Author: Online Trading Academy

The Apple Influence on Index Futures

Nasdaq futures chart showing drop in Apple stock

In the last 18 years, one company has not only revolutionized how we buy, store and listen to music but has also been one of the most innovative in showing us new ways we communicate and interact with our cell phones. And talk about customer loyalty? There are only a handful of companies throughout history that can claim such fierce devotion to their products. We are, of course, referring to Apple Corporation.

So why am I writing about Apple in an article dedicated to futures trading?  To some of you, it may be already evident that Apple influences the movement of not only the Nasdaq but the broader market in general, and for the rest of you, this piece may elucidate you into to the Why of this phenomenon.

As I write this article, news has come across the tape that Apple Corporation is guiding their earnings lower for the first quarter of  2019. They’re citing the shortfall due to the slowing economy in China. If you’re wondering how the Nasdaq futures are reacting: the chart below answers that question.

Nasdaq futures chart showing drop in Apple stock

To understand this reaction, let’s start with the basics on how the stock indexes are constructed. The four major stock indexes are the Nasdaq 100, S&P 500, Dow Jones Industrial Average and the Russell 2,000 small cap Index. Coincidentally, Apple is a big component of the first three of these indexes.

Indexes are the aggregation of all the stocks that are included in an index. These stocks are then added together based on their weighting and divided by a specific diviser to end up with a number (the Index price). So as an example, the Nasdaq 100 Index is taking the 100 largest companies in the Nasdaq market to assemble this particular Index. Most of the major equity indexes are cap weighted with the only exception being the Dow Jones Industrial average, which is price weighted. The Nasdaq, for example, is a Cap weighted index. Therefore, the bigger the stock’s market capitalization, the bigger the influence that stock will have on the price movement of its corresponding index. When referring to the market cap of a company this is simply the price of the stock multiplied by the shares outstanding. As an example of market capitalization, let’s say a company has 100 million shares outstanding and they’re currently priced at $10.00 per share. The stock’s market cap is 1 billion.

The meteoric rise of Apple since 2009 has vaulted it to being one of the most valuable (in terms of market capitalization) companies in the world, surpassing Exxon Mobil and Microsoft which previously held that distinction. This, in turn, makes it almost 20% of the weighting of the Nasdaq 100 Index. As you might have guessed, this fact makes it one of the most influential stocks in the Nasdaq and S&P 500 index. This pull was clearly felt immediately after Apple guided lower at the time of this writing.  This also has had a huge ripple effect across the currencies and other related markets this Wednesday afternoon.

To illustrate the correlation between Apple shares and the Nasdaq 100 E-mini futures, I have superimposed the chart of Apple (the orange line) on top of that of the Nasdaq 100 futures (blue line). In it we see the strong correlation between the two.

Stock chart showing Apple shares super-imposed over the Nasdaq 100 futures for comparison.

The question for traders going forward is if the inextricable link between Apple and the markets will break anytime soon. The answer is, probably not, and if that’s the case, how does this determine the outlook for the overall stock market going forward?

Free Trading WorkshopApple shares have sold off along with the board market since September, and during that pullback created supply levels that have not been tested.  There are also several gaps that were created after the news of the lower guidance. We will be looking at some of these levels for guidance as to where to be shorting both the stock and the Nasdaq e-mini futures.  There may also be possible buying opportunities at lower prices in upcoming days at fresh demand levels. So, for now, Apple will continue to be a leadership stock and we must keep an eye on it as the supply and demand levels that form will help us gauge where it might reverse in the near term. One caveat: never let a great company (which undeniably Apple is), or the affinity for their products, cloud your judgment as to when to short the stock or take profits when you have them.  Profits, after all, are our main objective when trading any markets. To that end, avoid falling in love with a company or its products if you want to produce long term consistent profits.

Until next time, I hope everyone has a wonderful week.

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Real Estate Newsletter – January 2019

Thoughts from Diana

Happy 2019!!

Hope you had time to refresh and start looking toward this new year. We have a couple of articles to help get you started in the right direction. A PLAN is key to success so see my article with some easy suggestions to on how to create one. Zani provides insight into the paradigm shift in the market for 2019, in his article. Also check out a full offering of classes and RECC’s to get you motivated to take action.

Remember we are here to provide guidance and support – contact us.


