This indispensable trading tool is based on a risk management signaling process Hedgeye CEO Keith McCullough developed during his years as a hedge fund manager and continues to refine. Nearly every trading day, you’ll receive Keith’s latest signals - buy, sell, short or cover.
...his first formal news conference since his Nov. 8 election victory, President-elect Donald Trump on Wednesday went after CNN and Buzz Feed hard for publishing what he called "fake news," denounced the publishing of claims he had been caught in a compromising position in Russia, and attacked U.S. intelligence agencies over the information leak.
Trump also discussed his plans to bring U.S. manufacturing jobs back from overseas plants and denounced drug companies for "getting away with murder" on pricing. Healthcare stocks took a hit following Trump's comments.
At a bare minimum, it's going to be an interesting and entertaining four years.
Here's a quick look at other related key issues investors should keep an eye on.
#Trump #Cabinet #ConfirmationHearings
As confirmation hearings began yesterday, three Trump nominees will face the most scrutiny in the Senate starting with Secretary of State-designate Rex Tillerson who will face tough questioning for his well-publicized ties to Russia, but now will see questions about Exxon’s business dealings in Iran.
Secretary of Treasury-designate Steve Mnuchin will be probed for his over questionable business practices between a bank he ran and a movie studio he chaired. The last pick that may face the toughest time is Secretary of Labor Nominee Andrew F. Puzder who is an outspoken critic of raising the minimum wage and Obamacare.
Despite the fireworks we expect all of Trump’s nominees to sail through - especially with coverage over the next 24 hours focusing on President Obama’s farewell and President-elect Trump’s first press avail in months.
#TaxReform #Paul Ryan
In an effort to bring team Trump into the fold, senior advisors to the president-elect met with Speaker Paul Ryan regarding the House Republican plan for tax reform. Ryan, who is steeped in tax policy, is working from his “Better Way” tax proposal which will serve as the blueprint for the effort starting in the Ways and Means Committee.
While Congress is leading the charge, Ryan and incoming chief of staff Reince Preibus are looking to ensure that both sides are singing from the same hymnal - especially when it comes to border adjustability as well as territorial tax proposal ending taxation of overseas profits of U.S. multinational corporations.
The little used and very powerful Congressional Review Act (CRA) will be dusted off in the early days of the Trump Administration. The law has only been used once in its 20-year history and will make up for lost time the coming months. Trump and Congress both want to overturn many Obama era rules even though employing CRA will have a negative impact on executive power; once a rule is overturned by the CRA, a new rule that is substantially the same cannot be issued making it difficult for any future president to propose a rule that covers a similar area.
What was thought to be a quick and easy repeal of Obamacare has run into a buzzsaw of sorts. A diverse mix of Hill constituencies from Libertarian KY Senator Rand Paul to conservative AR Senator Tom Cotton to moderate TN Senator Bob Corker have all expressed varying levels of discontent to repealing the law without a plan for replacement. All of them are now pushing for immediate replacement of the ACA. And, just in time - President-elect Donald Trump is now calling for a replacement plan within weeks of repeal.
Senator Ben Cardin (D-MD), Ranking Member of Senate Foreign Relations Committee is preparing a bill that would provide congressional authorization for economic sanctions against Russia. The bill has bipartisan support - notably from Senators John McCain and Lindsey Graham. This could cause an early faceoff between the Senate and President-elect Trump over the direction of U.S. policy with Russia.
“I’m not just bullish on oil because oil is going up. On the up moves in oil, we’ve seen rising volume and breaking down volatility.”
–Hedgeye CEO Keith McCullough
Oil prices have been bouncing around lately on speculation about whether the 14-member country cartel OPEC can control its supply of oil and boost prices. For investors, that may be just a distraction. Prevailing macro trends suggest that Oil’s volatility, or the CBOE Crude Oil Volatility Index ETF (OVX) will continue to break down (-11% in the past 3 months).
That’s a bullish signal for oil prices and oil-related stocks.
As long as crude’s volatility stays below $37 (it’s currently $33.84), the signal on oil should remain bullish. “Oil’s volatility is now comfortably below the trend. And the trend is your friend provided that oil volatility is below 37,” says McCullough in the video above.
The Oil & Gas Exploration and Production ETF (XOP) is towards the low end of its risk range, $40.09 - $42.81. So buy it.
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Simple... Yen ↓ = Nikkei ↑
In the past three months, the Yen has weakened -10% against the U.S. Dollar. The Nikkei is up 15% over that same period.
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After years of stagnation, worried Rust Belt Trump voters are finally getting the bump up in their pay stubs for which they've long yearned. More is coming. None of this has anything to do with Trump and everything to do with the U.S. economic cycle. Here's why.
