weekly market update 11-2-16phoenixcapitalmarketing.com/pwa11-2-16.pdf2016/11/02  · 11 9 action to...

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Weekly Market Update 11-2-16

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Thetwomostimportantitemsofthelastweekare:

1) TheECBhasallbutconfirmedthatQEisending.2) TheBankofJapanhasgivenuponitsinflationtarget.

Regarding#1,GermanEconomicexpertsannouncedearliertodaythattheECBshouldslowdownitsbondpurchasesandendthemearlierthanitscurrentMarch2017deadline.

EurozonestatesshouldimplementstructuralreformstosustaintheeconomicupswingdrivenbytheEuropeanCentralBank'sexpansionarypolicywhichshouldbecurtailedasitthreatensfinancialstability,GermaneconomicexpertssaidonWednesday.ThecouncilofexpertsthatadvisestheGermangovernmentoneconomicpolicyalsosaidtheextentofthecentralbank'smonetaryeasingwasnolongerappropriategiventhebloc'seconomicrecovery."Consequently,theECBshouldslowdownitsbondpurchasesandendthemearlier,"theexpertswroteinareportthatwashandedtoChancellorAngelaMerkel.http://www.reuters.com/article/us-germany-economy-ecb-idUSKBN12X12K

Remember,backinAugustECBPresidentMarioDraghisuggestedthattheECBshouldstepbackandthatEUmemberstates,specificallyGermany,shouldemployfiscalstimulus.

TheEuropeanCentralBankleftits€1.7trillion($1.9trillion)stimulusunchangedatapolicymeetingThursday,brushingoffconcernsovereconomicshockwavesfromBritain’svotetoleavetheEuropeanUnionanddisappointinginvestorsexpectingtheECBtoactagainsoon.Despitethat,Mr.Draghisaidpolicymakersdidn’tevendiscussfreshstimulus,andpraisedtheeffectivenessofthebank’sexistingpolicymeasures,whichincludenegativeinterestratesand€80billionamonthofbondpurchases.HealsoaimedanunusuallydirectrebukeatGermany,criticizingBerlinfornotboostingspendingtosupporttheeconomy.“Countriesthathavefiscalspaceshoulduseit,”Mr.Draghisaid.“Germanyhasfiscalspace.”

WEEKLY MARKET UPDATE 11-2-16

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http://www.wsj.com/articles/european-central-bank-leaves-rates-unchanged-1473335620

Thiswasanincrediblestatement.Itwas,effectively,Draghistating,“theECBisdonewithmonetarypolicy.EUmemberstatesneedtopickuptheslack.”AtthattimeInotedthattheECBwas“outofammo”sotospeakandthatQEwouldbeending.Thisflewinthefaceofwhat99%ofanalystsweresaying.TheECBhassincemetinSeptember.AndonceagainwhilethemediatriedtospinthemeetingasindicatingmoreQEwascoming,theECBadmittedthatithadnotevendiscussedthepotentialforextendingQEbehindcloseddoors.Fast-forwardtotodayandnowevenGermany’stopeconomicadvisorsaresuggestingtheECBshouldhaltQE.Folks,thisisascloseasyoucangettohavingtheEUliterallybroadcastwhatiscoming.QEisending.TheEurowillbegoingto120.

WearelongEurosinourcashportfolio.Feelfreetobuyifyouhavenoalreadydoneso.

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ActiontoTake:BuytheEuroTrust(FXE)ifyouhavenotalreadydoneso.ThismoveintheEuroisgoingtocollapsethe$USD.AnditwilligniteMAJORmovesininflationhedges.Wearealreadylongpreciousmetalsandanumberofminers.IbelieveOilisnowbottomingaswell.

Asyoucansee,Oilhasbrokenaboveits50-weekmovingaverage(WMA)whichisnowturningupwards.Ithasalsobuiltasolidupwardstrendline.Thetargetforthismoveis$60perbarrel.

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Asaresultofthis,we’readdingpositionsinseveralOilcompaniestoourStocksportfolio.UNDERSTANDTHATWEMIGHTBEALITTLEEARLYONTHESEPOSITIONS.Oilmightfallabitfurther(redline)beforebeginningitsnextlegup.

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However,giventherisktorewardsetuphere.I’mreadytohaveusmovein.ThefirstplayisConoco-Phillips(COP)

Asyoucansee,we’vebrokenadowntrendstartedinmid-2014.We’vealsoestablishedafirmbasedat$38.Wewillbemovinguptosomewhereinthatredbandwithinthenextsixmonths.ActiontoTake:BuyConocoPhillips(COP).ThenextplayisSchlumberger(SLB).

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Onceagainwe’vebrokenthedowntrendandputinastrongbase.Wemightrevisit$75onelasttimebutwe’reeventuallygoingtotheredband(andpossiblyhigher)in2017sometime.ActiontoTake:BuySchlumberger(SLB)IalsothinkbothChevron(CVX)andExxonMobil(XOM)aregoingtonewhighs.Here’sChevron(CVX).

