Welcome to The Santarelli Exchange!

Hello TRADERS and welcome to The Santarelli Exchange! I am Dave Santarelli, the CEO/President of Santarelli Trading Exchange LLC., and I look forward to helping you with your educational and trading goals and I am making it my mission to helping you become a better trader and investor with the use of this site and its services! We teach a Trade plan and system that I use and share with you on a daily basis.


Welcome to the Santarelli Trading Exchange LLC.! 

Our mission is to help traders get started trading by teaching them a winning trade plan, allowing them to paper trade or virtual trade AS THEY LEARN our system and Trade Plan. As they learn by interacting in our live trading room, view our live trades, our live streaming videos, take part in classes, get our trade alerts sent to them and have the ability to analyze it and make a better trading decision you are undoubtedly going to become a better trader. Our goal is to help you and we are here to do that in any way that we can. But, you must understand that first learning the trade plan, understanding it, practicing it first until you get the hang of it is extremely important. I tell our members and students daily, that PATIENCE, DISCIPLINE and a great TRADE PLAN is all I feel you need to succeed at trading! We are not licensed brokers or advisors, we are traders helping other traders!


Our DETAILED DAILY SCHEDULE at Santarelli Trading Exchange:


Monday: Observation day ( Generally like to see how the markets react to news and events over the weekend, so if I do make a swing trade, it would likely be in the afternoon) If day trades are made, they are made in the Trade Room! I am usually still in the Trade Room on Mondays if you need to find me!

Tuesday to Thursday: Normal Trading ( Day Trades or Swing Trades)

Friday: DAY TRADING ( I personally love to day trade on Friday options expiration day as there is very little extrinsic value (time value), built into the option premium since it expires that day. So if you find a stock making a move, a trade utilizing options on the underlying stock could generate very large returns. It is important to wait and watch for the right opportunities!)


The Trade Room is open daily, every day. The Trade Room is archived, So if you wanted, you would scroll up and look at the log from months ago and what exactly we were doing that day! We use the TRADE ROOM daily to chat with traders, share charts, trades, idea’s, news, and anything else on our minds! I like to use the Trade Room as a way to teach traders our trade plan, discuss trade idea’s, and if we are currently in a trade, I would give a detailed candle by candle analysis of the trade as it follows our trade plan! We have just started using new cameras to start doing LIVE STREAMING VIDEO TRADING to our premium clients! If you are interested in that, you can contact me at Dave@TheSantarelliExchange.com

TRADE ROOM HOURS: Tuesday to Friday from 9:30am to 4:00pm a TSE employee will be in the Trade Room to assist those needing help. IF WE ARE IN A TRADE, our focus is on our trade and questions not related to the trade will be answered later. Mondays are an observation day for me, but, I am generally in the Trade Room on Mondays if you are looking for me!


You can reach us by hitting the CONTACT US button on the top of the page, OR, you can email me directly Dave@TheSantarelliExchange.com

Our Facebook Business page is: https://www.facebook.com/TheSantarelliExchange/


This tab on our page will lead you to where you are now! This specific page will now be set up in a way that I will post a daily market recap in this section, I will discuss any trades we made, AND, I will do an update each day with a chart picture to show what cycle we are in now with our trade plan. So if we were showing todays chart, which I did, it shows we are now still in Breakout/Momentum cycle. So this section will be used for market updates, trading news, and any other type of information that would help traders. This section will also have the links to everything you need at Santarelli Trading Exchange LLC.


This is the section that shows our Trades and the details of that trade! So this section is when I first made the trade, then the DETAILS of that trade (if a swing trade) will be posted in the MARKET NEWS tab on the website, this way you know if we are in the middle of a trade that expires a month from now, you can jump on this TRADE FEED tab to see the actual trade (if it was an official trade), and THEN, you can go to the MARKET NEWS tab and actually search it there and see any updates ( if we are in an official swing trade, I will post a picture of the chart and my analysis of it daily in the MARKET NEWS tab.


I do not use this section, do not know why it is there, I like the details of the TRADE FEED better, so I would not go to this section.


Obviously, this is where you will find our videos. But, we always upload them to youtube, for now, so if you just subscribe to our youtube channel linked here at the end, then once you subscribe, hit the bell to get notified of whenever we post new content or go live! So make sure you subscribe and hit the bell here! https://www.youtube.com/channel/UCqSZ-Ps3rmu217RNkBv8EsQ


If you click on this tab, you will enter into our archived Trade Room/Chatroom. You can scroll back months ago and see what we did and what time as everything is time dated and stamped! Most members always scroll through this and see what’s going on, and learn from the things I talk about during the trading day and as I am the moderator, my name is in red and you can easily see my posts, comments and pictures! This is a great place for a new trader to go and ask questions as we can go over charts and discuss things to help with any areas you are struggling with. I share updates in here, pictures, and a lot of great information and important trading info goes on in here during the day!


This section was made to show our performance of trades we have officially sent out enter and closing trade alerts on. This section does not include trades that are still “open”


If you love our service, you can spread the word, what you think of us and if you signup as an affiliate, it will give you a link to share, and if others signup from that link, YOU get a cash affiliate reward!


One thing we are ALWAYS trying to do is stay on top of things and innovate with technology. If you can share some information with us on this survey and let us know what we can do better, I would be greatly appreciative and happy if you can fill that out after you have been using our service for a while! Thank you!


If you really want to get a jump start on trading and start learning quickly with me, you can signup for a course that goes over our trade plan and how I personally use it and can go at your pace. We offer hourly rates and course rates. I do offer 1 on 1 trading during live market hours but for that, since it is taking away time from me trading, will run at a premium rate you can message me about.


Official Trade alerts are sent via email, text, posted on the website and in the Trade Room. Sometimes I will make trades I do not post about that are personal trades. I usually post pictures of trades entered in the Trade Room, also usually post pictures of where the trade is at right before I close it as well. We do 2 types of trades. DAY TRADES and SWING TRADES. If I make a Day Trade I will share it in the Trade Room, since I am usually in and out of these quick, there is no time to send out an official trade alert, so day trades are only posted in the Live Trading Room. SWING TRADES are on stocks that follow our TRADE PLAN or entering on other information but are trades that are lasting at least overnight. Swing Trade Alerts will be sent out via Email, Text, posted on website and can ask about in our Trade Room.


I will post daily recaps and reviews of any TRADES we are in and I will post that in the “MARKET NEWS” tab. At the end of the trade, I will post the results here as well.


We are building the site out as we go, making it better for our users and getting them the information they need and want, QUICK! My goal is to ALWAYS BE IMPROVING! So if you have suggestions for us or have a great idea and want to share it with us, let us know!


Email us Dave@TheSantarelliExchange.com


Disclaimer: We are not licensed brokers or financial advisors, please consult with whoever is responsible for your money, as trading involves a risk that is not suitable for everyone and can result in your account being worthless.


