European Equities: A Quiet Economic Calendar to Test Support Further

Economic Calendar

Thursday, 23rd September

Spanish GDP (QoQ) (Q2)

French Manufacturing PMI (Sep) Prelim

French Services PMI (Sep) Prelim

German Manufacturing PMI (Sep) Prelim

German Services PMI (Sep) Prelim

Eurozone Manufacturing PMI (Sep) Prelim

Eurozone Markit Composite PMI (Sep) Prelim

Eurozone Services PMI (Sep) Prelim

Friday, 24th September

German Ifo Business Climate Index (Sep)

The Majors

It was a particularly bearish start to the week for the European majors on Monday.

The DAX30 slid by 2.31% to lead the way down, with the CAC40 and the EuroStoxx600 seeing losses of 1.74% and 1.67% respectively.

Economic data on the day was limited to wholesale inflation figures from Germany, which had a muted impact on the majors.

The lack of stats left the markets with little to avert attention away from Wednesday’s FOMC policy decision and projections.

Following Friday’s pullback, dip buyers remained on the sidelines, with FED policy uncertainty testing support for the majors.

Adding to the market angst on the day was the Evergrande crisis, which sparked contagion fears across the global financial markets.

The Stats

It’s a was a quiet day on the Eurozone economic calendar. In August, Germany’s annual wholesale rate of inflation picked up from 10.4% to 12.0%. Economists had forecast an uptick to 11.4%. Month-on-month, Germany’s producer price index rose by 1.5%, following a 1.9% increase in July. Economists had forecast a more modest 0.8% increase.

From the U.S

It was also a particularly quiet day on the economic calendar, with no major stats for the markets to consider.

The Market Movers

For the DAX: It was a bearish day for the auto sector on Monday. Continental tumbled by 5.59% to lead the way down, with Volkswagen sliding by 3.89%. BMW and Daimler weren’t far off, however, with losses of 2.73% and 2.68% respectively.

It was also a bearish day for the banks. Deutsche Bank and Commerzbank slumped by 7.67% and by 7.92% respectively.

From the CAC, it was a bearish day for the banks. Soc Gen and BNP Paribas slid by 5.70% and by 4.46% respectively, with Credit Agricole falling by 3.86%.

It was also a bearish day for the French auto sector. Stellantis NV slid by 4.47%, with Renault falling by 2.19%.

Air France-KLM bucked the trend, rallying by 5.31%, while Airbus SE slipped by 0.97%.

On the VIX Index

It was a 3rd consecutive day in the green for the VIX on Monday.

Following an 11.34% jump on Friday, the VIX surged by 23.55% to end the day at 25.71.

On Monday, the NASDAQ slid by 2.19%, with the Dow and S&P500 ending the day down by 1.78% and by 1.70% respectively.

VIX 210921 Daily Chart

The Day Ahead

It’s another particularly quiet day ahead on the Eurozone’s economic calendar.

There are no major stats to provide the European majors with direction at the start of the week.

From the U.S there are also no major stats to consider later in the session, leaving the markets in limbo ahead of Wednesday’s FOMC.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 4 points.

For a look at all of today’s economic events, check out our economic calendar.

How To Visualize A Market Dip

So that got me thinking. If September is usually negative, is there a way to capture the dip? Well, here’s my way of visualizing a market dip.

I’m all about data…especially Big Money data. My favorite indicator is the Big Money Index. It’s my way to tracking what big institutions are likely doing in stocks.

When it falls, expect red markets. When it rises, get the rally hats out:

Chart, line chart

Description automatically generated

Source: www.mapsignals.com

You can see that it’s in an uptrend because summer-selling has been slowing.

Inside of the BMI are the daily buys and sells. Below you can see how buying has been increasing lately. That’s why the BMI is perking higher. I’ve circled the increased buying:

Chart, histogram

Description automatically generated

Source: www.mapsignals.com

But since this article is all about a market dip, look how using MAPsignals data can help us visualize a market dip.

Below is the same chart, but I’ve isolated those big red days. Those are days when there’s a lot of selling in stocks. Look:

Chart, histogram

Description automatically generated

Source: www.mapsignals.com

Notice how each of those big red sticks marks the low for the market? That’s the S&P 500 (SPY ETF) I’m using as the market gauge.

But more importantly, look at the 2 week forward performance of SPY after those big sell days. It’s mega juice:

Table

Description automatically generated

Source: MAPsignals, FactSet

That’s how I visualize a market dip with data. But what’s cool is we can see the same similar patterns in ETFs. Below are the daily Big Money buys and sells of ETFs according to MAPsignals. I’ve outlined big red sell days:

Chart, histogram

Description automatically generated

Source: MAPsignals.com

Visually it looks like the stock sells chart. And for good measure, here’s the 2-week return for all of those instances above.

Table

Description automatically generated

Source: MAPsignals, FactSet

Talk about a cool way to see a market dip through the eyes of data.

Here’s the bottom line:

Investors and traders like to talk about buying the dip. And it’s a real phenomenon. Recently, we can see that big sell days for stocks and ETFs have been dips to buy. Will that be the case in the future? Only time will tell.

But, one thing should be apparent. Data can be helpful to a solid trading process.

Disclosure: the author holds no position in SPY, QQQ, DIA, or IWM at the time of publication.

Learn more about the MAPsignals process here: www.mapsignals.com

Disclaimer

https://mapsignals.com/contact/

For a look at all of today’s economic events, check out our economic calendar.

