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DDDD - The Rise of “Buy the Dip” Retail Investors and Why Another Crash Is Imminent
In this week's edition of DDDD (Data-driven DD), I'll be going over the real reason why we have been seeing a rally for the past few weeks, defying all logic and fundamentals - retail investors. We'll look into several data sets to see how retail interest in stock markets have reached record levels in the past few weeks, how this affected stock prices, and why we've most likely seen the top at this point, unless we see one of the "positive catalysts" that I mentioned in my previous post, which is unlikely (except for more news about Remdesivir). Disclaimer - This is not financial advice, and a lot of the content below is my personal opinion. In fact, the numbers, facts, or explanations presented below could be wrong and be made up. Don't buy random options because some person on the internet says so; look at what happened to all the SPY 220p 4/17 bag holders. Do your own research and come to your own conclusions on what you should do with your own money, and how levered you want to be based on your personal risk tolerance. Inspiration Most people who know me personally know that I spend an unhealthy amount of my free time in finance and trading as a hobby, even competing in paper options trading competitions when I was in high school. A few weeks ago, I had a friend ask if he could call me because he just installed Robinhood and wanted to buy SPY puts after seeing everyone on wallstreetbets post gains posts from all the tendies they’ve made from their SPY puts. The problem was, he actually didn’t understand how options worked at all, and needed a thorough explanation about how options are priced, what strike prices and expiration dates mean, and what the right strategy to buying options are. That’s how I knew we were at the euphoria stage of buying SPY puts - it’s when dumb money starts to pour in, and people start buying securities because they see everyone else making money and they want in, even if they have no idea what they’re buying, and price becomes dislocated from fundementals. Sure enough, less than a week later, we started the bull rally that we are currently in. Bubbles are formed when people buy something not because of logic or even gut feeling, but when people who previously weren’t involved see their dumb neighbors make tons of money from it, and they don’t want to miss out. A few days ago, I started getting questions from other friends about what stocks they should buy and if I thought something was a good investment. That inspired me to dig a bit deeper to see how many other people are thinking the same thing. Data Ever since March, we’ve seen an unprecedented amount of money pour into the stock market from retail investors. Google Search Trends \"what stock should I buy\" Google Trends 2004 - 2020 \"what stock should I buy\" Google Trends 12 months \"stocks\" Google Trends 2004 - 2020 \"stocks\" Google Trends 12 months Brokerage data Robinhood SPY holders \"Robinhood\" Google Trends 12 months wallstreetbets' favorite broker Google Trends 12 months Excerpt from E*Trade earnings statement Excerpt from Schwab earnings statement TD Ameritrade Excerpt Media cnbc.com Alexa rank CNBC viewership & rankings wallstreetbets comments / day investing comments / day Analysis What we can see from Reddit numbers, Google Trends, and CNBC stats is that in between the first week of March and first week of April, we see a massive inflow of retail interest in the stock market. Not only that, but this inflow of interest is coming from all age cohorts, from internet-using Zoomers to TV-watching Boomers. Robinhood SPY holdings and earnings reports from E*Trade, TD Ameritrade, and Schwab have also all confirmed record numbers of new clients, number of trades, and assets. There’s something interesting going on if you look closer at the numbers. The numbers growth in brokers for designed for “less sophisticated” investors (i.e. Robinhood and E*Trade) are much larger than for real brokers (i.e. Schwab and Ameritrade). This implies that the record number of new users and trade volume is coming from dumb money. The numbers shown here only really apply to the US and Canada, but there’s also data to suggest that there’s also record numbers of foreign investors pouring money into the US stock market as well. However, after the third week of March, we see the interest start to slowly decline and plateau, indicating that we probably have seen most of those new investors who wanted to have a long position in the market do so. SPX daily Rationale Pretty much everything past this point is purely speculation, and isn’t really backed up by any solid data so take whatever I say here with a cup of salt. We could see from the graph that new investor interest started with the first bull trap we saw in the initial decline from early March, and peaking right after the end of the crash in March. So it would be fair to guess that we’re seeing a record amount of interest in the stock market from a “buy the dip” mentality, especially from Robinhood-using Millennials. Here’s a few points on my rationalization of this behavior, based on very weak anecdotal evidence
They missed out of their chance of getting in the stock market at the start of the bull market that happened at the end of 2009
They’ve all seen the stock market make record gains throughout their adult lives, but believing that the market might be overheated, they were waiting for a crash
Most of them have gotten towards the stage of their lives where they actually have some savings and can finally put some money aside for investments
This stock market crash seems like their once-in-a-decade opportunity that they’ve been waiting for, so everyone jumped in
Everyone’s stuck at their homes with vast amounts of unexpected free time on their hands
Most of these new investors got their first taste in the market near the bottom, and probably made some nice returns. Of course, since they didn’t know what they were doing, they probably put a very small amount of money at first, but after seeing a 10% return over one week, validating that maybe they do know something, they decide to slowly pour in more and more of their life savings. That’s what’s been fueling this bull market. Sentiment & Magic Crayons As I mentioned previously, this bull rally will keep going until enough bears convert to bulls. Markets go up when the amount of new bullish positions outnumber the amount of new bearish positions, and vice versa. Record amounts of new investors, who previously never held a position in the market before, fueled the bullish side of this equation, despite all the negative data that has come out and dislocating the price from fundamentals. All the smart money that was shorting the markets saw this happening, and flipped to become bulls because you don’t fight the trend, even if the trend doesn’t reflect reality. From the data shown above, we can see new investor interest growth has started declining since mid March and started stagnating in early April. The declining volume in SPY since mid-March confirms this. That means, once the sentiment of the new retail investors starts to turn bearish, and everyone figures out how much the stocks they’re holding are really worth, another sell-off will begin. I’ve seen something very similar to this a few years ago with Bitcoin. Near the end of 2017, Bitcoin started to become mainstream and saw a flood of retail investors suddenly signing up for Coinbase (i.e. Robinhood) accounts and buying Bitcoin without actually understanding what it is and how it works. Suddenly everyone, from co-workers to grandparents, starts talking about Bitcoin and might have thrown a few thousand dollars into it. This appears to be a very similar parallel to what’s going on right now. Of course there’s differences here in that equities have an intrinsic value, although many of them have gone way above what they should be intrinsically worth, and the vast majority of retail investors don’t understand how to value companies. Then, during December, when people started thinking that the market was getting a bit overheated, some started taking their profits, and that’s when the prices crashed violently. This flip in sentiment now look like it has started with equities. SPY daily Technical Analysis, or magic crayons, is a discipline in finance that uses statistical analysis to predict market trends based on market sentiment. Of course, a lot of this is hand-wavy and is very subjective; two people doing TA on the same price history can end up getting opposite results, so TA should always be taken with a grain of salt and ideally be backed with underlying justification and not be blindly followed. In fact, I’ve since corrected the ascending wedge I had on SPY since my last post since this new wedge is a better fit for the new trading data. There’s a few things going on in this chart. The entire bull rally we’ve had since the lows can be modelled using a rising wedge. This is a pattern where there is a convergence of a rising support and resistance trendline, along with falling volume. This indicates a slow decline in net bullish sentiment with investors, with smaller and smaller upside after each bounce off the support until it hits a resistance. The smaller the bounces, the less bullish investors are. When the bearish sentiment takes over across investors, the price breaks below this wedge - a breakdown, and indicates a start of another downtrend. This happened when the wedge hit resistance at around 293, which is around the same price as the 200 day moving average, the 62% retracement (considered to be the upper bound of a bull trap), and a price level that acted as a support and resistance throughout 2019. The fact that it gapped down to break this wedge is also a strong signal, indicating a sudden swing in investor sentiment overnight. The volume of the break down also broke the downwards trend of volume we’ve had since the beginning of the bull rally, indicating a sudden surge of people selling their shares. This doesn’t necessarily mean that we will go straight from here, and I personally think that we will see the completion of a heads-and-shoulders pattern complete before SPY goes below 274, which in itself is a strong support level. In other words, SPY might go from 282 -> 274 -> 284 -> 274 before breaking the 274 support level. VIX Daily Doing TA is already sketchy, and doing TA on something like VIX is even more sketchy, but I found this interesting so I’ll mention it. Since the start of the bull rally, we’ve had VIX inside a descending channel. With the breakdown we had in SPY yesterday, VIX has also gapped up to have a breakout from this channel, indicating that we may see future volatility in the next week or so. Putting Everything Together Finally, we get to my thesis. This entire bull rally has been fueled by new retail investors buying the dip, bringing the stock price to euphoric levels. Over the past few weeks, we’ve been seeing the people waiting at the sidelines for years to get into the stock market slowly FOMO into the rally in smaller and smaller volumes, while the smart money have been locking in their profits at an even slower rate - hence an ascending wedge. As the amount of new retail interest in the stock market started slowed down, the amount of new bulls started to decline. It looks like Friday might have been the start of the bearish sentiment taking over, meaning it’s likely that 293 was the top, unless any significant bullish events happen in the next two weeks like a fourth round of stimulus, in which case we might see 300. This doesn’t mean we’ll instantly go back to circuit breakers on Monday, and we might see 282 -> 274 -> 284 -> 274 happen before panic, this time by the first-time investors, eventually bringing us down towards SPY 180. tldr; we've reached the top EDIT - I'll keep a my live thoughts here as we move throughout this week in case anyone's still reading this and interested. 5/4 8PM - /ES was red last night but steadily climbed, which was expected since 1h RSI was borderline oversold, leaving us to a slightly green day. /ES looks like it has momentum going up, but is approaching towards overbought territory now. Expecting it to go towards 284 (possibly where we'll open tomorrow) and bouncing back down from that price level 5/5 Market Open - Well there goes my price target. I guess at this point it might go up to 293 again, but will need a lot of momentum to push back there to 300. Seems like this is being driven by oil prices skyrocketing. 5/5 3:50PM - Volume for the upwards price action had very little volume behind it. Seeing a selloff EOD today, could go either way although I have a bearish bias. Going to hold cash until it goes towards one end of the 274-293 channel (see last week's thesis). Still believe that we will see it drop below 274 next week, but we might be moving sideways in the channel this week and a bit of next week before that happens. Plan for tomorrow is buy short dated puts if open < 285. Otherwise, wait till it goes to 293 before buying those puts 5/5 6PM - What we saw today could be a false breakout above 284. Need tomorrow to open below 285 for that to be confirmed. If so, my original thesis of it going back down to 274 before bouncing back up will still be in play. 5/6 EOD - Wasn't a false breakout. Looks like it's still forming the head-and-shoulders pattern mentioned before, but 288 instead of 284 as the level. Still not sure yet so I'm personally going to be holding cash and waiting this out for the next few days. Will enter into short positions if we either go near 293 again or drop below 270. Might look into VIX calls if VIX goes down near 30. 5/7 Market Open - Still waiting. If we break 289 we're probably heading to 293. I'll make my entry to short positions when we hit that a second time. There's very little bullish momentum left (see MACD 1D), so if we hit 293 and then drop back down, we'll have a MACD crossover event which many traders and algos use as a sell signal. Oil is doing some weird shit. 5/7 Noon - Looks like we're headed to 293. Picked up VIX 32.5c 5/27 since VIX is near 30. 5/7 11PM - /ES is hovering right above 2910, with 4h and 1h charts are bullish from MACD and 1h is almost overbought in RSI. Unless something dramatic happens we'll probably hit near 293 tomorrow, which is where I'll get some SPY puts. We might drop down before ever touching it, or go all the way to 295 (like last time) during the day, but expecting it to close at or below 293. After that I'm expecting a gap down Monday as we start the final leg down next week towards 274. Expecting 1D MACD to crossover in the final leg down, which will be a signal for bears to take over and institutions / day traders will start selling again 5/8 Market Open - Plan is to wait till a good entry today, either when technicals looks good or we hit 293, and then buy some SPY June 285p and July 275p 5/8 Noon - Everything still going according to plan. Most likely going to slowly inch towards 293 by EOD. Will probably pick up SPY puts and more VIX calls at power hour (3 - 4PM). Monday will probably gap down, although there's a small chance of one more green / sideways day before that happens if we have bullish catalysts on the weekend. 5/8 3:55PM - SPY at 292.60. This is probably going to be the closest we get to 293. Bought SPY 290-260 6/19 debit spreads and 292-272 5/15 debit spreads, as well as doubling down on VIX calls from yesterday, decreasing my cost basis. Still looks like there's room for one more green day on Monday, so I left some money on the side to double down if that's the case, although it's more likely than not we won't get there. 5/8 EOD - Looks like we barely touched 293 exactly AH before rebounding down. Too bad you can't buy options AH, but more convinced we'll see a gap down on Monday. Going to work on another post over the weekend and do my updates there. Have a great weekend everyone!
