Monthly Archives: October 2017

Stock market edges higher to book another round of records

All three major stock indexes eked out gains to close at a record for a second session in a row Wednesday, but trading was subdued as investors searched for catalysts that could breathe new life into the rally.

The S&P 500 SPX, +0.08% added 1.89 points to finish at 2,498.37, which was also its intraday high. Energy and consumer discretionary shares led the gains while real estate and health care were big losers.

The U.S. stock market is exhibiting positive short- and long-term momentum, and breadth has expanded enough to lift the S&P 500 to a new all-time high, said Katie Stockton, chief technical strategist at BTIG Research.

Short-term overbought conditions have returned for the S&P 500, but they tend to be managed well when associated with breakouts, which are abundant, Stockton said.

The Dow Jones Industrial Average DJIA, +0.18% edged up 39.32 points, or 0.2%, to end at 22,158.18 while the Nasdaq Composite Index COMP, +0.09% rose 5.91 points to close at 6,460.19.

Stocks spent most of the session flipping between small gains and losses before extending gains into the closing bell. Analysts continue to warn that stocks are overdue for a pullback.

Markets are fully valued now, so earnings will need to catch up to prices. Until the next earnings season begins, we would not be surprised to see sideways moves or a time correction, said Maris Ogg, president at Tower Bridge Advisors.

We could also see a pullback between now than then if there is a catalyst that would spook investors, Ogg said.

Economic news: The producer-price index rose 0.2% in August, mostly thanks to higher gas prices. Core PPI also rose 0.2%, though the 12-month change remains unchanged at 1.9%. The closely watched inflation report is due on Thursday.

See: MarketWatchs economic calendar

Stock movers: Shares of Apple Inc. AAPL, -0.75% slipped 0.8%. The tech giant on Tuesday revealed its new lineup of gadgets, but the much anticipated new flagship iPhone X wont be delivered until November.

Read: Delayed iPhone X launch pressures Apple stock

Centene Corp. CNC, +8.01% climbed 8% after the health insurer said late Tuesday it has signed an agreement in which Fidelis Care will become Centenes health plan in the state of New York.

SeaDrill Ltd. SDRL, +20.24% surged 20% after the offshore driller said late Tuesday it has filed for bankruptcy protection and agreed to a major restructuring plan with its senior lenders.

Western Digital Corp. WDC, -3.42% dropped 3.4% after losing out on a Toshiba Corp. 6502, -2.42% deal. Toshiba said it had picked a consortium led by Bain Capital, instead of Western Digital, to buy its chip business for more than $18 billion.

Nordstrom Inc. JWN, +5.97% rallied 6% after a report late Tuesday that the retailer is taking steps to go private.

Other markets: Oil prices advanced, with the U.S. crude benchmark CLV7, -0.14% rising more than 2%. The gain came after reports that the Organization of the Petroleum Exporting Countries is considering adding more non-cartel members to its output deal. In addition, the International Energy Agency said there are signs the oil market is tightening.

Gold prices GCZ7, -0.18% fell while the greenback strengthened, with the ICE Dollar Index DXY, +0.05% gaining 0.6%.

Stocks in Asia closed mixed, while European indexes were mostly higher even as U.K. stocks slid.

Sara Sjolin contributed to this article.

Economy Looks Like Early Stages Of An Economic Boom

As I said on Friday, people continue to look for what could bust the economy from here, and are missing out on what looks like the early stages of a boom.

We constantly hear about how the fundamentals don’t support the move in stocks.  Yet, we’ve looked at plenty of fundamental reasons to believe that view (the gloom view) just doesn’t match the facts.

Remember, the two primary sources that carry the megaphone to feed the public’s appetite for market information both live in economic depression, relative to the pre-crisis days.  That’s 1) traditional media, and 2) Wall Street.

As we know, the traditional media business, has been made more and more obsolete. And both the media, and Wall Street, continue to suffer from what I call "bubble bias."  Not the bubble of excess, but the bubble surrounding them that prevents them from understanding the real world and the real economy.

As I’ve said before, the Wall Street bubble for a very long time was a fat and happy one. But the for the past ten years, they came to the realization that Wall Street cash cow wasn’t going to return to the glory days.  And their buddies weren’t getting their jobs back.  And they’ve had market and economic crash goggles on ever since. Every data point they look at, every news item they see, every chart they study, seems to be viewed through the lens of "crash goggles." Their bubble has been and continues to be dark.

Also, when we hear all of the messaging, we have to remember that many of the "veterans" on the trading and the news desks have no career or real-world experience prior to the great recession.  Those in the low to mid 30s only know the horrors of the financial crisis and the global central bank sponsored economic world that we continue to live in today. What is viewed as a black swan event for the average person, is viewed as a high probability event for them And why shouldn’t it?  They’ve seen the near collapse of the global economy and all of the calamity that has followed. Everything else looks quite possible!

