Tag Archives: Stocks
For those that follow me regularly, you will know that I have been tracking a set up for the VanEck Vectors Gold Miners ETF (NYSEARCA:GDX), which I analyze as a proxy for the metals mining market. I believe that the GDX can outperform the general equity market once we confirm a long term break out has begun, and I still think we can see it in occur in 2018. But, after last week’s break down below the December 2017 low, the set up will have to be resurrected first in the coming months.
I am not sure what more there is to say. We have had several break-out set ups break down in the GDX over the last year. Yet, all the market has done is consolidate sideways for an entire year. Clearly, this is not something I would have or could have expected. Moreover, we still have a 5-wave structure off the 2015 lows, which still keeps us in a longer term bullish perspective.
Since the GDX is a composition of a whole host of mining stocks, I think I have to resolve myself to understanding that the weaker stocks have certainly been a strong drag on the overall fund. So, until the weaker stocks prove they have a bottom in place, it seems quite clear that the GDX will continue to frustrate us.
With that being said, the miners we are holding in our EWT Miners Portfolio are presenting as exceptionally strong, especially relative to the GDX as a whole. Many of them seem as ready to break out similarly to the manner in which GLD seems poised to break out. Yet, when I go back to look at stocks like ABX, it seems quite clear why the GDX has been underperforming.
As you can see from the attached ABX chart, it has followed through down to lower lows in this current pullback. When I highlighted this chart a few months ago to our members of my The Market Pinball Service, I noted this lower low potential, and the ABX is now fulfilling that potential. But, as I also noted in those updates, the long-term potential being presented by this chart is quite strong. As you can see, the positive divergences evident on this chart as the market has dropped down to just below its .618 retracement of its 2016 rally is quite stark. This is often a precursor to a strong reversal which will likely kick off the larger degree 3rd wave which has failed to take hold over the last year.
Within the micro count of ABX, it would seem we are completing the wave v of (C) of y of ii. But, within wave v, we may still see another 4-5 structure before this completes its downside. That means that the 14 region is going to be the resistance over which it will have to rally in impulsive fashion to begin to signal that this wave ii has finally completed. Should that occur, we may see the ABX catch up quite quickly to the rest of the complex behind which it has been lagging.
So, in order to align the GDX chart with the ABX chart, I have to consider any bounce below the 22-22.66 region as being a 4th wave bounce, similar to the potential we see in the ABX. It will take an impulsive rally through the 22.66 region to suggest that the lows have been struck in the GDX, assuming the ABX is also impulsively rallying through its 14 region. Again, we will have to start seeing the laggards in this complex catch up and potentially even outperform to signal that a true low has been struck.
But, in conclusion, even though the GDX technically broke its recent (1)(2) structure, the metals charts still give me reason to remain bullish in the larger degree. As I noted to my subscribers, the short-term indications in my 144-minute silver chart suggest it is trying to bottom out, while the longer-term structure in ABX suggests it should also catch up to the rest of the market, which would allow the GDX to finally break out when the ABX is finally able to complete its longer-term pullback. Until such time, it seems the market is trying to teach us a lesson in patience, such as that exhibited by the biblical figure Job.
Lastly, it seems that Seeking Alpha has changed the way they tag articles. So, while my articles used to be sent out as an email to those that follow the metals complex, they are now only being sent out to those that have chosen to “follow” me. So, if you would like notification as to when my articles are published, please hit the button at the top to “follow” me. Thank you.
The Market Pinball Wizard
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Disclosure: I am/we are long PHYSICAL METALS AND VARIOUS MINING STOCKS.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I significantly reduced my hedges, and only hold an appropriate amount for portfolio insurance at this time.
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Last month in “It’s A Mad, Mad, Mad World“, I took a stab at explaining how and why cryptocurrencies represent a systemic risk.
Over the last year, I’ve developed a pretty solid understanding of Bitcoin, blockchain, and the cryptosphere in general. But if you’re a regular Heisenberg reader, you know that my definition of “solid understanding” is a bit different from most people’s definition.
