“when the facts change, you must change your mind” – unknown

1. China Scraps Presidential Term Limits, Clearing Way for Xi’s Indefinite Rule — China’s parliament voted to repeal presidential term limits, allowing President Xi Jinping to keep power indefinitely in a formal break from succession rules set up after Mao Zedong’s turbulent rule. The votes gives Xi more time to enact plans to centralize party control, increase global clout and curb financial and environmental risks. It comes after the U.S. reportedly asked China to import more cars, aircraft, soybeans and natural gas as part of a plan to cut its bilateral trade deficit by $100B and avoid placing tariffs on Chinese imports.
2. Trump Issues Order to Block Broadcom Takeover of Qualcomm — President Trump has issued an order to block Broadcom’s (NASDAQ:AVGO) hostile takeover of Qualcomm (NASDAQ:QCOM). The order states “There is credible evidence that leads me to believe that Broadcom … through exercising control of Qualcomm … might take action that threatens to impair the national security of the United States,” .
3. Democrat Conor Lamb Apparent Winner of Pennsylvania Special Election — Democrat Conor Lamb is the apparent winner of a House seat in Pennsylvania’s 18th congressional district, a region President Trump won by 20 percentage points in 2016. The election was watched nationwide as a sign of political tides eight months ahead of congressional elections.
4. Facebook, Google Cracks Down on Crypto Advertising — following a similar hard-line approach taken by Facebook (NASDAQ:FB), Google (GOOG, GOOGL) will ban crypto-related advertising starting in June, including ICOs, wallets, and trading advice across any of its platforms. Google’s director of sustainable ads stated “We don’t have a crystal ball to know where the future is going to go with cryptocurrencies, but we’ve seen enough consumer harm or potential for consumer harm,” .
5. GE Begins Flight Trials for World’s Largest Jet Engine — General Electric has begun flight trials of the world’s largest jet engine after several delays caused by technical problems. The GE9X will power the Boeing (NYSE:BA) 777-9 and 777-8, which are scheduled to enter service in 2020 and 2022, respectively. Despite the problems, GE feels “very confident” it will meet a 2019 target date for safety certification, said spokeman.
6. Ford Sets Aggressive Hybrid Timetable — Ford (NYSE:F) announced it’s going all-in on hybrids. 75% of its lineup will be replaced in the hybrid push, while the automaker will add four new trucks and SUVs. The news comes as UBER discusses the possibility of installing its self-driving systems in Toyota (NYSE:TM) minivan models, expanding its partnerships with outside companies.

The week ahead — Economic data from Econoday.com:

“Be fearful when others are greedy and be greedy when others fearful.” — Warren Buffett

1. China Sets Growth Target at ‘about 6.5%’ — China’s National People’s Congress has officially kicked off with over 3,000 lawmakers descending on Beijing, where the country’s rubber-stamp parliament is expected to eliminate the two-term limit for the presidency. Continuing a campaign to reduce risks in China’s financial system, Premier Li Keqiang also set a target for economic growth for 2018 at “about 6.5%,” a slight recalibration from last year’s objective of “around 6.5% or higher if possible.”.
2. Senate to Vote on Dodd-Frank Rollback — Senate Majority Leader Mitch McConnell has filed a motion to have a procedural vote on a bill, sponsored by Senate Banking Committee Chairman Mike Crapo, that would roll back key regulations of Dodd-Frank. The measure spikes the asset level at which a bank becomes “systemically important” from $50B to $250B, freeing dozens of regional banks from stringent rules like additional capital buffers and stress tests.
3. Gary Cohn Announced His Resignation as Top Economic Adviser to President Trump — widely viewed as a voice for Wall Street in the White House, Gary Cohn has announced his resignation as the top economic adviser to President Trump, fanning fears of protectionist tariffs and a full-blown trade war. Trump tweeted he “will be making a decision soon” on replacing Cohn, who oversaw a major revamp of the U.S. tax code and pushed for a significant rewrite of financial rules.
4. AAII Weekly Sentiment Survey — in this week’s sentiment survey from AAII, bullish sentiment dropped nearly 11 percentage points falling from 37.28% down to 26.4%. That’s the lowest weekly reading since the end of August and the largest two-week decline since June 2013.

However, bearish sentiment hasn’t seen much of a bounce. At 28.38%, it is slightly higher than bullish sentiment, but it has been higher as recently as early February.

5. Trump Agrees to Meet N. Korean Leader on De-nuclearization Talks — President Trump has agreed to an invitation from North Korean leader Kim Jong-un to meet to discuss denuclearization. Kim made the invitation for Trump to come to North Korea in a letter hand delivered by South Korea’s national security adviser Chung Eui-yong, and Trump said he would meet by May, though the White House is now saying the time and place of the meeting is yet to be determined. Kim says he’s prepared to suspend nuclear and missile tests in the meantime.

