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!

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Market Thoughts

Rate Cuts AND Trade Deals: Markets seemingly have priced in both.
Aside from my assumption that Powell is loathe to cut, although he knows how to keep hope alive as long as possible, Fed will unwind their prior tightening when and if Trade Tariff Wars pick up and further cause U.S. consumer confidence, jobs and economic growth to turn down. Trump has in essence weaponized the Fed to fight his Trade War.
Aside from my assumption that the Trade War/s are far from being settled in any meaningful way or in good faith – without mercurial Trump reneging on them (aka Mexico), US Companies will continue to navigate supply and demand concerns in the dark which will erode confidence, delay investment and force even more consolidation, and at worst malinvestment (debt-fueled buybacks, fracking, etc).
Aside from my assumption that a continued Bull Steepener is bad for stocks (see chart below), Fed cuts take time to work into the system, like the negatively affected GDP from lower private and government income. We still have the credit markets’ active participation and private equity in full froth. The trick is knowing when the cup is over-filled, too hot and starting to crack down the sides – then it’s nasty to have the whole mess land in your lap and burn you. A reversal in this 10-year bull market of substance, like other Big Trend Reversals, will happen slowly at first, then all at once. This is the benefit of closely following Technical Analysis against a backdrop of Macro, Fundamental, Intermarket and Sentiment data. I’m already looking for The Turn.

So what ‘news’ could we get next few weeks to rocket this ship into overhead trend-line resistance… that sucks in the Bulls – Bigga Time – and then reverses violently down to retest and refill that $2718 gap fill? Or maybe more? We’ll soon find out. My best guess:
Market is pricing in 3 rate cuts THIS YEAR – with January 2020 fed fund futures implying an effective average rate of 1.67% at the end of 2019 while it currently sits near 2.38%. This divergence in these rate expectations combined with a market tiring of the rhetoric of negotiated Trade Wars… but living the reality from the economic impact from Trade Wars unresolved …will test my $2718 gap-fill thesis this summer. @SamanthaLaDuc

Private Equity

Caution: Contents Are Hot!

Every week it seems another $2bn-$3bn leveraged buyout gets announced without much fanfare, according to Financial Times. Even the large deals, i.e. a $14.3bn takeover of a fibre optic cable operator or the $18.7bn purchase of US warehouses, don’t generate much newsprint. Private Equity activity in the first half of a year has eclipsed the pace seen in the boom year of 2006. The dealmaking is being fuelled by nearly $2.5tn of unspent capital that private equity groups have raised to finance their takeovers, money that has poured in from pension and sovereign wealth funds but not yet been spent. The value of leveraged buyouts climbed to $256bn in the first six months of 2019, the second-largest first-half on record, according to new figures from Refinitiv. The surge represents 13 per cent of global acquisition activity, the highest level since 2013


Looking Ahead – Risk Events

With futures seemingly rise every night on optimism another trade truce will be declared during the G-20, I look for the ‘gotchas’ that are hiding in plain sight. Once such risk factor not discussed in full glory, as G20 and Democratic Debates fill the airwaves, is the fact we have a Debt Limit Ceiling to pass to avoid another government shutdown. Most think this is not an ‘issue’ until closer to the event in the Fall, but there is a date occuring June 30th – same date as Xi and Trump G20 meeting – that may shed light on the intentions moving into the Debt Ceiling debate. This weekend we should hear if the Reauthorization of TANF (temp assistance for needy families + child care entitlement) is extended. This will be a good test of the intention from the White House as this debt extension needs bipartisan support to pass.
Aside from the timing of the G20 meetings, I will also be looking at Oil’s reaction to Iran set to breach the 2015 nuclear deal, which was expected to happen today. Higher oil can pull inflation expectation and rates higher. OPEC meets this weekend, too. Given the timing for fiscal, political and economic mis-steps, risks are rising. The market just doesn’t feel them yet.
Next week is a holiday-shortened trading week and wouldn’t you know, most will be off their desks when the next Non-Farm Payroll report hits next Friday – just in time for Q2 Earnings Season soon kicking off with expected flat to negative growth.

