Each day I scan and synthesize market-moving news. I look at macro themes, currency moves and global economic indicators that support or challenge my thinking on the Big Picture and help me take the mood of the market. I like to assemble these data points so I can turn them into operational trade ideas for my clients in my Live Trading Room. Some may even make it into my Brokerage-Triggered, Trade Alerts!

You are getting this Free Bait (Daily Market Thoughts) as part of LaDucTrading’s Free Fishing Lessons! Take the next step: Come Fish With Me.


Market Thoughts

Despite market at all-time-highs, positive GDP growth, unemployment at 50 yr lows and, as a result, consumer confidence near 20 year highs, oh, and even with fiscal and monetary conditions at their loosest in decades, Fed Chair Powell announced the FOMC decision to stop their balance sheet run-off (two months early) and offer up ‘a’ 25 bps rate cut. July 31st was a day for the record books: from Quantitative Tightening to Quantitative Easing in dramatic turn-around fashion.

And you would think the markets would love it as they surely demanded and expected it. But they didn’t expect or love his reference to it being a “mid-cycle adjustment”. And with that I said in my live trading room and twitter to brace for impact. (I think my exact words were something to the affect “he just screwed the pooch” and with that markets dropped hard with Gold and Miners while USD went into escape velocity mode. I was angry; I said so on Twitter.

TICK hit -1,768 – only one lower occurrence since 2010…

My position was articulated in advance. That the 25 bps cut NEEDED to be 50bps – as I pitched in a @realvision interview Tuesday that sadly won’t be aired. My position was that a bigger cut was needed to keep markets aloft, to revert the yield curve inversion + reflate commodities.

Also see my Market Thoughts on USD Monday wherein I have been calling for $DXY to $100: US Dollar on Path of Least Resistance

While the Dollar flew, my Gold prediction started to pay off as posted in SeeItMarket last week: Prepare For Pullback In Gold Then Relaunch – Just Like 2008


Recent Gone Fishing Newsletters for Clients


What you won’t see on RealVision

My Interview, which I recorded on Tuesday but was scrapped last minute by their content team. So… here’s what I said:

* A Bull Steepener in next 6-12 months.
* Higher USD before weakens EOY.
* Fed cutting 50 bps this yr and sooner is better than later to try and avert recession.
* Rotation into oversold small caps and transports as alternative.

SamanthaLaDuc, Founder LaDucTrading, CIO LaDuc Capital LLC

Gone Fishing Newsletter, Trade Alert and Live Trading Room clients at least have my charts and timing and trade set ups.

Moving forward, market is pricing in a 71% probability they cut again at the next FOMC meeting on September 18. The curve is still inverted. Markets did not get their 50bps cut in July but they will for September, and here’s why: 

BROKERAGE-TRIGGERED TRADE ALERTS!


 

Samantha Says

Market Commentary from Samantha’s Live Trading Room and StockTwits Premium Chat Room

