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Ten years after crash, Americans still have not fallen back in love with stocks

Ten years after crash, Americans still have not fallen back in love with stocks

NEW YORK (Reuters) – Luke Thomas, 44, an information technology field manager who lives in Miami, began investing in the U.S. stock market in his early 20s, attracted by the prospect of learning “how to grow a little bit of money into a lot,” he said.

A bronze “Charging Bull” statue is seen in New York’s financial district March 4, 2016. REUTERS/Brendan McDermid

At the time, he put most of his money into a handful of small-cap and over-the-counter stocks. Yet watching the Russell 2000 index of small-cap companies fall more than 60 percent during the 2008-2009 financial crisis scared him into diversifying his portfolio. He now invests in large-cap stocks, real estate, options, and cryptocurrencies such as bitcoin, spreading his risk over several asset classes.

“A younger Luke would have focused 90 percent on crypto, putting all my eggs in one basket. But this way, I’m not overly exposed,” he said.

Thomas is not alone in his hesitation to make big bets.

Ten years after the start of the financial crisis that erased $16.4 trillion in assets from U.S. households, Americans have yet to embrace the U.S. stock market with the same fervor as before, holding fewer individual stocks and putting less money into equities overall despite an uninterrupted 9-year bull market that has pushed the S&P 500 up nearly 310 percent from its 2009 lows.

Overall, U.S. households have $900 billion less invested in stocks than in 2007, according to Goldman Sachs research, leaving buying by U.S. corporations now the greatest driver of demand. In 401(k) retirement plans, meanwhile, investors now hold an average of 52.4 percent in equity-only funds, down from the 64.7 percent they held in 2007, according to Fidelity.

Instead, investors now hold an average of 33.2 percent of their assets in blended target-date funds that combine stocks, bonds and cash based on a person’s expected retirement date, more than double the 14.5 percent of assets invested in the category in 2007.

The decline in the assets invested in stocks comes even as investors have largely benefited from the recovery in equity prices. The average 401(k) balance at the end of 2017 was $104,300, up 112 percent from the average of $49,000 at the end of 2008 and up 54 percent from the pre-crisis average of $67,600 at the end of 2007, according to Fidelity.

“There just doesn’t seem to be the same level of interest or animal spirits” among investors now for equities, said Mark Paccione, director of investment research at Raleigh, North Carolina-based Captrust Financial Advisors, which oversees $250 billion in assets.

Clients are much more concerned about the effect of rising interest rates and inflation on their bond portfolios, he said.

“They’re very worried we will have a bear market in bonds and direct almost all of their focus there,” he said.

ERA OF STOCK-PICKING LOOKS OVER

Investors are not only holding fewer assets in stocks overall, but those dollars that are invested in the market are increasingly likely to be put into index funds or exchange-traded funds that track broad indexes rather than in individual shares or funds that are run by a stockpicker.

Financial advisors say that the push is driven by clients who lost trust in the ability of professional fund managers after nearly all of them failed to anticipate the financial crisis.

“Index investing is more prevalent than it’s ever been, and that’s because active management didn’t protect you from losses during the crisis and has underperformed over the last 10 years,” said Matt Hanson, a senior wealth advisor at Los-Angeles based Kayne Anderson Rudnick, which oversees approximately $18.9 billion in assets.

Passive funds now comprise about 46 percent of total mutual fund and ETF assets, compared with just 8 percent in early 2008, according to fund-tracker Morningstar. There are now 1,400 passively managed equity mutual funds and ETFs, with a total of $5.4 trillion in assets, compared with 707 funds holding $1.2 trillion in 2007, according to Lipper data. That push toward passive investing has helped make index-based fund providers BlackRock Inc and privately-held Vanguard the world’s two largest money managers.

The growth rates of the trading of options are accelerating faster at brokers such as E Trade Financial and TD Ameritrade than they are for the trading of individual equity shares, said Mac Sykes, an analyst at Gabelli & Co. Monthly stock trading volume for the NYSE Group, meanwhile, was 43 percent lower in 2017 than in 2007, according to NYSE data.

Instead of the day-traders of the 1990s dot-com craze or the house-flippers of the mid-2000s, small-scale investors say they are looking for cryptocurrencies such as bitcoin to deliver the outsized returns they no longer believe the stock market can deliver.

Layla Tabatabaie, an entrepreneur and advisor to tech startups who lives in New York, began investing in initial coin offerings, or ICOs, about a year and a half ago, she said. She now holds the majority of her portfolio in cryptocurrencies, which she sees as offering the possibility for greater gains.

“The way that I see crypto as being more favorable than stocks is it seems like there is more of an opportunity for retail investors to get in earlier,” she said. “Crypto now is taking the place of the way stocks used to behave 10 years ago, 15 years ago.”

Reporting by David Randall; Editing by Alden Bentley, Jennifer Ablan and James Dalgleish

Published at Sun, 18 Mar 2018 11:16:05 +0000

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Surprise!

Surprise!

by SCOTT

It is axiomatic that surprise actions cause the biggest moves.

So it’s no surprise at all that when everybody expects support to hold, and it doesn’t… hilarity ensues.

That really looks like a completed retest of the lows that should kick off at least a test of the old highs.

Aww sheet… that’s gonna leave a mark

So now we really are retesting the lows. Except THIS time, notice the volume is rising to the downside. Odds now favour breaking support again.

But that’s not the whole story, BTC is a heavily manipulated market, and a concerted effort by the Tether/Whales crew could jump in and save it.

By the technical analysis this SHOULD make new lows and fall and keep falling…

But I smell fuckery. I think there is a significant chance that this drop is engineered bullshit games. No way to tell at this stage.

Scott Phillips

Published at Thu, 15 Mar 2018 06:11:15 +0000

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Microsoft Reversal Could Signal Greater Downside

Microsoft Reversal Could Signal Greater Downside

By Alan Farley | March 14, 2018 — 10:08 AM EDT

Shares of Dow component Microsoft Corporation (MSFT) bounced with other big tech stocks following the broad-based decline but failed to break out above the Feb. 1 high, reinforcing range resistance that could signal the next stage of an intermediate correction. Market players will be watching the $91 level closely, with a breakdown exposing a volatile trip back to the Feb. 9 low.

The Nasdaq-100 rallied to a new high on March 9 while other benchmarks lagged badly, reversing this week at or below bull market highs posted in late January. It will take little selling pressure at this point for the tech-heavy index to fail the breakout and join weaker indices in range-bound action that could eventually post lower lows in a correction lasting well into the second quarter. (See also: Why a 20% Plunge in Tech Stocks Is a Buying Opportunity.)

MSFT Long-Term Chart (1999 – 2018)

A multi-year uptrend topped out near $60 in December 1999, giving way to a painful decline that relinquished nearly 40 points into the end of 2000. Microsoft stock tested that price level in 2002 and posted a double bottom reversal, but the uptick into 2006 failed to reach the .382 Fibonacci sell-off retracement level, stalling near $30. A final buying surge into 2007 ended below the 50% retracement, giving way to intense selling pressure that broke the prior lows, dumping the stock to an 11-year low in the mid-teens.

