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S&P 500 breaks record run on jobs data, drug chain drop


S&P 500 breaks record run on jobs data, drug chain drop

NEW YORK (Reuters) – The S&P 500 eased on Friday, ending a six-day run of record highs as the first monthly decline in U.S. nonfarm jobs in seven years dampened sentiment and pharmacy shares fell on Amazon competition fears.

The Nasdaq ended up for a ninth straight day, however, and set its sixth straight record high close, its longest such streak since seven records in February.

Walgreens Boots Alliance (WBA.O) and CVS Health (CVS.N) fell and were among the biggest drags on the S&P 500 after a CNBC report that Amazon (AMZN.O) was close to a decision on selling prescription drugs. Walgreens shares dropped 4.9 percent and CVS was down 4.9 percent, while Amazon shares rose 0.9 percent.

The Labor Department’s closely watched jobs report showed nonfarm payrolls fell by 33,000 in September as hurricanes Harvey and Irma left displaced workers temporarily unemployed and delayed hiring. A bright spot was a better-than-expected rise in average wages.

“It’s been amazing how resilient our U.S. stock market has been, going up on no news or bad news, so there’s no surprise on a day where most people feel it was a mixed jobs report at best that the market actually is reacting in a way that makes sense,” said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma.

“It’s a logical move for this illogical stock market.”

The Dow Jones Industrial Average .DJI fell 1.72 points, or 0.01 percent, to end at 22,773.67, the S&P 500 .SPX lost 2.74 points, or 0.11 percent, to 2,549.33 and the Nasdaq Composite .IXIC added 4.82 points, or 0.07 percent, to 6,590.18.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., October 3, 2017. REUTERS/Brendan McDermid

The benchmark’s slight decline follow a six-day run of record closing highs, its longest since 1997.

The CBOE Volatility index .VIX, Wall Street’s fear gauge, bounced sharply after setting a record low close in the previous session.

For the week, the S&P 500 rose 1.2 percent, the Dow added 1.6 percent and the Nasdaq gained 1.5 percent.

Adding to the day’s worries was a report that North Korea is preparing to test a long-range missile.

S&P energy index .SPNY declined 0.8 percent as oil prices CLc1 LCOc1 fell amid a bout of profit taking and the return of oversupply worries.

Shares of Costco (COST.O) dropped 6 percent after the warehouse club retailer reported a fall in gross margins. The stock was the biggest drag on the S&P 500 and the Nasdaq.

Declining issues outnumbered advancing ones on the NYSE by a 1.74-to-1 ratio; on Nasdaq, a 1.11-to-1 ratio favored decliners.

About 5.7 billion shares changed hands on U.S. exchanges. That compares with the 6.2 billion daily average for the past 20 trading days, according to Thomson Reuters data.

Additional reporting by Yashaswini Swamynathan and Gayathree Ganesan in Bengaluru; Editing by Nick Zieminski and James Dalgleish


Published at Fri, 06 Oct 2017 21:25:57 +0000

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How to Trade Emerging Markets After This ETF Set a Multiyear High


How to Trade Emerging Markets After This ETF Set a Multiyear High

By Richard Suttmeier | October 6, 2017 — 3:47 PM EDT

The iShares MSCI Emerging Market ETF (EEM) represents 850 overseas investments heavily-weighted to China, South Korea and Taiwan. The exchange-traded fund includes popular ADRs for Chinese companies Alibaba and Baidu.

The ETF is recovering from two major bear markets. The ETF declined 40% from a high of $45.85 set during the week of Sept. 5, 2014 and a low of $27.61 set during the week of Jan. 22, 2016. This decline has been fully recovered with the ETF setting a slightly higher high of $45.98 on Oct. 5.

Investors need to be aware that this decline and recovery is within a larger bear market decline of 67% from its all-time intraday high of $55.82 set during the week of Nov. 2, 2007 to its multiyear intraday low of $18.22 set during the week of Nov. 21, 2008.

Let’s put this into prospective. The emerging markets ETF will have to rally 22% from Thursday’s close of $45.85 to the 2007 high.

Compare this to the S&P 500, which set its all-time intraday high of 2,552.51 on Thursday and is 62% above its Oct. 2007 high of 1,576.

The Weekly Chart for EEM

Courtesy of MetaStock Xenith

The weekly chart for the emerging markets ETF is positive but overbought with the ETF above its five-week modified moving average (in red) at $44.81. The stock is well above its 200-week simple moving average (in green) at $38.58.

The horizontal lines are two sets of Fibonacci retracement levels. Those at the right of the chart represent the inner decline from the Sept. 2014 high to the Jan. 2016 low. The 61.8% retracement at $38.88 lines up with the 2-week SMA.

The horizontal lines across the entire chart are the Fibonacci retracement levels of the decline from the Nov. 2007 high to the Nov. 2008 low. The 61.8% retracement of this decline is $41.46. This level has been a magnet since the week of Sept. 18, 2009.

The 12x3x3 weekly slow stochastic reading is projected to end the week at 89.17 well above the overbought threshold of 80.00.

Given this chart, my trading Strategy is to buy weakness to my quarterly and semiannual value levels of $43.59 and $38.40, respectively, and reduce holdings on strength to my monthly and annual risky levels of $46.72 and $53.86, respectively.


Published at Fri, 06 Oct 2017 19:47:00 +0000

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Stocks Continue to Hit Highs Amid Positive Economic Data

Stocks Continue to Hit Highs Amid Positive Economic Data

By Justin Kuepper | October 6, 2017 — 5:59 PM EDT

The major U.S. indexes moved higher over the past week. While nonfarm payrolls unexpectedly fell by 33,000, which is presumably due to the hurricanes, the big surprise was a decline in the unemployment rate by two-tenths of a point and an increase in average hourly earnings by 0.5%. The news followed an unexpectedly bullish ISM Manufacturing Index reading of 60.8 and an equally impressive ISM Non-Manufacturing Index reading of 59.8.

International markets followed U.S. markets higher over the past week. Japan’s Nikkei 225 rose 1.69%; Germany’s DAX 30 rose 0.99%; and Britain’s FTSE 100 rose 2.03%. In Europe, the IHS Markit survey hit a four-month high in a sign that the Eurozone economy is picking up steam. In Asia, Japan’s economy is likely to match its second best stretch of uninterrupted growth since World War II, despite an ongoing lack of inflation. (See also: Why Is Deflation Bad for the Economy?)

The SPDR S&P 500 ETF (ARCA: SPY) rose 1.25% over the past week, making it the worst performing major index. Since the beginning of the month, the index has posted a string of gains that have led it past trendline​ and R1 resistance at $253.79. Traders should watch for an extended breakout to R2 resistance at $256.34, or if a false breakout occurs, a move back into its price channel below trendline support. Looking at technical indicators, the relative strength index (RSI) has reached significantly overbought levels at 77.61, but the moving average convergence divergence (MACD) remains in a bullish uptrend.

Technical chart showing the performance of the SPDR S&P 500 ETF (SPY)

The SPDR Dow Jones Industrial Average ETF (ARCA: DIA) rose 1.67% over the past week, making it the best performing major index. After breaking out from R1 resistance at $226.28, the index moved closer to R2 and trendline resistance at $228.74. Traders should watch for a breakout from these upper resistance levels or a move lower back into its price channel. Looking at technical indicators, the RSI appears very overbought at 80.45, but the MACD remains in a bullish uptrend following a near crossover in late September.

Technical chart showing the performance of the SPDR Dow Jones Industrial Average ETF (DIA)

The PowerShares QQQ Trust (NASDAQ: QQQ) rose 1.52% over the past week. After forming an ascending triangle over the past few months, the index broke out to fresh highs just above R1 resistance at $147.18. Traders should watch for a breakout to R2 resistance at $148.91 or, if there’s a false breakout, a move back below trendline support. Looking at technical indicators, the RSI appears lofty at 65.97, but the MACD experienced a bullish crossover. (See also: 5 Big Tech Stocks’ Largest Threat May Be Uncle Sam.)

