“An August August for Gold?”

310721_gold_scoreboard

Moreover, ’twas during August just a year ago when Gold impressively printed its All-Time High at 2089. August indeed, that August. But from the “That Was Then, This Is Now Dept.”, what about this August? Shall it be another august August for Gold? Or rather a month of directionless disorganization, similar to the bedlam from one Dr. August Balls of Nice, (aka “The Great Balls”, so dubbed by Inspecteur Jacques Clouseau)?

To be sure, Gold was at best disorganized throughout July, price settling yesterday (Friday) at 1817. Having opened July at 1771 and not reaching below 1766, price could not clear 1835, the month’s wee 3.9% trading range being Gold’s narrowest since that recorded over two years ago in May 2019.

Our take is that Gold shall record another august August. Not necessarily up to its All-Time High (2089), let alone our forecast high for this year (2401). But nonetheless, an up month in the offing. And if for no other technical reason than price’s refusing to succumb to the ongoing parabolic Short trend as denoted by the rightmost red dots in this chart of Gold’s weekly bars from one year ago-to-date:

310721_gold_weekly

“So mmb, are you already eliminating August for Gold reaching your 2401 level?”

Not absolutely ruling it out, Squire; rather, being seasonally realistic. Our sense is that Gold’s best shot to accelerate upward shall occur during the September-October period when — for everything else — “it all goes wrong”. Such timely market turmoil you and I see as justified both fundamentally and quantitatively, but to which the balance of the investing world seem out to lunch, (which is always how it is before IT suddenly happens).

Still to this day when we query money folk about how they’re prepared to protect their or their client’s portfolios upon waking up with the S&P 500 futures “locked limit-down”, it remains that the subject swiftly is changed and/or we hear crickets. And as we’ve already cited: upon the price/earnings ratio of the S&P reverting to its mean (19.2x) — which it has always done throughout the Index’s 64-year history — the loss this time ’round regressed into “Dow” terms may exceed -20,000 points in as little as three “trading-suspended” days. (As a recent reminder exercise, calculate the “Dow” high from 19 February to its 18 March low of just a year ago).

And now Dr. Anthony Fauci declares our COVID vaccinations shan’t necessarily shield us from DELTA? What’s next? OMEGA? Got Gold?

Surely none of us wish to see Gold soar because the world ends, (“Dow +2”). We merely wish to see Gold rise to meet its Scoreboard debasement value, presently shown as 3888.

Still to date in 2021, hardly is Gold on any run. For as we turn to our BEGOS Markets Standings, the yellow metal is but one notch above the bumbling Bond:

310721_begos_standings

‘Course, we cannot completely discredit the Bond: for as the “red-hot” economy was instead cooling through most of Q2, the price of the Bond today is 7.6% above its 18 March low, the yield since then having fallen from 2.505% to now 1.897%. Clearly that is indicative of Bond traders (who live in reality) following the Economic Barometer, whilst equity traders (who live in lemming land) chase earningless risk. Here’s the Baro, its rightmost pale violet stint essentially representative of the metrics reported for Q2.

Thus when you just saw the “Advanced Gross Domestic Product” annualized pace for Q2 come in nearly flat (6.5%) compared with that of Q1 (6.3%) — whilst all around were projecting a pace some 30% higher (8.5%) — hardly were you surprised when CNBS reported: “U.S. GDP Rose 6.5% Last Quarter, Well below Expectations”. (But that’s why you follow our stuff).

Still, with July’s Chicago Purchasing Managers Index and the Conference Board’s read on Consumer Confidence both improving, June’s Personal Income was flat with Spending hardly higher, New Home Sales slowing, and Pending Home Sales shrinking. “Red-hot”? Not: as so anticipated the Federal Open Market Committee, their only “talking taper” as usual in again voting unanimously last Wednesday to do nothing. They know they’re both stuck as well as a catalyst for “it all going wrong” the instant they jerk the rug a tad.

Meanwhile, we have a positive read on Q2 Earnings Season: with 277 of the S&P 500‘s constituents having reported, 88% having beaten their bottom lines of a year ago, far and away the best year-over-year performance we’ve ever recorded. (‘Course going from “shut” to “open” makes for such substantive improvement). In fact, so “august” are earnings improvements that (thus far) they’ve knocked our “live” p/e for the S&P down from 56.3x a week ago to 49.8x today. Why, a return to the 19.2x median warrants an S&P correction of now just -61%. Are you prepared? (…crick-crick …crick-crick.. .crick-crick…)

As to the yellow metal’s aforementioned state of disorganization, so ’tis further emphasized here per our graphic of Gold & Co’s percentage tracks from one year ago-to-date, all of which are under water save for (barely) Franco-Nevada (FNV) +2%, followed by Newmont (NEM) -4%, Gold itself -7%, the Global X Silver Miners exchange-traded fund (SIL) -11%, Agnico Eagle Mines (AEM) -14%, the VanEck Vectors Gold Miners exchange-traded fund (GDX) -16%, and from worst-to-first-and-back-to-worst Pan American Silver (PAAS) -21%. But upon their all going well when “it all goes wrong”, don’t forget the leverage, luv:

310721_gold_gdx_nem_aem_fnv_sil_paas

Now here’s an eye-opener that is as Pro-Silver as ever. In going ’round the horn for all eight BEGOS Markets by their daily bars from one month ago-to-date, look notably at the ascending grey trendline for precious metal Gold. Look as well at the ascending grey trendline for industrial metal Copper. And yet almost impossibly, the same for Silver is descending. But here’s the good news: rare as ’tis, this phenomena has occurred (on a mutually-exclusive basis) six times since the beginning of 2020. And each time hence Silver has within a matter of weeks settled at minimum three full points higher. So from the yellow and red metals to the white metal, there’s a tradable gift on a Silver platter. Note too that Silver’s baby blue dots indicative of trend consistency have just kinked up:

310721_begos_dots

Next, specific to the last fortnight, here we’ve the Market Profiles for Gold on the left and Silver on the right, their nearby trading supports as noted, (with a little resistance up there for Gold at 1832):

310721_gold_silver_profiles

And it being month-end, we can’t quite wrap it without bringing up Gold’s Structure by the monthly bars. With respect to that mentioned earlier, the rightmost bar shows us just how comparatively narrow was Gold’s July … ahead of what we anticipate shall be a more robust, indeed august, August:

310721_gold_structure

To close, we have these three observations:

  • From the ever-popular “They’re Just Figuring This Out Now? Dept”: Bloomy reported this past week that “Oil Rebounds After Industry Report Shows Shrinking U.S. Supplies”. Given the perfunctory shutdown of otherwise potential U.S. Oil transport facilities in the changeover of the StateSide Administration this past January, ought we be surprised? (See too, in leading the aforeshown BEGOS Markets Standings, Oil +52.4% year-to-date … Thanks Joe).
  • Next week brings the oft-dubbed “Mother of All Numbers Day” (Friday, 06 August) when the Department of Labor Statistics reports Non-Farm Payrolls for July, the expectation being for a 9% gain over those for June, with the Unemployment Rate dropping from 5.9% to 5.6%. That’s nice, ‘cept the ADP Employment Change (Wednesday, 04 August) for July is estimated to be a 6% loss. But who’s counting, right?
  • And last Wednesday, Dow Jones “Red-Hot Economy” Newswires noted in spite of vaccinations, COVID continues to emanate from one surge to the next, but that “…a host of adaptations by governments and businesses have also helped limit economic damage…” Translated to layman’s terms, such “adaptations” are currency debasement and enterprise restriction. Reason enough to follow the stars for Gold’s august August that also shines for Silver!

