American Indices Moving in Opposite Directions

American Indices are currently moving in opposite directions. The tech-heavy NASDAQ index is going down, aiming for the long-term up trendline while the old-school Dow Jones flirts with all-time highs after the price escaped from the pennant formation.

The German Dax is trading inside a flag formation, which is promoting a long-term breakout to the upside.

Gold is aiming higher after a successful bounce from the 1760 USD/oz support.

The USDCAD broke the lower line of the channel down formation, which should be considered an extreme weakness.

The AUDCHF tested the lower line of the symmetric triangle pattern. A breakout to the downside is very probable.

The ZARJPY shot higher after a false bearish breakout from the Head and Shoulders formation.

The EURPLN is aiming higher after a very handsome bullish engulfing pattern on the daily chart.

The USDHUF dropped like a rock after the price created a shooting star on the daily chart, which bounced from a combination of dynamic and horizontal resistances.

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

 

Divergences Could Sink McDonald’s Uptrend

Dow component McDonald’s Corp. (MCD) posted an all-time high above 238 this week, adding to a modest uptick after the company beat Q1 2021 top and bottom line estimates, earning $1.92 per-share on 8.7% revenue growth to $5.12 billion. Global comparative sales rose a healthy 7.5%, underpinned by a 13.6% surge in the United States. Foreign venues reported positive but less impressive growth, highlighting continued restrictions as a result of the pandemic.

Winning the Chicken Wars

The fast food giant noted continued expansion of digital order and delivery segments, even though seating restrictions have been eased or removed in many states. It’s looking for pent-up demand to drive positive net 2021 growth, although it hasn’t been too hard to buy a Big Mac since April 2020. The company also noted victories in the chicken sandwich wars breaking out across the nation, noting their applicants “have exceeded projections especially after 4pm”.

Telsey Advisory Group analyst Bob Derrington raised his target to $260 on Tuesday, noting the company “reported strong 1Q results which included adjusted EPS of $1.92 compared to our $1.76 estimates. McDonald’s global system sales benefited from the strategic embrace of its 3-Ds (Drive-thru, Digital, Delivery), its streamlined menu, quicker drive-thru service and the successful launch of new products across its system. That included the February launch of its new Crispy Chicken sandwich within its U.S. market, which has enjoyed robust sales”.

Wall Street and Technical Outlook

Wall Street consensus now stands at an ‘Overweight’ rating based upon 25 ‘Buy’, 2 ‘Overweight’, and 9 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions and move to the sidelines. Price targets currently range from a low of $225 to a Street-high $282 while the stock is set to open Thursday’s session about $25 below the median $260 target. Additional upside appears likely, given this relatively humble configuration.

McDonald’s topped out above 220 in August 2019 and plunged to a multiyear low during 2020’s pandemic decline. A strong recovery wave reached the prior high in September, yielding a failed breakout, followed by a rounded correction that completed a cup and handle pattern in March. The breakout into May has started slowly, with the stock trading just three or four points above new support, but this classic pattern may support much higher prices in coming months.

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. 

E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Support Moves Up to 33896 and 33688

June E-mini Dow Jones Industrial Average futures are in a position to close higher late Wednesday after the cash market Dow hit a record high earlier in the session on the back of strong performances by components technology giants Microsoft Corp and Apple Inc. Helping to dampen the rally were shares of Boeing Co, which fell 1.6%.

At 20:52 GMT, June E-mini Dow Jones Industrial Average futures are trading 34116, up 96 or +0.28%.

In other news, the ADP National Employment Report showed U.S. private payrolls increased in April as companies rushed to boost production amid a surge in demand, powered by massive government aid and rising vaccinations against COVID-19.

Daily June E-mini Dow Jones Industrial Average

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 34219 will signal a resumption of the uptrend. The main trend will change to down on a move through the nearest swing bottom at 33572.

The first minor range is 33572 to 34219. Its 50% level or pivot at 33896 is the first support.

The second minor range is 33157 to 34219. Its pivot at 33688 is another potential support level.

The short-term range is 31951 to 34219. If the main trend changes to down then its 50% level at 33085 will become the primary downside target.

Short-Term Outlook

The early trade on Thursday is likely to be determined by trader reaction to 34113.

Bullish Scenario

A sustained move over 34113 will indicate the presence of buyers. If this move creates enough upside momentum then look for the rally to possibly extend into 34219. This price is a potential trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under 34113 will signal the presence of sellers. If this move generates enough downside momentum then look for the selling to possibly extend into the first pivot at 33896.

Side Notes

Taking out 34219 on Thursday then closing lower will form a potentially bearish closing price reversal top.

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

S&P Dow Jones Brings Bitcoin, Ethereum to Wall St with Cryptocurrency Indexes

The new indexes, S&P Bitcoin Index, S&P Ethereum Index and S&P Crypto Mega Cap Index, will measure the performance of digital assets tied to them.

The list will expand to include additional coins later this year, the division of financial data provider S&P Global said.

The company first announced the plan in December when it said it would cover more than 550 of top-traded coins and that its clients will be able to create customized indices and other benchmarking tools on cryptocurrencies.

“Traditional financial markets and digital assets are no longer mutually exclusive markets,” said Peter Roffman, global head of innovation and strategy at S&P Dow Jones Indices.

The indexes will use data from New York-based virtual currency company Lukka.

Bitcoin, the most popular cryptocurrency, has seen a wild rally in prices after backing from high-profile companies including Tesla and Bank of NY Mellon. Its price, however, has come off its record highs.

Ethereum, meanwhile, touched a record high on Monday after rising above $3,000 for the first time over the weekend.

(Reporting by Niket Nishant in Bengaluru; Editing by Shailesh Kuber and Arun Koyyur)

Stock Buybacks: Why Would a Company Reinvest in Themselves?

U.S. corporate buybacks are on the rise in 2021 lifting investor spirits after last year’s pandemic dampened activity. While most investors are eager to see how much buybacks may support their investments, some are confused over what they are and how they work, and whether they are actually good or bad for a company’s stock price.

Corporations often buy back large blocks of their stocks typically when share prices are low, but some may choose for other reasons to buy their company’s stock even when analysts believe company shares are overvalued. Whether they buy their shares at cheap or expensive levels, a stock buyback is not always beneficial for individual investors.

Table of contents

Historic Background

Stock repurchases weren’t always legal per se. After the stock market crash of 1929 and the Great Depression, the U.S. government passed the Securities Act of 1933 and the Securities Exchange Act of 1934 to try to prevent it from happening again.