Technical chart showing the performance of the PowerShares QQQ Trust (QQQ)

The iShares Russell 2000 Index ETF (ARCA: IWM) rose 1.26% over the past week. After breaking out from trendline resistance last month, the index moved close to R1 resistance at $151.66 before moving sideways. Traders should watch for a resumed move higher to R2 resistance at $155.14 or a move lower to trendline support at $147.00. Looking at technical indicators, the RSI appears very overbought at 81.18, but the MACD remains in a bullish uptrend. (For more, see: Could Small-Cap Rally Be Coming to a Close?)

Technical chart showing the performance of the iShares Russell 2000 Index ETF (IWM)

The Bottom Line

The major indexes moved higher over the past week, but many remain overbought from a technical standpoint. Next week, traders will be watching several key economic indicators, including the FOMC minutes on Oct. 11 and retail sales data on Oct. 13. (For additional reading, check out: How Rising Wages Will Fire Up U.S. Stocks.)

Note: Charts courtesy of As of the time of writing, the author had no holdings in the securities mentioned.


Published at Fri, 06 Oct 2017 21:59:00 +0000

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Costco Stock Gets Pummeled Despite Upbeat Quarter


Costco Stock Gets Pummeled Despite Upbeat Quarter

By Alan Farley | October 6, 2017 — 11:33 AM EDT

Costco Wholesale Corporation (COST) shares are getting pummeled in the aftermath of Thursday evening’s fiscal fourth quarter earnings report, dropping more than nine points to a four-week low despite beating EPS and revenue estimates. Weak gross margins have been cited for the decline, while fears of growing competition from, Inc.’s (AMZN) Whole Foods acquisition have also weighed on sentiment.

RBC, Stifel and Telsey analysts retained positive ratings after the news, insisting that investor fears are overblown and that the stock will prosper despite growing headwinds. Rapid e-commerce growth and solid traffic numbers have underpinned those optimistic outlooks, which may limit the downside in coming days. However, Morgan Stanley issued a downgrade ahead of the open, and others may follow, adding selling pressure that drops the price into critical support near $153. (See also: 7 Retail Stocks Hammered by Amazon May Be Good Buys.)

COST Long-Term Chart (1995 – 2017)

The stock tested the 1987 low near $5.50 at the end of 1994 and took off in a strong uptrend that cleared the top of a multi-year trading range near $15 in 1997. Rally momentum increased after the breakout, contributing to a powerful thrust that quadrupled the stock’s price into the 2000 high at $60.50. It plunged off that peak a few weeks later, dumping into the mid-$40s, with that price level holding support throughout the dotcom bear market.

Costco stock tested the bear market low in the first quarter of 2003 and turned higher, taking four years for the advancing price to reach the 2000 high. It broke out in the summer of 2007 and ticked higher into May 2008, when it topped out at $75.23, ahead of a steep decline during the economic collapse. That selling impulse settled at a four-year low at $38.17 in March 2009, giving way to a stair-step recovery that reached the prior high in the first quarter of 2011. (For more, see: Behind Costco’s 180% Rise in 10 Years.)

It broke out immediately, entering a powerful trend advance that posted the strongest gains so far this century. Buying pressure finally eased in February 2015 near $150, yielding a shallow rising channel that remains in force more than two years later. The relatively weak uptrend added more than 30 points into the May 2017 all-time high at $183.18, with price action since that time carving a triple top breakdown.

COST Short-Term Chart (2014 – 2017)

A base near $110 in the first half of 2014 gave way to strong rally into the February 2015 high at $156, printing the first peak in the rising channel. A decline into August undercut new support, leaving behind a candlestick shadow, ahead of less volatile price action that added three highs at resistance and two lows at support. The final high above $183 in May 2017 posted the middle peak of a triple top pattern that broke down in June when it undercut range support near $165. (See also: Costco’s Business Model Is Smarter Than You Think.)

Selling pressure ended in July at channel support near $150, generating a small-scale double bottom reversal, followed by a bounce into new resistance ahead of this week’s earnings report. The violently bearish reaction confirms the triple top breakdown, dropping the stock to $157 in the first hour of Friday’s session. In turn, this exposes a trip into channel support, which has now lifted to $153.

On-balance volume (OBV) topped out in March 2015 and entered an aggressive distribution wave that ended in August 2015, while an upturn into August 2016 fell short of the prior high. Bulls took control once again in the fourth quarter, lifting the indicator to an all-time high, while the June 2017 breakdown triggered violent downside that hit a three-year low. This bearish sequence raises the odds that the stock will eventually break support and enter a secular downtrend. (To learn more, see: Uncover Market Sentiment With On-Balance Volume.)

The Bottom Line

Costco stock fell nearly 10 points and 6% in the first hour of Friday’s session after a highly bearish reaction to fiscal fourth quarter earnings. Major technical damage in the second and third quarters could now generate a bearish feedback loop, breaking multi-year channel support and dropping the retailer’s shares into a bear market. (For additional reading, check out: Can Costco Recover From Amazon-Driven Decline?)


Published at Fri, 06 Oct 2017 15:33:00 +0000

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Top And Bottom Performing Stocks For Week #40

Finance Photo

Top And Bottom Performing Stocks For Week #40


It is Sunday afternoon and that means we get to review the performance of last week’s historical top and bottom stock symbols in the S&P 500. As you may recall these symbols are the result of parsing a database containing over 50 years worth of statistical performance data. The idea is to extract the prospective top ten winners and losers of the coming week purely based on historical statistics. The result is then sorted by liquidity and any symbol that is scheduled to report earnings or pass ex-dividend is being excluded.

How To Trade Along

Although being no guarantor of success, the long and short candidates posted here each week are intended to perform along their respective historical bias. One way of trading along would be to simply create a small one-week portfolio by buying the long candidates and selling the short candidates on Monday morning shortly after the open. There are no official stops or targets and all transactions are reversed Friday afternoon right before the bell.

Results For Week # 39

The way we keep track is to record the respective relative performance of each week’s long and short portfolio in percentage points. So here are the results for week #39 ending 10/01/2017:

Long Profits: PAYX=0.35, WEC=-1.3

Long Profits Total: -0.95

Short Profits: AMD=4.14, AAPL=-1.47, INTC=-2.42, CSCO=-0.78, ARNC=5.07, JPM=-0.72, KO=1.06, AMAT=-9.04, BMY=-0.6, HAL=-4.02

Short Profits Total: -8.78

Combined Profits Total: -9.73

Clearly this was supposed to be a bearish week for stocks and it turned out to be everything but. So we’re logging a solid loss here, no if or buts.


Published at Sun, 01 Oct 2017 21:38:45 +0000

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The stocks set to win under Trump’s tax plan


Inside the GOP's tax blueprint
Inside the GOP’s tax blueprint

 The stocks set to win under Trump’s tax plan


Get ready for a party on Wall Street if President Trump and Congress successfully rewrite the corporate tax code.

Corporate America’s bottom line would grow dramatically under the proposed slashing of the corporate tax rate from 35% from 20%.

Many critical questions about the GOP’s tax framework remain unanswered — including how to pay for it without blowing up deficits and whether it’ll ever become a reality.

If it does, it’s clear that the tax overhaul would leave some corners of the stock market cheering louder than others. Here are some of the biggest potential winners under the GOP framework:

Tech titans sitting on tons of cash:

Wall Street is drooling over the part of the GOP plan that calls for repatriating cash that is being kept offshore.

American companies have hoarded about $1.3 trillion of cash overseas, where it’s not subject to U.S. taxes, according to Moody’s.

