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Wrapping Up A Profitable Week

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Wrapping Up A Profitable Week

Call it what you want, the Trump Election Ramp or the Farewell Obama Rally – it’s been a great ride for us and we’ll be wrapping up another profitable week. And boy do we deserve it after fighting off rattlesnakes, blood leeches, and sharks with laser beams for most of the year. But that’s how it goes really as a trader. You work your butt off every single day but the most profitable earning periods often come down to just a few weeks. Of course if we knew which ones in advance then being a trader would be a lot easier. Absent a crystal ball your default mindset should be that every single week may be the one. Okay, granted -maybe except for a few mid summer holiday weeks, they almost always suck 

2016-12-09_silver

I am already long silver and if you’re a sub chances are you are as well. For the rest of you guys, you are in luck, here’s an entry you may consider today or on Monday. FWIW, this one is really testing out patience, which either means it’s going to disappoint or it’ll bust higher in a big way. The more they try to shake you off the bigger the reward. It’s not a guarantee but if you’re a seasoned trader I have an inkling you’d be agreeing with me.

2016-12-09_soybeans

Soybeans is yet another one that has kept us in suspense and as you can see it actually dropped below my break/even spot but has not stopped me out yet. The daily panel is actually starting to look even better and if I wasn’t in already then I certainly would strike the iron now. If you must follow us in the abyss then I suggest you place your stop below 1020 or lower.

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It’s not too late – learn how to consistently bank coin without news, drama, and all the misinformation. If you are interested in becoming a subscriber then don’t waste time and sign up here. The Zero indicator service also offers access to all Gold posts, so you actually get double the bang for your buck.

Please login or subscribe here to see the remainder of this post.

gluehwein

It’s Friday and instead of my regular Hefeweizen treat I’ll be following tradition and switch to a nice glass of Glühwein. If you’ve never had it then boy are you in a for a treat – here’s the recipe. Please don’t waste a perfectly good 1986 Saint Emilion on this, any cheap bottle of Six Buck Chuck will do just fine.

Enjoy!

ABOUT THE AUTHOR

The Mole

Mole created Evil Speculator amidst the chaos of the financial crisis in early August of 2008. His vision for Evil Speculator is a refuge of reason, hands-on trading knowledge, and inspiration for traders of all ages and stripes. You can follow him and his nefarious schemes at various social media waterholes below.

Published at Fri, 09 Dec 2016 14:30:54 +0000

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Tech, bank stocks drive Wall Street to new high

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Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., December 8, 2016.REUTERS/Brendan McDermid

Tech, bank stocks drive Wall Street to new high

By Lewis Krauskopf

Major U.S. stock indexes climbed again on Thursday and set fresh record highs as a month-long rally following the presidential election of Donald Trump rolled on.

Investors have driven up equities since Trump’s Nov. 8 election over optimism about domestic economic stimulus and reduced corporate taxes and regulations.

Supporting the upbeat sentiment on Thursday was a report that showed the number of Americans filing for unemployment benefits fell from a five-month high last week, pointing to labor market strength that underscored the economy’s momentum.

“This is just a continued melt-up post-election. The path of least resistance has been higher,” said Jason Ware, chief investment officer with Albion Financial Group in Salt Lake City, Utah.

“Seasonally, you have a strong period. You have money coming out of the bond market … so that money has to go somewhere,” Ware said.

The Dow Jones industrial average .DJI rose 65.19 points, or 0.33 percent, to 19,614.81, the S&P 500 .SPX gained 4.84 points, or 0.22 percent, to 2,246.19 and the Nasdaq Composite .IXIC added 23.59 points, or 0.44 percent, to 5,417.36.

All three indexes set new records, a day after they each posted gains of at least 1 percent. The Russell 2000 index of small-cap stocks, which has soared 15 percent since the election, also hit a new high.

Financials .SPSY, among the major gainers since the election, led the way again on Thursday, rising 0.9 percent. Industrials .SPLRCI, another post-election beneficiary, fell back 0.5 percent, weighed down by defense stocks.

While investors are still adjusting to the economy’s outlook under a Trump administration, “generally speaking, the idea that taxes will be less and regulations will be dialed back seems to be creating not only optimism but laying the groundwork for economic expansion,” said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.

“So if you own stock, you want to hold onto it. If you don’t, you want to buy it,” Hellwig said.

The Dow Jones Transport index .DJT rose 0.5 percent, a day after setting a new closing record high for the first time in two years. The fresh high triggered a bullish sign for some investors who look for parallel performance for both the Dow industrial and transportation averages.

Adding to positive sentiment for equities has been recent positive economic data, as well as S&P 500 companies poised to end a streak of declining profits with their third-quarter results.

Investors on Thursday were digesting the European Central Bank’s decision to trim back its asset buys but also its vow of protracted stimulus to aid a still-fragile recovery.

Next week’s Federal Reserve meeting, at which the U.S. central bank is widely expected to raise interest rates, is also coming into focus as market participants seek clues about the future pace of any rate hikes.

In corporate news, Lululemon (LULU.O) soared 15 percent after the yoga and leisure apparel retailer reported a better-than-expected quarterly profit.

Express Scripts (ESRX.O) shares tumbled 6.7 percent after short-seller Citron Research called the pharmacy benefit manager the “real culprit” in drug price gouging.

About 8 billion shares changed hands in U.S. exchanges, just above the 7.8 billion daily average over the last 20 sessions.

Advancing issues outnumbered declining ones on the NYSE by a 1.69-to-1 ratio; on Nasdaq, a 2.06-to-1 ratio favored advancers.

The S&P 500 posted 112 new 52-week highs and 4 new lows; the Nasdaq Composite recorded 481 new highs and 28 new lows.

(Additional reporting by Yashaswini Swamynathan in Bengaluru; Editing by Anil D’Silva and Nick Zieminski)

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Published at Thu, 08 Dec 2016 16:43:08 +0000

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Thursday: Unemployment Claims

Job seekers fill out applications during the 11th annual Skid Row Career Fair the Los Angeles Mission in Los Angeles, California, U.S. on May 31, 2012. REUTERS/David McNew/File Photo

Thursday: Unemployment Claims

by Bill McBride on 12/07/2016 09:38:00 PM

 From Matthew Graham at Mortgage News Daily: Mortgage Rates Fall Ahead of European Central Bank Announcement

Mortgage rates moved moderately lower today, as financial markets positioned themselves for an important announcement from the European Central Bank (ECB) tomorrow regarding the possibility of tapering its asset purchases.

4.125% remains the most prevalent conventional 30yr fixed rate on top tier scenarios with 4.25% not too far behind. 4.0% is a distant third. Today’s rates are most similar to those seen on December 2nd. Things could change in a big way depending on what the ECB says tomorrow, for better or worse.
emphasis added

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released.  The consensus is for 255 thousand initial claims, down from 268 thousand the previous week.

• At 10:00 AM, The Q3 Quarterly Services Report from the Census Bureau.

by Bill McBride on 12/07/2016 09:38:00 PM

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Published at Thu, 08 Dec 2016 02:38:00 +0000

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Western Digital Guidance May Signal PC Turnaround

by edar from Pixabay

Western Digital Guidance May Signal PC Turnaround

By Alan Farley | December 7, 2016 — 11:13 AM EST

Data storage giant Western Digital Corp. (WDC) gave the beaten down tech sector a lift on Tuesday evening, raising second quarter guidance while renewing a patent cross-license agreement with Samsung. The S&P 500 component gapped up at Wednesday’s opening bell, held gains in excess of 5% through the first hour of the session and could trade even higher in coming days.

PC peripheral stocks have struggled in recent years due to the exodus from home computers into tablets and smartphones. The industry now expects 2016 to end with a 6.4% sales decline, which is lower than previous estimates. Negative growth is expected to continue in 2017 at a slower pace, with analysts projecting a 2.6% annual decline while looking for overall flat sales into 2020.

WDC Long-term Chart (1993-2016)

WDC

The stock bottomed out at $1.00 in 1991 following a 4-year downtrend and turned higher, returning to the 1987 high at $16.32 in 1996. It broke out and zoomed higher, peaking at $54.75 one year later. The Dot-com bubble failed to end the subsequent downtrend, which carved a series of volatile lows into the 2001 bottom at $1.95, less than a point above the 1991 low.

It completed a 4-year basing pattern in 2003 and broke out above resistance at $8.80, entering an uptrend that carved several deep corrections into the June 2008 peak at 40.00. The stock turned sharply lower with world markets during the economic collapse, finding support at the base breakout in November. The subsequent recovery wave unfolded at the same trajectory as the prior decline, completing a V-shaped 100% retracement in November.

Price action then eased into a multi-year range, finally breaking out in 2013. It rallied through the 1997 high a few months later and continued to gain ground into its December 2014 all-time high at $114.69. The subsequent downtrend did extensive technical damage, with the stock losing 70% of its value into the May 2016 low at $34.99. The bounce since that time has carved a rising wedge pattern that’s undermined momentum after each small-scale breakout.

WDC Short-Term Chart (2014 – 2016)

WDC

The decline that started at the end of 2014 cut through the 1997 high at the start of 2016 signaling a major failure and remounted that level in September. This turnaround issued a 2B buy signal, which denotes the failure of bears to hold a resistance level, confirmed by higher prices into December. However, the rally has failed to build enough momentum to break free from the rising wedge pattern and make significant upside progress.

The stock gapped above the .386 retracement level after Wednesday’s opening bell, but it’s too early to tell if that gap will hold. If successful, the door will open to a continued advance that faces massive resistance in the mid-70s, where the .50 retracement level and broken third quarter lows have narrowly aligned. That barrier warns trend followers to expect a back-and-fill tape rather than quick recovery into triple digits.

On Balance Volume (OBV) fell to a 3-year low in May 2016 and turned higher, gaining ground at a faster pace than price. This signals a bullish divergence that predicts higher prices in coming months. In fact, this volume pattern contradicts the more bearish price pattern, telling us buyers will stay in control of price action well into 2017. At a minimum, it warns short sellers to look elsewhere for exposure.

The Bottom Line

Western Digital rose more than 6% on Wednesday morning after raising guidance and renewing a patent cross-license agreement with Samsung. The rally has lifted the stock to a 13-month high in the upper 66s, with good odds for continued gains into strong resistance in the mid-70s.

Disclosure: The author held no position in Western Digital at the time of publication

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Published at Wed, 07 Dec 2016 16:13:00 +0000

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Banks, telecoms lead Wall Street up; another Dow record

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Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., December 5, 2016.REUTERS/Brendan McDermid

Banks, telecoms lead Wall Street up; another Dow record

By Lewis Krauskopf

Wall Street climbed on Tuesday as telecom stalwarts AT&T and Verizon gained and bank shares added to their torrid post-election rally, helping the Dow set another record closing high.

The S&P financial sector .SPSY rose nearly 1 percent, lifted by a 2.2 percent gain for Wells Fargo (WFC.N). The bank’s chief executive told an investor conference it will see a near-term profit hit because of the sharp rise in interest rates, but will benefit in the longer term from rising rates.

Bank of America (BAC.N), Citigroup (C.N) and Goldman Sachs (GS.N) also ended higher.

Financials have climbed more than 15 percent since the Nov. 8 election and are seen as one of the sectors particularly benefiting as President-elect Donald Trump seeks to pass economic stimulus and reduce corporate taxes and regulations.

Meanwhile, the Federal Reserve is widely expected to raise interest rates next week, in another boost for banks.

Financials in general are “benefiting from the feeling that interest rates are done going down and we are going to see a much more favorable interest rate and spread environment for financials,” said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.

The Dow Jones industrial average .DJI rose 35.54 points, or 0.18 percent, to 19,251.78, the S&P 500 .SPX gained 7.52 points, or 0.34 percent, to 2,212.23 and the Nasdaq Composite .IXIC added 24.11 points, or 0.45 percent, to 5,333.00.

Equities are also gaining support from recent positive economic data and corporate results from S&P 500 companies, which in the third quarter were poised to snap a streak of quarterly profit declines, said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana.

“It looks like we are leaving the earnings recession and we have entered a period of earnings growth that I think can support the higher prices that we’re seeing,” Carlson said.

AT&T (T.N) shares rose 1.9 percent. The company said its new streaming television service DirectTV Now has so far exceeded expectations.

Verizon shares climbed 1.2 percent. The No. 1 U.S. wireless carrier is selling 29 data centers to Equinix (EQIX.O) for $3.6 billion.

Verizon also helped boost the Dow, which has outperformed other major indexes and notched a series of fresh record highs since the election as investors pile into financials and industrial stocks.

Trump’s market influence was seen on Tuesday as Boeing (BA.N) shares fell after he tweeted that the government should cancel an order with the plane maker to develop a revamped Air Force One. Boeing shares recovered initial losses and ended marginally positive.

Trump’s announcement that Japanese telecoms and internet firm SoftBank (9984.T) agreed to invest $50 billion in the United States also rippled through markets, with Sprint shares (S.N) rising 1.5 percent and T-Mobile (TMUS.O) gaining 1.8 percent.

In other corporate news, Nike (NKE.N) fell 2.5 percent after Cowen & Co downgraded the shoe and apparel maker’s shares to “market perform.”

About 7.1 billion shares changed hands in U.S. exchanges, below the 7.9 billion daily average over the last 20 sessions.

Advancing issues outnumbered declining ones on the NYSE by a 2.45-to-1 ratio; on Nasdaq, a 1.97-to-1 ratio favored advancers.

The S&P 500 posted 41 new 52-week highs and four new lows; the Nasdaq Composite recorded 294 new highs and 21 new lows.