The 1934 legislation didn’t bar stock buybacks, per se, but it barred companies from doing anything to manipulate their stock prices. Companies knew that if they did a stock buyback, it could open them up to accusations from the Securities and Exchange Commission (SEC) of trying to manipulate their stock price, so most just didn’t.

Tax cuts during the Trump administration made stock repurchases very popular as corporations spent billions on their own stock to reward shareholders and investors. However, corporate executives and insiders have also been accused of taking advantage of the stock buyback boom to sell shares they own to the companies they work for, profiting handsomely. Companies are spending millions or billions of dollars to reward shareholders and prop up their stock prices with buybacks, even if that means laying off workers to do it.

Recently, the Biden Administration announced it was planning on reforming current tax laws. If corporations begin to fear that some of the tax advantages of a stock buyback may be reduced or eliminated then this may encourage companies to become more active in 2021 before the tax changes become law.

What is a Stock Buyback?

A stock buyback, also known as a share repurchase, takes place when a corporation buys its own outstanding shares in order to reduce the number of shares available on the open market.

In a stock buyback, a company repurchases its own shares from the broader marketplace, usually through the open market. That leaves the remaining shareholders with a bigger chunk of the company and increases the earnings they reap per share, on top of the regular dividend payments that companies make to shareholders out of their profits.

Why Companies Perform Buybacks

Corporations buy back shares for a number of reasons such as to increase the value of remaining shares available by reducing the supply of outstanding shares or to prevent other shareholders from taking a controlling stake, sometimes called a hostile takeover.

Another reason for a buyback is for compensation purposes. Companies often award their corporate employees with stock and stock options. This benefits the existing shareholders and board members who are usually paid in stock options.

Pros of Stock Buybacks for Investors

  1. Boost in share prices
  2. Rising dividends
  3. Better earnings per share
  4. Less excess cash
  5. Positive psychology

“With the market being as expensive as it seems, share repurchases could drive the market that much higher,” said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut.

“It adds to the Street’s belief that there’s an underlying bid, we’re not in this alone, and someone else is going to support the stock and that’s the company,” he said. “It turns out to be a good thing for share prices. But they run the risk of overvaluing stocks, and it speaks to the broader question about why companies are doing it.”

Cons of Stock Buybacks for Investors

  1. Poor predictions
  2. Sinking dividends
  3. Poor use of capital
  4. Management self-interest
  5. Cover for stock handouts

Larry Fink, CEO of BlackRock, one of the largest investment companies in the world, in 2014 warned U.S. companies to slow down on buybacks and dividends.

“We certainly believe that returning cash to shareholders should be part of a balanced capital strategy; however, when done for the wrong reasons and at the expense of capital investment, it can jeopardize a company’s ability to generate sustainable long-term returns,” he wrote in a letter.

Recent Activity Indicates Companies Leaning to the Pro Side

The rapidly improving economy and stocks at record highs may be fueling a flurry of stock buyback activity in 2021.

Banks have improved their capital positions and should be allowed to continue to buy back their own shares, Treasury Secretary Janet Yellen said in March.

Regulators restricted share repurchases in 2020 for the biggest institutions in the country as a precautionary measure after COVID-19 reached pandemic status. After those banks passed a pandemic-focused stress test in December, the Federal Reserve said it would allow buybacks to resume, though with some restrictions.

Yellen, speaking in March before the Senate Committee on Banking, Housing and Urban Affairs, said she agreed with allowing the share buybacks.

“I have been opposed earlier when we were very concerned about the situation the banks would face about stock buybacks,” Yellen said. “But financial institutions look healthier now, and I believe they should have some of the liberty provided by the rules to make returns to shareholders.”

They are expected to do just that as the buyback restrictions eased during the first quarter of 2021.

While Yellen see no problem with financial institutions resuming buyback activity, Warren Buffett’s capital-deployment machine pulled back on several fronts at the start of the year as the billionaire took a more cautious stance on stocks.

Berkshire Hathaway Inc slowed its buyback pace, according to a regulatory filing Saturday. Buffett has struggled in recent years to keep up with Berkshire’s ever-gushing cash flow. That’s led him to repurchase significant amounts of Berkshire stock, pulling a lever for capital deployment that he had previously avoided in favor of big acquisitions or stock purchases. He set a record in the third quarter of last year, snapping up $9 billion of stocks, but slowed that pace during the first quarter with repurchases of $6.6 billion.

Berkshire repurchased more stock in January and February than the company did in March when the stock climbed 5.8% according to the filing. Buffett’s long been disciplined on the price of buybacks, noting in 2018 when the company loosened its repurchase policy that he and his longtime business partner and Berkshire Vice Chairman Charlie Munger can repurchase shares when they’re below Berkshire’s intrinsic value.

Despite buybacks that fell short of Buffett’s quarterly record, the billionaire investor has continued to go after Berkshire’s own stock since the end of March, with at least $1.25 billion of repurchases through April 22, according to the filing. And given that Berkshire has no set amount allocated for buyback plans, sizable repurchases are still a nice bit of capital deployment, according to CFRA Research analyst Cathy Seifert.

“The fact that Berkshire allocated over $6 billion to buybacks this quarter is going to be positively received by investors” Seifert said.

What Bloomberg Intelligence Says

“The $6.6 billion 1Q buyback was an expected drop from 4Q, but still significant. Nearly all segments showed accelerated revenue and earnings.”

Share Buyback Plans are Booming

Corporate buyback announcements ‘exploded’ as trading in April wrapped up and that helped push stocks higher, said Vanda Research.

A jump in buybacks should help soften the blow in the U.S. equity market in the event of a drawdown.

“As net equity supply shrinks every dollar invested in the U.S. market will have a larger marginal impact,” said Vanda.

E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Jumps after Breaking Out Over Pivot

June E-mini Dow Jones Industrial Average futures are trading higher shortly after the cash market opening on Monday, boosted by shares tied to the economic reopening. Dow components Disney, Caterpillar and Travelers Companies were all up about 1%.

Another component, Verizon, rose 0.9% after the telecom giant said it will sell its media group to private equity firm Apollo Global Management for $5 billion. The sale allows Verizon to offload properties from the former internet empires of AOL and Yahoo.

At 13:47 GMT, June E-mini Dow Jones Industrial Average futures are trading 34003, up 236 or +0.70%.

