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Natural Gas from Pipelines to PortfoliosNatural gas was once considered a byproduct of oil production. It is now becoming increasingly important as one of the cleanest burning fossil fuels and a key piece of the clean energy transition. Today, it forms the backbone of global energy production. This paper delves into the supply and demand factors affecting natural gas prices and proposes a long position in Henry Hub Natural Gas Futures (NG1!) to harness gains from seasonal price trends with an entry of 2.484 with a target of 3.099 and a stop loss at 2.172 delivering risk/reward ratio of 2x. Natural Gas Supply and Demand Supply Largest producers and exporters of Natural Gas are US, Russia, Iran, China, Canada, Qatar, Australia, Norway, and Saudi Arabia. The standout in the list is Russia. Following the conflict in Ukraine, gas exports from Russia plummeted 58% in 2022. This led to price shocks in EU natural gas (TTF). US supply is unable to adequately bridge this deficit as transporting natural gas using ships requires converting it to Liquified Natural Gas (LNG) and using special refrigerated vessels which is not economical for large quantities of natural gas. This is also why the spread between EU and US natural gas is much wider than EU and US oil. Notably, US shale reserves have a high concentration of natural gas. Along with newly developed fracking techniques, this has led to increasing gas production in the US. Moreover, natural gas is also obtained in the process of oil extraction, which means gas production is linked to oil production. This has interesting ramifications when looking at present supply. Despite low natural gas prices over the past few months, production in the US has remained high as a result of high oil production. Similarly, higher prices do not readily translate to higher production. This suggests that Natural Gas price-supply relationship is inelastic. Demand Demand for Natural Gas comes from: • Energy Production – Natural Gas is used in power plants to generate electricity. Natural Gas electricity production has been rising over the last decade as it replaces Coal. Notably, manufacturers using natural gas as an energy source can switch to other energy sources during price spike, which provides some elasticity to demand. • Commercial and Residential Heating – Natural Gas is used for heating homes in winter. This can lead to a seasonal demand during winter months in the Northern Hemisphere. • Industrial Use – Natural Gas is used as a raw material for industrial products such as plastics, ammonia, and methanol. Natural gas demand is heavily affected by weather. Unusually warm summers in the Northern Hemisphere drive higher energy usage from air conditioners while colder winters drive higher demand for heating. Inventories Gas can be injected into storage facilities and stored for later use. These inventory levels play a major role in balancing supply-demand. Summer months (April-October) are referred to as injection periods while winter months (November-March) are withdrawal periods. Inventory levels help even out the surge in winter demand. However, natural gas is much harder to store than oil as it is less dense. This means the inventory effect is not as apparent which explains the larger seasonal variation in natural gas prices as compared to oil prices. Seasonality in Natural Gas Prices Seasonal price action of Natural Gas shows two distinct price rallies. A large rally during winter in the US and EU driven by surge in supply for heating in winters, during this period, prices peak in early-December before declining. The other, smaller spike is during summers in the US and EU when demand for electricity rises, during this period, prices peak in early-June before declining. Further, prices show the highest deviation from the seasonal trend in late-September. Over the past five years, the winter rally has become wider, with prices staying elevated from August to early-December. Additionally, seasonal trend points to a price appreciation of +11% between September and December. However, investors should note that past seasonal trends are not representative of current or future market performance. Henry Hub Futures Henry Hub is the most prominent gas trading hub in the world. It is located at the intersection of major on-shore and off-shore production regions and connected by an extensive pipeline network. This is also where US natural gas exports are dispatched. CME’s benchmark Natural Gas futures (NG) deliver to Henry Hub and is the largest gas futures contract in the world. Other notable Natural Gas futures contracts are TTF (EU) and JKM (Asia). Futures from both regions are also available for trading on CME. Asset Managers are Bullish Commercial traders are heavily net short on Natural Gas futures, short positioning in July was at its highest level since 2021 but has since reduced. Overall, net short commercial positioning points to bullish sentiment. Asset managers have switched positioning in Natural Gas futures from net short to net long since May. Last week net long positioning reached its highest level since May 2022. Options markets OI points to a neutral market view on natural gas with Put/Call ratio close to 1. Options P/C has stayed close to 1 for the past 3 months. At the same time, Implied Volatility on Natural Gas options has been rising in August. A rally last week failed to break past a key support level but vols remain elevated suggesting that price may retest that level again. Henry Hub Gas Dynamics with European Gas Last week, EU Natural Gas futures (TTF1!) spiked by almost 28% due to a strike at Australia’s second largest LNG plant, still the rally soon retraced almost entirely. LNG supply disruption, especially at the key transition to the winter season can lead to volatility spikes. Though, EU gas inventories are 90% full, supply disruptions like this can still have a major effect on gas prices but especially on volatility. Over the past few years, higher flexibility and capacity in the global LNG supply chain has led to the various global natural gas benchmarks tracking each other more closely. This means that Henry Hub natural gas futures are exposed not just to US and Canada Natural Gas production but also to disruptions in global supply. However, the effect is comparatively limited due to ample supply in the US. This can be seen in the price action of Henry Hub natural gas futures which rose by 6% on the same day. Recent Trend in Natural Gas Inventories As per the EIA, Natural Gas supply fell 0.1% WoW last week. At the same time demand rose by 0.3% WoW. Note that working natural gas in underground storage has started to flatten over the past 4 weeks, rising by just 94 billion cubic feet (BCf) compared to the 5Y average increase of 140 BCf during the same period. Still, inventory levels are close to the top of their 5-year maximum, elevated by high US gas production during the summer driven by higher oil production. EIA forecasts that the depletion season will end with inventories 7% higher than their 5-year average. EIA expects production to remain flat for the remainder of the year, so watching weekly consumption reports could point to early indicators of seasonal inventory depletion. However, due to elevated inventory levels, the seasonal effect may not be as strong as prior years. In a longer-term trend, gas rigs in the US have started to decline this year after surging over the past year. This will likely lead to lower production over the next year. Trade Setup With options markets pointing bullish and seasonal trends suggesting price appreciation during this period, a long position in Natural Gas futures expiring in October (NGV) allows investors to benefit from an increase in Natural Gas prices. Each contract of CME Henry Hub Natural Gas Futures provide exposure to 10,000 MMBtu of Natural Gas while the October contract has maintenance margin of USD 5,070 for a long position. A USD 0.001 MMBtu change in quoted price per MMBtu leads to a PnL change of USD 10 in one Henry Hub Natural Gas Futures. Entry: 2.484 Target: 3.099 Stop Loss: 2.172 Profit at Target: USD 6,150 Loss at Stop: USD 3,120 Reward/Risk: 2x MARKET DATA CME Real-time Market Data helps identify trading set-ups and express market views better. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com DISCLAIMER This case study is for educational purposes only and does not constitute investment recommendations or advice. Nor are they used to promote any specific products, or services. Trading or investment ideas cited here are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management or trading under the market scenarios being discussed. Please read the FULL DISCLAIMER the link to which is provided in our profile description.