Cheers!

…m…

www.deMeadville.com
www.TheGoldUpdate.com

‘Follow the Money’: Major Players Betting on Vaccinations to Keep Global Economy Afloat

The coronavirus is in the news again, not last year’s pandemic fueling COVID-19 version, but the fast-spreading Delta variant. While dominating the mainstream news in the United States (See CNN and FoxNews), and globally on business website such as CNBC, Reuters and Bloomberg, to name a few, we’re not really seeing a major impact on the financial markets.

This is interesting to note because the mainstream story is centered on rising infection numbers, the slow pace of vaccinations and what is likely to happen if countries don’t start clamping down on the spread of the virus. In other words, people’s health. Some experts are even calling it a “life or death” situation.

In the financial markets, obviously we’re not seeing the same reaction as we did in 2020 with stocks dropping 20% in a matter of weeks and crude oil testing prices below $20 a barrel. Instead we’re seeing a relative calm.

Is this telling us to “follow the money?” Is this telling us that since the situation is not as bad as last year, there is no need to panic? Are the financial markets indicating there is not enough information yet to understand the impact of this new outbreak? Do we wait for the bad economic numbers or do we anticipate them?

The answer is all of the above.

Of course, I don’t recommend putting your finances ahead of your health. I don’t think anyone is doing that. Traders are making their decisions on what they know at this time. Some are even basing their decisions on their belief in the vaccinations.

In this case, they feel that enough people are vaccinated so major economic shutdowns are warranted at this time. But we’ve seen different reactions all around the globe, which could be adding to the confusion over what to do. Lighten up on the long side? Buy more, start selling? Move to the sidelines?

I don’t think I am going to be able to answer any of these questions in this article, but if I had to center on one, I’d have to say “follow the money”. But I should add that I am vaccinated, so I may be biased.

Here’s What Others are Saying and Doing

Fed’s Powell Downplays Delta Variant’s Threat to the Economy

The spread of the COVID-19 delta variant is raising infections, leading some companies and governments to require vaccinations and raising concerns about the U.S. economic recovery, according to the AP.

But on Wednesday, Federal Reserve Chair Jerome Powell injected a note of reassurance, suggesting that the delta variant poses little threat to the economy, at least so far.

“What we’ve seen is with successive waves of COVID over the past year and some months now,” Powell said at a news conference, “there has tended to be less in the way of economic implications from each wave. We will see whether that is the case with the delta variety, but it’s certainly not an unreasonable expectation.”

“Dining out, traveling, some schools might not reopen,” he said. “We may see economic effects from some of that or it might weigh on the return to the labor market. We don’t have a strong sense of how that will work out, so we’ll be monitoring it carefully.”

More Corporations are Requiring Workers to Get Vaccinated ~ Axios

The federal government in May said that it is legal for companies to require employees to get vaccinated for coronavirus.

Google CEO Sundar Pichai sent an email to employees announcing that those going back to the office needed to be vaccinated. The company is also extending its work-from-home policy through October 18.

Facebook said that anyone going back to work in their U.S. campuses must be vaccinated.

Netflix is requiring that the casts for all of its U.S. productions be vaccinated, as well as everyone who comes in contact with them.

Drop in UK COVID-19 Cases Indicates Infections Surge May Be Past Peak ~ Reuters

Early last week, the UK added to the confusion when it reported its lowest daily total of new coronavirus cases since July 4, adding to signs that a recent surge in infections driven by the spread of the Delta variant may have passed its peak.

Sydney Readies for the Army as Lockdown Fails to Squash Australia Delta Outbreak ~ CNN

Sydney’s poorest neighborhoods on Friday braced for military enforcement of the city’s toughest and longest lockdown of the COVID-19 pandemic as the infection as the infection numbers held persistently high five weeks since restrictions began.

The situation appears to be so bleak in Australia that economists are already predicting a third quarter contraction.

Oil Climbs, Notches Fourth Monthly Gain on Growing Demand – Reuters

The crude oil market is interesting since it sold off sharply early in July when the Delta-variant story first broke. The biggest concern was demand destruction.

Since then, however, both WTI and Brent have recovered enough to post a fourth monthly gain, with demand growing faster than supply and vaccinations expected to alleviate the impact of a resurgence in COVID-19 infections across the world.

Conclusion

The best advice appears to be: bet on the vaccinations to work, keep monitoring the global economy especially output and labor and keep an eye on gasoline demand.

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

China Manufacturing PMI Eases; Hong Kong, China Shares Tumble on Regulatory Restrictions, COVID Worries

China released economic data early Saturday that showed factor activity expanded in July as the slowest pace in 17 months as higher raw material costs, equipment maintenance and extreme weather weighed on business activity, adding to concerns about a slowdown in the world’s second-biggest economy, Reuters reported.

The report follows a week of volatile trading in Chinese markets that left Hong Kong Hang Seng Index 5% lower. Both Hong Kong and mainland-listed stocks fell on Friday, losing the partial recovery they made after diving earlier in the week.

China’s Factory Activity in July Grows at Slowest Pace Since February 2020

The official manufacturing Purchasing Manager’s Index (PMI) eased to 50.4 in July from 50.9 in June, data from the National Bureau of Statistics (NBS) showed on Saturday, but remained above the 50-point mark that separates growth from contraction.

Analysts had expected it to slip to 50.8. It was the lowest figure since the index slumped to 35.7 in February 2020, after China began lockdowns to control the coronavirus pandemic.

The official non-manufacturing Purchasing Managers’ Index (PMI) eased to 53.3 in July, from 53.5 in June, a separate survey from the NBS showed.

Hong Kong, China Stocks Resume Slump on Regulatory Concerns, COVID Jump

Shares in Hong Kong and China resumed their slump on Friday after rebounding in the previous session, with key indexes booking their worst monthly performance in years, as persistent concerns over regulatory crackdowns outweighed Beijing’s attempts to calm markets.

China’s blue-chip CSI300 Index closed down 0.8% and posted its biggest monthly loss since October 2018, while the Shanghai Composite Index lost 0.42%, capping its worst month since 2019.

Hong Kong tech shares slumped again, pulling the benchmark Hang Seng Index to its biggest monthly fall since October 2018.

The Hang Seng closed down 1.4%, following Thursday’s 3.3% rally. Tech giants such as Meituan and Alibaba led Friday’s decline. The Hang Seng Tech Index plunged 2.56%, extending its weekly fall to 6.7%.

Global investors have been dumping shares in Chinese companies after Beijing banned for-profit tutoring on core school subjects, following crackdowns earlier this year on the tech sector. The regulatory moves have revived worries about the risks of investing in China.

Finally, a resurgence in COVID-19 cases in mainland China and Hong Kong also dented investors’ risk appetite.

Chinese Companies Looking for US Listings Must File More Disclosures – SEC Chair

The chair of the US Securities and Exchange Commission said on Friday that he had asked staff to mandate certain disclosures from offshore issuers associated with China-based operating companies before registration statements can be declared effective.

Gary Gensler also said in a statement that the new disclosures will require Chinese companies tell the regulator and investors whether certain actions could affect the firm’s “financial performance and the enforceability of the contractual arrangements.”

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

Japan, South Korean Shares Pressured by Chinese Technology Crackdown, Renewed COVID-19 Concerns

The major Asia-Pacific stock indexes finished lower across the board on Friday, ending a mostly bearish week on a down note. The markets were rattled all week as a Chinese crackdown on its technology sector and rising cases of the Delta coronavirus variant raged against still-dovish monetary policy and mixed earnings from a range of companies.

