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

by stevepb from Pixabay

 

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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Schedule for Week of May 21, 2017

by geralt from Pixabay

Schedule for Week of May 21, 2017

by Bill McBride on 5/20/2017 08:11:00 AM

The key economic reports this week are April New and Existing Home sales, and the second estimate of Q1 GDP.

—– Monday, May 22nd —–

8:30 AM: Chicago Fed National Activity Index for April. This is a composite index of other data.

—– Tuesday, May 23rd —–

New Home Sales10:00 AM ET: New Home Sales for April from the Census Bureau.

This graph shows New Home Sales since 1963. The dashed line is the March sales rate.

The consensus is for a decrease in sales to 604 thousand Seasonally Adjusted Annual Rate (SAAR) in April from 621 thousand in March.

10:00 AM: Richmond Fed Survey of Manufacturing Activity for May.

—– Wednesday, May 24th —–

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

9:00 AM: FHFA House Price Index for March 2017. This was originally a GSE only repeat sales, however there is also an expanded index.

Existing Home Sales10:00 AM: Existing Home Sales for April from the National Association of Realtors (NAR). The consensus is for 5.67 million SAAR, down from 5.71 million in March.

Housing economist Tom Lawler estimates the NAR will report sales of 5.56 million SAAR for April.

During the day: The AIA’s Architecture Billings Index for April (a leading indicator for commercial real estate).

2:00 PM: FOMC Minutes for the Meeting of May 2 – 3, 2017

—– Thursday, May 25th —–

8:30 AM ET: The initial weekly unemployment claims report will be released. The consensus is for 237 thousand initial claims, up from 232 thousand the previous week.

11:00 AM: the Kansas City Fed manufacturing survey for May.

—– Friday, May 26th —–

8:30 AM: Durable Goods Orders for April from the Census Bureau. The consensus is for a 0.9% decrease in durable goods orders.

8:30 AM: Gross Domestic Product, 1st quarter 2017 (Second estimate). The consensus is that real GDP increased 0.8% annualized in Q1, up from the advance estimate of 0.7%.

10:00 AM: University of Michigan’s Consumer sentiment index (final for May). The consensus is for a reading of 97.6, down from the preliminary reading 97.7.

Published at Sat, 20 May 2017 12:11:00 +0000

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Traders renew bets on U.S. rate increase in June

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Traders renew bets on U.S. rate increase in June

U.S. interest rates futures fell on Friday, suggesting traders revived bets the Federal Reserve would raise interest rates in June as financial markets recovered from their sharp losses earlier this week.

While this week’s data supported the notion the U.S. modest economic expansion remains intact, the dollar and Wall Street stocks tumbled on Wednesday due to concerns that the widening probes into U.S. President Donald Trump’s 2016 presidential campaign’s possible ties with Russia would hamper the passage of tax cuts and other federal fiscal stimulus.

Since Thursday, the greenback .DXY and equities prices have rebounded, rekindling bets the U.S. central bank remains on track for further rate increases later this year, analysts said.

Encouraging data on jobless claims and business activity in the U.S. Mid-Atlantic region on Thursday helped to bolster investor confidence in the economy.

“In response to the strong data and rebound in stocks, Fed pricing partly reversed the move Wednesday to further take out much of anything past June and start to even call June more into question,” Morgan Stanley economist Ted Wieseman wrote in a research note.

On Wednesday, the Dow and S&P 500 suffered their biggest one-day percentage drop since Sept. 9, while the dollar index touched its lowest level since Nov. 9.

Traders shrugged off comments on Friday from St. Louis Fed President James Bullard who said the Fed’s expected rate-hike path may be too aggressive in the wake some recent weaker-than-expected economic data.

On Tuesday, the government said housing starts unexpectedly fell 2.6 percent in April, while industrial output recorded a 1 percent increase last month, the biggest gain in more than three years.

Federal funds futures implied traders saw about a 74 percent chance the Federal Reserve would raise interest rates by a quarter point to 1.00-1.25 percent FFM7 FFN7 at its June 13-14 policy meeting, CME Group’s FedWatch program showed.

This compared with a 65 percent probability on Wednesday, which was the lowest since April 21.

Fed funds futures suggested traders priced in a 45 percent chance the U.S. central bank would increase key short-term rates to 1.25-1.50 percent by its December policy meeting FFZ7.

This was higher than Wednesday’s 38 percent which was the lowest since April 19.

(Reporting by Richard Leong; Editing by Alistair Bell)
Published at Fri, 19 May 2017 18:11:34 +0000

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Wall St. retreats after S&P, Nasdaq hit record highs

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Wall St. retreats after S&P, Nasdaq hit record highs

By Yashaswini Swamynathan

U.S. stocks reversed course as some investors locked in gains after the S&P 500 and the Nasdaq hit record highs, with healthcare and industrial stocks leading the decliners.

While strong first-quarter earnings supported the indexes in the past few weeks, global geopolitical tensions and developments in Washington could unsettle the market’s record-setting spree.

Investors turned cautious after reports that President Donald Trump disclosed highly classified information to Russia’s foreign minister about a planned Islamic State operation.

The latest development could distract the Trump administration from its priorities such as tax reform, healthcare and simpler regulations.

The dollar index .DXY – which measures the greenback against six other major currencies – hit a six-month low, while prices of safe-haven gold rose.

“This kind of backdrop is very conducive to stock-pickers and that is helping drive idiosyncratic positions across markets,” said Matt Miskin, senior capital markets research analyst at John Hancock Investments in Boston, Massachusetts.

Home Depot’s (HD.N) first-quarter performance was a bright spot. The stock gave the biggest boost to the S&P 500 and the Dow with a 1.7 percent gain.

A report from the Federal Reserve showed U.S. factory output in April rose at its fastest clip in three years, supporting a view that economic growth was rebounding in the second quarter after a sluggish start to the year. [nTLAGGED9W]

“As long as we have growth, whether it is earnings or economic data, the markets are likely to be able to take such (political) headlines in stride,” Miskin said.

At 11:05 a.m. ET (1505 GMT), the Dow Jones Industrial Average .DJI was down 15.73 points, or 0.07 percent, at 20,966.21, the S&P 500 .SPX was down 3.09 points, or 0.13 percent, at 2,399.23 and the Nasdaq Composite index .IXIC was up 1.06 points, or 0.02 percent, at 6,150.73.

Ten of the 11 major S&P 500 sectors were lower. Healthcare .SPXHC was the top loser with a 0.5 percent decline.

Pfizer (PFE.N) was down 1.8 percent at $32.54 after Citigroup downgraded the drug developer’s stock to “sell” from “neutral”.

Staples (SPLS.O) was off 5 percent and was the top percentage loser on the S&P 500 after the office supplies retailer reported a decline in quarterly sales.

Akebia Therapeutics (AKBA.O) was up 15 percent at $14.85 after the drug developer entered into an agreement with Vifor Pharma Group, which also made a $50 million equity investment in the company.

Declining issues outnumbered advancers on the NYSE by 1,755 to 978. On the Nasdaq, 1,686 issues fell and 979 advanced.

The S&P 500 index showed 50 new 52-week highs and 12 new lows, while the Nasdaq recorded 85 new highs and 40 new lows.

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Saumyadeb Chakrabarty)
Published at Tue, 16 May 2017 15:45:25 +0000

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The dollar’s Trump bump has vanished

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The Trump rally, 100 days in
The Trump rally, 100 days in

President Trump’s victory and promise to implement an “America First” agenda propelled the US dollar to 13-year highs.