For Trading September 3RD PROFIT TAKING HITS TSLA, AAPL, & ZM New Highs for NAZ & S&P-500 Today’s market started higher on the futures action and with the exception of 10:45 – 12:00 it never looked back. There was really nothing special about the economic numbers and the DJIA finished +454.84 (1.59%), NASDAQ +116.77 (.98%), S & P 500 +54.19 (1.54%), the Russell +13.71 (.87%), and the DJ Transports + 134.82 (1.19%). The surprise was the VIX also gaining, although not much, but up on a day like today, I would expect it to go lower. Factory orders were +6.4% vs an expected 5.7, ADP payroll was a disappointing +428M vs 1.17Million expected, and MBA mortgage apps were -2%. Tomorrow is Initial and continuing claims, ISM non-manufacturing and productivity and labor costs. Our “open forum” on Discord, which allows me to interact with subscribers and others to allow direct questions and chart opinions on just about any stock, continues to grow with more participants every day. It is informative and allows me to share insights as the market is open and moving. The link is: https://discord.gg/ATvC7YZ and I will be there and active from before the open and all day. It’s a great place to share ideas and gain some insights, and we’ve grown to almost 3000 members. I also returned to my radio show today with a great live interview with the Chief Medical Officer of JANONE (JAN) and it was a great show. This is the link to the audio recording including my discussion of the market and the very exciting story of JAN’s phenomenal NON-OPIOID Pain Med! This is the link: https://www.youtube.com/watch?v=oCFCxnijFO4 Enjoy!! TODAY’S RADIO SHOW: https://youtu.be/nwRM60J1Mu0 With my guest: Dennis Marlow! Tonight’s closing comment video: https://youtu.be/d8cQvBkJ9Ow SECTORS: We had a pullback in the biggest gainers with AAPL, TSLA, ZM, and CRM. None gave up anything exceptional compared with their recent performance. CRM had the distinction of being the biggest loser in its first week in the averages shedding 30 DPs. On the other hand, AMGN had the biggest gain of 48 DPs today in its first week. Due to the lateness I’m going to shorten tonight’s NOTE and use only the biggest movers and the ETF changes. FOOD SUPPLY CHAIN was HIGHER with KR +1.21 (3.42%), CPB +1.70 (3.31%), and PBJ $34.99 +.61 (1.77%). BIOPHARMA was HIGHER with ICPT +1.51, ISRG +23.54 (3.17%). And IBB $134.97 +1.95 (1.47%). CANNABIS: was LOWER with KERN -.49 (8.7%), CURLF -.39 (4.77%), and MJ $12.41 +.02 (.16%). DEFENSE: was HIGHER with BWXT +2.04 (3.71%), and ITA $170.48 +3.21 (1.92%). RETAIL: was HIGHER with M -.08 (1.14%), RL +2.42 (3.5%), and XRT $53.27 +.30 (.57%). FAANG and Big Cap: were HIGHER with GOOGL +63.92 (3.86%), TSLA -37.79 (7.95%), and XLK $127.03 +1.12 (.89%). PLEASE BE AWARE THAT THESE PRICES ARE LATE MARKET QUOTES AND DO NOT REPRESENT THE 4:00 CLOSES. FINANCIALS were HIGHER with GS +5.29 (2.57%), TRV +2.80 (2.44%), and XLF $25.49 +.36 (1.43%). OIL, $41.51 -1.25. Oil was lower in today’s trading before we fell to the bottom of the day’s range. The stocks were LOWER with XLE $35.24 -.17 (.48%). GOLD $1,944.70 -34.20, rose early in the session and moved higher to the 2,001 range before falling back to close midrange. I am still a bull on the metal, and we have a September bull call spread on using NEM 65/70 calls with a cost of $1.45, which closed today @ $2.32. BITCOIN: closed $11460 -615. After breaking out over $10,000 we have had a “running correction” pushing prices toward $12,000, reaching a recovery high of $12220 Thursday, and after a day of rest in between, we resumed the rally touching $12,635, but have sold off back to support. We had 750 shares of GBTC and sold off 250 last week at $13.93 and still have 500 with a cost of $8.45. GBTC closed $13.20 -.65 today. Tomorrow is another day. CAM
For Trading August 28th ! New Highs for NAZ & S&P-500 INITIAL CLAIMS OVER 1MM TIKTOK &WMT? Today’s market was another split affair with the DJIA +160.35 (.57%) and the NASDAQ -39.72 (.34%), S&P 500 +5.82 (.17%), the Russell +4.37 (.28%), DJ Transport +79 (.71%), with a gain, second day in a row of the VIX also higher 24.47 +1.20 (5.16%). That lost one is both unusual and ominous in my book. A/D was also split with the NYSE 4:3 UP and NASDAQ 9:8 Down with light volume again. Initial claims were again over 1 million with continuing very slightly lower at 14,535,000, but the big number (although it was just preliminary and changeable) was the decline in Q2 GDP -31.7%. Chairman Powell spoke at the virtual Jackson Hole meeting and made the startling comment that he still doesn’t see any inflation and since they haven’t been able to hit their marks, they are reevaluating the actual definition of what they consider inflation! Clearly, he doesn’t go grocery shopping, or buy kids sneakers or school supplies. What a putz! Like that idiot Wilbur Ross who quoted prices at 7-11 for beer and Campbell’s soup. These people have less than no understanding of what it’s like in the real world. Our “open forum” on Discord, which allows me to interact with subscribers and others to allow direct questions and chart opinions on just about any stock, continues to grow with more participants every day. It is informative and allows me to share insights as the market is open and moving. The link is: https://discord.gg/ATvC7YZ and I will be there and active from before the open and all day. It’s a great place to share ideas and gain some insights, and we’ve grown to almost 3000 members. I also returned to my radio show today with a great live interview with the Chief Medical Officer of JANONE (JAN) and it was a great show. This is the link to the audio recording including my discussion of the market and the very exciting story of JAN’s phenomenal NON-OPIOID Pain Med! This is the link: https://www.youtube.com/watch?v=RNCWw2by2wI Enjoy!! Tonight’s closing comment video: https://youtu.be/AQ_FSMkj-Fg SECTORS: The day started with the ABT news of the FDA granting the expedited approval of a $5.00, 15-minute “antigen” test for Covid-19. It is expected that Mr. Trump will announce a deal for $750 million for the manufacture and sale of the test to be ramped up immediately. Never let a good pandemic go to waste during an RNC convention, virtual or not! The stock traded as high as $117 in premarket but could only hit $114 in the real world and while higher on the day, it finished $111.29 +8.10 (7.85%) but nearer the lows. WMT was the power behind the DJIA adding 41 DP’s on the news that it was interested in sharing TIK TOK with MSFT, also a winner adding 38 DP’s too. So, half the net change in those two names. After the close we had numbers from ULTA, a beat top and bottom lines trading to $270.80 and finishing $256.64 +32.69 (14.65%), WDAY also beat and after closing $216.63 +3.01, after adding $20 yesterday on the CRM pop, traded $246 before closing $242.50 +25.87 (12.3%). Also reporting were HPQ 19.36 +.60 (3.1%), GPS 18.50 +1.12 (6%), and VMW 144.68 +1.98 (1.3%). FOOD SUPPLY CHAIN was HIGHER with TSN +.60, BGS +.19, FLO +.06, CPB +.51, CAG +.24, MDLZ -.23, KHC -.15, CALM +.35, JJSF +3.36, SAFM +6.71, HRL +.03, PPC +.36, SJM -.81, KR -.21 and PBJ $34.40 -.2 (.07%). BIOPHARMA was MIXED with BIIB +.09, ABBV -.11, REGN +2.97, ISRG +9.40, GILD +.02, MYL -.16, TEVA -.12, VRTX +2.84, BHC -.31, INCY +.55, ICPT -.36, LABU -1.18, and IBB $132.67 -.15 (.11%). CANNABIS: was HIGHER with TLRY -.05, CGC +.03, CRON +.10, GWPH -1.01, ACB +.14, NBEV unch., CURLF +.18, KERN -.15, and MJ $12.34 unchanged. DEFENSE: was HIGHER with LMT +.40, GD +2.36, TXT +.49, NOC +7.59, BWXT -.48, TDY +.88, RTX +.43, and ITA $168.07 +1.46 (.88%). RETAIL: was HIGHER with M +.15, JWN +.25, KSS +.50, DDS +.30, WMT +7.75, TGT -1.93, TJX +.49, RL +.61, UAA +.09, LULU -4.55, TPR +.04, CPRI +.47, and XRT $52.50 -.38 (.72%). FAANG and Big Cap: were LOWER with GOOGL -15.61, AMZN -36.34, AAPL -5.19, FB -11.66, NFLX -19.98, NVDA -6.78, TSLA +93.83, BABA -9.01, BIDU -.41, CMG +8.21, BA +3.10, CAT +1.82, DIS +2.33, and XLK $122.40 +.41 (.34%). PLEASE BE AWARE THAT THESE PRICES ARE LATE MARKET QUOTES AND DO NOT REPRESENT THE 4:00 CLOSES. FINANCIALS were HIGHER with GS ++3.09, JPM +3.61, BAC +.59, MS +1.07, C +1.06, PNC +3.69, AIG +.62, TRV +3.64, AXP +3.60, V +1.40, and XLF $25.26 +.42 (1.69%). OIL, $43.04 -.35. Oil was higher in today’s trading before we fell to the middle of the day’s range. Some of the gains may be storm related, but gasoline is helping support prices. The stocks were MIXED with XLE $35.80 +.07 (.20%). GOLD $1,9532.60 -19.90, rose early in the session and moved higher to the 1963 range. I am still a bull on the metal, and we have a September bull call spread on using NEM 65/70 calls with a cost of $1.45, which closed today @ $1.59 -19. BITCOIN: closed $11,270 -210. After breaking out over $10,000 we have had a “running correction” pushing prices toward $12,000, reaching a recovery high of $12220 Thursday, and after a day of rest in between, we resumed the rally touching $12,635, but have sold off back to support. We had 750 shares of GBTC and sold off 250 last week at $13.93 and still have 500 with a cost of $8.45. GBTC closed $12.88 -58 today. Tomorrow is another day. CAM
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For Trading September 1st Zoom, Zoom, Zoom! New Highs for NAZ & S&P-500 AAPL & TSLA CONTINUE HIGHER Today’s market was another split affair with the DJIA, including it 3 new members was down all day and finished -223.82 (.78%) while the NASDAQ was +79.83 (.68%), S&P 500 was -7.70 (.22%) even though it made a new intraday high at 3514.77, the Russell was weak -16.47 (1.04%) and the biggest loser, DJ Transports 136.65 (1.21%). Market internals were soft with NYSE 2.2:1 and NASDAQ 1.8:1, both down. The VIX was 26.41 +3.69 (16.24%), not a good thing at all. Volume was slightly higher. On the DJIA there were only 6 higher with AAPL +28 and UNH +18 DPs. BA was the biggest loser -26, V and DIS -24, MSFT -23, and GS, JPM, and V all down 18DPs. Verizon (VZ) was unchanged. Our “open forum” on Discord, which allows me to interact with subscribers and others to allow direct questions and chart opinions on just about any stock, continues to grow with more participants every day. It is informative and allows me to share insights as the market is open and moving. The link is: https://discord.gg/ATvC7YZ and I will be there and active from before the open and all day. It’s a great place to share ideas and gain some insights, and we’ve grown to almost 3000 members. I also returned to my radio show today with a great live interview with the Chief Medical Officer of JANONE (JAN) and it was a great show. This is the link to the audio recording including my discussion of the market and the very exciting story of JAN’s phenomenal NON-OPIOID Pain Med! This is the link: https://www.youtube.com/watch?v=oCFCxnijFO4 Enjoy!! Tonight’s closing comment video: https://youtu.be/8ZZ1qYQiOKA SECTORS: We started the day with the news that the FDA was fast tracking Vaccines and Exact Sciences (EXAS), the maker of those Colon cancer at home tests getting emergency authorization for an at home nasal swab for COVID-19 testing. The stock, $ .36 in 2008 has traded as high as $123 in 2019, traded up to $77.75 this morning and managed a close of $75.24 +2.13 (2.8%). WMT, ORCL, and MSFT were all down early and while they rallied a bit, they were all down on the day with questions about the TIK TOK sale. AMZN got FAA approval of “drone delivery” of packages and the stock traded as high as $3495 before closing $3455 +4 of packages and the stock traded as high as $3495 before closing $3455 +53.20 (1.56%). AAPL (4:1) was + $4.44 on its new split price at $129.24 and TSLA (5:1) closed $508.88 +66.02 (14.95%). Doesn’t anyone realize that with fractional shares traded everywhere that it’s no different than getting 5 $1’s for a $5 bill? And the big winner today was Aimmune Therapeutics (AIMT), who agreed to be bought by Nestle, S.A. (Nestle Health Care) for $34.50 in cash. AIMT’s main product is an already approved treatment for Peanut allergies. The stock, which had a high of $42.00 in 2/2018 had closed Friday @ $12.60 and opened $34.19 and finished the day $34.15 +21.55 (171%). FOOD SUPPLY CHAIN was HIGHER with TSN -1.09, BGS +.03, FLO +.04, CPB +.84, MDLZ -.14, KHC +.10, CALM -2.52, JJSF -1.28, SAFM -.13, HRL +.38, SJM +.53, PPC -.33, KR +.34, and PBJ $34.35 +.03 (.10%). BIOPHARMA was HIGHER with BIIB +6.18, ABBV +1.52, REGN +15.72, ISRG +2.83, GILD +1.16, MYL +.15, TEVA +.17, VRTX +8.44, BHC -.29, INCY +2.45, ICPT +.46, LABU +3.88, and IBB $135.62 +2.57 (1.93%). CANNABIS: was MIXED with TLRY +.03, CGC -.38, CRON -.14, GWPH +.98, ACB -.02, NBEV +.02, CURLF -.24, KERN -.15, and MJ $12.96 +.28 (2.21%). DEFENSE: was LOWER with LMT -2.94, GD -2.92, TXT -.54, NOC -2.14, BWXT -.39, TDY -2.83, RTX -1.24, and ITA $167.04 -2.36 (1.40%). RETAIL: was LOWER with M -.02, JWN +.32, KSS -.29, DDS -.23, WMT -1.53, TGT +.40, TJX -.30, RL -2.36, UAA -.34, LULU -1.29, TPR -.15, CPRI -1.10, and XRT $51.79 -.77 (1.45%). FAANG and Big Cap: were MIXED with GOOGL -10.43, AMZN +57.64, AAPL +4.40, FB -.98, NFLX +3.11, NVDA +8.79, TSLA +66.77, BABA -2.60, BIDU -4.47, CMG +8.74, BA -3.70, CAT =1.32, DIS -3.73, and XLK $123.40 +.24 (.19%). PLEASE BE AWARE THAT THESE PRICES ARE LATE MARKET QUOTES AND DO NOT REPRESENT THE 4:00 CLOSES. FINANCIALS were LOWER with GS -1.69, JPM -2.58, BAC -.59, MS -.63, C -1.22, PNC -1.35, AIG -.23, AXP -1.04, V -4.26, and XLF $24.99 -.37 (1.45%). OIL, $42.61 -.36. Oil was higher in today’s trading before we fell to the middle of the day’s range. Some of the gains that were storm related were taken back without the shortages that generally occur during the hurricane season. The stocks were LOWER with XLE $35.67 -.77 (2.11%). GOLD $1,978.60 +3.70, rose early in the session and moved higher to the 1985 range before falling back to close midrange. I am still a bull on the metal, and we have a September bull call spread on using NEM 65/70 calls with a cost of $1.45, which closed today @ $2.33. BITCOIN: closed $11,835 +205. After breaking out over $10,000 we have had a “running correction” pushing prices toward $12,000, reaching a recovery high of $12220 Thursday, and after a day of rest in between, we resumed the rally touching $12,635, but have sold off back to support. We had 750 shares of GBTC and sold off 250 last week at $13.93 and still have 500 with a cost of $8.45. GBTC closed $1213.52 +.32 today. Just a quick mention about two commodity related trades discussed in last night’s Weekly Insights: Coffee continued higher again today closing $129.05 +2.70, and the proxy for this is the coffee ETN: JO $39.27 + 1.18 (3.08%). I also talked about Natural Gas being ready for a pullback, and after trading down to $2.4970 -$ .16 (6%), it rallied back to close $2.63 and is +.01 again tonight. Our proxy for this is UNG, which traded down to $13.42 before turning back up to close $14.20, only .05 from the high of the day. Tomorrow is another day. CAM
﷽ The Federal Reserve and the United States government are pumping extreme amounts of money into the economy, already totaling over $484 billion. They are doing so because it already had a goal to inflate the United States Dollar (USD) so that the market can continue to all-time highs. It has always had this goal. They do not care how much inflation goes up by now as we are going into a depression with the potential to totally crash the US economy forever. They believe the only way to save the market from going to zero or negative values is to inflate it so much that it cannot possibly crash that low. Even if the market does not dip that low, inflation serves the interest of powerful people. The impending crash of the stock market has ramifications for Bitcoin, as, though there is no direct ongoing-correlation between the two, major movements in traditional markets will necessarily affect Bitcoin. According to the Blockchain Center’s Cryptocurrency Correlation Tool, Bitcoin is not correlated with the stock market. However, when major market movements occur, they send ripples throughout the financial ecosystem which necessary affect even ordinarily uncorrelated assets. Therefore, Bitcoin will reach X price on X date after crashing to a price of X by X date.
