debt

Image credit: All images belong to Aleph Blog

Well, finally the bear market… at 3/31/2002 the S&P 500 was priced to return a trice less than zero in nominal terms. After the pasting the market received today, that figure is 3.57%/year nominal (not adjusted for inflation). You would likely be better off in an ETF of 10-year single-A rated bonds yielding 4.7% — both for safety and return.

I will admit that my recent experiment buying TLT has been a flop. I added to the position today. My view is that the long end of the curve is getting resistant to the belly of the curve, and thus the curve is turning into the “cap” formation, where the middle of the curve is higher than the short and long ends. This is a rare situation. Usually, the long end rallies in situations like this. The only situation more rare than this is the “cup” formation where the middle of the curve is lower than the short and long ends.

I will have to update my my old post of “Goes Down Dou

Will Pandexit Support Gold?

Will Pandexit Support Gold?

Arkadiusz Sieron Arkadiusz Sieron 25.10.2021 00:14
Pandemic will cease to be a problem at some point. It will leave the world with other problems though, and they could be supportive of gold. Maybe it’s not the best timing, given the spread of the Delta variant of the coronavirus, but let’s be optimistic and assume that we will soon leave the epidemic behind us. It goes without saying that the pandexit, or the exit of the Covid-19 pandemic from the world, is believed to be positive for the global economy. However, even if the pandemic ends, it will leave the world with many risks. As Agustín Carstens, Bank for International Settlements General Manager, has recently noted, “policymakers still face daunting challenges as we exit the pandemic”. The first threat is, of course, that the pandemic won’t end anytime soon, as new variants could emerge, entailing further lockdowns, as well as monetary and fiscal stimulus. I cannot exclude it, but my bet is that the economic impact of new strains will be smaller, as people will be better adapted to the epidemic, while sanitary restrictions will be softer because people will be vaccinated and fed up with lockdowns. The second risk is that inflation could rise further or turn out to be more persistent than expected. I analyzed this threat thoroughly earlier in the Gold Market Overview, so I don’t want to write too much about this issue here. However, I would like to point out that if high inflation persists, inflation expectations could become more “backward-looking” and increase more than anticipated. The central bank claims that inflation expectations remain well-anchored, as it enjoys anti-inflation credentials. But the longer high inflation persists, the higher the odds that the central bank will lose its reputation when inflation expectations de-anchor. At some point, people will question the “transitory” character of inflation and increase their expectations. Why wouldn’t they, given that the Fed is openly telling that it has changed its inflation targeting regime toward one more tolerant of inflation above the target? The August 2020 Survey of Consumer Expectations published by the New York Fed is illustrating my point. The report shows that one-year and three-year consumer inflation expectations rose to new highs of 5.2% and 4.0%, respectively (see the chart below). What’s important, both increases were broad-based across age and income groups. Well-anchored, huh? The third risk is the accumulation of debt. Private and public debts were very high already before the pandemic, but they surged even further since all this happened. In the second quarter of 2021, global debt rose to a new record high of $296 trillion, while the US total public debt increased to about $29 trillion, as the chart below shows. In relation to the GDP, the debt has moderated somewhat, but it remains much higher than before the pandemic. Such high indebtedness reduces the financial capacity to respond to new economic shocks in the future and raises the odds of debt distress, defaults, or even a full-blown debt crisis. Excessive indebtedness not only entails risks on its own but also complicates the normalization of monetary policy. Although there is a mammoth pile of public debt, the burden of the costs is manageable because the interest rates are at ultra-low level. However, if the central bank hikes them, the debt-servicing costs will increase, upsetting the government. Importantly, the median maturity of the US government debt has effectively shortened, so the changes in short-term interest rates may be even more challenging for Uncle Sam. Let’s do some math. Given that the public debt is around 125% of the GDP (see the chart below), every percentage-point rise in interest rates implies 1.25 percentage-point growth in the fiscal deficit as a share of the GDP. I bet that the government won’t be happy seeing that. What does it all imply for the gold market? Well, even if the pandemic ends (and we are still far from it), our economic problems won’t disappear. We won’t go back to the pre-pandemic normalcy, as the conditions are completely different. First of all, the debt and inflation are much higher. This creates a particularly unpleasant combination. You see, if inflation is not kept in check relatively early, the Fed most likely will have to jack up the federal funds rate to beat inflation later. The problem is that aggressive monetary policy tightening could boost the risk premiums and exacerbate debt problems, possibly even leading to a financial crisis. Given all these risks, it seems unlikely to me that gold could get out of favor. However, these risks don’t have to materialize, and even if they do – I believe that we haven’t seen the full economic repercussions of the pandemic yet – it won’t happen tomorrow. So, it might be the case that gold will suffer first due to a shy tapering of quantitative easing, only to rally later in response to inflation and/or debt crisis. Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter. Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today! Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care.
November Monthly