Wage growth is finally breaking out. Average hourly earnings growth hit a post-recession high last Friday, of +2.9% year-over-year. This should come as no surprise to anyone really (and to the relief of Federal Reserve officials, who have been hoping for wage gains to justify further rate hikes). The dynamics are fairly simple. Ask yourself this simple question (below is our answer):
Q: What happens when the pool of available labor shrinks to new lows in both absolute and relative terms?
A: Employment growth slows because you can’t hire fast enough (i.e. the easy gains have been made) and wage growth accelerates because the negotiating dynamics shift from a buyers to a sellers’ market.
Let's run through the numbers.
It's not entirely complicated.
"The typical progression of slowing employment growth and accelerating wage growth should make a ton of sense for anyone with some familiarity of ninth grade macroeconomics," writes Hedgeye Senior Macro analyst Darius Dale in today's Early Look.
As you can see in the Chart of the Day below, the ratio of available labor to job openings fell to 2.4 in November from 2.5 in the prior month. Jobs growth on a year-over-year basis continues to slow to +1.51%, down -77 basis points from its February 2015 peak of +2.28%.
#Wages #Earnings #Consumption #GDP
Wage gains will continue to filter down into consumption and provide further support to our view that the U.S. economy is accelerating. Consumption growth continues to track the broader economy and suggest that both have bottomed out and are now re-accelerating:
This relationship isn't altogether shocking since U.S. Consumption makes up 70% of GDP. Prior to this, the U.S. economy had been relying on revolving credit to fill in for slowing wage growth and help backstop consumption. With both now rising, the U.S. economy is poised to grow.
Rust Belt voters may finally get the relief they so desperately deserve after a protracted recession in the industrial side of the economy. Don't praise Trump. Simply put, the U.S. economy is accelerating once again.
By David Rosenblatt, Psy.D., MarketPsych
You might wonder why I’m writing about financial markets.
Most traders acknowledge there is a “soft” side to trading. Yet it is anecdotal and generally ill-defined. I assert that that soft side is all about how we handle uncertainty in a rapidly changing environment. In other words, stress management.
Traders’ need for stress management surged last year. The plot below shows the price of the S&P 500 and Stress about the S&P 500 expressed in social media (a 500-day average represented by the blue line). Data is provided by the Thomson Reuters MarketPsych Indices and covers financial social media such as tweets, message boards, and blogs.
Data show that stress about the S&P 500 expressed in social media hit a two-year high last year, despite the bullish environment for stocks.
Working in the hospital environment I became a specialist in stress management. Success required navigating uncertainty, managing risk, and following a plan. In short, making the unpredictable predictable.
And my stress reaction to a patient’s glare is the same – biologically speaking – as a trader’s stress response to investment uncertainty. The reaction can be visceral and distracting. However, predicting the unpredictable is best done with a clear mind.
In this 4-article series I will share what I’ve learned about stress management that can be of benefit to traders. To illustrate this point, I’ll share a story about an incarcerated young man with whom I worked named John.
John came from a broken home and he spent most of his time on the streets where he assaulted numerous people. Once locked up, he had difficulty adjusting. All day he scanned people and the surroundings for danger. All night he was tormented by visions of his maimed victims. Conversation was difficult because his mind was either racing or blank. Once he could trust me, he tried a few simple stress-management techniques.
John learned that to manage his stress. He needed to take control. Being incarcerated, however, he could not control his environment. So, what could he control? Features of his thought process and specific behaviors.
This is also true for traders in the market. Traders cannot control prices, but they can intervene in their thought processes and take specific actions. Domains where they can take control include directing focus, managing downtime, and engaging in deliberate mental exercises.
First, focus needs to be flexible. To help keep the mind loose and limber, vary the eyes’ focal point a few times an hour. Look away from the screen, to the wall near you, then gaze out the window. Setting a periodic alarm as a reminder to look away can be helpful to break unhelpful thought patterns that form during a day of looking at screens.
Second, quality sleep is paramount to health. With constant scanning and thinking, the mind becomes a runaway train. Sleep is a station blown past. A winding-down ritual cues the mind and body that sleep is the destination. To slow that mental momentum, dim the lights, make some herbal tea, and jot down a few light-hearted ideas.
Third, and paradoxically, one way to take control is to let go of control. A clear mind allows one to choose the contents. To create clarity, find a quiet space, close the eyes, and focus on breathing for two minutes.
So, what happened to John? He’s still in prison. But once he learned to manage his mind, he was able to obtain a formal education and get a job. He could read for pleasure. His sleep improved.
You can take control of your psychological well-being to bolster financial success. This article is a brief introduction into taking control. I’ll follow up with three articles that further explore each mental dimension - focus, sleep, and mindfulness.
This is a Hedgeye Guest Contributor piece written by David M. Rosenblatt Psy.D. Dr. Rosenblatt is an investor coach for MarketPsych, an expert in stress management, and an avid individual investor. Additionally he works with the California Department of State Hospitals treating Mentally Disordered Offenders. This piece does not necessarily reflect the opinion of Hedgeye.