How Seasonality The Week Of Memorial Day Has Changed Over The Years

By Rob Hanna

Happy Memorial Day! The week of Memorial Day has shown some interesting seasonal tendencies over the years. But it has faltered greatly the last few. The chart below is one I have shown in the past, and have now updated. It examines SPX performance from the Friday before Memorial Day to the Friday after it.

2018-05-28

There was no substantial edge apparent throughout the 70s, but starting in 1983 through 2009 there was a bullish tendency. The last 8 years this week has mostly struggled.  That said, Thursday continues to look seasonally strong, and I will update that study later this week.

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What to Expect at a Critical Market Point: End of a Wave 2 Rally

By Elliott Wave International

“Most investors are convinced that the bull market never went away.”

The great game of Wall Street — where huge amounts of money are at stake every trading day.

Many speculators play this game by watching for events outside of the stock market that they believe will “trigger” the next big move in prices.

However, the real driver of all those green up arrows and red down arrows is nothing more or less than investor psychology. This famous Kal’s cartoon sums it up perfectly:

sellcartoonwithcopyright

First investor: “I’ve got a stock here that could really excel.”

Second investor: “Really excel?”

Fourth investor: “Sell?” — and the crowd goes, “Sell, sell, sell!”

First investor again: “This is madness! I can’t take it any more, good bye!”

Second investor: “Good bye?”

Third investor: “Buy?” — and the crowd goes: “Buy, buy buy!”

As random and unpredictable as this cartoon makes it look, EWI’s research reveals that investor psychology actually goes through similar phases during every market cycle. So, if you know the current psychological phase of the market, you can make a high-confidence prediction about the next phase.

Continue reading What to Expect at a Critical Market Point: End of a Wave 2 Rally

The Only Charts Investors Need This Memorial Day Weekend (video)

By Chris Ciovacco

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Subscribe to NFTRH Premium for an in-depth weekly market report, interim updates and NFTRH+ chart and trade ideas. You can also keep up to date with plenty of actionable public content at NFTRH.com by using the email form on the right sidebar. Or follow via Twitter @BiiwiiNFTRH, StockTwits or RSS. Also check out the quality market writers at Biiwii.com.

Sentiment Snapshot: Bonds and Reflation

By Callum Thomas

This week I took a long hard look at the survey results and a series of other charts, because they all seemed to be challenging my medium term views and biases.  Not only that, they seem to be flying in the face of a range of crowded and consensus trades.  In short, the bond selloff is being called into question, and if you have questions on bonds, then you’re probably going to end up with questions on the whole reflation trade…

This series of articles looks at the results from the weekly surveys I run on Twitter which ask respondents to differentiate bullish vs bearish views on bonds and equities for fundamental vs technical rationale. I also add some of my other charts and indicators to round out the picture.

The key takeaways from the weekly sentiment snapshot are:

-Equity investors are reassessing the fundamentals outlook.

-Bond investors seem to be already well ahead of them on that front.

-Bond survey trends point to a counter-trend move in bond yields, and the macro momentum seems to line up.

-Questions on bonds may lead to questions on the reflation trade.

1. Equity Fundamentals vs Technicals:  Starting as usual with a look at the weekly survey results for equity “fundamentals” vs “technicals” sentiment (the survey asks respondents whether they are bullish or bearish for primarily fundamental vs technical rationale), technical net-bulls dropped slightly, but it was the drop in fundamental net-bulls that caught my attention this week.  You could say that based on the latest results investors are starting to reassess the fundamentals outlook.  As I noted in the latest weekly S&P500 #ChartStorm, the fundamentals (at least earnings) have been looking pretty decent, but the outlook is by no means baked in.

Continue reading Sentiment Snapshot: Bonds and Reflation

Gold, US Stocks and Bonds

By NFTRH

I’ll try to keep things simple with this recap of the 3 of the 5 major food groups (leaving aside commodities and currencies) for investors. No confusing you today with too many inter-market ratios, overly technical language or cute metaphors like the 3 Amigos (although it is notable that Amigo #2 is stopping exactly as we’d forecast, as you’ll see in the Bonds segment below).

So let’s take a technical look at larger picture of the 3 groups using weekly charts for gold and SPX and a monthly for 30yr bond yields, along with some thoughts. We’ll reserve the shorter-term technical management for subscriber updates and weekly NFTRH reports.

Gold

For the sake of your financial well being, continue to tune out inflation, trade wars, shooting wars, Ebola, China demand and Indian wedding season as reasons to be bullish the relic, it’s wilder little brother, silver and the miners. Continue to tune in to gold’s standing vs. stocks and other risk ‘on’ assets along with investor confidence, the economy, interest rate dynamics (including the yield curve) and to an extent, the state of your local currency.

Continue reading Gold, US Stocks and Bonds

23 Companies With The Most Buyback ‘Success’…

By Heisenberg

And 23 That Will Be The Most ‘Successful’ Going Forward

Ahhhh, buybacks. The equity-linked-compensation-inflating music to soothe a savage market beast.

Buybacks have of course been at the top of investors’ minds in 2018, as the windfall from the Trump tax cuts is generally expected to be plowed into shareholder-friendly initiatives (as opposed to, say, wage increases) thus putting between $600 billion and $840 billion (depending on whose estimates you’re inclined to believe) worth of plunge protection under the market at a time when geopolitical jitters and other concerns have conspired to weigh on sentiment.

Buybacks

We (and everyone else) have covered this exhaustively. Earlier this month, we highlighted a Bloomberg interview with SocGen’s Andrew Lapthorne, who regular readers know is no fan of companies borrowing money to repurchase their own inflated shares, an exercise he has variously characterized as “clearly nonsense”. Here’s the money quote from a note out last year:

Continue reading 23 Companies With The Most Buyback ‘Success’…

A Fresh Look at Lumber and Housing Stocks

By Tom McClellan

Lumber leads housing stocks
May 24, 2018

For a few years now, I have been employing lumber prices as a leading indicator for what the homebuilding sector of the stock market would do, and it has worked pretty well.  But lately the correlation is broken, with housing stock prices falling even as lumber said they were supposed to continue trending higher.  So it’s time to reevaluate the hypothesis about lumber giving a leading indication.

In the past, I have found that a lag time of just over a year worked to show how the HGX’s movements tended to match the earlier ones in lumber.  That is the correlation which has broken down recently.  So I decided to see if perhaps the lag time had changed, or perhaps something else is going on.

Playing around with different lag times, I came up with this week’s chart shown above.  It features a lag time of only 55 trading days, which is about 2-1/2 months.  For most of the period shown in this chart, this relationship seems to work, although the alignments of the highs and lows in each plot are not perfect.  Sometimes it seems like a longer lag time would work better, sometimes a shorter one.  55 trading days seems to get the best overall fit.

That is, up until February 2018, when the relationship breaks down.  That was the point for the HGX plot that is equivalent to when lumber futures prices went up above $450, and that seems to be what “broke” the correlation.

Continue reading A Fresh Look at Lumber and Housing Stocks

COT Black: Diverging Like ’13?

By Jeffrey Snider

During the week of February 21, 2017, Money Managers (MGR) in the WTI futures market went all the way for higher oil prices. The CFTC Commitment of Traders (COT) report showed a then-record 405k net to the long side. For whatever reason(s), oil prices didn’t necessarily follow at least not in the same nearly direct manner as they had in the past. The intensity of MGR’s net long position alone had up until the “rising dollar” determined the domestic benchmark oil price.

A week after, the final one in February last year, MGR’s started to back off. Oil prices did, too, though to a lesser degree like on the way up. After just four weeks, the long position had been pared back by almost half. WTI that had climbed to a rebound high of $54.48 on February 23, 2017, declined back to $47 in late March.

