Archive for 2014

Sector Detector: Patient bulls finally get a new entry point, thanks to inflation fears

Courtesy of Sabrient Systems and Gradient Analytics

Now that’s what I’m talking about. I have been discussing the overbought technical conditions of the S&P 500 for some time and the need for a pullback to test bullish support levels. And as many commentators have suggested, the more time between pullbacks, the more severe is the action when it finally arrives. Bears had become very hungry after a prolonged hibernation. This week offered up a nasty pullback. But fear not, because in my view it was just what the doctor ordered for the bulls to recruit new troops in order to have a chance at breaking through some ominous resistance levels.

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading ideas, including a sector rotation strategy using ETFs and an enhanced version using top-ranked stocks from the top-ranked sectors.

Market overview:

Once Fed Chairwoman Yellen mentioned a little something about inflation, bulls got spooked, and of course a little fear at overbought levels can snowball in short order. The stock market is a discounting mechanism in that the theoretical fair value in a discounted cash flow model is the sum of future earnings discounted back to a present value. So, if inflation starts to creep up, there would be pressure on the Federal Reserve to increase the discount rate, which would make it harder to support elevated multiples. Moreover, it would make corporate borrowing for stock buybacks or capital investment less attractive. Thus, the kneejerk reaction. This further underscores the need for economic expansion and rising corporate earnings (as well as rising revenues) to support valuations. So far, earnings season has been pretty good, and of course Q2 GDP smoked all predictions by clocking in at a robust +4%, while the dismal Q1 rate was revised upward.

Wage inflation is the necessary precursor to price inflation, and reports showed that U.S. labor costs in Q2 recorded their biggest gain in more than five years. Argentina defaulting on its sovereign debt and increasingly severe sanctions on Russia didn’t help investor psyche, either. On Friday, unemployment ticked up to 6.2% (even though many observers thought it might drop below 6%), most likely due to…
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Lies For Empire

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Submitted by James E. Miller via Mises Canada,

In his provocative cover story “Why Liberalism Means Empire” for The American Conservative, Daniel McCarthy makes a rather astounding claim: that liberalism, or rather laissez faire secular order, needs a state hegemon to be long-lasting. I call this argument astounding because McCarthy often advocates non-intervention in foreign affairs. He’s never one to shy away from damning the bellicose transgressions of the United States government. Yet he, at times, seems to be defending Washington’s vice grip on global affairs, and claims that such mastery is necessary for liberal democracy and the free flow of trade. He writes:

“Liberal imperialism is not directed toward gratuitous conquest but toward maintaining a global environment conducive to liberalism.”

Whether McCarthy’s argument is correct or not will not be addressed here. Rather, the question of intentions behind empire will be examined, as they receive scant attention in McCarthy’s polemic. It’s certainly true that governments are driven by people trying to shower their universal values upon the planet. But is it really the case that the U.S. government is interested in promoting liberal democracy abroad?

McCarthy points out that the British Empire played a key role in engendering autonomy within the early years of the U.S. He notes that with “Britain keeping any possible global predator at bay, American statesmen could pursue their ends through means other than war.” Following World War I, and Britain’s war losses at the hands of Germany, it was time for a new world power to rise up and reestablish the liberal order. The United States, which had largely minded its own business prior to the Great War, was thrust to the forefront of being the globe’s protector of classical liberalism.

Decades later, neoconservative ideology adopted the “spread democracy abroad” trope as an excuse for imperium. But today, as the American economy remains bogged down in stagnation, and the national debt climbs ever higher, the salad days of U.S. worldwide influence are waning. Empire is expensive. In a representative democracy such as America, it also requires both the votes and tax dollars of citizens to sustain itself. Public perception is leaning more towards non-intervention. The warmongers and elites in D.C. decry the shift in sentiment, and are busy trying to find excuses to continue…
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Volatility Shocks & The Cheapest Hedge

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Low volatility is being driven, in BofAML's view, by both fundamental and technical factors. Fundamentally, the volatility of real economic activity and inflation has fallen to near 20 year lows in what some are calling the Great Moderation 2.0. However, the recent further collapse in volatility is also explained by a feedback loop fueled by low conviction, low liquidity, low yields and low fear. Central bank policy has been the largest explanatory factor of both the fundamentals and technicals… and that has BofAML concerned about the risks of short-term volatility spikes exacerbated by market illiquidity.

