IB Traders Insight


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Futures

Crude Gets Crushed Again and a Boost to Gold


Scott Martin, Fox News Contributor & United Advisors

This video is from CME Group and is being posted with CME Group’s permission. The views expressed in this video are solely those of the author and/or CME Group and IB is not endorsing or recommending any investment or trading discussed in the video. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


8597




Stocks

Q4 Earnings Reports by Sector SPDR ETF


Excluding Energy Earnings Growth Was Decent

 

With about two-thirds of S&P 500 firms having now reported Q4 2015 results (and using consensus estimates for those that have not), it looks as if overall index earnings declined about $3.9 billion, or 1.5% year-on-year, dragged down by a 73% decline in profits from companies in the Energy Sector SPDR (XLE). Technology (XLK) was the biggest contributor to S&P profit growth followed by Consumer Discretionary (XLY), as shown in Figure 1.

Figure 1: S&P500 4Q15 Earnings growth by sector
$millions and percent change, year-on-year

Source: FactSet AltaVista Research

Excluding Energy, we calculate that S&P 500 profit growth would have been about 4.9% in the fourth quarter, which though slow is decent considering how late in the profit cycle we are. The current profit expansion began in the fourth quarter of 2009.

The 4.9% profit growth is all the more respectable considering that many firms are struggling to grow their top lines at all. Energy was a big drag of course, but so to was Industrials (XLI), Materials (XLB) and even Technology! Health Care (XLV) saw good revenue growth—as it usually does—and Consumer Discretionary firms managed to see decent top-line growth as well, suggesting consumers are spending at least some of their savings from the gas pump at retailers, car dealers and elsewhere (Figure 2).

Figure 2: S&P500 4Q15 Sales growth by sector
$millions and percent change, year-on-year

Source: FactSet and AltaVista Research

Looking ahead to 2016, current consensus estimates for individual index constituents suggest that overall S&P 500 profits will rise by 6.4% to $1.14 trillion, nearly half of which will come from just two sectors, Financials and Technology, while Energy is forecast to be the smallest sector in terms of profits. The danger is all this is that even given a normal rate of “decay”—that is, the rate at which consensus estimate tend to be revised lower—of 1% or so per month, by then end of this year we could be look at a full year decline in earnings as opposed to the 6.4% increase currently forecast.

Investors should always be mindful of valuations, but this becomes particularly important in a slow-growth (or no growth!) environment. Table 1 has common valuation metrics for each of the Select Sector SPDR ETFs based on consensus esimates for fund constituents, along with the ALTAR Score™ rating, which is our measure of an ETF’s overall investment merit.

Table 1: Valuation Metrics and ALTAR Scores™ by Sector SPDR
Based on consensus 2016 estimates for individual fund constituents



Source: AltaVista Research

Reprinted with permission from AltaVista Research
For more information go to www.etfresearchcenter.com
T 646.435.0569 | E info@altavista-research.com

About AltaVista

A better approach to ETFs. AltaVista’s ETF reports and ratings are built on a fundamentally-driven analysis of each fund’s underlying constituents, with the aim of helping investors make better fund selections based on forward-looking measures of investment merit.

This article is from AltaVista and is being posted with AltaVista's permission. The views expressed in this article are solely those of the author and/or AltaVista and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


8596




Stocks

Dow Jones Resources Coverage


EXCLUSIVE ANALYSIS AND NEWS BEATS

In This Issue:

  • Exclusive news on Iran’s crude-oil price cuts, its nixing of a nascent plan to hold an emergency OPEC meeting, Libya’s efforts to recover from Islamic State attacks and much more
  • Unique analysis on investors hedging their bets on a crude-oil revival and a sour outlook in Russia despite rising crude output

Exclusive News

Iran Follows Saudi Oil Price Cut

We reported exclusively on Jan. 19 that Iran would cut crude prices to Europe in February, in line with similar reductions by Saudi Arabia, signaling that it wants to compete with its largest rival but without making deep discounts after international sanctions were lifted on its oil.

  • National Iranian Oil Co. said it would reduce its official prices in North West Europe by 55 cents a barrel for its light crude and by 15 cents in the Mediterranean for delivery in February.
  • The move came amid softer international oil markets, as traders prepared for the arrival of Iranian crude.

Libya Details Port Damage From Attacks
  
 
The head of Libya's state-owned oil company told Dow Jones on Jan. 13 that he would meet with major oil companies such as BP PLC to try to jump-start the country's potential to produce petroleum after Islamic State militants inflicted heavy damage on a key oil-export terminal.

