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Tuesday, July 11, 2017

HIGH PROFIT TRADING SIGNALS AND MARKET NEWS JULY 12,2017



The dollar index is marginally higher this morning but flat-lining against the euro. The real gain is against the yen, where the dollar hit another 4-month high at 114.48. The roundnumber phenomenon implies 115 will be the target and darned hard to acquire. The USD continues to fade against the CAD ahead of the Bank of Canada meeting tomorrow and a widely expected and thoroughly signaled rate hike.

In other markets, oil is falling again after a small pop on a story that OPEC is really very annoyed at Libya for taking advantage of having been exempted from output caps and may try to impose them on both Libya and Nigeria. We get the API inventory report today and the Energy Dept version tomorrow. Meanwhile, Bloomberg reports Goldman Sachs warns oil can fall under $40 if OPEC can’t impose discipline. It had already cut the year-end price forecast to $47.50. Bloomberg also has a story on oil company executives saying peak oil is behind us. Demand will start falling dramatically in about 25 years as electric cars, alternative energy and China’s maturing all set it.

In the UK, the British Retail Consortium reported June sales up 1.2% after -0.4% in May and 2.1% q/q. The BRC named warm weather (sales of clothing) and higher food prices but the point is, probably, that the Brtisih consumer is not hiding under the covers. We get employment and wage growth tomorrow, potentially a clue as to whether the BoE is actually serious about a rate hike. We keep thinking hawkish talk is just bluster, but we were wrong about Canada, so stay tuned.

In the eurozone, Italy was the first to report May industrial production, quite good at 0.7% when 0.5% was forecast (Bloomberg) and 2.8% y/y. France and Germany already reported production at 1% or more. We get the overall eurozone version tomorrow.


The euro is hanging on to gains by the skin of its teeth. The post-payrolls low was 1.11378 on Friday, then we got 1.11380 yesterday and so far today, 1.1381. We still expect a re-test of the recent highs around 1.1446, but it can slip instead.


The Reuters 10-year yield index closed at 2.371% on a doji, down from the high Friday at 1.396%. It’s quoted at 2.386% this morning from 2.375% yesterday morning and 2.379% Friday morning. It may match-and-surpass the last high, 2.400% from May 11. The Bund yield is steady at 0.548% from 0.544% yesterday morning and the 18-month high Friday at 0.58%.

Market Outlook: The US calendar is skimpy, offering mostly the JOLTS report, which could be interesting for the data on voluntary job leavings. Canada reports housing data today ahead of the BoC policy meeting tomorrow. The consensus is for a rate hike, the first in seven years, because of a perceived need to pop a real estate bubble and rein in household debt. Canada does not have general price inflation. May’s CPI was 1.3%. Nevertheless, nine of ten primary dealers surveyed by the WSJ agree a 25 bp hike is in the cards. (Six see a second hike before year-end to 1%.) The swap market is pricing in a 90% probability.

Here’s the problem: Canada does not actually have broad-based inflation, just a real estate boom and a high household debt-to-income ratio. Central banks normally don’t raise rates to target a particular sector. Any yet, the BoC changed its tune only a few weeks ago and started aggressively talking about the need for tightening. A revised communications policy had to take some serious thought. Were the BoC to stay its hand tomorrow after throwing out so many hawkish hints, it would face a severe loss of confidence.

 “Buy on the rumor, sell on the fact” is almost certainly going to come into play in the CAD, no matter what the BoC does. The Canadian rate hike is fully priced in by now. If the BoC retreats from the hawkish stance, the CAD falls further. But it’s going to fall no matter what on profit-taking and positionparing. See the daily chart. Both the MACD and stochastic oscillator are screaming the USD/CAD is oversold. The bond is a screaming sell, too. See the second chart.



But after the shouting is over, Canada will enjoy a narrowing differential in the 10-year yield with the US.


Today the yield is 1.889% (up from 0.997% in Jan 2016), or a differential with the US of 46.7 bp. This is not negligible but it’s the narrowing that counts in FX. Then, if the BoC goes again in the fall alongside the Fed, the differential may narrow a bit more. Now see what may happen long-term on the USD/ CAD chart. A return to the last lowest low looks entirely plausible—1.2461 from May 2016. Off the left-hand side of the chart is the true lowest low off which the Fib series is drawn and it lies at 1.0620 (from June 2014). That would be a 100% retracement, yikes.

We have been dismissing the BoC rate hike idea as not something conventional central banks do. Nobody is more conventional than Canada. But those primary dealer surveys are a tipping point. We now imagine the BoC will do what it says it will do. And after a “buy on the fact” moment, the USD/CAD may continue lower. A lot lower. And notice oil is not even mentioned here. A change to higher energy prices would provide a dandy tailwind to the CAD. We get the CAD wrong more than any other currency, so take this forecast with a dose of salt.


 In other news, Amazon Prime is holding a giant sale today with over $1 billion in sales expected, and also attacking brand names with cheaper unbranded stuff. This is seen as revolutionary but hey, Costco had it figured out a long time ago. The core assumption is that the American consumer is a slob who doesn’t care about quality, only price. Alas, this will raise prices for higher-quality items.