NYMEX:NG1!Long
by mintdotfinance
17
Are Chips Losing Their Edge to Software Stocks?Semiconductor stocks have surged this year, thanks in large part to NASDAQ:NVDA Nvidia. But they could be losing relative strength to software makers within the technology sector. Today’s main chart focuses on the NASDAQ:SMH VanEck Semiconductor ETF, which closely tracks the NASDAQ:SOX Philadelphia Semiconductor Index. It recently slipped below the 50-day simple moving average (SMA), which may signal weakness over the intermediate term. The lower study shows its relative strength versus the NASDAQ:NDX Nasdaq-100. Notice how it’s mostly lagged the broader index since late June. Next, consider the same chart and studies for the AMEX:IGV iShares Software ETF. It’s shown the opposite patterns. Price is above the 50-day SMA and relative strength against the Nasdaq-100 has recently improved. The last chart compares these two ETFs as a ratio (IGV/SMH). It uses monthly candles to provide a long-term view. Software could be turning up from a 17-year low, which may also suggest relative strength is shifting between these two major groups within the key technology sector. Standardized Performances for ETF mentioned above: VanEck Semiconductor ETF (SMH): 1-year: +45.61% 5-years: +186.80% 10-years: +741.25% iShares Expanded Tech Software ETF (IGV): 1-year: +28% 5-years: +79.25% 10-years: +390.50% (As of August 31, 2023) Performance data shown reflects past performance and is no guarantee of future performance. The information provided is not meant to predict or project the performance of a specific investment or investment strategy and current performance may be lower or higher than the performance data shown. Accordingly, this information should not be relied upon when making an investment decision. Exchange Traded Funds (“ETFs”) are subject to management fees and other expenses. Before making investment decisions, investors should carefully read information found in the prospectus or summary prospectus, if available, including investment objectives, risks, charges, and expenses. Click here to find the prospectus. TradeStation has, for decades, advanced the trading industry, providing access to stocks, options, futures and cryptocurrencies. See our Overview for more. Important Information TradeStation Securities, Inc., TradeStation Crypto, Inc., and TradeStation Technologies, Inc. are each wholly owned subsidiaries of TradeStation Group, Inc., all operating, and providing products and services, under the TradeStation brand and trademark. TradeStation Crypto, Inc. offers to self-directed investors and traders cryptocurrency brokerage services. It is neither licensed with the SEC or the CFTC nor is it a Member of NFA. When applying for, or purchasing, accounts, subscriptions, products, and services, it is important that you know which company you will be dealing with. Please click here for further important information explaining what this means. This content is for informational and educational purposes only. This is not a recommendation regarding any investment or investment strategy. Any opinions expressed herein are those of the author and do not represent the views or opinions of TradeStation or any of its affiliates. Investing involves risks. Past performance, whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. There is a possibility that you may sustain a loss equal to or greater than your entire investment regardless of which asset class you trade (equities, options, futures, or digital assets); therefore, you should not invest or risk money that you cannot afford to lose. Before trading any asset class, first read the relevant risk disclosure statements on the Important Documents page, found here: www.tradestation.com .
NASDAQ:SMH
by TradeStation
4
Soft Landing?A lot of market participants are falling for the Fed's illusion that a soft landing has been achieved. However, the charts are still warning that a recession is coming. The chart below shows the extreme degree of inversion between the 10-year Treasury bond and the 3-month Treasury bill. The current inversion is the worst in over 40 years. A yield curve inversion reduces bank lending for various reasons, one of which is the removal of the incentive for banks to borrow at lower short-term rates and lend at higher long-term rates. Since bank credit is how most money comes into creation, a yield curve inversion is, therefore, a sign that monetary conditions are deteriorating. Indeed, manipulating the interest rate is how the central bank controls the money supply and induces a recession. The impact of rate hikes always occurs on a lagging basis. The lag can last anywhere from several quarters to several years. As the infographic below shows, an economic recession will likely begin in the U.S. between Q4 2023 and Q4 2024. The warning signs of the coming liquidity crisis are everywhere. In a prior post (shown below), @SquishTrade and I pointed out that a major disparity between the volatility of bond prices and the volatility of equity prices is occurring. This extreme disparity could be a warning that much greater volatility for equity markets has yet to come. Even for stocks that have experienced a strong rally in 2023, the basis of their surge is largely unsupported by dollar liquidity levels. In the chart below, the price of NASDAQ:NVDA is compared against the dollar liquidity index. This is further confirmed by the below chart, which shows how extreme the price of NASDAQ:NVDA as a ratio to the price of a risk-free 10-year Treasury bond has become. Never before have investors been willing to pay so high of a risk premium to hold Nvidia's stock. While anything is possible, the charts suggest that there isn't enough money in the economy to support the payment of debt at current yields. The below chart shows the price of long-term government Treasurys (adjusted for interest payments) as a ratio to the M2 money supply. There is simply not enough money in the M2 money stock for market participants to be able to pay all newly issued debt at the current high rates. When the liquidity issues begin to mount, the Fed will quickly pivot back to new money creation, as it did in March 2023 when it abruptly created the Bank Term Funding Program (BTFP), which is the latest of the many tools that the Fed uses to create new money. However, when the economy begins to slow, this time around central banks will get trapped because of commodity price inflation. Although commodity prices are generally disinflating at the present time, this slow disinflation is merely forming a bull flag on the higher timeframes. With unemployment also bull flagging on the higher timeframes, when commodity prices and unemployment concurrently break out, the result will definitionally be stagflation. Important Disclaimer Nothing in this post should be considered financial advice. Trading and investing always involve risks and one should carefully review all such risks before making a trade or investment decision. Do not buy or sell any security based on anything in this post. Please consult with a financial advisor before making any financial decisions. This post is for educational purposes only.
FRED:T10Y3M
by SpyMasterTrades
89
Yen Rises Sharply after Hawkish Government Announcements USD/JPY Analysis: Yen Rises Sharply after Hawkish Government Announcements Since 2016, the interest rate in Japan has been in the negative zone and has remained unchanged — for more than 7 years it has been -0.10%. This makes Japan fundamentally different from other countries. But over the weekend the Yomiuri newspaper published an interview with Bank of Japan CEO Kazuo Ueda. He said the central bank could end the era of negative interest rates once it becomes clear that the 2% inflation target has been achieved. Suppose these words may not be a declaration of intentions that will become reality, but just a verbal intervention aimed at supporting the yen. One way or another, the USD/JPY chart clearly shows signs of a change in sentiment: → last week, the bulls put pressure on the upper boundary of the ascending channel (shown in blue), increasing the likelihood of reaching the psychological level of 150 yen per US dollar; → last week’s close was near the high, but the current week began with a bearish gap, after which the yen weakened by 0.8% within just a few hours; → level 146.66, which served as support last week, now appears to be offering resistance. A similar action can be expected from the level of 147 yen per US dollar. In the near future, the price may realize a scenario where it reaches important support from the median line of the ascending channel with a subsequent rebound from it. If this rebound does form, but it is no more than 50% of the unfolding decline, then we will have more arguments that bears are taking more control in the USD/JPY market amid government announcements. This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
by FXOpen
5
