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What happened to WTI today could happen to Brent next weekAs I understand it, today's oil price meltdown was triggered by an oil ETF called USO. Unlike gold ETFs that hold physical gold, oil ETFs like USO hold no physical oil. The way USO works is that it holds contracts for delivery of physical oil next month (in this case, contracts for delivery on May 20). Then, on the 20th of the month, it sells those contracts and uses the proceeds to buy contracts for delivery the following month (in this case, contracts for delivery on June 20). Ordinarily this works just fine, because the volume in USO is typically pretty low and there are usually plenty of real oil buyers out there willing to pick up USO's contracts on the 20th and take delivery of the physical oil. Lately, however, speculators have been putting billions of dollars into USO. So today, as it rolled over to next month's contracts, USO dumped all those billions of dollars of May 20 delivery contracts onto a market with very few real oil buyers willing to take May 20 delivery of physical oil. USO's Brent oil counterpart BNO works the same way and has been getting similar inflows from speculators. My understanding is that Brent oil delivery contracts roll over on the 29th of the month, so a similar meltdown may be coming in Brent oil on April 29. Also, after today's meltdown we may see some of the demand from speculators go away, and the price of oil stay down at a level that reflects the actual demand from people and companies with licenses to take physical delivery. Added to all of this are the problems that the world's oil storage space is filling up fast, and the reopening of the economy in June is likely to encounter lots of logistical bottlenecks that may slow down the return of oil demand. So I'm thinking the near-term environment for oil looks incredibly weak. One way to play this is to short producers, especially US shale companies that may go bankrupt due to high debt and high production costs. Another way to play it might be to short BNO.
TVC:UKOILShort
by ChristopherCarrollSmith
22
Ahrvo Weekly Sector Rankings: 4/13/2020Earnings season for the first quarter of 2020 kicked off yesterday, with 21 S&P 500 companies reporting results. Of the 21 companies, 16 reported positive EPS surprise and 15 reported a positive revenue surprise. For Q1, 72 S&P 500 companies have issued negative EPS guidance and 32 have issued positive EPS guidance. 54 companies report(ed) earnings today, including major banks JP Morgan (profits down 69%) and Wells Fargo (profits down 99%). Both banks have set aside billions in reserves to cover potential lending losses from the coronavirus pandemic. S&P 500 earnings are expected to decline by 10% year-over-year, with revenue growth expected to be 1.0% According to Factset, analysts expect the S&P 500 to return 17.8% over the next year (S&P 500 price target of 3239). Financials (+23.3%) and Consumer Discretionary (+18.6%) are the only sectors expected to outperform the market. Technology, Industrials, Healthcare, Utilities, Materials, Energy, and Consumer Staples are expected to return 17.4%, 17.1%, 16.5%, 14.6%, 14.5%, 14.2%, 14.1%, and 11.2%, respectively. Similar to earnings expectations, analysts tend to overestimate the expected return of the market. Over the last decade, analysts have overshot their price target on the S&P 500 by 2.3% on average. Over the last 15 years, that number is much higher, with analysts’ predictions 9.8% higher than actual performance results. Going forward, market/sector price targets will likely be revised downward. While all S&P sectors were up last week, the performance of cyclical and defensive sectors were relatively mixed. However, cyclicals continued to outperform. Materials (ticker: XLB), Consumer Discretionary (ticker: XLY), Financials (ticker: XLF), Utilities (ticker: XLU), and Energy (ticker: XLE) outperformed the S&P 500 (+11%), returning 18.0%, 15.4%, 14.7%, 13.7, and 13.3% respectively. Technology (ticker: XLK), Industrials (ticker: XLI), Healthcare (ticker: XLU), and Consumer Staples (ticker: XLP) underperformed, returning 10.7%, 8.9%, 8.3%, and 4.3%, respectively. Over the last two weeks, cyclical sectors have outperformed, making up ground from the substantial losses suffered during the market sell-off in March. However, on a year-to-date basis, cyclical sectors (w/the exception of consumer discretionary) have substantially underperformed the broader market. Given their sensitivity to economic activity, coupled with the fact