Welcome back! Hope you had an enjoyable holiday with your loved ones and got some well-deserved rest and relaxation. Markets got off to a choppy start to the new year after a rough finish to 2014, with the Dow finishing barely in the green after an early 100+ point pop that quickly fizzled out, while both the Nasdaq and S&P 500 closed red on the first trading day of 2015. Amidst the volatility gold managed to stage a modest rally on Friday, but still under the $1,200 level, with miners GDX and juniors GDXJ ending strongly up on the week. Natural gas continued to crumble with an EIA draw of -26bcf, well below expectations of -38bcf despite colder weather forecasts. Futures closed below $3 for the second time on Friday despite a strong morning rally that held above $3 most of the morning but was abruptly cut in half with a massive plunge back below by 14:25ET. The triple-leveraged UGAZ and DGAZ ETFs have been trending the past few weeks on StockTwits, with UGAZ losing more than 75% of its value in just over a month! Conversely, DGAZ has more than doubled over the same period.
Russian markets have been closed this week since Dec. 30th and reopen on Monday, but with another holiday on Jan. 7th. This has not stopped traders from making bets on the RSX Russia ETF as well as its triple leveraged cousins RUSL and RUSS, which have seen a wild ride tracking the volatile movements in crude oil and the ruble, both of which have resumed their downtrend.
The first full trading week of 2015 should set a more decisive tone for the short term, with some key economic releases including jobs data Wednesday through Friday, as well as the FOMC minutes on Wednesday. ISM non-manufacturing numbers are also due Tuesday morning (full calendar here). Some notable earnings this week include Micron Technology, WD-40, SUPERVALU, Bed Bath and Beyond, Constellation Brands and Apollo Education. As usual Alcoa kicks off the main reporting season the week after on Jan. 12th, with major financials Goldman Sachs, Bank of America, Citigroup, JP Morgan and Wells Fargo reporting the same week.
That’s it for now- trade well and stay disciplined, and wishing you all a great start to 2015!
What appeared at first to be another rout in gold on Friday turned into a monster bounce rally, after prices hit a low of $1,146 before roaring all the way back up to $1,192, just shy of the psychologically important $1,200 level. This lit a fire under the still beaten-down and almost forgotten miners index, GDX, which clocked a massive +6% gain and closed above the recent $19 resistance level. The triple-leveraged NUGT ETF added 17.4% to close at $13.90. Could this be the start of a recovery after falling off the cliff last month upon the official announcement of the end of QE? The weakness in the US dollar also helped, as it took a breather after a strong rally, which also helped oil prices bounce.
This has been an impressive week for tech names, with AAPL hitting new all time highs of $114.19, just a hair’s breadth away from the pre-split $800 level. YHOO also powered to new highs, as did BABA, reaching exactly $120 before pulling back five bucks and change. Interestingly, BBRY also broke through $12 on Thursday, a level not seen since August 2013, as CEO John Chen announced new software and gave a tantalizing glimpse of his plans for potential new partnerships in China with Lenovo and Xiaomi, as well as confirming a deal with Samsung during their Investor Day event. Unfortunately any bets on a strong finish to the week proved, well, fruitless, as it gave back all of Thursday’s gains and more. Granted, the stock had already rallied the entire week so perhaps this was the pause that refreshes.
FOMC minutes are out this Wednesday at 2pm ET, as well as some jobs and housing numbers the rest of the week. Full US economic calendar can be found here.
US markets juggernauted on to new highs this week once the midterm elections were out of the way leaving the Republicans firmly in control of the Senate and Congress. After that there was no looking back as Mario Draghi offered little surprise on Thursday with the ECB interest rate decision unchanged, and the Friday jobs report showing continued improvement, with the jobless rate at a 6-year low, although companies were hiring fewer workers. Alibaba (BABA) continued to soar to record highs, closing in on the $115 level after a breathtaking two-week run leading into earnings. Hard to believe this was only trading in the $82s during the mid-October correction. I surmise this rally has been partly fueled by short speculation that the stock would drop back below its IPO price of $68. Once again the chatrooms and boards showed the desperation of some unfortunate put holders and short positions as every $0.10-0.20 pullback in the SPY was greeted with proclamations of collapse, ‘rug pulls’ and ‘bull traps’. Quite the opposite, as every dip was bought back fiercely as we closed near all-time highs in the last minutes of Friday’s session.
On the commodities front, gold and silver both hit new year lows, hitting $1,131 and $15.04 respectively, before bouncing back sharply 3% (+$34.80!) and 2.26% by the end of the day on Friday. This helped stem the hemorrhaging in the gold miners ETF GDX and its leveraged cousin NUGT, which had fallen off a cliff since the official announcement of the end of QE, but now enjoyed a massive dead cat bounce of 8% and 24% respectively. Crude oil also continued to slide before bouncing off $77.19, but what really got my attention was the huge squeeze in Natural gas – going parabolic from a low last week of $3.62 all the way to $4.49. I was tempted to nibble a little at the 3x leveraged Natgas ETF UGAZ, which jumped from $10.02 to a high of $18.75 on Friday, but alas, it had already surged past levels I was comfortable with in such a short span of time. I can’t help but think there’s a commodities desk blowing up somewhere.
Other notable comebacks were in the coals sector with beaten-down-left-for-dead tickers like ANR, BTU, WLT staging huge double digit rallies on an almost daily basis.
Thanks for stopping by, enjoy your week, trade well and stay disciplined!