But the Trump bump has proved fleeting for the greenback, which has lost virtually all of its post-election gains.

The US dollar lost further ground against rivals on Tuesday. The euro jumped 1% to $1.109, the strongest level since the days before Trump’s victory in November.

Likewise, the dollar index, which measures the greenback against a basket of rival currencies, dropped to territory unseen since just after the election.

So why is the dollar in the doldrums? Currency analysts point to a range of factors, including relief over France’s presidential election, weak US economic growth to kick off this year and concern that Trump’s political trouble will doom his economic agenda.

“Today, your key driver is the fact that Trump is facing an existential threat here,” said Karl Schamotta, director of global market strategy at Cambridge Global Payments.

Schamotta pointed to the political fallout over reports that Trump shared classified information with a Russian official. (Trump has defended his conversations with Russia.)

Win Thin, a currency strategist at Brown Brothers Harriman, similarly blamed the new dollar weakness in part on Trump’s latest Russia controversy.

The news “not only heightened ongoing concerns about the Administration’s ties with Russia but also is seen by some as jeopardizing the administration’s aggressive legislative agenda,” Thin wrote in a report on Tuesday.

Trump’s economic proposals — slashing taxes, cutting regulation and pumping up infrastructure spending — lifted the US dollar after the election because many thought they could give the American economy a shot in the arm.

But Trump’s agenda has been delayed by political setbacks, as evidenced by the failure thus far to repeal and replace Obamacare.

However, other currency analysts think the US dollar’s stumble has little to do with Trump. They point to how the stock market appears unfazed by Trump’s problems, with the S&P 500 hitting a record high on Tuesday.

“Trump’s new soap opera story,” isn’t a main driver for the dollar, Peter Boockvar, chief market analyst at The Lindsey Group, wrote in a report.

Instead, Boockvar believes the greenback has been hurt by shifts in the global economy and central bank policy. He pointed to how the euro has been helped by a record European trade surplus in March, highlighted by a 13% jump in goods exports.

While Europe’s economy has regained momentum, the US slowed down significantly at the beginning of this year. First-quarter GDP was just 0.7%, the weakest in three years. That’s a far cry from the 3% or 4% growth Trump has been promising.

“It’s not full steam ahead here by any means,” said Schamotta.

Another big difference between the US and Europe: the euro has recently benefited from positive political news. France relieved global markets by electing Emmanuel Macron as its next president over Marine Le Pen, who had called for the nation to dump the euro.

The retreat for the US dollar isn’t great news for Americans planning to travel abroad. Don’t expect a big discount while shopping in Europe.

But the currency shift is just fine for big multinationals like Nike(NKE) and Apple(AAPL, Tech30) that sell lots of stuff overseas. A strong dollar makes an iPhone more expensive to foreign buyers.

That’s why last month Trump told The Wall Street Journal the dollar is “getting too strong.”

“Partially that’s my fault because people have confidence in me,” Trump said at the time.

 Published at Tue, 16 May 2017 16:00:43 +0000

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Technicals stand out amid a quiet market

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Technicals stand out amid a quiet market

By Rodrigo Campos and Terence Gabriel| NEW YORK

As the strongest earnings season since 2011 draws to a close, and with the S&P 500 .SPX and Nasdaq Composite .IXIC hovering near record highs, the biggest concern for some market analysts is, well, the lack of concern.

The largest daily move on the S&P 500 in almost three weeks was only 0.4 percent. The small daily moves are partly the reason for a more than 20-year closing low hit this week on the CBOE Volatility index .VIX, a measure of investor anxiety.

“Most of what you’ll find that is outright negative will have to do with sentiment,” said Marc Pado, president at DowBull.com in San Francisco.

“People worried about the market on a technical basis are worried because there is too much complacency or optimism, but not on an indication that there is some kind of top.”

The S&P 500 posted record closing highs twice this week, but both were lower than the intraday high set March 1, just below 2,401. The intraday record high set Tuesday, near 2,404, doesn’t signal a breakout from the resistance level set some 11 weeks ago.

Precisely because of the sideways move, momentum has not mirrored what was seen in early March. The 14-day momentum measure of the S&P peaked this year on March 1. On Friday it closed at its weakest level in nearly three weeks.

“The bigger risk now (to the stock market) would be overbought conditions, even more overseas than in the U.S.,” said Katie Stockton, chief technical strategist at BTIG in New York.

“If momentum doesn’t stay strong enough, which I think it will, that would be a risk to the market. It’s a matter of momentum remaining strong enough.”

BREADTH THINNING

The Nasdaq Composite, which closed Friday almost 4 percent above its March 1 close and set intraday and closing records this week, is showing a particularly damning pattern in terms of breadth.

The 50-day average of advancing names on Nasdaq peaked this year in mid-January and is in a clear trend lower. It hit its lowest level this year on May 5, and the spread with the 50-day average of decliners has been in and out of negative territory since early March.

Waning breadth suggests the market advances on less than solid ground as fewer and fewer stocks participate to the upside.

On the S&P 500 the 50-day advancers average is at its lowest level since the Nov. 8 U.S. presidential election. However, with the index trading basically sideways since the March record, the signal can be misleading.

“In every one of the (previous) legs higher we saw internal breadth indicators confirming the new high. We haven’t seen that over the last week but the high was marginal only,” said Paul Hickey, co-founder of research firm Bespoke Investment Group in Harrison, New York, who remains with a positive view of the market.

“We see this as the continuation of a consolidation period the markets have been in since March 1.”

The case is even darker for the 30-component Dow industrials, where the 50-day average of advancers is also near the lowest level since November. Apple Inc (AAPL.O) alone is responsible for 25 percent of the Dow’s year-to-date advance, even if the index is not market-cap weighted.

There’s more bad news for Dow followers. The Dow Transport Average .DJT, which peaked with the industrials on March 1, is more than 6 percent below its high, while the industrials are just 1 percent below their record.

A record on the industrials without the confirmation of the transports would be another bad omen for stocks. Timing can be blunt, but there was divergence present between these two averages at major tops in 2000, 2007 and 2015.

(Reporting by Rodrigo Campos and Terence Gabriel; Editing by Leslie Adler)
Published at Sat, 13 May 2017 19:31:58 +0000

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Schedule for Week of May 14, 2017

Schedule for Week of May 14, 2017

by Bill McBride on 5/13/2017 08:11:00 AM

The key economic report this week is April Housing Starts.

For manufacturing, April industrial production, and the May New York, and Philly Fed manufacturing surveys, will be released this week.

—– Monday, May 15th —–

8:30 AM ET: The New York Fed Empire State manufacturing survey for May. The consensus is for a reading of 7.0, up from 5.2.10:00 AM: The May NAHB homebuilder survey. The consensus is for a reading of 68, unchanged from 68 in April. Any number above 50 indicates that more builders view sales conditions as good than poor.

—– Tuesday, May 16th —–

Total Housing Starts and Single Family Housing Starts8:30 AM: Housing Starts for April.This graph shows total and single unit starts since 1968.

The graph shows the huge collapse following the housing bubble, and then – after moving sideways for a couple of years – housing is now recovering (but still historically low).

The consensus is for 1.256 million, up from the March rate of 1.215 million.

Industrial Production9:15 AM: The Fed will release Industrial Production and Capacity Utilization for April.

This graph shows industrial production since 1967.

The consensus is for a 0.4% increase in Industrial Production, and for Capacity Utilization to increase to 76.3%.

