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Making Money, Moving Money: The World's Financial Services Exports
By: Howmuch | September 3, 2019
International trade has been in the news lately, with a growing standoff between not just the United States and China, but even the U.S. and Europe. The focus of these headlines is usually on trade in agriculture and physical goods, but trade in financial services matters too, and has its own looming issues.
• Total global exports in financial services was $489.8 billion in 2018, up 5.6% from the prior year.
• The United States and United Kingdom together make up 40% of the world’s financial services exports.
• U.S. exports of financial services was at a record-high $113 billion.
• The United Kingdom’s access to European Union financial markets after Brexit is uncertain.
In this post we look at the World Trade Organization (WTO)’s 2018 report on financial services exports. To find the data on the WTO dashboard, make sure to set “Type of trade” to “Trade in commercial services” and “Commodity/sector” to “financial services.” Each country is drawn to scale on the map based on the size of its financial services exports. A darker shade of green also indicates more financial exports.
Top 10 Biggest Exporters of Financial Services
1. United States: $113.04 B (23.51%)
2. United Kingdom: $83.08 B (17.28%)
3. Luxembourg: $64.29 B (13.37%)
4. Singapore: $27.15 B (5.65%)
5. Germany: $24.40 B (5.07%)
6. Hong Kong, China: $23.73 B (4.93%)
7. Switzerland: $21.79 B (4.53%)
8. Ireland: $17.88 B (3.72%)
9. Japan: $11.47 B (2.39%)
10. France: $9.54 B (1.98%)
Together, the U.S. and the European Union (EU) make up almost exactly half of the world’s financial services exports. It’s an impressive statistic, but one that’s about to be made less so: the European Union figure includes the United Kingdom (UK), which at some point will be leaving the EU. Traditionally a banking and finance powerhouse, the UK makes up over 17% of the planet’s financial services exports. Recently, the UK financial sector has benefitted from easy exposure to European markets as part of the so-called European single market. With Brexit, the exact trading status between the UK and EU remains unclear, but the consensus is that this will negatively impact the UK financial sector. The consulting firm PricewaterhouseCoopers suggests that the UK financial market will lose between 7 and 12 billion British pounds due to Brexit in 2020.
The UK isn’t the only financial market bracing for hits in 2019: the yield curve for US Treasury bonds recently inverted -- a traditional harbinger for recession. On top of that, the amount of negative-yielding debt now equals nearly a third of tradeable bonds worldwide, according to J.P. Morgan. These signs of a global slowdown are likely to accompany a reduced demand in financial services.
On what terms will the UK leave the EU, and how will this affect its access to financial markets? Is the U.S. economy headed for recession? What would that mean for financial exports? Let us know your thoughts in the comments.
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DP WEEKLY WRAP: Seriously Suspecting September Seasonality
By: Carl Swenlin | August 30, 2019
The month of September has a reputation for being a bad month for the stock market. After the October 1987 Crash, the month of October carried a bad rep for years, but more recently we are told that it's really September we have to watch out for. On the old decisionpoint.com website I used to keep a set of charts going back to the 1920s that tracked the two annual six-month seasonality periods -- favorable November through April and unfavorable May through October. The theory seemed to work statistically, but taken year to year, I found it more useful to just rely on traditional price chart analysis. Below is a chart available on the StockCharts.com Member Dashboard showing the monthly seasonality for the 20 years going back to 1999. Note that it is a binary measurement, showing the percentage of times that the market closed higher in a given month. We can see that September closed higher fifty percent of the time, but the average change was a -1.1% decline, making September the worst performing month in the 20-year period. All things considered, I don't find this very helpful. Maybe the best idea is to keep seasonality tendencies tucked in the back of our minds, while we base our actual decisions primarily upon what we see on the charts.
GLOBAL MARKETS
These charts are included in this report because I think, for background, we need to be generally aware of what these indexes are doing, but on a deeper level, I don’t really care enough to get into a tedious analysis of them. Look at the charts, get a general impression, and move on. A picture is worth a thousand words. Look at the picture and think.