In economic news, U.S. Final Manufacturing PMI came in at 60.5, missing the 60.7 forecast and 60.6 previous reading.

Daily June E-mini Dow Jones Industrial Average

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 34144 will signal a resumption of the uptrend. A move through 31951 will change the main trend to down.

The minor trend is down. A trade through 34066 will change the minor trend to up.

The first minor range is 34144 to 33572. The Dow is currently trading on the bullish side of its pivot at 33858.

The second minor range is 33157 to 34144. Its 50% level at 33651 is support. It is also a potential trigger point for an acceleration to the downside.

The main range is 31951 to 34144. Its 50% level at 33048 is major support.

Daily Swing Chart Technical Forecast

The direction of the June E-mini Dow Jones Industrial Average on Monday is likely to be determined by trader reaction to 33858.

Bullish Scenario

A sustained move over 33858 will indicate the presence of buyers. The first upside target is the minor top at 34066, followed by the main top at 34144. The latter is a potential trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under 33858 will signal the presence of sellers. This could trigger a break into the second pivot at 33651, followed by the minor bottom at 33572. The latter is a potential trigger point for an acceleration to the downside.

The daily chart indicates there isn’t much support under 33572 with 33048 the next potential downside target.

Side Notes

Since the market traded sideways for two weeks, buyers are treating today’s move over the pivot at 33858 like an upside breakout.

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

Costco Testing Key Resistance Level

Costco Wholesale Corp. (COST) is pressing against a key resistance level in Monday’s pre-market in reaction to bullish analyst commentary. The stock is still in the red for 2021 after posting a 28% return in 2020, underpinned by its commanding retail position during the COVID-19 pandemic. Taken together with 2019’s 36% return, the underperformance isn’t usual, given the market’s classic warning that “the big the move, the broader the base”.

Post-Pandemic Economic Surge

Big box store sentiment has deteriorated this year, with rival Walmart Inc. (WMT) also posting a negative year-to-date return. Despite investor reluctance, Costco is perfectly positioned to benefit from the post-pandemic economic surge in the United States and other parts of the world, given its massive footprint in North America, Asia, Australia, and Europe. It’s also trading close enough to the 2020 high to potentially support an advance toward the 500 level.

Telsey Advisory Group analyst Joseph Feldman raised his target to $375 on Monday, noting “Costco should remain a share gainer, with its solid sales, high membership renewal rates, and square footage growth of LSD. Costco should continue to generate solid EPS growth, driven by a MSD-DD comp, MSD-HSD membership fee income growth, healthy digital growth, and lapping COVID-19 related costs. We maintain our ‘Outperform’ rating, applying a P/E multiple of ~35x to our new FY22 EPS estimate of $11.15.”

Wall Street and Technical Outlook

Wall Street consensus also stands at an ‘Overweight’ rating, based upon 19 ‘Buy’, 4 ‘Overweight’, and 10 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions and move to the sidelines. Price targets currently range from a low of $325 to a Street-high $415 while the stock is set to open Monday’s session more than $25 below the median $400 target. The Q3 2021 earnings report on May 27 could lift these targets.

Costco rallied above the February 2020 high at 325 in July and took off in a strong uptrend that posted an all-time high at 393.15 in November. It sold off more than 80 points into March and bounced strongly, grinding out a straight line recovery that stalled at the .786 Fibonacci retracement level at 375 about two weeks ago. A rally above this harmonic barrier should support a rapid advance into the 2021 peak near 400, setting off a potential breakout attempt.

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. 

Indices Start a New Month With a Drop

Gold is still holding above the 1760 USD/oz support.

The Dow Jones bounced from the upper line of the symmetric triangle pattern.

The DAX is aiming for the lower line of the rectangle formation.

The EURUSD is back inside the wedge formation, sentiment is back to negative.

The USDCAD bounced from the lower line of the wedge formation.

The EURCAD bounced after Friday’s heavy drop.

The NZDCHF broke the lower line of the rectangle pattern and then tested it as a closest resistance.

The GBPNZD broke from the sideways trend to the upside. This perfectly shows the recent negative sentiment towards the New Zealand’s currency.

The USDHUF tested the broken supports as closest resistances. When the price stays below the resistance levels, a strong sell signal will emerge.

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

The Week Ahead – Central Banks, Economic Data, and COVID-19 in Focus

On the Macro

It’s a quieter week ahead on the economic calendar, with 57 stats in focus in the week ending 7th May. In the week prior, 61 stats had been in focus.

For the Dollar:

In the 1st half of the week, private sector PMIs and ADP nonfarm employment change figures are in focus.

Expect the market’s favored ISM Non-Manufacturing PMI and ADP figures to be key.

The focus will then shift to the weekly jobless claim figures on Thursday ahead of the NFP numbers on Friday.

Expect nonfarm payroll figures and the unemployment rate to be the main area of focus late in the week.

On the monetary policy front, FED Chair Powell is scheduled to speak early in the week. The markets will be looking for any break from the script.

In the week, the Dollar ended the week up by 0.46% to 91.280.

For the EUR:

It’s also a busy the week on the economic data front.

Monday through Wednesday, private sector PMIs for Italy and Spain and German retail sales figures are in focus.

While retail sales are key, expect Italy and the Eurozone’s private sector PMIs to be key.

Late in the week, the German economy is back in focus.

German factory orders, industrial production, and trade data are due out. Following some disappointing GDP numbers last week, we can expect EUR sensitivity to the stats.

On the monetary policy front, ECB President Lagarde is due to speak at the end of the week…

The EUR ended the week down by 0.64% to $1.2020.

For the Pound:

It’s a relatively quiet week ahead on the economic calendar.

Finalized private sector PMIs will be in focus in a shortened week.

Expect any revisions to the services PMI to be key.

The main event of the week, however, is the BoE’s monetary policy decision on Thursday.

While the BoE is expected to stand pat, any dissent and hawkish talk give the Pound a boost.

The Pound ended the week down by 0.39% to $1.3822.

For the Loonie:

It’s a quiet week ahead on the economic calendar.

On Tuesday, trade data for March will influence ahead of April employment and Ivey PMI figures on Friday.

Expect the employment figures to be the key driver at the end of the week.

The Loonie ended the week up 1.51% to C$1.2288 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a relatively quiet week ahead.

Key stats include manufacturing data at the start of the week and trade data on Tuesday.

Building approvals are also due out on Wednesday but will likely have a muted impact on the Aussie Dollar.

