The Enhanced Investor Weekly Macro
January 1, 2017
ENHANCED INVESTOR WEEKLY WRAP & UPDATE Market Wrap and Update Happy New Year, Everyone! Investors will get back to work fast when markets reopen for the new year this week, with all eyes on the monthly U.S. employment report due Friday. This may present an opportunity in the miners if the Jobs Report falls less than expected, as it will implicate slower monetary tightening going forward into 2017. Global financial markets will also focus on Wednesday’s minutes of the Federal Reserve’s December policy meeting for further hints on the future path of monetary policy. Meanwhile, in China, market players will be looking out for data on the country's manufacturing sector, amid ongoing concerns over the health of the world's second biggest economy. In addition, Wednesday’s euro zone inflation data will be closely watched for indications on how recent weakness in the euro and raising oil prices affected consumer prices. Elsewhere, in the U.K., traders will focus on a trio of reports on activity in the manufacturing, construction and services sectors for further indications on the continued effect that the Brexit decision is having on the economy. Here are some of the biggest events this week that will move the markets. 1.
U.S. Jobs Report for December
The U.S. Labor Department will release its December nonfarm payrolls report at 8:30AM ET (13:30GMT) on Friday. The consensus forecast is that the data will show jobs growth of 175,000, following an increase of 178,000 in November, the unemployment rate is forecast to inch up to 4.7% from 4.6%, while average hourly earnings are expected to rise 0.3% after falling 0.1% a month earlier.
Monetary Policy After the Financial Crisis will be on watch from now through the end of Q2 of 2017.
By now, we know that an upbeat employment report will point to an The Enhanced Investor Weekly Macro
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The Enhanced Investor Weekly Macro
January 1, 2017
improving economy and support the case for higher interest rates in the coming months, while a weak report would add to uncertainty over the economic outlook and push prospects of tighter monetary policy further off the table. Besides the employment report, this week's calendar also features U.S. data on manufacturing and service sector growth, construction spending, auto sales, weekly jobless claims, factory orders as well as monthly trade figures. 2. Fed FOMC Meeting Minutes The Federal Reserve will release minutes of its December policy meeting on Wednesday at 2:00PM ET (19:00GMT). The U.S. central bank hiked interest rates following its meeting on December 14, in a widely expected decision, and signaled it expects to raise interest rates three times in 2017, up from the two hikes predicted in September. There are also several Fed speakers this week, with Chicago Fed President Charles Evans, Richmond Fed President Jeffrey Lacker and Dallas Fed President Robert Kaplan all speaking on Friday. 3. Chinese Manufacturing Data for December The Caixin manufacturing index is due at 01:45GMT Tuesday (9:45PM ET Monday). The survey is expected to inch down to 50.7 from 50.9 in the preceding month. The official manufacturing purchasing managers' index released on Sunday Beware of Biotech. dipped to 51.4 in December from 51.7 in November, slightly below the forecast If the XBI breaks for 51.5. $58.75, it will test Anything above 50.0 signals expansion, while readings below 50.0 indicate industry contraction.
$55 (easily). If it breaks $58.75 LABD will make a play.
The lack of momentum in manufacturing growth
Gold correction is most like continues to worry investors heading into the over. Watch for a sustained break above $1,161 to $1,176. new year, with the yuan’s record-setting slide
versus the dollar in 2016 not seen to be providing much of a boost to the sector.
4. Euro Zone Flash December Inflation Figures The euro zone will publish flash inflation figures for December at 10:00GMT (5:00AM ET) Wednesday.
The Enhanced Investor Weekly Macro
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The Enhanced Investor Weekly Macro
January 1, 2017
The consensus forecast is that the report will show consumer prices rose 1.0%, compared to a rise of 0.6% in November, while core prices are expected to gain 0.8%, unchanged from the prior month. A weaker euro and rising oil prices mean that projections the European Central Bank released less than a month ago could be revised higher in 2017. Any sign of faster consumer-price gains could spur more-hawkish ECB officials to call for a gradual exit from monetary stimulus. The ECB extended its bond-buying program for an additional nine months in December, even as it cut back on the size of asset purchases. 5. U.K. December PMI’s The U.K. will release readings on December manufacturing sector activity on Tuesday, followed by a report on the construction sector on Wednesday and the service sector on Thursday. The manufacturing PMI is forecast to inch down to 53.3 from 53.4 a month earlier, construction activity is expected to improve slightly to 53.0 from 52.8, while a survey on Britain's giant services sector is forecast to dip to 54.7 from 55.2 last month. The Bank of England kept monetary policy on hold last month and reiterated that policy can respond “in either direction” to the changes in the outlook.
Long-Term Stock Ideas and 2017 Preparation Like most years, going into 2017 there is going to be consolidation, profit-taking, and semi-tax related selling. I have advised that the selling would be less than most years due to the incoming administration relative to future tax structure. Post-election, a lot of Shorts covered. Now, they’re building their positions again, however the Bulls are still ahead of the Bears by a 3:1 ratio. • • •
IBD has big front and center articles this weekend about Artificial Intelligence and Augmented Reality. Pay attention to any news related to Fannie Mae and Freddie Mac. The US government owns over $1 Trillon USD in these old mortgages and rumor has it they’re going to begin unloading. Industrials continue to be mentioned by top money managers. I noted this BEFORE the election, but take a look at TRN. TRN is one of these that benefits from transportation, construction, and energy industries with a low PE ratio.
NSM - Mortgage servicing provider nearing highs in a consolidation with reasonable PE ratio TREX - 8 week base pattern for the maker of Trex composite materials for construction, decking Strong growth COMM - 6-week base pattern for this communications provider, PE Ratio 15 recent growth 50% AMAT - Chip equipment provider and more, expanding into new business lines. 6 week base pattern
The Enhanced Investor Weekly Macro
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The Enhanced Investor Weekly Macro
January 1, 2017
QTNA - Post IPO base continues for this Wireless Chip and communications solutions provider ICHR - Semi Conductor Post IPO base for this Fluid solutions provider to chip industry
Additional Info For any newcomers who don’t know me, I’ve been contributing via the Enhanced Investor Weekly Macro Reports under #WatchList for almost a year. As I noted last week, given the recent market action and my in-depth knowledge of bubbles relative to political shifts and global economics, I’ve decided that it was simply not enough for beginners, or even intermediate traders because in order to have the ability to synthesize what’s truly happening - you need to be operating at the MBA/PhD level. Unfortunately, some PhD’s forget the basics. Anyway, as I said a few weeks ago, it’s not fair for me to assume that all of you have what those at investment banks call “financial sophistication”, but that’s why we’re working together here at Enhanced Investor. Combatting Wall Street and gaining the upper edge is why we do this. Anyway, I am more than happy to help, so if for some reason I don’t receive a tag in the #mainstockchat, or you don’t direct message me on Discord, please feel free to email here adamwood@fas.harvard.edu or you can tag me on StockTwits @ EILeadMacroAnalyst. Don’t fear the bubble. We do not fear bubbles here at Enhanced Investor. Why? Because we’re armed with the strategic, tactical, and historical knowledge of every major bubble that has ever occurred. From the Tulip Mania of 1637 to the Housing Crisis of 2008 and the current market conditions - we’re prepared.
The Enhanced Investor Weekly Macro
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