All posts by Michael Comeau
August NFP Report Instant Analysis: Did the Fed Fool Us Again?
Oh man, did we just get fooled by the Fed again? Fed heads have been selling a super-hawkish narrative for weeks but today’s job report was just a little bit shaky. The 151K headline number missed expectations by 29K. And perhaps most importantly, average hourly earnings rose just 0.1% month-over-month, missing the 0.2% consensus. We’re seeing a predictable reaction: gold is ripping, up almost 1%, and the gold miners (GDX) are up 4.5%. Meanwhile, the US dollar is sagging and Treasuries are up. SPX futures are now about 10 handles off morning lows. I’d have though they’d sag on the report because markets have acted as if they’d welcome a rate hike. Fed funds futures are now pricing in a 58% chance of a December rate hike, down from 60% earlier today — that’s not much of a change. Remember, the Fed doesn’t make decisions based on a single data point, so let’s not go overboard. And of course, keep in mind that we often see multiple market reactions and counter-reactions on NFP days. We’ve already seen crude oil round-trip its reaction move and start yet another move: We could see ANYTHING by the close today… even actual volatility.
Continue Reading -->The Morning Hammer: Happy Jobs Day!
It’s been about a decade since the market’s made a real move, but maybe we’ll get some excitement with this morning’s August NFP report, which hits the wires at 8:30 a.m. ET. Traders are looking for 180K on the headline number with a 4.8% unemployment rate and 0.2% month-over-month growth in average hourly earnings. With the way the dollar’s been acting, it seems like the market is expecting a beat, which would help clear the way for the Fed to raise rates. The Fed heads have been out in force as of late preparing the market for coming rate hikes, but the market itself may need a little more convincing. Fed funds futures are currently pricing in a 60% chance of a December rate hike. That’s up from just 9% post-Brexit, but still — it doesn’t exactly scream total certainty. So maybe if we get big numbers today (headline number above 220K and 0.3% growth average hourly earnings), those odds push higher. On the flip side, if we get an in-line report or a miss, I’d expect the gold bugs to have a big party while equities pull back. I’d especially watch for a selloff in regional banks (KRE). But no one really knows. SPX futures are doing nothing this morning, which should come as no surprise since they’ve been doing nothing for 2 months. As I’ve said about 10 million times, the SPX hasn’t had a 1% down day since June 27. But with jobs numbers hitting, I guess today’s as good a day as any to break this miserable streak. Crude oil is up this morning, giving us a break from the downtrend. Russian President Vladimir Putin said he’s like OPEC and Russia to reach a deal to freeze supply. Nigerian exports also fell in August. So for now, it’s steady as she goes, though I’m hoping that changes when the big jobs report hits.
Continue Reading -->T3’s Take 3: Bears Fail Ahead of Pivotal Jobs Report
1) Jobs in Focus The nonfarm payrolls report is always one of the biggest events of the month, and with traders thinking the Fed is about to raise rates, tomorrow’s August report is no exception. Today, the US dollar fell on profit-taking following weaker-than-expected Markit US Manufacturing PMI, ISM Manufacturing, and Construction Spending numbers. But it’s been had a nice bounce since the Fed hawks came out in force to prepare the market for additional rate hikes. So presumably, traders are gearing up for a repeat of the big July jobs report, which was an impressive across-the-board beat. 2) The Bears Fail in Spectacular Fashion. The S&P 500 fell 0.6% to 2157.09 in early trading and the VIX popped 8.9% to 14.61. That had a lot of folks — myself included — thinking the S&P would have its first 1% down day since June 27. However, that small dip was quickly bought and the index climbed up to finish flat on the day. Biotechnology overcame an early deficit to turn green, and we also saw rebounds in large cap tech and transports. Regional banks led the decliners column, and energy was weak due to another drop in oil prices. 