Friday’s Cash Market Performance

In Japan, the Nikkei 225 Index settled at 27283.59, down 498.83 or -1.80%. In Hong Kong, the Hang Seng Index finished at 25961.03, down 354.29 or -1.35% and South Korea’s KOSPI Index closed at 3202.32, down 40.33 or -1.24%.

China’s benchmark Shanghai Index settled at 3397.36, down 14.37 or -0.42% and in Australia, the S&P/ASX 200 Index finished at 7392.60, down 24.80 or -0.33%.

Nikkei Ends at Over 6-Month Low on Virus Worries, Earnings Lag

Japan’s Nikkei stock average closed at its lowest since the start of the year on Friday as spiking COVID-19 cases, some earnings disappoints and a decline in U.S. stock futures dented investor sentiment.

The Nikkei’s 1.8% decline on Friday was its biggest decline since June 21 and the lowest close since January 6.

For the month, the Nikkei slumped 5.24%, its worst performance since the coronavirus-induced market meltdown in March last year, after recording an 11th straight decline on the final trading day of the month.

In COVID-related news, Japan’s government on Friday proposed extending the state of emergency through August 31 for Tokyo and some other prefectures, as COVID-19 cases spike to record highs.

“The earnings weren’t that bad, but in terms of the outlook, there doesn’t seem to be a lot of confidence,” which is weighing on stocks, said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management.

“The market is wary that the Nikkei could break below 27,000.”

South Korea Stocks Post Worst Month Since March 2020 on Weak China Shares, Virus Woes

South Korean shares tumbled more than 1% on Friday, and posted its worst monthly decline in more than a year, weighed by continued worries about the Chinese government’s regulatory crackdown and the COVID-19 pandemic.

The KOSPI ended down 40.33 points, or 1.24%, at 3,302.32, its sharpest daily fall in more than two months. The index ended the month down 2.86%, its sharpest monthly decline since March last year, and snapped an eight month winning streak.

In economic news, Friday’s data showed South Korea’s factory output in June rebounded from May on a boost in semiconductor and car production.

In COVID-related news, South Korea reported 1,710 new cases for Thursday, still near the record infections marked this week, even after the country imposed the toughest distancing measures in the metropolitan Seoul area and some neighboring cities.

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

European Equities: A Month in Review – July 2021

The Majors

It was another bullish month for the European majors in July, logging a 6th consecutive monthly gain.

The CAC40 and the EuroStoxx600 rose by 1.61% and by 1.97% respectively, while the DAX30 struggled, rising by just 0.09%.

It was a choppier month for the European majors. Concerns over the resilience of the economic recovery tested support for the majors at the start of the 3rd quarter of the year.

A continued rise in new COVID-19 cases across the world added to the market angst in the month.

Economic data from Germany was also disappointing, pegging the DAX30 back.

Central bank assurance of support, dip buying, corporate earnings, and economic data for France and the Eurozone delivered support, however.

The Stats

Key stats in the month included inflation, consumer spending, consumer sentiment, private sector PMIs, and 2nd quarter GDP numbers.

Once more, the stats were skewed to the positive, delivering support to the broader market.

The Private Sector

The Eurozone’s composite PMI rose from 59.5 to 60.6 in July, according to prelim numbers. Service sector activity picked up, delivering the upside at composite level.

Germany’s Manufacturing PMI increased from 65.1 to 65.6, which was key as private sector activity across France saw slower growth.

As a result of weak numbers from France, the Eurozone’s Manufacturing PMI fell from 63.4 to 62.6.

The German Economy

From Germany, while survey-based numbers were upbeat, non-survey-based data disappointed in the month.

Factory orders (-3.7%) and industrial production (-0.30%) were weak, with Germany’s trade surplus narrowing from 15.9bn to 12.6bn EUR.

German business and consumer confidence also failed to impress in spite of the reopening of the economy. Rising cases of the Delta variant across the world raised uncertainties over the economic outlook in the month.

Late in the month, 1st estimate GDP numbers for the 2nd quarter were also in focus.

The German economy expanded by 1.5%, quarter-on-quarter, partially reversing a 2.1% contraction from the previous quarter. Economists had forecast 1.9% growth.

A positive in the week, however, was a fall in the unemployment rate from 5.9% to 5.7%, which should support consumption.

The Eurozone

For the Eurozone, the economy expanded by 2.00% in the 2nd quarter, reversing a 0.3% contraction from the previous quarter.

The numbers were aligned with the ECB’s optimistic outlook on the economic recovery.

Inflation

In the month, the ECB also revised its price stability target, increasing the inflation target to 2.0%. The move was viewed as dovish, giving the ECB more legroom before having to make a move on the policy front.

In spite of this, the Eurozone’s annual rate of inflation accelerated from 1.9% to 2.2% in July, according to prelim figures.

From the U.S

Economic data delivered mixed results for the markets.

Inflationary pressures continued to build, though following assurances from the FED, failed to spook the markets.

The market’s preferred ISM private sector PMIs for June were disappointing for June, which raised concerns over the economic recovery.

Weekly jobless claim figures also failed to impress, with claims falling to a month low 360k before climbing to a high 419k.

In the final week of the month, consumer confidence and 2nd quarter GDP numbers delivered mixed results.

Consumer confidence picked up in July, suggesting a further increase in consumption. In June, retail sales had risen by a modest 0.5%. On the economic growth front, however, the U.S economy grew by just 6.5% in the quarter, falling well short of a forecasted 8.5%.

Monetary Policy

In July, both the ECB and the FED left monetary policy unchanged. Both central banks delivered assurances of unwavering support, ultimately propping up the European majors in the month.

The Market Movers

For the DAX: It was a bearish month for the auto sector in June. Continental and BMW slid by 7.88% and by 6.09% respectively. Daimler and Volkswagen ended the month down by 0.44% and by 2.49% respectively.

It was also a bearish month for the banks. Deutsche Bank fell by 2.86%, with Commerzbank sliding by 9.03%.

From the CAC, it was a bearish month for the banking sector. BNP Paribas fell by 2.69%, with Credit Agricole and Soc Gen seeing losses of 0.42% and 0.52% respectively.

It was also a bearish month for the auto sector. Renault slid by 6.02%, with Stellantis NV ending the month down by 2.20%.

Air France-KLM fell by a further 3.71%, while Airbus SE rallied by 6.69%.

On the VIX Index

It was a first monthly gain in 6-months for the VIX in July.

Reversing a 5.55% loss from June, the VIX rose by 15.22% to end the month at 18.24.

In July, the S&P500 rallied by 2.27%, with the Dow and the NASDAQ ending the month up by 1.25% and by 1.16% respectively.

VIX 310721 Monthly Chart

The Month Ahead

Following some mixed numbers from Germany, we can expect increased sensitivity to the German numbers in the month ahead.

Private sector PMIs will also remain key, with any fall back in private sector PMIs likely to test support for the majors.

Following the latest spike in inflation, a further pickup in inflationary pressure will also raise questions over consumption. As a key component of the economic recovery, any concerns over consumption would also pressure the majors.

From the U.S, labor market numbers will now be the key area of focus as inflationary pressures continue to pick up.

Consumer confidence and consumption numbers will need to impress to support riskier assets.

From elsewhere, private sector PMIs and trade data from China will also need tracking.

Away from the economic calendar, COVID-19 news will also need monitoring. As new cases continued to rise in July, the threat of a vaccine resilient variant remains, which would materially impact the growth outlook.

European Equities: A Week in Review – 30/07/21

The Majors

It was another choppy week for the majors in the week ending 30th July, with the majors taking another slide to kickstart the week.

The DAX30 fell by 0.80%, while the CAC40 and the EuroStoxx600 ended the week with relatively modest gains of 0.67% and 0.05% respectively.

