All posts by Michael Comeau
The Morning Hammer: Round 2 for the Bears!
Friday was the first -1% down day in the SPX since June 27 — and it was an ugly one. The SPX and Nasdaq each fell -2.5% while the Russell 2000 dropped -3.1%. And the VIX spiked an incredible 40% to 17.56. Many traders blamed the initial weakness on hawkish comments from Boston Fed President Eric Rosengren, who is a voting member of the Federal Open Market Committee. That obviously impacted the lousy action in US Treasuries and gold, but didn’t seem to fully explain the broader downturn in the market. Crude was slumping and the ECB disappointed, but to me the real factor was time. Volatility is mean-reverting and after an extended period of failures, the bears were due for a victory. The news is the justification after the drop — not the cause of the drop itself. As my friend Jeff Cooper says, “the news breaks with the cycles.” We’re seeing some follow-through this morning. European and Asia markets are off. WTI crude is down -2.4% to $44.80, breaking its 50 day moving average. The yen is soaring. German bunds and US Treasuries are falling. Gold is getting hit. SPX futures are down -0.7%, which doesn’t exactly spell disaster, but it’s clear that traders are feeling very, very spooked about what’s to come this week. SPX sliced through the key 2147 level Friday, and it’s below the 20/50 day moving averages. The 200 day is below at 2057. The 2090-2120 range looks key short-term. I really wonder what happens at the open: I wonder if traders will dump in the hopes of avoiding a catastrophe. Full disclosure: I have a position in VIX calls and that makes chaos my friend. Traders seem to be worried about Democratic Presidential candidate Hillary Clinton’s pneumonia scare, which could presumably help Donald Trump’s chances. In fact, the Mexican peso, which has been tracking Donald Trump’s perceived odds of winning, is down on this news today! BofAML actually issued a note today saying the market is not paying sufficient attention to Trump, who has been moving up in battleground states. The market is largely assuming a Clinton victory (which partially explains the weakness in biotech). I believe Trump has a better chance of winning than most people assume, and I would not count him out until the votes are tallied.
Continue Reading -->Oil Booms! And 4 More Thoughts on Today’s Action!
1) Oil Booms! We just saw the biggest decline in US crude inventories since January 1999. Traders were looking for a 905K build but the EIA report showed a drop of -14.5 million barrels. Yesterday after the equity market close, the API reported a -12 million barrel decrease, which certainly set the stage for a bullish EIA report. WTI crude is now up 3.8% to $47.22. We are still seeing tons of conflicting headlines regarding a change in OPEC policy, so stay on your toes. 2) Biotech Follows Through Yesterday into the close, biotech got a huge bid after Reuters reported that GW Pharmaceuticals (GWPH) hired advisers after being approached for a takeover. Today, Gilead (GILD) supported biotech M&A hopes by saying it “feels an urgency” to do deals. Traders are already looking at Tesaro (TSRO) as a possible target, and that stock is ripping. More deals would certainly help IBB get above the widely watched $300 mark, which in turn would be a big psychological victory for the bulls. 3) Looking at Bonds/Utilities EWI is up 3.4% since I added it to my little experimental income model portfolio. I’m now looking back at adding some US bond or utilities exposure based on my assumption that Fed rate hikes may come slower than many traders expect. 4) Gold Scold The US dollar is ripping pretty hard intraday as Treasury yields pick up. And gold is getting smacked down, with the gold miners (GDX) off -1.7%. Part of this is profit-taking after the recent rebound on lousy economic data, so I wonder if the gold bugs push back soon. 5) Hot New Issues The hot post-IPO names are all over the place. Line Corp (LN) and TPI Composites (TPIC) look great, while Acacia (ACIA) is sliding If the bears are to succeed, they need to knock these names out all at once. I’d also eyeball Twilio (TWLO) and Impinj (PI).
Continue Reading -->The Morning Hammer: Let’s Go Super Mario!