Keysight Stock Attracts Big Money

So, what’s Big Money? Said simply, that’s when a stock goes up in price alongside chunky volumes. It’s indicative of institutions betting on the shares.

Smart money managers are always looking for the next hot stock. And Keysight has many fundamental qualities that are attractive.

This sets up well for the stock going forward. But how the stock is trading points to more upside. As I’ll show you, the Big Money has been consistent in the shares for years.

You see, fund managers are always looking to bet on the next outlier stocks…the best in class. They spend countless hours sizing up companies, reading reports, speaking to analysts…you name it. When they find a company firing on all cylinders, they pounce in a big way.

That’s why I’ve learned how critical it is to gauge Big Money demand for shares. To show you what I mean, have a look at all the big money signals KEYS has made the last year.

The last few weeks have seen Big Money activity, too. Each green bar signals big trading volumes as the stock ramped in price:

Chart, histogram

Description automatically generated

Source: www.mapsignals.com

In 2021, the stock has attracted 17 Big Money buy signals and zero sell signals. Generally speaking, recent green bars could mean more upside is ahead.

Now, let’s check out technical action grabbing my attention:

  • 1-year outperformance vs. VanEck Semiconductor ETF (+33.83% vs. SMH)

Outperformance is huge for leading stocks.

Next, it’s a good idea to check under the hood. Meaning, I want to make sure the fundamental story is strong too. As you can see, Keysight has been growing revenues and earnings rapidly. Take a look:

  • 3-year sales growth rate (+10.21%)
  • 3-year earnings growth rate (+110.51%)

Source: FactSet

Marrying great fundamentals with technically superior stocks is a winning recipe over the long-term.

In fact, Keysight has been a top-rated stock at my research firm, MAPsignals, for years. That means the stock saw buy pressure, strong technicals, and growing fundamentals. We have a ranking process that showcases stocks like this on a weekly basis.

KEYS has a lot of qualities that are attracting Big Money. And since it first appeared on this report back on 1/15/2019, it’s up 162%. The blue bars below show the times that Keysight was a top pick:

Chart, histogram

Description automatically generated

Source: www.mapsignals.com

It’s been an all-star stock for years according to the MAPsignals process. I wouldn’t be surprised if KEYS makes additional appearances in the years to come. Let’s tie this all together.

Keysight continues to fire on all cylinders technically alongside growing sales and earnings. I like the long-term story of the stock.

The Bottom Line

The Keysight rally could have further to go. Big money buying in the shares is signaling to take notice. Shares could be positioned for further upside. Given the historical gains in share price and strong fundamentals, this stock could be worth a spot in a growth-oriented portfolio.

Disclosure: the author holds no position in KEYS at the time of publication.

Learn more about the MAPsignals process here.

Disclaimer

https://mapsignals.com/contact/

 

Wall Street Ends Sharply Lower in Broad Sell-Off

The Nasdaq fell to its lowest level in about a month, and Microsoft Corp, Alphabet Inc, Amazon.com Inc, Apple Inc, Facebook Inc and Tesla Inc were among the biggest drags on the index as well as the S&P 500.

All 11 major S&P 500 sectors were lower, with economically sensitive groups like energy down the most.

Investors also were nervous ahead of the Federal Reserve’s policy meeting this week.

The banking sub-index dropped sharply while U.S. Treasury prices rose as worries about the possible default of Evergrande appeared to affect the broader market.

“You kind of knew that when there was something that caught markets off guard, that it was going to lead to probably a bigger sell-off and you didn’t know what the reason would be,” said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute.

“I guess it’s the China news but… it’s not altogether surprising given how bullish people were.”

Wednesday will bring the results of the Fed’s policy meeting, where the central bank is expected to lay the groundwork for a tapering, although the consensus is for an actual announcement to be delayed until the November or December meetings.

Unofficially, the Dow Jones Industrial Average fell 620.22 points, or 1.79%, to 33,964.66, the S&P 500 lost 75.28 points, or 1.70%, to 4,357.71 and the Nasdaq Composite dropped 325.95 points, or 2.17%, to 14,718.02.

The S&P 500 is down sharply from its intra-day record high hit on Sept. 2 and is on track to snap a seven-month winning streak.

Strategists at Morgan Stanley said they expected a 10% correction in the S&P 500 as the Fed starts to unwind its monetary support, adding that signs of stalling economic growth could deepen it to 20%.

The CBOE volatility index, known as Wall Street’s fear gauge, rose.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Caroline Valetkevitch in New York; additional reporting by Devik Jain and Sagarika Jaisinghani in Bengaluru and by Noel Randewich in San Francisco; Editing by Sriraj Kalluvila and Lisa Shumaker)

Coinbase Scraps Plans for Crypto Lending Program

The move comes days after U.S. regulators said it would sue Coinbase if it went ahead with its program allowing users to earn interest by lending digital assets.

“As we continue our work to seek regulatory clarity for the crypto industry as a whole, we’ve made the difficult decision not to launch the USDC APY program,” Coinbase’s blog post said.

USDC is a stablecoin that is pegged to the U.S. dollar and can be redeemed for $1 on a one-to-one basis.

The crypto exchange also said it has discontinued the waitlist for its USDC APY (annual percentage yield) program, a high-yield alternative to traditional savings accounts that would have paid lenders of USDC to Coinbase a 4% APY.

