Monday Delivered the Long-Awaited Test of the October Lows

Excerpt from Louis Navellier's Marketmail - 11/13/2018

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Monday was a holiday throughout much of the land, and Wall Street had relatively low volume, but the market finally tested its October lows Monday, with the Dow falling 602 points. The good news is that we didn’t have the kind of machine selling we had in October. This selloff was much simpler. An Apple supplier issued lower guidance, so sellers shot Apple, but big tech stocks will continue to have strong sales and earnings. Basically, everyone is over-reacting. Many energy and retail stocks were up, after being hit on previous days, because good stocks bounce. We’re still in a “washing machine” cycle. Some of the decline is related to lingering election uncertainty in several recounts, but I believe NVIDIA’s earnings announcement Thursday could boost the tech sector, along with announcements of more share buybacks

Normally, as earnings announcement season winds down, the last few S&P 500 sales and earnings reports tend to show sub-par results. However, the last few corporate third-quarter sales and earnings announcements have gotten stronger. Amazingly, with over 85% of the S&P 500's earnings announced, average sales growth has accelerated to 10.3% and average earnings growth is now running at a stunning +28.9%! Many companies are lowering their sales guidance, but I suspect they are really just trying to lower analyst expectations so that they can surprise us again during the next announcement season.

Naturally, the big news last week was Tuesday's mid-term elections and, for once, the pollsters were correct. The GOP picked up some seats in the Senate (two of which are being contested in recounts), while the Democrats gained 35 to 40 seats in the House of Representatives and some Governorships. 

I'll have more to say about the election later, but other than infrastructure spending and maybe more drug pricing reforms, I don't expect a lot of meaningful progress out of Congress over the next year or two.

In This Issue of Marketmail (Click Here to Read)

The bond market is telling us there is no recession in sight, says Bryan Perry, while the oil price says inflation is no threat, either. Gary Alexander hails “gridlock” returning to Washington, along with free trade after the fall of the Berlin Wall, promoting global growth since 1989. Ivan Martchev sees China’s slow growth as the catalyst in oil’s recent price dip, as Beijing is running out of policy tools to prevent a steep recession there. Jason Bodner sees new sectors leading the emergence from October’s market turbulence, while I will expand on the subjects of political gridlock and the long-term outlook for lower inflation.

Income Mail:  

A Downbeat Bond Market is Heeding Upbeat Fed Rhetoric

           By Bryan Perry

Low Oil Prices Might be the Inflation Hedge the Bull Market Needs


Growth Mail:  

The Stock Market Endorses a Return to “Gridlock” in Washington, DC

           By Gary Alexander

The Wall to End All Walls Fell November 10, 1989


Global Mail:

Oil Breaking $60 is Likely Due to China

           By Ivan Martchev

Is This China’s Tipping Point?


Sector Spotlight:

Rebirth Follows Devastation: Always Has, Always Will

           By Jason Bodner

Some New Sector Leaders Begin to Emerge


A Look Ahead:

Markets Like Mid-Term Elections and Gridlock

           By Louis Navellier

Inflation Statistics Wax and Wane but the Trend is Flat

Election Results May Bring Certainty Back to a Nervous Market

Excerpt from Louis Navellier's Marketmail - 11/6/2018

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The S&P 500 gained 2.42% last week in a recovery rally. The good news is that there has been (1) wave after wave of positive third-quarter earnings announcements, (2) more big stock buy-backs, and (3) mergers like Electro Scientific (ESIO) accepting a $30 per share buyout offer from MKS Instruments (MKSI), which was announced in conjunction with ESIO’s better-than-expected sales and earnings announcement. 

Navellier & Associates owns ESIO, and MKSI, in managed accounts and a sub-advised mutual fund. Louis Navellier and his family own ESIO, and MKSI via the sub-advised mutual.

This is likely the first of many acquisitions to be announced in the upcoming weeks, now that many top-quality stocks are trading at bargain prices, with historically low price/earnings ratios. Companies often postpone their dividend increases, stock buy-backs, and acquisition announcements until their quarterly earnings are released; so, as this earnings season winds down, I expect to see more positive news!

I for one am certainly happy that October is over, since it was the worst month since February 2009 for most stock market indices. Fortunately, November is a seasonally strong month. The Dow Industrials have risen an average of 1.35% and 1.87% in the past 50 and 20 years, respectively, according to Bespoke Investment Group, making November the third best month in both time frames. An early “January Effect,” boosting small capitalization stocks, typically commences in November, usually around Thanksgiving,

I also expect to see the stock market celebrate the fact that the mid-term elections will mercifully be over tonight. No matter the outcome, this day removes much of the uncertainty that has been distracting many investors. I live in two swing states, Florida and Nevada, and I have been shocked by the long lines for early voting. Since there appears to be record turnout, we may see some surprising results tonight!

In This Issue of Marketmail (Click Here to Read)

Bryan Perry sees a rise in yields being the biggest impediment to a market rise in the next two months, while Jason Bodner sees the trade resolution as the market’s main concern and biggest key to recovery. Ivan Martchev agrees, with a dollar breakout giving the trade impasse a new urgency. Gary Alexander just returned from New Orleans, where the bears roared once again, but he brings some historical parallels which could offer an election boost. Then I’ll close with some market trading insights and economic data.

Income Mail:  

Bond Yields Rise with a Spike in New Hires

           By Bryan Perry

Rising Yields Pose Biggest Threat to Year-end Rally


Growth Mail:  

The New Orleans Bears Growl Yet Again

           By Gary Alexander

The Yin and Yang of Gold and Stocks in the 2016 & 2018 Elections


Global Mail:

The U.S. Dollar Index Breaks Out

           By Ivan Martchev

The Trade-Weighted Dollar Is Much Stronger


Sector Spotlight:

Market Lows Seem Lower than the Market Highs Seem High

           By Jason Bodner

Trade Resolution is Now the Market’s Main Concern


A Look Ahead:

Arbitrage Traders are Targeting Tech Stocks

           By Louis Navellier 

Economic Indicators Turn Positive Just Before Election Week


Written by:  Rich Farr, Chief Market Strategist for Bluestone Capital Management and Jim McGovern, Market Strategist for Bluestone Capital Management 

Bluestone Capital Management is the Sub-Advisor to the Cavalier Multi Strategy Fund



* Wages slowed a bit in September, and now Atlanta Fed sees Q4 GDP at 2.6%.

* With wages, GDP, and even inflation slowing, how can Fed hike?

* Bolsonaro wins in Brazil.  But the Bovespa may already have that priced in.

* Q3 2018 Earnings are coming in strong, at $162 annual run-rate.

* Therefore, our 2019 $165 Earnings Estimate looks low.  We still like our 3,050 YE target!


The Bureau of Economic Analysis reported that Personal Income increased for the 31stconsecutive month, up +$35.7 billion to a record high $17.726 trillion (SAAR) in September.  This is an increase of +0.20% M/M; however, income slowed to +4.43% Y/Y (versus +4.73% Y/Y prior).   Moreover, Disposable Personal Income (Income less Taxes) increased for the 34thconsecutive month, up +$29.2 billion (+0.19% M/M and +4.93% Y/Y vs. +5.25% prior).  Note that Personal Income taxes increased +0.32% M/M and +0.81% Y/Y to $2.08 trillion (+0.97% Y/Y prior).


Personal Spending (PCE) increased for the seventh consecutive month, up +$53.0 billion to a record high $14.124 trillion in September.  Thus, spending increased +0.38% M/M and +5.04% Y/Y (+5.49% Y/Y prior).


In September, wages and salaries increased for the 31st consecutive month, up +0.22% M/M and +4.60% Y/Y (+4.79% Y/Y prior).  Private wages increased +0.20% M/M but slowed to +5.01% Y/Y (+5.26% Y/Y prior) and Government wages increased +0.33% M/M and +2.29% Y/Y (+2.34% Y/Y prior).  Note that Supplements to Wages & Salaries increased +0.22% M/M and +3.26% Y/Y (+3.34% prior).


In September, Rental Income increased +0.94% M/M and +5.03% Y/Y (versus +4.93% prior) and Interest & Dividend Income increased +0.14% M/M and slowed to +5.29% Y/Y (versus +5.99% prior), despite the recent FOMC rate hikes.   However, Proprietors’ Income declined -0.82% M/M and slowed to +3.83% Y/Y (+5.21% prior).


Since Disposable Income lagged Personal Outlays in dollar terms in September, Personal Savings declined for the seventh consecutive month, down -$28.7 billion and the “Savings Rate” fell to 6.23% (versus 6.43% prior).   As we’ve shown in prior notes, the “savings rate” is a plugged number and actually isn’t savings at all.  It is defined as Income minus Spending minus Taxes.  But “Income” isn’t exactly income, as it includes government transfer payments such as Medicare, Medicaid, Unemployment Benefits, and Social Security.  When you factor in that individuals are receiving more in government benefits than they are paying into those programs, it becomes clear that savings isn’t actually savings; rather the government is running up the debt on our behalf.  This debt is essentially an off-balance sheet item.  When we add it back, we find that the true “savings rate” is actually -3.35% (far off from the +6.23% reported number)!


