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Dow races to new record

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Trump bump still won't slump
Trump bump still won’t slump

Remember when Wall Street was worried about President Trump?

No? Neither does Wall Street.

The Dow popped 136 points to 21,144 on Thursday, landing at its first record close since March 1. The S&P 500 and Nasdaq also finished at all-time highs.

While many American were focused on the fallout from President Trump’s decision to withdraw from the climate deal, market analysts said Thursday’s march higher on Wall Street was linked to healthy signals from the U.S. economy.

“It’s not because of the climate accord. People expected that,” said David Kelly, chief global strategist at JPMorgan Funds.

Investors were instead fired up by a report from ADP showing the U.S. added 253,000 private-sector jobs in May. Wall Street is betting that’s a very good sign ahead of Friday’s more closely-watched government jobs report.

“It was a very strong reading and helps reduce worries the economy had lost momentum,” Kelly said.

The Dow is now up more than 500 points since the Trump-fueled selloff on May 17.

Solid jobs numbers on Friday should clear the way for the Federal Reserve to raise interest rates later this month. They would also reassure investors that the rebound in corporate profit growth can continue.

In many ways, the Dow is just playing catch-up with the other indexes that were already in record territory. While the Nasdaq is up 16% this year and the S&P 500 has rallied 8.5%, the Dow is up a more modest 7%.

Art Hogan, chief market strategist at Wunderlich Securities, said Wall Street’s better mood is partly because Trump’s scandals are getting less attention.

“There’s been no new drama, except for a misspelled word in a tweet,” said Hogan. “James Comey testifies next week, so that’s not this week’s disaster du jour.”

Published at Thu, 01 Jun 2017 20:26:39 +0000

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Resistance Levels Suggest Commodities Are Headed Lower

by 2966152 from Pixabay

Resistance Levels Suggest Commodities Are Headed Lower

By Casey Murphy | May 30, 2017 — 10:34 AM EDT

Commodities have fallen out of favor in recent months as investors around the globe seek out growth and yield. Lackluster demand for commodities has caused many investors to turn toward equities and other asset classes. As you’ll read below, the charts of several commodity-related assets are suggesting the downtrend could just be getting started. (For further reading, checkout: The Downtrend In Commodities Is Set To Continue).

PowerShares DB Commodity Index Tracking Fund

When it comes to investing in commodities, the best way to gain exposure is through the use of futures contracts. With that said, trading futures requires a specific account, which requires a relatively high level of sophistication to be able to trade comfortably. Luckily for retail investors, exchange-traded products such as the PowerShares DB Commodity Index Tracking Fund (DBC), allow investors to gain exposure to a basket of futures contracts on fourteen of the world’s most important physical commodities. Taking a look at the chart, you can see that the price has recently tested the resistance of the 200-day moving average and has failed to break above (shown by the red arrow). The bounce off of the resistance is typical behavior based on technical analysis. When the failed move above the 200-day moving average is combined with the bearish crossover between the 50-day and 200-day moving average (shown by the red circle), it suggests that the downtrend is in its earliest phase. Based on this chart, the bears will likely set their short-term targets near the May lows and then watch for a break lower from there. (For more on this topic, check out: 3 Charts That Suggest the Downtrend in Commodities Will Continue).

Wheat

With summer approaching many investors start to shift focus toward agriculture commodities such as wheat and soybeans. Taking a look at the five-year weekly chart of the Teucrium Wheat Fund (WEAT), it is clear that the wheat market is trading within one of the strongest downtrends around. The combined resistance of the 50-week moving average and long-term descending trendline will be used by active traders as guides for order placement. It will likely to continue to prove strategic for the bulls to remain on the sidelines until the price is able to notch several consecutive closes above one of the aforementioned resistance levels. (For more, see: Technical Indicators Suggest Agriculture Commodities Are Headed Lower).

Soybeans

As discussed above, agriculture commodities have struggled to find support in recent weeks as investors flock to other market segments that they believe offer better returns. Like wheat, soybeans are also trading within a defined downtrend. Based on the chart of the Teucrium Soybean Fund (SOYB), you can see that the bears are in control of the momentum and the recent failed attempt to overcome the 50-day moving average is an indication that prices are likely to continue to move lower. Active traders will also likely use the bearish crossover between the MACD and its signal line as confirmation of the move lower and most will likely set their stop-loss orders above either the swing high from earlier this month or above $18.25.

The Bottom Line

Commodities have fallen victim to lackluster fundamentals combined with an insatiable appetite for risk by most global investors. Based on the charts above, it appears as though the nearby resistance levels will prevent a sustainable move higher and that the bears are likely to continue dominating the underlying trends. (For more, see: 3 Commodity Charts to Watch in 2017).
Published at Tue, 30 May 2017 14:34:00 +0000

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BlackRock expects windfall from insurers after new ETF regulations

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BlackRock expects windfall from insurers after new ETF regulations

By Trevor Hunnicutt and Suzanne Barlyn| NEW YORK

BlackRock Inc (BLK.N) expects $300 billion in new money from insurers to flood into the already booming bond exchange-traded fund sector over the next five years, a spokeswoman said on Tuesday, following a move by regulators to adjust some requirements on how the investments are valued.

A National Association of Insurance Commissioners working group in April modified requirements on how insurers can record some bond ETFs for accounting purposes.

A group of ETFs already identified by the NAIC can qualify for a more favorable accounting treatment similar to that accorded bonds if they meet certain requirements. In some cases, insurers will be able to calculate a bond ETF’s value based on the cash flows of the bonds held by the fund.

That switch to a “systematic value” accounting treatment is a potentially big shift within the conservative world of asset management at insurance companies.

Insurers can also make the calculations using the funds’ fair value, a potentially more-volatile measure.

Previously, those ETFs would typically have been valued based on what the funds cost.

“This allows companies not to have the volatility of fair value if they’re willing to do the work to calculate systematic value,” said Jean Connolly, a managing director who tracks NAIC developments for PwC, an accounting and professional services firm.

Some insurers said the bond-like accounting technique would help them more easily meet their own risk and capital requirements.

BlackRock, the world’s largest asset manager and the largest ETF provider, is eager to get its ETFs used more often and by more investors. It helped design the new accounting methods during the NAIC’s four-year process to redraft its rules.

Insurers have been an important target for BlackRock’s growth strategy because they invest billions in bonds that have become harder to trade, at low cost, for smaller investors.

U.S.-based bond ETFs attracted record cash last quarter, according to researcher Morningstar Inc, and BlackRock’s iShares unit took in $4 in $10 of that money.

Insurers that want ETFs to be eligible for the new systematic value treatment have to designate them by the end of the year.

 

(Editing by Steve Orlofsky)
Published at Tue, 30 May 2017 21:09:53 +0000

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A Seasoned Vet Among ESG ETFs

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A Seasoned Vet Among ESG ETFs

By Todd Shriber | May 30, 2017 — 1:58 PM EDT

In recent years, issuers of exchange-traded funds (ETFs) have brought an increasing number of funds dedicated to environmental, social and governance (ESG) principals to market. However, the concept of ESG investing traits in the ETF wrapper is not new. For example, the iShares MSCI KLD 400 Social ETF (DSI), home to more than $842 million in assets under management, will turn 11 years old in November. DSI tracks the MSCI KLD 400 Social Index, which is “composed of U.S. companies that have positive environmental, social and governance characteristics as identified by the index provider,” according to iShares.

DSI hit an all-time high last Friday and is up 8.7 percent year to date, a performance that is in line with that of the S&P 500. This ESG ETF holds 399 stocks, indicating that is a different animal than the S&P 500. A familiar argument as it pertains to ESG investing is whether or not principal-based investing can generate superior outcomes for investors. (See also: 3 Trends to Watch in ESG Investing.)

The idea of investing based on principals is undoubtedly attractive to many investors, but the name of the investing game is to make money. For ESG ETFs to continue flourishing, these funds need to deliver returns that are at least in the ballpark of non-ESG benchmarks with comparable or lower risk. Past performance is never a guarantee of future returns, but DSI’s lengthy track record at least gives investors a sense for how prioritizing ESG traits can affect total returns.