Stock Market Crash
The Federal Reserve has caused some serious consternation with their release of ridiculous amounts of money in an attempt to buoy the economy. At face value, it does not seem to have any rationale or logic behind it other than keeping the economy afloat long enough for individuals to profit financially and politically. However, there is an underlying basis to what is going on which is important to understand in order to profit financially. All markets are functionally price probing systems. They constantly undergo a price-discovery process. In a fiat system, money is an illusory and a fundamentally synthetic instrument with no intrinsic value – similar to Bitcoin. The primary difference between Bitcoin is the underlying technology which provides a slew of benefits that fiat does not. Fiat, however, has an advantage in being able to have the support of powerful nation-states which can use their might to insure the currency’s prosperity. Traditional stock markets are composed of indices (pl. of index). Indices are non-trading market instruments which are essentially summaries of business values which comprise them. They are continuously recalculated throughout a trading day, and sometimes reflected through tradable instruments such as Exchange Traded Funds or Futures. Indices are weighted by market capitalizations of various businesses. Price theory essentially states that when a market fails to take out a new low in a given range, it will have an objective to take out the high. When a market fails to take out a new high, it has an objective to make a new low. This is why price-time charts go up and down, as it does this on a second-by-second, minute-by-minute, day-by-day, and even century-by-century basis. Therefore, market indices will always return to some type of bull market as, once a true low is formed, the market will have a price objective to take out a new high outside of its’ given range – which is an all-time high. Instruments can only functionally fall to zero, whereas they can grow infinitely. So, why inflate the economy so much? Deflation is disastrous for central banks and markets as it raises the possibility of producing an overall price objective of zero or negative values. Therefore, under a fractional reserve system with a fiat currency managed by a central bank – the goal of the central bank is to depreciate the currency. The dollar is manipulated constantly with the intention of depreciating its’ value. Central banks have a goal of continued inflated fiat values. They tend to ordinarily contain it at less than ten percent (10%) per annum in order for the psyche of the general populace to slowly adjust price increases. As such, the markets are divorced from any other logic. Economic policy is the maintenance of human egos, not catering to fundamental analysis. Gross Domestic Product (GDP) growth is well-known not to be a measure of actual growth or output. It is a measure of increase in dollars processed. Banks seek to produce raising numbers which make society feel like it is growing economically, making people optimistic. To do so, the currency is inflated, though inflation itself does not actually increase growth. When society is optimistic, it spends and engages in business – resulting in actual growth. It also encourages people to take on credit and debts, creating more fictional fiat. Inflation is necessary for markets to continue to reach new heights, generating positive emotional responses from the populace, encouraging spending, encouraging debt intake, further inflating the currency, and increasing the sale of government bonds. The fiat system only survives by generating more imaginary money on a regular basis. Bitcoin investors may profit from this by realizing that stock investors as a whole always stand to profit from the market so long as it is managed by a central bank and does not collapse entirely. If those elements are filled, it has an unending price objective to raise to new heights. It also allows us to realize that this response indicates that the higher-ups believe that the economy could crash in entirety, and it may be wise for investors to have multiple well-thought-out exit strategies.
Economic Analysis of Bitcoin
The reason why the Fed is so aggressively inflating the economy is due to fears that it will collapse forever or never rebound. As such, coupled with a global depression, a huge demand will appear for a reserve currency which is fundamentally different than the previous system. Bitcoin, though a currency or asset, is also a market. It also undergoes a constant price-probing process. Unlike traditional markets, Bitcoin has the exact opposite goal. Bitcoin seeks to appreciate in value and not depreciate. This has a quite different affect in that Bitcoin could potentially become worthless and have a price objective of zero. Bitcoin was created in 2008 by a now famous mysterious figure known as Satoshi Nakamoto and its’ open source code was released in 2009. It was the first decentralized cryptocurrency to utilize a novel protocol known as the blockchain. Up to one megabyte of data may be sent with each transaction. It is decentralized, anonymous, transparent, easy to set-up, and provides myriad other benefits. Bitcoin is not backed up by anything other than its’ own technology. Bitcoin is can never be expected to collapse as a framework, even were it to become worthless. The stock market has the potential to collapse in entirety, whereas, as long as the internet exists, Bitcoin will be a functional system with a self-authenticating framework. That capacity to persist regardless of the actual price of Bitcoin and the deflationary nature of Bitcoin means that it has something which fiat does not – inherent value. Bitcoin is based on a distributed database known as the “blockchain.” Blockchains are essentially decentralized virtual ledger books, replete with pages known as “blocks.” Each page in a ledger is composed of paragraph entries, which are the actual transactions in the block. Blockchains store information in the form of numerical transactions, which are just numbers. We can consider these numbers digital assets, such as Bitcoin. The data in a blockchain is immutable and recorded only by consensus-based algorithms. Bitcoin is cryptographic and all transactions are direct, without intermediary, peer-to-peer. Bitcoin does not require trust in a central bank. It requires trust on the technology behind it, which is open-source and may be evaluated by anyone at any time. Furthermore, it is impossible to manipulate as doing so would require all of the nodes in the network to be hacked at once – unlike the stock market which is manipulated by the government and “Market Makers”. Bitcoin is also private in that, though the ledge is openly distributed, it is encrypted. Bitcoin’s blockchain has one of the greatest redundancy and information disaster recovery systems ever developed. Bitcoin has a distributed governance model in that it is controlled by its’ users. There is no need to trust a payment processor or bank, or even to pay fees to such entities. There are also no third-party fees for transaction processing. As the ledge is immutable and transparent it is never possible to change it – the data on the blockchain is permanent. The system is not easily susceptible to attacks as it is widely distributed. Furthermore, as users of Bitcoin have their private keys assigned to their transactions, they are virtually impossible to fake. No lengthy verification, reconciliation, nor clearing process exists with Bitcoin. Bitcoin is based on a proof-of-work algorithm. Every transaction on the network has an associated mathetical “puzzle”. Computers known as miners compete to solve the complex cryptographic hash algorithm that comprises that puzzle. The solution is proof that the miner engaged in sufficient work. The puzzle is known as a nonce, a number used only once. There is only one major nonce at a time and it issues 12.5 Bitcoin. Once it is solved, the fact that the nonce has been solved is made public. A block is mined on average of once every ten minutes. However, the blockchain checks every 2,016,000 minutes (approximately four years) if 201,600 blocks were mined. If it was faster, it increases difficulty by half, thereby deflating Bitcoin. If it was slower, it decreases, thereby inflating Bitcoin. It will continue to do this until zero Bitcoin are issued, projected at the year 2140. On the twelfth of May, 2020, the blockchain will halve the amount of Bitcoin issued when each nonce is guessed. When Bitcoin was first created, fifty were issued per block as a reward to miners. 6.25 BTC will be issued from that point on once each nonce is solved. Unlike fiat, Bitcoin is a deflationary currency. As BTC becomes scarcer, demand for it will increase, also raising the price. In this, BTC is similar to gold. It is predictable in its’ output, unlike the USD, as it is based on a programmed supply. We can predict BTC’s deflation and inflation almost exactly, if not exactly. Only 21 million BTC will ever be produced, unless the entire network concedes to change the protocol – which is highly unlikely. Some of the drawbacks to BTC include congestion. At peak congestion, it may take an entire day to process a Bitcoin transaction as only three to five transactions may be processed per second. Receiving priority on a payment may cost up to the equivalent of twenty dollars ($20). Bitcoin mining consumes enough energy in one day to power a single-family home for an entire week.
Trading or Investing?
The fundamental divide in trading revolves around the question of market structure. Many feel that the market operates totally randomly and its’ behavior cannot be predicted. For the purposes of this article, we will assume that the market has a structure, but that that structure is not perfect. That market structure naturally generates chart patterns as the market records prices in time. In order to determine when the stock market will crash, causing a major decline in BTC price, we will analyze an instrument, an exchange traded fund, which represents an index, as opposed to a particular stock. The price patterns of the various stocks in an index are effectively smoothed out. In doing so, a more technical picture arises. Perhaps the most popular of these is the SPDR S&P Standard and Poor 500 Exchange Traded Fund ($SPY). In trading, little to no concern is given about value of underlying asset. We are concerned primarily about liquidity and trading ranges, which are the amount of value fluctuating on a short-term basis, as measured by volatility-implied trading ranges. Fundamental analysis plays a role, however markets often do not react to real-world factors in a logical fashion. Therefore, fundamental analysis is more appropriate for long-term investing. The fundamental derivatives of a chart are time (x-axis) and price (y-axis). The primary technical indicator is price, as everything else is lagging in the past. Price represents current asking price and incorrectly implementing positions based on price is one of the biggest trading errors. Markets and currencies ordinarily have noise, their tendency to back-and-fill, which must be filtered out for true pattern recognition. That noise does have a utility, however, in allowing traders second chances to enter favorable positions at slightly less favorable entry points. When you have any market with enough liquidity for historical data to record a pattern, then a structure can be divined. The market probes prices as part of an ongoing price-discovery process. Market technicians must sometimes look outside of the technical realm and use visual inspection to ascertain the relevance of certain patterns, using a qualitative eye that recognizes the underlying quantitative nature Markets and instruments rise slower than they correct, however they rise much more than they fall. In the same vein, instruments can only fall to having no worth, whereas they could theoretically grow infinitely and have continued to grow over time. Money in a fiat system is illusory. It is a fundamentally synthetic instrument which has no intrinsic value. Hence, the recent seemingly illogical fluctuations in the market. According to trade theory, the unending purpose of a market or instrument is to create and break price ranges according to the laws of supply and demand. We must determine when to trade based on each market inflection point as defined in price and in time as opposed to abandoning the trend (as the contrarian trading in this sub often does). Time and Price symmetry must be used to be in accordance with the trend. When coupled with a favorable risk to reward ratio, the ability to stay in the market for most of the defined time period, and adherence to risk management rules; the trader has a solid methodology for achieving considerable gains. We will engage in a longer term market-oriented analysis to avoid any time-focused pressure. The Bitcoin market is open twenty-four-hours a day, so trading may be done when the individual is ready, without any pressing need to be constantly alert. Let alone, we can safely project months in advance with relatively high accuracy. Bitcoin is an asset which an individual can both trade and invest, however this article will be focused on trading due to the wide volatility in BTC prices over the short-term.
Technical Indicator Analysis of Bitcoin
Technical indicators are often considered self-fulfilling prophecies due to mass-market psychology gravitating towards certain common numbers yielded from them. They are also often discounted when it comes to BTC. That means a trader must be especially aware of these numbers as they can prognosticate market movements. Often, they are meaningless in the larger picture of things.
Volume – derived from the market itself, it is mostly irrelevant. The major problem with volume for stocks is that the US market open causes tremendous volume surges eradicating any intrinsic volume analysis. This does not occur with BTC, as it is open twenty-four-seven. At major highs and lows, the market is typically anemic. Most traders are not active at terminal discretes (peaks and troughs) because of levels of fear. Volume allows us confidence in time and price symmetry market inflection points, if we observe low volume at a foretold range of values. We can rationalize that an absolute discrete is usually only discovered and anticipated by very few traders. As the general market realizes it, a herd mentality will push the market in the direction favorable to defending it. Volume is also useful for swing trading, as chances for swing’s validity increases if an increase in volume is seen on and after the swing’s activation. Volume is steadily decreasing. Lows and highs are reached when volume is lower.
Therefore, due to the relatively high volume on the 12th of March, we can safely determine that a low for BTC was not reached.
VIX – Volatility Index, this technical indicator indicates level of fear by the amount of options-based “insurance” in portfolios. A low VIX environment, less than 20 for the S&P index, indicates a stable market with a possible uptrend. A high VIX, over 20, indicates a possible downtrend. VIX is essentially useless for BTC as BTC-based options do not exist. It allows us to predict the market low for $SPY, which will have an indirect impact on BTC in the short term, likely leading to the yearly low. However, it is equally important to see how VIX is changing over time, if it is decreasing or increasing, as that indicates increasing or decreasing fear. Low volatility allows high leverage without risk or rest. Occasionally, markets do rise with high VIX.
As VIX is unusually high, in the forties, we can be confident that a downtrend for the S&P 500 is imminent.
RSI (Relative Strength Index): The most important technical indicator, useful for determining highs and lows when time symmetry is not availing itself. Sometimes analysis of RSI can conflict in different time frames, easiest way to use it is when it is at extremes – either under 30 or over 70. Extremes can be used for filtering highs or lows based on time-and-price window calculations. Highly instructive as to major corrective clues and indicative of continued directional movement. Must determine if longer-term RSI values find support at same values as before. It is currently at 73.56.
Secondly, RSI may be used as a high or low filter, to observe the level that short-term RSI reaches in counter-trend corrections. Repetitions based on market movements based on RSI determine how long a trade should be held onto. Once a short term RSI reaches an extreme and stay there, the other RSI’s should gradually reach the same extremes. Once all RSI’s are at extreme highs, a trend confirmation should occur and RSI’s should drop to their midpoint.
Trend Definition Analysis of Bitcoin
Trend definition is highly powerful, cannot be understated. Knowledge of trend logic is enough to be a profitable trader, yet defining a trend is an arduous process. Multiple trends coexist across multiple time frames and across multiple market sectors. Like time structure, it makes the underlying price of the instrument irrelevant. Trend definitions cannot determine the validity of newly formed discretes. Trend becomes apparent when trades based in counter-trend inflection points continue to fail. Downtrends are defined as an instrument making lower lows and lower highs that are recurrent, additive, qualified swing setups. Downtrends for all instruments are similar, except forex. They are fast and complete much quicker than uptrends. An average downtrend is 18 months, something which we will return to. An uptrend inception occurs when an instrument reaches a point where it fails to make a new low, then that low will be tested. After that, the instrument will either have a deep range retracement or it may take out the low slightly, resulting in a double-bottom. A swing must eventually form. A simple way to roughly determine trend is to attempt to draw a line from three tops going upwards (uptrend) or a line from three bottoms going downwards (downtrend). It is not possible to correctly draw a downtrend line on the BTC chart, but it is possible to correctly draw an uptrend – indicating that the overall trend is downwards. The only mitigating factor is the impending stock market crash.
