Archive for June, 2018

Week of June 22 2018 Weekly Recap & The Week Ahead

Monday, June 25th, 2018

“If you personalize losses, you can’t trade.” — Bruce Kovner

1. Trump Directs More Tariffs at China — Trump asked the United States Trade Representative to identify $200 billion worth of Chinese goods for additional tariffs, at a rate of 10 percent. If China “refuses to change its practices” and insists on continuing with the new tariffs it recently declared, then the additional levies would be imposed on Beijing. However, the Chinese Commerce Ministry issued a response, stating that the latest threat of more tariffs violates previous negotiations and consensus reached between both the U.S. and China. Furthermore, President Trump has threatened a further $200B in tariffs on Chinese products should Beijing hit back again, bringing to $450B the potential amount that could be targeted. That sum approaches the roughly $500B in total annual Chinese exports to the U.S. As the trade war unfolds, the Trump administration is also working on measures that protect agriculture and other critical industries from retaliatory tariffs being threatened by China.
2. New York Sues 3M Over Toxic Foam — New York state is going after 3M (NYSE:MMM) and five other manufacturers for the almost $39M the government has spent to protect residents from the toxic firefighting foams made by the companies. Their use at five military and civilian airports in the state caused “extensive contamination” to nearby fish, soil and water, and increased the risk to people of immune system damage and other health problems.
3. China Threatens to Strike Dow-Listed Firms — China’s state-controlled Global Times reported that “If Trump continues to escalate trade tensions with China, we cannot rule out the possibility that China will strike back by adopting a hard-line approach targeting Dow Jones index giants,”. “Beijing will further open up China’s financial markets to the world, a move that may draw funds from U.S. stock markets as global investors increasingly add Chinese stocks to their portfolios.”
4. Dow Jones Removes GE from Index — the Dow Jones Index dropped GE and replaced with Walgreens (NASDAQ:WBA). GE released a statement saying that “Today’s announcement does nothing to change those commitments or our focus in creating a stronger, simpler GE.” The industrial conglomerate has been the worst performing stock in the index – where it was an original member in 1896 and a member continuously since 1907 – falling 55% over the last 12 months, and more than 25% YTD.
5. OPEC Ministers Agree to Raise Oil Production by 1 Million Barrels a Day — OPEC members agreed to start pumping more oil, though the agreement will not end the group’s 18-month-old deal to limit output. Instead the producers are seeking to cut no deeper than 1.2 million bpd, the target they set in November 2016. Expecting a large oil deficit in the second half of this year – due to outages in Venezuela and Libya – as well as calls from top consumers to cool down prices, consensus among the group is to raise production by a combined 1M barrels per day.

The week ahead — Economic data from Econoday.com:

Week of June 15 2018 Weekly Recap & The Week Ahead

Monday, June 18th, 2018

…“People somehow think you must buy at the bottom and sell at the top to be successful in the market. That’s nonsense! The idea is to buy when the probability is greatest that the market is going to advance”… Jesse Livermore

1. Trump Drops G7 Communique Endorsement — President Trump refused to endorse a G7 statement pledging to “fight protectionism and reduce tariff barriers,” saying trade among the G7 nations should be free of tariffs and other barriers. “Based on the fact that Canada is charging massive Tariffs to our U.S. farmers, workers and companies, I have instructed our U.S. Reps not to endorse the Communique as we look at Tariffs on automobiles flooding the U.S. Market!”.
2. Trump, Kim Sign ‘Comprehensive’ Document — the meeting between President Trump and Kim Jong-un signed a “comprehensive” and “historic” document that included the following four points: Establishing new US-DPRK relations, building a lasting and stable peace regime, reaffirming commitments to work toward complete denuclearization and recovering POW/MIA remains. U.S. sanctions will remain in effect for the time being and American forces will not be reduced on the Korean peninsula.
3. Lithium Revival Across the U.S. — In North Carolina, Nevada and half a dozen other states, miners are working to revive the U.S. lithium industry, once the world’s largest until it fell off in the 1990s. According to Reuters, Piedmont Lithium (NASDAQ:PLLL), Albemarle (NYSE:ALB) and Lithium Americas (NYSE:LAC) all see opportunity amid a surging EV market and increased battery demand. The U.S. produced only about 2% of the world’s lithium last year, but has around 13% of the world’s identified resources.
4. AT&T prevails in Time Warner merger trial — U.S. District Court Judge Richard Leon has approved AT&T’s (NYSE:T) $85.4B purchase of Time Warner (NYSE:TWX) without conditions, giving the pay-TV provider ownership of cable channels HBO and CNN, as well as film studio Warner Bros. The outcome could spur a wave of deals in the telecom and media industries, as well as clear the way for future vertical mergers.
5. Fed Raises Interest Rates and Signals 2 More Increases Are Coming — the Federal Reserve raised interest rates last Wednesday and signaled that two additional increases were on the way this year. Jerome H. Powell, the Fed chairman, said the economy had strengthened significantly since the 2008 financial crisis and was approaching a “normal” level that could allow the Fed to soon step back and play less of a hands-on role in encouraging economic activity. The Fed’s optimism about the state of the economy is likely to translate into higher borrowing costs for cars, home mortgages and credit cards over the next year as the central bank raises interest rates more quickly than was anticipated
6. Latest AAII Weekly Sentiment — based on the latest Weekly Sentiment, the Bulls are on the offensive this week as AAII Bullish sentiment jumped to 44.78% from 38.93% last week, which is the highest level since mid-February.