DSI debuted in mid-November 2006 and has returned 76.2 percent over that period, but the S&P 500 is higher by nearly 115 percent over the same period. In recent years, DSI has done a better job of keeping pace with the S&P 500, and the ESG ETF’s three-year standard deviation is only a few basis points higher than that of the S&P 500. (See also: Top 5 ETFs for Impact Investing for 2017.)

ESG strategies often overweighttechnology stocks and underweightenergy relative to the S&P 500, and DSI is true to that form. DSI allocates 28.4 percent of its weight to technology, an overweight of 535 basis points compared with the S&P 500. DSI’s energy weight of about 5.1 percent is 100 basis points below what is found in the S&P 500. DSI is also underweight financial services by more than 400 basis points against the S&P 500. Noting that DSI is underweight energy and financial services, two of this year’s worst-performing sectors, while being overweight technology, the top-performing sector, it can be argued that the ESG fund should be doing more than merely keeping pace with broader U.S. equity benchmarks.

One glaring reason DSI is not outperforming the S&P 500 is that the ESG ETF, despite being overweight technology, does not own shares of Apple Inc. (AAPL). The iPad maker is up 32.6 percent year to date. (See also: Apple Is Most Environment-Friendly Tech Company.)
Published at Tue, 30 May 2017 17:58:00 +0000

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Will Banks Break the Bull Market?

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Will Banks Break the Bull Market?

The S&P 500 lifted to an all-time high this week while commercial and regional bank funds slumped in the red, continuing weak price action in place in early March. The conflict signals a bearish divergence that raises doubts about the latest leg of the 6-month rally while telling market players to watch these stocks closely in coming weeks because their behavior could presage a steep summer correction.

The banking sector lagged badly after the 2008 economic collapse, stuck under the weight of bad decisions, heavy debt and Dodd-Frank regulation designed to address too-big-too-fail systematic risks. But Donald Trump’s election was supposed to change all that, with regulatory rollbacks, stronger commercial lending and higher interest rates signaling a golden age for sector profits.

However, Fed data reports that business and consumer loans slowed in the first quarter of 2017, continuing a downtrend that started in early 2016. These sober reports contrast with wildly optimistic projections that followed the election of a business and bank friendly president. Apparently, U.S. businesses are in no hurry to borrow and expand when they can sit back and build profits through corporate tax relief.

JPM

JP Morgan Chase and Co. (JPM) has carved the banking industry’s strongest price pattern so any weakness in this market leader should reflect more challenging economic conditions. The stock topped out in the upper-60s in 2000 and sold off when the tech bubble burst, reaching a multi-year low in the mid-teens in 2002. It tested that level during the market crash, undercutting support by 30-cents ahead of a recovery wave that stalled in the low-50s in 2010.

The stock broke out above that level in 2013 and reached resistance at the 2000 high in 2015. A volatile 16-month consolidation pattern yielded a post-election breakout, lifting the stock to an all-time high at $93.98 following President Trump’s well-received Congressional address on March 1st. A pullback into January support in the low-80s got bought but fizzled out after the company reported mixed first-quarter earnings in April. It fell to support once again this month, completing a head and shoulders pattern that could signal a much steeper slide into the low-70s.

BAC

Unlike rival Chase, Bank of America, Corp. (BAC) has failed to fully recover from last decade’s financial catastrophe, even with the historic post-election rally. It topped out in the mid-50s in 2006 and sold off to a multi-decade low at $2.53 in the first quarter of 2009. A bounce into October posted the strongest price action so far in this bull market cycle, recouping more than 15-points into the upper teens. That level generated heavy resistance for the next seven years, triggering five failed breakout attempts into the second half of 2016.

The November breakout ejected into a healthy momentum rally that lifted the stock to an 8-year high at $23.39 in December. It rallied above that level in mid-February, but the uptick stalled a few weeks later, giving way to significant profit-taking that dropped price into January support near $22. A bounce into the second quarter failed to attract significant buying interest, reversing above $24 in mid-May, ahead of a decline that’s testing horizontal support once again. It’s also carved a head and shoulders pattern, with a breakdown targeting November breakout support near $20.

The Bottom Line

Blue-chip banking giants have carved bearish-looking consolidation patterns well above November breakout levels. This scenario tells us that breakdowns will generate two-sided trade setups, with the decline targeting newly-minted shareholders who bought too high in the rally pattern while generating long-term buying signals when the selloff reaches November support. Secondary breakdowns through those deeper levels would have a much stronger impact on the broad tape, likely signaling the end of the secular bull market.

(Why?)
Published at Fri, 26 May 2017 14:46:00 +0000

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Stocks Rise as Earnings Surpass Expectations

 

Stocks Rise as Earnings Surpass Expectations

By Justin Kuepper | May 26, 2017 — 4:58 PM EDT

The major U.S. indexes moved higher over the past week as first-quarter earnings estimates continue to surpass analyst expectations. According to FactSet, one-third of S&P 500 companies have beat mean earnings estimates, and 64% have beat mean sales estimates. New home sales swung 11.4% lower to an annualized rate of 569,000 and existing home sales fell 2.3% to a 5.57 million annualized rate, but long-term averages remain firmly in positive territory, and existing home prices remain strong with a 6% year over year gain to $244,800.

International markets were mixed over the past week. Japan’s Nikkei 225 rose 0.52%; Germany’s DAX 30 fell 0.29%; and, Britain’s FTSE 100 rose 0.7%. In Europe, the European Central Bank talked down the impact of the ‘Brexit’ on the Eurozone economy as economic activity hovered near a 6-year high. In Asia, Moody’s lowered China’s credit rating for the first time since 1989 citing concerns over rising debt. The rating was lowered by one notch to A1 from Aa3, putting in the same category as countries like Israel and Japan.

The S&P 500 SPDR (ARCA: SPY) rose 1.42% over the past week. After rebounding from its lower trend line support, the index rebounded past its R1 resistance at $240.90 to its upper trend line resistance. Traders should watch for a breakout to R2 resistance at $243.73 or a breakdown to the 50-day moving average at around $236.97. Looking at technical indicators, the RSI has moved closer to overbought levels at 63.56, while the MACD may have experienced a bullish crossover after a brief decline.

The Dow Jones Industrial Average SPDR (ARCA: DIA) rose 1.33% over the past week. After rebounding from lower trend line support, the index reached its upper trend line support and R1 resistance at $211.23. Traders should watch for a breakout to R2 resistance at $214.00 or a breakdown to the 50-day moving average and pivot point at $207.04. Looking at technical indicators, the RSI is approaching overbought levels at 62.90, but the MACD may have experienced a bullish crossover.

The PowerShares QQQ Trust (NASDAQ: QQQ) rose 2.45% over the past week, making it the best-performing major index. After rebounding from its lower trend line support, the index reached upper trend line resistance at around $142.00. Traders should watch for a breakout to new highs or a breakdown to R2 resistance at $140.20 on the downside. Looking at technical indicators, the RSI is overbought at 71.82 while the MACD may be experiencing a bullish crossover after a modest decline.

The iShares Russell 2000 Index ETF (ARCA: IWM) rose 1.12% over the past week, making it the worst-performing major index. After rebounding from lower trend line support, the index reached the pivot point at $138.18. Traders should watch for a breakout toward upper trend line resistance and R1 support at $142.70 or a move lower to lower trend line support and S1 support at $134.54. Looking at technical indicators, the RSI appears neutral at 50.35 while the MACD remains relatively flat over the past few sessions.

The Bottom Line

The major U.S. indexes moved higher over the past week, although several of them remain in overbought territory. Next week, traders will be closely watching several key economic events, including personal incomes on May 30, jobless claims on May 31, and employment data on June 2. Of course, investors will also be keeping a close eye on the evolving political situation in the United States and other countries.

Note: Charts courtesy of StockCharts.com. As of the time of writing, the author had no holdings in the securities mentioned.
Published at Fri, 26 May 2017 20:58:00 +0000

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Funds to cut fixed income research as EU rules shake up sector

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Funds to cut fixed income research as EU rules shake up sector

By Simon Jessop| LONDON

New rules on pricing investment research are shaking up the European fixed income, currency and commodity (FICC) industry, with many funds planning to scale back or ditch a service that banks use to drum up business.

