Archive for Opinions – Page 46

26 Jul

Week Ahead: Trillion Dollar Titans In Focus

By ForexTime 

  • 4 of the so-called “Magnificent 7” set to publish earnings
  • Combined market cap of 4 tech giants over $9 trillion
  • Beyond earnings, key focus remains on AI initiatives
  • Meta could move almost 10% ↑ or ↓ post-earnings
  • Apple biggest company in the world reports results Friday

An exceptional list of key risk events could present fresh trading opportunities in the week ahead.

Rate decisions my major central banks to the US monthly jobs report and corporate earnings from the most valuable companies in the world will be in focus:

Monday, 29th July

  • US30: McDonald’s earnings
  • NETH25: Heineken earnings
  • NAS100: Nvidia & Meta fireside chat

Tuesday, 30th July

  • EU50: Eurozone economic/consumer confidence, GDP
  • GER40: Germany CPI, GDP
  • JP225: Japan unemployment
  • USDInd: US consumer confidence
  • NAS100: Microsoft earnings

Wednesday, 31st July

  • AU200: Australia CPI, retail sales
  • CN50: China PMI’s
  • EU50: Eurozone CPI, Germany unemployment
  • JP225: BoJ rate decision, industrial production, retail sales
  • TWN: Taiwan GDP
  • US500: Meta Platform earnings, Fed rate decision

Thursday, 1st August  

  • CN50: China Caixin manufacturing PMI
  • EU50: Eurozone/Germany manufacturing PMI
  • UK100: BoE rate decision, manufacturing PMI
  • USDInd: initial jobless claims, ISM manufacturing
  • NAS100: Apple, Amazon earnings

Friday, 2nd August

  • US500: US June NFP report

Our attention falls on earnings from the trillion-dollar club after disappointing results from Alphabet and Tesla fanned fears over the A.I. frenzy being overblown.

As of writing, US equities are heading for a second week of declines after recording their worst day since 2020 on Wednesday.

Four of the so-called “Magnificent” 7 tech giants with a combined market cap of over $9 trillion are set to publish their results in the week ahead. This is what you need to know:

    1) Microsoft

Microsoft reports its fiscal fourth quarter earnings on Tuesday 30th after US markets close.

Despite shedding over 6% this month, its shares are still up roughly 10% year-to-date thanks to the A.I. frenzy. The bar has been set quite high with investors looking for solid results to support its whooping $3.1 trillion market valuation. Much focus will be on Microsoft’s Azure cloud platform business which fueled the tech giant’s earnings beat in previous quarters and any fresh updates on its AI initiatives.

Markets are forecasting a 4.9% move, either Up or Down, for Microsoft stocks post earnings.

Micro

 

    2) Meta Platforms

Meta is set to report second-quarter earnings after US market close on Wednesday 31st July.

Its shares are up almost 30% this year amid the excitement around AI translating to big profit in the tech arena. While the company is expected to report year-over-year revenue and earnings growth, it’s all about the strength of its advertising business. Any new insight on AI opportunities especially after the launch of Llama 3.1 could be welcomed by investors.

Markets are forecasting a 9% move, either Up or Down, for Meta stocks post earnings.

Meta

 

    3) Amazon

On Thursday 1st of August after US markets close, Amazon will publish its second quarter earnings.

Quarterly revenues are seen rising to $148.8 billion from $134.4 billion in the prior year, equating to a near 11% increase. Still, much focus will be on Amazons cloud computing and advertising business in addition to any updates on AI to gauge its business outlook.

Markets are forecasting a 7% move, either Up or Down, for Amazon stocks post earnings.

Amazon

 

    4) Apple

The most valuable company in the entire world with a market cap of $3.3 trillion reports its third quarter earnings on Thursday 1st after US markets close.

The titan is expected to report year-over-year revenue and earnings growth. However, attention will be on the performance of iPhone sales – especially due to the challenges in China. Beyond the earnings investors will be looking for any fresh updates on its new AI generative software or possible guidance for the upcoming quarter.

Still, Apple shares are up 13% this year with markets projecting a 4% move, either Up or Down, for Apple stocks post earnings.

Apple

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ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

Opinions Stock Market News
25 Jul

Broadcom (AVGO) and Micron (MU): Top Picks for Data Center Investment Surge

By The Ino.com Team

The expected record spending on infrastructure by cloud computing leaders such as Microsoft Corporation (MSFT) and Amazon.com, Inc. (AMZN) this year highlights the escalating investments in artificial intelligence (AI) data centers, a trend likely to benefit chipmakers significantly.

Bank of America (BofA) analysts forecast that cloud service provider capital expenditures will reach $121 billion in the second half of 2024, bringing the total to a record $227 billion in 2024. This figure marks a 39% increase compared to the previous year.

c, Microsoft, and Meta Platforms, Inc. (META) are predicted to more than double their spending compared to 2020 levels, while Oracle Corporation (ORCL) is expected to increase its capital expenditure nearly sixfold. The proportion of this spending allocated to data centers is already around 55% and is anticipated to rise further, reflecting the critical role of data centers in supporting advanced AI applications.

While NVIDIA Corporation (NVDA) stands out as the dominant player in the AI GPU market, BofA analysts have highlighted Broadcom Inc. (AVGO) and Micron Technology, Inc. (MU) as compelling alternatives for investors seeking to benefit from this trend.

In this article, we will delve into why Broadcom and Micron are well-positioned to capitalize on growing investments by cloud service providers in AI data centers, evaluate their financial health and recent performance, and explore the potential headwinds and tailwinds they may encounter in the near future.

Broadcom Inc. (AVGO)

Valued at a $732.45 billion market cap, Broadcom Inc. (AVGO) is a global tech leader that designs, develops, and supplies semiconductor and infrastructure software solutions. Broadcom’s extensive portfolio of semiconductor solutions, including networking chips, storage adapters, and advanced optical components, makes it a critical supplier for data centers.

Moreover, Broadcom’s leadership in networking solutions, exemplified by its Tomahawk and Trident series of Ethernet switches, positions it as a critical beneficiary of increased AI data center spending.

In May, AVGO revolutionized the data center ecosystem with its latest portfolio of highly scalable, high-performing, low-power 400G PCIe Gen 5.0 Ethernet adapters. The latest products provide an improved, open, standards-based Ethernet NIC and switching solution to address connectivity bottlenecks caused by the rapid growth in XPU bandwidth and cluster sizes in AI data centers.

Further, Broadcom’s strategic acquisitions, such as the recent purchase of VMware, Inc., enhance its data center and cloud computing capabilities. With this acquisition, AVGO will bring together its engineering-first, innovation-centric teams as it takes another significant step forward in building the world’s leading infrastructure technology company.

Broadcom’s solid second-quarter performance was primarily driven by AI demand and VMware. AVGO’s net revenue increased 43% year-over-year to $12.49 billion in the quarter that ended May 5, 2024. That exceeded the consensus revenue estimate of $12.01 billion. Revenue from its AI products hit a record of $3.10 billion for the quarter.

AVGO reported triple-digit revenue growth in the Infrastructure Software segment to $5.29 billion as enterprises increasingly adopted the VMware software stack to build their private clouds. Its gross margin rose 27.2% year-over-year to $7.78 billion. Its non-GAAP operating income grew 32% from the year-ago value to $7.15 billion. Its adjusted EBITDA was $7.43 billion, up 30.6% year-over-year.