(To learn more about Fibonacci retracements, check out Chapter 6 of the Technical Analysis course on the Investopedia Academy)

The plunge into 2009 marked a historic buying opportunity, ahead of a recovery wave that reached the 2008 high in 2013. Microsoft shares broke out into 2014, carving a strong uptrend that finally mounted the prior century’s high in the fourth quarter of 2016. Buying pressure escalated through 2017, posting the most prolific gains in decades before topping out a few points below $100 in February 2018.

The stock entered a narrow rising channel in October 2016, holding within those boundaries into an October 2017 breakout that demonstrated unusual relative strength. Price action hasn’t the touched the 50-week exponential moving average (EMA) since the middle of 2016, pointing to unsustainable technical conditions that could generate a steep correction. Meanwhile, the October 2017 gap between $79 and $83 remains partially unfilled, offering a magnetic target if sellers break the February low. (For more, see: Behind Microsoft’s 127.4% Rise in 10 Years.)

MSFT Short-Term Chart (2017 – 2018)

A Fibonacci grid stretched across the last wave of the long-term uptrend organizes recently volatile price action, placing the .786 retracement level right at the Feb. 9 bounce. The decline tested the 50-day EMA, matching August, September and December pullbacks, but pierced the moving average by more than four points before a strong reversal. This penetration could signal a major change in character, presaging steeper downside.

The 50-day EMA has now lifted to $91, establishing a conflict zone that could test the resolve of newly minted bulls. The March 2 swing low has aligned perfectly with this support level, suggesting an ample supply of sell stops between $90 and $91. As a result, a breakdown would expose the February low, with the moving average offering resistance for the first time since the middle of 2016.

On-balance volume (OBV) topped out in the last quarter of 2014, well below the 2007 and 2010 peaks. Committed buyers returned in the second half of 2016, but the indicator has just lifted above the prior high, even as the stock has nearly doubled in price over the same period. This signals a bearish divergence that could amplify downside pressure if the forces of mean reversion take control of intermediate price action. (See also: Why Amazon, Microsoft, Netflix Pose a Risk to Stock Market.)

The Bottom Line

Microsoft stock has reversed sharply after lifting above the Feb. 1 high, signaling a failed breakout that could mark the next stage in an intermediate correction lasting well into the second quarter. (For additional reading, check out: Microsoft to Gain on New Enterprise Buying: Bulls.)

 

Published at Wed, 14 Mar 2018 14:08:00 +0000

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PG&E Stock Breaks Out After California Proposal

by Nikiko from Pixabay

PG&E Stock Breaks Out After California Proposal

By Justin Kuepper | March 14, 2018 — 10:28 AM EDT

PG&E Corporation (PCG) shares rose more than 6.3% on Tuesday after California issued a proposal to address the impact of natural disasters and climate change following the recent wildfires. Among other things, the proposal aims to update liability rules and regulations for utility services in light of these types of events, which could reduce liabilities faced by these companies following natural disasters and climate change.

Last month, Standard & Poor’s downgraded PG&E to BBB+ from A- and kept the rating on negative watch following the “considerable risk” from the wildfires in its service area. The credit analyst no longer believes that the company’s risk management policies are consistent with its prior ratings. These same issues have plagued other companies such as Edison International (EIX) that have exposure to the area’s risks. (See also: Prepare Now for the Next Financial Storm.)

Technical chart showing the performance of PG&E Corporation (PCG) stock

From a technical standpoint, PG&E stock has been trending higher since mid-February following a significant decline over the past several months. The breakout from the 50-day moving average and pivot point could mark a turning point for the stock. The relative strength index (RSI) appears a bit overbought at 67.02, but the moving average convergence divergence (MACD) continues to see a strong bullish trend toward its zero line.

(Learn more about supplemental technical indicators like the MACD in Chapter 4 of the Technical Analysis course on the Investopedia Academy)

Traders should watch for a breakout from the 50-day moving average and pivot point at around $42.00 to R2 resistance at around $51.50 over the coming sessions. With the lofty RSI reading, traders could see some consolidation above these support levels before a significant move higher. A breakdown back below these support levels could lead to a move down to retest prior lows near S1 support at $36.59, but that scenario appears less likely now. (For more, see: PG&E Reports Results for the Quarter Ended Dec. 31 – Summary.)

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

Published at Wed, 14 Mar 2018 14:28:00 +0000

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3 Charts That Suggest Now Is the Time to Invest in Agriculture

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By monicore from Pixabay

3 Charts That Suggest Now Is the Time to Invest in Agriculture

By Casey Murphy | March 13, 2018 — 8:36 AM EDT

It is not exactly news that the prices of key agriculture commodities such as wheat and corn have struggled to overcome dominant downtrends over the past couple of years. However, based on the recent price action shown on the charts of key exchange-traded products, it looks as though the story is changing and that prices seem to be poised for a move higher over the coming weeks and months.

In this article, we take a closer look at the patterns and try to determine in more detail how active traders will position themselves so that they can take advantage of what looks to be the best trading opportunity in this space in quite some time. (For more, see: Soft Commodities Could Bounce Higher This Week.)

PowerShares DB Agriculture Fund (DBA)

One of the most popular funds that is used by retail investors for gaining exposure to the agriculture sector is the PowerShares DB Agriculture Fund. In case you aren’t familiar, this fund offers investors a cost-effective and convenient way to invest in commodity futures such as wheat, corn, soybeans, cocoa, live cattle, sugar, coffee, lean hogs, feeder cattle and cotton.

From a technical perspective, taking a look at the chart below, you can see that the bears have been in control of the trend for much of the past couple of years, as mentioned earlier. Active traders would have likely been keeping a close eye on the combined resistance of the 200-day moving average (blue line) and the descending trendline (red dotted line). The multitude of failed attempts to move above resistance was a clear indication that the downtrend would be in control of the momentum. Looking at the price action, the recent close above resistance is a technical signal of a trend reversal and is likely being used as a signal that many of the soft commodities are ready to move higher. Traders will now likely hold a bullish outlook on soft commodities, and many will likely use the newfound support near $19 to determine the placement of their stop-loss orders. (For further reading, see: Trade the Rise in Agriculture Commodities.)

Technical chart showing the performance of the PowerShares DB Agriculture Fund (DBA)

Wheat

With 13.87% of the total net assets of the DBA fund, wheat is one of the soft commodities that seems to be the best choice for further attention on the part of active traders. Taking a look at the chart of the Teucrium Wheat Fund (WEAT), which is the most popular exchange-traded product to track this commodity, the recent break beyond the resistance of its 200-day moving average and influential trendline suggests that the bulls are taking control of the momentum. The surge in volume that followed the break higher is likely to be used as confirmation, and the support near $6.50 is creating one of the strongest risk/reward setups in the market.

