#$stt

[dragonflycap]

4 Trade Ideas for State Street: Bonus Idea

State Street, $STT, started to move higher in November, confirming a double bottom with a gap up. It continued to a top in the middle of March and has basically moved sideways since. The stock has stayed in a range between 78 and 88 for 5 months. It comes into the week at the top of the range with the Bollinger Bands® opening higher. The RSI is at the edge of a move into the bullish zone as it rises. The MACD is positive and moving higher. There is resistance at 88.50 and then back in 2018 at 92 and 97.50 before 100.75. Support lower comes at 87 and 84.50 then 83 and 80.60. Short interest is low at 1%. 

The stock pays a dividend with an annual yield of 2.62% and will next trade ex-dividend on September 30th. The company is expected to report earnings next on October 14th. The August options chain shows open interest between 85 and 80 on the put side. It is much bigger at 95 and 92.50 on the call side. In the September chain it is biggest at the 70 and then 80 strike puts. The call side is biggest at 87.50. In the November chain the 80 put has the largest open interest and on the call side it is at 85 with most other higher.

State Street, Ticker: $STT

Trade Idea 1: Buy the stock on a move over 88.50 with a stop at 83.50.

Trade Idea 2: Buy the stock on a move over 88.50 and add a September 85/80 Put Spread ($1.45) while selling the November 100 Call ($1.05).

Trade Idea 3: Buy the August/November 90 Call Calendar ($3.10) while selling the September 80 Puts (1.05).

Trade Idea 4: Buy the November 80/90/100 Call Spread Risk Reversal for 15 cents.

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After reviewing over 1,000 charts, I have found some good setups for the week. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Friday which with the month of July in the books, saw equity markets showed some signs of being tired.

Elsewhere look for Gold to possibly reverse higher while Crude Oil continues in an uptrend. The US Dollar Index continues to drift to the downside in the short term while US Treasuries push higher in an uptrend. The Shanghai Composite looks to continue the short term move lower while Emerging Markets trend lower at support.

The Volatility Index looks to remain low making the path easier for equity markets to the upside. Their charts look strong on the longer timeframe with the exception of the IWM which remains marking time sideways. On the shorter timeframe both the QQQ and SPY shift to short term consolidation with momentum divergences while the IWM muddles along. Use this information as you prepare for the coming week and trad’em well.

[dragonflycap]

4 Fearless Trades in State Street: Bonus

State Street, $STT, has custody of over $1 trillion of assets, yet they have been in the news lately for a statue of a little girl. The Fearless Girl statute was a marketing piece for a new ETF that State Street’s investment management arm, SSGA, created. They have a lot of experience in ETF’s. They created the first one, the $SPY, over 24 years ago. These two businesses, custody and asset management, drive their company.

The stock price has had a less interesting news cycle over the last year though. It rose with the banks from July into a consolidation that began in September. That ran through the election when it jumped higher. But since that 2 day move up after the election it has churned sideways for nearly 6 months. That may have changed late last week. That is when the stock price broke above the channel.

This took it out of the Bollinger Bands® and it pulled back toward them Friday. The Bollinger Bands have widened to allow a move, and the RSI is bullish. In fact it touched into overbought territory and is stalling. The MACD is rising. This is a bullish set up. The broader move into the long channel suggests a Measured Move to the upside to 90 at first and then to 110. Often a break out retests the break area before moving up and this may be happening with State Street.

There is no resistance above 85.38 and support lower comes at 83 and 80.60 followed by 77.50 and 75.50. Short interest is low at 1.1%. The company pays a 1.8% dividend but with the stock last going ex-dividend on March 30th it will not pay another until the end of June. The company is expected to report earnings July 26th.

The options chain for May show highest open interest at the 85 strike calls. This could draw the price higher. June options are lighter but have the biggest open interest at the 87.50 call strike. July is similar to June with open interest biggest at 87.50. The August options, the first after the next earnings report, are still building open interest and too light for a tell.

State Street, Ticker: $STT

Trade Idea 1: Buy the stock now (over 83) with a stop at 82.50.

Trade Idea 2: Buy the stock now (over 83) with a May 82.5/80 Put Spread (75 cents) as protection. Sell the June 87.5 Call (85 cents) to pay for the hedge.

Trade Idea 3: Buy the June 80/87.5 bullish Risk Reversal (18 cents).

Trade Idea 4: Buy the June/July 87.5 Call Calendar (93 cents) and sell the June 80 Put (87 cents).

After reviewing over 1,000 charts, I have found some good setups for the week. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Friday which heading into May, sees the equity markets making and testing highs again, but in a mixed fashion with strength shifting to the SPY and QQQ and away from the IWM.