The week ahead — Economic data from Econoday.com:

“We learn from history that we do not learn from history,” — George Wilhelm Friedrich Hege

1. Apple is Launching Medical Clinics — Apple is launching a group of medical clinics called AC Wellness to deliver the “world’s best healthcare experience” to its employees and their families, CNBC reports. A quietly published website, acwellness.com, said the Apple (NASDAQ:AAPL) initiative will begin this spring. The news comes as Amazon announced an effort with Berkshire Hathaway (BRK.A, BRK.B) and JPMorgan (NYSE:JPM) to improve the healthcare of their employees.
2. GE to Restate Two Years of Earnings — General Electric plans to restate the last two years of corporate profits, resulting in a cut of $0.13 in reported earnings per share for 2016 and $0.16 per share for 2017. The reduction comes as the conglomerate adopts new accounting standards for recognizing revenue from long-term contracts amid an SEC investigation into the method. GE will make the restatements on April 20.
3. U.S. to Imposed Heavy Duties on Aluminum Foil from China — the U.S. Commerce Department has imposed duties as high as 106% on aluminum foil from China after concluding that the country’s producers are dumping the product in the U.S. and receiving unfair government subsidies. In response, China’s Ministry of Commerce expressed “strong dissatisfaction” with the action and will take necessary measures to protect its legal rights and interests.
4. Energy ETF Closes February with Worst Monthly Drop Since December 2015 — the largest energy ETF (XLE) fell 10.8% for February, its worst monthly showing since December 2015. Prices for the April WTI contract settled 4.8% lower in February, the first monthly loss since August, while Brent crude fell 4.7% for the month in its first monthly loss since June. Also, Sundial Capital Research’s Jason Goepfert notes that “this is the first time since December 2015 that the S&P 500 has gained 1% or more for two straight days only to drop 1% or more on each of the next two days. That doesn’t happen very often, just 23 times since 1928. Here’s the rub: “All but 3 of them occurred during bear markets,” Goepfert writes. “Because it tended to occur in downtrends, future returns were poor, with declines over the next 30 days 65% of the time averaging -1.9%,” Goepfert writes.
5. SEC Launches Sweeping Probe Into Cryptocurrencies — the SEC has issued scores of subpoenas and information requests in a sweeping probe of technology companies and advisers involved in the booming market for digital tokens, the Wall Street Journal reports. The investigation significantly ratchets up the regulatory pressure on the booming U.S. market for raising funds in cryptocurrencies. Coin offerings raised $6.5B in 2017 and more than $1.6B so far this year despite a crash in the price of Bitcoin and other cryptocurrencies.
6. Trump’s Announcement Tariffs on Steel and Aluminum — Trump plans to impose tariffs of 25 percent on steel imports and 10 percent on aluminum. However, he didn’t elaborate on the details, saying the formal announcement will come next week. The EU said that it could target imports of Harley Davidson Inc. motorbikes, Levi Strauss & Co. jeans and bourbon whiskey as part of its response. Many nations are making a last-ditch attempt to have their nation’s steel and aluminum exempt from the action, a targeted strategy the U.S. Defense Department had voiced support for. Meanwhile, Canadian and Brazilian steel comprised a respective 16% and 13% of U.S. steel imports as of September 2017, while China, frequently criticized politically for dumping cheap steel on trade partners, is not one of the top 10 exporters of steel to the U.S., the report said. Meanwhile, top foreign sources of aluminum during 2013-16 included Canada (56%), Russia (8%) and the United Arab Emirates (7%).

The week ahead — Economic data from Econoday.com:

“Volatility is greatest at turning points, diminishing as a new trend becomes established.” George Soros