Further, the company’s non-GAAP net income was $5.39 billion or $10.96 per share, up 20.2% and 6.2% from the prior year’s quarter, respectively. Cash from operations of $4.58 billion for the quarter, less capital expenditures of $132 million, resulted in free cash flow of $4.45 billion, or 36% of revenue.

When it posted solid earnings for its second quarter, Broadcom announced a ten-for-one stock split, which took effect on July 12, making stock ownership more affordable and accessible to investors.

Moreover, AVGO raised its fiscal year 2024 guidance. The tech company expects full-year revenue of nearly $51 billion. Broadcom anticipates $10 billion in revenue from chips related to AI this year. Its adjusted EBITDA is expected to be approximately 61% of projected revenue.

Analysts expect AVGO’s revenue for the third quarter (ending July 2024) to grow 45.9% year-over-year to $12.95 billion. The consensus EPS estimate of $1.20 for the ongoing quarter indicates a 14% year-over-year increase. Also, the company has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.

In addition, the company’s revenue and EPS for the fiscal year ending October 2024 are expected to increase 43.6% and 12.4% from the previous year to $51.44 billion and $4.75, respectively.

AVGO’s shares have gained more than 29% over the past six months and around 74% over the past year. Moreover, the stock is up nearly 40% year-to-date.

Micron Technology, Inc. (MU)

Another chipmaker that is well-poised to benefit from significant data center spending among enterprises is Micron Technology, Inc. (MU). With a $126.70 billion market cap, MU provides cutting-edge memory and storage products globally. The company operates through four segments: Compute and Networking Business Unit; Mobile Business Unit; Embedded Business Unit; and Storage Business Unit.

Micron’s role as a leading provider of DRAM and NAND flash memory positions it to capitalize on the surging demand for high-performance memory solutions. The need for advanced memory products grows as data centers expand to support AI and machine learning workloads. The company’s innovation in memory technologies, such as the HBM2E, aligns well with the performance requirements of modern data centers.

Also, recently, MU announced sampling its next-generation GDDR7 graphics memory with the industry’s highest bit density. The best-in-class capabilities of Micro GDDR7 will optimize AI, gaming, and high-performance computing workloads. Notably, Micron reached an industry milestone as the first to validate and ship 128GB DDR5 32Gb server DRAM to address the increasing demands for rigorous speed and capacity of memory-intensive Gen AI applications.

Further, MU’s strategic partnerships with leading tech companies like Nvidia and Intel Corporation (INTC) position the chipmaker at the forefront of technology advancements. In February, Micron started mass production of its HBM2E solution for use in Nvidia’s latest AI chip. Micron’s 24GB 8H HBM3E will be part of NVIDIA H200 Tensor Core GPUs, expected to begin shipping in the second quarter.

For the third quarter, which ended May 30, 2024, MU posted revenue of $6.81 billion, surpassing analysts’ expectations of $6.67 billion. That compared to $5.82 billion in the prior quarter and $3.75 billion for the same period last year. Moreover, AI demand drove 50% sequential data center revenue growth and record-high data center revenue mix.

MU’s non-GAAP gross margin was $1.92 billion, versus $1.16 million in the prior quarter and negative $603 million for the previous year’s quarter. Its non-GAAP operating income came in at $941 million, compared to $204 million in the prior quarter and negative $1.47 billion for the same period in 2023.

Additionally, the chip company reported non-GAAP net income and earnings per share of $702 million and $0.62 for the third quarter, compared to non-GAAP net loss and loss per share of $1.57 billion and $1.43 a year ago, respectively. Its EPS beat the consensus estimate of $0.53. Its adjusted free cash flow was $425 million during the quarter, compared to a negative $1.36 billion in the prior year’s quarter.

For the fourth quarter of fiscal 2024, Micron expects non-GAAP revenue of $7.60 million ± $200 million, and its gross margin is anticipated to be 34.5% ± 1%. Also, the company expects its non-GAAP earnings per share to be $1.08 ± 0.08.

Analysts expect AVGO’s revenue for the fourth quarter (ending August 2024) to increase 91.4% year-over-year to $7.68 billion. The company is expected to report an EPS of $1.14 for the current quarter, compared to a loss per share of $1.07 in the prior year’s quarter. Further, the company has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.

MU’s shares have surged over 30% over the past six months and approximately 75% over the past year.

Bottom Line

The substantial surge in capital expenditures by cloud computing giants like Microsoft, Amazon, and Alphabet highlights the importance of AI and data centers in the tech industry’s landscape. Broadcom and Micron emerge as two of the most promising chip stocks for investors seeking to benefit from this trend. Both companies offer solid financial health, significant market positions, and exposure to the expanding data center and AI markets.

While Broadcom’s diverse semiconductor solutions and Micron’s leadership in memory technology make them attractive investment opportunities, investors must remain mindful of potential headwinds, including market competition and geopolitical risks. By evaluating these factors and understanding the growth potential of these companies, investors can make informed decisions in the rapidly evolving technology sector.

By Ino.com – See our Trader Blog, INO TV Free & Market Analysis Alerts

Source: Broadcom (AVGO) and Micron (MU): Top Picks for Data Center Investment Surge

Opinions Stock Market News
24 Jul

Spot Ethereum ETFs go live!

By ForexTime 

  • Ethereum ETF’s exceed $100 million inflows on debut
  • Collective trading volume of ETFs surpass $1 billion
  • Cryptocurrency ↑ 50% since start of 2024
  • Technical levels – 21 & 50 day SMA

Only a few months ago we discussed the possibility of Ethereum ETFs after Bitcoin paved the way.

Earlier this week, Ethereum ETFs finally went live – marking another watershed moment in the digital asset space. And its debut yesterday did not disappoint, bringing in over $100 million of inflows despite the massive $484 million outflows from Grayscale’s freshly converted Ethereum Trust.

Note: An ETF is a derivative that enables traders to benefit from changes in the underlying asset’s price without owning it.

Like we have seen with Bitcoin ETFs, this crucial development may lead to increased exposure to Ethereum – providing greater and easier access without owning it. In addition, the second crypto adoption could open the floodgates for more ETF adoptions, with fresh anticipation for a Solana ETF soon.

Despite the collective trading volume of the nine new spot ETFs surpassing over $1 billion, Ethereum offered a muted response. Prices are trading around 3466 as of writing, trapped within a range on the daily charts.

Still, Ethereum is up over 50% since the start of 2024 and may push higher if the new Ether ETFs attract fresh inflows from investors and institutions.

Since reaching all-time highs on March 12th, 2024, Ethereum seems to be morphing into a descending triangle.

After bouncing off the support of the descending triangle on July 8th, 2024, the cryptocurrency rallied for 8 consecutive days and has remained in a range for the past 9 days.

The last 6-days have seen Ethereum prices close above its 50-day moving average and the cryptocurrency bulls may look to the following near-term resistance levels.

  • $3547.34: The resistance of the current range-bound channel

  • $3686: An important price level

Ethereum bears on the other hand will have their sights on the following near-term support level.