Concern over the continued rise in new Delta variant cases weighed on the markets and sentiment towards the economic outlook.

Mixed economic data from Germany, in particular, also pressured the markets in the week.

There were a number of support avenues for the majors, however.

Upward growth revisions from the IMF for advanced economies, a dovish FED, and corporate earnings provided support.

GDP numbers from France and the Eurozone were also ahead of forecasts at the end of the week. The data limited the damage in what was a bearish end to the week.

The Stats

Through much of the week, the German economy was in focus.

Business and consumer sentiment figures delivered mixed results. While business sentiment waned in July, consumer confidence remained unchanged, in spite of the reopening of economies.

Unemployment figures from Germany were upbeat. The unemployment fell from 5.9% to 5.7% in July.

Inflationary pressures continued to surge, however, with Germany’s annual rate of inflation accelerating in July to 3.8%.

At the end of the week, 1st estimate GDP numbers and prelim inflation figures were the key stats of the week.

Quarter-on-quarter, the French economy grew by 0.9% versus a forecasted 0.7% in the 2nd quarter.

Germany saw growth of 1.5%, falling short of a forecasted 1.9%. In the 1st quarter, the economy had contracted by 2.1%.

For the Eurozone, the economy grew by 2.0%, coming in ahead of a forecasted 1.5%. The economy had contracted by 0.3% in the previous quarter.

Inflation also ticked up, aligned with member state numbers. According to prelim figures, the Eurozone’s annual rate of inflation accelerated from 1.9% to 2.2% in July, rising above the ECB’s 2% target.

From the U.S

Consumer sentiment and durable goods orders drew attention early in the week.

In June, durable goods orders ex transportation rose by 0.3%, following a 0.5% increase in May.

More significantly was a pickup in consumer confidence in July. The CB Consumer Confidence Index rose from 128.9 to 129.1. Economists had forecast a decline to 126.0.

On Thursday, jobless claims and 2nd quarter GDP numbers were in focus. The stats were skewed to the negative, however.

In the 2nd quarter, the U.S economy grew by 6.5%. This fell well short of a forecasted growth of 8.5%.

Jobless claims also fell short of expectations, with initial jobless claims falling from 424k to 400k. Economists had forecast a decline to 370k.

At the end of the week, personal spending and inflation figures came in ahead of forecasts, however.

Personal spending rose by 1.0% in June, with the annual rate of inflation seeing a pickup from 3.4% to 3.5%.

While the stats were material, the FED monetary policy and press conference were the main events of the week.

In line with market expectations, the FED left policy unchanged. The FED Chair also looked to assure the markets that there would be no near-term moves, the guidance considered dovish.

The Market Movers

From the DAX, it was a mixed week for the auto sector. Daimler rose by 0.32% to buck the trend in the week. Continental slid by 2.49% to lead the way down, however. BMW and Volkswagen also struggled, ending the week down by 1.64% and by 1.34% respectively.

It was also a mixed week for the banking sector. Deutsche Bank rose by 1.18%, while Commerzbank fell by 0.18%.

From the CAC, it was a bullish week for the banks. BNP Paribas and Soc Gen rose by 1.74% and by 1.06% respectively, with Credit Agricole gaining 0.77%.

The French auto sector also found support with Stellantis NV and Renault seeing gains of 2.64% and 2.59% respectively.

Air France-KLM slipped by 0.05%, however, while Airbus rallied by 3.77%.

On the VIX Index

It was a back into the green for the VIX.

In the week ending 30th July, the VIX rose by 6.05%. Partially reversing a 6.78% fall from the previous week, the VIX ended the week at 18.24.

3-days in the green from 5 sessions, which included a 10.13% jump on Tuesday delivered the upside.

For the week, the NASDAQ fell by 1.11%, with the Dow and the S&P500 ending the week down by 0.36% and by 0.37% respectively.

VIX 310721 Daily Chart

The Week Ahead

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

Private sector PMIs for Italy and Spain will be in focus. Finalized numbers for France, Germany, and the Eurozone are also due out.

Any revisions to prelim numbers and Italy’s PMIs will likely draw the greatest interest.

Early in the week, Eurozone and German retail sales figures will also be key, however. The ECB is looking for a consumption driven economic recovery.

Later in the week, the ECB Economic Bulletin and member state trade data will also be in focus.

From the U.S, ISM Manufacturing and Non-Manufacturing PMIs will be key through the 1st half of the week.

On the labor market front, however, ADP nonfarm employment change, weekly jobless claims, and nonfarm payrolls will also influence.

Away from the economic calendar, corporate earnings and COVID-19 news updates need continued monitoring.

AMC Chief Gives Individual Investors Louder Voice, Addresses Share Count

AMC Entertainment held its shareholder meeting on July 29 at a time when the company’s future hangs in the balance. Investors had all but written off the stock during the pandemic-fueled lockdowns, but the company experienced a 180-degree turn in 2021. With the tailwind of retail investors at its back and a digital strategy beginning to unfold, AMC is making moves to make its shareholders feel even more invested in the future direction of the company.

AMC CEO Adam Aron, who is active on social media, took to Twitter to thank shareholders who voted on issues at the latest meeting in Kansas City. Aron reminded his followers that the company reversed its recent decision to issue more shares after receiving backlash from investors, saying,

“You were not ready for this. And we listened to you.”

Debunking FUD

Aron also addressed what he described as “so much FUD going on around on the internet.” He was seemingly referring to accusations that the company was not being transparent about the meeting, but the chief executive put the kibosh on those rumors.

Aron took things a step further when he revealed that individual shareholders would be invited to ask questions on future earnings webcasts, a benefit typically reserved for Wall Street analysts. He also tipped his hand to a possible future direction of the company, saying that AMC will engage with U.S. professional sports leagues about potentially securing theatrical rights for the following:

  • College football
  • Premiere League
  • FIFA World Cup
  • UFC
  • Boxing

Aron admitted, however, that this is a “difficult and possibly prohibitively expensive” process.

Share Count

On the Twitter thread, followers debated the transparency of AMC’s share count, which Aron addressed head-on. He revealed that the “all-inclusive share count total” was 513,330,240 of “legally issued shares” as of June. The company has not issued any new shares since that time. On naked short-selling as well as options trading, Aron basically pleads the Fifth.

Source: Twitter

Buying the Dip

AMC’s stock price has been on a wild ride for the month of July, starting above the USD 50 level and ending below USD 40. Many retail investors are holding out for the next big short squeeze in hopes of cashing in on their bets.

Investors are encouraging one another on social media to dig in their heels and buy the dip.

S&P 500 Price Forecast – Stock Markets Continue to Grind Sideways Looking for Next Push Higher

The S&P 500 has pulled back a little bit to kick off the trading session on Friday but turned around to show signs of life again. Because of this, the market looks as if it is ready to go much higher given enough time. I think there is plenty of support underneath at the uptrend line, which of course is followed right along by the 50 day EMA. With this being the case, it is difficult to imagine area where I would be short at, because quite frankly between here and there I anticipate there will be plenty of value hunters.

S&P 500 Video 02.08.21

If we did break down, the 4200 level and of course the 4000 level both offer enticing areas to pick up value, especially the 4000 level as it would be a 10% correction. It should be noted that the 4400 level has caused a bit of noise, but if we can break above there then the 4500 level is my next target but ultimately, I would anticipate seeing markets go much higher than that. My year-end target at the moment is 4600, but quite frankly this market continues to outperform expectations I do not see why it would be any different now.