Time Symmetry Analysis of Bitcoin
Time is the movement from the past through the present into the future. It is a measurement in quantified intervals. In many ways, our perception of it is a human construct. It is more powerful than price as time may be utilized for a trade regardless of the market inflection point’s price. Were it possible to perfectly understand time, price would be totally irrelevant due to the predictive certainty time affords. Time structure is easier to learn than price, but much more difficult to apply with any accuracy. It is the hardest aspect of trading to learn, but also the most rewarding. Humans do not have the ability to recognize every time window, however the ability to define market inflection points in terms of time is the single most powerful trading edge. Regardless, price should not be abandoned for time alone. Time structure analysis It is inherently flawed, as such the markets have a fail-safe, which is Price Structure. Even though Time is much more powerful, Price Structure should never be completely ignored. Time is the qualifier for Price and vice versa. Time can fail by tricking traders into counter-trend trading. Time is a predestined trade quantifier, a filter to slow trades down, as it allows a trader to specifically focus on specific time windows and rest at others. It allows for quantitative measurements to reach deterministic values and is the primary qualifier for trends. Time structure should be utilized before price structure, and it is the primary trade criterion which requires support from price. We can see price structure on a chart, as areas of mathematical support or resistance, but we cannot see time structure. Time may be used to tell us an exact point in the future where the market will inflect, after Price Theory has been fulfilled. In the present, price objectives based on price theory added to possible future times for market inflection points give us the exact time of market inflection points and price. Time Structure is repetitions of time or inherent cycles of time, occurring in a methodical way to provide time windows which may be utilized for inflection points. They are not easily recognized and not easily defined by a price chart as measuring and observing time is very exact. Time structure is not a science, yet it does require precise measurements. Nothing is certain or definite. The critical question must be if a particular approach to time structure is currently lucrative or not. We will measure it in intervals of 180 bars. Our goal is to determine time windows, when the market will react and when we should pay the most attention. By using time repetitions, the fact that market inflection points occurred at some point in the past and should, therefore, reoccur at some point in the future, we should obtain confidence as to when SPY will reach a market inflection point. Time repetitions are essentially the market’s memory. However, simply measuring the time between two points then trying to extrapolate into the future does not work. Measuring time is not the same as defining time repetitions. We will evaluate past sessions for market inflection points, whether discretes, qualified swings, or intra-range. Then records the times that the market has made highs or lows in a comparable time period to the future one seeks to trade in. What follows is a time Histogram – A grouping of times which appear close together, then segregated based on that closeness. Time is aligned into combined histogram of repetitions and cycles, however cycles are irrelevant on a daily basis. If trading on an hourly basis, do not use hours.
Daily Lows Mode for those Months: 1, 1, 2, 4, 12, 17, 18, 24, 25, 28, 29, 30
Hourly Lows Mode for those Months (Military time): 0100, 0200, 0200, 0400, 0700, 0700, 0800, 1200, 1200, 1700, 2000, 2200
Minute Lows Mode for those Months: 00, 00, 00, 00, 00, 00, 09, 09, 59, 59, 59, 59
Day of the Week Lows (last twenty-six weeks):
Weighted Times are repetitions which appears multiple times within the same list, observed and accentuated once divided into relevant sections of the histogram. They are important in the presently defined trading time period and are similar to a mathematical mode with respect to a series. Phased times are essentially periodical patterns in histograms, though they do not guarantee inflection points Evaluating the yearly lows, we see that BTC tends to have its lows primarily at the beginning of every year, with a possibility of it being at the end of the year. Following the same methodology, we get the middle of the month as the likeliest day. However, evaluating the monthly lows for the past year, the beginning and end of the month are more likely for lows. Therefore, we have two primary dates from our histogram. 1/1/21, 1/15/21, and 1/29/21 2:00am, 8:00am, 12:00pm, or 10:00pm In fact, the high for this year was February the 14th, only thirty days off from our histogram calculations. The 8.6-Year Armstrong-Princeton Global Economic Confidence model states that 2.15 year intervals occur between corrections, relevant highs and lows. 2.15 years from the all-time peak discrete is February 9, 2020 – a reasonably accurate depiction of the low for this year (which was on 3/12/20). (Taking only the Armstrong model into account, the next high should be Saturday, April 23, 2022). Therefore, the Armstrong model indicates that we have actually bottomed out for the year! Bear markets cannot exist in perpetuity whereas bull markets can. Bear markets will eventually have price objectives of zero, whereas bull markets can increase to infinity. It can occur for individual market instruments, but not markets as a whole. Since bull markets are defined by low volatility, they also last longer. Once a bull market is indicated, the trader can remain in a long position until a new high is reached, then switch to shorts. The average bear market is eighteen months long, giving us a date of August 19th, 2021 for the end of this bear market – roughly speaking. They cannot be shorter than fifteen months for a central-bank controlled market, which does not apply to Bitcoin. (Otherwise, it would continue until Sunday, September 12, 2021.) However, we should expect Bitcoin to experience its’ exponential growth after the stock market re-enters a bull market. Terry Laundy’s T-Theory implemented by measuring the time of an indicator from peak to trough, then using that to define a future time window. It is similar to an head-and-shoulders pattern in that it is the process of forming the right side from a synthetic technical indicator. If the indicator is making continued lows, then time is recalculated for defining the right side of the T. The date of the market inflection point may be a price or indicator inflection date, so it is not always exactly useful. It is better to make us aware of possible market inflection points, clustered with other data. It gives us an RSI low of May, 9th 2020. The Bradley Cycle is coupled with volatility allows start dates for campaigns or put options as insurance in portfolios for stocks. However, it is also useful for predicting market moves instead of terminal dates for discretes. Using dates which correspond to discretes, we can see how those dates correspond with changes in VIX. Therefore, our timeline looks like:
2/14/20 – yearly high ($10372 USD)
3/12/20 – yearly low thus far ($3858 USD)
5/9/20 – T-Theory true yearly low (BTC between 4863 and 3569)
Technicals, Fundamentals. I work in IT for a major forklift / automations provider in a large metro city. Our new orders are down 80%+ from last year this time. Service orders are down 55%+ We have a footprint into the consumer, as most of our products helps to get product from truck to store to consumer. This also applies to the non-brick and mortar. Think of why big name(s) have back-log on orders, think its really due to delivery? Demand destruction! VIX is the canary in the coalmine. Gold isn't even safe, and when Tudor Jones rings the bitcoin bell, take note! There is NO HEDGE to liquidity demand! Can't print our way out of excessive debt! Even if we get people back to work, someone needs to chart the psychology of the consumer which faces risks of infection. Deflation will come b/c of the lack of demand! Listen to earnings calls, companies are NOT providing guidance! WHY? 9/12/14c SPXS 6/19, painfully, 60% of portfolio sitting in GLD til storm calms. Occasional calls, no more than 2% breakeven on SPY on down days. There are no technical"s" for what we are witnessing with monster FED put!
No big surprises in impact to market sectors. Airlines, hotels, and oil hit the worst. Consumer staples and utilities hit the least.
Some surprises in impact by market cap. Traditional wisdom would predict small caps would be hit the worst, then mid caps, then large caps, as people flee to the safety of blue chips. The data shows a more mixed result with some small and mid cap deciles holding up better than large caps.
Analyzing by best performers from the previous year, the traditional wisdom would be that the highest fliers would be the hardest hit, but again the actual results are more mixed. Some deciles on the worst and best ends were hit less than deciles in the middle. This argues somewhat against the idea that recent high performers are so over-bought (Damodaran said "richly valued") that they would fall the most in a correction.
Gold vs. "Millennial's Gold" (Bitcoin): Chart shows gold vs. bitcoin moving in opposite directions, which argues against the idea that Bitcoin is a safe haven similar to gold.
Bottom line: As a function of the decline in 2020 earnings and the percentage recoupment by 2025, where 100% is as if coronavirus didn't exist and 2020 was on the same trajectory as it was before the crisis. S&P 500 ranges from a worst case of 2423 (-20% earnings drop in 2020, 0% recoupment) to best case of 3068 (-5% earnings drop in 2020, 100% recoupment).
Negative indicators for equity values to watch for:
More downward adjustments to earnings guidance
Earnings actuals significantly down YoY
10Y T-bond stays below 1% yield
VIX stays near historic highs (increasing equity risk premium)
Cash flow actuals significantly down, with attendant dividend cuts and reduced rate of new buybacks
DON’T PANIC. The Guide To The Current Situation In The Cryptogalaxy
In the last month, the world markets are experiencing dramatic events. In light of the coronavirus pandemic, an economic crisis is unfolding in the world. Because of quarantine actions across the world, many manufactures and non-food stores are being closed, the level of product turnover is falling. Small and medium-sized businesses suffer huge losses due to downtime, the unemployment rate increases and the purchasing power, in the opposite, decreases. The value of the CBOE VIX index, reflecting the level of market volatility, increased the value to 82 points, for comparison, during the 2008 crisis, this index did not exceed 80 points, and in recent years it has been held at the level of 15-25 with peaks up to 45. Against the background of total panic among investors, on March 30, Brent crude updated the minimum of November 2002, falling to the level of $22.6 per barrel. The S&P, Dow Jones and Nikkei indexes are critically losing their positions. Experts note that the downward trend began even before the announcement of the COVID-19 pandemic, but the spread of the disease played a crucial role in the crisis increase. by StealthEX At the same time, digital assets also found themselves in a zone of turbulence: in the middle of the month, the price of bitcoin fell to $3800, followed by the price of altcoins. Panic sale leads to a chain reaction, many investors are getting rid of the cryptocurrency which is considered a risky investment, and the price of coins continues to decline. The cryptocurrency market highly depends on what is happening in the world, so it will strengthen and continue to grow only when the situation with the pandemic becomes clear and less unpredictable. Therefore, the main task at this stage is to maintain composure and don’t give in to emotions when making decisions. Despite the extremely uncertain situation, most analysts now give fairly favorable forecasts. Judging by the latest fluctuations in the exchange rate, the cryptocurrency market has come out of an uncontrolled fall. In their opinion, we expect a long flat with a slow trend of price growth against the background of halving. Despite bearish trends and skidding at $6,500, at the close of the quarter, bitcoin was able to hold above the important support level of $6,400. Michaël van de Poppe, a cryptanalyst of the Amsterdam Stock Exchange, believes that now bitcoin is in the stage of consolidation and will gradually pay off in the next 4-6 years. Tuur Demeester, analyst and founder of Adamant Capital, suggests that holding the $6,300 level could be a key resistance level before the bull market can resume. Similar dynamics are predicted for altcoins, which maintain a high correlation with the first cryptocurrency. Here’s what the quarterly charts for BTC, ETH and XRP look like: Bitcoin chart for 3 months. Source: CoinGecko Ethereum chart for 3 months. Source: CoinGecko XRP chart for 3 months. Source: CoinGecko Also, experts in cryptocurrency research believe that the current situation in the oil and stock markets can have a positive impact on digital currencies. WTI oil, like Brent, fell to the level of 2002, trading around $20 mark. Black gold continues to look very vulnerable as well as the prospects for the oil market in general. At the end of the first quarter of 2020, the bitcoin exchange rate decreased by 13%, but in comparison with traditional stock markets, the first cryptocurrency showed more successful results. The S&P 500 index, which includes shares of the 500 largest companies by capitalization, fell 19% to 2,584 points. This is the worst figure since 1938. President Trump’s proposal to allocate $2.2 trillion to support the American economy is criticized by many economists as leading to more problems than offering a real solution. They consider hyperinflation as the most likely scenario for the next year. Since cryptocurrencies are not subject to inflation and are not in control of governments and banks, many predict that digital assets will be popular as a tool for hedging risks. Earlier co-founder and CEO of Gemini exchange Tyler Winklevoss stated in his twitter: https://preview.redd.it/xc61jsazlls41.png?width=768&format=png&auto=webp&s=06084bd6d511f93da4c485cd7eb3281566f2c4cc The founder, head and CEO of the Galaxy Digital, Michael Novogratz, also believes that cryptocurrencies with mathematically limited emission could be a safe haven in the face of inflation. Peter Brandt called the current crisis a “perfect storm” and noted that it could be a crucial period for Bitcoin. It is at this point that the coin can reveal itself as a protective asset and grow in price. In his tweet of March 23, he also advises treating cryptocurrencies as insurance policies rather than investments. Trading volume on 22 popular crypto exchanges increased by 61% in the first quarter compared to the previous one — to $154 billion. In March, major cryptocurrency exchanges recorded a sharp increase in the number of new users. Pierre Richard strategist of the Kraken exchange believes that people who are concerned about the futile efforts of the authorities to contain the crisis against the background of the pandemic feel the need to leave the centralized financial system. With other positive aspects, we should not forget that cryptocurrencies remain extremely susceptible to manipulation by major players. That collapse, which we experienced in the middle of the month, allowed corporations to buy coins at an extremely low price and, in fact, nothing can prevent them from attacking the market in the future. Whatever happens on the market, you can always exchange coins at StealthEX as we always have unlimited exchanges without requesting personal data. A large number of currencies available for exchange will allow you to create your investment portfolio in the most suitable way for you. Original article was posted onhttps://stealthex.io/blog/2020/04/09/dont-panic-the-guide-to-the-current-situation-in-the-cryptogalaxy/
This is what my main Day Trading screen looks like! What about yours?? https://preview.redd.it/rogxp2prt0a31.png?width=3839&format=png&auto=webp&s=eb4c83a4f80c149db2753580e17e371e1f823411 Top left: 4 DOMs, left-most I change often. In the screenshot, it's showing Bitcoin futures, but I often look at Gold, Crude Oil, or currencies there. Second is most of the time the 10-year or 30-year treasury futures. Third one is the main, where I trade the E-mini S&P 500 futures. Fourth one is the E-mini NASDAQ 100 futures. This is where I place and manage nearly all of my orders related to day trading. The exception being when I'm day trading options, I might sometimes not use a DOM at all and just place the orders directly using an "order entry" window. Bottom left: 5-min chart corresponding to the left-most DOM, the trading controls for the 4 DOMs above, the VIX and the TICK charts — these last 2 help me in my decision making process when trading the E-mini S&P 500 futures. Right: in the top a TPO chart corresponding to 3rd (main) DOM, and below it a delta volume chart also corresponding to the main DOM (*). Behind it (not shown) there's a very long-term (i.e., many years worth of data) OHLC weekly chart of the SP500 with nothing on it. All over the place, there are some watchlists with instruments I like to watch, trade, and some longer-term portfolios and strategies I have positions on. On a separate screen (not shown), I have Interactive Brokers' Trader Workstation platform open with my portfolio, order management and history, and an options chain, and a separate tab with Risk Navigator. In addition, there's TweetDeck, and a browser, where I mostly read news, reports, and other data. Oh, and Spotify, as I need music to trade! (*) the delta volume chart includes to the left the daily volume profile (VP) grouped at points (rather than at individual ticks), highlighting the Volume Point of Control (VPOC) and the Value Area (VA). To right, there's another VP with mostly the same settings, except that it shows volume at individual ticks, and it only looks at the most recent 1-hour period, which it displays with a dashed box. The yellow background is the developing VA. The blue / yellow dots are the VWAP, with the color just representing where price is relative to the VWAP. Below it, I have the Cumulative Delta (CD), which highlights whenever there's divergence between price and CD movements (e.g., the left-most green highlight means that CD was going down, and price was going up), and also highlights whenever bars are formed too quickly (the "falling" thin white lines you can see a bunch of near 13:00, which is the market close at my timezone). Further down, the yellow horizontal line is yellow for the day session and blue for the overnight session, which helps me when I'm looking at more data. All the way down, there's a simple volume histogram.