While we can expect the trade data to have the greatest impact, the RBA monetary policy decision is the main event of the week on Tuesday.

Any hawkish chatter and expect the Aussie Dollar to eye a return to $0.80 levels.

The Aussie Dollar ended the week down by 0.30% to $0.7716.

For the Kiwi Dollar:

It’s a relatively quiet week ahead.

On Wednesday, employment figures for the 1st quarter are due out ahead of building consent numbers on Thursday.

Expect the employment change figures to be key in the week. The markets will be looking from a pickup in hiring to support a sustainable economic recovery.

The Kiwi Dollar ended the week down by 0.51% to $0.7162.

For the Japanese Yen:

It is a quiet week ahead, with the Japan markets closed Monday through Wednesday.

Economic data is limited to finalized private sector PMIs for April. Barring any marked revision from prelim figures, however, we don’t expect too much impact on the Yen.

The Japanese Yen rose by 0.85 to ¥107.88 against the U.S Dollar.

Out of China

It’s a busy week ahead.

Through the 1st half of the week, the market’s preferred Caixin survey PMI numbers are due out. Expect the manufacturing PMI for April to have the greatest impact on Tuesday.

At the end of the week, April trade figures will also be in focus.

A continued surge in both imports and exports would support riskier assets.

The Chinese Yuan ended the week up by 0.33% to CNY6.4749 against the U.S Dollar.

Geo-Politics

U.S and China and U.S and Russia relations remain the main areas of focus in the week ahead.

The markets will also need to monitor any chatter from Iran, however.

Corporate Earnings

While a number of the big names have released earnings results, a large number are still scheduled to release results in the week ahead.

From the U.S, big names include CVS Health Corp (Tues), ICHOR Holdings (Tues), and FOX Corp (Wed).

US Stocks – Apple, Alphabet Drag Wall Street Lower on Friday, but S&P 500 Posts 5% Gain in April

The major U.S. stock indexes closed lower on Friday, dragged down by weakness in major tech-related companies despite the release of strong quarterly earnings reports earlier in the week.

Just one day after the S&P 500 Index posted a record high close, Apple, Google-parent Alphabet and Facebook each fell more than 1%, giving back gains following upbeat quarterly numbers this week.

Cash Market Performance

In the cash market on Friday, the benchmark S&P 500 Index settled at 4181.17, down 30.30 or -0.72%. The blue chip Dow Jones Industrial Average finished at 33874.85, down 185.51 or -0.55% and the tech-driven NASDAQ Composite closed at 13962.68, down 119.87 or -0.86%.

Major Index Monthly Performances

Most of the 11 major S&P 500 sector indexes were lower, with technology and materials down more than 1%, while energy dropped 2.2%.

Despite Friday’s weakness, the S&P 500 Index notched its third straight month of gains in April, adding more than 5% to the index as investors bet on a big economic and profit recovery from the pandemic. The NASDAQ posted its six consecutive month of gains, boosted by impressive results from big technology companies. The Dow Jones finished in positive territory for the third month in a row.

Stocks on the Move

Amazon, the last of Wall Street’s mega-cap tech companies to publish results, reported a record first-quarter profit. Despite the bullish news, the stock finished down 0.11%.

Twitter plunged on user growth results and second-quarter revenue guidance that fell short of analysts’ forecasts. Twitter shares fell 15.2% on Friday.

Apple came under some slight pressure after the European Union said the company’s App Store was breaching its competition rules. The shares dropped 1.5%.

Chevron Corp shed more than 3% after its first-quarter profit fell 29%, hit by weaker refining margins and production losses.

AbbVie Inc rose 0.6% after it reported strong results and raised its 2021 earnings forecast, helped by demand for its rheumatoid arthritis drug in the Unites States.

Earnings Updates

While mega-cap favorites posted largely strong earnings in the first quarter, their shares have struggled to maintain the upward trajectory that many had coming into reporting season.

Of the 303 companies in the S&P 500 that have reported so far, 87.1% have topped analysts’ earnings estimates, with Refinitiv IBES data now predicting a 46.3% jump in profit growth.

US economic News

Data on Friday showed U.S. consumer spending rebounded in March amid a surge in income as households received additional COVID-19 pandemic relief money from the government. March spending jumped a better-than-expected 4.2%, while personal incomes surged by a massive 21.1% amid more fiscal stimulus.

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

The Weekly Wrap – Impressive Stats from the U.S Give the Greenback a Much-Needed Boost

The Stats

It was a busier week on the economic calendar, in the week ending 30th April.

A total of 61 stats were monitored, following 46 stats from the week prior.

Of the 61 stats, 30 came in ahead forecasts, with 23 economic indicators coming up short of forecasts. There were 8 stats that were in line with forecasts in the week.

Looking at the numbers, 38 of the stats reflected an upward trend from previous figures. Of the remaining 23 stats, 22 reflected a deterioration from previous.

For the Greenback, a run of 3 consecutive weekly losses came to an end. In the week ending 30th April, the Dollar Spot Index rose by 0.46% to 91.28. In the previous week, the Dollar had fallen by 0.76% to 90.859.

Out of the U.S

It was a busier week on the economic data front.

In the 1st half of the week, core durable goods and consumer confidence figures were in focus.

The stats were skewed to the positive. Core durable goods reversed a 0.3% fall, with a 1.6% rise in March.

More significantly, the CB Consumer Confidence Index jumped from 109.0 to 121.7.

In the 2nd half of the week, GDP, jobless claims, personal spending, and inflation figures were in focus.

The stats were also skewed to the positive, supporting market optimism towards the economic outlook.

In the 1st quarter, the economy expanded by 6.4%, following 4.3% growth in the 4th quarter of last year.

Jobless claims figures were also positive, with initial jobless claims falling from 566k to 553k in the week ending 23rd April.

At the end of the week, personal spending also impressed, jumping by 4.2% to reverse a 1% fall from February.

Inflationary pressures were on the rise, with the FED’s preferred Core PCE Price Index rising by 1.8% in March, year-on-year. In February, the index was up by 1.4%. Following the FED’s assurances from earlier in the week, however, the uptick had a muted impact on the markets.

On the monetary policy front, the FED stood pat on policy, which was in line with expectations. FED Chair Powell continued to reassure the markets that there would be no tapering to the asset purchasing program or shift in interest rates any time soon.

The assurances had left the Greenback on the backfoot in response.

In the equity markets, the Dow and the NASDAQ fell by 0.50% and by 0.39% respectively, while the S&P500 eked out a 0.02% gain.

Out of the UK

It was a particularly quiet week.

There were no material stats to provide the Pound with direction in the week.

The lack of stats left the Pound in the hands of market optimism towards the reopening of the economy.

In the week, the Pound fell by 0.39% to end the week at $1.3822. In the week prior, the Pound had risen by 0.70% to $1.3876.

The FTSE100 ended the week up by 0.45%, partially reversing a 1.15% fall from the previous week.

Out of the Eurozone

It was a busy week on the economic data front.

In the 1st half of the week, German business and consumer confidence waned as a result of the latest spike in new COVID-19 cases.

In the 2nd half of the week, stats were also skewed to the negative weighing on the EUR.

While the French economy managed to avoid a contraction in Q1, both Germany and the Eurozone’s economies contracted.

The contraction was aligned with ECB President Lagarde’s outlook and the latest downward revision to Germany’s economic forecasts.

Inflation for the Eurozone and member states, unemployment figures from Germany and the Eurozone, and French consumer spending figures also drew attention.

Consumer spending hit reverse in France while inflationary pressures picked up in France and across the Eurozone.

Unemployment from Germany disappointed, while the Eurozone’s unemployment rate declined from 8.2% to 8.1%.

For the week, the EUR slipped by 0.64% to $1.2020. In the week prior, the EUR had risen by 1.00% to $1.2097.

The CAC40 rose by 0.18%, while the DAX30 and EuroStoxx600 ended the week down by 0.94% and by 0.34% respectively.

For the Loonie

It was a busier week.

Retail sales figures impressed mid-week, with core retail sales and retail sales both jumping by 4.8% in February. In January, core retail sales had fallen by 1.2% and retail sales by 1.1%.

At the end of the week, February GDP and March RMPI numbers were also in focus.

The economy expanded by a further 0.4%, following 0.7% growth in January. In March, the RMPI rose by 2.3% following a 6.6% jump in February.

Continued market reaction to the previous week’s BoC outlook and policy decision also supported the Loonie.

In the week ending 30th April, the Loonie jumped by 1.51% to C$1.2288. In the week prior, the Loonie had risen by 0.22% to C$1.2476.

Elsewhere

It was a bearish week for the Aussie Dollar and the Kiwi Dollar, with a Friday pullback leaving the pair in the red.

In the week ending 30th April, the Aussie Dollar fell by 0.39% to $0.7716, with the Kiwi Dollar ending the week down by 0.51% to $0.7162.

For the Aussie Dollar

It was a quiet week.

1st quarter inflation and private sector credit figures for March were in focus in the week.

The stats were skewed to the negative, pegging the Aussie back in the week.

In the 1st quarter, the trimmed mean CPI rose by 1.1% year-on-year, its lowest annual movement on record.

Private sector credit figures were positive, however, with both personal and business credit on the rise.

For the Kiwi Dollar

It was also a quiet week.

Trade data and business confidence figures were in focus.

A narrowing of New Zealand’s trade surplus was Kiwi Dollar negative, while a pickup in business confidence provided support late in the week.

The narrowing of New Zealand’s trade surplus came as imports surged at the end of the 1st quarter. Year-on-year, New Zealand’s trade surplus narrowed from NZ$2,380m to NZ$1,690m.

In April, the ANZ Business Confidence Index rose by 6 points from a prelim -8.4 to -2.0.

For the Japanese Yen

It was a busy week.

Mid-week, retail sales figures impressed. In March, retail sales were up by 5.2%, year-on-year. In February, sales had been down by 1.5%.

At the end of the week, industrial production increased by 2.2%, reversing a 1.3% decline from February.

Deflationary pressures picked up in April, however, with Tokyo core consumer prices falling by 0.2%, year-on-year. In March, core consumer prices had fallen by 0.1%.

The Japanese Yen fell by 1.33% to ¥109.31 against the U.S Dollar. In the week prior, the Yen had risen by 0.85% to ¥107.88.

Out of China

It was a quiet week on the data front.

NBS private sector PMIs were in focus at the end of the week. The stats were skewed to the negative, however, with both service and manufacturing sector growth easing in April.

The Manufacturing PMI fell from 51.9 to 51.1, with the Non-Manufacturing PMI falling from 56.3 to 54.9.

In the week ending 30th April, the Chinese Yuan rose by 0.33% to CNY6.4749. In the week prior, the Yuan had risen by 0.37% to CNY6.4963.

The CSI300 slipped by 0.23%, with the Hang Seng ended the week down by 1.22%.

E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Downside Bias Strengthens Under 33651

June E-mini Dow Jones Industrial Average futures are trading lower late in the session on Friday as investors shrugged off a strong profit beat from e-commerce giant Amazon. Weighing on the Dow were weaker components Apple and Chevron.

Apple was trading down 1.2% late in the session after the European Union said the company’s App Store was breaching its competition rules.

Chevron, the Dow’s biggest loser, was down 3.21% after quarterly EPS failed to exceed expectations.

At 18:40 GMT, June E-mini Dow Jones Industrial Average futures were at 33767, down 184 or -0.54%.

In economic news, the PCE price index for March increased 0.5% month-over-month and 2.3% on a year-over-year basis. The Core PCE, excluding food and energy, rose 0.4% for March and 1.8% year-over-year. The PCE inflation metric is watched closely by the Federal Reserve and Chairman Jerome Powell warned earlier in the week it may show a transitory increase in prices.

The inflation numbers apparently weren’t as high as feared, as the 10-year yield remained flat after the numbers were released.

Daily June E-mini Dow Jones Industrial Average

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum is trending lower. A trade through 34144 will signal a resumption of the uptrend. The main trend will change to down on a move through 31951.

The minor trend is down. This is controlling the momentum. The minor trend will change to up on a trade through 34066. Taking out 33572 will indicate the selling pressure is getting stronger.

The minor range is 34144 to 33572. The market has been straddling its 50% level for eight straight sessions.

The second minor range is 33157 to 34144. Its 50% level at 33651 has been providing support for eight straight sessions.

The short-term range is 31951 to 34144. Its 50% level at 33048 is a key support level.

Daily Swing Chart Technical Forecast

The direction of the June E-mini Dow Jones Industrial Average into the close on Friday will be determined by trader reaction to 33858 and 33651.