(Want to learn about analyzing stock charts using trendlines and moving averages? Check out Chapter 2 of the Technical Analysis course on the Investopedia Academy)

Technical chart showing the performance of the Teucrium Wheat Fund (WEAT)

Corn

Traders who want to gain exposure to corn, which comprises 13.14% of the total net assets of the DBA fund, often turn to the Teucrium Corn Fund (CORN). Taking a look at the chart, you can see that the price has been trading below the long-term resistance of the 200-day moving average for most of the past year, and the trend has been dominated by the bears. The continued buying pressure so far in 2018 has managed to send the price above the key resistance, as shown by the blue circle. This buy signal could trigger a flood of buy orders and will likely be used as a guide for placing stop-loss orders in the future. (For more, see: Active Traders Are Turning to Soft Commodities for Answers)

Technical chart showing the performance of the Teucrium Corn Fund (CORN)

The Bottom Line

Soft commodities such as corn and wheat have been out of favor with investors for quite some time. However, given the bullish price action on the charts of key soft commodities exchange-traded products, it seems like the trend is reversing. The traders who watch the charts could stand to enter at one of the strongest risk/reward scenarios found anywhere in the public markets. (For more, see: Forget Stocks, Buy Soft Commodities)

Charts courtesy of StockCharts.com. At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.

Published at Tue, 13 Mar 2018 12:36:00 +0000

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Tesla Stock Retests Support After Breakout This Week

Tesla Stock Retests Support After Breakout This Week

By Justin Kuepper | March 13, 2018 — 10:36 AM EDT

Tesla, Inc. (TSLA) shares rose more than 5.6% on Monday after Elon Musk suggested at the SXSW festival in Austin, Texas, that self-driving technology could become ubiquitous much sooner than expected. In particular, Musk believes that self-driving cars will be able to handle all modes of driving by the end of next year and suggested that his company’s AutoPilot technology could prove safer than human drivers within two years.

The breakout higher came despite a temporary suspension in Model 3 production late last month. While the company is targeting 2,500 units per week by the end of the first quarter and 5,000 units per week by the end of the second quarter, the production suspension could result in lower-than-expected deliveries during the first quarter. The positive news is that improvements in automation could make future production numbers more sustainable. (See also: Tesla Suspended Model 3 Production for a Week in Feb: Report.)

Technical chart showing the performance of Tesla, Inc. (TSLA) stock

From a technical standpoint, the stock rebounded from trendline support on Monday and broke through its 50- and 200-day moving averages before retesting them early Tuesday. The relative strength index (RSI) appears neutral at 51.73 along with the moving average convergence divergence (MACD). These technical indicators provide few hints into future price direction but leave the door open to a swing higher or lower over the intermediate term.

(Want to learn more about supplemental technical indicators like the RSI and MACD? Check out Chapter 4 of the Technical Analysis course on the Investopedia Academy)

Traders should watch for a rebound from the key moving average support levels to retest upper trendline resistance at around $360.00. If the stock breaks down from these levels, traders should watch for a move to retest lower trendline resistance at around $325.00. A breakdown from these levels could lead to S1 support at $305.22, while a breakout from upper trendline resistance could lead to a move to R1 resistance at $370.45. (For more, see: Tesla Semis Hit the Road With First Cargo.)

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

Published at Tue, 13 Mar 2018 14:36:00 +0000

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Wall Street is asking: Which Trump will we get?

Wall Street is asking: Which Trump will we get?

1. Trump vs. Trump: It’s been 16 months since the election, but Wall Street is still trying to figure out which President Trump it will get.

Will it be pro-business Trump? His big corporate tax cuts and deregulation agenda fueled the stock market boom.

Or populist Trump? He demonized Goldman Sachs(GS) and hedge funds on the campaign trail and attacked American icons like Ford(F) on Twitter.

More recently, there’s been protectionist Trump, whose love of tariffs and tirades against trade deals have raised the specter of an unwinnable trade war.

The pro-business crowd has been sounding the alarm about Trump the trade hawk since the White House proposed steep tariffs on aluminum and steel imports. They are set to go into effect in two weeks.

The Business Roundtable, a powerful business lobby, called the tariffs a “major unforced error” by Trump that will put “tens of thousands of American jobs at risk.”

The Wall Street Journal’s editorial page went a step further, saying Trump’s “protectionist eruption” is a “dangerous moment” for his presidency. The risk, the paper said, is that he “veers into the Herbert Hoover ditch.”

Wall Street seems to be betting that pro-business Trump will win, or at least that his tax cuts will provide a cushion against trade turbulence.

That bet may be based in part on Trump’s own obsession with the performance of the stock market. Surely he wouldn’t do anything to risk that, right?

Stocks climbed on Thursday after Trump softened his tariff stance by offering indefinite exemptions for Mexico and Canada. Trade fears were firmly in the rearview mirror by Friday as the Dow surged after a “Goldilocks” jobs report revealed strong employment gains coupled with modest wage increases.

But the risk of trade trouble is hardly over. Much will depend on how trading partners, especially the European Union, respond if they don’t get exemptions of their own.

S&P Global Ratings warned in a report on Friday that Trump’s tariffs raise the risk of a “retaliatory spiral.” While a “full-scale trade war” isn’t expected, the report said, “such an outcome is not assured.”

And don’t forget: Trump has signaled a bigger trade crackdown more squarely aimed at China is coming.

Chris Krueger of Cowen Washington Research Group lamented in a recent report that “predicting what is going to happen on trade policy is impossible.”

The path for a more muscular trade agenda has been cleared by the resignation of Gary Cohn, Trump’s top economic adviser and a staunch defender of free trade.

Cohn’s eventual replacement could offer clues to Trump’s next steps.Will he tap a defender of free trade like Larry Kudlow or even a Cohn-like deputy and Wall Street veteran, such as Shahira Knight?

Or will he go the other way and select a trade hawk like Peter Navarro?

If it’s Navarro, Wall Street may be forced to prepare for protectionist Trump.

2. Inflation watch: On Tuesday, the Labor Department plans to release the Consumer Price Index for February. Wall Street will pay close attention to the inflation indicator.

In January, inflation rose faster than economists expected. That’s bad news for investors, who fear that inflation could prompt the Fed to raise interest rates more quickly — and steeply — than it had planned. The Dow dipped slightly in early morning trading when the inflation figure was reported last month.

The market also reacted wildly following January’s jobs report, which revealed that wages grew at the fastest pace in eight years.

Inflation fears have receded in recent weeks, especially after the February jobs report showed strong employment gains but a slowdown in wage growth. The Dow surged 441 points on the news.

3. Consumer snapshot: The Commerce Department on Wednesday will release February’s retail sales. On Friday, the University of Michigan will reveal its consumer sentiment index for March.

Taken together, the two will shed light on how American consumers are feeling.

In January, US retail and food services sales ticked down 0.3% from December, but were 3.6% higher than in January 2017. And Michigan’s index showed that Americans were out shopping in February: consumer sentiment was at its second highest level since 2004.

4. Jewelers report earnings:Signet Jewelers(SIG) is set to report earnings on Wednesday, and Tiffany(TIF) on Friday. The two jewelers are facing very different challenges.

Signet, which owns mall-based Kay, Jared and Zales, reported weak sales last quarter and over the holidays. Mall closures are hurting the affordable jewelery brands, and will likely continue to pose a threat.

Tiffany, on the other hand, had a good third quarter and great holiday sales. But the luxury jeweler is worried about this year — in January, the company lowered its expectations for 2018.

