DHUnplugged Podcast

Markets are still contending with cross currents and the free-fall in commodity prices. The most recent earnings from Apple (AAPL) and Google (GOOG) are pushing and pulling investors in different directions.

We delve into the recent move by the Bank of Japan, earnings and the latest news that are shaping the investment climate. Plus, we reveal the winning entry from our 300th Anniversary show.

Plus, we take a look at negative interest rates and the potential for the Fed to restart QE.

Click HERE for Show Notes and Links

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Results from the DHFed – No one got it exactly right – but close… (Scroll to bottom)

The Bank of Japan shocked markets last Friday with the announcement that they are moving toward negative rates. (Only for new money deposited at the BOJ and will not hurt bank profits) Yen drop 2% on the news after initially soaring. Negative rates are a really bad experiment.

Tonight, in response to the selloff in US and oil hitting $29.45 (down 23% YTD), Japan markets down 3%, Hang Seng down 3%, and futures running lower)

* Tomorrow may be ugly…. However, probably a good amount of potential bounce opportunity ahead of Friday. **

Crude oil now back to $30… Nasty fall after big move up.  markets following step-by-step. DJIA dropped 300 points today and NAZ and S&P ugly. Where to next?

Google/Alphabet (GOOG) unseats Apple (AAPL) as the most valuable company in the world. With the recent earnings announcement, Google’s market cap is larger than Apple. WOW!

– Google had more paid clicks at a lower cost per click and beat by a wide margin.

Yahoo! laying off 2,500 employees. But, is Marissa Mayer one of them .. NO!

WAIT!!! 3:30pm, some chatter about yahoo! looking for…. “Strategic Alternatives” – stock ramps (smells like desperation).

Yahoo! also announced that they are going to explain a major restructuring after the earnings announcement tonight – that led me to believe that there is the potential for a significant miss in their quarterly report. (There is also some discussion out there are lawsuits against Yahoo! regarding their stacking process for employee reduction)

Natural gas getting whacked! Below $2.00 now and off by 14% YTD, 13% in Feb. Maybe because Punxsutawney Phil sees no shadow, predicts early spring??

The 10-year Treasury is 1.87% now, the recent low was 1.5% in 2012 when the Fed was pressing rates. Does this mean that markets do not believe that the Fed will be raising rates again AND may be moving toward additional stimulus? Or something else under the surface…

BANKS: This is bad..Click to see recent performance

Click For Bank Performance

Iowa Caucus – Clinton and Cruz. WOW… Trump must be pissed.

What is with this Zika virus – really picking up steam. WHO now calling this a global emergency. (LINK)

— Report that the first spread through sexual contact in the US just hit the wires.

Comcast – Xfinity – I have service and they opened up their WiFi so wherever I am it picks it up, piggybacking off of others Wifi. Is this right?

It is starting…. Exxon Mobil profits down 58%, BP down 90% or so…..

Market comeback? Short-squeeze ahead of the Fed? Oil hitting bottom? Not so fast…

Apple’s (AAPL) earnings, facts about Oil and the million dollar Oprah Tweet – Just a few of  the important discussion points from this episode – and much more.

The big question is: Will this end up being the worst January for market in history or will the Yellen and her band of merry men be able to save the markets?

Oh – not to forget that we are having a special giveaway this episode – check the show notes below for more information.

Click HERE for Show Notes and Links

Announcing the DHFed – We give away money too! Special giveaway for the 300th show will be announced at the end of the show. (Scroll to bottom)

The first week up this year. With a good amount of chatter from Central Banks last week, the thought is that they are going to once again save markets. However, there is a palpable change in sentiment over whether they can do it this time.  (Draghi spoke last week and promised to do “everything possible” again and there is the hope floating that the Bank Of Japan will add stimulus.)

Several “big firms” are cutting their year end price target for the S&P 500. The latest was JP Morgan with a move from 2,200 to 2,000 by the end of 2016.

– Quick calc: EPS of $120 X PE 17 = 2,040 or 7% possible move from here…

– The above also assumes EPS grows by 10%+ for full year 2016

China continues to be the target of selling as the PBOC not trusted and massive flight of money out of the country. Some capital controls have been added to try to keep money from leaving.

Meanwhile, China is targeting further cuts in crude steel production capacity by as much as 150 million tons and “large scale” reductions in coal output as part of supply-side measures aimed at curbing overcapacity and excess labor in state-owned industries. The country has lowered steel production by about 90 million tons “in recent years” and will push to cut a further 100 million to 150 million tons, while “strictly controlling” steel capacity increases and halting new coal mine approvals. (LINK)

Don’t believe China’s economic data? The Communist Party’s anticorruption commission announced late Tuesday that it was looking into the head of the country’s statistics agency over what it called “serious violations.”

Markets following price of Crude. In 2016, 95% correlation of S&P 500 to the daily move in crude price. Usually only 50% over longer term period.

Post Close,  WTI oil futures sell off after the API reports a massive build of +11.4 mln barrels of oil vs. last week’s build of 4.6 mln barrel (Briefing.com)

Big week for earnings – 150+ companies in the S&P 500 are reporting this week. So far a mixed bag. Amazon (AMZN) on Thursday.

Twitter (TWTR) – big management changes, very abrupt departures of heads of key areas of the company. And, Twitter Chief Executive Jack Dorsey announced Tuesday that American Express’s Leslie Berland will join the social media company as its chief marketing officer (AXP? Really???).

