Weekly Market Update

Transcription

1 1 Weekly Market Update Phoenix Capital Research, Phoenix Capital Management Inc. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This newsletter may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of Phoenix Capital Management Inc. All Rights Reserved.

2 Disclaimer: The information contained on this newsletter is for marketing purposes only. Nothing contained in this newsletter is intended to be, nor shall it be construed as, investment advice by Phoenix Capital Research or any of its affiliates, nor is it to be relied upon in making any investment or other decision. Neither the information nor any opinion expressed on this newsletter constitutes and offer to buy or sell any security or instrument or participate in any particular trading strategy. The information in the newsletter is not a complete description of the securities, markets or developments discussed. Information and opinions regarding individual securities do not mean that a security is recommended or suitable for a particular investor. Prior to making any investment decision, you are advised to consult with your broker, investment advisor or other appropriate tax or financial professional to determine the suitability of any investment. Opinions and estimates expressed on this newsletter constitute Phoenix Capital Research's judgment as of the date appearing on the opinion or estimate and are subject to change without notice. This information may not reflect events occurring after the date or time of publication. Phoenix Capital Research is not obligated to continue to offer information or opinions regarding any security, instrument or service. Information has been obtained from sources considered reliable, but its accuracy and completeness are not guaranteed. Phoenix Capital Research and its officers, directors, employees, agents and/or affiliates may have executed, or may in the future execute, transactions in any of the securities or derivatives of any securities discussed on this newsletter. Past performance is not necessarily a guide to future performance and is no guarantee of future results. Securities products are not FDIC insured, are not guaranteed by any bank and involve investment risk, including possible loss of entire value. Phoenix Capital Research, OmniSans Publishing LLC and Graham Summers shall not be responsible or have any liability for investment decisions based upon, or the results obtained from, the information provided. Phoenix Capital Research is not responsible for the content of other newsletters to which this one may be linked and reserves the right to remove such links. OmniSans Publishing LLC and the Phoenix Capital Research Logo are registered trademarks of Phoenix Capital Research. OmniSans Publishing LLC - PO BOX 2912, Alexandria, VA 22301

3 Weekly Market Update As you know we ve been waiting for the Trump election win trade to unwind. This process has been excruciating as the markets have been pinned at current levels since mid-december. Indeed, as of today, the S&P 500 has spent 36 days without a single 1% intraday move (a move of 1% within a single day). Put another way, the last time the market moved more than 1% during a single trading session (from 9:30AM to 4PM) was December 14, days without a single 1% intraday move. This. Is. An. All. Time. Record. Meanwhile, underneath the surface, the markets have been falling to pieces. The percentage of stocks above their 50-DMAs (blue line) has rolled over sharply as the general index is held up by fewer and fewer individual companies. 3

4 We ve been waiting for a tell that this move in the markets was ending. That tell is now here: long Treasuries have just caught a bid. 4

5 As soon as we take out that red line, the Trump election trade will finally begin to unwind aggressively. And based on the fact that stocks have been pinned for 36 days, the odds have shifted to it being a violent adjustment. The first move will be a sharp drop down to 2250 or so. That could very well hit this week. After that we ll be grinding our way downward over the coming weeks, eventually unwinding the entire move since November 8 before we hit June I ve drawn the support lines where the market is most likely to bounce on the below chart. Given how pinned the market has been, the first leg down could see us take out 2,200 in a matter of just a few sessions. Here are stocks relative to bonds. As I routinely state, stocks always get it last. This time around it s no different. Bonds have figured it out. Stocks are about to. 5

6 Another tell concerns financials which are finally beginning to break down. 6

7 Indeed, we re beginning to see repeated tests of the 50-DMA here. Once we finally take it out, the trap door opens for stocks and we re heading DOWN. Put simply, the move we ve been waiting for is finally about to begin. What s going to trigger this move? The markets realizing that the perceived Trump economic utopia is not about to unfold. Indeed, while CNBC is talking about GDP growth of 5%, I m seeing numerous signals flashing that the US economy is in fact rolling over. First and foremost, restaurant sales are dropping hard. The average American eats out 4.5 times per week. And when consumers begin to cut back on expenses, eating out is one of the places to take a hit. With that in mind consider the following. 7

8 Restaurant industry same-store sales fell 2.4 percent in December, according to the latest MillerPulse index, as consumers ended the year eating at home or at independent restaurants. The performance was the worst in at least six years for the index, which measures restaurant chain same-store sales. You can clearly see things took a turn for the worse in December. Auto sales (another economically sensitive metric) are rolling over sharply as well. Automakers sold 1.14 million vehicles in the U.S. in January, down 1.8% from a torrential pace in January 2016, according to Autodata.The decline came as they tried to keep the momentum going by piling on discounts. Each of the Detroit Big 3 automakers posted sales declines, with General Motors down 3.9%, Ford settling 0.7% and Fiat Chrysler tumbling 11.2% compared to the same month last year. The next largest automaker, Japan's Toyota, was pummeled in January, down 11.3%. It badly trailed analyst expectations. 8