A Traders’ Playbook: The agile trader wins this week Trading Overview We head into the new trading week with the USD index (DXY) closing higher for the 8th straight week, a fate we haven’t seen in some 18 years – it's little surprise that retail traders are countering that move, accruing a solid net short position. EURUSD has closed lower by the same duration, and that makes a fitting backdrop for the two headline catalysts this week: the September ECB meeting, and the US CPI print. Further afield, the CLP (Chilean Peso), PLN (Polish Zloty) and MXN were the weakest currencies in FX markets last week (all offered by Pepperstone). USDMXN has seen increased attention from traders, and we’ve seen exhaustion in the buying in USDMXN after 6 straight days higher. I am a buyer of weakness. AUDUSD fell 1.2% last week and remains a liquid proxy of China, but again, after a strong move to below 0.6400 we see that the sellers are feeling fatigued – consolidation can be a good thing, even for those whose strategies work their edge in more linear moves. China’s CPI/PPI, released on Saturday (coming in at 0.1% and -3% respectively), shouldn’t worry markets to any great degree. US and Brent Crude gets close attention, with OPEC+ determined to tighten supply crude. After the run price is factoring in a lot of positive factors, however, a daily close above $88 (in SpotCrude) would greatly accelerate the prospect of $100 coming into play, with BrentCrude likely to get there first. I’m not sure risk assets will appreciate further upside in energy prices, and I consider a scenario where we see further gains in crude, married with an above consensus US core CPI print. One suspects if that scenario we’re to play out we could see increased angst, and higher vol. While the VIX index has moved below 14% and S&P500 20-day realised vol is turning lower again, it is still a big week for equity – after a small pullback, we question if the US500 is ready to make a tilt at strong support at 4330 or find a more positive tone? This week we manage risk, consider our exposures and positions over key event risk/news and model potential movement against the account balance. Stop placement is key, where understanding the degree of risk taken on will only serve you well. Good luck. The marquee event risks for the week ahead: ECB meeting (Thursday 22:15 AEST) – A hawkish pause? The ECB meeting is a significant risk event for EUR FX / EU equity traders and one that could result in a sizeable bout in cross-asset volatility. EU swaps price 9bp of hikes (a 38% chance of a hike), and 18bp of hikes cumulative to the peak rate (in December) and this could play a key factor in the reaction of the EUR. We see 26/49 economists see the ECB leaving rates unchanged, highlighting just how split the view is out there. Positioning in the EUR is held very short by leveraged insto funds, while retail has positioned exposures for a counter move and a bounce in EURUSD. Given pricing and positioning, we should see a more pronounced rally in the EUR on a 25bp hike, than a fall if we see rates kept unchanged, at least to the initial reaction to the rates call. Rate hike (or not) aside, ECB guidance, new economic projections and debate around PEPP reinvestments could result in vicious intraday reversals playing out, so trading over news – if that is your tipple - will be a challenge and it pays to be nimble. US CPI (Wed 22:30 AEST) – The outcome of the CPI report could significantly shape expectations for the November FOMC meeting, where the market is currently pricing a balanced 12bp of hikes. The market eyes US headline CPI at 0.6% MoM/3.6% YoY and core CPI at 0.2% MoM/4.3% YoY. By way of market pricing, the CPI ‘fixings’ market (market pricing for the CPI print) is pricing headline CPI at 3.64%, while alternatively, the Cleveland Fed inflation Nowcast model sees US headline CPI headline inflation higher at 3.8% and core CPI at 4.46%, offering modest upside risk to the economist’s consensus call. The form guide has favoured short USD positions, where the USD index (DXY) has dropped in the 30 minutes after each of the past 6 CPI reports. This time could be different given USD positioning. I am biased for USDJPY to push above 148, with current underlying momentum favouring longs. US PPI inflation (Thursday 22:30 AEST) – Overshadowed by the US CPI report and the ECB meeting (15 minutes earlier), US PPI is expected to print 0.4% MoM / 1.3% YoY. If the PPI print proves to be a big beat/miss to consensus it could make trading through this period even more problematic. US retail sales (Thursday 22:30 AEST) – The market eyes sales of +0.1% for August, while the ‘control’ group – the sales element that feeds more directly into the GDP calculation – is expected to fall 0.1%. The market picks and chooses when to run with this data point, so I suspect it could be a vol event only should we see a sizeable beat/miss to expectations. UK jobs and wages report (Tuesday 16:00 AEST) – The swaps market prices 19bp of hikes for the 21 Sept BoE meeting, with peak bank rate expectations at 5.56% by Feb 2024. The UK jobs/wages report could influence that pricing, with the consensus expecting the unemployment rate eyed at 4.3% (from 4.2%) and wages unchanged at 7.8%. GBPUSD eyes the 200-day MA (1.2427), and a level for the scalpers. Leveraged funds are now short GBP, while the slower-moving real money is still holding a punchy net long GBP position. BoE speakers – Chief economist Huw Pill speaks (Monday 18:00 AEST) and External member Catherine Mann speaks the day after (Tuesday 09:00 AEST). The market is certainly warming to a one-more-and-done approach from the BoE and GBP has taken notice. China high-frequency data (Friday 12:00 AEST) – We watch for Industrial production (consensus 3.9% vs. 3.7% July), fixed asset investment (3.3% from 3.4%), and retail sales (3% vs. 2.5% July) – so some improvement is expected in this data flow. China equity could be sensitive to this growth data, although on current trends CHINAH is favoured into 6000. USDCNH also pushing to new cycle highs, and I stay bullish this cross. PBOC decision on the Medium-term Lending Facility (MLF - Friday 11:20 AEST) – Only one economist (of 11 surveyed by Bloomberg) is calling for a cut to the MLF facility, with the strong consensus that it is too soon after the recent policy easing to see more. USDCNH is still a favoured long exposure. Australia employment report (Thursday 11:30 AEST) – The consensus calls for 25.5k jobs created in August. The unemployment rate is expected to be unchanged at 3.7%, although that could be influenced by the participation rate, which is expected to remain at 66.7%. I can’t see this data point affecting expectations of RBA policy too intently, with the market staunchly of the view that the RBA are on an extended pause. AUDUSD - Tactically, favour placing limit orders and to fade intraday extremes, as the initial move shouldn’t stick. Apple ‘Wonderlust’ event (Tuesday) – The market is looking more closely at the news flow around China’s proposed iPhone curbs, and how that plays into expected revenue. ‘Wonderlust’ is likely more of an event for the tech heads, with the new iPhone 15 due to be unveiled – I see no statistical pattern, or price trends, through prior product launches to offer any bias on how the tech giant could trade.
PEPPERSTONE:USDXLong
by Pepperstone
7
Bitcoin (BTC) -> Bullish Cycle ComingMy name is Philip, I am a German swing-trader with 4+ years of trading experience and I only trade stocks , crypto , options and indices 🖥️ I only focus on the higher timeframes because this allows me to massively capitalize on the major market swings and cycles without getting caught up in the short term noise. This is how you build real long term wealth! In today's anaylsis I want to take a look at the bigger picture on Bitcoin. Looking at the chart of Bitcoin you can see that just 8 months ago Bitcoin perfectly retested the previous cycle high of 2018 at the $18.000 level and rejected towards the upside. I think that the whole crypto market but especially Bitcoin is ready for a new bullish cycle and after another short term drop on Bitcoin I do expect a longer term bullish continuation. - - - - - - - - - - - - - - - - - - - - I know that this is a quite simple trading approach but over the past 4 years I've realized that simplicity and consistency are much more important than any trading strategy. Keep the long term vision🫡
CRYPTO:BTCUSDLong
by basictradingtv
115
How to tell which way inflation is going?In this video, we are studying the time lag between commodities, inflation data, and central bank decisions. 3 types of crude oil for trading: • Crude Oil Futures 0.01 per barrel = $10.00 Code: CL • E-mini Crude Oil Futures 0.025 per barrel = $12.50 Code QM • Micro WTI Crude Oil 0.01 per barrel = $1.00 Code MCL Disclaimer: • What presented here is not a recommendation, please consult your licensed broker. • Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises. CME Real-time Market Data help identify trading set-ups in real-time and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
NYMEX:CL1!
by konhow
23
Crash coming soon I wrote this 18 months ago. I still stand by every word. TLDR: April 2022.. Recession fears, interest rate hikes, high inflation In the first phase of a recession, the market falls due to fear because "everyone knows a recession is coming" In the second phase, companies report excellent profits because "duh it's inflation that's why we raise our prices" when actually they are price gouging swine. Excellent profits = market rises, which traders don't understand because "Wait this is a recession? I seem to be short and caught". Third phase.. No one has any savings left, thanks to the price gouging. Rents and heating bills and food prices are sky-high. The proles can only afford the basics. Companies will only report their drops in profits 3 months later. At first it's just a few poor reports, then a flood. They don't have sufficient reserves because they had pressure to pay fat dividends to the greedy funds that own them, so they start to fail. This happens just as all the shorts in stocks cut their losses and buy it back and those who missed out on the "fools rally" crack and buy in at the top. Fourth phase: Crash. We may get a new ATH or a double top beforehand, but you heard the truth here first. Look at the Commitments of Traders indicator at the bottom.. Big boys selling off. We give this away free. See website.