that we are likely in the early innings of an economic and earnings recession, I expect cyclicals to underperform going forward (w/ the exception of consumer discretionary). Defensives should continue to perform well, with the exception of consumer staples stocks, which seem to be priced to perfection. It will be interesting to see how our stock, industry, and sectors models adjust with the slew of earnings information coming out over the next few weeks. -Appo Agbamu, CFA What our models say… Week-over-week change: 04/06/2020 vs. 04/13/2020 Ahrvo Score (Overall Score) 1)Utilities (no change) 2)Technology (no change) 3)Consumer Staples (no change) 4)Industrials (no change) 5)Financials (no change) 6)Consumer Discretionary (no change) 7)Basic Materials (no change) 8)Health Care (no change) 9)Energy (no change) Momentum Score 1)Utilities (no change) 2)Healthcare (⬆️2 spots) 3)Consumer Staples (⬇️1 spot) 4)Technology (⬇️1 spot) 5)Basic Materials (no change) 6)Industrials (no change) 7)Financials (no change) 8)Consumer Discretionary (no change) 9)Energy (no change) Growth Score 1)Financials (no change) 2)Industrials (no change) 3)Technology (no change) 4)Consumer Discretionary (no change) 5)Consumer Staples (no change) 6)Utilities (no change) 7)Health Care (no change) 8)Basic Materials (no change) 9)Energy (no change) Quality Score 1)Consumer Discretionary (no change) 2)Consumer Staples (no change) 3)Industrials (no change) 4)Technology (no change) 5)Utilities (no change) 6)Financials (no change) 7)Energy (no change) 8)Basic Materials (no change) 9)Health Care (no change) Value Score 1)Industrials (no change) 2)Consumer Discretionary (no change) 3)Financials (no change) 4)Utilities (no change) 5)Energy (no change) 6)Consumer Staples (no change) 7)Technology (⬆️1 spot) 8)Basic Materials (⬇️1 spot) 9)Health Care (no change) This material is for informational purposes only. Under no circumstances should any information or materials presented be used or construed as an offer to sell, or a solicitation of an offer to buy, any securities, financial instruments, investments or other services. Any investment made is at your sole discretion. There are many factors that you must consider when making an investment decision, including, but not limited to, product features, risks, whether or not an investment meets your investment objectives, risk tolerance, and other personalized factors. Investing in securities involves risks, and there is always the potential of losing your entire investment .
AMEX:SPY
by AhrvoStockApp
I SPY the End of a Trend With the market closed on Friday we were left with watching the crypto markets take a dip in a less than dramatic fashion. Only left to wonder what the the stock market would have done! For a while I've been beating the drum that Bitcoin is an excellent leading indicator of the markets so it's not farfetched to think that the stock market would have dropped a bit today. I'll speak more on how Bitcoin is a leading indicator on a separate post. Here we have the AMEX:SPY . What follows is some basic Elliot wave and classical charting to assess the next market move. Image 1 : Here I want to know whether both impulses up are equal. We can see using the trend based fib extension that the SPY has yet to tap the 0.88 Fibonacci suggesting potential of further upside. Image 2: On image two, using a small timeframe, 15 min, we see a simple rising wedge formation. Normally seen when trends are stretching out and are nearing their end. I included RSI to show a normal bearish divergence. Image 3 : Putting it all together, the SPY appears to be completing a Zig Zag (5-3-5) correction. If you look closer at the ending diagonal there could be some more price action to the upside before a pull back. From my perspective the overall trend remains down as this was a corrective move to the upside. More to come in future posts from a high timeframe perspective!
AMEX:SPYShort
by DailyClose
3
What we're looking for to suggest a bottom is in!Crashes occur when markets are already oversold so there could be more downside from here. One of the indicators we look at is the percentage of stocks above their 200 day moving average to determine if we've hit a short term bottom. As you can see in the chart we entered 2 lines where stocks could be considered extremely oversold. There isn't one indicator that can tell us when the market bottoms exactly but we can look at the overall number of stocks above their 200 dma as a good tell that a rally could be imminent. Let us know what you think.
INDEX:MMTH
by TradingETFscom