(Additional reporting by Yashaswini Swamynathan in Bengaluru; Editing by Dan Grebler and James Dalgleish)

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Published at Tue, 06 Dec 2016 22:56:10 +0000

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EIA: “Retail gasoline prices are forecast to average $2.30/gal in 2017”

gas-price-1744734_1280

by paulbr75 from Pixabay

EIA: “Retail gasoline prices are forecast to average $2.30/gal in 2017”

by Bill McBride on 12/06/2016 01:43:00 PM

The EIA released the Short-Term Energy Outlook today. From the STEO:

• U.S. crude oil production averaged 9.4 million barrels per day (b/d) in 2015, and it is forecast to average 8.9 million b/d in 2016 and 8.8 million b/d in 2017.

EIA forecasts Brent crude oil prices to average $43 per barrel (b) in 2016 and $52/b in 2017. West Texas Intermediate (WTI) crude oil prices are forecast to average about $1/b less than Brent prices in 2017. The values of futures and options contracts indicate significant uncertainty in the price outlook. The NYMEX contract values for March 2017 delivery traded during the five-day period ending December 1 suggest that a range from $34/b to $71/b encompasses the market expectation of WTI prices in March 2017 at the 95% confidence level.

• Lower crude oil prices contributed to U.S. average retail regular gasoline prices in November averaging $2.18 per gallon (gal), a decline of 7 cents/gal from the October level. EIA expects gasoline prices to fall to an average of $2.10/gal in January. Retail gasoline prices are forecast to average $2.14/gal in 2016 and $2.30/gal in 2017.

• Global oil inventory builds are forecast to average 0.7 million b/d in 2016 and 0.4 million b/d in 2017.
emphasis added

WTI is currently at $50.69 per barrel, and Brent at $53.86 per barrel. So the EIA isn’t expecting any further increase in 2017 (on average).

Read more at http://www.calculatedriskblog.com/2016/12/eia-retail-gasoline-prices-are-forecast.html#xo1B0CRkwVWsOkMt.99

by Bill McBride on 12/06/2016 01:43:00 PM

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Published at Tue, 06 Dec 2016 18:43:00 +0000

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Fixed income attracts $132 billion in third quarter, asset managers snap losing streak

 

An investor checks stock information on a mobile phone at a brokerage house in Shanghai, China November 9, 2016.REUTERS/Aly Song

Fixed income attracts $132 billion in third quarter, asset managers snap losing streak

Fixed income products attracted $132 billion of net inflows in the third quarter, the latest data from research provider eVestment showed on Tuesday.

Although there has been talk of a “great rotation” out of deflation plays such as bonds and into assets expected to do well as inflation rises, investors continued to dump equities in the third quarter, withdrawing a net $116 billion, eVestment’s data showed.

The firm, which tracks more than $37 trillion in institutional money globally, aggregates data reported to it by asset managers overseeing money for pension funds, insurers, sovereign wealth funds and foundations.

This showed that fixed income products found favor after four consecutive quarters of net outflows, attracting $66.8 billion of net inflows to U.S. bonds and $18.3 billion into U.S. corporate bonds.

Emerging market debt strategies attracted $12.4 billion. Institutional assets invested in emerging market debt totaled $480.5 billion at the end of the third quarter, a two-year high.

But investors pulled money from equity strategies for a seventh consecutive quarter, with $80.3 billion withdrawn from U.S. equity and $10 billion from global equity strategies.

An outlier was emerging market equities, which attracted $9.3 billion, with European investors the driving force behind the inflows, eVestment said.

Overall, institutional asset managers attracted $19.7 billion in the third quarter, although some clients, such as sovereign wealth funds, remained net sellers for a ninth consecutive quarter.

These withdrew a net $5.2 billion, after outflows of $19.3 billion in the second quarter. Redemptions were led by $2.9 billion in net outflows from global equity strategies, with the passively managed funds bearing the brunt of the withdrawals.

Sovereign investors also cut European equity strategies by $1.8 billion, Japanese equity strategies by $1.2 billion and U.S. equity strategies by $1.2 billion.

Public funds pulled out some $25.2 billion, and foundations and endowments withdrew some $5.3 billion.

The firm also noted that, whilst U.S. domiciled accounts reported $123.6 billion in outflows, investors in Europe and the UK were net buyers, with inflows of $41.7 billion and $3.7 billion respectively.

“The uncertainty in Europe regarding the Brexit decision has led to an influx of assets into cash management strategies, both in the UK and Europe,” eVestment said.

European cash management funds reported inflows of $23.3 billion, while UK cash management funds had net inflows of $9.3 billion.

(Reporting by Claire Milhench; Editing by Kevin Liffey)

Published at Tue, 06 Dec 2016 15:21:02 +0000

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Trump win creates ‘considerable’ uncertainty, Fed’s Dudley says

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William Dudley, President of the New York Federal Reserve Bank, speaks at Brooklyn College in the Brooklyn borough of New York, March 7, 2014.REUTERS/Keith Bedford/File Photo

Trump win creates ‘considerable’ uncertainty, Fed’s Dudley says

By Jonathan Spicer | NEW YORK

The U.S. election of Donald Trump has created “considerable” uncertainty over the policies he will pursue so it is too soon for the Federal Reserve to judge whether its plan for gradual interest rate hikes needs adjusting, one of the most influential Fed policymakers said on Monday.

In a speech that stepped well into fiscal policy, including a nod to rising debt levels and a prescription for more predictable actions from Washington, New York Fed President William Dudley painted a fairly benign picture of the current U.S. economy.

He cited firming wage growth and said he expects further improvement in both the labor market and in pushing inflation a bit higher toward a Fed target of 2 percent.

“Assuming the economy stays on this trajectory, I would favor making monetary policy somewhat less accommodative over time by gradually pushing up the level of short-term interest rates,” said Dudley, a permanent voter on monetary policy and a close ally of Fed Chair Janet Yellen.

“There is still considerable uncertainty about how fiscal policy will evolve over the next few years. At this juncture, it is premature to reach firm conclusions,” he told a breakfast of the nonprofit Association for a Better New York, without mentioning the president-elect by name.

Since last month’s election of the Republican Trump as president, stocks, bond yields and the dollar have all risen. Dudley called this a “tightening” in market conditions, but not one that concerns him since it appears to be driven by expectations of more government spending that should boost the economy.

If that happens, and if the U.S. central bank, in response, raises rates more than currently expected, he said the investor reaction is “appropriate,” though he would wait to adjust monetary policy expectations as the fiscal picture becomes clearer, he added.

Trump was elected on a platform of infrastructure spending, tax cuts, cuts to government regulations, and the renegotiation or halting of international trade agreements. The election, which shocked pollsters, has only hardened already high expectations that the Fed will raise rates a quarter-percentage point to 0.5-0.75 percent on Dec. 14.

Less clear is how aggressively the central bank will continue to tighten policy next year.

Wading into the debate over what policies the Republican-controlled White House and Congress should pursue, Dudley said “monetary policy could use an assist from fiscal policy,” given low rates are unlikely to get too much higher before the next economic downturn.

It is “important that the United States retains sufficient fiscal capacity so that fiscal policy can support the economy when the next cyclical downturn does occur,” said Dudley, noting that debt service costs will nearly double over the next decade.

