Showing posts from August, 2019

Two Retail stocks for next months: KR and ROST

1. The Kroger Co. KR, $23.92.
This stock is especially important in these days of Trade War escalation, using it as a hedge, due Kroger operates retail food and drug stores manufacturing its own products, so, unlike other retail stores, have little exposition to China. Last week, I emphasize that retailers could fuel a next market bullish rally, due great July Retail Sales report.

Kroger is near 20% down this year, however, the company reports decent Q1 earnings, showing that its CEO Mac Mullen probably finds a way to reverse after an ugly 2018 (-26%) a bad year for all the retail sector. An early August' upgrade from Pivotal Research fuels the stock from the $21 level, "a cheap price enough for a buy" as they said. And also last week announces a test concept with Walgreens WBA, expanding its Express store-within-a-store pilot in Tennessee. Seems interesting.

Technically, the stock is finally breaking the resistance line of its downtrend channel that began in March. Yes…

Markets: quick review of the last, choppy, week

Market Pulse.
U.S. equities were on track to finish higher for the week until China unveiled a new round of retaliatory tariffs and President Trump vowed to respond, unnerving markets. In this new episode of escalating trade tensions, China announced that it would impose tariffs ranging from 5% to 10% on $75 billion of U.S.goods in two batches, effective on September 1st and December 15th, including a 25% tariff on U.S. cars.

The S&P500 SPX finished Friday down 2.59%, concluding the volatile week down 1.4%. The index is now down 4.5% for the month of August and 6.0% lower from the record high it reached in July. The Dow Jones Industrial Average fell 2.4% on the day and finished down 1.0% for the week.

At the annual central bank summit in Jackson Hole, Fed Chairman Powell left the door open for another rate cut when the committee meets next month, acknowledging the risks to global growth from trade uncertainty.

An inverted yield curve (when long-term rates are below shor…

Trade War escalation today: some notes

The most awaited news on Wall Street today, the Powell's speech in Jackson Hole, was almost forgotten by investors and traders, due he didn't tell nothing new, but most because today the Trade War reached its peak of intensity. A round trip of attacks via tweets that ended with both countries, U.S and China, raising their tariffs, and with Trump ordering companies in his country not to have commercial relations with China and start looking for other countries (as if it were easy to find a similar market!). Wall Street plunges with all this news in a strong sell-off: the SP500 SPX closes -2.59% at 2,847.11

Some notes:
- Whoever says that the world is not headed for a global recession, lies. It is unavoidable.
- It is no longer interesting to look at the inverted yield curve in the US on a daily basis, hoping to read that the risk of recession decreases: the Trade War is getting worse and has no solution in the short term.
- The economy deceleration is global and many world …

Keep an eye on Retail Sector

Seems incredible, due to its past performance struggling an entire year, but now the retail sector could fuel the next bullish rally on Wall Street if it happens. You know, essentially, retail sales cover the durables and nondurables portions of consumer spending. And consumer spending typically accounts for about two-thirds of GDP and is, therefore, a key element in economic growth. And Wall Street stocks love strong economic growth, best if it comes without excessive inflation as the current environment.

Now, some of its main and iconical stores had great earnings this season, beginning last week with Walmart WMT, and continuing this week with Home Depot HD, Target TGT, and Lowe LOW. The ETF that follows this sector (XRT) hit historical lows past week, but after those company results, and also a nice Retail Sales July report, a buy-the-dip trade here isn't a bad idea now.

Check below the highlights: all major readings easily surpass the consensus. More: the non-stores sub-sec…

Today Retail Earnings take pressure off the Fed

When Jackson Hole was becoming an obsession for Wall Street, this week’s retail earnings come to calm the waters and tell the market that the U.S. economy probably isn't cooling as hard and fast as it is believed. It's well known that the Trade War without a solution, the inverted yield curve, the fall in the yield of bonds globally (see graph) and, the threat of recession are factors that should scare any economy and regardless, the US consumer sector, key in every economy, seems to flow well.

Yesterday Home Depot HD was up 4% after good Q2 results reaffirming its guidance for this year. And today, at premarket, Target TGT exploits more than 18% after beat EPS and sales with a wide margin, with raises forecast and reaching all-time highs. The same happens today with Lowe LOW (+ 12%) another great retail chain, beats EPS and sales and affirms guidance.

The next data of Housing this week can reaffirm this perception of the US economy. Finally, the Fed now has less pressure (…

JPMorgan: stocks could outperformance into month-end

JPMorgan's Marko Kolanovic said investors are questioning how much of recent equity moves can be attributed to increased recession risk vs. technical flows in this environment of poor liquidity.

JPM's analysts have reasoned that more than half of the recent move in interest rates and inversion of the yield curve was caused by technical drivers (convexity hedging of mortgages, bank portfolios, and variable annuities in poor liquidity conditions) and less than half of the move can be explained by fundamentals such as the growth, inflation, and monetary policy outlook. "This is an important data point for equity investors, as moves in rates (e.g. yield curve inversion) significantly impact investment sentiment,"

Marko wrote, "by looking at various systematic flows in equity markets, we find similar results – i.e. that more than half of equity moves were driven by systematic rather than fundamental trading."Looking at systematic equity flows during (and as a …

Trump pressures the Fed again

Given that a definitive trade agreement with China, and the end of the Trade War, is more complicated than ever (moreover, I see it impossible to realize this year), Trump heads his weapons to 'the real enemy at home', as said with those words: the Fed.

Today, as he is now a reliable economist (its mention of "the crazy inverted yield curve" was really hilarious), "suggested" urgent decisions: a rate cut of 100 bps (!!) and also a Quantitative easing. He does not ask little. I agree with him that their economy is the best in the world, but that fact must be endorsed with good economic policies, which I believe the Fed has been doing until today, without taking care the usual aggressive tweets from the President.

Is sure Powell knows he needs to steepen the yield curve and would lower rates next month (the 10-year T-Bond yield TNX is at historic lows, near 1.6%), but also he is evaluating the entire economic environment. The U.S. consumer sentiment of the e…

The big question: what will happen to the SP500 in the following weeks?

With the SP500 correcting today very strong (SPX +1.28% now) for the second consecutive session since its sell-off last Wednesday, the big question on Wall Street is if this rebound is reliable, that is, if finally, its pullback finished, reaching a short-term low at 2,825. Can you take advantage of the occasion buy-the-dip trades right now?

JPMorgan JPM publishes it clearly today: don't buy the dip until September. Personally, as trader, I think it's the healthiest and cautious decision. World central banks reducing its interest rates (near in 30 countries this year), an inverted yield curve in the benchmark US T-Bond 2/10 spread (a clear signal of the beginning of a recession sharpen by the Trade War), are so strong economic signs to set aside.

Some private indicators, as the Fear & Greed Index from CNN Business show its number in 26. As it is a contrarian indicator, the buy signal is activated only in values below 20, but take note that it's ascending from its la…

SP500 technical levels to follow in the short-term

A quick analysis to the daily chart of the SP500 (not shown) reveals its two main levels to check for the next sessions: as support, the key SMA200 average at near 2,800, also a psychological level. And as resistance, the 61.8% of its Fibonacci (at 2949.25) of its last pullback from August, as this level is probably the most important and followed retracement view by traders and investors. So, in the recent volatile behavior, it could reach some of these levels soon.

Now SPX is touching the 50% retracement, and overbought, with Stochastic above 90. But informed traders know that the Stochastic could stay many days, or weeks, above the level 80 due as the greed that involved traders in that point. Not the same happens in low levels, below 30, where fear is the main sentiment with peaks as its main pattern if panic comes. The 1-hour chart above shows it more clear.