Investors focus on U.S. bonds as markets take their first 2018 dip

Short-term treasury yields are climbing today to relative highs after news of a possible drawdown in U.S. debt purchasing from China. Reports indicate China may cut down on buying U.S. government paper, or stop the activity altogether. Yields spiked on Tuesday as well, following a cut in bond buying from the Bank of Japan. The move is being interpreted by many as an indication that Japan’s central bank is moving away from its loose monetary policy.

Although Japan’s activity is both expected and understandable, the move from China is a bit more ambiguous and leading to speculation about their intent. The decision can be seen as a move toward more diversified holdings, or it can be looked at as a preemptive measure to better position itself against possible U.S. trade protectionism. Investors will need to closely monitor commentary from the Trump administration regarding trade policy, particularly with China, for 2018.  

Stocks in focus

Reports of a ‘major blockchain initiative’ and the launch of a proprietary cryptocurrency from Eastman Kodak Co. (KODK) has sparked a sharp spike in shares this week. The stock rose 119% on Tuesday and is up 57.65% at the time of publication. This will be a test-bed for corporate blockchain projects, but we can expect to see similar moves from technology companies with the ability to take risks and make fast and decisive moves in this area.

At the time of publication, the DJIA is down 0.02%, or 5.72 points, at 25,380. The S&P 500 is trading at 2,748- down 0.12% from the open. The Nasdaq-100 is down 0.30% at 7,142.

Using the ^GSPC symbol to analyze the S&P 500, our 10-day prediction window shows  negative movement. Today’s negative vector figure of -0.19% moves to -0.81% within three trading sessions.  Today’s predicted support and resistance is 2,726.55 (± 6.19) and 2,752.12 (± 6.25), respectively. The predicted close today is 2,732.43. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.  

Highlight of a Recent Winning Trade

On January 8, our ActiveTrader service- which is included in all Tradespoon membership plans- generated a bullish trade for Texas Instruments Inc. (TXN). Our ActiveTrader service is designed for intraday trading.

Trade Breakdown

TXN opened and moved within the Entry 1 ($108.58, ± 0.31) price range, and climbed higher throughout the trading day. The stock hit our Target Price of $109.67 in the fourth hour of trading. The Stop Loss was set at $107.49.

Buy, Buy, Buy: Stock Signals for Thursday

Our featured stock for Thursday is SunTrust Banks, Inc. (STI). STI is showing solid bullish signals in our Stock Forecast Toolbox’s 10-day forecast. This stock is assigned a Model Grade of (B)– indicating it ranks in the top 25th percentile for accuracy for predicted support and resistance, relative to our entire data universe. Our 10-day prediction model shows vector figures rising above +3.15% within the next two trading sessions. Our benchmark for vector figures is +1.00%.

*Please note: Our featured stock is part of your free subscription service. It is not included in any paid Tradespoon subscription service. Vlad Karpel only trades his own personal money in paid subscription services.  If you are a paid subscriber, please review your Premium Member Picks, ActiveTrader or ActiveInvestor recommendations.  If you are interested in receiving Vlad’s personal picks, please click here.

The stock is trading at $68.43 at the time of publication, up 2.21% from the open with a +0.81% vector figure.

Thursday’s prediction shows an open price of $67.52, a low of $66.91 and a high of $69.06.

The predicted close for Thursday is $67.68. Vector figures show +1.28% for tomorrow, and rise incrementally throughout the forecast.  This is a good signal for trading opportunities, because we use vectors as a primary factor in determining price movements for stocks and ETF.

Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.

Note: The Vector column calculates the change of the Forecasted Average Price for next trading session relatively to average of actual prices for last trading session. The column shows expected average price movement “Up or Down”, in percent. Trend traders should trade along predicted direction of the Vector. The higher the value of the Vector the higher its momentum.

Oil

The consistent climbs in the crude oil market are extending today, following EIA reported data showing another weekly decline in U.S. crude inventories. The report also highlighted a drop in production rates for crude. WTI prices are eyeing a three-year high and may achieve that point today.  Unrest in Iran continues to shore up support for crude prices, so U.S. data like this has a more pronounced effect despite technical indicators showing prices as somewhat overbought.

West Texas Intermediate for February delivery (CLG8) is priced at $63.29 per barrel at the time of publication, up 0.56% from the open.  