Bearish Scenario

A sustained move under 33858 will signal the presence of sellers. Taking out 33651 will indicate the selling is getting stronger. This could lead to a quick test of 33572. This level is a potential trigger point for an acceleration to the downside with the next major target the pivot at 33048.

Bullish Scenario

A sustained move over 33651 will indicate the presence of buyers. Taking out 33858 will indicate the buying is getting stronger. This is a potential trigger point for an acceleration to the upside with the next targets the minor top at 34066, followed closely by the main top at 34144.

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

Terrible Month for USD but Maybe the Last Day Will Be Better

Gold attacked a crucial support again but this time with a very sharp fall.

Brent oil initiated a bearish correction.

The Dow Jones is still in a pennant waiting for a breakout.

The DAX is still in a rectangle pattern also patiently waiting for a direction.

The EURUSD has started a bearish correction.

The Canadian Dollar is still going stronger.

The EURAUD is in a symmetric triangle waiting for a breakout.

The AUDCHF is in a similar situation.

The EURNZD is also waiting to end the sideways trend but in this case, the price is locked inside of a rectangle.

The AUDJPY defends a crucial support level after the bullish breakout from the triangle. It’s an interesting opportunity in terms of risk to reward ratio.

The ZARJPY defends the neckline of the head and shoulders formation.

The USDHUF is in a long-term sell signal after the price drops below the major support.

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

Strong U.S. Equities, Bond Yields, and GDP Put Pressure on Gold

These events resulted in an extended trading range for gold. Gold traded to an intraday high of $1789.90 a low of $1756.60, and gold futures moved back to near on changed. As of 4:40 PM EST, the most active June 2021 Comex contract was fixed at $1772, which is the result of a $1.90 decline.

gold April 29

There were multiple factors that pressured gold today, the first of which was an exceedingly strong report on the gross domestic product of the United States. Today the Commerce Department released an advance estimate of the first quarter GDP for 2021. The official government website said that “Real gross domestic product (GDP) increased at an annual rate of 6.4 percent in the first quarter of 2021 (table 1), according to the “advance” estimate released by the Bureau of Economic Analysis. In the fourth quarter of 2020, real GDP increased 4.3 percent. The GDP estimate released today is based on source data that are incomplete or subject to further revision by the source agency. The “second” estimate for the first quarter, based on more complete data, will be released on May 27, 2021.”

The official website said that the real increase in GDP for the first quarter of 2021 was a reflection of increases in PCE (personal consumption expenditures), nonresidential fixed investment, government spending, residential fixed investment, and state and local government spending. These expenses were partially offset by decreases in private inventory investments and exports.

Investors today turned to U.S. equities favoring the risk-on asset class, which also pressured gold. The Standard & Poor’s 500 traded to a new all-time record high of 4211.47, a net gain of 28.29 points (+0.68%). Although the Dow Jones Industrial Average did not trade to a new record high, it gained almost 0.75%, which is a net gain of 239.98 points and closed at 34,060. The NASDAQ composite gained +0.22% today and is currently fixed at 14,082.5461.

Lastly, U.S. 10-year Treasury notes gained +0.18 today and currently have a yield of 1.638%. Today’s rise in the yield of 10-year notes followed the release of the first-quarter GDP estimates. The 30-year Treasury bond gained approximately two basis points, currently yielding 2.32%.

The latest numbers indicating strong growth, as reflected in the most current estimates of GDP, set the wheels in motion for both a strong finish in U.S. equities and rising yields in U.S. bonds. Concurrently they also pressured gold prices resulting in today’s low of $1754.60.

It seems as though market participants are disregarding the recent swelling of the national debt as well as the Federal Reserve’s balance sheet, which currently stands well in excess of $7 trillion. The economic fallout from these increasingly expensive burdens on the U.S. does not seem to affect the optimism for strong economic growth in the United States.

For more information on our service, simply use this link.

Wishing you, as always, good trading and good health,

Gary Wagner

Apple Trading Higher After Blowout Quarter

Dow component Apple Inc. (AAPL) is trading higher by nearly 3% in Thursday’s pre-market after beating Q2 2021 top and bottom line estimates by wide margins, posting a profit of $1.40 per-share on $89.58 billion in revenue. The tech icon beats expectations across all product categories, led by iPhone sales of $47.9 billion, which fueled an overall 53.6% year-over-year   revenue increase. Guidance for double digit year-over-year Q3 growth and a 7% dividend increase capped off the highly bullish presentation.

Strong Sales Across the Board

Installed base upgrades to 5G iPhone 12 models added considerable revenue during the quarter while iPad posted the strongest March sales ever.  Even Mac got into the act, wrapping up the best three quarters in the company’s history. Sales grew by double digit percentages in all geographical regions, highlighting the impact of massive U.S. stimulus and a slow worldwide recovery from the COVID-19 pandemic.

Goldman Sachs analyst Rod Hall cried “Uncle” after the report, upgrading Apple from ‘Sell’ to ‘Neutral’, noting “We are upgrading our rating after Apple posted another large beat and implied a raise vs. our June revenue expectations. Our original view that the iPhone cycle would disappoint in the midst of COVID was clearly wrong. Not only has Apple done better than we expected on iPhone during the cycle but Mac and iPad have also materially outperformed our forecasts”.

Wall Street and Technical Outlook

Wall Street consensus currently stands at an ‘Overweight’ rating based upon 24 ‘Buy’, 4 ‘Overweight’, 10 ‘Hold’, 1 ‘Underweight’, and 1 ‘Sell’ recommendation. The blowout quarter should lift ratings and targets in coming sessions but it might not be enough to trigger a new trend advance. Price targets currently range from a low of $83 to a Street-high $185 while the stock is set to open Thursday’s session about $23 below the median $160 target.

Apple returned to February 2020 resistance in the low 80s in May and broke out, entering a strong uptrend that stalled at 138 on Sept 2, just two days after the 4-for-1 split. A swift decline to 103 got bought aggressively but a January breakout failed after just four sessions, reinforcing resistance between 138 and 145. Price action is now pushing against the lower edge of this zone but adverse cycles predict the trading range will be hard to break in the short term.

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. 

Gold With a Bounce From a Crucial Support

Gold is bouncing from a crucial support with a hammer formation on the daily chart.

Silver is still in a a mid-term channel up formation.

The SP500 is at the all-time highs.

The Dow Jones and Dax are still inside a pennant, in both cases we’re waiting for a breakout.

The EURUSD is still moving upwards.

