Lackluster trading ahead of the Thanksgiving Day holiday on light volumes, as U.S. major averages are trading just slightly below the all-time record highs posted late yesterday for the Dow Industrials, S&P 500, Nasdaq Comp and Russell 2000. Economic data came in mixed today with a surprising miss for monthly Durable Goods orders, while jobless claims were reported in-line and sentiment data dipped from the prior month, but markets await clues about whether the central bank will raise rates next month in the Fed minutes which are released at 2:00 PM EST today. The US dollar is broadly lower, while commodity prices gains (gold and oil) and bonds rising early. Mixed batch of earnings again overnight in what is wrapping an overall solid quarter of corporate results, with shares of DE and GME rising on results while tech players CRM, HPQ, HPE and retailers CAL and GES slide on results.
Treasuries, Currencies and Commodities
Sector Movers Today
For those who did not see it, last night’s report from the American Petroleum Institute (API) on WTI crude oil inventory declined by -6.36m/bbl, or more than 4.4-times the reduction analysts expect the Department of Energy to show later today of -1.43m/bbl.
The key is to not look at this in isolation. Over the last 10 weeks, crude oil inventories in the United States have shed more than 46 million barrels (Source: API).
Put another way, not only was last night’s draw larger than the 10-week average but it also brings WTI one step closer to the 5-year average of comparative inventory for the first time in three years.
There were two reactions to this data worth pointing out.
Firstly, the front-month contract for WTI oil futures turned more expensive than the second-month contract. The market has not settled in that structure, known as backwardation, since November 2014. Additionally, the move put the entire WTI curve through 2021 into backwardation for the first time.
Secondly, the WTI-Brent spread has begun to react. As a way of background, some of this spread is a “fear premium” because of tensions in the Middle East – the GCC boycott of Qatar, the Iraqi Kurdish independence referendum, the Saudi Arabia proxy wars, etc. However, that geopolitical risk premium has not subsided. If anything, it has increased. Therefore, we know that some of it is also a buildup of inventories at the Cushing, Oklahoma storage facility and WTI pricing point. That means, WTI is tightening relative to Brent for the first time primarily because of US inventories. As you can see, the spread broke the 50-day moving average today.
As a reminder, we view the 200-day moving average (DMAVG) as a short-term trend change, the 55-week moving average (WMAVG) as a medium-term trend change, and the 200-week moving average (WMAVG) as a cycle change.
Collectively, the generic contract of WTI is a stone throw away from breaking the 200-week moving average, or what we consider a cycle change.
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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.
Roku Inc. (ROKU)
Making its debut in the first week of October, this early player in streaming video gadgets had only been trading in the public market since September 28. With an IPO price of $14 a share, long investors, who were able to secure shares, appear to have got a bargain, given that the shares have risen some 176 percent since, closing last week at $38.59. As is common with new IPO stocks, short sellers are quick to take positions, utilizing as much stock as is available in the hope of being in a position to take advantage of any bubbles that may form. Roku provided some relief as the shares fell through October and into November, just as short sellers increased their trade volume by 25 percent, driving utilization up from 75 percent to 87 percent. Since then, volumes have jumped some 44 percent as new supply has become available, pushing utilization down to 78 percent, even after the volume increase. The share price has also jumped, exceeding $38 a share, but even with that leap, short sellers appear unperturbed and content to wait it out.
1. Snap Inc. (SNAP) – Snap, the owner of the popular Snapchat app, has been around since March, making it a lot older than Roku, but still a new share. The last week saw the share price appreciate just $0.23 or 2 percent, closing the week at $12.99, still over 52 percent below the post IPO peak. Short sellers appear reluctant to leave Snap alone, adding a further 8 percent to the volume of their outstanding positions. However, long investors are also expressing interest in Snap once more, bringing new supply to the market pushing utilization down to 94 percent from almost 98 percent, despite the rise in absolute volumes. A small movement in the share price, plus a drop in utilization, could be taken as positive signs, but it will be a long road back for Snap, and short interest sentiment remains dominant.
2. GoPro Inc. (GPRO) – This last week has delivered more of the same market behavior toward GoPro as short sellers closed out a further 2 percent of their outstanding positions. However, similar to the prior week, utilization actually increased, albeit by only 1 percent even as absolute volumes fell. The shares continued their slide downwards, closing down $0.22 or 2 percent to close the week at $8.29. This latest drop could well be in line with the fall in lendable supply, as larger institutional investors continue to sell out of their GoPro holdings, potentially concerned that, in line with multiple analyst downgrades for the company’s fourth quarter earnings, it will be some time before GoPro can return to the share price levels of almost $12 seen earlier this year.
3. Accelerate Diagnostics Inc. (AXDX) – Making its debut this week is Accelerate Diagnostics, a provider of in vitro diagnostic solutions helping to track serious infections. Around mid-year, the company shares were hitting their 12-month peak of over $30 a share and have since declined a net 40 percent to a low of around $18 in November. Short interest volumes have remained relatively flat since the start of 2017, but as a percentage of the available supply have risen steadily from an already high level of over 85 percent to over 95 percent in September. Volumes began to rise more steeply through October, adding more than 25 percent in absolute terms, pushing utilization up to just under 99 percent. A growing supply of shares has allowed the short sellers more room to borrow shares, with long investors buying into the company as its share price staged a sharp recovery in November, closing last week at $22.45, up $4 from the 12-month low.