5. Coming this week:

Tuesday — Consumer Price Index; Dick’s Sporting Goods(DKS) earnings

Wednesday — Signet Jewelers earnings; US retail sales

Thursday — Dollar General(DG), Broadcom(AVGO) earnings

Friday —Tiffany(TIF) earnings

Published at Sun, 11 Mar 2018 13:29:51 +0000

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Premarket: 5 things to know before the bell

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Premarket: 5 things to know before the bell

1. Tariff time?: President Donald Trump could formalize new tariffs on steel and aluminum imports on Thursday.

Or not.

There was confusion late Wednesday over whether the paperwork would be ready in time for the planned signing around 3:30 p.m. ET. There’s also confusion about whether some countries would be exempt.

“The expectation is that the order enacting the tariffs will be signed by the end of the week, but the details remain elusive,” said Mike O’Rourke, chief market strategist at JonesTrading.

The tariffs are expected to lead to retaliatory measures from other countries, raising concerns about an all-out trade war.

China’s Foreign Minister Wang Yi said Thursday that “in the event of a trade war — China will make a justified and necessary response.” The European Union is preparing tariffs on US products, including orange juice.

US stock futures were a bit soft.

European markets were mixed in early trading. Asian markets ended the day with gains.

2. Healthy acquisition environment: Shares in Cigna(CI) and Express Scripts(ESRX) could be on the move after the Wall Street Journal reported the insurer and pharmacy-benefit manager are in talks.

The newspaper said Cigna was “nearing a deal” to buy Express Scripts in a transaction that could be worth over $50 billion.

It would be the latest in a series of major health care deals.

3. Earnings:Kroger(KR), Embraer(ERJ) and American Eagle(AEO) will release earnings before the open. El Pollo Loco(LOCO) will follow after the close.

Kroger, the largest grocery chain in the US, announced last week that it would stop selling guns and ammunition to customers under the age of 21. The chain sells weapons and ammunition at 45 Fred Meyer stores.

The grocer may face questions from investors about its decision on guns, and its reported talks with Chinese e-commerce giant Alibaba(BABA).

4. Economics: The European Central Bank will announce a decision on interest rates and hold a news conference on Thursday.

Investors will be watching to see if the central bank gives any hints about its plans to wind down its stimulus program. Concerns over weak inflation and a potential trade war could force the ECB to keep its foot on the gas.

5. Coming this week:

Thursday — International Women’s Day;Kroger(KR) earnings; Trans-Pacific Partnership Agreement set to be signed in Santiago de Chile; Geneva Motor Show opens to the public
Friday — US monthly jobs report

Published at Thu, 08 Mar 2018 09:59:59 +0000

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Micron Stock Breaks Out but Could See Near-Term Consolidation

Micron Stock Breaks Out but Could See Near-Term Consolidation

By Justin Kuepper | March 7, 2018 — 9:41 AM EST

Micron Technology, Inc. (MU) shares rose nearly 10% this week after Bank of America Merrill Lynch analysts upgraded their assessment for semiconductor stocks. Analyst Vivek Arya noted that semiconductor sales were up 23% over the prior year in January, led by analog, discrete and DRAM, and he believes that there will be broad sales improvements throughout the supply chain during the second quarter.

Goldman Sachs analyst Mark Delaney also raised his price target on Micron shares from $55.00 to $58.00, saying that he expects second quarter financial results and third quarter guidance to come in ahead of Street expectations given positive DRAM trends. The options market has been extremely active following these analyst comments, with a five-to-one ratio of call options to put options during Tuesday’s session. (See also: Micron May Rise 12% as Analysts Grow More Bullish.)

Technical chart showing the performance of Micron Technology, Inc. (MU) stock

From a technical standpoint, the stock broke out from its prior highs earlier this week to reach fresh multi-year highs. The relative strength index (RSI) moved into overbought territory with a reading of 74.26, but the moving average convergence divergence (MACD) remains in a strong bullish uptrend. These indicators suggest that there may be some near-term consolidation, but the trend still remains very skewed toward the upside.

Traders should watch for some consolidation between trendline support at $50.00 and R2 resistance at $57.20 over the coming week. A breakout from R2 resistance could lead to fresh multi-year highs, while a breakdown below trendline support could lead to a move down to the pivot point at $45.26. According to NASDAQ, Micron is expected to report its second quarter earnings on March 22 after the market closes. (For more, see: Why Chip Stocks Will Keep Rising.)

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

Published at Wed, 07 Mar 2018 14:41:00 +0000

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Stocks soar as trade war fears ease

Trump official: Tariffs won't hurt the economy
Trump official: Tariffs won’t hurt the economy

Stocks soar as trade war fears ease

Fears of a trade war eased on Wall Street — for a day, at least.

The Dow climbed 336 points on Monday after House Speaker Paul Ryan and other top Republicans broke with the White House over President Trump’s planned steel and aluminum tariffs.

“We are extremely worried about the consequences of a trade war and are urging the White House to not advance with this plan,” Ryan spokeswoman AshLee Strong said in a statement Monday morning.

Investors seemed to be betting that GOP opposition could soften Trump’s position.

“You’re starting to get blowback not just from Corporate America but from Trump’s own party,” said Michael Block, chief market strategist at Rhino Trading Partners. “He’s getting pushback and a reminder that if markets and the economy don’t go the right way, it’s going to endanger the GOP’s chances in November.”

Caterpillar(CAT) and Boeing(BA), two companies that would take hits if the tariffs led to a rise in steel prices, led the Dow on Monday. The average snapped a four-day losing streak and turned positive on the year.

Trump announced on Thursday that his administration would impose a 25% tariff on steel imports and a 10% tariff on aluminum.

Top American allies, including Canada and the European Union, have pledged to retaliate if Trump follows through on the plan. White House trade adviser Peter Navarro said on CNN’s “State of the Union” on Sunday that no countries will be excluded from the tariffs.

Wall Street was spooked by the tariffs and the potential that they will set off a global trade war. The Dow lost 491 points on Thursday and Friday. Trump escalated those fears on Friday by writing on Twitter, “Trade wars are good, and easy to win.”

Asked about Ryan’s position on Monday, Trump told reporters, “No, we’re not backing down.”

Published at Mon, 05 Mar 2018 21:15:40 +0000

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U.S. Treasury to close ‘carried interest’ loophole in new tax law

U.S. Treasury to close ‘carried interest’ loophole in new tax law

WASHINGTON (Reuters) – The U.S. Treasury said on Thursday it will close an unintended loophole created by the Republican tax overhaul that let some Wall Street financial managers dodge new limits on“carried interest” by operating as businesses known as S-corporations.

Carried interest refers to a longstanding Wall Street tax break that let many private equity and hedge fund financiers pay the lower capital gains tax rate on much of their income, instead of the higher income tax rate paid by wage-earners.

President Donald Trump vowed to close the loophole during the 2016 presidential election campaign.

Republican tax legislation signed into law by Trump in December required fund managers to hold investments for at least three years before becoming eligible for the lower capital gains rate, but it exempted corporations.