—– Wednesday, May 17th —–

7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.11:00 AM: The New York Fed will release their Q1 2017 Household Debt and Credit Report

—– Thursday, May 18th —–

8:30 AM ET: The initial weekly unemployment claims report will be released. The consensus is for 240 thousand initial claims, up from 236 thousand the previous week.8:30 AM: the Philly Fed manufacturing survey for May. The consensus is for a reading of 19.6, down from 22.0.

—– Friday, May 19th —–

10:00 AM: Regional and State Employment and Unemployment (Monthly) for April 2017

Published at Sat, 13 May 2017 12:11:00 +0000

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Trump rally is built on Obama-like hope

Trump rally is built on Obama-like hope

  @lamonicabuzz

The market rally has taken a pause this week. Stocks have been relatively flat as the Trump circus in Washington continues to dominate the financial headlines.

But even though the Dow, S&P 500 and Nasdaq haven’t moved substantially higher in the past few days, they are all still up since Inauguration Day and not far from all-time highs.

Wall Street remains upbeat about the Trump agenda. The promise of rolling back Obama-era rules on health care and banks, reforming the tax code and spending more to rebuild the nation’s infrastructure to stimulate the economy has investors excited.

How excited? Despite the firing of James Comey and a general sense from the mainstream media that the Trump White House is in disarray, CNNMoney’s Fear & Greed Index, which looks at seven measures of market sentiment, hit Greed levels this week.

The index was registering signs of Fear just a month ago, shortly after the Trump administration pulled its plans in late March for a vote in Congress to repeal and replace Obamacare.

wall street sign greed

The Dow even went on an eight-day losing streak, its longest since 2011.Since then, Republicans in the House were able to push a new plan to dump the Affordable Care Act.

Corporate earnings — particularly from tech companies — have been strong as well. And Wall Street is brushing off the Comey/FBI drama.

The VIX(VIX), a gauge of market volatility that is one of the components of the Fear & Greed Index, fell to a more than two-decade low earlier this week.

Other parts of the Fear & Greed Index are flashing even more bullish signs.

More stocks are hitting 52-week highs than lows, for example. And investors are increasingly selling safe haven bonds to get back into stocks.

Ironically enough, traders and fund managers appear to be feeling an emotion that was one of the trademarks of President Obama’s 2008 campaign — hope.

Adam Abelson, chief investment officer of Stralem & Co., says investors are still hopeful Trump will fulfill his economic pledges, even though the current political reality would suggest that many of his plans could be pushed to later this year or even 2018.

“The allure of deregulation is strong,” Abelson said, adding that many on Wall Street are clinging to the promise of what Trump might eventually do. “Hope is a powerful thing these days.”

Abelson notes that despite all the incendiary Trump tweets attacking Corporate America over the past few months, Trump is still viewed as being an ally to large companies and Wall Street.

“Everything Trump represents is great for big business and investors,” Abelson said.

But he added that it’s still not clear whether this optimism will help average Americans, many of whom voted for Trump because they felt he could get the job market and overall economy to improve at a faster pace.
Published at Fri, 12 May 2017 16:15:00 +0000

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Euro Island

by PeteLinforth from Pixabay

 

Euro Island

The 2nd round of the French presidential elections almost seemed procedural to me in that Macron was clearly the front runner plus it was clear that various voting blocks would coalesce in order to prevent Le Pen from gaining a majority. So suffice to say that Monsieur Macron’s overwhelming 65% win wasn’t exactly a big surprise to me. Which is exactly why I had been accumulating a big stack of € cash ahead of the final round. Although I anticipated a bit of weakness after the election I did not think we would find ourselves near the lower edge of the current island again.

2017-05-10_EURUSD_island

Now it’s quite possible that the current sell off is just an extended round of profit taking, a.k.a. sell the news. But it’s gone a bit further than I for one had expected. The daily panel currently shows a very well developed island formation with a 100 pip gap just below.

2017-05-10_6E_volume

I think there’s a good chance to see a drop to a little further below to 1.085 at which point the EUR bulls will have to show their cards. Either run it back higher or let her drop through the gap and then regroup. As you can see there ‘s not much accrued volume within the gap which should accelerate a slider lower.

Caveat – I do however not see a huge potential for an extended sell off and based on the current formation it seems that the EUR is going to remain above 1.065 at least for the foreseeable future. Unfortunately for me of course as life is going to be a wee bit more expensive for me over here in Europe. If the EUR continues to strengthen from here I may even be forced to cut down my nudie bar visits from four to three times per week. The horror!

2017-05-10_soybeans_addendum

By the way whoever is making market in soybeans did a great job stopping me out and bouncing right back. No comment…

2017-05-10_soybean_meal_update

Speaking of crack smokers I don’t know what’s going on in soybean meal but I’m starting to get dizzy. More seriously though – if you’re deployed just like yours truly then this can be either very good or very bad. Good as in that it establishes more and more context above your entry position which later provides valuable buffer space above your b/e spot. Bad as in well, just take a look at soybeans above….

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.

P.S.: About the title image – I couldn’t find a good EUR island, so bite me
Published at Wed, 10 May 2017 13:19:59 +0000

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Is the Market Getting Stronger or Weaker?

by joslex from Pixabay

Is the Market Getting Stronger or Weaker?

Here’s a useful measure of strength and weakness of the US stock market for the intraday trader (raw data from e-Signal).  Imagine that you are tracking every stock traded on every exchange every minute and computing how many stocks are making fresh new highs for that trading day minus the number making fresh new lows that day.  That tells you how strength and weakness are emerging, across stocks, through the trading day.  

Most of the time, the new highs/lows measure will track price well.  When we have a trending market, we’ll see an expansion of new highs over new lows and the measure staying consistently positive or negative (depending on trend direction).  Oscillating above and below a neutral zero point is more common in range bound, rotational environments.

Note how, on Friday, we tested the day session lows in ES (blue line) and yet the new highs/lows measure (red line) held well above their morning lows.  This was an important sign that selling was not gaining breadth.  We then saw the new highs/lows climb steadily higher with price through the afternoon.  The positive and expanding breadth was an important tell that you wanted to be on the long side of the market.  There was no emerging weakness to fade, intraday.

An interesting facet of this time series is that you can track the new highs/lows during premarket hours to see if breadth is strengthening or weakening among stocks trading before the NY open.  This sets up valuable comparisons when the market opens, as on Friday, and breadth immediately deteriorates from premarket levels.  This is a useful indication that early morning participants who rely on liquidity in the opening minutes are distributing shares.  That information helpfully flipped me from long to short in my early morning trades.

At a broader level, this is an example of how traders can benefit from looking at new and different information.  There are many stagnating traders who look at the same information in the same old ways.  Collecting new data sets allows for exploration of patterns, some of which can be useful in innovating and finding fresh sources of edge.

 

Published at Sat, 06 May 2017 09:51:00 +0000

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Schedule for Week of May 7, 2017

by geralt from Pixabay

 

Schedule for Week of May 7, 2017

by Bill McBride on 5/06/2017 08:11:00 AM

The key economic reports this week are Retail Sales and the Consumer Price Index (CPI).

—– Monday, May 8th —–

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

—– Tuesday, May 9th —–

6:00 AM ET: NFIB Small Business Optimism Index for April.

Job Openings and Labor Turnover Survey10:00 AM: Job Openings and Labor Turnover Survey for March 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 increased in February to 5.743 million from 5.625 million in January.

The number of job openings (yellow) were up 3% year-over-year, and Quits were up 3% year-over-year.

—– Wednesday, May 10th —–

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

—– Thursday, May 11th —–

8:30 AM ET: The initial weekly unemployment claims report will be released. The consensus is for 244 thousand initial claims, up from 238 thousand the previous week.