The top 5 U.S. cash hoarders — Apple(AAPL, Tech30), Microsoft(MSFT, Tech30), Alphabet(GOOGL, Tech30), Cisco and Oracle(ORCL, Tech30) — hold 88% of their money overseas. It’s not just Silicon Valley though. Other cash-rich companies include Johnson & Johnson(JNJ), Amgen, Gilead Sciences, Ford(F), Merck and Pfizer(PFE). Each of them were sitting on at least $25 billion in cash at the end of last year, according to Moody’s.

The tax plan seeks to encourage U.S. multinationals to bring those profits back to the U.S. by offering a one-time, low tax rate under “deemed” repatriation, meaning they have to pay the tax whether they bring the money back or not.

The goal is to get companies to deploy that cash to create jobs by building new factories and investing in the business. In reality, much of that money will likely go to investors in the form of dividends and share buybacks.


Banks have a higher tax burden, making them big winners if rates go lower. Financials account for 25% of the tax expenses of the broad S&P 1500, according to KBW Research.

JPMorgan Chase(JPM), Wells Fargo(WFC) and Bank of America(BAC) would all enjoy a 20% or more jump in profits if the corporate tax rate is lowered to 20%, KBW estimates.

Banks also stand to gain in other ways, too. The repatriation of hundreds of billions of dollars in cash could find a home in banks. All of that cash may lead to an uptick in M&A deals that Wall Street firms get paid to advise on. A faster economy, which is the goal of the tax plan, could boost demand for loans.

More good news for banks: Tax reform may cause interest rates to rise. Higher rates make it easier for banks to profit on the difference between what they charge borrowers and what they pay on interest.

“Banks touch all the bases,” said Art Hogan, chief market strategist at Wunderlich Securities.


Companies that tend to pay more to Uncle Sam each year will obviously benefit more than those who pay very little.

The sectors of the S&P 500 that paid the highest tax rates last year were telecom (33.4%), consumer staples (29.1%) and consumer discretionary (28.5%), according to Howard Silverblatt of S&P Dow Jones Indices.

Ninety-nine companies in the S&P 500 paid more than 35% in taxes last year, Silverblatt said. By contrast, he said that 115 companies paid less than 15%, including 42 that got money back.

Tiny stocks

Small-cap stocks are on fire right now thanks to all the Trump tax cut talk. The Russell 2000, home to mostly smaller and U.S.-based companies, has hit a record five days in a row. The index has almost quadrupled the September gains of the more international-focused S&P 500.

The reasoning is that smaller companies tend to pay more in taxes than their larger cousins, which tend to have more sophisticated tax strategies. Due to their size, even just subtle improvements to the cash flows of smaller companies can have a big impact.

Potential losers

Trump’s tax plan may also create some losers, depending on how the details on deductions shake out.

For instance, some fear the GOP’s plan to eliminate state and local tax deductions could hurt the real estate market in high-tax states like New Jersey and Illinois. That would be bad news for homebuilder stocks.

Private-equity firms could also end up losing. The framework did not call for eliminating the carried interest deduction that benefits private-equity firms and hedge funds. However, Gary Cohn, Trump’s top economic official, told CNBC that the president “remains committed” to ending this loophole.

Of course, more negotiations are needed on the tax plan. The deal may ultimately collapse in a cloud of Republican infighting, like the Obamacare repeal plan did.

But Hogan is betting it gets done, eventually.

“Tax reform seems a lot more possible than any other pillar of the administration’s platform. They desperately want a victory,” he said.

–CNNMoney’s Jeanne Sahadi contributed to this report.


Published at Fri, 29 Sep 2017 15:30:06 +0000

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Dow notches longest quarterly win streak in 20 years


Trump's shifting views on stock market highs
Trump’s shifting views on stock market highs

Dow notches longest quarterly win streak in 20 years


The stock market, undaunted by monster hurricanes, political tension and North Korea threats, keeps climbing to new heights.

The Dow soared another 5% during the third quarter, which ends for Wall Street on Friday.

The strong gains extend the Dow’s streak of winning quarters to eight. It’s the longest since an 11-quarter boom that ended in September 1997, according to FactSet stats. Back then, the U.S. economy was going gangbusters under President Bill Clinton at the start of the dotcom boom.

The current streak began during the final three months of 2015 and accelerated after last fall’s election. For those scoring at home, that’s five winning quarters on President Barack Obama’s watch and three under President Trump, who took office in January.

Trump, who claimed as a candidate that the market was in a “big, fat, ugly bubble,”brags about it now that he’s in charge. He did that again on Friday, cheering the “RECORD HIGH” for the S&P 500.

It’s true that the stock market soared after Trump’s victory. Wall Street cheered his promises to revamp the tax code, slash regulation and ramp up infrastructure spending. (The market largely ignored the administration’s less business-friendly trade and immigration policies.)

Stocks have continued climbing even though none of Trump’s economic policies have gotten through Congress. That’s because economic strength in the United States and overseas has kept corporate profits growing.

“The market is primarily up because earnings have been good. The tax reform proposal has been icing on the cake — but that’s not the ultimate reason,” said JJ Kinahan, chief market strategist at TD Ameritrade.

dow trump election stocks 4000

Wall Street has been largely unfazed by the turbulence of the past few weeks and months. The GOP’s repeated failure to repeal and replace Obamacare didn’t dent the market. Nor did the hurricanes that ravaged the Gulf Coast and Caribbean. And escalating tension between Trump and North Korean leader Kim Jong Un caused just fleeting concern among investors.

If anything, September was a bore for the stock market despite its history as a rocky month. The S&P 500 had its least volatile September going back at least to 1970, according to Ryan Detrick at LPL Financial. That’s based on how much the market moves from its high to its low each day.

The calendar ahead looks favorable for the stock market. Over the past 20 years, the Dow climbed 70% of the time during October, according to Bespoke Investment Group. The final three months of the year have historically been the best for the stock market.

That could change this year if Corporate America lets Wall Street down. Investors are hoping third-quarter results, set to begin streaming in later this month, will continue to show healthy profits.

Wall Street may also have to withstand bickering over the GOP’s plans to overhaul the tax system. Tax reform is complex, and many major questions remain unanswered.

“The bill’s announcement, and its eventual passing, are and will be bullish for stocks. But what comes in between is not bullish, and that starts right now,” Michael Block, chief market strategist at Rhino Trading Partners, wrote in a report.

Eventually, investors may grow impatient with Washington if it looks like the tax overhaul is being further delayed or watered down by politics.

“The markets are not going to ignore politics in 2018,” said TD Ameritrade’s Kinahan. “Washington has to get something done.”


Published at Fri, 29 Sep 2017 16:16:54 +0000

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Russell Breakout Lifts Small Caps Into Leadership


Russell Breakout Lifts Small Caps Into Leadership

By Alan Farley | September 28, 2017 — 12:04 PM EDT

The Russell 2000 index has lifted to a bull market and all-time high this week, signaling the next stage of a powerful small-cap rotation that could continue into year end and beyond. At the same time, this emerging leadership may force funds and institutions to exit overheated tech stocks to free up speculative capital, dropping the Nasdaq 100​ into a long period of relative underperformance.

Look no further than the currency markets to find the reason for this bullish development, with the U.S. Dollar Index (DXI) bouncing off two-year range support following a brutal decline in response to the Trump presidency. Domestic issues, including small caps, tend to strengthen and outperform during periods of U.S. dollar strength because multinational corporations become less profitable due to exchange rate headwinds. (For a refresher, check out: An Introduction to Small-Cap Stocks.)

There are dozens of ways to play this breakout, led by the venerable iShares Russell 2000 ETF (IWM), which currently trades more than 22 million shares per day on average. The Vanguard Small Cap Value ETF (VBR) offers an interesting second choice, holding the second highest asset total among active funds while trading fewer than 300,000 shares per day. Market players seeking higher exposure may consider Direxion Daily Small Cap Bull 3X Shares (TNA) or ProShares UltraPro Russell 2000 ETF (URTY), which offers 2X leverage. (See also: Top 3 Small-Cap ETFs for 2017.)