  • Mustafa Sanallah, chairman of the state-run National Oil Co., said Islamic State's recent attacks would delay the return of 300,000 barrels a day of output, about 20% of the country's capacity.
  • An attack on the Es Sider terminal and previous fighting nearby left only three storage tanks still usable out of 19 at the port, he said.

Iran Won't Join Immediate OPEC Production Cut

We broke the news on Jan. 29 that Iran wouldn’t join a producers’ cut debated by Russia and Saudi Arabia to stem a global oil slump, quoting Iranian and Gulf oil officials.

  • Russia had said the previous day it was in talks with OPEC producers to slash 5% of their respective production. Iran’s remarks–-confirmed by OPEC delegates–-scuttled the idea.
  • On Feb. 1, we were first to report that Arab states in the Persian Gulf don’t support an emergency OPEC meeting to discuss the output cut, preferring to wait and see how Iran’s return to the market affects prices.

More Exclusive News

Read more about the scoops discussed above and listed below by searching the wire for ((N/NRG or N/DJCS) and P/PMDM).

  • Feb. 2—Around $20 million worth of sugar was backed up at the Sri Lankan port of Colombo. The bottleneck, we reported exclusively, is a knock-on effect of sugar smuggling from Myanmar to China, which has artificially sweetened buying prices in order to support domestic farmers.
  • Jan. 22—Iran was preparing a shipment of at least a million barrels of light crude to a Mediterranean port in the European Union as early as mid-February, the first Europe-bound shipment from Iran since an embargo was lifted the previous week.
  • Jan. 22—Schlumberger was in talks to buy back its former Iranian unit, said Siamak Javid, managing director of former subsidiary Well Services of Iran.
  • Jan. 20—The next phase of development for Iran's giant South Pars gas field will start producing in February, Petropars, the state-owned company that runs it said.
  • Jan. 17—Suncor Energy Inc. was working on a friendly transaction to raise its all-stock offer for rival Canadian Oil Sands Ltd.
  • Jan. 11—Alcoa signed a long-term deal with General Electric to supply $1.5 billion of metals for engines and engine parts.
  • Jan. 11— Saudi Aramco chairman Khalid al-Falih told Dow Jones that the company’s potential IPO could include upstream assets. He added that the state-owned oil giant is looking to sell shares in its expanding downstream businesses.
  • Jan. 8—Kazakhstan's $64 billion oil fund could run out within six or seven years as slumping oil prices cut revenue and the government spends its savings, a central bank official said.

Unique Analysis

Investors Hedge Bets on a Crude-Oil Revival

Avenue Capital Group, Och-Ziff Capital Management Group, Carlson Capital and Blackstone Group’s  GSO Capital are among firms that have raised or are raising money from investors to plow into the energy sector, investors told us in an article published on  Jan. 27. But wary of the sharp price declines that stung early bargain hunters, they are approaching their investments more cautiously.

  • Some funds are focusing on senior, secured loans—those that are first in line to get paid back if energy companies run into problems handling their debt. Others are buying hedges against further declines in oil or natural-gas prices.
  • Those steps will mean lower gains than if they took riskier positions. But they also could guard against the risk of being too early in a market that, while battered, continues to post steep declines.

Russia’s Oil Output Rises But Its Prospects Sour

The Siberian drilling rigs of oil giant OAO Lukoil are helping raise Russia's oil output to its highest level since the breakup of the Soviet Union a quarter-century ago. But falling crude prices, U.S.-led sanctions and diminished oil exploration threaten Russia's oil industry and raise questions about its capacity to continue underwriting President Vladimir Putin's ambitions at home and abroad, we reported on Jan. 26.

  • While recent increases in Russian oil output have helped cushion the sharp price fall, Mr. Putin is so squeezed for cash, his government postponed a planned reduction in oil-export duties this year.
  • Executives say they fear the postponement could be extended, diverting money to Moscow that could be invested in new drilling and exploration to supplement aging oil fields.

About This Newsletter

This weekly newsletter covers Central Banks, Deals, Resources and Technology topics on a rotating basis. Next week: Technology.

If you have questions about Dow Jones and The Wall Street Journal, visit us online or email service@dowjones.com.
 
If you have questions about the content of this newsletter, email Jacques van Wersch at jacques.vanwersch@dowjones.com

About Dow Jones

Dow Jones & Company is a global provider of news and business information, delivering content to consumers and organizations via newspapers, Web sites, apps, video, newsletters, magazines, proprietary databases, conferences, and radio.