PARADIGM SHIFT IN THE REAL ESTATE MARKET AND WHAT’S CAUSING IT

By Zani Patasin

Previously, we looked at the question of Bubble or no-Bubble for the Real Estate Market. In it we mentioned that institutional buyers had entered the market following the 2008 real estate collapse, taking advantage of high inventory and low real estate prices. Here, we’ll take a look at what has changed in the real estate market since 2008, the major catalysts for that change and how institutions play a part.

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GOAL SETTING WITH A PLAN

By Diana Hill

Every year I write an article or two about goal setting. Goal setting is one of the biggest differentiators between people who are successful and those who aren’t.

There are many different ways to set goals and different acronyms used for goals setting. One of the most well-known is SMART Goals.

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Upcoming Classes

In-Center Classes
Real Estate Foundations with Gary Tole
Austin, 1/18/2019 – 1/19/2019
Online Classes

Real Estate Tax Strategies with Michael Atias
1/14/2019 – 1/15/2019

Rental Investor with Jason Tom
1/18/2019 – 1/21/2019

Real Estate Foundations with Gary Tole
1/28/2019 – 1/31/2019
Evenings 4:00 PM PST

Wholesaler with Joe Short
2/1/2019 – 2/4/2019

RECC 4:00PM – 5:30PM (Pacific Time)
1/3/2019: The Math of Rental & guest John OD – Jason Tom
1/10/2019: Benchmark IRR – Ron Fields
1/17/2019: Building & Developing of Apartments – Joe Russo
1/24/2019: Probate Basics – Diana Hill

Questions can be submitted to help@tradingacademy.com and deals can be uploaded for deal review.

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When To Review Your Estate Plan

Other than perhaps philosophers, most people do not like to contemplate their own demise. Even fewer enjoy the idea of planning for it! So most folks prepare an estate plan, put it in a safety deposit box and forget it. That could be a fatal estate pla…

S&P 500 and the Future of Equity Markets

Happy New Year! A few weeks ago, I published an article where I discussed my view of the equity markets and predicted some of the activity to expect from them in 2019. This week, we will dive deeper into one of those markets for a more in-depth analysis. We will be examining the S&P 500 first, before continuing onto the Nasdaq, Dow and Russell indexes.

The S&P 500 index doesn’t get as much focus from news outlets as the Dow Jones Industrial Average or Dow as it is known. The reason the Dow gets most of the attention is because the number is larger, and reporting on hundreds of points movements is much more exciting than a report on tens of points. However, there are two problems when using the Dow index as a market barometer. The first is the method for calculating the index value, and the second is the composition of the index itself.

How Is the Dow Index Value Calculated vs. Other Indexes?

The Dow Jones Industrial Index is the world’s only price weighted index. This means that the stock within the index with the highest price has the most influence on the index itself. A $1 move in a $100 stock would move the index more than a $5 move in a $30 stock, even though the latter had a more significant percentage move.

In comparison, the S&P 500 and other indexes are market capitalization, (Market Cap) weighted. Market cap multiplies the current price of the stock by the number of shares outstanding. The largest influence this way would not necessarily be the most expensive stock, it would be the one most widely held in people’s portfolios, which provides a more accurate picture of the markets.

The S&P 500’s composition is also a better representation of the stock market and the American Economy as a whole. As you can see below, the Dow is over weighted in the industrial sector and utilities are not even included in that index.

Dow Jones sector allocation vs S&P 500 sector allocation

Market Outlook for the S&P 500

Let’s dive deeper into the S&P 500 index and see what it has to say about its future and the future of the American economy. Remember, people invest in the stock market based on what they expect the future economy to be. Traders and investors will buy stocks in advance of bullish economic data and will sell off or short the markets when they fear a recession.

Unless Santa replaces his sled and reindeer with a rocket ship, it is unlikely for the index to close above the 13-month exponential moving average. In past articles, I highlighted that when there is a monthly close below this line, prices will make a lower low before making a higher high. This is a very bearish omen for the markets.

Chart of the 13 month moving average

The current drop in price is not like anything we have seen before. It is much steeper. Perhaps this is due to electronic trading and the easier access to the markets that we all enjoy now. Looking for the monthly demand zones, we try to answer the question, where will the bear market end? The last two bear markets, (2000 and 2008) both ended when prices hit fresh monthly demand zones after more than a 50% price drop from the highs.