Media reports soon followed saying that some investment funds were setting up pass-through entities known as S-corporations in the hopes of qualifying for the corporate exemption and skirting the carried interest restriction.

On Thursday, the Treasury and its tax-collecting Internal Revenue Service announced that forthcoming regulations will prevent S-corporations from taking advantage of the carried interest exemption.

S-corporations are a form of business entity that passes profits on to business owners as personal income.

New Treasury rules are expected to specify that the exemption applies only to C-corporations, including publicly traded companies, which pay income tax before distributing net profits to shareholders as dividends.

“We worked expeditiously to take this first step to clarify that S corporations are subject to the three-year holding period for carried interest,” Treasury Secretary Steven Mnuchin said in a statement.

The American Investment Council, which represents private equity investors, welcomed Treasury’s guidance, saying in a statement that the government’s position“correctly clarifies the intent of the law.”

Reporting by David Morgan; Editing by Kevin Drawbaugh

Published at Thu, 01 Mar 2018 17:45:13 +0000

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Housing Industry Concerned about Tariffs

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By cjweaver13 from Pixabay

Housing Industry Concerned about Tariffs

by Bill McBride on 3/04/2018 10:28:00 AM

On Thursday, NAR chief economist was quoted in Inman News: Trump tariffs on steel and aluminum will be a blow to the construction industry

“Tariffs could measurably raise the cost of building materials and hinder home construction of affordable homes,” said Yu. “But more importantly, tariffs and restrictions to international trade will hold back economic growth and job creations. A better way to raise GDP growth is to produce more homes. Job growth and additional housing inventory will greatly help American workers and American consumers.”

And from the NAHB: Statement from NAHB Chairman Randy Noel on New Steel and Aluminum Tariffs

“Given that home builders are already grappling with 20 percent tariffs on Canadian softwood lumber and that the price of lumber and other key building materials are near record highs, this announcement by the president could not have come at a worse time.

“Tariffs hurt consumers and harm housing affordability.”

As a noted in When the Story Changes, Be Alert, housing is facing several headwinds in 2018: higher mortgage rates, a negative impact from tax changes, higher labor costs, and higher material costs (especially lumber), and now tariffs on steel and aluminum.

Read more at http://www.calculatedriskblog.com/2018/03/housing-industry-concerned-about-tariffs.html#PutQ2se4SBrewMhC.99

 

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Stocks Plummet Amid Fears of a Trade War

Stocks Plummet Amid Fears of a Trade War

By Justin Kuepper | March 2, 2018 — 5:33 PM EST

The major U.S. indexes moved sharply lower over the past week after President Trump announced plans to impose a 25% tariff on steel imports and a 10% tariff on aluminum imports. After the Commerce Department found that steel and aluminum imports posed a risk to national security, the Trump administration gained the authority to establish import tariffs and promised to rebuild the American steel and aluminum industries.

International markets were lower over the past week. Japan’s Nikkei 225 fell 3.25%, Germany’s DAX 30 fell 4.57%; and Britain’s FTSE 100 fell 2.26%. In Europe, European Central Bank (ECB) President Mario Draghi indicated that slack in the Eurozone economy may be larger than initially estimated and noted the slow rise of inflation. In Asia, China voted to end term limits for President Xi Jinping in a move that has some investors and human rights activists concerned. (See also: Where Does the U.S. Import Steel From?)

The SPDR S&P 500 ETF (ARCA: SPY) fell 2.04% over the past week. After briefly reaching February’s pivot point levels, the index moved sharply lower to March’s pivot point levels at $269.21. Traders should watch for a breakout above these levels to retest the 50-day moving average at $273.08 or upper trendline resistance at around $278.00, or a move lower to retest reaction lows at around $258.00. Looking at technical indicators, the relative strength index (RSI) fell to slightly oversold levels of 46.00, while the moving average convergence divergence (MACD) could see a near-term bearish crossover.

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

The SPDR Dow Jones Industrial Average ETF (ARCA: DIA) fell 2.99% over the past week, making it the worst performing major index. After briefly hitting its February pivot point at around $258.00, the index moved sharply lower. Traders should watch for a move down to reaction lows or S1 support at $243.83 or a rebound higher past its pivot point at $248.53 to the 50-day moving average at $252.07. Looking at technical indicators, the RSI appears modestly oversold at 42.62, while the MACD could see a near-term crossover. (For more, see: 6 Reasons for Another $6 Trillion Stock Market Correction.)

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

The PowerShares QQQ Trust (NASDAQ: QQQ) fell 1.30% over the past week. After briefly hitting its prior highs of around $170.00, the index moved sharply lower before rebounding from its pivot point and 50-day moving average at around $163.22. Traders should watch for a further rally to retest prior highs or a breakdown from the pivot point and 50-day moving average to reaction lows at around $155.00. Looking at technical indicators, the RSI appears neutral at 52.94, but the MACD could see a bearish crossover.

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

The iShares Russell 2000 Index ETF (ARCA: IWM) fell 1.06% over the past week, making it the best performing major index. After nearly reaching February’s pivot point, the index moved sharply lower to its March pivot point at $150.00 before rebounding. Traders should watch for a rally past the 50-day moving average at $153.91 to R1 resistance at $157.54 or a move lower to retest reaction lows and the 200-day moving average at $145.60. Looking at technical indicators, the RSI appears neutral at 49.62, but the MACD could turn bearish.

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

The Bottom Line

The major indexes moved lower over the past week, with neutral RSI readings and bearish MACD readings predicting further downside. Next week, traders will be watching several economic indicators, including employment data due out on March 9. The market will also be closely watching how China and other trade partners react to President Trump’s new tariffs for steel and aluminum imports. (For additional reading, check out: Tariff Talk May Signal NAFTA Exit: Goldman Sachs.)

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

Published at Fri, 02 Mar 2018 22:33:00 +0000

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The Squeeze Is On

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By geralt from Pixabay

The Squeeze Is On

by The MoleFebruary 26, 2018

Happy Monday everyone! I am happy to report that several of the entry opportunities I posted last Friday are faring well with hopefully more ill-gotten gains beyond the horizon. On the equities side the E-Mini is getting ready to put the squeeze on whoever remains short at this point. And let me tell you right now – if you are a bear, or are still holding short, you are probably not going enjoy this post.

About 2/3 of the late January sell off has already been recaptured and in my mind the recent spike high near 2750 was the final line in the sand for the short term perspective. Every tick higher henceforth now adds additional defensive context for the longs and increasingly reduces the odds of another leg lower. At least on a short term medium term basis. Long term I have a few more thoughts below the fold.

The Zero indicator (you are a sub I hope!) showed us weak but consistently positive participation on Friday, further bolstering our long perspective.

A continued vega squeeze on the VIX has been leading the charge higher as visualized by our trusted SPX:VIX ratio – here plotted against just the SPX. At least short term everything is pointing higher.

Thus it is not surprising that I entered long the ES on a breach of 2731.25 as planned (in the subscriber section – sorry I can’t give it all away). It is now time to advance my stop to break/even.

Crude was slow going at first but now seems to be picking up the pace. I’m advancing my trail to < 62.50. The formation on the daily panel suggests continuation higher.