3) Jeff Cooper on Twitter Twitter (TWTR) has been one of the hottest stocks in the market, and today, Jeff Cooper stepped in to break down the action: TWTR continues be on the prowl into the weekend on great expectations of something going on. This morning it Pinocchioed the 20 strike which perpetuated some selling and a pullback to yesterday’s highs coincident with the 20 period on the 10 min as anticipated in yesterday’s note. Note how this morning’s spike occurred out of an hourly bull flag following yesterday’s surge. Friday’s Trading Calendar US Economics (Time Zone: EDT) 08:30 Trade Balance (Jul): exp. -$41.4b, prior -$44.5b 08:30 Change in Nonfarm Payrolls (Aug): exp. 180k, prior 255k 08:30 Two-Month Payroll Net Revision (Aug): prior 18k 08:30 Change in Private Payrolls (Aug): exp. 180k ,prior 217k 08:30 Change in Manufact. Payrolls (Aug): exp. -3k, prior 9k 08:30 Unemployment Rate (Aug): exp. 4.80%, prior 4.90% 08:30 Average Hourly Earnings MoM (Aug): exp. 0.20%, prior 0.30% 08:30 Average Hourly Earnings YoY (Aug): exp. 2.50%, prior 2.60% 08:30 Average Weekly Hours All Employees (Aug): exp. 34.5, prior 34.5 08:30 Change in Household Employment (Aug): prior 420 08:30 Labor Force Participation Rate (Aug): prior 62.80% 08:30 Underemployment Rate (Aug): prior 9.70% 09:45 ISM New York (Aug): prior 60.7 10:00 Factory Orders (Jul): exp. 2.00%, prior -1.50% 10:00 Factory Orders Ex Trans (Jul): prior 0.40% 10:00 Durable Goods Orders (Jul F): exp. 4.40%, prior 4.40% 10:00 Durables Ex Transportation (Jul F): exp. 1.50%, prior 1.50% 10:00 Cap Goods Orders Nondef Ex Air (Jul F): prior 1.60% 10:00 Cap Goods Ship Nondef Ex Air (Jul F): prior -0.40% 13:00 Fed’s Lacker Speaks on Interest Rate Benchmarks in Richmond 13:00 Baker Hughes U.S. Rig Count (9/2): prior 489 13:00 Baker Hughes U.S. Rotary Gas Rigs (9/2): prior 81 13:00 Baker Hughes U.S. Rotary Oil Rigs (9/2): prior 406 Global Economics 03:00 EUR Spanish Unemployment Change 04:30 GBP Construction PMI 08:30 CAD Trade Balance Earnings Before Open: None of Significance After Close: None of Significance
Continue Reading -->Jobs Report Preview: Is Volatility About to Explode?
The nonfarm payrolls report is always one of the biggest events of the month, and with traders thinking the Fed is about to raise rates, tomorrow’s August report is no exception. Here is a list of the consensus numbers: Change in Nonfarm Payrolls (Aug): exp. 180k, prior 255k Two-Month Payroll Net Revision (Aug): prior 18k Change in Private Payrolls (Aug): exp. 180k, prior 217k Change in Manufact. Payrolls (Aug): exp. -4k, prior 9k Unemployment Rate (Aug): exp. 4.80%, prior 4.90% Average Hourly Earnings MoM (Aug): exp. 0.20%, prior 0.30% Average Hourly Earnings YoY (Aug): exp. 2.50%, prior 2.60% Average Weekly Hours All Employees (Aug): exp. 34.5, prior 34.5 Change in Household Employment (Aug): prior 420 Labor Force Participation Rate (Aug): prior 62.80% Underemployment Rate (Aug): prior 9.70% Source: Bloomberg Today, the US dollar is down on profit-taking following the weaker-than-expected Markit US Manufacturing PMI,ISM Manufacturing, and Construction Spending numbers. But it’s been had a nice bounce since the Fed hawks came out in force to prepare the market for additional rate hikes. So presumable, traders are gearing up for a repeat of the big July jobs report, which was an impressive across-the-board beat. I’ve been waiting for an explosion in volatility, and it could come soon. To be clear, I’m long VIX calls so I have a vested interest in the market falling hard. But volatility is mean reverting, and tension is slowly returning to the tape. Of course, trying to time those reversions is incredibly difficult! But let’s look at the backdrop. The S&P 500 hasn’t had a 1% move since July 8, and the last 1% down day was on June 27 — the day after the Brexit. July and August was a total snoozefest, but cracks are appearing in the mirror: 1) The S&P 500 broke its 8 and 21 day moving averages, which means a loss of short-term momentum. 2) Crude oil is dropping like a rock. 3) Biotech is sagging, with IBB on the verge of breaking its 50 day moving averages. To be fair, over the past 2 months, the bears have failed at every possible turn. But a miss on tomorrow’s jobs numbers will likely reverse many of the recent big trades. Namely, I would expect the gold miners (GDX) to explode higher with a selloff in broader equities that drives the VIX up big. And if we see an in-line report or a small beat, there’s a decent chance of a “sell the news” reaction that gives the same result — strong gold, weak broader equities — albeit on a smaller scale. I’d imagine that it would require an enormous beat to drive the rate hike narrative — and associated trades like long USD/short gold — any further.