BROAD MARKET INDEXES
Smaller-cap indexes are lagging behind.
SECTORS
Each S&P 500 Index component stock is assigned to one, and only one, of 11 major sectors. This is a snapshot of the Intermediate-Term and Long-Term Trend Model signal status for those sectors.
INTEREST RATES
In normal circumstances, the longer money is borrowed the higher the interest rate that must be paid. When rates are inverted, the reverse is true. It is generally believed that rate inversions result from "a flight to safety." On the chart below shows the inversion of the 10-Year T-Bond and the 2-Year T-Bond, traditionally the inversion most talked about.
The following is our interest rate array chart. Note that the 1-Month and 3-Month T-Bills have a higher yield than the 30-Year T-Bond.
STOCKS
IT Trend Model: NEUTRAL as of 8/15/2019
LT Trend Model: BUY as of 2/26/2019
SPY Daily Chart: Except for the first trading day, price in the month of August has been locked in 4.2% trading range, where it went nowhere in an interesting fashion. There were an abundance of big up days and big down days. While the market didn't break down from the trading range, it also couldn't manage to break out of it either. Since this continuation pattern has formed subsequent to the breakdown from the July price top, we must assume that the ultimate resolution should be downward.
SPY Weekly Chart: The weekly PMO slowed its descent because of the price advance this week, but it is still below the signal line and falling, a very negative configuration.
SPY Monthly Chart: The monthly PMO is also below the signal line and falling. We note that there have been a number of PMO direction changes this year, so the most recent is not necessarily decisive.
Climactic Market Indicators: There have been a large number of net breadth and net volume climaxes this month, but none of them have initiated a durable change of direction. The Bollinger Bands are beginning to squeeze the VIX, which means to me that we will see a resolution of the market's trading range sooner than later.
Short-Term Market Indicators: The STO-B and STO-V are oversold again, so we should expect some weakness in this time frame.
Intermediate-Term Market Indicators: These indicators are all rising, but they are also in the neutral zone. Being neither overbought or oversold, they do not, by themselves, favor any particular resolution in this time frame.
CONCLUSION: For all my skepticism regarding seasonality, it may be relevant to the current setup. The market broke down this month and entered a consolidation, aka continuation pattern. This configuration sends a message that lower prices can be expected. September's negative seasonality aligns perfectly with this expectation, and it could exacerbate the negative outcome.
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Dow Jones Industrials Index (DJIA) - Knee Jerk Low »» Monthly Summary Analysis
By: Marty Armstrong | August 31, 2019
THE ANALYSIS PER THE CLOSE OF Fri. Aug. 30, 2019: Dow Jones Industrials closed today at 2640328 and is trading up about 13% for the year from last year's closing of 2332746. This price action here in September is reflecting that this is within the scope of a bearish reactionary move on the monthly level thus far.
Up to now, the market remains bullish on the short-term levels of our indicators while the long-term trend is neutral and our cyclical strength is bearish.
During this year, we have exceeded last year's high thereby making a new historical major high to date and we have been in a bull market for a reasonable period of 10 years.
Meanwhile, our technical resistance stands at 2818645 and it will require a closing above this level to signal a breakout of the upside is unfolding. Nevertheless, our technical support lies at 1881635 which is still holding at this time. At this moment, the market remains between these two projections leaving it neutral on a technical basis.
A possible change in trend appears due come November in Dow Jones Industrials so be focused. The last cyclical event was a high established back during July. Normally, this implies that the next turning point should be a low. However, the market has been neutral for right now, so caution is advisable. Watch the short-term trading levels for a hint of the next directional move into that target time frame. Last month produced a low at 2533960 but closed on the positive side and we need to penetrate that level on a monthly closing basis to suggest perhaps a further decline.