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Attheveryleastweshouldhit$120sometimein2017.Butifthatisaconfirmedinverseheadandshoulders(messy,butpossible)wecouldevengoto$140.ActiontoTake:BuyChevronCorp(CVX).Exxonhascorrectedfromitssharprallyandisnowpreparingtoputinabase.Wemightbeearlyonthisone.

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ActiontoTake:BuyExxonMobil(XOM)ifyouhavenotalreadydoneso.Finally,Apache(APA)isgoingto75ifnotnewalltimehighs.

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ActiontoTake:BuyApache(APA)Again,itisquitepossiblewearealittleearlyonALLofthesepositions.Sodonotbesurprisedifweareinitiallydown5%.Buttheriskrewardisfantasticforalong-term(think6+months)playfor25%ormoreinallofthese.Whichbringsusto#2onourinitiallist:

2) TheBankofJapanhasgivenuponitsinflationtarget.Long-timereaderswillrememberthattheBankofJapanisattheforefrontofmonetarypolicyforglobalCentralBanks.TheFedfirstwenttoZIRPandlaunchedQEin2008.TheECBfirstwenttoZIRPandlaunchedQEin2012and2015,respectively.TheBankofJapanwenttoZIRPin1999andlaunchedQEin2001.ItisoveraDECADEaheadoftheFedandtheECBintermsofmonetarypolicy.Keepthatinmindwhenyouconsiderthebelowstory.

TheBankofJapanacknowledgeddefeatTuesdayinitsquesttoachieveits2percentinflationgoalduringGov.HaruhikoKuroda’stermthroughApril2018,dealingamajorsetbacktoPrimeMinisterShinzoAbeandhisAbenomicspolicymixthatwasdesignedtotameprolongeddeflation.

Thecentralbank,however,leftitsmonetarypolicyunchanged,withKurodasayingthatthenation’seconomicsituationremainslittlechangedfromlateSeptember,whentheBOJ’slastPolicyBoardmeetingwasheld.

http://www.japantimes.co.jp/news/2016/11/01/business/economy-business/major-setback-abenomics-boj-gives-hitting-inflation-target-kuroda-term/#.WBnuitzCL89

ThisistheBankofJapan,admittingthatitwon’treachitsinflationtargetof2%byApril2018(afull18monthsfromnow).

Bearinmind,thiscomesaftertheBoJ’sheadHaruhikoKurodaadmittedbackinJanuarythatJapanhasa“GDPpotentialor0.5%orlower”(animplicitadmissionthatQEandNIRPcannotgenerateeconomicgrowtheither).

Thus,inthelast12months,theBoJhasadmittedthatmonetarypolicycannotgenerateGDPgrowthANDthatitwillfailtogeneratethedesiredinflationarygoals.

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ThisisaCLEARsignalthattheBoJ,liketheECB,issteppingbackfromengaginginmoremonetarystimulus.

ThereasonforthisisthattheBoJ,liketheECB,hasrealizedthatdevaluingitscurrencydoesn’tworkforthesimplereasonthatpushingtheYen(ortheEuro)downpushestheUSDollarUP.

TheUSDollaristhereservecurrencyoftheworld.WhentheUSDollarisupitmeansDEFLATIONglobally.

ThisiswhyQEandZIRP/NIRPhavebeenineffectivefortheECBandBoJ.Sure,thosepoliciesmighthaveshort-termbeneficialeffects,butlong-termtheypushthe$USDhigherwhichonlyspreadsdeflationthroughoutthefinancialsystem.

ThefacttheBoJisactuallysteppingbackfrommoremonetarypolicyisactuallythefirstreallypositivenewsforJapanesestocksintwoyears.

Withthatinmind,we’reclosingourUltraShortNikkeiETF(EWV)

ActiontoTake:ClosetheUltraShortNikkeiETF(EWV)Indeed,Japanesestocksmightbeprimedforaseriousmovehigher.AsSocieteGeneralrecentlynoted,arecord55%ofJapanesenon-financialcompaniesnowholdmorecashthandebt(comparedtoonly20%fortheUS).Moreover,whiletheS&P500issportingaforwardP/Eof17,theNikkeiisatjust13.Fromatechnicalperspective,theNikkeihasputinasolidbase(redline)andbrokenabovecriticalresistance(greenline)aswellasitsmultiyeardownwardchannel(bluelines).

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Thisisextremelybullish.I’mlookingforindividualJapanesecompaniesforus.I’llhavesometoyouoverthecomingweeks.Butgiventhefundamentals(highcash,lowdebt)aswellasthetechnicalsetup,thishasthemakingsofbeingablockbusteropportunity.Elsewhereinthemarkets…Amazon(AMZN)hastakenoutitstrendline.It’sgoingto$675ifnot$650.

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Facebook(FB)isabouttotakeoutitstrendlinefromthe2016low.Ultimatelywe’reheadingtotheredline.ThecompanyjustbetestimatedonbothEPSandrevenuesbutisstillDOWNaftermarketonnewsitisloweringitsrevenueforecasts.