While bullish sentiment spiked higher, bearish sentiment did not see as big of a move to the downside. As shown in the chart below, negative sentiment declined from 26.72% down to 21.70%.

7. New High Cumulative A/D Line Versus S&P500 — below displays the chart of the S&P500 ‘s underlying breadth which points to an eventual new high in price for the S&P 500.

The week ahead — Economic data from Econoday.com:

Week of June 8 2018 Weekly Recap & The Week Ahead

Monday, June 11th, 2018

“The secret to being successful from a trading perspective is to have an indefatigable and an undying and unquenchable thirst for information and knowledge.” — Paul Tudor Jones

1. China Launches Foreign Chipmaker Probe — Chinese regulators are investigating Micron Technology (NASDAQ:MU), Samsung Electronics (OTC:SSNLF) and SK Hynix (OTC:HXSCL) as the country tries to reduce dependency on foreign chips, WSJ reported. Some speculate the probe concerns the rising cost of DRAM chips – the three companies are dominant suppliers – or it might be seeking to use the current DRAM pricing environment to gain leverage for a technology transfer. Also, ZTE has signed an agreement in principle that would lift a U.S. Commerce Department ban on buying from American suppliers, sources told Reuters. The preliminary deal includes a $1B fine, plus $361 from an earlier settlement and $400M in escrow to cover any future violations
2. Primaries Shape Battle for Congress In Mid-Term Election — the battle for control of Congress is on the radar as voters across eight states choose nominees in a slew of hotly contested primaries. The California races have garnered the most attention because of that state’s open primary system, in which the top two vote-getters advance regardless of party affiliation. An oversupply of Democratic candidates could result in a splintered electorate, allowing two Republicans to advance to November’s midterm election.
3. U.S.-China Trade Developments Progress — China has offered to purchase nearly $70B of U.S. farm, manufacturing and energy products if the Trump administration abandons its threat for $50B in duties on China-made products. The White House, which is looking to reduce its trade deficit with China by $200B, has said it plans to move ahead with the tariffs shortly after June 15 as a way to pressure Beijing to make more sweeping changes in its economy.
4. EU Prepares tariffs against U.S. in July — the EU “expects to conclude the relevant procedure in coordination with member states before the end of June,” European Commission Vice-President Maros Sefcovic told a news briefing. From blue jeans to motorbikes and whiskey, the hit list of U.S. products targeted for tariffs reads like a catalog of emblematic American exports.
5. The Pentagon’s Hypersonic Weapons Project — Hypersonic weapons are among the technologies emphasized in the Senate’s newly released $716B defense authorization bill for FY 2019. But as Russia and China continue their march toward fielding hypersonics, the Pentagon and its largest weapons supplier have shared limited details about their own efforts. Lockheed (NYSE:LMT) will be responsible for designing, engineering, integration and logistical support on the $928M U.S. hypersonic project.

The week ahead — Economic data from Econoday.com:

Week of June 1 2018 Weekly Recap & The Week Ahead

Monday, June 4th, 2018

“The financial markets generally are unpredictable. So that one has to have different scenarios… The idea that you can actually predict what’s going to happen contradicts my way of looking at the market.” – George Soros

1. Euro, Yield Worries Amid Turmoil in Italy — Italy’s anti-establishment parties have abandoned plans to form a coalition government after the country’s president refused to accept a controversial choice for economy minister, raising the possibility of snap polls. Investors fear the election will resemble a referendum on the EU and the euro, posing an existential threat for the bloc. That sparked the currency to slip below the $1.16 level, while the gap between Italian and German 10-year bond yields widened to its highest in over four years, putting pressure on banks and stocks across the region.
2. U.S. Moves Forward with China Tariffs — the White House is proceeding with its proposal to impose 25% tariffs on $50B worth of goods from China, and place new limits on Chinese investments in U.S. high-tech industries. “This statement is obviously in violation of the consensus reached in Washington recently by both China and the U.S,” China’s Commerce Ministry declared, pointing to the “trade war hold” announced by Treasury Secretary Steven Mnuchin less than 10 days ago.
3. US Allies Strike Back Against U.S. Tariffs — besides retaliatory tariffs from the European Union, the U.S. is facing “counter-balancing measures” from its northern (Canada) and southern neighbors (Mexico) after imposing duties on steel and aluminum. Canada’s levies will cover C$16.6B in imports, including whiskey, orange juice and other food products, alongside metal tariffs. Mexico’s reciprocal measures will also target steel, as well as pork legs, apples, grapes and cheeses.
4. China A-shares Join MSCI Indexes — more than 230 Chinese stocks, known as A-shares, have been finally added to MSCI’s Emerging Markets Index (ETF: EEM), giving ordinary U.S. investors greater access to mainland China. The move is expected to drive a surge of foreign money into local markets.

The week ahead — Economic data from Econoday.com:

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