The process has repeated in 2018 with a few notable exceptions. MGR positions hit a new record long the week of January 30 – the same week that global liquidations swept across stock markets. Since, managers have cooled in their enthusiasm, though not quite in the same repositioning as 2017. The net long as of the latest estimates (for the week of May 15) has only fallen back below 400k.

Continue reading COT Black: Diverging Like ’13?

Do Bond Investors Have to Take Duration Risk?

By Charlie Bilello

Duration giveth, and duration taketh away.

For much of the past 35 years, while interest rates were in a secular decline, duration (a measure of a bond’s sensitivity to changes in interest rates) was the best friend of bond investors. In 2018, it has become their worst enemy.

At one end of the spectrum, you have short-term Treasury bills (BIL) with a duration of 0.1 and a total return of 0.6% year-to-date. At the other end of the spectrum, you have long-term zero-coupon bonds (ZROZ) with a duration of 27.3 and a total return of -10.0%.

The correlation between duration and year-to-date returns in the table of popular bond ETFs below? -0.86.

Data Source: YCharts

While 10-Year Treasury yields have risen from 2.4% to 3.06% in 2018, the largest bond ETF (AGG) is down 2.81% and the largest bond mutual fund (VBTLX) is down 2.84%. The duration on both instruments is roughly 6 years.

Continue reading Do Bond Investors Have to Take Duration Risk?

No Nuance in the Bond Market

By Kevin Muir

It’s now cool to be bearish bonds. A couple of years ago you were labeled a pariah for even suggesting inflation might pick up. The few of us that argued locking in 10-year money at 1.4% wasn’t a good risk reward supposedly didn’t understand the overwhelming three Ds – debt, demographics and deflation. Yeah, ok…

However, given the recent bond bear market, nowadays the tide has turned to the point where anyone suggesting we might see a bounce in bonds is equally chastised for not fully grasping the atrocious fundamentals surrounding the US debt market.

Here is a great chart I lifted from a Bloomberg article titled “Corporate Bonds Sink Fast in One of Worst Tumbles Since 2000 by Cecile Gutscher that shows the rolling 100-day return of the JPMorgan bond index.

Funny how prices make opinions and not the other way round.

Continue reading No Nuance in the Bond Market

NFTRH 500, Free for the Taking

By NFTRH

An offer you can’t refuse (something for nothing). This will be the last freebie probably forever. No info collected. Just you getting a free report and considering it (and associated in-week updates) for your needs going forward.

I just finished revamping the NFTRH Premium landing page and updated the sample report to this week’s NFTRH 500 milestone edition. You can go get it if you’d like. It will show you why I (and many NFTRH subscribers) think it’s only a part of the best all around service out there. It’s more than worth its price as a stand-alone weekly, let alone the included real time updates and trade highlights at the site.

Click the NFTRH Premium link above, download and read this easy to digest report and think about joining the service at some point. This is going to sound a little stuck up, but when I see what is available out there at higher prices I just shake my head.

Not everything you read in NFTRH 500 will prove to have been correct with the test of time, but you will know it was honestly produced and upon finishing it you will feel well armed about today’s financial markets. We don’t predict markets, we stay in tune with them… at all times.

“Congrats on the milestone [NFTRH 500] Gary. Not the volume that is impressive but the consistent quality.”  –Frederick L  5.21.18

“Gary, Congratulations on reaching your 500th edition. Have only been with you for about half that journey, but appreciate the quality and honesty of the content/analysis. Gradual and progressive improvement is the assured quality approach. Please keep up the good work.”  –Andrew C  5.21.18

“On the occasion of your 2.5 millionth word, I’d like to compliment you on the quality and style of your newsletter. It is extraordinarily well-written and readable, qualities that seem to be in short-supply among newsletter writers these days. As the former executive editor of my law school’s law review, and later an occasional editor of the [omitted by request, but very notable], I value good writing, and thank you heartily for yours.”  –James S  5.20.18

You can review NFTRH’s Terms & Conditions here.