Elsewhere look for Gold to continue the pullback in its uptrend while Crude Oil consolidates deciding if it is a bottom or just a pause. The US Dollar Index continues to move lower while US Treasuries are biased lower in consolidation. The Shanghai Composite seems to have found support and Emerging Markets are biased to continue higher.

Volatility is back at abnormally low levels and looks to remain very low going forward, keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. Their charts show strength in the SPY and QQQ in the short term but the IWM rolling over. On the longer timeframe it is similar with the QQQ leading and the SPY turning up, but the IWM stalling at resistance. Use this information as you prepare for the coming week and trad’em well.

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[dragonflycap]

5 Trade Ideas for Monday: Blackrock, Corning, Overstock, Packaging Company of America and StateStreet

5 Trade ideas excerpted from the detailed analysis and plan for premium subscribers

Blackrock, Ticker: $BLK

Blackrock, $BLK, had a strong run higher from a bottom in January. It peaked in April and pulled back to the 50 day SMA. From there it rebounded to that April high before a drop over the last two weeks. Last week saw a reversal Friday, confirming the Hammer higher. Look for continuation to participate to the upside.....

Corning, Ticker: $GLW

Corning, $GLW, had a strong run higher from a January low. It pulled back hard in April but found support early May and reversed higher. It made a higher high in June and pulled back again. This time it has made a higher low. The RSI is turning back higher after touching the mid line and the MACD is falling. Look for continuation higher to participate in the upside.....

Overstock, Ticker: $OSTK

Overstock, $OSTK, broke above a consolidation range in May. It rose to the November high, where it gapped down from. After closing the gap it pulled back in a bull flag until Friday when it started higher. The RSI has turned higher off of a touch at the mid line, while the MACD is leveling after a pullback. Look for continuation higher to participate to the upside.....

Packaging Corporation of America, Ticker: $PKG

Packaging Corporation of America, $PKG, ran higher faster from a February low. It found resistance 2 weeks ago and has pulled back to a short term consolidation range at the 50 day SMA. The RSI is turning back higher and the MACD continues lower. Look for the break of the consolidation last week to the upside to participate higher....

State Street, Ticker: $STT

State Street, $STT, fell hard from December to a low in February. Since then it had trended higher until hitting the falling 200 day SMA in May. It has pulled back from there and may have found a bottom at a higher low. The RSI is turning back higher and the MACD is falling. Look for continuation higher to participate in the upside.....

After reviewing over 1,000 charts, I have found some good setups for the week. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Friday which saw following the June FOMC meeting and Options Expiration, the market got a shock to the downside, but not deep. Now it can look forward to the Brexit vote and then summer.

Elsewhere look for Gold to consolidate with an upward bias while Crude Oil moves higher after a digestive pullback. The US Dollar Index looks to consolidate sideways at the bottom of the range while US Treasuries are biased higher. The Shanghai Composite and Emerging Markets are running in place with the Chinese market biased to lean lower and Emerging Markets higher.

Volatility looks to remain near the top of the lower range keeping the bias lower for the equity index ETF’s SPY, IWM and QQQ, mildly. Their charts suggest intermediate term consolidation with a short term downward bias for the SPY and QQQ, but the IWM looking a bit stronger. Use this information as you prepare for the coming week and trad’em well.

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[dragonflycap]

5 Trade ideas for Monday: Bristol-Myers, Cummins, Rockwell Collins, eBay & State Street

5 Trade ideas excerpted from the detailed analysis and plan for premium subscribers

Bristol-Myers Squibb, Ticker: $BMY

Bristol-Myers Squibb, $BMY, has been moving in a broad channel between 58 and 70 for 18 months. This after a series of steps higher. Not tight flat steps, but broad messy ones, like the current environment. Most recently is has pressed up to and through an area of resistance for all of 2016. The RSI is trending higher but leveling while the MACD is rising, with the Bollinger Bands® opening higher. These support a continued move up. Look for a move higher Monday to participate.

Cummins, Ticker: $CMI

Cummins, $CMI, is revving up for a move higher after a long plunge from May through to January. The bounce from the depths consolidated through February and started higher again at the end of last week. The RSI is in the bullish zone and rising with the MACD turning back higher as well. Look for a continued hold over 100 to participate in the upside.