Looking at our chart, you can see that there are two such zones below. The first is 1689 for a 42% decline from the September highs and the second is 1440 or a 51% decline that would be in line with the previous market moves.

Chart showing demand zones in the S&P 500 that could indicated a bear market.

Of course, we shouldn’t move straight down to those targets without some bouncing. Looking to the weekly charts, there are several demand zones that should offer pause points along the way to the monthly targets. The price bounces from those areas are also excellent opportunities to exit losing long positions, add to winning shorts, or even initiate new shorts and hedges.

Stock chart showing possible opportunities to short the markets.

In this time of increased volatility, it is important to work to protect your money. Many financial advisors will tell you to hold fast and ride out the storm. That the markets always recover, and you’ll be fine if you don’t panic. The problem is that even though the price of the indexes and stocks do go back up, you never recover the time lost waiting for them.

S&P chart showing potential gains for active traders and investors compared to buy and hold strategy.

Holding on through the last crash wasted over five years of your investing life. Yes, if you held on from the peak in 2008, your portfolio is currently up nearly 50%. Sounds great, right? Not when you consider that, that equates to only a 5% annual gain for the last ten years! If you used Online Trading Academy’s Core Strategy to time the markets, you could have experienced a 253% gain or over 25% annually instead! Just imagine the difference in your portfolio!

Free Trading WorkshopMarkets run up and also crash. You do not need to expose your money to both. If you want to, at least learn how to profit in the bearish market conditions. The markets can offer you profits in any direction or condition, you simply have to have the right knowledge and skill to navigate them. Come visit your local Online Trading Academy center today and learn how you can secure your financial future today!

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Tips When Buying U.S. Properties From or Selling to Expats and Foreigners

In 2018, ‘Canadians purchased approximately 27,400 residential real estate properties in the U.S. valued at $10.5 billion dollars…. The average purchase price was $383,900 and the median price was $292,000. Canadians were responsible for about 10% of all foreign real estate sales in the U.S.’ according to CanadatoArizona.  This is amazing since Canadian currency is weaker in the U.S. So why do they continue to buy in the U.S.? And where?

Stacks of Canadian money in the shape of a house

What Types of Properties Do Canadians Own in the U.S.?

  • 40% of purchases in the U.S. are for a vacation property or second home, these are known as Snowbirds
  • 23% of purchases are primary residence, they have a desire to become permanent residents of the U.S.
  • 15% of purchases are purely for investment properties, such as long-term rentals
  • 16% of purchases are intended for part-time home and part-time rental uses – like Airbnb
  • Approximately 68% of Canadian buyers purchased single family homes
  • 22% purchased condominium properties
  • 8% purchased townhomes
  • 2% purchased residential land

Canadians purchasing single-family homes has been on the rise and is a new trend in the U.S. real estate market. We are also seeing a trend toward the purchase of new construction because it offers the latest in amenities, technology and there is less required maintenance.

Where Are Canadians Buying Properties in the U.S.? 

Free Real Estate Investing WorkshopNot surprisingly, most Canadians are purchasing properties in the sand states such as; California, Florida, Arizona and Nevada. The state with the fifth highest Canadian real estate purchases is New York, with additional purchases being made in Texas, Michigan and Washington.

No doubt this is a thriving market and Canadians aren’t the only foreigners participating. However, there are a couple of things which should be taken into consideration when buying real estate from or selling to an expatriate or foreign buyer.

 Laws and Logistics of Purchasing U.S. Property From/Selling to Expats/Foreigners

Financial Resources

Many properties purchased by foreign buyers or expats are often purchased in cash. They are simply unaware that they can apply for a U.S. mortgage and that it could be a great option for them. It is usually easier for them to secure a mortgage loan if they have a Green Card or a valid work visa.

Legal Factors

The U.S. allows most foreigners to purchase and own property.  However, rules can differ from state to state and at the municipal levels, so this should be checked.  Buyers will also need to apply for a taxpayer ID number.  The purchase and sale of property in the U.S. is subject to U.S. tax laws.

Management and expenses

Buying the property isn’t the end of the expense for foreign real estate buyers. In fact, it’s just the start. There are continuing expenses and management costs which must be accounted for, even if the property isn’t used as a rental.