November Monthly

Marc Chandler Marc Chandler 03.11.2021 15:17
Three main forces are shaping the business and investment climate:  Surging energy prices, a dramatic backing up of short-term interest rates in Anglo-American countries, and the persistence of supply chain disruptions.  The US and Europe have likely passed peak growth.  Fiscal policy will be less accommodative, and financial conditions have tightened. Japan appears to be getting a handle on Covid and after a slow start.  Its vaccination rate has surpassed the US.  The lifting of the formal state of emergency and a hefty dose of fiscal stimulus is expected to be delivered in the coming months. Many developing economies have already lifted rates, some like Brazil and Russia, aggressively so.  They will likely finish earlier too.      US light sweet crude oil rose nearly 12% last month, even though US inventories rose last month for the first time since April.   The price of WTI rose almost 10% in September.  Statistically, the rise in oil prices is strongly correlated with the increase in inflation expectations.  OPEC+ will boost supplies by another 400k barrels a day at the start of November and is committed to the same monthly increase well into 2022.   At the same time, new Covid infections in several Asia-Pacific countries, including China, Singapore, and Australia, warn of the risk of continued supply-chain disruptions.  In Europe, Germany and the UK recently reported the most cases since the spring. Belgium is tightening curbs.  Bulgaria is seeing a rise in infections, and Romania was at full capacity in its intensive care facilities.  The fact that Latvia lags the EU in vaccination at about 50% leaves it vulnerable.  The US may be lagging behind Europe, and the next four-six weeks will be critical.  Roughly 40% of Americans are not fully vaccinated.   The rise in price pressures and the gradual acknowledgment by many central bankers that inflation may be more persistent have helped spur a significant backing up of short-term rates in the Anglo-American economies. The ultimately deflationary implications of the surge in energy prices through demand destruction and the implications for less monetary and fiscal support still seem under-appreciated. Yet, the market has priced in aggressive tightening of monetary policy over the next 12 months.   The focus of the foreign exchange market seems squarely on monetary policy.  From a high level, the central banks perceived to be ahead in the monetary cycle have seen stronger currencies. The likely laggards, like the Bank of Japan, the Swiss National Bank, and the ECB, have currencies that underperformed.  Norway and New Zealand have already raised rates and are expected to do so again in November.    Of course, as you drill down, discrepancies appear.  In October, the Australian dollar was the top performer among the major currencies with a 4% gain.  It edged out the New Zealand dollar and the Norwegian krone, whose central banks are ahead of the Reserve Bank of Australia.  The RBA has pushed against market speculation that has 90 bp of tightening priced into 12-month swaps.  The Australian dollar outperformed sterling by about 2.5% in October even though the Bank of England has been so hawkish with its comments that the market had little choice but to price in a high probability of a hike as early as the November meeting.  In fact, the market has the UK's base rate above 50 bp by the end of Q1 22.  This is important because in its forward guidance that BOE has identified that as the threshold for it to begin unwinding QE by stopping reinvesting maturing issues.  Interestingly enough, when the BOE meets on March 17 next year, it will have a sizeable GBP28 bln maturity in its portfolio.   In an unusual quirk of the calendar, the Federal Reserve meets before the release of the October jobs report.  All indications point to the start of the tapering process.  It is currently buying $120 bln a month of Treasuries ($80 bln) and Agency Mortgage-Backed Securities.  The pace of the reduction of purchases is a function of the duration, and the Fed has clearly indicated the tapering will be complete around mid-year. That suggests reducing the purchases by about $15 bln a month.  Chair Powell indicated that unlike the Bank of England, the Fed will stop its bond purchases before raising rates. A faster pace of tapering would be a hawkish signal as it would allow for an earlier rate hike.  The gap between when the tapering ends and the first rate hike does not appear predetermined. Powell has talked about the economic prerequisites, which emphasize a full and inclusive labor market in the current context. The Fed funds futures entirely discount a 25 hike in July, with the risk of a move in June.  Comments by several officials hint that the Fed may drop its characterization of inflation as transitory, which would also be understood as a hawkish development.   