News out of Re/code that Twitter has stopped showing ads to their more valuable users.

Twitter Stopping Ads…

Apple (AAPL) out with earnings: (now holding $216 billion in cash)

There has been no let up of the selling pressure. Even with an overnight pop, stocks lost most of their luster as the correction continues.

Earnings season is now in full swing and even as we see some decent beats, that is not helping. Banks are expecting big losses on energy related debt and few companies have bright outlooks to share.

Click HERE for Show Notes and Links

Three Powerball winners – Since we are still doing the show, assume that neither of us won?

Market update: At the end of last week, January 2016 moved up to the #1 worst January since 1966. While it came off the bottom Friday, it is still in the Top 3. Oil dropping, concern over rising provisions at banks for bad debt, consumers spending less and the outlook for earnings still has a cloud hanging over markets. Today we are seeing a bit of a relief rally from an oversold condition – will it last? (All major indices in correction territory now)

BIG reversal (again) today. Futures on S&P 500 were up 24 handles pre-market. By mid-day they were flat. Sellers are not kidding around. (By 2pm, all major indices in the red)

Slowest growth in 25 years! China GDP 6.8% – world markets watching this closely as concern over the growth of the country’s economy could be a problem for the rest of the world. Lowest GDP since 2009. The question is: Do we believe it?

– Several analysts out saying that GDP may really be well below, possibly 5%

– China may need to continue to devalue the Yuan to reduce debt and stoke growth

China GDP Trend

Iran economic sanctions lifted. Iran immediately added 500,000 barrels per day to oil production. Sent Brent crude under $29. Current forecasts are all over the place – see chart.

Brent Crude Forecast

Over five million jobs will be lost by 2020 as a result of developments in genetics, artificial intelligence, robotics and other technological change, according to World Economic Forum research. (But there are over 3 billion employed worldwide, is this a big deal?) (LINK)

Seems that there is not just one cockroach. Renault SA shares plunged the most in 17 years after a union said French fraud investigators seized computers from the automaker, apparently as part of a probe into emissions testing. (Seems that Europe is not very concerned and wants to possibly change emissions rules as their auto sector could be hit by these findings)

Problem for the big ticket housing market? The Treasury Department’s Financial Crimes Enforcement Network said that it will seek out the identity of individuals behind limited-liability companies that pay cash for high-end residential real estate in Manhattan and Miami-Dade County. Starting in March, title insurers will be required to name the true “beneficial owner” behind the anonymous entities.

Bank earnings are flowing in – while they look good on the surface, there is concern over the outlook and loan loss provisions. Bank of America (BAC) reported and stock down again. (Also concern about banks in Europe as potential for banking crisis rising again) For 2016:

– Bank of America (BAC): – 16%

It was a historic week on Wall Street. 2016 started with a nasty blow to markets. Investors liquidated as they ran for cover and headlines are painting a bleak picture.

Earnings season, China, crude and the major news that will move markets are all discussed. We also confirm our car sales theory with data that backs it up.

The Iranian affair and the State of The Union Address are up for commentary as well.

What is that coffee company that John can’t recall?

Show Notes and Links

President Obama’s final State of the Union… and?

THE WORST FIRST WEEK OF YEAR EVER – that is the headline that is being pushed around. Also seeing many compare the future to 2008…. Yes, it was bad…. How bad?

Some Stats:

XHB

SPDR S&P Homebuilders

-9.13%

XLB

S&P Sel Materials Spdr Fd

-7.74%

XTL

SPDR S&P Telecom ETF

-6.92%

XLF

S&P Sel Finl Spdr Fd

-7.26%

XLE

S&P Sel Energy Spdr Fd

-7.08%

XLK

S&P Sel Tech Spdr Fd

-6.40%

XLI

S&P Sel Industrial Spdr Fd

-6.21%

XLY

S&P Sel Consum Discretion’y Sp

-5.82%

SPY

SPDR S&P 500 ETF

-5.86%

XLV

S&P Sel Health Care Spdr Fd

-5.57%

XLP

S&P Sel Consum Staples Spdr Fu

-2.91%

XLU

S&P Sel Utilities Spdr Fd

-0.39%

Other markets around the world fared even worse last week:

China -13%, Africa -11%, Australia, -11%, Mexico -9%, Brazil -8%, Canada -6.75%….

Sectors that are getting beat up so far in 2016:

Homebuilders -9%, Materials -7.75%, Telcom -7%, Financials -7%, Energy -7%…

Utilities and Consumer Staples held up the best with only fractional losses.

Technical Conditions at end of last week:

* At the close of the week, only 101 stocks in the S&P 500 were above their 200 day moving average

* At the close of the week, only 61 stocks in the S&P 500 were above their 50 day moving average

* S&P 500 is under the 10-month and 12-month moving average

* Our Key Reversal Indicator (KRI) is flashing “oversold levels” consistent with near-term market turning points

* The Spearman Indicator is close to a low point that shows bottoming

Key Reversal Indicator

From Tom McClellan this week: “In a Dec. 11, 2015 Chart In Focus article, I posed the rhetorical question about whether the market was reliving its past from 2012, or from 2008.  The financial panic in China seems to have settled the question for us, and the market has decided on the 2008 scenario.”

Market Doomsday Chart

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