Critical support still underlies this market at 2606258 and a break of that level on a monthly closing basis would warn that a sustainable decline ahead becomes possible. Immediately, the market is trading within last month's trading range in a neutral position. Overall on a broader basis, looking at the monthly level on our models, this market is currently in a rising trend. We see here the trend has been moving up for the past 8 months. The previous low of 2171253 made during December 2018 on the Monthly level. The previous high made during July on the Monthly level at 2739868 remains significant technically and only exceeding that level on a closing basis would suggest a reversal in the immediate trend. However, we still remain below key resistance 2669596 on a closing basis.
• DiscoverGold Stay Away from These Stocks in September
By: Schaeffer's Investment Research | August 30, 2019
• One oil stock, in particular, tends to have a rough month
• MPC stock has averaged the steepest loss of all eligible SPX components
We recently outlined the 25 best stocks to own in September, historically, with Southwest Airlines (LUV) enjoying some of the best returns over the past decade. Today, however, we're taking a look at the stocks that tend to slide in September, with oil-and-gas concern Marathon Petroleum Corp (NYSE:MPC) logging the steepest average loss of all eligible S&P 500 Index (SPX) stocks.
Below are the 25 worst stocks to own in September, looking back 10 years, courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. As you can see, MPC has averaged a monthly loss of 5.28%, and has ended September higher just a quarter of the time.
Marathon Petroleum stock has spent 2019 in a channel of lower highs and lows, with rally attempts stalling around its 120-day moving average. The security touched an annual low of $43.96 earlier this month, and was last seen trading around $49.09. Another 5.28% drop from current levels would put MPC around $46.50 heading into October.
Despite dropping more than 40% over the past year, MPC remains beloved among analysts. In fact, the security has racked up 13 "buy" or better endorsements, compared to just one "hold" and not a single "sell." Meanwhile, the consensus 12-month price target of $77.88 represents a steep 58% premium to current levels. Should MPC extend its downward slump amid seasonal headwinds, a flood of downgrades and price-target reductions could exacerbate selling pressure on the shares.
Options buyers also remain enamored of Marathon Petroleum. The equity sports a 10-day call/put volume ratio of 4.43 on the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), meaning traders have bought to open more than four MPC calls for every put in the past two weeks. This ratio is higher than 68% of all other readings from the past year, pointing to a slightly healthier-than-usual appetite for bullish option bets during the past two weeks. An exodus of option bulls could also weigh on the oil stock.
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A Dynamic Stock?
By: Greg Schnell | August 30, 2019
One of the industry groups that hit a new high this month was the Aerospace and Defence industry group ($DJUSAE). That chart looks beautiful.
Looking through the charts in that industry group, Northrop Grumman (NOC) has been roaring higher. But another chart setting up nicely right now is General Dynamics (GD). The chart made new 2019 highs this week!
The SCTR is trying to get up into the top 25%, showing strength compared to the other big performers in the large-cap space. The relative strength to the S&P 500 broke the down trend in late July. The stock wobbled in August, but now looks set to move up.
With the NYSE Advance-Decline Line hitting fresh cumulative highs here, it looks like this market still wants to move to the upside. I'll have more information on the Canadian Technician weekend market review.
Good trading,
Greg Schnell, CMT, MFTA
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Signal Says to Ditch This Shipping Dud Before Things Get Worse
By: Schaeffer's Investment Research | August 30, 2019
• FedEx has struggled over the past 12 months
• The shipping name is approaching the historically bearish 70-day trendline
Shipping giant FedEx Corporation (NYSE:FDX) is trading 1.3% higher at $159.46 today, a rarity for the stock, as its long-term performance has a grim history. The stock has shed 35% over the past 12 months, touched a three-year bottom of $147.82 on Wednesday, and is now seeing pressure from a historically bearish trendline. Below, we will explore data from Schaeffer's Senior Quantitative Analyst Rocky White that reveals why FedEx stock may be eyeing its next leg lower.
Specifically, the security just rose to within one standard deviation of its 70-day moving average, after a lengthy stretch below the trendline. This signal has flashed four times in the past few years, per White, resulting in an average 15-day loss of 10.9%, with not a single one of the returns positive. A similar plunge would put FDX back near $142 -- a more than three-year low.