Elaborating on Datadash's 50k BTC Prediction: Why We Endorse the Call
As originally published via CoinLive I am the Co-Founder at CoinLive. Prior to founding Coinlive.io, my area of expertise was inter-market analysis. I came across Datadash 50k BTC prediction this week, and I must take my hats off to what I believe is an excellent interpretation of the inter-connectivity of various markets. At your own convenience, you can find a sample of Intermarket analysis I've written in the past before immersing myself into cryptos full-time. Gold inter-market: 'Out of sync' with VIX, takes lead from USD/JPY USD/JPY inter-market: Watch divergence US-Japan yield spread EUUSD intermarket: US yields collapse amid supply environment Inter-market analysis: Risk back in vogue, but for how long? USD/JPY intermarket: Bulls need higher adj in 10-y US-JP spread The purpose of this article is to dive deeper into the factors Datadash presents in his video and how they can help us draw certain conclusions about the potential flows of capital into crypto markets and the need that will exist for a BTC ETF. Before I do so, as a brief explainer, let's touch on what exactly Intermarket analysis refers to: Intermarket analysis is the global interconnectivity between equities, bonds, currencies, commodities, and any other asset class; Global markets are an ever-evolving discounting and constant valuation mechanism and by studying their interconnectivity, we are much better positioned to explain and elaborate on why certain moves occur, future directions and gain insights on potential misalignments that the market may not have picked up on yet or might be ignoring/manipulating. While such interconnectivity has proven to be quite limiting when it comes to the value one can extract from analyzing traditional financial assets and the crypto market, Datadash has eloquently been able to build a hypothesis, which as an Intermarket analyst, I consider very valid, and that matches up my own views. Nicolas Merten constructs a scenario which leads him to believe that a Bitcoin ETF is coming. Let's explore this hypothesis. I will attempt to summarize and provide further clarity on why the current events in traditional asset classes, as described by Datadash, will inevitably result in a Bitcoin ETF. Make no mistake, Datadash's call for Bitcoin at 50k by the end of 2018 will be well justified once a BTC ETF is approved. While the timing is the most challenging part t get right, the end result won't vary. If one wishes to learn more about my personal views on why a BTC ETF is such a big deal, I encourage you to read my article from late March this year. Don't Be Misled by Low Liquidity/Volume - Fundamentals Never Stronger The first point Nicholas Merten makes is that despite depressed volume levels, the fundamentals are very sound. That, I must say, is a point I couldn't agree more. In fact, I recently wrote an article titled TheParadox: Bitcoin Keeps Selling as Intrinsic Value Set to Explode where I state "the latest developments in Bitcoin's technology makes it paradoxically an ever increasingly interesting investment proposition the cheaper it gets." However, no article better defines where we stand in terms of fundamentals than the one I wrote back on May 15th titled Find Out Why Institutions Will Flood the Bitcoin Market, where I look at the ever-growing list of evidence that shows why a new type of investors, the institutional ones, looks set to enter the market in mass. Nicholas believes that based on the supply of Bitcoin, the market capitalization can reach about $800b. He makes a case that with the fundamentals in bitcoin much stronger, it wouldn't be that hard to envision the market cap more than double from its most recent all-time high of more than $300b. Interest Rates Set to Rise Further First of all, one of the most immediate implications of higher rates is the increased difficulty to bear the costs by borrowers, which leads Nicholas to believe that banks the likes of Deutsche Bank will face a tough environment going forward. The CEO of the giant German lender has actually warned that second-quarter results would reflect a “revenue environment [that] remains challenging." Nicholas refers to the historical chart of Eurodollar LIBOR rates as illustrated below to strengthen the case that interest rates are set to follow an upward trajectory in the years to come as Central Banks continue to normalize monetary policies after a decade since the global financial crisis. I'd say, that is a correct assumption, although one must take into account the Italian crisis to be aware that a delay in higher European rates is a real possibility now. !(https://coinlive.io/ckeditor_assets/pictures/947/content_2018-05-30_1100.png) Let's look at the following combinations: Fed Fund Rate Contract (green), German 2-year bond yields (black) and Italy's 10-year bond yield (blue) to help us clarify what's the outlook for interest rates both in Europe and the United States in the foreseeable future. The chart suggests that while the Federal Reserve remains on track to keep increasing interest rates at a gradual pace, there has been a sudden change in the outlook for European rates in the short-end of the curve. While the European Central Bank is no longer endorsing proactive policies as part of its long-standing QE narrative, President Mario Draghi is still not ready to communicate an exit strategy to its unconventional stimulus program due to protectionism threats in the euro-area, with Italy the latest nightmare episode. Until such major step is taken in the form of a formal QE conclusion, interest rates in the European Union will remain depressed; the latest drastic spike in Italy's benchmark bond yield to default levels is pre-emptive of lower rates for longer, an environment that on one hand may benefit the likes of Deutsche Bank on lower borrowing costs, but on the other hand, sets in motion a bigger headache as risk aversion is set to dominate financial markets, which leads to worse financial consequences such as loss of confidence and hence in equity valuations. !(https://coinlive.io/ckeditor_assets/pictures/948/content_2018-05-30_1113.png) Deutsche Bank - End of the Road? Nicholas argues that as part of the re-restructuring process in Deutsche Bank, they will be facing a much more challenging environment as lending becomes more difficult on higher interest rates. At CoinLive, we still believe this to be a logical scenario to expect, even if a delay happens as the ECB tries to deal with the Italian political crisis which once again raises the question of whether or not Italy should be part of the EU. Reference to an article by Zerohedge is given, where it states: "One day after the WSJ reported that the biggest German bank is set to "decimate" its workforce, firing 10,000 workers or one in ten, this morning Deutsche Bank confirmed plans to cut thousands of jobs as part of new CEO Christian Sewing's restructuring and cost-cutting effort. The German bank said its headcount would fall “well below” 90,000, from just over 97,000. But the biggest gut punch to employee morale is that the bank would reduce headcount in its equities sales and trading business by about 25%." There is an undeniably ongoing phenomenon of a migration in job positions from traditional financial markets into blockchain, which as we have reported in the past, it appears to be a logical and rational step to be taken, especially in light of the new revenue streams the blockchain sector has to offer. Proof of that is the fact that Binance, a crypto exchange with around 200 employees and less than 1 year of operations has overcome Deutsche Bank, in total profits. What this communicates is that the opportunities to grow an institution’s revenue stream are formidable once they decide to integrate cryptocurrencies into their business models. One can find an illustration of Deutsche Bank's free-fall in prices below: !(https://coinlive.io/ckeditor_assets/pictures/946/content_2018-05-30_1052.png) Nicholas takes notes of a chart in which one can clearly notice a worrying trend for Italian debt. "Just about every other major investor type has become a net seller (to the ECB) or a non-buyer of BTPs over the last couple of years. Said differently, for well over a year, the only marginal buyer of Italian bonds has been the ECB!", the team of Economists at Citi explained. One can find the article via ZeroHedge here. !(https://coinlive.io/ckeditor_assets/pictures/953/content_2018-05-30_1451.png) Equities & Housing to Suffer the Consequences Nicholas notes that trillions of dollars need to exit these artificially-inflated equity markets. He even mentions a legendary investor such as George Soros, who has recently warned that the world could be on the brink of another devastating financial crisis, on lingering debt concerns in Europe and a strengthening US dollar, as a destabilizing factor for both the US's emerging- and developed-market rivals. Ray Dalio, another legend in the investing world and Founder of Bridgewater Associates, the world’s largest hedge fund, "has ramped up its short positions in European equities in recent weeks, bringing their total value to an estimated $22 billion", MarketWatch reports. Nicholas extracts a chart by John Del Vecchio at lmtr.com where it illustrates the ratio between stocks and commodities at the lowest in over 50 years. As the author states: "I like to look for extremes in the markets. Extremes often pinpoint areas where returns can be higher and risk lower than in other time periods. Take the relationship between commodities and stocks. The chart below shows that commoditieshavennot been cheaper than stocks in a generation. We often hear this time it is different” to justify what’s going on in the world. But, one thing that never changes is human nature. People push markets to extremes. Then they revert. " !(https://coinlive.io/ckeditor_assets/pictures/954/content_2018-05-30_1459.png) Bitcoin ETF the Holy Grail for a Cyclical Multi-Year Bull Run It is precisely from this last chart above that leads Nicholas to believe we are on the verge of a resurgence in commodity prices. Not only that but amid the need of all this capital to exit stocks and to a certain extent risky bonds (Italian), a new commodity-based digital currency ETF based on Bitcoin will emerge in 2018. The author of Datadash highlights the consideration to launching a Bitcoin ETF by the SEC. At CoinLive, our reporting of the subject can be found below: "Back in April, it was reported that the US Securities and Exchange Commission (SEC) has put back on the table two Bitcoin ETF proposals, according to public documents. The agency is under formal proceedings to approve a rule change that would allow NYSE Arca to list two exchange-traded funds (ETFs) proposed by fund provider ProShares. The introduction of an ETF would make Bitcoin available to a much wider share of market participants, with the ability to directly buy the asset at the click of a button, essentially simplifying the current complexity that involves having to deal with all the cumbersome steps currently in place." Nicholas refers to the support the Bitcoin ETF has been receiving by the Cboe president Chris Concannon, which is a major positive development. CoinLive reported on the story back in late March, noting that "a Bitcoin ETF will without a doubt open the floodgates to an enormous tsunami of fresh capital entering the space, which based on the latest hints by Concannon, the willingness to keep pushing for it remains unabated as the evolution of digital assets keeps its course." It has been for quite some time CoinLive's conviction, now supported by no other than Nicholas Merten from Datadash, that over the next 6 months, markets will start factoring in the event of the year, that is, the approval of a Bitcoin ETF that will serve as a alternative vehicle to accommodate the massive flows of capital leaving some of the traditional asset classes. As Nicholas suggests, the SEC will have little choice but to provide alternative investments. Bitcoin as a Hedge to Lower Portfolios' Volatility Last but not least, crypto assets such as Bitcoin and the likes have an almost non-existent correlation to other traditional assets such as stocks, bonds, and commodities, which makes for a very attractive and broadly-applicable diversification strategy for the professional money as it reduces one’s portfolio volatility. The moment a Bitcoin ETF is confirmed, expect the non-correlation element of Bitcoin as a major driving force to attract further capital. Anyone Can BeWrongDatadash, But You Won't be Wrong Alone Having analyzed the hypothesis by Nicholas Merten, at CoinLive we believe that the conclusion reached, that is, the creation of a Bitcoin ETF that will provide shelter to a tsunami of capital motivated by the diversification and store of value appeal of Bitcoin, is the next logical step. As per the timing of it, we also anticipate, as Nicholas notes, that it will most likely be subject to the price action in traditional assets. Should equities and credit markets hold steady, it may result in a potential delay, whereas disruption in the capital market may see the need for a BTC ETF accelerate. Either scenario, we will conclude with a quote we wrote back in March. "It appears as though an ETF on Bitcoin is moving from a state of "If" to "When." Datadash is certainly not alone on his 50k call. BitMEX CEO Arthur Hayes appears to think along the same line. On behalf of the CoinLive Team, we want to thank Nicholas Merten at Datadash for such enlightening insights.
Theory: Funds liquidated Bitcoin to cover VIX shorts?
There has been talk about the recent correlation between VIX volatility and Bitcoin selling. Latest bear move from Bitcoin happened right around the same time as VIX shot up (and the recent sell off of stocks). And we all know what happened to the XIV. 2 things could have happened in my mind if there is an association. 1) As VIX shot up, people had to cover the VIX shorts so they sold Bitcoin (and stocks) to cover it. Or alternatively, 2) People, and funds, panicked when volatility rose and sold off all their positions. Does this seem plausible to any of you? Something to this effect is happening as there is correlation, but I'm not sure what exactly. EDIT: Article on the correlation of Bitcoin price and low volatility, and we have seen it drop with higher volatility. http://www.businessinsider.com/bitcoin-price-wall-street-volatility-index-correlation-deutsche-bank-2018-1 EDIT2: Video from Wells Fargo strategist discussing the correlation: https://www.cnbc.com/2018/02/07/wells-fargo-strategist-bitcoin-and-the-market-are-correlated.html
Latest interview with Jeffrey Gundlach. Transcript of interview.