The Fed policymaker repeated that he backs “automatic” fiscal stabilizers like higher unemployment compensation when the jobless rate rises. It has fallen to 4.6 percent.

Dudley, a dovish member of the core Fed policymakers, said the economy is now “in reasonably good shape” and that he expects it to grow at a 1.8 percent rate or slightly more in 2017.

(Editing by Jeffrey Benkoe)

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Published at Mon, 05 Dec 2016 18:19:11 +0000

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WRAP UP 1-Trump should not spend like economy in crisis -Fed officials

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St. Louis Fed President James Bullard speaks about the U.S. economy during an interview in New York February 26, 2015.REUTERS/Lucas Jackson/File Photo – RTX2TY27

WRAP UP 1-Trump should not spend like economy in crisis -Fed officials

By Howard Schneider | PHOENIX

Federal Reserve officials cautioned on Monday that the incoming Trump administration’s economic plans should not be cast as if the economy is in crisis, but instead be designed to help the economy’s long-run prospects.

The comments reflected a developing debate within the Fed over the impact of president-elect Donald Trump’s leadership of a Republican-controlled government.

Fed officials worry there is risk that overly aggressive fiscal, tax and other changes could become inflationary given the economy’s current strength.

That could force the Fed into more rapid interest rate increases and possibly raise the risk of recession. Yet there is also potential, officials feel, for well-designed tax, regulatory and infrastructure spending to boost the country’s lagging productivity.

Properly designed and executed policies to boost infrastructure, modify regulations for some industries and overhaul the tax code “may have some impact … if they are directed towards improving medium-term U.S. productivity growth,” St. Louis Fed President James Bullard said in remarks in Phoenix at a luncheon sponsored by Arizona State University.

But “these policies should not be viewed as countercyclical measures,” Bullard said. “The economy is not in recession today.”

“An infrastructure plan would be terrific, that would be good,” Chicago Federal Reserve bank president Charles Evans said in Chicago. “I think corporate tax rationalization would be a huge improvement.”

Yet he agreed: “you don’t need explicit stimulus” with the jobless rate already so low.

FISCAL OUT OF SYNC

Fed officials are typically reluctant to give specific advice to the elected officials who set government spending and debt levels, in part to preserve their own political independence.

But in recent months they have become more voluble on the subject. They feel fiscal policy in the critical early years after the 2007-09 financial crisis was out of sync with what the country required, set too tight at a time when the country needed, and the Fed was pushing to achieve, higher growth.

Trump’s victory, coupled with the election of a Republican-controlled House and Senate, has turned that debate on its head: elected officials may be pushing to stimulate the economy at a time when the Fed is beginning to raise interest rates and sees the economy approaching full employment.

The dilemma would be resolved, Fed officials suggested, if the new administration’s policies focus on efforts that revive productivity growth, and do not amount to spending for spending’s sake.

“If you put the right public capital in place it could improve productivity and you would have a higher trend growth rate,” Bullard said in comments that have been echoed across the Fed.

In remarks in New York, Fed vice chair and New York Fed President William Dudley recommended Congress and the administration set rules that could help in the next crisis with programs that automatically boost spending in a downturn.

Such automatic stabilizers “would kick in to support incomes,” Dudley said, which “should lead workers to be less fearful about losing their jobs, and businesses to be less concerned that demand for their products might fall precipitously.”

(Additional reporting by Ann Saphir in Chicago and Jon Spicer in New York; Editing by David Chance, Paul Simao and Meredith Mazzilli)

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Published at Mon, 05 Dec 2016 20:44:49 +0000

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Sunday Night Futures

 

Sunday Night Futures

by Bill McBride on 12/04/2016 07:17:00 PM

 Weekend:

Schedule for Week of Dec 4, 2016

Monday:
• At 10:00 AM ET, The Fed will release the monthly Labor Market Conditions Index (LMCI).

• Also at 10:00 AM, the ISM non-Manufacturing Index for November. The consensus is for the index to increase to 55.5 from 54.8 in October.

From CNBC: Pre-Market Data and Bloomberg futures: S&P futures are down 8, and DOW futures are down 40 (fair value).

Oil prices were up sharply over the last week with WTI futures at $51.68 per barrel and Brent at $54.46 per barrel.  A year ago, WTI was at $40, and Brent was at $41 – so oil prices are up 25% to 30% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.18 per gallon – a year ago prices were at $2.04 per gallon – so gasoline prices are up more than 10 cents per gallon year-over-year.

Oil PricesClick on graph for larger image

This graph shows the year-over-year change in WTI based on data from the EIA.

Five times since 1987, oil prices have increased 100% or more YoY.  And several times prices have almost fallen in half YoY.  Oil prices are volatile!

WTI oil prices are currently up 27% year-over-year.

Read more at http://www.calculatedriskblog.com/2016/12/sunday-night-futures.html#zQZRRGOTtiTTHrDX.99

by Bill McBride on 12/04/2016 07:17:00 PM

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Published at Mon, 05 Dec 2016 00:17:00 +0000

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Schedule for Week of Dec 4, 2016

department-store-1778720_1280

by MichaelGaida from pixabay

Schedule for Week of Dec 4, 2016

by Bill McBride on 12/03/2016 08:11:00 AM

 This will be a light week for economic data.
The key reports are the ISM non-manufacturing index, Job Openings, and the October trade deficit.

The Q3 Quarterly Services and the Fed’s Q3 Flow of Funds reports will be released this week.

—– Monday, Dec 4th —–

10:00 AM ET: The Fed will release the monthly Labor Market Conditions Index (LMCI).

10:00 AM: the ISM non-Manufacturing Index for November. The consensus is for index to increase to 55.5 from 54.8 in October.

—– Tuesday, Dec 5th—–
 

U.S. Trade Deficit8:30 AM: Trade Balance report for October from the Census Bureau.

This graph shows the U.S. trade deficit, with and without petroleum, through September. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

The consensus is for the U.S. trade deficit to be at $42.0 billion in October from $36.4 billion in September.

10:00 AM: Manufacturers’ Shipments, Inventories and Orders (Factory Orders) for October. The consensus is a 2.7% increase in orders.

—– Wednesday, Dec 6th —–

7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.
 

Job Openings and Labor Turnover Survey10:00 AM: Job Openings and Labor Turnover Survey for October from the BLS.

This graph shows job openings (yellow line), hires (purple), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Jobs openings decreased in September to 5.486 million from 5.453 million in August.

The number of job openings (yellow) were up 2% year-over-year, and Quits were up 12% year-over-year.

3:00 PM: Consumer credit from the Federal Reserve.  The consensus is for a $19.0 billion increase in credit.

—– Thursday, Dec 7th —–

8:30 AM ET: The initial weekly unemployment claims report will be released.  The consensus is for 255 thousand initial claims, down from 268 thousand the previous week.

10:00 AM: The Q3 Quarterly Services Report from the Census Bureau.

