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Technical Analysis

VIX (VX) Formed 1st Green Weekly Candle in 8 Weeks


The VIX (VX) saw profittaking Friday after 3 days of green, and is now trying to stabilize just above the steep downchannel resistance (on the weekly chart).  Except for the weekly MACD (which still slopes slightly down and lacks sufficient history in the accompanied weekly chart to be meaningful), weekly and daily RSI, Stochastics and MACD are rallying, bottomish or consolidating recent gains.  I am flat and will look to enter long intraday in the green zone (of the daily chart) with an upside target of the red zone by mid week.

 

VIX (CFE VX Mar17) Weekly/Daily/4hr/Hourly

 

Click here for today's technical analysis on Cotton, Nikkei

 

Tradable Patterns was launched to demonstrate that the patterns recurring in liquid futures and spot FX markets can be traded consistently profitably. Tradable Patterns’ daily newsletter provides technical analysis on a subset of three CME/ICE/Eurex futures (commodities, equity indices, and 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.

 

 

 


12436




Stocks

Filing Season Finds: Thursday, February 23


Forget all the “earnings season” analysis you read last month. The real earnings season—annual 10-K filing season—is happening right now.

Every year in this six-week stretch from mid-February through the end of March, we parse and analyze roughly 2,000 10-Ks to update our models for companies with a 12/31 fiscal year end. Our analysts work tirelessly to uncover red flags hidden in the footnotes and make our models the best in the business.

There’s no way we could analyze so many filings in such a short without our engineering team’s help. Using machine learning and natural language processing, we automate much of the rote work of data gathering and modeling. Our technology frees our analysts up to spend more time on the complicated and unusual data points that other firms miss.

Investors understand that analyzing all financial statements and footnotes is an essential part of the diligence needed to fulfill the fiduciary duty of care. How else can one make the necessary adjustments to assess a company’s true earnings and return on invested capital (ROIC)? Our innovation is to scale this diligence and make it easily accessible to our subscribers.

What We Accomplished Yesterday

Figure 1 shows the work our analysts did yesterday and over the entirety of this filing season so far.

Figure 1: Filing Season Diligence

newconstructs_filingseasondiligencestats_2017-02-23
Sources: New Constructs, LLC and company filings.

Yesterday, our analysts parsed 92 filings and collected 13,987 data points. In total, they made 2,451 adjustments with a dollar value of $1.6 trillion. That breaks down into:

  • 1,042 income statement adjustments with a total value of $111 billion
  • 1,016 balance sheet adjustments with a total value of $668 billion
  • 393 valuation adjustments with a total value of $780 billion

In particular, Senior Analyst Hunter Gray found an unusual item in Advanced Micro Devices’ (AMD: $14/share) 10-K.

Like many firms, Advanced Micro Devices has non-operating expenses hidden in operating earnings. Non-operating expenses are unusual charges that don’t appear on the income statement because they are bundled in other line items. Without careful footnotes research, investors would never know that these non-recurring expenses distort GAAP numbers by lowering operating earnings.

In 2016, AMD took a $340 million (8% of reported revenue) charge related to a warrant agreement they entered into with West Coast Hitech L.P. This adjustment removes that non-operating expense and reduces AMD’s pre-tax operating loss by $340 million.

After all adjustments, AMD’s operating profit (NOPAT) in 2016 was -$124 million compared to GAAP net income of -$497 million. Without this adjustment one cannot get the true recurring profits of AMD’s business.

This article originally published here on February 23, 2017.

Disclosure: David Trainer, Hunter Gray, Kyle Guske II, Kyle Martone, and Sam McBride receive no compensation to write about any specific stock, sector, style, or theme.

 

About New Constructs

Our stock rating methodology instantly informs you of the quality of the business and the fairness of the stock’s valuation. We do the diligence on earnings quality and valuation so you don’t have to.

In-depth risk/reward analysis underpins our stock rating. Our stock rating methodology grades every stock according to what we believe are the 5 most important criteria for assessing the quality of a stock. Each grade reflects the balance of potential risk and reward of buying that stock. Our analysis results in the 5 ratings described below. Very Attractive and Attractive correspond to a "Buy" rating, Very Dangerous and Dangerous correspond to a "Sell" rating, while Neutral corresponds to a "Hold" rating.