Jul. 31st, 7:33 am GM!! Well take a look at $GE… it is breaking out post EPS and will be on a nice trajectory north if it can stay above $10.64 on a weekly close. This will be a morning chase for me and potential swing set up with a call spread to start. For those who are option players and more long-term, this was an ideal financed call spread from lower prices through all of this congestion these many months and continues to look like a solid set up into year end.
Jul. 31st, 7:42 am I can already see the onslaught of upgrades for $APPL. I prefer long small caps Over NASDAQ and SPY as the Russell/IWM have room for catch up and are performing much better this earnings season than large cap.
Jul. 31st, 7:43 am $AMD and $SPOT are slightly sold off post EPS and I venture they get defended and move higher (Trend Trade in SPOT)
Jul. 31st, 7:50 am Despite two weeks of testing sideways and lower at times, oil and XLE did not break. Oil finally spiked yesterday and I am still long. Given time decay and lack of volatility, call spreads would have been better but now with Fed presenting their rate cut, the more dovish a cut the higher the commodity spike so look for volatility later today!
Jul. 31st, 9:16 am AAPL – think it gaps up, hits 218 and then retraces
Jul. 31st, 9:23 am SPOT; Lower after earnings and AAPL performance. Look for move to 144 and then I think it gets defended.
Jul. 31st, 9:56 am ATVI; has a nice looking bottom fishing play on the weekly. Above 48.93 for entry consideration.
Jul. 31st, 10:07 am Oil and gas best performing today. Pot stocks getting a little love. Not trading anything until we see what the Fed does.
Jul. 31st, 10:14 am AAPL; holding over 218 – that is line in the sand now to see if it can hold these gains.
Jul. 31st, 2:02 pm FED cuts 0.25bps AND is withdrawing balance sheet run off in August
Jul. 31st, 2:03 pm Pretty muted reaction other than UUP (dollar) up BIG
Jul. 31st, 2:04 pm Stopping balance sheet run off early could be considered a “rate cut”
Jul. 31st, 2:06 pm Would need VIX above 15 to really see something happen to downside momentum
Jul. 31st, 2:07 pm Lots of the same in statement, but suggesting further cuts possible.
Jul. 31st, 2:10 pm $TLT taking off higher
Jul. 31st, 2:12 pm foreign currency getting whacked. EEM hit as well
Jul. 31st, 2:32 pm As of now, yield curve remains inverted. Fed may not have done enough…
Jul. 31st, 2:45 pm As soon as Powell said “mid-cycle” rate cut the market began to dump. Longest expansion in history yet now he’s saying mid-cycle?? No credibility.
Jul. 31st, 2:47 pm: GLD and SLV (shorts working) Think TLT will pull back after this initial move higher – overbought.
Jul. 31st, 4:48 pmThe Fed Presser was more than upsetting. If you follow me on TWTR @SamanthaLaDuc you saw when I knew the market was in trouble. – “MID CYCLE ADJUSTMENT” my arse. I had a few other things to say that I didn’t print… And market tanked hard needless to say. With that, I’m getting asked, Q: “So was the Fed expecting the dollar to fall rather than pop higher?” A: Munchin is already expecting to do massive tightening once debt ceiling is passed. THAT will cause a sucking sound of liquidity out of the markets. Hence Powell stopping QT (balance sheet run-off) 2 mos early helps offset some of that, but not really. The 25 bps NEEDED to be 50 bps to even be on same playing field of keeping markets aloft, averting lengthy yield curve inversion+ reflate commodities. Fed Failed Markets big time and I contend this IS “too little too late”. I am officially on Recession Watch now.
Jul. 31st, 4:49 pm Biggest Deal: Powell/Fed caused the USD – the most important asset in the world – to go into escape velocity mode – as written about for mos – and that could have been avoided if they cut 50 bps. Remember my posts: US Dollar on Path of Least Resistance https://laductrading.com/2019/market-thoughts-us-dollar-on-path-of-least-resistance/ And SeeItMarket article on Gold (and why I was short GLD, SLV, GDX into the Fed). https://www.seeitmarket.com/prepare-for-pullback-in-gold-then-relaunch-just-like-2008/
Jul. 31st, 5:02 pm BTW, I did not sell my gold, silver, miner shorts but my TLT short was stopped out. Rest assured I am nothing if not determined. My TWTR call spread hit PT as did my ORCL short which made up for TLT and some funky too-tight stops in some of my chases GE, TTWO. Otherwise, the trade I mentioned at open of shorting $AAPL if broke $118 – closed at $213 – and SPOT getting defended at $146 – closed at $154 – were unaffected by Powell’s pathetic attempts at building confidence in the Fed, rate cuts and US competence in general. If I was a betting woman… I would bet he does not do a press conference again.

Wall Street Jane’s Journal

Jane is not only Samantha’s Live Trading Room moderator, she facilitates client engagement and relays Samantha’s trade ideas into the LaDucTrading StockTwits Premium Room. A former banking VP during the GFC, she now trades full-time and actively shares her trading ideas, plan and process.

After the big FED day and the subsequent market move lower, I think we really just have to wait and see what tomorrow brings before making new assessments. It’s hard for me to get away from the idea that buy-the-dip mentality remains in play and that, while we may pull back a bit more, was today really the catalyst that breaks the proverbial camel’s back?

