Weekly Market Review & Target Fills October Week 4

The major news for the week, is the broad sell off in bond markets of sovereign debt in major markets including in the United States. The trend is at the highest level in months. It is being caused by a number of factors which include spiraling government debt, stagnating corporate profits with rising debt, overall sluggish global economic growth and finally, the speculation that the United States will raise interest rates at the end of the year.

The concern among global investors is the major central banks will hit the brakes on any further stimulus. Slightly better economic data from the United States, puts the likelihood of a hike in interest rates there at 72%.

World investors have raised cash levels to a 16 month high, on fears of increased market instability and recession.

Total global debt now stands at $152 trillion USD (United States Dollar)

Despite the repeated agreements to freeze or reduce crude production within OPEC (Organization of the Petroleum Exporting Countries) output is continuing to rise. September saw an increase in oil production, up 220,000 barrels a day from the month before.

Total production was recorded at 33.39 million barrels a day. OPEC crude output is now at the highest level in eight years.

Crude oil prices are now heading below $50 USD on the fact, that investors continue to be skeptical of any freeze or cuts on levels of production coming from OPEC or Russia.

Final levels of crude production for individual countries,are to be worked at the meeting of OPEC in which is now technically beginning in Vienna, Austria. If an agreement is made, it will be the first time the cartel has been able to agree to output cuts since the financial crisis.

Another ongoing event is the drop in precious metals over the last few weeks. Gold had been slowly dipping in price, since reaching a high of $1,370.80 USD in August.

A major set back took place three weeks ago. The price dropped to $1256.90 from $1326.00, a decrease of $69.10 USD (5.50%) It was a drop of 9.06% from the recent high.

This week gold is listed for $1273.90 from $1266.90 USD last week an increase of 0.55%. Gold prices in 2016, are still up +20% in 2016.

The price for silver decreased to $17.85 USD from $19.43 USD over the past month,a $1.58 USD dip which is an 8.85% decline for the period.

International News

NATO (North Atlantic Treaty Organization) is beginning its biggest military buildup on Russia’s borders since the Cold War.

The United States is finally acknowledging that the policy of attempting to persuade the isolated government of North Korea to give up its nuclear weapons has failed.

The United States has for the first time abstained, from voting against the annual United Nations resolution, that calls for the end to the American embargo on Cuba.

Global trade is experiencing the weakest rate of growth since 2007. Protectionist policies are on the rise and progress on two leading trade treaties have stalled.

Political support for the Trans-Pacific Partnership and the Trans-Atlantic Trade and Investment Partnership is declining in both Europe and the United States. These trends are ominous signs for world equity and bond markets.

United States

GDP for the third quarter came in at 2.9% today. This was at the fastest pace in two years. The rise was attributed to a surge in exports (+10%) and slower growth in imports.

On the negative side, there was a build in inventories and consumer spending is slowing. The latter is responsible for two-thirds of the economy.

The final estimate of GDP (Gross Domestic Product) for the 2^nd quarter in the United States is 1.4% annual rate instead of the lower 1.3% level that was expected.

Medical insurance policies sold through what is known as Obamacare, are expected to see an average of a 25% increase in price for 2017.

All three market exchanges in the United States (U.S.) saw gains reversing losses from earlier in the week. The Dow Jones Industrial Averages is between 18,200 and 18,300 today. The Standard & Poor 500 & the NASDAQ composite both has similar results.

Year to date, the major indexes have advanced the following. The Dow Jones Industrial Averages is up about 6.4%, the Standard & Poor 500 has climbed near 6.3% and the tech heavy NASDAQ has advanced about 6.7%.

Africa

Nigeria will spend a total of $10 billion USD, in the southern part of the country. The government is hoping to end the insurgency in the oil rich region.

Europe

Markit’s manufacturing PMI for the Euro-zone rose to a 30 month high of 53.3. The forecast had estimated 52.6. Germany, the largest economy in Europe came in at 55.1, the highest level in 33 months. France, the second largest economy in the Euro-zone was at 51.3, a 10 month high.

Spain was able to officially re-elect conservative Prime Minister Mariano Rajoy once again after 10 month delay and two elections.

The Socialist Party decided to stop blocking his attempts to form a minority government. Although the present coalition will be unstable, the action forestalls the need for a third election in less than a year.

Business confidence in Germany is at a two and a half year high well ahead of expectations. The DAX the main German stock exchange, hit a high this week for 2016 jumping to 10,827. It is still down from the 52 week high of 11,430.87.

Belgium has dropped its opposition to the free trade deal between the European Union and Canada.

Officials in the Euro-zone approve an additional 2.8 billion Euros ($3.06 billion USD) for Greece, in approval for the progress made in a number national reforms. These included improvements in banking, energy, pensions and revenue collection.

