The stock of Macom Technology Solutions has set up into a momentum squeeze on institutional traders increasing their long positions. Institutional trader positions have increased by a big 11.75% over the last 3 months.
A few of the more noteworthy Q1 institutional transactions were:
KBC Group NV bought a new position in the company during the first quarter, according to its most recent filing with the SEC. The firm bought 9,211 shares of the semiconductor company’s stock, valued at approximately $445,000. FMR LLC increased its position by 182.8% in the fourth quarter. FMR LLC now owns 818,493 shares of the semiconductor company’s stock valued at $37,880,000. Pinnacle Associates Ltd. acquired a new stake in MACOM Technology Solutions during the first quarter valued at approximately $16,539,000. Wells Fargo & Company MN boosted its stake in the company by 565.9% in the first quarter. Wells Fargo & Company MN now owns 318,562 shares of the semiconductor company’s stock valued at $15,387,000.
MACOM Technology Solutions Stock Chart
The Twiggs Money Flow went bearish on June 14,2017, but now looks like it’s ready to round up as traders accumulate off the 50 SMA line.
MACOM Technology Solutions presents a decent setup pattern. Prices have been consolidating lately and the volatility has been reduced forming a momentum squeeze.
There is a resistance zone just above the current price starting at 60.09. Right above this resistance zone may be a good entry point. There is a support zone below the current price at 54.84, a stop order could be placed below this zone.
Lance Jepsen of GuerillaStockTrading has issued a trader alert regarding oil prices. So goes oil, so goes the US economy.
Traders and investors are looking for a continuation of strong earnings to justify high stock valuations, now trading near their highest levels since 2004.
Most of the expectation for a recovery in earnings is predicated on oil prices being around $47 to $55 a barrel. If you don’t get those numbers, you do not get the strong earnings the stock market needs to warrant the high S&P 500 P/E ratio of around 25.
U.S. crude futures have been pressured lower by a supply glut. They’ve averaged over $48 per barrel so far this quarter, however, traded around $43 on Friday and are down over 20 percent from February, when they hit an 18-month high.
U.S. stocks are in the ninth year of a bull run that has been fueled of late by bets on pro-growth policies from U.S. President Donald Trump. But with the timetable for reforms extending further into the future, earnings are regarded as a crucial support for stock prices.
Revenue expectations have dropped for 10 of 11 industry groups since early April.
The benchmark S&P 500 stock index as a whole is expected to deliver 7.9 percent profit growth, down from 15.3 percent in the first quarter, and below the 10.2 percent forecast in April, Thomson Reuters data shows.
While lower oil prices can help some sectors such as industrials and transports, as well as boosting consumer sentiment, high expectations for earnings growth mean any stumble will be felt broadly.
Energy industry profits are seen up an incredible 683% from a year ago according to Thomson Reuters data. Without energy, profit growth estimates drop to 4.8 percent for the quarter.
A week later after upending the grocery industry, Amazon.com Inc. is taking aim at fashion as Amazon stock price continues to trend higher.
The e-commerce giant’s latest service, which lets consumers try on items at home before they purchase them, prompted a downturn in stocks of Macy’s Inc. and Nordstrom Inc., in addition to European on-line specialists Zalando SE, Boohoo.com Plc and Asos Plc. It was a rerun of what happened to supermarket shares when Amazon announced a $13.7 billion agreement for Whole Foods Market last week.
The new Amazon service is called Prime Wardrobe. Prime Wardrobe aims to eliminate one of the main drawbacks of online clothing shopping — the minute when clients realize they’ll never have the ability to squeeze into those new jeans that looked great on a website. Shoppers have been able to get around that hassle by buying several pairs but that means having to return those that are big or small for a refund.
