IB Traders Insight


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Stocks

OTC Markets Group Q4 Indexes Performance & Rebalancing


On January 26, OTC Markets Group announced the fourth quarter 2015 performance and quarterly rebalancing of the OTCQX® indexes, the OTCQB® Venture Index, the OTCM QX ADR Index (“OTCQX30”) and the OTCM ADR Index, which track securities traded on the OTC Markets.

OTCQX U.S. Index (.OTCQXUS) Q4 Performance

The OTCQX Composite Index (.OTCQX) gained 4.5% in the fourth quarter, compared to an 11.6% decline in the prior quarter.  The Index was up 3.9% for the full year 2015.  

The OTCQX Billion+ Index (.OTCQXBIL) was up 4.6% in the fourth quarter, compared to an 11.6% decline in the third quarter.  The Index was up 1.8% since its launch in the second quarter 2015.  

The OTCQX International Index (.OTCQXINT) rose 4.5% in the fourth quarter, compared to an 11.6% decline in the prior quarter.  The Index was up 3.8% for the full year 2015.  

The OTCQX U.S. Index (.OTCQXUS) gained 9.8% in the fourth quarter and was up 20.2% for the full year 2015.  

The OTCQX Banks Index (.OTCQXBK) rose 6.4% in the fourth quarter, compared to a 1.0% gain in the prior quarter.  The Index was up 16.1% since launching in the first quarter 2015.

The OTCQB Venture Index (.OTCQB) declined 7.0% in the fourth quarter and was down 26.8% since its launch in the first quarter 2015.  

The OTCM QX ADR 30 Index (.OTCQX30), powered by BNY Mellon DR IndicesSM, gained 4.89% in the fourth quarter compared to a 9.95% decline in the third quarter.  The Index was flat for the year.

The OTCM ADR Index (.OTCDR) powered by BNY Mellon DR Indices, rose 4.72% during the fourth quarter compared to an 11.95% decline in the prior quarter.  The Index was down 1.06% for the full year 2015.


To view the real time best bid/ask data for 10,000 OTCQX, OTCQB, and Pink securities, customers of Interactive Brokers can subscribe to OTC Markets Group data in Account Management.


Q4 2015 Index Performance & Rebalancing

These indexes are market capitalization-weighted and have a minimum liquidity screen to ensure tradability; and are re-balanced every quarter.

In Q4, the following companies were removed from our indexes as they graduated to an exchange listing during the quarter:
-    Anavex Life Sciences Corp.
-    Klondex Mines Ltd.
-    Xtant Medical Holdings, Inc.
-    Alexandria Real Estate Equities, Inc.
-    COPsync, Inc.
-    Titan Pharmaceuticals, Inc.
-    Trinity Place Holdings Inc.

OTC Markets Group Inc. (OTCQX: OTCM) operates Open, Transparent and Connected financial markets for 10,000 U.S. and global securities.  Through our OTC Link® ATS, we directly link a diverse network of broker-dealers that provide liquidity and execution services for a wide spectrum of securities.  We organize these securities into markets to inform investors of opportunities and risks: the OTCQX® Best Market; the OTCQB® Venture Market; and the Pink® Open Market.  

OTC Markets Group continues to be the global leader in exchange graduates, advancing more than 450 companies to the New York Stock Exchange, NASDAQ and NYSE MKT since 2009. In 2015, 60 companies graduated from the OTCQX, OTCQB and Pink markets to an exchange compared with nine graduates from Canada’s TSX Venture Exchange and four graduates from the London Stock Exchange’s AIM Market.

Our data-driven platform enables investors to easily trade through the broker of their choice at the best possible price and empowers a broad range of companies to improve the quality and availability of information for their investors.  To learn more about how we create better informed and more efficient financial markets, visit www.otcmarkets.com.

OTC Link ATS is operated by OTC Link LLC, member FINRA/SIPC and SEC regulated ATS.

Subscribe to the OTC Markets RSS Feed

Past performance does not guarantee future results. Investors cannot invest directly in any of these indexes.

OTC Markets Group Inc. provides no advice, recommendation or endorsement with respect to any company or securities.  Nothing herein shall be deemed to constitute an offer to sell or a solicitation of an offer to buy securities. Investors should undertake their own due diligence and carefully evaluate companies before investing.


This article is from OTC Markets Group and is being posted with OTC Markets Group's permission. The information provided in this article is from OTC Markets Group 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.


8594




Stocks

The Best and Worst of the Materials Sector 1Q16


Sector Analysis 1Q16

The Materials sector ranks fourth out of the ten sectors as detailed in our 1Q16 Sector Ratings for ETFs and Mutual Funds report. Last quarter, the Materials sector ranked seventh. It gets our Neutral rating, which is based on aggregation of ratings of nine ETFs and 15 mutual funds in the Materials sector as of January 22, 2016. See a recap of our 4Q15 Sector Ratings here

Figure 1 ranks from best to worst the eight Materials ETFs that meet our liquidity standards and Figure 2 shows the five best and worst-rated Materials mutual funds. Not all Materials sector ETFs and mutual funds are created the same. The number of holdings varies widely (from 26 to 121). This variation creates drastically different investment implications and, therefore, ratings.

Investors seeking exposure to the Materials sector should buy one of the Attractive-or-better rated ETFs or mutual funds from Figures 1 and 2.

Figure 1: ETFs with the Best & Worst Ratings – Top 5

* Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

Fidelity MSCI Materials Index ETF (FMAT) is excluded from Figure 1 because its total net assets (TNA) are below $100 million and do not meet our liquidity minimums.

Figure 2: Mutual Funds with the Best & Worst Ratings – Top 5

* Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

iShares US Basic Materials ETF (IYM) is the top-rated Materials ETF and Fidelity Advisor Materials Fund (FMFEX) is the top-rated Materials mutual fund. Both earn an Attractive rating.

PowerShares S&P SmallCap Materials Portfolio (PSCM) is the worst-rated Materials ETF and Rydex Basic Materials Fund (RYBMX) is the worst-rated Materials mutual fund. PSCM earns a Dangerous rating and RYBMX earns a Very Dangerous rating.

161 stocks of the 3000+ we cover are classified as Materials stocks.

Monsanto Company (MON: $91/share) is one of our favorite stocks held by IYM and earns an Attractive rating. Over the past decade, Monsanto has grown after-tax profit (NOPAT) by 16% compounded annually. Over this same time, the company has improved its return on invested capital (ROIC) from 7% to 14%. Despite the long-term profitability of the company, shares remain undervalued. At its current price of $91/share, Monsanto has a price to economic book value (PEBV) ratio of 1.1. This ratio means the market expects Monsanto’s profits to grow by only 10% over its remaining corporate life. If Monsanto can grow NOPAT by just 5% (under a third of historical rate) compounded annually for the next decade, shares are worth $140/share today – a 54% upside.

Vulcan Materials (VMC: $82/share) is one of our least favorite stocks held by Materials ETFs and mutual funds and earns a Dangerous rating. Vulcan Materials business has yet to recover from the global recession in 2008. Since 2007, the company’s economic earnings have fallen from -$88 million to -$463 million on a trailing twelve months basis. Over this same time, its ROIC has declined from 8% to a bottom quintile 3%. Despite the deterioration of the business, the stock trades at the same prices it did prior to the recession, which leaves it significantly overvalued. To justify its current price of $82/share, Vulcan must grow profits by 14% compounded annually for the next 23 years. This expectation is awfully optimistic given that since 1998, Vulcan’s NOPAT has actually declined by 1% compounded annually.

Figures 3 and 4 show the rating landscape of all Materials ETFs and mutual funds.

Figure 3: Separating the Best ETFs From the Worst ETFs

Sources: New Constructs, LLC and company filings

Figure 4: Separating the Best Mutual Funds From the Worst Mutual Funds

Sources: New Constructs, LLC and company filings

Disclosure: David Trainer and Kyle Guske II receive no compensation to write about any specific stock, sector or theme.

 

 

About New Constructs

QUESTION: Why shouldn’t ETF research be as good as stock research? Why should ETF investors rely on backward-looking price trends?
ANSWER: They should not.

Don’t judge an ETF by its cover. Take a look inside at its holdings and understand the quality of earnings and valuation of the stocks it holds. We enable you to choose the best ETF based on its stock-picking merits so you do not have to rely solely on backward-looking technical metrics. 

The figure below details the drivers of our forward-looking Rating system for ETFs. The drivers of our predictive rating system are Portfolio Management and Total Annual Costs. The Portfolio Management Rating (details here) is the same as our Stock Rating (details here). The Total Annual Costs Rating (details here) captures the all-in cost of being in an ETF fund over a 3-year holding period, the average period for all fund investors.

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.


8636




Futures

Stocks and Oil Plunge as Safe Haven Continues for Gold & Bonds


Scott Shellady, Futures Institute Contributor

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.


8635




Technical Analysis

Silver (SI) Surges Over 3% Breaking Weekly Chart Downchannel Resistance


Silver (SI) surged over 3% yesterday breaking above upchannel resistance (on the weekly chart), but is nowhere near as overextended as Gold (GC) in the near-term.  Admittedly, I missed the earlier buying opportunity, but will not chase SI as GC (which often correlates highly with SI) appears ripe for a bit of profittaking.  Furthermore, SI's daily and 4hr RSI and Stochastics are tiring.  I'm targeting to go long on any slide back to the 4hr chart upchannel support.

 

Silver (CME SI Mar16) Weekly/Daily/4hr/Hourly

 

Click here for today's technical analysis on US Treasury Bond, Gold, VIX, Soybean, S&P500, Nasdaq100, DAX, Euro Stoxx 50, Nikkei

 

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.

 


8634




Technical Analysis

Gold (GC) Surges Over 4% Breaking Daily Chart Upchannel Resistance


Gold (GC) surged over 4% yesterday breaking above upchannel resistance (on the 4hr and daily charts), and is now appearing rather overextended in the near-term.  Rather than chasing this long opportunity, I'll continue waiting for a healthy pullback.  Admittedly, I missed the earlier buying opportunity, but prefer not going long on upchannel resistance breakouts, as these are typically not sustainable, with the price typically falling back within the upchannel within a few sessions.  Furthermore, the daily and 4hr RSI and Stochastics are tiring.  I'm tentatively targeting to go long on any slide back to the 4hr chart upchannel support.

 

Gold (CME GC Apr16) Weekly/Daily/4hr/Hourly

 

Click here for today's technical analysis on US Treasury Bond, Silver, VIX, Soybean, S&P500, Nasdaq100, DAX, Euro Stoxx 50, Nikkei

 

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.


8633




Technical Analysis

US Treasury Bond (ZB) Rejected at Weekly Chart Upchannel Resistance


US Treasury Bond (ZB) spiked higher yesterday only to begin reversing most of the day's gains around the US equity market open.  Rejection occurred right at upchannel resistance (on the 4hr, daily and weekly charts).  With ZB having led the safe haven markets higher in recent months, I expect any weakness to presage a rebound in risk appetite.  Although the weekly RSI, Stochastics and MACD don't display well on the chart screenshot (due to limited history on the March 2016 contract), the tiring daily and 4hr RSI and Stochastics are hinting that ZB may want to pullback soon towards upchannel support (on the 4hr chart) at the very least.

 

US Treasury Bond (CME ZB Mar16) Weekly/Daily/4hr/Hourly

 

Click here for today's technical analysis on Gold, Silver, VIX, Soybean, S&P500, Nasdaq100, DAX, Euro Stoxx 50, Nikkei

 

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.


8632




Stocks

ETF "Short" Report


Short Interest Can Distort Fund Flow Data

Many investors watch ETF money flow data in an effort to discern where the “smart money” is moving. Inflows into a certain area are generally viewed as bullish while outflows are perceived as bearish. One shortcoming of this approach however is that money flow data is often distorted by short interest in the ETF. This is because ETFs are often the “go-to” instrument for short sellers, and Authorized Participants can easily create more shares to satisfy demand from short sellers, which appear as bullish inflows but are really just creating larger short positions.

This was particularly acute during the Financial Crisis, when traders were prohibited from short selling stocks of large financial firms such as J.P. Morgan Chase (JPM) and Citigroup (C). Instead they shorted the Financial Select Sector SPDR (XLF), which saw its shares outstanding soar more than 10-fold between June 2007 and September 2008, even as prices plunged (Figure 1). The large inflows here clearly would not have been viewed as a bullish indicator.

Fortunately, FINRA requires member firms to report short interest positions in all securities—that is, the number of shares sold short—on a semi-monthly basis. Data from the many member firms is aggregated and then reported as a percentage of shares outstanding for each stock or ETF. This information, combined with the standard fund flow data we already have, can help give investors a clearer picture of investor sentiment. With it, we can calculate whether money flows are net long (i.e., bullish) or net short (bearish).

So what does recent data show? At the highest level, money flows look much the way investors might expect for the month of January, which was a rough period for stock investors. Money flowed out of equity ETFs and into Fixed Income funds. However, the net short flows of $25.7 billion away from equities were about 50% higher than the outflows calculated under the standard approach, which were about $16.8 billion, as the short interest in equity ETFs grew from 8.2% to 8.8% during the month (Figure 2). Meanwhile net long flows into Fixed Income funds were about $12.3 billion, just slightly below the standard flow measure of $12.7 billion, as short interest in the category rose from 3.3% to 3.5%.

Delving deeper into equity funds reveal some surprising data points. While Emerging Markets continued to see outflows along with the rest of the world, the net short flows were actually smaller, at $2.8 billion, than the $4.0 billion outflows seen by standard measures, as short interest in the category declined. This suggests that some short sellers see further downside as limited, and they may have decided to take some profits in anticipation of a possible rebound.

Energy is another area where flows were particularly distorted by changes in short interest. Money flows into the sector were a positive $400 million for January under standard measures, suggesting some bullishness on the part of investors. However, when we take into account the increase in short interest, those inflows turn into outflows, or net short flows, to the tune of $475 million.

While ETF money flows are helpful indicators of changes in investor sentiment, short interest in the underlying stocks of an ETF may tell us more about the levels of bearish sentiment, both because conviction levels are likely higher among investors shorting a single stock, and because the notional dollar amounts are typically far greater. The latter point is due to the fact that the combined market cap of any ETF’s constituents far exceed the ETF’s assets, so even a relatively low short interest in the underlying constituents likely represents a larger “bet” in dollar terms than whatever the short interest in the ETF equates to.

So where is short interest indicating the most bearishness? Table 1 below shows the ten ETFs with the highest percentage of short interest in their underlying constituents. A quick glance reveals that Biotech and Energy-related ETFs are heavily represented, suggesting these areas may see yet more subpar performance going forward. These ETFs have sizeable allocations to such heavily shorted stocks as Myriad Genetics (MYGN), United Therapeutics (UTHR) and Transocean Ltd. (RIG).

Ironically, this could actually redound to the benefit of investors who own any of these funds, since many funds earn extra income from lending securities in their portfolios. This extra income may lead to positive tracking error (that is, enable the ETF to beat its benchmark), thereby offsetting  the fund’s expense ratio borne by investors.

Short sellers aren’t always right, of course, but they don’t survive long without some skill in spotting losers. Short interest reflects the collective wisdom of the short-selling crowd, and therefore is another valuable data point to consider when evaluating ETFs.

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.


8631




Macro

Crude Oil is a Live Grenade into Mid-Next Week


Let’s all agree that the new low in the front-month crude oil futures contract (CLH6) today formally negated the attempt to break the downtrend channel that began on January 20th.

In fact, the daily chart of the April futures (CLJ6) has completed a small 3-week H&S pattern. This is important to recognize as many were watching the move off the lows to gauge whether crude oil would indeed finally resolve the larger and more important 11-month continuation H&S pattern on the daily continuation chart.

The key point is that from a classical technical discipline, the barrel is now very vulnerable to the downside.

As well, the CME noted that on February 9th there was a record trading volume of 1,603,771 futures contracts in WTI crude oil – vs. the prior record of 1,585,710 contracts from December.

Intuitively, most would immediately extrapolate that the high volume was indicative of long selling by discretionary speculators (not CTAs) as the long position established over the last few weeks was at an 8-month high in WTI futures, according to the most recent CFTC data.

What we would say is that it exposed how many retail investors piled on with institutions attempting to get long.

As a reminder, the United States Oil Fund LP (USO) roll period is from February 8-11th. Approximately 75% of the underlying assets in that flawed ETF are/were in March futures and the shares outstanding on this ETF were at an ALL-TIME high on February 9th.

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.

8630




Options

Gold Has Its Day


The price of gold is catching a bid yet again as bulls struggle to maintain any composure in the face of ongoing selling. Once again there is no single catalyst souring the mood. Rather it is weakness in oil prices, fear of economic weakness, uncertainty over the outlook for monetary policy and selling of equities that is dragging down the mood. The trek towards negative interest rates across G7 nations is spooking investors wondering precisely what firepower central bankers have left and listening attentively for any utterance of calming words from a leading finance minister. Gold’s spot price is almost 6% higher Thursday at $1255.90 per troy ounce. Meanwhile implied volatility on SPDR Gold Shares (Ticker: GLD) has been boosted by the 4.6% surge in the price of the underlying stock as investors try to lock-in acceleration in the price of the ultimate safe haven metal. By lunchtime, more than 550,000 options contracts have traded on GLD led by demand for calls expiring in March and June. Implied volatility – a measure of future share price movements for the share price – is up by about 50% this week to 28.5% - about in line with the main stock market measure of the Vix index.

Chart – GLD implied volatility surging again

The analysis in this article is provided 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 investments. 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.


8629




Stocks

Nasdaq Market Intelligence Desk - Equity Market Insight February 11, 2016


Market Update:

Stocks across the globe are trading deep in the red, as central bank intervention and discussion of negative rates has investors fearing a global growth slowdown. Depressed commodity prices and an earnings slowdown are also factors in the malaise gripping the market. All 10 sectors are in the red, while the “flight to safety trade” remains true, and Gold extends its 2016 gains (+18% YTD). The Dow is lower by almost 400 points while the S&P 500 is below 1850 support and possibly eyeing 1800. The 10-year is up sharply with a corresponding yield decline to 1.58%. The yield was over 2% just over two weeks ago.   

  • Day two of Janet Yellen’s testimony to congress was highlighted by her belief that market conditions have suffered significantly recently, falling to levels last seen in August (China’s Yuan Devaluation). US employment remains a strong talking point, as companies haven’t been reducing their workforce during this volatile trading period (Initial jobless claims this morning came in at 269,000 so a somewhat better result than the 280,000 survey expectation). Lastly, the committee has anticipated Euro/dollar parity, but the precipitous decline in crude oil wasn’t on their radar.  
  • On the earnings front, Cisco (CSCO) is soaring this morning (+8.5%) after results that beat expectations, but a 24% increase in its quarterly dividend is catalyst behind today’s outperformance. TripAdvisor is also bucking the trend in the broader market, up +14% on the heels of Q4 revenue that beat expectations by the largest margin since 2013.
  • The IPO market is tough, as is the market for biotech stocks. Despite this fact, NASDAQ celebrated the opening of two IPOs today at our MarketSite location in Times Sq., New York. Proteostasis Therapeutics (PTI) opened on Nasdaq, with company executives on hand to watch the first trade, raising $50 million in the process. AVXS also raised $95 million. Congratulations to these two companies for getting deals done in choppy conditions. 

Technical Take:

As of 11:15 AM EST
Nasdaq Composite:
Advancers: 366
Decliners: 1862
Advance Volume: 26MM shares
Decline Volume: 216MM shares
New 52 week Highs (prior close): 8
New 52 week Lows (prior close): 221


As a result of the growing idea of an impending global recession we continue to see money flow out of equities and into Bonds (pushing yields to multi-year lows), as well as defensive proxies like Utilities, Telco, Staples and Gold. This comes as a collective reaction to a perceived failure of monetary and fiscal policy, where the Fed has not only turned course to tightening (at the wrong time) but also has done little to assuage fears while congress has done absolutely nothing in terms of implementing a new course of fiscal policy necessary to sustain economic growth over the long duree. The grinding punishment stocks have thus far taken during this sector by sector rout reminds us that rule #1 of bear markets is the same as in boxing; always protect yourself.  Whether you’re a long term investor or a trader, know that the directional bias of the market, no matter what you want to believe, is to the downside and one must manage risk accordingly on an intermediate term basis. Today’s chart shows the flight to safety YTD.   

  • Another day and another new closing low, fading an advance for the S&P 500 Index (SPX) with a close at 1850 support. The next support is 1810 on further weakness, then appreciably lower if we confirm that breakdown. For the Nasdaq Composite Index (CCMP), much of the same floundering and inability to hold any gains whatsoever.  Small support today at 4220 should be watched. After that it’s the Ebola lows of 2014 at 4130.      
  • Our colleagues at Dorsey Wright have echoed our similar observations; systematically increasing their recommended weightings for Cash, Bonds and defensive sectors for their managed accounts. They further site that: “In times like this where it can be easy to get caught in the emotions of following the headlines, it is more important than ever to follow the indicators and take defensive action when the indicators suggest doing so. We will continue to work the game plan and not let subjectivity rule our investment process. We would rather lose opportunity than money.” See full commentary in Dorsey Wright’s monthly update HERE.


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.


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