  • $3408.04; The 50-day simple moving average

  • $3385.39; The support level of the current range-bound area

  • $3262.77; The 21-day simple moving average

Ether

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Cryptocurrencies Opinions
23 Jul

American Bank Stocks Surge on IB Comeback

Source: McAlinden Research (7/18/24)

McAlinden Research Partners McAlinden Research takes a look at shares of U.S. banks, which it believes are surging in the wake of recent quarterly earnings.

The latest spate of bank earnings coincided with the SPDR S&P Bank ETF’s (KBE:NYSEARCA) best 5-day span of trading since November 2020, rising by 12% in the period to Wednesday. The market’s positive reaction to second-quarter results was largely based on an ongoing rebound in the investment banking divisions of America’s largest financial institutions and some light at the end of the tunnel for beaten-down regional banks that have languished under persistently high short-term rates at the Fed.

In our July 1 Intelligence Briefing, we noted that results from Jefferies Financial Group, which come in well before most other financial firms, demonstrated a powerful performance from its capital markets and IB businesses. That disclosure resulted in Jefferies’s stock price touching an all-time high. We noted that the bounce in revenues could foreshadow similar strength for its larger peers. This was to be expected as global M&A volumes were up about 8% in Q2 YoY, but JPMorgan, Citigroup, and Wells Fargo reported particularly strong annual increases in their IB revenue of 46%, 60%, and 38%, respectively.

In fact, the Financial Times reports that Q2 was Wall Street’s best quarter for investment banking in more than two years, and four of the five largest US banks (with Goldman Sachs being the exception) announced higher-than-expected investment banking revenues for the quarter.

That was a helpful boost, but U.S. banks will need to see a continued resurgence of M&A to keep an increasing level of fees rolling in. Goldman Sachs noted that M&A volumes were still about 20% below 10-year averages, largely as a result of persistently slow private equity dealmaking volume. Bloomberg notes that PE sponsors have constituted up to 30% of investment banking revenue in some recent years. A burgeoning recovery in the underwriting of new public listings would also help to juice the fortunes of financial shares in quarters to come.

MRP recently highlighted a slight uptick in IPO proceeds YoY in Q1, along with a similarly moderate bounce in the number of initial listings, noting that a critical pillar of any potential IPO market recovery will be an expansion of PE exits. In 2023, US exits fell to a tenth of the 140 recorded in 2021, and it has been a tough start to 2024 as well, as PitchBook data showed only two private equity-backed IPOs over $100 million had been completed by the end of April, raising about $1 billion.

A gradual decline in rates should assist in the bounce-back of M&A activity. Long-term rates in the U.S. have already eased significantly since the end of April, but banks will also need a steeper fall in short-term rates to see earnings improve more significantly. One of the headwinds banks highlighted in second-quarter results was the consistent elevation of funding costs for the capital they lend out. Banks borrow money at the short end of the yield curve and end at the long end and a more than 20-month-long inversion of the 10-year U.S. Treasury yield versus the 3-month yield (10yr-3mo) has continually diminished net interest margins (NIMs which measure interest earned on loans versus interest paid to depositors) across four of the past five quarters.

When short-term rates are high, depositors tend to demand greater compensation for providing banks with their deposits — typically the cheapest source of liquidity for banks. As such, banks end up having to raise rates paid on deposits to compete with money market funds, as well as each other, for flows. Relief on this front is increasingly likely as a continued softening of consumer price inflation and a gradual weakening of labor market tightness is boosting bets on a rate cut in September. In fact, CME’s FedWatch tool calculates that bets made by Fed Funds futures have increased the odds of more than one cut by the end of the year to roughly 95%.

 

Important Disclosures:

  1. Statements and opinions expressed are the opinions of the author and not of Streetwise Reports, Street Smart, or their officers. The author is wholly responsible for the accuracy of the statements. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Any disclosures from the author can be found  below. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
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McAlinden Research Partners Disclosures
This report has been prepared solely for informational purposes and is not an offer to buy/sell/endorse or a solicitation of an offer to buy/sell/endorse Interests or any other security or instrument or to participate in any trading or investment strategy. No representation or warranty (express or implied) is made or can be given with respect to the sequence, accuracy, completeness, or timeliness of the information in this Report. Unless otherwise noted, all information is sourced from public data.
McAlinden Research Partners is a division of Catalpa Capital Advisors, LLC (CCA), a Registered Investment Advisor. References to specific securities, asset classes and financial markets discussed herein are for illustrative purposes only and should not be interpreted as recommendations to purchase or sell such securities. CCA, MRP, employees and direct affiliates of the firm may or may not own any of the securities mentioned in the report at the time of publication.

Opinions Stock Market News
23 Jul

Cutting marketing spending often backfires on businesses – new research could help investors distinguish shortsighted cuts from smart ones

By Andre Martin, University of Notre Dame  

Businesses are often tempted to cut their marketing budgets for the short-term savings it provides – but those cuts can cause problems in the long term. A new study my colleague Tarun Kushwaha and I published in The Journal of Marketing proposes a method for predicting whether these counterproductive cuts will take place up to a year in advance.

We gathered transcripts of nearly 25,000 earnings calls held by public companies from 2008 to 2019. We then analyzed how management teams discussed marketing and earnings. We found that the more earnings-oriented language was in a call — think words like “lucrative” or “revenues” — the more likely a management team was to cut their marketing budget for a boost in earnings.

Unlike business-as-usual budget shifts, the motive in these cases was to raise short-term earnings to gain personal profits – for example, to boost stock prices before an executive retires – to raise immediate funds, or to satisfy investor pressure and expectations. These cuts in exchange for a bump in earnings are shortsighted, since investing in marketing tends to grow a company’s market share over time.

Why it matters

Executives often feel pressured to meet short-term earnings targets at the expense of long-term goals, survey data and research have shown. Cutting costs is one way businesses make themselves look better in the short term. And since investing in marketing takes time to pay off, marketing spending often winds up on the chopping block.

My fellow marketing professors call these “myopic” marketing spending decisions – “myopic” being a fancy word for shortsighted. They often happen before initial public offerings, share repurchases and executive retirements.

While these myopic decisions have short-term benefits, they harm investors, customers and other stakeholders in the long term. After companies myopically cut marketing spending, they often lose market value; that’s why such cuts are linked with worse stock-market performance in the long run. A tool that helps investors identify myopic marketing spending would help them protect their portfolios from negative long-term consequences.

Our method isn’t just backward-looking – it can be used to forecast future shortsighted cuts to marketing spending. Investors could use it to analyze publicly available earnings-calls transcripts for useful data up to four times a year. We estimate that for every US$100 invested, using our method to avoid investing in shortsighted companies could return an additional $6.44 over four years compared with conventional methods. Marketing firms and advertising agencies could also use it to identify companies that plan to pare their marketing budgets.

What’s next

As part of our research efforts, my team has published the algorithm and data necessary to replicate our findings. This will let individual investors and other stakeholders gain valuable insights into executives’ intentions regarding the funding of their marketing and research departments.

While our research has primarily focused on transcribed text from earnings calls, we see more potential in analyzing the audio and video from these calls. Audio analysis could reveal insights from tone, pitch, pauses and filler words, while video analysis could capture the brief involuntary facial expressions known as micro-expressions.

