sentence goes to the heart of what I discussed this past week with respect to “baby boomers” and the “new secular bull market” thesis: “Old people are living longer and young people are delaying marriage and children. This means fewer people paying into a social welfare system, while more or taking out. This demographic problem is not going to be fixed anytime soon and has manifested itself in lower rates of household formations. More importantly, the drag from the elderly on the financial system is going to be a much bigger problem than most currently expect.” The problem is two-fold. As an increasing number of individuals begin to extract capital from the market, there will be a rising headwind to the markets which is dependent on cash inflows for advances. As Tyler notes, the accelerating transition from active to passive management will end in tears, as passive management only works as long as the rising tide keeps lifting all boats. As I have discussed previously, while passive indexing works while all prices are rising, the reverse is also true. The problem is that once prices begin to fall the previously “passive indexer” becomes an “active panic seller.” With the flood of money into “passive index” and “yield funds,” the tables are once again set for a dramatic and damaging ending. Why do I say that? Because we have seen this occur repeatedly in the markets. In the late 90’s everyone was piling into Technology stocks. Heading into 2007, it was all about real estate. Today it is passive indexing and Robo-Advisors. It is only near peaks in extended bull markets that logic is dismissed for the seemingly easiest trend to make money.Today is no different as the chart below shows the odds are stacked against substantial market gains from current levels. But, in the meantime, here is what I am reading this weekend. Fed / Economy PIMCO: Global Economy About The 3-P’s by Elena Holodny via BI Yellen Refutes Trumps Partisan Charges by Nathan Bomey via USA Today Economy Overheating Or Stuck via Reuters I Trashed The Economy As Fed Head by Mark Gilbert via Bloomberg Alan Greenspan Confused Again by Jeffrey Snider via Alhambra Partners Negative Rates Aren’t Working by Paul Kupiec & Alex Pollock via RCM Evidence Of Brexit Vote by Allister Heath via The Telegraph Rules Vs. Discretion by Narayana Kocherlakota via Brookings No Hillary, Tax Cuts Don’t Cause Recessions by Thomas Del Beccaro via Forbes Yellen May Quit If Trump Wins by Steve Goldstein via MarketWatch Is An Economy Reliant On Yellen Worth Saving? by John Tamny via RCM Central Banks Double Down On Failure by Stephen Roach via MarketWatch The Fed’s Path To Economic Hell via John Mauldin via Forbes Half Of Middle Class Lives Paycheck-To-Checkbook by Karol Markowicz via NY Post Markets Passive Investors Unite by Danielle DiMartino-Booth via Money Strong 50-Slides For Gold Bulls by Akin Oyedele via BI The Ted Spread Isn’t Dead by Jesse Felder via The Felder Report October: Worst Month Of Election Year by Jeff Hirsch via Almanac Trader Profit Margins Fortell Credit Cycles by Daniel Oliver via Myrmikan Research Are Stocks In A “Big Fat Ugly Bubble” by Paul La Monica via CNN Money How Charts Make You A Better Investor by Michael Kahn via Barron’s Most Interesting Charts by J.C. Parets via AllStarCharts Sometimes, Just Do Nothing by Joe Calhoun via Alhambra Partners Julian Robertson: This Will End In Chaos by Tyler Durden via ZeroHedge A Persistent Profits Recession by Ed Yardeni via Yardeni Research Yield Curve. Does It Matter? by The Capital Spectator Outflows From Active Funds Surpass Records by Tyler Durden via ZeroHedge Fed’s Phony Housing Recovery by Lee Adler via ContraClub Interesting Reads Wells Fargo: A Culture Problem by Bob Bryan via Business Insider Stock Charts: How They Work & How To Use Them by Michael Kahn via Barron’s 71% Aren’t Saving Enough For Retirement by Rodney Brooks via Washington Post 7-Reasons Middle Class Is In Trouble by Sean Williams via USA Today ObamaCare’s Death Spiral by Luke Hilgemann via IBD The Hot New Millennial Housing Trend by Ilana Strauss via The Atlantic The Basket Of Deplorable Investments by Tony Isola Yes, Valuations Still Matter by Meb Faber via Faber Research Sales Estimates Suggest No Growth by Eric Bush via GaveKal Millennials Must Save 22% Of Pay by Darla Mercado via CNBC Peak Debt Complacency by Carmen Reinhart via Zerohedge Fed: Dope Dealers On Speed-Dial by John Hussman via Hussman Funds Trump: We Are In A “Big Fat Ugly Bubble” by David Stockman via Contra Corner Stocks Test Post-February Uptrend by Dana Lyons via Tumblr Must Watch: Central Bank Independence? by Jesse Felder via The Felder Report “Acknowledge the complexity of the world and resist the impression that you easily understand it. It’s a basic fact of life that many things ‘everybody knows’ turn out to be wrong.” — Jim Rogers
October Worst Month of Election Year October has a frightful history of market crashes such as in 1929, 1987, the 554-point drop on October 27, 1997, back-to-back massacres in 1978 and 1979, Friday the 13th in 1989 and the 733-point drop on October 15, 2008. During the week ending October 10, 2008, Dow lost 1,874.19 points (18.2%), the worst weekly decline in our database going back to 1901, in point and percentage terms. It is no wonder that the term “Octoberphobia” has been used to describe the phenomenon of major market drops occurring during the month. But October has also been a turnaround month—a “bear killer”. Twelve post-WWII bear markets have ended in October: 1946, 1957, 1960, 1962, 1966, 1974, 1987, 1990, 1998, 2001, 2002 and 2011 (S&P 500 declined 19.4%). However, eight were midterm bottoms. This year is neither a midterm year nor is a bear market in progress, thus October’s performance in past election years is of greater importance. Election-year