8:30 AM: The Producer Price Index for April from the BLS. The consensus is for 0.2% increase in PPI, and a 0.2% increase in core PPI.

—– Friday, May 12th —–

Retail Sales8:30 AM ET: Retail sales for April will be released.  The consensus is for a 0.6% increase in retail sales.

This graph shows retail sales since 1992 through March 2017.

8:30 AM: The Consumer Price Index for April from the BLS. The consensus is for a 0.2% increase in CPI, and a 0.2% increase in core CPI.

10:00 AM: University of Michigan’s Consumer sentiment index (preliminary for May). The consensus is for a reading of 97.3, up from 97.0 in April.

10:00 AM: Manufacturing and Trade: Inventories and Sales (business inventories) report for March.  The consensus is for a 0.1% increase in inventories.

Published at Sat, 06 May 2017 12:11:00 +0000

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Yellen’s solution for the US economy: More working women

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Unemployment rate at lowest in 10 years
Unemployment rate at lowest in 10 years

If women worked at the same rate as men, the US economy would be 5% bigger, according to Federal Reserve Chair Janet Yellen, who cited a 2012 study.

“We, as a country, have reaped great benefits from the increasing role that women have played in the economy,” Yellen said Friday at Brown University, her alma mater, which is celebrating 125 years of admitting female students. “But evidence suggests that barriers to women’s continued progress remain.”

Yellen shed light on the legacy and challenges faced by women in the workforce.

Her chief point: America needs better policies to encourage more women to work full careers. Sustained careers could help narrow the gender wage gap and boost growth overall.

Women working full-time still earn about 17% less than men per week, Yellen said. Even when comparing men and women in the same job positions with similar backgrounds, the wage gap is 10%.

Yellen also warned that the US is falling behind other advanced economies in Europe. The rate of working women in the US economy — known as female labor force participation — ranks 17th out of 22 advanced nations.

What’s troubling is that female participation among those who could be working has declined since 2000. Participation of “prime age” women between 25 and 54 years old is at 74.7% today, down from its peak of 77.3% in 2000, though it did make progress last year.

Male participation is much higher at 88.8%.

Yellen argued that European economies are seeing more working women due to expanded parental leave policies, increased affordability of child care and more opportunities for part-time work.

Citing research, Yellen said if the US had such workplace policies as those in Europe, female participation could jump to 82% from 74.3%.

That would boost the economy, she argued.

“We cannot all succeed when half of us are held back,” Yellen said, quoting Malala Yousafzai, the Pakistani advocate for women’s education and Nobel Prize winner.
Published at Fri, 05 May 2017 19:47:38 +0000

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Stocks End Mixed Despite Positive Employment Report

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Stocks End Mixed Despite Positive Employment Report

By Justin Kuepper | May 5, 2017 — 5:15 PM EDT

The major U.S. indexes were mixed over the past week after large employment gains. According to the Bureau of Labor Statistics, U.S. job growth rebounded sharply in April with 211,000 jobs added following a measly 79,000 gain in March. The headline unemployment rate fell to a 1-year low of 4.4% with substantial gains in leisure and hospitality, healthcare, and social assistance, as well as business and professional services payrolls. The gains support the notion that the 0.7% first quarter GDP growth was merely a transitory issue.

International markets were mixed over the past week. Japan’s Nikkei 225 rose 4.43%; Germany’s DAX 30 rose 5.55%; and, Britain’s FTSE 100 rose 2.47%. In Europe, equity indexes moved largely higher as France wraps up its presidential election this weekend with the centrist Emmanuel Macron leading the polls. In Asia, the risk of conflict in North Korea appears to have decreased, and Japanese equities recovered a lot of lost ground, although some risk remains and investors remain cautious in the region.

The S&P 500 SPDR (ARCA: SPY) rose 0.68% over the past week. After trending below last month’s R1 resistance levels, the index moved marginally higher toward its new R1 resistance level at $240.90. Traders should watch for a breakout from these levels toward R2 resistance at $243.73 or a move lower to its pivot point at $236.71. Looking at technical indicators, the RSI is getting lofty at 65.70, while the MACD remains in a bullish uptrend.

The Dow Jones Industrial Average SPDR (ARCA: DIA) rose 0.33% over the past week. After breaking out from its descending triangle chart pattern, the stock has trended sideways over the past couple of weeks. Traders should watch for a breakout to re-test its prior highs near R1 resistance at $211.85 or a move lower to its pivot point and 50-day moving average near $207.39. Looking at technical indicators, the RSI appears lofty at 63.68, but the MACD remains in a bullish uptrend dating back to late-April.

The PowerShares QQQ Trust (NASDAQ: QQQ) rose 1.13% over the past week, making it the best performing major index. After breaking out from its price channel, the index continued to make gains toward R1 resistance at $138.09. Traders should watch for a breakout from these levels toward R2 resistance at $140.20 or a move lower to its trend line support at around $135.75. Looking at technical indicators, the RSI appears massively overbought at 77.31, but the MACD shows a continuation in the bullish reversal dating back to late-April.

The iShares Russell 2000 Index ETF (ARCA: IWM) fell 0.05% over the past week making it the worst performing major index. After briefly hitting R1 resistance at $142.70, the index moved lower to the middle of its price channel and the pivot point at $138.18. Traders should watch for a move higher to re-test R1 resistance or a move lower to the lower trend line and S1 support at around $134.54. Looking at technical indicators, the RSI appears neutral at 55.36, but the MACD could see a near-term bearish crossover.

The Bottom Line

The major U.S. indexes were mixed over the past week with small-caps underperforming and technology stocks outperforming. Next week, traders will be watching several key economic indicators including jobless claims on May 11 and retail sales and consumer sentiment data on May 12. Investors will also be closely watching the French elections for any upset where the nationalist Marine Le Pen might secure a victory and potentially destabilize the euro area.

Note: Charts courtesy of StockCharts.com. As of the time of writing, the author had no holdings in the securities mentioned.
Published at Fri, 05 May 2017 21:15:00 +0000

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Shifting World Economies Present Massive Opportunities for Investors

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tags
By Unsplash from Pixabay

Shifting World Economies Present Massive Opportunities for Investors

By: Chris Vermeulen | Fri, May 5, 2017


Recent news from the World Economic Forum (weforum.org) has outlined recent core global economic functions and relationships (https://www.weforum.org/agenda/2017/03/worlds-biggest-economies-in-2017).  We found this interesting in both factual data and interpreted data and we wanted to present our analysis to you, our valued members.

The factual data presented by the World Economic Forum is clearly showing that China’s growth as an emerging, diversified economy is already displacing some other emerging economies (India, Brazil, Italy, France and Canada). When we consider the maturity of these economies as well as their total output (see the infographic below), we begin to understand the mature global economies are likely saddled with more debt as multiple global economic crisis events have transpired since 2000. The graphic below clearly illustrates that many North American and European countries have gone further into debt since the initial Dot Com bubble event took place near the turn of the century (2000).

Gross Debt Ratio 2000 – 2013

Country Gross Debt Ratio 2000 - 2013

Interestingly, many of the countries that have acquired so much new debt since 2000 are also the worlds largest economies and, therefore, are much more capable of experiencing continued economic growth cycles to address and pay down these debt expansions.