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Johnson & Johnson (JNJ) has a NEW DRUG, an anti-depressant, possibly getting FDA approval by March 4th

This new drug is made from a popular party drug called Ketamine. They are saying they will control this and the possibility of becoming addicted by having patients only getting their dosage at a doctors office via a nasal spray. From what we hear, insurance companies will be paying for this and patients will have their normal copays and deductibles.

So far, patients who have been on the trials for months have noticed huge improvements in their mood, attitude and say this drug has helped much better and quicker than any of the other anti-depressants the patient has taken.

Continue reading

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QQQ chart and my analysis after the State Of The Union Address

QQQ has been in BreakOUT/Momentum for the entire year of 2019 so far. Here is the thing… from what I see today, if we do not have a green candle on QQQ tomorrow, I feel that QQQ may pull back to the 10, 20, or 50 day SMA ( Simple Moving Average) in the next few days. If it has a red candle tomorrow, we will be talking more about what I will be looking for. But today was more of a cautious day than anything after coming back from the State Of The Union last night. Very pleased we did not see any major selling pressure after the speech last night, so now we need to see what happens tomorrow.

Also, keep in mind that the next possible govt shutdown may be happening on the 15th again, which is next Friday. So, we may see the market remain calm until after that deadline. If we get a deal done before the deadline, I feel we would see a nice move higher in the markets. That is my opinion with my experience, now we just need to wait and see what actually happens! Our trade plan for me is the key factor when I determine to exit a trade.

Lets see what happens tomorrow and will see you in the Trade Room!

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OSTK Chart getting a POP higher today and entering into BreakOUT/Momentum with our TSE Trade Plan

Analyst Price targets are 66.50/share average with a high target of 75/share and a low target of 58/share. Shares just broke above 20/share in a sign of a reversal from the lows here. I personally believe it is a good buy at this price for a long term investment. That is my personal opinion. We picked up a trade on OSTK today for the June 21st monthly expo. Check trade feed or email for details. If you guys enjoy me making posts like this and keeping an eye on them and talking about the charts as we go along here, just feel free to comment below! Shakes spiked higher by 9% today on heavy volume

Shares of several online retail companies are trading higher after the National Retail Federation forecast 2019 retail sales growth between 3.8% and 4.4% including online retail growth, which they expect to be between 10-12%.

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Tech Rallies BIG off strong Facebook Earnings today

Well, FB reported a PHENOMENAL Quarter and the stock rallied more than 11% This sparked a lot of tech charts to enter into ” BreakOut/Momentum Phase”

Here is the thing… the economy is doing great. World news, politics, and our next possible government shutdown on February 15th, that is what is holding us back. China, tariffs and the trade war is holding the markets back. So I think if they make a deal before the Feb 15th date, that would give the markets a little extra boost higher.

We had a trade on FB and it was down for some time, but, it just entered into our “BreakOut/Momentum Phase” and the chart looked great, I felt it had the bad news behind it and was going to move forward. It was a small trade. Got it on January 22nd.

The first picture is of FB now WITH our TSE Trade Plan outlying it in red and green channels. Currently FB is BREAKOUT/MOMENTUM in the chart below and following our TSE Trade Plan. * Please read what I have written in white on the chart*


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Here is how the markets look as far as swing trades go on DIA ( DOW ETF)

Here is a look at the DIA 6 month chart WITH our Trade Cycles outlined in our “Trade Plan”

We are currently in BREAKOUT/MOMENTUM and climbing after the longest shutdown in govt history finally comes to an end!

So as far as SWING TRADES go, I will likely wait until the afternoon on Monday before making any swing trades. I will keep you updated on that.

As far as DAY TRADES go, I am in the TRADE ROOM daily, I have even just started doing LIVE STREAMING TRADING VIDEOS which I am still learning a bit, and then plan on doing live daily trading videos for those interested in that. But as far as DAY TRADES go, if I see some good setups or news events we can trade off on Monday, I will alert it in the trade room and possibly try another live day trading video!

( Please work with me, we are trying to add new features in this section to give updates to all members, including those who can not be with us during the live trade room, they will be able to see recaps of it and other news in this section! AND, if there is ANYTHING ANY MEMBERS WOULD LIKE TO REQUEST US TO POST ABOUT DAILY, LET ME KNOW AND I CAN POST IT IN THIS SECTION! Sorry for any confusion as we are currently building this out to better suit member needs and focus points.)

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New Changes

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The Santarelli Exchange (TSE) Has implemented a NEW Trade Alert system! Members LOVE IT!

Here is a link to view our word document of our new Trade Alert System. If you have ANY questions, please feel free to hit the contact us button and send us a message and we would be glad to respond back to you!

New Trade Alert System

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Trading Shares of Stock VS Trading Stock Options with example

Here i a link for a word document on trading shares of stock vs trading stock options. Also have a video being made that will be posted to our homepage.


Shares of stock vs stock options example

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Banks can be your best investments over next 12 to 24 months with interest rates still on the rise as banks make profits without having to lift a finger with higher rates

Best Bank Stocks to Own as the Fed Hikes

Interest Rates


It looks all but certain that the Federal Reserve will raise short-term interest rates when it concludes its two-day meeting on March 15. Bank stocks are traditional beneficiaries of higher interest rates, but they have already rallied sharply since the presidential election in November because investors are giddy about potential corporate tax cuts and financial deregulation. If the central bank does indeed hike short-term rates at its next meeting, are there any bank stocks with more upside to come?

Plenty, says analyst Richard X. Bove of Rafferty Capital Markets. Due to safeguards put in place during the Great Recession, banks are sitting on big piles of cash that are earning very low returns. “In the last 10 years, the government has forced them to raise their cash and securities, so if you get an increase in rates they see a jump in interest income,” Bove says. “And there’s no cost against that. It’s a simple increase in revenue.”

Kiplinger is forecasting three quarter-point rate hikes in 2017. If that holds true, the Fed’s target on the federal-funds rate, the rate banks charge each other for overnight loans and a key influencer of other interest rates, would rise to a range of 1.25% to 1.5% by the end of the year. As rates rise, banks, which have heaps of assets already on the books, will prosper without management having to lift a finger. Here are three bank stocks that are especially well positioned to benefit from Fed rate hikes. (Prices and data as of March 10.)

Bank of America (BAC, $25.31)

All of the big national banks should get a lift from rising interest rates, but Bank of America stands out. By the bank’s own estimates, a one-percentage-point rise in short- and long-term rates would increase its net interest income — the difference between how much it earns in interest on loans and how much interest it pays on deposits — by $3.4 billion a year. That’s real money even for a bank the size of Bank of America. It has a market value (share price multiplied by number of shares outstanding) of $254 billion and reported net interest income of $10.3 billion in the fourth quarter.