—– Friday, Dec 8th —–

10:00 AM: University of Michigan’s Consumer sentiment index (preliminary for December). The consensus is for a reading of 94.1, up from 93.8 in November.

10:00 AM: Monthly Wholesale Trade: Sales and Inventories for October. The consensus is for a 0.4% decrease in inventories.

12:00 PM: Q3 Flow of Funds Accounts of the United States from the Federal Reserve.

Read more at http://www.calculatedriskblog.com/2016/12/schedule-for-week-of-dec-4-2016.html#2mkJOhGAq8cRAGct.99

by Bill McBride on 12/03/2016 08:11:00 AM

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Published at Sat, 03 Dec 2016 13:11:00 +0000

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Obama’s gift to Trump: A ‘pretty solid’ economy

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Jobless rate hits lowest level since 2007

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Public and Private Sector Payroll Jobs: Carter, Reagan, Bush, Clinton, Bush, Obama

People wait in line to enter the Nassau County Mega Job Fair at Nassau Veterans Memorial Coliseum in Uniondale, New York, U.S. October 7, 2014. REUTERS/Shannon Stapleton/File Photo

People wait in line to enter the Nassau County Mega Job Fair at Nassau Veterans Memorial Coliseum in Uniondale, New York, U.S. October 7, 2014. REUTERS/Shannon Stapleton/File Photo

Public and Private Sector Payroll Jobs: Carter, Reagan, Bush, Clinton, Bush, Obama

by Bill McBride on 12/02/2016 01:00:00 PM

 By request, here is another update of an earlier post through the November 2016 employment report including all revisions.  And, yes, I will post these graphs during the next Presidential term.
NOTE: Several readers have asked if I could add a lag to these graphs (obviously a new President has zero impact on employment for the month they are elected). But that would open a debate on the proper length of the lag, so I’ll just stick to the beginning of each term.

Note: We frequently use Presidential terms as time markers – we could use Speaker of the House, or any other marker.

Important: There are many differences between these periods. Overall employment was smaller in the ’80s, however the participation rate was increasing in the ’80s (younger population and women joining the labor force), and the participation rate is generally declining now.  But these graphs give an overview of employment changes.

First, here is a table for private sector jobs. The top two private sector terms were both under President Clinton.

The third best growth for the private sector is Obama’s 2nd term.

Reagan’s 2nd term saw about the same job growth as during Carter’s term.  Note: There was a severe recession at the beginning of Reagan’s first term (when Volcker raised rates to slow inflation) and a recession near the end of Carter’s term (gas prices increased sharply and there was an oil embargo).

Term Private Sector
Jobs Added (000s)
Carter 9,041
Reagan 1 5,360
Reagan 2 9,357
GHW Bush 1,510
Clinton 1 10,884
Clinton 2 10,082
GW Bush 1 -811
GW Bush 2 415
Obama 1 1,921
Obama 2 9,4881
146 months into 2nd term: 9,901 pace.


The first graph shows the change in private sector payroll jobs from when each president took office until the end of their term(s). Presidents Carter and George H.W. Bush only served one term, and President Obama is in the final months of his second term.

Mr. G.W. Bush (red) took office following the bursting of the stock market bubble, and left during the bursting of the housing bubble. Mr. Obama (blue) took office during the financial crisis and great recession. There was also a significant recession in the early ’80s right after Mr. Reagan (yellow) took office.

There was a recession towards the end of President G.H.W. Bush (purple) term, and Mr Clinton (light blue) served for eight years without a recession.
 

Private Sector PayrollsClick on graph for larger image.

The first graph is for private employment only.

The employment recovery during Mr. G.W. Bush’s (red) first term was sluggish, and private employment was down 811,000 jobs at the end of his first term.   At the end of Mr. Bush’s second term, private employment was collapsing, and there were net 396,000 private sector jobs lost during Mr. Bush’s two terms.

Private sector employment increased slightly under President G.H.W. Bush (purple), with 1,510,000 private sector jobs added.

Private sector employment increased by 20,966,000 under President Clinton (light blue), by 14,717,000 under President Reagan (yellow), and 9,041,000 under President Carter (dashed green).

There were only 1,921,000 more private sector jobs at the end of Mr. Obama’s first term.  Forty six months into Mr. Obama’s second term, there are now 11,409,000 more private sector jobs than when he initially took office.
 

Public Sector Payrolls A big difference between the presidencies has been public sector employment.  Note the bumps in public sector employment due to the decennial Census in 1980, 1990, 2000, and 2010.

The public sector grew during Mr. Carter’s term (up 1,304,000), during Mr. Reagan’s terms (up 1,414,000), during Mr. G.H.W. Bush’s term (up 1,127,000), during Mr. Clinton’s terms (up 1,934,000), and during Mr. G.W. Bush’s terms (up 1,744,000 jobs).

However the public sector has declined significantly since Mr. Obama took office (down 334,000 jobs). This has been a significant drag on overall employment.

And a table for public sector jobs. Public sector jobs declined the most during Obama’s first term, and increased the most during Reagan’s 2nd term.

Term Public Sector
Jobs Added (000s)
Carter 1,304
Reagan 1 -24
Reagan 2 1,438
GHW Bush 1,127
Clinton 1 692
Clinton 2 1,242
GW Bush 1 900
GW Bush 2 844
Obama 1 -708
Obama 2 3741
146 months into 2nd term, 390 pace


Looking forward, I expect the economy to continue to expand through the two months of Mr. Obama’s presidency, so I don’t expect a sharp decline in private employment as happened at the end of Mr. Bush’s 2nd term (In 2005 and 2006 I was warning of a coming down turn due to the bursting of the housing bubble – and I predicted a recession in 2007).

For the public sector, the cutbacks are over.  Right now I’m expecting some further increase in public employment during the last months of Obama’s 2nd term, but obviously nothing like what happened during Reagan’s second term.

Below is a table of the top four presidential terms for total non-farm job creation.

Currently Obama’s 2nd term is on pace to be the 3rd best ever for private job creation.  However, with very few public sector jobs added, Obama’s 2nd term is only on pace to be the fifth best for total job creation.

Note: Only 374 thousand public sector jobs have been added during the forty six months of Obama’s 2nd term (following a record loss of 708 thousand public sector jobs during Obama’s 1st term).  This is about 25% of the public sector jobs added during Reagan’s 2nd term!

Top Employment Gains per Presidential Terms (000s)
Rank Term Private Public Total Non-Farm
1 Clinton 1 10,884 692 11,576
2 Clinton 2 10,082 1,242 11,312
3 Reagan 2 9,357 1,438 10,795
4 Carter 9,041 1,304 10,345
5 Obama 21 9,488 374 9,862
Pace2 9,901 390 10,291
146 Months into 2nd Term
2Current Pace for Obama’s 2nd Term


The last table shows the jobs needed per month for Obama’s 2nd term to be in the top four presidential terms. Right now it looks like Obama’s 2nd term will be the 3rd best for private employment (behind Clinton’s two terms, and ahead of Reagan) and probably 5th for total employment.