The Greek government has now received 31.7 billion out of 86 billion Euros, that were promised in a third round of bailouts.

ECB (European Central Bank) President Mario Draghi, is warning about the dangers of keeping interest rates low, for too long a period of time.

The United Kingdom reported economic growth of 0.5% in the third quarter. The service industry accounting for 80% of GDP, lead the way with an expansion of 0.8%.

GDP in France rebounded in Quarter 3, by 0.2%, Spain grew 0.7% during the same period. The French Consumer Price Index (CPI) for October at 0.0% month to month.

Italy is defending its rule-breaking 2017 federal budget to the European Commission. The government insists an ongoing migrant crisis,earthquake restoration costs & lower than expected domestic growth are to blame.

Latin America

Venezuela is in a crisis both economically and politically. With the economy in a tailspin and near collapse, the Vatican has facilitated a meeting between the ruling government and the opposition.

Huge public demonstrations have taken place against President Maduro, due to runaway inflation and consumer product shortages.

A general strike by the opposition was called in Venezuela today demanding a referendum that will allow the recall of President Nicolas Maduro.

Middle East

The IMF (International Monetary Fund) warns the Gulf States that non-oil economic growth will only be 1.75% this year. Growth averaged 7% from 2000 to 2014.

Rebels in the Syrian city of Aleppo launched a counter offensive this week.

Iraqis and Kurdish forces with the assistance of the United States, are slowly encircling and taking back the city of Mosul. It is the second largest city in Iraq. Once retaken, it virtually ends ISIS ( Islamic State of Iraq and Syria) control over northern Iraq.

Asia

President Rodrigo Duterte of the Philippines traveled to Japan this week, to calm fears of his recent drive for a rapprochement with China and deteriorating relationship with the United States.

President Duterte signed deals with China worth some $24 billion USD.

China’s GDP growth in Quarter 3 remained at 6.7% according to officials there. This was the result of higher government spending, record bank lending and an overheated real estate market in major cities. This type of economic growth is unsustainable.

South Korean GDP grew just 0.7% in the third quarter. This was partly the result of the collapse of Hanjin Shipping, strikes at Hyundai Motors and the recall of the Galaxy Note 7 made by Samsung. Economic growth for the year is still expected to be 2.7%.

Business News

U.S. companies have struck a total of $248.9 billion USD in merger agreements this month,surpassing the previous record of $240 billion USD which was met in July 2015.

Amazon watched its share price fall by more than 6% on Friday, with the forecast that operating income would be far lower next quarter. This occurred despite beating estimates in the third quarter.

Qualcomm has agreed to buy NXP Semiconductors in a deal worth $47 billion USD. The company is trying to expand the reach of its computer chips from phones to cars.

AT&T in talks to buy Time Warner for $85.4 billion USD The former had their share price reached a 15 year high. There are certain to be political obstacles involved in the deal.

Apple is the largest company in the S&P 500 by market capitalization, which now exceeds $606 billion USD. Shares are down about 2% to $115.00 USD on the quarterly business report. It is the third straight quarter of lower iphone shares. The company has failed to fully capitalize on the Samsung product recalls of the Galaxy Note 7.

Tesla reported its first quarterly profit in three years. In addition, CEO Elon Musk stated no further capital would be needed to fund the Model 3.

Volkswagen made a 2.3 billion Euro ($2.52 billion USD) profit last quarter, after massive losses that began a year ago.

Deutsche Bank reported a third quarter profit, due to lower litigation and restructuring costs.

American West Texas Intermediate (WTI) has increased from $50.64 USD last week to $49.39 USD today. International Brent during the same period went from $51.61 last week to $50.18 USD today.

American priced and Brent crude oil is still up more than +30% in 2016.

The Investment Newsletter had 7 target fill to report this week, and 0 early stock target fills.

Nintendo $NTDOY bought as a short for $31.99 on 10/20/16, Short Term Target Fill at $29.08, a 10% return for investors.

Blackberry $BBRY bought as a short for $7.99 on 10/03/16, Short Term Target Fill at $7.26 a 10.06% return for investors.

Wayfair $W bought as a short at $39.99 on 05/25/16. Medium Term Target Fill at $34.77, a 15.01% return for investors.

Chipotle $CMG bought as a short at $409.99 on 07/13/16. Short Term Target Fill at $372.71, a 10% return for investors.

Sears $SHLD bought as a short for $11.99 on 10/20/16. Short Term Target Fill at $10.90,a 10% return for investors.

Rosetta Stone $RST bought as a short at $8.19 on 08/09/16. Medium Term Target Fill at $7.12, a 15.03% return for investors.

Yelp $YELP bought as a short on 09/06/16 for $38.99,Long Term Target Fill on 10/28/16 at $32.49,a 20.01% return for investors.