The Research Brief is a short take on interesting academic work.The Conversation

About the Author:

Andre Martin, Assistant Professor of Marketing, University of Notre Dame

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Opinions Stock Market News
20 Jul

Currency Speculators push British Pound bets to Record High

By InvestMacro

Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC).

The latest COT data is updated through Tuesday July 16th and shows a quick view of how large market participants (for-profit speculators and commercial traders) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar.

Weekly Speculator Bets led by British Pound & Japanese Yen

The COT currency market speculator bets were lower this week as five out of the eleven currency markets we cover had higher positioning while the other six markets had lower speculator contracts.

Leading the gains for the currency markets was the British Pound (48,212 contracts) with the Japanese Yen (30,961 contracts), the EuroFX (21,126 contracts), the Australian Dollar (8,700 contracts) and the US Dollar Index (2,342 contracts) also recording positive weeks.

The currencies seeing declines in speculator bets on the week were the Canadian Dollar (-21,261 contracts), the New Zealand Dollar (-13,351 contracts), the Swiss Franc (-3,705 contracts), the Mexican Peso (-1,613 contracts), the Brazilian Real (-1,842 contracts) and with Bitcoin (-461 contracts) also registering lower bets on the week.

Currency Speculators push British Pound bets to Record High

Highlighting the COT currency’s data is the new record high bullish sentiment in the speculator’s positioning of the British Pound Sterling.

Large speculative Sterling positions jumped this week by +48,212 contracts following last week’s rise by +22,649 contracts and the previous week’s (two weeks ago) gain by +17,993 contracts. This week’s rise by over +48,000 contracts is the largest one-week increase on record and pushed the overall net speculator standing to +132,902 contracts – a new all-time record bullish position. This new high level surpasses the previous record high of +98,366 contracts that was recorded on July 17th of 2007.

The GBP position has now gained by +152,977 contracts in just the past nine weeks, going from a bearish level of -20,075 contracts on May 14th to a new record high level this week to complete an incredible sentiment turnaround in a short period of time.

The Pound Sterling exchange rate (GBPUSD currency pair) against the US Dollar has been on the move higher and touched above the 1.3000 level this week for the first time in almost exactly a year. Helping the GBP strength is the outlook that the Bank of England will take longer to cut their interest rate due to sticky inflation while the US Federal Reserve is forecast-ed to start cutting rates this year and the Eurozone is possibly going to reduce their rate again in September.

Currencies Net Speculators Leaderboard

Legend: Weekly Speculators Change | Speculators Current Net Position | Speculators Strength Score compared to last 3-Years (0-100 range)

Strength Scores led by British Pound & Australian Dollar

COT Strength Scores (a normalized measure of Speculator positions over a 3-Year range, from 0 to 100 where above 80 is Extreme-Bullish and below 20 is Extreme-Bearish) showed that the British Pound (100 percent) and the Australian Dollar (100 percent) lead the currency markets this week. The New Zealand Dollar (65 percent), Mexican Peso (62 percent) and Bitcoin (58 percent) come in as the next highest in the weekly strength scores.

On the downside, the Brazilian Real (0 percent), the Swiss Franc (0 percent) and the Canadian Dollar (9 percent) come in at the lowest strength levels currently and are in Extreme-Bearish territory (below 20 percent).

Strength Statistics:
US Dollar Index (43.6 percent) vs US Dollar Index previous week (38.6 percent)
EuroFX (30.8 percent) vs EuroFX previous week (21.9 percent)
British Pound Sterling (100.0 percent) vs British Pound Sterling previous week (77.4 percent)
Japanese Yen (20.2 percent) vs Japanese Yen previous week (1.3 percent)
Swiss Franc (0.0 percent) vs Swiss Franc previous week (6.2 percent)
Canadian Dollar (8.8 percent) vs Canadian Dollar previous week (21.0 percent)
Australian Dollar (100.0 percent) vs Australian Dollar previous week (92.7 percent)
New Zealand Dollar (65.0 percent) vs New Zealand Dollar previous week (90.7 percent)
Mexican Peso (61.7 percent) vs Mexican Peso previous week (62.5 percent)
Brazilian Real (0.0 percent) vs Brazilian Real previous week (1.9 percent)
Bitcoin (57.7 percent) vs Bitcoin previous week (64.6 percent)

Australian Dollar & British Pound top the 6-Week Strength Trends

COT Strength Score Trends (or move index, calculates the 6-week changes in strength scores) showed that the Australian Dollar (53 percent) and the British Pound (42 percent) lead the past six weeks trends for the currencies. The US Dollar Index (29 percent), the New Zealand Dollar (10 percent) and Bitcoin (8 percent) are the next highest positive movers in the latest trends data.

The Mexican Peso (-31 percent) leads the downside trend scores currently with the Brazilian Real (-27 percent), Canadian Dollar (-23 percent) and the EuroFX (-18 percent) following next with lower trend scores.

Strength Trend Statistics:
US Dollar Index (29.1 percent) vs US Dollar Index previous week (25.7 percent)
EuroFX (-18.4 percent) vs EuroFX previous week (-23.0 percent)
British Pound Sterling (42.1 percent) vs British Pound Sterling previous week (27.8 percent)
Japanese Yen (-11.6 percent) vs Japanese Yen previous week (-15.8 percent)
Swiss Franc (-6.8 percent) vs Swiss Franc previous week (-2.9 percent)
Canadian Dollar (-23.4 percent) vs Canadian Dollar previous week (-14.1 percent)
Australian Dollar (52.6 percent) vs Australian Dollar previous week (44.1 percent)
New Zealand Dollar (10.3 percent) vs New Zealand Dollar previous week (45.9 percent)
Mexican Peso (-30.9 percent) vs Mexican Peso previous week (-28.3 percent)
Brazilian Real (-27.0 percent) vs Brazilian Real previous week (-6.4 percent)
Bitcoin (8.1 percent) vs Bitcoin previous week (9.6 percent)

Individual COT Forex Markets:

US Dollar Index Futures:

US Dollar Index Forex Futures COT ChartThe US Dollar Index large speculator standing this week was a net position of 18,550 contracts in the data reported through Tuesday. This was a weekly rise of 2,342 contracts from the previous week which had a total of 16,208 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 43.6 percent. The commercials are Bullish with a score of 60.0 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 19.6 percent.

Price Trend-Following Model: Uptrend

Our weekly trend-following model classifies the current market price position as: Uptrend. The current action for the model is considered to be: Hold – Maintain Long Position.

US DOLLAR INDEX StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:78.59.68.1
– Percent of Open Interest Shorts:30.559.46.2
– Net Position:18,550-19,278728
– Gross Longs:30,3273,6953,141
– Gross Shorts:11,77722,9732,413
– Long to Short Ratio:2.6 to 10.2 to 11.3 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):43.660.019.6
– Strength Index Reading (3 Year Range):BearishBullishBearish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:29.1-27.6-6.6

 

Euro Currency Futures:

Euro Currency Futures COT ChartThe Euro Currency large speculator standing this week was a net position of 24,749 contracts in the data reported through Tuesday. This was a weekly lift of 21,126 contracts from the previous week which had a total of 3,623 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 30.8 percent. The commercials are Bullish with a score of 70.7 percent and the small traders (not shown in chart) are Bearish with a score of 26.5 percent.