The Federal Reserve has stated this week that it was not going to get close to tapering anytime soon, so that continues to drive the market higher. We are in the midst of earnings season which of course was very strong, but I think that was already expected considering what we had seen over the last year.

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

Why Amazon Stock Is Down By 7% Today

Amazon Stock Dives On Weak Q3 2021 Guidance

Shares of Amazon found themselves under significant pressure after the company released its second-quarter earnings report.

Amazon reported revenue of $113.1 billion, which was lower than analyst estimates. The company’s GAAP earnings of $15.12 per share exceeded analyst expectations but were not sufficient enough to provide support to Amazon shares.

In Q3 2021, Amazon expects to report revenue of $106 billion – $112 billion, which means that Amazon’s revenue will decrease compared to the second quarter. The company’s operating income is projected to be between $2.5 billion and $6 billion compared to $6.2 billion in Q3 2020.

The market was clearly shocked by the company’s quidance for the next quarter, and the stock opened with a big gap down. The stock has made an attempt to gain ground as some speculative traders decided to buy the dip, but it failed to develop upside momentum.

What’s Next For Amazon Stock?

Investors and traders got used to strong reports from Amazon so the soft Q3 2021 guidance dealt a major blow to the stock. Analysts expect that the company will report earnings of $55.86 per share in 2021 and $72.38 per share in 2022, so the stock is trading at roughly 46 forward P/E.

Amazon has always enjoyed rich multiples as investors believed in its growth story, and it remains to be seen whether one report will change the market’s view.

It should be noted that the report highlights potential problems for all leading tech companies as they may face slower growth in case the world succeeds in its battle against the coronavirus pandemic and gets back to normal life.

It’s too early to say that Amazon’s growth story is under question, and the stock will surely attract opportunistic buyers. However, it remains to be seen whether support from such buyers will be sufficient enough to push Amazon shares back to recent highs in the upcoming trading sessions.

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

Stocks Retreat As Amazon Drags Down Tech Shares

Stocks Are Under Pressure Ahead Of The Weekend

S&P 500 futures are moving lower in premarket trading as Amazon‘s disappointing quarterly results put pressure on tech stocks.

Amazon released its second-quarter report yesterday, after the market close. The company reported revenue of $113.1 billion and GAAP earnings of $15.12 per share, missing analyst estimates on revenue and beating them on earnings.

The market focused on the disappointing revenue performance and weak third-quarter guidance as Amazon forecasted revenue of $106 billion – $112 billion in Q3 2021.

Currently, the stock is down by about 7% in premarket trading, and Nasdaq futures are down by roughly 1%. It remains to be seen whether traders will rush to buy the dip in Amazon shares and other tech stocks ahead of the weekend or choose to take some profits off the table near record highs for S&P 500 and Nasdaq.

Personal Income Increased By 0.1% In June

U.S. has just released Personal Income and Personal Spending reports for June. The reports indicated that Personal Income increased by 0.1% month-over-month in June compared to analyst consensus whcih called for a decline of 0.3%. Personal Spending grew by 1% compared to analyst consensus of 0.7%.

Today, traders will also have a chance to take a look at the final reading of Consumer Confidence report for July. Analysts expected that Consumer Confidence declined from 85.5 in June to 80.8 in July.

WTI Oil Settles Above The $73 Level As Traders Shrug Off Virus Worries

WTI oil managed to get above the $73 level and continues to move higher as traders bet that demand for oil will continue to increase despite the recent surge in the number of new COVID-19 cases which was caused by the Delta variant of coronavirus.

Recent data indicates that crude inventories are moving lower, which is bullish for oil. Today, oil-related stocks will have a good chance to continue their rebound after strong results from Exxon Mobil and Chevron.

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

Chevron Stock Price Rally As Company Posts Second Straight Quarters Of Profits

The shares of Chevron are up by more than 1% during Friday’s pre-market trading session after the company reported profits for the second consecutive quarter.

Chevron Posts Profit Again

Oil giant Chevron reported its second quarter of the year earnings earlier today, beating analysts’ estimations and recording profits yet again. The rising demand for petroleum products and an increase in oil prices in recent months contributed massively to Chevron’s success in the last quarter.

Chevron reported earnings of $1.71 per share during the second quarter of 2021 on an adjusted basis. Meanwhile, the revenue generated during that period stands at $37.6 billion. The figures were better than expected, with analysts estimating earnings per share of $1.59 and revenue of $35.94.

The performance in this quarter far outweighs the company’s output in the same period last year. Due to the Coronavirus pandemic, Chevron lost 1.59 per share on an adjusted basis and revenue of $13.49 billion.

The results of the second quarter are also better than the first, with demand for products increasing as more countries reopen their economies. In Q1 2021, Chevron earned 90 cents per share on an adjusted basis and reported a revenue of $32.03 billion.

Chevron To Resume Share Repurchases

After recording profits for the second consecutive quarter, Chevron said it would resume repurchasing shares again in the third quarter. Mike Wirth, Chevron’s chairman and CEO, said, “Our free cash flow was the highest in two years due to solid operational and financial performance and lower capital spending. We will resume share repurchases in the third quarter at an expected rate of $2-3 billion per year.”

The oil giant said it would continue to exercise discipline regarding its capital spending. The company cut down capital spending by 32% over the past year. The shares of Chevron rose by over 1.3% at Friday’s pre-market trading session, thanks to the news of the company’s positive quarter.

CVX stock chart. Source: FXEMPIRE

Year-to-date, CVX is up by over 20%, with investors appreciating the company’s performance in the first two quarters of 2020.

Daily Gold News: Friday, July 30 – Gold Broke Above Consolidation

The gold futures contract gained 2.01% on Thursday, as it broke above its July 15 high of $1,835. Precious metals’ prices have followed weakening U.S. dollar after Wednesday’s FOMC Statement release. This morning gold is retracing some of yesterday’s advance, as we can see on the daily chart (the chart includes today’s intraday data):

Today gold is 0.4% lower, as it’s trading slightly below $1,830 mark. What about the other precious metals? Silver is 0.1% higher, platinum is 1.1% lower and palladium is 0.5% higher. So precious metals’ prices are mixed this morning.

Yesterday’s Advance GDP and the Unemployment Claims releases have been worse than expected. Today we will get Personal Income, Personal Spending and Chicago PMI Releases, among others.

Where would the price of gold go following Wednesday’s FOMC news? We’ve compiled the data since January of 2017, a 53-month-long period of time that contains of thirty six FOMC releases. The following chart shows average gold price path before and after the FOMC releases for the past 36 releases. The market was usually declining ahead of the FOMC day. Then it was going up for a week-long period. We can see that on average, gold price was 0.49% higher 10 days after the FOMC Statement announcement.

Below you will find our Gold, Silver, and Mining Stocks economic news schedule for today:

Friday, July 30

  • 4:00 a.m. Eurozone – German Preliminary GDP q/q
  • 8:30 a.m. U.S. – Personal Income m/m, Personal Spending m/m, Core PCE Price Index m/m, Employment Cost Index q/q
  • 8:30 a.m. Canada – GDP m/m, IPPI m/m, RMPI m/m
  • 9:45 a.m. U.S. – Chicago PMI
  • 10:00 a.m. U.S. – Revised UoM Consumer Sentiment, Revised UoM Inflation Expectations
  • 9:00 p.m. China – Manufacturing PMI, Non-Manufacturing PMI

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.

 

Ferrari’s Revenue to More Than Double in Q2; Target Price $238

The luxury sports car maker Ferrari is expected to report earnings of $1.26 per share for the second quarter, representing a 3,050% increase over $0.04 per share a year earlier.

