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 -->T3’s Take: Oil and Biotech Scream but Fail to Start a Party
1) Oil Blasts Into Orbit Today, we saw the biggest decline in US crude inventories since January 1999. The Energy Information Administration said US crude stocks fell -14.5 million barrels last week. Traders were expecting a 905K increase, so needless to say, the market was taken by surprise. WTI crude rose 4.2% to $47.41, and in turn, energy stocks led the market. Oil service names were especially strong. However, we still see a lot of conflicting headlines regarding possible changes in OPEC policy, so stay on your toes. 2) Biotech Rips on More Deal Hopes Yesterday, biotech caught a bid into the close after Reuters reported that GW Pharmaceuticals (GWPH) hired advisers after being approached for a takeover. Today, Gilead (GILD) added to the positivity by saying at an investor conference that it “feels an urgency” to do deals, noting an interest in cancer drugs. Traders immediately looked at cancer treatment specialists Tesaro (TSRO) and Clovis Oncology (CLVS) as potential targets, and both stocks rose sharply today. The Nasdaq Biotech Index ETF (IBB) rose 0.7% to $288.03, vastly outperforming the major indices. 3) Stocks Grind Gears Even with crude oil and biotechnology rocking hard, the S&P 500 couldn’t drive any upside, and it declined -0.2% to 2181. That felt a bit odd, since typically, stocks perform well when oil and biotech rally. Apple (AAPL) sank -2.6% on a downgrade from Wells Fargo, which weighed on the Nasdaq. Gold took a hit today as the dollar rose sharply against the yen, which sent gold miners (GDX) sharply lower. We also saw weakness in US Treasuries, retailers, and real estate names. Friday’s Economic Calendar US Economics (Time Zone: EDT) 08:15 Fed’s Rosengren to Deliver Economic Forecast in Boston 09:30 Fed’s Kaplan Speaks in Austin, Texas 10:00 Wholesale Inventories MoM (Jul F): exp. 0.10%, prior 0.00% 10:00 Wholesale Trade Sales MoM (Jul): exp. 0.20%, prior 1.90% 13:00 Baker Hughes U.S. Rig Count (9/9): prior 497 13:00 Baker Hughes U.S. Rotary Gas Rigs (9/9): prior 88 13:00 Baker Hughes U.S. Rotary Oil Rigs (9/9): prior 407 Global Economics 04:30 GBP Goods Trade Balance 08:30 CAD Unemployment Rate Earnings Before Open: Hovnanian Enterprises (HOV) Kroger (KR) Mattress Firm Holding (MFRM) After Close: None of Significance
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 -->Scott Redler’s Morning Call Express: Be Ready for Anything
In today’s Morning Call Express, T3 Live Chief Strategic Officer Scott Redler discusses the action in SPX, as well as individual names like AAPL, AMZN, and GOOGL.
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 -->Morning Call Express: Beta Time!
In today’s Morning Call Express, Scott Redler looks at the SPX and how yesterday’s action plays into his overall plan. With the AAPL event today, he also looks at the chart of AAPL and provides some techincal levels to keep an eye on for trading. He also looks at some high beta tech names as well that remain on his radar.
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 -->5 Reasons the $5 Trillion Forex Market Might Be Right for You
For some strange reason, many people think trading forex isn’t for them. But forex is way simpler than you think, and it offers 5 huge advantages over stock, options, commodities, and futures trading: 1) It’s Practically a 24/7 Market Forex is a global market and is open 24 hours a day from 5:00 p.m. ET Sunday through 5:00 p.m. ET on Friday. This is perfect for traders with flexible schedules, or for those making more money outside standard standard exchange hours. 2) Unmatched Liquidity Since forex is a $5 trillion dollar per day market with expanded hours, there are also virtually no gaps, effectively bridging the gap (no pun intended) between day and swing trading. It is very easy to get in and out, at will, no matter the time, day or night. 3) You Can Short At Will Nowadays, there are many restrictions put on stock trading, the uptick rule for one. With forex, there are no limitations on the currencies you trade. You can short at will. 4) Trading Costs Are Incredibly Low Most forex accounts are commission free. PLUS, there are no exchange, data, or platform fees. The only cost you have as a forex trader is the spread, or difference between the bid and ask, which is always visible for you to see. That makes forex trading much, much cheaper than stocks, options, and futures. 5) Incredible Leverage Because the forex market is so liquid, brokers will extend you significant leverage — up to 50:1, and even higher outside the US). Leverage goes both ways though. Just as easily as you can accelerate profits, you can also suffer accelerated losses. That is why you MUST have a method and plan! P.S. below is a recent FREE webinar I did…check it out!!
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