Prime Wardrobe allows Amazon’s Prime members try on clothes first and if they enjoy the fit and look, to then purchase. The business is currently offering free delivery both ways and a seven day trial period at no subscription price. Amazon is enabling customers to pick the clothes themselves and isn’t charging any membership fee for the service. This seems to be an attempt on the part of the e-commerce giant to overcome the objection many customers have to buying clothes online as many customers prefer to try them on before making a decision.
Amazon stock price is expensive with a Price/Earnings ratio of 188.21. This indicates investors are willing to pay a high price for the stock in the present because of where they think it will be in the future. Indeed, AMZN shows a strong growth in revenue. Measured over the last 5 years, revenue has been growing by 36.57% annually.
Amazon Stock Price
A Pocket Pivot (blue dot on chart above) took place on June 16, 2017 after the company announced it would be buying Whole Foods. The Twiggs Money Flow is bullish and shows that traders are accumulating on pullbacks. Large players continue to pile into this stock.
I think Amazon stock price action on the chart and the most recent consolidation pattern shows a good setup pattern for a long entry. There is a resistance zone just above the current price starting at 1006.74. Right above this resistance zone may be a good entry point. There is a support zone below the current price at 993.08, a stop order could be placed below this zone.
Most investors and traders believe there is a stock market bubble right now but in a new Keiser Report (link above) Max Keiser makes a powerful argument that everything is in a bubble. The economics of supply and demand are not what’s driving the market higher.
Stock Market Bubble
Central banks bought $15 trillion worth of bad assets from banks to keep the stock market bubble alive. Central banks could continue buying bad debt from banks and keep pushing the stock market higher. This is why we have real estate bubbles in countries around the world.
Too many auto loan defaults? The central bank will just come in and start buying up those bad auto loans.
What about the FANG stocks on Wall Street. Facebook, Apple, Netflix, and Google. These stocks can double again because there’s no accountability. If you can collateralize a bubble and sell it to pension funds with the help of Goldman Sachs, and there’s no law against it, then the economics of supply and demand is meaningless. There is no real price discovery. The entire market is based not on economics but on derivatives of derivative packages that are sold to pension funds.
The Russell 2000 index fund IWM has broken down once again after a lot of traders got excited with the strong move up last week. It was a massive headfake that burned a lot of traders. So wicked. So evil.
Russell 2000 Index Fund
That headfake is just wrong on so many levels. This is the kind of market action that’s pushing traders into bitcoin and markets that are not dominated by HFT, algos, and quant trading desks.
Many traders were thinking that after the downtrend channel breakout and then the convincing break above $139.50 resistance, that perhaps a trend change was at hand on the Russell 2000 index fund. Institutional traders basically told amateur traders no such luck suckers. Now let’s see if the $136 downtrend channel line holds.
In this lesson you will learn who the “smart money” is, their trading habits, and how they move millions of shares without anyone noticing. These institutional trades are hidden inside of secret dark pools. You will also learn how amateur traders can profit from dark pool trading.
First, let’s start off with a good description of who the “smart money” is and why they use dark pools to trade.
How To Profit From Dark Pools
Traders pick up orders from the dark pool and execute them in the open market. Even though we can’t see the trades inside the dark pool, we can see the trades as they come off the dark pools to be executed in smaller blocks in the open market.
For example, on September 6, 2016, a huge 2.6 million shares trade was detected in Wells Fargo. It was “smart money” dumping massive long positions over dark pools. The actual trade was probably for 15 million shares or more, but the smaller block orders of 2 million and 2.6 million shares coming off the dark pool and into the public market was detected by the block trades screener in Etrade Pro.
On September 8, 2016, two days after large block orders were detected in Wells Fargo, the news broke that 5,300 bank employees had opened 2 million bank accounts, and charged fees on those accounts, without customers authorization. The “smart money” knew about the coming scandal and was quickly unloading Wells Fargo stock before the story was released to the public.