Investment banks and other brokers have long provided research to funds as a way of attracting them to their trading business, and there has never been a formal bill attached. However, they must break out the cost of the research and charge for it separately under the EU regulations, MiFID II, which come into force in the new year.

Many funds using FICC research are concerned this will simply land them with an additional cost. Eight funds spoken to by Reuters said they expected to reduce the research services they use as a consequence of the reform.

Their reactions supported the results of a poll of 270 fixed-income investors at a capital markets conference in London this month which found 59 percent had either not decided whether to continue using broker research or had decided to dispense with it altogether.

On the other side, the drop-off in demand could hit the investment banks, if funds consequently reduce the number of brokers they trade with. The new rules severely limit the amount of detailed research funds can receive for free.

The uncertain situation facing both banks and investors reflects the nebulous nature of the current arrangement in the FICC industry.

Unlike in some equity markets such as Britain, where funds already pay for research separately from trading, in FICC markets it is open to interpretation how investors pay for the service – or whether they do so at all.

“Given the fundamental differences in the infrastructure of the fixed income market, applying the same rules to FICC will create some difficulties,” said Jon Howard, chief operating officer at London-based hedge fund Anavio Capital Partners.

 

FUNDS’ FEARS

FICC research includes insight on macroeconomic trends and interest rate movements, as well as on currencies, commodity markets and corporate bond and loan issues.

Many funds say the cost is usually included by brokers in “the spread” between the buying and selling prices of the products they deal in – and if a separate research fee is introduced, then the spread should therefore be narrowed.

Some banks, however, say research is just one of several factors influencing the spread and that any narrowing is unlikely under the new rules, according to industry sources.

Given that, fund managers say they fear they will be left with a new bill for research and no proof that the spread has been narrowed by the broker to compensate them.

“Historically, that research cost is in the spread. Now the Street (investment banks) is telling you ‘we’re going to charge you separately now’, but that’s not really going to make the spread change, I don’t think,” said Matthieu Duncan, chief executive at French firm Natixis Asset Management.

Gildas Surry, partner at Axiom Alternative Investments, which manages around $1 billion in assets, said the change would hit smaller fund firms harder.

“The cost of this adaption period will be dear for the industry … It will generate more profits for the dealer community, but for smaller managers it will be even more difficult for them to grow.”

 

BANKS’ POSITION

Ten investment banks contacted by Reuters declined to comment on the matter. Two others, speaking on condition of anonymity, said the spread had only a limited relation to the cost of research.

“Typically banks write FICC research as a cost of being in business and to promote their capabilities. Trading and market pricing takes place in a competitive environment,” said Julian Allen-Ellis, Director of MiFID at the Association for Financial Markets in Europe, which represents leading banks.

“The major factors influencing an instrument’s spread include credit risk, market liquidity, volatility, the bank’s inventory position, its capitalization and many others. It would be impossible to isolate and remove a single factor from the spread and show a correlated change.”

The European Securities and Markets Authority (ESMA), Europe’s markets watchdog, did not respond to a request for comment on Friday. It has previously said that the new rules will increase transparency for investors and ensure they receive value for money.

It has given scope for “short market updates with limited commentary or opinion” to be classed as a minor non-monetary benefit and therefore be given for free. Some material commissioned and paid for by corporate debt issuer may also be given for free, it said.

How brokers and funds will value research is still up in the air.

Pricing models being discussed between funds and banks vary from a flat fee for basic read-only access to tiered access for more expensive services, said Axiom’s Surry.

Given the complex nature of the discussions, any arrangements that are agreed could change over the next couple of years, fund and bank sources said.

 

(Additional reporting by Vikram Subhedar and Alex Chambers; Editing by Pravin Char)
Published at Fri, 26 May 2017 13:53:10 +0000

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Pot Stock Winners of the Week

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Pot Stock Winners of the Week

Partner Content By Daily Marijuana Observer | May 27, 2017 — 1:09 PM EDT

Looking across the 200+ cannabis-related publicly listed companies, there were a few clear pot stock winners this week. A handful of cannabis-related companies ended the week up more than 5%, and a few have market capitalizations greater than $50 million USD. The broader marijuana sector, as tracked by the Solactive North American Medical Marijuana Index, finished this week up roughly 1.5%.

(MORE: What Stocks are on the Marijuana Index)

This week’s pot stock winners are:

Insys Therapeutics Inc. (NASDAQ:INSY)

On the winners list for the second week in a row, Insys Therapeutics Inc. gained over 11% this week. On Wednesday, Insys announced that the U.S. Food and Drug Administration has approved the final product label for Syndros™, the company’s dronabinol (synthetic THC) oral solution for the treatment of chemotherapy-induced nausea and vomiting and AIDS related anorexia. This approval marks the final regulatory step necessary before the product can be launched commercially.

Marapharm Ventures Inc. (CSE:MDM)(OTC:MRPHF)

Shares of Marapharm Ventures Inc. gained over 40% this week. On Tuesday, May 23rd, Marapharm announced that the company will be applying for recreational marijuana licenses in the state of Nevada. Just a day later, Marapharm announced that the building permits for two modular buildings placed to meet the requirements of licensing have been approved. The news at Marapharm didn’t end here. On Thursday, Marapharm announced that one of their Nevada licenses has received final approval from the state to grow and sell cannabis.

MMJ Phytotech Ltd. (ASX:MMJ)

Shares of MMJ Phytotech Ltd. were up more than 5% this week, closing Friday’s trading at $0.365 AUD per share. This week’s bullish action came without any news from MMJ Phytotech. Australia is currently building out their medical marijuana program after it became legal nationally in November of 2016 and there are quite a few marijuana companies listed on the ASX.

MORE: Top 4 Marijuana Stocks to Watch for May

Tetra Bio-Pharma Inc. (CSE:TBP)(OTC:TBPMF)

Shares of Tetra Bio-Pharma gained more than 20% this week. On Wednesday, Tetra Bio-Pharma signed an agreement with Panag Pharma to develop and commercialize two cannabinoid based formulations for the treatment of pain and inflammation.

Zynerba Pharmaceuticals Inc. (NASDAQ:ZYNE)

Insys Therapeutics Inc. wasn’t the only winner in the cannabinoid biotech space this week, Zynerba Pharmaceuticals Inc. also posted notable gains in this week’s trading. Shares of Zynerba Pharmaceuticals Inc. finished this week up roughly 5%. This week’s bullish action came without any news from Zynerba.
Published at Sat, 27 May 2017 17:09:00 +0000

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The Market Is Not Broken

 

The Market Is Not Broken

This post is my attempt to make sense of the interesting observation that many smart and experienced traders lapse into periods of trading like idiot rookies.  I don’t think it’s simply that their emotions get away from them or that they stop following sound processes.  In fact, I think it’s just the opposite:  they keep doing what has worked in the past, but now–in changed market conditions–their strategies no longer produce an edge.  In other words, as market regimes change, consistency shifts from being a trading virtue to becoming a significant vulnerability.

Let’s take a simple example.  I have created a daily measure of buying pressure and selling pressure from intraday uptick and downtick data.  I treat the upticks and downticks as separate variables reflecting buying and selling activity throughout each day.  My data set goes back to 2014 and we can examine how buying and selling pressure are related to price change X days forward.  Indeed, we can place buying and selling pressure readings into a multiple regression formula and identify an equation that significantly predicts forward price movement.

When we examine scatter plots of buying and selling pressure versus forward price change, however, we see significant departures from the linear regression line toward the extremes of the distributions.  In other words, when buying and selling pressure are unusually high or low, the implications for forward price movement are different than when the values are more moderate.  Methods that extend linear regression to identify significant nonlinearities are able to more precisely model the relationships among buying/selling pressure and future price change.  As it turns out, an important mediating (interacting) variable is the volatility of the market.  The relationship between past buying and selling pressure and forward price change is not the same in one volatility regime as in another.

