S&P Futures are extending their losses from yesterday this morning as a wave of selling pressure seen from Asia to Europe overnight. Markets will be paying attention to this morning’s reports on factor orders and job openings. After the bell yesterday GTLB & HQY released positive earnings reports. ZS also beat but lowered Q1 guidance. This morning, DLTR released weaker than expected eps report, DKS and CIEN are on deck this morning. While the U.S. & China’s economic data was slightly disappointing yesterday, markets remain in the red this morning, price action appears overblown. Bank of Canada is expected to announce a rate cut this morning. OPEC is said to be consider a delay to its October production hikes. In Europe, the major three indexes are lower. Oil prices have reversed course and are now trading higher.
Day: September 4, 2024
The Great Realignment
by David Prentice, American Thinker: The Trump campaign has been shaking the foundations of America since he came down the escalator. Part of the shake-up is due to Trump himself. A blue-collar billionaire who was not part of the political in-crowd. Brash. Bold. Creative. Speaks his mind. He knows how to sell and promote his […]
US trade deficit widest in two years: govt
The US trade deficit in July expanded to its largest since mid-2022, according to government data released Wednesday, as imports rose more quickly than exports. Overall, the trade gap widened to $78.8 billion, from a revised $73.0 billion in June, the Department of Commerce said.
The post US trade deficit widest in two years: govt appeared first on Insider Paper.
Three Megabanks Had Loans Outstanding of $1.832 Trillion to Giant Hedge Funds on March 31
by Pam Martens and Russ Martens, Wall St On Parade: The Office of Financial Research (OFR), the federal agency created after the 2008 financial collapse on Wall Street to defog the lenses of federal regulators to prevent a replay of that disaster, has posted frightening graphs on its website as part of its “Hedge Fund […]
Risks Facing Bullish Investors As September Begins
Risks Facing Bullish Investors As September Begins
Authored by Lance Roberts via RealInvestmentAdvice.com,
Since the end of the “Yen Carry Trade” correction in August, bullish positioning has returned with a vengeance, yet two key risks face investors as September begins. While bullish positioning and optimism are ingredients for a rising market, there is more to this story.
It is true that “a rising tide lifts all boats,” meaning that as the market rises, investors begin to chase higher stock prices, leading to a virtual buying spiral. Such leads to an improvement in market breadth and participation, which supports further price increases. Following the August decline, the chart below shows the improvement in the NYSE advance-decline line and the number of stocks trading above their respective 50-day moving averages (DMA).
Given that “for every buyer, there must be a seller,” this data confirms that buyers are increasingly willing to pay higher prices to bring sellers to market. That cycle continues until buyers willing to pay higher prices decline. While prices are rising, we are seeing a dwindling of buyers at current prices, as shown in the chart of trading volume at various price levels. As shown, buyers currently “live lower” between 5440-5480 and the recent correctional lows.
However, despite the diminishing pool of buyers at current levels, investors are becoming increasingly bullish as prices rise. As shown in our composite fear/greed gauge, based on “how investors are positioned” in the market, we are back to more “greed” based levels. While not at extreme levels, investors are becoming increasingly optimistic about higher future prices. Of course, such readings only confirm what market prices are already telling us.
However, two primary risks to the bullish advance are developing as we enter September.
Share Buyback Window Begins To Close
Over the next two months, a primary risk to bullish investors is removing a critical buyer in the market – corporations. For more on the importance of corporate share purchases on the financial markets, read the following:
Those articles support that corporations have comprised roughly 100% of net equity purchases since 2000. In other words, the market would be trading closer to 3000 rather than 5600 without corporate share buybacks.
However, these share buybacks also pose risks to the market in the short-term as well. As Michael Lebowitz noted this morning:
“Like the meteorological seasons, share buybacks also follow predictable patterns. Accordingly, as shown below, we are past the peak share buyback season. Following the peak, share buybacks will decline rapidly until early November. Declining share buybacks is not a bearish indicator per se. However, as the number of buybacks declines, the market, specifically the stocks conducting buybacks, will have less demand for their stock. Think of share buybacks as a tailwind.