Continue Reading -->T3’s Take 3: Do You Feel the Heat Around the Corner?
“Don’t let yourself get attached to anything you are not willing to walk out on in 30 seconds flat if you feel the heat around the corner.” -Neil McCauley, as portrayed by Robert DeNiro in Heat Before I get started, I’d like to invite you to check out the replay of our latest webinar Why You Shouldn’t Fear Forex. 1) Is that the Heat Around the Corner? For what seems like the 900th day in a row, the S&P 500 failed to make a substantial move. The index fell -0.2% to 2170.95 — far from a disaster — but tension is starting to appear on the tape. The index is now trading below its lost its 8 and 21 day exponential moving averages, indicating a loss of short-term momentum. Crude oil is almost 10% off its highs. (more on this below) Biotechnology, which has been slumping since Presidential candidate Hillary Clinton’s attack on Mylan (MYL) last week, continued its losing streak. The Nasdaq Biotech ETF (IBB) recently lost its 20 day moving average, and it is sitting right on top of its 50 day moving average — a break of which could spook traders. However, keep in mind that the bears have not been able to score a real victory since June 27, when the S&P fell -1.8% post-Brexit. Since then, we have not had a single 1% down day. 2) Crude Oil Takes a Big Hit WTI crude oil dropped over 3% below $45 today on another bearish inventory report. The E.I.A. said US crude stocks rose 2.3 million barrels last week, which was well above the 1.3 million consensus. This was the second large surprise build in a row, giving traders another reason to take profits ahead of the September OPEC meeting in Algeria. There has been assorted chatter that OPEC will announce a production freeze at meeting, but that’s clearly up in the air. 3) The Hawk Trade Rages On The big hawk trade — long US dollar, long banks, and short gold — is still going strong on hopes of more Fed rate hikes. In the equity markets, the gold miners (GDX) continue to take the brunt of the damage, with GDX falling -1.6% after yesterday’s -4.9% decline. And on the flip side, regional banks (KRE) continue to be a source of leadership. KRE is a good ETF for active traders to follow since it makes bigger moves than the better-known S&P Financials ETF (XLF). Thursday’s Trading Calendar US Economics (Time Zone: EDT) 07:30 Challenger Job Cuts YoY (Aug): -57.10% 08:30 Nonfarm Productivity (2Q F): exp. -0.60%, prior -0.50% 08:30 Unit Labor Costs (2Q F): exp. 2.10%, prior 2.00% 08:30 Initial Jobless Claims (8/27): exp. 265k, prior 261k 08:30 Continuing Claims (8/20): exp. 2145k, prior 2145k 09:45 Bloomberg Consumer Comfort (8/28): prior 45.3 09:45 Markit US Manufacturing PMI (Aug F): exp. 52.1, prior 52.1 10:00 Construction Spending MoM (Jul): exp. 0.50%, prior -0.60% 10:00 ISM Manufacturing (Aug): exp. 52, prior 52.6 10:00 ISM Prices Paid (Aug): exp. 54.8, prior 55 10:00 ISM New Orders (Aug): prior 56.9 10:30 EIA Natural Gas Storage Change (8/26): exp. 42, prior 11 10:30 EIA Working Natural Gas Implied Flow (8/26): exp. 42, prior 11 12:25 Fed’s Mester Speaks to Kentucky Philanthropy Initiative Wards Domestic Vehicle Sales (Aug): exp. 13.50m, prior 13.77m Wards Total Vehicle Sales (Aug): exp. 17.20m, prior 17.77m Global Economics 03:15 EUR Spanish Manufacturing PMI 04:30 GBP Manufacturing PMI Earnings Before Open: Campbell Soup (CPB) Ciena Corp (CIEN) Joy Global (JOY) Lululemon Athletica (LULU) After Close: Ambarella (AMBA) Broadcom (AVGO) Smith & Wesson Holding (SWHC)