Dow Jones Newswires delivers premium business news, commentary and insight in real time and with unquestionable accuracy and depth. Built on a renowned global reporting network of nearly 2,000 journalists, Dow Jones Newswires publishes more than 16,000 daily news items – including exclusive content from The Wall Street Journal, Barron’s and MarketWatch – covering every asset class and key regions and markets worldwide.

This article is from Dow Jones & Company (Dow Jones) and is being posted with Dow Jones' permission. The views expressed in this article are solely those of the author and/or Dow Jones and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


8595




Macro

US Equities - Momentum Factor Unwinding


In our experience, there are two types of momentum unwind.

The first one is the normal run-of-the-mill unwind due to irrational exuberance in valuations and an extended positioning in consensus strategies.

The second one is related to changes in cycles.

It is a bad combination when all three – valuations, positioning, and cycles – converge as is the case now, in our opinion.

Regardless of which bucket you want to place the current episode into, the reality is that these exercises tend to last 2-3 months, and in some cases when the world is really in bad shape, as many currently feel it is, can last 6-months or longer.

The key point here is that to expect a resumption of momentum or a recovery of that factor’s leadership this early in the unwind, especially considering the PnL duress in the professional community is currently more violent than the losses suffered in January, would be misguided.

Put another way, if there is a momentum strategy, style relationship, market capitalization, sector rotation, you watch daily, and it is down or has reversed by 5-10%, call us when it is down or has reversed by 20-30%, and we will take a look at it.

Finally, ask yourself this question.

If the EURO STOXX 50 Index (SX5E), German DAX (DAX), NASDAQ 100 (NDX), Russell 2000 (RTY), and Facebook-Amazon-Netflix-Google (FANG) all made new "closing lows" for 2016 last Friday, then is it more likely that the next move for global risk assets is a bounce or that the Nikkei 225 (NKY) and S&P 500 (SPX) will play catch up?

Our bet is that that the Nikkei 225 and S&P 500 play catch up.

To see the equity strategies we're employing to capture this unwind, take a free trial to Sight Beyond Sight through Interactive Brokers...


Sight Beyond Sight® is a global macro trading newsletter written daily by Neil Azous. With close to two decades of institutional experience across asset classes, Neil interprets the day-to-day economic, policy and strategy developments and provides actionable trading ideas for investors. We invite clients of Interactive Brokers to sign up for a free trial in Account Management. If you are not a client of IB, you can sign up for a free trial by visiting our website.
 
This article is from Rareview Macro and is being posted with Rareview Macro’s permission. The views expressed in this article are solely those of the author and/or Rareview Macro and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


 


8593




Macro

The Truth about Productivity


Rick Rieder explains why slowing productivity is a statistical mirage.

 

One of the greatest economic mysteries out there, according to many market watchers: Why labor market productivity has slowed sharply around the world in recent years.

As my co-authors and I write in a new BlackRock Investment Institute paper, “Productivity Slowdown Puzzle: Structural, Cyclical or Erroneous,” the slowdown in productivity matters. In a world where developed market workforces are shrinking thanks to aging populations, productivity will be the key driver of potential economic growth rates in the long term.

But in my opinion, the productivity slowdown mystery, puzzle or whatever you want to call it has a simple solution: It’s a statistical mirage. As Nobel Prize-winning economist Robert Solow famously put it back in 1987, “You can see the computer age everywhere but in the productivity statistics.”

I’m of the camp that traditional economic metrics simply haven’t kept pace with fast-changing technologies geared toward greater efficiency at lower cost. In other words, official numbers don’t capture the productivity gains coming out of new, often free technologies. The calculations behind the data understate the benefits of innovation — and as a result, underestimate productivity.

Technology is changing the world in ways never before witnessed. U.S. consumers are adopting new technologies such as smart phones at the fastest rate since the advent of the television, and this is resulting in the widespread use of app-based innovations that arguably enhance productivity, but are unaccounted for in official data. Just one example: free apps that allow us to learn a language or check road conditions.

At the same time, new technologies are also bringing greater efficiencies to businesses at lower cost. Think cloud-based computing, energy-sector fracking, the sharing economy, improved data storage, enhanced computing power, developments in robotics and inventory management systems, which enable asset-light business models and drive down the cost of corporate investment. An area where this greater efficiency is showing up: lower inventory levels. Approximately one-fifth of the largest 1,500 U.S. companies by market value now have zero inventories, up from 5 percent in 1980, according to Morgan Stanley data.