So, for example, low volatility regimes see considerable momentum effects:  high buying pressure and low selling pressure tend to be associated with further price strength.  In higher volatility regimes, short term buying pressure or low selling pressure tend to be associated with short-term mean reversion.  In low volatility regimes, the most powerful predictive time horizon is between 10 and 20 trading sessions out–significantly longer than in higher vol regimes.

The point here is that the patterns we observe in markets do not have universal validity.  Whether we follow chart patterns and “setups” or statistical relationships, the predictive power of these varies as a function of market conditions.  When we move from a higher volatility regime to a lower one, for example, what used to work no longer has a universal edge.  The entire idea of finding your edge and trading it with flawless discipline and consistency is itself flawed.  We need to adapt to market conditions and find relationships specific to the conditions in which we find ourselves.

Lately I’ve heard many traders lament that the market is broken, that volatility is gone for good, that algorithms are manipulating prices, etc.  Meanwhile, they continue to apply their linear methods to a nonlinear world.  The stock market is not broken.  It is simply behaving like low volatility markets behave.  Edges are present.  They may not be the edges that were present several years ago, and they may not be edges on the time frame that you happen to prefer.  They also may not be edges that you can uncover with lines and patterns on charts or simple correlations and linear regressions. Our challenge is to adapt to what is, not stay mired in what used to be.

 

Published at Sat, 27 May 2017 12:26:00 +0000

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Switch it up this year: Buy in May, till November stay

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Switch it up this year: Buy in May, till November stay

By Sinead Carew| NEW YORK

“Sell in May and go away” is perhaps the oldest saw on Wall Street, but it appears there’s no shortage of U.S. mutual funds doing exactly that this year.

After all, the S&P 500 .SPX has delivered a total return, including reinvested dividends, of 10.8 percent over the last six months, essentially capturing all of the average rolling 12-month total return on the index since 1990, so why not cash in?

Indeed, political drama and high valuations are clearly driving some investors to take profits. American fund investors have yanked more than $17 billion from U.S. stocks so far this month, data from fund tracker Lipper shows, with some $10.1 billion in withdrawals in the latest week alone, the second biggest outflow for the year.

Some hearty investors, however, stand ready to bet against that flow – and history – and are advocating a buy-in-May approach this year.

“If anything you might want to buy in May and sell in November,” said Chris Zaccarelli, Chief Investment Officer at Cornerstone Financial Partners, in Huntersville, North Carolina, who bases his bullishness on the healthy outlook for the global economy rather than expectations for a policy boost from the Trump administration.

While stocks appear to have priced in hope for a Trump stimulus this year, Zaccarelli says his expectations for progress on Trump’s agenda in 2017 has recently tumbled to 40/60 from 80/20 because he doesn’t see Trump gaining enough support from a severely divided Republican party, which suggests to him that selling will be more opportune a few months down the road.

“If we go the entire year and Washington does nothing, no tax reform, no repatriation, I think there will be a little disappointment,” he said. “Ironically enough, the disappointment will be in November or December because people will realize they went the whole year and got nothing done.”

 

AN OLDIE BUT A GOODIE

The sell-in-May tactic has been kicked around Wall Street for decades and is premised on the historic outperformance of the November-May period over the other six months of the year. It works.

In the last 20 years, a $100 investment in the S&P from November through April would have become $343 while a $100 investment in May through October in the same years would have slipped to $98.5, according to Bespoke Investment Group, in Harrison, New York.

From 1928 to 2017 the $100 would have become $4,270 from November through April but would only be worth $257 from investing from May through October, according to Bespoke.

In the summer months “things slow down so you tend to see the chances for a pickup in volatility. That’s usually accompanied by weakness in the market,” according to Paul Hickey, Co-founder of Bespoke Investment Group, LLC who is not selling now as he still has “a positive view toward equities.”

Other factors that can drive a summer lull include a corporate tendency to hold stock-boosting investor meetings early or late in the year, a reduction of over-optimistic analyst estimates around mid-year, and a boost just ahead of the end-of-year holiday shopping season, says Linda Bakhshian, portfolio manager at Federated Investors in Pittsburgh.

John Augustine, Chief Investment Officer at Huntington National Bank in Columbus, Ohio said he is “taking the opposite tack to “sell in May” and moving into U.S. small and mid cap stocks which have underperformed large caps so far this year.

The small cap Russell 2000 index has risen just 1.8 percent year-to-date compared with 7.8 percent for the S&P 500, 6.6 percent for the Dow Jones Industrial Average .DJI and 15.3 percent for Nasdaq Composite .IXIC.

“To sell we’d need a Fed that’s more hawkish than expected mixed with economic data that’s weaker than expected. That combination could give us a domestic stock sell off this summer. But markets have discounted that this week based after Fed minutes, thinking the Fed would stay dovish this Summer,” said Augustine.

(Reporting by Sinead Carew; editing by Dan Burns and Andrew Hay)

 
Published at Sat, 27 May 2017 05:57:30 +0000

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A Close Shave

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By AndyLeungHK from Pixabay

A Close Shave

Over the years I have employed a variety of stop strategies with varying results. I’ve tried wide stops, narrow stops, multiple and partial stops, lazy stops, intelligent stops based on volatility, etc. After having spent a significant amount of time and effort on trying to find the one perfect stop logic I’ve basically boiled it down to this: There is no perfect stop – period. Getting stopped out is an inherent aspect of trading and you should simply recognize it as a transition point between being in and out of the market. Don’t over think it. After all you can always enter again should market conditions warrant a new campaign.

2017-05-26_bonds_update

Let me demonstrate. By all accounts my trailing stop was set pretty well given the current MFE in my bonds campaign. Unfortunately stop runners did a pretty good job sniffing out my position and so it was taken to the woodshed yesterday.

2017-05-26_copper_update

And here’s copper which nearly got stopped out but survived by a few ticks – a pretty close shave! Did I do anything differently here? Well, for one I had a better spike low to work with but I would mostly ascribe it to plain old dumb luck. And clearly we’re not out of the woods just yet.

2017-05-26_EURUSD

Alright the EUR/USD is looking a bit weak here but I’m going to take a very small long position (i.e. 0.25R) with a stop below 1.11385. I would love to see this one crash and burn but odds have it thus far that this one continues higher.

2017-05-26_AUDUSD

The AUD/USD is another long for me with again only a small 0.25R position size. My stop here will need to be below the recent spike low, e.g. < 0.742. If you can catch this one a bit lower then good for you – I’ve tried but it seems to be eager to rip higher.

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Hirter_Pils

That’s the beer I was enjoying in ample quantities when I was in Corinthia last week, which is in the South of Austria. Great stuff and I wish I could find some of that here in VLC.

Prost!

(Why?)
Published at Fri, 26 May 2017 13:03:44 +0000

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Top Trump aide: Coal doesn’t make ‘much sense anymore’

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Can coal make a comeback under President Trump?
Can coal make a comeback under President Trump?

Top Trump aide: Coal doesn’t make ‘much sense anymore’

President Trump has painted himself as the savior of America’s coal industry and the countless miners who have been crushed by its demise.

“For those miners, get ready because you’re going to be working your asses off,” Trump said in a May 2016 speech in front of a crowd holding up “Trump digs coal” signs.

While Trump has moved to rip up regulations burdening the coal industry, his most senior economic aide doesn’t look like he’s jumping on the coal train.

“Coal doesn’t even make that much sense anymore as a feedstock,” Gary Cohn said, aboard Air Force One on Thursday, referring to raw materials that get converted into a fuel.

Cohn, who serves as director of the White House National Economic Council, instead praised natural gas as “such a cleaner fuel” — and one that America has become an “abundant producer of.”

While Trump rarely talks up the potential of renewable energy, Cohn sounds like a fan.

“If you think about how solar and how much wind power we’ve created in the United States, we can be a manufacturing powerhouse and still be environmentally friendly,” Cohn said.

Related: Why Trump’s coal promises are doomed

Cohn’s comments stand out, but not because they are inaccurate. They jive with what energy experts have been saying for some time. It’s just that Cohn’s comments sound like ones that were written by President Obama’s speechwriters, not Trump’s.