 

Via BofAML,

Volatility across asset classes, including credit, rates, FX, commodity and equity has collectively hit its lowest level in recorded history, not only in terms of the volatility being realized by markets but also the volatility implied by options.

This is impressive given the fact that prior to this, the 2003-2007 period represented the biggest bubble recorded in volatility, driven by the liquidity produced through the excesses of the credit bubble and the exponential growth in hedge fund capital and leverage.

Volatility across asset classes has also become statistically more interlinked in recent years, being driven to a greater degree by a fewer number of factors.

This is most likely the increasing influence of central bank policy operating through multiple channels on the overall price of risk.

*  *  *
What are the key drivers of today’s low volatility? While the factors impacting volatility across asset classes range from highly macro to idiosyncratic issues of a given asset class, we point to four factors impacting most assets globally:

1) Low economic volatility: This is one of the most striking long-term trends in the volatility landscape.

 

 

 

Chart 3 illustrates that since the mid-80s, during times of economic expansion, GDP growth has been very smooth compared to any other period post WWII. While many dismissed the “Great Moderation” of stable growth and low and stable inflation during the unwinding of the credit bubble, we are seeing clear evidence of a “Great Moderation 2.0” post GFC.

 

 

 

 

Chart 4 shows the realized volatility of economic activity indicators including Nonfarm Payrolls, Industrial Production and Personal Consumption, as well as volatility of realized inflation, which has


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Despite Surging PMIs, China’s Poor Resort To Self-Immolation

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

With China’s Manufacturing PMI at cycle highs and Services PMI comfortably in expansion, everything must be ponies and unicorns among the world’s most mal-invested credit-bubble-fueled populace. However, as we have pointed out, discrepancies abound in the data and now desperately sad anecdotal picture of a wretched working class in China are starting to emerge. As WantChinaTimes reports, 55-year-old Zhao Guangsheng poured flammable liquids on his body before lighting himself on fire and running into Xingtan city government’s office lobby (in Hunan province). Poverty appears to be the reason for his self-immolation, aside from mental instability, as Zhao was unable to pay utility bills after being moved due to forced land acquisitions by the government.

 

As WantChinaTimes reports,

The city government of Xingtan in south China’s Hunan province has confirmed rumors that a man set himself on fire outside government offices on Friday after photos of the self-immolation incident went viral on the internet.

 

Witnesses say the man, identified as Zhao Guangsheng, a 55-year-old former local boiler plant worker, poured flammable liquids on his body before lighting himself on fire and running into the city government’s office lobby at around 4:30pm on Aug. 1.

 

 

 

The flames were eventually put out by security guards and Zhao was rushed to the hospital, where he reportedly sustained third-degree burns to 99% of his body.

 

 

Zhao’s motive for setting himself on fire appears to be linked to a combination of long-term financial desperation, family problems and emotional and psychological instability.

 

 

Neighbors told reporters that Zhao and his son previously lived in public housing but were forced to vacate the property for a different government-funded community in the second half of 2013 because they were unable to pay utility bills. Sources told Xinhua that Zhao had visited the government office on multiple occasions and had applied for early retirement and low-price housing…

 

 

In some of the photos online, it appeared someone had written the Chinese characters for “Land” on the ground, leading to speculation that the incident may have been related to forced land acquisitions by the government, though this has been denied by insider sources.

*  *  *

This is all very depressing –…
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GueRNiGaZa…

Courtesy of ZeroHedge. View original post here.

Submitted by williambanzai7.





Hussman’s Hint Of Advance Warning

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Excerpted from John Hussman’s Weekly Market Comment,

Historically-informed investors are being given a hint of advance warning here, in the form of a strenuously overvalued market that now demonstrates a clear breakdown in internals. We observe these breakdowns in the form of surging credit spreads (junk bond yields versus Treasury yields of similar maturity), weakness in small capitalization stocks, and other measures.

These divergences have actually been building for months, but rather quietly. Note, for example, that as the S&P 500 pushed to new highs in recent weeks, cumulative advances less declines among NYSE stocks failed to confirm those highs, while junk bond prices were already deteriorating.

We don’t take any single divergence as serious in itself, but the accumulation of divergences in recent weeks should not be ignored. Notably, the majority of NYSE stocks are now below their respective 200-day moving averages (which again, isn’t serious in itself, but feeds into a larger syndrome of internal breakdowns in a market that remains strenuously overvalued).