The USDCAD is moving lower after a false breakout from the down trend. The Bank of Canada (BoC) is helping the situation.

The EURCAD is also moving lower but the drop is slowed down by a stronger EUR.

The NZDCHF is inside a rectangle pattern, waiting for a decisive breakout.

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

US Stock Index Futures Edge Higher after Apple, Facebook Beat Estimates

The major U.S. stock indexes were trading higher during the pre-market session on Thursday on the back of strong quarterly earnings reports from Apple and Facebook. The move represented a rebound from Wednesday’s session where U.S. stocks drifted lower as investors assessed the impact of the Federal Reserve’s monetary policy statement.

Early in the session on Thursday, futures contracts linked to the blue chip Dow Jones Industrial Average gained 88 points, benchmark S&P 500 Index futures and the tech-related NASDAQ-100 Index futures also traded in positive territory, putting them in a position to test record highs.

We’re probably looking at a delayed reaction to three major events from Wednesday. The Fed made its announcements during the last two hours of the trading session. Apple and Facebook made their announcement after the cash market close and President Joe Biden addressed Congress at 01:00 GMT.

Fed Recap

The Federal Reserve said that it would hold interest rates near zero. The S&P slid from its high after Federal Reserve Chairman Jerome Powell said during a press conference following the Federal Open Market Committee’s (FOMC) decision that there are some signs of froth in the market.

The Fed also took a rosier view of the U.S. economic recovery and the nation’s war against the coronavirus, but said it was too early to consider rolling back its emergency support with so many workers still left jobless by the pandemic.

Though inflation is due to rise, Powell said the coming price increases would almost surely be of a passing nature, and not present the sort of persistent problem that would force the Fed to begin raising interest rates sooner than expected.

Apple and Facebook Post Strong Quarterly Earnings

Apple reported a blowout quarter late Wednesday, announcing companywide sales up 54% higher than last year, and significantly stronger profits than Wall Street expected. Apple stock rose over 4% at one point in extended trading.

Facebook stock price was up more than 6% in after-hours trading on Wednesday after the company released its first-quarter earnings, beating Wall Street’s expectations for earnings and revenue.

Joe Biden’s Speech Before Congress

Late Wednesday evening, President Joe Biden proposed a sweeping new $1.8 trillion plan in a speech to a joint session of Congress on Wednesday, pleading with Republican lawmakers to work with him on divisive issues and to meet the stiff competition posed by China.

Pushing a vision of more government investment funded by the wealthy, the Democratic president urged Republicans who have so far resolutely opposed him to help pass a wide array of contentious legislation from taxes to police reform to gun control and immigration.

Thursday Outlook

Thursday is the busiest day of the earnings season, with roughly 11% of the S&P 500 slated to provide quarterly updates. Caterpillar, McDonald’s, Comcast and Merck are among the names on deck before the market opens. Amazon, Gilead Sciences, Twitter, U.S. Steel and Western Digital will post quarterly results after the market closes.

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

Asia Shares Extend Gains on Supportive Fed, Biden’s Stimulus

By Kane Wu

European and U.S. markets were set to open higher as well, with FTSE futures up 0.15%. E-mini futures for the S&P 500 index rose 0.53% and Nasdaq futures advanced 0.87%.

Biden proposed the sweeping new $1.8 trillion plan in a speech to a joint session of Congress on Wednesday, pleading with Republican lawmakers to work with him on divisive issues and to meet the stiff competition posed by China.

He also made an impassioned plea to raise taxes on corporations and rich Americans to help pay for what he called the “American Families Plan” in his maiden speech to Congress. He has also proposed nearly doubling the tax on investment income, which knocked stock markets last week.

Stephen Dover, Franklin Templeton’s chief market strategist in California, said the effect of the tax package on markets is hard to measure for now.

“If it passes, I think it will have an impact on individual stocks that will pay a higher rate of tax or companies with founders that will pay capital gains and could sell stocks,” he said. “I think investors are going to think about whether they want take their gains now and that creates the possibility of short-term volatility now.”

MSCI’s broadest index of Asia-Pacific shares outside Japan built on early gains and was up 0.46% by mid-afternoon.

Australia’s S&P/ASX 200 edged up 0.24%, as strong oil prices lifted energy stocks.

China’s blue-chip CSI300 index was 0.45% higher, while Hong Kong’s Hang Seng index rose half a percentage point. Seoul’s KOSPI was flat while Taiwan shares rose 0.17%.

Markets in Japan were closed for a holiday but Nikkei futures rose 0.35% to 29,055 points.

For the rest of the day, investors will focus on the first estimate of U.S. GDP for the first quarter, which is expected at 13:30 GMT.

Fed Chair Jerome Powell said on Wednesday that “it is not time yet” to begin discussing any change in policy after the U.S. central bank left interest rates and its bond-buying programme unchanged, despite taking a more optimistic view of the country’s economic recovery.

Excerpts of Biden’s speech released in advance by the White House “hit the high points – big infra(structure) spend, talking climate action and vaccines,” said John Milroy, investment adviser at Ord Minnett. “The Fed remains dovish, all very supportive.”

Tech shares got a boost after Apple Inc on Wednesday posted sales and profits ahead of Wall Street expectations, though it warned a global chip shortage could dent iPad and Mac sales by several billion dollars.

Wall Street ended lower on Wednesday. The Dow Jones Industrial Average fell 0.48% to end at 33,820.38 points, while the S&P 500 lost 0.08% to 4,183.18.

The dollar pared up early losses against the yen to 108.61 and the euro gained 0.07% to 1.2132 following the Fed’s decision to maintain supportive policies.

Oil prices extended gains on Thursday after rising 1% in the previous session as bullish forecasts for a demand recovery this summer offset concerns of rising COVID-19 cases in India, Japan and Brazil.

Brent crude for June rose 0.27% to $67.45 a barrel, while U.S. West Texas Intermediate crude for June was at $64.02 a barrel, up 0.25%.

Spot gold added 0.14% to $1,783.85 an ounce.

(Reporting by Kane Wu in Hong Kong; additional reporting by Andrew Galbraith in Shanghai and Scott Murdoch in Hong Kong; Editing by Jacqueline Wong and Kim Coghill)

Fed Holds Policy Steady, Acknowledges ‘Strengthened’ Recovery, Gives No Signs of Tightening Plans

The U.S. Federal Reserve held its benchmark interest rate and its monthly bond-buying program steady on Wednesday, as widely expected, while acknowledging the strength in the U.S. economy but giving no signs it was ready to start reducing its support for the recovery.