IWM Long-Term Chart (2000 – 2017)

The iShares Russell 2000 ETF came public in May 2000 in the mid-$40s and rallied quickly to $54.60. That peak marked the highest high for more than three years, ahead of a volatile decline that posted an all-time low at $32.30 in the fourth quarter of 2002. It finally broke out to a new high in 2004, entering a rising channel that contained price action into the 2007 bull market high at $85.20.

The fund plunged during the 2008 economic collapse but held above the 2002 low, ahead of a V-shaped recovery wave that completed a 100% round trip into the 2007 high in April 2011. It spent the next two years grinding out a cup and handle pattern at that level, ahead of a 2013 breakout that generated the most prolific gains so far in this bull market cycle. The rally’s trajectory eased above $120 in March 2014, giving way to a shallow uptrend that topped out at $129 in June 2015. (For more, see: IWM: iShares Russell 2000 Index ETF.)

It then entered a severe correction, losing ground in a multi-wave decline that came to rest at a two-year low in the mid-$90s in February 2016. A recovery wave into September stalled four points below 2015 resistance, generating a pullback into November, followed by a November breakout that stalled in the low $140s just one month later. The fund carved a narrow consolidation at that level for more than nine months and broke out this week.

IWM Short-Term Chart (2015 – 2017)

IWM fell more than 35 points after topping out in June 2017, coming to rest well above new support at the 2013 breakout in the mid-$80s. The subsequent bounce followed 2007 to 2011 fractal behavior, gaining ground at the same pace as the prior decline. However, it spent little or no time testing resistance in this instance, breaking out within one day of reaching the 2015 high. (See also: Small Caps: Rising Rates Not All Bad News.)

The consolidation into September 2017 carved a shallow rising channel that generated a long series of bull traps. This week’s rally finally cleared channel resistance, opening the door to a much stronger price rate of change that could generate upside into $170, or 1,700 on the underlying index. Pullbacks to $142 should be buyable in this scenario, while declines need to hold the 50-day exponential moving average (EMA), currently rising from $140.

The Bottom Line

The Russell 2000 small-cap index has broken out above a nine-month rising channel, confirming last December’s breakout while setting the stage for healthy fourth quarter gains. (For additional reading, check out: A Big Battle Among Small-Cap ETFs.)


Published at Thu, 28 Sep 2017 16:04:00 +0000

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Tax Reform Should Bode Well for Charles Schwab


Tax Reform Should Bode Well for Charles Schwab

By Donna Fuscaldo | September 28, 2017 — 1:09 PM EDT

Charles Schwab Corp. (SCHW), the discount brokerage firm, has been bouncing along near its 52-week high so far this week, but that doesn’t mean it won’t go higher, particularly if President Donald Trump gets tax reform pushed through.

That’s according to Seeking Alpha, which laid out a bevy of reasons why investors may want to buy shares of Charles Schwab, one of the leaders in the online brokerage world. Even at $44.01, close to its 52-week high of $44.35, shares could start to gain more, particularly in the first quarter of next year.

Charles Schwab (SCHW) Upsides and Downsides

Take tax reform for starters. While all eyes have been on technology stocks that have a lot of cash overseas and are hoping for a reduced tax rate to bring it back to the U.S., Charles Schwab is the opposite, with little business outside the U.S. That means that if tax reform does get passed and the corporate tax rate is reduced, Schwab stands to benefit the most. On top of that, because it doesn’t have big exposure overseas, it won’t suffer as much as rivals from a weakening U.S. dollar. If the U.S. dollar stays weak next year it could increase interest in stocks like Schwab.

Use Investopedia’s broker reviews to find a broker to match your investing goals.

But it’s not just tax reform that could draw more interest to the San Francisco-based discount broker. On the sector front, with ongoing consolidation, Schwab could become an attractive takeover target for a big financial firm that is betting the financial markets will be huge during the next 10 years. While Schwab has been a player in the consolidation, it could become a target, which should send the stock higher.

Back in 2011, the company spent $1 billion to acquire OptionsXpress as way to get in on the options trading market. Rival E*Trade has also been on a buying spree in recent years, spending $725 million last July for OptionsHouse. If Charles Schwab doesn’t get bought out, its not a bad thing either for the stock. That’s because consolidation in a sector may not bode well for consumers, but it does mean less competition, which in turn could result in higher commissions for the likes of Schwab. That would be a welcome reversal from the years of declines.


Published at Thu, 28 Sep 2017 17:09:00 +0000

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Wall St. edges up on modest tech rebound

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., June 2, 2017. REUTERS/Brendan McDermid


Wall St. edges up on modest tech rebound

NEW YORK (Reuters) – U.S. stocks advanced modestly on Tuesday as technology shares bounced from sharp losses in the prior session and comments from Fed Chair Janet Yellen boosted expectations of a December rate hike.

Yellen said the Fed needs to continue gradual rate hikes and it would be imprudent to leave rates on hold until inflation reached the Fed’s 2-percent target.

Earlier in the session, Atlanta Fed Chief Raphael Bostic, a non-voting member this year, said he would want “clear evidence” that prices were firming before committing to another rate increase, but did not rule out another hike in 2017.

Chances of a rate hike in December rose to 78 percent from about 40 percent a month ago, according to CME Group’s FedWatch tool.

“Until either (she) or her cohorts say something that is not expected, the market is going to roll over pretty much everything they say,” said David Schiegoleit, managing director of investments, U.S. Bank Private Wealth Management in Newport Beach, California.

Economic data showed U.S consumer confidence fell in September while home sales dropped to an eight-month low in August due to the impact of Hurricanes Harvey and Irma.

The Dow Jones Industrial Average .DJI rose 11.5 points, or 0.05 percent, to 22,307.59, the S&P 500 .SPX gained 2.69 points, or 0.11 percent, to 2,499.35 and the Nasdaq Composite .IXIC added 20.25 points, or 0.32 percent, to 6,390.84.

Technology .SPLRCT, up 0.56 percent, was the best performing major sector, recovering somewhat from losses in the prior session. Tech shares suffered their worst one-day drop in five weeks on Monday as concerns over tensions with North Korea prompted investors to book profits in what has been the best performing sector this year.

Apple (AAPL.O) rose 2.11 percent after four straight sessions of losses to help prop up the three major indexes, after Raymond James boosted its price target on the iPhone maker to $180 from $170.

“When we woke up today and the lights still came on everybody may have said there are some opportunity in those tech shares. It is simply just a little bit duller, mirror image of what we saw yesterday,” said Schiegoleit.

Marine Corps General Joseph Dunford said the U.S. regards North Korea as the world’s greatest threat but despite an escalation in tensions over its ballistic missile and nuclear program, Pyongyang has not changed its military posture.

Darden Restaurants (DRI.N) slumped 5.60 percent after the Olive Garden parent said it expected the negative effects on sales and earnings from Hurricane Irma to be about double that from Hurricane Harvey.

Red Hat (RHT.N) rose climbed 4.09 percent after the Linux distributor’s quarterly profit came in above estimates and the company raised its full-year forecast.

Advancing issues outnumbered declining ones on the NYSE by a 1.53-to-1 ratio; on Nasdaq, a 1.59-to-1 ratio favored advancers.

Reporting by Chuck Mikolajczak; Editing by Nick Zieminski


Published at Tue, 26 Sep 2017 18:46:54 +0000

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Duy: “Has The Fed Abandoned Its Reaction Function?”