Continue Reading -->The Morning Hammer: More of the Same Yawns…
Crude oil is dipping below $46 on the American Petroleum Institute’s inventory report, which said US crude stocks rose 942K barrels last week. Remember, we get EIA data today at 10:30 a.m. ET. Traders are looking for a 1300K build. It should be interesting. Two weeks ago, we saw a massive beat, but last week was a huge miss. We’ve also got the ADP Employment Change, Chicago PMI, and Pending Home Sales on the calendar, but folks are really waiting for Friday’s big jobs report. SPX futures are flat, which shouldn’t be a surprise to anyone given the past 2 months of basically no volatility. The dollar is up as the hawk trade is still raging, though gold is down only fractionally. The miners got destroyed yesterday and I’m curious to see if there are any dip buyers there. In deal news, cloud software name Interactive Intelligence (ININ) is being acquired by Genesys for $60.50 a share, or $1.4 billion. ININ had been rumored to be exploring a sale. Overnight, European markets are mostly positive. EU inflation beat expectations in August, which extends the streak of better-than-expected post-Brexit economic data. German and Italian unemployment, and UK house prices were also solid. Irish airline Ryanair warned that it may reduce earnings guidance if ticket prices continue to drop. Looking out today, crude oil is obviously important, but I’m closely watching biotech. The major indices are holding up well, but IBB has been deteriorating over the past week or so, implying profit taking. I’d also watch the hot new issues like Acacia (ACIA), Twilio (TWLO), and Line Corp (LN). They’re all over the place as a group, but if they start declining in concert, that could be a sign of trouble. But for now, the bull is holding things together pretty well. Maybe Friday’s jobs report will be a catalyst for volatility, but that feels like wishful thinking after a horribly boring August.
Continue Reading -->T3’s Take 3: The Big Hawk Is Still Flying!
1) The Hawk Trade Rages on Today, Fed Vice Chairman Stanley Fischer said he believes that productivity growth will rebound, keeping traders confident that the Fed will raise rates again this year. This helped boost the popular long dollar/short gold trade. The dollar rose by 1.1% against the yen and 0.4% against the euro, while gold fell -2.0%. The junior gold miners ETF (GDXJ), which has more than doubled this year, took the brunt of the damage today with a -4.9 decline. 2) Shifty Markets Aside from the ugliness in gold, stocks remain range-bound as traders await the return of volatility. The S&P 500 fell -0.2% to 2176.12, making today the 37th straight trading day without a 1% move in the S&P 500. Market volatility is as low as it’s been since November 2014. Banks were strong courtesy of the hawkish Fed talk and prospect of rising rates, while utilities and retailers were weak. The important biotech sector was down, but no major damage was done. 3) Apple Stung on Tax Beef Today, the European Commission found that Ireland gave Apple (AAPL) an illegal “selective tax treatment.” Apple has been ordered to repay 13 billion euros ($14.5 billion) plus interest, though Ireland will appeal the ruling. Apple traded as low as $103.50 in premarket trading, and it finished at $106.00, down -0.8%. The verdict also impacted the shares of other tech names that use Ireland as a tax haven, namely Google (GOOGL) and Facebook (FB). Wednesday’s Trading Calendar US Economics (Time Zone: EDT) 03:15 Fed’s Rosengren to Address Financial Conference in Beijing 03:15 Fed’s Evans Speaks on Economy and Policy in Beijing 07:00 MBA Mortgage Applications (Aug 26): -2.10% 08:00 Fed’s Kashkari Speaks on Fed Structure in St. Paul 08:15 ADP Employment Change (Aug): exp. 175k, prior 179k 09:45 Chicago Purchasing Manager (Aug): exp. 54, prior 55.8 10:00 Pending Home Sales MoM (Jul): exp. 0.70%, prior 0.20% 10:00 Pending Home Sales NSA YoY (Jul): exp. 2.20%, prior 0.30% 10:30 DOE U.S. Crude Oil Inventories (8/26): exp. 1300k, prior 2501k 10:30 DOE Cushing OK Crude Inventory (8/26): exp. 400k, prior 375k 10:30 DOE U.S. Gasoline Inventories (8/26): exp. -1000k, prior 36k 10:30 DOE U.S. Distillate Inventory (8/26): exp. -125k, prior 122k 10:30 DOE U.S. Refinery Utilization (8/26): exp. -0.50%, prior -1.00% 10:30 DOE Crude Oil Implied Demand (8/26): prior 16833 10:30 DOE Gasoline Implied Demand (8/26): prior 10113.4 10:30 DOE Distillate Implied Demand (8/26): prior 5055.6 Global Economics 02:00 EUR German Retail Sales m/m 03:55 EUR German Unemployment Change 05:00 EUR CPI Flash Estimate 08:30 CAD GDP m/m 21:00 CNY Manufacturing PMI 21:30 AUD Private Capital Expenditures 21:30 AUD Retail Sales 21:45 CNY Caixin Manufacturing PMI Earnings Before Open: None of significance After Close: Five Below (FIVE) Salesforce.com (CRM)
Continue Reading -->The Apple Bounce, and 4 Other Things I’m Watching
1) Apple Bounces Apple (AAPL) is down but well off its morning low, which was driven by the EU tax ruling. The final verdict is unknown, but even in the worst case scenario, Apple may not feel a thing from a financial standpoint. The real significance, however, is seen in other tech names who have Ireland tax exposure: Facebook (FB) and Google (GOOGL) are off today. But for now this seems more like an excuse to take profits rather than an end-of-world scenario. An excuse may be enough though… 2) Crude Oil Crude oil is pretty weak today ahead of inventory numbers from the API (reported after the close today) and the EIA (tomorrow morning). Iraq will support an output freeze at next month’s OPEC meeting in Algeria, according to Prime Minister Abadi. However, what OPEC actually will do remains a mystery. A lot of traders got stung by OPEC’s failure to freeze production in June, and some folks are justifiably afraid of a repeat. 3) Biotech Biotech (IBB) is pretty listless today. I regularly harp on biotech’s importance to any serious bull move, but it does feel like it’s getting worn out. Check out the chart — IBB lost the 20 day and the 50 is coming up fast. 4) The Hawk Trade The big hawk trade is still going as Fed rate hike expectations have increased quite a bitver the past month. Gold is getting roughed up and the dollar’s in full rip mode. Active stock traders should be watching the Regional Banks ETF (KRE). It’s not nearly as followed as XLF, but it moves a heck of a lot more. 5) Dove Soup And on the flip side, the dove trades (utilities, Treasuries, housing) are coming under pressure. Like Jeff Cooper, I’m closely watching the junior gold miners (GDXJ). They’re still up 131% YTD, so if gold keeps flopping, the miners have an awful lot of room to drop. However, just be aware that these trades really can go anywhere. At the Brexit, traders were pricing in basically zero chance of a rate hike. Now they see 60% odds. Any big shifts in the broader markets or economic data could shake things up.