The BEA also reported that the Fed’s preferred inflation metric (Core PCE Deflator) increased for the 18th consecutive month, up +0.015% M/M in September.  Moreover, Core PCE increased +1.97% Y/Y (versus +1.96% Y/Y prior).  Nonetheless, Core PCE is still within 3 basis points of the Fed’s target of 2%.  Meanwhile, the headline PCE deflator increased +0.12% M/M but slowed to +1.99% Y/Y (+2.22% Y/Y previously), which is the slowest pace since February.

We have to ask the question, with commodities prices down, with CPI having peaked two months ago, with slowing GDP and with headline PCE ticking lower, how can the Fed hike at this point?


As of October 26th, 238 of the S&P 500 Index companies have reported Q3 earnings, of which 184 have beaten earnings (77.31%) and only 36 have missed (15.13%) earnings estimates.  Moreover, 59% of companies have also beaten on the top line.  Early on, the earnings beats have been led by Technology (96.43%) and Health Care (82.76%).  On the other hand, only 50% of Energy companies and 55.6% of Materials companies have beaten Q3 estimates.   It is now nearly half way through Q2 earnings season and all signs point to another record quarter.


Due to the stellar numbers in Q3, over the few months Wall Street analysts have increased their 2018 Q3 EPS estimates by +$0.34/share to $40.52.  At the current pace, Q3 earnings would be record earnings and up +29.3% Y/Y!  Nonetheless, the street lowered their full year 2018 EPS estimates by -$0.41/share to $157.38 and their 2019 EPS estimates by -$0.64/share to $176.36.  This implies EPS growth of +26.4% Y/Y and +12.1% Y/Y in 2018 and 2019, respectively.  Although our outlook is still below those lofty forecasts, we still see strong EPS growth for 2018 and 2019.  With margin pressures likely having peaked (wages slowed and commodities prices are falling), we think our 3050 year end S&P 500 target looks quite attainable still.

Source: Bloomberg


Today, the Dallas Federal Reserve reported that the Current General Business Activity Index improved for the first time in four months, up +1.3 points to +29.4 in the month of October.  This marks the 25th consecutive month of growth in the region.   In the month, there were notable improvements in Current New Orders (+42 points to +18.9), Unfilled Orders (+4.1 points to +5.9), Delivery Time (+3.4 points to +7.5), and Number of Employees (+6.2 points to +23.9).  Furthermore, there were increases in Prices for Raw Materials (+10.0 points to +54.4) and Prices Received for Finished Goods (+3.9 points to +17.5).  However, there were slowdowns in Production, Shipments, Finished Inventories, and Average Workweek.  As for the outlook, manufacturers had a slightly less positive business outlook, as the Forecast fell -2.4 points to +35.6.

Source: Bloomberg


The Bovespa Index is up meaningfully today and closing in on its all-time high following the much anticipated presidential win by Jair Bolsonaro.  Mr. Bolsonaro brings hope for economic reforms, including privatizations, reduced corruption, anti-crime, and even wants to start mining the rain forest to increase economic growth potential.

From a macro perspective, we like the direct Mr. Bolsonaro is heading, but now comes the execution.  There remain questions about Mr. Bolsonaro’s ability to enact pension reforms, and to turn a country around that faces tremendous debts, slowing GDP, and rising inflation.  There are also questions about Mr. Bolsonaro’s military / autocratic leadership tendencies.  It doesn’t help that Mr. Bolsonaro’s politician son, Eduardo Bolsonaro, threatened recently that they could shut down the Brazilian Supreme Court.

Our take:  With the Bovespa nearing an all-time high, we’ll take a wait and see approach to Bolsonaro.  We tend to think this could be a ‘sell the news’ moment despite the potential for political and economic improvement.   We want to see the execution of free market principals first, and a return to stronger growth, before we would want to jump in to Brazil.


According to the Ministry of Economy, Trade and Industry, Japan’s Retail Sales declined for the first time in four months, down -0.19% M/M on a seasonally-adjusted basis in September (+0.88% prior).  Moreover, retail sales slowed to +2.10% Y/Y (vs. +2.73% Y/Y previously).  Retail sales slowed on a Y/Y basis because Total Commercial Sales slowed to +0.99% Y/Y (+4.16% Y/Y prior) and Wholesale Sales slowed to +0.51% Y/Y (+4.81% Y/Y prior).  On the other hand, Large-Scale Retailers sales increased +1.12% Y/Y (versus +0.61% Y/Y prior).

Source: Bloomberg


U.S. GDP:  Our GDP model sees 3%+ Real GDP growth through Q1 2019, but as higher oil and interest rates flow through the system, our model sees slower growth thereafter (Note that the Atlanta Fed’s preliminary estimate for Q4 GDP came in at 2.6% today).   Our model doesn’t factor in the stimulus from the recent tax cut, so the reversal in 2019 could be more pronounced than our model appreciates (it is presumed that 2018 will be better than our model due to the tax cut, whereas the delta for 2019 would be worse than our model predicts).

U.S. Inflation:  U.S. inflation appears to have hit a peak two months ago and with oil prices down and the dollar index up, we believe inflation has peaked (for now).   

U.S. Federal Reserve:  The Fed is signaling that rates will be 100 bps higher by the end of 2019, and with inflation peaking, they’re wrong.   We don’t even think they should hike in December at this point.  We believe the U.S. Dollar will continue to strengthen given interest rate parity and overall relative economic strength in the U.S., and this has now become a headwind for inflation (and potentially growth).  We think a Fed pause is coming faster than the market currently appreciates (but a December hike is still on the table for now).

U.S. Treasuries:  Although recent inflation data has been cooling, the job market remains tight and Real GDP trending is still trending well above +3.0%.  With that in mind, we still believe the yield on the 10-year U.S. Treasury will trend higher.  We expect to see yields approach 3.50% by year end 2018, particularly if the market sniffs out a coming Fed pause (as that’s ultimately reflationary). 

U.S. Equities and Earnings:  S&P 500 operating earnings are rising materially, but the question remains, will the market put a 20 P/E multiple on forward earnings?  We think a 20 forward multiple is aggressive, but 18.5 may not be.   Our SPX target is for an 18.5x P/E on 2019 forward earnings of $165, bringing our 2018 SPX target to 3,050.  We prefer financials given expectations for economic growth and an improving (steepening) yield curve.   We also have a positive bias on the Technology and Health Care sectors.

Argentina:  The macro looks abysmal in Argentina, and they have IMF involvement, but there is a silver lining here in that Q2 GDP was so bad that it might be hard for Q3 to be negative!  Overall, Argentina’s economic condition appears to have weakened in 2018.   Inflation is at a lofty 40.5%, Industrial Production is down -5.6% Y/Y, Consumer Confidence has deteriorated since January, the Economic Activity Index collapsed in May, and Unemployment jumped to 9.6% in Q2 (7.2% in Q4 2017).

Brazil:  See above.

Canada: Canada’s housing market has been weak, as building starts and permits have gone negative, Retail Sales slipped in August, and home prices are slowing (Toronto area is now negative).  Note that Canada’s monthly Real GDP has been in a slowing trend since October (3.5% in October, but now down to 2.4%), while monthly Nominal GDP has slowed from +6.5% in June 2017 to +4.1% Y/Y in Q2 … remember, nominal pays the bills.

Mexico: Overall, Mexico’s macro data looks to be improving, but inflation is also turning up.  GDP is up 2.6% Y/Y, Retail Sales accelerated to +4.2% Y/Y, PMI’s have been steady, and Consumer Confidence jumped in Q3.

Venezuela: Remains uninvestable.


United Kingdom:  If you look at the GBP, you’d think BREXIT is a major economic problem.  However, when you look at the macro data, you don’t see any meaningful deterioration.  Inflation has been in a slowing trend in 2018, unemployment has been declining, wages have been turning up, and PMI’s have been steady.   Even the big macro risk, housing, hasn’t shown much weakness.  In fact, home prices improved slightly in August on a Y/Y basis.

European Union:  Although Unemployment continues to trend lower and Retail Sales are now up +1.8% Y/Y, Economic Sentiment is turning lower, Industrial Production is down -0.1% Y/Y, and PMI’s have turned back from recent highs, and the political situation has gotten so bad that Merkel isn’t going to run again.  The events in Italy foreshadow possible macro risks for Europe, as monetary accommodation is removed.  We still believe Europe is uninvestible.   

European Central Banks:  The ECB is slowly removing accommodation and has reiterated its claim that bond buying is over in December.  But Mario Draghi hasn’t given a timeline for raising rates and the recent decline in CPI will give them even further pause for doing so

Eastern Europe: As we saw earlier in the year with Italy, nations with high debt levels can rapidly become front-burner macro items.  The same can be said for Eastern Europe, given high Debt/GDP levels, most notably Cyprus (104%), Croatia (88%, up from 66% at the end of 2013), and Slovenia (81%).   Yet, economic data have been robust this year across most of Eastern Europe.

South Africa:  We remain highly negative on South Africa, but we have noticed recent efforts by the ANF to walk back some of the rhetoric.   The ANF is now trying to reengage with foreign capital and wants to liberalize some of the rules around mining investment.   Politics aside, the macro picture is getting bleaker by the day as Business Confidence is rolling over, GDP is negative, Inflation has turned up, Retail Sales are barely positive, and PMI’s are bouncing around the ‘50’ level.  None of this will help unemployment (27.2% in Q2).   In our view, the mere risk of having assets appropriated will grind foreign capital commitments and new business investment to a screeching halt, and more time is going to need to pass in order for foreign investors to feel any degree of confidence.  Our best guess is that more downside exists for South Africa’s economy and we believe the currency and equity market will suffer as a result.