Duy: “Has The Fed Abandoned Its Reaction Function?”

by Bill McBride on 9/25/2017 01:44:00 PM

From economist Tim Duy at FedWatch:

The immediate policy outcomes of the FOMC meeting were largely as expected. Central bankers left interest rates unchanged while announcing that the reduction of the balance sheet will begin in October as earlier outlined in June. The real action was in the Summary of Economic Projections. Policymakers continue to anticipate one more rate hike this year and three next. This policy stance looks inconsistent with the downward revisions to projections of inflation and the neutral rate; under the Fed’s earlier reaction function, the combination of the two would drive down rate projections. Arguably, policy is thus no longer as data dependent as the Fed would like us to believe. That or the reaction function has changed.

The economic forecasts were somewhat confounding. Policymakers edged up their growth forecasts, but still anticipate that unemployment will end the year at 4.3%.

The unemployment forecast for the next two years edged down 0.1 percentage point, but this relative stability is somewhat confusing given that growth is expected to exceed potential growth until 2020 (remember, the Fed believes that labor force participation is more likely to fall than rise, so strong growth should induce downward pressure on unemployment).

Bottom line: the Fed is strongly committed to rate hikes. The[y] don’t appear to be following their earlier reaction function; policy feels path dependent at the moment. Indeed, given the Fed’s expectation of low inflation and volatile and possibly weak data due to the hurricanes, it is difficult to see what stops the Fed from hiking in December.



Published at Mon, 25 Sep 2017 17:44:00 +0000

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Microsoft Stock Is Record Breaking But Overvalued


Microsoft Stock Is Record Breaking But Overvalued

By Donna Fuscaldo | September 25, 2017 — 10:32 PM EDT

Microsoft Corp.’s (MSFT) stock has been setting record highs in 2017 as the company benefits from growth in its cloud computing business and its prospects in advanced technologies such as artificial intelligence and augmented reality.

But while investors are bidding up share prices of the software giant so far this year, it could be creating a scenario in which the stock is overvalued, and that means less of a chance of upside for investors. Consider this analysis from InvestorPlace, which looks at stocks from a technical perspective. Shares are more than 15.5 times trailingEBITDA, marking a 10-year high. Microsoft stock is also close to a decade high from a trailing sales, trailing operating cash flow and trailing free cash flow perspective, setting the stage for concerns about its valuation.

High, or Too High?

The cloud computing growth the company has enjoyed in 2017 has resulted in shares surging this year, but InvestorPlace doesn’t see how it can push the stock and thus the valuation higher. “The cloud giants trading at more than 20-times next year’s earnings estimates (like MSFT) all have much larger growth prospects than MSFT. This group includes Alphabet’s (GOOG) Google, (AMZN), (CRM), Alibaba Group (BABA), and others,” wrote InvestorPlace. It’s also worrisome given some of the software company’s other businesses are seeing revenue that is slowing. (See also: Microsoft Could Surpass Amazon in Cloud Computing This Year.)

For its fourth quarter, for example, the software giant reported adjusted revenue of $24.7 billion, which surpassed Wall Street views. Adjusted earnings per share also topped analyst expectations coming in at $0.98 a share. Growth was driven by the company’s services business, with revenue increasing 44% to $9.548 billion compared to a year ago. Revenue in the productivity and business unit jumped 21% to $8.4 billion while its cloud business had 11% increase in revenue to $7.4 billion. Its Azure cloud business saw a 97% increase in revenue. Personal computers were a drag on the company in the fourth quarter, coming in down 2%. (See also: 10 Stocks For The Next Tech Boom.)

Microsoft also rattled investors last week when it failed to raise its quarterly dividend as much as Wall Street was expecting. It announced a 7.6% increase in its dividend to $0.42 per share each quarter. IHS Markit had expected the dividend to go to $0.43 a share from $0.39 a share, increasing the yield to 2.3%. Meanwhile, Stifel analyst Brad Redback said in a note to clients that while he expected the dividend hike to be in the 10% to 15% range.


Published at Tue, 26 Sep 2017 02:32:00 +0000

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Top And Bottom Performing Stocks For Week #39


Top And Bottom Performing Stocks For Week #39


It is Sunday afternoon and that means we get to review the performance of last week’s historical top and bottom stock symbols in the S&P 500. As you may recall these symbols are the result of parsing a database containing over 50 years worth of statistical performance data. The idea is to extract the prospective top ten winners and losers of the coming week purely based on historical statistics. The result is then sorted by liquidity and any symbol that is scheduled to report earnings or pass ex-dividend is being excluded.

How To Trade Along

Although being no guarantor of success, the long and short candidates posted here each week are intended to perform along their respective historical bias. One way of trading along would be to simply create a small one-week portfolio by buying the long candidates and selling the short candidates on Monday morning shortly after the open. There are no official stops or targets and all transactions are reversed Friday afternoon right before the bell.

Results For Week # 38

The way we keep track is to record the respective relative performance of each week’s long and short portfolio in percentage points. So here are the results for week #38 ending 9/24/2017:

Long Profits: T=4.02, PFE=1.7, LLY=1.78, PAYX=3.28

Long Profits Total: 10.78

Short Profits: AMD=-6.23, MU=-4.1, INTC=-0.49, CSCO=-2.87, ARNC=-3.43, AMAT=-1.34, C=-3.42, XOM=0.19, HST=-0.44, BSX=0.28

Short Profits Total: -21.85

Combined Profits Total: -11.07

Obviously the shorts almost all ended up closing higher last week and thus produced a loss for the week. It may make sense to take on more positions on the truncated side, e.g. in this case take on 2.5 x the number of shares of T, PFE, LLY, and PAYX. This would have produced a total of 26.95% for the total long profits and thus eke out a combined total profit of 5.1%.

Top 2 performing stocks for week #39

It’s going to be another bearish week apparently and we’ve got only 2 top performing symbols on the long side. So going by the multiplier concept we’d have to buy 5x the amount of shares of both to even the exposure on the long and short side:


Published at Sun, 24 Sep 2017 21:02:06 +0000

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Shorting volatility: Rising risks mean itchier trigger fingers


Shorting volatility: Rising risks mean itchier trigger fingers

NEW YORK (Reuters) – A long stretch of low volatility for U.S. stocks has made betting on continued calm a popular and lucrative trade, but traders and strategists warn that risks to the trade have mounted, while the potential for profits has shrunk.

U.S. equity market volatility – the daily fluctuations in stock prices – has hovered near record lows for much of this year.

The CBOE Volatility Index .VIX, a gauge of the degree to which investors expect share prices to fluctuate, has averaged 11.4 this year. That is lower than for any comparable period over its nearly three-decade history.

Robust corporate earnings, encouraging economic growth and a view that world central banks are available to rescue markets if trouble strikes, have helped mute stock market gyrations and spell success for those betting on calm.

The VelocityShares Daily Inverse VIX Short-Term ETN (XIV.P), which makes money as long as the volatility drops or holds in place, is up about 100 percent this year.

Some traders, however, have grown more wary of increased risks to the trade.

“I think a lot of folks have gotten lulled into a false sense of security because the short trade has gone so well for so long,” said Matt Thompson co-head of Volatility Group at Typhon Capital LLC, in Chicago.

“We are still shorting volatility but we have an itchier trigger finger.”


While there are many ways to short volatility – bet on lower stock gyrations – investors’ hunger for this trade is particularly apparent in the growth in volatility-linked exchange traded products (ETPs).

Assets under management for the top two short volatility products is at $2.8 billion and their exposure to volatility is at an all-time high, according to Barclays Capital.

But the very popularity of the trade has cranked up the risk.

These products hold first and second month volatility futures, buying and selling these contracts daily to keep their volatility exposure in line with the level of stock swings in the market.

Managers of these leveraged and inverse products are required to buy volatility futures as they go up and sell when they decline.

Strategists fear that this rebalancing – which needs be even more pronounced if a shock follows a period of unusually muted volatility, such as now – may be akin to adding fuel to fire.