The White House didn’t respond to questions about whether Cohn’s remarks signal a shift in Trump’s energy and environmental policies.

Cohn’s words are especially significant, because Trump is expected to soon decide whether to keep the U.S. in the Paris climate accord, which is forcing governments in many countries to crack down on the carbon emissions from coal and other fossil fuels. World leaders, Democrats and some major companies have urged Trump not to ditch the landmark deal that represents the most significant effort to date to combat climate change.

“He’s heard arguments that are persuasive on both sides. They’re both good arguments,” Cohn said about the Paris accord.

Trump’s love for coal helped his vote totals in the Rust Belt that carried him to victory last November. It didn’t help that his opponent, Hillary Clinton, badmouthed coal by promising to “put a lot of coal miners and coal companies out of business.”

Related: Solar jobs growing 17 times faster than US economy

By contrast, Trump followed through on his promise to end Obama’s “war on coal” by signing an executive order in March that started undoing the last administration’s signature efforts on climate change.

The problem is that Trump’s deregulation push is unlikely to bring about the coal renaissance he wants. That’s because coal’s dramatic downfall has come not from regulations, but has been driven by market forces, especially the abundance of cheap natural gas.

An in-depth study by Columbia University concluded that “Trump’s efforts to roll back environmental regulations will not materially improve economic conditions in America’s coal communities.”

The academics urged Trump to focus on ways to retrain coal workers and safeguard their health benefits instead of offering “false hope that the glory days can be revived.”

(Why?)
Published at Fri, 26 May 2017 20:29:15 +0000

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BlackBerry Turnaround Catching Fire

by Meditations from Pixabay

BlackBerry Turnaround Catching Fire

By Alan Farley | May 24, 2017 — 12:19 PM EDT

BlackBerry Ltd. (formerly known as Research in Motion Ltd.) (BBRY) is trading at a 2-year high this week, after lifting into double digits for the first time since May 2015. A refocus on software, and licensing fees has underpinned the long overdue turnaround, following a brutal downtrend triggered by market share destruction in the wake of iPhone and Android. While revenues are unlikely to reach lofty levels posted during its smartphone reign, the newer smaller operation could pay dividends for patient shareholders.

The company beat fiscal fourth-quarter profit and revenue estimates in its March release while surprising Wall Street analysts with guidance that expects profitability and positive cash flow into 2018. Enterprise mobility management and security software divisions comprised nearly 84% of total revenues, with those units expected to drive growth in coming quarters.

BBRY Monthly Chart (1999-2017)

BBRY

The Canadian technology company listed on the U.S. exchanges in February 1999, at the height of the Dot.com bubble. It opened at $3.69 and fell sharply, dropping to an all-time low at $1.14 just one month later. A bounce into midyear caught fire, lifting the stock in a vertical rally that topped out at $29.29 in March 2000. It fell more than 80% in the next three months, victimized by the collapse in tech stocks, and bounced back into the lower teens in October.

The wild two-sided action continued into the second half of 2001 when a more persistent downtrend took control. The decline broke yearlong support near $2.59 in May 2002 and entered a climactic phase that ended 25-cents above the 1999 low in October. The subsequent bounce continued the pattern of broad price swings, returning to the 2000 high in 2004 and breaking out in 2006, setting off a final buying spree that posted an all-time high at $148.13 in June 2008.

A bear market decline into the mid-30s generated horizontal support within a multi-year double top that broke to the downside in 2011. The stock plunged into the second half of 2012, finding support near $6.20 in 2012 but selling pressure didn’t end until it posted a deeper low at $5.44 more than one year later. Price action since that time has carved a shallow basing pattern that’s triggered an aggressive reversal each time it’s lifted into double digits.

As a result, the current rally wave has now entered a critical testing phase, highlighted by a series of 2014 and 2015 highs between $11.50 and $12.50. That price zone hides a massive June 2013 gap between $14.48 and $10.98 that remains partially unfilled nearly 4-years later. Also, the 50-month EMA has dropped into that resistance level, setting up a major battle because the stock hasn’t traded above that line-in-the-sand since 2011.

BBRY Weekly Chart (2012–2017)

BBRY

A Fibonacci grid stretched over the 2013 decline brings order to the chaotic basing pattern, with the 2014 into 2015 recovery wave stalling at the 50% retracement level. The stock is now headed into that zone after lifting above the 200-week EMA for the first time since 2011. This combination suggests the upside will flame out in coming weeks, giving way to a bullish consolidation pattern or a major reversal back into single digits.

A trading range between $10 and $13 will set the stage for a secondary assault that could eventually reach the 2013 high above $18. Progress above that level will be difficult due to the massive double top breakdown and intense selling pressure in 2011. Even so, the majority of shareholders impacted by that catastrophic price action have now departed, allowing a new crowd of speculators to take advantage of the turnaround.

The Bottom Line

BlackBerry has rallied to a 2-year high in double digits and is expecting profitable results in the coming year. This positive price action should mark a long-term reversal that generates the first sustained uptrend in many years for the former smartphone giant.
Published at Wed, 24 May 2017 16:19:00 +0000

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3 Simple Steps To Building Wealth

3 Simple Steps To Building Wealth

By William Artzberger | Updated May 23, 2017 — 11:20 AM EDT

Building wealth – it’s a topic that sparks heated debate, promotes quirky “get rich quick” schemes and drives people to pursue transactions they might otherwise never consider. “Three Simple Steps To Building Wealth” may seem like a misleading title, but it isn’t. While these steps are simple to understand, they’re not easy to follow.

The Steps

Basically, building wealth boils down to this: to accumulate wealth over time, you need to do three things:

  1. You need to make it. This means that before you can begin to save or invest, you need to have a long-term source of income that’s sufficient to have some left over after you’ve covered your necessities.
  2. You need to save it. Once you have an income that’s enough to cover your basics, you need to develop a proactive savings plan.
  3. You need to invest it. Once you’ve set aside a monthly savings goal, you need to invest it prudently.

This makes a simple equation:

Income – Spending = Savings

Step 1: Making Enough Money

This step may seem elementary, but for those who are just starting out, or are in transition, this is the most fundamental step. Most of us have seen tables showing that a small amount regularly saved and compounded over time can eventually add up to substantial wealth. But those tables never cover the other sides of the story – that is, are you making enough to save in the first place? Keep in mind that there’s only so much you can cut costs. If your costs are already cut down to bone, you should look into ways to increase your income.

And not least, are you good enough at what you do and do you enjoy it enough that you can do it for 40 or 50 years in order to save that money?

To begin, there are two types of income – earned and passive. Earned income comes from what you “do for a living,” while passive income is derived from investments. This section deals with earned income.

Those beginning their careers or in the midst of a career change can think about the following four considerations to decide how to derive their “earned income”:

  1. Consider what you enjoy. You will perform better and be more likely to succeed financially doing something you enjoy.
  2. Consider what you’re good at. Look at what you do well and how you can use those talents to earn a living.
  3. Consider what will pay well. Look at careers using what you enjoy and do well that will meet your financial expectations.
  4. Consider how to get there (educational requirements, etc.). Determine the education requirements, if any, needed to pursue your options.

Taking these considerations into account will put you on the right path. The key is to be open-minded and proactive. You should also evaluate your income situation annually.

Step 2: Saving Enough of It

You make enough money, you live pretty well, but you’re not saving enough. What’s wrong? There’s only one reason why this occurs: your wants exceed your budget. To develop a budget or to get your existing budget on track, try these steps:

  1. Track your spending for at least a month. You may want to use a financial software package to help you do this. If not, your checkbook is the best place to start. Either way, make sure you categorize your expenditures. Sometimes just being aware of how much you are spending will help you control your spending habits.
  2. Trim the fat. Break down your wants and needs. The need for food, shelter and clothing are obvious, but you also need to address less obvious needs. For instance, you may realize you’re eating lunch at a restaurant every day. Bringing your own lunch to work two or more days a week will help you save money.
  3. Adjust according to your changing needs. As you go along, you probably will find that you’ve over- or under-budgeted a particular item and need to adjust your budget accordingly.
  4. Build your cushion – you never really know what’s around the corner. You should aim to save around three to six months’ worth of living expenses. This prepares you for financial setbacks, such as job loss or health problems. If saving this cushion seems daunting, start small.
  5. Get matched! Contribute to your employer’s 401(k) or 403(b) and try to get the maximum your employer is matching. Some employers match 100% of the participant’s contribution, and this can be a big incentive to add even a few dollars each paycheck.