PEPPERSTONE:US500Short
by Paul_Varcoe
109
Impact of FAA Regulations and Rumors in Aerospace Stock TradingInvesting in aerospace-related stocks can be a lucrative endeavor due to the industry's potential for growth and innovation. You may find a lot of long-term investors holding major airline stocks (especially, positions added during COVID lows) and relatively new aerospace startups. However, it is essential to closely monitor and consider the impact of Federal Aviation Administration (FAA) regulations and even rumors on their investment decisions even if you’re not day trading these stocks. In this article, we explore real-life examples of how FAA regulations have negatively affected the stock prices of companies in the aerospace sector, highlighting the crucial role of monitoring and reacting to regulatory developments. Example #1. FAA Limits on Flight Numbers and the Plunge in US Airline Stocks: The FAA recently imposed restrictions on the number of flights to alleviate pressure on the national airspace. While this regulation aims to enhance safety and efficiency, it has directly impacted US airline stocks, such as American Airlines (AAL). Airlines faced reduced capacity and higher operational costs. This resulted in decreased revenue and profitability, causing a sharp decline in American Airlines' stock price. Investors who were not prepared for this regulatory change suffered losses. However, in reality this has been a topic of conversation since April, so the late June announcement shouldn’t have caught anybody by surprise. If taken proper measures, the positions might have been cashed out at July highs until the FAA inevitable reduces the geography of this regulation. Which it already started as of 3-4 weeks ago, meaning we can expect a retracement soon. Example #2. Minimum Flight Time Requirements and the Struggles of EVTOL Companies: FAA regulations now require small aircraft, including Electric Vertical Takeoff and Landing (EVTOL) vehicles, to have a minimum flight time of 30 minutes. This regulation has posed significant challenges for EVTOL companies like Joby Aviation, as battery technology limitations make meeting this requirement very difficult. For instance, even industry leaders like Joby Aviation, despite its high potential, faced setbacks due to the FAA's minimum flight time regulation. The company's stock price suffered as investors became wary of the challenges presented by battery size limitations amid this new requirement. Some other example of FAA regulations impacting aerospace stocks include: 1. Noise Restrictions: Recent FAA regulations aimed at reducing aircraft noise levels have affected companies specializing in quieter aviation technologies. 2. Safety Mandates: Stricter safety regulations have led to increased research and development costs for aerospace companies, impacting their profitability. 3. Environmental Regulations: Regulations promoting sustainable aviation and reducing carbon emissions have influenced aerospace companies' strategies, causing fluctuations in their stock performance. As you may see FAA regulations have a substantial and immediate impact on the stock prices of companies in the aerospace sector. However, this analogy was just an example because of my personal interest as a PhD in Aerospace Engineering and investor into several aerospace stocks. In reality, when trading/investing you should always stay up to date with regulations imposed by your governing body (food or pharmacy should watch out for FDA and so on). Knowledge is power, dear community members. So stay alert and informed in any comfortable way for you. Some like to watch Bloomberg, some read yahoo finance. In reality, you can substitute that by reading through some of the deep good breakdowns by fellow TradingView writers. Make the most out of it!
NASDAQ:AAL
by Investroy
21
Disney: Is The Content Gold Rush Over?Over the last 6 months, there's been an interesting trend happening. Stocks in media delivery networks, like Charter and Comcast, have done quite well, while shares of content companies, like Disney, Paramount, and Warner Bros, have deeply underperformed. This performance lies in contrast to the "content is king" narrative that's been popular amongst investors over the last decade or so. What's happening here? There's 3 issues at play. First up; the writer / actor strikes. These strikes have hurt content companies as they've introduced costs into the system. Either these will come in the form of opportunity cost as less profitable content gets made, or direct costs should Paramount, Netflix, or Warner Bros consent to the profit-share demands of labor. Secondly, debt. This applies mostly to WBD, but to a lesser degree it impacts all of the content companies. Debt has reduced FCF across the board at these companies, which has led to a decline in both profits, and earnings multiples. Finally, Business Strategy. Netflix changed the game in the 2010's as it pioneered a DTC video consumer model. As the company boomed, they began producing their own shows to the degree that the company is now a vertically integrated entertainment powerhouse. Other companies, like Paramount, lack the scale to achieve this. Thus, costs of running Paramount+ have skyrocketed, when it may have just been more profitable to license their final content products. This approach allows for less bargaining power (due to the lack of customer relationship ownership), which is why it likely hasn't been pursued. However, things will likely switch back, which should lead to higher profits in the long run for shareholders. Here at PropNotes, we believe that things are set to turn around. The DIS / CHTR spread has hit all time lows: Once media companies realize that they can generate the same leverage in licensing negotiations by creating compelling content, the cash will begin to flow, and companies like DIS will continue to print money. This will take some time, but there's a potential trade here once the heiken ashi candles begin to print green. It's going to be a long, bullish trade once that happens. Cheers! Looking for more high-probability trade ideas? Follow us below. ⬇️⬇️
NYSE:DISLong
by PropNotes
13
What's next for the rate debate?The U.S. interest rate debate changed dramatically in August 2023. The economic debate shifted gears with diminishing concerns about a recession, leading U.S. long-term Treasury yields to rise sharply. And the debate over future Federal Reserve policy transitioned from trying to call the peak in short-term rates to discussing the length of time rates might remain elevated. The net result was a less inverted U.S. yield curve, not because short-term interest rates fell, but because long-term yields rose. With the no recession view becoming the more popular base case, there has also been a shift in the longer-term inflation debate. Without a recession, many economists are coming to the view that core inflation, which the Fed targets, will remain well above the Fed’s 2% target throughout 2024 and possibly longer. We studied extended periods where short-term rates held above the prevailing inflation rate. There appears to be a loose relationship between the growth of nominal GDP and long-term Treasury yields. This makes sense if one thinks about nominal GDP growth as part inflation and part real economic activity, and it helps explain why bond yields have moved higher. Put another way, the period of 1% fed funds rates under the Greenspan Fed in the early 2000s and then the near-zero fed funds rates introduced by the Bernanke Fed after the 2008 Great Recession are historical outliers. These super low rates encouraged a search for yield and popularized the view that the Fed has the market’s back, artificially supporting both equities and bond prices (that is, lower bond yields). The Powell-led Fed is guiding us that those days are in the rearview mirror, and market participants are starting to agree. In his closely watched Jackson Hole speech, Powell highlighted the economic uncertainty ahead and how risk management remains key moving forward. If you have futures in your trading portfolio, you can check out on CME Group data plans available on TradingView that suit your trading needs www.tradingview.com By Bluford Putnam, Managing Director & Chief Economist, CME Group *Various CME Group affiliates are regulated entities with corresponding obligations and rights pursuant to financial services regulations in a number of jurisdictions. Further details of CME Group's regulatory status and full disclaimer of liability in accordance with applicable law are available below. **All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.
