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Sun, 25th June 2017

Anirudh Sethi Report

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Archives of “stock market” Tag

Dow closed +89 points up.Nasdaq Composite crashed 114 points down.

S&P down but limited. Dow ends the day up. ROTATION.

The stock market rotated out of the high flying tech stocks.
  • The Nasdaq reached an all time high earlier in the day, but the afternoon saw the market tumble.  The high reached 6341.695. The low 6137.67 – a range of over 200 points. That is huge.   The index is settling at 6207.92, down -113.85 or -1.80%. For the week, the index declined by -1.55%.
In the other major indices:
  • The S&P fell -2.02 points or 0.08%. For the week the index was down -0.30%
  • The Dow closed higher up 89.44 points or +0.42%. For the week the Dow was up 0.31%.

Oil-Private inventory data shows US crude stocks bigger than expected draw

Following last week’s biggest crude build since 2016, API reports another large crude draw (seemingly confirming refinery run rates remain high), but WTI/RBOB prices slipped lower on an unexpectedly large build in Gasoline (and Distillates).

Genscape reported a 750k draw at Cushing last week…

API

  • Crude -4.62mm (-3.25 exp) -0 9th weekly build in a row
  • Cushing -1.56mm (-593k exp) – biggest draw since Oct ’16
  • Gasoline +4.08mm (-50k exp) – biggest build since Jan ’17
  • Distillates +1.75mm

Following last week’s biggest build since 2016, API reported a 9th weekly draw in Crude but Gasoline saw its biggest build since Jan 2017, very much against the recent trend…

Japan’s central bank nearly doubles ETF holdings in one year

The Bank of Japan has stepped up purchases of exchange-traded funds as part of its monetary easing policy, with the balance surging to 15.93 trillion yen ($144 billion) as of March 31.

The total marks an 80% rise from a year earlier and more than a sevenfold increase since the central bank kicked off its quantitative and qualitative easing — adding riskier assets to its balance sheet — in April 2013. ETF purchases have gradually increased under the unconventional policy, expanding to 6 trillion yen a year in July 2016 from 3.3 trillion yen.

 The bank apparently buys frequently on days when the stock market dips in the morning, serving to stabilize share prices.

“The BOJ’s ETF purchases help provide resistance to selling pressure against Japanese stocks,” says Rieko Otsuka of the Mizuho Research Institute.

Should the current pace of buying continue, the BOJ’s ETF holdings would reach about 30 trillion yen in about two years. The market capitalization of the Tokyo Stock Exchange’s first-section companies comes to 550 trillion yen.

The bank’s growing market presence has raised concerns about the repercussions when the easing policy eventually winds down. When speculation of a BOJ exit grows, the anticipated cutbacks on ETF purchases would accelerate selling of Japanese stocks. As a precaution against a sharp market decline, “the BOJ many need to set aside provisions,” Otsuka says.

MSCI to make decision on China A-share inclusion on June 20

Mark your calendars China watchers.

MSCI will on June 20 announce whether it would finally include China’s domestic A-shares in its global indices.

The US index provider last June delayed for a third straight year the A-shares’ inclusion into its benchmark $1.5tn emerging markets stock index, citing regulation worries and accessibility for global investors.

Ahead of this year’s decision, China has embarked on a series of new actions aimed at addressing these concerns. Its banking regulator has launched a “regulatory windstorm” while the central bank has made the first move to ease capital controls, providing much needed liquidity to the offshore renminbi market.

Meanwhile, BlackRock has for the first time publicly backed the inclusion of onshore stocks in MSCI’s indices and Chinese officials have even criticised dividend-dodging companies, dubbed “iron cockerels”, and promised extra scrutiny.

How Hedge Funds Play The OPEC Deal Extension

We’ve had a good two-way crude oil market since the first of the year which has helped hold crude oil in a relatively narrow range as aggressive traders continue to play the long side, in anticipation of a balance between supply and demand.

This year began with an oversupplied crude oil market, but with a bullish tone set by OPEC when they decided to start reducing output in an effort to trim supply and stabilize prices. On paper, the idea seemed bullish. What they didn’t expect, however, was the surge in U.S. production that skewed their forecasts and timetables for global supply and demand to reach a balance.