1. China to Retaliate Against U.S. Metal Tariffs — It’s the latest trade tension escalation between the world’s top two economies. China has threatened retaliation after the Trump administration received a green light to impose steep tariffs on aluminum and steel imports on national security grounds. “If the final decision from the U.S. hurts China’s interests, we will definitely take necessary measures to protect our rights,” said Wang Hejun, a senior official at China’s Commerce Ministry.
2. Apple Looks to Buy Cobalt Directly from Miners — Apple is in talks to buy long-term supplies of cobalt directly from miners for the first time, seeking to procure “several thousand” metric tons of cobalt per year for a period of at least five years, Bloomberg reports. The strategy is designed to buffer Apple’s (NASDAQ:AAPL) reserves of the key lithium ion battery ingredient amid industry fears of a shortage driven by the electric vehicle boom.
3. United Technologies to Consider Breakup Decision in 2018 — United Technologies (UTX) is studying a plan to split up a portfolio that includes aerospace, elevators and air conditioners, with a decision to be announced by the end of this year. “The real question is do you get a significant multiple expansion by having separate companies,” CEO Greg Hayes told the Barclays investor conference in Miami.
4. Chinese Regulator Seizes Control of Anbang Insurance Group— the Chinese government has seized control of Anbang Insurance Group and said its chairman had been prosecuted, in a striking move that highlights Beijing’s willingness to crack down on financial risk and curtail debt-laden conglomerates. Anbang is said to have violated laws and regulations that “may seriously endanger the solvency of the company,” following acquisitions including the Waldorf Astoria and insurers in Europe and Asia.

The week ahead — Economic data from Econoday.com:

“If I have positions going against me, I get right out; if they are going for me, I keep them… Risk control is the most important thing in trading. If you have a losing position that is making you uncomfortable, the solution is very simple: Get out, because you can always get back in.” Paul Tudor Jones

1. OxyContin Maker Stops Promoting Opioids — OxyContin maker Purdue Pharma is stopping to promote the drug and other opioids to doctors amid a series of state and municipal lawsuits that blame the company for contributing to the opioid epidemic. It will also cut its U.S. sales force by more than 50%, to about 200 people, while remaining representatives “will no longer be visiting offices to engage in discussions about opioid products.”
2. ‘5G.Connected’ Debuts at Olympics — attendees of the Winter Olympic games in Pyeongchang are experiencing the future of wireless technology. The “5G.Connected” showcase, engineered by KT Corp. (NYSE:KT), uses technology from Intel (NASDAQ:INTC), Ericsson (NASDAQ:ERIC) and Samsung Electronics (OTC:SSNLF), for the world’s first broad-scale 5G network. At 10 gigabits a second, it’s about 100 times faster than 4G.
3. Trump To Endorse $0.25/gallon Gasoline Tax Hike — Pres. Trump stated late last week that he would support a $0.25/gallon increase in federal gasoline and diesel taxes to help pay for upgrading U.S. roads, bridges and other public works. The government has not raised the gas tax since 1993, under the Clinton administration. The current federal levy is 18.4 cents a gallon on retail gasoline and 24.4 cents for a gallon of diesel.
4. Big Investor Moves in Latest 4Q 13-F filings — Warren Buffett’s Berkshire Hathaway (BRK.A, BRK.B) reported a new fourth quarter stake in Teva (NYSE:TEVA), and bought more shares of Apple (NASDAQ:AAPL), which surpassed Wells Fargo (NYSE:WFC) as its largest common stock investment. Dan Loeb’s Third Point took a 2M share stake in Netflix (NASDAQ:NFLX), while David Einhorn’s Greenlight Capital showed several new big retailer holdings in J.C. Penney (NYSE:JCP), Nordstrom (NYSE:JWN), Kohl’s (NYSE:KSS) and Under Armour (NYSE:UAA).
5. Senate Blocks Immigration Plans — the Senate blocked four immigration-related proposals late last week, including a bipartisan plan that would have provided $25B for border security and a path to citizenship for 1.8M young, undocumented immigrants. A separate measure that lost by a large margin would’ve ended a diversity visa lottery program and imposed strict limits on family-based migration.
6. Latest Weekly AAII Sentiment — In this week’s survey, bullish sentiment increased from 37.0% up to 48.5% for a gain of 11.5 percentage points. That’s the largest weekly increase since last September.

Bearish sentiment plunged from 35.0% down to 21.4%. That’s the largest weekly decline in two years!

The week ahead — Economic data from Econoday.com:

“But, like Cinderella at the ball, you must heed one warning or everything will turn into pumpkins and mice: Mr. Market is there to serve you, not to guide you. It is his pocketbook, not his wisdom, that you will find useful. If he shows up some day in a particularly foolish mood, you are free to either ignore him or to take advantage of him, but it will be disastrous if you fall under his influence. Indeed, if you aren’t certain that you understand and can value your business far better than Mr. Market, you don’t belong in the game. As they say in poker, “If you’ve been in the game 30 minutes and you don’t know who the patsy is, you’re the patsy.'” — Warren Buffett