“There could be a feedback effect and maybe selling begets more selling,” said Salil Aggarwal, equity derivatives strategist at Deutsche Bank in New York.

“Risk/reward considerations would imply cutting positions to more manageable levels,” he said.


Meanwhile, investors are not reaping as much for taking on risk as they did in the past, said Anand Omprakash, director of equity and derivative strategy at BNP Paribas, in New York.

What traders are being paid to take on the short volatility risk currently, is slightly below their average historical take since January 2013, and roughly 6 percent lower than what they were paid monthly in mid-2016, Omprakash estimates.

“You were being paid much better for much of 2016 than for much of 2017,” he said. “I don’t know if I would necessarily say the trade has run out of steam, but I don’t think it offers the kind of risk adjusted return that it offered last year.”

And the stakes are high. Strategists warn that one or two big shocks could wipe away months of profits.

The inverse volatility product XIV, while having doubled in price this year, logged an 11.4 percent decline in August as stock gyrations picked up briefly amid escalating worries about the ability of the administration of President Donald Trump to push through its economic agenda.

“The risk/reward of the trade as a buy and hold proposition is not the same as it was before the U.S. election or in the middle of the oil crisis in 2015 and early 2016,” said Stephen Aniston, president of investment adviser Black Peak Capital, in Connecticut.

Positioning in these products, primarily driven by retail players, may be more skewed to the short side than the broader market where institutional investors hold sway.

“I don’t think the risk is necessarily as big on the institutional side as it is on the retail side,” said Omprakash.

To be sure, not everyone is rushing to bet on a spike in volatility, but experts do warn that investors should tread carefully when shorting volatility from here.

Additional reporting by Terence Gabriel; Editing by Bernadette Baum


Published at Sat, 23 Sep 2017 01:00:07 +0000

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Bed Bath & Beyond shares plunge after disappointing earnings report

Bed Bath & Beyond shares plunge after disappointing earnings report


Bed Bath & Beyond shares plunged nearly 15% in early trading Wednesday following a disappointing earnings report.

The retailer said after the closing bell Tuesday that earnings for the second quarter were $94.2 million, a significant drop from the $167.3 million it reported in the same period last year. Same-store sales fell by about 2.6% from a year ago.

 The company said that while online sales grew by more than 20%, in-store sales have dipped.

The “unfavorable impacts” of restructuring costs and the damage sustained by Hurricane Harvey contributed to the results, Bed Bath & Beyond (BBBY) said in a news release.

The home goods provider is not the only traditional retailer struggling to keep up with online competitors.

Toys ‘R’ Us just filed for bankruptcy, succumbing to mountains of debt it accrued when trying to fight off Amazon (AMZNTech30) and Walmart (WMT). The news is troubling or toy makers Hasbro (HAS) and Mattel(MAT), who saw their stocks dip when the bankruptcy was just a rumor.

Across the board, stores are closing at an alarming rate as shoppers lose interest in brick-and-mortar locations. And as bad as things are now, Wall Street thinks things are only going to get worse.

According to analysis by Bespoke Investment Group, investors are more pessimistic about the retail industry now than they have been since September 2008.

But Bed Bath & Beyond may also be facing tougher competition from traditional rivals. Williams-Sonoma (WSM), which also owns Pottery Barn and West Elm, reported earnings last month that topped forecasts.

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Will Teva Pharmaceutical Stock Close the Gap?


Will Teva Pharmaceutical Stock Close the Gap?

By Justin Kuepper | September 19, 2017 — 10:10 AM EDT

Teva Pharmaceutical Industries Limited (TEVA) shares fell nearly 45% over the past three months despite a brief relief rally earlier this month. The big question for traders is whether the rally was a dead cat bounce or if a base has formed at around $16.00 to $17.00. The stock has been difficult for long-term investors to value given the many changes, which has opened the door for traders to control short-term price action in the interim.

Earlier this month, the company signed two agreements to sell its specialty global women’s health business for $1.38 billion. The proceeds from these sales will help pay down debt and alleviate a major concern for investors, but the company still faces an uphill battle in turning around its generics business, which has seen intensifying competition. The positive news for the stock is that the company has finally identified a new CEO with experience in leading turnarounds. (See also: Teva Stock Jumps After New CEO Is Named.)

Technical chart showing the performance of Teva Pharmaceutical Industries Limited (TEVA) stock

From a technical perspective, the stock briefly rallied earlier this month before losing momentum by the middle of the month. The relative strength index (RSI) appears neutral with a 41.18 reading, while the moving average convergence divergence (MACD​) experienced a bullish crossover in late August. These technical indicators provide few hints as to where the stock may be headed over the coming weeks.

Traders should watch for a continued breakdown to prior lows to close the gap formed earlier this month on the downside. If shares rally from this point, traders should watch for a move higher to retest prior highs at around $20.00 or even the 50-day moving average at around $22.30 on the upside. The RSI reading implies that there is room for the stock to move higher or lower, but the MACD points to a potential rally higher. (For more, see: Can Teva Pharmaceutical Turn Around Under New CEO?)

Chart courtesy of The author holds no position in the stock(s) mentioned except through passively managed index funds.


Published at Tue, 19 Sep 2017 14:10:00 +0000

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Herbalife Stock Setting Off Multiple Sell Signals

Herbalife Stock Setting Off Multiple Sell Signals

By Alan Farley | September 19, 2017 — 11:53 AM EDT

Multi-level marketer Herbalife Ltd. (HLF) may finally be ready to reward long-suffering short sellers following several years of brutal squeezes triggered by hedge fund manager Bill Ackman’s notorious short position. His endless table pounding attracted a huge population of weak hands, augmented by 2016’s “Betting on Zero,” an anti-Herbalife documentary funded by another hedge fund with a record of shorting the stock.

The price chart has held up remarkably well through all this drama and comic relief, with media outlets routinely documenting the estimated $1 billion loss incurred by Ackman’s still active short position. As it turns out, the technical outlook is now deteriorating at a rapid pace, raising the odds that the stock will finally roll over and enter a major decline that bails out the controversial fund manager while gaining considerable traction. (See also: Herbalife Sinks as FTC Regulation Stands to Thwart Growth.)

HLF Long-Term Chart (2004 – 2017)

The stock came public at $7.00 in December 2004 and ground sideways into a May 2005 breakout that generated a momentum-fueled uptrend into $20.60 in June 2006. It posted a series of nominal new highs into the April 2008 top at $25.55 and turned sharply lower during the economic collapse, dropping to an all-time low at $6.06. The subsequent bounce gained ground at the same pace as the prior decline, completing a round trip into the 2008 high in May 2010.

A breakout into mid-year caught fire, generating healthy gains into the 2012 high at $73.00, ahead of a brutal decline that relinquished nearly 50 points in just eight months. The stock then recovered in another V-shaped pattern, returning to the prior high in January 2014 and breaking out in a buying spike that posted an all-time high at $83.51 just three weeks later. It then failed the breakout, spiraling into a downtrend that tested the 2012 low in the first quarter of 2015. (For more, see: Herbalife Scrambles, Hires New Lawyer as Short Interest Booms.)

The stock spent nearly a year and a half working its way back to the 2014 high but stalled and reversed in June 2017 at the .786 Fibonacci sell-off retracement level. Price action during the recovery wave ground out three marginally higher highs in a shallow uptick that has tested the will and patience of the company’s nervous shareholder base. Meanwhile, the stock remains firmly entrenched in a trading range between the 2012 low and 2013 high.

HLF Short-Term Chart (2014 – 2017)

The stock eased into a rising channel after bouncing into 2015, with that price structure still in force more than two years later. It spent more than two months testing channel resistance into August 2017 and rolled over in a failure swing that could print a lower high within the 3.5-year trading range. The sell swing filled the May 5 gap before settling at the 200-day exponential moving average (EMA), ahead of a bounce that ended on Monday with a breakdown at the 50-day EMA in the upper $60s. (See also: Herbalife, Other MLMs, Crash on Chinese Crackdown.)