Crude oil is up 1.7% this morning after the American Petroleum Institute reported a massive 12 million barrel drop in crude stocks. I’d have thought oil would be up even more on that massive numbers, but there are likely 2 factors at play: 1) The E.I.A. numbers hit at 10:30 a.m. ET, and traders may want confirmation. (consensus here is +905K, but the huge API drop would imply that traders expect the E.I.A. numbers to also show a drop. 2) The question of whether OPEC will freeze or cut output at the big meeting in Algiers is a mystery. Iran said it’s too early to discuss a freeze, while Iraq said it coudl support one. Good luck sorting out the confusing and contradictory news flow, which is very reminiscent of what we saw in the lead-up to the June OPEC meeting, which ended with no change in policy. So let’s lump OPEC in with the Fed — there is just no telling what’s next! SPX futures are flat as an ironing board, which is no surprise given that we haven’t had a 1% move in the index since July 8. Traders are complacent… or they’re falling asleep. So far, it looks like we have 1 chance for excitement today — Mario Draghi’s press conference at 8:30 a.m. ET this morning. The ECB rate decision hits at 7:45 a.m. ET, and odds are nothing changes there. Twitter (TWTR) is off a little after CNBC reported that there are “no bids on the table.” Twitter is starting to remind me of the old Research In Motion (RIMM) (now known as BBRY) — I can’t go 10 minutes without hearing a made-up takeover rumors. Supermarket chain Supervalue (SVU) lowered guidance due to competition and deflation — exactly what we heard from Sprouts Farmers Market (SFM) yesterday. Wells Fargo (WFC) downgraded Apple (AAPL) following yesterday’s product launch event, saying the positives are priced in and shares are likely to remain range-bound. Apple is quickly recovering pre-market losses though and is nearly back to flat. Citi is recommending overweighting Russian stocks, saying dividends may increase — though Russia just seems like part of the oil trade. Yesterday afternoon, Reuters reported that GW Pharma (GWPH) hired advisers after being approached by potential buyers. Cantor is out saying it could be worth $165/share. It’s off a few bucks in premarket trading. The GWPH chatter pushed biotech up hard into the close yesterday — I wonder if there’s any follow-through today. Good luck out there!
Continue Reading -->T3’s Take 3: Biotech Rocks on Deal Chatter
Try this hot market… Tons of stock and options traders are switching to this exciting, lucrative market. Click here to learn more 1) New iPhone Day! Apple (AAPL) held a new product launch event today, unveiling the iPhone 7 and 7 Plus smartphones, plus an updated Watch. The iPhone 7 line features water and dust protection, plus faster processors and enhanced camera features. In a somewhat controversial move, Apple also removed the headphone jack from the iPhone, paving the way for an all-new wireless audio interface. While Apple didn’t make any Earth-shattering announcements, iPhone fans seemed generally pleased with the new feature set, and Apple shares rose 0.6% to $108.36, outpacing the broader markets. 2) Biotech Rips on Deal Chatter Biotech was lackluster for most of the day, but slammed up into the close on takeover rumors. This afternoon, Reuters reported that hot biotech/marijuana play GW Pharma (GWPH) hired advisers after receiving takeover interest. GWPH closed up 23.6% to $104.03, and in turn, the Nasdaq Biotech ETF (IBB) rose 0.7% to $286.10, making it one of the best-performing sector ETFs. Curiously, this morning, some very “lucky” trader bought 380 February $100 GWPH calls at $4.20: Those calls closed at $12.66. That’s what I call good timing… 3) YAWN! Traders are still falling asleep as the S&P 500 fell -0.01% to 2186.16, with the VIX falling back under 12. We haven’t had a 1% S&P move since July 8, and we haven’t had a 1% down day since June 27. On the plus side, we saw some very bullish action below the surface. Aside from the big biotech bounce, small caps were very strong, with the Russell 2000 rising 0.6%. Regional banks also bounced hard, and crude oil rose after the close on a very bullish inventory report from the American Petroleum Institute. Thursday’s Trading Calendar US Economics (Time Zone: EDT) 08:30 Initial Jobless Claims (9/3): exp. 265k, prior 263k 08:30 Continuing Claims (8/27): exp. 2151k, prior 2159k 08:45 Bloomberg Sept. United States Economic Survey 09:45 Bloomberg Consumer Comfort (9/4): prior 43.4 10:30 EIA Natural Gas Storage Change (9/2): exp. 42, prior 51 10:30 EIA Working Natural Gas Implied Flow (9/2): exp. 42, prior 51 11:00 DOE U.S. Crude Oil Inventories (9/2): exp. 905k, prior 2276k 11:00 DOE Cushing OK Crude Inventory (9/2): exp. 100k, prior -1039k 11:00 DOE U.S. Gasoline Inventories (9/2): exp. -750k, prior -691k 11:00 DOE U.S. Distillate Inventory (9/2): exp. 1150k, prior 1496k 11:00 DOE U.S. Refinery Utilization (9/2): exp. -0.40%, prior 0.30% 11:00 DOE Crude Oil Implied Demand (9/2): prior 17080 11:00 DOE Gasoline Implied Demand (9/2): prior 10060.4 11:00 DOE Distillate Implied Demand (9/2): prior 4887.3 15:00 Consumer Credit (Jul): exp. $16.000b, prior $12.320b Global Economics 07:45 EUR Minimum Bid Rate 08:30 EUR ECB Press Conference 08:30 CAD Building Permits m/m 12:20 CAD Gov Council Member Lane Speaks 21:30 CNY CPI y/y 21:30 CNY PPI y/y Earnings Before Open: Barnes & Noble (BKS) Conn’s Inc (CONN) After Close: Finisar Corp (FNSR) Restoration Hardware (RH) Zumiez (ZUMZ)
Continue Reading -->Why the Fed Is a Total Mystery Right Now
As US economic data has generally slumped as of late, traders have pulled back on their rate hike expectations relative to last week. You can see the trend in this chart plotting implied Fed rate hike odds for each of the next 5 FOMC rate decisions: Traders are now pricing in a 48.8% chance of a December rate hike, down from about 60% last week. That means we’re right back to being split down the middle. Some traders were also thinking the September 21 meeting was “live.” Now it looks like that’s off the table, as a mere 20% probability is being priced in. Unfortunately, we may not get much clarity soon. This week’s US economic calendar is pretty much empty. The next big releases are the August retail sales report next Thursday 9/15 (plus industrial production that day), and August CPI on Friday 9/16. And there isn’t much else between those reports and the next FOMC rate decision on September 21. So what else do we have to look at? Well, we have Fed officials Rosengren, Kaplan, Lockhart, and Kashkari out chattering over the next week. But only Rosengren is a current voting member of the FOMC. And besides, it’s getting harder and harder to reconcile all the hawkish chatter with the concurrent decline in US economic data. Check out this chart of the Citi US Economic Surprise Index, which measures economic data relative to expectations. The trend turned down hard with the weak Q2 GDP report on July 29, and it’s looking pretty sorry.
Continue Reading -->The Morning Hammer: Maybe the Fed Went Too Far
One key trend we’ve been pointing out here again and again has been the degrading trend in US economic data, culminating in yesterday’s trio of misses. Now all of a sudden, the market’s thinking that maybe the Fed went too far in pushing its rate hike case because we’ve seen such lousy data as of late. Traders are now pricing in a 52% chance of a December rate hike, down from 60% last week. September odds are down to 24% from 34% last week. Gold has been on a rampage while the dollar’s taking heat. Equities of course, are still going nowhere. SPX volatility is at a near 2-year low. We haven’t had a 1% SPX move since July 8, and we haven’t had a 1% down down day since June 27. I’m long VIX calls, so I have good reason to be bitter. But I’m also just plain bored out of my mind. Individual stocks are moving around nicely, but I’d love to see a little excitement in the broader indices. Chipotle (CMG) is up this morning on news that Bill Ackman’s Pershing Square took a 9.9% position. Ackman’s going after the board to shake things up. Grovery chain Sprouts Farmers Market (SFM) cut its earnings outlook on competitive pressures and ongoings deflation. Whole Foods (WFM) is down in sympathy with it, The economic calendar is pretty light with no market-moving reports, so it looks like we’ll be in a holding pattern today ahead of tomorrow morning’s ECB rate decision. Good luck… staying awake, that is.
Continue Reading -->T3’s Take 3: Did the Fed Go Too Far?