Turkey:  Remains uninvestable.


Australia:  The Australian data remain mixed but we have serious concerns about the decline in building approvals and new home loans.  So far, the Unemployment Rate appears to be ticking lower (to +5.0% in September), Real GDP accelerated to +3.8% Y/Y in August, Exports are up +15.3% Y/Y, Wages are up +2.1% Y/Y, Retail Sales accelerated to +2.9% Y/Y in July, and Consumer Sentiment has ticked slightly higher recently.  However, consumer credit remains elevated and the value and number of home loan approvals and permits have turned negative, which is a bad sign as home prices have turned negative as well.  We remain neutral on Australia at this time but increased concerns about China could push us into the negative.

China:   It’s officially a trade war and Jack Ma thinks we’ve got 20 more years to go.  We have the under on 20 years, but the over on 1 year as China isn’t even interested in meeting with the Trump Administration at this time (although there is a token Xi/Trump meeting on the calendar).  China claims it’s going to pull out all the stops, is going to ‘encourage’ institutions to buy stocks, and there is talk of cutting taxes.   We doubt any of this will work to plug the large liability problem in China’s banking system.

We continue to believe that trade talks aren’t going to get better for quite some time and China will use every tool in its arsenal, which includes Renminbi depreciation.  It is notable that China is already working to stimulate its banking sector by lowering reserve requirements and encouraging banks to do “debt for equity’ swaps.  Note that PMI’s continue to indicate slow growth, Industrial Production is slowing, and now China may have an inflation problem.

India:  Indian economic activity appears strong, which runs counter to worries about shadow banking issues.  Commercial Credit accelerated to +14.4% Y/Y in October, Industrial production has been strong, M3 money growth has been steady at 10%, and PMI’s still show growth (albeit slower).  We are watching to see if any deterioration happens, but so far the only meaningful deterioration was confined to a drop in exports in September.

Indonesia:  Indonesia had gone four years without raising rates, but now rates have been hiked +125bps since Mid-April.   Indonesia’s GDP and Private Consumption Expenditures are up over +5% Y/Y, Consumer Confidence has been stable, Manufacturing PMI had been stable in the 49-51 range for a year and came in at 51.9 in August, Industrial Production rebounded +9.0% Y/Y.  However, Retail Sales slowed slightly to +2.8% Y/Y and Exports slowed to +4.1%.  If there’s one emerging market that we’d be inclined to be bullish, this would be it, but we’d need to see the free-fall in the currency come to an end first.  

Japan:  Overall, the economic data have been mixed but we are encouraged by Prime Minister Abe’s promise to fix social security, immigration, and workforce participation.   We are slowly becoming positively biased.

Russia: As we stated recently, the sanctions are beginning to have an impact on Russia.  And it is never a good thing when officials talk about their ability to cushion “crashes”.   We find Russia uninvestible at this time.

South Korea:  Overall, the economic data have been mixed.  While the world looks forward to peace on the Korean Peninsula, we are keeping an eye on trade data into China, which increased +20.8% Y/Y in August.   Also, GDP increased +2.8% Y/Y in Q2, Income is up +4.2% Y/Y, Industrial Production increased +0.9% Y/Y, and Retail Sales accelerated to +7.4% Y/Y.  Conversely, the Unemployment Rate increased to 4.2% in August and the Nikkei South Korea Manufacturing PMI has been below ‘50’ for six months in a row.


Source: Bloomberg


Source: Bloomberg



Source: Bloomberg



Source: Bloomberg
















The October Washout is Mostly Robo-Driven Algorithm-Based Selling

Excerpt from Louis Navellier's Marketmail - 10/30/2018

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The best way to explain this October’s market action is that the “tail has been wagging the dog.” Due to computerized trading, index arbitrage and ETFs are becoming less liquid due to widening discounts and premiums to their net asset value (NAV). My hope is that economic fundamentals and wave after wave of positive earnings announcements will break that spell and disrupt recent computer index arbitrage selling.

Most robo-traders aren’t looking at the fundamentals. They have programmed their computers to sell on key words in various news releases. Thankfully, trading volume was relatively light early last week, but trading volume rose steadily each day. Since Friday’s sell-off had some high trading volume, I saw some “light at the end of the end of the end of the tunnel,” hoping that Friday might be a capitulation day.

I recorded three podcasts last week. (Here is a link to my Friday podcast.) As I have repeatedly said on many of my podcasts, it is very odd for this selling pressure to be occurring during a bullish quarterly earnings announcement season, especially when the average stock in the S&P 500 (so far) has posted 8.3% annual sales growth and 25.3% annual earnings growth. I was especially happy to see how Boeing (BA) and Twitter(TWTR) reacted after posting better-than-expected sales and earnings while providing positive guidance, and I was especially excited about the huge (86.1%) third-quarter earnings surprise ($5.75 per share vs. a consensus estimate of $3.09) for I am not worried that its sales were slightly below some analyst estimates. Amazon remains a great buying opportunity on dips.

Navellier & Associates holds AMZN, BA & TWTR in managed accounts and a sub-advised mutual fund. Louis Navellier & his family own AMZN, BA & TWTR via the sub-advised mutual fund and holds AMZN in a separate account.

In This Issue of Marketmail (Click Here to Read)

I’ll have more on last week’s market mayhem in my closing column. But first, Bryan Perry argues (with President Trump) that the Fed is out of touch with reality in their public statements, while the economic indicators tell a more positive story. Gary Alexander tells the same story, while debating a recent cover article from The Economist about their premature warnings of America’s “Next Recession.” Then, Ivan Martchev updates his junk bond indicator and then compares this October to 1974, 1929, 2008, and most notably 1987. Jason Bodner looks inside the “machine” (literally) to tell us what computers are doing to this market and how human logic will save us in the end. Then I’ll return to amplify what Jason just said.

Income Mail:  

The Stock Market Says Fed Policy is Overshooting Inflation Risks

          By Bryan Perry

The Numbers Still Support a Healthy Stock Market


Growth Mail:  

An October to Remember – or Forget?

           By Gary Alexander

The Economist Predicts “The Next Recession” (When None is in Sight)


Global Mail:

Junk Bonds Still “A-Okay”

           By Ivan Martchev

The 1987 Comparison


Sector Spotlight:

Computers Made This “An October for the Ages”

           By Jason Bodner

This Market is Now Seriously Oversold


A Look Ahead:

When Computers Do Their Thing – Beware of Trading with Them

           By Louis Navellier 

The Bond Market is More Orderly Than Stocks Right Now

The Market Passes its First Test of the October 11-12 Lows

Excerpt from Louis Navellier's Marketmail - 10/23/2018

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On Friday, the Russell 2000 essentially retested its October 12th intraday low on light trading volume. The NASDAQ Composite might also retest its October 12th intraday in the upcoming days, but again, as long as trading volume remains light, we should not worry – as long as there is no panic selling. Although the broader stock market may still try to retest its intraday lows, companies like Netflix, which have already announced better-than-expected third-quarter results, are not expected to retest their recent lows.

The selling pressure from index funds during the first few trading days in October is largely to blame for the recent market chaos. Specifically, the arbitrage folks were selling the Russell 2000 and buying the S&P 500, which temporarily caused small capitalization stocks to falter. However, despite Friday’s retest for the Russell 2000, I want to assure investors that small capitalization stocks can also “melt up” in the upcoming weeks as wave after wave of positive third-quarter earnings and sales results are announced.

Special Announcement: Our ETF Portfolio is Rated #1 for 3-5 Years by Morningstar

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In This Issue of Marketmail (Click Here to Read)

Bryan Perry says the economy and the Fed are sending mixed signals, so the market seems a bit manic-depressive this October, but clarity should emerge after the elections. Gary Alexander agrees that we have to endure the tension of the next two weeks, especially the fear generated by the press coverage of the market’s inevitable down days. Ivan Martchev has some of the brightest news this week, the relatively small spread between junk bonds and Treasuries, indicating a relatively strong economy. Jason Bodner returns from a doom-and-gloom conference in Bermuda with some tonic for what ails the pessimists – a long check list of what’s going right. Then I’ll conclude with a short wrap-up of the economic outlook.

Income Mail:  

Bigtime Mixed Signals Stoke Market Volatility 

     By Bryan Perry

Mr. Market is Not Diggin’ the Fed’s Forward Plan


Growth Mail:  

The Press Loves Market Down Days but Ignores Up Days

     By Gary Alexander

GDP, Stocks, or Earnings Could Tip the Election


Global Mail:

Junk Bonds Say It’s Too Early to Fret

     By Ivan Martchev

What are Emerging Markets’ Bonds Saying?


Sector Spotlight:

The Left and Right Agree – We’re Doomed!

     By Jason Bodner

October Has Been Ugly for All Sectors (Except Two)


A Look Ahead:

President Trump “Jawbones” the Fed About Raising Rates

     By Louis Navellier

The Economic News is Mixed – Arguing for Caution in Raising Rates

October Opens with a Huge Switch from Small-Cap to Big-Cap Stocks

Excerpt from Louis Navellier's Marketmail - 10/09/2018

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We remain in a nervous “mean reversion” market, since many previously-hot small-capitalization stocks consolidated last week (after being strong in the last week of September), while big multinational stocks firmed up. Specifically, Bespoke Investment Group broke down the S&P 1500 by 10 deciles of market capitalization. The 150 largest (top 10%) rose 0.08% last week while the smallest 10% were down 3.74%.