Gold was another juicy entry last week and I’m now advancing my stop a few ticks < break/even (I didn’t correct the comment on the chart) which is near the 100-hour SMA right now. Reason is that it’s quite possible that we’re going to see another retest of that one which is why I’m putting it < 1332.4.

My BTC campaign wasn’t as lucky and immediately proceeded to ISL after entry. There currently is a new attempt to produce a short term floor but it would be too premature to enter here. The medium term trend still supports the longs here but if they continue to be unable to drag the horse across the 11,800 mark then bad things may happen. That said – a convincing spike low with a retest would put me into another long campaign.

LTC on the other hand is holding steady and I just advanced my trail to the recent spike low. As you can see, no drama, no rumors, no excitement here – simply entries taken as we would in any other market vertical.

More entries and a few additional market perspectives below the fold:

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Published at Mon, 26 Feb 2018 13:31:27 +0000

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Weight Watchers Stock Extends Impressive Rally

 

by TeroVesalainen from Pixabay

Weight Watchers Stock Extends Impressive Rally

By Justin Kuepper | February 28, 2018 — 10:45 AM EST

Weight Watchers International, Inc. (WTW) shares rose nearly 10% in early trading on Wednesday after the company reported better-than-expected fourth quarter financial results. Revenue rose 16.9% to $312.5 million – beating consensus estimates by $4.93 million – and net income of 37 cents per share beat consensus estimates by six cents per share. Management anticipates full-year revenue of $1.55 billion versus a consensus of $1.44 billion and earnings per share of $2.40 to 2.70 versus a consensus of $1.90.

Weight Watchers stock has risen more than 75% over the past three months after the company implemented a turnaround plan that has more than doubled profits over the past two years. After the launch of the Freestyle program in December, the company ended the fourth quarter with 2 million online subscribers and 3.2 million total subscribers. (See also: Oprah’s Weight Watchers Bet Finally Paying Off.)

Technical chart showing the performance of Weight Watchers International, Inc. (WTW) stock

From a technical standpoint, the stock rebounded from lower trendline support toward the middle of its price channel  earlier this week. The relative strength index (RSI) moved toward overbought levels at 62.88, while the moving average convergence divergence (MACD) remains in a slight bearish downtrend. These dynamics suggest that the stock could see some consolidation above R1 resistance at $73.68 in the near term.

Traders should watch for a breakout toward upper trendline and R2 resistance at $83.06, which would put the stock at its all-time highs. If the stock breaks down below lower trendline support at $70.00, traders should watch for a move to the 50-day moving average at $60.93 or the pivot point support at $59.49, although this scenario seems less likely. (For more, see: Weight Watchers Stock Breaks Out of 4-Week Base.)

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

Published at Wed, 28 Feb 2018 15:45:00 +0000

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Volatility Begets Volatility

Volatility Begets Volatility

Markets never move in a straight line and the 12% correction in the S&P 500 in late January sent an IV shockwave through the financial system from which it is still attempting to recover. What usually follows a large volatility event is a counter reaction followed again by smaller events until either the old market regime re-asserts itself or something even more dire happens.

We now find ourselves at that very threshold at which the market direction for the remainder of this year will be determined.  And that incidentally not only applies to equities but also to the FX and crypto space. What happens here will set the stage for whatever transpires over the rest of this year and beyond, so we’d better pay attention.

I best speak in charts, and I usually put my money where my mouth is. Which is why I just grabbed a long position here with a stop below 2705.25. For one the formation on the short term panel is looking very bullish to me, so does the sequence of higher highs and higher lows on the daily. Until I see a breach < 2682 I have to be long here.

Should we breach below that then I would have to get confirmation via a breach and retest of the 100-day SMA. Only a spike high below that mark would get me to take on short positions. The exception being that I see very concerning divergences on my momo charts and of course our trusted Zero indicator:

Which by the way consistently pointed downwards during yesterday’s sell off. However I don’t see any major warning signs on the hourly panel (left). It is slightly divergent but not sufficiently yet to warrant short positions. If you are a short here then I suggest you trail your positions and keep an eye on the Zero signal (in case we get a bullish divergence today or tomorrow). By the way if you trade the E-mini and you are not a subscriber yet then sign up here – you’ll be glad you did.

Now on the currency front the EUR/USD has been somewhat weakening recently and then stabilized in a ‘wait and see’ formation in anticipation of Powell’s speech. I wasn’t even aware that he was scheduled to speak until sometime Friday when I checked the event schedule for the coming week. Which once again speaks to the power of simple price action to tell you what’s up without having to follow a ton of fundamental or macro-economic data.

Since Jerome Powell’s slightly hawkish hearing in Congress the Euro has once again descended lower and in the process managed to trigger a short position I had proposed sometime last week (to the subs that is). It’s a bit too early to move my stop to break/even as price action is choppy and there may be another push higher. As a matter of fact I don’t think the odds are great for this campaign and it only was presented as the potential payoff could be large due to a potential long squeeze scenario. My target range for this campaign would be near 1.2 from where its 100-day SMA currently hails.

Crude is a stop out at about 1R of profits – not much given the time it was active but we always need to adjust our time horizons to the price action and not the other way around. Some symbols move slowly but steadily, some more volatile (BTC sends its regards), and some do both for extended times. Crude isn’t in an easy market regime right now and trading it takes patience. However when it starts trending then it usually makes a b-line for its target range – hopefully we’ll see it switch back to that soon again.

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Published at Wed, 28 Feb 2018 12:32:49 +0000

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Penny Stocks to Watch for March 2018

Penny Stocks to Watch for March 2018

By Alan Farley | Updated February 28, 2018 — 11:00 AM EST

Volatility rose sharply in the first half of February, driven by rising Treasury yields and growing odds that the Federal Reserve will raise interest rates. It’s projected that the Fed will increase rates at least three times in 2018. Major stock indices plummeted in early Feb but eventually found their footing and have now recouped the majority of losses. Even so, it’s likely the broad market has entered a correction or rangebound phase that encourages profit-taking and rotation into new instruments.

The Russell-2000 small-cap index fell more than 11% during the selloff and has now settled in the upper half of a trading range in place since September. Selling pressure spared the majority of penny stocks and low-priced stocks, with profit-taking focused on high growth plays that rallied to unsustainable levels in the January uptrend. A healthy share of freed up capital could rotate into these issues in coming weeks, as speculative appetite returns to normal levels.

February’s watch list performed well given volatile cross-currents. In February, Viking Therapeutics, Inc. (VKTX) was a top penny stock pick and advanced by 30%. Digital Turbine, Inc. (APPS) added more than 16% during the month while Safe Bulkers, Inc. (SB) rose more than 10%. These issues have returned in the March list, along with two February plays that have drawn bullish consolidation patterns. Given the relatively strong performance of industrial plays, the new penny stocks to watch list also includes two stocks that should benefit from new infrastructure spending and the strengthening world economy.