1. The SEC and CFTC Plan to Ask Congress for Federal Oversight of Digital-Currency & Credit Card Ban on Buying Crypto-currencies — worries over a global regulatory clampdown led bitcoin – which is still trading below $8,000 – last week to record its biggest weekly loss since December 2013. Lloyds (NYSE:LYG) is barring its credit card customers from buying bitcoin and other cryptocurrencies. It follows similar moves by U.S. rivals JPMorgan (NYSE:JPM), BofA (NYSE:BAC) and Citigroup (NYSE:C), which all announced similar bans on crypto purchases via credit cards. In addition, the SEC and CFTC plan to ask Congress to consider federal oversight for digital-currency trading platforms, many of which have been operating in a regulatory gray zone.
2. Steve Wynn Steps Down as Wynn Resorts Chairman, CEO — Steve Wynn has resigned as CEO and Chairman of Wynn Resorts (NASDAQ:WYNN) in the wake of allegations of sexual misconduct that surfaced in recent weeks. “I have reached the conclusion I cannot continue to be effective in my current roles,” he declared. The company has named current President Matt Maddox as its new CEO and Boone Wayson as Non-Executive Chairman.
3. CBOE Announced No major Impact from VIX products’ Demise — CBOE Global Markets does not expect any significant impact on trading volumes at the exchange following the collapse of two popular exchange-traded products (ETPs) that let traders bet that volatility will fall. The Chicago exchange addressed analysts’ questions after markets closed late last week, following an almost 15% decline in CBOE’s share price in the last three days.
4. Gun Maker Remington Seeks Financing for Bankruptcy Filing — one of the biggest U.S. gun manufacturers is taking steps toward filing for bankruptcy, according to Reuters. Remington has “reached out to banks and credit investment funds” in search of “debtor-in-possession financing” that would let the company continue operations once it went bankrupt.
5. Congress Ends Brief Government Shutdown — Just hours after the government stumbled into another shutdown, Congress passed a budget agreement early Friday that would extend the current level of federal funding until March 23. The bill would also bump limits on defense and non-defense spending by about $300B over the next two years.
6. Stock-market Correction Looks a lot like 1996-1997 — according to Jeff deGraaf of Reinaissance Macro Research, the current market trend for the past 12-month shows similar pattern from the 1996-1997. Noted ““Today’s price action is weaker over a shorter period of time than that of ‘96, and then, as we suspect happens today, the market needed a few weeks to convalesce before resuming its uptrend. When we aggregate the price paths of the top 25 correlations with today, the picture suggests a pause of a few weeks and resumption of trend,”. See the chart below.

The week ahead — Economic data from Econoday.com:

There will not be any re-cap for the week of Jan 26 208. We are away for some needed R&R.

The staffs at EGS.

Earnings for the week of Feb 2 2018

“By living the philosophy that my winners are always in front of me, it is not so painful to take a loss.” – Marty Schwartz

1. Ford Ups Electrification Investment to $11B — Ford will significantly increase its planned investments in EVs to $11B by 2022 and have 40 hybrid and fully electric vehicles in its model lineup. “We’re taking our mainstream vehicles, our most iconic vehicles, and we’re electrifying them,” Chairman Bill Ford told reporters. Ford (NYSE:F) also showed off its 2019 Ranger, after pulling the midsize pickup off the market in North America eight years ago.
2. China Crackdowns on Crytocurrency — South Korea stating a ban on trading was now “a live option” and China reportedly raising the bar on its cryptocurrency crackdown. Bitcoin dropped eventually tumbling to under $11,000 for the first time since Dec. 6 from the high of nearly $20,000. PBOC Vice Governor Pan Gongsheng says authorities should ban centralized trading of virtual currencies as well as individuals and businesses that provide related services.
3. U.S. Plans New Nuclear Weapons — the Pentagon is planning to develop more “low-yield” nuclear warheads and a sea-based nuclear cruise missile, according to a leaked draft of the 2018 Nuclear Posture Review. It follows reports that Russia has developed an unmanned underwater nuclear drone that has a range of 10,000 kilometers and can carry a 100-megaton nuclear warhead. Companies affected are: BW, HON, ACM, JEC, SAIC, OA, COL, LMT, BA, NOC, GD, AJRD, HII.
4. U.S. Considers ‘fine’ on China for IP Theft — the U.S. is considering a major “fine” as part of a probe into China’s alleged theft of intellectual property. “We’re talking about big damages,” President Trump told Reuters. “We’re talking about numbers that you haven’t even thought about.” American businesses claim to have lost billions of dollars to Chinese firms that force them to turn over intellectual property as part of the price of doing business in the country.
5. US World’s Next Largest Oil Producer According to IEA — the IEA said in the latest monthly report that “2018 promises to be a record-setting one for the U.S.,”. “Relentless growth should see the U.S. hit historic highs above 10M barrels a day [in production], overtaking Saudi Arabia and rivaling Russia during the course of 2018 – provided OPEC and non-OPEC restraints remain in place.”

