Wednesday, March 8, 2017

Impressive Job Report means next Rate Hike?

Good Job Report: Rate Hike on Wednesday?

After the impressive result of private employment ADP on Wednesday (298k compared to the expected 183k), it was expected that the Job Report data follow that line, because they are generally aligned, and that was it: I greatly exceed the consensus (200k) to be placed in 235k, while the unemployment rate remained flat, as seen in the chart.

The market had an undecided reaction in the first hours, with the SPX instead of falling (which was logical because they do not want the Rate Hike) opened strong, perhaps supported by the Hourly Income data that did not exceed the expected 0.3%. Also, for this reason, the dollar /DX had an illogical behavior as it closed at -0.49% after such good employment data. At the end of the day the SP500 SPX index closed at + 0.21%, a moderate rise, which means that the markets remain complacent once again.

The SPX futures received the Job Report well (in shaded the extended hours). It is surprising if today's fall of the dollar (and the consequent rise in the price of US bonds) in the face of such good employment data.

Gold could continue its correction

Gold also looks interesting this next week, because given that it reacts contrary to the dollar /DX, this week can continue its correction that comes from two weeks ago if the expected Rate Hike is given (today the odds are around 90%). Technically /GC seems to be bouncing on 50% of its Fibonacci, although the last word will be on Wednesday the FED at its FOMC meeting, and the global geopolitical situation.

As you can see, gold seems to be bouncing around 50% of its Fibonacci, although
its future behavior will be defined by the FED's decision this Wednesday.

Draghi and the ECB Meeting

At the ECB meeting, Draghi focused, as expected, on the tapering, the end of the QE and the possible rise in interest. Although the interesting thing came later when Bloomberg quoted that there are members of the ECB (the Germans, in fact) who are already asking for this rise, even before the QE ends. This would bring down the prices of the bonds, already artificially high in its bubble of many years, and if we assume that the tapering may end in December this year, the explosion there may be of global consequences.

I don´t believe in Snapchat

I see little future in stock exchange to this fashion company in the long term. And my reasons are not without techniques or fundamentals (very premature yet), but more than anything intuitive: it seems to me a purely juvenile product, too much for my taste (see the lower picture). And it is not that I distrust young people, but I do not trust their ease with which they move from one gadget or from one fashion to another. And that can happen to Snapchat SNAP when the next successful and youthful computer application appears. Today, for now its value is falling 11% ...

Personally, I bought some shares the first minutes of the IPO, product of the novelty for its departure and the strong promotion with which it was preceded. Knowing the typical behavior on the first day of an IPO, I sold them within minutes of their exit for an acceptable gain: that is, pure speculation, but valid for a trader. Today I have SNAP in my watchlist as a potential sell (without going into short yet), because I believe that the stock and its price are overvalued. I also suspect that internet tigers like Facebook FB should be waiting for their price to reach $ 15-16 levels to bid for it ...

Youth is, for the most part, the most interested in Snapchat as an app and in acquiring shares. I see as a stock more to speculate for a few months, and unattractive for a long-term investor.

Next "buy the dip": Deutsche Bank

Deutsche Bank DB. It continues to fall (-10% in 2 sessions) after its announcement of restructuring and capital increase (8,000M euros through the issuance of 687M of shares), a decision not very well received initially by investors, due to the intention of not selling its retail division Postbank, which has 14 million customers. After two years of losses and scandals, I think the decision of the bank is good, in view its previous reduction of costs did not work. I have it on my watchlist as a next 'buy on the dip', even this week.

Since 2016, Deutsche Bank's stock usually recovered strongly after a few days of a drastic fall. This time the same thing can happen, because the decision to increase capital is not bad idea.