Partly owing to the extended emergency in Japan, it is marching to the beat of a different drummer than the other high-income countries. Inflation is not a problem.  In September, the headline rate rose to 0.2% year-over-year, the highest since August 2020.  However, this is a function of fresh food and energy prices, without which the consumer inflation stuck below zero (-0.5%).  In December 2019, it stood at 0.9%.  In addition, while fiscal policy will be less accommodative in Europe and the US, a sizeable supplemental budget (~JPY30 trillion) is expected to be unveiled later this year.   After expanding by 1.3% quarter-over-quarter in Q2, the Chinese economy slowed to a crawl of 0.2% in Q3, which was half the pace expected by economists. Some of the decline in economic activity resulted from the virus and natural disasters (floods). Still, some of it stemmed from an effort to cut emissions in steel and other sectors.  The problems in China's property development space, accounting for a large part of its high-yield bond market,  unsettled global markets briefly.  Talk of a Lehman-like event seems a gross exaggeration. Still, given the sector's importance to China's economy (30% broadly measured) and the use of real estate as an investment vehicle, it may precipitate a structural shift in the economy.   The Communist Party and the state are reasserting control over the economy's private sector and the internet and social network.  It has also weighed in on family decisions, like the number of children one has, how long a minor should play video games, the length of men's hair, what kind of attributes entertainers should have, and appropriate songs to be played with karaoke.   It seems to be reminiscent of part of the Cultural Revolution and a broader economic reform agenda like Deng Xiaoping did in the late 1970s and Zhu Rongji in the 1990s.  At the same time, Beijing is wrestling with reducing emissions and soaring energy prices, which also dampen growth. Even though consumer inflation is not a problem in China (0.7% year-over-year in September), Chinese officials still seem reluctant to launch new stimulative fiscal or monetary initiatives. Moreover, new outbreaks of the virus could exacerbate the supply chain disruptions and delays fuel inflation in many countries.  The aggressiveness in which investors are pricing G10 tightening weighed on emerging market currencies in October.  The JP Morgan Emerging Market Currency Index fell by almost 0.8% last month after falling 2.9% in September, the largest decline since March 2020.  The continued politicization of Turkey's monetary policy and the aggressive easing saw the lira tumble nearly 7.5% last month, which brings the year-to-date depreciation to 22.5%.   On the other hand, Brazil's central bank has aggressively hiked rates, and the 150 bp increase in late October brought this year's tightening to 575 bp and lifting the Selic to 7.75%.  Yet, it is still below the inflation rate (10.34% October), and the government has lost the confidence of domestic and international business.  The Brazilian real fell nearly 3.5% last month to bring the year-to-date loss to almost 7.8%.   Our GDP-weighted currency basket, the Bannockburn World Currency Index, snapped a two-month decline and rose by 0.35%.  The rise in the index reflects the outperformance of the currencies against the dollar.  The currencies from the G10 countries, including the dollar, account for about two-thirds of the index, and emerging markets, including China, the other third.  The yen was the weakest of the majors, falling 2.3%.  It has a weighting of 7.5% in the BWCI.   Among the emerging market currencies in our GDP-weighted currency index, the Brazilian real's 3.4% decline was the largest, but its 2.1% weighting minimizes the drag.  It was nearly offset by the Russian rouble's 2.5% advance.  It has a 2.2% weighting in our basket.  The Chinese yuan, which has a 21.8% share, rose by 0.6%.      Dollar:   The market is pricing in very aggressive tightening by the Federal Reserve.  As recently as late September, only half of the Fed officials anticipated a hike in 2022.  The December 2022 Fed funds futures are pricing in a little more than two hikes next year. More than that, the market is discounting the first hike in June next year, implying a transition from completing the bond-buying to raising rates with no time gap.  The disappointing 2% Q3 GDP exaggerated the slowing of the world's largest economy.  We note that the supply-side challenges in vehicle production halved the growth rate.  Growth is likely to re-accelerate in Q4, but we continue to believe that the peak has passed.  While inflation is elevated, the pace of increase slowed in Q3.  Consider that the PCE deflator that the Fed targets rose at an annualized rate of 4.0% in Q3 after a 5.6% pace in Q2.  