The way to profit from large block orders is to use the price level at which large block orders were detected as a pivot level. If the stock begins falling below that pivot level, the “smart money” is selling. If the stock rises above that pivot level, the “smart money” is buying. I like to look for patterns of several large block orders to confirm the buying or selling. This is why we also use a Level II quotes tool to look for a pattern of large block orders in a given security. Think of it as the block trades screener finds the large block orders in a given security, while the level II quotes lets you zoom in and focus your attention on that security as you look for more unusual block orders.
Setting Up Your Dark Pools Screener In Etrade Pro
In Etrade Pro, you can monitor level II and large block trades by setting up the block trades screener, level II quotes, and finally a chart tool.
Click on Tools, select Strategy Screener:
Select Block Trades from the Predefined Strategies list:
The screener captures orders of more than 20,000 shares, then filters the results based on the average daily volume and the relative volume. Click the Go button.
The block trades screener in Etrade Pro tracks the largest dark pool providers Liquidnet and POSIT among other undisclosed markets.
Now set up the level II quotes tool by clicking on Tools, select Market Depth:
Finally, to add a chart tool, select Tools and Chart.
You want to link the level II quotes tool and the chart tool to the block trades screener so that when you click on an alert in the block trades screener, it pulls the level II quotes and the chart for that security.
Left click Links in the top right corner of each of the three tools we added above and set them all to the same link:
Under link setup, the link you assigned to the three tools we added above should look like this:
Goldman Sachs just hired exchange owner Nasdaq Inc. to run its dark pool Sigma X stock-trading system. The Nasdaq has spent years working on “Ocean,” its dark pool hosting service.
Dark pools are similar to standard markets with one big exception; they can hide their activity by not printing the trades to any public data feed. If a regulatory agency requires dark pool trades to be printed to a public exchange, they will do so but with as large a delay as legally possible. In a dark liquidity pool, neither the price nor the identity of the trading company is displayed.
Dark liquidity pools offer institutional investors many of the efficiencies associated with trading on public exchanges but without showing their actions to others.
High-frequency trading (HFT) has long benefited from large blocks of equities moving. With a dark pool, institutional traders can move large block orders without showing the HFT community what they are doing.
Dark pools are run by private brokerages which operate under fewer regulatory and public disclosure requirements than public exchanges. Reuters writes…
Around 40 percent of all U.S. stock trades, including almost all orders from “mom and pop” investors, now happen “off exchange,” up from around 16 percent six years ago.
Nearly half of all U.S. stock trades, we are not even seeing! So much for paying extra for Level II access, you’re still as blind as a bat!
The Federal Reserve held short-term interest rates steady as traders expected. In the Fed’s postmeeting policy statement, it said it only needed “some further evidence” of economic progress before moving forward with a rate hike.
What exactly is the further evidence that the Fed needs? To answer that, you have to know about what happened last year to the unemployment rate and wages.
After the Fed had raised rates in December of 2015, it said that it would raise rates four times in 2016. I went off the rails. Long time viewers of the weekly Saturday night show remember how angry I was at the absurd proposition that the economy was strong enough to hike rates four times in 2016.
The Fed was ultimately wrong in their four hikes in 2016 statement. What happened? Here’s where the Fed went wrong. The Fed thought that in December of 2015 that wages would begin to accelerate rapidly. For most of 2016, the monthly Employment Situation report showed an average of 220,000 jobs added per month. The unemployment rate had gone to 5% from 5.8%. The Fed thought that the demand for labor would shift to the right as illustrated in this graph.
The Fed thought that the demand curve would shift to the right from D to D1. As demand for employment increased, unemployment would continue to fall, and wages would rise rapidly. The problem is that the Fed assumed that the job market was very tight because of the low unemployment rate. In other words, the Fed assumed that the labor market supply was fairly static so that increased demand for labor would cause wages to rise rapidly.
Last year I was one of many voices yelling out to anyone who would listen that the labor force participation rate was dropping.