The S&P 500 fell 0.97% last week, but the Nasdaq 100 was off 3.2% and the small-cap Russell 2000 fell 3.8%. Small-cap growth was down -4.58%. Among the sectors, Consumer Discretionary, Technology, and the new Communication Services sector were hit hard, while Energy, Financials, and Utilities rose.

I’ll cover more about the market’s “reversion to the mean” in my closing column this week, or you can hear my analysis of the market’s latest downdraft in a podcast on our home page:

In This Issue of Marketmail (Click Here to Read)

Bryan Perry opens with the good news on the economic front, along with the dangers and opportunities in the latest rise of 10-year Treasury rates above 3.2%. Then, Gary Alexander looks at Europe’s economic and banking malaise and finds they haven’t truly recovered from the 2008 financial crisis. Ivan Martchev is more concerned over the emerging market currencies, once the dollar resumes its inexorable rise, than he is over the latest U.S. bond moves. Jason Bodner covers the latest sell-off and sector swings along with a look at the media’s false narrative vs. the longer-term realities driving this bull market. Then I’ll return to cover the commodities, notably oil, and the premature release of the likely-lowball monthly job totals.

Income Mail:  

The “Too Good to Be True” Economy (According to Fed Chair Powell)

           By Bryan Perry

The Bond Market Bends on Latest High Yields


Growth Mail:  

Europe May Be Entering its Third Stagnation in a Decade

           By Gary Alexander

Why Europe Can’t Seem to Recover from 2008


Global Mail:

No Time for a Big Bond Bear

           By Ivan Martchev

U.S. Dollar Rally Soon to Accelerate


Sector Spotlight:

An Unexpected Bill Comes Due

           By Jason Bodner

The Three Main Drivers Behind This Choppy Market


A Look Ahead:

A “Mean Reversion” Pushes Commodities Up & Stocks Down

           By Louis Navellier

Can’t Anybody Around Here Count Jobs Right?

This Week Launches the Best Quarter of the Market Year

Excerpt from Louis Navellier's Marketmail - 10/02/2018

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According to research by Bespoke Investment Group, October has been the #1 stock market month in the past 20 years, and this year will likely get an added boost from strong quarterly earnings announcements. November is also a strong month (#3 of 12) and I expect the market to surge this year after the uncertainty of the mid-term election is resolved. Thanksgiving is also a seasonally strong time of year, when an early “January effect” typically begins, and finally, due to the highest consumer confidence in 18 years, I am expecting a record holiday shopping season, so it appears that we should have an excellent fourth quarter.

This is what I like to call “lock and load” time, when all investors should be fully invested.

I should add that, according to TrimTabs, $827 billion in stock buybacks have been announced so far this year. Furthermore, if stock buyback activity continues to rise in the fourth quarter, it is likely that we will reach $1 trillion in stock buybacks in 2018. The fact that the S&P 500 has not risen as much as its record earnings has caused P/E ratios to plummet, which encourages even more corporate stock buybacks. 

By reducing share totals, this aggressive stock buyback activity is significantly boosting earnings per share. The chart illustrates that the record stock buyback pace has picked up in second quarter.

To learn more about how the stock market is physically shrinking via stock buybacks and fewer listings, I recommend that you read our latest white paper, Honey, I Shrunk the Stock Market … click this link.

In This Issue of Marketmail (Click Here to Read)

In Income Mail, Bryan Perry opens with a warning about a serious European Sovereign debt meltdown threat coming from Italy this time. Next, Gary Alexander charts the history of stock market surges before and after mid-term elections, along with a tutorial on the media’s past job-market misinterpretations. Ivan Martchev turns his attention to the ongoing (and third in a series of) Argentine currency crises, and how locals and outsiders can play this crisis. Jason Bodner examines the new shuffling of the 11 S&P sectors, involving Telecoms, Infotech and Consumer Discretionary, while I cover the latest moves in crude oil.

Income Mail:  

The Bond Vigilantes and Short Sellers Take Aim at Italy’s Debt

A Tale of Two 10-Year Yields (U.S. vs. Italy)

 by Bryan Perry


Growth Mail:  

Mid-Term Election Euphoria Could Lift the Market Dramatically

The “Tragedy” of Americans Working Second Jobs…Demythologized

by Gary Alexander


Global Mail:  

Significant Emerging Markets Contagion is Very Much Possible

What to Do in a Currency Crisis

by Ivan Martchev


Sector Spotlight:  

Is the New “Hot” Trend Real, or Fake?

Introducing a “New” (Supercharged Old) S&P Sector: Communications Services

by Jason Bodner


A Look Ahead:  

Crude Oil Reaches a Four-Year High – What’s Next?

The Fed Raises Rates – and Signals (Maybe) One More Increase

by Louis Navellier

Fundamental Growth Commentary - 10/1/2018

below is a republished weekly commentary; originally published by Louis Navellier, of Navellier & Associates; Sub-Advisor to the Cavalier Fundamental Growth Fund…

Hi everybody,

Our Fundamental Growth stocks, on average, exhibited tremendous relative strength last week and rose an average of 1.44%, while the S&P 500 declined by 0.51%.  Some of our top holdings, like Abiomed (ABMD) and Nvidia (NVDA) were especially strong, as were many of our energy-related companies.  There is no doubt that our Fundamental Growth stocks also benefited from quarter-end window dressing as well as the 90-day smart Beta ETF realignment. 

The Wall Street Journal featured a great article last week about stock buybacks in the S&P 500.  In the first quarter, there was $189 billion in stock buybacks in the S&P 500, which was substantially higher than the previous six quarters, where the biggest quarter for stock buybacks was $137 billion.  The WSJ pointed out that the aggressive stock buyback activity is significantly boosting the underlying earnings per share. 

The attached chart illustrates that the record stock buyback pace picked up in second quarter.  I should add that according to TrimTabs, $827 billion in stock buybacks have been announced so far this year.  Furthermore, if the stock buyback activity continues to rise in third and fourth quarters, it is possible that possible $1 trillion in stock buybacks will occur in 2018.  The fact that the S&P 500 has not risen as much as its underlying earnings has caused price-to-earnings ratios to plummet, which just encourages more aggressive stock buyback activity. 

To learn more about how the stock market is physically shrinking via stock buybacks, I recommend that your read our latest white paper, Honey, I Shrunk The Stock Market … see link:

There was a lot of important economic news last week.  On Tuesday, The Conference Board announced that consumer confidence soared to 138.4 in September, up from 134.7 in August.  Interestingly, economists were expecting consumer confidence to decline a bit to 132 in September, so this was truly a surprise that may cause some economists to revise their GDP estimates higher.  One of the catalysts behind consumer confidence rising to the highest level in 18-years was optimism about short-term business conditions over the nest six months, plus improving conditions in labor markets as jobless claims hit their lowest level in 49 years.  Since consumer spending accounts for approximately 70% of GDP growth, third quarter GDP is expected to be well over 4% and the upcoming holiday shopping season should be spectacular.

On Thursday, the Commerce Department reported that orders for durable goods soared 4.5% in August, which is the biggest monthly increase since February and substantially higher than economists’ consensus estimate of a 2.2% increase.  July’s durable goods report was revised to a 1.2% decline, up from a 1.7% decline that was previously estimated.  Commercial aircraft orders soared 69% in August, which helped cause overall transportation orders to rise 13%.  Naturally, surging durable goods orders is good news for Boeing (BA) and aviation suppliers like HEICO Corporation (HEI), as well as third quarter GDP estimates, which may now be revised higher by some economists.

One of the primary factors holding back third quarter GDP growth is the trade deficit.  The Commerce Department on Thursday reported that the trade deficit rose 5.3% in July to $75.8 billion as exports declined by 1.6% to $137.9 billion and imports rose by 0.7% to $213.7 billion.  A big drop in soybean exports to China was the primary reason that exports declined as the trade spat with China escalates.

Crude oil prices were soaring last week over concerns that Russian, Saudi Arabian and other crude oil producers may not be able to make up the lost production from Iran and Venezuela.  At an OPEC meeting in Algiers, Russia reiterated that they should adhere to current production quotas, which helped to propel Brent crude oil prices over $80 per barrel.  At the United Nations (UN), President Trump on Tuesday said that OPEC is “ripping off the rest of the world by pushing crude oil prices higher.”  

The U.S. sanctions on Iran will be imposed on November 4th and are expected to cause a temporary global supply crunch.  During his UN speech, President Trump also said “everything about Iran is failing right now” and added that Iran is in the “worst economic trouble of any country in the world.”  President Trump concluded that Iran would eventually want to negotiate a deal with him because the country is basically “failing.”

Further adding to the tension in the crude oil market was that President Trump in his UN speech said that the chaos in Venezuela is “unacceptable,” which raised concern that the U.S. might aggressively intervene in Venezuela.  President Trump also met with Columbia’s President on Tuesday and it is widely viewed that the U.S. is formulating its policy on Venezuela by coordinating any action with Columbia, which is Venezuela’s much more affluent neighbor.  The probability of military intervention in Venezuela is rising, especially since some Venezuelan military leaders (who were also on the U.S. sanction list) reportedly met a few months ago with the Trump Administration, but again, the U.S. apparently wants to coordinate any action with Columbia.