Coinbase, which said it has seen a rise in crypto interest account in recent times, had been planning to offer a principal guarantee to lenders of USDC in their Coinbase account.

It added that a 4% APY on USDC would provide a customer eight times the national average on high-yield savings accounts, based on a Bankrate.com survey of U.S. savings accounts in June 2021.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Sohini Podder in Bengaluru; Editing by Shailesh Kuber)

U.S. Swap Spreads Widen, Three-Month Libor Rises as Risk Aversion Spreads

In another sign of concern brewing in money markets, analysts cited three-month Libor, which rose to 12.5 basis points, a four-week peak, according to Refinitiv data, which may reflect some stress in the banking system.

Evergrande has been scrambling to raise funds to pay its many lenders, suppliers and investors. Regulators have warned that its $305 billion in liabilities could spark broader risks to China’s financial system if its debts are not stabilized.

Spreads of interest rate swaps are typically viewed as indicators of market risk, analysts said. A higher spread suggests market participants are willing to swap their risk exposures, suggesting overall risk aversion.

The spread on 10-year U.S. swaps over benchmark Treasuries rose to 5.25 basis points, from 4 basis points late on Friday. The spread was 3.25 basis point late Monday.

U.S. 10-year swaps measure the cost of swapping fixed rate cash flows for floating rate ones over a 10-year term.

“Wider swap spreads reflect an expectation that Libor is going to move higher,” said Dan Belton, fixed-income strategist, at BMO Capital in Chicago.

“And Libor is generally seen as the fear gauge. When there is financial market stress, Libor tends to widen and swap spreads tend to follow,” he added.

Libor has been on a downtrend this year given excess cash in the banking system as a result of the Federal Reserve’s asset purchases under its quantitative easing program. But Libor has perked up over the last week and a half.

That said, Belton clarified that wider spreads can also be attributed to technical factors.

“A lot of the moves has been technical in nature, a lot to do with the Libor transition. Interest rate swaps are still referencing Libor, but in two years, it will SOFR (secured overnight financing rates), plus a fixed spread,” Belton said.

For now, global banks still use Libor to price U.S. dollar-denominated derivatives and loans, but they will soon have to transition to using SOFR.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Andrea Ricci)

Evergrande Nerves Weigh on Offshore Yuan, Dollar Edges Up on Safety Bid

Market sentiment has been rattled by the potential contagion from Evergrande, which is trying to raise funds to pay a host of lenders, suppliers and investors. A deadline for an $83.5 million interest payment on one of its bonds is due on Thursday, and the company has $305 billion in liabilities.

On Thursday, the yuan strengthened to its highest level in three months at 6.4226 per dollar before starting to reverse as Evergrande’s woes worsened. The move sharpened on Monday after warnings from Chinese regulators that the company’s insolvency could fuel broader risks in the country’s financial system if not stabilized.

Analysts at Wells Fargo said on Monday they expect the dollar to reach 6.60 per yuan within the next month. The offshore Chinese yuan last weakened versus the greenback at 6.4839 per dollar.

“We are seeing a classic flight to safety in the dollar until we get some sense of clarity on whether or not it is going to be an orderly or disorderly resolution to Evergrande,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington DC.

“We were likely to see a continuation of the decline we’ve seen in risk assets going into this week and you throw in Evergrande and it has really unsettled the markets.”

The dollar and other safe-haven currencies such as the yen and Swiss franc gained with the risk-off sentiment, which saw Wall Street’s S&P 500 index on pace for its biggest one-day percentage drop 11 months.

The dollar index rose 0.025%, with the euro unchanged at $1.1725.

The dollar has also been gaining ground on expectations the Federal Reserve will begin reducing its monthly bond purchases this year, with the central bank’s policy announcement due on Wednesday.

Aside from the Fed, multiple central banks around the globe will hold policy meetings this week, including those of Sweden, England, and Norway.

The Japanese yen strengthened 0.58% versus the greenback at 109.32 per dollar, while sterling was last trading at $1.3656, down 0.63% on the day.

The Canadian dollar, also a commodity currency that correlates with risk sentiment, weakened to as low as C$1.2895 per dollar, its lowest level in four weeks. It last fell 0.42% versus the greenback at C$1.28 per dollar.

Polling for Monday’s national election in Canada points to an advantage for incumbent Prime Minister Justin Trudeau, but he is unlikely to gain a parliamentary majority.

In cryptocurrencies, bitcoin last fell 7.76% to $43,577.67.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Chuck Mikolajczak; Editing by Bernadette Baum and Cynthia Osterman)

Universal Music Valued Around $39 Billion Ahead of Stock Market Debut

France’s Vivendi is spinning off Universal and on Monday set a reference price for the listing at 18.5 euros per share, according to a statement issued by Euronext.

Universal Music Group’s (UMG) listing will be Europe’s largest this year and will hand 60% of shares to Vivendi shareholders.

Universal is betting that a boom in streaming led by Spotify that has fuelled royalty revenue and profit growth for several years still has a long way to run, in a music industry it dominates along with Warner and Sony Music, part of Sony Group Corp.

Its flotation carries high stakes for Canal+ owner Vivendi, which hopes to rid itself of a conglomerate discount. However, the listing raises questions about Vivendi’s strategy once it parts ways with its cash cow, in which it will retain only a 10% stake.