Penny Stocks to Keep Watching

1. Viking Therapeutics, Inc. (VKTX)

Viking Therapeutics, Inc. (VKTXposted an all-time high at $10.23 just a few sessions after coming public at $8.50 in April 2015. The junior biotech stock then turned sharply lower, losing ground into the second half of 2017 when it posted an all-time low at 88-cents. The stock finally ended the multi-year downtrend when it broke out above a trendline of lower lows in September and has now entered a healthy uptrend that could eventually reach the IPO print above $8.00.

2. Westport Fuel Systems, Inc. (WPRT)

Westport Fuel Systems, Inc. (WPRTtopped out at an all-time high in the low-50s in 2012 and rolled over, entering a brutal decline that continued into March 2017’s all-time low at 82-cents. A bounce into October stalled at $4.09, giving way to a rectangular trading range that’s holding support at the 200-day EMA near $2.70. The next bounce could gain traction, lifting the stock back to range resistance, ahead of a breakout that targets the 2015 high at $6.74.

3. Tuesday Morning, Corp. (TUES)

Tuesday Morning, Corp. (TUESended a multi-year uptrend in the low-20s in the fourth quarter of 2014 and entered a decline that reached a 9-year low at $1.60 in June 2017. The stock built a basing pattern at that level and turned higher in August, stalling at the 200-day EMA near $3.00 in September. Two breakout attempts have failed while price action has carved a rectangle pattern with support at $2.40. It’s just rallied to a 4-week high and could break out in coming weeks, reaching broken 2015 support near $5.00.

4. Safe Bulkers, Inc. (SB)

Safe Bulkers, Inc. (SBhit a 5-year high at $11.48 in March 2014 and carved a topping pattern, ahead of a breakdown that escalated in the fourth quarter of 2015, dropping the stock to an all-time low at 30-cents. The subsequent recovery wave eased into a rising channel in April 2016, with that pattern still in force nearly two years later. The uptick stalled at $3.50 in September 2017, generating two failed breakout attempts ahead of a successful February 2018 advance that could now reach channel resistance above $5.00.

5. Digital Turbine, Inc. (APPS)

Digital Turbine, Inc. (APPSgot crushed between 2008 and 2010, dropping from the low-30s to just 75-cents. A recovery rally into 2013 stalled at $6.00, generating a double top pattern and 2015 breakdown that undercut 2010 support, posting an all-time low at 56-cents in November 2016. Constructive price action since that time has reached double top resistance near $2.50 while impressive buying power predicts an eventual breakout. That trend advance has the potential to double the stock’s price in coming months.

New Penny Stock Picks for March

6. Gerdau SA ADS (GGB)

Gerdau SA ADS (GGBposted an all-time high at $26.22 in 2008 and sold off into single digits during the economic collapse. A bounce into 2010 stalled at $17.99, yielding a downtrend that picked up steam between 2013 and 2016, dropping the stock to a 13-year low at 79-cents. The subsequent recovery stalled at $4.30 in December 2016, giving way to an inverse head and shoulders pattern that broke to the upside earlier this month. This breakout could gain traction in coming weeks, underpinned by the likelihood of U.S. steel tariffs and infrastructure legislation.

7. HTG Molecular Diagnostics, Inc. (HTGM)

HTG Molecular Diagnostics, Inc. (HTGMcame public at $14 in May 2015 and topped out quickly at $19.75. The subsequent decline generated a single bounce into February 2017, posting an all-time low at $1.20. A dramatic March buying surge reached $13.25 before rolling over in a long correction that found support near $1.60 in August. The stock turned higher once again in January 2018 and just reversed at the .382 Fibonacci selloff retracement level above $5.00. Look for buyers to return at or above $3.70, igniting a buying surge that could eventually reach the .618 retracement at $8.80.

8. PolyMet Mining, Corp. (PLM)

PolyMet Mining, Corp. (PLMfound support at 46-cents in 2009 following a steep decline from $4.50. The subsequent uptick ended at $3.79 in 2010, yielding 8-years of rangebound action between those price levels. The stock tested range support in 2015 and again in 2017, finally turning higher in December. The rally gained traction into February 2018 and stalled at $1.34, generating a narrow triangle pattern that could yield a rally into the 2011 high at $2.65. Buying power has escalated in recent months, offering the potential for even stronger gains.

9. Civeo, Corp. (CVEO)

Civeo, Corp. (CVEOturned sharply lower just three months after coming public in the low-20s in June 2014, descending in a vertical decline that finally ended at an all-time low under a buck in January 2016. A bounce into 2017 stalled just above $3.50, giving way to a rounded correction that’s now completed an inverse head and shoulders pattern. A breakout will target the unfilled December 2014 gap between 5 and eight but is unlikely to fill the big hole on the first attempt. As a result, taking profits within that price zone makes perfect sense.

10. Telaria, Inc.(TLRA)

Telaria, Inc. (TLRAgapped down between $9.25 and $5.10 in November 2013, establishing a resistance zone that remains in force more than four years later. The subsequent decline posted an all-time low at $1.29 in February 2015, ahead of a base-building period that yielded an August 2017 breakout. The stock reached gap resistance in October and eased into a rectangular pattern that’s still in play. This week’s failed breakout attempt will test bulls’ resolve, with support at $3.52 likely to hold and generate more bullish second-quarter price action.

The Bottom Line

March’s penny stock watch list features many industrial plays that could benefit from U.S. tax cuts, infrastructure spending and strong economic growth around the world.

Published at Wed, 28 Feb 2018 16:00:00 +0000

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Cronos, a marijuana producer, starts trading on the Nasdaq

Sessions to rescind Obama-era marijuana policy
Sessions to rescind Obama-era marijuana policy

Cronos, a marijuana producer, starts trading on the Nasdaq

Canadian marijuana producer Cronos Group started trading on the Nasdaq on Tuesday, marking a big step for the cannabis industry.

Cronos is the first pot producer and seller to trade on Wall Street, though other companies with indirect relations to cannabis are trading.

“We’re the only pure play marijuana company” to be traded on a U.S. exchange, Cronos CEO Mike Gorenstein told CNN.

Analysts called the development a milestone for both Toronto-based Cronos and the entire cannabis industry.

“We imagine the SEC would have gone through a very thorough review/vetting process before allowing a cannabis company to list on a major U.S. exchange,” Vahan Ajamian, an analyst for Beacon Securities, wrote in a note to investors.

Cronos is only involved with countries that do not have a federal ban on marijuana, like Israel, Australia, Germany and Canada, and that probably helped them get approved for the Nasdaq, he said.

Gorenstein said that Cronos exports marijuana to Germany, and is building facilities to grow cannabis in Australia and Israel.

Cronos shares dropped more than 2% on their first day. “Like with any new asset class there’s certainly a lot of volatility,” said Gorenstein, noting that the stock jumped 10% on the Toronto exchange on Monday, and then dipped 2% on Tuesday.

Ajamian said the Nasdaq launch is a big deal for Wall Street because “it alerts the U.S. investors that there’s a federally legal sector [for marijuana] they can invest in.”

Some investors already have. Constellation Brands of New York, an alcohol beverage company with 76 brands including Corona, paid $190 million last year for a 10% stake in Canopy Growth Corp., a Canadian cannabis producer.