The core rate slowed to an annualized pace of 3.3% last quarter, half of the speed in the previous three months.  The infrastructure spending plans have been reduced, and some of the proposed tax hikes, including on corporations, appear to be dropped as part of the compromise among the Democratic Party.   Euro:  For most of Q3, the euro has been in a $1.17-$1.19 trading range.  It broke down in late September, and was unable to recapture it in October.  Instead, it recorded a new low for the year near $1.1525.  A convincing break of the $1.1500 area could signal a move toward $1.1300. The single currency drew little support because growth differentials swung in its favor in Q3:  the Eurozone expanded by 2.2% quarter-over-quarter while the US grew 2% at an annualized pace.  The ECB is sticking to its analysis that the rise in inflation is due to transitory factors while recognizing that energy prices may prove more sticky.  That said, news that Gazprom may boost gas sales to Europe after it finishes replenishing Russian inventories after the first week in November, natural gas prices fall at the end of October.  After the Pandemic Emergency Purchase Program ends next March, decisions about the asset purchases next year will be announced at the December ECB meeting along with updated forecasts.   (October indicative closing prices, previous in parentheses)   Spot: $1.1560 ($1.1580) Median Bloomberg One-month Forecast $1.1579 ($1.1660)  One-month forward  $1.1568 ($1.1585)    One-month implied vol  5.1%  (5.1%)         Japanese Yen:  The dollar rose 2.3% against the yen in October to bring the year-to-date gain to nearly 9.5%.  The Bank of Japan will lag behind most high-income countries in the tightening cycle, and the higher US yields are a crucial driver of the greenback's gains against the yen.  Japan's headline inflation and core measure, which only excludes fresh food, may be rising, but they are barely above zero and, in any event, are due to the surge in energy prices. In response to the weakening yen, Japanese investors appear to have boosted their investment in foreign bonds, while foreign investors increased their holdings of Japanese stocks.  The LDP and Komeito maintained a majority in the lower chamber of the Diet. A sizeable stimulus supplemental budget is expected to help strengthen the economic recovery now that the formal emergencies have been lifted.  In Q3, the dollar traded mainly between JPY109 and JPY111.  It traded higher in the second half of September rising to nearly JPY112.00.  The dollar-yen exchange rate often seems to be rangebound, and when it looks like it is trending, it is frequently moving to a new range.  We have suggested the upper end of the new range may initially be the JPY114.50-JPY115.00.  The four-year high set last month was about JPY114.70.  A move above JPY115.60 could target the JPY118.50 area.     Spot: JPY113.95 (JPY111.30)       Median Bloomberg One-month Forecast JPY112.98 (JPY111.00)      One-month forward JPY113.90 (JPY111.25)    One-month implied vol  6.4% (5.6%)   British Pound:  Sterling rallied around 4 1/3 cents from the late September low near $1.34.  The momentum stalled in front of the 200-day moving average (~$1.3850).  After several attempts, the market appeared to give up.  We anticipate a move into the $1.3575-$1.3625 initially, and possibly a return toward the September low. The implied yield of the December 2021 short-sterling interest rate futures rose from 22 bp at the end of September to 47 bp at the end of October as the market.  It was encouraged by Bank of England officials to prepare for a hike at the meeting on November 4, ostensibly while it is still providing support via Gilt purchases.  If there is a surprise here, it could be that, given the unexpected softening of September CPI and the fifth consecutive monthly decline in retail sales, rising Covid cases, that the BOE chooses to take the more orthodox route.  This would entail ending its bond purchases, as two MPC members argued (dissented) at the previous meeting and holding off lifting rates a little longer.        Spot: $1.3682 ($1.3475)    Median Bloomberg One-month Forecast $1.3691 ($1.3630)  One-month forward $1.3680 ($1.3480)   One-month implied vol 6.8% (7.1%)      Canadian Dollar:  The three drivers for the exchange rate moved in the Canadian dollar's favor in October and helped it snap a four-month slide against the US dollar.  First, the general appetite for risk was strong, as illustrated by the strength of global stocks and the record highs in the US.  Second, the premium Canada pays on two-year money more than doubled last month to almost 60 bp from 25 bp at the end of September.  Third, commodity prices in general and oil, in particular, extended their recent gains.  The CRB Index rose 3.8% last month, the 11th monthly increase in the past 12, to reach seven-year highs.  