July 26, 2021
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Top Stories
US stock markets began last week amid a selloff but technical analyst Katie Stockton, CMT, correctly maintained they would turn around in the following days, noting that market breadth was shrinking with the major tech names gathering momentum, and said: "I would be looking for opportunities to add exposure." Since her remarks, the S&P 500 and Nasdaq surged to record highs on Friday, largely propelled by names such as Amazon and Alphabet, as Stockton suggested.
Full Story: Business Insider (tiered subscription model) (7/19),  Reuters (7/23) 
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The US economy is traveling a bumpy path on the road to recovery from the COVID-19 pandemic, but Harvard University economist Karen Dynan, a former Federal Reserve and Treasury official, said that should not be surprising. "I think we should have expected there to be frictions in getting the economy reopened after this unprecedented shock," Dynan said. The New York Times reported that businesses continue to suffer from supply shortages, which is keeping them from meeting rising consumer demand and fueling price inflation.
Full Story: The New York Times (7/22) 
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Industry News
Sen. Elizabeth Warren, D-Mass., and Senate banking committee Chair Sherrod Brown, D-Ohio, have expressed dissatisfaction with Federal Reserve Chair Jerome Powell's approach to bank regulation as his position comes up for renomination. "I am concerned when I see the rules weakened rather than strengthened," Warren said.
Full Story: Bloomberg (7/22) 
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The UK's benchmark FTSE 100 index endured its worst day in two months with a 2.8% fall last Monday, but recovered quickly with gains most days which prompted one commentator to say the rout that started the week "now seems like a distant memory." Technical analyst Pierre Veyret acknowledged that concerns linger over inflation and the coronavirus threat, but said "strong reactions over key support levels suggest the bullish trading stance remains alive."
Full Story: MarketWatch (tiered subscription model) (7/20),  Proactive Investors (7/23) 
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Robinhood pledges unprecedented investor access to IPO
(Justin Sullivan/Getty Images)
Robinhood will set aside $770 million of shares -- as much as a third of its upcoming initial public offering -- for its customers to buy through its app. The IPO, which expected this week, is the first time a company has offered such a large amount of shares to everyday investors, as only about 1% or 2% is typically allocated for customers.
Full Story: The New York Times (7/22),  Axios (7/20) 
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While numerous commodities benefited from a surge during the coronavirus crisis but then pulled back, coffee futures continue to perform well, notes technical analyst Chris Kimble. Industry experts say production levels are likely to be exceptionally low for the year, and Kimble points out coffee futures are currently testing a 2016 high of around $175 and are poised for a breakthrough that could send them up a further 25% to $225.
Full Story: See It Market (7/21),  MarketWatch (tiered subscription model) (7/22) 
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The investment challenges facing insurers
Low interest rates, regulation and ESG risks are not new considerations for insurers' investment strategies. However, the long-term fallout from COVID-19 is adding a layer of complexity they will need to adjust to.
Technology and Data Visualization
Researchers from the UK and the University of California have used artificial intelligence and other analytics to demonstrate that the tone of voice used in statements by the Federal Reserve chair can move the S&P 500 by as much as 200 basis points, regardless of the statement's actual content. Studying statements from the past three Fed chairs, the researchers found that current chair Jerome Powell's intonation has the most negative effect on markets, Janet Yellen's was the most neutral and Ben Bernanke's was the most positive.
Full Story: Reuters (7/21) 
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Market Structure and Regulation
Platforms offering crypto tokens or other products with prices derived from securities need to report to the Securities and Exchange Commission, SEC Chair Gary Gensler said in a speech to the American Bar Association. "These platforms -- whether in the decentralized or centralized finance space -- are implicated by the securities laws and must work within our securities regime," he said.
Full Story: The Block (7/21),  Bloomberg (7/21),  CoinDesk (UK) (7/21) 
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International Markets
India's benchmark Nifty index appears to be in the grip of indecision, with swings through the week that ended with a marginal loss at 15,856, as researcher Ajit Mishra warned of high volatility to the end of July. "A decisive breakthrough with a sustained move above 15,900 is necessary to resume its journey to uncharted territory," comments technical analyst Amit Trivedi, CMT.
Full Story: The Economic Times (India) (7/25),  MoneyControl (India) (7/25) 
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While some analysts say the euro's performance against the dollar may be the foundation for a rebound, technical analyst David Sneddon asserts its repeated failure to hold above 1.18 may indicate a significant downturn. "We continue to look for a clear break of key support from its recent low and "neckline" support from November at 1.1781/71 to add weight to our view we are seeing the formation of a large "head & shoulders" top to mark an important change of trend lower," he comments.
Full Story: Pound Sterling Live (7/23) 
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Association News
Using leverage to magnify performance is an idea that has enticed investors and traders throughout history. The critical question of when to employ leverage and when to reduce risk, though, is not often addressed. Michael Gayed, CFA, and Charlie Bilello, CMT, establish that volatility is the enemy of leverage and that streaks in performance tend to be beneficial to using margin.
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There is a simple volatility indicator available in the public domain that can be used to implement trading strategies based on the concept of VIX. This indicator, the VIX Fix developed by Larry Williams, overcomes the limitations of VIX. Amber Hestia-Barnhart reviews what VIX is, highlight some of its limitations of VIX, describes an alternative to VIX and provides test results demonstrating how well the VIX Fix works.
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