The Global Macro Digest® Weekly Newsletter: For April 21, 2017

Oil Prices Plunge

Highlights:

It certainly has been a volatile time for commodities. Last week I highlighted gold prices. Precious metals had been on a rally for several weeks. Gold had risen for four consecutive weeks. It looked like a serious rally was beginning. And, as to be expected, several commentators opined that this was the beginning of a long bull run in precious metals. Some of these commentaries were featured on The Global Macro Digest® website. (See below for the links to the website.) However, this week gold prices retreated slightly. COMEX spot gold fell -.27%. Silver slipped as well, -3.08%.

The biggest story this week was the crash in oil prices. Oil prices fell hard. Brent North Sea crude fell -7.03%; West Texas Intermediate fell -6.69%. Ouch! Naturally, energy companies and energy service companies followed in the decline. This was the first week since March 24 in which West Texas Intermediate oil closed below $50 per barrel. This has called into question whether OPEC’s planned production cuts will actually affect the markets.

The GMD Weekly Newsletter (4-21-2017)

MARKETS OVERVIEW:

In the U.S. and overseas, except for energy related positions, the financial markets have been fairly quiet lately. Among emerging markets, Turkey, Mexico and India have been the best performers. Spain and Chile are not far behind. (Apparently living under a Muslim dictator does not trouble some people.)

Airlines:

Fuel is the largest cost factor affecting airlines. So it is no surprise then that the plunge in oil prices would spur a rally in airline stocks.

Defense:

Defense and aerospace stocks have also been doing well. Credit Kim Jong-un with that.

Technical Indicators:

Technical indicators improved slightly this week. The principal technical indicators (Advance/Decline and Up Volume/Down Volume) strengthened. However, a decline in overall volume continues to be a worry. Trading volume on both the NYSE and the NASDAQ has been falling since mid-March. That downward trend continued this past week. March 22 marked a peak in volume and obvious deterioration thereafter in both markets. Since then volume has been in a steady decline.

Featured stocks:

JD.com, Inc. (JD)

JD.com is a very interesting company. They operate online direct sales in the People’s Republic of China. Their business is primarily in electronics and home appliances, audio and video products, and books. In addition, they offer an online marketplace for third-party sellers. They are a Chinese version of Amazon. They are second in size behind Alibaba.

POS:     JD has emerged as a leading force in China’s retail industry. They offer excellent products at competitive prices and with prompt delivery services.

POS:     JD recently reported a strong quarter, with revenue beating estimates. They produced a positive net income margin (non-GAAP) for the third consecutive quarter and appear to have reached sustainable profitability.

NEG:    Their major competitor in the industry is Alibaba (BABA). Alibaba is an excellent company and a formidable competitor, and is larger than JD.com.

NEG:    JD’s profit margins remain very narrow.

Important note: None of the comments expressed herein constitutes a recommendation to BUY any security. DO YOUR OWN DUE DILIGENCE. And by all means, manage the risk. Always use stop loss orders to protect your positions.

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