Several high-profile investors have also already snapped up large Universal stakes, banking in part on the group’s back catalogue, which includes the likes of Bob Dylan and the Beatles. They also hope deals with ad-supported software and social media platforms such as Alphabet Inc’s YouTube and TikTok will sustain its performance and valuation.

U.S. billionaire William Ackman suffered a setback when his attempt to invest in Universal via a special purpose acquisition vehicle (SPAC) hit a snag with regulators and investors. However, Ackman still got a 10% stake via his Pershing Square hedge fund. China’s Tencent owns 20% of Universal.

One winner in the listing will be Vincent Bollore, the French media tycoon who is Vivendi’s controlling shareholder. He will receive Universal shares worth 6 billion euros at Monday’s price.

Bollore has been an aggressive consolidator in France’s media and publishing landscape, and he has a long-held ambition to build up a southern European media powerhouse.

Vivendi itself may suffer in the short run, however, and shares are expected to fall Tuesday as they begin trading without Universal.

BNP Paribas, Natixis, Credit Agricole, Morgan Stanley and Societe Generale are the lead financial advisers on the deal, out of 17 banks in total — an unusually large total.

The fee pot is expected to be below standard listings as no fresh cash is being raised as part of the spin-off.

Universal said in its prospectus that the overall expenses to be paid in relation to the Universal deal would not go beyond 0.5% of the total amount of the share distribution.

The listing is the latest win for Euronext in Amsterdam, which has grown as a financial centre in the wake of Britain’s departure from the European Union. Before Universal, Amsterdam had attracted a record 14 IPOs so far this year, of which 10 were SPACs.

But the only Amsterdam listing of a size comparable to Universal in recent history was the 95 billion euro listing of technology investor Prosus, also a spin-off, in September 2019.

For a look at all of today’s economic events, check out our economic calendar.

($1 = 0.8524 euros)

(Additional reporting by Toby Sterling; Writing by Sarah White; Editing by David Evans and Lisa Shumaker)

S&P 500 Update: Anticipated Correction Unfolding. Low-4000s on Tap as Expected

In my last update, see here, I showed by using the Elliott Wave Principle (EWP) that the S&P500 (SPX) had most likely completed a significant-top (wave-iii of 3) and would be heading down to the low-4000s on a break below the August low at SPX4368. Nine days later and the index is already trading at SPX4345. Thus the anticipated correction is unfolding, and the low-4000s remain IMHO in tap with an ideal target of SPX4250+/-20. Allow me to explain below.

Figure 1. S&P500 daily chart with detailed EWP count and technical indicators

Today’s break below the August low makes for a lower low

In my last update, I showed that “since the early May low, the SPX has been in an overlapping set of regular interval rallies, lasting about 20 TDs with 3-day corrections, all bottoming around the 18th of each month. Each low and high was a higher low and a higher high: a Bullish pattern. Hence, because the most recent string of down days is already five, a drop below the August low at SPX4368 (orange wave-4 at the green arrow) will confirm a (red) intermediate wave-iv to ideally SPX4030-4235 is underway. I prefer the upper end of the target zone because, in Bull markets, the downside often disappoints, and the upside surprises.

Well, we got the break lower. Thus we have a lower low, and now SPX4030-4235 must be respected as the logical target zone with SPX4250+/-20 as the preferred narrowed-down level to watch. My premium major market members were already ahead of the curve as I identified five waves down last week and anticipated SPX4400-4300 after a bounce (see my tweet here, for example).

The beauty of the EWP is that we know with certainty in an impulse, the 3rd wave up is followed by a 4th wave correction down and then another 5th wave higher. Intermediate wave-iii of major-3 has topped, and wave-iv is now underway, which means wave-v of major-3 is still pending.

For now, I anticipate the SPX to bottom out soon (green minor wave-a in Figure 1 above) at ideally SPX4310-4335, and at a minimum, provide us with a strong bounce (green minor wave-b) before heading lower again. However, there are by then already enough waves in place to call the correction complete: three waves (a,b,c). Besides, I expect wave-v of wave-3 to complete around SPX4800-5000. Thus it is soon time to look for higher price, be it for a bounce (to possibly as high as SPX4600) or a new rally.

Bottom line: the correction I anticipated nine days ago is unfolding. I am now looking for a bottom soon in the SPX4310-4335 region before expecting a significant bounce at a minimum, possibly already a new rally. Namely, ideally, this correction should last longer and reach SPX4250+/-20, but there are soon enough waves in place to consider it complete. And in a Bull market, it is prudent to respect the upside.

For a look at all of today’s economic events, check out our economic calendar.

E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – Weakens Under 14920.25, Strengthens Over 15069.75

December E-mini NASDAQ-100 Index futures are trading lower at the mid-session as global technology shares take a hit across the board. No sector or subsector is safe from heavy selling pressure during today’s session. The catalysts behind the sell-off are worries over the strength of the global market recovery and fear that economic problems in China will spread to other financial markets.

At 17:10 GMT, December E-mini NASDAQ-100 Index futures are trading 14887.50, down 438.50 or -2.86%.

In stock related news, Advanced Micro Devices Inc is the performing the worst, down 3.22%. Adobe Inc is down 2.28%. Align Technology is off by 2.50%, Amazon.com Inc is weaker by 3.53% and Amgen Inc is trading 1.70% lower.