Average Jobs needed per month (000s)
for remainder of Obama’s 2nd Term
to Rank Private Total
#1 698 857
#2 297 731
#3 -66 467
#4 -224 242

Read more at http://www.calculatedriskblog.com/2016/12/public-and-private-sector-payroll-jobs.html#rca2UGtL2fzlu2g5.99

by Bill McBride on 12/02/2016 01:00:00 PM

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Payrolls rise solidly; jobless rate at nine-year low

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Job seekers fill out applications during the 11th annual Skid Row Career Fair the Los Angeles Mission in Los Angeles, California, U.S. on May 31, 2012.REUTERS/David McNew/File Photo

Payrolls rise solidly; jobless rate at nine-year low

By Lucia Mutikani | WASHINGTON

U.S. employers boosted hiring in November and the unemployment rate dropped to a more than nine-year low of 4.6 percent, making it almost certain that the Federal Reserve will raise interest rates later this month.

Nonfarm payrolls increased by 178,000 jobs last month after increasing by 142,000 in October, the Labor Department said on Friday. The solid employment gains likely reflect growing confidence in the economy, which has been marked by rising consumer spending and inflation.

The unemployment rate fell three-tenths of a percentage point last month, hitting its lowest level since August 2007, because more people found work as well as dropped out of the labor force. The drop in unemployment occurred mostly among men.

“The decline in the unemployment rate and the unambiguous decrease in labor market slack are likely to place further upward pressure on inflation. This report easily clears the bar for a December rate hike,” said Michael Gapen, chief economist at Barclays in New York.

But wages fell for the first time in nearly a year after two straight months of solid increases. Economists partially blamed the drop in average hourly earnings on a calendar quirk, which they expect Fed officials will overlook at their Dec. 13-14 policy meeting. Wages are expected to rebound in December.

Average hourly earnings fell three cents, or 0.1 percent, after shooting up 0.4 percent in October and rising 0.3 percent in September. Average hourly earnings fell for workers in mining, manufacturing and utilities.

Last month’s drop lowered the year-on-year gain in wages to 2.5 percent in November from October’s 2.8 percent increase, which was the largest rise in nearly 7-1/2 years.

“This is likely to be a temporary setback, as further tightening in labor market conditions should increase competition for skilled labor and support stronger wage growth,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors in Kalamazoo, Michigan.

Economists had forecast payrolls rising by 175,000 last month and the unemployment rate remaining unchanged at 4.9 percent.

A broad measure of unemployment that includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment fell two-tenths of a percentage point to 9.3 percent, the lowest level since April 2008.

U.S. stocks were trading largely higher, while the dollar .DXY fell against a basket of currencies. Prices for U.S. government bonds rose.

BROAD GAINS

While a recent surge in U.S. government bond yields and a rally in the dollar in the wake of Donald Trump’s victory in the U.S. presidential election had tightened financial market conditions, economists said it was probably insufficient for the Fed to stand pat on rates this month.

The U.S. central bank raised its benchmark overnight interest rate last December for the first time in nearly a decade. Trump’s plan to increase infrastructure spending and slash taxes could encourage companies to boost hiring and spur an even faster pace of economic growth over the coming years.

Job gains have slowed from an average of 229,000 per month in 2015 to an average of 180,000 this year as the labor market nears full employment. Still, the monthly increases are more than enough to absorb new entrants into the labor market.

Fed Chair Janet Yellen has said the economy needs to create just under 100,000 jobs a month to keep up with growth in the working-age population.

“It is not that firms aren’t trying to hire, they just cannot find qualified workers at the wages they want to pay,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.

The jobs report added to data on consumer spending, the housing market and manufacturing in suggesting the economy continued to gain momentum in the fourth quarter after output rose at its fastest pace in two years in the third quarter.

Even as wages fell last month, a proxy for take-home pay rose 3.9 percent in November from a year ago, which bodes well for consumer spending.

About 226,000 people dropped out of the labor force last month. As a result, the labor participation rate, or the share of working-age Americans who are employed or at least looking for a job, fell 0.1 percentage point to 62.7 percent.

The participation rate is near multi-decade lows, partly reflecting demographic change. Economists believe that the low participation rate is hindering faster wage growth.

Job gains last month were broad, though manufacturing shed another 4,000 jobs. Manufacturing payrolls have now dropped for four straight months. Construction employment increased by 19,000 jobs last month after rising by 14,000 in October.

The retail sector shed 8,300 jobs in November, which could reflect a shift toward online shopping that has forced department stores such as Macy’s Inc (M.N) to close several stores. Retail jobs have declined for two straight months.

Professional and business services payrolls increased by 63,000 last month. Healthcare and social assistance employment increased by 34,700. Temporary-help jobs, a harbinger for future hiring, rose by 14,300.

Government employment gained 22,000 jobs. There was a surge in local government hiring, which could have been driven by the Nov. 8 U.S. election.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

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U.S. jobs report: 4 facts to know before its release

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Trump claims victory at Carrier, but critics aren’t so sure

U.S. jobs report: 4 facts to know before its release

  @CNNMoney

Americans will get their first look at the U.S. job market Friday since the victory of President-elect Donald Trump, who campaigned on promises for better jobs.

The Labor Department will publish the November jobs report at 8:30 a.m. ET. Here are four facts to know.

What to expect

Economists surveyed by CNNMoney forecast that the U.S. economy added 181,000 jobs in November. That would be slightly better than the initial estimate for October’s job gains of 161,000. There will be a revised October jobs figure Friday.

The unemployment rate is expected to remain at 4.9%, according to the survey. That’s considered near “full employment,” meaning the rate can’t go down a lot further.

Final hurdle for the Fed

Almost everyone expects the Federal Reserve to raise interest rates at its meeting that ends on December 14. But the jobs report needs to be at least decent on Friday for Fed officials to move ahead with their plans.

It would be the Fed’s only rate hike this year after it originally forecast raising rates four times — only to face several setbacks that changed plans.

The Fed last raised rates in December 2015, which was its first rate hike in nearly a decade. A rate hike is considered a sign that the economy is getting healthier.

 

How many Americans are out of work?

Trump said throughout the campaign that roughly 94 million Americans are out of work.

“Over 14 million have left the workforce since Obama came into office, bringing the total not working to 94 million,” Trump said before the election.

Trump’s team could throw that same punch at the Obama economy one last time on Friday. While it’s technically true, it’s not nearly as bad as it sounds. The vast majority of the 94 million Americans out of the job market are retired, studying, taking care of a loved one or disabled. Only about 2 million Americans are not working for unknown reasons.

Trump win doesn’t reverse decline of manufacturing

Trump’s victory this week to keep 1,000 jobs at Carrier’s plant in Indiana is not a bellwether for America’s manufacturing sector. In fact, manufacturing jobs have been in decline this year. In October, there were 53,000 fewer manufacturing jobs compared to a year ago. New numbers come out Friday.