Price Trend-Following Model: Weak Downtrend

Our weekly trend-following model classifies the current market price position as: Weak Downtrend. The current action for the model is considered to be: Hold – Maintain Short Position.

EURO Currency StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:27.757.811.4
– Percent of Open Interest Shorts:23.965.47.6
– Net Position:24,749-49,54924,800
– Gross Longs:179,937375,21774,281
– Gross Shorts:155,188424,76649,481
– Long to Short Ratio:1.2 to 10.9 to 11.5 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):30.870.726.5
– Strength Index Reading (3 Year Range):BearishBullishBearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:-18.418.4-13.9

 

British Pound Sterling Futures:

British Pound Sterling Futures COT ChartThe British Pound Sterling large speculator standing this week was a net position of 132,902 contracts in the data reported through Tuesday. This was a weekly rise of 48,212 contracts from the previous week which had a total of 84,690 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 100.0 percent. The commercials are Bearish-Extreme with a score of 0.0 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 96.3 percent.

Price Trend-Following Model: Strong Uptrend

Our weekly trend-following model classifies the current market price position as: Strong Uptrend. The current action for the model is considered to be: Hold – Maintain Long Position.

BRITISH POUND StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:65.318.114.3
– Percent of Open Interest Shorts:18.071.28.5
– Net Position:132,902-149,11816,216
– Gross Longs:183,28750,80340,067
– Gross Shorts:50,385199,92123,851
– Long to Short Ratio:3.6 to 10.3 to 11.7 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):100.00.096.3
– Strength Index Reading (3 Year Range):Bullish-ExtremeBearish-ExtremeBullish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:42.1-40.822.4

 

Japanese Yen Futures:

Japanese Yen Forex Futures COT ChartThe Japanese Yen large speculator standing this week was a net position of -151,072 contracts in the data reported through Tuesday. This was a weekly gain of 30,961 contracts from the previous week which had a total of -182,033 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 20.2 percent. The commercials are Bullish-Extreme with a score of 80.0 percent and the small traders (not shown in chart) are Bullish with a score of 57.4 percent.

Price Trend-Following Model: Downtrend

Our weekly trend-following model classifies the current market price position as: Downtrend. The current action for the model is considered to be: Hold – Maintain Short Position.

JAPANESE YEN StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:15.470.312.2
– Percent of Open Interest Shorts:64.618.514.9
– Net Position:-151,072159,089-8,017
– Gross Longs:47,356216,04237,613
– Gross Shorts:198,42856,95345,630
– Long to Short Ratio:0.2 to 13.8 to 10.8 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):20.280.057.4
– Strength Index Reading (3 Year Range):BearishBullish-ExtremeBullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:-11.616.5-32.1

 

Swiss Franc Futures:

Swiss Franc Forex Futures COT ChartThe Swiss Franc large speculator standing this week was a net position of -49,793 contracts in the data reported through Tuesday. This was a weekly reduction of -3,705 contracts from the previous week which had a total of -46,088 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 0.0 percent. The commercials are Bullish-Extreme with a score of 100.0 percent and the small traders (not shown in chart) are Bearish with a score of 23.2 percent.

Price Trend-Following Model: Weak Downtrend

Our weekly trend-following model classifies the current market price position as: Weak Downtrend. The current action for the model is considered to be: Hold – Maintain Short Position.

SWISS FRANC StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:6.682.310.5
– Percent of Open Interest Shorts:57.019.822.5
– Net Position:-49,79361,672-11,879
– Gross Longs:6,49181,21910,344
– Gross Shorts:56,28419,54722,223
– Long to Short Ratio:0.1 to 14.2 to 10.5 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):0.0100.023.2
– Strength Index Reading (3 Year Range):Bearish-ExtremeBullish-ExtremeBearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:-6.87.7-3.7

 

Canadian Dollar Futures:

Canadian Dollar Forex Futures COT ChartThe Canadian Dollar large speculator standing this week was a net position of -132,473 contracts in the data reported through Tuesday. This was a weekly fall of -21,261 contracts from the previous week which had a total of -111,212 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 8.8 percent. The commercials are Bullish-Extreme with a score of 89.5 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 15.7 percent.

Price Trend-Following Model: Strong Downtrend

Our weekly trend-following model classifies the current market price position as: Strong Downtrend. The current action for the model is considered to be: Hold – Maintain Short Position.

CANADIAN DOLLAR StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:8.878.010.3
– Percent of Open Interest Shorts:56.029.012.1
– Net Position:-132,473137,579-5,106
– Gross Longs:24,734219,02729,000
– Gross Shorts:157,20781,44834,106
– Long to Short Ratio:0.2 to 12.7 to 10.9 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):8.889.515.7
– Strength Index Reading (3 Year Range):Bearish-ExtremeBullish-ExtremeBearish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:-23.419.19.3

 

Australian Dollar Futures:

Australian Dollar Forex Futures COT ChartThe Australian Dollar large speculator standing this week was a net position of 11,113 contracts in the data reported through Tuesday. This was a weekly gain of 8,700 contracts from the previous week which had a total of 2,413 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 100.0 percent. The commercials are Bearish-Extreme with a score of 0.0 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 100.0 percent.

Price Trend-Following Model: Uptrend

Our weekly trend-following model classifies the current market price position as: Uptrend. The current action for the model is considered to be: Hold – Maintain Long Position.

AUSTRALIAN DOLLAR StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:46.336.814.9
– Percent of Open Interest Shorts:41.548.97.6
– Net Position:11,113-27,88316,770
– Gross Longs:106,31284,40334,164
– Gross Shorts:95,199112,28617,394
– Long to Short Ratio:1.1 to 10.8 to 12.0 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):100.00.0100.0
– Strength Index Reading (3 Year Range):Bullish-ExtremeBearish-ExtremeBullish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:52.6-51.432.4

 

New Zealand Dollar Futures:

New Zealand Dollar Forex Futures COT ChartThe New Zealand Dollar large speculator standing this week was a net position of 12,561 contracts in the data reported through Tuesday. This was a weekly decrease of -13,351 contracts from the previous week which had a total of 25,912 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 65.0 percent. The commercials are Bearish with a score of 33.4 percent and the small traders (not shown in chart) are Bullish with a score of 52.1 percent.

Price Trend-Following Model: Weak Uptrend

Our weekly trend-following model classifies the current market price position as: Weak Uptrend. The current action for the model is considered to be: Hold – Maintain Long Position.

NEW ZEALAND DOLLAR StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:56.632.07.6
– Percent of Open Interest Shorts:35.951.88.4
– Net Position:12,561-12,102-459
– Gross Longs:34,47319,4844,648
– Gross Shorts:21,91231,5865,107
– Long to Short Ratio:1.6 to 10.6 to 10.9 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):65.033.452.1
– Strength Index Reading (3 Year Range):BullishBearishBullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:10.3-8.1-12.8

 

Mexican Peso Futures:

Mexican Peso Futures COT ChartThe Mexican Peso large speculator standing this week was a net position of 61,710 contracts in the data reported through Tuesday. This was a weekly reduction of -1,613 contracts from the previous week which had a total of 63,323 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 61.7 percent. The commercials are Bearish with a score of 38.3 percent and the small traders (not shown in chart) are Bearish with a score of 26.9 percent.