Majority of company earnings will be announced next week.

The week ahead — Economic data from Econoday.com:

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

1. SEC Crypto Crackdown Continues — the SEC continues to crack down on cryptocurrency trading, halting shares of UBI Blockchain Internet (OTCPK:UBIA) through Jan. 22. The regulator cited potentially inaccurate disclosures and unusual market activity. The stock spiked to $87 on Dec. 18 from just $9 on Dec. 11 and has since fallen back to $22.
2. Intel Unveils Self-Driving Car, Security Ipdates at CES — Intel showcased its first self-driving test car at CES, announcing a number of automaker tie-ups and stating Mobileye’s autonomous tech will be used in 2M vehicles. Also, Intel (NASDAQ:INTC) said it will form a new cybersecurity group and expects to issue processor updates by the end of January. Also, Intel (NASDAQ:INTC) capped its keynote address at this year’s CES by letting an 18-rotor air taxi fly across the stage. That marks the first time the Volocopter VC200, which can cover a distance of 27 kilometers and charges in less than 40 minutes, flew in North America.
3. China Diversifying Forex Reserves — China is diversifying its foreign exchange reserves in order to safeguard their value, according to the country’s currency regulator, while dismissing a Bloomberg report stating the government was halting or reducing its U.S. debt purchases. Chinese officials were said to have recommended the move amid a less attractive market for Treasury bonds and rising U.S.-China trade tensions.
4. S.Korea Plans Trading Ban Cryptocurrency via Exchanges — South Korea is planning to ban cryptocurrency trading via exchanges, according to Justice Minister Park Sang-ki, sending bitcoin prices plummeting and throwing the virtual coin market into turmoil. It’s a major development as the country is one of the biggest markets in the crypto space. The news also follows warning from Warren Buffett that speculation in bitcoin, and other cryptocurrencies, “will have a bad ending.”
5. S&P Cuts Brazil Rating Deeper into Junk — citing the government’s failure to pass key fiscal reforms, Standard & Poor’s has downgraded Brazil’s credit rating deeper into junk territory, to BB-, or three notches below investment grade. It’s a disappointed move for the administration of President Michel Temer, which has been touting Brazil’s progress in recovering from its worst recession on record.

The week ahead — Economic data from Econoday.com:

“If I have positions going against me, I get right out; if they are going for me, I keep them… Risk control is the most important thing in trading. If you have a losing position that is making you uncomfortable, the solution is very simple: Get out, because you can always get back in.” – Paul Tudor Jones

1. Iran Unrest Lifts Crude Prices — crude oil benchmarks, Brent and WTI, have both started the year above $60 per barrel for the first time since January 2014. “Growing unrest in Iran set the table for a bullish start to 2018,” the U.S.-based Schork Report said in a note to clients. Iran is the third-largest producer in OPEC, which agreed last year to extend its oil output cuts through Dec. 31, 2018.
2. China Became Biggest Importer of Natural Gas — Beijing’s crackdown on pollution has put China on track to overtake Japan this year as the world’s biggest importer of natural gas. Already the largest importer of oil and coal, China is the world’s third biggest user of natural gas behind the U.S. and Russia, but has to import around 40% of its total needs as domestic production can’t keep up with demand.
3. Trump to ‘Sharply’ Expand Offshore Drilling, Including Pacific Ocean — looking to boost domestic energy production, the Trump administration has proposed opening nearly all U.S. offshore waters to oil and gas drilling, including in the Atlantic, Arctic and Pacific oceans. That would reverse the Obama-era order placing 94% of the Outer Continental Shelf off limits to drillers.
4. Attorney General Sessions to Allow State Attorneys Decide on Federal Pot Enforcement Law — Attorney General Jeff Sessions has rescinded an Obama-era policy that had discouraged prosecutors in states where marijuana was legalized from bringing pot-related charges, unless they involved distribution to minors, revenue sale benefiting gangs and a few other federal priorities. In its place, prosecutors will be given discretion (not guidance) to pursue marijuana-related prosecutions.
5. AAII Weekly Sentiment Survey — According to the weekly sentiment survey from the American Association of Individual Investors (AAII), bullish sentiment increased to 59.75% from 52.65% last week. Not only is this the third straight week where bullish sentiment has been above 50%, but it’s also the second-highest reading in bullish sentiment of the bull market!

Also, Bearish sentiment dropped from 20.63 down to a paltry 15.56%. The only week where bearish sentiment was lower was in November 2014, when it dropped to 15.05%.

The week ahead — Economic data from Econoday.com: