Dovish Fed Aides a Recovery from GDP

S&P 500 & The Fed

I am getting used to saying “another wild ride” in the markets.  It seems like every day we are seeing 25-30 point swings in the S&P and today was no different.  The GDP number was a joke, which in my mind takes June off the table for a rate hike.

The markets love a dovish fed and given the weak data recently, they have little choice but to wait for it to improve before they can make any changes in interest rates.  The last thing the Fed wants to do is tank the market.

I really think we would have seen all time highs today if it weren’t for that awful GDP print.  Still I firmly believe that given the very strong support that was shown once again around the 2090 area in the futures we will see a strong rally tomorrow.  As every attempt to take this market down has rebounded on the sellers this week.

There are a few economic reports tomorrow morning including Vehicle sales that have been positive of late.  That with a sprinkling of positive earnings could see a nice move higher from here. I will be so bold and say it is overdue.

Market News

U.S. stocks closed lower on Wednesday as investors remained on edge amid earnings as the Federal Reserve reaffirmed its data-dependent stance following a weak first-quarter GDP report.

The Federal Reserve Open Market Committee released its meeting statement on Wednesday afternoon that removed all calendar references and showed no new guidance on the timing of the rate hike.

Analysts had not expected a change to policy from this Fed meeting.

Earlier in the afternoon, the Dow Jones industrial average briefly fell more than 150 points as all the major indices declined on the morning’s weak GDP report.

The advance estimate of first quarter GDP showed an increase of 0.2 percent, a sharp slowdown from the fourth quarter’s 2.2 percent pace and below expectations of 1 percent growth. The government cited the strong dollar and the West Coast port strikes as negative factors.

Pending home sales data for March showed an increase of 1.1 percent, the fastest rate since last summer.

Mortgage applications gave back their gains last week, falling exactly as much as they had risen the previous week, according to the Mortgage Bankers Association (MBA). The decline came as interest rates edged higher.

European equities extended losses on the U.S. GDP report and awaited the outcome of a two-day meeting by the U.S. Federal Reserve.

Friday:

Earnings: Chevron, CVS Health, Aon, Calpine, Clorox, Moody’s, Newell Rubbermaid, Duke Energy, Weyerhaeuser, TransCanada, VF Corp, Madison Square Garden, Legg Mason, CBOE

Vehicle sales

8:30 a.m.: Cleveland Fed President Loretta Mester

9:45 a.m.: Manufacturing PMI

10 a.m.: ISM manufacturing, construction spending, consumer sentiment

3:45 p.m.: San Francisco Fed President John Williams


Cargo Ship Sinks The Market

Cargo Ship

The wild ride in the markets today is indicative of the trend we have been in since late March.  Somehow, some way, I find myself still in considerable profit despite the markets best attempts to shake me off.  With bogus misinterpretation of news around a US cargo ship being held by the Iranians this morning, the market plunged only to fully recover, and then some, when the news was properly reported.

No wonder there are conspiracy theories alive and well in the financial markets.  And apologies for the pun in the title, I couldn’t help myself!

Anyway, for me there was no harm done.  I think with a dovish statement from the Fed tomorrow a new all-time high is a shoe-in.  Unless another cargo ship is kidnapped of course…Futures are already rising after the close.

Market News

U.S. stocks closed mixed on Tuesday as investors eyed tech earnings and awaited the Federal Reserve’s statement on Wednesday.

Twitter shares resumed trading down about 20 percent. The company was scheduled to report after the bell but released its earnings early, after shares were halted following a 5.5 percent plunge on online reports that earnings may have leaked.

The social media company reported a beat on earnings but a miss on revenue, as well as lower 2015 full-year expectations. Guidance on second-quarter revenue was about $100 million lower than estimates.

Tuesday’s afternoon gains in equities were muted, with the Nasdaq failing to stay in positive territory, as investors remained on edge ahead of Wednesday’s expected Fed statement.

The Federal Market Open Committee began on Tuesday and will conclude with the release of a post-meeting statement expected at 2 p.m. on Wednesday. A wave of mostly disappointing domestic data since the previous FOMC meeting has spurred economists to downgrade their outlooks for the U.S. economy in 2015, particularly for the first quarter. Signs of economic improvement in the subsequent quarters could still support a rate hike at some point later this year.

Senior US defense officials told NBC News that Iranian Revolutionary guard forces seized a cargo ship, flagged to the Marshall Islands. According to the officials, the revolutionary forces boarded the vessel in international waters off the coast of Iran and may be taking it to an Iranian port.

The Maersk Tigris, which had no U.S. citizens abroad, was traveling through the Strait of Hormuz near the Persian Gulf when the incident occurred, a Pentagon spokesman told Reuters.

The euro strengthened to above $1.09, with hopes of progress on the Greece debt talks, Boockvar said. However, the stronger currency put pressure on European stocks, which closed lower.

Greek Prime Minister, Alexis Tsipras, said on Monday that he may resort to a referendum if lenders insist on demands that the government deems unacceptable, Reuters reported. But he added that he was confident of striking a deal to avoid such a scenario.

The Conference Board consumer confidence survey results for April was 95.2, below expectations of a rise.

The S&P/Case-Shiller’s 20-City Composite gained 5 percent year-over-year in February, compared with a 4.5 percent increase in January.

Wednesday

Earnings: Deutsche Bank, Fiat Chrysler, Northrop Grumman, General Dynamics, Hess, Starwood, Brunswick, Carlyle Group, Spirit Airlines, Norfolk Southern, Southern Co, Time Warner, Garmin, GrubHub, International Paper, Thomson Reuters, MasterCard, Marriott, Whiting Petroleum, Williams Cos, Boston Beer, Cabot, Murphy Oil, Baidu, Vertex, Yelp, Shutterfly, LaQuinta, Goodyear

8:30 a.m.: Q1 GDP, pending home sales

1:00 p.m.: $29 billion 7-year notes

2:00 p.m.: FOMC statement


Apple Just Posted Another Beat

Apple-logo1

April has been a good month so far, albeit rocky.  Today at the open it was very positive again, however, that wasn’t to last and a pullback ensued.

I was expecting an immediate pullback after Friday’s euphoria as the profit takers came in, so I was a little surprised at the gap up this morning starting in the futures around 3am.  But it wasn’t to last.

Thankfully the pullback so far is not much to speak of.  I now will be looking for further buying from here. Although, should there be some more selling, I cannot see it going down more than a further 10-15 points on the S&P before we will re-start the ascent to a new high.  I feel this quasi-trend has at least one more push before we can see a downtrend or further consolidation phase.

After hours as I write this Apple just posted earnings that smashed it AGAIN, therefore perhaps the selling is already over…

Market News:

U.S. stocks closed lower on Monday, failing to hold Friday’s records, as investors eyed earnings and looked ahead to the beginning of the two-day Federal Reserve meeting on Tuesday.

The Nasdaq reversed to trade mildly lower around noon as biotech stocks lagged. The iShares Nasdaq Biotechnology ETF (IBB) fell more than 4 percent to near its 50-day moving average. Health care was the greatest decliner in the S&P 500, with the S&P Biotech ETF falling more than 5.5 percent.

Also weighing on biotechs, Mylan plunged more than 5.5 percent after rejecting Teva’s unsolicited $40 billion bid on Monday but remained open to future talks.

The Dow Jones industrial average attempted to hold gains but traded mostly lower as Pfizer and UnitedHealth declined about 2 percent to be among the greatest laggards.

Earnings season continues this week, with Apple after the bell. The stock pared gains after earlier trading about 2 percent higher. Visa and health care names such as Gilead Sciences are among those reporting in the next few days.

Apple closed up 1.80 percent, recovering some early losses, ahead of its fiscal second-quarter report. TD Ameritrade’s chief strategist JJ Kinahan noted that options were pricing a 4.8 percent move in the stock on Monday.

The Federal Reserve Open Market Committee meets on Tuesday and Wednesday, with the conclusion and post-meeting statement due Wednesday.

The recent string of weak data and first-quarter growth expected at around 1 percent has convinced many in the markets that the Fed will not raise interest rates until September at the earliest.

In Europe, equities turned higher after Greece reshuffled the team negotiating with the euro zone.

Shares of Deutsche Bank slipped about 5 percent after the bank announced an overhaul of its banking operations on Monday.

Tuesday

Earnings: BP, Bristol-Myers, Merck, Pfizer, Ford, Honda Motor, Total, Aetna, Twitter, Kraft Foods, UPS, GoPro, Express Scripts, Western Digital, Panera, Yamana Gold, US Steel, Kaiser Aluminum, Corning, Cummins, Owens-Illinois, Supervalu, Penske Auto Group, JetBlue, Genworth Financial, Buffalo Wild Wings, Applied Micro, Samsung Electronics, Aflac, AK Steel, Parker Hannifin

9 a.m.: S&P/Case-Shiller

10 a.m.: Consumer confidence, housing vacancies


Nasdaq Stocks Rocket on Earnings

green rocket

Today was a blast off day over on the Nasdaq.  Amazon, Google, Starbucks and Microsoft as well a a few other big names reported their earnings and SMASHED IT!

The Nasdaq ETF’s we trade shot off like the rocket in the picture, great day and turning out to be a great trend.  Of course, now we are in no man’s land at all-time highs, so what next?

I think there is a little more upside here before we will see a significant pull-back or anything close to a correction.  But Monday is more than probable going to see a small pull-back.

That being said, with the help of another Apple earning smash after Monday’s close, on Tuesday we could see quite the distance between the previous all-time high and the new one on the S&P 500.

The superstar for me right now is TQQQ. up over 14% on cash, much more for those trading using some extra margin since the late March entry signal.  There is simply no better way to trade than trend trade.

The hardest part of trend trading is letting your winners run, it is so tempting to grab at big gains and start thinking that this must be the top, but as no one knows where the top is, it is best to follow your trading plan and turn big winners into monsters a few times per year.  Stay in the trade, stay in the trend…

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Market News

U.S. stocks closed higher on Friday, with the Nasdaq setting another record as investors cheered major earnings reports.

The Nasdaq Composite closed at a record for the second day in a row. The index set its first record close in 15 years on Thursday, topping the previous high from March 2000.

The S&P 500 ended mildly higher for a new record close. Earlier, the index also touched a new intraday high, while the Dow attempted to shake off a decline as its top-weighted stocks lagged.

Microsoft surged more than 10 percent to lead blue chips gains. The company posted earnings and revenue that beat estimates after the close Thursday, as the firm shook off the negative impact of the strong U.S. dollar with growth in hardware sales and commercial cloud computing.

Amazon.com spiked 15.5 percent to a new intraday high despite reporting a decline in earnings as expected and light guidance. Revenue did beat expectations with a boost from the e-commerce firm’s primary market, North America.

The Dow Jones industrial average still had more than 1 percent to go before surpassing its record close.

Futures briefly pared gains following durable goods that beat on the headline figure but showed a disappointing decline in the core figure.

Durable goods, ex-transportation, fell 0.2 percent, below expectations for a slight gain but less than February’s 1.3 percent decline.

Including transportation, which tends to be volatile, the report posted an increase of 4 percent for March, surpassing expectations for a moderate bounce back, after February’s disappointing 1.4 percent month-on-month drop.

With no other economic data expected, major stocks moving the market higher included Microsoft, Google, Amazon.com, and Starbucks, which reported earnings after the bell on Thursday.

Starbucks briefly surged more than 4 percent to hit an all-time high on Friday. The coffee retailer topped expectations for global same-store sales and beat on both the top and bottom lines.

In Europe, European equities were higher on earnings despite little progress on Greece debt talks in the meeting of the euro zone finance ministers.

Greece is willing to make compromises to reach a deal on its debt, Finance Minister Yanis Varoufakis said on Friday after tense talks with his euro zone peers on this issue.

Greece is running out of cash and needs a last tranche of bailout aid in order to meet debt repayments. So far, its reform drive has been slow and the aid has not been released.

Earlier, neither ministers involved nor analysts were holding out hope for a deal on Friday.

German Finance Minister, Wolfgang Schaeuble, said he did not believe there would be decisive progress on Greece in Riga, while his Austrian counterpart said he was “quite annoyed” with the lack of progress over reforms, Reuters reported.

News source: CNBC


Pac Man Chomps The Short Sellers

Pac Man

There was a major short squeeze today as the breakout to All-time highs finally came.  Like pac man the market chomped it way right through them rocketing the market higher..  All short stops were no doubt just above the 2105.75 I had mentioned in my daily email yesterday in the S&P 500 E-Mini Futures.  Soon as that target went the All-Time High in the Index was sure to follow.

Looks like we may be in the throws of a natural small pull-back here,  But, I expect another push higher by Tuesday,  Apple earnings are out after the close on Monday and although expectation is always high, they somehow still manage to surprise to the upside.  So, possibly small steps sideways tomorrow.

This trend we entered since the 26th March has been the choppiest market action I have possibly ever encountered, but thankfully we have managed to hold on to break to new highs.  Onwards and upwards from here, but maybe not much longer before another significant pull-back.

Market News:

U.S. stocks closed near highs on Thursday, with the Nasdaq at a record, as investors cheered corporate reports.