Statisticians try to factor in such improvements by tweaking price deflators. Yet I believe such deflators still understate quality improvements — and, therefore, true productivity. In short, they don’t fully account for technology’s downward influence on price.

Consider technologies’ quality improvements and downward influence on prices, and productivity growth starts to look much better than it first appears. In fact, understated productivity means real annual U.S. gross domestic product (GDP) growth may have been 0.7 percent higher than reported over the past five years, Goldman Sachs estimated in a July 2015 report.

Looking forward, if the productivity slowdown is simply a mirage, then both actual and potential economic growth are understated, and we could see a gradual lifting of productivity estimates over time as measurement errors are corrected.

That said, given that the understated growth of the past few years was still quite solid and the labor market probably experienced its cyclical peak at the end of 2015, there are signs that the U.S. economy is actually decelerating now, and higher productivity estimates are unlikely to reverse this trend. As I’ve long argued, this means the Federal Reserve likely began normalizing rates too late, and it may now have to initiate more quantitative easing over the next year or so.

However, in the very near term, monetary policy will likely remain the same, and I’m not holding my breath that statisticians will suddenly see the error of their ways on the productivity front. In the meantime, the low productivity myth shouldn’t be so readily accepted.


Rick Rieder, Managing Director, is BlackRock’s Chief Investment Officer of Global Fixed Income and is a regular contributor to The Blog.
 

This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of February 2016 and may change as subsequent conditions vary. The information and opinions contained in this post are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by BlackRock, its officers, employees or agents. This post may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this post is at the sole discretion of the reader.

©2016 BlackRock, Inc. All rights reserved. iSHARES and BLACKROCK are registered trademarks of BlackRock, Inc., or its subsidiaries. All other marks are the property of their respective owners.

USR-8416

This article is from BlackRock and is being posted with BlackRock’s permission. The views expressed in this article are solely those of the author and/or BlackRock and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


8590




Stocks

This Week in Corporate Events: Earnings Announcements


Wall Street Horizon (WSH) is tracking 730 earnings announcements for this week and 4,951 for Q1.  This is the second busiest week this earnings cycle.  Two hundred and eighty four (284) companies this week are reporting earnings on a date that has either changed from a prior tentative or verified date.  Why does this matter?  Find out HERE . . .

Companies reporting earnings this week include 21st Century Fox, AIG, Cisco, Coca-Cola, CVS, PepsiCo, Time Warner and Walt Disney.

About Wall Street Horizon
 
Wall Street Horizon provides institutional investors and traders with an ever expanding set of forward-looking and historical corporate event datasets including earnings dates, dividend dates, options expiration dates, splits, spinoffs and a wide variety of investor-related conferences. With access via machine-readable feeds or Enchilada, its easy-to-use online application, the company's data is widely recognized for its unmatched accuracy and timeliness.  For more information, please visit http://www.WallStreetHorizon.com or email us at info@wallstreethorizon.com.
 
This article is from Wall Street Horizon and is being posted with Wall Street Horizon's permission. The views expressed in this article are solely those of the author and/or Wall Street Horizon and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

8592




Stocks

Nasdaq Market Intelligence Desk - Equity Market Insight February 8, 2016


Market Update:

Friday’s slide resumes this morning as all four major indices fall over 2%. All ten major sectors are lower, led by financials (-3.0), IT (-2.8%) and consumer discretionary (-2.8%). There is not a specific catalyst for today’s action other than continued fears over slowing global growth and pressures on commodity prices. The selling began with emerging and European markets; the Stoxx Europe 600 Index traded down for the sixth consecutive day and is nearly off 3%. Asian markets were generally mixed in a quiet session due to the start of Lunar New Year celebrations. Nasdaq Composite down -2.7%, the Dow down -2.1%, the S&P 500 down -2.2% and the Russell 2000 down -2.5%.

  • Reuters discussed that global hedge funds lost so much money in January that the month marked the industry's worst start to the year since the 2008 financial crisis according to Hedge Fund Research (HFR) data released on Friday. The article stated the HFRI Fund Weighted Composite Index posted a 1.7% loss for January vs a 2.69% loss in 2008. This still outpaces the broader market returns for January with the S&P 500 losing about -5%, the Nasdaq Composite -7.8% and the Russell 2000 -8.8%.
  • Crude oil continues to show weakness and is trying to hold the $30 level. There was word that Saudi and Venezuelan oil ministers met to presumably discuss production levels and prices, but the meeting yielded no action. Bloomberg notes that short and long positions in crude futures are at the highest levels since the CFTC began tracking the data in 2006. The trade is crowded with speculators, and that explains some of the recent volatility. Crude is lower for five of the last six sessions: WTI (-2.3%); Brent (-1.5). In related action Chesapeake Energy is off about 50% this morning on reports that it hired a restructuring firm. 