What this means is that the supply of labor was not static at all, in fact, it was just the opposite. The labor market continued to generate jobs at an average of 187,000 per month for most of 2016, but the unemployment rate stayed at 5%, and wages barely moved at all. Why? Because, as the labor participation rate was signaling, people came off the sidelines and back into the job market. We know this because the labor participation rate began rising in 2016.
As you remember from our lesson on illegal immigration, a rise in the supply of labor shifts the supply curve down. In other words, it largely offsets the outward shift of the demand curve! In case you don’t understand, let’s track this on a supply and demand graph.
In step 1, the labor demand curve shifts outward from D to D1 as the Fed predicted. A new equilibrium is established at point a. In step 2, suddenly people who gave up looking for work see wages rising, and so they come back into the labor market looking for work. That increase in labor supply shifts the supply curve down from S to S1 as wages fall. A new equilibrium is established at point b, the same original wage rate! We have a greater number of people employed, but the unemployment rate and more importantly wages stay the same.
At the end of 2015, the Fed thought the labor rate was much tighter than it really was because of the low unemployment rate. There was a lot more slack in the labor market (low labor participation rate) that was not being factored into the Fed’s equations. In other words, the Fed made a mistake by miscalculating how many people were on the sidelines and ready to jump back into the job market at the first sign of rising wages. That’s why the Fed said in December of 2015, after hiking rates a quarter point, that they would likely be hiking another four times in 2016. They thought wages were going to move higher really fast. There was much more slack in the labor market than the Fed thought, and there could still be more.
The Fed got fooled once. The Fed will not get fooled twice. This is what I think the Fed means by it only needs “some further evidence” of economic progress before moving forward with a rate hike. The Fed wants a little more evidence before hiking rates that most of the slack in the labor market is gone and that wages are rising from an outward shift in the labor demand curve.
The prospect of a Federal Reserve rate hike is driving up the US dollar. The rising US dollar has a significant impact on the US economy and thus stock market. It’s important that traders understand the implications of a rising US dollar from a macroeconomic perspective.
Rising US interest rates mean that a lot of people around the world will want to take advantage of higher interest rates inside the US. For simplicity sake, we will use just one country, Brazil, to illustrate what happens.
On the supply and demand graph S equals the supply of the Brazilian real and D equals demand for the real. If the exchange rate were one dollar for two reals, then the price of one real would be 50 cents.
When the Federal Reserve raises US interest rates, Brazilians will want to take advantage of higher interest rates on their savings, and so they will want to put more money in the US. To get the relatively higher interest rates in the US, Brazilians need to exchange Brazilian reals for US dollars. Thus, the supply of reals increases which shifts the supply curve outward.
The increased supply of reals is now used to buy US dollars, so the demand for dollars goes up which shifts the demand curve for dollars outward. This increase in demand for US dollars pushes the value of the dollar up. The supply and demand graph is S equals the supply of US dollars and D equals the demand for US dollars.
The dollar will now buy more reals, and it would take more reals to buy a dollar. The dollar has appreciated, and the real has depreciated.
The rising value of the dollar is good for US consumers as it makes imports cheaper and so demand for imports goes up. That’s bad for the domestic US economy because cheaper imports are purchased over more expensive domestically produced goods.
Another reason why a rising US dollar is not good for the US economy has to do with exports. A strong US dollar is bad for the US economy as it makes US exports more expensive and thus decreases US export sales.
A rising US dollar increases imports and decreases exports. If the value of the imports is greater than the exports, the country is said to have a trade deficit. The rising US dollar makes the trade deficit worse.
A trade deficit (Exports – Imports) subtracts from the GDP. In the GDP formula:
GDP = C + I + G + (Exports – Imports)
Having more imports than exports means US dollars are flowing out of the country and not going into the “I” (business investment) component of the GDP formula. All the business investment is going into manufacturing plants overseas instead of into the domestic economy.
The US dollar is exploding higher right now.
The rising US dollar is why the durable goods orders and shipments activity in the US continue to languish.
New manufacturing orders just can’t get going in a rising US dollar environment.