This price action sets the stage for a test at the summer low, with a breakdown opening the door to additional losses into channel support in the low $50s. Aggressive short sellers can now consider opening positions while maintaining stop-losses above the September high at $69.76. A breakdown at the 200-day EMA in the lower $60s will issue the second sell signal, allowing sellers to increase position size while bringing more conservative players off the sidelines.

A channel breakdown would complete the positive feedback loop, signaling a long-term downtrend that has the power to generate healthy long-term profits. Of course, the stock could recover at any point between now and then, forcing short sellers to maintain aggressive risk management techniques that respect this security’s endless capacity to punish that side of the market. (For more, see: Herbalife Q2 Earnings Top, New FTC Rules Raise Concern.)

The Bottom Line

Herbalife has set off warning signals after topping out at a key Fibonacci retracement level and rising channel resistance, raising the odds that the long-term recovery wave is coming to an end ahead of a new downtrend. (For additional reading, check out: Herbalife Initiates Tender Offer, Indicates Going Private.)


Published at Tue, 19 Sep 2017 15:53:00 +0000

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A Cryptocurrency Miner is Going Public…and it’s Huge


A Cryptocurrency Miner is Going Public…and it’s Huge

By: Ross Pilot | Mon, Sep 18, 2017

HIVE Blockchain Technologies Ltd. will list on the TSX Venture Exchange Monday, September 18th, under the symbol TSX.V: HIVE.

The company is backed by Genesis Mining, the largest cloud Bitcoin miner in the world with 700,000 customers. Genesis owns 30% of HIVE.

HIVE’s launch transaction involves the acquisition of an initial state-of-the-art blockchain infrastructure facility in Iceland from Genesis.

The facility produces mined cryptocurrency around the clock like RIGHT NOW.

This is one of the first (I think it is the first, but I could have missed something) real and legitimate pure play in the public markets for investors.

So I expect it to be a big deal and get lots of attention.  If you’re an investor that doesn’t buy Bitcoin or Ethereum directly, this could be a simple proxy—as I’ll explain below, while this company does have growing revenue and positive cash flow, I would expect the stock to trade closely with Ethereum.

HIVE also has an option to acquire at least four additional data centres from Genesis in Iceland and/or Sweden. (This could be very important very quickly if these options get exercised; the growth rate in the public company would increase dramatically.)

HIVE has an exclusive arrangement with Genesis to operate its data centres covered by a master service agreement. That’s a fancy way of saying that’s it baked in the cake that Genesis will hand off more data centres in the future to HIVE.

“The time has come for the blockchain and cryptocurrency sector to come together with public equity markets. HIVE will become a leading infrastructure company for the blockchain era, and introduce this exciting sector to a new audience of investors. This is a strategic opportunity for Genesis to access capital and build a bigger business publicly than we ever imagined building our first home-based bitcoin mining machines five years ago.”
– Marco Streng, Co-founder and CEO of Genesis Group

So what is the business model? Well it looks to me like:

1.     Genesis buys the gear and builds a Crypto-mining data centre.

2.     The moment the servers are flipped on, the centre is mining crypto-coin.

3.     The crytocoin is exchanged for US dollars (or stored).

4.     The data centre can then be transferred to HIVE where the public markets will give the data centre a valuation X times cash flow proven by the number of coins it mines.

5.     Genesis uses the money from public markets to buy more gear and builds more centres.

6.     Repeat.

To me this looks like the closest thing to a legal money-printing machine outside of the US Bureau of Engraving and Printing.

Using the news release from SEDAR (the Canadian equivalent of EDGAR, where public companies have to post their news releases and quarterly financials), I am able to make some pie-in-the-sky guesses about revenue:

“Based on the computational capacity of the first Data Centre, the historical prices, and required hash rates, and using a mine and immediately sell strategy, the trailing 12 month EBITDA would have been approximately US$7 million.”

EBITDA is an acronym—Earnings Before Interest, Taxes, Depreciation and Amortization—that basically means cash flow.  EBITDA=cash flow, which is what most business valuations are based on now.

The mining facility will probably (I’m guessing) be mining mostly Ethereum.

That news release was issued in June so the $7 million shows what the centre would have mined hypothetically from June 2016 to June 2017.

Earnings for the following twelve months will be much, much higher but take a guess as revenue from this company will be strongly correlated to the price of Ethereum.

The Genesis Mining Group were much the original pioneers in mining Ethereum. Their first large-scale Bitcoin mining facility was built in 2014 using custom hardware.

This was followed up in 2016 with the construction of the world’s largest Ether mining facility — specifically built to support the Ethereum Project at an early stage of its development.

So they figured out a way to mine Ethereum for profit back in 2016 when it was under $15. Who knows how much money they have made this year.

Here’s how the share structure looks like:

Genesis Mining (the private company) received $9,000,000 and 30% of HIVE stock for the data center, which was 67,975,428 shares. The shares are subject to escrow with a hold period of four months and one from September 13th.

There was 100 million shares in the public shell, which is held almost entirely by management (see names below).  These shares are released quarterly—25% will be free trading immediately, then another 25% in November, then Feb 2018 and May 2018.

There was 55 million shares issued at 30 cents, which went to mostly Canadian institutions/fund managers.  There was very strong demand here, as there is no real legitimate way to play crypto currency.

They had to increase this financing to meet the Street’s strong demand. I think that bodes well for the stock trading tomorrow morning.

This stock is not free trading until December.  So the initial free trading amount of stock (called the “float”) that the public can buy is fairly small at 20 million or so.

There will be 226,584,760 shares out total, and once  you add in 22.6 million stock options and 700,000 warrants, there is a fully diluted 249,917,759 shares.

I expect the stock to open between 60 cents – $1 on the first day.  I will probably buy some more if that happens (I’m already long from when it was Leeta Gold Corp: TSXV:LTA. the original shell company).

I will say again it’s the first cryptocurrency miner to trade in the public markets (that I see) meaning there will be HUGE interest in the stock and not just from buyers.

As I wrote in an earlier post the cryptocurrency mining industry is currently a $7 billion a year industry and growing 100% year-over-year.

Until now, all the miners have been private, meaning NOBODY outside the owners have known just how the financial end of the business operates. You can bet that every quarterly filing that HIVE puts out, every North America analyst study it like it’s the Bible.

One confident prediction I will make is that you won’t see positive net revenue anytime, every little bit of cryptocurrency mined will be plowed right back into the business. HIVE will be adding more hash power (think computing power; CPU power) as soon as they can find room for new servers.

The management team and directors that is running HIVE is impressive (almost a complete opposite of some ICOs that I have looked at). HIVE is the result of a partnership between Hong Kong-based Genesis Mining and Vancouver-based Fiore Group, which is headed by Frank Giustra aka the founder of Lionsgate Entertainment, NYSE: LGF.A.

Other members on the board include Harry Pokrandt, Frank Holmes (CEO of US Global out of Texas), and Olivier Roussy Newton. All of these guys pass the Google and LInkedin test with flying colours (I particularly recommend Olivier’s twitter feed).

THIS IS GOING TO BE INTERESTING IN SO MANY WAYS. There has been no way for investors to get exposure to crypto directly other than through initial coin offerings (ICOs), which have had poor disclosure and vague use of proceeds.

ICOs may not be shady, but they’re not transparent like they were being closely watched by the SEC…which HIVE will be, being a public company in cryptocurrency.

In conclusion, HIVE has been gifted a solid business with revenue flowing from day one from a market leader in an industry that has seen hyper-growth in 2017 and looks set for the next decade. Even Jamie Dimon would like this deal.

So I think the business is going to do well, given the management team’s intimate knowledge of the business partnering up with one of the top junior finance teams in North America.  And you can be sure I’ll be keeping everybody updated on how they’re doing.