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Published at Fri, 02 Dec 2016 05:00:29 +0000

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Hedge fund returns mixed for November after market rally

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U.S. President-Elect Donald Trump speaks at event at Carrier HVAC plant in Indianapolis, Indiana, U.S., December 1, 2016.REUTERS/Chris Bergin

Some big hedge funds got a bump in November after Donald Trump’s surprise U.S. presidential election victory sent stocks higher, but lagged behind the broader market’s gains, according to some early returns.

Barry Rosenstein and David Einhorn, both closely watched for their investment ideas, told clients they made money in November, but not as much as the Standard & Poor’s 500 stock index, which gained 3.6 percent.

Investors bet on a business-friendly president after Trump’s victory in the Nov. 8 election. Some sectors, including financial and healthcare stocks, performed even better than the broader index, fueled by hopes for lighter regulation, corporate tax cuts, fiscal stimulus and higher interest rates.

Most hedge funds are still compiling their monthly numbers which are generally not made public.

Rosenstein’s Jana Partners Fund gained 2.2 percent in November, marking one of its strongest monthly gains this year after starting 2016 with losses. November’s gains helped put the fund back into the black with a year-to-date gain of 1.4 percent, an investor summary seen by Reuters showed.

Einhorn’s Greenlight Capital climbed 1.9 percent in November, leaving the fund up 7.7 percent for the year, an investor said.

The Standard & Poor’s 500 has gained 7.2 percent since Jan. 1.

To be sure, there are funds outpacing the stock market’s year-to-date gains both on a monthly and yearly basis.

Whitney Tilson’s Kase Capital jumped 7.5 percent last month, he said in an email, largely because of a gain in government-backed mortgage giant Federal National Mortgage Association (Fannie Mae), which has jumped 172 percent since the election. Trump’s Treasury secretary pick, Steven Mnuchin, said Fannie Mae and Freddie Mac should be privatized.

Renaissance Technologies LLC’s Renaissance Institutional Equities Fund, one of two portfolios available to outsiders, has gained 14.8 percent this year, an investor said. It stumbled in November with a 1.7 percent loss.

(Reporting by Svea Herbst-Bayliss; Editing by Bill Rigby)

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Published at Thu, 01 Dec 2016 21:48:04 +0000

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Tech stocks weigh on S&P, Nasdaq

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Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., November 29, 2016.REUTERS/Brendan McDermid

Tech stocks weigh on S&P, Nasdaq

By Yashaswini Swamynathan

Losses in technology stocks dragged down the Nasdaq and the S&P 500 on Thursday, while gains in bank and energy shares propped up the Dow.

Declines in Facebook (FB.O), Microsoft (MSFT.O) and Apple (AAPL.O) pushed the Nasdaq near a two-week low, while setting the S&P 500 technology index .SPLRCT for its worst day since August.

While Wall Street has rallied since the November election on hopes that President-elect Donald Trump’s policies would be market friendly, technology stocks have barely budged, posting a mere 0.6 percent gain.

“I think what you are seeing is people moving out of names that have been winners in the past couple of years and from companies that have predictable growth such as Facebook, Alphabet and Apple,” said Michael Scanlon, managing director of Manulife Asset Management.

Facebook fell 3.2 percent to $114.73 after Canaccord Genuity cut its price target on the stock, while Microsoft (MSFT.O), Apple (AAPL.O) and Alphabet (GOOGL.O) fell between 1.5 percent and 2.2 percent.

However, the Dow moved higher, powered by a more than 5 percent rise in oil prices and gains in bank stocks.

Brent futures LCOc1 hit a six-week high of $53.98. The commodity rallied nearly 9 percent on Wednesday after major oil producers agreed to cut output and support prices – the first of such a move since 2008.

The S&P 500 energy index .SPNY rose 2 percent, with shares of Exxon (XOM.N) and Chevron (CVX.N) leading the pack.

Investors are now turning their attention to economic data to assess whether the Federal Reserve could raise interest rates at its meeting on Dec. 13-14.

The central bank has been preparing the markets for a rate increase amid improving economic conditions. Some Fed officials have said President-elect Donald Trump’s policies could boost inflation, pushing it closer to the central bank’s 2 percent target.

Financial index .SPSY rose 1.65 percent on Thursday. The sector has risen more than 12 percent since the November election on prospects of an interest rate hike this month and simpler bank regulations.

Traders have currently priced in a 91 percent chance of a rate increase in December, according to Thomson Reuters data.

At 12:19 p.m. ET the Dow Jones Industrial Average .DJI was up 73.73 points, or 0.39 percent, at 19,197.31.

The S&P 500 .SPX was down 2.52 points, or 0.11 percent, at 2,196.29 and the Nasdaq Composite .IXIC was down 54.84 points, or 1.03 percent, at 5,268.84. Six of the 11 major S&P sectors were trading lower, with bond proxies such as utilities .SPLRCU and real estate .SPLRCR among the big losers.

Shares of Dollar General (DG.N) was the biggest loser on the S&P, falling 6 percent after the discount retailer reported a surprise drop in quarterly comparable sales and tempered its full-year profit forecast.

Bluebird Bio (BLUE.O) soared 16 percent to $70.25 after the gene-therapy developer said patients undergoing its multiple myeloma treatment showed strong benefits. Shares of Celgene (CELG.O), which is developing the therapy with Bluebird, was up marginally.

Skechers (SKX.N) surged 13.7 percent after Buckingham Research upgraded the shoemaker’s stock to “buy” from “neutral”.

Declining issues outnumbered advancers on the NYSE by 1,627 to 1,305. On the Nasdaq, 1,516 issues fell and 1,205 advanced.

The S&P 500 index showed 78 new 52-week highs and six new lows, while the Nasdaq recorded 148 new highs and 41 new lows.

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Anil D’Silva)

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Published at Thu, 01 Dec 2016 18:02:31 +0000

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Thursday: ISM Mfg, Auto sales, Unemployment claims, Construction Spending

 

Thursday: ISM Mfg, Auto sales, Unemployment claims, Construction Spending

by Bill McBride on 11/30/2016 07:20:00 PM

A few comments from Steven Kopits of Princeton Energy Advisors LLC:

“OPEC today struck what increasingly appears to be a historic deal, with both cuts and participation well in excess of earlier expectations.  Total OPEC cuts, compared to OPEC production as recorded by secondary sources for October 2016, are forecast at 1.2 mbpd.  To this is added 0.3 mbpd from Russia, and another, yet-to-be-confirmed 275 kpbd from Mexico, Oman and Kazakhstan.

In total, this would represent a cut of over 1.7 mbpd.  Compliance should be expected at 70% based on historical precedent, representing an effective cut of 1.2 mbpd compared to October 2016 levels.  This is a big deal, and may be enough to balance markets (which some think are already drawing in any event).  With these cuts, global excess crude and product inventories should be run off as soon as the end of Q2 2017, and not later than Q4 2017.

This implies that a robust recovery for the global oil sector is in store, with a strong H2 2017 in the outing.”