Being able to talk intelligently about something isn’t even close to what I would consider sufficient when it comes to putting digital pen to digital paper. That’s why everything I’ve written about cryptocurrencies and Bitcoin over at Heisenberg Report revolves around price action, psychology, the reasons why cryptocurrencies aren’t viable as “money” and the possible knock-on effects for other assets and/or the broader economy (i.e. systemic risk).
I feel comfortable discussing those aspects of the cryptocurrency phenomenon because those discussions lean heavily on things I am extremely qualified to talk about. That is, when it comes to price action, investor psychology, what it means for something to be a currency (or to be “money”, so to speak) and systemic risk, I have much more than a “solid understanding”. In those matters, I’m a walking encyclopedia. What I do not posses encyclopedic knowledge of are the technological underpinnings of digital currencies. Again, I have a solid understanding of the technological points, but you’re not going to see me penning manifestos about why blockchain is or isn’t going to change the world or why Ripple can or can’t upend SWIFT.
Just to be clear, I don’t think developing that depth of understanding when it comes to the technology is important right now for anyone other than the people who are behind this movement and maybe a handful of academics who can perhaps help discern how the technology can actually be applied in a way that has some utility outside of speculation and/or outside of providing what Nassim Taleb has called “an insurance policy that will remind governments that the last object establishment could control, namely, the currency, is no longer their monopoly.”
The reason I don’t think it’s necessary for the rest of us to get too bogged down in it is precisely because by the time it matters, something bad will have happened that will ultimately force governments to regulate cryptocurrencies so heavily that they will cease to be objects of public fascination and thus vehicles for speculation.
There are a number of things that can go wrong here, some of which obviously have to do with the potential for cryptocurrencies to serve ostensibly nefarious purposes, but what I try to zoom in on are the possible knock-on effects for traditional markets and also for the economy more generally.
One particularly disconcerting development is that according to a LendEDU poll published the day after Bitcoin peaked in December, nearly 20% of people were using a credit card to get in on the craze:
Hilariously (or not, depending on your penchant for dark humor), that actually coincided with a spike in Google searches for “can you buy Bitcoin with a credit card?”:
Correlation doesn’t equal causation, but it seems like some coincidence that the publication of the poll cited above, the peak in that Google Trends chart, and Bitcoin’s high at roughly $ 20,000 all came within the same 48-hour window.
The risk there is clear. That effectively represents a high interest loan collateralized by an “asset” that’s depreciated by roughly 50% over the ensuing month. The chances that ends up showing up in, for instance, banks’ losses on credit cards are probably low, but you can’t rule it out.
On top of that, at least one bank recently “went there” by trying to estimate what the “wealth effect” (i.e. an increase in consumers’ propensity to spend based on unrealized gains in financial assets) might be from Bitcoin trading in Japan. The fact that anyone is even talking about that is unnerving. If, for instance, consumers did in fact end up spending more based on gains in their cryptocurrency accounts and that was reflected in high level economic data, the sugar high from that could evaporate in the event those unrealized crypto gains disappear. That could create noise in the data and make q/q and m/m compares more difficult, complicating policymaker reaction functions.
But beyond all of that, it’s becoming increasingly likely that traditional risk assets will begin to take their cues from the crypto market. Deutsche Bank was out with a great note this week describing how, far from the “safe haven” status crypto proponents often ascribe to Bitcoin, cryptocurrencies in fact represent exactly the opposite. That is, they represent the new frontier in risk-taking, replacing short vol. as the proxy for risk sentiment. Here’s the bank’s Masao Muraki:
The current ‘triple-low environment’ of low interest rates, low spreads, and low volatility has given birth to new asset classes like implied volatility (ETFs selling volatility), and cryptocurrencies. The prices of both asset classes have plummeted and rebounded simultaneously and in 2018, correlation between Bitcoin and VIX has increased dramatically.