Still, as I’ve said, if you awoke today from a decade-long slumber, and I told you that unemployment was under 5%, inflation was ultra-low, gas was $2.60, mortgage rates were under 4%, you could finance a new car for 2% and the stock market was at record highs, you would probably say, 1) that makes sense (for stocks), and 2) things must be going really well!  Add to that, what we discussed on Friday:  household net worth is at record highs, credit growth is at record highs and credit worthiness is at record highs.

We had nearly all of the same conditions a year ago.  And I wrote precisely the same thing in one of my August Pro Perspective pieces.  Stocks are up 17% since.

day trading futures

Citigroup bond analyst Murali Ganti and team consider the impact of Valeant Pharmaceuticals’ (VRX) statement regarding its attempt to modify its bond covenants…

Kris Tripplaar/Sipa USA

On 03/30/16, Valeant launched its Credit Agreement amendment process to extend the filing deadlines for filing its FY 2015 10-K to 05/31/16 from 04/29/16 and its 1Q 2016 10-Q to 07/31/16. Along with the filing extensions, the company is also looking to waive the cross-default language related to Valeants bond indentures for not filing its FY 2015 10-K by 03/15/16 (the deadline for filing per the bond indentures). Furthermore, Valeant is also looking to amend its Minimum Interest Coverage Ratio Covenant, which was set to step up to 3.00x from 2.25x with the start of 2Q 2016, as well as to adjust its definition of Consolidated EBITDA to increase the amount of permitted add-backs related to a number of items such as restructuring expenses, transaction expenses and debt amendment fees…

day trading futures: Achillion Pharmaceuticals Inc.(ACHN)

Advisors’ Opinion:

  • [By Ben Levisohn]

    We updated our annual U.S. Hep C survey in early July, in order to gauge the future for Gilead, AbbVie/Enanta Pharmaceuticals (ENTA), Merck, and J&J/Achillion Pharmaceuticals (ACHN). In conjunction with script trends, physicians indicate that the market for treatment-eligible, easily accessible Hep C patients is shrinking, but that Gilead’s share of the shrinking pie is continuing to grow. With no end to script declines in sight, we are left wondering where the Hep C will bottom…

day trading futures: Franklin Resources, Inc.(BEN)

Advisors’ Opinion:

  • [By Craig Jones]

    Jim Strugger recommended on Bloomberg Markets a long position in Franklin Resources, Inc. (NYSE: BEN).

    He said the company is in the assets management sector and he added that the market is probably getting into the period of higher dispersion, which is usually favorable for active managers. Speaking on the positive catalysts for the stock, Strugger said Franklin Resources is going to benefit from the cash repatriation.


    Franklin Resources (BEN) : “I’d rather see you in Morgan Stanley (MS) or E*TRADE Financial (ETFC) .”

    Kinder Morgan (KMI) : “They are OK now, but there are better ones.”

day trading futures: Gap, Inc. (The)(GPS)

Advisors’ Opinion:

  • [By Peter Graham]

    A long term performance chart shows shares of Lululemon Athletica basically range boundwhile other players in the athletic apparel or yoga space like large capsUnder Armour Inc (NYSE: UA), Nike Inc (NYSE: NKE) and The Gap Inc (NYSE: GPS) have performed better except for the latter:


    Wall Street ended Friday with slight losses after a string of earnings disappointments from the retail sector with players such as Gap (GPS) , Abercrombie & Fitch (ANF) , and Footlocker (FL) posting results. 

  • [By Leo Sun]

    Gap (NYSE:GPS), the parent company of Old Navy, Gap, and Banana Republic, trades at 14 times earnings. It pays a forward yield of 3.9%, which is supported by a payout ratio of 55%. The company has hiked that dividend annually for seven straight years.

  • [By Peter Graham]

    A long term performance chart shows shares of athletic apparel or yoga space playersLululemon Athletica, Under Armour Inc (NYSE: UA) and The Gap Inc (NYSE: GPS) now underperforming while Nike Inc (NYSE: NKE) peaked in late 2015 and has drifted lower since then:

day trading futures: Methanex Corporation(MEOH)

Advisors’ Opinion:

  • [By Jim Robertson]

    Back in February of last year, we suggested Methanex Corporation (MEOH), which ended up providing us with some pretty good gains in a fairly short amount of time, and based on what’s happening with the stock technically right now, it could be another gainer over the next several days to few weeks.