CBOT:ZB1!
by CME_Group
11
Is EURUSD Ready To Change The Direction Of The Short-Term Trend?Looking at the technical picture of EASYMARKETS:EURUSD on our 4-hour chart, we can see that the pair made its way back to its short-term tentative downside resistance line drawn from the high of 18th of July. This happened after finding support near the 1.0765 territory. Given that the downside line currently remains intact, according to the TA rules, we have to stick to the downside scenario and aim lower. That said, we will most likely go with that plan, if we see strong rejections near that trendline. If that happens, we will then aim for the 1.0842 obstacle, or even the 1.0783 and 1.0765 levels. A break of the latter one would confirm a forthcoming lower low, possibly inviting even more sellers into the game. As we also know, the more tests a trendline experiences, the more chances for a break there is. If the previously mentioned trendline surrenders to the bulls and we also see a push above the current high of this week, at 1.0892, this may spook the bears from the field for a while. FX_IDC:EURUSD could then make its way to the high of last week, at the 1.0930 zone, or the psychological 1.1000 territory. @DariusAnucauskas Disclaimer: easyMarkets Account on TradingView allows you to combine easyMarkets industry leading conditions, regulated trading and tight fixed spreads with TradingView's powerful social network for traders, advanced charting and analytics. Access no slippage on limit orders, tight fixed spreads, negative balance protection, no hidden fees or commission, and seamless integration. Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, are intended only to be informative, is not an advice nor a recommendation, nor research, or a record of our trading prices, or an offer of, or solicitation for a transaction in any financial instrument and thus should not be treated as such. The information provided does not involve any specific investment objectives, financial situation and needs of any specific person who may receive it. Please be aware, that past performance is not a reliable indicator of future performance and/or results. Past Performance or Forward-looking scenarios based upon the reasonable beliefs of the third-party provider are not a guarantee of future performance. Actual results may differ materially from those anticipated in forward-looking or past performance statements. easyMarkets makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or any information supplied by any third-party.
by easyMarkets
23
Macro Monday 9~ Initial Jobless Claims MACRO MONDAY 9 Initial Jobless Claims Historical Analysis and Important upcoming levels Initial claims are new jobless claims filed by U.S. workers seeking unemployment compensation, included in the unemployment insurance weekly claims report. "Initial claims" refers to the government report on the number of workers applying for unemployment benefits for the first time following job loss First-time jobless claims can be a useful leading indicator because elevated numbers tend to lead to further economic weakness, and to decline ahead of a recovery Initial claims show the recent layoffs trend and does not a full picture of the labor market however it can provide more frequent data points indicating the trend in layoffs based on the recent decisions of U.S. employers. The layoffs trend can be particularly telling at economic turning points. With that in mind lets look at the chart and its historic patterns. The Chart The chart looks complicated but is incredibly simple and can be summarised as follows. - Recessions are in red - Increases to Initial Jobless Claims prior to recessions are in blue - It is clear that prior to recessions Jobless Claims typically increase but for how long and by what amount? - The min/max increase in claims prior to recession is between 35k - 127k - The min/max timeframe of increasing claims prior to recession is 7 - 23 months - The average of the above is a 71k claims increase over a 14 month period. - At present we are below that average at 49k increase over 11 months @ 230,000 claims. - I have set out levels on the chart for us to monitor going forward in line with the min and max claims amounts and timelines as above. We can monitor these levels on trading view going forward just by pressing play and seeing if we are nearing or hitting the indicative levels. - Once we reach the average increase amount at 252k or the average timeline of 14 months in Nov 2023, we are entering into higher risk recession territory. Currently, the max increase in claims prior to recession is projected to be at the level of 308,000 (based on historic claims) and the max timeframe is out to Aug 2024 (based on historic timeframes) thus indicating that between Nov 2023 and Aug 2024, subject to continued increasing initial claims (above the average level of 252,000) it is probable that there will be a recession within this time window (Not guaranteed). If initial claims fall below their recent low of 200,000 I believe this might invalidate the possibility of a recession or at least have a significant lagging effect on time horizon. At present this outcome seems unlikely but anything is possible and we can monitor this on an ongoing basis. The current yield curve inversion on the 2/10 year Treasury Spread provided advance warning of recession/capitulation prior to all of the above recessions however it provided us a wide 6 - 22 month window of time from the time the yield curve made its first definitive turn back up to the 0% level (See Macro Monday 2). September will be the 6th month of that 6 – 22 month window and thus we are closing in on dangerous territory very fast. From reviewing initial jobless claims we can see how from Nov 2023 we are stepping into a higher risk zone on this chart also (subject to continued higher increases in claims). Should we have claims higher than the average of 252,000 we will be confirming another step towards a higher risk of a recession. Factoring in yield curve inversion and the initial jobless claims we could consider the months of Sept-Oct 2023 as Risk level 1 (yield curve inversion time window opens) and Nov-Dec 2023 as stepping into a higher Risk Level 2 (Jobless claims average timeframe hit). Should the yield curve continue to move up towards being un-inverted and should Jobless Claims increase then Jan 2024 forward could be considered a higher Risk level 3. Adding to the above concerns is that M2 Money supply is still reducing (Macro Monday 8) and Global Net Liquidity is continuing to reduce (Macro Monday 4) as the S&P 500 is hitting a major resistance zone when accounting for M2 money supply (Macro Monday 8). At present it is clear that liquidity is reducing both globally and in the US. Currently fiscal stimulus appears to be filling the gaps and may be causing additional lagging effects to the changes we have seen imposed by Federal Reserve (balance sheet reduction and increased interest rates). Keep in mind that the Fed is also targeting higher unemployment to help quell the effects of inflation thus adding to the relevance of the Initial Jobless Claims numbers. Continued jobless claims are another metric that is not covered here today. Continued Jobless Claims accounts for the continuation of claims over a time period, thus indicating that those workers who made the first “Initial claims” have remained unemployed thereafter and have not managed to get new work. We might cover this in a future Macro Monday. Let me know if you want it sooner than later? We need all the help we can find in managing risk going forward and I hope all these charts can help you with that. We can monitor all these charts on my trading view just by pressing play and seeing where things are going. Regardless ill be providing updates along the way. Be safe out there PUKA
ECONOMICS:USIJC
by PukaCharts
37
Looking at USD/TRY following the huge rate rise last weekLast week, the Turkish central bank made a significant move by raising rates by 750 basis points. This caused a sharp downward movement in the US dollar relative to the Turkish lira. Since then, there has been a notable response, with the market showing a sharp rebound. During times of such volatile market reactions, it's valuable to examine Fibonacci retracements. These retracements help us predict potential new support and resistance levels in the market. Looking ahead, we can pinpoint key levels of support and resistance. The first is the 38.2% retracement, approximately at 26.00/25.98. The second notable level is the 78.6% retracement, approximately at 26.80. It's likely that the market will move within these boundaries as it absorbs and adapts to the unexpected rate increase. Disclaimer: The information posted on Trading View is for informative purposes and is not intended to constitute advice in any form, including but not limited to investment, accounting, tax, legal or regulatory advice. The information therefore has no regard to the specific investment objectives, financial situation or particular needs of any specific recipient. Opinions expressed are our current opinions as of the date appearing on Trading View only. All illustrations, forecasts or hypothetical data are for illustrative purposes only. The Society of Technical Analysts Ltd does not make representation that the information provided is appropriate for use in all jurisdictions or by all Investors or other potential Investors. Parties are therefore responsible for compliance with applicable local laws and regulations. The Society of Technical Analysts will not be held liable for any loss or damage resulting directly or indirectly from the use of any information on this site.