Largest Economies 2017

World's Biggest Economies

It is our opinion that the expansion of debt across the globe since the year 2000 will find a means to propel economic growth in many of these most mature markets vs. transition to younger emerging markets with higher risks. Our opinion is based on two primary factors; longer-term economic growth and contraction cycles and the understanding that capital always attempts to move towards the safest net positive return venues at times of uncertainty. Although we believe certain opportunities will continue to exist in younger emerging markets, we believe these opportunities should be viewed as much shorter term rotational plays in global markets that may present a higher risk opportunity for valuation or price rotation. We strongly believe the major growth opportunities will continue to be present in the more mature and economically diverse economies that continue to drive global growth and propel many of the emerging markets opportunities.

Recently, many people have been talking about the US GDP growth predictions and if the US growth will ever get back to near 3%. The word “luck” seems to pop up in regards to reaching this level ever again. We disagree with the concept that “luck” has anything to do with this level being reached in the near future. We believe the longer-term economic cycles will begin to play a more tangible role in all global economies over the next 3~7 years. We also believe these cycles will present major headwinds for certain emerging markets that may equate to contagion type crisis events for many.

We believe these emerging market crisis events will drive investment capital away from many of these debt laden emerging markets as these events unfold and push capital investment into stronger, more stable, mature economies.  This dramatic shift of capital deployment will further strengthen these established global economies and allow they to experience economic growth on a scale that has not been seen since the 1950s~1980s.

Global Economy 101

Global Economy

Many people fail to realize the world has experienced at least 7 of these major cycle events in recent history (from the 15th century till now). Empires have fallen. Emerging markets have collapsed. Dynamics and wealth shift dramatically in the midst of these major cycle events and many times the strongest and most capable empires are the one that are able to restructure, rebuild and thrive.

When we consider this list of the top 20 countries with the highest debt to GDP ratio, we see that nearly 80% of them are what we would consider “fledgeling economies”. Debt for these countries is a method of attempting to launch themselves onto the global playing field and a process of the easy money policies of the last 20+ years. The newer European Union and BRICs hype of the late 1990s and early 2000s likely drove many of these countries to have larger and larger debt requirements in an attempt to compete on a larger global level. Now, as we believe this major cycle event will begin to play out over the next few years, we believe the opportunity for investors will be to chase the rotation of capital around the globe as it attempts to find safe and stable growth opportunities.

20 countries with highest debt to GDP ratios

20 countries with highest debt to GDP ratios

We believe the opportunities for strategic investors will be seen and experienced in global ETFs, major global Indexes, precious metals and currencies. We believe the opportunities for massive moves are just starting and key elements of the proposed global capital migration will begin to become noticeable over the next 6 to 18 months. If you wish to continue receiving our updates and detailed trading signals, please visit ActiveTradingPartners.com or TheGoldAndOilGuy.com.  We keep our clients up to date with the highest levels of forward looking market analysis and trading opportunities. We welcome you to become a member and begin profiting from our shared experience.

In closing, take a look at these sample Emerging market charts. Notice the multi-year downward sloping peaks correlating with global QE events. Notice how massive price rotation (30~60%) events happened when QE events ended or when these economies were left to operate without outside impetus? Now, imagine the price rotation that may occur with a major, “generational”, event cycle playing out? Where do you think all that capital will run to for deployment and safety?

GMM Emerging Markets Weekly Flag

GMM Emerging Markets Weekly Flag

EET Ultra Emerging Markets Weekly Flag

EET Ultra Emerging Markets Weekly Flag

There are many new and exciting positions to be entered this month and we just added another two this week each with the potential for over 30% profit upon MRM breakout pattern.


Visit www.ActiveTradingPartners.com today to learn more.


Chris Vermeulen

Chris Vermeulen
President of AlgoTrades Systems
www.TheGoldAndOilGuy.com

10126 Hwy 126 East, RR#2
Collingwood, ON, L9Y 3Z1

Chris Vermeulen

Chris Vermeulen, founder of AlgoTrades Systems., is an internationally recognized
market technical analyst and trader. Involved in the markets since 1997.

Chris’ mission is to help his clients boost their investment performance while
reducing market exposure and portfolio volatility.

Chris is also the founder of TheGoldAndOilGuy.com, a financial education and
investment newsletter service. Chris is responsible for market research and
trade alerts for of its newsletter publication.

Through years of research, trading and helping thousands of individual investors
around the world. He designed an automated algorithmic trading system for the
S&P 500 index which solves his client’s biggest problem related to investing
in the stock market: the ability to profit in both a rising and falling market.

AlgoTrades’ automated trading systems allows
individuals to investing using either exchange traded funds or the ES mini
futures contracts. It is supported by many leading brokerage firms including:

– Interactive Brokers
– Trade MONSTER
– MB Trading
– OEC OpenECry
– The Fox Group
– Dorman Trading
– Vision Financial

He is the author of the popular book “Technical
Trading Mastery – 7 Steps To Win With Logic
.” He has also been featured
on the cover of AmalgaTrader Magazine, Futures Magazine, Gold-Eagle, Safe
Haven,The Street, Kitco, Financial Sense, Dick Davis Investment Digest and
dozens of other financial websites. His list of personal and professional
relationships approaches 25,000, people with whom he connects and shares
is market insight with out of his passion for trading.

Chris is a graduate of Seneca College where he specialized in business operations
management.

Chris enjoys boating, kiteboarding, mountain biking, fishing and has his ultralight
pilots license. He resides in the Toronto area with his wife Kristen and two
children.

Copyright © 2008-2017 Chris Vermeulen

All Images, XHTML Renderings, and Source Code Copyright © Safehaven.com
Published at Fri, 05 May 2017 08:27:17 +0000

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Oil stocks are the biggest losers of 2017

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The price of Nigeria's oil addiction
The price of Nigeria’s oil addiction

Oil stocks are the biggest losers of 2017

  @mattmegan5

Big Oil didn’t get invited to this year’s Trump party on Wall Street.

Even though President Trump is unabashedly pro-oil, the fossil fuel industry is once again under serious pressure. Oil stocks are drowning in a sea of cheap crude prices, which tumbled this week to a five-month low.

Six of the S&P 500’s bottom 10 stocks this year are in the oil business, led by 25% plunges from Transocean(RIG), Hess(HES) and Anadarko Petroleum(APC).

Crude prices rebounded by more than 2% on Friday, but the energy sector remains the worst-performing group of the S&P 500. It’s down 11% in 2017, a year that has otherwise been a strong one for the stock market.

The oil slump marks yet another reversal in the notoriously boom-to-bust industry. Wall Street piled back into oil stocks late last year as crude prices seemed to stabilize and OPEC’s willingness to finally cut production fueled hopes of higher prices to come.

But the long-awaited “rebalancing” of the oversupplied oil market hasn’t really happened, largely due to resurgent supply from US shale producers. Crude plummeted as low as $43.76 a barrel early on Friday, touching the lowest level since the OPEC supply cut in late November.

“When oil prices are rising quickly, investors are afraid of missing out so they pile in. But when there’s a sign of weakness like now, a lot of people bail,” said Brian Youngberg, senior energy analyst at Edward Jones.

Even Big Oil stalwarts are feeling the pain. Chevron(CVX) and ExxonMobil(XOM) are the second and third-worst performers on the Dow this year, trailing only Verizon.

The commodity slide has been driven by a myriad of factors, but it’s led by renewed concern that strong output from US shale producers in the Permian Basin and elsewhere will deepen the glut. Many analysts are predicting the surprisingly-strong shale rebound will lift the US to record output in 2018.

Investors have been caught off guard by the technological innovations and balance sheet improvements that have allowed shale to be competitive at prices that were once far too low.