Cutting-edge technology enables us to scale our forensics accounting expertise so that we can cover enough stocks to cover the ETFs that hold them as well. Learn more about New Constructs. Get a free trial. See what Barron’s has to say about our research.

This article is from New Constructs, LLC and is being posted with New Constructs, LLC’s permission. The views expressed in this article are solely those of the author and/or New Constructs, LLC 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.


12435




Macro

Warming up to the potential of China's equities


An overly cautious approach may mean missing out on fresh returns from the world's second-largest economy. Kate explains.
 

Powerful structural and cyclical forces make China’s equities attractive to investors. The key reasons? Global reflation and a domestic cyclical upswing should be supportive. See the BlackRock GPS for China. Progress on domestic structural reforms and undemanding valuations add to China’s attractiveness.

An increasing debt load, persistent capital outflows and a potential trade war with the U.S. under the new Trump administration have made investors wary of China. Yet trade is a smaller growth driver than in the past, and China is strengthening ties within Asia and making its economy more consumer-driven.

Performance conundrum

Chinese equity returns have trailed the nation’s spectacular growth since 2000, underperforming emerging markets such as India. Structural problems (resulting from the 2009 stimulus) and declining multiples have weighed on equity returns since the financial crisis.

Companies have enjoyed solid earnings growth, but high levels of investment have left little to distribute to shareholders. China H-shares—listed on foreign exchanges such as Hong Kong—have fared better than A-shares—listed on onshore exchanges. See the chart below.

chart-BII-investors-rewarded

These dynamics should change as policymakers in Beijing press ahead with reforms, domestic and offshore valuations converge, and China is admitted to global equity indexes.

“Old economy” sectors such as materials, industrials and financials are still overrepresented in the domestic A-share market, but “new economy” companies in consumption-driven sectors such as technology and services accounted for half of the IPOs in the A-share market in 2016, we calculate.

The eventual inclusion of domestic A-shares in indexes should expand the representation of China in global capital markets and attract a broader group of investors. China’s onshore and offshore markets are set to converge, attracting a more stable and less speculative investor base. This begs the question: Are Chinese equities investible? And where are the greatest opportunities today?

It may be tempting for investors to focus exclusively on “new economy” stocks given the high indebtedness and mature growth rates of some industrial and manufacturing companies. Yet we also see opportunities as the programs to reduce capacity and improve profitability in overbuilt heavy industries such as steel and coal are broadened to other industries over the coming years.

Trumped on exports?

The biggest immediate risk to Chinese equity markets is a breakdown in global trade. U.S. President Donald Trump has threatened to raise tariffs on imported goods from China, while a U.S. congressional proposal could result in a 20% border adjustment on imported products and components.

China has become less dependent on exports to the U.S. than in the past, and net exports’ contribution to gross domestic product (GDP) has also declined. Yet any curbs on Chinese exports could hurt the country’s technology and energy industries, which draw about one-fourth of their revenue from overseas. Other sectors such as consumer staples and utilities are less dependent on foreign sales.

China, meanwhile, is far from passive. Its leadership has been laying the groundwork for deeper ties with Asian trade partners through the Asian Infrastructure Investment Bank and the One Belt, One Road development program.

Bottom line

We see Chinese stocks supported by an accommodative and flexible policy that aims to stabilize growth ahead of the 19th Party Congress this fall. The near-term upside may be capped by trade tensions and the pace of structural reforms. There is also China’s ever-growing debt pile to monitor. But over the medium term, we believe Chinese equities are an attractive, and under-owned, asset.

Many of the challenges are discounted in market valuations, and profitability is improving thanks to supply-side reforms. The ongoing liberalization of the financial system will gradually make it easier for foreign investors to participate directly in China’s markets. Read more on this in my Global Equity Outlook.

Kate Moore is BlackRock’s chief equity strategist, and a member of the BlackRock Investment Institute. She is a regular contributor to The Blog.


Investing involves risks, including possible loss of principal.