As anticipated, on Wednesday, the Fed removed the word “accommodative” from its Federal Open Market Committee (FOMC) statement.  The Fed signaled that a fourth key interest rate hike in 2018 is likely in December, but it all depends on both inflation and market interest rates.  In the past several days, Treasury bond yields have meandered higher after the bid-to-cover ratios on recent Treasury auctions declined to 2.4 from 2.8 just a month ago.  Typically, the smaller the bid-to-cover ratio, the more likely that Treasury yields will meander higher. 

The FOMC also forecasted that the Personal Consumption Expenditure (PCE) index would remain at a 2.1% rate over the next several months, so the Fed is not forecasting that inflation will accelerate.  I have to add that Fed Chairman Jerome Powell was very calm, transparent and exuded confidence in his Wednesday press conference, which helped to reassure financial markets that the U.S. economy would continue to grow without excessive inflation.

Overall, now that the Fed has painted a picture of steady economic growth in sync with its 2% inflation target, Wall Street can now refocus on booming GDP growth and another round of record earnings announcements.  We remain in a Goldilocks environment of stable interest rates and reasonable stock valuations, so the overall stock market is poised to finish 2018 on a strong note, especially since the seasonably strong time of year is fast approaching.  

According to the attached Bespoke report, October has been a very strong month in the past 20 years and will likely benefit from wave after wave of record quarterly announcements.  November should be an even stronger month and I expect that the stock market will surge after the uncertainty surrounding the mid-term elections are over and rally into Thanksgiving, which is seasonally a very strong time of year when an early “January effect” typically commences.  Finally, due to the highest consumer confidence in 18 years, I am expecting a record holiday shopping season, so it appears that 4+% GDP growth will persist for the remainder of 2018.

 This is what I like to call “lock and load” time, all investors should be fully invested, since I expect a strong year-end rally!


  Source: Bespoke Research  Graphs are for discussion purposes only. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. Information may be incomplete or condensed. This is not to be construed as an offer to buy or sell any financial instruments and should not be relied upon as the sole factor in an investment making decision. The views and opinions expressed are those of Navellier at the time of publication and are subject to change. There is no guarantee that these views will come to pass. As with all investments there are associated inherent risks. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. Please obtain and review all financial material carefully before investing. Past performance does not guarantee future results.

Source: Bespoke Research

Graphs are for discussion purposes only. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. Information may be incomplete or condensed. This is not to be construed as an offer to buy or sell any financial instruments and should not be relied upon as the sole factor in an investment making decision. The views and opinions expressed are those of Navellier at the time of publication and are subject to change. There is no guarantee that these views will come to pass. As with all investments there are associated inherent risks. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. Please obtain and review all financial material carefully before investing. Past performance does not guarantee future results.

The Market Rose Through Two Painful Historical Anniversaries

Excerpt from Louis Navellier's Marketmail - 09/18/2018

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Last week the S&P 500 rose every day of the week, closing up 1.16% despite two tragic anniversaries – the 9/11 observance and the 10th anniversary of the 2008 market crash. Like every 9/11 anniversary, I am relieved that there has not been another major terrorist attack on U.S. soil, but I must say that the financial media’s coverage of the cause behind the 2008 financial crash has been pathetic, since they fail to account for the government’s role in causing and then exacerbating the crisis. I did my best to name names and reveal exactly what happened in my white paper, “Did the Government Really Cause the 2008 Crash?” 

This report lays out the chain of events that triggered the collapse of Bear Stearns and Lehman Brothers as well as why Citigroup eventually was deemed “too big to fail.” Furthermore, this white paper discusses the biggest risk to financial markets since 2008, including the August 2015 intraday “flash crash.” 

Just click this link to read my white paper.

I sincerely hope that all of you in the Carolinas and nearby regions are safe from Hurricane Florence!

In This Issue of Marketmail (Click Here to Read)

Even though the media headlines are getting more negative by the week, the market seems to ignore the noise. Bryan Perry examines the under-covered trend of global financial assets pouring into the U.S. as a safe haven. Gary Alexander cites the epidemic of toxic headlines. The problem, he says, is that too many people believe this bad news and avoid the stock market altogether. Ivan Martchev returns to his New Year’s predictions that gold would go down this year, but Bitcoin would go down a lot more. Jason Bodner examines whether Technology is in the process of a ‘Tech Wreck’ or merely taking a much-needed breather. In the end, I’ll return to examine inflation and other recent indicators to determine whether the Fed will be hawkish or dovish in their statement after their FOMC meeting next week

Income Mail:  

The Capital Flight to U.S. Assets is Relentless

There’s No Place Like Home – The USA

 by Bryan Perry


Growth Mail:  

The Negativity in the Air is Getting Crazier by the Week

Headlines Tell Us What to Think – And We Mindlessly Obey

by Gary Alexander


Global Mail:  

Bitcoin: When Manias End

Update on the Gold/Bitcoin Ratio

by Ivan Martchev


Sector Spotlight:  

Change is All Around Us – But Which Direction Next?

Technology Still Holds the Key to Mankind’s Future

by Jason Bodner


A Look Ahead:  

Inflation Remains Subdued, Despite Oil’s Price Rise

The Other Economic News Should Cause the Fed to Be Cautious Next Week

by Louis Navellier

Despite September Fears, the Market's Best Season Approaches

Excerpt from Louis Navellier's Marketmail - 09/11/2018

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The S&P declined each day of the holiday-shortened first week of September, but it only fell 1% in all. That’s nothing to worry about, but the bears were out in full force warning about the potential of a September crash, especially in light of the upcoming 10th anniversary of the 2008 financial panic. We may indeed have a “flash crash” or a normal correction, but I expect we’ll see quarter-ending window-dressing and ETF rebalancing, which typically benefits stocks. At the same time, the Fed will likely raise rates on September 26th and then issue a “dovish” statement, which should boost the market as September ends.

Then, beyond September, we have the year’s strongest quarter to look forward to. October in the past 20 years has been seasonally strong. Furthermore, forecasted third-quarter sales and earnings are expected to remain strong, thanks to 4.4% estimated GDP growth, so “peak earnings momentum” has yet to arrive. I expect wave after wave of strong announcements to propel stocks higher in October. I also expect the market to rally after the mid-term elections in early November, regardless of the results, since most of the political distractions will finally be over. Finally, as Thanksgiving nears, typically an early “January effect” commences as small-to-mid capitalization stocks tend to end the year on a strong note.

In This Issue of Marketmail (Click Here to Read)

In Income Mail, Bryan Perry focuses on the Fed’s favorite yield curve measure, which indicates more shelf-life in this economic recovery and bull market. In Growth Mail, Gary Alexander looks at the added caution evident among most investors as well as “Gen-Z” youth in their savings after the trauma of 2008. Ivan Martchev returns to the precious metals market to examine the “great gold/silver divergence,” as well as the sagging mining stock sector. Jason Bodner’s Sector Spotlight contrasts the yin-yang of weak sectors winning in down weeks while strong sectors still dominate the year-to-date gains. Then, in the end, I’ll return with my answer to the latest doomsday theory, the coming “Great Liquidity Crisis.”

Income Mail:  

Bulls Find New Catalyst to Bankroll More Gains

A Better Interest-Rate Indicator Gives the Bulls a Green Light

 by Bryan Perry


Growth Mail:  

The Trauma of 2008 Created More Cautious Investors

Economic and Market Fundamentals are Still Strong

by Gary Alexander


Global Mail:  

The Great Gold/Silver Divergence Continues

What Mining Stocks are Telling Us

by Ivan Martchev


Sector Spotlight:  

A Week of Worries Assaulted Investors Once Again

Get Prepared Now for a Strong Fourth Quarter

by Jason Bodner


A Look Ahead:  

Are We Headed for A "Great Liquidity Crisis"?

Unlike 2008, We're Nowhere Near a Recession

by Louis Navellier

Reflections on What Happened 3 Years Ago and Its Impact on ETF Trading

by: Louis Navellier

Today marks the third year anniversary of an "intraday flash crash" that had devastating consequences. Specifically, on August 24, 2015, approximately 1,278 stocks "gapped down" more than 5% at the opening, so the NYSE stopped trading on those stocks. However, ETFs continued to trade; but without knowing the underlying value of how much the 1,200+ stocks would reopen at, the ETF specialists at the time abruptly dropped their bids on ETFs approximately 35%. The apparent reason the ETF specialists only dropped their bids 35% was back in the May 6, 2010 intraday 5-minute flash crash when all trades that dropped 40% or more were reversed as if they never happened. The ETF specialists knew that they should not cross that 40% threshold, so they just "picked off" everybody 35% intraday instead. The next two charts show the intraday carnage:

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The reason I showed the iShares Select Dividend ETF (DVY) being hit 34.95% intraday on August 24, 2015, is that I wanted to prove that a big, well-respected ETF, with high Morningstar Ratings as well as a nice dividend yield, was not immune to intraday Wall Street specialist shenanigans. Furthermore, a high dividend stock at the time, KKR, plunged 58.82%, apparently fuelled by intraday margin calls from investors that unwisely bought KKR and other high dividend stocks on margin.