There is “growing evidence of the ability of US shale to respond near $50/barrel and the availability of capital to support such activity,” Goldman Sachs strategists wrote in a report on Friday.

In fact, a number of American shale producers have recently signaled more output is coming as they focus on the most lucrative US shale plays.

Take Marathon Oil(MRO), for instance. On Friday, Marathon said that following its recent exit from the Canadian oil sands, 95% of its spending budget is devoted to US shale. Marathon also raised its forecast for 2018 output.

“Many shale producers are increasing their production guidance. That is spooking a lot of people that shale will offset the OPEC cuts,” said Youngberg.

In other words, US shale is threatening to further delay the rebalancing process.

Besides excess supply, oil has been dragged down by surprisingly-weak US demand for gasoline. Analysts have struggled to explain the demand drop-off, but they point to the fact that gasoline prices are up from early 2016’s very low levels and that new cars continue to guzzle less gas.

Some on Wall Street are concerned the oil trouble will spell trouble for other parts of the market and economy. That’s what happened in early 2016 when oil prices briefly crashed to $26 a barrel.

“Can oil derail the whole market? I often worry when there are large outlier moves in markets, and this oil move is looking like one,” Michael Block, chief market strategist at Rhino Trading, wrote in report to clients.

So far, that doesn’t look like the case. The Dow is flat this week, despite crude prices crashing 6%.

Regardless, shareholders in oil companies hope that Friday’s rebound for crude prices marks the beginning of a turnaround.

Many analysts express confidence that oil prices will eventually head higher, because that’s what is needed to attract new investment. Without that investment, there could be supply shortages in the future.

“The industry cannot survive on $50 or below oil prices over time,” said Youngberg. “From here we see upside. Investors just need to very patient and tolerant of the volatility. That’s a challenge.”
Published at Fri, 05 May 2017 15:54:21 +0000

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Wednesday: FOMC Announcement, ADP Employment, ISM non-mfg Survey

Wednesday: FOMC Announcement, ADP Employment, ISM non-mfg Survey

by Bill McBride on 5/02/2017 06:26:00 PM

A few excerpts from an FOMC preview by Goldman Sachs economist Spencer Hill:

• We expect the FOMC to keep policy unchanged next week and see only limited changes to the statement.

• Similar to the March statement, we expect constructive comments on economic activity, as we think Fed officials will view the slowdown in reported growth last quarter as temporary in nature …We do expect a brief acknowledgement of the softer March core inflation data …

• We look for the balance of risk assessment and the characterization of current policy (“accommodative”) to remain unchanged. We also believe the statement will probably leave out any explicit mention of fiscal policy, given the lack of incremental clarity on the legislative outlook since the March meeting.

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

• At 8:15 AM, The ADP Employment Report for April. This report is for private payrolls only (no government). The consensus is for 170,000 payroll jobs added in April, down from 263,000 added in March.

• At 10:00 AM, the ISM non-Manufacturing Index for April. The consensus is for index to increase to 55.8 from 55.2 in March.

• At 2:00 PM, FOMC Meeting Announcement. No change to policy is expected at this meeting.

Published at Tue, 02 May 2017 22:26:00 +0000

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Technical Market Report for April 29, 2017

The Wall Street bull is seen in the financial district in New York, U.S., March 7, 2017. REUTERS/Brendan McDermid

Technical Market Report for April 29, 2017

By: Mike Burk | Sat, Apr 29, 2017


The good news is:
• The NASDAQ composite (OTC) and the Russell 2000 (R2K) both hit all time highs last week.

The market had another good week.

New highs increased, new lows remained insignificant, while the secondaries outperformed the blue chips and volume picked up.

The Negatives

The market is over bought. The major indices are up 2.5% – 4.5% in the past 2 weeks.

The first chart covers the past 6 months showing the OTC in blue and a 10% trend (19 day EMA) of NASDAQ new highs (OTC NH) in green. Dashed vertical lines have been drawn on the 1st trading day of each month.

OTC NH moved sharply upward last week, but was far from confirming the new index high.

OTC and OTC NH

The next chart is similar to the one above except it shows the S&P 500 (SPX) in red and NY NH, in green, has been calculated with NYSE data.

The pattern is similar to the chart above.

SPX and NY NH

The Positives

The secondaries outperformed the blue chips and new lows remained at non threatening levels.

The next chart covers the past 6 months showing the OTC in blue and a 40% trend (4 day EMA) of NASDAQ new highs divided by new highs + new lows (OTC HL Ratio), in red. Dashed horizontal lines have been drawn at 10% levels for the indicator; the line is solid at the 50%, neutral, level.

OTC HL Ratio rose finishing the week at a very strong 81%.

OTC and OTC HL Ratio

The next chart is similar to the one above one except it shows the SPX in red and NY HL Ratio, in blue, has been calculated from NYSE data.

NY HL Ratio rose to finish the week at a very strong 89%.

SPX and NY HL Ratio

Seasonality

Next week includes the first 5 trading days of May during the 1st year of the Presidential Cycle. The tables below show the daily change, on a percentage basis for that period.

OTC data covers the period from 1963 to 2016 while SPX data runs from 1928 to 2016. There are summaries for both the 1st year of the Presidential Cycle and all years combined.

Average returns for the coming week have been much stronger during the 1st year of the Presidential Cycle than average of all years.

The OTC has not had a down year for this period since 1981 and the SPX since 1989.

Report for the first 5 days of May.
The number following the year represents its position in the Presidential Cycle.
The number following the daily return represents the day of the week;
1 = Monday, 2 = Tuesday etc.