Price Trend-Following Model: Downtrend

Our weekly trend-following model classifies the current market price position as: Downtrend. The current action for the model is considered to be: Hold – Maintain Short Position.

MEXICAN PESO StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:49.946.52.9
– Percent of Open Interest Shorts:18.679.01.7
– Net Position:61,710-64,1822,472
– Gross Longs:98,49591,8665,742
– Gross Shorts:36,785156,0483,270
– Long to Short Ratio:2.7 to 10.6 to 11.8 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):61.738.326.9
– Strength Index Reading (3 Year Range):BullishBearishBearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:-30.930.2-1.7

 

Brazilian Real Futures:

Brazil Real Futures COT ChartThe Brazilian Real large speculator standing this week was a net position of -44,526 contracts in the data reported through Tuesday. This was a weekly lowering of -1,842 contracts from the previous week which had a total of -42,684 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 0.0 percent. The commercials are Bullish-Extreme with a score of 100.0 percent and the small traders (not shown in chart) are Bearish with a score of 32.6 percent.

Price Trend-Following Model: Strong Downtrend

Our weekly trend-following model classifies the current market price position as: Strong Downtrend. The current action for the model is considered to be: Hold – Maintain Short Position.

BRAZIL REAL StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:24.272.52.6
– Percent of Open Interest Shorts:75.221.32.8
– Net Position:-44,52644,720-194
– Gross Longs:21,14063,2872,240
– Gross Shorts:65,66618,5672,434
– Long to Short Ratio:0.3 to 13.4 to 10.9 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):0.0100.032.6
– Strength Index Reading (3 Year Range):Bearish-ExtremeBullish-ExtremeBearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:-27.025.310.0

 

Bitcoin Futures:

Bitcoin Crypto Futures COT ChartThe Bitcoin large speculator standing this week was a net position of -579 contracts in the data reported through Tuesday. This was a weekly decrease of -461 contracts from the previous week which had a total of -118 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 57.7 percent. The commercials are Bullish with a score of 69.3 percent and the small traders (not shown in chart) are Bearish with a score of 22.0 percent.

Price Trend-Following Model: Weak Downtrend

Our weekly trend-following model classifies the current market price position as: Weak Downtrend. The current action for the model is considered to be: Hold – Maintain Short Position.

BITCOIN StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:79.23.54.7
– Percent of Open Interest Shorts:81.12.93.4
– Net Position:-579181398
– Gross Longs:24,7101,0911,463
– Gross Shorts:25,2899101,065
– Long to Short Ratio:1.0 to 11.2 to 11.4 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):57.769.322.0
– Strength Index Reading (3 Year Range):BullishBullishBearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:8.1-4.7-8.1

 

Article By InvestMacro – Receive our weekly COT Newsletter

*COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets.

The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting). See CFTC criteria here.

COT Updates Forex and Currency News Opinions
20 Jul

Speculator Extremes: Australian Dollar, Gold & British Pound top Bullish Bets

By InvestMacro

The latest update for the weekly Commitment of Traders (COT) report was released by the Commodity Futures Trading Commission (CFTC) on Friday for data ending on July 16th.

This weekly Extreme Positions report highlights the Most Bullish and Most Bearish Positions for the speculator category. Extreme positioning in these markets can foreshadow strong moves in the underlying market.

To signify an extreme position, we use the Strength Index (also known as the COT Index) of each instrument, a common method of measuring COT data. The Strength Index is simply a comparison of current trader positions against the range of positions over the previous 3 years. We use over 80 percent as extremely bullish and under 20 percent as extremely bearish. (Compare Strength Index scores across all markets in the data table or cot leaders table)

Here Are This Week’s Most Bullish Speculator Positions:

Australian Dollar


The Australian Dollar speculator position comes in as the most bullish extreme standing this week. The Australian Dollar speculator level is currently at a 100.0 percent score of its 3-year range.

The six-week trend for the percent strength score totaled 52.6 this week. The overall net speculator position was a total of 11,113 net contracts this week with a rise of 8,700 contract in the weekly speculator bets.

Speculators or Non-Commercials Notes:

Speculators, classified as non-commercial traders by the CFTC, are made up of large commodity funds, hedge funds and other significant for-profit participants. The Specs are generally regarded as trend-followers in their behavior towards price action – net speculator bets and prices tend to go in the same directions. These traders often look to buy when prices are rising and sell when prices are falling. To illustrate this point, many times speculator contracts can be found at their most extremes (bullish or bearish) when prices are also close to their highest or lowest levels.

These extreme levels can be dangerous for the large speculators as the trade is most crowded, there is less trading ammunition still sitting on the sidelines to push the trend further and prices have moved a significant distance. When the trend becomes exhausted, some speculators take profits while others look to also exit positions when prices fail to continue in the same direction. This process usually plays out over many months to years and can ultimately create a reverse effect where prices start to fall and speculators start a process of selling when prices are falling.

Gold


The Gold speculator position comes next in the extreme standings this week. The Gold speculator level is now at a 100.0 percent score of its 3-year range.

The six-week trend for the percent strength score was 20.5 this week. The speculator position registered 285,024 net contracts this week with a weekly boost by 30,249 contracts in speculator bets.

British Pound


The British Pound speculator position comes in third this week in the extreme standings. The British Pound speculator level resides at a 100.0 percent score of its 3-year range.

The six-week trend for the speculator strength score came in at 42.1 this week. The overall speculator position was 132,902 net contracts this week with a gain of 48,212 contracts in the weekly speculator bets.

Silver


The Silver speculator position comes up number four in the extreme standings this week. The Silver speculator level is at a 98.8 percent score of its 3-year range.

The six-week trend for the speculator strength score totaled a change of 5.1 this week. The overall speculator position was 60,165 net contracts this week with a small edge lower by -891 contracts in the speculator bets.

Coffee


The Coffee speculator position rounds out the top five in this week’s bullish extreme standings. The Coffee speculator level sits at a 95.0 percent score of its 3-year range. The six-week trend for the speculator strength score was 3.2 this week.

The speculator position was 70,979 net contracts this week with a decrease of -4,441 contracts in the weekly speculator bets.

This Week’s Most Bearish Speculator Positions:

5-Year Bond


The 5-Year Bond speculator position comes in as the most bearish extreme standing this week. The 5-Year Bond speculator level is at a 0.0 percent score of its 3-year range.

The six-week trend for the speculator strength score was -0.2 this week. The overall speculator position was -1,576,174 net contracts this week with a dip by -9,573 contracts in the speculator bets.

Brazil Real


The Brazil Real speculator position comes in next for the most bearish extreme standing on the week. The Brazil Real speculator level is at a 0.0 percent score of its 3-year range.

The six-week trend for the speculator strength score was -27.0 this week. The speculator position was -44,526 net contracts this week with a reduction by -1,842 contracts in the weekly speculator bets.

Swiss Franc


The Swiss Franc speculator position comes in as third most bearish extreme standing of the week. The Swiss Franc speculator level resides at a 0.0 percent score of its 3-year range.

The six-week trend for the speculator strength score was -6.8 this week. The overall speculator position was -49,793 net contracts this week with a drop of -3,705 contracts in the speculator bets.