The problem here is that just as the proliferation of strategies that explicitly or implicitly rely on the low-volatility environment continuing has the potential to create a “tail wagging the dog” dynamic whereby vol. spikes force selling in the underlying, if cryptocurrencies are increasingly viewed by larger investors as a proxy for risk sentiment, sharp moves have the potential to spill over. Here’s Deutsche again:
Cryptocurrencies are closely watched by retail investors, affecting their risk preferences for stocks and other risk assets. Although institutional investors recognize that stocks and other asset valuations may have entered bubble territory (US equities’ average P/E is around 20x), they cannot help but continue their risk-taking. Now, a growing number of institutional investors are watching cryptocurrencies as the frontier of risk-taking to evaluate the sustainability of asset prices. The result is that institutional investors, who are supposed to value assets using their sophisticated financial literacy, analysis, and information-gathering strengths, are actually seeking feedback about the market from cryptocurrency prices (which are mainly formed by retail investors). We believe the correlation between Bitcoin and VIX can increase as more institutional investors begin trading Bitcoin futures.
Underscoring that is a new piece out in the Wall Street Journal that documents the extent to which retail brokerages are seeing an avalanche of inflows from what they say are first-time investors (millennials are specifically named) attempting to capitalize off the gains in crypto-related stocks and, when they’re allowed to trade them, Bitcoin futures. Here’s the Journal:
Discount brokerages TD Ameritrade Holdings Corp., E*Trade Financial Corp. and Charles Schwab Corp. reported surges in client activity at the end of 2017 that have accelerated in January. The firms attributed much of the activity to retail, or individual, investors who are opening brokerage accounts for the first time, some of them lured by the boom in cryptocurrency and cannabis investments.
“Crypto and cannabis…volumes have been up big,” E*Trade Chief Executive Karl Roessner said Friday on the firm’s fourth-quarter earnings call with analysts and investors. Despite the bitcoin-futures offering not being “a material offering,” Mr. Roessner said about a 10th of daily average revenue trades—a key metric for brokerages—has so far this month been blockchain- or pot-related.
Keep in mind that the obvious risks in inherent in all of that come on top of the risk associated with clearing crypto derivatives with other assets. Those risks were laid out in an open letter to the CFTC penned by Thomas Peterffy, the billionaire founder and chairman of Interactive Brokers, back in November.
Earlier this month, the Cboe’s suggested that futures on other cryptocurrencies could eventually be in the cards. To wit, from comments Chris Concannon, Cboe’s president and chief operating officer, made at a press briefing in New York:
You look at the entire crypto space and you look at what other products have the liquidity and the notional size, a derivative makes sense.
I guess that depends on your definition of “makes sense”. For now, crypto ETFs are still getting quite a bit of pushback from the SEC, but it’s probably just a matter of time before we cross that bridge as well.
But irrespective of how this develops, crypto risk is already embedded in markets and to a lesser extent in the broader economy as detailed above. And I could give you a long list of other arguments to support the same contention.
To be clear, more and more people are starting to voice concerns about spillover effects. For instance, Wells Fargo’s Chris Harvey has been very vocal about the risk to stocks over the past couple of months. Here’s what he told CNBC in his latest appearance on the network:
We see a lot of froth in that market. If and when it comes out, it will spill over to equities. I don’t think people are really ready for that.
No, people are probably not “ready for that”. And part of the reason no one is ready is because it’s not clear that everyone understands the points Deutsche Bank made in the note cited and excerpted above.
What all of this suggests for investors is that you’re going to have to start watching cryptocurrencies the same way you might watch the VIX. If it’s true that larger investors are going to start using cryptocurrencies as a proxy for risk sentiment, well then you might want to start asking yourself what that might mean in terms of the potential for a large drawdown in the space to impact what you previously assumed were unrelated assets.
I’m not saying you should obsess over every tick in Ripple, but when you see things like that $ 400 million theft from Coincheck on Friday, you should consider that fair warning about how unstable that market really is.