In the meantime I did want to mention one of my favorite trading names on the long side for the past couple of years – $ADSK  It had gone on its merry way with typical ebb and flow but started showing signs of topping and as of today it appears we are at decision time. A classic head and shoulders pattern with price closing just above the neckline. It’s been selling off hard for a couple of days already and is approaching daily oversold levels. It’s also coming in to support at the weekly 50MA and the daily 200MA. Looking at the bollinger bands, it has closed three days in a row outside the lower band on the daily and is approaching the lower band on the weekly. We might just get a brief reprieve and then a definitive break of the neckline, so I’ll be watching closely for directional moves that confirm or negate this pattern.

Macro Matters

Economic Data

ADP Employment Report: 156,000 private-sector jobs added created in July

The nation’s businesses created 156,000 private-sector jobs in July, payroll processor ADP said Wednesday, showing that companies are still willing to hire despite stiffer headwinds for the economy such as the ongoing trade spat with China. Economists polled by Econoday had forecast a gain of 155,000.

Big companies added 78,000 jobs, mid-sized firms took on 67,000 new workers and small businesses hired 11,000 people.

Professional and business services led the way by creating 44,000 jobs. Employment also rose by 35,000 in health care, 27,000 in transportation, 26,000 in leisure and hospitality and 15,000 in construction.

Employment Cost Index: ECI rose 0.6% in the second quarter

The cost to businesses of employing American workers rose at a slower pace in the second quarter, offering more evidence that labor costs are not adding much to inflation.

The employment cost index rose 0.6% in the second quarter, the government said Wednesday. Economists polled by MarketWatch had forecast a 0.7% increase.

The increase in compensation gains over the past year, what’s more, slipped to 2.7% from 2.8%.

Chicago PMI: The Chicago PMI business barometer decreased to 44.4 in July from 49.7 in June

A measure of business conditions in the Chicago region dropped further into contraction territory in July. The Chicago PMI business barometer decreased to 44.4 in July from 49.7 in June, MNI Indicators said Wednesday.That’s the lowest since December 2015. Any reading below 50 indicates worsening conditions. And readings below 45 are especially worrying. Economists had expected a rebound to 50.5, according to Econoday.

Four out of the five components were in contraction territory in July with only the supplier delivery index above 50. The production index hit a 10-year low. In a special question, only 14% of manufacturers expected the economy to pick up.

Trade Wars and More

US, China trade meeting ends with sharp response to Trump

U.S. and Chinese negotiators wrapped up a brief round of trade talks on Wednesday that Beijing described as “constructive,” including discussion of further purchases of American farm goods and an agreement to reconvene in September.

The talks began amid low expectations, with Trump on Tuesday accusing Beijing on Twitter of stalling, and warning of a worse outcome for China if it continued to do so.

On Wednesday, Chinese Foreign Ministry spokeswoman Hua Chunying said that she was not aware of the latest developments during the talks, but that it was clear it was the United States that continued to “flip flop.”

American farmer: Trump ‘took away all of our markets’

Since trade tensions began in 2018, farmers have faced major financial challenges, since China was once a major U.S. agriculture buyer.

And losing customers has become a major issue. Soybean farmers have been dealing with this, as China has turned to other countries like Brazil for soybeans. Nuylen said this is also happening for wheat farmers, as China has begun importing wheat from Russian regions.

“All these countries went to different countries to get their grain,” Nuylen said. “How are we going to get the relations back with them to buy our grain again and be our customers?”

Between 2016-2017, China was the fourth-largest wheat buyer in the world, importing more than 61 million U.S. bushels. In 2019, the top U.S. export destinations for wheat include Mexico, the Philippines, Japan, and Nigeria — China is not even among the top 10.

U.S. imposes sanctions on Iran’s foreign minister Zarif

The United States on Wednesday imposed sanctions on Iranian Foreign Minister Mohammad Javad Zarif, targeting the country’s top spokesman and potentially hurting chances of diplomatic talks amid rising tensions between the two countries. The sanctions against Zarif would block any property or interests he has in the United States, but the Iranian foreign minister said he had none.

Zarif was an important figure in the 2015 Iran nuclear deal agreed under the administration of President Barack Obama with Tehran and other world powers. President Donald Trump pulled the United States out of the deal last year.

Great Reads

File under who would have thought: Your Old Bra Clasps Can Save Injured Turtles