“It wasn’t raining when Noah built the ark.” — Howard Ruff

There will not be any Weekly Re-Cap for the week of Aug 12 to Aug 23 2019. We are away for some needed R&R.
Have a good week.
The staffs at EGS.

“Reaching any goal in trading requires specific domain knowledge and technical skills. But then, after that, it’s all mindset management. Yet most people ignore that —they automatically think they have that last part all figured out, and it’s a mistake.”

1. FedEx Said It Would End its Contract to Deliver Amazon Packages — FedEx is gambling that it is better off filling its trucks with other customers’ goods. The company’s contract with Amazon expires at the end of this month. In June, FedEx said it was ending its air-shipping contract with Amazon in the U.S. The company would still handle international shipments. The decisions are evidence of escalating tensions between the longtime partners as Amazon builds its own delivery network.
2. White House to Move Forward With Ban on U.S. Government Business With Huawei — the White House is expected to start implementing provisions of a law that bars the U.S. government from doing business with Huawei. The planned move comes despite the Chinese tech giant’s efforts to block the rule in court. The Office of Management and Budget issued an interim rule this week laying out steps to ensure government agencies aren’t doing business with Huawei and several other Chinese companies. The rule is set to go into effect Aug. 13. Additionally, the White House is reportedly delaying a decision on whether to allow U.S. companies to do business with Huawei, while China released weaker economic data and pegged the yuan north of the $7 mark for the second consecutive session.
3. China Keeps Official Yuan Rate Just Stronger Than 7 Per Dollar — earlier in the week, Beijing let traded prices for its currency weaken past 7 per dollar, prompting the U.S. Treasury to designate it a currency manipulator. China currency at the weakest level since 2008, but again avoided moving this rate beyond the critical 7-yuan-to-the-dollar level. Asian stocks declined, while European stocks edged up against a backdrop of continuing worries about the U.S.-China trade war. The tensions are rising at a time when Chinese President Xi Jinping can ill afford to make concessions as he struggles with domestic issues. That raises the likelihood of a protracted trade conflict.
4. Britain, U.S. to Protect Shipping Through Strait of Hormuz From Iranian Threats — Britain joined the U.S. in forming an international mission to protect shipping through the Strait of Hormuz from Iranian threats, a decision that came after London struggled to build a European maritime coalition to safeguard ships in the region. The U.K. was dragged into the center of the simmering crisis between Iran and the West after Iran seized a tanker flying the British flag in July. The capture came after Britain seized an Iranian tanker the U.K. claimed was carrying oil to a sanctioned entity in Syria.
5. Facebook Introduces Facebook News Tab This Fall — set to launch this fall, Facebook (NASDAQ:FB) has confirmed that it’s working on a news tab to deliver “trustworthy news” to users. The announcement follows a WSJ report that said the social network had approached numerous news outlets like ABC News, Dow Jones, The Washington Post and Bloomberg about paying them as much as $3M annually to license their news articles. The tab would give news high prominence on Facebook, alongside core features like the News Feed (which includes updates from friends), Messenger and Watch (for videos).
6. AAII Investor Sentiment — AAII is reporting individual investor bullish sentiment declined a sizable 16.8 percentage points to 21.7% in the week ending 8/7/2019. This is the lowest level since bullish sentiment reached 20.9% on December 13, 2018, a market bottom in the fourth quarter 2018 pullback. The low level of bullish sentiment certainly classifies this as an extreme level.

Neutral sentiment fell 7.4 percentage points, resulting in bearish sentiment spiking higher to 48.2%. This results in the bull/bear spread coming in at an extreme -26.5 as seen in the below chart. At this level of spread, historically, market lows have occurred at or near these levels.

The week ahead — Economic data from Econoday.com:

“We want to perceive ourselves as winners, but successful traders are always focusing on their losses” – Peter Borish”

1. U.S. and China Are Set to Resume Trade Talks in Shanghai — negotiators will make another attempt to piece together a trade agreement amid considerably lowered expectations for a sweeping deal. People close to the talks say a major breakthrough is unlikely on points such as the U.S. insistence that China commit to legal changes to protect intellectual property and abandon state subsidies to business, or Beijing’s demands that the U.S. drop all tariffs as a condition for a deal. But more modest achievements may be possible, such as a commitment by China to purchase more agricultural products and action by the U.S. to relax its ban on U.S. companies selling to telecommunications giant Huawei Technologies.
2. Massive Data Breach at Capital One (COF) — CapitalOne disclosed a data breach exposed 140K Social Security numbers of its credit card customers, around 80K bank account records and 1M Canadian Social Insurance numbers. Additional information including names, addresses, phone numbers, credit scores and credit limits were also exposed, although credit card account numbers and log-in credentials were not taken. The suspect? Paige A. Thompson, a former employee of Amazon Web Services (NASDAQ:AMZN), where the bank had stored its customer data. Capital One (NYSE:COF) estimates the hack will cost the company approximately $100M-$150M in 2019.
3. Federal Borrowing Soars as Deficit Fear Fades — the U.S. government expects to borrow more than $1 trillion in 2019. Political support for taming deficits has faded in recent years, with Republicans supporting higher deficits in exchange for tax cuts and Democrats pushing for domestic-spending increases. Low borrowing costs suggest markets remain unfazed by all the red ink. Government debt has soared, but 10-year Treasury yields have fallen. Mainstream economists are increasingly questioning whether larger federal debt and deficits might be tolerable if put toward programs that would bolster long-term growth.
4. Hospitals May Be Forced to Disclose Discount Rates Negotiated With Insurer — The Trump administration proposed a rule requiring hospitals to disclose the discounted prices they negotiate with insurance companies, or face fines. The proposal could upend the $1 trillion hospital industry by revealing rates that have long been secret. The price-disclosure requirements would cover all of the more than 6,000 hospitals that accept Medicare, as well as some others. Hospitals that fail to share the discounted prices in an online form could be fined up to $300 a day, according to the proposal. The price-disclosure requirements would cover all the more than 6,000 hospitals that accept Medicare, as well as some others, and is likely to face fierce industry opposition. Comments on the proposal would be due in September and, if completed, the rule would take effect in January.
5. Fed Cuts Rates by a Quarter Point in Precautionary Move — the Federal Reserve cut interest rates by a quarter-percentage point—the first reduction since 2008—in a pre-emptive strike to cushion the economy from a global slowdown and escalating trade tensions. Officials also announced they would end the runoff of their $3.8 trillion asset portfolio on Thursday, two months earlier than previously planned. Fed Chairman Jerome Powell, at a news conference after the decision was released, called the rate cut a “mid-cycle adjustment” and didn’t rule out more reductions. But he also said it was “not the beginning of a long series of rate cuts” because that path is only followed at times of more severe economic distress. Powell’s remark raised comparisons to 1995-96 and 1998, when Alan Greenspan headed the Fed. In each instance, the central bank ended up cutting rates three times in a successful effort to prolong an economic upswing that until this year was the longest.

The week ahead — Economic data from Econoday.com: