IB Traders Insight

Global market commentary from Interactive Brokers Group traders and market participants.

Click here for important disclosures

1 2 3 4 5 2 612
2015-05-22 15:57:20

Posted by
Kevin Kastner
Washington Deputy Bureau Chief for Economic Data Operations
MNI News
Contributor
Macro

MNI US DataWatch

The May 25 week starts with the Memorial Day holiday, but quickly accelerates with a host of data releases on Tuesday, including consumer confidence, new home sales, durable goods orders, home prices, and regional data from the Richmond and Dallas districts. Later in the week, first-quarter GDP is expected to be revised down to a 1.0% rate of decline from the 0.2% rise posted in the advance estimate, though many analysts suggest that GDP actually posted small increase in the quarter when seasonal adjustment issues are excluded.

Here is a closer look at the key data in the coming week:

DURABLE GOODS ORDERS FOR APRIL, TUESDAY, MAY 26 AT 8:30 A.M. ET

Durable goods orders are expected to fall 0.2% in April, with a larger reversal in transportation orders the key factor. Boeing reported 37 total aircraft orders in April, down slightly from 39 orders in March. Orders excluding transportation are seen posting a modest increase in April. The data will include the annual revisions released on May 14.

NEW HOME SALES FOR APRIL, TUESDAY, MAY 26 AT 10:00 A.M. ET

New home sales are expected to accelerate to a 510,000 annual rate in April from the 481,000 rate posted in March. Sales were up sharply from a year ago in March before seasonal adjustment, outpacing strong year/year supply growth. Supply of new homes for sales could see further gains if single-family housing starts remain strong. Both permits and starts rose sharply in April, a strong positive for supply in the new future. 

CONSUMER CONFIDENCE FOR MAY, TUESDAY, MAY 26 AT 10:00 A.M. ET

The Conference Board's index of consumer confidence is expected to rise very slightly to a reading of 95.3 in May following an April dip. The Michigan Sentiment index fell sharply to a reading of 88.6 in early-May.

WEEKLY JOBLESS CLAIMS FOR MAY 23 WEEK, THURSDAY, MAY 28 AT 8:30 A.M. ET

The level of initial jobless claims is expected to fall by 7,000 to 267,000 in the May 23 week after a 10,000 increase in the previous week. The four-week moving average fell by 5,500 to 266,250 in the May 16 week to another 15-year low, but could rebound in the current week’s data. The 262,000 level in the April 25 week will roll off the four-week average calculation as the current week's is added, which would result in a modest 1,250 rise in the moving average if the MNI forecast is realized, all else being equal.

Seasonal adjustment factors expect unadjusted claims to post a very small increase in the May 23 week after an extremely small gain of only 88 claims in the previous week. In the comparable week a year ago, unadjusted claim fell by 11,986 when seasonal factors had expected a small increase, so unadjusted claims fell by 18,000 that week. This followed a 29,000 seasonally adjusted increase in the previous week. 

SECOND ESTIMATE OF GDP FOR FIRST QUARTER, FRIDAY, MAY 29 AT 8:30 A.M. ET

First quarter GDP is expected to be revised down to a 1.0% rate of decline, with the key factor in the revision being a much wider trade gap than previously assumed. Inventory growth and nonresidential fixed investment are also seen as being revised lower. Analysts are concerned about the seasonal adjustment difficulties usually seen in the first quarter GDP data, which depress the overall change. However, even with that taken into account, most agree that first quarter 2015 growth is still fairly weak and look to a second quarter rebound. The chain price index is forecast to be unrevised at a 0.1% decline.

MNI CHICAGO REPORT FOR MAY, FRIDAY, MAY 29 AT 9:45 A.M. ET

The MNI Chicago report's business barometer is expected to rise further to a reading of 53.0 in May after rebounding to 52.3 in April. Other regional data already released have suggested modest growth in May.

FINAL MICHIGAN SENTIMENT FOR MAY, FRIDAY, MAY 29, AT 10:00 A.M. ET

The University of Michigan sentiment index is expected to be revised up to a reading of 90.0 in May from the 88.6 preliminary estimate, though it would remain well below the 95.9 reading in April. 

 

MNI is a wholly owned subsidiary of Deutsche Börse Group.

This article is from Market News International (MNI) and is being posted with MNI’s permission. The views expressed in this article are solely those of the author and/or MNI 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.

 

2015-05-22 13:16:05

Posted by
Steven Levine
Fixed Income Reporter
MNI News
Contributor
Fixed Income

MNI's U.S. Risk-O-Meter

Heavy sales of new investment-grade corporate bonds continued at a fast clip this past week, with some issuers again lured by still ultra-low U.S. interest rates to sell large-sized debt offerings. Siemens AG priced a $7.75 billion, six-part bond likely to help finance its purchase of Dresser-Rand Group, Inc. Credit quality rose in diversity compared to last week’s issuance, however ‘A’-rated deals continued to comprise the bulk of supply. Average deal size rose to $1.018 billion from $778.64 million, with fewer deals priced last week. Other multi-part offerings included Volkswagen Group of America Finance’s $2.8 billion of  single-’A’ rated bonds in four parts and Comcast Corp.’s $4.0 billion, ‘A’-rated, three-part notes. Meanwhile, U.S.-based issuers and non-domestic borrowers were about evenly split.

 

Keep pace with the latest corporate news with MNI's US Risk-O-Meter, a weekly recap of credit risk appetite!
For more information and a full version of the US Risk-O-Meter, email Steven Levine at slevine@mni-news.com. Click here for more about MNI.

 

This article is from Market News International (MNI) and is being posted with MNI’s permission. The views expressed in this article are solely those of the author and/or MNI 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.

2015-05-22 11:37:08

Posted by
Russ Koesterich, CFA
BlackRock
Contributor
Macro

What a Rate Hike May Mean for Stocks

Russ looks back at equity performance following past rate increases to gauge what could be ahead for investors.

 

By the end of the year, investors will likely be contending with the first Federal Reserve (Fed) rate hike in nearly a decade.

While the pace of monetary tightening is likely to be gradual, more than a few investors are worried about the equity impact of any marginal tightening, believing that the entire edifice of today’s bull market has been built on a foundation of cheap money.

I would agree with the view that monetary policy has been one of the principal catalysts and sustainers of this bull market. But as I write in my new Market Perspectives paper, “No Exit,” I’m skeptical that an initial rate hike will herald the end of the rally, though history does suggest that it could result in a modest correction.

Not only is any tightening likely to be gentle and from an exceptionally low base, but tighter monetary conditions are generally associated with more volatility and downside risk, not bear markets.

When you look at S&P 500 performance during rate cycles for various periods going back to the 1970s, a clear pattern emerges. Regardless of the period, 3-month returns following the start of a period of steady tightening were on average negative and more volatile, as markets initially reacted negatively to the start of a tightening cycle. However, looking out at 6 or 12 months, markets rebounded and generally produced positive, albeit subpar, returns. The chart below looking at forward 3-, 6- and 12-month returns on the S&P 500 following an initial change in the Federal Funds target rate shows this pattern.

Index returns are for illustrative purposes only.  Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results.

The averages above do hide a significant amount of variation in returns, and the direction of equity valuations at any given point in time also matters. Indeed, in the past, U.S. equity markets have been more resilient to tightening monetary conditions if valuations were flat or lower over the preceding 12 months. But if valuations had been rising in the previous year, the S&P 500 has historically performed much worse following the start of a tightening cycle.

Put differently, markets characterized by multiple expansion—in other words, when investors are paying more per dollar of earnings—are more vulnerable to a change in monetary conditions. The fact that U.S. equity multiples have been consistently rising since 2011 suggests that markets are at greater risk for at least a modest correction following a rate hike. In addition, one area of the market – namely small caps – may be particularly vulnerable and warrants caution. Historically, small caps have been more sensitive than large caps to the reduction in returns associated with monetary tightening.

To be sure, this will be a very different tightening cycle than previous instances. Rates have never been this low for this long, and the Fed will be forced to adopt a new set of monetary tools to wind down its bloated balance sheet.

As a result, the equity market’s reaction to tightening is more unpredictable than it has ever been, a fact likely to increase anxiety and uncertainty throughout the cycle. Still, a normalization in U.S. monetary policy is unlikely to herald a catastrophe.

Starting this fall, investors should, at the very least, expect more volatility and a heightened likelihood of a correction. For more on the likely market impact of a Fed rate hike, read my full Market Perspectives paper, and be sure to check out this BlackRock Investment Institute paper too.

Sources: Bloomberg, BlackRock

 

Russ Koesterich, CFA, is the Chief Investment Strategist for BlackRock. He is a regular contributor to The Blog and you can find more of his posts here.

 

This material is contains information from publications prepared by the BlackRock Investment Institute and 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 May 2015 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.

©2015 BlackRock. All rights reserved. iSHARES and BLACKROCK are registered and unregistered trademarks of BlackRock. All other marks are the property of their respective owners.

iS-15624

 

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.

2015-05-22 09:51:31

Posted by
John Carter
President
Simpler Stocks
Contributor
Stocks

Simpler Stocks: Thursday Movers

US stocks closed higher Thursday, with the S&P 500 index touching a new record. Investors walked away from a weaker manufacturing report and the Fed commentary from Wednesday signaled that a rate hike may not be in the immediate offing.

FireEye, Inc. (Ticker: FEYE)

FEYE is not necessarily a takeout target for CSCO, reported outlets of the financial trade press, but FireEye should continue to benefit from high-profile corporate data hacks. The most notable recent ones have come from the health care industry. Earlier this week, Carefirst said it had detected a data breach compromising 1.1 million current and former members. A positive write-up in USA Today, suggests the company has become a “go to” source for defense against data breaches.                  

Quality Systems, Inc. (Ticker: QSII)

Shares in QSII rocketed 5% higher intraday on Thursday as the health care IT outfit reported results that topped expectations. Adjusted net income of $0.21 a share topped the Street by a nickel. The $128 million reported on the top line also bested consensus at $126 million. A turnaround seems evident as the company reported a return to growth. Adjusted PE sinks into the low 20s, while the $1 billion market cap may be of interest to a strategic acquirer.

VCA Inc. (Ticker: WOOF)

Animal hospital and lab company VCA Inc. can be viewed as a defensive play, as pet owners usually do not skimp on health care costs for their pets no matter the economic climate. Sales growth is in the healthy mid single digits to high single digit range, according to estimates. Yet EPS growth is quite a bit better at about 14%, while free cash flow yield is 5%.   

Williams-Sonoma Inc. (Ticker: WSM)

Williams-Sonoma earnings topped estimates on the strength of its West Elm brand, and EPS of $0.48 was better than estimates by four pennies. The company guided a bit below the Street but the miss may be a one-off as it is tied to the West Coast port slowdown. Comps rose in the low to mid single digits by brand. The stock yields a little less than 2% and sports a beta below 1x.

CVS Health Corporation (Ticker: CVS)

CVS shares gained 3% intraday Thursday on the company’s announced purchase of Omnicare (Ticker: OCR) for nearly $13 billion. The move expands CVS into drug distribution, with strong presence in dispensing medication in assisted living and other long term care facilities. The stock trades for less than 1x sales, with continued strong free cash flow above $5 billion. The shares also just moved above the 50-day moving average.

Dycom Industries Inc. (Ticker: DY)

Engineering, construction and services company Dycom Industries managed to beat earnings by a whopping 20 cents a share, and guided above the Street earlier this week. The stock is near all-time highs, yet still trades at only slightly above 1x sales, with strong double-digit ROE and steady sales growth north of 8%.

 

About the author: John Carter has been a full time trader for 15 years, serving over 100,000 subscribers in over 100 countries.  For more analysis on high growth stocks visit www.SimplerStocks.com.

 

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

2015-05-22 06:43:10

Posted by
Darren Chu, CFA
Founder
Tradable Patterns
Contributor
Technical Analysis

WTI Crude (CL) 3 Week Consolidation Nearing Completion

WTI Crude (CL) strongly added to Wednesday's gains yesterday, reclaiming the point at which upchannel support (on the daily chart) broke early in the week, and continuing to form a 3rd straight weekly Doji.  On the 4hr chart, CL is testing downchannel resistance.  CL appears poised to continue its rebound today despite the daily MACD still sloping slightly downwards.  Weekly and 4hr MACD are still strongly rallying, while weekly, daily and 4hr RSI and Stochastics appear to simply be entering a healthy consolidation phase.  I will look to go long CL intraday today on any notable dips to the 59-60 range. 

 

WTI Crude (CME CL Jul15) Weekly/Daily/4hr/Hourly

 

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.

 

2015-05-22 06:42:11

Posted by
Darren Chu, CFA
Founder
Tradable Patterns
Contributor
Technical Analysis

GBPUSD Rebounds off Upchannel Support on Daily Chart

The GBPUSD posted a strong rebound yesterday from upchannel support (on the daily chart), and appears poised to continue its rebound today despite the daily MACD making what appears to be a negative crossover.  Weekly MACD is still strongly rallying, while weekly RSI and Stochastics appear to simply be entering a healthy consolidation phase, while daily RSI and Stochastics are sloping up again.  The 4hr RSI, Stochastics and MACD all look bullish as well for today.  I am long GBPUSD at 1.5674, which I will look to close before Carney speaks at 7am EST.

 

GBPUSD Weekly/Daily/4hr/Hourly

 

 

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.

2015-05-22 06:41:13

Posted by
Darren Chu, CFA
Founder
Tradable Patterns
Contributor
Technical Analysis

EURUSD Nearing End of Consolidation Ahead of Draghi's Comments

The EURUSD is close to completing its 38.2% Fib retrace of the roughly 1.06-1.145 rally, and appears to want to resume its rally from here rather than from upchannel support (on the daily chart).  Although the daily MACD suggests more downside, weekly MACD is still strongly rallying, while daily RSI and Stochastics are flattening and appear readying for a resumption to the upside.  The 4hr RSI, Stochastics and MACD all look bullish as well for today.  I am now long EURUSD at 1.1137, which I will look to close before Draghi speaks at 4am EST.

 

EURUSD Weekly/Daily/4hr/Hourly

 

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.

2015-05-21 15:03:26

Posted by
Neil Azous
Founder & Managing Member
Rareview Macro LLC
Contributor
Macro

Sight Beyond Sight: Research Tidbits

US Transportation Sector Focus: Yesterday was the first time since 1900 that the Dow was this close to a six-month high while the Transports were at a six month low (Source: Bespoke Investment).

  • Below is a custom chart (left-side) of the ratio of the Dow Jones Transport Index (TRAN) divided by the Industrial Index (INDU). After the TRAN Index had a 100% down day yesterday (i.e. all 20 stocks closed negative), the ratio broke its 100-week moving average for the first time in almost 3-years. The chart on the right-side is the two indices overlaid. The TRAN Index has broken the 200-day moving average. (Source: Rareview Macro)

 

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.

2015-05-21 14:04:15

Posted by
Erik Norland
Executive Director and Senior Economist
CME Group
Contributor
Macro

Six Sources of Upcoming Volatility

In recent years, U.S. stocks have been heading higher along a low-volatility path. The last major correction occurred in the summer of 2011, and the VIX index, which measures the implied volatility of options on the S&P 500, has been trading near historic lows.  These might change due to three reasons: 1) corporate profits have stopped growing, 2) equity valuations are reasonably high, and 3) the Fed might begin to tighten monetary policy.

Corporate profits peaked out around 10% of gross domestic product (GDP), a level corporate profits has never historically exceeded (Figure 1).

Figure 1.

Past peaks in corporate profits occurred before tops in the equity markets. For instance, during the 1990s expansion, corporate profits peaked at around 7% of GDP in 1997 and began to decline about three years before the equity market itself peaked in 2000.  Likewise, during the growth cycle from 2002-2007, corporate profits peaked at around 8.5% of GDP in 2006 and began to decline more than a year before the equity market itself peaked in October 2007. Once again, the current expansion in corporate profits appears to have a reached a cyclical peak, plateauing from 2011 through 2014, and now appear to be declining as costs rise faster than revenue. This has not yet led to a correction in the equity market but it might at some point.

During the 1990s and 2000s, after corporate profits peaked, equity volatility began to rise noticeably (Figure 2).  Although the uptrend in equities continued for one to three years after corporate profits began to decline, the upward path of equities became much more jagged and prone to corrections. The cost of options also began to increase quite rapidly.

Figure 2.

Given the recent decline in corporate profits as a percentage of GDP and the continued pressure on corporate margins stemming from rising labor costs, it will be interesting to see if the equity market becomes more prone to corrections and volatility going forward. The fact that stocks have rallied for so long with only minor pullbacks itself could be seen as a warning, but there are others.

Equity valuations are stretched by some measures as well. The Shiller price-to-earnings (P/E) ratio, which measures market valuation relative to cyclically adjusted earnings, shows that equities are at fairly high valuation levels (Figure 3) that resemble levels seen around 2008 and exceed those of the mid-1960s. That said, they aren’t nearly as high as they were in 1929 or in 2000.

Figure 3.

The fact of high valuation levels relative to earnings could also make equities more prone to a correction. Other valuation measures are a mixed bag, with price-to-sales ratios as high as they were in 2000 but price-to-book ratio substantially lower, owing to the corporate deleveraging that has taken place over the past fifteen years.

If the Federal Reserve does begin to tighten policy, what impact will it have on equities? To what extent has the rally in equities been fed by low interest rates? These are difficult questions to answer but we do know that equities and bonds are closely connected. I explore this connection and others in my May 15th webinar Six Sources of Upcoming Volatility co-sponsored with Interactive Brokers. Click here to view the recording of the event, or check out additional insights from CME Group economists in the Economic Research section of the CME website.

 

This post is an excerpt from a paper adapted from an earlier article, "Volatility: A Rough Ride Ahead" authored by Bluford Putnam, Chief Economist and Managing Director, CME Group.

 

Erik Norland is Executive Director and Senior Economist of CME Group. He is responsible for generating economic analysis on global financial markets by identifying emerging trends, evaluating economic factors and forecasting their impact on CME Group and the company’s business strategy, and upon those who trade in its various markets. He is also one of CME Group’s spokespeople on global economic, financial and geopolitical conditions.

 

All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.

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

2015-05-21 13:24:25

Posted by
Waverly Advisors, LLC
Technical/Quantitative Market Research
Contributor
Technical Analysis

Waverly Advisors Summary Stats

%Chg: percent change from the previous day’s close

SigmaSpike: the day’s change expressed as a standard deviation of the last 20 trading days. Values inside +/- 1.0σ are generally insignificant, +/- 2.5σ are large (for the volatility of the particularly instrument), and +/-4.0σ are very large.

C/DayRng: the current price as the pipe “|” within the day’s range. Can easily see at a glance if trading near high or low of the day. The day’s open is “:”. You can read more about this indicator in my book.

For sectors: analysis is done using the State Street Sector SPDRs (XLE, XLF, etc.) %Chg is the day’s change for the SPDR, and Excess is the Excess Return for the day (the SPDR’s return – the S&P 500 return).

 

For more information about Waverly Advisors please click here.

 

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

1 2 3 4 5 2 612


Disclosures

We appreciate your feedback. If you have any questions or comments about IB Traders' Insight please contact ibti@ibkr.com.

The material (including articles and commentary) provided on IB Traders' Insight is offered for informational purposes only. The posted material is NOT a recommendation by Interactive Brokers (IB) that you or your clients should contract for the services of or invest with any of the independent advisors or hedge funds or others who may post on IB Traders' Insight or invest with any advisors or hedge funds. The advisors, hedge funds and other analysts who may post on IB Traders' Insight are independent of IB and IB does not make any representations or warranties concerning the past or future performance of these advisors, hedge funds and others or the accuracy of the information they provide. Interactive Brokers does not conduct a "suitability review" to make sure the trading of any advisor or hedge fund or other party is suitable for you.

Securities or other financial instruments mentioned in the material posted are not suitable for all investors. The material posted does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before making any investment or trade, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice. Past performance is no guarantee of future results.

Any information posted by employees of IB or an affiliated company is based upon information that is believed to be reliable. However, neither IB nor its affiliates warrant its completeness, accuracy or adequacy. IB does not make any representations or warranties concerning the past or future performance of any financial instrument. By posting material on IB Traders' Insight, IB is not representing that any particular financial instrument or trading strategy is appropriate for you.