See also: 4 Best Personal Finance Apps for 2017

The most important step is to distinguish between what you really need and what you merely want. Finding simple ways to save a few extra bucks here and there could include: programming your thermostat to turn itself down when you’re not at home; using plain unleaded gasoline instead of premium; keeping your tires fully inflated; buying furniture from a quality thrift shop; and learning how to cook. This doesn’t mean that you have to be thrifty all the time: if you’re meeting savings goals, you should be willing to reward yourself and splurge (an appropriate amount) once in a while! You’ll feel better and be motivated to make more money.

Step 3: Investing It Appropriately

You’re making enough money and you’re saving enough, but you’re putting it all in conservative investments. That’s fine, right? Wrong! If you want to build a sizable portfolio, you have to take on risk, which means you’ll have to invest in equities. So how do you determine what’s the right exposure for you?

Begin with an assessment of your situation. The CFA Institute advises investors to build an Investment Policy Statement. To begin, determine your return and risk objectives. Quantify all of the elements affecting your financial life including: household income; your time horizon; tax considerations; cash flow/liquidity needs; and any other factors that are unique to you.

Next, determine the appropriate asset allocation for you. Most likely you will need to meet with a financial advisor unless you know enough to do this on your own. This allocation will be based on the Investment Policy Statement you have devised. Your allocation will most likely include a mixture of cash, fixed income, equities and alternative investments.

Risk-averse investors should keep in mind that portfolios need at least some equity exposure to protect against inflation. Also, younger investors can afford to allocate more of their portfolios to equities than older investors, as they have time on their side.

Finally, diversify. Invest your equity and fixed income exposures over a range of classes and styles. Do not try to time the market. When one style (e.g., large cap growth) is underperforming the S&P 500, it is quite possible that another is outperforming. Diversification takes the timing element out of the game. A qualified investment advisor can help you develop a prudent diversification strategy.
Published at Tue, 23 May 2017 15:20:00 +0000

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Bond market braces for impact of New York’s free tuition plan

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Bond market braces for impact of New York’s free tuition plan

By David Randall| NEW YORK

Little known private colleges that are already struggling to grow their revenues are facing a new threat that could further weaken their finances and make borrowing harder: free tuition at public universities.

The State of New York passed in April a bill that will by 2019 offer free tuition at community colleges and public universities in the state to residents whose families make less than $125,000 per year. At least six other states are considering similar laws, to ease the burden of student debt that has doubled since 2008 to over $1.3 trillion, according to the Federal Reserve Bank of New York.

Fund managers expect that such initiatives, combined with other pressures that have long been building up, will cause bonds issued by smaller private colleges to fare far worse than the broader market if interest rates continue to rise.

So far the bond market has largely ignored such a threat as historically low rates encourage many investors to take on greater risks in search for better yields.

“There are many schools that are going to be losers in this game,” said R.J. Gallo, a portfolio manager at Federated Investors in New York.

Gallo, who owns debt issued by well-known institutions such as Northeastern University in Boston and Northwestern University in suburban Chicago, said that bonds of lower-rated schools yield only about 1.3 percentage points more than AAA-rated ones. That, for him, is not enough to compensate for the additional risk.

Nearly 80 percent of college-age students in New York qualify for the scholarship, according to state estimates. While the state has yet to say how many new students it expects to take advantage of the plan, analysts say that they expect a significant number forgoing private colleges located in the Northeast and opting for public options instead.

RECORD HIGH ‘DISCOUNT RATES’

The prospect of competition from free public programs comes at a time when many private colleges are already forced to offer incoming students discounts because of stagnant personal incomes and years of above-inflation tuition hikes.

The proportion of gross tuition revenue that is covered by grant-based financial aid averaged a record 49.1 percent for full-time freshmen in the current school year, according to a May 15 report by the National Association of College and University Business Officers.

The average U.S. private non-profit four year institution charges $45,370 per year in tuition, room and board, a 12 percent increase over the last five years, according to the College Board. Graphic: tmsnrt.rs/2qHVUBj

Moody’s forecasts that financial pressures will triple the number of schools that close their doors nationwide from today’s rate of two to three schools per year. Free public education will add to those pressures, said Christopher Collins, an analyst at Moody’s.

“It’s a highly competitive sector and there’s also now the fact that these really small schools are competing with public colleges and universities with a much lower price,” he said.

Given that there are more than 1,000 private colleges and universities nationwide, closures are rare.

Earlier this year, Connecticut’s Sacred Heart University and St. Vincent’s College announced plans for a potential consolidation. Last November, Dowling College in Long Island, New York, filed for bankruptcy after defaulting on $54 million in debt issued through local government agencies.

New York’s scholarship plan alone is unlikely to cause any private school to go under, said college financial aid expert Mark Kantrowitz, the president of consulting service Cerebly Inc. Instead, regional private schools that tout their small class sizes may lose their appeal if the competition from free programs forces them to lower tuition and they try to offset that by increasing enrollment.

“These colleges justify their costs by saying that you will get a more personal education, but will increasingly start to fail,” he said, adding that he expects to see more private colleges closing their doors over the next decade.

Nicholos Venditti, a bond fund manager at Thornburg Investment Management in Santa Fe, New Mexico, said he has been cutting his funds’ exposure to private college debt in part because other states could soon emulate New York’s model.

“If free tuition becomes a widespread phenomenon, it puts pressure on every higher education model throughout the country,” he said.

(Reporting by David Randall; Editing by Jennifer Ablan and Tomasz Janowski)
Published at Tue, 23 May 2017 12:55:48 +0000

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Trump seeks to slash government spending in budget plan

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Trump seeks to slash government spending in budget plan

By Roberta Rampton| WASHINGTON

The White House on Tuesday will ask Republicans who control the U.S. Congress – and federal purse strings – to slash spending on healthcare and food assistance programs for the poor as they push ahead on plans to cut taxes and trim the deficit.

President Donald Trump is set to propose a raft of politically sensitive cuts in his first full budget, for the fiscal year that starts in October, a proposal that some analysts expected would be put aside by lawmakers as they craft their own budget and spending plans.

Trump, who is traveling overseas and will miss the unveiling of his plan, wants lawmakers to cut $3.6 trillion in government spending over 10 years, balancing the budget by the end of the decade, according to a preview given to reporters on Monday.

More than $800 billion would be cut from the Medicaid program for the poor and more than $192 billion from food stamps.

Republicans are under pressure to deliver on promised tax cuts, the cornerstone of the Trump administration’s pro-business economic agenda, which would cut the business tax rate to 15 percent from 35 percent, and reduce the number of personal tax brackets to three from seven.

But their policy agenda has stalled as the White House grapples with the political fallout from Trump’s firing of former FBI Director James Comey.

Comey had been leading a probe of alleged Russian meddling in the 2016 U.S. election.

Trump’s biggest savings would come from cuts to the Medicaid program made as part of a Republican healthcare bill passed by the House of Representatives.

The bill aims to gut the Obama administration’s signature 2010 Affordable Care Act, known as Obamacare, that expanded insurance coverage and the government-run Medicaid program for the poor. But it faces an uncertain future in the Senate, which is writing its own law.

The White House proposed changes that would require more childless people receiving help from the Supplemental Nutrition Assistance Program, better known as food stamps, to work.

 

STEEP CUTS

The plan would slash supports for farmers, impose user fees for meat inspection and sell off half the nation’s emergency oil stockpile. Another politically fraught item is a proposal for cuts to the U.S. Postal Service, a goal that has long eluded lawmakers and administrations from both political parties.

The first look at the plan came in a “skinny budget” released in March – a document that received a tepid response from Congress.

Most departments would see steep cuts, particularly the State Department and the Environmental Protection Agency.