The Bank of Canada unexpectedly stopped its new bond purchases and appeared to signal it would likely raise rates earlier than it had previously indicated.  The swaps market is pricing 125 bp of rate hikes over the next 12 months, with the first move next March or April.  Still, the US dollar's downside momentum stalled near CAD1.2300.  There is scope for a corrective phase that could carry the greenback into the CAD1.2475-CAD1.2500 area.     Spot: CAD1.2388 (CAD 1.2680)  Median Bloomberg One-month Forecast CAD1.2395 (CAD1.2580) One-month forward CAD1.2389 (CAD1.2685)    One-month implied vol 6.2% (6.9%)      Australian Dollar:  The Aussie's 4% gain last month snapped a four-month, roughly 6.5% downdraft.  Despite RBA Governor Lowe's guidance that the central bank does not anticipate that the condition to hike rates will exist before 2024 is being challenged by the market.  Underlying inflation rose above 2% in Q3. The central bank's failure to continue defending the 10 bp target of the April 2024 bond spurred speculation that it would be formally abandoned at the November 2 policy meeting.  The RBA's inaction unsettled the debt market.  The two-year yield soared almost 70 bp last month, and the 10-year yield rose nearly 60 bp.  Although the RBA could have handled the situation better, New Zealand rates jumped even more.  Its two-year yield jumped 80 bp while the 10-year yield surged by 58 bp.  Last month, the Australian dollar's rally took it from around $0.7200 to slightly more than $0.7550, where it seemed to stall, just in front of the 200-day moving average.  We suspect the October rally has run its course and see the Aussie vulnerable to a corrective phase that could push it back toward $0.7370-$0.7400.  The New Zealand dollar has also stalled ($0.7220), and we see potential toward $0.7050.       Spot:  $0.7518 ($0.7230)        Median Bloomberg One-Month Forecast $0.7409 ($0.7290)      One-month forward  $0.7525 ($0.7235)     One-month implied vol 9.1  (9.0%)        Mexican Peso:  The peso eked out a minor gain against the dollar last month.  However, the nearly 0.4% gain understated the swings in the exchange rate last month.  The dollar's recovery seen in the second half of September from almost MXN19.85 to nearly MXN20.40 at the end of the month was extended to a seven-month high around MXN20.90 on October 12.  It then proceeded to fall to almost MXN20.12 before the greenback was bought again.  A move above the MXN20.60 area now would likely signal a test on last month's high and possibly higher. Recall that the dollar peaked this year's peak set in March was near MXN21.6350. The economy unexpectedly contracted in Q3  by 0.2% (quarter-over-quarter).  Nevertheless, with the year-over-year CPI at 6% in September, Banxico will see little choice but to hike rates at the November 11 meeting. The market expects a 25 bp increase.  A 50 bp hike is more likely than standing pat.       Spot: MXN20.56 (MXN20.64)   Median Bloomberg One-Month Forecast  MXN20.42 (MXN20.41)   One-month forward  MXN20.65 (MXN20.74)     One-month implied vol 9.6% (11.0%)      Chinese Yuan: Our starting point is the yuan's exchange rate is closely managed.  The fact that the yuan rose to four-month highs against the dollar and a five-year high against the currency basket (CFETS) that the PBOC tracks imply a tacit acceptance.  While it is tempting for observers to link the appreciation to securing an advantage as it secures energy supplies and other commodities, we note that the yuan's gains are too small (0.6% last month and less than 2% year-to-date) to be impactful.  We suspect that the dollar's recent weakness against the yuan will be unwound shortly.  The US government continues to press its concerns about the risk for investors in Chinese companies listed in the US and American companies operating in China. At the same time, the FTSE Russell flagship benchmark began including mainland bonds for the first time.  China's 10-year government bond is the only one among the large bond markets where the yield has declined so far this year (~16 bp).  On the other hand, Chinese stocks have underperformed.  That said, some investors see this underperformance as a new buying opportunity.  The NASDAQ Golden Dragon Index that tracks Chinese companies listed in the US fell by 30% in Q3 and gained 5% in October, its best month since February.  Lastly, the Central Committee of the Chinese Communist Party meets November 8-11 this year, a prelude to the important National Party Congress in 2022 that is expected to formally signal the third term for President Xi.     Spot: CNY6.4055 (CNY6.4450) Median Bloomberg One-month Forecast  CNY6.4430 (CNY6.4470)  One-month forward CNY6.4230 (CNY6.4725)    One-month implied vol  3.5% (3.4%)    Disclaimer
The 10 Public Companies With the Biggest Bitcoin Portfolios