Also, in politics, three Trump campaign officials, including a son and son-in-law, met with a Russian promising dirt on Clinton direct from the Kremlin—in June 2016. Trump denials are not worth the air they occupy. It may be bad judgment, bad morals and even treason, but not, evidently, illegal. At the same time, the hysteria and self-righteousness of the “liberal press” is getting tiresome.

And some analysts say the dollar is moving on expectations of comments by Yellen to Congress… but they do not name what she might say that is new or even interesting that would have any effect on the dollar at all. Our take: keep watching the yield.

Finally, the real news today is from a story in the FT: the US will export more oil in coming years than most OPEC members. Now that’s a Holy Cow! moment. Oil consultancy Pira Energy forecasts the US will quadruple crude oil exports to some 2.25 million b/d by 2020, from 520,000 last year and in comparison to Kuwait at 2.1 million b/d and Nigeria at 1.7 million b/d. Bottom line, “The US will become one of the top 10 exporters in the world,” says Pira. This arises from the Obama administration allowing exports only in 2015 and Trump embracing “energy dominance.” We should all go buy real estate in Corpus Christi, Texas. The point: the US economy is chock-full of aggressive opportunity-takers and has the resilience, skills and financing to take advantage of openings. Let’s just note that all those anti-capitalism protesters at G20 last weekend don’t have a clue.

HIGH PROFIT TRADING SIGNALS:


SPOT FOREX SIGNALS

SELL GBP/USD- recommended entry @ 12851 ( DAY TRADING)) STOP-12885, TAKE PROFIT- 12812
BUY EURO/USD- recommended entry @ 11408 ( DAY TRADING)) STOP- 11370, TAKE PROFIT- 11456
BUY AUD/USD -recommended entry @ 7625 ( DAY TRADING)) STOP- 7598, TAKE PROFIT- 7655
SELL USD/JPY- recommended entry @ 11391 ( DAY TRADING)) STOP- 11422, TAKE PROFIT- 11359
LONG EURO/USD (POSITION TRADE)
LONG GBP/USD   (POSITION TRADE)
SHORT USD/CHF  (POSITION TRADE)
LONG EURO/JPY   (POSITION TRADE)


-Option Trade of the Week- The best option idea each week, based on projected potential return, with less than a $5000 investment and no margin requirement.


Call (Bull) Debit Spread on Facebook Inc.- FB (current price $155.27)
Buy 10 - September 2017, $150 strike calls for $6.45
AND
Sell 10 - September 2017, $160 strike calls for $4.20

Based upon the projected share price of $161.72 at (or before) expiration on 9/15/17, Return on Investment (ROI) would be 99.40% (including reasonable commission) if FB rises 4.14% in the next 9 1/2 weeks. Options are suitable for only very aggressive investors.


-Make Best Buy’s Pain Your Gain
Monday’s swoon led to a mad dash for option protection. The demand surge lifted Best Buy’s implied volatility rank to a six-week high. And that means option sellers can now sell their wares for a pretty penny.
Sell the Aug $50, put for 65 cents. If the stock can remain above $50, you will capture the 65 cents expiration. The initial margin requirement for the trade should be around $650, so your potential return on investment is close to 10%.

Not a fan of BBY Stock? Trade XRT Instead!

For those wishing to sidestep stock picking altogether, you can always trade the entire retail industry with XRT. The fund is down 6% over the past four trading sessions and getting a touch oversold. Its implied volatility rank is even juicier than Best Buy at 58%.
If you want to be a contrarian bull in retail, then sell the Aug $37 naked put if it rises in value to 50 cents over the next few days.
STOCK PICK JETBLUE AIRWAYS CORP. ($JBLU)

JetBlue Airways Corp. (JBLU): ABOVE $23.55, with a $25.50 first target, a $28.75 second target, and a $21.50 stop loss. Confirmation Volume Area= 3.7M, Risk Rating= 4, Industry= Regional Airlines

JBLU TRADING TIP: Watch this VOLATILE formation as it sets up for another stage higher, while the market posts gains. Any further accumulation may break this stock higher, helping it take a run into ‘uncharted territory’. When reviewing new trading ideas for purchase, pay the price that coincides with your desired exit strategy; being patient by waiting for desired prices may drastically reduce trade risk. NOTE: consider bidding for wanted Stock Picks; the markets generally charge for impatience.

JetBlue Airways Corp. (JBLU) rose $0.48, to $23.36 on good volume on Friday! JBLU is a passenger carrier company, which provides air transportation services. JBLU operates a fleet of 37 Airbus A321 aircrafts, 130 Airbus A320 aircrafts, and 60 Embraer E190 aircrafts. JBLU also serves 100 destinations in 29 states in the United States, the District of Columbia, the Commonwealth of Puerto Rico, the U.S. Virgin Islands, and 21 countries in the Caribbean and Latin America.








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