The company, known for its prancing horse logo, would post revenue growth of over 107% to around $1.3 billion. According to ZACKS Research, the company has beaten earnings per share (EPS) estimates in three of the last four quarters.

The U.S. listed Ferrari shares have slumped about 6% so far this year. The stock closed 1.88% higher at $216.21 on Thursday.

Analyst Comments

“Growth potential and strong execution. Global shipments of >11k units in 2021, growing at a 9.1% CAGR to 2030 ending at ~22k shipments. Adj. EBITDA margins rise to 35% in 2021 on improved mix and pricing after launching 5 new models in 2020 and 2 in 2021,” noted Adam Jonas, equity analyst at Morgan Stanley.

Ferrari trades at a justified premium to luxury brands, in line with luxury leader, Hermes, albeit with more opportunity to grow organically via: new customers, new segments and geographically in China & Asia-Pac, as well as exhibiting a unique moat with a world-renowned brand and a 12+ month customer order book.”

Ferrari Stock Price Forecast

Nine analysts who offered stock ratings for Ferrari in the last three months forecast the average price in 12 months of $238.63 with a high forecast of $281.00 and a low forecast of $202.00.

The average price target represents a 10.35% change from the last price of $216.24. From those nine analysts, four rated “Buy”, four rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the stock price forecast of $265 with a high of $350 under a bull scenario and $160 under the worst-case scenario. The firm gave an “Overweight” rating on the luxury automaker’s stock.

Several other analysts have also updated their stock outlook. BofA slashed the price objective to $281 from $287. UBS Group cut their price objective to $238 from $247 and set a buy rating.

NASDAQ Bearish Divergence, Amazon’s After-Hour Losses Weighing on US Futures Overnight

U.S. stock index futures are down sharply in Friday’s pre-market session as a disappointing earnings report from Amazon.com threatened to dampen an otherwise strong month ahead of July’s final day of trading. The early price action has put the major futures indexes in a position to post a potentially bearish closing price reversal top. If confirmed, this could mean a weak start to August.

Early Trading Results

At 04:41 GMT, September E-mini S&P 500 Index futures are trading 4378.25, down 33.50 or -0.76%. September E-mini Dow Jones Industrial Average futures are at 34863, down 111 or -0.32% and September E-mini NASDAQ-100 Index is trading 34861, down 113 or -0.32%.

Possible Bearish Divergence

On Thursday, the S&P 500 Index and the Dow Jones Industrial touched record highs but the NASDAQ Composite underperformed. This created a divergence in the major indexes, suggesting weakness in the technology sector.

Weighing on the tech-heavy NASDAQ Composite during the regular session were shares of Facebook, which tumbled 4% after the social media company’s earnings report.

A disappointing IPO from online brokerage firm Robinhood helped cap NASDAQ’s gains throughout the regular session. The stock opened at $38 per share on Thursday, but eventually closed its debut session more than 8% lower at $34.82 per share.

The weakness carried over into the after-hours and pre-market sessions after e-commerce giant Amazon and social media platform Pinterest released their earnings reports to investors.

Amazon equity sank 7.4% in extended trading after it reported its first quarterly revenue miss in three years and gave weaker guidance. The move in Amazon’s stock helped weigh on NASDAQ-100 futures. Pinterest fell even further, down 19%, after saying it lost monthly users during the three months ended June 30.

Thursday Recap

Thursday’s positive session came despite a government report that showed U.S. second-quarter gross domestic product accelerated 6.5% on an annualized basis, considerably less than the 8.4% Dow Jones estimate. Meanwhile, weekly initial claims surprisingly came in higher-than-expected.

Helping to underpin the markets was the Fed news from late Wednesday. Many investors were relieved that the Federal Reserve signaled no imminent plans for dialing back asset purchases.

Fed Chairman Jerome Powell also noted that while the economy has come a long way since the COVID-19 recession, it still has a ways to go before the central bank considers adjusting its easy-money policies.

Near-Term Outlook

The bearish divergence between the NASDAQ and the other major indexes could be an early sign that a major top is forming. If the tech-heavy NASDAQ trades sharply lower, it will drag the technology sector of the S&P 500 with it. The Dow is not likely to feel as much pain since it is tech unweighted.

The U.S. stock markets could be facing several near-term headwinds including summer vacation until after the U.S. Labor Day holiday. This would lead to low volume trading sessions. Overvaluation is another concern as well as the coronavirus outbreak.

One major concern is that investors won’t have a clue as to what the Fed is planning to do about tapering until it meets on September 21-22.

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

European Equities: 2nd Quarter GDP and July Inflation in Focus

Economic Calendar

Thursday, 29th July

German Unemployment Change/Rate JUL

German Inflation Rate MoM Prel JUL

Friday, 30th July

French GDP Growth Rate QoQ Prel Q2

French Household Consumption MoM JUN

German GDP Growth Rate Flash Q2

French Inflation Rate YoY Prel JUL

Spanish GDP Growth Rate Flash Q2

Italian GDP Growth Rate Adv Q2

Eurozone Core Inflation Rate Flash JUL

Eurozone GDP Growth Rate Flash Q2

Italian Inflation Rate MoM Prel JUL

Eurozone Inflation Rate Flash JUL

The Majors

It was another bullish day for the European majors on Thursday.

The CAC40 rose by 0.37%, with the DAX30 and the EuroStoxx600 ending the day up by 0.45% and by 0.46% respectively.

Market reaction to Wednesday’s dovish FED and economic data from the Eurozone and the U.S provided the majors with support.

From the Eurozone, German unemployment figures impressed, while stats from the U.S looked to have put a near-term lid on any need for the FED to make a move. U.S GDP and jobless claims figures were good enough, however, to support riskier assets and not spook the markets.

Support also came from corporate earnings releases on the day.

The Stats

The German economy was in focus once more on Thursday, with unemployment and inflation the key stats of the day.

In July, unemployment slid by 91k, following a 39k decline in June. As a result of the decline, the unemployment rate fell from 5.9% to 5.7%. Economists had forecast a 22k decline and for the unemployment rate to fall to 5.8%.

On the inflation front, Germany’s annual rate of inflation accelerated from 2.3% to 3.8% in July, according to prelim figures. Economists had forecast a pickup to 3.2%.

Month-on-month, consumer prices rose by 0.9%, following a 0.4% increase in June. Economists had forecast a 0.4% rise.

From the U.S

1st estimate GDP numbers for the 2nd quarter were out along with the weekly jobless claim figures.

In the 2nd quarter, the U.S economy grew by 6.5% in the 2nd quarter, ticking up from a 1st quarter 6.4%. Economists had forecast 8.5% growth in the quarter, however.

On the employment front, U.S jobless claims fell from 424k to 400k in the week ending 23rd July. Economists had forecast a decline to 370k.

The Market Movers

For the DAX: It was a bullish day for the auto sector on Thursday. Daimler rallied by 2.80%, with BMW and Volkswagen ending the day up by 1.40% and by 1.28% respectively. Continental saw a more modest 0.80% gain on the day.

It was also a bullish day for the banks. Deutsche Bank and Commerzbank ended the day up by 3.23% and by 1.74% respectively.

From the CAC, it was a bullish day for the banks. BNP Paribas gained 1.78%, with Soc Gen and Credit Agricole rising by 1.55% and by 1.38% respectively.

It was also a bullish day for the French auto sector. Stellantis NV rallied by 3.36%, with Renault ending the day up by 0.62%.

Air France-KLM and Airbus SE also found further support, rising by 1.06% and by 0.61% respectively.

On the VIX Index

It was a 2nd consecutive day in the red for the VIX on Thursday, marking the 2nd decline of the week.