Analysts also like the tailwind Bank of America is getting from expense reductions. “We believe that BAC shareholders will continue to benefit from owning BAC as the Fed increases rates and BAC management executes on the company’s cost saving program,” says Brian Kleinhanzl of Keefe Bruyette & Woods.

Kleinhanzl has a rating of “outperform” (buy, essentially) on the stock based on the expectation of two additional Fed rate hikes per year in 2017 and 2018. The stock has a dividend yield of 1.1% based on the last four quarters of earnings, which helps sweeten potential returns.

JPMorgan Chase (JPM, $91.28)

After Bank of America, Bove says JPMorgan Chase is best positioned to take advantage of higher interest rates. “They have something like $600 billion in assets that would see an increased return when interest rates go up,” the analyst says. And even in the unlikely event that there are no rate increases this year, JPMorgan still expects the Fed’s quarter-point hike from December to boost net interest income by approximately $3 billion in 2017. Net interest income totaled about $46 billion last year.

Credit Suisse analyst Susan Roth Katzke has an “outperform” rating on the stock, thanks to above average and improving return on equity, driven in part by higher rates. Return on equity is a key measure of a bank’s profitability that shows how much income it generates on each dollar of shareholder equity.

UBS Global Research rates JPMorgan shares at “buy,” noting that the bank is “well positioned to benefit from higher interest rates, moderately faster economic growth, and, possibly, better capital markets.” The nation’s largest bank by assets has a market value of $326 billion and offers investors a dividend yield of 2.1%.

Northern Trust (NTRS, $89.30)

Northern Trust is something of a “quasi” bank, Bove says. As a financial holding company, it offers services such as wealth management, private banking and custodial and administrative services for institutions. Nevertheless, it’s positioned for much higher returns as rates go up.

The duration of the company’s bond portfolio is a bit longer than a year, Bove notes. That’s a short period of time in the world of fixed income and suggests a one percentage point rise in interest rates would only lower the value of its bond portfolio by 1% or so. As rates rise, Northern Trust can quickly replace mature debt with newer bonds carrying higher interest payments. Bove notes that as of Dec. 31, the company had $942 billion in assets under management and $8.5 trillion in assets under custody and administration.

In addition to higher interest income, Northern Trust gets a lift from a rising stock market. “If the equity markets go up, they see a big jump in revenues because they charge based on assets under management or custody and there’s no cost against it,” Bove says. When stronger economic growth is in the forecast, as it is today, interest rates and stock prices can rise at the same time. The bank has a market value of $20 billion and a dividend yield of 1.7%.


By DAN BURROWS, Contributing Writer 
March 14, 2017



Buying some LEAP calls or call spreads for January 2019 expiration can have some massive returns as bank stocks rise as revenue increases without banks having to lift a finger as fed raises rates which in turn means great profits for banks resulting in shares of banks continuing to rise. Simple patience and discipline can payoff huge for investors who have the patience and discipline to buy and manage these positions carefully. For example, looking at the BAC January 18th, 2019 you can buy the 27.00 strike calls for 2.10 OR you can buy the 27.00/30.00 debit vertical call spread for about .88 ($88) per contract. Your max return on this spread is difference between the 2 strikes 27.00 – 30.00 which is 3.00 minus the premium paid .88 for a max net gain of 2.12 ($212) per contract, which is a 240% max net return! For example, a $5,000 investment would be worth over $17,000 IF BAC shares are 30.00/share or higher at January 18th, 2019 expiration. Not a bad return if you have the patience to hold and manage a position for a little over a year and 3 months.

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Market Volatility Has Vanished Around the World

As Wall Street’s ‘fear gauge’ nears all-time lows, one commonly used measure shows Asian equities near their least volatile this century

The calm that has descended on U.S. financial markets is stretching around the world.

Based on one commonly used measure, Asian equities are near their least volatile this century—a byproduct of improving corporate earnings, stabilizing economic growth and the diminishing impact of geopolitical events on markets.

In the U.S., Wall Street’s “fear gauge” is near all-time lows, and in Europe, volatility has also largely subsided.

“This is a global dynamic,” said Michael Parker, head of strategy, Asia-Pacific at Bernstein Research in Hong Kong. “You see low volatility everywhere.”

By contrast, sharp gyrations in Chinese markets early last year caused a spike in volatility around the globe.

Bouncing BackMSCI Asia ex-Japan stock indexTHE WALL STREET JOURNALSource: FactSetNote:
2000’02’04’06’08’10’12’14’160100200300400500600700800900Sept. 27, 2006×451.41

In Asia, Mr. Parker cites the MSCI Asia ex-Japan stock index, a broad measure of regional performance—weighted most heavily to China, South Korea, Taiwan, Hong Kong and India—that has risen 19% this year. The index’s 90-day realized volatility, a measure of historical moves over that period, has fallen to 8.2%, near its lowest since at least 2000, according to Mr. Parker, and down by nearly half from a year ago. Only in summer 2014 was this volatility gauge lower.

Realized volatility is a measure of how much share prices move around. At this percentage, it shows that the market has moved by about 0.5% a day on average over the measured time frame.

It’s Quiet Here, TooA measure of volatility in the MSCI Asia ex-Japan stock indexTHE WALL STREET JOURNALSource: Bernstein Research

Another sign of calm is the lack of major daily declines: Since January 2016, the index has fallen more than 3% in one day just once. By comparison, in the prior two bull markets—September 2001-October 2007 and March 2009-May 2011—there were 3% daily declines on average every two to three months.

Few and Far BetweenAverage number of days between 3% declines during bull markets since 2000THE WALL STREET JOURNALSource: Bernstein Research
Sept. ’01 to Oct. ’07March ’09 to May ’11Jan ’16 to present050100150200250300350400

Mr. Parker reckons that investors haven’t had to contend with as many “binary events,” such as China’s surprise devaluation of August 2015, which sent shock waves through global markets. Signs of healthier consumer demand and strengthening industrial profits regionally have helped bolster equities. “Broad fears around China imploding and capital fleeing have abated,” he said.

Global index provider MSCI is expected to decide this week whether to include China’s domestically traded A-shares in its indexes. In prior years, MSCI said mainland stocks weren’t accessible or transparent enough to warrant inclusion. A different decision this time would increase the China exposure of the many global investors who invest based on MSCI indexes.

Low volatility has swept across asset classes globally. In the U.S., the CBOE Volatility Index, or VIX, closed Friday at 10.38, near its lowest level since 1993. The VSTOXX index of eurozone equity volatility, a European variation of the VIX, was also near a record low.

For now, few see any reason for the low volatility to end.

Investors will likely continue to watch China closely, analysts at Goldman Sachs said in a note last week. Policy makers there have recently been trying to tamp down leverage in the country’s financial system, and any “over-tightening…could exacerbate the mild growth slowdown so far,” Goldman said.

As for U.S. prospects, the Federal Reserve’s failure to raise rates as fast as it earlier forecast has made investors skeptical about the pace of increases it forecasts now. That could leave markets open to “hawkish surprises” later this year if U.S. growth doesn’t disappoint, Goldman said.