by The_STA
4
The Evolution Of Streaming Platforms For Movies And SeriesIn this work, we will analyze the evolution of streaming platforms for movies and series, from the emergence of the first video rental stores to the present day. We will compare the main companies in the sector, such as Amazon, Netflix, Warner Bros. and Disney, and evaluate their technical and fundamental performance in the stock market. Our thesis is that streaming platforms are a phenomenon that revolutionized the entertainment industry, but that also face challenges and controversies in a turbulent economic and social scenario. 1. The origin of streaming platforms Hollywood, located in Los Angeles, in the state of California, became very famous for producing movies and series that are consumed worldwide. This made Los Angeles one of the 5 most profitable cities in the world. In the 80s, there was a popularization of VHS tapes and, because they had a slightly higher cost, several video rental stores appeared, where they lent these tapes in exchange for a monthly fee or separate rentals. And so, with technology maturing, they started to integrate these movies into DVDs, where access became much easier than VHS tapes, but also brought the entry of piracy, which became very popular in countries with underdeveloped governments, such as Brazil, Mexico, Colombia, Turkey and among others. Even with the advancement of technology, the film industry did not stop, which brought a lot of profitability to the state of California and to the city of Los Angeles, which was the main film hub in the world. And while this was happening, the internet evolved. What was already something interesting with telephone stairs lines or radio signals gradually became what would replace video rental stores, giving rise to the first streaming platforms. Netflix, which originally was a physical video rental store, started to integrate a very well-designed library of movies and series for a low subscription cost. 2. The popularization of the internet and online content Over the years, it seemed that this internet thing would work out very well. The Justin.tv platform allowed people to broadcast everyday and normal events. This site saw a significant increase in internet users, which led to the creation of Twitch, focused on games and interaction with viewers. Note that at this point there was still no transmission of movies, as it was not something that happened much at the time. Also with the popularization of YouTube, from Google, which belongs to Alphabet Inc., people started to consume videos made by ordinary people about some content made by these same internet users. And there was a maturation on the part of people, who hired platforms like Netflix to watch movies and YouTube to watch other types of content that did not air on television. Since this type of content was for cable TV, where there was a variety of exclusivities. With abusive prices for cable TV and several repetitions by broadcasters, since the content of closed channels always repeated programming, where it became a snowball of reruns and that gradually stressed the consumer, who gradually abandoned the idea of using cable TV and switched to the internet. There were several clandestine sites, where people started watching movies and series online, without having to resort to cable TV. However, with many annoyances of ads and pop-ups with an unpleasant courtesy to those who watched. With that, with the popularization of these clandestine sites, Netflix also became popular, which offered its services without having any type of annoying ads. So, people started to pay for it so they don’t have to resort to clandestine sites. And those who didn’t pay watched within these sites anyway. What happened was that since DVD, where piracy was born, the internet also managed to mature it a lot with these clandestine sites that pirated content. 3. The competition and diversification of streaming platforms Obviously, the strike will hinder some plans for major streaming platforms. Well, this shows that with all the evolution we described here, the fight for exclusivity and copyrights has become increasingly fierce and competitive. And of course competition also generates performance and what also attracts investors. Bringing now 5 actions from these respective companies. Starting to do a study, where we will analyze first the paper from Amazon. Because it acquired Justin.tv, launched in 2007, and Twitch, being a branch, being launched in 2011. And so in 2014, Justin.tv being discontinued. Also in the same year, it was acquired by Amazon. It also has a streaming platform that has rivaled Netflix quite a bit, which is Amazon Prime Video. In addition to having another streaming system aimed at music, which has also rivaled Spotify quite a bit, which is Amazon Music Unlimited and Amazon Prime Music. Speaking now about Netflix, which is a company that has a great history and that has been around for a long time. In addition to a streaming service, it also now started to develop movies and series to fill the catalog that were removed due to copyrights. Of course Netflix is a controversial company, loved by many and hated by others, for addressing issues that are not very receptive by a large part of the public, such as gender ideology or something related to the queer public. And even with all the controversies and controversies about Netflix, it is a great company with good numbers. Speaking now about Warner Bros., which is another company that is in the streaming business, betting heavily on HBO Max. What worked out very well in 2021, where the paper rose a lot. Warner is a very reputable company, which has been around for a long time, owning several successful movies and brands. In addition, they are also in the music business, calling themselves Warner Bros. Music Inc. But we can’t say that just like Amazon and Netflix, Warner suffered a lot from the American macroeconomy, with high inflation acceleration. Also dropping the paper, going from 74 to below 9 USD. Having a devaluation of 81.9%, which is a very high value for the investor who had a lot of losses by holding this paper. Despite all this, Warner is trying to reinvent itself, as it has made productions that have not pleased the large community. So they have bet on a reboot in the cinematic universes of their respective scripts. And lastly, now we will talk about Disney. It is a mega-company, not only acting in movies, but also it has several amusement parks. Being the most famous Walt Disney World, located in Orlando, Florida. Just like the other companies mentioned here, Disney was also badly hurt in 2022 with some economic problems in the United States. But with the high of 2021, which was a placebo effect of pandemic recovery. And also with the success of the Disney+ platform, which made the company rise to the level of 200 USD. Just like Netflix, Disney has been heavily criticized for tirelessly addressing gender ideology issues, changes in ethnicity of consolidated characters, in addition to several controversial accusations about reproducing content to sexualize children. The path of diversity and liberalism has bothered a large part of investors, who are not pleased with the company’s policies. In addition, it also felt the effects of high American inflations, causing the paper to plummet a lot. All this together with the effect of fundamental analysis. 4. The technical and fundamental analysis of the main companies in the sector Let’s look at the technical and fundamental analysis of each of the companies we mentioned, and see how they have behaved in the stock market. 4.1 Amazon Let’s look at the technical analysis of this asset: Notice that in 2022 there was a drop in Amazon. This was normal, since the S&P itself felt this drop. So all companies in the index were affected, including the Nasdaq Composite asset. Within this downtrend channel, in November 2022 they started to form a range, where the first test is done without enough supply for the price to drop further. And again in March we have another test with lower sales than the last purchases. With that, an uptrend channel started, where it returned to the top of September 2022 and to the region of the VWAP of 750 periods. It seems that we can see Amazon’s paper plummet a little. Maybe there in the range of 120 to 125. And if there is no buyer interest in this price range, we can see the market fall further. But reaching this price range and happening to enter buyer flow, they can hold the price at 125 and make it return to the same top of the region of 135. Now we will be analyzing the fundamental data. Source Yahoo Finance The company has a strong market, good cash generation and high growth, but it also has an uncertain valuation, high costs, high risks and high debt. This means that it can be an investment opportunity for those seeking high long-term returns, but it can also be a pitfall for those unwilling to take the risks involved. The company does not pay dividends, which can be a negative point for those looking for passive income Well, this is not a good foundation, but it is open to interpretation. Seeing this and the technical scenario, things may not be so good for Amazon. In addition to a very stretched price at a top of the VWAP of 750 periods, it is also not very convincing in fundamentals. But that doesn’t take away from the fact that the Amazon empire is a wonderful and successful company. 