9 7 Note that this decline occurred despite automakers offering intense discounts. Gasoline demand has also plummeted. U.S. refiners are facing the prospects of weakening gasoline demand for the first time in five years, stoking fears that earnings this year may be even worse than the dismal performances seen in The sign of weakening U.S. gasoline demand comes as U.S. refiners are in the midst of reporting their worst year of earnings since the U.S. shale boom started in The oil boom turned to bust in 2014, and U.S. independent refiners reaped the profits as plunging pump prices and a growing economy helped fuel a surge in demand. Goldman Sachs is attempting to shrug this off as somehow not indicative of a recession, but the below chart (courtesy of ZeroHedge) seems pretty clear to me. 9

10 8 Job openings and hires are also rolling over into contraction. This is confirmed by hiring at S&P 500 companies turning negative for the first time since

11 In short, there are numerous signals of economic weakness developing. And the market has rallied hard based on expectations of raging economic growth! As I mentioned before, the markets are finally beginning to wake up to these realities. I think we re just days away from the unwind beginning. The Russell 2000 (RUT) has taken out its 50-DMA for the first time since election night. The momentum has shifted downwards and we re ready to drop hard. Indeed, the one sector that currently looks great in the US markets is a highly defensive sector, Utilities (XLU) which have undone their entire post election drop and are now breaking to new highs. 11

12 Action to Take: Buy the Utilities ETF (XLU) As much as US stocks look poised for a sharp correction, outside of the US, we re also getting some nice buy signals. First and foremost, Brazil looks ready to break to a new high. 12

13 Action to Take: Buy the Brazil ETF (EWZ). Iron ore companies also look prepared for a major bull run. Cliff Resources has broken out of one of the largest bullish falling wedges I ve ever seen. 13

14 Moreover, we ve put in a new base and are now ready for the next leg up. Action to Take; buy Cliffs Natural Resources (CLF) Finally, I ve got another precious metals miner for you. It s Royal Gold (RGLD). 14

15 As you can see, we ve broken out of a clean downward channel and are now breaking above critical resistance. We ll be moving to $85 in the next six months. Action to Take: Buy Royal Gold (RGLD). This concludes this week s market update for Private Wealth Advisory. The long wait is finally ending. Market leaders (financials, particularly banks) are breaking down. Bonds are finally catching a bid. And Gold is going strong. Barring any new developments you ll next hear from me next week in our usual weekly market update. Until then Best Regards, Graham Summers Chief Market Strategist Phoenix Capital Research 15

16 OPEN POSITIONS STOCKS PORTFOLIO POSITION SYMBOL DATE CURRENT GAIN/ LOSS Exxon XOM 9/24/14 $95.82 $ % RPX Corp RPXC 8/5/15 $15.48 $ % Ambev ABEV 11/25/16 $4.96 $ % Cemex CX 11/25/16 $8.07 $8.70 8% Enterprise Products 10% EPD 11/31/16 $25.93 Partners $28.43 Peru ETF EPU 12/7/16 $33.23 $ % Uranium ETF URA 6/8/16 $15.49 $ % Cameco CCJ 1/4/17 $10.69 $ % Coal ETF KOL 1/4/17 $12.59 $ % Agricultural 2% RJA 1/12/17 $6.46 Commodities ETF $6.59 Emerging markets 3% EEM 1/12/17 $36.60 ETF $37.70 China ETF ASHR 2/1/17 $24.91 $ % Cliffs Nat Resources CLF 2/8/17 $9.52 NEW! Brazil ETF EWZ 2/8/17 $37.58 NEW! Utilities ETF XLU 2/8/17 $49.40 NEW! BONDS PORTFOLIO POSITION SYMBOL DATE CURRENT GAIN/ LOSS Nuveen Muni. Fund NVG 1/2/14 Emerging Market Bonds EMB 11/21/16 Long US Treasuries TLT 11/21/16 $13.12 $ $ Prices as of market s close on 2/8/17. Gains include dividends $ % $ % $ % 16

17 PRECIOUS METALS/ MINERS PORTFOLIO POSITION SYMBOL DATE CURRENT GAIN/ LOSS Gold Silver* 3/17/10 3/17/10 $1,120 $16.23 $1, $17.78 Gold Miners ETF GDX 10/5/16 $22.83 $25.57 Gold Mining Juniors GDXJ ETF 10/5/16 $37.52 $42.19 Silver Wheaton SLW 10/5/16 $22.59 $22.82 Silver Standard SSRI Resources 10/5/16 $10.30 $11.84 Barrick Gold ABX 10/5/16 $15.54 $19.59 New Gold NGD 10/5/16 $3.88 $3.02 Royal Gold RGLD 2/8/17 $71.36 NEW 11% 10% 12% 16% 1% 15% 26% -22%! SPECIAL SITUATIONS/HEDGES/SHORTS PORTFOLIO POSITION SYMBOL DATE CURRENT GAIN/ LOSS France ETF (SHORT) EWQ 9/16/16 $23.38 $ % Italy ETF (SHORT) EWI 9/16/16 $21.56 $ % Russell 2000 ETF (SHORT) IWM 12/14/16 $ $ % Financials ETF (SHORT) XLF 12/21/16 $23.61 $ % US Steel (SHORT) X 2/1/17 $31.33 $ % Prices as of market s close on 2/8/17 at market s close Returns include dividends *Average price of $17.50 and $

18 CASH/ CURRENCIES PORTFOLIO POSITION SYMBOL DATE CURRENT GAIN/ LOSS Euro Trust FXE 10/5/16 $ $ % Prices as of market s close on 2/8/17 at market s close Price include dividends 18