Canada is expected to legalize the retail sale of recreational marijuana in August. Gorenstein said his company will produce recreational marijuana when that happens.

Cronos isn’t the only pot-related company to trade on the Nasdaq. The British GW Pharmaceutical(GWPH) has a cannabidiol treatment for epilepsy, and there are several other pot-related stocks, like Innovative Industrial Properties(IIPR), a real estate developer and lessor to pot farmers.

Recreational marijuana is legal in 9 U.S. states and also Washington, D.C., and medical marijuana is legal in 30 states. It’s prohibited by the federal government.

Published at Tue, 27 Feb 2018 23:20:33 +0000

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Nike Stock Hits All-Time High Ahead of March Report


By Alan Farley | February 27, 2018 — 8:38 AM EST

Dow component Nike, Inc. (NKE) shares surged to an all-time high on Monday, rallying above resistance at the December 2015 high. Speculation about March 22 earnings could add to gains between now and then, but the stock has a tendency to shake out buyers after the news, forcing market players to choose their entry prices wisely. Even so, the stars are aligning for a historic breakout that could lift the apparel giant into Dow leadership for the first time since 2014.

The company beat fiscal second quarter EPS and revenue estimates in December’s report but fell more than four points after the news, signaling caution ahead of the March confessional. North American sales growth declined 5% in the prior quarter, but impressive Asian and Latin American metrics made up the shortfall and should keep growth on the fast track throughout 2018. (See also: Inside Billionaire Bill Ackman’s $365 Million Nike Investment: 13F.)

NKE Long-Term Chart (1990 – 2018)

A multi-year uptrend ended out at a split-adjusted $2.82 in 1992, yielding a deep correction that found support at $1.35 in the fourth quarter of 1993. The stock turned sharply higher into the second half of the decade, reaching $9.55 in 1997 and pulling back in a rounded pattern that posted a deep low at $3.22 at the start of the new millennium. Nike shares traded in a narrow trading range during the internet bubble bear market, more than doubling in price but failing to reach the prior decade’s high.

The stock completed the round trip in 2004 and broke out, but momentum failed to develop, generating sideways action into 2006, when it took off in a trend advance. It topped out in the upper teens in 2008 and held up relatively well during the economic collapse, posting a two-year low at $9.56 in March 2009. A quick bounce to a new high in 2010 set the stage for an impressive uptrend that posted returns in excess of 300% into December 2015, when the stock topped out near $70.

Aggressive sellers took control into the second half of 2016, carving a volatile decline that held above the August 2015 low at $47.25. The March 2017 swing high completed the outline of a symmetrical triangle, ahead of a December breakout that has generated an impressive surge into 2015 resistance. This buying power has registered on relative strength indicators, lifting the monthly stochastics oscillator into the first overbought technical reading in more than two years. (For more, see: Nike Declares It Is a Growth Company.)

NKE Short-Term Chart (2016 – 2018)

The correction into 2017 generated four failed attempts to rally above $60, establishing a line in the sand that broke in December 2017. The stock rallied quickly into 2015 resistance and dropped into a small-scale inverse head and shoulders pattern ahead of this week’s buying surge. This classic pattern should resist selling pressure, but a pullback could trade as low as $63 without undermining the bullish long-term outlook.

On-balance volume (OBV) ended a three-year accumulation phase at the end of 2015 and rolled into a distribution phase that continued into October 2017. Buying pressure since that time has failed to reach the prior high and is now flashing a bearish divergence, signaling weak institutional sponsorship. This deficit may increase March volatility and shake out weak hands while adding a cautious note to the upcoming earnings report and its sell-the-news tendency.

Price action since December has carved a rising channel that is easier to visualize on a logarithmic scale chart than an arithmetic scale chart. This pattern establishes short-term support at $63 and short-term resistance at $72. Informed market players will be watching those levels into earnings to gauge buying power and to look for buying opportunities. Conversely, a decline through channel support would have bearish implications, possibly triggering a long-term double top. (See also: Why Netflix, Nike and Starbucks Are Breaking Out.)

The Bottom Line

Nike rallied to an all-time high this week and could gain additional ground ahead of a late March earnings release that may test the resolve of newly minted shareholders. (For additional reading, check out: 12 Stocks That Can Thrive as Economy Gains Speed: Goldman.)

Published at Tue, 27 Feb 2018 13:38:00 +0000

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Global stocks firm, dollar dips before big week for central banks

Global stocks firm, dollar dips before big week for central banks

LONDON (Reuters) – Global stocks notched further gains on Monday and the dollar stayed on the back foot, as investors bet the new head of the U.S. Federal Reserve will steer a steady course on policy when he addresses lawmakers this week.

MSCI’s index of world stocks was up 0.3 percent, with the pan-European Stoxx 600 up 0.6 percent.

Asian markets also rose, with Chinese stocks up 1.2 percent after the ruling Communist Party set the stage for President Xi Jinping to stay in office indefinitely.

Much of the market’s focus during the coming week will be on monetary policy, with the heads of the European Central Bank and Bank of England set to give speeches. But they are likely to be overshadowed by Fed chair Jerome Powell.

U.S. stock markets calmed on Friday after the Fed said it saw steady economic growth continuing and no serious risks on the horizon, a trend that looks set to continue on Monday.

Dow Jones futures pointed to the index opening 0.6 percent higher, with S&P 500 futures up 0.4 percent.

Investors also seem to be wagering that Powell will stick to that script at his first appearance before the House on Tuesday, followed by testimony to the Senate on Thursday.

“Given he’s speaking on behalf of the committee it would be a big surprise to see much deviation from recent Fed commentary, but much will probably be made of how he handles the scrutiny,” said Jim Reid, a macro strategist at Deutsche Bank.

STERLING, EURO GAIN

The expected lack of policy surprises from Powell saw yields on U.S. 10-year Treasuries back off to 2.86 percent and away from a four-year top of 2.957 percent, dragging down the dollar.

The currency surrendered early gains to dip 0.2 percent against a basket of currencies to 89.68. That followed a 0.8 percent bounce last week.

Sterling was up 0.5 percent on Monday after Bank of England deputy governor Dave Ramsden said the bank might need to raise interest rates somewhat sooner than he had expected if wage growth picked up early this year.

The pound also benefited from hopes that Britain’s exit from the European Union might be less disruptive than feared, after opposition leader Jeremy Corbyn gave a speech on Monday backing a new customs union with the bloc.

The euro was 0.3 percent firmer on the back of dollar weakness, though investors largely held back from taking big positions ahead of a national election in Italy and the conclusion of coalition talks in Germany.

ECB President Mario Draghi is also set to appear before the European Parliament later in the day, while BoE governor Mark Carney speaks in Edinburgh on Friday.

In commodities, oil prices steadied after hitting their highest level in nearly three weeks, supported by comments from top exporter Saudi Arabia that it would continue to curb shipments in line with the OPEC-led effort to cut global supplies.

Reporting by Alasdair Pal, Additional reporting by Wayne Cole in Sydney; Editing by Matthew Mpoke Bigg

Published at Mon, 26 Feb 2018 12:39:53 +0000

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