The moral of the August 24, 2015 intraday flash crash is that Wall Street is only liquid at a deep discount and that stop loss orders cannot protect you from intraday ETF and stock price anomalies. The aftermath of the August 24, 2015 intraday flash crash triggered lots of interesting articles like the following:

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Ironically, if you go to Morningstar and key in DVY, it shows that currently iShares Select Dividend ETF (DVY) is a well-respected 5-star ETF. Furthermore, DVY's monthly Premium/Discount according to Morningstar is very low. In fact, in August 2015, the average discount was only -0.01%. So this implies that despite the 34.95% intraday drop on August 24, 2015, this price drop must have been an anomaly, since the average discount was only -0.01% during August 2015. 

As a quantitative analyst, the only way I can duplicate Morningstar's monthly Premium/Discount calculations is to calculate volatility based on closing day prices, which effectively mask the 34.95% intraday drop on August 24, 2015. However, when I do "full range" volatility based on all trades of DVY during August 2015, the 34.95% intraday discount reappears. In other words, based on my calculations, Morningstar is not doing its math correctly, since it appears that its monthly Premium/Discount calculations are based on an end of the day closing price, versus all intraday ETF trades during the day.

When you look at only ETF trades at the end of the day, it tends to show a very pretty picture of many ETFs. As an example, our friends at Bespoke recently published a fascinating research article (below) called "Fear the Day." Specifically, Bespoke's research pointed out that if you bought the biggest and most liquid ETF, namely SPY, at the opening and sold it at the close every day since January 1993, between January 1993 to January 2018 you would lose -11.9%. On the other hand, if you bought SPY at the close and covered it at the opening every day since January 1993, between January 1993 to January 2018 you would make 565%! This amazing 576.9% return differential is due to the fact that Bespoke's research proved that more than 100% of SPY's gains since 1993 happen after market hours. 

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So apparently, the moral of the story is that if you want to be a successful ETF investor you have to stop trading ETFs during the day! Well not exactly. If you can successfully buy or sell an ETF at or near its net asset value or what Morningstar calls Intraday Indicative Value, then go ahead and trade during market hours. However, as too many ETF managers have learned, moving big blocks of ETFs during market hours can be problematic, which is why my management company has stopped trading via many large model management platforms that insist on doing the ETF trading themselves, which raises the conflict that the ETF specialists can pick off ETF managers as the following article explained for one unfortunate ETF manager:

At my management company, we are currently proud to be the #1 ETF manager according to Morningstar Advisor out of the 469 GIPS certified managers in the past 3 & 5-years (see next page). However, if we signed up for many popular model management programs that financial advisors utilize, we would not be always be able to effectively execute our ETF trades, so you will not see Navellier & Associates' managed ETF portfolios in many of the big model management programs, since we do not want to lose control of ETF trading. In my opinion, the best model management program is led by Craig Love at Fulcrum EQ in Dallas, because his platform allows big "step out" trades with the ETF firms themselves. Essentially, when we have to move big blocks of ETFs, we have the option of calling the respective ETF firm and they help us move big blocks of ETFs with minimal premiums/discounts.

So the moral of this story is that much of our managed ETF success comes from (1) waiting to trade ETFs during orderly markets with minimal premiums/discounts relative to net asset value, (2) avoiding poor trading platforms that prohibit "step out trading" to more effectively move big ETF blocks, and (3) naturally buying great smart Beta ETFs, especially the AlphaDEX ETFs from First Trust. I should also add that so far in 2018, our ETF turnover has been low, since we remain in a very selective market that is favoring a few key sectors and more domestic small-to-mid capitalization stocks. ETFs that emphasize fundamentally superior stocks and are more equally weighted, like the First Trust AlphaDEX ETFs, remain crucial for our success in the current market environment.



This information is general and does not take into account your individual circumstances, financial situation, or needs, and is not presented as a personalized recommendation to you. This is for informational purposes only and should not be taken as an offer to buy or sell any financial instruments and should not be relied upon as the sole factor in your investment making decisions. Individual strategies discussed may not be suitable for you, and it should not be assumed they were or will be profitable. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. All investing is subject to risk, including the loss of your principal.

Earnings Season Delivers Second-Straight Spectacular (24%+) Gains

Excerpt from Louis Navellier's Marketmail - 08/21/2018

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This week basically wraps up earnings season and it looks like it will be the second straight quarter of 24%+ earnings growth. On Thursday, NVIDIA (NVDA) announced better-than-expected second-quarter sales (up 39.9%) and earnings (up 91.3%!). NVDA is my largest holding and it has now exceeded analyst expectations for 12 straight quarters, which is truly amazing. Unfortunately, the company lowered third-quarter sales guidance to $3.19 billion, down from $3.32 billion previously estimated due largely to the fact that its crypto data mining sales are now immaterial. Although NVIDIA beat analysts' estimates in all other sales categories, there was an adverse reaction to the crypto news. Frankly, I never invested in NVIDIA for its ancillary crypto data mining sales so in my opinion the stock remains an outstanding buy! 

NVIDIA's stock should firm up fast, just like Home Depot (HD) did after briefly consolidating after its better-than-expected second-quarter results. Home Depot on Tuesday announced better-than-expected second-quarter sales (up 8.4%) and earnings (up 31%) while raising its 2018 guidance. Initially, Home Depot stock consolidated, but then it firmed up in subsequent days. The moral of this story is that better-than-expected sales, earnings, and guidance are working, even though it sometimes happens with a delay. 

The dollar is strong while the Turkish lira is collapsing, and the Chinese yuan continues to decline. In the past three months, the yuan is down 8% to the U.S. dollar. This has been unfortunate for the Chinese ADRs that I had recommended, so I have sold most of them, despite their continued strong sales and earnings.

Navellier & Associates owns Home Depot & NVIDIA in both managed accounts, a sub-advised mutual fund and in family accounts."

In This Issue of Marketmail (Click Here to Read)

Thursday is an important day, with U.S./China trade talks, the last large list of second-quarter earnings releases, and the Kansas City Fed's annual meeting in Jackson Hole, Wyoming. First, Bryan Perry digs deep into the "end game" strategies of the coming U.S./China trade talks, while Gary Alexander looks at history for clues that may emerge from the Jackson Hole talks. Ivan Martchev turns his attention to gold, in light of the negative correlation between gold and the strong U.S. dollar. Jason Bodner addresses the all-important question of price: Should we look for low-priced bargains or winners on the rise? In the end, I'll return to look at the China trade talks and the global economic outlook in light of the Turkey crisis.

Income Mail:  

Trump's Constrictor Strategy Begins to Pay Off  

Trump's Master Plan - To Destabilize and Weaken China?

 by Bryan Perry


Growth Mail:  

Market Clues Point to a Strong "Final Third" of 2018  

Watch China Trade Talks and Jackson Hole for Major Market Cues

by Gary Alexander


Global Mail:  

What's Behind Gold's Dip to $1,160?

The Broad Dollar Index is Much Stronger

by Ivan Martchev


Sector Spotlight:  

Does a Higher Price Mean Higher Value?

Weekly Winners Vary, But Long-Term Winners are Consistent

by Jason Bodner


A Look Ahead:  

China May "Blink" First in the Trade War Talks  

Germany and the U.S. Seem Untouched by the Turkey Crisis

by Louis Navellier

Earnings Season Begins Strongly, as the S&P 500 Nears Record Highs

Excerpt from Louis Navellier's Marketmail - 08/7/2018

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The daily oscillations in the stock market have been largely subdued due to stunning second-quarter results. Last week began with a flagship NASDAQ stock, Apple (AAPL), reporting better-than-expected sales and earnings on Tuesday. Many leading NASDAQ tech stocks are enjoying recurring service revenue from their cloud backup services, which continues to boost their sales and earnings. Although not all NASDAQ stocks pay a nice dividend or have predictable earnings, the fact that two NASDAQ companies - and Apple - should each become $1 trillion market capitalization companies soon (Apple crossed $1 trillion last Thursday) is helping to boost investor confidence.

(Please note: Louis Navellier does not currently hold a position in Apple & Amazon. Navellier & Associates does not currently own a position in Apple & Amazon for client portfolios).

With the majority of stocks in the S&P 500 having announced second-quarter results, sales have risen at a 10.3% annual pace while earnings have risen at a 26.7% annual pace. Folks, this is stunning, because this means sales and earnings are running at 1.5% and 5.2%, respectively, above already-lofty expectations. Despite a currency headwind for many multinational companies, "peak earnings momentum" has not yet materialized. Although the remaining second-quarter S&P 500 earnings may decelerate a bit, there is no doubt that the second quarter will rival the first quarter as a record-high earnings announcement season.

In This Issue of Marketmail (Click Here to Read)

Bryan Perry takes a closer look at China and sees more than "currency manipulation" going on, perhaps some capital flight, which should drive China's leaders to the bargaining table. Gary Alexander looks beyond the monthly jobs report to two long-term trends - one positive, one negative - rising real wages and the disappearance of many prime-working-age males. From Bulgaria, Ivan Martchev weighs in on the emerging markets crisis, focusing on China and then Turkey. Jason Bodner signals the end of the Dog Days with a review of the rapidly-changing sector traffic patterns of summer, while I take a closer look at earnings trends and GDP in light of trade war rumors, along with an analysis of the latest ISM statistics..