CNBC Exclusive: CNBC Transcript: DoubleLine Capital CEO Jeffrey Gundlach Speaks with CNBC’s Scott Wapner Today Published Mon, Dec 17 2018 • 4:06 PM EST WHEN: Today, Monday, December 17, 2018 WHERE: CNBC’s “Fast Money Halftime Report ” The following is the unofficial transcript of a CNBC EXCLUSIVE interview with DoubleLine Capital CEO Jeffrey Gundlach and CNBC’s Scott Wapner on CNBC’s “Fast Money Halftime Report” (M-F 12PM – 1PM) today, Monday, December 17th. The following are links to video from the interview on CNBC.com: https://www.cnbc.com/video/2018/12/17/doublelines-jeffery-gundlach-this-is-definitely-a-bear-market-stocks.html, https://www.cnbc.com/video/2018/12/17/doubleline-jeffrey-gundlach-government-dysfunction-negative-world-economy-congress-demorcrat-house.html, https://www.cnbc.com/video/2018/12/17/a-high-quality-bond-portfolio-is-2019s-best-bet-says-doublelines-gundlach.html, https://www.cnbc.com/video/2018/12/17/jeffrey-gundlach-federal-reserve-should-not-raise-interest-rates-december-jay-powell.html, and https://www.cnbc.com/video/2018/12/17/doublelines-gundlach-tariffs-are-only-going-to-get-worse-in-the-trade-war-before-they-get-better.html. All references must be sourced to CNBC. SCOTT WAPNER: Welcome to Los Angeles Jeffrey. Thank you for having us back. JEFFREY GUNDLACH: Welcome to DoubleLine. SCOTT WAPNER: Almost a year to the day we were last with you. JEFFREY GUNDLACH: I think it was December 13th last year. SCOTT WAPNER: That’s right. We’re still volatile in the market. Today is another representation of that. We’re still about 50 points above on the S&P of the February lows. JEFFREY GUNDLACH: Yes. SCOTT WAPNER: Do you think we’re going to go below that? JEFFREY GUNDLACH: Well in the fullness of time, I think absolutely we’ll go below that. I’m pretty sure this is a bear market. People like this definition of 20% down as a bear market, but that’s obviously very arbitrary. I’ve been around over 35 years in the business and have seen a number of bear markets. It’s more about how you lead into it, how it develops and how the sentiment changes, and I think we’ve had pretty much all of the variables that characterize a bear market I remember going -- usually something happens that really doesn’t make any sense at all and I’m kind of amazed how it goes on longer than it should like back in the dotcom days when companies were being IPO’d and had no sales let alone revenues that’s hard to be and they would actually explode to the upside on the IPO. That’s kind of crazy and then we had the subprime lending with pick a pay loans back in ’05 and ’06 and that was kind of crazy and that went on longer than it should have. This time like we talked about a year ago it was crypto, bitcoin which was truly a mania, we talked a year ago it just went up. Maybe in the end it’s a good thing or the block chain technology is a good thing. The way it was being treated and believed in was a mania and then it crashed about a week after we met a year ago and it was at 17,500 when we were speaking right in this spot and of course now it’s down below 3,500 so an 85% decline. And one after another you start to see various sectors of the global financial markets give it up. The global stock market peaked January 26th. And so did the New York Stock Exchange composite, January 26 but the Dow Jones Industrials, the Nasdaq, the S&P 500. All of these things, one by one, started to roll over and come the summertime or later in the summertime you were down to the FAANGs and then you were down to two stocks it was amazon and apple and then amazon gave it up. And then finally when they decided they weren’t going to tell you how many phones they sold anymore apple gave it up. SCOTT WAPNER: That was the last straw. JEFFREY GUNDLACH: That was kind of the last straw. It was October 3rd when the tariffs -- well, it was that USMC -- whatever it’s called, it’s really NAFTA but it was announced we would have this change in NAFTA that would lead to a requirement that a certain fraction of car parts be made in higher costs locales which basically meant not Mexico. A senior executive at ford motor said, well obviously we’re going to have to raise the prices on our cars if input prices are going up. Suddenly the market seemed to wake up to the fact that this was real and the next day the stock market tipped over in fact, on October 3rd, Jay Powell said we’re a long way from neutral. And that was a big problem, too. SCOTT WAPNER: That seemed to be the tipping point. JEFFREY GUNDLACH: Yes that with the USMCA thing and the Ford Motor executive, those things seemed to come together and coalesce into we’ve had enough. And, yeah, the Jay Powell thing was interpreted by the market as a scary thing, the fed was going to keep going a long distance further and then the market dropped over 10% and suddenly the Fed had to massage the rhetoric. And suddenly it was, well, we have a new definition of neutral maybe. We’re actually within the lower bound or close to the lower bound of neutral in an attempt to stabilize the market. So, yeah, it seems like a bear market to me in the way things trade with late day volume being bad and the like the best thing for the near term, I think, is that the most export sensitive stock market, South Korea, the Kospi bottomed October 29 so at least that’s not pushing to new lows and emerging markets broadly are doing better because they’re extremely export driven. Maybe this leg down is getting toward an exhaustion point the sentiment is pretty dark right now. I’d be happier on the short term outlook if the VIX would go above 40 which is usually a sign. SCOTT WAPNER: That would be quite a spike. JEFFREY GUNDLACH: Well, that’s typically what happens when you get to the bottom, there’s so much nervousness and fear but the Vix is a little bit disturbing how it doesn’t go higher. Actually as the market pushes to the down side. But i think this is a bear market and i think we’ll go below the February lows almost with certainty. SCOTT WAPNER: Is it a long lasting bear market or it can be short term as some have suggested on our air and then this secular bull market will resume? JEFFREY GUNDLACH: I don’t think so. I think it’s a bear market. I think we’ve had the first leg down and the second leg down is usually more painful than the first leg down if this is indeed a bear market. Maybe in the short term we’re getting flushed out. I think it’s lasted a long time. It has a lot to do with the fact i believe we’re in a situation that maybe unprecedented was too strong but it is highly unusual that we are increasing the budget deficit so spectacularly so late in the cycle while the fed is hiking interest rates. I know you’ve teased the segment by talking about the suicide mission I’ve been talking about for months. The fed almost seems to be on a suicide mission. What i mean by that the deficit in the United States is extraordinarily high from where we are in the economic cycle and given what the debt level accumulated is already. In the first two months of fiscal ’19 it was just announced last week there’s a funny thing that happened in November where the payments for December ended up being pushed to November because December 1st was on a Saturday if you take that out it’s $44 billion that’s a big number. So if you wake that out and say that’s December and not November. Still, the first two months of fiscal ’19, the budget deficit is going up at an annualized rate of $1.62 trillion. And that’s the official budget deficit. The actual budget deficit is larger than what the report -- for example, for fiscal ’18, which ends September 30th, the deficit was around $800 billion. But the national debt went up by $1.3 trillion almost now. Why? What’s the difference there? There are items that are off budget. So the budget deficit really for fiscal ’18 was $1.3 nearly trillion that’s 6% of GDP and we’re supposedly having a good economy and we’re supposedly having jobs growth and all this other great stuff. In actuality we increase the deficit by 6% of GDP since government deficit change is a significant fraction – a significant variable in the GDP equation it seems to me there’s no real economic growth that’s happening away from the deficit. So what worries me is that as we move into a weaker economy, which will happen at some points and certainly the economy looks weaker now than it did entering 2018, that the deficit will continue to expand at a rate which could be prohibitive for the usual decline in interest rates helping to stimulate the economy. That’s what I think is the real big variable investors need to focus on. And while this is happening with the deficit exploding, the fed is raising interest rates which means the interest expense is going to be increasing year by year as these zero interest rates that we had for a number of years start to roll off and the bonds have to be refloated once they mature, the next five years we have something like $7 trillion of treasuries that are maturing the average coupon on those treasuries is almost as low as 2%, slightly higher, 2.1%. When they roll over, they’re going to be at a higher interest rate because the fed has been on the suicide mission of raising interest rates so the interest expense on that $7 trillion of treasuries is going to be -- maybe the rate will be at 3% like it is now or maybe 4% and you might even see we have an expense that goes up $100, $140 billion. So kind of the … of our government is coming back to haunt us ultimately. In financial markets, these things go on so much longer than they should Ross Perot ran for president running infomercials about we were doomed on the deficit and there was a book written in 1992, that same year, that was somewhat sponsored by the Peterson Foundation called bankruptcy 1994. And the idea behind the book was we have this compounding curve and this debt problem that is going to come back and really cause us problems. Well, he was early. He was early by at least 26 years. But he’s right, you can’t keep going on with the debt finance scheme, and I’m worried when the next recession comes we could be looking at, well heck, we’re supposedly in a good economy and the next two months we’re running $1.6 trillion what if we go into a recession what’s the deficit going to be $3 trillion? And does that mean interest rates don’t go down during the next recession, which is an idea I’ve been noodling around for a long time maybe they go higher with I’ve had a call the next two years that come 2021 the ten-year treasury will be at 6%. I get a lot of pushback a lot of debt deflation is out there in the twitter-sphere absolutely wrong the economy can’t handle higher interest rates. Interest rates might have a life of their own. It might not matter what the market can handle or can’t handle. SCOTT WAPNER: they haven’t to this point. It’s been somewhat surprising that rates have remained where they are you said 3%. They hit 3%. 3.25%. Here we are below 2.9% today. JEFFREY GUNDLACH: yes, on the ten year. I was focusing on the three year when it broke above 3.25% that was incredibly important frankly, I didn’t think we’d go back below 3.25 once we broke above because it seemed like such an important level. Here we are back below 3.25. But not impressively not in a way that would be consistent with a big decline in the global stock market. There’s a thing called the death cross. It’s a 50-day moving average goes below 200 a day particularly when they’re both declining. Presently about 80% of the countries in the MSCI World Index are in a death cross 80%. It’s amazing. And there was a chart that got a lot of play put out by deutsche bank about how many risk assets globally are in officially bear market down the arbitrary 20% number that, again, i don’t really ascribe to but so commonly used at that they used it and the highest in the data series going back to 1901. It’s like 90% of the risk assets around the world in dollar terms are in bear markets. So it’s a pretty widespread and coordinated set of weaknesses. SCOTT WAPNER: Are you saying that by embarking on this suicide mission that the fed shouldn’t raise interest rates this week? JEFFREY GUNDLACH: I don’t really think that’s the main thrust of my idea this week, yeah, they shouldn’t raise them this week. SCOTT WAPNER: They shouldn’t? JEFFREY GUNDLACH: No I don’t think they should. The bond market is saying, fed, you’ve got no way you should be raising interest rates look at the 2s, 3s, five-year part of the yield curve which are flat at 270 I guess that corroborative of a hike. But it is basically saying in the year 2019 you’re going to have a cut, this big, but a cut that was priced into the yield curve and in 2020 another cut. The problem, though, isn’t that the fed shouldn’t be raising rates. The problem is the fed shouldn’t have kept them so low for so long. SCOTT WAPNER: Sure. JEFFREY GUNDLACH: The problem we shouldn’t have had negative interest rates like we still have in Europe. We shouldn’t have done quantitative easing which is a circular financing scheme. The problem really is the deficit. The fed is kind of helpless here. The fact that the deficit is so out of control this late in the economic cycle, we have never before had the fed raise interest rates while the budget deficit was expanding it’s never happened. Because usually the budget deficit expands in response to a recession. It’s a way of stimulating to get us out of recession. Instead, we did it as a last gasp of keeping this economic recovery going by making it completely deficit based. SCOTT WAPNER: So this morning, President Trump once again Tweeted about the Fed. Quote, “It’s incredible that with a very strong dollar and virtually no inflation, the outside world blowing up around us, Paris burning, China way down, that the Fed is even considering another interest rate hike. Take the victory,” he stayed. Stan Druckenmiller, today, Op-Ed “Wall Street Journal”: The Fed should quote “Pause its double-barreled blitz of higher rates and tighter liquidity.” So they’re right, you agree with them? JEFFREY GUNDLACH: I do agree with them. I’ve been saying this pretty much all year, the double-barreled was actually -- he may have borrowed that from me, that’s how I’ve been talking about – it’s how I’ve been phrasing it all year – that we’ve really been tightening interest rates in a way that’s more than people understand. There’s a duo of economists at the Atlanta Fed called Wu and Xia, who did a study a few years back ‘What was the effect of quantitative easing?’ If they hadn’t done the quantitative easing and instead had taken the European model and gone to negative interest rates, how negative would those rates have had to be to have the same stimulative effect as the quantitative easing? And they concluded – and I don’t know if they’re right or not it’s very hypothetical – but their conclusion was that the quantitative easing amounted to 300 basis points of further cuts. So if they hadn’t done quantitative easing, to have the same stimulative effect, the Fed funds would have had been negative 300 basis points. Well let’s just say they’re right. Since they did about 2.5 trillion of quantitative easing and it was 300 basis points, 2.5 trillion divided by 3 is roughly $800 billion. Okay? So $800 billion is -- $800 billion divided by 4 means that’s what quantitative easing is one cut. So 100 basis points is $800 billion. So divided by 4. 25 basis points is $200 billion of quantitative easing. Well so far we’re pushing towards $400 billion -- we’re not there yet but we’re soon to be there -- of quantitative tightening. That means we’ve had would more rate hikes from quantitative tightening if Wu and Xia are right. So the Fed hasn’t just raised rates in that context eight times. They’ve raised them ten times. And the quantitative tightening is stated to be as high as $600 billion over fiscal ’19. So that’s another three rate hikes. So if they were going to follow their dots and raise rates so many times, there’s another three on top of that. So the amount of tightening has been underappreciated, I think, and Stan is right as he often is – he’s one of the greatest investors ever for, him and Chanos, the two titans of the hedge fund industry. They’re right that we are seeing the bond market react in a way that is historically very predictive of the Fed should not be doing this. And yet, we have this strange dynamic that they’ve almost promised a rate hike here in December. And then the President shows up with his Tweets trying to bully them into not doing it and it puts Jay Powell and the team in a very tough position. Because they’re damned if they do and damned if they don’t.
USD (DXY) up 0.08%, EUR down 0.04%, GBP down 0.50%, JPY down 0.12%, CNY Onshore up 0.12%, CNH Offshore up 0.02%, AUD down 0.23%
VIX up 0.65% to 9.25
Gold up 0.13% to $1,269.01
Silver down 0.11% to $16.62
Copper up 0.25% to $305.40
WTI Crude down 0.79% to $50.39
Brent Crude down 0.18% to $56.90
Natural Gas down 0.44% to $2.91
Corn down 0.07% to $3.49/bu
Wheat up 0.06% to $4.41/bu
Bitcoin up 1.55% to $4,414.56
Treasuries 2yr yields are up ~1.3bps at 1.500%, 10yr yields are up ~1.6bps at 2.364% and 30yr yields are up ~0.9bps at 2.899%
Japan 10yr yields 0.045%, up ~1.0bps on the day
France 10yr yields 0.750%, up ~1.9bps on the day
Italy 10yr yields 2.156%, up ~1.8bps on the day
Spain 10yr yields 1.704%, up ~1.8bps on the day
Germany 10yr yields 0.474%, up ~2.2bps on the day
What’s happening this morning? It was another slow evening of news other than the German Aug factory order numbers (which were very strong although the euro and Eurozone stocks are both in the red), a few US earnings reports (COST and YUMC), andsome M&A (GIMO, HON, JWN, PENN/PNK, SNCR, and more). The overall macro narrativeremains the same as it was at the Thurs close (see below for an update on the macro narrative as well as potential upcoming risks). The major Asian indices generally saw gains – TPX +0.28%, NKY +0.3%, Hang Seng +0.28%, HSCEI +0.54%, Taiwan +0.14%, Australia +1.04%, and India +0.5-7% (mainland China and Korea were both closed). There weren’t any huge themes in Asia although Macau casino stocks were weak in HK on back of underwhelming Golden Week visitor numbers (autos and financials led HK on the upside). Australia’s 1% rally was led by banks, miners, and telecoms. The major Eurozone indices are trading off small (~10-20bp); autos are outperforming while banks, retail, energy, and utilities lag. The GBP is extending its losses from Thurs amid more uncertainty around UK PM May (the DXY spiked ~50bp Thurs and is up small so far Fri morning). US S&P futures are trading down 1-2 points.