Rockwell Collins, Ticker: $COL

Rockwell Collins, $COL, had a violent drop to start 2016, falling nearly 20% in just 6 weeks. But then it found support and rocketed higher even faster. It spent the last two weeks consolidating that 'V' recovery but Friday saw a peek over the top of consolidation. The RSI is in the bullish zone, as the MACD rises, both supporting more upside. Look for confirmation of a break of the consolidation to participate.

eBay, Ticker: $EBAY

eBay, $EBAY, started to fall in December. It has given two different scenarios where it may have reversed along the way. The first time failed, and it is now trying a second time. The RSI is cruising along the mid line after rising from an oversold condition while the MACD is rising. Look for a move higher to participate in the upside.

State Street, Ticker: $STT

State Street, $STT, fell from a double top over 80 in July to a bottom at the end of January just over 50, losing 38% of its market cap. Since mid January it has gone through a bottoming process and seems to have broken out above that range Friday. But with a Shooting Star candle, a possible reversal. In fact this is an indecision candle so it can play out either direction. With the RSI rising and ion the edge of the bullish zone and the MACD rising, look for a break to the upside to participate.

After reviewing over 1,000 charts, I have found some good setups above for the week. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Friday which heading into the next week sees the equity markets on the verge of a major reversal higher.

Elsewhere look for Gold to continue higher in its uptrend along with Crude Oil. The US Dollar Index looks weak short term in consolidation while US Treasuries are biased lower. The Shanghai Composite and Emerging Markets are biased to the upside in the short run. Volatility looks to continue toward the normal range with a bias lower, adding a breeze to the backs of the equity markets.

The equity index ETF's SPY, IWM and QQQ, look better to the upside, with the SPY and IWM showing strength in break a range higher, while the QQQ lags behind but also looks better to the upside. Use this information as you prepare for the coming week and trad'em well.

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[welcometokindergarten]

Funds aren’t cutting fees, investors are

There’s a fascinating trend happening within the asset management industry where the public is using data and the information available online to make better investing decisions, slowly but surely. There is absolutely zero data that links high fund costs with outperformance over any relevant period of time and the “persistence” data from SPIVA has done a number on the idea that investors who overpay for active management get what they pay for.

Investors are leaving higher cost funds and gravitating toward lower cost funds. I would surmise that the education they are getting on financial blogs and from their advisors is helping to drive this trend.

A new Morningstar study released today shows that the asset-weighted expense ratio across all funds (including mutual funds and exchange-traded products, or ETPs, but excluding money market funds and funds of funds) was 0.64% in 2014, down from 0.65% in 2013 and 0.76% five years ago. The trend is being driven more by investors seeking low-cost funds than it is by fund companies cutting fees.

The data is undeniable: the investor class is learning:

Mutual funds and ETPs with expense ratios ranking in the least-expensive quintile of all funds attracted an aggregate $3.03 trillion of estimated net inflows during the past 10 years, compared with just $160 billion for funds in the remaining four quintiles. That is to say that 95% of all flows have gone into funds in the lowest-cost quintile.

There is an implied link to the fact that service models among financial advisors have shifted dramatically in recent years. There are many more clients now being served by fee-based financial advisors than pure transactional brokers – a trend I have documented laboriously on this site and in my book.

With less brokers, there is the commensurate decline in the type of funds brokers favor (the ones that pay them most). Broker-sold or “load” funds are going the way of the dodo in place of ETFs in wrap accounts or institutional share class mutual funds. Morningstar notes that “Load shares, which charged an asset-weighted expense ratio of 1.02% in 2014, held just 20% of assets as of year-end, down from 37% in 2004.”

The pendulum is not going to be swinging back to higher-cost funds any time soon, contra the opinion of Fidelity’s chief Abigail Johnson. Actively managed funds will either react by rationalizing their costs or continue to watch the dollars flow out.

One other anomaly worth mentioning – investors are allocating to one area with higher than average fees, the liquid alts space. That said, it’s such a small pocket of the overall fund biz that it’s hardly worth mentioning at this point. Time will tell whether liquid alts can grow into a much large contributor to the industry and still maintain high internal expense ratios.

Source:

Investors Drive Expense Ratios Down (Morningstar)

2015 Fee Study: Investors Are Driving Expense Ratios Down (Morningstar)

Image by Gerard Stolk

[bencarlsonyahoofinance]

The Cost of Doing Business For Active Mutual Funds

I received a great deal of feedback on my post from a few weeks ago about passive inflows and where I think active managers have a place in the fund world of the future (see Putting Passive Inflows Into Perspective).