Income Mail:  

Capital Flight Out of China - A Better Market "Tell"  

Is the Weak Yuan a Result of Manipulation or Something Structural?

 by Bryan Perry


Growth Mail:  

Ignore the Monthly Jobs Report: Look to Long-Term Trends Instead   

Where Have all the PWAMs (Prime Working Age Males) Gone?

by Gary Alexander


Global Mail:  

Welcome to the August Doldrums in Eastern Europe

The Dollar/Emerging Markets Empirical Test

by Ivan Martchev


Sector Spotlight:  

The "Dog Days of Summer" are Almost Over

Sector Rotations are More Rapid in the Summer Months

by Jason Bodner


A Look Ahead:  

Will Tariffs Help or Hurt (or Not Impact) Earnings and GDP?  

ISM Statistics Move Sharply Lower: Temporary or Worrisome?

by Louis Navellier

Markets Rise Strongly in Early July, Despite China Fears

Excerpt from Louis Navellier's Marketmail - 07/17/2018

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The S&P 500 is up over 3% in the first half of July and Nasdaq is at an all-time high, despite the ongoing tariff disputes with China. I believe the press has overblown the "trade war" story, but the overall market is waking up to the fact that the likely eventual outcome will be fewer tariffs and fairer trade in the end.

I'll believe there is a true trade war with China when I see most of the shelves at Best Buy and Wal-Mart empty, since the vast majority of their goods are made in China. China still has a huge trade surplus with us. For every dollar of U.S. exports to China, the U.S. imports $3.87 of Chinese merchandise, so China has a lot more to lose than the U.S. does. In the end, I expect that China will seek a truce on trade tariffs.

My global expert, Ivan Martchev, has been writing about China a lot lately. As he has pointed out, China and the U.S. are dependent on each other. As a result, the relationship President Trump has with Chinese President Xi Jinping is very important. I suspect that the Trump Administration will not try to publicly humiliate President Xi Jinping, like he has been doing to our Canadian and German allies. Instead, I expect that the tariff "war" between the U.S. and China will be resolved diplomatically. As a result, every market dip on trade concerns represents a buying opportunity for our recommended U.S. and global stocks.

In This Issue of Marketmail (Click Here to Read)

Bryan Perry compares the Shanghai and American stock indexes to demonstrate why China needs trade resolution more than America does. Gary Alexander shows how great earnings and other indicators trump the shrinking yield curve when it comes to predicting U.S. economic growth. Ivan Martchev turns his attention to zero-coupon Treasuries as the preferable bond play now, while Jason Bodner sees the same two or three sectors continuing to lead this market higher. I'll return with a few comments on German-American trade talk and the latest oil and inflation news, as well as some specific energy stock picks.


Income Mail:  

It's "Shanghai Noon" for the Chinese Stock Market

Broken Links in the Global Supply Chain are the Real Risk

 by Bryan Perry


Growth Mail:  

Let's "Make Earnings Great Again" (MEGA)

Is the Shrinking Yield Curve Signaling a Recession?

by Gary Alexander


Global Mail:  

U.S. Treasury Zeroes, the Contrarian Trade of the Century

The Yuan is the Weapon of the Sun Tzu Disciples

by Ivan Martchev


Sector Spotlight:  

When Predictions Don't Work...Change Your Mind!

The Same Leaders Are Driving This Market Higher

by Jason Bodner


A Look Ahead:  

German-American Language Differences

Higher Oil Prices Spark a New Wave of "Temporary" Inflation

by Louis Navellier

Stocks Open the Second Half of 2018 on a Positive Note

Excerpt from Louis Navellier's Marketmail - 07/10/2018

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The S&P rose 1.52% last week with the biggest surge (+0.85%) on Friday. NASDAQ did even better (+2.37%) while the Russell 2000 doubled the S&P 500 with a 3.10% gain. Earlier in the week, market oscillations were caused by air pockets that are common in the summer months and may continue in upcoming weeks. However, thanks to record stock buyback activity as well as dividend increases, the market continues to meander steadily higher. Whenever the market meanders higher on light trading volume, that is a very good sign, since it can potentially go up a lot more when trading volume rises when the second quarter announcement season begins.

If you drove a lot during the long holiday week, don't get mad about the high prices at the pump. Instead, you can profit from those higher gas prices. Refiners are expected to post very strong earnings from the highest "crack" spreads in approximately three years. Our stocks that receive a double-A grade ("A" in both Dividend Grader and Portfolio Grader) are dominated by refiners like Valero Energy (VLO), which should post exceptionally strong earnings from those spreads.

(Please note; Louis Navellier currently personally owns a position in VLO, Navellier currently owns a position in VLO for client portfolios)

I also bet that your weather has been sizzling hot lately! Not only is the US setting record-high temperatures, but so is Canada, Europe, the Middle East and Asia. This hot weather is helping boost natural gas demand, since much of the US has natural gas power plants designed to meet extraordinarily high air conditioning demand. That means the only weak energy commodity, natural gas, is now resurging, since the weather is expected to remain hot well into September.

Also, multiple "heat domes" around the world are creating tropical depressions, so it looks like this could be a record season for hurricanes, so re-insurance companies like Berkshire Hathaway may be at risk if we suffer more natural disasters, such as the new wave of fires out West.

(Please note; Louis Navellier currently does not own a position in Berkshire Hathaway, Navellier currently does not own a position in Berkshire Hathaway for client portfolios)

In This Issue of Marketmail

Overall, our authors deliver a side of the trade war story that you don't often hear, and our angle is beginning to resonate with investors who are tired of the scare stories that have dominated the press since January. Bryan Perry begins by showing how the bulls bought stocks big on the day the tariffs were added. Then Gary Alexander shows Trump's secondary goal of attacking product piracy as well as our trade deficits. Ivan Martchev shows how far more tariffs have been imposed than implemented, while Jason Bodner shows why America is still the best place for your stock money. I'll return to give you a media report on trade jitters, along with the latest jobs data.


Income Mail:  The Bulls Want to Bust Out of the China Shop  

Utilities: A Surprising Summer Sweet Spot

 by Bryan Perry


Growth Mail:  Of Doomsday Books and Articles, There Will Be No End  

Case in Point: Trump's Tariffs are Not "Smoot Hawley II" 

by Gary Alexander


Global Mail:  What the Goldman Sachs Indicator is Telling us Now
Business Cycle Statistical Distribution

by Ivan Martchev


Sector Spotlight:  When to Bet on "Impossible" Comebacks - In Sports and Stocks
Leading Sectors for First Half: Consumer Discretionary & Info Tech 

by Jason Bodner


A Look Ahead:  All the Scary Tariff Talk is Beginning to Backfire  

US Job Growth Soars, But We Need More Qualified Workers

by Louis Navellier

We're in the 2nd Longest Bull Market Run, EVER...

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original article from John Waggoner (

It's been said that “bull markets don’t die of old age; they die of fright.”

Usually, that fright doesn't come from high prices or panic in the comes from external events: war, oil shortages, unexpected financial collapse, etc.

Here’s a look at the nine bear markets since World War II — and the events that precipitated them.

May 1946 — May 1947

Dow decline:  -23.2%

Cause: Sharp Winding Down of the War Effort

Stocks had soared starting in 1942, once victory in World War II seemed more likely. As the troops came home, however, government factory jobs ground to a halt, industrial production plunged and investors feared the return of the Great Depression.

December 1961 — June 1962

Dow decline:  -27.1%

Cause: Rising Cold War Fears, Labor Unrest

The failed Bay of Pigs invasion of Cuba in August 1961 stoked Cold War fears. Under pressure from President John F. Kennedy, unions negotiated modest salary increases. The president was furious when the industry promptly hiked prices $6 a ton. "My father always told me that all businessmen were sons of bitches, but I never believed it until now,” he said, sparking fears of an anti-business administration.

February 1966 — October 1966

Dow Decline:  -25.2%

Cause: The Costs of War

The “Go-Go” years hit a speed bump. The Federal Reserve warned in March 1965 that the economy was close to overheating. Treasury bill rates and the consumer price index began rising. The U.S. bombing of Hanoi marked a substantial increase in the Vietnam war effort.

December 1968 — May 1970

Dow Decline:  -35.9%

Cause: Political Turmoil

Race riots in Detroit in July 1967 were just a taste of what was to come in the next two years as the nation struggled with rioting after the murder of Martin Luther King Jr., the murder of Robert Kennedy and massive anti-war demonstrations. Inflation rose to 6% and Treasury bill yields headed north of 7%.

January 1973 — December 1974

Dow Decline:  -45.1%

Cause: Oil Embargo, Watergate

The Arab Oil Embargo started in October 1973, sparking long gas lines, price spikes and an 11.5% prime rate. The Watergate scandal helped push stocks down even more as President Richard Nixon resigned and President Gerald Ford pardoned him.

April 1980 — August 1982

Dow Decline:  -24.1%

Cause: Inflation Whipped

Paul Volcker became chairman of the Federal Reserve in July 1979, and set out to crush soaring inflation by raising rates to unprecedented heights. By December 1979, the prime rate hit 21.5%, and by August 1982, unemployment was at 10.5%.

August 1987 — October 1987

Dow Decline:  -36.1%

Cause: Rising Interest Rates

One of the greatest bull markets of all time was born in the wake of the 1982 bear market, buoyed by falling interest rates and Reagan-era tax cuts. Inflation jitters sent the bellwether 10-year Treasury note yield to 10.1% in October 1987 from 7% in January, sparking a flight to safety. The Dow plunged 22.6% on Oct. 19, 1987, still the sharpest one-day drop in history. (An equivalent drop today would take the Dow down nearly 5,000 points.)