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5 things to know about the Dow’s attempt to rally to 20,000 and beyond

It’s growing louder — and maybe even kind of annoying.

No, not that Christmas tune that drives you crazy, but rather the buzz around the Dow DJIA, +0.11%  potentially rising to 20,000.

The stock gauge finished last week only 243 points below the 20K mark, and it isn’t looking like it will give up much ground on Monday. The Dow Jones Industrial Average was trading slightly higher around midday.

Here are five points that Dow watchers are making as the blue-chip barometer nears another big round number.

Others see few impediments to rising to 20,000 and beyond.

The only thing that could derail the stock market’s rally is a massive change in sentiment, wrote Brad McMillan, Commonwealth Financial Network’s chief financial officer, in a blog post titled “Dow 20,000 in sight.” And such a shift in mood doesn’t look likely, given that economic reports keep coming in better than expected, he argued.

“With the very real prospect of corporate tax reform, it’s possible that earnings might come in even better than the current economic fundamentals would suggest, due to lower tax rates,” he said.

“Valuations might end up looking lower than they now seem, leaving more room for market gains.”

Bulls also point out that European stocks SXXP, -0.46%are breaking out as well this month, and some are already talking about Dow 50K.

2. Fastest 1,000-point gain ever? If the Dow closes above 20,000 on Monday afternoon, the index will have scored its fastest-ever advance from a thousand-point milestone to another.

The benchmark first closed above 19,000 on Nov. 22, and Monday is its 13th trading day since that achievement.

Thus far, the fastest 1,000-point rally came during the jump to 11,000 from 10,000. That happened in early 1999 over 24 trading sessions, as a recent MarketWatch story noted.

So even if the Dow can’t top 20,000 for 10 sessions, it still would score its speediest 1,000-point gain. Of course, as the gauge has climbed higher over the years, the percentage change associated with any 1,000-point move has become smaller.

3. Problems at big round numbers: The Dow has struggled with big milestones such as the 100 mark, the 1000 level and even 10,000. A recent Wall Street Journal column made that point.

The Dow first hit 100 in 1906, but didn’t trade convincingly above that level until the mid-1920s.

The blue-chip average first touched 1,000 intraday in 1966, but didn’t close above that mark until 1972, the column said. And the Dow first crossed above 10,000 in 1999, but only began to really live above that milestone in 2010.

4. The Goldman Sachs Industrial Average? Goldman Sachs GS, -1.64%  and other financial stocks XLF, -0.87%  have been key leaders in the “Trump rally” that began after Election Day.

It’s a similar story when looking at the year to date. The chart below shows how Goldman has contributed more to the 30-stock Dow’s 2016 climb than any other component. The graphic comes from Barron’s cover story over the weekend — titled “Get ready for Dow 20,000.”

Can financials keep leading the way higher? Bulls can argue the sector still has room to run, given that it’s trading well below its peak hit before the financial crisis.

But bears maintain that buying of banking stocks has reached panic proportions, suggesting a trend reversal over the next couple of weeks.

5. Bears aren’t throwing in the towel: The stock market’s doubters aren’t calling it quits just because another big round number is looming.

If everything is so bullish, why are bank insiders dumping their shares at a record pace? That was the question posed by Wolf Street’s Wolf Richter in a blog post on Friday.

Financial newsletter writer Harry Dent — known for his often-spectacular misses in forecasting — is getting attention this month for predicting the Dow could plunge by 17,000 points. Not tumble to the 17,000 level, but lose more than half its value.

Tune him out? Investors should consider giving a fair hearing to even Dent’s extreme views, according to a recent MarketWatch column by Chuck Jaffe.




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Walmart Black Friday: Black Friday Could Be Huge for Walmart Stock

Black Friday Boosting WMT Stock’s Appeal?
Black Friday is a big deal for Wal-Mart Stores, Inc.’s (NYSE:WMT) shoppers. But rather than looking for the best deals from the retailer, let’s take a look at what Black Friday could mean for Walmart stock.

The Thanksgiving-Black Friday weekend is a typical time of year for retailers to make a killing, and Walmart wouldn’t miss this opportunity. Last year, shoppers lined up outside Walmart stores waiting for them to open. By early morning on Friday, Walmart reported that it had already sold “enough movies to watch for close to 3,000 years.” (Source: “Black Friday Winners And Losers: How Amazon, Walmart, Apple And More Fared,” Forbes, November 30, 2015.)

However, a one-time sales boost might not be enough to get investors excited about Walmart stock these days. When consumers are moving from physical stores to online channels, WMT stock does not sound nearly as exciting as the names in the e-commerce segment.

The thing is, though, that things could be different this time around.

I have no doubt that on this Black Friday, shoppers will flock to Walmart’s stores, just like in previous years. However, I reckon that the biggest boost could come from the retail giant’s e-commerce segment.

You see, the company had a major overhaul in its online marketplaces, which means it’s a lot more prepared for an event like this. In just the past three months alone, its e-commerce marketplace, Walmart.com, has added eight-million stock-keeping units (SKUs). (Source: “Third Quarter Fiscal Year 2017 Earnings Call,” Wal-Mart Stores, Inc, November 17, 2016.)

As a matter of fact, e-commerce has become a big growth driver at the retail giant. In the third quarter of the company’s fiscal 2017, which ended October 28, 2016, e-commerce sales surged 20.6% year-over-year on a constant currency basis. Excluding its Yihaodian e-commerce business in China, Walmart’s gross merchandise volume (GMV) increased 28.6% under constant currency. (Source: “Walmart Reports Q3 FY17 EPS of $0.98,” Wal-Mart Stores, Inc, November 17, 2016.)

According to Doug McMillion, Walmart’s president and chief executive officer, “E-commerce contributed 50 basis points to our Q3 Walmart U.S. comp, which is our largest contribution yet.” (Source: Wal-Mart Stores, Inc, November 17, 2016, op cit.)

For the quarter, Walmart’s total revenue increased 2.5% year-over-year to $120.3 billion. Comp sales at Walmart U.S. increased by 1.2%, driven by a traffic increase of 0.7%.

And don’t forget that Walmart recently completed the acquisition of Jet.com, Inc. and now has its co-founder, Marc Lore, leading the company’s e-commerce segment. Jet.com is a great fit for Walmart because the companies share the same value: Walmart is known for its “everyday low prices,” while Jet.com uses its “realtime pricing algorithm” to offer better value than its competitors.

Note that last year, more consumers shopped online than at stores over the Black Friday weekend. According to a survey by Prosper Insights & Analytics, some 103-million Americans shopped online over last year’s Black Friday weekend, slightly more than the 102 million who went out to stores. (Source: “NRF’s Thanksgiving Weekend 2015 consumer survey data,” National Retail Federation, last accessed November 22, 2016.)