After an extended and extreme compression of risk premiums, we’re now observing increasing divergences across a variety of market internals and security types (e.g. breadth, leadership, momentum stocks, small caps, junk bonds).

We’ve come to avoid pointed warnings in this market, because speculative conditions have extended much longer than in other cycles. Indeed, we’ve had a few deteriorations in recent years that reversed fairly quickly as investors shifted back to risk-seeking, particularly after fresh initiatives or assurances about monetary easing (though further initiatives may not be forthcoming in this instance). So we’re open to a favorable shift on these measures, and if that was to occur following a somewhat greater retreat in valuations, it could even open up some amount of constructive opportunity. Meanwhile, despite our view of stocks as severely overvalued, our response is to remain defensive without taking a stance that greatly relies on immediate market weakness.

An awareness of divergence and uniformity is the bread-and-butter of signal extraction – inferring true information signals from the sea of random noise. We take the present breakdown of market internals seriously.

Whatever the crowd wishes to do about it, historically-minded investors should think carefully about whether a strenuously overvalued market with deteriorating market internals is a desirable environment for risk taking. For our part, the answer is a resounding “No.”





Obama’s “Folks”

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

When President Obama explained so eloquently on Friday that the US "tortured some folks," we got an eery sense of deja vu about his phrasing. Sure enough, as The Washington Post reports, it was very much not the first time that he'd used the word "folks."

 

March 2014. Folks discussed: Hardworking folks, folks cooking meals for the troops, folks at the top, chairless folks, folks who need a raise.

Talking to an audience in Connecticut, Obama discussed income inequality — "there are folks at the top who are doing better than ever" — but "we understand that some folks are going to earn more than others." But he was fighting to give "hardworking folks" a pay increase. Folks like the "folks who are cooking the meals of our troops, or washing their dishes, or cleaning their clothes."

He also apologized because he knew "the folks here don't have chairs."

 

February 2014. Folks discussed: Folks who worked at Costco, folks who earned tips, folks with pockets.

This one is pretty easy to piece together.

 

October 2012. Folks discussed: Rich folks, middle class folks, Chinese folks, gangbanger folks, folks who mess with Americans.

During a presidential debate, Obama says that Mitt Romney wants "to make sure that folks at the top play by a different set of rules." He, on the other hand wants "give middle-class families and folks who are striving to get into the middle-class some relief." Different folks.

He later accuses Romney of investing in companies that "are building surveillance equipment for China to spy on its own folks." And he makes his case on immigration: "What I've also said is if we're going to go after folks who are here illegally, we should do it smartly and go after folks who are criminals, gang bangers."

On Benghazi, he reminded Americans of his longstanding plan. "[O]ne of the things that I've said throughout my presidency is when folks mess with Americans, we go after them."

 

August 2011. Folks discussed: Korean folks, folks outside machine shops, non-farm folks.

Obama's weekly address was about putting Americans (American folks) back to work. He wanted to "see folks in Korea driving Fords, Chevys and Chryslers," he said. He wanted folks in Washington to put country before party, lessons…
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Tracking the Market with Social Media

Courtesy of Doug Short.

Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.


The Trade Followers Momentum indicator for the S&P 500 Index (SPX) issued a consolidation warning on 7/11/14. That warning is still in effect. During the past week the indicator was turned back at its down trend line that had given the first indication that the market may experience some choppiness. In order to clear the consolidation warning momentum will need to rise above that down trend line.

Currently a small positive divergence is in place from both Twitter and StockTwits and momentum is barely below zero. This is an encouraging sign given the sharp decline in price on Thursday and continued weakness on Friday. However, the indicators are below zero and any move that takes them below their previous lows will signal continued weakness ahead.

Momentum from small cap stocks (IWM) is compressing in a triangle which suggests that traders on Twitter and StockTwits are split between buying this dip and pressing short trades hoping to break the May lows in price. A break of those lows that is confirmed by momentum breaking its downtrend line will warn that the market may accelerate lower.

Breadth from Twitter and StockTwits (calculated from the stock with the most support and those with the least) continues to move lower. This indicates that market participants are finding fewer stocks they like and more short opportunities.

Support and resistance levels gleaned from the Twitter stream showed a bit of fear from traders. Calls for 2000 on SPX dried up while tweets for lower prices increased. The most tweeted levels below the market were 1925, 1910, and 1850 making them support. Resistance comes at 1955 and the recent highs near 1990.