OTC Presidential Year 1
Day1 Day2 Day3 Day4 Day5 Totals
1965-1 0.27% 1 -0.04% 2 0.31% 3 0.04% 4 0.13% 5 0.72%
1969-1 0.26% 4 0.12% 5 0.34% 1 0.19% 2 -0.38% 3 0.53%
1973-1 0.10% 2 1.01% 3 0.70% 4 0.98% 5 -0.37% 1 2.42%
1977-1 0.37% 1 0.40% 2 0.44% 3 0.27% 4 0.01% 5 1.48%
1981-1 -0.03% 5 -1.55% 1 -0.83% 2 0.20% 3 0.79% 4 -1.41%
1985-1 -0.33% 3 -0.22% 4 0.47% 5 -0.16% 1 0.37% 2 0.12%
1989-1 -0.02% 1 0.13% 2 0.19% 3 0.09% 4 0.35% 5 0.74%
1993-1 0.80% 1 1.72% 2 0.75% 3 -0.47% 4 0.21% 5 3.00%
Avg 0.16% 0.09% 0.20% -0.01% 0.35% 0.79%
1997-1 0.77% 4 2.74% 5 2.60% 1 -0.81% 2 -0.41% 3 4.89%
2001-1 2.46% 2 2.42% 3 -3.35% 4 2.11% 5 -0.82% 1 2.82%
2005-1 0.36% 1 0.23% 2 1.51% 3 -0.02% 4 0.28% 5 2.36%
2009-1 0.11% 5 2.58% 1 -0.54% 2 0.28% 3 -2.44% 4 0.00%
2013-1 -0.89% 3 1.26% 4 1.14% 5 0.42% 1 0.11% 2 2.04%
Avg 0.56% 1.84% 0.27% 0.40% -0.65% 2.42%
OTC summary for Presidential Year 1 1965 – 2013
Averages 0.33% 0.83% 0.29% 0.24% -0.17% 1.52%
% Winners 69% 77% 77% 69% 62% 92%
MDD 5/3/2001 3.35% — 5/7/2009 2.68% — 5/5/1981 2.39%
OTC summary for all years 1963 – 2016
Averages 0.33% 0.16% 0.02% -0.08% -0.08% 0.35%
% Winners 64% 69% 58% 54% 56% 61%
MDD 5/7/2010 9.33% — 5/7/2002 6.78% — 5/3/2000 6.34%
SPX Presidential Year 1
Day1 Day2 Day3 Day4 Day5 Totals
1929-1 0.19% 3 0.46% 4 1.00% 5 0.42% 6 -0.60% 1 1.46%
1933-1 1.32% 1 0.36% 2 -0.59% 3 2.85% 4 1.04% 5 4.98%
1937-1 0.00% 6 0.24% 1 1.58% 2 -0.84% 3 0.72% 4 1.71%
1941-1 -0.11% 4 0.32% 5 0.21% 6 -0.11% 1 1.71% 2 2.04%
1945-1 -0.34% 2 -0.14% 3 0.68% 4 0.34% 5 0.20% 6 0.74%
1949-1 0.27% 1 0.47% 2 1.14% 3 -0.07% 4 -0.60% 5 1.22%
1953-1 0.45% 5 1.09% 1 0.12% 2 -0.12% 3 -0.40% 4 1.14%
Avg 0.05% 0.40% 0.75% -0.16% 0.33% 1.37%
1957-1 0.61% 3 0.80% 4 -0.11% 5 -0.15% 1 -0.30% 2 0.85%
1961-1 -0.21% 1 0.72% 2 0.82% 3 0.39% 4 0.12% 5 1.84%
1965-1 0.13% 1 0.31% 2 0.22% 3 0.23% 4 -0.08% 5 0.83%
1969-1 -0.17% 4 0.47% 5 0.36% 1 0.47% 2 -0.18% 3 0.94%
1973-1 0.12% 2 1.24% 3 1.65% 4 0.71% 5 -0.42% 1 3.30%
Avg 0.10% 0.71% 0.59% 0.33% -0.17% 1.55%
1977-1 0.50% 1 0.51% 2 0.53% 3 0.15% 4 -0.62% 5 1.07%
1981-1 -0.07% 5 -1.54% 1 -0.27% 2 0.35% 3 0.68% 4 -0.85%
1985-1 -0.81% 3 0.36% 4 0.60% 5 -0.05% 1 0.43% 2 0.52%
1989-1 -0.17% 1 -0.32% 2 0.01% 3 -0.13% 4 -0.05% 5 -0.66%
1993-1 0.52% 1 0.36% 2 0.11% 3 -0.28% 4 -0.21% 5 0.48%
Avg -0.01% -0.13% 0.20% 0.01% 0.04% 0.11%
1997-1 -0.35% 4 1.81% 5 2.13% 1 -0.31% 2 -1.47% 3 1.82%
2001-1 1.36% 2 0.08% 3 -1.49% 4 1.44% 5 -0.24% 1 1.15%
2005-1 0.46% 1 -0.09% 2 1.25% 3 -0.26% 4 -0.11% 5 1.25%
2009-1 0.54% 5 3.39% 1 -0.38% 2 1.74% 3 -1.32% 4 3.97%
2013-1 -0.93% 3 0.94% 4 1.05% 5 0.19% 1 0.52% 2 1.78%
Avg 0.21% 1.23% 0.51% 0.56% -0.52% 1.99%
SPX summary for Presidential Year 1 1929 – 2013
Averages 0.15% 0.54% 0.48% 0.32% -0.05% 1.44%
% Winners 55% 82% 77% 55% 36% 91%
MDD 5/5/1981 1.87% — 5/7/1997 1.77% — 5/3/2001 1.49%
SPX summary for all years 1928 – 2016
Averages 0.12% 0.16% 0.19% -0.06% 0.14% 0.55%
% Winners 55% 68% 63% 44% 49% 66%
MDD 5/3/1930 8.27% — 5/7/2010 7.60% — 5/4/2000 4.01%

May

Since 1963, over all years, the OTC in May has been up 61% of the time with an average gain of 0.6%. During the 1st year of the Presidential Cycle the OTC in May has been up 77% of the time with an average gain of 2.7% (helped considerably by a 11.1% gain in 1997). The best May ever for the OTC was 1997 (+11.1%), the worst 1970 (-13.0%).

The average month has 21 trading days. The chart below has been calculated by averaging the daily percentage change for each of the 1st 11 trading days and each of the last 10. In months when there were more than 21 trading days some of the days in the middle were not counted. In months when there were less than 21 trading days some of the days in the middle of the month were counted twice. Dashed vertical lines have been drawn after the 1st trading day and at 5 trading day intervals after that. The line is solid on the 11th trading day, the dividing point.

In the chart below the blue line shows the average daily performance of the OTC in May over all years since 1963, while the green line shows the average during the 1st year of the Presidential Cycle over the same period.

OTC May, All, Year 1 1963-2017

Since 1928 the SPX has been up 57% of the time in May with an average loss of 0.1%. During the 1st year of the Presidential Cycle the SPX has been up 59% of the time with an average gain of 1.6%. The best May ever for the SPX was 1933 (+15.9%) the worst 1940 (-24.0%).

The chart below is similar to the one above except it shows the average daily performance over all years since 1928 for the SPX in May in red and the average daily performance during the 1st year of the Presidential Cycle, over the same period, in green.

SPX May, All, Year 1 1928-2017

Since 1979 the Russell 2000 (R2K) has been up 66% of the time in May with an average gain of 1.4%. During the 1st year of the Presidential Cycle the R2K has been up 100% of the time with an average gain of 4.6%. The best May ever for the R2K 1997 (+11.0%), the worst 2010 (-7.7%)

The chart below is similar to those above except it shows the average daily performance of the R2K over all years since 1979 in magenta and the average daily performance during the 1st year of the Presidential Cycle in green.

Russell 2000 May, All, Year 1 1979-2017

Since 1885 the Dow Jones Industrial Average (DJIA) has been up 52% of the time in May with an average loss of -0.1%. During the 1st year of the Presidential Cycle the DJIA has been up 58% of the time in May with an average gain of 0.9%. The best May ever for the DJIA 1898 (+14.7%), the worst 1940 (-21.7%)

The chart below is similar to those above except it shows the average daily performance over all years for the DJIA in May in grey and the average performance during the 1st year of the Presidential Cycle in green.

Dow Industrials May, All, Year 1 1885-2017

Conclusion

The market continued its rally last week and seasonally next week is strong.

I expect the major averages to be higher on Friday May 5 than they were on Friday April 28.

These reports are archived at: http://www.safehaven.com/

Good Luck,
YTD W 6 / L 7 / T 4


Mike Burk

Mike Burk independently publishes a weekly newsletter on the stock market from a technical perspective.

Charts and figures presented
herein are believed to be reliable but we cannot attest to their accuracy.
Recent (last 10-15 yrs.) data has been supplied by CSI (csidata.com), FastTrack
(fasttrack.net), Quotes Plus (qp2.com) and the Wall Street Journal (wsj.com).
Historical data is from Barron’s and ISI price books. The views expressed are
provided for information purposes only and should not be construed in any way
as investment advice. Furthermore, the opinions expressed may change without
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Copyright © 2003-2017 Mike Burk

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Published at Sat, 29 Apr 2017 09:21:46 +0000

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Schedule for Week of Apr 30, 2017

FILE PHOTO: A street sign for Wall Street is seen outside the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S. December 28, 2016. REUTERS/Andrew Kelly/File Photo

Schedule for Week of Apr 30, 2017

by Bill McBride on 4/29/2017 08:12:00 AM

The key report this week is the April employment report on Friday.