For nearly six months, traders have been pelted with stories nearly every day telling them about OPEC supply cuts and increased U.S. production. The stories seem to have neutralized the markets to a point where crude oil prices have become range bound.

In order for a market to become range bound, some major market player has to be selling enough crude oil to stop a rally and some major market player has to be buying enough crude oil to stop the decline.

However, inside the trading range we’ve seen several pockets of volatility and these moves can only be blamed on the speculators and namely, the hedge funds.

If you’ve traded speculative markets, I’m sure you’ve noticed that markets come down faster than they go up. Essentially, this is because speculative buyers tend to be very careful about where they buy or enter the market, but when it’s time to sell, they don’t care what they pay to get out.

Nasdaq’s “Big 5” Stocks Near $3 Trillion Market Cap

Since President Trump was elected – much to the heart-crushing chagrin of the billionaire class in Silicon Valley and its epic funding of Hillary – the big 5 stocks of the Nasdaq (Alphabet, Amazon, Apple, Facebook, and Microsoft) have gained a stunning $675 billion in market cap.

This pushes them near $3 trillion and well over 10% of the entire US equity market…

For context, Bloomberg notes that is more than the total value of stocks in any single equity market worldwide except the five largest: the U.S., China, Japan, Hong Kong and the U.K.

Apple receives $1tn valuation call from Drexel Hamilton

Apple on Monday landed a $1tn valuation after analysts at Drexel Hamilton boosted their price target on the stock.

Brian J White at Drexel Hamilton maintained his “buy” rating on the stock and boosted its price target to $202 a share — the highest on Wall Street — from $185 previously. That values the iPhone maker at more than $1tn based on its outstanding share count of 5.2bn shares on May 8.

Apple’s shares were up as much as 2.9 per cent to an all-time high of $153.25 on Monday.

Moreover, he notes that Apple has “proven its resilience through its unique ability to develop hardware, software and services that work seamlessly together. We believe this positions Apple very well to capitalise on the trend toward more ‘things’ becoming a computer.”

Looking ahead, he notes that Apple’s quarterly results will be less important as investors focus on the iPhone 8 this fall, capital distribution plans, “depressed valuation” and possible innovations.

A Problem Emerges: Central Banks Injected A Record $1 Trillion In 2017… It’s Not Enough

Two weeks ago Bank of America caused a stir when it calculated that central banks (mostly the ECB & BoJ) have bought $1 trillion of financial assets just in the first four months of 2017, which amounts to $3.6 trillion annualized, “the largest CB buying on record.” 

 

Probability in Trading

The indulgence of probability

Probability in day trading is an extremely flexible and equally subjective authority. It is one such aspect that provides for a comprehensive room in terms of making decisions and analysing the potential effects of the decision as well. It can be envisioned as a semi-mechanical process which is based on an automated system comprising of various probabilities that depict two possible results at the end of it all.

Application of the laws of probability to determine market curve

The laws of probability are majorly applied to the stock market arena in speculating the growth curve. One of the most common examples is the influence of present growth on a stock. For instance the laws of probability in stock market confers to the fact that a stock is expected to underperform following an adverse growth session since major players tend to reap in the benefits without further risk involvement.

The substantial loss is incurred since major proportions of the people seemingly think alike and want to either cash out with the profits they have made or simply by virtue of the fear of losing money. Either way the scenario is completely structured owing to the presumptuous thinking of the common people and the misguiding statistical analysis with probability at its core.

It is therefore easily understandable that probability plays a comprehensive role at the crux of shaping the stock market manoeuvres. Probability in day trading is completely speculative yet self-induced as well. In an easier and subtle language it can be envisioned as a pseudo element that helps to shape the movements. It is significantly a common entity that is extensively present at the back of the mind in each trader.  

Probability based trading

Amazon shares hit record high after beating on earnings. Microsoft down, Google up.

Amazon beats again

  • Revenue $35.7B versus $35.31B expected
  • Earnings $1.48 per share versus $1.13 expected
  • Operating income $1 vs guidance in $250m to $900m range

Shares up to $960 from $917 at the close.

That likely makes Jeff Bezos the world’s second-richest man, trailing only Bill Gates.

Microsoft, meanwhile, only met estimates. Shares are down to $65.85 from $68.31 at the close.  Google is up to $900 from $873 on a beat. Intel down to $36.02 from $37.37.