If the trend continues to this year, Walmart should be better prepared to reap the rewards.

The Bottom Line on Walmart Stock
Black Friday is no doubt a big event for retailers. However, Walmart stock investors should keep in mind that the company’s scale is different from its competitors. In its previous fiscal year, Walmart generated $482.0 billion of sales; that’s more than the sales of Target Corporation (NYSE:TGT), Costco Wholesale Corporation (NASDAQ:COST), and Amazon.com, Inc. (NASDAQ:AMZN) combined.

The idea is that Walmart is deeply entrenched in the retail industry. WMT stock commands more than $200.0 billion of market cap. No matter how big an event Black Friday turns out to be, it’s probably not going to cause Walmart stock to shoot through the roof.

Rather, the company’s potential success this weekend could convince investors that it’s not falling behind in the e-commerce boom. And that would make WMT stock even more appealing as a dividend stock. At the end of the day, what really makes Walmart stock special is that the company has increased its annual cash dividend every single year since 1974. A solid e-commerce segment could make sure that this track record continues.

By Jing Pan, B.Sc, MA

Walmart Black Friday: Black Friday Could Be Huge for Walmart Stock

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How an OPEC output deal could catapult U.S. producers back to stardom

Oil prices are likely to climb if members of the Organization of the Petroleum Exporting Countries agree next week to curb crude production, but upside will be limited if the resulting rally give U.S. producers incentive to ramp up output once again.

And President-elect Donald Trump’s energy policy plans could intensify OPEC’s worries over loss of market share and eventually make it even easier for the U.S. to ramp up output in response to higher prices.

“News of the potential agreement could still lend decent support to oil prices in the short term outlook,” said Fawad Razaqzada, technical analyst at Forex.com. But “those potential price gains will likely be capped in the medium term by expectations of a renewed rise in oil production in the U.S.”

Oil prices have seen volatility as the 14-member group of major oil producers debates how to complete a plan announced in late September to limit output at 32.5 million to 33 million barrels a day.

OPEC is expected to hash out the final details at its official meeting in Vienna on Nov. 30. Its members have been gathering behind closed doors ahead of that to discuss the plan.

“It really depends on the actual agreement, but the price should move into the mid-$50s and possibly as high as $60,” assuming a deal to cut output is reached, said James Williams, energy economist at WTRG Economics.

Futures prices for West Texas Intermediate crude CLF7, +0.15% settled at $48.03 a barrel on the New York Mercantile Exchange on Tuesday. They’re up about 30% year to date, but well below the peak seen in 2014 above $100.

The Trump effect
Traders have been weighing the potential impact the Trump administration will have on the energy sector, as his plan to ease federal restrictions on oil drilling would benefit some in the oil industry, but likely further add supply to an already glutted market over time—weighing on prices.

In a video posted on YouTube, Trump pledged to “cancel job-killing restrictions on the production of American energy,” including shale.

“Trump’s policies will have an impact but they will not be immediate,” said Williams. “This year the greatest influence by far will be if OPEC’s actions result in higher prices.”

Still, the impact of Trump’s policies in the oil market may become evident in the second half of next year, he said.

That impact is likely to be first seen in the Bakken in North Dakota “as it would accelerate the completion of the North Dakota Access pipeline,” said Williams. “The lower transportation cost means producers there will receive more for the oil they pump and encourage them to complete more wells.”

Trump’s energy policies would also eventually lead to more drilling on federal lands, which was delayed during the Obama administration, Williams said.

U.S. oil production was already a factor in OPEC’s decision against cutting output in late 2014, even as prices had plummeted. The group, instead, choose to defend its share of the oil market from non-OPEC producers, particularly the U.S. shale industry.

With Trump aiming for U.S. energy independence, OPEC could revert to protecting its market share, instead of working to temper the global supply overhang that’s dragged prices down by more than half from their peak in mid-2014.

Several years of $100 oil had contributed to the rate of development and improvements in shale technology, said Williams. Now oil prices “north of $70-$75 once again will threaten OPEC’s market share.”

So “an OPEC deal will eventually help the U.S. become the real star producer,” he said. That claim to fame belongs to Russia, the world’s biggest oil producer, with Saudi Arabia being the largest producer in OPEC.

“A good [oil] price will spur the completions of uncompleted wells and there are about 5,000 of them,” Williams said. Still, “no matter what Trump’s plan is, it will be months before it impacts production.”

Wait and see
To be sure, OPEC’s plan is also far from a done deal.

Expectations that OPEC would reach a final agreement were starting to grow. Then on Tuesday, Reuters reported that the group will wait until the official meeting to debate a plan to production by members by 4% to 4.5%, excluding Libya and Nigeria. The news report also said that Iran and Iraq raised certain conditions for their participation in the agreement.

To reach a final deal, the group will have to collectively agree to ease back production, which the International Energy Agency estimated at 33.83 million barrels a day in October.

“Rationally, the group should be able to reach agreement to cut its oil production in 2017, even if it is only a watered-down version of what was contemplated in late September in Algiers,” analysts at Credit Suisse, led by Jan Stuart, said in a Tuesday note.

“However, we think it is at least possible that key members not only fail to find common ground, but break off talks and resume a drive for market share all over again,” they said.

OPEC would have to set individual member quotas. That will be a challenge since some members, particularly Iran, which wants to boost output to pre-sanctions levels, and Iraq, which is fighting Islamic State, have said they want to be exempted from production cuts.

The political battle between Iran and Saudi Arabia is “about power as much as economics and therefore hard to predict,” said Vic Sperandeo, president and chief executive officer of EAM Partners, which is known for the Trader Vic Index, a long-short algorithm that has a commodities focus. “Most likely, any agreement will try to look positive, but will have very limited production cuts.”

He expects OPEC to “lower production a bit just for show,” and that could create an “initial up move,” but prices would then resume a move lower.

Omar Al-Ubaydli, a program director at the Bahrain Center for Strategic, International and Energy Studies, singled out two scenarios. “Either they agree on each country producing optimally from its own perspective, and they will present it as if it is a collective agreement…or they will try to agree on something substantive and fail,” he said.

In both cases, he expects to see only a “negligible effect” on prices as “oil markets are getting a little wiser to OPEC’s ineffectiveness and window-dressing.”

Still, Al-Ubaydli, does see a downside price risk. “Trump is likely to enact policies that decrease U.S. oil imports,” he said. And a rise in shale oil production means that “prices above $60 a barrel are unlikely.”

That said, “Trump’s policies will have an effect once their precise details are confirmed,” said Al-Ubaydli. “Everyone is holding their breath.”




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How Trump’s latest potential hires could send the stock market ‘through the roof’ Critical information for the U.S. trading day

Critical information for the U.S. trading day

Mike Pence dusted himself off from his “Hamilton” outing long enough to confirm on Sunday that Mitt Romney is a top candidate to serve as Donald Trump’s secretary of state. If Jim Cramer has it right, handing that title over to Mr. 47% could give the stock market a nice pop.