Ethereum reaches new all time high

Walid Koudmani Walid Koudmani 02.11.2021 12:21
Ethereum reaches new all time high Moods in cryptocurrency markets have improved after positive news emerged from Asia and following the solid performance of Bitcoin, which closed October with the highest monthly gain in 2021, further boosting investor confidence. The second biggest cryptocurrency by market cap has now also managed to reach a new all time high with Ethereum breaking above the previous high and reaching a new one after gaining over 3% as the majority of coins appear to be rising. While it is unclear whether this move will continue, today's achievement could further boost confidence in the current market as it comes after an updated prediction of Ethereum by Goldman Sachs which projected the coin reaching $8000 before the end of the year. Furthermore, prospects for a potential Ethereum ETF after the approval and launch of Bitcoin ETFs appears to be a possibility in the near future, which in turn continues to point towards increased adoption of the new blockchain technologies along with a wider appeal of this type of asset as more investors shift towards the space.   BP announce positive quarter and boost share buyback BP announced another quarter of positive results, indicating rising commodity prices and improving conditions as main drivers for the company's continued growth. The company also announced an expansion of its ongoing share buyback program by adding a further $1.25billion which will be adding to the $1.4billion already executed in the first half of the year. While net debt remains a key area of concern, totalling around $32billion, investors may look favourably on today's report as it highlights the companies resilience and adaptability along with it's prioritization of cash flow to strengthen its financial position as future prospects of rising oil prices driven by increased demand and limited supply could also potentially improve the outlook, particularly for the next quarter. Download our Mobile Trading App:   Google Play   App Store
Getting Back To Risky Assets As A Result Of Russian Move?