Additional expenses when you own real estate:

  • Utilities, which can vary by area and property type
  • HOA or Community Fees, if the property is new construction or a Condo/Townhouse there will be monthly fees to maintain the infrastructure and grounds, for example
  • Taxes, local property taxes and, if it is a rental property, there is the possibility of income taxes
  • Home Security, installing a security system and/or professional monitoring service
  • Management Company, to manage tenants and maintenance of the property if it is a rental

For more information about buying or selling out of your local area click here. Remember the world just keeps getting smaller.

Good Fortune,

Diana D. Hill – Diana@OTARealEstate.com

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The Paradigm Shift in the Real Estate Market and What’s Causing It

Previously, we looked at the question of Bubble or no-Bubble for the Real Estate Market.  In it we mentioned that institutional buyers had entered the market following the 2008 real estate collapse, taking advantage of high inventory and low real estate prices. Here, we’ll take a look at what has changed in the real estate market since 2008, the major catalysts for that change and how institutions play a part.

What’s Causing the High Prices in Real Estate?

There’s been a paradigm shift and, at least in part, it’s caused by this: prices started to rise, started to return to pre-collapse levels where the institutions historically cease acquisition mode, but this time institutions continued to acquire real estate at record levels.

Real estate agent standing in front of a house by a For Rent sign.

This means that, not only are retail buyers competing with other retail buyers for homes, what many do not realize is they are also competing with the likes of Colony Capital, Progress Residential and Resi-Cap, hence the rise in demand-based pricing. Tweet: Not only are retail buyers competing with other retail buyers for homes, what many do not realize is they are also competing with institutional buyers, hence the rise in demand-based pricing. https://ctt.ec/cEb5O+

You see, the driving factors, the story if you will, is much deeper than meets the eye.

How Is the Housing Market Changing?

As stated, housing in America is in the midst of a paradigm shift in the real estate market. Home ownership in this country is at a 52-year low! Outside the annals of professional and institutional investors, no one is talking about this.

To understand the shift, we must explore today’s largest demographic: The Millennial. Recent market research studies identify that YES, they do aspire to own their own homes someday, but not yet.

The Millennial demographic is staying in school much longer than their parents did. It is not uncommon for young professionals to be in college well into their mid to late 20s. More time in school means traditional relationship formation, aka marriage, is also delayed. Getting married in your mid to late 20s or beyond is commonplace today. Add in the weight of student loan debt, and renting is their chosen mode of housing. Long gone is the stigma once attached to renting. It’s no longer, do you rent, but, where do you rent.

For additional consideration, we must also factor in the delay in family formation (having kids), again occurring much later than in the past. That, along with the reduction in family size, and well, you can see why we are experiencing the nationwide boom in multifamily housing units.

Next, we must look at the grossly under-saved Baby Boomers. Impacted by more market corrections than any generation in American history, we are witnessing a generational transformation from home ownership to the fixed cost of renting, which frees up what is often their largest bastion of cash, also known as equity, to help supplement their grossly underfunded retirement accounts.

Add in the millions of Americans that don’t qualify for traditional mortgages and the demand for single family rental homes and apartments has never been higher. Rising interest rates, stock market corrections and/or  a significant event that erodes consumer confidence will only add to demand.

A recent study revealed that today 48% of all homes in LA County are now owned by institutions or private investors. Factor in that home ownership is now at the shortest tenure in American history, at only 7 years mainly due to the need for employment mobility, and you could argue that, unless you paid cash for your home, even those who own a home are pretty much still just renters.

Opportunities for Real Estate Investors 

As you can see, the changes occurring in the real estate market are opening up opportunities for those interested in owning rental property. However, with institutional buyers’ interest in acquiring property not yet waning, there’s added competition. For those who know where to look and have the tools to do so, there are plenty of real estate deals to be had. Just remember that  all segments of real estate and real estate investing offer varying levels of risk and reward and are directly tied to identifying the needs of that market and serving those demonstrated needs.

Free Real Estate Investing WorkshopFor example, doing a fix and flip in Buffalo may pose huge risk for investors, while Austin, TX offers tremendous opportunity for profit. Building a portfolio of rentals in a market experiencing population decline like Erie, PA offers a higher probability for vacancy, while a robust rental portfolio inclusive of Denver, Charlotte, Phoenix and Nashville offer strong opportunities for monthly rental income and long-term asset appreciation at the hands of expanding population bases.

To take advantage of unprecedented opportunities that are Market Wise, capitalize on our more than 250 years’ worth of accumulated experience in knowing what market segments to invest by contacting OTA Real Estate for additional information.

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