Technical Take:

As of 11:00 AM EST
Nasdaq Composite:
Advancers: 317
Decliners: 1895
Advance Volume: 22MM shares
Decline Volume: 157MM shares
New 52 week Highs (prior close): 5
New 52 week Lows (prior close): 214

 
As we had remarked on Friday, failure to hold initial supports of interest on the major indices last week will likely lead to new, lower lows in those indices. Today, for a variety of reasons, traders are seeing just that. There seems to be no help in sight as even positive earnings results are mostly being met with eventual selling and the most beloved of the growth mega cap names are now crumbling. This week could get ugly as traders attempt to find a new, lower low.

  • With its decisive fall and weekly close below 1900 the S&P 500 Index (SPX) is most likely headed for minimally a retest of the 1850 – 1810 level on a closing basis. Beyond this we have to look on a 3 year chart for support which we sight around 1780 then 1740 and better at 1700. For the Nasdaq Composite Index (CCMP), it too saw a conclusive weekly close below support at 4500 which has opened the index up to a move beneath next support at 4350 and today slicing through its ‘flash crash’ intraday lows from 8/24. Next support zone is from the Ebola panic of 2014 between 4240 and 4130. Lower lows mean bear market; what type and how long is still TBD.
  • Regardless of what the economists and fundamentalists have forecast, technical analysis teaches one to be flexible in observance of the fact that markets are dynamic and instead to listen what the market is saying. To help with this task we’ve enlisted a chart of the US 10YR bond where they are firmly below 1.8% for the first time since a brief period one year ago. What’s important right now is that the 10YR is trading on the cusp of breaking a 4 year uptrend line. A set of weekly closes below the uptrend line may act as further confirmation of the economic worries presently manifested in stock and credit markets around the world.  

Nasdaq's Market Intelligence Desk (MID) Team includes:  

Michael Sokoll, CFA is a Senior Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over 25 years of equity market experience. In this role, he manages a team of professionals responsible for providing NASDAQ-listed companies with real-time trading analysis and objective market information.
Jeffrey LaRocque is a Director on the Market Intelligence Desk (MID) at Nasdaq, covering U.S. equities with over 10 years of experience having learned market structure while working on institutional trading desks and as a stock surveillance analyst. Jeff's diverse professional knowledge includes IPOs, Technical Analysis and Options Trading.
Vincent Randazzo, CMT is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over 13 years of experience in equity markets having served in equity research sales and desk analyst roles at major banks. Vincent’s specific expertise is in technical analysis and has been a Chartered Market Technician (CMT) since 2007.
Steven Brown is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over twenty years of experience in equities. With a focus on client retention he currently covers the Financial, Energy and Media sectors.
Christopher Dearborn is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq. Chris has over two decades of equity market experience including floor and screen based trading, corporate access, IPOs and asset allocation. Chris is responsible for providing timely, accurate and objective market and trading-related information to Nasdaq-listed companies.

This article is from Nasdaq and is being posted with Nasdaq’s permission. The views expressed in this article are solely those of the author and/or Nasdaq and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


8591




Options

VIX Goes Global


The CBOE is making the “fear gauge” available early in the morning.

 

The CBOE Volatility Index, which has emerged since the 2008 financial crisis as one of the world’s most important reflections of investor sentiment, will soon be available during international trading hours.

Next month, CBOE Holdings (ticker: CBOE) plans to begin disseminating the “fear gauge” from 3:00 a.m. to 9:15 a.m. Eastern Standard Time. The ability to more broadly reference the VIX will enable investors to better assess international market action. VIX is currently only quoted from 9:30 a.m. to 4:15 p.m. to accommodate New York trading.

CBOE’s decision follows last March’s introduction of extended trading hours for options on the Standard & Poor’s 500 Index and VIX options.

We proposed extending VIX’s hours last July, when global markets were roiled by fears that Greece could collapse (“The Case for a 24-Hour VIX,” July 18). VIX would have helped investors determine if market reactions were too extreme or subdued. China has since replaced Greece as the market’s menace, and we expect VIX’s extended hours will aid investors in putting world events in context. Market forces may shift constantly, but the VIX lets markets better calibrate decisions.