Stocks of Interest in the News

Boeing (BA):  More concerns arise as: Pilots Flagged Software Problems on Boeing Jets Besides the Max

Pilots flying Boeing aircraft in recent years have reported flight-control problems they blamed on malfunctioning software — not on the company’s maligned 737 Max jets, but widely used earlier versions of the plane that are still in the air. Earlier this week, the Federal Aviation Administration disclosed that it had identified additional computer problems with the Max, aside from the anti-stall software known as MCAS that has been linked to two fatal nose-dive crashes in recent months. Fixing the newly discovered software glitch could take as long as three months, people familiar with the matter said Thursday.

Nike (NKE): Shares fell more than 3% in the extended session Thursday after the company missed consensus earnings estimates but beat revenue projections.

The company reported fourth-quarter net income of $989 million, or 62 cents a share, compared with $1.14 billion, or 69 cents a share, in the year-ago period. Revenue rose to $10.18 billion from $9.79 billion in the year-ago period. Analysts surveyed by FactSet had estimated 66 cents a share on revenue of $10.16 billion. For the first quarter, analysts expect adjusted earnings of 79 cents a share and sales of $10.64 billion. “Amid foreign exchange volatility, our double-digit currency-neutral revenue growth and expanding [return on invested capital] showcase Nike’s unrivaled ability to create extraordinary value for consumers and shareholders over the long term,” Chief Financial Officer Andy Campion and said in a statement.

Sector Inflection

Are Transports A Good Value Play?

Are Financials Now a Value Play?

Financials in S&P combrise 12% Market Cap but 20% of Earnings Weight.

“Lower short-term rates, higher longer rates, and a yield-curve steepening might just be the “macro” that helps the sector.”

Gold volatility – the GVXX – couldn’t get enough!

Up close to 90% from early June. Charts courtesy https://themarketear.com/

Gold volatility, GVXX index, can't get enough.

Gold bull continues…at least in call volumes!

Gold sentiment – also at extremes

Gold’s Daily Sentiment Index was above 95. In the past, sentiment readings above 95 were bearish for gold 65% of the time 2 months later, with an average max drawdown of -5.66%

Macro Matters

The case for >3000 as per Adam Crisafulli, JPM

1) the recent deceleration in US growth momentum (seen in May and June data) begins to stabilize while int’l numbers (specifically Europe and China) improve

2) central banks proceed with easing actions (specifically the ECB and FOMC) despite the improved growth backdrop (as monetary policy aims to combat disinflationary pressures)

3) the US TSY curve continues to steepen (as Fed-sensitive 2yr yields are driven lower while nominal growth-sensitive 10yr yields hold flat or even rise)

4) the USD sees further downward pressure (providing a boost to SPX EPS estimates in the process)

5) Brent stays above $60 (and ideally above $65) but because of improved demand and ongoing OPEC+ discipline (not heightened US-Iran tensions in the Middle East)

6) US-China trade tensions quickly deescalate (specifically, some of the existing tariffs are rescinded and a compromise is negotiated to keep Huawei alive)

7) the 2020 SPX EPS consensus moves back up towards ~$183-185 (it currently stands at ~$178-179 and is creeping lower).

Not the base case though.

Economic Data

Weekly Jobless Claims: Came in slightly higher than expected at 227,000 vs. a consensus of 220,000

First-Quarter GDP Revision: The final Q1 GDP revision came in unchanged at 3.1%

The pace of growth in the U.S. economy in the first three months of 2019 was left at 3.1%, revised government figures show, as stronger business investment offset a weaker increase in consumer spending.

Most economists predict growth will taper off in the second quarter, however. The first quarter benefited from a surprisingly large increase in inventories of unsold goods as well as an improved trade balance, neither of which is expected to be repeated.

Pending Home Sales for May: Pending home sales jumped by a seasonally adjusted 1.1% in May but were 0.7% lower than a year ago, the National Association of Realtors said Thursday. The May increase beat the consensus forecast for a 0.6% rise.

Contract signings precede closings by about 45-60 days, so the index is a leading indicator for upcoming existing-home sales reports.