Calling the Precious Metals Bull

Monica Kingsley Monica Kingsley 08.11.2021 16:54
S&P 500 paused to a degree, but bonds didn‘t – we‘re far from a peak. That though doesn‘t mean a brief correction (having a proper look at the chart, sideways consolidation not reaching more than a precious couple of percentage points down) won‘t arrive still this month. It‘s a question of time, and I think it would be driven by tech weakness as the sector has reached lofty levels. It‘ll go higher still, but this is the time for value and smallcaps. And when the dollar starts rolling over to the downside (I‘m looking at the early Dec debt ceiling drama to trigger it off), emerging markets would love that. And commodities with precious metals too, of course – sensing the upcoming greenback weakness has been part and parcel of the gold and silver resilience of late. Precious metals are only getting started, but the greatest fireworks would come early spring 2022 when the Fed‘s failure to act on inflation becomes broadly acknowledged. For now, they‘re still getting away with the transitory talking points, and chalking it down to supply chain issues. As if these could solve the balance sheet expansion or fresh (most probably again short-dated) Treasuries issuance (come Dec) – the Fed is also way behind other central banks in raising rates. Canada, Mexico and many others have already moved while UK and Australia are signalling readiness – the U.S. central bank is joined by ECB in hesitating. Don‘t look for the oil breather to last too long – black gold is well bid above $78, and hasn‘t made its peak in 2021, let alone 2022. As I wrote on Friday, its downswing that works to increase disposable income (serving as a shadow Fed funds rate in the zero rates environment), would prove short-lived. The real economy would have to come to terms with stubbornly high oil prices – and it will manage. The yield curve is starting to steepen modestly again, and fresh spending initiatives would breathe some life into the stalling GDP growth. Next year though, don‘t be surprised by a particularly weak (even negative) quarterly reading, but we aren‘t there by a long shot, I‘m telling you. Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook S&P 500 looks getting ripe for taking a pause – the rising volume isn‘t able to push it much higher intraday. Credit Markets HYG strength indeed continues, and it‘s a good sign that quality debt instruments are joining – the reprieve won‘t last long though (think a few brief weeks before rates start rising again). Gold, Silver and Miners Gold and silver continue reversing the pre-taper weakness, and miners are indeed joining in. I‘m looking for more gains with every dip being bought. Crude Oil Crude oil hasn‘t peaked, and looks getting ready to consolidate with a bullish bias again. $85 hasn‘t been the top, and the energy sector remains primed to do well. Copper Copper is deceptively weak, and actually internally strong when other base metals are examined. As more money flows into commodities, look for the red metal to start doing better – commodities haven‘t topped yet. Bitcoin and Ethereum Bitcoin and Ethereum consolidation has come to an end, and the pre-positioned bulls have a reason to celebrate as my prior scenario– stabilization followed by slow grind higher is what‘s most likely next – came to fruition. Summary S&P 500 breather is a question of time, but shouldn‘t reach far on the downside – the credit markets don‘t support it. Commodities are catching up in the (dovish as assessed by the markets too) taper aftermath, and precious metals are sniffing the dollar‘s weakness a few short weeks ahead. With fresh money not needed to repair commercial banks‘ balance sheets, it flows into the financial markets, and the taper effects would be negated by the repo operations – yes, I‘m not looking for a liquidity crunch. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
Great Profitable Runs