Cotton


The Cotton speculator position comes in as this week’s fourth most bearish extreme standing. The Cotton speculator level is at a 0.8 percent score of its 3-year range.

The six-week trend for the speculator strength score was -13.3 this week. The speculator position was -26,507 net contracts this week with a decline of -1,998 contracts in the weekly speculator bets.

Corn


Finally, the Corn speculator position comes in as the fifth most bearish extreme standing for this week. The Corn speculator level is at a 3.5 percent score of its 3-year range.

The six-week trend for the speculator strength score was -15.1 this week. The speculator position was -238,816 net contracts this week with an increase of 1,125 contracts in the weekly speculator bets.

Article By InvestMacro – Receive our weekly COT Newsletter

*COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets.

The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting). See CFTC criteria here.

COT Updates Opinions
19 Jul

Want to Learn How to “Read” a Price Chart? Start Here.

See how Elliott wave patterns “subsume” other technical analysis chart patterns

By Elliott Wave International

Some investors who are fans of technical analysis may not realize that another way to look at many classic chart patterns — for example, Head and Shoulders — is to describe them in terms of Elliott waves.

What this means is that once you’ve learned Elliott wave analysis, by proxy you’ve learned most other technical analysis chart patterns that simply go by different names!

It’s a huge time saver.

In August and October 2005, as well as February 2006, Robert Prechter’s Elliott Wave Theorist discussed several chart patterns and showed two examples (with an introductory quote from the August 2005 Elliott Wave Theorist):

The acknowledged “bible” of traditional chart interpretation is Technical Analysis of Stock Trends (1948) by Robert Edwards and MIT alumnus John Magee. … The discussion here utilizes the fifth edition (1966).

Edwards and Magee collected others’ observations about chart patterns and added their own, producing a comprehensive list of forms against which we may compare related aspects of the Wave Principle. It may not be necessary that we undergo this exercise, as these authors observed and displayed these patterns exclusively in charts of individual stocks, not in the averages where the Wave Principle is deemed best to apply. Nevertheless, because many chartists use the same forms for general market interpretation and since the Wave Principle has some applicability to individual stocks, this exercise is important in order to determine if there are any valid market patterns outside the forms of the Wave Principle.

Head and Shoulders Top

Figure 8a shows Edwards and Magee’s depiction of a head and shoulders top, and Figure 8b is Figure 7-4 from Elliott Wave Principle. In a normal wave development, wave five of 3 and wave 4 form the “left shoulder” of the pattern, wave 5 and wave A form the “head,” and wave B and wave one of C form the “right shoulder.” Wave two of C creates the return to the neckline that is typical of the pattern.

Symmetrical Triangle

The Wave Principle covers the chartist’s “symmetrical triangle.” As you can see in Figures 11a and 11b, Edwards and Magee’s example is a perfect rendition of Elliott’s description, right down to the five subwaves.

Edwards and Magee claim, “Prices may move out of a Symmetrical Triangle either up or down. There is seldom if ever…any clue as to the direction….” Elliott’s form is more specifically defined, and its position in the market structure and therefore its implications are more definite.

Even though just two examples were shown here, hopefully, you get a flavor of what was presented in 2005 and 2006 — and an idea of the quality of analysis which our Financial Forecast Service regularly offers.

Realize that a chart pattern — even though it’s “classic” — offers no guarantees — and the same with the Wave Principle.

Yet, keep in mind this adaptation of a Q&A with Robert Prechter from an issue of The Elliott Wave Theorist:

Q: Do you believe that the Wave Principle provides for an objective form of analysis? Two different people can look at the same chart and derive very different wave counts. There are market watchers who say that applying wave theory is very subjective.

A: I always ask, “compared to what?” There is no group more subjective than conventional analysts who look at the same “fundamental” news event [like] a war, the level of interest rates, the P/E ratio, GDP reports, the President’s economic policy, the Fed’s monetary policy, you name it and come up with countless opposing conclusions. They generally don’t even bother to study the data. The Wave Principle is an excellent basis for assessing probabilities regarding future market movement. Probabilities are by nature different from certainties. Some people misinterpret this aspect of analysis as subjectivity, but all probabilities may be put in order objectively according to the rules and guidelines of wave formation.

If you’re unfamiliar with Elliott wave analysis, read Frost & Prechter’s Elliott Wave Principle: Key to Market Behavior, which is the definitive text on the subject. Here’s a quote from the book:

[Ralph N.] Elliott recognized that not news, but something else forms the patterns evident in the market. Generally speaking, the important analytical question is not the news per se, but the importance the market places or appears to place on the news. In periods of increasing optimism, the market’s apparent reaction to an item of news is often different from what it would have been if the market were in a downtrend. It is easy to label the progression of Elliott waves on a historical price chart, but it is impossible to pick out, say, the occurrences of war, the most dramatic of human activities, on the basis of recorded stock market action. The psychology of the market in relation to the news, then, is sometimes useful, especially when the market acts contrarily to what one would “normally” expect.

If you’d like to read the entire online version of Elliott Wave Principle: Key to Market Behavior, you can get complimentary access by following this link: Elliott Wave Principle: Key to Market Behavior.

This article was syndicated by Elliott Wave International and was originally published under the headline Want to Learn How to “Read” a Price Chart? Start Here.. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Economics & Fundamentals Opinions
19 Jul

Week Ahead: Alphabet to kick-start Big Tech earnings

By ForexTime 

  • Alphabet ↑ 27% year-to-date
  • Pay close attention to updates on AI innovations
  • Technical levels = $183, $177 & $170 (Alphabet)
  • Tesla earnings also in focus, stocks ↑ 26% MTD

The week ahead is packed with high-impact data releases and a slew of corporate earnings from the largest companies in the world:

Monday, 22nd July

  • CN50: China loan prime rates
  • TWN: Taiwan jobless rate

Tuesday, 23rd July  

  • EU50: Eurozone consumer confidence
  • SG20: Singapore CPI
  • TWN: Taiwan industrial production
  • NAS100: Alphabet, Tesla earnings
  • FRA40: LVMH earnings

Wednesday, 24th July  

  • CAD: Bank of Canada rate decision
  • EU50: Eurozone, Germany PMI
  • UK100: UK S&P Global PMI
  • US30: IBM earnings, US S&P Global PMI
  • GER40: Deutsche Bank earnings

Thursday, 25th July

  • GER40: Germany IFO business climate
  • US500: US Q2 GDP, initial jobless claims
  • Bitcoin: Crypto 2024 conference in Nashville

Friday, 26th July

  • JP225: Japan Tokyo CPI
  • SG20: Singapore industrial production
  • USDInd: US June PCE report, University of Michigan consumer sentiment

Although earnings season is in full swing, the excitement levels could jump next week when big tech companies report their results. Expectations remain high around whether these AI giants can keep up the bullish momentum that has propelled US markets to record highs this year.

Two of the so-called “Magnificent” 7 tech titans will be under the spotlight.  Here’s what you need to know.

    1) Alphabet

Google parent company Alphabet reports its second-quarter earnings on Tuesday 23rd July after US markets close.