In May, pending sales in the Northeast were 3.5% higher, and in the Midwest, they were 3.6% higher. In the West, they dropped 1.8%. In the South, they edged up 0.1%, but were slightly higher than year-ago levels, the only region in which that was the case in May.

Samantha Says

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

Jun. 27th, 9:07 am  AAOI – upgrade this morning. Above 10.50 looks good for gap fill to 11.60 and then 12.75
Jun. 27th, 9:13 am OSTK trade alert yday AM for long >11.50 went to $13.88 H intraday. It didn’t trade with BTC this yr – which at its high was up $250%/yr + 30% for wk – so it shouldn’t be affected by BTC volatility going forward (?!). Late Bloomer? As long as OSTK stays>$11.50 close on Wk, it can run to 15.50/16 next mo which is 30WK for swing. The JUL $12.50C were my vehicle yday. Pushing out a fun post from Guest Captain this morning on BTC. Look for it under Fishing Lessons: https://laductrading.com/free-fishing-lessons/
Jun. 27th, 9:14 am News: Overstock.com and Medici Ventures Celebrate the Launch of tZERO Crypto Wallet Mobile App – SI
Jun. 27th, 9:20 am CAG Bounce or Trounce: Needs to hold 27 for higher otherwise headed to retest ($26.50 on way to) 24.50 and then 22.50
Jun. 27th, 9:29 am WBA looks like a nice move higher if it can hold over 53.50. 1st PT 56.45 (2nd PT 57.75.)  Wide stop at 51.50 Tight Stop at 52.50
Jun. 27th, 9:31 am  Gold and miners looking weak on that dollar bounce (still short).
Jun. 27th, 9:35 am BA So long as it stay below 372 looks like weakness to 361, 358, 353 and 348 for price targets.
Jun. 27th, 9:35 am Month end dollar rebalancing still looks very bullish
Jun. 27th, 9:38 am Semis continuation move higher. MU earnings and then AMD upgrade this morning helping. NVDA big 6% move y-day and up another 2% this morning
Jun. 27th, 9:43 am AVGO Constructive for swing or chase long. 282 for tight stop with chase PT of 292 and swing PT of 300. Looking at July 300 calls.
Jun. 27th, 9:55 am Pot stocks getting some interest. CRON, CGC, ACB; CRON if it can hold on a weekly above 16.70 could be good for a swing long.
Jun. 27th, 3:20 pm THAT WAS A RAD IDEA!! So this AM my top trade ideas: Long: OSTK, AAOI, RAD, WBA, X, AVGO – all working. Short: CAG, GIS, BA, TSLA, TSN, ROKU – only CAG triggered.
Jun. 27th, 3:20 pm So what ‘news’ could we get next few wks to rocket this ship into overhead Trend-line resistance… that sucks in the Bulls Big Time… and then reverses violently down to retest and refill that $2718 gap fill. Hmmm
Jun. 27th, 3:26 pm With the announcement of RAD serving as “counter” to AMZN, this ‘circle the drain’ extremely oversold name just needed a trigger to bounce (post 1/20 stock split baahaahaa). Anyway, this AM I liked how the AMZN news reversed the 11% post EPS pre-mkt drop to ‘even’ at $7.43. I gave it an $8.50PT. It hit $9.69 before settling at $8.60. Pretty much the only time I trade Stocks over Options – when they are fast moving, low-priced puppies like this.
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 actively trades full-time and actively shares her trading ideas, plan and process.

This morning in Samantha’s trading room she mentioned that healthcare was a significant percentage of the sector mix in the Russell 2000.  Given the small caps laggard performance this year, I thought I’d take a look at how the large cap sector ETF’s have performed YTD in relation to RUT and IWM. Before looking up the data I thought we’d be talking about outperformance of the large cap ETF’s in the range of 5-10%, but it wasn’t that wide at an ETF/RUT outperformance of 4.01%. With this information in hand I’ll be curious to watch performance for the second half of the year. Do the small caps remain out of favor, or do they start to get some love and RUT plays catch up?

Great Reads

HPV vaccine has major impact on reducing infections, cancer, study finds

Vaccination against the virus that causes almost all cervical cancer is having a major impact on stopping infections and should significantly reduce cases of the disease within a decade, researchers said on Wednesday.