Why? Because it just might mean Trump is more savvy about foreign policy than some/many people might think.

For traders looking to scalp profits by timing Trump appointments — good luck with that — CNBC’s human bullhorn shared this tip: “A name-brand, Wall Street-friendly Treasury secretary, on top of tabbing Romney for state, would send this market through the roof … that is, if there even is a roof.”

As it stands now, Trump is likely to choose between investment banker Steven Mnuchin and Texas Rep. Jeb Hensarling for the Treasury — though he apparently still has a thing for the idea of Jamie Dimon.

Meanwhile, “fake” has definitely emerged as a buzzword in recent days. “Fake news” on Facebook FB, +1.26% supposedly helped seal Hillary Clinton’s fate in the election, and the “fake economy,” at least according to our call of the day, could do the same for the stock market (see more below).

But if the inevitable reckoning is in the offing, you wouldn’t know it from the mostly upbeat pre-Thanksgiving holiday mood that seems to be settling over markets.

Key market gauges
Futures on the Dow YMZ6, +0.07% and the S&P ESZ6, +0.21% are up a bit this morning, but they aren’t straying too far from break-even territory. Crude CLZ6, +2.08% is also higher, and so is gold GCZ6, +0.58% . The Nikkei NIK, +0.77% rallied nicely, but otherwise no big moves in Asian markets ADOW, +0.63% . Europe SXXP, +0.13% has been choppy early.

Last week, blue chips managed to eke out some minimal gains, while the Nasdaq COMP, -0.23% knocked out a solid 1.6% rally. Techs still have a ways to go considering the stock market’s SPX, -0.24% post-Election Day advance has pulled the Dow DJIA, -0.19% up 2.9% in total, compared with a 2.5% rise for the Nasdaq. Read:Market Snapshot.

The call
Forget “fake news,” it’s the “fake economy” investors should be worried about, says Graham Summers, chief market strategist at Phoenix Capital Research.

“President Obama at one point claimed that those who questioned the strength of the recovery were ‘peddling fiction,’” he wrote. “It’s an interesting claim given the entire recovery, at least post 2010, has been built on fake economic data to perpetuate a fake narrative of growth.”

From there, Summers went on to cast doubt on employment, GDP and government spending figures, to come up with this question: “So what happens to the fake stock market when it finally adjusts the economic realities?”

The chart
Barron’s used the chart below to help back its case for issuing 100-year bonds.

“Given the incoming administration’s ambitious plans, and the nation’s already high debt,” Randall Forsyth wrote for Barron’s cover story, “the president-elect might ask: What would Hamilton do?”

And in answering the question, he argues, Hamilton might say: “Take advantage by issuing Treasury bonds now — and for the longest term possible.”

This chart, Barron’s says, clearly supports the move that countries like Ireland and Mexico have already made. Read:The case for taming federal debt by issuing 100-year bonds

“Given that the odds today favor higher rather than lower interest rates, now would be the time to nail down historically low borrowing costs,” Forsyth wrote. “You would think someone like the billionaire president-elect, who calls himself ‘the King of Debt,’ would want to do what he can to minimize his borrowing costs.”

The quote
“I nudged my kids and reminded them, that’s what freedom sounds like” — Vice President-elect Mike Pence, responding to a question about the boos he heard from the crowd when he showed up at Hamilton on Friday night.

The stat
1.67 million — That’s how much Hillary Clinton beat Donald Trump by in the popular vote, according to the latest tally. Of note, that’s more than triple the popular-vote margin Al Gore had over George W. Bush back in 2000.

The economy
Considering Thanksgiving will cut things short, there’s still plenty of data to digest this week. We’ll get a tandem of reports from the housing sector on Tuesday and Wednesday. As for today, the Chicago Fed National Activity Index for October hits at 8:30 a.m. Eastern Time.

Random reads
What exactly are people ordering at cocktail bars?

Still firmly on track to be the greatest of all time.

Presidential hopeful Kanye West endears himself again.

Those photos of Trump and Japan PM Abe are problematic, and not just because of Ivanka.

And for those of you who just can’t stomach what America’s going to look like under a Trump presidency, pack your bags for “The Bubble”


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The Biggest Post-Trump Winner So Far? DryShips Is Up 1600%

DryShips Inc. (NASDAQ:DRYS) is having a week for the ages, seeing its shares surge an almost inconceivable amount following last week’s election results.

What’s behind this obscure shipping stock’s massive 1600% (yes, that’s sixteen-hundred percent) surge? It’s a confluence of a few factors.

Firstly, DRYS is working off of a very low starting share price. The stock has actually completed not one, not two, but three giant reverse splits this year in order to buoy its rapidly declining stock price. These moves include 1-for-25, 1-for-4, and 1-for-15 splits since mid-March.

If not for those splits, DRYS shares would be trading around 5 cents per share right now.

The next factor working on DRYS’ favor is the most obvious one: Donald Trump was elected president. Trump has made no secret of his plans to renegotiate trade agreements and try to spur more economic activity. A popular economic gauge, the Baltic Dry Index, has surged 25% in response, and most cargo shipping companies are getting a big bump as a result (although none as big as DRYS).

The final catalyst for DRYS’ price explosion is its ongoing debt negotiations with creditors. The company is precariously close to bankruptcy (as its big year-to-date price decline indicates), and has reached a make-or-break point. From the Motley Fool:

[The] company is actively working with lenders to restructure its bank credit facilities. Three of them have matured, and the company has yet to make final balloon payments, instead suspending principal and interest payments to preserve liquidity. However, the company has been actively selling off vessels to pay down its revolving credit facilities. For example, at the end of October, it announced the sale of five vessels for $29.4 million. Given the steps it is taking to address its credit facilities, there’s some growing optimism in the market that DryShips can restructure in a way other than going through bankruptcy.
So based upon Trump’s surprise win, and expectations for rising trade and higher shipping activity, investors are betting that DRYS can avoid bankruptcy and return its balance sheet to some semblance of normalcy.

I wouldn’t hold my breath for that. Investors should avoid this sinking ship at all costs.

DryShips shares were up $37.13 (+86.63%) to $79.99 in Tuesday afternoon trading. Year-to-date, however, DRYS is still down nearly 72%.

The Biggest Post-Trump Winner So Far? DryShips Is Up 1600%

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Trump stock-market rally reflects expectations for new era of fiscal stimulus

Republican lawmakers have spent the past eight years bashing President Barack Obama as fiscally irresponsible, but investors are now betting that Donald Trump could run much bigger budget deficits than Democratic rival Hillary Clinton had planned.

Those bets might underestimate potential political pitfalls, but expectations expansionary fiscal policy will boost economic growth and boost inflation are part of the reason stocks quickly recovered from the swoon that sent futures sharply lower as a surprise Trump victory in the presidential election became apparent late Tuesday night. And it is also part of the reason why Treasury bonds sold off sharply, sending yields soaring.