Looking at USO, a crude oil tracker, our 10-day prediction model shows strong positive signals. The fund is trading at $12.64 at the time of publication, up 0.60% from the open. Today’s prediction sees support at $12.47 (± 0.05) and resistance at $12.80 (± 0.05). The predicted close for today is $12.72. Vector figures show +1.15% today, pushing to +1.86% in three trading sessions. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.   

Gold

The price for February gold (GCG8) is up 0.30% at $1,319.50 a troy ounce at the time of publication. A pullback in the ICE U.S. Dollar Index- which measures the currency against six ‘rivals’- has propped up gold prices. One major factor in the slide is a cut in bond purchasing from the Bank of Japan. The U.S. dollar dropped the most against the Japanese yen. China’s consideration of a slash or outright halt in purchasing U.S. bonds is also contributing today. Investors holding foreign currencies find gold to be more attractive when the U.S. dollar is weak, as the non-fiat asset is denominated in the greenback.

Using SPDR GOLD TRUST (GLD) as a tracker in our Stock Forecast Tool, the 10-day prediction window shows slight positive signals. The gold proxy is trading at $125.06, up 0.26% at the time of publication. Today’s predicted low is $124.30 (± 0.23) and the predicted high is $125.00 (± 0.23). The predicted close today is $124.75. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.   

Treasuries

Yields are rising today as bonds are selling off due to the aforementioned news of cuts in bond-purchasing from China and the Bank of Japan. The move from China could be the most significant, particularly because the motivation likely stems from an anticipated trade spat with the U.S. China is one of the largest U.S. debt holders, and their opinion on the attractiveness of U.S. treasurys has an immediate impact on broader financial markets.  The yield on the 10-year Treasury note is up 0.50% at 2.59% at the time of publication.

Using the iShares 20+ Year Treasury Bond ETF (TLT) as a proxy for bond prices in our Stock Forecast Tool, we see initial negative signals followed by an uptrend in our 10-day prediction window. Today’s vector of -0.38% reverses to +0.65% tomorrow, remaining positive throughout the forecast. The ETF is priced at $123.22 at the time of publication, down 0.59%. The predicted close today is $123.81 with a low and high of $123.24 (± 0.38) and $124.54 (± 0.38), respectively. In this particular situation, it would be advised to allow our models one trading session to adjust to today’s data  Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.

Cryptocurrencies

Bitcoin spot prices and futures dropped today, with the spot price seeing recovery but futures continuing losses. The spot price for a single bitcoin (BTCUSD) is up 1.00% at $14,602.43 at the time of publication, after seeing a 6.6% drop in earlier trading. CME’s January futures contract for bitcoin (BTCF8) is down 0.68% at $14,680 at the time of publication.

Ripple coins continue to slide in value, and the market cap has been halved after a speculative rally fueled by rumors of a Coinbase offering were squashed by the popular exchange in recent days. Recently, Ripple had surged dramatically and replaced Ethereum as the No.2 contender to Bitcoin in terms of market cap.  The spot price of a single Ripple coin is down 12.86% at $2.01 at the time of publication.

Ether coins on the Ethereum blockchain are continuing to rally and have reclaimed the No.2 spot in terms of market cap, topping $128 billion. The spot price for an Ether coin is up 8.78% at $1,329.33 at the time of publication.

Using Grayscale’s Bitcoin Investment Trust (GBTC) as a Bitcoin tracker in our Stock Forecast Toolbox, we see today’s predicted positive movement reverse to a block of negative signals in our 10-day prediction window. Today’s vector of +0.12% moves to -1.74% within three trading sessions. The proxy trust is priced at $2,080.00 at the time of publication, down 3.70% or $80.00. The predicted close today is $2,155.65 with a low and high of $2,060.65 (± 130.46) and $2,284.18 (± 144.61), respectively.  Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.

Volatility

The CBOE Volatility Index (VIX) is down 0.79% from the open at 10.00 at the time of publication, and our 10-day prediction window shows a mixed outlook.  The predicted close today is 10.49 with a positive vector of +1.66%, which holds positive until the latter half of the 10-day forecast.  Today’s predicted lows and highs are 10.00 (± 0.19) and 11.14 (± 0.22), respectively. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.