The pattern is predictable because it directly relates to corporate earnings reports. For three reasons, most companies ban share buybacks about a month before their quarterly earnings report.
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Insider Trading Concerns—Employees have access to non-public information regarding their earnings. Therefore, the ban helps eliminate the perception that the company might be trading its stock on such information.
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Investor Perception– Similarly, investors might be suspicious if the company was actively buying its stock right before the earnings announcements. If the investors were mimicking the company’s purchases, this could create heightened volatility in the stock.
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Regulatory Concerns—While the SEC does not regulate share buybacks before earnings, most companies want to avoid an investigation if the SEC suspects those buying back the shares have inside information.
As shown on Thursday, September 5th, the window for buybacks will begin to close. Corporate buying support will be non-existent by the beginning of October and through the end of the month. In other words, the primary buyer of equities will not be available to bid prices.
If you don’t believe that share buybacks are as crucial as we state, the following chart should answer any questions.
Unfortunately, removing that primary buyer will coincide with a secondary market risk.
Presidential Election Concerns
As we enter September and October, a secondary risk increases. Historically, these months have seen stock market declines, especially in years with a Presidential election. There are three primary reasons for this trend.
1. Uncertainty Surrounding Election Outcomes
Markets dislike uncertainty, and the outcome of a Presidential election is a significant unknown. Investors become cautious during election years, especially when the race is tight. They worry about potential policy changes impacting taxes, regulations, and government spending. That heightened uncertainty increases market volatility and often results in stock market declines as investors move to safer assets.
2. Policy Change Concerns
Depending on the election outcome, significant policy changes can occur. For instance, Harris and Trump have very different approaches to fiscal policy, regulation, and international trade this year. With the polls very tight, Wall Street may look to lock in gains before the election, fearing that new policies might negatively affect corporate profits via higher tax rates and, potentially, changes to capital gains rates.
3. Economic Data Releases
September and October are critical months for economic data releases, particularly since the Federal Reserve expects to cut rates in September. Key indicators from employment, inflation, and housing will potentially move markets over the next two months. Given the approaching election, the markets will scrutinize those releases closely as candidates try to leverage the data. Any negative surprises could result in a sharp pickup in volatility.
Conclusion
As we head into September, which already has a weak performance record, understanding these two risks can help investors navigate a potential pickup in volatility, particularly during election years.
However, the timing of such a consolidation or correction is always tricky.
We suggest maintaining risk controls, taking profits as needed, rebalancing portfolios, and holding slightly higher cash levels.
While these actions won’t entirely shield portfolios from a near-term decline, they will buffer increased volatility, allowing for more rational and controlled portfolio management decisions.
Tyler Durden
Wed, 09/04/2024 – 07:20
Creeping Towards Conscription: Senate Defense Bill Looks to Automatically Register Young Men and Women for the Draft
While the US Government has not had military conscription in more than 50 years, Congress is toying with the idea again. This country receives no benefits from the draft, but that hasn’t stopped some in Congress from claiming it “protects our freedoms.”
De-facto US envoy warns Taiwan is not China’s only target
The new de-facto US ambassador to Taiwan said Wednesday that the democratic island is “not the only target” of China’s “intimidation and coercion”, with more countries cooperating with Washington to “avoid war.” China claims self-ruled Taiwan as part of its territory and has said it will never renounce the use of force to bring the […]
The post De-facto US envoy warns Taiwan is not China’s only target appeared first on Insider Paper.
Natural Law and Rothbardian Liberty
Modern mainstream economics bases its theories on utilitarianism. Murray Rothbard, on the other hand, saw economic law as based in natural law. Furthermore, he rejected the legal positivism of our age, again deferring to the law of nature.
The Truth about Churchill
“Winston Churchill was a Man of Blood and a politico without principle, whose apotheosis serves to corrupt every standard of honesty and morality in politics and history.”
Why the Political Establishment Won’t Touch the Chronic Disease Issue
Despite all the money spent on US healthcare, an astounding number of Americans suffer from chronic illnesses. Yet the political establishment has shown no interest in even discussing the issue. It’s important to understand why.