“What traders saw was a far more expansive fiscal policy than what they had imagined under Hillary Clinton,” wrote Thierry Albert Wizman, global interest-rates and currencies strategist at Macquarie. ”Moreover, with the Republican sweep of the House and Senate, the prospect that President Trump will actually enact low tax/high-spending policies (a fiscal expansion) was seen to have gotten credible and valid.”

Many Republican lawmakers, including House Speaker Paul Ryan, would likely be reluctant to significantly expand the deficit, however, which could ultimately limit the scope of fiscal measures, analysts said.

While details remain scarce, investors are looking for Trump to follow through on spending pledges when it comes to upgrading the nation’s infrastructure.

“We’re going to rebuild our infrastructure, which will become, by the way, second to none. And we will put millions of our people to work as we rebuild it,” Trump said early Wednesday.

Infrastructure stocks have performed well this year as both Clinton and Trump pledged to boost spending on dilapidated roads, bridges and other items, but appeared to top in the summer.

The victory by Trump, whose plans, while more vague, were larger, should be a “strong rebound candidate” in the next few months, wrote analysts at Pavilion in Montreal. The largest infrastructure exchange-traded fund, the iShares Global Infrastructure ETF IGF, -1.35% remains up 6.4% year to date, but shed 3.2% on Wednesday.

With Republican lawmakers likely to want to rein in public debt, the Trump administration is expected to work with the states to use public-private partnerships to fund much of the infrastructure spending, which would likely help support large construction groups and real-estate investment trusts that are already active in the sector, the Pavilion analysts said.

Trump also has criticized the automatic military-spending cuts that were enacted under budget sequestration in 2011. Presumably, Trump will move to reverse the trend given his support for expanding military capabilities across the board, the Pavilion analysts said, which means most domestic-focused names in aerospace and defense should benefit. The SPDR S&P Aerospace and Defense ETF XAR, +1.44% is up 8.6% this week and 17.4% year to date.

Tax cuts
Tax cuts are high on Trump’s agenda, including calls for sweeping reductions in personal income-tax rates and slashing the corporate income-tax rate to 15% from 25%. Reduced revenues could be partly offset by a cap on itemized deductions and other measures.

The tax measures will have the biggest impact on the deficit and debt levels under the Trump plan. The Committee for a Responsible Federal Budget estimates the Trump proposals would reduce revenues by $5.8 trillion over a decade. Overall, Trump’s measures are forecast by the group to add $5.3 trillion to the deficit over 10 years, versus the $200 billion rise that was expected over the same period under the Clinton plan.

With the deficit implications, it’s “no wonder that the bond market rioted” on Wednesday, wrote Wizman.

The yield on the 10-year Treasury note TMUBMUSD10Y, +0.00% saw its biggest surge in three years Wednesday to trade above 2% for the first time since January. Yields rise as bond prices fall.

While still very low by historical standards, the yield continued to rise Thursday, “driven by the prospect that expansive fiscal policy — in the face of near full-employment — will only drive inflation higher, and prompt a Fed response eventually,” Wizman said.

A “more sanguine” interpretation of the yield move is that stronger economic growth would warrant a higher level of interest rates, said Albert Brenner, director of asset allocation at People’s United Wealth Management, in an interview.

Brenner and others also pointed to the possibility that Congress would seek to at least partly reduce the revenue hit from tax measures by instituting a tax holiday on repatriation of profits held overseas by U.S.-based corporations.

The holiday would see corporations encouraged, or perhaps even required, to bring back profits, which would be taxed at a lower rate, providing a near-term revenue windfall.

Meet the deficit hawks
That’s unlikely to be enough, however, to prevent wider deficits and a bigger debt pile. The deficit shrunk from $1.4 trillion in 2009 to $588 billion in fiscal 2016, while public debt has topped $19 trillion. It will be interesting to see how Republican lawmakers, including tea party conservatives, react.

In October 2014, every Republican senator voted against suspending the debt ceiling. At the time, Republicans were in the minority in the upper chamber. Republicans are now in the majority.

Trump’s proposals would require either a huge increase in the debt ceiling, a repeal of the law or its continued suspension, noted Ian Shepherdson, chief economist at Pantheon Economics, in a Thursday note.

“We just don’t know at this point how the competing interests within the Republican Party will be reconciled,” he said, “though we’re guessing that the prospect of enormous tax cuts will persuade many previously resistant lawmakers to revise their principles.”

Article is from Market Watch By:

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Oil Prices Edge Up as Hopes Shift to OPEC’s November Meeting

Oil prices edged up Wednesday, supported by potential production caps by OPEC in November and ahead of a possible decline in U.S. stock levels.

The November contract for global crude benchmark Brent was up 0.78% at $46.33 while its U.S. counterpart West Texas Intermediate gained 0.58% to hit $44.94.

The likelihood of an agreement on production cuts or a freeze being reached between members of the Organization of the Petroleum Exporting Countries when they sit down in Algiers on Wednesday has faded, but hopes have risen that an agreement can be reached at an official meeting in November. Increased optimism around the cartel came after Saudi Arabia offered to trim production by 500,000 barrels a day.
Some analysts remain skeptical, however.

Germany’s Commerzbank said in a note that current output from OPEC is already high enough to mean that the global surplus of crude wouldn’t fall as forecast in 2017. It added that any additional production from individual members would further exacerbate the issue.

“It is easy to forget that Nigeria and Libya also want to be allowed to step up their output, which is likely to account for over 1 million barrels a day,” the note said.

Saudi Oil Minister Khalid al-Falih at the 15th International Energy Forum in Algiers on Tuesday. ENLARGE
Saudi Oil Minister Khalid al-Falih at the 15th International Energy Forum in Algiers on Tuesday. PHOTO: ZUMA PRESS
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Other analysts believe Saudi Arabia’s offer to trim production by 500,000 barrels a day would be woefully inadequate, with Olivier Jakob from Switzerland-based Petromatrix going as far to brand the offer a “trick.”

“A meaningful OPEC deal requires Saudi Arabia to cut by at least 1 million barrels a day and not just by its usual summer-to-winter seasonal variation, but we see no signs that this is about to happen,” Mr. Jakob said in a note.

Traders are also awaiting the weekly U.S. inventory data due later Wednesday. Analysts surveyed by The Wall Street Journal expect the Energy Information Administration to report domestic crude stockpiles rose last week.

The American Petroleum Institute, an industry group, said late Tuesday that its own data for the week ended Sept. 23 showed a 752,000-barrel drop in crude supplies, a 3.7-million-barrel decrease in gasoline stocks and a 343,000-barrel decline in distillate inventories, according to a market participant.