Using a U.S. sentiment gauge to measure international markets may strike some as a misapplication. But investors have learned since the 2008 credit crisis that liquidity is king when markets face major challenges. The ability to increase or reduce risk is critical when dealing with macro-hobgoblins that can make markets in Asia, Europe, and the Americas behave like each other. The U.S. has the world’s deepest, most liquid markets, and this has made VIX and SPX global proxies.

VIX levels are therefore closely watched to gauge investor reactions. Even now, with VIX at a relatively subdued reading of 22, investors parse the fear gauge’s movements to help determine if investors are too bullish, too bearish, or too complacent about stocks. The analysis is more involved than checking spot levels, but this ditty is a good rule: When VIX is high, it’s time to buy. When VIX is low, it’s time to go.

While VIX’s extended hours are an important step, more remains to be done. CBOE should determine how to quote and trade the fear gauge on a near 24-hour schedule. The sun should never set on the fear gauge.

WHEN WE LAST RECOMMENDED selling puts on Twitter (TWTR), we reasoned it was OK to buy stock at a lower price, as Twitter would either realize its potential or become a takeover target (“Tweet to Twitter: Better Investor Communications,” July 25, 2015). The former seemed more likely, but alas, the company is reportedly in play. Twitter’s management sometimes seems like Narcissus, the beautiful boy of Greek mythology who was so taken with his own image in a pool of water that he fell in and drowned.

It is hard to know if the deal rumors have merit, but we hope (the most dangerous word in an investor’s lexicon) that hard-eyed financiers show Twitter’s self-involved technologists how to get it done. Anyone who followed our recommendations to sell the January $26 put now owns the stock, which is fine. The worry is that Twitter could become a “takeunder” candidate just as easily as it could be a takeover candidate, meaning that it would go for less than its recent share price. To increase the stock’s yield, investors can sell upside calls, but wait until after its Feb. 10 earnings report. The stock is priced in the options market for a 20% earnings-day move, compared to a 12% move over the past eight quarters. It is simply too hard to call the trade before earnings with macro-market crosscurrents. Someone will realize the full value of Twitter, something the current management group—despite its creative products—hasn’t been able to do.

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This article is from Barron's and is being posted with Barron’s permission. The views expressed in this article are solely those of the author and/or Barron's and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

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Futures

The Jobs Report and Retail Sales Data


Scott Nations, CNBC Contributor & NationsShares

This video is from CME Group and is being posted with CME Group’s permission. The views expressed in this video are solely those of the author and/or CME Group and IB is not endorsing or recommending any investment or trading discussed in the video. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


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Technical Analysis

S&P500 (ES) Nearing January, October Lows Post-NFP


Following Friday's Non-Farm Payrolls (NFP), the S&P500 (ES) is now approaching the January, October lows.  As the ES has in recent weeks been amongst the stronger of the index futures on my Watchlist, I'll be watching it closely today for a sign of a short-term short covering-fueled bounce.  Although the weekly, daily and 4hr RSI and Stochastics are trying to bottom, the weekly MACD continues sloping negatively.  In today's Asian morning, it appears the ES wants to rebound off triangle support (on the 4hr chart).  A rebound breaking above this triangle's resistance could allow the ES to form a higher low (versus the low in January), and pave the way for a short-covering rally this week that could bring ES back up towards the bear flag resistance (on the daily chart).  I am flat and will continue watching carefully for whether ES appears to want to form a short-term bottom.

S&P500 (CME ES Mar16) Weekly/Daily/4hr/Hourly

Click here for today's technical analysis on Nasdaq100, Nikkei, VIX, Natural Gas, Silver, Gold, WTI Crude, EURJPY, AUDJPY

Tradable Patterns was launched to demonstrate that the patterns recurring in liquid futures, spot FX and equity CFD markets can be traded consistently profitably. Tradable Patterns’ daily newsletter (blog) provides technical analysis on a subset of ten to twelve CME/ICE/Eurex futures (commodities, equity indices, interest rates), spot FX and US equity markets, which it considers worth monitoring for the day/week for trend reversal or continuation. For less experienced traders, tutorials and workshops are offered online and throughout Southeast Asia.

 

This article is from Tradable Patterns and is being posted with Tradable Patterns’ permission. The views expressed in this article are solely those of the author and/or Tradable Patterns and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


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