Market Update:
There has been a tremendous amount of damage show up over the past 48 hours as the so-called Trump rally is quickly deteriorating. In fact, the Nasdaq 100 ($QQQ) has erased all its post election gains! That is not some random no-name penny stock, it is the Nasdaq 100. Remember, the market was weak before the election and what we are seeing now is a lot of damage show up beneath the surface as leadership dries up and fewer and fewer areas are holding up well. Just look at the S&P 500 and where the 50 dma line is. There’s a big void that could easily be filled. Tomorrow is the always fun jobs report. As always, we want to see where the market closes tomorrow and we will have a full report for you this weekend. Unless we see a huge rally, take your time and play defense.
Two Historical Precedents To Keep In Mind:
In 1980, stocks jumped after Reagan won the election. The little post election rally topped out on Nov 26, 1980 and the market fell in to a bear market. In fact that high was not taken out until 1982! The second historical precedent to keep in mind is last December 2015 when the Fed raised rates for the first time since before the financial crisis. Stocks moved sideways until the end of the year but sold off hard in Jan and Feb 2016. So if the Fed raises – we could see another big fall shortly thereafter. Depending how hawkish they are. We also know that Trump doesn’t like Yellen. So she might be more aggressive with raising rates if they don’t “play nice.” Finally, the fact that this bull market is 8 years old and there is a lot of damage emerging- we want to exercise caution up here – even though the major indices are near record highs.
FLS Portfolio:
Thankfully, the FLS portfolio is acting well. We don’t like the action so we are moving out stops up to lock in our gains. Here’s a snapshot of the FLS portfolio as of today’s close,
- The service owns:SMH +15.46%, MU +3.01%
B. The service will exit: SMH @ 67.37, MU @ 18.16
Working Orders:
| Status | Order | Ticker | Buy Stop | Protective Sell Stop | Risk From Entry |
| Open | Buy | HACK | 28.23 | 26.97 | -4.46% |
| Open | Buy | CME | 115.41 | 111.82 | -3.11% |
Earnings Recap & Look Ahead:
Major Data 11.28.16 to 12.2.16 (as of 12/1 afternoon)
495 (99%) companies in the S&P have reported Q3 equivalent earnings
6 (1.2) companies in the S&P will report earnings next week
Q3 Earnings Summary:
72.5% have POSITIVE EPS surprise
7.3% have NEUTRAL EPS surprise
20.2% have NEGATIVE EPS surprise
69.7% have HIGHER EPS year over year
3.0% have NEUTRAL EPS year over year
27.3% have LOWER EPS year over year
Q3 Sector Performance (percentage of Positive Surprise):
Information Tech: 89.1%
Financials: 84.4%
Consumer Staples: 76.5%
Utilities: 78.6%
Energy: 70.3%
Industrials: 68.7%
Healthcare: 68.4%
Consumer Discretionary: 67.9%
Real Estate: 53.6%
Materials: 51.9%
Telecom Svcs: 40.0%
Earnings growth for the SPX the third quarter is 2.9% vs expectations of 3.3%
Ø Worth Noting: Earnings growth for the 431 non-financials that reported is 1.2%
Revenue growth for the SPX the third quarter is 2.2% vs expectations of 2.26%
Economic Data (*all times ET)
U.S.
Monday (12/5)
Markit US Services PMI (9:45): 54.7 expected
Markit US Composite PMI (9:45):
ISM Non Manufacturing Composite (10:00): 55.0 expected
Tuesday (12/6)
Trade Balance (8:30): -$41.5 billion
Factory Orders (10:00): 2.6% expected
Durable Goods Orders (10:00): 0.7% expected
Wednesday (12/7)
Mortgage Applications (7:00):
Thursday (12/8)
Initial Jobless Claims (8:30):
Continuing Claims (8:30):
Bloomberg Consumer Comfort (9:45):
Friday (12/9)
Wholesale Inventories MoM (10:00): -0.4% expected
U of Mich Sentiment (10:00): 94.2 expected
International
Monday (12/5)
Germany Markit Services PMI (4:30):
Germany Markit Composite PMI (4:30):
UK Markit Services PMI (4:30): 54.3 expected
UK Markit Composite PMI (4:30):
Eurozone Markit Services PMI (5:00):
Eurozone Markit Composite PMI (5:00):
Tuesday (12/6)
Germany Factory Order MoM (2:00):
Eurozone GDP QoQ (5:00):
Eurozone GDP YoY (5:00):
Wednesday (12/7)
Germany Industrial Production (2:00):
UK Halifax House Prices (3:30):
UK Industrial Production MoM (4:30): 0.2% expected
UK Industrial Production YoY (4:30): 0.4% expected
UK Manufacturing Production MoM (4:30): 0.2% expected
UK Manufacturing Production YoY (4:30): 0.8% expected
Japan Trade Balance (18:50):
Japan GDP QoQ (18:50): 0.6% expected
Japan Annualized GDP QoQ (18:50): 2.3% expected
Thursday (12/8)
Japan Eco Watchers Survey (00:00):
Eurozone ECB Main Refinancing Rate and Meeting (7:45):
China CPI YoY (20:30): 2.2% expected
China PPI YoY (20:30): 2.1% expected
Friday (12/9)
Germany Trade Balance (2:00):
UK Trade Balance (4:30):
Earnings
- Mon 12/5
o Open:
o Close:
- Tues 12/6
o Open: AutoZone (AZO), Bank of Montreal (BMO), GW Pharma (GWPH), HD Supply (HDS), Michaels (MIK), Toll Brothers (TOL)
o Close: Dave & Busters (PLAY)
- Wed 12/7
o Open: Brown-Forman (BF.B), Vera Bradley (VRA)
o Close: Costco (COST), H&R Block (HRB), lululemon (LULU), Ollie’s Bargain Outlet (OLLI), United Natural Foods (UNFI)
- Thurs 12/8
o Open: Acushnet (GOLF), Ciena (CIEN), Science Applications (SAIC)
o Close: Broadcom (AVGO), DAVIDsTEA (DTEA), Finisar (FNSR)
- Fri 12/9
o Open: Vail Resorts (MTN)
o Close:
Disclaimer:
This analysis contains information from resources believed to be reliable but are not guaranteed as to accuracy or wholeness as of the date of this publication. Past performance is not necessarily indicative of future results. There is always a risk of loss in trading and investing. Opinions articulated are subject to change without notice. This analysis and any opinions expressed are intended for educational purposes only and should NOT BE interpreted as a call for engagement in any transaction involving the purchase or sale of any security or investment product or service. The risk of loss in investing and or trading can be substantial, and traders/investors should carefully consider the inherent risks of such an investment in light of their financial condition. The author, firm, associates, or the firm’s clients may have a position in any of the investments mentioned and their positions are subject to change without notice. Any reproduction or retransmission of any portion of this report without the express written consent of Sarhan Capital is strictly prohibited.