Its shares have gained 27% in 2024 thanks to investor hype around artificial intelligence translating to big gains in the tech space. Still, investors will be looking for another round of exceptional results to justify the solid gains fuelled by the A.I. frenzy.

Beyond the revenue growth and earnings-per-share, updates on AI innovations will be in focus.

Markets are forecasting a 5.8% move, either Up or Down, for Alphabet stocks post earnings.

Talking technicals, Alphabet stocks have shed roughly 6% this week with prices wobbling above the 50-day SMA. The past few days have been rough for tech stocks due to reports of the US mulling tougher restrictions on trading chips with China.

  • A solid breakdown below $177 may open a path towards $170.
  • Should the 50-day SMA prove reliable support, prices may retest $183 and $188.50.

 

    2) Tesla

Tesla is also set to release its second-quarter earnings on Tuesday after the close of US trading.

Despite gaining over 25% in July thanks to a strong delivery report, Tesla stocks are just barely in positive territory year-to-date. The company’s revenues, any mention of affordable vehicles, and the full self-driving software update will be scrutinized by investors to gauge its business outlook.

Quarterly revenues are seen slipping to $24.6 billion from $24.9 billion in the prior year, equating to a 1.2% decline.

Markets are forecasting an 8% move, either Up or Down, for Tesla stocks post-earnings.

Looking at the technical picture, Tesla stocks remain in a wide range on the daily charts with support at $232.50 and resistance at $270. Given the potential 8% move either up or down, a breakout could be on the horizon.

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Opinions Stock Market News
16 Jul

Will a market crash one day be pinned on the Supreme Court? An accounting expert explains why recent rulings have him worried

By Paul Griffin, University of California, Davis 

In two major rulings this past month, the U.S. Supreme Court curtailed the authority of federal agencies to draft and enforce policies that affect the nation’s financial health. One important agency, the Securities and Exchange Commission, took a particularly big hit.

Speaking as someone who has researched financial shenanigans for almost 50 years, I’m concerned that these rulings will backfire on markets and investors.

Taken together, they could lead to watered-down regulations, weakened enforcement and less oversight of the nation’s financial markets and public companies. I fear that they could ultimately be a significant factor in a future market crash.

In one case, Securities and Exchange Commission v. Jarkesy, the court rebuked the SEC — the agency that protects investors from fraud — for using in-house proceedings to discipline firms and others for breaking securities laws. Now, the SEC will need to bring accused securities fraudsters to federal court, which could be more complicated and expensive.

And in the other case, Loper Bright Enterprises v. Raimondo, the court cut back sharply on a long-standing doctrine — the Chevron rule — that gave agencies considerable freedom to craft rules and regulations, particularly when the underlying law might be ambiguous. As a result, federal agencies, including the SEC, have less power to act, ceding that power to lengthier and costlier trial proceedings.

More layers of hidden risk for investors

Both decisions could affect the nation’s financial well-being. Investors who rely on the disclosure rules and the enforcement mechanisms of the SEC for protection – now subject to legal challenge – are about to be saddled with an extra layer of hidden risk not seen in decades – in particular, more questionable accounting practices in their regulatory filings.

Recall that in 1933 and 1934, Congress established the SEC in the aftermath of the Great Depression. What followed in the ensuing years was the formation of less risky and more informed markets.

Investors could also rely on market prices to efficiently and unbiasedly reflect all public information, rather than have to pore over complex financial statements. This led to the U.S. markets becoming the most attractive destination in the world for funds to invest in risky business projects.

The SEC later bolstered financial markets with measures under the Dodd-Frank Act of 2010 to rectify other excesses — such as overly generous credit ratings — that arguably contributed to the 2007–2008 Great Recession. Today, thanks to extensive disclosure requirements and relatively efficient enforcement mechanisms, the U.S. has perhaps the healthiest and most robust financial markets ever.

A new challenge to enforcement

Healthy and robust financial markets don’t operate out of altruism, however.

Monitoring and enforcement mechanisms are pivotal. While the SEC relies partly on the private sector to spot and discipline errant managers for violations of the securities laws – for example, through federal and state securities class action litigation – much of the effort relies on the enforcement division of the SEC.

In particular, the SEC uses “accounting and auditing enforcement releases,” or AAERs, to ensure that firms keep a clean set of books. Since 1995, the SEC has issued 3,266 AAERs, mostly to correct accounting and auditing deficiencies in company financial statements. Numerous studies confirm AAERs as evidence of financial fraud.

AAERs are also a highly efficient form of enforcement — and much less costly than a private securities class action lawsuit. Companies generally agree to settle the allegations of wrongdoing without admission of liability by taking timely steps to improve accounting and auditing and paying fines and penalties.

The payments have been substantial. For example, for 760 enforcement actions in 2022, companies paid as much as US$6.4 billion to the SEC. The announcement of an AAER action is also costly for the firm’s shareholders, with stock prices falling 50% over the next six months following an AAER announcement, according to researchers.

But the Jarkesy ruling could change everything. I don’t see why any publicly traded company would agree to settle an AAER action with fines and sanctions now that it can challenge the SEC’s arguments in a court of law.

The danger of enforcement by courts

What might be the result of removing or paring back the SEC’s key tool of enforcement?

The risk is possibly reverting to an environment like 1928 or 2007. That’s because the ruling will effectively reduce the cost of accounting or auditing violations for would-be or actual violators. It shifts the purview of deciding penalties and fines to the courts rather than in-house proceedings by the SEC, increasing the cost of enforcement to the SEC.

In short, companies will worry less about a future AAER investigation.

In addition, despite auditors’ efforts to ensure that publicly traded financial and investment firms keep a clean set of books based on generally accepted accounting principles, or GAAP, there is still much room for choice, including greater use of non-GAAP accounting rules. With less enforcement, the Jarkesy ruling will encourage more creative accounting, not less.

That creativity already skews toward optimistic earnings reports. The vast majority of earnings releases now exceed analysts’ forecasts — 77% for the S&P 500 in the first quarter of 2024. Moreover, my own research indicates that it’s not just that earning reports exceed analysts’ forecasts, but the dollar size of firms’ positive earnings surprises has grown steadily over the past decade, which is another hidden risk.

Less scrutiny, more long-term risks

Some securities lawyers say the Jarkesy decision won’t change the SEC’s behavior, since the agency has increasingly shifted proceedings to regular courts.

While that’s true for some actions, I think the largest impact will lie in SEC actions not yet undertaken. Businesses and the SEC will act differently in the future because Jarkesy makes SEC enforcement activity more expensive and more uncertain.

Expect more efforts by firms to present their financial performance in the most glowing terms possible, knowing that the cost of SEC enforcement has just increased and the detection likelihood and expected cost to a firm of violating generally accepted accounting principles or generally accepted auditing standards has just decreased.

While not all scholars agree, there are two major periods in the financial history of the United States when a financial meltdown occurred that was in part plausibly due to shoddy accounting and reporting – the Great Depression of 1929 and the Great Recession of 2007–2009.

In the years or decades ahead, should the country face another serious financial crisis leading to a recession, it will be harder to blame the accountants and investment bankers. Instead, attention may turn to two mid-2024 court decisions and the justices who wrote them.The Conversation

About the Author:

Paul Griffin, Distinguished Emeritus Professor of Management, University of California, Davis

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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