The Nasdaq Composite outperformed the major indices to set a new, all-time closing record, topping the previous high of 5,048.62 set in March 2000.

The Federal Reserve meets next Tuesday and Wednesday but will not hold a press conference.

New home sales for March came in weaker than expected, at 481,000 in March, versus the 510,000 unitestimate.

The 11.4 percent decline follows a 7.8 percent month-on-month jump in February that brought sales to a near-seven-year high of 539,000, according to Robert Kuenzel at Daiwa Capital Markets.

Weekly jobless claims showed an increase of 1,000 to 295,000.

Manufacturing PMI showed that growth in the U.S. manufacturing sector dipped more than expected in April, with factory activity showing the slowest momentum since January, according to financial data firm Markit.

The preliminary U.S.Manufacturing Purchasing Managers’ Index fell to 54.2 in April from the final March read of 55.7. Economists polled by Reuters had forecast the April figure would come in at 55.5.

Manufacturing data overseas was also weak. HSBC’s preliminary reading of China’s factory activity for April came in at 49.2, compared with a Reuters forecast for a 49.6 print.

Markit’s German flash composite PMI, which tracks manufacturing and services activity, fell to 54.2 in April from an eight-month peak of 55.4 in March.

The negative data weighed on European equities but sent Asian stocks in Tokyo and Seoul to multi-year highs. Despite the PMI figures that indicated contraction in China, the Shanghai Composite ended mildly higher, up 0.4 percent, while the Hang Seng closed down 0.4 percent.

Greek Prime Minister Alexis Tsipras called for a speeding up of work to conclude a reform-for-cash deal with euro zone creditors to keep his country afloat after talks with German Chancellor Angela Merkel on Thursday. Both sides called the discussions constructive.

Friday

Earnings: Biogen, AstraZeneca, American Airlines Group, Cabot Oil and Gas, State Street, Xerox, A.O. Smith, Tyco

8:30 am: Durable goods

News Source: CNBC


Throw Your Hat Over The Wall

Hat-over-the-Wall

I realize this is a trading service and a trading blog, but I was thinking over the weekend about success in general.

By definition, success requires an above average level of performance or achievement.  Therefore, not everyone can be successful.  In the financial markets there must be losers in order to have winners.

One could argue that just because your trade made money means that someone else lost.  But in my opinion it is not that black and white.   People take losses on some positions, while gaining in others.  Using options as they were intended (as insurance) springs to mind as a good example of this.

However, in general it is a well-established concept that most people that try and conquer the financial markets lose money.  It is what it is.  Trading is not easy, not by a long stretch, and using the definition above again, it does require a level of mastery that is “above average”.

Whatever your accepted definition, those who are successful in anything succeed regardless of intelligence and have an overwhelming desire to achieve that level of success.  Most billionaires on the planet don’t have a university degree and were even high school drop outs.

The key in order to succeed is to simply refuse to accept any obstacles put in your path and somehow, fueled by a burning desire, do whatever is necessary to find a way. In that sense winners make themselves available to learn from their mistakes and therefore commit to a journey of personal development.

Last year I heard a speaker use the term “throw your hat over the wall”.  This was her definition of success.  She visualized standing in front of a huge brick wall that looked simply too high to scale.  Armed with knowing that what she wanted was on the other side of this wall, she took off her hat and tossed it over the wall…and she was going to get her hat back, no matter what!

The interesting difference with success in trading verses most if not all other great endeavors is perception.  It is seen as more achievable.  For example there are very little barriers to entry. Anyone with a small amount of capital and an IQ above room temperature can have a go.  It takes 5 years to qualify as a Doctor and another ten or so to reach the pinnacle of one’s specialism in the medical world. If you challenge your perspective and view trading as a profession why should it be any different?

I was not an overnight success….geez, I wish.  I have 10+ years of trading scars, some I will probably never even share despite the fact that I am now very successful at this and can only laugh at my past failures.  I accept that they were necessary lessons that led me to the place I am at right now.  Persistence and a thirst for knowledge and understanding to get better and better and better at it is what has left me with a feeling of certainty of success no matter what the chaotic world of the financial markets throws at me…With the greatest humility, I know I WILL WIN!

The added bonus for me is that anyone that follows me ends up with the same outcome…In fact I am better because I share my strategy.  As Les Brown puts it “Help others achieve their dreams and you will achieve yours”.