Sectors showed across the board weakness from the Twitter stream. Technology was the only sector to show any strength. This indicates that selling was widespread last week giving investors no place to hide. This is a negative for the market because it shows a lack of willingness to own any stocks, including the defensive sectors.

Overall indications from social media suggest the worst isn’t behind us yet. Twitter momentum is still on a consolidation warning, breadth is declining, traders are tweeting mostly lower prices, and the sectors show a fear to own…
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Money Creation – “So Simple The Mind Is Repelled”

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

As John Kenneth Galbraith famously stated, "The process by which money is created is so simple the mind is repelled." As Peak Prosperity's Chris Martenson explains (as part of his excellent Crash Course), essentially, money is lent into existence though fractional reserve banking. The dollars you deposit at the bank? They turn into nearly 10x that amount as your bank subsequently makes loans using that money as collateral. As simple as the process is, nearly every American remains ignorant of it and its massive implications. At the heart of the matter is this: our money supply and its related debt obligations MUST continue expanding (thereby devaluing the purchasing power of each dollar ad infinitum) — forever — or the entire system collapses upon itself. Prepare to be repelled…

 

For those who simply don't want to wait until the end of the year to view the entire new series, you can indulge your binge-watching craving by enrolling to PeakProsperity.com. The entire full new series, all 27 chapters of it, is available — now-- to our enrolled users.

The full suite of chapters in this new Crash Course series can be found at www.peakprosperity.com/crashcourse

And for those who have yet to view it, be sure to watch the 'Accelerated' Crash Course — the under-1-hour condensation of the new 4.5-hour series. It's a great vehicle for introducing new eyes to this material.





Transformation or Bust

Thoughts from the Frontline: Transformation or Bust

By John Mauldin

China continues to be front and center on my list of concerns, even moreso than the latest Federal Reserve press release or fluctuation in the Dow (although you should pay attention). I believe China is the single biggest risk to world economic equilibrium, even larger than Japan or Europe. This week my young associate Worth Wray provides us with a keenly insightful essay on what is currently happening in China. I will admit to not having written about China very much in the past five years, primarily because, prior to Worth’s coming to work with me I really had no secure understanding of what was happening there. I know some readers may be surprised, but I really don’t like to write about things I have no understanding of. Worth has helped me focus. (It helps that he studied Mandarin and lived in China for a while, and is obsessed with China.)

Worth has been working directly with me for over one year now. I have had the privilege of working with a number of impressive (lately mostly younger) people over the years, but Worth brings something extra to the table. He is one of the best young macroeconomic minds I have been with in years. He constantly challenges me to step up my game. And so without further ado, let me give you Worth’s thinking regarding our latest discussions on China.

Transformation or Bust, China Version

The People’s Republic of China is running up against its debt capacity; and its consumption-repressing, credit-fueled, investment-heavy growth model is nearly exhausted. History suggests that China’s “miracle” could dissipate into a long period of painfully slow growth or terminate abruptly with a banking crisis and sudden collapse. That said, China’s modern economic transformation has defied historical precedents for decades. However unlikely, China could surprise us again. Miracles will happen in the Age of Transformation.

What happens next depends largely on the economic wisdom and political resolve of China’s reformers, who must find a way to gradually deleverage overextended regional governments and investment-intensive sectors while simultaneously rebalancing the national economy toward a more sustainable consumption-driven, service-intensive model. The


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Zero Hedge

Johns Hopkins, Bristol-Myers Face $1 Billion Suit For Infecting Guatemalan Hookers With Syphilis 

Courtesy of ZeroHedge. View original post here.

A federal judge in Maryland said Johns Hopkins University, pharmaceutical company Bristol-Myers Squibb and the Rockefeller Foundation must face a $1 billion lawsuit over their roles in a top-secret program in the 1940s ran by the US government that injected hundreds of Guatemalans with syphilis, reported Reuters.

Several doctors from Hopkins an...



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Phil's Favorites

This Is The One Chart Every Trader Should Have "Taped To Their Screen"

Courtesy of Zero Hedge

After a year of tapering, the Fed’s balance sheet finally captured the market’s attention during the last three months of 2018.

By the start of the fourth quarter, the Fed had finished raising the caps on monthly roll-off of its balance sheet to the full $50bn per month (peaking at $30bn USTs, $20bn MBS, although on many months the (balance sheet) B/S does not actually shrink by this full amount which depends on the redemption schedule) and by end-Q4 markets also experienced some of the largest volatility and drawdowns in nearly a decade.

As Nomura&...



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ValueWalk

The Competition For Capital Has Made Stocks Cheap

By Michelle Jones. Originally published at ValueWalk.

The new year is upon us, and now is the time many investors look at what 2018 was and prepare for what 2019 might be. Recession jitters are starting to pick back up again, especially now that the full picture of 2018 is in the books. But what if you could pick only one theme for 2018? Jefferies strategist Sean Darby and team have a suggestion which is especially timely given that it appears to mark the end of an era.

StockSnap / PixabayVolatility carries into the new year

This past year was one of extremes, and the markets ended i...



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Kimble Charting Solutions

Stock declines did not break 9-year support, says Joe Friday

Courtesy of Chris Kimble.

We often hear “Stocks take an escalator up and an elevator down!” No doubt stocks did experience a swift decline from the September highs to the Christmas eve lows. Looks like the “elevator” part of the phrase came true as 2018 was coming to an end.

The first part of the “stocks take an escalator up” seems to still be in play as well despite the swift decline of late.

Joe Friday Just The Facts Ma’am- All of these indices hit long-term rising support on Christmas Eve at each (1), where support held and rallies have followed.

If you find long-term perspectives helpf...



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Digital Currencies

Transparency and privacy: Empowering people through blockchain

 

Transparency and privacy: Empowering people through blockchain

Blockchain technologies can empower people by allowing them more control over their user data. Shutterstock

Courtesy of Ajay Kumar Shrestha, University of Saskatchewan

Blockchain has already proven its huge influence on the financial world with its first application in the form of cryptocurrencies such as Bitcoin. It might not be long before its impact is felt everywhere.

Blockchain is a secure chain of digital records that exist on multiple computers simultaneously so no record can be erased or falsified. The...



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Insider Scoop

Cars.com Explores Strategic Alternatives, Analyst Sees Possible Sale Price Around $30 Per Share

Courtesy of Benzinga.

Related 44 Biggest Movers From Yesterday 38 Stocks Moving In Wednesday's Mid-Day Session ...

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Chart School

Weekly Market Recap Jan 13, 2019

Courtesy of Blain.

In last week’s recap we asked:  “Has the Fed solved all the market’s problems in 1 speech?”

Thus far the market says yes!  As Guns n Roses preached – all we need is a little “patience”.  Four up days followed by a nominal down day Friday had the market following it’s normal pattern the past nearly 30 years – jumping whenever the Federal Reserve hints (or essentially says outright) it is here for the markets.   And in case you missed it the prior Friday, Chairman Powell came back out Thursday to reiterate the news – so…so… so… patient!

Fed Chairman Jerome Powell reinforced that message Thursday during a discussion at the Economic Club of Washington where he said that the central bank will be “fle...



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Members' Corner

Why Trump Can't Learn

 

Bill Eddy (lawyer, therapist, author) predicted Trump's chaotic presidency based on his high-conflict personality, which was evident years ago. This post, written in 2017, references a prescient article Bill wrote before Trump even became president, 5 Reasons Trump Can’t Learn. ~ Ilene 

Why Trump Can’t Learn

Donald Trump by Gage Skidmore (...



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Biotech

Opening Pandora's Box: Gene editing and its consequences

Reminder: We are available to chat with Members, comments are found below each post.

 

Opening Pandora's Box: Gene editing and its consequences

Bacteriophage viruses infecting bacterial cells , Bacterial viruses. from www.shutterstock.com

Courtesy of John Bergeron, McGill University

Today, the scientific community is aghast at the prospect of gene editing to create “designer” humans. Gene editing may be of greater consequence than climate change, or even the consequences of unleashing the energy of the atom.

...

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Mapping The Market

Trump: "I Won't Be Here" When It Blows Up

By Jean-Luc

Maybe we should simply try him for treason right now:

Trump on Coming Debt Crisis: ‘I Won’t Be Here’ When It Blows Up

The president thinks the balancing of the nation’s books is going to, ultimately, be a future president’s problem.

By Asawin Suebsaeng and Lachlan Markay, Daily Beast

The friction came to a head in early 2017 when senior officials offered Trump charts and graphics laying out the numbers and showing a “hockey stick” spike in the nationa...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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