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released.  The consensus is for 253 thousand initial claims, up from 251 thousand the previous week.

• At 10:00 AM, ISM Manufacturing Index for November. The consensus is for the ISM to be at 52.3, up from 51.9 in October. The ISM manufacturing index indicated expansion at 51.9% in October. The employment index was at 52.9%, and the new orders index was at 52.1%.

• Also at 10:00 AM, Construction Spending for October. The consensus is for a 0.6% increase in construction spending.

• All day, Light vehicle sales for November. The consensus is for light vehicle sales to decrease to 17.8 million SAAR in November, from 17.9 million in  October (Seasonally Adjusted Annual Rate).

Read more at http://www.calculatedriskblog.com/2016/11/thursday-ism-mfg-auto-sales.html#ox6MCzUqsA12lwbv.99

by Bill McBride on 11/30/2016 07:20:00 PM

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Oil prices surge, smash trading volume records as OPEC, Russia agree output cut

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A gas pump is seen hanging from the ceiling at a petrol station in Seoul June 27, 2011.REUTERS/Jo Yong-Hak/File Photo

Oil prices surge, smash trading volume records as OPEC, Russia agree output cut

By Devika Krishna Kumar | NEW YORK

Oil prices surged more than 4 percent on Thursday, with Brent crude at its highest in about 16 months, extending gains after OPEC and Russia agreed to restrict output to reduce the global supply glut more quickly.

The Organization of the Petroleum Exporting Countries agreed on Wednesday to its first oil output reduction since 2008 after the group’s leading producer Saudi Arabia accepted “a big hit” and dropped a demand that arch-rival Iran also slash output.

The deal also included OPEC’s first coordinated action in 15 years with non-member Russia. Azerbaijan said it was also willing to discuss cuts.

Doubts about the historic deal were widespread in the market.

“It remains to be seen how well they stick to the plan, but if OPEC hadn’t come to an agreement the probability is that oil prices would have fallen to $40 a barrel, perhaps even lower,” said Simon Flowers, chief analyst at consultancy Wood Mackenzie.

“Brent was trading at about $50 a barrel after the announcement, and we expect it to trade at an average of $55-$60 per barrel in 2017.”

Benchmark Brent futures for February delivery jumped as much as 5.1 percent to $54.53 a barrel, the highest since July 27, 2015. By 12:28 p.m. EST (1728 GMT), Brent was up $2.34, or 4.5 percent, at $54.18 a barrel.

U.S. crude rose $2.06, or 4.2 percent, to $51.50. Its session high was $51.80 a barrel, 13 cents below its 2016 high.

U.S. refined products also rose along with crude – ultra low sulfur diesel (ULSD) futures soared as much as 5.5 percent to its highest in more than a year while gasoline futures jumped as much as 6 percent.

The OPEC deal triggered frenzied trading, with Brent futures hitting record trading volumes for February and March, when the supply cuts should start to be visible in the market.

The Intercontinental Exchange Inc also said ICE Brent crude futures hit a daily volume record of 1.96 million contracts on Wednesday.

Even after Thursday’s steep rise, oil prices remained about half their mid-2014 levels, when prices began to collapse to the lowest in a generation.

OPEC produces a third of global oil, or around 33.6 million bpd, and the deal aims to reduce output by 1.2 million bpd from January 2017, similar to January 2016 levels.

“It’s clearly too soon to know what beyond the short-term market gain will be the consequences of this mini-renaissance of OPEC – for other producers and for the group itself,” Credit Suisse analysts said.

Others noted that the cuts could leave the field open for other producers, especially U.S. shale drillers.

“We do not believe that oil prices can sustainably remain above $55 per barrel, with global production responding first and foremost in the U.S.,” Goldman Sachs said.

The head of the International Energy Agency Fatih Birol warned of greater volatility after the OPEC deal.

“Unlike in the past OPEC decisions, if prices move to around $60, a substantial amount of oil in United states is ready to come to the markets,” Birol said.

Coinciding with the OPEC cuts, supply of the four major North Sea grades of crude oil will hit a one-year high next month, according to monthly loading programs.

(Additional reporting by Christopher Johnson in London, Henning Gloystein and Keith Wallis in Singapore; Editing by Marguerita Choy and David Gregorio)

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Published at Thu, 01 Dec 2016 04:57:56 +0000

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Fed’s Beige Book: Modest to moderate expansion, Tightening labor market

 

Fed’s Beige Book: Modest to moderate expansion, Tightening labor market

by Bill McBride on 11/30/2016 02:33:00 PM

 Fed’s Beige Book “Prepared at the Federal Reserve Bank of Cleveland based on information collected on or before November 18, 2016.”

Reports from the twelve Federal Reserve Districts indicate that the economy continued to expand across most regions from early October through mid-November. Activity in the Boston, Minneapolis, and San Francisco Districts grew at a moderate pace, while Atlanta, Chicago, St. Louis, and Dallas cited modest growth. Philadelphia, Cleveland, and Kansas City cited a slight pace of growth. Richmond characterized economic activity as mixed, and New York said activity has remained flat since the last report. Outlooks were mainly positive, with six Districts expecting moderate growth.

A tightening in labor market conditions was reported by seven Districts, with modest employment growth on balance. Districts noted slight upward pressure on overall prices..
emphasis added

And on real estate:

Residential real estate activity improved across Districts. Reports about existing- and new-home sales were mixed, but most Districts noted a slight to modest increase during the period. Residential construction was up in the Cleveland, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, and Dallas Districts. Home prices grew in many Districts, including Boston, Philadelphia, Cleveland, Atlanta, St. Louis, Kansas City, and San Francisco. Philadelphia reported that the strength of the single-family market is in high-end housing. In contrast, Kansas City reported that sales of low- and medium-priced homes continued to outpace sales of higher-priced homes. Dallas reported that the sales of lower-priced homes remained solid. Home inventories were generally reported to be low or declining and restraining sales growth. Boston, Philadelphia, Cleveland, Richmond, and Minneapolis reported low or decreasing inventories. Reports on inventory levels varied in Atlanta, while inventories held steady in Kansas City.

Commercial construction activity moved higher in the New York, Cleveland, Richmond, Atlanta, St. Louis, Kansas City, and San Francisco Districts. In contrast, Minneapolis noted a slowing in commercial construction. The Boston, Richmond, Minneapolis, and San Francisco Districts reported increases in leasing activity, while Philadelphia noted a lull in nonresidential leasing growth compared with the prior period. Dallas reported leasing activity as mostly unchanged. Commercial sales activity continued to be robust in Minneapolis and grew modestly in Kansas City. Ongoing multifamily construction has been steady at a fairly high level in New York. Multifamily construction varied in the Atlanta District and slowed somewhat in Richmond, Minneapolis, and San Francisco.

Real estate is decent.

Read more at http://www.calculatedriskblog.com/2016/11/feds-beige-book-modest-to-moderate.html#4M6dZgxDm5vq7ehl.99

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Published at Wed, 30 Nov 2016 19:33:00 +0000

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