International investing involves special risks including, but not limited to currency fluctuations, illiquidity and volatility. These risks may be heightened for investments in emerging markets.

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 2017 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.

©2017 BlackRock, Inc. All rights reserved. BLACKROCK is a registered trademark of BlackRock, Inc., or its subsidiaries. All other marks are the property of their respective owners.

USR-11745

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.


12434




Technical Analysis

Active Management's New Best Friend: Inflation


I don’t know if I’d exactly be going out on a limb here to say that there are few people, even in the mostly conservative Serengeti of the institutional investment community, who are ambivalent about our new President.  To be candid, I have yet to be in a meeting in which anyone has expressed full-throated support of the new Administration, partly I suspect, out of a deference to political sensibilities in a politically correct world.  But we have heard plenty from conservative #NeverTrumpers and liberals alike who remain disheartened if not outright horrified that Donald Trump is President.  Although it might not always seem so, we do our level best as a firm to present the facts and our forecasts as honestly and as apolitically as possible.  We’re trying to forecast and provide context for what we believe is most likely to happen as opposed to what we necessarily feel should happen.



We felt before the election, as we do now, that a Trump Administration would be broadly bullish for equities and bearish for bonds.  For those clients who remain inconsolable, we offer what we believe to be a bright side – the coming policy mix is likely to break the cycle of financial repression that has made active management so difficult since the financial crisis.  It’s only in hindsight I guess that the negative unintended consequences of central bank hyperactivity have become more apparent.  The financial crisis in 2008 would by almost any definition qualify as the “exigent circumstances” necessary for the Fed to greatly expand its balance sheet to avoid a deep and long-lasting recession if not depression.  Still, one wonders why, after, let’s say tripling the size of its assets with little effect that quintupling them would be any more effective, especially in an environment of ever-greater financial regulation.

 

By our lights, the epiphany that monetary policy had gone from being merely ineffectual to actually harmful came with Japan’s failed experiment with negative interest rates.  Let’s face it, when people start buying safes and hoarding bank notes, you’re not too far away from the barter system regardless of how many Ph.D.s tell you they might just need a little more time.  Perhaps not wholly unrelated to the vast central bank experiments since the financial crisis, the populist wave that gripped the U.K. and the U.S. last year seems poised to greatly alter the course of economic policy.  Taken at face value, the President’s economic agenda is inflationary – deregulation of the financial industry will bring the match closer to the large fuel tank of excess bank reserves, lower taxes will likely lead to greater deficit spending, and a more hawkish approach to trade will bring with it higher prices on finished goods.  This is to say nothing about wages when one adds stimulus to an economy that is already close to full employment.

Given the historically strong relationship between earnings multiples and inflation, you might ask yourself: what’s so great about that?  The answer to that question, in our view, is simply this – the shot clock on a real business cycle, and eventually a recession, has started.  Greater economic volatility tends to bring with it greater market volatility, lower correlations, and greater dispersion of assets.  The purgatory imposed on an economy through the mechanism of near-zero interest rates avoids pain but prevents joy as well, perhaps not for academics, but for entrepreneurs with capital at risk and real people who don’t have tenure.  How can an active managers possibly be expected to outperform when all companies enjoy a low and invariable cost of capital?  As the table on page four shows, the Hedge Fund Return Index failed to surpass the performance of the S&P 500 in each of the eight years since the Fed started to expand its balance sheet.  That is unprecedented.  Correlation is not causation, of course, but it certainly seems as if low interest rates contributed more to asset price inflation than economic growth.  While S&P 500 operating earnings were flat for the past three years, the total return of the index has increased +29% over the same period.

 



Generally speaking, there are three main causes of recessions – central bank tightening in response to inflation, a policy mistake like Japan’s VAT tax hike in 1997, or an exogenous shock like the 1973 OPEC oil embargo.  The most common cause, naturally, is a central bank’s attempts to curb inflation.  As the chart below shows, the Fed has had its fingerprints on almost every recession in the postwar period.  The good news for active managers, is that we are entering a sweet spot in which real rates are still low and stimulative but in which inflation is rising fast enough for the markets to ration debt capital.  While this may lead to lower aggregate Index returns at precisely the time so many investors have become so enamored with passive investment strategies, it will also likely lead to a divergence of fortunes among companies that should allow stock pickers to once again have their day in the sun.  The market may start to be recognizing this.  Publicly-traded long only managers have started to rise.                                            

Strategas Research Partners' Institutional Investor-ranked Research Team works to identify the major themes with broad implications for global financial markets. Strategas covers the broad investment landscape, with published reports discussing Investment Strategy, Economics, Washington Policy, Quantitative and Fixed Income research. The team's thematic and macro-driven approach relies on empirical data as well as fundamental and technical research to provide readers with an integrated investment strategy for a variety of time horizons.

 

This article is from Strategas Research Partners and is being posted with Strategas Research Partners’ permission. The views expressed in this article are solely those of the author and/or Strategas Research Partners 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.


12433




Stocks

Nasdaq Market Intelligence Desk - Equity Market Insight February 24, 2017


As of 11:50AM:

NASDAQ Composite -0.3% Dow -0.3% S&P 500 -0.3% Russell 2000 -0.2%
NASDAQ Advancers: 728 / Decliners: 1341
Today’s Volume (100day avg):  -3%

Stocks across the globe are lower today as a shift into defensive plays is seeing its 2nd day of outperformance. Utilities and Telecoms are up 1% and 0.5%, respectively, while Financials are the weakest (-1%). The US Dollar Index saw a reversal right before the opening bell, while Gold prices are at their highest price since the election.

  • Despite the pullback this morning, the S&P 500 is still on pace for its 5th consecutive weekly gain. Warren Buffet will release his annual report to his shareholders over the weekend, and traders might be interested to hear if he addresses the recent political shifts in the US.  On Tuesday, President Trump will address Congress and likely highlight his administrations tax cut plan, and possibly regain momentum in infrastructure spending chatter which has lost some steam over the past few sessions.
  • The monthly U of M Consumer Confidence dropped to 96.3 from 98.5 in January, but was in line with expectations.  The increasing divide between the republicans and democrats might be weighing on sentiment.  Treasury Secretary Steven Mnuchin believes that low borrowing costs will continue for awhile, which is pressuring the US Dollar lower and Gold to a 4 month high.
  • All major indices remain around all-time highs, but investors are showing signs that the recent rally might be ending. The DOW ETF witnessed sharp outflows this past week (largest since the funds inception), with more than $2 billion taken out of the fund that tracks 30 Blue-chip stocks and is price-weighted. Financials and Industrials benefited significantly since the election, as the DOW has climbed more than 15%.

 

Technical Take:

Early yesterday the S&P 500 made another new all-time high when it reached 2,369 and has since seen a very modest 0.2% pullback.   Doubters are hootin’ and hollerin’ that equities are running on “hopium” of tax cuts and robust fiscal stimulus which will prove to come in well short of expectations in terms of size and timing.  Based on this the belief is the current gains in equities are overdone and the market is due for a meaningful correction.  While that may or may not be the case, the price action underneath the hood has been seen a constructive as there has been a clear rotation of leadership within the main sectors of the market as investors “lock and roll” funds from winners to underperformers.  Most recently the leadership baton has been passed to the utilities sector.    Following a choppy month in January, the S&P 500 utilities index has gained 4% in February.  This week alone the index gained 3.6% for its best weekly gain since early July when the market was reacting to the Brexit vote.  Today the utilities index topped out at the ~260 level which equals a pivot high made in September 2016.  It reaches this expected level of resistance with an RSI at the overbought 73 level suggesting buyer exhaustion could be setting in and utilities could now be entering a period of consolidation.  Thus investors chasing performance may want to be careful about chasing this group ion the near term.  

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.

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.

Brian Joyce, CMT has 16 years of trading desk experience. Prior to joining Nasdaq Brian executed equity orders and provided trading ideas to institutional clients. He also contributed technical analysis to a fundamental research offering. Brian focuses on helping Nasdaq’s Financial, Healthcare and Airline companies among others understand the trading in their stock. Brian is a Chartered Market Technician.

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.


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Disclosures

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