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It’sasimilarstoryforApple(AAPL),whichisgoingto$105orpossiblyeven$97.50.

Finally,Europe’sbankingproblemsarenotover.DeutscheBank(DB)isrollingoveragainandisreadytomakenewlows.

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Thisconcludesthisweek’smarketupdateforPrivateWealthAdvisory.TheS&P500hasfinallytakenoutsupport.We’resharplyoversoldheresoIexpectabrief1-2daybounce,butafterthattheredlinebeckons.

I’mwatchingthemarketscloselyandwillissueupdatesasneeded.Barringanynewdevelopmentsyou’llnexthearfrommenextWednesdayafterthemarket’scloseinourusualweeklymarketupdate.Untilthen…

ChiefMarketStrategistPhoenixCapitalResearch

BestRegards,

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OPEN POSITIONS

STOCKS PORTFOLIO POSITION SYMBOL BUY

DATE BUY

PRICE CURRENT

PRICE GAIN/ LOSS

Exxon XOM 9/24/14 $95.82 $83.46 -7% RPXCorp RPXC 8/5/15 $15.48 $9.75 -37%

Conoco-Phillips COP 11/2/16 $43.24 NEW BUY!

Schlumberger SLB 11/2/16 $77.77 NEW BUY!

Chevron CVX 11/2/16 $105.38 NEW BUY!

Apache APA 11/2/16 $59.47 NEW BUY!

BONDS PORTFOLIO

POSITION SYMBOL BUY DATE

BUY PRICE

CURRENT

PRICE

GAIN/ LOSS

NuveenMuni.Fund NVG 1/2/14 $13.12 $15.03 34%

Pricesasofmarket’scloseon11/2/16Priceincludedividends*Averagepriceof$17.50and$14.97

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POSITION SYMBOL BUY DATE

BUY PRICE

CURRENT

PRICE

GAIN/ LOSS

Gold 3/17/10 $1,120 $1,297.00 16% Silver* 3/17/10 $16.23 $18.52 14%

UraniumETF URA 6/8/16 $15.49 $11.93 -23%

GoldMinersETF GDX 10/5/16 $22.83 $24.76 8% GoldMiningJuniorsETF GDXJ 10/5/16 $37.52 $41.37

10%

SilverWheaton SLW 10/5/16 $22.59 $24.00 6% SilverStandardResources SSRI 10/5/16 $10.30 $11.55

12%

BarrickGold ABX 10/5/16 $15.54 $18.11 17%

NewGold NGD 10/5/16 $3.88 $4.03 4%

NaturalGasTrust UNG 10/5/16 $8.71 $7.49 -14%

PRECIOUS METALS/ MINERS PORTFOLIO

Pricesasofmarket’scloseon11/2/16

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SPECIAL SITUATIONS/HEDGES/SHORTS PORTFOLIO

POSITION SYMBOL BUY DATE

BUY PRICE

CURRENT PRICE

GAIN/ LOSS

UltraShortEmergingMktsETF* EEV 1/20/16 $24.03 $15.89 -34% UltraShortChinaETF FXP 1/20/16 $59.95 $32.34 -46%UltraShortBrazilETF** BZQ 1/20/16 $74.40 $17.43 -77% UltraShortFinancialsETF*** SKF 2/10/16 $56.82 $40.90 -28% UltraShortRussell2000**** TWM 2/10/16 $47.92 $33.06 -31% UltraShortS&P500ETF SDS 7/27/16 $16.60 $17.43 5% RioTinto(SHORT) RIO 8/12/16 $31.08 $34.46 -11% EuropeanFinancialsETF EUFN 7/5/16 $14.86 $17.34 -17% CreditSuisses CS 7/5/16 $10.30 $13.57 -32% Santander(SHORT) SAN 2/3/16 $4.13 $4.73 -15% Barclays(SHORT) BCS 7/5/16 $7.92 $8.91 -13% FranceETF(SHORT) EWQ 9/16/16 $23.38 $23.79 -2% ItalyETF(SHORT) EWI 9/16/16 $10.78 $10.98 -2% Amazon(SHORT)***** AMZN 2/25/15 $484.19 $765.56 -58% AmericanEagleOutfitters(SHORT) AEO 5/26/16 $15.36 $16.67 -9% Facebook(SHORT) FB 9/27/16 $128.69 $127.26 1% Apple(SHORT) AAPL 9/27/16 $113.09 $111.59 1% *Averagepriceof$26.98and$21.08**Averagepriceof$110.71and$38.10***Averagepriceof$60.95and$51.69****Averagepriceof$52.94and$42.90*****Averagepriceof$385.37and$583Pricesasofmarket’scloseon11/2/16Priceincludedividends

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CASH/ CURRENCIES PORTFOLIO

POSITION SYMBOL BUY DATE

BUY PRICE

CURRENT

PRICE

GAIN/ LOSS

EuroTrust FXE 10/5/16 $108.80 $107.88 -1%

Pricesasofmarket’scloseon11/2/16Priceincludedividends