If it opens up under 80 cents, I am probably a buyer. There are very few quality ways for investors to play the crypto space in the public markets, and I think this company will attract a lot of attention in its first few months.  It will have a honeymoon for at least a couple quarters.

Please note I own shares in HIVE.

Ross Pilot is not his real name.

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Published at Mon, 18 Sep 2017 08:13:21 +0000

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NVIDIA Breakout Bodes Well for AMD Stock


NVIDIA Breakout Bodes Well for AMD Stock

By Alan Farley | September 18, 2017 — 9:29 AM EDT

Video graphics powerhouse NVIDIA Corporation (NVDA) rocketed higher on Friday, posting heavy volume during a breakout above three-month resistance at $170 and closing at an all-time high above $180. The uptick should gain traction in the coming months, lifting the high-tech market leader well above $200. It also bodes well for Advanced Micro Devices, Inc. (AMD) stock, which has attempted to mimic its larger rival’s bullish behavior in the past two years.

AMD shares rose nearly 400% in 2016, tracking a historic NVIDIA uptrend triggered by growing speculation on virtual reality gaming hardware. AMD stock topped out just above $15 in February and dropped into a long-overdue correction that has held relatively close to resistance in recent months. Its rival’s breakout could now generate fresh buying power, lifting AMD stock off a six-week test at the 200-day exponential moving average (EMA) and into an uptrend that targets the low $20s. (See also: AMD vs. NVIDIA: Who Dominates GPUs?)

AMD Long-Term Chart (1990 – 2017)

The Sunnyvale, California-based chipmaker ended a multi-year decline at $1.82 in 1990, giving way to a volatile uptrend that stalled out at $19.63 in 1995. A steep pullback into the single digits got bought in 1996, triggering a two-legged rally that topped out at an all-time high just above $48 in 2000, at the same time the dotcom bubble was bursting. It plunged with other tech stocks in the next two years, dropping to an 11-year low at $3.10 in October 2002.

The subsequent recovery wave unfolded at the same trajectory as the prior decline, lifting in a V-shaped pattern that stalled within six points of the 2000 high in 2006. That peak marked the highest high in the past 11 years, ahead of a decline that picked up steam during the 2008 economic collapse. It undercut the 1990 low in November, posting an all-time low at $1.62, while the subsequent bounce failed to attract substantial buying interest, topping out at $10.24 in 2010. (For more, see: AMD Surges on Bitcoin-Fueled Earnings.)

A bounce following a 2012 test at the 2008 low stalled in 2013, generating a year-long topping pattern followed by a decline that reached the prior decade’s low once again in 2015. Aggressive buyers emerged in the first quarter of 2016, generating a momentum-fueled uptrend that mounted the 2010 high in January 2017. The rally ended at a 10-year high less than two months later, yielding a trading range that is still under development as we near the fourth quarter.

AMD Short-Term Chart (2015 – 2017)

The 2016 rally broke the 10-year string of lower lows when it mounted the 2013 and 2014 highs in June. Momentum then accelerated, generating a series of rally waves that ran out of gas in the first quarter of 2017. Price action since that time has held support at the 200-day EMA, while a July breakout attempt triggered a major reversal. The subsequent decline settled below $12 in August, giving way to a basing pattern that could now support a trip back to range resistance. (See also: AMD Stock Could Break Out or Break Down.)

On-balance volume (OBV) hit an all-time high in June 2017, but the stock failed to break out, generating a minor distribution wave that has settled into a holding pattern, indicating that shareholders are hanging tough but failing to get paid for their efforts. A rally above $14 is needed to avoid growing frustration and support another test at range resistance above $15. Conversely, a failure to bounce strongly in the next week or two could trigger a capitulative selling event that breaks support and drops the stock into a deeper correction.

The Bottom Line

AMD has settled at the midpoint of a six-month trading range, while its larger rival has broken out to an all-time high. That wake-up call offers a golden opportunity to attract sponsorship lost during six months of corrective action and generate a trend advance that could reach the lower $20s. (For additional reading, check out: Why AMD’s Stock Is Not Worth $20.)


Published at Mon, 18 Sep 2017 13:29:00 +0000

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McDonald’s Stock at Key Support After Expiration Swoon


McDonald’s Stock at Key Support After Expiration Swoon

By Alan Farley | September 18, 2017 — 11:27 AM EDT

Dow component McDonald’s Corporation (MCD) is struggling to recover from a brutal expiration week decline that dropped the fast food giant nearly six points in two hours. A bearish research report was blamed for the rout, but triple witching’s quarterly influence offered a more logical explanation, with the swift decline forcing many short-dated calls to expire worthless.

Research firm M Science claimed on Sept. 12 that hurricane disruptions could force McDonald’s to miss third quarter expectations, sending the stock into a tailspin that reached a five-week low at $155.77. The stock has held three-month channel support and the 50-day exponential moving average (EMA) into the new trading week, raising the odds for a recovery wave that re-establishes McDonald’s strong leadership role. (See also: McDonald’s Has a Long-Term Growth Problem.)

MCD Long-Term Chart (1990 – 2017)

An uptrend starting after the October 1987 crash gained traction throughout the 1990s, lifting the stock to $47.38 in the first half of 1999. It pulled back to the mid-$30s and bounced, testing the high in December and turning lower in a double top pattern that broke to the downside in January 2000. That decline signaled the start of the most bearish period in the stock’s long history, relinquishing more than 75% of its value into the March 2003 low at $12.12.

It took four years for the subsequent bounce to complete a round trip into the 1999 high, yielding a late 2007 breakout that eased into a narrow trading range during the 2008 economic collapse. That resilience lifted the stock into a market leadership role after the bear market ended, generating a 2010 uptrend that posted a series of new highs into 2012, when it topped out just above $100 and dropped into a shallow trading range with support in the mid-$80s. (For more, see: If You Had Invested Right After McDonald’s IPO.)

A persistent sideways pattern denied trend followers into an October 2015 breakout that caught fire, lifting the stock to $132 in May 2016. A pullback into the November election found committed buyers, yielding a strong recovery wave and secondary breakout in April 2017. Price action added points at a rapid pace into last week’s all-time high at $161.72, ahead of a nasty reversal that could presage even lower prices in coming weeks.

MCD Short-Term Chart (2016 – 2017)

Price action after the 2012 top carved a holding pattern generated by weaker-than-expected same-store sales growth. The company then introduced the “all-day breakfast,” an immediate hit that added to the bottom line while supporting franchisee reorganization and other cost-cutting initiatives. Those measures have now taken hold, allowing the stock to break out and post a fresh series of new highs. (See also: McDonald’s Is Desperate to Modernize Its Franchisees.)

The stock eased into a rising channel in June 2017, posting four higher highs, but on-balance volume (OBV) has failed to respond, topping out in July and entering a distribution phase that could signal a longer-term top. However, minimal technical damage to this point has issued few sell signals, allowing bulls an opportunity to reload positions and lift the stock back to last week’s high.

The stock spent the past four sessions grinding out a possible bear flag pattern, but it is too early to predict a rollover to weekly lows. More likely, the recovery wave will lift into broken range support at $158.50, with aggressive sellers making a stand at that level. On the flip side, a channel break would also signal new resistance at the 50-day EMA, favoring continued downside that could reach the 200-day EMA, which is currently rising through the low $140s. (For more, see: How McDonald’s Makes its Money.)

The Bottom Line

Red flags are waving after McDonald’s shares sold off nearly six points in a few hours in reaction to a bearish research report. While bulls have a golden opportunity to lift the stock back to the rally high, clearly delineated resistance could attract aggressive short selling interest that triggers an intermediate breakdown. (For additional reading, check out: Why McDonald’s Shares Could Fall 20%.)


Published at Mon, 18 Sep 2017 15:27:00 +0000

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