Fed Credits Vaccinations, Policy for Strengthening Economy, Employment

“Amid progress on vaccinations and strong policy support, indicators of economic activity and employment have strengthened,” the U.S. central bank said in a unanimous policy statement at the end of a two-day meeting.

Fed Continues to See Risks

Despite the improvement, Fed policymakers still see risks to the economy. “The path of the economy will depend significantly on the course of the virus, including progress on vaccinations,” the Fed said. “The ongoing public health crisis continues to weigh on the economy and risks to the economic outlook remain.’

Fed Dampens View on Coronavirus

The Fed changed the language about the coronavirus in April’s statement, reflecting a slightly less negative view than the Fed’s description in March, when it said the health crisis “poses considerable risks to the economic outlook.”

Fed Reiterates Guidance

Despite acknowledging the gains in the economy, Fed policymakers reiterated the guidance it has followed since December, setting the list of conditions that must be achieved before it considers pulling back from the emergency support put in place to stem the economic fallout of the pandemic in 2020. That includes “substantial further progress” towards its inflation and employment goals before stepping back from its monthly bond purchases.

Mixed Market Reaction

Ahead of the release of the Fed’s monetary policy statement, investors and analysts weren’t expecting any major changes from the Federal Reserve, and the initial reaction in the financial markets was subdued. Stocks were flat, yields were slightly higher and the dollar was capped.

Time Will Tell

Since the last Fed meeting in March, U.S. job growth has surged and inflation has risen. Nonetheless, the economy remains more than 8 million jobs short of where it was before the pandemic forced whole industries to shut down in an effort to control the spread of the virus. Furthermore, policymakers will allow inflation to overshoot the 2% benchmark.

Overtime, conditions are expected to improve further which will offer the Fed the opportunity to begin trimming its $120 billion in monthly bond purchases. This will eventually lead to policymakers lifting overnight interest rates from the current historically low levels.

The Fed will maintain current levels of economic aid, but the economy’s prospects will also be contingent on continued progress in managing the pandemic.

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

Want To Invest In Real Estate But Don’t Have The Down Payment?

As an asset class, real estate should be a part of every balanced investment portfolio. That’s because real estate investments generally have a low correlation to stocks, can offer lower risk, and provide greater diversification.

Today about 65% of Americans own a home, but that means that tens of millions of Americans have no exposure to real estate. Making matters worse, becoming a homeowner today is harder than in previous generations, with 1 in 5 millennials believing they will never be able to afford a home. Is there a way to get exposure to the real estate market for as little as $100?

Residential Real Estate Market Trend

From the chart below, we can see that the residential real estate market continues to climb and the median price of houses sold in the US is near recent all-time highs of $347,500. Even though mortgage rates remain near all-time lows, the appreciation of prices in certain pockets of the country are making many cities and areas simply unaffordable for most. Things look much the same for industrial, commercial, agricultural, and most other specialized real estate subsectors.

How Can You Invest in Real Estate Through the Stock Market

The stock markets offer three different ways you can invest in real estate, and today we will be looking at three of them: REITs, ETNs, and ETFs.

A REIT is a real estate investment trust and it generally owns, manages, and/or finances income-producing real estate assets. REITs are generally highly liquid (trading like stocks) and are known to produce steady income through dividends as opposed to focusing on capital appreciation.

There are hundreds of REITs, with the most popular focused on retail, residential, healthcare, office, and mortgages. Having REIT status enables those companies to avoid paying taxes at the corporate level as taxes are paid by the investors when they receive distributions of income in the form of dividends.

A real estate ETN is unsecured debt of real estate assets, essentially a type of bond with a maturity date (but without interest payments). ETNs do not provide ownership of the underlying assets, but their performance is directly correlated to the performance of those assets.

Investors need to be wary that they can lose all of their ETN investment if the underlying debt goes into default. They also face closure risk if the issuer closes the ETN before maturity by paying the prevailing price in the market (potentially creating a loss for the investor). Despite these risks, some investors prefer ETNs because of the tax treatment for long-term ETN holdings.

A real estate ETF is the same as any ETF, being a basket of securities in the real estate sector that can be bought and sold on the stock market. Real estate ETFs often focus on a collection of REITs, offering investors a way to diversify their real estate bets without the torture of researching hundreds of REITs. REIT ETFs offer investors to earn dividend income like REITS while also benefiting from higher diversification and greater market liquidity, which are the hallmarks of all ETFs.

What Makes a Good REIT ETH?

First, you need to decide if you want a mortgage or equity REITs, as well as if you are looking for an objective-specific REIT (like storage facilities) or something more broad and big-picture (like residential real estate). Your REIT ETF should also have a good amount of assets under management in order to keep expense ratios down, and always check to see if the ETF you are interested in has sufficient liquidity.

The charts below show you the performance of the three largest real estate ETFs. Each of these ETFs have over $5 billion of assets, are highly liquid, and a slightly different focus in either the index they track or the real estate assets they are comprised of.

Vanguard Real Estate Index Fund (NYSEARCA: VNQ)

Vanguard focuses on US equity REITS with a small allocation to specialized REITS and real estate firms.

iShares U.S. Real Estate ETF (NYSEARCA: IYR)

The iShares REIT, above, follows the Dow Jones U.S. Real Estate Index, whereas Schwab’s REIT ETF (below) follows the smaller Dow Jones U.S. Select REIT Index.

Schwab US REIT ETF (NYSEARCA: SCHH)

For those of you that get my daily BAN Hotlist, you will know that real estate triggered a signal more than a month ago indicating the sector to be in an uptrend. Real estate continues to be a top-performing sector, with all three of the biggest ETFs gaining more than 15% so far in 2021. In fact, more than 90% of all real estate ETFs have outperformed the S&P500 this year. When you add in the fact that some of the REIT ETFs are also producing annual dividend rates as high as 7-8%, it becomes clear that real estate ETFs should be part of your portfolio.

For those who believe in the power of trading on relative strength, market cycles, and momentum but don’t have the time to do the research every day then my BAN Trader Pro newsletter service does all the work for you with daily market reports, research, and trade alerts.

More frequent or experienced traders have been killing it trading options, ETFs, and stocks using my BAN Hotlist ranking the hottest ETFs, which is updated daily for my premium subscribers.

Happy Trading!

Chris Vermeulen
Founder & Chief Market Strategist
www.TheTechnicalTraders.com