Daily December E-mini NASDAQ-100 Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum is trending lower.  A trade through 14699.00 will change the main trend to down. A move through 15702.25 will signal a resumption of the uptrend.

The minor trend is down. This is controlling the momentum. A trade through 15532.50 will change the minor trend to up.

The short-term range is 14437.00 to 15702.25. The index is currently testing the lower end of its retracement zone at 15069.75 to 14920.25.

The main range is 13450.00 to 15702.25. If the main trend changes to down then look for the selling to possibly extend into its retracement zone at 14576.00 to 14310.25.

The minor range is 14699.00 to 15702.25. Its 50% level at 15200.75 is additional resistance.

Daily Swing Chart Technical Forecast

The direction of the December E-mini NASDAQ-100 Index into the close on Monday is likely to be determined by trader reaction to 14920.25.

Bearish Scenario

A sustained move under 14920.25 will indicate the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly extend into the main bottom at 14699.

Taking out 14699 will change the main trend to down and could trigger an acceleration into the retracement zone at 14576.00 to 14310.25. Look for buyers on the first test of this area.

Bullish Scenario

A sustained move over 14920.50 will signal the return of buyers. This could create a lowered rally with potential upside targets coming in at 15069.75 and 15200.75.

Overtaking 15200.75 will indicate the buying is getting stronger. Overcoming 15326.00 will put the index in a position to form a potentially bullish closing price reversal bottom.

For a look at all of today’s economic events, check out our economic calendar.

E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Weak Under 33826, Strong Over 34132

December E-mini Dow Jones Industrial Average futures are down sharply at the mid-session on Monday as concerns about the pace of a global recovery spurred a sell-off across sectors at the start of a week in which the Federal Reserve will decide on potentially tapering its pandemic-era stimulus.

At 16:42 GMT, December E-mini Dow Jones Industrial Average futures are trading 33739, down 723 or -2.10%.

In stock related news, Dow Component Caterpillar Inc is down 4.86%. Goldman Sachs Group Inc is off by 4.4%, followed by American Express and JPMorgan Chase & Co, which are both lower by 3.47%. Dow Inc is down 3.28%.

Daily December E-mini Dow Jones Industrial Average

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The next major downside target is the July 19 main bottom at 33533, followed by the June 21 main bottom at 32835.

A trade through 35383 will change the main trend to up. This is highly unlikely, but due to the prolonged move down in terms of price and time, traders should start watching for a closing price reversal bottom chart pattern. This would change the trend, but if confirmed, it could trigger the start of a 2 to 3 day correction.

The main range is 32835 to 35429. The Dow just crossed over to the weak side of its retracement zone at 33826 to 34132, making it new resistance.

Daily Swing Chart Technical Forecast

The direction of the December E-mini Dow Jones Industrial Average into the close on Monday is likely to be determined by trader reaction to 33826.

Bearish Scenario

A sustained move under 33826 will indicate the presence of sellers. If this move continues to generate enough downside momentum then look for the selling to extend into 33533. Taking out this level could trigger an acceleration to the downside with 32835 the next likely target.

Bullish Scenario

A sustained move over 33826 will signal the return of buyers. If this move generates enough upside momentum then look for a possible intraday surge into 34132. Overtaking this area could put the Dow in a position to close higher for the session and thus form a closing price reversal bottom.

For a look at all of today’s economic events, check out our economic calendar.

China Evergrande Contagion Concerns Rile Global Markets

Shares in Evergrande, which has been scrambling to raise funds to pay its many lenders, suppliers and investors, closed down 10.2% at HK$2.28 on Monday, after earlier plummeting 19% to its weakest level since May 2010.

Regulators have warned that its $305 billion of liabilities could spark broader risks to China’s financial system if its debts are not stabilised.

World shares skidded and the dollar firmed as investors fretted about the spillover risk to the global economy. U.S. stocks were sharply lower, with the S&P 500 down nearly 2%.

A major test comes this week, with Evergrande due to pay $83.5 million in interest relating to its March 2022 bond on Thursday. It has another $47.5 million payment due on Sept. 29 for March 2024 notes.

Both bonds would default if Evergrande fails to settle the interest within 30 days of the scheduled payment dates.

In any default scenario, Evergrande, teetering between a messy meltdown, a managed collapse or the less likely prospect of a bailout by Beijing, will need to restructure the bonds, but analysts expect a low recovery ratio for investors.

Evergrande’s troubles also pressured the broader property sector, with Hong Kong-listed shares of small-sized Chinese developer Sinic Holdings down 87%, wiping $1.5 billion off its market value before trading was suspended.

Evergrande executives are working to salvage its business prospects, including by starting to repay investors in its wealth management products with real estate.

“(Evergrande’s) stock will continue to fall, because there’s not yet a solution that appears to be helping the company to ease its liquidity stress, and there are still so many uncertainties about what the company will do in case of a restructuring,” Kington Lin, managing director of Asset Management Department at Canfield Securities Limited, said.

Lin said Evergrande’s shares could fall to below HK$1 if it is forced to sell most of its assets in a restructuring.

“As of right now, I don’t see any systemic risk for the global economy from the Evergrande situation, but there doesn’t need to be any systemic risk in order for markets to be affected,” David Bahnsen, chief investment officer, The Bahnsen Group, a wealth management firm based in Newport Beach, Calif, said in emailed commentary.

There was some confidence, however, that the situation would be contained.