4. Entercom Communications Corp. (ETM) – Another new debut stock this week is Entercom, the local, regional and national radio broadcaster operating a portfolio of 28 stations across the US. Over the past 12 months, the company share price has fallen from a peak of over $16 in February to lows of less than $9.50 by May. A recovery to over $12 in October was brief but following another fall, the shares have climbed back to close last week at $11.45. Short interest had been near zero until the start of 2017, when a slow but sure increase began, accelerating more quickly through October and November. The latter half of October saw utilization breach the 75 percent, pushing the cost of borrowing to rise rapidly as remaining supply dwindles. As of last week’s close, utilization had reached over 89 percent and fee levels were firmly into the expensive zone. Despite this and the recent rise in share price, short sellers appear committed to waiting for further falls.
5. Carvana Co. (CVNA) – Carvana, the e-commerce platform for buying used cars through a mobile app, came to the market via an IPO in April this year. Making its debut on the hot stocks list this week, Carvana has seen its post-IPO share price peak of $23.39, seen in June, steadily eroded to a closing value last week of $15.50. While this remains above the IPO price, the drop of some 34 percent from the peak will have cheered the short sellers who, in line with many new similar shares, built their positions quickly post the IPO. Since May, short interest volume has risen over 320 percent, but utilization, despite a dip as low as 65 percent in June and July, has remained above 90 percent for most of the time. Short sellers have been borrowing almost every share that became available in the expectation that the shares will fall in price, and have been rewarded with a 34 percent fall since June. Utilization remains at 100 percent, as at the end of last week, despite very high borrowing costs, suggesting that many believe the long-term sustainability of the share price is poor.
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This article is from FIS' Astec Analytics and is being posted with FIS' Astec Analytics' permission. The views expressed in this article are solely those of the author and/or FIS' Astec Analytics 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.
Dan Gramza takes a look at some key charts heading into Wednesday's open, including gold, oil and the dollar.
Yesterday provided more proof that investors have a lot to be thankful for this year, as the Dow, Nasdaq, and S&P 500 all hit new record highs. It remains to be seen if there is more where that came from, but for now, the futures for the major indices aren't exposing much of a selling inclination.
The S&P futures are up one point, the Nasdaq 100 futures are up seven points, and the Dow Jones Industrial Average futures are up 35 points, setting the stage for a slightly higher open and a continuation of the feel-good vibe that typically predominates this time of year.
The seasonality trade for stocks was in play yesterday as the major indices took a few feet of positive-sounding developments and ran a mile with it. Not surprisingly, the technology sector paced the broad-based advance.
Today's action is likely to be less dramatic, if only for the fact that yesterday's outsized move left plenty of participants convinced that the turkey-day work was done and that the time has arrived to settle in for the Thanksgiving holiday, which will have markets closed tomorrow and open for only a half day of trading on Friday.
Accordingly, volume is apt to be on the light side of things today, which features a fair share of economic data and the release of the FOMC Minutes from the October 31-November 1 meeting at 2:00 p.m. ET.
On a related note, Fed Chair Yellen said on a panel last night that she still thinks inflation will pick up, but that she is very uncertain about that prognostication.
The back end of the Treasury curve certainly hasn't been pricing in much fear of inflation picking up as the yield on the 10-yr note (2.36%) is 12 basis points lower than where it was when the year started.
This morning's data is unlikely to be a catalyst that changes the inflation narrative for the Treasury market.
Initial claims for the week ending November 18 decreased by 13,000 to 239,000, as expected, leaving claims in the sweet spot they have been for some time. Continuing claims for the week ending November 11 increased by 36,000 to 1.904 million.
The key takeaway from the report is that it covers the period in which the household survey for the November employment report was conducted, so it should feed economists' expectations for another solid month of nonfarm payroll gains.
The Durable Goods Orders report for October, meanwhile, revealed a 1.2% decrease in orders (Briefing.com consensus +0.4%) that was led by a 4.3% drop in new orders for transportation equipment. Excluding transportation, orders were up 0.4% (Briefing.com consensus +0.5%) on the heels of an upwardly revised 1.1% increase (from +0.7%) for September.
Nondefense capital goods orders excluding aircraft -- a proxy for business spending -- decreased 0.5% after increasing 2.1% in September and 1.4% in August. Shipments of these goods, which factor into GDP forecasts, were up 0.4% after increasing 1.2% in September.
The key takeaway from the report is that business spending decelerated in October, yet there is little reason at this juncture to think that deceleration is more than some normal slowing following some nice-sized gains in previous months.
The futures weakened a bit after the release of the data, yet there hasn't been much downside traction there like there will be on plenty of living room couches on Thursday.
This article is from Briefing.com and is being posted with Briefing.com's permission. The views expressed in this article are solely those of the author and/or Briefing.com 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.