Why The Dexcom Deal Is Big For Fitbit

Several days ago Fitbit (FIT) and Dexcom (DXCM) announced they are partnering to develop CGM (continuous glucose monitoring) solutions for people living with diabetes. The first product will incorporate DXCM’s CGM data and bridge it with FIT’s new Ionic watch. Users of Android and iOS devices would be able to see “activity and glucose levels, right on their wrist.”

So what’s the big deal?

Th truth is that it isn’t such a big deal for DXCM. The company already sells and markets a similar product for both Android and iOS devices.

However, please note that the Ionic will have four days of battery life, which could be considered mission critical in such medical applications. Apple’s (AAPL) new iWatch 3 on the other hand clams to have up to 18 hours of battery life.

Also, the Ionic smartwatch has a built-in GPS tracker, an optical heart rate sensor, an accelerometer and a blood oxygen sensor. So perhaps DXCM and FIT might have more plans for medical Apps in the future. The AAPL iWatch does not have all those amenities, and to get the GPS tracker you have to fork out about $30 more.

Like I said in a previous article (please consider: Buy Fitbit: The Dust Has Settled), I do not expect FIT to even come close to sell as many smartwatches as Apple. In fact probably not even as many as Samsung (OTC:SSNLF). But the issue is that it doesn’t need to sell that many.

Please remember that FIT is only a $1.5B company. It doesn’t have the market cap of AAPL. All FIT has to do is to sell perhaps as much as $300M in watches for the entire year, and its stock will catch fire.

The Ionic is a catalyst within a catalyst

There are other issues besides the Ionic being a catalyst for a much higher FIT stock price. As I said in my previous article, even without the Ionic watch, FIT is on track to grow for three consecutive quarters. That in itself marks an upward growth trend. In other words, even without the Ionic, FIT is gro wing.

The Ionic will be bought by people who take their workouts serious and want to be connected to FIT’s fitness ecosystem. By virtue of the fact that FIT is the number one fitness gadget company in the world, the Ionic by itself should sell well.

However, when one looks at the additional possibilities, then the Ionic goes beyond the sports and fitness market. The medical wearables space is perhaps even larger than FIT’s fitness space.

The wearable space was initially about tracking activity, counting calories, and sharing activities with friends. This is something FIT has pioneered and does well.

However the next phase will be tracking and monitoring the body and providing feedback. At the current time the technology is not that reliable enough, or integration is only partially at the level needed to make wearables a mass market item.

But given time, the wearables space will be the next big thing, even if we do not realize it now. A host of new censors, interfaces and the networking required to make wearables run together is only starting to come of age.

Everyone has heard of IoT (internet of things). However it’s not yet clear what this is, because it is still being defined. Wearables in my mind are a subset of IoT. Small gadgets that will be worn by us 24/7, that will provide us with information not just about our workout, but also about our health and body.

So within the IoT space, health wearables are the next big thing. And that’s where the Ionic comes in. The Ionic is a catalyst within a catalyst, because not only will it provide FIT with an additional product that was missing from its product arsenal but it’s also a wearable that should sell well, being part of the medical wearables space.

According to ABI Research (link here), the healthcare wearables market alone by 2022 will exceed $10B a year. Market research firm Tractica (same link) predicts that the smart clothing and bo dy sensor market will reach $19B by 2022.

Granted there will be many players. However FIT is right in the middle of this new space, be it medical, health, or fitness wearables.

Why is this a big deal for Fitbit

The big deal from an investment perspective is not the Ionic itself (but it is a catalyst), but the fact that FIT is only a $1.5B market cap company still trading at less that 1X revenue.

Like I said, FIT is on track to grow for three consecutive quarters, and that’s even before the Ionic begins selling. If FIT plays its cards right and can continue to execute over the next several quarters, then revenue and EPS might surprise even the most optimistic analysts.

This because the Ionic adds a whole new dimension to FIT’s revenue arsenal, that, as demonstrated by the deal with DXCM, is not confined to fitness. Health monitoring and medical applications are coming of age, and companies that make devices like FIT are in the center of it all.

And while the Apple Watch 3 will barely make a dent in AAPL’s revenue and EPS, if Ionic’s revenue proves to be several hundred million, it will do wonders for FIT’s stock.

I have no estimates of what FIT’s revenue and EPS might be over the next several quarters. My thinking is that FIT is a small enough market cap company at the moment that if only partially successful can produce above average returns over the next several quarters (if not years).

So given that we are talking about a $1.5B market cap stock, if the Ionic does even slightly well over the next two quarters, I think FIT’s stock can double from current levels.

This despite the fact that FIT has fallen to the No. 3 wearables company in the world, from number 1 the same period last year.


Simply put, the wearables space is big and getting bigger, and all FIT has to do is get a small piece.

Disclosure: I am/we are long FIT.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

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