“Beijing has demonstrated in recent years that it is fully able and willing to step in to stem widespread contagion when major financial/corporate institutions fail,” Alvin Tan, FX Strategist at RBC Capital Markets, said in a research note.

DOLLAR BONDS

Despite mounting worries about the future of what was once the country’s top-selling property developer, analysts, however, have played down comparisons to the 2008 collapse of U.S. investment bank Lehman Brothers.

“First, the dollar bonds will likely get restructured, but most of the debt is in global mutual funds, ETFs, and some Chinese companies and not banks or other important financial institutions,” said LPL Financials’ Ryan Detrick.

“Lehman Brothers was held on nearly all other financial institution’s books,” he said. “Secondly, we think the odds do favor the Chinese communist government will get involved should there be a default.”

Policymakers in China have been telling Evergrande’s major lenders to extend interest payments or rollover loans, but market watchers are largely of the view that a direct bailout from the government is unlikely.

The People’s Bank of China, its central bank, and the nation’s banking watchdog summoned Evergrande’s executives in August in a rare move and warned that it needed to reduce its debt risks and prioritise stability.

Trading of the company’s bonds underscore just how dramatically investor expectations of its prospects have deteriorated this year.

The 8.25% March 2022 dollar bond was traded at 29.156 cents on Monday, yielding over 500%, compared to 13.7% at the start of year. The 9.5% March 2024 bond was at 26.4 cents, yielding over 80%, compared to 14.6% at the start of 2021.

PROPERTY PUNISHED

Goldman Sachs said last week that because Evergrande has dollar bonds issued by both the parent and a special purpose vehicle, recoveries in a potential restructuring could differ between the two sets of bonds, and the process may be prolonged.

Investors, meanwhile, are increasingly worried about the contagion risk, mainly in the debt-laden Chinese property sector, which along with the yuan came under pressure on Monday.

The yuan fell to a three-week low of 6.4831 per dollar in offshore trade.

Hong Kong-listed Sinic, which saw massive selling pressure, has nearly $700 million in offshore debts maturing before June 2022, including $246 million due in a month — a bond which has tumbled to around 89 cents on the dollar.

Sinic has a junk rating from Fitch, which downgraded its outlook to negative on Friday.

Other property stocks such as Sunac, China’s No.4 property developer, tumbled 10.5%, while state-backed Greentown China shed around 6.7%.

Guangzhou R&F Properties Co said on Monday it was raising as much as $2.5 billion by borrowing from major shareholders and selling a subsidiary, highlighting the scramble for cash as distress signals spread in the sector.

For a look at all of today’s economic events, check out our economic calendar.

($1 = 7.7863 Hong Kong dollars)

(Reporting by Clare Jim; additional reporting by Tom Westbrook and Alun John; Writing by Sumeet Chatterjee; Editing by Shri Navaratnam; Mark Potter and Alexander Smith)

S&P 500 Price Forecast – Stock Markets Break Trendline

The S&P 500 has fallen hard during the trading session on Monday, breaking below a major trendline. Furthermore, the market is below the 50 day EMA, something that catches a lot of people’s attention. With this being the case, it is very likely that the 4350 level is an area where we have seen a little bit of support. At this point though, it looks as if the market is trying to break down rather significantly, and if that is going to be the case, then I might be a buyer of puts. I will not get crazy to the short side, because quite frankly it is just so difficult to imagine a scenario where I am comfortable shorting a market that is so highly manipulated. At this point, the market is struggling overall, and I would be cautious about anything the Federal Reserve says or does.

S&P 500 Video 21.09.21

The 4300 level being broken probably opens even more stringent selling, but again, I would not be short of this market, rather I would be a buyer of puts. If we turn around to take out the top of the candlestick for the trading session on Monday, that would be a very bullish sign, and eventually make this a “false breakout”, something that causes a lot of trouble for short sellers.

Regardless, this is a market that I think will eventually find a reason to go higher, if for no other reason than the Federal Reserve stepping in and jawboning the market, or perhaps getting involved in the bond market. Yes, there are a lot of concerns out there when it comes to credit situations in China, but that being said Wall Street always seems to have a narrative that it hangs on to to start buying again.

For a look at all of today’s economic events, check out our economic calendar.

Why Twitter Stock Is Under Pressure Today

Twitter Agrees To Pay $809.5 Million To Settle Class Action Lawsuit

Shares of Twitter found themselves under pressure after the company announced that it had entered into a binding agreement to settle class action securities lawsuit for $809.5 million. This lawsuit commenced back in 2016. The copmany stated that it settled the lawsuit “without any admission, concession or finding of any fault, liability or wrongdoing”.

According to the press release, Twitter intends to use cash on the balance sheet to pay $809.5 million. This amount is expected to be paid in the fourth quarter of 2021. Twitter finished the previous quarter with more than $4 billion of cash on the balance sheet, so the settlement will not have a serious impact on the company’s liquidity.

What’s Next For Twitter Stock?

With a market capitalization that is close to $50 billion and more than $4 billion of cash on the balance sheet, Twitter can easily deal with a $809.5 million hit. At this point, current valuation valuation levels and general market sentiment present bigger risks for Twitter stock.

Analysts expect that Twitter will report earnings of $0.9 per share in 2021 and $1.2 per share in 2021, so the stock is trading at roughly 50 forward P/E. Analyst estimates have started to move lower in recent weeks, which may serve as an additional bearish catalyst for Twitter.