Paul Tudor Jones: 4 Ways to Make Money

One of the greatest traders ever is a chap called Paul Tudor Jones (http://en.wikipedia.org/wiki/Paul_Tudor_Jones)

He began his first Hedge Fund in 1980 and made money every year since then for his investors before closing this original fund in 2015.  He is a billionaire many times over.

Certainly someone to respect and aspire to as a trader.  The clip above was taken during the making of a documentary that was filmed right before the “Black Monday” crash of ’87.  Paul and his partner at the time became legends as they correctly called the crash and made an astonishing return in 1 day, indeed tripling their account and that of their clients.

At the 25th anniversary of the crude oil contract on the NYMEX, Paul gave a presentation where he described how he categorizes trading strategies. Here they are with some examples:

1) Specialized knowledge of an Instrument

Stock picking long/short (research analysts)

Floor traders (back in the day tape readers)

Insider trading

2) Arbitrage (take advantage of pricing inefficiencies)

Microstructure (Bid/Ask spreads)

The most notable type here is High Frequency Trading (HFT)

3) Execute at the “Peak of Human Emotions”

For example, value Investors that sell when stocks get overvalued and buy when their fundamentals reflect that they are undervalued and therefore going cheap.  Often also looking to invest in distressed companies i.e. BP after the Gulf oil spill.  The most famous value investor is of course is Mr. Buffett.  As he states: “Be greedy when others are fearful and fearful when others are greedy”

4) Trend (Momentum) Trading

This is my style of trading.  Just as Paul has been very good at in his career, I get a great deal of satisfaction from predicting the next trend and getting in at the bottom of each new trend.  Some would say market timing is foolish, but Paul and his track record may disagree.

Of course there are trend traders that are day traders, as trends show up in the smallest of timeframes, but that is very difficult to do as there is so much more noise., hence the reason about 95% of people that try to do it fail.

In my opinion, the big money in trading, and I say trading as I do not mean investing, is made by letting your winners run and having small losses when you are wrong.  It sure feels good to catch the mega moves that happen several times per year in the ETF’s I trade.  It simply means that I make a lot of money while I sit on my hands and do nothing.  I believe that one of the traders from the book “Market Wizards” in the 80’s said that the most money he ever made was sitting on his hands!  Funny but poignant…

As a conclusion to this post I want to honour Paul’s words in the video above.  Managing your risk is key.  Although we could argue that the current financial planning industry manages your risk very well…too well perhaps as most people end up dissatisfied as they don’t make ANY money.  So risk and reward is a finely tuned balance, but I agree with Paul when he says: You need to spend your time managing your risk rather than thinking about how much money you are going to make.  Focus on the risk and the rewards will come.


Major Breakthrough…Wait Till You See This!

SPXL Apr15

The most challenging market action, particularly for trend traders like me is sideways chop.  Chop refers to when the market makes short term moves up and down without any particular trend direction.  My system has always been configured to take advantage of the trends up, but sit out when the market trends down.  So sideways chop was something I just had to put up with and manage my risk around as best I could.

In December, January and March my system did not perform as well as I would have hoped.  So I set to work on finding a way to manage trades in this condition allowing me to grab trades closer to the bottom of these shorter term choppy moves in a codable systematic rule based way.

Well, this week I finally achieved this feat.  In the chart above there are 2 examples of what I have to look forward to as I walk forward in the months and years to come.  For example, turning a 3% cash loss into almost a 14% gain would have made a HUGE impact on my trading performance at the end of 2014. (Especially when it follows the monster winner I had in October)

The ability to grab and anticipate market bottoms has been an obsession of mine for many years.  Most don’t think it is possible, but study the chart in the picture and tell me it’s impossible.  Visually the system as it stands grabbed the bottom of the major trend in August & October 2014 and Feb 2015 as well as many other times in the previous months and years not on view.

I of course remain but a humble participant in the trading world and this system is not perfect, no trading system is, but every year I get closer to the top and bottoms of all the large and small trends in the market using a systematic algorithmic approach that has no room for emotional decisions.  Therefore, I am absolutely delighted with this change and look forward to yielding the incredible returns it will undoubtedly bring me and those that follow me.

If you can buy bottoms and sell tops as shown in the chart above, while continuing to manage your risk and compound your money…it’s pretty hard to fail.  And frankly, the system is this good now because I started sharing it.  I am driven by the humbling testimonials I have received over the years since I started sharing my trades, It makes me work harder and work smarter towards my goal of having the best trend trading system on the planet…If it isn’t already 😉