March 2000 — October 2002

Dow Decline:  -38%

Cause: Insane Prices

Here’s a bull market that actually did die of fright. Stock prices gleefully soared to astonishing heights, and some of the highest fliers didn’t actually have earnings. Selling began in March 2000, tearing the technology-laden Nasdaq the hardest.

October 2007 — March 2009

Dow Decline:  -53.8%

Cause: Housing Market & Banking Collapse

For a brief time in 2006, all you really needed to buy a $1 million starter castle was a bright smile and a cowboy mortgage broker. Thanks to the miracles of Wall Street engineering, investors found that bundles of bad loans were just as bad as individual bad loans. The mortgage miasma sucked down some of the biggest institutions on Wall Street, from Countrywide bank to Lehman Brothers.


Mid-Year Review: A "Goldilocks" Investment Environment Continues

Excerpt from Louis Navellier's Marketmail - 07/03/2018

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In my podcast last week, I pointed out that the stocks being added to the Russell 2000 index were very firm. Furthermore, I named multiple stocks that would benefit from the quarter-ending smart-Beta realignment. The bottom line is that money is not leaving the stock market, it is merely being reshuffled.

I should add that so far this year, stock buy-backs have risen 42%. In the first quarter, stock buy-backs in the S&P 500 hit an all-time record of $137 billion and I expect that the second quarter figure will be even larger. It is important to point out that the stock market has not risen as much as earnings have risen this year, so price-to-earnings ratios continue to decline. Since companies with a high return-on-equity (ROE) and low forecasted price-to-earnings ratios love to buy their shares, this buy-back trend should continue.

I was also watching the bid-to-cover ratios during last week's Treasury auctions and there were a lot more bidders than buyers, so the bid-to-cover ratios continue to rise, and Treasury yields continue to moderate. Market rates remain soft, especially the 10-year Treasury bond. This will continue to take pressure off the FOMC to raise rates further, despite robust GDP growth. Overall, the current interest rate environment, combined with robust sales and earnings means that we remain in a Goldilocks investment environment.


In This Issue of Marketmail

Our authors agree that uneven trade barriers need fixing but talk of a "trade war" is overblown. Bryan Perry believes that Chinese and American leaders need to find a way to overcome their "language barrier" by next Friday or the market could undergo another "tariff tantrum." Gary Alexander looks beyond the media headlines to find an under reported story - this time, in European immigration and GDP reduction. Ivan Martchev looks at the trade war through the measuring rod of the Chinese yuan. He also surveys China's "ghost cities" to see where the Chinese credit bubble began. Jason Bodner's angle on the trade war is how the algorithmic traders keep generating new buying opportunities by creating mini-market quakes after every new tariff announcement. I'll close with a little wisdom from the auto makers I met in Alabama last week, plus late news on Sunday's Mexican election and the latest U.S. economic barometers.


Income Mail:  Is Tough Trade Talk Risking a New "China Syndrome"?  

Comparing American Apples and Chinese Oranges

 by Bryan Perry


Growth Mail:  After 242 Years, America is Still the World's #1 Safe Haven   

First Half Winners: Oil, Nasdaq & Small Stocks (Big Loser: Bitcoin)   

by Gary Alexander


Global Mail:  China's Empty Cities Sure Don't Come Cheap
Weaponizing the Yuan

by Ivan Martchev


Sector Spotlight:  Don't Mind the Small Market Quakes
The Ups and Downs of the Trade War Story 

by Jason Bodner


A Look Ahead:  Alabama Sees Through the Media's Scare Tactics

The Other Economic News Was Not So Exciting Last Week

by Louis Navellier

S&P 500 - Sector Change


Recently the GICS (Global Industry Classification Standards) Index Manufacturers, together with S&P Dow Jones Indexes, announced that they were re-aligning the Sectors of the S&P 500. The major changes include:

  • Renaming Telecommunications to Communications.
  • Repositioning 18 media and entertainment companies from Consumer Discretionary and adding them to Communications, including Netflix, CBS and Walt Disney.
  • Repositioning 5 entertainment and software services companies from Technology and adding them to Communications including Google and Facebook.
  • Repositioning EBAY from Technology and adding it to Consumer Discretionary.

In Summary, these changes will result in a 6% reduction in the size of the Technology Sector and a 3% reduction in the size of the Consumer Discretionary Sector. The updated Communications Sector will comprise about 10% of the S&P 500. The final Index changes are expected to be announced on July 1st and the official rebalance of the Index Sectors is expected to take place on September 24th.

The Cavalier Tactical Rotation Fund now incorporates the Communications Sector.  The Fund utilizes all 11 S&P 500 Sectors in the Tactical Rotation methodology.

The First Half of 2018 Should Close with a "Big Bang" in Small Stocks

Excerpt from Louis Navellier's Marketmail - 06/26/2018

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Even though a wave of tariff escalations sent the Dow Jones average down 2% last week, the truth of the matter is that the U.S. has the leverage, since China needs the U.S. because it is its biggest export market. 

This week marks the annual Russell realignment, so I expect to see many stocks surging higher as they are added to the Russell 1000, 2000, and 3000 indices (Note: The Russell 3000 index is composed of the Russell 1000 & 2000 indexes). Quarter-ending window dressing will also positively impact stocks this week, especially growth stocks with strong sales and earnings, Furthermore, the crisis in emerging markets is causing worldwide capital flight to the U.S. dollar. In 2017, most investment funds flowed into international stocks, including emerging markets and multinational stocks, but in 2018 that flow has been diverted to domestic stocks, propelling the Russell 2000 index higher. The critical path now is into domestic micro-, small-, and mid-capitalization companies with strong forecasted sales and earnings.

On my Tuesday podcast, I reiterated that the stock market is still the best place to be, since the S&P 500 yields approximately 1.9% and dividends are taxed at a maximum federal rate of just 23.8%. That means investors earn more staying in the stock market than by putting their money in a bank, where their interest income is taxed at a maximum federal rate of 40.8%. Furthermore, the 10-year Treasury bond yield has declined significantly since mid-June's Federal Open Market Committee meeting. This means the yield curve is "flattening," removing pressure on the Fed to hike key interest rates in upcoming months. This creates a 'nirvana' environment of moderate interest rates, 4% GDP growth, and strong company earnings


In This Issue of Marketmail

Bryan Perry sees the stars lining up for a second-half rally, particularly in dividend growth stocks. Gary Alexander takes time out to honor Charles Krauthammer, including some of his financial commentaries. Ivan Martchev expands on something I've long said about many ETFs - they act like a scam on small investors, and Jason Bodner gives us an example of how it often pays not to sell into a panicky market.


Income Mail: Setting Up for a Sizzling Second-Quarter Earnings Reporting Period

"FOMO" Will Make Domestic Dividend Growth Investing the Second-Half "Sweet Spot"  

by Bryan Perry


Growth Mail: R.I.P. Charles Krauthammer (1950-2018)  

Krauthammer's Common-Sense Solution to the Entitlements Crisis  

by Gary Alexander


Global Mail: The ETF Industry is Like a $3.6 Trillion Scam
A Practical Example of a "Bad" ETF

by Ivan Martchev


Sector Spotlight: Don't Let the Bad News Bewitch You into Selling
An Example of Not Selling into Bad News

by Jason Bodner


A Look Ahead: This "Trade War" Will Likely End with Fewer (and Lower) Tariffs   

Despite Negative Political News, "Positive Business Outlook" is at Record Highs  

by Louis Navellier

World Leaders Pose and Strut but Will Likely Cooperate in the End

Excerpt from Louis Navellier's Marketmail - 06/12/2018

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As we go to press, President Trump is meeting North Korean Supreme Leader Kim Jong-un in Singapore. Over the weekend, there was a lot of outraged reaction by G7 leaders to President Trump's appearance at the G7 meeting, but I expect that most countries will follow China, which offered last week to purchase nearly $70 billion of U.S. farm, manufacturing, and energy products in order to keep the trade flowing.

The truth of the matter is that the U.S. has the leverage, since it is typically the biggest buyer of exports. Countries with big trade surpluses, like China and Germany, do not want to jeopardize their lucrative trade relationships. President Trump's tariff threats are merely tactics to negotiate more favorable trade deals. It will be interesting to see how each country responds, but I expect the U.S. to prevail in the end.

The Fed is also meeting this week. New Fed Chairman Jerome Powell was reportedly hand-picked by Treasury Secretary Mnuchin to be more "market friendly." The Fed wants stable financial markets, since it is good for the banking industry, especially now that some major money center banks are under stress from troubled emerging markets and the flattest Treasury yield curve in over a decade. So again, I expect a relatively dovish FOMC statement that will continue to boost both the bond and stock markets.

In This Issue of Marketmail

In bringing the global headlines back to the world of investing, Bryan Perry favors covered calls on U.S.-based technology stocks. Gary Alexander also counsels focusing on domestic stocks, due in part to the rise in global conflicts - soon to be dramatized in the World Cup matches in Russia. Ivan Martchev sees problems in several emerging-market currencies as well as the deflating bitcoin bubble, while Jason Bodner compares sectors to sports teams (and stocks to sports stars) with Info Tech being the new sector "dynasty." In the end, I'll return with a look at small stock realignment and the Fed's meeting this week.