It remains to be seen whether Twitter will be able to trade at 50 forward P/E in case general market pullback continues and investors start to pay more attention to valuation levels. In this environment, it may be hard to justify paying 50 times future earnings for an established company in the digital space. At the same time, many traders may be ready to buy stocks after notable pullbacks, and Twitter shares have already declined from the $73 level in July to $60.

For a look at all of today’s economic events, check out our economic calendar.

S&P 500 Is Poised to Open Much Lower, Is This a Dip-buying Opportunity?

The broad stock market index broke below its short-term consolidation on Friday, as the S&P 500 index fell below its recent local lows along 4,450 price level. On September 2 the index reached a new record high of 4,545.85. Since then it has lost almost 120 points. This morning stocks are expected to open much lower following big declines in Asia and Europe after news about Evergrande Real Estate Group crisis in China.

The nearest important support level of the broad stock market index is now at 4,300-4,350 and the next support level is at 4,200. On the other hand, the nearest important resistance level is now at 4,400-4,450, marked by the previous support level. The S&P 500 broke below its over four-month-long upward trend line, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):

Dow Jones Is Leading Lower

Let’s take a look at the Dow Jones Industrial Average chart. The blue-chip index broke below a potential two-month-long rising wedge downward reversal pattern recently. It remained relatively weaker in August – September, as it didn’t reach a new record high like the S&P 500 and the Nasdaq. Today it may sell off to 34,000 level or lower. The next support level is at around 33,250-33,500 and the resistance level is at 34,500, marked by the recent support level, as we can see on the daily chart:

Apple Breaks Below Upward Trend Line

Apple stock weighs around 6.3% in the S&P 500 index, so it is important for the whole broad stock market picture. In early September it reached a new record high of $157.26. And since then it has been declining. So it looked like a bull trap trading action. We can still see negative technical divergences between the price and indicators and a potential topping pattern. The stock is breaking below an over two-month-long upward trend line.

September Last Year – S&P 500 Fell Almost 11%

In 2020, the S&P 500 index reached a local high of 3,588.11 on September 2 and in just three weeks it fell 10.6% to local low of 3,209.45 on September 24. This year, September’s downward correction has started from the new record high of 4,545.85 on September 3, so there is a striking similarity between those two trading actions.

Conclusion

The S&P 500 index broke below its short-term consolidation on Friday and today it will most likely accelerate the downtrend from the early September record high. However, later in the day we may see some short-term/ intraday bottoming trading action.

The market seems overbought, and we may see some more profound downward correction soon. Therefore, we think that the short position is justified from the risk/reward perspective.

Here’s the breakdown:

  • The market is extending its downtrend today, as the S&P 500 index is likely to open much below 4,400 level.
  • Our speculative short position is still justified from the risk/reward perspective.
  • We are expecting a 5% or bigger correction from the record high.

Like what you’ve read? Subscribe for our daily newsletter today, and you’ll get 7 days of FREE access to our premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

Thank you.

For a look at all of today’s economic events, check out our economic calendar.

Paul Rejczak,
Stock Trading Strategist
Sunshine Profits: Effective Investments through Diligence and Care

* * * * *

The information above represents analyses and opinions of Paul Rejczak & Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. At the time of writing, we base our opinions and analyses on facts and data sourced from respective essays and their authors. Although formed on top of careful research and reputably accurate sources, Paul Rejczak and his associates cannot guarantee the reported data’s accuracy and thoroughness. The opinions published above neither recommend nor offer any securities transaction. Mr. Rejczak is not a Registered Securities Advisor. By reading his reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees, affiliates as well as their family members may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Pfizer Close to Long-Term Buying Opportunity

Pfizer Inc. (PFE) and BioNTech SE (BNTX) released positive data on their COVID-19 vaccine for ages 5 to 11 on Monday but the stock is losing ground with the broad market, adding to a five-week slide that’s already relinquished more than 16%.  The decline is roughly tracking the slow rollover of U.S. Delta infections and another slowdown in daily vaccinations. Last week’s FDA advisory meeting didn’t help, with the group declining to recommend broad-based booster shots.

Pulling Back from August Breakout

The pharmaceutical giant has gained 17% so far in 2021 despite the latest downturn, with a good portion of selling pressure generated by a rotation out of pandemic plays. However, the last six months have proved how difficult it will be to transition from pandemic to endemic, especially with billions around the world still unvaccinated. Taken together with Pfizer’s bullish breakout pattern, the current decline should offer a low risk buying opportunity.

Approval for ages 5 to 11 will open eligibility to more than 50 million new vaccinations in the EU and USA. As the business partners noted on Monday, “Pfizer and BioNTech plan to share these data with the FDA, European Medicines Agency (EMA) and other regulators as soon as possible. For the United States, the companies expect to include the data in a near-term submission for Emergency Use Authorization (EUA) as they continue to accumulate the safety and efficacy data required to file for full FDA approval in this age group.”

Wall Street and Technical Outlook

Wall Street consensus is surprisingly lukewarm, with a ‘Hold’ rating based upon 4 ‘Buy’, 15 ‘Hold’, and 1 ‘Underweight’ recommendation. No analysts are recommending that shareholders close positions. Price targets currently range from a low of $39 to a Street-high $61 while the stock is set to open Monday’s session on top of the median $44 target. While this placement indicates that Pfizer is fairly-valued, it’s also likely that analysts are underestimating the vaccine’s long-term revenue potential.