Calendar for Fri 10/6 – the focus will be on the US jobs report for Sept (8:30amET), US wholesale inventories/trade sales for Aug (10amET), US consumer credit for Aug (3pmET), and Fed speakers (Kaplan 8:30amET on CNBC, Bostic 9:15amET, Dudley 12:15pmET, Kaplan 12:45pmET, and Bullard 1pmET). o US jobs preview – there is very little anticipation or focus on the Sept jobs report (Fri morning 8/6 8:30amET) as 1) most are anticipating large storm-related distortions and 2) at this point in the cycle it only requires ~75K monthly adds to keep the UR steady (as was discussed in this JPMorgan report http://bit.ly/2fbT6cE). The St is in print at +80K for adds (vs. ADP for Sept at +135K and Aug BLS +156K) w/a 4.4% UR (unchanged w/Aug) and wages +0.3% M/M and +2.5% Y/Y (vs. Aug +0.1% M/M and +2.5% Y/Y). It’s very difficult to see the Sept BLS report changing the near-term US monetary policy trajectory (w/ongoing normalization and a FF hike on 12/13). The potential for a hike on 11/1 is very low and if anything the Sept CPI on Fri 10/13 may be a more important data point than jobs on Fri 10/6. Instead, the bigger Fed uncertainty has nothing to do w/data or policy but instead concerns staffing (i.e. who will be the next chair? A Trump announcement could come as soon as next week – Powell and Warsh are the frontrunners according to media reports w/the former appearing to have a slight edge).
Top Headlines for Friday
Eco data recap for Fri morning 10/6 – the big data came out of Germany where factory orders for Aug beat expectations by a wide margin (orders +3.6% M/M vs. the St +0.7% and +7.8% Y/Y vs. the St +4.7%). See JPMorgan’s comments on the German data (http://bit.ly/2y42sh4). Japan’s wage inflation figures for Aug were soft, as expected (http://bit.ly/2kuygr0). o Fed chair – markets would be comfortable w/any of the main candidates (including Powell, Warsh, Cohn, Yellen, etc.) w/the exception of one person: John Taylor. Bloomberg. o Fed update – Kansas City Fed President George spoke Thurs night and said the US economy needed further rates hikes (http://cnb.cx/2kqTiqj). JPMorgan’s Mike Feroli published an updated FOMC hawk/dove chart following the confirmation of Quarles (http://bit.ly/2z1jSti). o Japan’s “Party of Hope” unveils an economic agenda that pledges to rely less on aggressive fiscal and monetary stimulus – Reuters http://reut.rs/2ghahXu o AUD hit as RBA’s Harper doesn’t rule out a rate cut in a WSJ article. http://on.wsj.com/2xW3nkD
UK PM May the subject of more speculation amid disclosure of plot to topple her; former party chairman, Grant Shapps, said May’s leadership should now be challenged. Reuters http://reut.rs/2yMrmzB
Spain/Catalonia – Spain’s Constitutional Court ordered the suspension of the Catalan parliament’s regional session scheduled for Mon; Catalonia had planned on declaring independence at the session. Reuters http://reut.rs/2xlDfjC o Spain’s gov’t will change rules and make it easier for firms to move their legal base out of Catalonia – Reuters http://reut.rs/2z1WQCF
Tax update - there is a lot of focus on taxes in the US as the Senate Budget Committee (right at the Thurs close) and the full House (at ~1pmET Thurs afternoon) advance budget resolutions (the full Senate will presumably vote within the next two weeks). This is a necessary step in the tax process (as these resolutions contain the reconciliation instructions allowing tax to pass via a simple majority in the Senate) but also a relatively minor one. Far more complicated will be agreeing on rates, deduction schedules, deficits, etc., and if anything all the press in the last few days and weeks point to divisions within the GOP on these matters being larger than anticipated. o Schumer warns that the proposal to eliminate the SALT deduction will kill the GOP tax plan – Bloomberg. https://bloom.bg/2xXX8KL o GOP desire to repeal the estate tax runs into resistance - from Republicans. As a result this piece of the 9/27 tax blueprint (among others) may wind up being scrapped - WSJ. http://on.wsj.com/2gf9G8E o Fed officials express concern over tax plans – Fed officials warned the tax plan may only provide a temporary boost to growth while fueling inflation and driving debt to unsustainable levels – Reuters http://reut.rs/2xWMrdG
Republican headaches keep growing as donors withhold money, a tax consensus fails to materialize, and “establishment” figures depart the scene (Strange losing to Moore, Corker retiring, etc.). Republican leaders are increasingly concerned about the party’s grip on the House and Senate should it fail to pass a tax bill. Leaders “fear that the inchoate populism that Mr. Trump personifies, and which Mr. Bannon is attempting to weaponize against incumbents, is on the march” – NYT http://nyti.ms/2y3lUKT
Trump looks to jolt NAFTA – the White House is considering a proposal that would represent a radical shift to the principles underlying NAFTA. According to rule changes being considered, automobiles would need to have a specific level of US-made content in order to qualify for tariff breaks (right now autos only need to have a specific level of content from within the NAFTA region). WSJ. http://on.wsj.com/2y4LXlo
Trump makes cryptic comment ahead of a dinner with US military leaders. Trump said the dinner might represent “the calm before the storm”. Asked repeatedly by reporters to clarify his comments, Trump said, “You’ll find out” – Bloomberg https://bloom.bg/2xXI2r6
Trump was “furious” over NBC’s Tillerson “moron” article; John Kelly was forced to rearrange his schedule and stayed in Washington in order to try and calm tensions – NBC. http://nbcnews.to/2fOGx3B
Iran/Trump – Trump will “decertify” the Iran nuclear accord next week (speech on 10/12) and declare the agreement as not being in the US national interest according to the Washington Post (article out at ~2:40pmET Thurs afternoon). This is consistent w/what the AP and Politico reported earlier in the week. Note that Trump’s 10/12 declarations won’t end the Iranian nuclear pact as it will be up to Congress whether re-impose sanctions on Tehran (and Trump will hold off on recommending such a step). Washington Post http://wapo.st/2z1zeOw o Decertifying the Iran Deal Wouldn’t Have to Kill It – WSJ http://on.wsj.com/2y40dKY
North Korea – US lawmakers are pressuring the Trump White House to toughen sanctions against North Korea – WSJ. http://on.wsj.com/2xlKdVQ
The Economist's lead article this week speaks to sentiment at the moment and this is one of the big reasons why stocks are proving to be so resilient. "Asset prices are high across the board. Is it time to worry?" (http://econ.st/2xVXOjv). o The WSJ notes that a key European junk-bond index is now yielding less than 10yr US TSYs although it offers a reasonable explanation for this ostensibly irrational price level – WSJ. http://on.wsj.com/2xkwYVb
Company-specific news update from Thurs night. There were a few earnings reports out Thurs AMC but for the most part it was another slow evening. COST EPS beats thanks to better SG&A and favorable tax while GMs were light; Sept same-store-sales beat w/upside in the US (the stock ended down 3% during the Thurs after-hours trading session). YUMC’s results came in ahead of expectations (EPS/same-store-sales) and it increased capital return. SNCR reentered M&A talks w/Siris Capital (Siris is looking to buy SNCR’s Intralinks and may take a ~20% equity stake in SNCR); SNCR ended up ~27% during the Thurs after-hours trading session. According to the WSJ, HON is pursuing an acquisition of Evoqua Water Tech in a deal that could be worth $3B (http://on.wsj.com/2yseCSp). The WSJ reported (during trading on Thurs http://on.wsj.com/2xjE24p) on merger talks between PENN and PNK (the firms have been unable to agree to terms but PENN is still interested in buying PNK).
JWN buyout not completely dead – the Nordstrom family is exploring a new deal structure w/Leonard Green that would involve less debt. The family is trying to raise more equity (although it isn’t clear where the money will come from). WSJ. http://on.wsj.com/2ggTvbh
GIMO – Elliot’s takeover talks w/the company have ground to a halt according to Reuters over price disagreements – Reuters http://reut.rs/2fNCepo
SUM, ASHG – SUM has made a rival bid for ASHG as it looks to scuttle the existing Ash Grove-CRH PLC transaction. Ash Grove’s board said the offer could result in a superior proposal and that it would engage in talks with the third party. Bloomberg.
AMZN: the one market where Amazon is failing to dominate: Hollywood. The WSJ discusses AMZN’s failure to become a force in content. WSJ. http://on.wsj.com/2xZcJtr
Macau casino stocks slump during Fri trading as Golden Week visitor numbers disappoint expectations – Bloomberg https://bloom.bg/2fOuGmd
Identifying risks – what could go wrong?
Reflation enthusiasm is undercut by less aggressive CB normalization, dramatic curve flattening, and/or a softening in nominal growth. Of all the reflation pieces (monetary policy normalization, expansionary fiscal policy, firming inflation, and ongoing real growth strength), the last piece (real growth) is increasingly being taken for granted.
Bank investors wind up focusing too much on reflation/yields (which are tailwinds) but miss weakening credit (higher provisions) and tepid loan growth.
The first speech by the next Fed chair unsettles sentiment (assuming the chair isn’t Yellen).
The tax process slows in Washington as Republicans prove incapable of reaching a consensus on rates, deductions, and deficits.
Paul Ryan decides to “pull a Boehner”, stepping down as Speaker out of frustration with his inability to pass legislation.
The final tax bill results in materially higher rates for upper-income Americans.
May winds up stepping down as UK PM, sowing ongoing Brexit uncertainty.
Abe does much worse than anticipated during the upcoming Japan election (10/22).
North Korea conducts an above-ground nuclear bomb test (or even worse, an atmospheric test).
Iran decides to resume its nuclear weapons program, sparking an immediate escalation of Middle East geopolitical tensions (Trump’s Iran speech is coming up on 10/12).
Washington introduces (or threatens to introduce) tough new regulations aimed at internet/social media companies following the Russia election investigations (note that US internet giants will be testifying before Congress on 11/1).
Prominent members of the Trump team decide to leave the gov’t (the market would be particularly sensitive to Tillerson, Mattis, Kelly, and/or Cohn departing; recent media reports suggest the Tillerson-Trump relationship is particularly strained).
The pro-reflation bias commenced back on 9/11 and has been propelled ever since by ongoing real growth strength, firming inflation, normalizing monetary policy/rhetoric, and expansionary fiscal policy (in particular in the US w/the 9/27 tax blueprint but also in Germany following that country’s election outcome and fin min change).
This enthusiasm can extend for a few more weeks but the ECB/BOE decisions (on 10/26 and 11/2, respectively) will mark the culmination of a series of pro-reflation catalysts/developments and thus the trade may enter a period of extended consolidation around those central bank events.
Meanwhile the nuances of this present reflation process aren’t being appreciated – growth and corporate earnings are late-cycle (not early), multiples are already rich (although not necessarily ridiculous), inflation is only very gradually firming to target, the economy faces enormous structural headwinds in the form of labor supply and productivity growth, and while central banks are normalizing policy will stay extremely accommodative for years to come (the structural headwinds and slow tightening pace will prevent yields from materially rising and curves from significantly steepening).
The tenor of sentiment is beginning to evolve and there is definitely greater frustration w/people being forced to participate in a tape many don’t particularly love at present levels – this helps fuel runs such has occurred over the last few weeks (the SPX hasn’t closed in the red since Mon 9/25) but it also makes for a precarious setup w/a lot of weak “renters” who will be quick to sell the minute momentum pauses.
Bottom Line: the lack of major catalysts is helping the rally propagate and the calendar is relatively clear until earnings (which kick off w/banks on Thurs 10/12). The reflation impetus will likely stay in place into the ECB/BOE (10/26 and 11/2, respectively) after which a consolidation (at least) is likely (note that a lot of the “easy” tax steps are occurring now – the blueprint on 9/27, the budget resolutions, etc. However, reaching a consensus on rates, deductions, and deficits will be extremely difficult and this will become more apparent later in Oct and into Nov, around the same time as the ECB/BOE decisions).
Calendar of events to watch for the week of Mon Oct 9
Calendar for the week of 10/9 – overall it should be a relatively slow week although a few items are in focus. The current reflation emphasis makes the US CPI on Fri 10/13 prob. the single most important eco data point of the week but there are other numbers in focus (German trade/IP for Aug and China imports/exports for Sept). The CQ3 earnings season kicks off in earnest with the banks on Thurs and Friday. Away from scheduled events, media reports suggest Catalonia could formally declare independence on Mon (although this could easily be delayed following court challenges and as the region’s leaders seek a settlement w/Madrid) while the White House may unveil its infrastructure spending blueprint during the week of 10/9 (http://bit.ly/2wwiop9). South Korean security officials have warned that North Korea may fire additional missiles between 10/10 and 10/18 while Trump’s Fed chair selection could come soon (media reports suggest Powell and Warsh are the two frontrunners). Trump is expected to deliver an Iranian policy speech on/around Thurs 10/12 during which he will declare the nuclear deal as no longer being in the US national interest. HON has said it will announce its formal portfolio review decision prior to earnings (media reports, including on CNBC, suggest it will retain its aerospace unit).
Calendar for Mon 10/9 – the day should be pretty quiet owing to the US Columbus Day holiday (equities will be open but fixed income is closed). The focus will be on the China FX reserve numbers for Sept (Fri night/Sat morning 10/7), the China Caixin services PMI for Sept (Sun night/Mon morning), Germany’s industrial production for Aug (2amET), and earnings (LVMH reports results after the European close).
Calendar for Tues 10/10 – the focus will be on the German trade figures for Aug (2amET), a bunch of analyst meetings (including TECD, Santander, WDAY, and WMT), the PG shareholder meeting (at which the Trian/Peltz board seat request will be voted on), and earnings (CUDA after the close).
Calendar for Wed 10/11 – the focus will be on the US JOLTs report for Aug (10amET), Fed minutes from the 9/20 meeting (2pmET), analyst meetings (KR), and earnings (DAL, BLK, FAST, and OZRK before the open).
Calendar for Thurs 10/12 – the focus will be on Eurozone IP for Aug (5amET), the US PPI for Sept (8:30amET), Trump’s Iran speech, analyst meetings (BOX, HPQ, LSCC, and WDC), and earnings (C, DPZ, JPM, LNN, Sky PLC, and Tata Consultancy pre-open).
Calendar for Fri 10/13 – the focus will be on China’s imports/exports for Sept (Thurs night/Fri morning), the US CPI for Sept (8:30amET), US retail sales for Sept (8:30amET), the Michigan Confidence numbers for Oct (10amET), US business inventories for Aug (10amET), analyst meetings (SAFM), and earnings (BAC, DRFG, FHN, FRC, JBHT, Man Group, PNC, and WFC pre-open).