Octobers rank dead last for Dow, S&P 500 (since 1952), Russell 1000, and Russell 2000 (since 1980). NASDAQ fairs slightly better, with October being the second worst month in election years since 1972. Eliminating gruesome 2008 from the calculation provides a moderate amount of relief, as rankings climb to mid pack. Should a meaningful decline materialize in October it is likely to be an excellent buying opportunity, especially for any depressed technology and small-cap shares. October’s First Trading Day a Mixed Bag Based upon data in the soon to be available 50th Anniversary Stock Trader’s Almanac for 2017 on page 86, the first trading day of October is the fourth weakest of all monthly first trading days since September 1997. Only September, August and June have been weaker. S&P 500 has been down 10 of the last 21 years on the first trading day of October. DJIA’s record is slightly weaker with 11 declines and NASDAQ has been the worst of the group, down 12 times with an average loss of 0.44%. Debates & Banks Spur Octoberphobia, Setting Up “Best Six Months” Seasonal Buy Signal From our vantage point the market is threatening to return to the downside after two days of bliss following Monday’s Presidential debate. The Down Friday/Down Monday warning this week is looming large again. Spooked by a host of market events, the often treacherous end of Q3 portfolio adjusting by fund managers and perhaps some Octoberphobia, stocks retreated today. News from Apple, Deutsche Bank, Wells Fargo and OPEC put the market in sell today. U.S. equity indices did rally off the mid-afternoon lows (which is historically the weakest part of the day), but the major indices finished the day all down around 1%. How we close out tomorrow’s action on the last trading day of Q3 should be instructive. The 50-day moving average has been resistance for DJIA and S&P and serving as support for NASDAQ and Russell 2000. If S&P 500 cannot reclaim its 50 DMA and instead breaks down through its monthly pivot point around 2150, the early September lows near 2120 come into play. Then there is some support near 2100 around June’s highs. If that level does not hold then further support can be found just below the 200-day moving average near 2050. However, this will be a solid set up for a quintessential October Buy. October is the best month to buys stocks, especially small caps and tech stocks. It’s even better after a pullback/correction. This current downside action is close to putting or MACD indicators into sell mode and setting up a solid “Best Six Months” Seasonal MACD Buy signal.
Stockaholics come join us in our market polls and vote where you think the markets will end this upcoming week, month, and quarter ahead! Weekly SPX Poll - Sentiment (10/3-10/7) <-- click there! Monthly SPX Poll - October 2016 Sentiment <-- click there! Quarterly SPX Poll - Q4 Sentiment (October - December) <-- click there! In addition we have our weekly & monthy stock picking contest now up and running as well! Stockaholics Weekly Stock Picking Contest for the Week of (10/3-10/7) <-- click there! Stockaholics October 2016 Stock Picking Contest <-- click there! It would be awesome to see all of you regulars here at Stockaholics join in and participate on these polls & contests! Have a fantastic weekend everyone!
Sept 30th - Oct 7th 2016 Market Wrap and Sector Watch It was looking a bit sketchy but Bulls remain in control SMH top sector to keep an eye on
ShadowTrader Video Weekly 10.2.16 - Interesting SPX Opportunity for October Video from ShadowTrader Peter Reznicek
great job once again this week Tim!! darn i'm heading out now for football so i'll miss your live stream this morning but i'll try to catch it on the archive a bit later today ... thx for all you do with putting these videos and streams together buddy! you da man! @Vegastrader66
There were good YOY numbers for gaming out of Macau for the month of September. Unless the bears can come up with negative forecast, expect WYNN, LVS, MGM, and MPEL to climb on this.
lol right on @Ken34 ... i'm not entirely sure how he ended up posting his picks in this thread haha i sent out a PM to our main contest participants ... i'm not entirely sure if anyone is having access issues or posting permission issues on that new groups section ... but that's about the only reason i can see why @DoveJohns may have posted his picks in here?
Haha thanks guys. I actually had two tabs one for here one for the contest page. I was here to look at the weekly calendar but seems like I ended up sending my post here too. I am actually not bullish for oil this week, it had its run. I am bullish with oil for the month though. It will not be easy to break $50 this week
Who is your Team Cy?? I am a diehard Browns fan and life as a football fan has been rough for me. LOL Glad you like the videos man.
haha i hear ya! i'm almost embarrassed to say lol, but it's the panthers here however, after last seasons embarrassing super bowl performance (not so much the game itself ... although that wasn't very pretty either!) but the post-game commentary from the players, in particular #1 was pretty disappointing to say the least ... probably the worst post-game presser i've seen from an nfl player, ever ... no joke here ... it was pretty awful to watch we're already off to a pretty crappy start this season at 1-3 ... albeit we've had a couple of these slow starts in past seasons only to see that we clawed our way back into it to make the playoffs ... however i'm not so sure this season will be as lucky for us ... i'm just not feeling that magic this season ... its been pretty rough to watch thus far good luck to your browns man, albeit a tough start there as well hah
WYNN, LVS, MGM, and MPEL are all up in pre-market.The fact that Mccarran airport numbers were up for August adds to the mix.