One last thing: I’m not sure the flipside of everything said above is ever going to be true. That is, even if Bitcoin and other cryptocurrencies have another year like 2017, you’re never going to be able to reliably extrapolate anything from that about a positive wealth effect for the economy or for increased risk appetite in equities. Why? Simple: because cryptocurrencies are so volatile that any of the positive externalities from a sharp rally have to be discounted because they can all be negated virtually overnight. You cannot extrapolate anything on the positive side from appreciation in an asset that, like Bitcoin, is 15-25x as volatile as the S&P, 20x-40x as volatile as gold, and 5x-11x as volatile as oil (according to Barclays and as measured by the coefficient of variation):
Nothing further. For now.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Editor’s Note: This article covers one or more stocks trading at less than $ 1 per share and/or with less than a $ 100 million market cap. Please be aware of the risks associated with these stocks.
Welcome to Seeking Alpha’s Stocks to Watch – a preview of key events scheduled for the next week. Follow this account and turn the e-mail alert on to receive this article in your inbox every Saturday morning.
By all appearances it’s going to take a lot to knock the stock market off its 2018 upward drive as potential landmines such as North Korea, political chaos and looming government shutdowns continue to be sidestepped with animal spirits stirred up. On that note, Bespoke Investment Group added up the cumulative declines on the S&P 500 on a rolling six-month basis to find that it’s been over 50 years since so little downward pressure has been applied to stocks. Looking ahead to next week, some heavy hitters are expected to post tax benefit-adjusted guidance in what could be another driver for investor enthusiasm.
Expected IPO filings Pagseguro Digital (Pending:PAGS) and Entera Bio (OTC:ENTZ) on Jan. 23; Solid Biosciences (Pending:SLDB), Gates Industrial (Pending:GTES) and Menlo Therapeutics on Jan. 24; Adial Pharmaceuticals (Pending:ADIL), PlayAGS (Pending:AGS) and Armo Biosciences (Pending:ARMO) on Jan. 25.
FDA watch: GlaxoSmithKline (NYSE:GSK), Innovia (NASDAQ:INVA) and Theravance Biopharma (NASDAQ:TBPH) are expected to find out if the supplemental new drug application for triple therapy inhaler Trelegy Ellipta has been accepted for review by the regulator. The FDA’s Tobacco Products Scientific Advisory Committee is also meeting on Jan. 24-25 to review Philip Morris International’s (NYSE:PM) iQOS. Feedback from the committee on the alternative tobacco product could also impact British American Tobacco (NYSEMKT:BTI), Altria (NYSE:MO), Vector Group (NYSE:VGR) and Turning Point Brands (NYSE:TPB).
IPO/secondary share lockup period expirations: Bill Barrett (NYSE:BBG), RBB Bancorp (NASDAQ:RBB), First Republic (NYSE:FRC) and Corbus Pharmaceuticals (NASDAQ:CRBP) on Jan. 22; Sienna Biopharmaceuticals (NASDAQ:SNNA), Ablynx (NASDAQ:ABLX), Immune Design (NASDAQ:IMDZ), Savara (NASDAQ:SVRA) and UniQure (NASDAQ:QURE) on Jan. 23; Newater Technology (NASDAQ:NEWA), Redfin (NASDAQ:RDFN), Idera Pharmaceuticals (NASDAQ:IDRA), Atossa Genetics (NASDAQ:ATOS) and Hutchison China MediTech (NASDAQ:HCM) on Jan. 24; First Bancshares (NASDAQ:FBMS), VBI Vaccines (NASDAQ:VBIV) , Celsion (NASDAQ:CLSN) on Jan. 25.