Following a 5.42% fall on Wednesday, the VIX declined by 3.33% to end the day at 17.70.

The NASDAQ rose by 0.11%, with the Dow and the S&P500 ending the day up by 0.44% and by 0.42% respectively.

VIX 300721 Daily Chart

The Day Ahead

It’s a particularly busy day ahead on the economic calendar. Eurozone and member state 1st estimate GDP numbers for the 2nd quarter are due out later today.

Expect plenty of interest in the numbers. We have seen concerns over the resilience of the economic recovery test support for the majors of late. Weaker than expected numbers would weigh.

Prelim inflation and consumer spending figures are also due out but will likely play 2nd fiddle to the GDP numbers.

From the U.S, inflation and personal spending figures will also influence late in the session.

Away from the economic calendar, corporate earnings and COVID-19 news updates will also need continued monitoring.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 21 points.

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

Today’s Market Wrap Up and a Glimpse Into Friday

Stocks finished the day in the green after investors were able to brush off signs that the economic recovery may have hit a snag. The Dow Jones Industrial Average tacked on more than 150 points, while the S&P 500 and tech-heavy Nasdaq also inched higher. The market indices showed resilience even as the delta variant threatens to throw a wrench into economic expansion for the rest of the year.

Second-quarter GDP expanded at an annual rate of 6.5%, which catapults the economy beyond pre-COVID levels but falls short of estimates. Meanwhile, the forecast for the rest of the year could be threatened by the uncertainty from the delta variant. Companies have responded by delaying the return to the office or in some cases reinstating mask policies for consumers. It’s déjà vu all over again.

Investors were able to focus on the glass half full. For example, consumer spending and corporate earnings have been bright spots of late. Meanwhile, supply chain issues seem to be a stumbling block.

Stocks to Watch

Amazon reported its Q2 results, and the stock sank 5% in after-hours trading. While the e-commerce giant reported revenue of slightly more than USD 113 billion, Wall Street analysts were looking for USD 115 billion. Amazon’s revenue outlook for Q3 also falls below consensus estimates, and the stock is being punished. The latest quarterly performance unfolded just before Jeff Bezos was replaced as CEO by Andy Jassy earlier this month.

Pinterest is also under pressure in extended-hours trading, falling 14%. The company fell short on its number of monthly active users, which came in at 454 million compared to estimates of 482 million. This indicator could also come back to bite Pinterest in Q3, for which management failed to provide any forecast and blamed the pandemic.

Robinhood’s IPO was a flop after the stock fell more than 8% on its first day of trading on the Nasdaq. The trading app’s shares opened at USD 38 and finished the day at just under USD 35. Robinhood sought to appeal to retail investors but was in for a rude awakening. The broker finished the day with a market cap of USD 29 billion.

Look Ahead

On the economic front, Personal Income & Spending for the month of June comes out on Friday. Wells Fargo economists predict that income fell 0.2% while spending increased 2% vs. May levels. The weaning away of the stimulus is pressuring incomes.

Robinhood Markets Snubbed by Investors on Nasdaq Debut

Commission-free trading app Robinhood is officially a publicly traded company, but investors did not roll out the welcome mat for the stock. Shares of Robinhood, which trade under the symbol “HOOD,” opened at USD 38 per share on the Nasdaq before falling to around USD 33. The new stock managed to recover some of those losses and is down 5% at the last check, which is better than the close to 10% declines it suffered earlier in the session.

Source: TradingView

Isn’t It Ironic?

There has been a great deal of hype surrounding the Robinhood app, for several reasons, chief among which was its decision to earmark shares for its users. Robinhood pledged more than one-third of its float for customers of the trading app, which is on the generous side. A typical IPO will reserve less than 10% for retail investors as hedge funds and other big investors tend to get first dibs.

Individual investors have seemingly not returned the favor to Robinhood, leaving the mobile trading app hanging on its stock market debut. It could have gone either way. Robinhood was hoping to mend the fences between itself and jilted retail investors who were left holding the bag after the broker placed trading restrictions on popular meme stocks, including GameStop and AMC Entertainment.

The massive buying in GME And AMC by the Reddit WallStreetBets crowd in early 2021 pressured short-sellers, mainly hedge funds, and Robinhood caved to the pressure. The broker has since lifted those trading restrictions. Apparently, all is not well that ends well, however, if Robinhood’s stock price on day one is any indication. Social media members couldn’t resist the irony of the situation.

Celebrity Backers

Robinhood is kicking off its future as a public company with a market cap of USD 34 billion. A couple of astute backers who timed it right are Nas and Snoop Dogg, who invested in the trading app in 2014 when the company had a value of USD 62 million attached.

NBA champion Kevin Durant and his manager Rich Kleiman are probably not complaining either. They placed a bet four years ago through Thirty Five Ventures, the VC firm Drant and Kleiman co-founded.

Their return on Robinhood is reportedly in the ballpark of 2,500%.

S&P 500 Price Forecast – 4400 Level Gets Cleared

The S&P 500 has rallied a bit during the course of the trading session on Thursday as we continue to find plenty of reasons to go higher. The S&P 500 is moving based upon the idea of liquidity measures and of course the fact that Jerome Powell was so dovish certainly helps the situation as well. Ultimately, this is a market that I think will continue to find plenty of buyers on dips based upon that, and of course the fact that we have a lot of support underneath. The 4400 level itself of course is an area that will attract a certain amount of attention, but beyond that we also have the 50 day EMA and the uptrend line.

S&P 500 Video 30.07.21

If we were to break down below there, then the 4200 level should be supportive, and then the 4000 level underneath would be the “floor in the market”, as we have the small gap and of course the 200 day EMA coming into the picture to offer a bit of support. If we were to break down below there, then I would be a buyer of puts, but I would not necessarily short the market flat out.

To the upside, the 4500 level is a target for the short term, as it is a big figure that a lot of people should pay close attention to. If we can break above there, then we will probably go looking towards the 4600 level, as the market tends to move in 200 point increments, as the past action has shown. Ultimately, this is a market that I have no interest in shorting and do not see an opportunity to do so anytime in the near future.

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

Why PayPal Stock Is Down By 5% Today

PayPal Stock Dives As Q3 Guidance Disappoints

Shares of PayPal found themselves under significant pressure after the company reported its second-quarter results. PayPal reported revenue of $6.24 billion and GAAP earnings of $1.00 per share, missing analyst estimates on revenue and beating them on earnings.

The company stated that the number of total active accounts exceeded 400 million in Q2 2021, and PayPal processed 4.7 billion payment transactions. PayPal also noted that it repurchased 765,000 shares of its common stock during the quarter.

While second-quarter results were good and the company’s earnings exceeded analyst estimates, the market focused on PayPal’s guidance for the third quarter.

In Q3 2021, PayPal expects to report revenue of $6.15 billion – $6.24 billion and GAAP earnings of $0.68 per share. The main problem for PayPal in the near term is that eBay Marketplace is moving away from PayPal, which hurts guidance.

What’s Next For PayPal Stock?

PayPal stock suffered due to disappointing Q3 2021 guidance, but traders should keep in mind that the negative impact from eBay’s move will be temporary as PayPal’s core business continues to grow.

The pandemic accelerated the shift to digital payments and allowed PayPal to grow its revenue by 19% in the second quarter.

Analysts expect that PayPal will report adjusted earnings of $4.73 per share in 2021, while the company’s own guidance is $4.70 per share. In 2022, PayPal’s profit is projected to grow to $5.89 per share, so the stock is trading at almost 50 forward P/E.

Such multiples are common for high-growth stocks in today’s market environment as traders are ready to pay premium for companies that benefit from trends which were boosted by the pandemic.