4.2 Netflix Let’s look at the technical analysis of this company and see what the chart along with the fundamentals want to say? Source: Yahoo Finance The company has good growth, good profitability and good cash generation, but a poor market value and does not pay dividends. Your margin, ROE, and ROIC metrics are good, but your asset turnover is bad. Its current liquidity is good, but its total debt to equity is high. Therefore, the company may be a good fit for investors looking for growth, but not for those looking for passive income or low risk. It is a company that, doing a technical study on it, has not corresponded so much. If we look closely, the part where Netflix had more appreciation was after the pandemic, where there is a spike in price and forming a very common pattern in technical analysis called zig zag pattern. Which is very common during reversal movements. From 2022 it was very bad for Netflix, which suffered a very abrupt drop, leaving 696 and coming to fetch 171. Which was indeed very worrying. She even managed to return to 416. However, this top, as we saw in the first chart, Netflix may be heading for another reversal. That is, being this high just a corrective movement. Because if we notice well, buyer interest has been falling more and more. And besides, she lost the region of the VWAP of 50 periods, showing that there is an acceleration in price. So in the most optimistic hypothesis, she could look for 360 USD. Source Yahoo Finance The company has good growth, good profitability and good cash generation, but a poor market value and does not pay dividends. Your margin, ROE, and ROIC metrics are good, but your asset turnover is bad. Its current liquidity is good, but its total debt to equity is high. Therefore, the company may be a good fit for investors looking for growth, but not for those looking for passive income or low risk. Observing that Netflix’s fundamental data have been good, despite some bad indicators. Even with good fundamentals, it has conflicted a bit with the technical part. However, as I said, being very optimistic, she may look for 366. And of course, if buyer interest appears there, they can accumulate. Even looking at the good fundamentals that the company has. This is because investors make decisions not only because of the good fundamentals of the company. They also take macroeconomics into account. 4.3 Warner Bros. Let’s look at the technical analysis of this asset: It seems that things are not very good. We will now do a fundamental analysis. Source Yahoo Finance The company has a bad market value, negative profitability and does not pay dividends. Your margin, ROE and ROIC metrics are bad, as is your EV/EBITDA. Its cash generation is good, but its current liquidity is poor and its total debt to equity is very high. Therefore, the company can be a bad option for investors, as it presents high risk and low return. With regular to regular fundamental data, fundamental analysis confirms the downward bias along with technical analysis. We know that Warner has a lot of growth potential and that despite all the problems she went through, she can turn things around. If you do good management of the company. 4.4 Disney We will be doing a technical analysis study on the asset. Here we have the presence of 3 charts, where we can clearly see that Disney has been going through a very worrying moment. At least on the technical analysis part, it has shown decline. You can’t tell how far it really goes, due to some proportions. For example, we know that Covid Bottom’s barrier is a psychological support, where participants took advantage of a panic moment there in 2020 to be able to spin the market. However, it seems that it is becoming unsustainable and we can see Disney fall a lot if it happens. It can also happen not to fall and there is buyer interest. But we have no technical evidence to show us buying at the moment. Now we will be observing the fundamentals: Source: Yahoo Finance The company has good market value, good cash generation and good EBITDA, but low P/E and low ROE. Its operating margin and current ratios are fair, but its net profit and total debt-to-equity ratios are weak. Some indicators are not available like DY, DP, ROIC, gross margin and asset turnover. Therefore, the company may be a moderate option for investors but the technical analysis leaves a lot to be desired, which can be worse. We can see that Disney’s fundamental data are regular, but not exactly the worst on the list. But it also does not present security to investors in a turbulent economic moment. 5. The conclusion and future prospects In conclusion, we can affirm that streaming platforms are a phenomenon that revolutionized the entertainment industry, but that also face challenges and controversies in a turbulent economic and social scenario. Through the technical and fundamental analysis of the main companies in the sector, we saw that they have presented varied performances in the stock market, depending on factors such as the quality of service, the diversity of catalog, customer loyalty, competition, innovation, reputation and macroeconomics. For the future, we hope that streaming platforms continue to grow and adapt to the demands and preferences of consumers, but also that they are responsible and ethical in relation to the content they produce and distribute.
NASDAQ:WBD
by Victoredbr
8
NVDA has topped. Sell it now.2023 has been an incredibly strong year for stocks. The Nasdaq rallied 38% in the first six months for one of the best starts to a year in history. This rally has been primarily led by an AI/tech theme that has been responsible for the bulk of these gains. That part of the rally is likely over, however… at least for now. Every bull market has a “theme” with leading stocks that set the pace. In the late 90s that was the dot-com bubble. In the 2009-2020 bull market that was big tech like Facebook, Amazon, Netflix, Apple and Google (hence the FAANG stocks moniker). The 2020-2021 bull market was led by “work-from-home” stocks like Zoom, Teladoc and Peloton. The 2023 bull market has been led by artificial intelligece. The leading stocks have been Meta, Microsoft, Dynatrace, MongoDB, Palantir, AMD, and the biggest leader of them all, Nvidia. Over the last 4-6 weeks we have witnessed many of these leading names roll over and retrace beneath their 50-day moving average – a key level that generally supports top stocks through the move higher. Despite the recent pullback in the market, Nvidia has held at its highs. Wednesday after the close, Nvidia reported earnings. And the results were better than anyone could have expected. Earnings $2.70 per share versus estimates of $2.08. Sales were $13.5 billion – 20% above expectations. And the company raised forward guidance (how much they expect to bring in next quarter) from $12 billion to $16 billion. They also announced a $25 billion share buyback which should act to propel the stock price even further. Investors got everything they wanted and then some. NVDA stock shot up 10% after hours. The news was so good, the entire Nasdaq index shot up 1% on the news. But Thursday, in the first few hours of trading, all of those gains were gone. The Nasdaq opened higher, and immediately began selling off. It fell 3% during the session. And NVDA was back where it closed the day before. This, to me, is a clear signal that the 2023 rally in tech stocks is over. The high was likely made on July 19th, and I doubt we see that level again this year. In a bear market, like we had in 2022, what you want to see is the market going UP on BAD news. This is the sign that the low is in, and buyers are coming back in. We saw this on October 13, 2022. After a government inflation report revealed the worst numbers yet – far worse than expectations – the market gapped down and opened a full 3% lower than it was the day before. However, stocks immediately began to rally, and the index surged 5% that day. This was the signal that the low was in. On the other hand, in a bull market, we want to watch for times when the market goes DOWN on GOOD news. This often signals a top. And I believe we saw that on Thursday. Nvidia was the only stock that could have reversed this pullback. The earnings report was better than even the most optimistic investor had hoped. This should have absolutely put an end to the pullback and caused the market to rally higher. Instead, we saw the opposite. So, what does this mean? First of all, and let me be clear on this, I am NOT saying the market is about to crash. I simply believe the “easy money” stage is over. I expect to see fairly choppy conditions for the next few weeks or months, and investors can no longer rely on the bull market to push everything higher. I believe tech stocks have seen their highs for 2023. Those with large open gains in stocks like Meta, Amazon, Apple, Google, Nvidia and the like may consider selling to lock in those gains here. There will still be stocks that go up, some of them by substantial amounts. But I believe this is now a more selective stock picker’s market. Personally, I sold the index funds in my long-term account and moved to cash ( I also went short the Nasdaq via QID). As of yesterday, those index funds funds were up 37% year-to-date. That is a phenomenal year, and I do not want to risk giving those gains back. To me, this is a low-risk decision. The worst-case scenario is that I am wrong or something material changes that propels stocks higher. If this happens, and the Nasdaq makes new highs this year, I will simply buy those funds back. All I will have missed is a 6% move.