It’s easy to demonize the active fund management industry what with their high fees and underperformance issues, but it’s not always so black and white. There are firms that charge higher fees simply because they can, but not everyone is out to screw over the little guy. An old friend who works for an active mutual fund company emailed me with the other side of the story. Here are some of his points that I found interesting:

There is a huge bottleneck for fund companies to charge lower fees to their shareholders, and it isn’t greed. It’s a combination of platform fees and stupid regulations. The cost of us for “helpers” is pretty massive, but none larger than this one: regardless of what platform (Schwab, Fidelity, Ameritrade, etc.) the cost to fund companies to have their funds trade on them is 40 bps. The platforms have held almost completely fast on this — it would be a fascinating study in market collusion since there is almost no price variance and very few companies can negotiate. Vanguard is big enough to provide on its own platform. Fairholme is one which has enough name recognition to negotiate. Everyone else has to pay at what is a fairly high rate. How the brokers have held the line here is a mystery to me, but the knock on effects are obvious since it is much, much more painful for fund companies to lower fees since their biggest cost center (the platforms) do not negotiate.

James Altucher interviewed the president of Yuengling (one of my favorite beers) this week on his podcast and the topic of distributors came up. Yuengling made it sound like the distributors are the gate-keepers of the adult beverage industry — good luck getting shelf space without them on your side.

According to this fund manager, this is basically how the mutual fund industry works as well. The cost of doing business is very high because of the regulations involved and the way the platforms are set up to sell the funds. Unless the fund shop has the scale of a Vanguard or Charles Schwab the costs are very cumbersome. The solution, according to this friend, is to sell the funds directly, but that’s not very easy to do in an entrenched industry.

This person doesn’t consider passive investments a threat to their fund platform because they are highly differentiated with large tracking error, but wanted to set the record straight on the fee issue. Most upstart firms would welcome the chance to lower their fees, but it’s very difficult with the way that the mutual fund industry is set up. I’m sure the regulations were set up with good intentions, but there are always unintended consequences.

I’m always willing to look at both sides of every argument. I didn’t realize the extent of the costs involved for active funds that don’t have the scale to negotiate. This doesn’t change anything about the fact that lower fees are better for the investment consumer than higher fees, but it does help put active management fees into perspective.

Further Reading: Not All Active Funds Consistently Underperform

And listen to the Altucher podcast if you’re interested in a case study on how to run a business the right way (Stansberry Radio)

This post from Ben Carlson (@awealthofcs) originally appeared on A Wealth of Common Sense.

Picture: Steven Depolo

[dragonflycap]

5 Trade Ideas for Monday: Citigroup, State Street, Norfolk Southern, Starbucks & Toyota

5 Trade ideas excerpted from the detailed analysis and plan for premium subscribers.

Citigroup, Ticker: $C

Citigroup, $C, has been rounding out of a bottoming pattern since May. It reached 54.12 in September before the market sell off and is now consolidating under that resistance again. The RSI is in the bullish zone but moving lower along with the MACD.

Norfolk Southern, Ticker: $NSC

Norfolk Southern, $NSC, has been trending higher all year. Since a visit at the 100 day SMA in mid October at the market bottom, it has moved higher in two legs and is currently in a bull flag. The RSI is in the bullish zone and the MACD is pulling back, but has not yet crossed.

Starbucks, Ticker: $SBUX

Starbucks, $SBUX, is at trend resistance for the third time and coming from a higher low. The RSI is bullish and the MACD avoided a cross down and turned back higher Friday.

State Street, Ticker: $STT

State Street, $STT, has been trending higher since May, outside of that little 'V' shaped dip in October. In fact stick your thumb over the dip and you do not even notice a break. Friday it started higher again with a RSI that turned back up after holding strongly in the bullish zone and a MACD that is leveling after a pullback.

Toyota Motor, Ticker: $TM

Toyota Motor, $TM, is also at trend resistance. It arrives from a third higher low. The RSI is in the bullish zone and drifting up while the MACD avoided a cross down and is now flat.

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After reviewing over 1,000 charts, I have found some good setups for the week. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Friday which, heading into the shortened Thanksgiving Holiday week sees the equity markets looking solid longer term but a bit stretched in the short term.

Elsewhere markets all are looking better to the upside. Look for Gold to continue the bounce higher while Crude Oil may join it as it is also biased to the upside short term. The US Dollar Index looks ready to resume its uptrend while US Treasuries round out of a short term pullback and continue up as well.  The Shanghai Composite looks to continue its uptrend and Emerging Markets may also be reversing higher.

Volatility looks to remain subdued keeping the bias higher for the equity index ETF's SPY, IWM and QQQ. Their charts continue to show divergence as the SPY and QQQ look higher in the intermediate term while the IWM continues sideways in a range. All three look at risk of a short term pullback this week, even if only Monday. Use this information as you prepare for the coming week and trad'em well.

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