Some analysts have even rushed to upgrade PayPal despite the company’s soft Q3 guidance, and the stock has already recovered some of its earlier losses. S&P 500 is currently testing new all-time high levels, and the general market sentiment is very bullish. In this environment, PayPal stock has a good chance to move back to recent highs as its core business growth remains strong.

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

The Inadvertent Debt/Inflation Trap – Is It Time To Face The Music?

What happens to a global economy after 10+ years of global central bank efforts to support a recovery attempt after a massive credit/debt collapse originates from a prior credit/debt housing bubble?  What happens to global economies when they become addicted to easy money policies and central bank activities that support greater and greater risk-taking? What is the end result of these actions after more than 10+ years of excess and central bank support for the markets?

Let’s play this out a bit to think about how the current market environment may be similar to what happened in the mid/late 1990s and see if we can come to any real conclusions. Remember, we are using our research and technical analysis skills to play a “what if” scenario in this research article.  Our current trading systems have not warned us of any major Bearish price trends of price collapses that may take place. Our systems are still trading the US markets based on current market trends.  This research is completely speculative in the sense that we are trying to identify “what if” scenarios based on events in the recent past.

One thing that our research team has been discussing over the past 8+ months, since shortly after the US elections in November 2020, is the idea that the new US President/US Federal Reserve may engage in policies that are initially perceived as supportive of the global markets in a post-COVID world – yet may engage in very dangerous end results.  An example of this is the continued stimulus efforts for a world that has somewhat moved beyond the initial COVID shock and has transitioned into a new form of economic activity.  Another example would be the US Federal continuing to act in a manner to support the US equities market while Inflation and consumer activity have recently shown extreme pricing/buying activities.

One idea that my research team suggested is this activity may be similar to President Ronald Reagan’s Star-Wars project in how Reagan was able to prompt a spending excess between the US and Russia which eventually broke the Russian economy.  The process between that event and what is happening right now are strangely similar.

The Strange Outcome Of Global Central Bank Policies – The US Is The Clear Winner

The US and many foreign central banks have pushed the envelope of easy money policies over the past 8+ years by continuing to run programs to support a stronger economic outcome.  The focus has been on creating an inflationary target to start a more traditional shift away from the ongoing easy money policies.  Inadvertently, these global central banks may have created and supported one of the biggest asset shifts/bubbles in the past 50+ years.

The COVID-19 virus event may have actually pushed the US Federal Reserve and foreign global central banks into an inadvertent process of creating a massive inflation trap at a time when the global economy and corporate world was banking on much more mild inflationary trends.  The reflation trade that came after June 2020 is likely to have pushed assets, commodities, credit & debt cycles beyond any conceivable scope of reason, while putting unimaginable pressure on foreign central banks in Asia, South America, Africa, and most of the emerging markets.

The incredible rally in commodities, asset values (homes, stocks, US equities, and others) prompted capital to shift towards the strongest and most capable outcomes on the planet.  This created a liquidity trap in many foreign markets where traders moved assets into US equities, Cryptos, US ETFs, and other assets while shunning less dynamic and secure global assets.

https://www.thetechnicaltraders.com/wp-content/uploads/2021/07/2021-07-16_WorldMarketCap-1.jpg

(Source: https://data.worldbank.org/indicator/CM.MKT.LCAP.CD)

What has transpired over the past 10+ years is that the US equities markets have risen to levels above the 2007~08 peak levels. US equities have also continued to skyrocket higher as foreign investors seek to move assets into US Dollar-based equities and ETFs, and away from stagnant, under-performing local equities and assets.  Currently, the US stock market total capitalization makes up nearly $48T of the total global market capitalization. The next closest foreign market exchange is China, which makes up nearly $12T in total capitalization.

https://www.thetechnicaltraders.com/wp-content/uploads/2021/07/2021-07-16_GlobalStockMarketCap-2.jpg

(Source: https://www.advratings.com/companies/the-largest-stock-exchanges)

When one takes into consideration the massive expansion of state, corporate, consumer, and global credit/debt that has taken place over the past 10+ years in China (and the risks associated with servicing that debt as well as increased commodities/asset costs which have taken place over the past 24+ months) one starts to consider if China may suddenly turn into Russia of the late 1990s.

At that time, the inflation rate in Russia reached over 120% and took place after a number of key economic events set up an almost perfect storm. The aftermath of this event continued to create moderate global market crisis events.

  • 1973 & 1979 Energy/Oil Crisis
  • 1982 US Interest Rate Peak/Recession
  • 1983 Israel Bank/Stock Crisis
  • 1987 Black Monday
  • 1991 India Economic Crisis
  • 1994 Mexican Peso Crisis
  • 1998 Russian Financial Crisis

Although the names and dates of these events are much different than what is set up today, imagine the 1973/79 oil/energy crisis was the peak in oil prices in 2018.  Imagine the 1982 peak in US interest rates was the peak in interest reached in 2018.  Imagine the Israel Bank/Stock Crisis and the 1987 Black Monday was the 2020 COVID crisis.  Imaging the 1991 India Economic Crisis, and 1994 Mexican Peso Crisis were the post-COVID economic and current crisis events that have taken place over the past 14+months throughout the world.

Now, imagine that China is the new 1998 Russian Financial Crisis taking place.  One of the biggest and strongest economies in the world is now at risk of entering a severe inflationary period where excess credit/debt of the past few decades may be washed away – just like what happened in Russia.

https://www.thetechnicaltraders.com/wp-content/uploads/2021/07/russia_inflation_rate2.jpg

(Source: https://www.timetoast.com/timelines/financial-crisis-1900s-2017)

Lastly, remember what came about after these events took place and how isolated the world was from the Russian economic collapse in the late 1990s. The world is not so isolated any longer.  If China initiates a credit/debt crisis event, there is a very strong likelihood that the global markets will react to this event moderately violently.

The Hang Seng Index May Foretell A Collapse In The Making

The typical process of the unwinding of this excess credit/debt/liability usually takes place in a common process.  First, individuals, corporations, and state-run agencies load up on cheap debt while inflation and costs are relatively consistent.  Then, as the economy heats up, inflation, commodity prices, and equipment/material costs begin to skyrocket – eating into operational profits for these entities. Meanwhile, the need to service the debt/credit persists.  As fractures in the system become evident (usually starting with isolated debt defaults by some large entities), investors start pricing greater risks into the credit/debt markets – further complicating the issues for these entities that are burdened with excess debt and diminishing profit margins.

Looking at the Russian Inflation Rate chart, above, any type of major inflationary increase will usually push these entities over the edge in terms of sustainability.  Once the cost of refinancing the debt and ongoing profit margins have been squeezed beyond limits, the crisis escalates to a point of implosion.

https://www.thetechnicaltraders.com/wp-content/uploads/2021/07/HSI_W_F.png

Given the rise in Real Estate, Commodities, Oil/Energy costs, and other factors, we believe this event may be unfolding right before us in current market trends.  China may be the focus of what Russia was in the late 1990s with extensive credit/debt issues, massive imports of raw materials, commodities, and food, and extensive global foreign debt/credit issues related to the Belt Road project.  If a global event were to unfold, which we are only speculating MAY happen at this point, China and Asia would become the focal point for this process.

More than ever, right now, traders need to move away from risk functions and start using common sense.  There will still be endless opportunities for profits from these extended price rotations, but the volatility and leverage factors will increase risk levels for traders that are not prepared or don’t have solid strategies.  Don’t let yourself get caught in these next cycle phases unprepared.

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Have a great day!

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

Chris Vermeulen
Chief Market Strategist
www.TheTechnicalTraders.com