Nymex reformulated gasoline blendstock for October—the benchmark gasoline contract—rose 137 points to $1.4074 a gallon, while October diesel traded at $1.4125, 26 points higher.

ICE gasoil for October changed hands at $413.50 a metric ton, up $3.50 from Tuesday’s settlement.




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Hedge-fund manager warns of biggest market correction since 2008

Hedge-fund manager Robert Citrone, whose Discovery Capital Management firm oversees about $12.4 billion, offered his clients a grim assessment of what’s to come in the stock market, according to a note obtained by Bloomberg

We believe we are in the midst of the market correction we have been expecting. It will likely persist over the next 3-4 months and be the largest correction since the 2008 crisis.

Robert Citrone

He did say in the note, however, that the coming retreat will be a “healthy adjustment from overvalued market levels, which are primarily a result of exceptionally easy monetary policies.”

Citrone, as Bloomberg points out, is one of many hedge-fund managers given the nickname “Tiger cub” after working at Julian Robertson’s Tiger Management.


By MarketWatch


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As housing reignites, even bust towns are booming again

The poster children of the housing bust are back.

Last week, Realtor.com released its August “Hotness Index,” ranking metro areas on how many days a listing in that area stays on the market, as well as how many web page views it receives.

(News Corp, which owns MarketWatch, publisher of this article, also owns Realtor.com, the listing website of the National Association of Realtors.)

Studding August’s top ten are names familiar from the housing bubble and the municipal distress that resulted when it burst: Vallejo and Stockton, two California cities that filed for Chapter 9 bankruptcy, as well as Modesto, Sacramento, and Fresno, which had hard times of their own.

Rank Market Median days on market
1 Vallejo-Fairfield, CA 37
2 Dallas-Fort Worth-Arlington, TX 41
3 Denver-Aurora-Lakewood, CO 36
4 San Francisco-Oakland-Hayward, CA 33
5 Stockton-Lodi, CA 38
6 San Diego-Carlsbad, CA 43
7 Columbus, OH 46
8 Waco, TX 47
9 Detroit-Warren-Dearborn, MI 46
10 Sacramento-Roseville-Arden-Arcade, CA 45
11 Fort Wayne, IN 48
12 Yuba City, CA 47
13 Modesto, CA 40
14 San Jose-Sunnyvale-Santa Clara, CA 33
15 Fresno, CA 47
16 Colorado Springs, CO 44
17 Santa Cruz-Watsonville, CA 48
18 Kennewick-Richland, WA 40
19 Santa Rosa, CA 51
20 Nashville-Davidson-Murfreesboro-Franklin, TN 39
A decade ago, California’s “Central Valley” was the epitome of “drive until you qualify,” a run-up of demand for housing at the outermost point from a job hub where homes become affordable.

Real estate markets there are benefiting once again from the booming job market in San Francisco and San Jose, where prices are notching new record highs. Prices in Vallejo, Stockton, Fresno, Sacramento and Modesto sank by about two-thirds, nearly double the national average, and are still well below the peaks they set during the bubble.

But the hard-luck cases swelled, and then burst, because of overbuilding, said Jonathan Smoke, chief economist for Realtor.com. “We were building homes that if not for speculation, no one would occupy.”

In fact, Smoke said, “We have the opposite problem now.” Housing starts rose to the second-highest rate since the recession in July,

While there’s always the risk of an economic downturn that wipes out jobs and then hits the housing market, Smoke said, “I don’t think there’s a significant fear that the Silicon Valley/Bay Area is likely to see job losses. It’s more that they can’t keep the pace of growth going because of the lack of housing.”

Smoke calls secondary metro areas near major hubs “spillover” cities. It’s a phenomenon that’s seen beyond California, in places like Providence, Rhode Island, and Portland, Maine, as Boston becomes pricey.

There’s another signal that outsize demand isn’t inflating a bubble this time around, Smoke said. Beyond cyclical job losses, a major factor that weighs on local housing markets is when the population shrinks over a long period of time, like in Detroit. But places like Columbus, which had been losing population for years, are re-appearing on Realtor.com’s index of hottest metros. “They’re not losing young people now,” he said.

In August, Columbus hit number-seven on the hotness list. Not far behind it, at number-nine, was Detroit. In fact, several other metros that have struggled, from Harrisburg, Pennsylvania, to Central Falls, Rhode Island, are all improving in terms of “hotness” compared to a year ago, Smoke said.




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10 charts show why market may be ripe for a correction

As the U.S. stock market rallies to fresh record highs every few days, most investors will be hard-pressed to find incentives to sell out of the market. Yet, Bank of America Merrill Lynch has decided to take on the role of Wall Street’s Debbie Downer, warning of an impending correction. CLICK LINK AT BOTTOM TO SEE PICTURES OF CHARTS.

Savita Subramanian, equity and quantitative strategist at Bank of America, has been the consistent voice of caution this year even as the S&P 500 SPX, -0.14% is poised for a six-month winning streak — the longest since 2013. On Tuesday, she cited 10 reasons why she believes the market is ripe for a selloff, framing her bearish outlook in a series of charts.

1. Valuation: As of end of July, the S&P 500 was overvalued pretty much on all fronts, according to Subramanian. “U.S. stocks look expensive versus history on most metrics,” she said.

Bank of America
2. Positioning: A decline in short-interest-to-float ratio suggests that sentiment is increasingly bullish, which some view as a contrarian indicator.

Bank of America
3. Fiscal stimulus: Expectations of fiscal support for the economy is hovering at levels not seen since the height of the Great Recession, but Subramanian believes investors betting on additional fiscal stimulus will be disappointed.

Bank of America
4. Economic surprises: The incidences of economic data beating on the upside have started to wane, which is expected to drag on market sentiment

Bank of America
5. Corporates: Earnings are not expected to recover anytime soon, while sales growth remains subdued, slipping to a three-year low. Many analysts believe the stock market will not be able to sustain its upside momentum if earnings do not recover.

Bank of America
6. China: Concerns about the world’s second-largest economy have abated amid signs of stability, but the country’s manufacturing sector has started to contract again, prompting worries of further economic slowdown.

Bank of America
7. Leverage: Debt at S&P 500 companies is rising, while creditors have been tightening their lending standards for the fourth consecutive quarter.

Bank of America
8. Elections: Political uncertainties are expected to mount ahead of the November presidential election and dampen corporate investment, a key engine for economic growth.

Bank of America
9. The Federal Reserve: The market may not be reading the Fed accurately. “BofAML interest rate forecasts imply a far more aggressive pace of Fed tightening than is currently priced into the market,” said Subramanian. The CME Group’s FedWatch tool, which tracks Wall Street’s expectations for a Fed interest-rate hike, indicated that the market was pricing in a 24% probability of a rate increase in September, and a 44.1% probability in December.

Bank of America
10. September slump: History is working against the market. September is typically the weakest month of the year; since 1928, the S&P 500 has dropped in September 56% of the time.




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