Catalysts – big events to watch over the coming months
China mainland markets closed Mon 10/2-Fri 10/6 for the National Day holiday.
US jobs report for Sept – Fri 10/6.
US infrastructure spending - the Trump White House may unveil its long-anticipated infrastructure plan during the week of 10/9 according to House Transport chairman Rep. Bill Shuster.
North Korea - South Korea’s national security adviser Chung Eui-yong said he expected Pyongyang to act around Oct. 10 and 18 (Reuters).
WMT analyst meeting – Tues 10/10 (note that KR has an analyst meeting the next day, Wed 10/11).
PG shareholder meeting – Tues 10/10 (decision to be made on Peltz’s board seat request).
Fed minutes – minutes from the 9/20 meeting will be released Wed 10/11. 2pmET.
HON – the co will announce its portfolio review decision before earnings in Oct.
Iran - Trump is planning to deliver an Iran policy speech on 10/12 and he is expected to say that the landmark 2015 nuclear deal is no longer in the U.S. national security interest (AP)
Bank earnings – the CQ3 earnings season kicks off w/Citigroup and JPM Thurs morning 10/12 while BAC, PNC, and WFC all report Fri 10/13.
US inflation – the Sept CPI will hit Fri 10/13.
IMF/World Bank - 2017 Annual Meetings of the World Bank Group and the International Monetary Fund. Oct 13-15 in Washington.
CQ3 earnings – the week of Mon 10/16 is the first busy week of the CQ3 reporting season.
Fed chair decision during the week of 10/16? Based on Trump’s “two to three” weeks comment (on Fri 9/29), his decision on a Fed chair could come as soon as the week of 10/16 (this week is also the first busy period of the CQ3 earnings season, the deadline for Trump to rule on the Iran nuclear deal, and the beginning of the China National Congress on 10/18). Media reports suggest the Fed chair frontrunners are Warsh and Powell followed by Yellen and Cohn.
China - the National Congress of the Communist Party of China starts Oct 18.
China Q3 GDP and Sept retail sales, IP, and FAI (Wed night/Thurs morning) – Thurs morning 10/19.
EU leaders hold summit in Brussels. Oct 19-20. Brussels.
Japan – the country will hold snap elections on Sun 10/22.
Flash PMIs for Oct – Tues 10/24
ECB meeting/press conf. Thurs Oct 26. The ECB is expected to provide guidance on LSAP tapering at this meeting (St assumes LSAP drops from EU60B now to EU40B w/6 month extension).
1949: The Year That Set the Course of Chinese-American Relations – NYT http://nyti.ms/2z2hGSv M&A/Strategic Actions
Brooklyn Nets – multiple suitors are in talks to buy a 49% stake in the NBA deal. Mikhail Prokhorov is seeking a valuation of >$2B for the entire team. NY Post. http://nyp.st/2y3KFY0 o Brooklyn Nets – BABA denied that its vice chairman, Joseph Tsai, was in talks to buy a stake in the Nets – Reuters http://reut.rs/2yuCBRa
GIMO – Elliot’s takeover talks w/the company have ground to a halt according to Reuters over price disagreements – Reuters http://reut.rs/2fNCepo
HON - according to the WSJ, HON is pursuing an acquisition of Evoqua Water Tech in a deal that could be worth $3B (http://on.wsj.com/2yseCSp).
HPQ, Samsung – China said it will approve HPQ’s purchase of Samsung’s printer business – Reuters http://reut.rs/2y06khP
JWN buyout not completely dead – the Nordstrom family is exploring a new deal structure w/Leonard Green that would involve less debt. The family is trying to raise more equity (although it isn’t clear where the money will come from). WSJ. http://on.wsj.com/2ggTvbh
PENN, PNK - the WSJ reported (during trading on Thurs http://on.wsj.com/2xjE24p) on merger talks between PENN and PNK (the firms have been unable to agree to terms but PENN is still interested in buying PNK).
Retailers helped through bankruptcy process – Reuters notes that many retailers are obtaining help during the bankruptcy process w/many being allowed to stay in business w/their store bases largely intact – Reuters http://reut.rs/2y3NcAN
SNCR - On October 4, 2017, SNCR and Siris determined to restart discussions regarding a potential transaction. Specifically, Siris is offering to buy Intralinks for $915MM cash, invest $185MM for a convert worth ~20% of SNCR’s common shares, and cancel the ~6MM SNCR common shares it now owns.
SUM, ASHG – SUM has made a rival bid for ASHG as it looks to scuttle the existing Ash Grove-CRH PLC transaction. Ash Grove’s board said the offer could result in a superior proposal and that it would engage in talks with the third party. Bloomberg.
Unilever – the co is seeking PE bids for its spreads business by 10/19; a sale could be worth $8B – Reuters http://reut.rs/2fNDYPe
Full catalyst list
Fri Oct 6 – German factory orders for Aug. 2amET.
Fri Oct 6 – US jobs report for Sept. 8:30amET.
Fri Oct 6 – US wholesale inventories/trade sales for Aug. 10amET.
Fri Oct 6 – US consumer credit for Aug. 3pmET.
Fri Oct 6 – Fed speakers: Bostic, Kaplan, Bullard
Sat Oct 7 – China FX reserves for Sept (Fri night/Sat morning)
Mon Oct 9 – China Caixin services PMI for Sept (Sun night/Mon morning)
Mon Oct 9 – German industrial production for Aug. 2amET.
Mon Oct 9 – earnings after the European close: LVMH.
Mon Oct 9 – Columbus Day holiday in the US (equities will be open while fixed income is closed).
Tues Oct 10 – German trade balance for Aug. 2amET.
Tues Oct 10 – analyst meetings: TECD, Santander, WDAY, WMT
Tues Oct 10 – PG shareholder meeting
Tues Oct 10 – earnings after the close: CUDA
Wed Oct 11 – US JOLTs report for Aug. 10amET.
Wed Oct 11 – Fed minutes from the Sept 20 meeting (2pmET).
Wed Oct 11 – analyst meetings: KR
Wed Oct 11 – earnings before the open: BLK, DAL, FAST, OZRK.
Thurs Oct 12 – Eurozone industrial production for Aug. 5amET.
Thurs Oct 12 – US PPI for Sept. 8:30amET.
Thurs Oct 12 – analyst meetings: BOX, HPQ, LSCC, WDC.
Thurs Oct 12 – earnings before the open: C, DPZ, JPM, LNN, Sky PLC, Tata Consultancy.
Thurs Oct 12 – earnings after the close: EXFO
Fri Oct 13 – China imports/exports for Sept (Thurs night/Fri morning)
Fri Oct 13 – US CPI for Sept. 8:30amET.
Fri Oct 13 – US retail sales for Sept. 8:30amET.
Fri Oct 13 – US Michigan Sentiment for Oct. 10amET.
Fri Oct 13 – US business inventories for Aug. 10amET.
Fri Oct 13 – analyst meetings: SAFM
Fri Oct 13 – earnings before the open: BAC, DRFG, FHN, FRC, JBHT, Man Group, PNC, WFC.
Mon Oct 16 – China CPI/PPI for Sept (Sun night/Mon morning)
Mon Oct 16 – Eurozone trade balance for Aug. 5amET.
Mon Oct 16 – earnings before the open: SCHW
Mon Oct 16 – earnings after the close: BRO, IEX, NFLX, Rio Tinto
Tues Oct 17 – Eurozone Sept auto registrations. 2amET.
Tues Oct 17 – German ZEW survey results for Oct. 5amET.
Tues Oct 17 – US import prices for Sept. 8:30amET.
Tues Oct 17 – US industrial production for Sept. 9:15amET.
Tues Oct 17 – US NAHB housing index for Oct. 10amET.
Tues Oct 17 – earnings before the open: BMI, CMA, CSX, GS, GWW, HOG, JNJ, MS, Pearson, PLD, Remy Cointreau, UNH
Tues Oct 17 – earnings after the close: ADTN, BHP, CP, CREE, IBM, LRCX, NAVI.
Wed Oct 18 – US housing starts for Sept. 8:30amET.
Wed Oct 18 – US building permits fro Sept. 8:30amET.
Wed Oct 18 – US Beige Book. 2pmET.
Wed Oct 18 – earnings before the open: ABT, Akzo Nobel, MTB, NTRS, USB
Wed Oct 18 – earnings after the close: AA, AXP, BHE, CCI, CCK, EBAY, LLNW, SLG, TCBI
Thurs Oct 19 – China Q3 GDP and Sept retail sales, IP, and FAI (Wed night/Thurs morning)
Tues Oct 24 – earnings after the close: AKAM, AMP, CMG, COF, DFS, ESRX, IRBT, T, TSS, TXN.
Wed Oct 25 – US durable goods for Sept. 8:30amET.
Wed Oct 25 – US FHFA home price index for Aug. 9amET.
Wed Oct 25 – US new home sales for Sept. 10amET.
Wed Oct 25 – earnings before the open: ALK, ALLY, ANTM, Antofagasta, AOS, BA, BAX, Dassault Systemes, DPS, FCX, FLIR, Fresnillo, HBAN, Heineken, IP, IR, KO, LEA, LH, Lloyds Banking Group, NDAQ, NSC, NYCB, Peugeot, TMO, TUP, V, WBA, WEC.
Wed Oct 25 – earnings after the close: ABX, ACGL, AFL, AMGN, CLGX, DLR, FFIV, FTI, KIM, LSTR, NOW, ORLY, PKG, PLXS, RJF, TSCO, UNM, VAR, XLNX.
Thurs Oct 26 – US wholesale inventories for Sept. 8:30amET.
Thurs Oct 26 – US advance goods trade balance for Sept. 8:30amET.
Thurs Oct 26 – US pending home sales for Sept. 10amET.
Thurs Oct 26 – earnings before the open: Aixtron, ALLE, ALV, Anheuser Busch, APD, Bayer, BMY, BSX, BWA, CCMP, CELG, CHTR, CMCSA, CME, Deutsche Bank, ENTG, EQT, F, HLT, MMC, NEM, Nokia, ODFL, Santander, Schneider Electric, UNP, UPS, WM, XEL.
Thurs Oct 26 – earnings after the close: AIV, ATEN, CB, CDNS, EXPE, FLEX, FTNT, GILD, GOOG, HIG, INTC, LPLA, MSFT, NATI, PFG, SYK, VDSI, VRSN.
Fri Oct 27 – China Sept industrial profits (Thurs night/Fri morning).
Fri Oct 27 – US Q3 GDP, personal consumption, and core PCE for Q3. 8:30amET.
Fri Oct 27 – US Michigan Confidence numbers for Oct. 10amET.
Fri Oct 27 – earnings before the open: B, MRK, PSX, SC, TRU, Volkswagen, WY, XOM.
Mon Oct 30 – US personal income/spending and PCE for Sept. 8:30amET.
Mon Oct 30 – US Dallas Fed index for Oct. 10:30amET.
Mon Oct 30 – analyst meetings: CSX
Mon Oct 30 – earnings before the open: HSBC
Mon Oct 30 – earnings after the close: AVB, CGNX, RE, RTEC, VNO
Tues Oct 31 – US Employment Cost Index for Q3. 8:30amET.
Tues Oct 31 – US Case-Shiller home price index for Aug. 9amET.
Tues Oct 31 – US Chicago PMI for Oct. 9:45amET.
Tues Oct 31 – US Conference Board Sentiment readings for Oct. 10amET.
Tues Oct 31 – earnings before the open: ADM, AET, Airbus, AMT, Barclays, BNP, CMI, ECL, GGP, K, MA, OSK, PFE, XYL.
Tues Oct 31 – earnings after the close: APC, CHRW, CXO, WFT, X
Wed Nov 1 – US ADP jobs report for Oct. 8:15amET.
Wed Nov 1 – US Markit Manufacturing PMI for Oct. 9:45amET.
Wed Nov 1 – US Manufacturing ISM for Oct. 10amET.
Wed Nov 1 – US construction spending report for Sept. 10amET.
Wed Nov 1 – US auto sales for Oct.
Wed Nov 1 – FOMC meeting decision. 2pmET.
Wed Nov 1 – earnings before the open: AGN, APO, CLX, EL, GRMN, HFC, Novo Nordisk, ORBK, Standard Chartered, TAP, TRI.
Wed Nov 1 – earnings after the close: ALL, BHF, BXP, CAVM, CSGS, FB, LNC, MANT, MET, MUSA, OXY, PRU, QCOM, ULTI, XPO.
Thurs Nov 2 – US nonfarm productivity and unit labor costs for Q3. 8:30amET.
Thurs Nov 2 – earnings before the open: ADP, AN, BCE, CI, Credit Suisse, DISCA, H, ICE, Royal Dutch Shell, Sanofi, Swiss Re, WRK.
Thurs Nov 2 – earnings after the close: AAPL, AIG, CBS, CRUS, FLR, HLF, RMAX, SBUX, UNIT.
Fri Nov 3 – US jobs report for Oct. 8:30amET.
Fri Nov 3 – US trade balance for Sept. 8:30amET.
Fri Nov 3 – US factory orders and durable goods orders for Sept. 10amET.
Fri Nov 3 – US non-manufacturing ISM for Oct. 10amET.
Tues Nov 7 – US JOLTs jobs report for Sept. 10amET.
Tues Nov 7 – US consumer credit for Sept. 3pmET.
Thurs Nov 9 – US wholesale trade sales/inventories for Sept. 10amET.
Fri Nov 10 – US Michigan Confidence preliminary numbers for Nov. 10amET.
Tues Nov 14 – US PPI for Oct. 8:30amET.
Wed Nov 15 – US CPI for Oct. 8:30amET.
Wed Nov 15 – US Empire Manufacturing for Nov. 8:30amET.
Wed Nov 15 – US retail sales for Oct. 8:30amET.
Wed Nov 15 – US business inventories for Sept. 10amET.
Thurs Nov 16 – US import prices for Oct. 8:30amET.
Thurs Nov 16 – US industrial production for Oct. 9:15amET.
Thurs Nov 16 – US NAHB housing index for Nov. 10amET.
Fri Nov 17 – US housing starts and building permits for Oct. 8:30amET.
Mon Nov 20 – US Leading Index for Oct. 10amET.
Tues Nov 21 – US existing home sales for Oct. 10amET.
Wed Nov 22 – US durable goods for Oct. 8:30amET.
Wed Nov 22 – US final Michigan Confidence numbers for Nov. 10amET.
Wed Nov 22 – FOMC 11/1 meeting minutes. 2pmET.
Fri Nov 24 – US flash PMIs for Nov. 9:45amET.
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