Continue Reading -->The Morning Hammer: Apple Slammed on Tax Ruling
Don’t Fear Forex… Attend Kurt forex’ free webinar today after the close and learn why so many stock and options traders are embracing the lucrative world of forex. ******* Shares of Apple (AAPL) are getting slammed this morning after the European Commission found that Ireland gave the iPhone maker an illegal “selective tax treatment. Apple has been ordered to repay 13 billion euros ($14.5 billion) plus interest, though Ireland will appeal the ruling. The stock traded as low as $103.50 in the early going but it’s come back a bit. Apple has well over $200 billion in cash so it won’t have any problem fitting the bill. The real issue is whether investors will start worry about the tech sector’s ability to cut taxes by using Ireland-based entities. NDX futures are down -0.2%, so it seems that no one really cares for now. But keep an eye out on this issue. Overseas markets are mostly in the green today, led by the banks, even with negative economic data. Euro-area economic confidence, UK mortgage approvals, and Adzuna advertised salaries were all weak. UK economic data has generally been solid post-Brexit, so these numbers are bucking the trend. Check out this of the Citi UK Economic Surprise Index (starts on 6/1/2016): The dollar is up and gold is down on increased confidence that the Fed is ready to move. The gold miners (GDX) look especially weak this morning. The news flow is pretty slow and the economic calendar is light, with just S&P CoreLogic home price and consumer confidence numbers on tap. Fed Vice Chairman Fischer appeared on Bloomberg TV this morning, expressing optimism that productivity growth will rebound. He also said that incoming economic data will determine the trajectory of interest rate increases. So for now, it looks like we’re back to the range, which makes sense ahead of Friday’s big jobs report. Maybe that will give traders an excuse to start taking real action? One can dream… P.S. Don’t forget to sign up for our FREE forex training session!
Continue Reading -->T3’s Take 3: Banks Lead the Way
1) Banks Rock Following FOMC Chair Janet Yellen’s hawkish-leaning speech in Jackson Hole on Friday, traders are increasingly certain that the Fed will raise interest rates this year. That sent up bank stocks, which benefit from higher rates, up big today. The S&P Financials ETF (XLF) rose 0.9% to $24.32, led by solid gains in Wells Fargo (WFC) and JP Morgan (JPM). The strong bank action pushed the market well into positive territory, more than making up for Friday’s small dip. The S&P 500 rose 0.5% to 2180.38. The Nasdaq underperformed due weakness in biotechnology and its smaller exposure to financials. 2) Why the USDJPY Will Drop In today’s Trade of the Week column, T3 Live’s Kurt Capra suggested a short of USDJPY: Entry Area: 101.80 Stop Price: 104.00 Target Area: 97.00-98.00 USDJPY has been in a downtrend on the daily chart for quite some time. Last month, it rallied and subsequently fell back to the prior low. Recently, it has been consolidating within a range. It is now at the top of the range where we’ll look for sellers to reemerge. By the way, I recommend you check out Kurt’s forex trading webinar scheduled for after the close tomorrow. 3) Apple Drama? Apple’s (AAPL) had a beautiful rally off the May lows when Warren Buffett announced he took a position in the iPhone maker. Apple shareholders are bound to see even more excitement over the next week. First, Apple sent out invites to its September iPhone 7 unveiling. And more immediately, Bloomberg reported that Apple could learn the outcome of its Irish tax case as early as tomorrow. According to the European Commission, Ireland gave Apple illegal tax breaks, which could result in financial penalties. Estimates of Apple’s damage run anywhere from 100 million to as much as 19 billion euros in a worst-case scenario, so the possible outcome here truly seems like a total mystery. Tuesday’s Trading Calendar US Economics (Time Zone: EDT) 09:00 S&P CoreLogic CS US HPI MoM SA (Jun): prior 0.19% 09:00 S&P CoreLogic CS 20-City NSA Index (Jun): prior 188.29 09:00 S&P CoreLogic CS 20-City MoM SA (Jun): exp. -0.10%, prior -0.05% 09:00 S&P CoreLogic CS 20-City YoY NSA (Jun): exp. 5.12%, prior 5.24% 09:00 S&P CoreLogic CS US HPI NSA Index (Jun): prior 180.7 09:00 S&P CoreLogic CS US HPI YoY NSA (Jun): prior 5.05% 10:00 Consumer Confidence Index (Aug): exp. 97, prior 97.3 Global Economics 03:00 EUR Spanish Flash CPI y/y 04:30 GBP Net Lending to Individuals m/m 08:30 CAD Current Account 21:00 AUD RBA Assist. Gov Debelle Speaks 21:00 AUD ANZ Business Confidence Earnings Before Open: Abercrombie & Fitch (ANF) DSW Inc (DSW) After Close: Bob Evans Farms (BOBE)
Continue Reading -->