Join This Week’s Training Sessions! They’re FREE! STARTING NOW!: Day and Swing Trading Signals You Need to Know Thursday 9/8: How to Start Trading Forex Like a Pro ******** 1) Did the Fed Go Too Far? If you’ve been following financial markets in any serious way, than you know that Fed officials, including FOMC Chair Janet Yellen, have been out in force getting the market ready for rate hikes. I now wonder if they went too far. Today, we saw disappointing Labor Market Conditions, ISM Services, and IBD/Tipp Economic Optimism. These were just the latest in a string of disappointing US economic data. Here is a chart of the Citi US Economic Surprise Index, which measures the strength of economic data relative to market expectations: As you can see, the trend turned decisively down in late July, when a disappointing second-quarter GDP report was released. Now, traders are pricing in a 51% chance of a December rate hike, down from 60% on Friday. 2) Gold Screams! With traders losing faith in the Fed’s willingness to raise rates, precious metals put in a repeat performance of Friday’s post-NFP rip. Gold rose 2.0% to $1353.90/oz, while the gold miners ETF (GDX) rose 4.4% to $28.56. Meanwhile, the US dollar fell hard against the yen and euro, and my colleague Kurt Capra is making the case that the dollar weakness could continue. I’d also consider reading Jeff Cooper’s recent work on gold. 3) Stocks: More of the Same The S&P 500 hasn’t made a 1% move since July 8, and today was more of the same. We still see pockets of volatility in areas like precious metals, biotechnology, and energy, but the broader markets are still going nowhere. The S&P rose 0.2% to 2173.81, with the Nasdaq doing slightly better due to strong action in biotech. Perhaps we’ll see some movement on Thursday, which has both the European Central Bank rate decision and US crude oil inventories. But with volatility at 2-year lows, I’m not holding my breath! Wednesday’s Trading Calendar US Economics (Time Zone: EDT) 07:00 MBA Mortgage Applications (9/2): 2.80% 10:00 Fed’s Lacker and George Appear before House Financial Panel 10:00 JOLTS Job Openings (Jul): 5625 5624 12:00 DOE Short-Term Crude Outlook (Sep): 51.58 12:00 DOE Short-Term Mogas Outlook (Sep): 2.26 12:00 DOE Short-Term Diesel Outlook (Sep): 2.7 12:00 DOE Short-Term Ht Oil Outlook (Sep): 2.6 12:00 DOE Short-Term NatGas Outlook (Sep): 10.66 14:00 U.S. Federal Reserve Releases Beige Book Global Economics 03:00 CHF Foreign Currency Reserves 03:30 GBP Halifax HPI m/m 04:30 GBP Manufacturing Production m/m 09:15 GBP Inflation Report Hearings 10:00 CAD BOC Rate Statement 19:50 JPY Final GDP q/q 21:30 AUD Trade Balance Earnings Before Open: None of Significance After Close: FuelCell Energy (FCEL)
Continue Reading -->Morning Hammer: 40 Days and 40 Nights
Join This Week’s Training Sessions! They’re FREE! Tuesday 9/6: Day and Swing Trading Signals You Need to Know Thursday 9/8: How to Start Trading Forex Like a Pro ********* Labor Day was not a cure for the summer snoozefest. SPX futures are flat as an ironing board as we come off 40 trading days without a 1% move in the S&P 500. And it’s been 48 days since the last 1% down day, which happened on June 27 after the Brexit. Overnight, German factory orders missed, while Swiss GDP and euro-area exports strengthened. Australia’s central bank held steady on interest rates as expected. Europe is slightly green, though it may remain in a holding pattern until the ECB rate decision on Thursday. Crude oil popped yesterday on news that Saudi Arabia would make a “significant” statement on the oil market. However, they did not announce any changes to output. Iran said it will support efforts to stabilize markets, but will not necessarily participate in a coordinated production freeze. Saudi Arabia’s energy minister also said there is no need to freeze output just yet. Gold is extending Friday’s gains on the slightly weaker-than-expected NFP report. Market perception of Fed rate hikes haven’t changed as much — this looks more like a relief rally after a hard decline. Traders are pricing in a 59% chance of a December rate hike, which isn’t much of a chance from Friday’s 60%-ish levels. In deal news, pipeline/storage giant Enbride (ENB) is buying Spectra Energy (SE) in a $28 billion transaction, creating the largest MLP in North America. On today’s economic calendar, we have the Labor Market Conditions Index and ISM Services numbers on tap. The Fed’s Williams (non-voter) will be speaking at 9:15 p.m. ET. Things don’t really pick up until next week, when we have retail sales and CPI. One trend worth watching is the degradation of US economic data starting with the weak GDP report in late July. Check out this chart of the Citi US Economic Surprise Index, which measures economic data strength relative to market expectations: It’s clearly sliding lower. The Fed always calls itself “data dependent,” which gives them a convenient back door. If the data continues to slip, maybe folks will start pricing in a smaller chance of a rate hike, or at least become convinced that the Fed is one and done. P.S. Check out our FREE webinars and learn from our top traders!