There is some new spending. The Pentagon would get a boost, and there would be a down payment to begin building a wall on the southern border with Mexico, which was a central promise of Trump’s presidential campaign.

The budget includes $25 billion for a plan to give parents six weeks of paid leave after the birth or adoption of a child, and $200 billion to encourage state and local governments to boost spending on roads, bridges, airports and other infrastructure programs.

The plan drew immediate fire from lobby groups, including from the Committee for a Responsible Federal Budget, which said it relied on “rosy assumptions,” gimmicks and unrealistic cuts.

“While we appreciate the administration’s focus on reducing the debt, when using more realistic assumptions, the president’s budget does not add up,” Maya MacGuineas, the group’s president, said in a statement.

Trump’s plan relies on forecasts for economic growth of 3 percent a year by the end of his first term – well beyond Congressional Budget Office assumptions of 1.9 percent growth.

“That assumes a pessimism about America, about the economy, about its people, about its culture, that we’re simply refusing to accept,” White House budget director Mick Mulvaney told reporters on Monday.

(Additional reporting by Yasmeen Abutaleb, David Shepardson, Timothy Gardner, Ginger Gibson, Jason Lange and Julia Edwards Ainsley in Washington, and PJ Huffstutter in Chicago; Editing by Peter Cooney)
Published at Tue, 23 May 2017 10:17:29 +0000

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Top 5 Alternative Energy ETFs for 2017

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Top 5 Alternative Energy ETFs for 2017

By Ruth Konigsberg | Updated May 23, 2017 — 6:00 AM EDT

The alternative energy space has not been as lucrative as environmentally-conscious investors would like. However, those interested in gaining some exposure to this potentially profitable market can diversify across several companies by buying alternative energy exchange-traded funds. (See also: Alternative Energy ETFs Drop to Key Support.)

The potential for this sector is very large due to growing awareness about global warming and the depletion of oil reserves over time. In addition, with oil prices on the rise again, alternative energy is becoming more attractive to many consumers. This can boost the bottom lines of alternative energy companies.

We selected five alternative energy ETFs based on dividend yield. Investors can expect to earn some income, although the total returns on all of these ETFs are negative. All performance figures are current as of May 18, 2017.

Guggenheim Solar ETF (TAN)

TAN tracks the Mac Global Solar Energy Index. The fund keeps 90% of its investments in securities from the index. This ETF is volatile, and the dividend yield is offset by the negative return. However, TAN would be considered a long-term play for investors who want to be in the alternative energy sector when it finally becomes mainstream.

  • Avg. Volume: 168,942
  • Net Assets: $204.87 million
  • Yield: 4.76%
  • YTD Return: 5.61%
  • Expense Ratio (net): 0.71%

First Trust Nasdaq Clean Edge Green Energy ETF (QCLN)

QCLN is for investors who want to focus on green energy. This ETF tracks the Nasdaq Clean Edge Green Energy Index. In addition to investing 90% of its assets in stocks from the index, QCLN weights its investments so that larger companies have a larger weighting. This is known as market-cap weighting. Despite this effort, the money managers place limits on how much money be put into any given stock to avoid over-exposure to large stocks in the index.

  • Avg. Volume: 11,688
  • Net Assets: $56.32 million
  • Yield: 1.01%
  • YTD Return: 9.18%
  • Expense Ratio (net): 0.60%

VanEck Vectors Solar Energy ETF (KWT)

KWT duplicates the performance of the MVISa Global Solar Energy Index. This index is comprised of companies that have a minimum of 50% of their assets in solar-power enterprises or that receive 50% of their revenues from solar power. This may include companies that provide equipment to solar power enterprises.

  • Avg. Volume: 526
  • Net Assets: $10.98 million
  • Yield: 3.89%
  • YTD Return: 7.91%
  • Expense Ratio (net): 0.65%

VanEck Vectors Global Alternative Energy ETF (GEX)

This ETF tracks the Ardour Global Index. The focus here is companies in any area that is considered alternative energy. The definition of “alternative energy” for this ETF is any company that provides power through environmentally-conscious means. There are small- and mid-cap companies in the portfolio, as well as foreign companies.

  • Avg. Volume: 4,190
  • Net Assets: $73.12 million
  • Yield: 1.88%
  • YTD Return: 13.46%
  • Expense Ratio (net): 0.62%

iShares Global Clean Energy Index Fund (ICLN)

The S&P Global Clean Energy Index is the benchmark for this ETF, which maintains a 90% concentration of assets in securities from the index. Up to 10% of assets may be in futures, options and swap contracts.

ICLN also invests in companies that are not part of the underlying index. There is also a focus on liquidity. The fund seeks clean energy companies that trade at volumes that are high enough to make them easier to trade than some smaller alternative energy stocks.

  • Avg. Volume: 57,001
  • Net Assets: $80.56 million
  • Yield: 3.61%
  • YTD Return: 7.61%
  • Expense Ratio (net): 0.47%

Bottom Line

Alternative energy has yet to produce a highly profitable company, but for investors who are willing to be patient and wait for increased consumer acceptance and government endorsement, alternative energy ETFs can be an attractive way to get into the sector. (See also: Going Green With Exchange Traded Funds.)
Published at Tue, 23 May 2017 10:00:00 +0000

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Sterling retreats after Manchester blast, euro steady, stocks advance

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Sterling retreats after Manchester blast, euro steady, stocks advance

Sterling extended losses on Tuesday after a suspected terrorist attack killed at least 19 people and wounded 50 at a pop concert in the English city of Manchester, while the euro held gains made after German Chancellor Angela Merkel said the currency was “too weak”.

The explosion, at a concert by U.S. singer Arianna Grande, took place just two-and-a-half weeks before an election that Prime Minister Theresa May is expected to win easily, though polls showing that the contest was tightening added to sterling’s woes.

The currency eased 0.1 percent to $1.299 GBP=D3, extending Monday’s 0.3 percent loss.

The pound dropped 0.2 percent to 144.40 yen GBPJPY=, after losing 0.2 percent on Monday.

If the blast is confirmed as a terrorist incident, this would be the deadliest attack in Britain by militants since four British Muslims killed 52 people in suicide bombings on London’s transport system in July 2005.

The impact on other areas of the market was limited, with Britain’s FTSE futures FFIc1 up 0.1 percent, while S&P E-mini futures ESc1 slipped 0.1 percent.

“We could see a bout of nervousness re: the terror threat, but it’s likely to be minor,” said Shane Oliver, head of investment strategy at AMP Capital in Sydney. “Ever since 9/11, the impact on markets from terrorist events has been declining.”

The euro EUR=EBS hit a six-month high overnight after Merkel said the currency, made “too weak” by the European Central Bank’s monetary policy, helped explain Germany’s relatively high trade surplus.

The common currency edged up 0.1 percent to $1.1251 after jumping as much as 0.5 percent and closing 0.3 percent higher on Monday.

“The thing with euro/dollar is that you have quite a positive mood on the euro at the moment,” said ABN Amro foreign exchange strategist Georgette Boele. “And when Merkel makes comments that the euro is probably too low then this is taken as another positive reason to push it higher.”

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.2 percent on Tuesday to be near its highest level since June 2015.

Japan’s Nikkei .N225 slipped 0.1 percent.

Korean shares .KS11 surged 0.9 percent to an all-time high.

Chinese shares .CSI300 reversed earlier losses and were up 0.4 percent.

Hong Kong’s Hang Seng .HSI rose 0.3 percent to its highest level since July 2015.

Overnight, Wall Street closed as much as 0.8 percent higher, driven by defense and technology stocks, after U.S. President Donald Trump announced arms deals and other investments with Saudi Arabia over the weekend that Secretary of State Rex Tillerson said could add up to $350 billion.

An uncertain political climate in the U.S. continued to weigh on the dollar, but a slowdown in Japanese manufacturing activity limited losses versus the yen.

The dollar was slightly lower at 111.20 yen JPY=.

The dollar index .DXY, which tracks the greenback against a basket of trade-weighted peers, was 0.1 percent lower at 96.916.