Notable earnings reports: Earnings season really heats up this week with major reports out of every sector. Netflix (NASDAQ:NFLX) and Halliburton (NYSE:HAL) on January 22; Johnson & Johnson (NYSE:JNJ), Texas Instruments (NYSE:TXN), Verizon (NYSE:VZ), Procter & Gamble (NYSE:PG), United Continental (NYSE:UAL), Capital One Financial (NYSE:COF) and Kimberly-Clark (NYSE:KMB) on Jan 23.; Ford (NYSE:F), General Electric (NYSE:GE), Las Vegas Sands (NYSE:LVS), Comcast (NASDAQ:CMCSA), United Technologies (NYSE:UTX) on Jan. 24; Intel (NASDAQ:INTC), Starbucks (NASDAQ:SBUX), (NYSE:VMW), Wynn Resorts (NASDAQ:WYNN) and Western Digital (NYSE:WDC) on Jan. 25; Honeywell (NYSE:HON), AbbieVie (NYSE:ABBV) and Colgate-Palmolive (NYSE:CL) on Jan. 26. See Seeking Alpha’s Earnings Calendar for the complete list.
M&A watch:There are potential deals brewing with Juno Therapeutics (NASDAQ:JUNO), Acorda Therapeutics (NASDAQ:ACOR), Kroger (NYSE:KR)-Overstock.com (NASDAQ:OSTK), CBS (NYSE:CBS), Fossil (NASDAQ:FOSL), Bloomin’ Brands (NASDAQ:BLMN) and in REIT world with Vici Properties (OTCPK:VICI)-MGM Growth Properties (NYSE:MGP).
Detroit Auto Show: With the dreamy talk about next-gen electrification and mobility goals out of the way, the second week of the Detroit Auto Show is all about letting the public see new models. Front and center in Detroit will be the Ford (F) Ranger, Chevrolet (NYSE:GM) Silverado and Ram (NYSE:FCAU) 1500. BMW (OTCPK:BMWYY) is looking to gain traction in a new sub-segment with the sporty X2 SUV, while Volkswagen (OTCPK:VLKAY) is showcasing the new sub-$ 20K Jetta as it looks to rebuild U.S. sales. On the exotic side, Steve McQueen fans might want to take a look at the special edition Ford Mustang Bullitt. Although Tesla (NASDAQ:TSLA) is skipping the Detroit Auto Show for the third year in a row, the Model 3 will be in the spotlight this week as it makes its way into more showroom. Early test drive reviews (Los Angeles Times, Edmunds (video), USA Today) are already starting to roll in.
Crypto: A couple of mainstream events are on the calendar this week with the Blockchain Davos Conference 2018 and Cannaccord Blockchain Investor Day scheduled for Jan. 23. The blockchain-focused Amplify Transformational Data Sharing ETF (NYSEARCA:BLOK) and Reality Shares Nasdaq NexGen Economy ETF (NASDAQ:BLCN) will also catch the spotlight as they close out their first week of trading. As always, expect volatility in the sector. 7-day crypto scorecard: Bitcoin -14%, Ripple -25%, Ethereum -18%, Bitcoin Cash -31%, Litecoin -19%, Cardano -24%, NEM -25%, NEO +5%, TRON -25%, Stellar -10% and IOTA -26%.
Investor/Analyst Days: The Medicines Company (NASDAQ:MDCO) on Jan 23.
Sales/business updates: HP (NYSE:HPQ) on Jan. 22; Workhorse Group (NASDAQ:WKHS) on Jan. 23; Progressive on (NYSE:PGR) on Jan. 24.
Extraordinary shareholder meetings: CTI Biopharma on (NASDAQ:CTIC) on Jan. 24; Broadsoft (NASDAQ:BSFT) on Jan. 25.
Americas Lodging Investment Summit: Just days after a big industry-rattling deal between Wyndham Worldwide (NYSE:WYN) and La Quinta (NYSE:LQ), hotel management execs meet in L.A. on Jan 22-25. Presenters include Hyatt (NYSE:H), Choice Hotels (NYSE:CHH), Park Hotels & Resorts (NYSE:PK), Marriott International (NYSE:MAR), Red Lion Hotels (NYSE:RLH) and Ashford (NYSEMKT:AINC).