Continue Reading -->T3’s Take 3: Gold Screams on NFP Miss
Join Next Week’s Training Sessions! They’re FREE! Tuesday 9/6: Day and Swing Trading Signals You Need to Know Thursday 9/8: How to Start Trading Forex Like a Pro ********* By Michael Comeau 1) NFP Miss Today we got the big bad August nonfarm payrolls report, and unfortunately, it disappointed. The 151K headline number missed expectations by 29K, and unemployment came in below consensus. And perhaps most importantly, average hourly earnings rose just 0.1% month-over-month, missing the 0.2% consensus. The Fed doesn’t make decisions based on a single data point, but watch the trend: US economic data has been on a downtrend as of late, as you can see in this chart of the Citi US Economic Surprise Index: 2) Gold Rocks – But Has Anything Changed? Gold had been selling off since mid-August on an endless stream of hawkish comments from Fed officials. However, with today’s NFP miss, traders decided to once again buy what now looks like an oversold dip. Gold rose 0.9% to $1329/oz and the gold miners ETF (GDX) rallied an impressive 3.6%, putting it up 7.3% in 2 days. However, the rally in gold does not imply that traders believe the Fed will go on hold. The US dollar was remarkably strong today after an early dip, and US Treasury yields rose. The dollar and yields tend to go up when traders believe the Fed will raise rates. 3) Bulls Fight Back In recent days, tension clearly appeared on the tape, but today’s NFP miss wasn’t bad enough to derail the bull. The S&P 500 rose 0.4% to 2179.98, while the Russell 2000 rose an impressive 1.0%. And much to my chagrin, the VIX fell 11.4% to 11.95. Regional banks were strong again, and we also saw a nice intraday rally in large-cap tech names, with Apple (AAPL) pushing up 0.9% to $107.76. On the downside, biotech (IBB) fell on Presidential Candidate Hillary Clinton’s drug pricing plan, which is aimed at curbing “unjustified” drug price hikes. P.S. Don’t forget to check out our FREE trader training sessions.
Continue Reading -->5 Thoughts on the Disappointing August Jobs Report
Now that we’re past the initial reaction to the weaker-than-expected August NFP report, let’s take an in-depth look at how the market’s doing: 1) Oil Wins! Oil is the big winner off the NFP report. WTI crude was red in the early going, but it’s now up 2.4%, and the Vaneck Vectors Oil Service ETF (OIH) is up 1.4%. And XLE is the best performing S&P sector ETF with a 1.1% gain. Plus, this is happening despite a major currency move… 2) Impressive Dollar USDJPY dropped to 102.811 post-NFP, but it’s rocketed up to 104.176. This really surprised me. I thought the light numbers would result in profit-taking, but I guess traders are happy to keep riding this freight train to the moon. This, along with the big selloff in bonds, is helping banks, especially the regionals. By the way, do you want to learn to trade forex? Sign up for next week’s FREE webinar. 3) Miners Rock Even with the dollar strength, gold is up 0.4% on the NFP miss. And the gold miners (GDX) are having a great day with a 1.9% pop following yesterday’s solid gain — wow. But remember, GDX just dropped from $31.79 on August 12 to $25.17 yesterday, so the pendulum had to eventually swing back the other way. 4) Rate Hike Odds Fed rate hike odds are essentially unchanged. Fed funds futures imply a 30% chance of a September rate hike, down from 34% yesterday. But December is holding steady at 60%. Traders will probably wait to see September numbers before really freaking out over employment data. 5) Fed Heads Fed officials will immediately continue their press tours, and there’s a chance they’ll comment on today’s jobs numbers. Lacker will be speaking in Richmond today at 1:00 p.m. ET And we have Williams next Tuesday and Rosengren next Friday. Only Rosengren is a voting member of the FOMC. The economic calendar is pretty light next week, so maybe these folks will get even more attention than usual, especially if they get feisty. P.S. Check out our FREE webinars and learn from our top traders!
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