Losses were also kept in check by a gauge of U.S. economic activity that improved in April to its highest level since late 2014, suggesting an acceleration in production and hiring activity following an anemic first quarter.

The White House is set to deliver Trump’s first full budget to lawmakers on Tuesday, a plan that would cut $3.6 trillion in government spending over 10 years, balancing the budget by the end of the decade.

Presidential budgets are often ignored by Congress, which controls federal purse strings.

But the budget plan, which proposed the sale of half the country’s strategic oil reserves, weighed on crude futures, offsetting optimism over expectations that other major oil producers would agree to extend supply curbs this week.

Global benchmark Brent LCOc1 retreated 0.3 percent to$53.68.

U.S. crude futures CLc1 surrendered some gains but were 0.4 percent higher at $50.93, after hitting their highest level in more than a month earlier in the session.

The weaker dollar lifted gold slightly. Spot gold XAU= climbed 0.15 percent to $1,262.10 an ounce in its third straight session of gains.

 

(Reporting by Nichola Saminather; Additional reporting by Marc Jones; Editing by Simon Cameron-Moore and Richard Borsuk)
Published at Tue, 23 May 2017 03:52:33 +0000

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3 Under-the-radar Momentum Plays

3 Under-the-radar Momentum Plays

By Alan Farley | May 22, 2017 — 10:45 AM EDT

A broad selection of blue-chip and other widely held names have rallied to bull market and all-time highs in recent months, fueled by optimism for a business-pleasing tax cut. Small caps have struggled during this period, but a handful of these under-the-radar stocks are also engaged in fast-moving rallies that can reward well-timed positions. Let’s look at three of the hottest plays, focusing on levels that may offer substantial upside.

Of course, there’s a dark side to playing the momentum game because it’s often necessary to enter positions well above obvious support levels in hopes of selling even higher. This stairstep mechanism exposes less disciplined players to sudden and sizable losses, especially when a large public crowd has discovered the trade, making them vulnerable to stop running by predatory algorithms that feed on human mistakes and skill inadequacies.

AAOI

Applied Optoelectronics, Inc. (AAOI) just crossed the one billion dollar line in market capitalization, underpinned by a powerful rally that’s tripled the stock’s price so far in 2017. It joined the Nasdaq exchange in September 2013 at 10 and posted a new high at $28.01 in March 2014. The subsequent decline found support in single digits in the first quarter of 2015, ahead of a proportional bounce followed by a May 2016 test of the low.

Buyers emerged at that level, generating a double bottom and uptrend that set off a powerful momentum rally in January 2017. The uptick ran into a buzzsaw of selling pressure in March, giving way to a pullback that reached support at the 50-day EMA in April, ahead of an early May bounce that reached a new high about two weeks ago. The stock is now building a base in the lower-60s, with a rally above the red line having the potential to reach the 80s in a vertical buying wave.

CALA

Calithera Biosciences, Inc. (CALA) creates compounds that fight tumor growth. It has risen nearly 500% since that start of 2017, grinding higher in a momentum rally that could eventually reach the 2014 peak in the mid-30s. It posted that all-time high just three months after coming public at $9.40 and turned sharply lower through 2015, with sellers maintaining full control into the October 2016 all-time low at $2.20.

The stock turned higher after the election and lifted into resistance at the 200-day EMA at year’s end. A January breakout built a 3-week basing pattern on top of new support, giving way to a vertical advance that topped out at $14.90 in March. A 2-month rounded correction at the 50-day EMA has now reached the first-quarter high, with a breakout opening the momentum door to a fast rally into the lower-20s.

WTW

Weight Watchers International, Inc. (WTW) rose sharply after Oprah Winfrey announced a large stake in October 2015 and slumped through most of 2016 due to mediocre earnings results. Recent metrics have shown surprising growth, triggering a momentum rally that’s testing the post-Oprah high in the upper-20s. While this level marks resistance that could trigger a sizable reversal, the pullback could offer a low-risk entry ahead of even greater upside.

The stock topped out in the 80s in 2012 and sold off to a 2015 low at $3.67 just ahead of the news. The current rally is testing resistance from that downtrend, with a breakout into the 30s relieving overhead supply while favoring a strong advance into the mid-50s. Market timers wanting to establish pullback positions should keep a close watch on the green 200-day EMA at 20, with a basing pattern at or above that support level setting the stage for quick upside.

The Bottom Line

A selection of small stocks have erupted in 2017 momentum rallies, signaling strong buying interest due to a bullish story, improving metrics or a positive feedback loop, in which one set of shareholders gets rewarded, inducing the next group to come off the sidelines and take exposure, so they don’t miss out on the move.
Published at Mon, 22 May 2017 14:45:00 +0000

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Jewellers Vulnerable to Brick & Mortar Exodus

 

Jewellers Vulnerable to Brick & Mortar Exodus

By Alan Farley | May 22, 2017 — 12:35 PM EDT

Jewelry stores and other luxury retailers have grown more vulnerable to the exodus out of brick and mortar sales into e-commerce, as evidenced by Signet Jewelers, Ltd.’s (SIG) March shortfall, which triggered a breakdown to a 4-year low. Larger rival Tiffany and Co.’s (TIF) eased sector anxiety a few weeks after that dismal report, beating estimates while guiding higher, but also raised red flags with declining holiday sales and limp year-over-year growth.

Both companies step to the plate this week with first-quarter confessionals that are unlikely to calm nerves about market share loss to online portals. That’s especially true with bearish chatter rising after a recent expose alleged that industry leaders including Tiffany’s mark-up diamonds more than 250%. At a minimum, the allegation opens the door to Net upstarts undercutting traditional price mechanisms to steal customers.

TIF

Tiffany’s rallied above a 10-year resistance zone between $45 and $58 in 2010 and reached $84.49 in 2011, ahead of a decline that tested new support for nearly two years. It resumed its upward trajectory in 2013, grinding out a series of 2014 highs before reaching November’s all-time high at $110.60. The stock gapped down more than 14-points in January 2015 and entered a steep downtrend that continued into June 2016 when it finally held support at a 3-year low.

It turned higher in July and remounted the broken February low, setting off a 2B buying signal triggered by the failure of bears to hold a new resistance level. That technical event attracted steady interest that lifted the stock above the broken 200-day EMA after the November election. It added to gains in the first quarter of 2017, stalling at $97.29 a few weeks after earnings triggered a quick 8-point rally.

On Balance Volume (OBV) stalled in the second half of 2014 and entered an aggressive distribution wave that finally ended in June 2016. Accumulation since that time has been impressive, but price remains stuck under resistance generated by the 2015 gap and .786 Fibonacci selloff retracement. It will take a post-earnings rally above $104 to undo that technical damage while a selloff through $90 could signal a lower high within a broad topping pattern.

SIG

Signet Jewelers Ltd. topped out at $99.10 in 1990 and entered a downtrend that reached $2.54 in 1992. It rallied above $50 into the middle of the last decline and plunged during the 2008 economic collapse, posting a higher long-term low at $5.91. The stock completed a 24-year round trip into the 20th century’s high in 2014 and broke out into triple digits, reaching an all-time high at $152.27 in October 2015.

It turned sharply lower in 2016, giving up more than half its value into the October low at $72.65. A bounce into year’s end got sold aggressively at the start of 2017, generating a steady downtick that’s now reached at 4-year low in the upper-50s. Fortunately for beaten down bulls, the decline is nearing strong support at the 2013 breakout above the 2007 and 2012 highs near $50. That level could trigger a sizable bounce, regardless of company performance.

The decline since 2015 has ground out a broad descending channel with support now located in the upper-30s. Meanwhile, OBV topped out with price and rolled into a downtrend that’s continued to gather steam for the last 18-months, highlighting the exodus of institutional and retail capital worried the company has fallen prey to the persistent flight out of traditional storefronts.

The Bottom Line

Traditional jewelry stores could show heightened vulnerability to the brick and mortar exodus in first-quarter earnings reports later this week. The relatively stronger Tiffany’s has more to lose than Signet Jewelers, which has hit highly oversold readings since dropping into a string of multi-year lows.

 
Published at Mon, 22 May 2017 16:35:00 +0000

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