Other key indicators include the April ISM manufacturing and non-manufacturing indexes, April auto sales, and the March Trade Deficit.

—– Monday, May 1st —–

8:30 AM: Personal Income and Outlays for March. The consensus is for a 0.3% increase in personal income, and for a 0.1% increase in personal spending. And for the Core PCE price index to be unchanged.ISM PMI10:00 AM: ISM Manufacturing Index for April. The consensus is for the ISM to be at 56.5, down from 57.2 in March.

Here is a long term graph of the ISM manufacturing index.

The ISM manufacturing index indicated expansion at 57.2% in March. The employment index was at 58.9%, and the new orders index was at 64.5%.

10:00 AM: Construction Spending for March. The consensus is for a 0.5% increase in construction spending.

—– Tuesday, May 2nd —–

Vehicle SalesAll day: Light vehicle sales for April. The consensus is for light vehicle sales to increase to 17.2 million SAAR in April, from 16.6 million in  March (Seasonally Adjusted Annual Rate).This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the March sales rate.

—– Wednesday, May 3rd —–

7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.8:15 AM: The ADP Employment Report for April. This report is for private payrolls only (no government). The consensus is for 170,000 payroll jobs added in April, down from 263,000 added in March.

10:00 AM: the ISM non-Manufacturing Index for April. The consensus is for index to increase to 55.8 from 55.2 in March.

2:00 PM: FOMC Meeting Announcement. No change to policy is expected at this meeting.

—– Thursday, May 4th —–

8:30 AM ET: The initial weekly unemployment claims report will be released. The consensus is for 246 thousand initial claims, down from 257 thousand the previous week.U.S. Trade Deficit8:30 AM: Trade Balance report for March from the Census Bureau.

This graph shows the U.S. trade deficit, with and without petroleum, through January. 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 $44.5 billion in March from $43.6 billion in February.

10:00 AM: Manufacturers’ Shipments, Inventories and Orders (Factory Orders) for March. The consensus is a 0.4% increase in orders.

—– Friday, May 5th —–

8:30 AM: Employment Report for April. The consensus is for an increase of 185,000 non-farm payroll jobs added in April, up from the 98,000 non-farm payroll jobs added in March.The consensus is for the unemployment rate to increase to 4.6%.

Year-over-year change employmentThis graph shows the year-over-year change in total non-farm employment since 1968.

In March, the year-over-year change was 2.13 million jobs.

A key will be the change in wages.

3:00 PM: Consumer credit from the Federal Reserve.  The consensus is for a $15.6 billion increase in credit.

Published at Sat, 29 Apr 2017 12:12:00 +0000

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U.S. first quarter growth weakest in three years as consumer spending falters

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U.S. first quarter growth weakest in three years as consumer spending falters

By Lucia Mutikani| WASHINGTON

The U.S. economy grew at its weakest pace in three years in the first quarter as consumer spending almost stalled, but a surge in business investment and wage growth suggested activity would regain momentum as the year progresses.

The soft patch at the start of the year is bad news for the Trump administration’s ambitions to significantly boost growth.

“It marks a rough start to the administration’s high hopes of achieving 3 percent or better growth; this is not the kind of news it was looking for to cap its first 100 days in office,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto.

Gross domestic product increased at a 0.7 percent annual rate also as the government further cut defense spending and businesses spent less on inventories, the Commerce Department said on Friday in its advance estimate. That was the weakest performance since the first quarter of 2014.

The pedestrian first-quarter growth pace is, however, not a true picture of the economy’s health. Wage growth in the first quarter was the fastest in 10 years as the labor market nears full employment and business investment on equipment was the strongest since the third quarter of 2015.

Also underscoring the economy’s underlying strength, consumer and business confidence are near multi-year highs. First-quarter GDP tends to underperform because of difficulties with the calculation of data that the government has acknowledged and is working to rectify.

Prices for U.S. Treasuries were narrowly mixed. The dollar was little changed while U.S. stocks were trading marginally lower.

President Donald Trump has pledged to raise annual growth to 4 percent through infrastructure spending, tax cuts and deregulation. On Wednesday, the White House proposed a tax plan that includes cutting the corporate income tax rate to 15 percent from 35 percent, but offered no details.

 

WAGE GROWTH ACCELERATING

Economists are skeptical that fiscal stimulus, if it materializes, will fire up the economy given weak productivity and labor shortages in some areas. They see growth just above 2 percent this year.

“The cupboard is bare when companies need to hire skilled labor. You can’t build American if you can’t find any American workers to put on your shop floor,” said Christopher Rupkey, chief economist at MUFG Union Bank in New York.

Growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, braked to a 0.3 percent rate, the slowest pace since the fourth quarter of 2009. That followed the fourth quarter’s robust 3.5 percent growth rate.

A mild winter undercut demand for heating and utilities production. Higher inflation, with the personal consumption expenditures price index averaging 2.4 percent – the highest since the second quarter of 2011 – was also a drag.

Spending also took a hit from government delays issuing income tax refunds to combat fraud.

In a separate report on Friday, the Labor Department said private sector wages jumped 0.9 percent in the first quarter, the largest increase in a 10 years, after rising 0.5 percent in the fourth quarter.

With wage growth, business investment and inflation firming, economists believe Federal Reserve officials will look past the weak first-quarter GDP when they meet next week.

Fed Chair Janet Yellen has previously described quarterly GDP as “noisy.” The U.S. central bank lifted its overnight interest rate by a quarter of a percentage point in March and has forecast two more hikes this year. It is not expected to raise interest rates next Wednesday.

“There is enough reason to doubt the growth slowdown for the Fed to stay the course on tightening, especially with a bigger-than-expected pop in employment costs,” said Chris Low, chief economist at FTN Financial in New York.

Businesses accumulated inventories at a rate of $10.3 billion in the last quarter, down from $49.6 billion in the October-December period. Inventories subtracted 0.93 percentage point from GDP growth.

Government spending on defense declined at a 4.0 percent pace, the biggest fall since the fourth quarter of 2014 and second quarterly drop.

Business spending on equipment accelerated at a 9.1 percent rate in the first quarter thanks to rising oil prices. Spending on mining exploration, wells and shafts surged at a record 449 percent rate. That led to spending on nonresidential structures rebounding at a 22.1 percent pace, the fastest in three years.

Investment in home building increased for a second quarter while rising exports narrowed the trade deficit.

 

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

 

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Goldman: U.S. Economy “now at full employment”

Goldman: U.S. Economy “now at full employment”

by Bill McBride on 4/28/2017 10:03:00 PM

A few excerpts from a note by Goldman Sachs economists Jan Hatzius and Daan Struyven:

On a broad range of measures, the US economy is now at full employment. Headline unemployment has fallen below most estimates of the structural rate, the discouraged worker share is back to pre-recession lows, and the still somewhat elevated share of involuntary part-timers is arguably structural.

And while the employment/population ratio remains well below its pre-recession level, the gap is fully explained by a combination of population aging and declining participation of prime-age men. This trend among prime-age men has continued for over six decades, has not stood in the way of a strong recent wage acceleration in that demographic, and therefore looks structural.

Job growth remains well above the pace needed to stabilize unemployment. The speed of the likely overshoot is comparable to the average postwar cycle, and we have lowered our end-2018 unemployment rate forecast to 4.1% from 4.3% prior.
emphasis added

Published at Sat, 29 Apr 2017 02:03:00 +0000

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