Pfizer topped out at 44.05 in 2018 and sold off to a six-year low during 2020’s pandemic decline. A volatile recovery finally reached the prior peak in August 2021, setting off an immediate breakout that posted an all-time high at 51.86 less than three weeks later. The pullback into September is now approaching a zone of strong support near 40, raising odds for a buy-the-dip wave that confirms the breakout and sets the stage for strong 2022 upside.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Stocks Retreat Amid Global Sell-Off

All Eyes On China

S&P 500 futures are under significant pressure in premarket trading as traders focus on the potential collapse of China Evergrande Group, which has amassed more than $300 billion in liabilities.

Fears of another financial crisis coming out of Asia pushed global indices towards multi-week lows, but it remains to be seen whether the impact of a potential Evergrande default will have widespread consequences.

Traders are also nervous ahead of the Fed meeting, although Fed Chair Jerome Powell will likely try to calm markets and reiterate his usual dovish message on September 22.

Global Rush To Safety

The yield of 10-year Treasuries has moved away from recent highs and is trying to settle below 1.30% as traders buy U.S. government bonds to protect themselves from the potential correction in riskier markets.

The U.S. dollar is also moving higher due to its safe-haven status. The U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, is trying to settle above the resistance at 93.40. In case this attempt is successful, it will move towards yearly highs near 93.75 which may put more pressure on stocks.

Interestingly, gold is gaining ground despite strong dollar as falling yields and demand for safe-haven assets have provided sufficient support. In this environment, gold mining stocks may rebound from yearly lows.

WTI Oil Tries To Settle Below The $70 Level

WTI oil is currently trying to settle below the support at the psychologically important $70 level as traders fear that Evergrande’s financial problems may have a notable negative impact on China’s economy and cut demand for oil.

Most other commodities are also under pressure, and the market mood is very bearish today. Premarket trading indicates that oil-related stocks will find themselves under huge pressure at the beginning of today’s trading session so traders should be prepared for fast moves.

For a look at all of today’s economic events, check out our economic calendar.

Daily Gold News: Monday, Sep. 20 – Gold Going Sideways Despite Stock Market’s Rout

The gold futures contract lost 0.30% on Friday, as it fluctuated following Thursday’s decline of 2.12%. On Thursday, it broke below the recent local lows as series of the U.S. economic data releases along with the rallying U.S. dollar led to a sell-off in precious metals. The yellow metal came back to $1,750 price level. This morning the market is extending a short-term consolidation along that support level, as we can see on the daily chart (the chart includes today’s intraday data):

Today gold is 0.2% higher, as it is trading slightly above $1,750 price level. What about the other precious metals? Silver is 0.1% lower, platinum is 1.8% lower and palladium is 3.0% higher. So precious metals’ prices are mixed this morning.

Friday’s Consumer Sentiment release has been slightly worse than expected at 71.0. Today we will get the NAHB Housing Market Index release at 10:00 a.m. But the markets will be waiting for Wednesday’s FOMC Monetary Policy Statement release.

Below you will find our Gold, Silver, and Mining Stocks economic news schedule for the next two trading days:

Monday, September 20

  • 10:00 a.m. U.S. – NAHB Housing Market Index
  • All Day, Canada – Federal Election
  • All Day, China – Bank Holiday

Tuesday, September 21

  • 8:30 a.m. U.S. – Housing Starts, Building Permits, Current Account
  • Tentative, Japan – Monetary Policy Statement, BOJ Policy Rate

For a look at all of today’s economic events, check out our economic calendar.

Paul Rejczak
Stock Selection Strategist
Sunshine Profits: Analysis. Care. Profits.

* * * * *

Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Say Bye-Bye to Major Supports. We May Not See Those Levels for a While

And it happened! The bears were talking about this for a long time and it finally happened; a bearish correction. The price broke the long-term up trendline on the SP500 and is aiming lower. The target for the drop is still far away, so it might be nice to buckle up.

The DAX also dropped like a rock after the breakout of the long-term up trendline and the neckline of the triple top formation. The next target: 14100 points.

Although indices are sliding, gold is not climbing higher. A stronger dollar is definitely not helping.

The GBPUSD came back inside the falling wedge pattern. That’s definitely negative.

The CADJPY is aiming for the 38,2% Fibonacci to test it as a crucial support.

The EURNZD is inside a small sideways trend. A breakout from it, will show us a direction.

The EURJPY has failed to create the inverse head and shoulders pattern and dropped lower.

The USDJPY bounced from the upper line of the triangle and brought us a sell signal with the target being on the lower line of this pattern.

For a look at all of today’s economic events, check out our economic calendar.

Equinor Wins Permission to Hike Troll, Oseberg Gas Exports, DN Reports

The increase would be valid for the next gas year, which starts on Oct. 1 and runs for 12 months, the minister was quoted as saying. He did not say by how much the production would be increased.

Equinor and the ministry were not immediately available for comment.

Day-ahead gas prices at the Dutch TTF hub, a European benchmark, have more than tripled this year to record levels, driving up power prices as the winter heating season approaches with below-average levels of gas in storage.

The situation is prompting Britain to consider state-backed loans to energy firms and big suppliers to ask for government support to cover the cost of taking on customers from companies that have gone bust.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Terje Solsvik and Victoria Klesty, editing by Gwladys Fouche)