Stocks Drop On Fears Of An Economic Slowdown

Hello traders everywhere. The move lower started early Friday in Europe when IHS Markit said that manufacturing activity in Germany dropped to its lowest level in more than six years in March. In France, manufacturing and services slowed down to their lowest levels in three months and two months, respectively. For the eurozone as a whole, manufacturing fell to its lowest level since April 2013. This data sent the German 10-year bund yield to their lowest level since 2016, briefly dipping into negative territory.

Once trading opened in the U.S. we got news that the spread between the 3-month Treasury bill yield and the 10-year note rate turned negative for the first time since 2007 - thus inverting the so-called yield curve - according to Refinitiv Tradeweb data. An inverted yield curve happens when short-term rates surpass their longer-term counterparts. This is considered a trustworthy indicator of a recession coming in the near future.

yield curve

These moves come after U.S. central bank surprised investors by adopting a sharp dovish stance on Wednesday, projecting no further interest rate hikes this year and ending its balance sheet roll-offs. Market sentiment was boosted by the Fed's updated outlook on interest rates, but the reasons behind it caused some concern.

Key Levels To Watch Next Week:

Continue reading "Stocks Drop On Fears Of An Economic Slowdown"

NJ Ready To Legalize Recreational Cannabis

New Jersey is on the fast track to legalizing recreational cannabis – and once again this is creating another great investment opportunity. I see four exciting cannabis companies that are ready to capitalize.

New Jersey gave the US cannabis industry a big jolt yesterday after New Jersey Governor, Phil Murphy, and state legislators announced they had agreed on legislation that would legalize recreational cannabis.

“Legalizing adult-use marijuana is a monumental step to reducing disparities in our criminal justice system,” Murphy said in a press release. “After months of hard work and thoughtful negotiations, I’m thrilled to announce an agreement with my partners in the Legislature on the broad outlines of adult-use marijuana legislation.”

Looking forward, the bill still has a few hurdles to clear.

It is still unknown if enough votes exist to clear the Democrat-controlled legislature. Murphy will have to rally enough votes in the Senate for legalization, but a floor vote is possible as early as March 25th. Continue reading "NJ Ready To Legalize Recreational Cannabis"

Stock Market Takes A Breather

Hello traders everywhere. The DOW closed lower for the first time in five days Tuesday, led by declines in Apple, all because investors were puzzled over conflicting reports over the progress of U.S.-China trade negotiations.

The index lost 26 points. The S&P 500 ended the day just below breakeven, while the Nasdaq Composite closed 0.1% higher. Both the S&P 500 and Nasdaq rose as much as 0.7%, while the Dow traded nearly 200 points up at its session high before heading lower for the day.

trade

Stocks headed lower after Bloomberg reported that U.S. officials are worried China may be pushing back against U.S. demands in the countries' ongoing trade talks. The report also said Chinese negotiators are worried they have not received assurances that tariffs imposed on Chinese goods would be lifted once a deal is struck. Continue reading "Stock Market Takes A Breather"

U.S. Equities Price Anomaly Setup Continues

This research post highlights what we believe to be a unique price anomaly setup in many of the US major markets this week. Our research suggests that April 21, or near this date, will be an important price inflection point base level for the US stock markets. We believe a unique price base will begin to form near this date and a bigger price move in May/June 2019 will unfold.

Our Advanced Dynamic Learning (ADL) price modeling system is suggesting the rotation in the US stock market may stay somewhat muted before this move on April 21 begins. The ADL predictive modeling system is one of our proprietary price modeling utilities that our research uses to identify key levels of future support and resistance as well as to watch for "price anomalies" that setup. Price anomalies are where the current price level of any symbol is greatly diverted from the ADL predictive price level. When this happens, the price will usually "revert" back to near the ADL levels at some point in the immediate future – sometimes setting up a great trading opportunity.

This Daily YM chart shows a current price anomaly in the YM of about 1000 points. This is a pretty big range for skilled traders that are capable of identifying the right trade. The ADL system is suggesting that YM will rotate lower between now and the end of April by at least 800~1000 pts.

adl price modeling system
Continue reading "U.S. Equities Price Anomaly Setup Continues"

World Oil Supply And Price Outlook, March 2019

The Energy Information Administration released its Short-Term Energy Outlook for March, and it shows that OECD oil inventories likely bottomed last June at 2.806 billion barrels. It estimated a 21-million barrel decline for February to 2.837 billion, 9 million barrels lower than a year ago.

However, throughout 2019, OECD inventories are expected to rise rather quickly through November. At year-end, EIA projects stocks to be 2.918 billion barrels, 64 billion more than at the end of 2018.

For 2020, EIA projects that stocks will build another 82 billion barrels to end the year at 3.000 billion. That would push stocks into glut territory.

oecd oil inventories

Oil Price Implications

I updated my linear regression between OECD oil inventories and WTI crude oil prices for the period 2010 through 2018. As expected, there are periods where the price deviates greatly from the regression model. But overall, the model provides a reasonably high r-square result of 80 percent. Continue reading "World Oil Supply And Price Outlook, March 2019"