Call buying has been a favorite of options traders. Data from the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows FDX with a 50-day call/put volume ratio of 1.65, which ranks in the 75th annual percentile. This indicates nearly two calls have been purchased for every put during the last two weeks on the equity, leaving plenty of room for put traders to enter the ring.
Analyst downgrades are also looking inevitable on the shipping stock. Ten of 17 brokerage firms sport a "buy" or better rating on FDX, while its average 12-month price target of $187.84 is sporting an almost 17.95% premium to current trading levels.
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2 Reasons to Like Costco Stock Next Month
By: Schaeffer's Investment Research | August 29, 2019
• COST could finally topple $300 in September
• COST stock typically outperforms during Labor Day week and the month of September
Costco Wholesale Corporation (NASDAQ:COST) has been in focus this week, after the company's grand opening in Shanghai, China, drew frenzied crowds -- so big, in fact, the retailer had to shutter the store early on Tuesday. COST stock is trading around $296.15, at last check, a chip-shot from its Aug. 28 record high of $299.95. What's more, shares of the bulk retailer could hit that elusive $300 mark in September, if past is precedent.
For starters, Costco stock is one of the 25 best S&P 500 (SPX) stocks to own during Labor Day week, looking back 10 years. Stocks had to have at least eight years' worth of returns to make the list, which was cultivated by Schaeffer's Senior Quantitative Analyst Rocky White. COST has generated a healthy average return of 1.4%, and has ended the week higher 80% of the time.
If that's not enough, then there's the stock's penchant for big gains in the entire month of September. According to White, COST is also one of the 25 best stocks to own in September, looking back 10 years. The stock has ended the month higher 90% of the time, averaging a healthy one-month gain of 4.1% -- good for fourth best on the list. A 4% pop by the end of September would put Costco stock around $308 -- uncharted territory.
The security is no stranger to upside moves, though, having added 45% year-to-date, with pullbacks this summer contained by its ascending 50-day moving average. And, after enjoying its best single-session percentage gain since March on Tuesday -- when the aforementioned Shanghai store opened -- COST is now pacing for its fourth straight win.
Options traders are expecting more short-term upside, at least. At last check, 23,000 calls have already changed hands -- double the normal amount, and volume pacing for the 97th percentile of its annual range. Sure enough, there is activity around the weekly 9/6 300-strike call, with buyers expecting COST to top $300 by the close next Friday, Sept. 6, when the options expire.
This call bias is nothing new, though. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Costco's 10-day call/put volume ratio of 2.73 not only indicates bought calls have more than doubled puts in the last two weeks, but the ratio ranks in the 100th annual percentile, meaning calls have been bought to open over puts at a highly accelerated clip.
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Lipper US Equity Fund Outflows -$7.3 Billion; Taxable Bond Fund Inflows $5 Billion
By: Thomson Reuters | August 28, 2019
FUND FLOW REPORTS FOR THE WEEK ENDED 08/28
For the week ended 08/28/2019 ExETFs - All Equity funds report net outflows totaling -$4.981 billion, with Domestic Equity funds reporting net outflows of -$3.061 billion and Non-Domestic Equity funds reporting net outflows of -$1.920 billion...ExETFs - Emerging Markets Equity funds report net outflows of -$0.487 billion...Net inflows are reported for All Taxable Bond funds of $5.020 billion, bringing the rate of inflows for the $3.052 trillion sector to $2.625 billion/week...International & Global Debt funds posted net inflows of $0.179 billion...Net inflows of $3.475 billion were reported for Corp-Investment Grade funds while High Yield funds reported net inflows of $0.689 billion...Money Market funds reported net outflows of -$16.235 billion...ExETFs - Municipal Bond funds report net inflows of $1.245 billion.
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Money managers Reduced their exposure to the US Equity markets since last week...
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NAAIM Exposure Index
* August 28, 2019 
The NAAIM Number
59.99
Last Quarter Average
77.30
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Click on "In reply to", to see The NAAIM Number from prior weeks