Barron’s mentions: In part 2 of its Roundtable, the panel discusses potential bargains including Samsung (OTC:SSNLF), Starbucks, GrubHub (NYSE:GRUB) and MetLife (NYSE:MET), among others. A set of picks for top stocks in emerging markets include Sberbank (OTCPK:SBRCY), Posco (NYSE:PKX), China Construction Bank (OTCPK:CICHY) and Hollysys Automation Technologies (NASDAQ:HOLI). And retailer H&M (OTCPK:HNNMY) isn’t a bargain yet despite a recent 20% decline.
Sources: CNBC, EDGAR, Bloomberg and Nasdaq.com.
Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.
Whereas railroads and Detroit automakers used to be the nuts and bolts of a well-rounded portfolio, today’s world runs on silicon chips and bits. There’s a reason Nvidia (nvda) has been one of the S&P 500’s best stocks two years in a row. The largest semiconductor maker by market capitalization is benefiting from virtually every tech trend—with its chips powering everything from Tesla’s self-driving cars, to Amazon’s and Microsoft’s cloud services, to the machines that mine the digital currency Bitcoin. Though Nvidia stock, at 47 times next year’s earnings, isn’t cheap, analysts expect revenue to soar 37% in the next fiscal year, justifying that price tag.
Ian Mortimer, comanager of the top-performing Guinness Atkinson Global Innovators Fund, is bullish on Nvidia. Further down the supply chain, he also likes Applied Materials (amat), which manufactures the equipment to make the chips, and trades at just 14 times 2018 earnings. In the past, such stocks have traded at a discount because they tended to have long down-cycles—slow periods between, say, the new iPhone or PlayStation launch. But the boom in A.I.-driven technology means semiconductors are far less cyclical, if not entirely recession-proof. “The demand is coming from other places that didn’t use to exist—smart homes, smart cars, etcetera,” Mortimer says.
While Nvidia’s chips are used in “the brain of the car,” Mortimer says, he also owns German chipmaker Infineon, whose sensors facilitate a host of more practical functions—from automatically opening and locking doors to detecting obstacles—that are nevertheless increasingly essential to electric and modern vehicles from Tesla, BMW, and many others. Infineon trades at 25 times earnings.
For income-conscious investors, tech also has more dividend-paying stocks than ever. In 2000, when Microsoft and Cisco (csco) were the two most valuable companies in the S&P 500, neither paid a dividend. Now, Cisco, which paid its first dividend in 2011, yields more than 3%; the S&P 500 average is around 2%. What’s more, after being nearly written off as a washed-up “cash cow,” Mortimer says, Cisco expects revenue to grow this quarter for the first time in two years. Pushing into cybersecurity and cloud services has put Cisco on the precipice of a comeback—reminiscent, in a way, of where Microsoft (whose dividend yields about 2%) was a few years ago, when its transition to cloud computing was just beginning to revive its growth. “There’s also some reassurance in the staying power of the older stalwarts, Mortimer adds: “It gives you a little bit more of that diversification, without having all your eggs in very high-growth companies that may or may not come through.”
Here are more of our picks for 2018:
A version of this article appears in the Dec. 15, 2017 issue of Fortune, as part of the article “Investor’s Guide 2018 — Stocks and Funds: The All-Tech Portfolio.“
And that’s what makes cloud computing stocks so intriguing. Alongside Big Data, the Internet of Things, augmented and virtual reality, the cloud …
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Hedge funds have struggled to outperform the market in 2016. According to the Barclay Hedge Fund Index, the average net return for hedge funds year to date is 3.43%, compared to 6.1% for the S&P 500. Throughout the second quarter and third quarter, the market has continued its heated pace of growth, even as several worrying trends signal a disconnect from economic reality. For one, nonfinancial-corporate profits from current production (operating income) declined from a 7.6% increase in the year ended June 2015 to a 9.3% contraction for the year ended June 2016. At the same time, nonfinancial corporate debt rose from 601% in the second quarter 2015 to 697% in the recent second quarter, the highest since 717% reached in second quarter 2010, according to Moody’s Analytics.