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
©2016·PhoenixCapitalResearch,PhoenixCapitalManagementInc.AllRightsReserved.Protectedbycopyright laws of the United States and international treaties. This newsletter may only be usedpursuanttothesubscriptionagreementandanyreproduction,copying,orredistribution(electronicorotherwise, including on theworld wideweb), inwhole or in part, is strictly prohibited without theexpresswrittenpermissionofPhoenixCapitalManagementInc.·AllRightsReserved.
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Disclaimer: The informationcontainedon thisnewsletter is formarketingpurposesonly. Nothing contained in thisnewsletter isintendedtobe,norshallitbeconstruedas,investmentadvicebyPhoenixCapitalResearchoranyofitsaffiliates,norisittoberelieduponinmakinganyinvestmentorotherdecision.Neithertheinformationnoranyopinionexpressedonthisnewsletterconstitutesandoffertobuyorsellanysecurityorinstrumentorparticipateinanyparticulartradingstrategy.Theinformationinthenewsletterisnotacompletedescriptionofthesecurities,marketsordevelopmentsdiscussed.Informationandopinionsregardingindividualsecuritiesdonotmeanthatasecurityisrecommendedorsuitableforaparticularinvestor.Priortomakinganyinvestmentdecision,youareadvisedtoconsultwithyourbroker,investmentadvisororotherappropriatetaxorfinancialprofessionaltodeterminethesuitabilityofanyinvestment.OpinionsandestimatesexpressedonthisnewsletterconstitutePhoenixCapitalResearch'sjudgmentasofthedateappearingontheopinionorestimateandaresubjecttochangewithoutnotice.Thisinformationmaynotreflecteventsoccurringafterthedateortimeofpublication.PhoenixCapitalResearchisnotobligatedtocontinuetoofferinformationoropinionsregardinganysecurity,instrumentorservice.Informationhasbeenobtainedfromsourcesconsideredreliable,butitsaccuracyandcompletenessarenotguaranteed.PhoenixCapitalResearchanditsofficers,directors,employees,agentsand/oraffiliatesmayhaveexecuted, or may in the future execute, transactions in any of the securities or derivatives of any securities discussed on thisnewsletter. Past performance is not necessarily a guide to future performance and is no guarantee of future results. SecuritiesproductsarenotFDICinsured,arenotguaranteedbyanybankandinvolveinvestmentrisk,includingpossiblelossofentirevalue.Phoenix Capital Research, OmniSans Publishing LLC and Graham Summers shall not be responsible or have any liability forinvestment decisions based upon, or the results obtained from, the information provided. Phoenix Capital Research is notresponsibleforthecontentofothernewsletterstowhichthisonemaybelinkedandreservestherighttoremovesuchlinks.OmniSansPublishingLLCandthePhoenixCapitalResearchLogoareregisteredtrademarksofPhoenixCapitalResearch.OmniSansPublishingLLC-POBOX2912,Alexandria,VA22301
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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