NASDAQ:NVDAShort
by rossgivens
79
SPX vs. Money Supply A fellow trader on Tradingview turned me on to the idea of tracking the US money supply and its effect on the S&P 500 and let me tell you, was this an all consuming rabbit hole or what! In this post, I will look at the relationship between the US money supply and the S&P. Well, that was what it was supposed to be. It then turned into a look at how global money supplies affect indices in general because it is a really interesting rabbit hole indeed. So let’s get into it. Does Money Supply Affect the Stock Market? The general consensus that I could find in economic research and reports is that, in general, the US money supply and, more generally, global money supplies influence stock markets indirectly. The most obvious way is, money supply is needed to fund global investments in markets. Without money, there would be no way to invest. But there are also some indirect ways that money supply (MS) can influence the stock market. The most notable way is by creating liquidity and influencing behaviour. This is probably the most fresh example as it was arguably one of the biggest fuels on the post-COVID recovery bull run we had. The Federal reserve enacted monetary policy that made borrowing attractive and promoted investment, borrowing and leveraging (which took advantage of very low interest rates). If we take a look at the chart above, this chart depicts the US money supply against $SPX. The data is standardized in Z-Score format to be able to do side by side, direct comparisons. We can see that immediately following the COVID crash, the US money supply began rapidly increasing. This was the result of federal reserve policy aimed at quantitative easing. This was arguably one of the leading causes to the unprecedented growth of the S&P in such a short timeframe. How has the US Money Supply Affected the S&P 500? If we zoom out on the above chart and look at the US money Supply since 1959 overlayed against the S&P, we can see, visually, how the US money supply has impacted the S&P 500: The first thing of note is there is a high degree of correlation between SPX and the US Money Supply, which has a Pearson correlation of 0.98. This is a strong, positive correlation . This means that as the US Money Supply increases, so too should the S&P and vice versa. We can also see that, for the most part, the S&P’s growth is comparable to the US money supply. As the Money Supply increases, the S&P grows to match this supply. The exception to this was a stint of time between 19843 and 2002 where the S&P outpaced the US Money Supply: The dotcom crash ultimately led to the S&P correcting back below the US Money supply, where it then recovered to catch back up to the US money supply, and the money supply actually became resistance in 2007. We then again outpaced the money supply in 2018. This likely could have been a cause to the 2018 correction, which actually brought the S&P back down in line with the current supply at that time: We then outpaced the money supply again in 2021, which was corrected during the 2022 bear market. However, we have ,yet again, in 2023, surpassed the current monetary supply: Calculating Money Supply & SPX Price The relationship between the monetary supply and the S&P is so strong, we can actually calculate the expected range of the SPX based on the current monetary supply. We can also reverse this and calculate what the monetary supply should be to support the current price of $SPX. To calculate the expected range of SPX based on the money supply, we would use this formula: SPX price = US Money Supply x 1.918^-10 – 114.426 This would calculate what the price of SPX should be within +/- 228 points. To calculate the needed money supply to support the price of SPX we would use this formula: Money supply needed = SPX price x 4970424901 + 8.204^11 This would calculate the money supply needed to match the SPX. So let’s do these calculations. As of August, the current US Money Supply is 20.903 Trillion. So we substitute: SPX Price = 20.903 Trillion * 1.918^-10 – 114.426 SPX Price = 3895.01 +/- 228 So the range that SPX should be in based on the money supply is between 4,123 and 3,667. What about our monetary supply? What should that be to support the current price of SPX? Well, let’s do the calculations. As of Friday August 25th, SPX closed at 4,405. Monetary supply needed = 4,405 x 4970424901 + 8.204^11 Monetary supply needed = 23.63 Trillion So the SPX should be at ~23.63 Trillion in order to support the current price of SPX. That is roughly a 13% increase from where we currently are. How does an Index surpass Monetary Supply? This is a great a question and one that I am not qualified or knowledgeable to answer very in-depth. But one way in which the SPX can sustain itself at levels above the current domestic monetary supply is through foreign investment. Indices and stocks are traded internationally and are not dependent on their own domestic currency alone. Where this gets interesting is if we start looking at global monetary supply. Now, there are no tickers or indices that look specifically at global monetary supply, but what we can do is take the monetary supply of a few nations that have a high degree of international trade and compare the monetary supply among those countries. You will notice the strong degree of correlation between all the nations in this table. (Keep in mind, these nations were randomly picked based on extent of their involvement with international and U.S. based trade.) If we were to standardize the data into Z-Score format (where we are just looking at the standard deviation) and put it into a line graph, this is the result: When we standardize data, the difference is very indiscernible. This is because, monetary supply naturally increases at a steady and controlled rate, as to keep inflation under control and create supply and demand. How does the SPX’s Growth Compare to Global Monetary Supply? In researching for this post, I was curious how SPX’s growth looked in relation to the global monetary supply. The reason being, the thesis is that SPX’s growth above monetary supply can only be supported by the global interconnectedness of nations and the ability of foreign investment to supplement domestic investment. To do this, I standardized SPX in the same way and overlayed it with the random sample of countries monetary supply. The results are displayed in Chart 1 below. I found this particularly interesting. I wondered if perhaps this was an American thing where everyone is just simply flocking to US investments. So then I thought to plot out some other indices, namely the TSX (Canada), NIFTY (India), DAX (Germany), and FTSE (U.K.). The results are listed in Chart 2 below. Well, colour me shook. For the longest time it was actually the DAX and TSX that were just growing beyond the average monetary supply. Who would’ve thought? However, in 2019, SPX began exponentially growing, where it currently sits at approximately 0.7 standard deviations above the average monetary supply. So what does it all mean? So the logical question is what does it all mean and how does it help me? And unfortunately, this is a question more for an economist than for me. But I and you yourself can speculate by looking at all the data. If we turn back to our SPX chart overlayed with the US monetary supply and apply Tradingview’s Cycle lines, we can see that the SPX operates in cycles in relation to the monetary supply: And using the Sine function: Essentially, these things are cyclical. We can see the same type of cyclical behaviour when we compare the individual indices to the SPX directly: All this means is that we should eventually correct back down to the monetary supply, during which time another index will outperform the SPX and take the lead. Then rinse and repeat. My personal take away from this little research project is twofold. First, diversification in foreign markets is a smart idea and provides somewhat of a hedge against putting all your eggs in one market and one economy. Second, you should pay attention to where and when you are investing in relation to the current monetary supply. If we look at the chart above, the most stable and healthy gains were achieved when SPX was below the monetary supply. Whenever it was trading above, it would frequently experience drops of, on average, 2 standard deviations back down to the monetary supply in a matter of months until eventually correcting with a bear run and then resuming a healthy bull run. That doesn’t mean you need to wait for a crash or calamity before investing, but its good to pay attention to the extent that a stock may exceed the current money supply. If we look for example at NVDA: This is not a place I would buy NVDA because this move is likely not sustainable. But if we look, for example, at a stock like Ford ( NYSE:F ): You will see that it is in a much more enticing area for a potential long entry. Final Thoughts: Hopefully you found this interesting, I sure did! I want to just say, that I am not saying SPX is going to crash or that we will experience another bear market any time soon. The reality of the situation is SPX has a track record of spending years trading above current monetary supply before correcting. Therefore, its not really realistic to expect SPX to suddenly come crashing down in a matter of weeks and correct back to the levels that the current MS supports. During the 1980s and 90s, it took over 15 years to correct! As well, only looking at the MS is probably going to be insufficient if its all you are looking at in planning your trades. Its just one of many things to consider when you are researching your investments for your portfolio with the ultimate decision coming from weighing out all factors holistically. But it is definitely something to be mindful of! And that concludes the lengthy post. Thank you for reading! Leave your comments and questions below!
SP:SPX
by Steversteves
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