Great Profitable Runs

Monica Kingsley Monica Kingsley 09.11.2021 15:04
S&P 500 pause goes on, and bonds support more of it to come. Tech keeps thus far the high ground gained, but value is showing signs of very short-term weakness – and yields haven‘t retreated yesterday really. The correct view of the stock market action is one of microrotations unfolding in a weakening environment – one increasingly fraught with downside risks. To be clear, I‘m not looking for a sizable correction, but a very modest one both in time and price. It‘s a question of time, and I think it would be driven by tech weakness as the sector has reached lofty levels. It‘ll go higher over time still, but this is the time for value and smallcaps in the medium term.The dollar though isn‘t putting much pressure on stock, commodity or precious metals prices at the moment – such were my yesterday‘s words:(…) when the dollar starts rolling over to the downside (I‘m looking at the early Dec debt ceiling drama to trigger it off), emerging markets would love that. And commodities with precious metals too, of course – sensing the upcoming greenback weakness has been part and parcel of the gold and silver resilience of late. Precious metals are only getting started, but the greatest fireworks would come early spring 2022 when the Fed‘s failure to act on inflation becomes broadly acknowledged.For now, they‘re still getting away with the transitory talking points, and chalking it down to supply chain issues. As if these could solve the balance sheet expansion or fresh (most probably again short-dated) Treasuries issuance (come Dec) – the Fed is also way behind other central banks in raising rates. Canada, Mexico and many others have already moved while UK and Australia are signalling readiness – the U.S. central bank is joined by ECB in hesitating.And that‘s what precious metals would be increasingly sniffing out. Commodities are joining in the post-taper celebrations, and my prior Tuesday‘s market assessments are coming to fruition one by one. Oil is swinging higher and hasn‘t topped, copper is coming back to life, and cryptos aren‘t in a waiting mood either.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 and Nasdaq OutlookS&P 500 pause is here, and all that‘s missing, is emboldened bears. They may or may not arrive given that VIX keeps looking lazy these days – either way, the risks to the downside are persisting for a couple of days at least still.Credit MarketsHYG strength evaporated, but it‘s on a short-term basis only. The broader credit market weakness would get reversed, but it‘s my view that quality debt instruments would be lagging.Gold, Silver and MinersGold and silver continue reversing the pre-taper weakness – the upswing goes on, but is likely to temporarily pause as the miners‘ daily weakness foretells. Still, I‘m looking for more gains with every dip being bought.Crude OilCrude oil bulls continue having the upper hand, no matter the relative momentary stumble in maintaining gains – the energy sector hasn‘t peaked by a long shot.CopperCopper is participating in the commodities upswing – not too hot, not too cold. Just right, and it‘s a question of time when the red metal would start visibly outperforming the CRB Index again.Bitcoin and EthereumBitcoin and Ethereum consolidation has indeed come to an end, and both leading (by volume traded) cryptos are primed for further gains. SummaryS&P 500 breather remains a question of time, but shouldn‘t reach far on the downside – the bears are having an opportunity to strike as credit markets have weakened, and there isn‘t enough short-term will in tech to go higher still. The very short-term picture in stocks is mixed, but downside risks are growing. The dollar is already weakening, much to the liking of commodities and precious metals – there is still enough liquidity in the markets as any taper can be easily offset by withdrawing repo money sitting on the Fed‘s balance sheet.Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
US indices retreat as Tesla drags market

US indices retreat as Tesla drags market

Walid Koudmani Walid Koudmani 10.11.2021 13:14
US indices retreat as Tesla drags market Wall Street interrupted a winning series with the S&P 500 index closing lower for the first time in 9 days and with the Nasdaq being the worst performing index after it was pressured significantly by the plunge of Tesla shares, caused partly by comments made by the CEO Elon Musk in which he indicated the possibility of selling a portion of his shares if a twitter poll were to decide accordingly.  Today, investors await US CPI inflation data which is expected to show an increase of 5.8% y/y and which could potentially influence the FED to further adjust it's QE tapering after it's announcement in the most recent central bank meeting. Furthermore, earnings reports from Disney and Beyond Meat could also be worth keeping an eye on after this earnings season has proved to be surprisingly positive for the majority of companies.  Marks and Spencer posts strong Q3 results  M&S H1 results indicated a significant rebound in sales and a performance recovery which could be attributed to underlying improvements in all main businesses along with a reduction of net debt as the company has managed to effectively adapt to changing conditions. Better than expected financial results, along with a clear plan to continue expanding thanks to more partnerships and store openings, continue to provide reassurance to investors who may be finally looking past the noticeable impact the pandemic has had on the business in recent times.
Intraday Market Analysis – USD Cuts Through Resistance

Intraday Market Analysis – USD Cuts Through Resistance

John Benjamin John Benjamin 11.11.2021 09:26
USDJPY attempts a bullish reversalThe US dollar broke higher after October’s CPI exceeded expectations.On the daily chart, the RSI has dropped back into the neutrality area. The greenback has secured bids around the 30-day moving average. An oversold RSI on the hourly chart attracted a ‘buying-the-dips’ crowd at 112.70.The latest surge above the psychological level of 114.00 has prompted sellers to cover their bets, paving the way for a bullish reversal above 114.25. Before that, an overbought RSI may lead to a pullback towards 113.05.XAUUSD breaks resistanceRising US CPI boosts the demand for gold as an inflation hedge.After being unable to clear the daily chart’s triple top at 1833 over the course of the summer, the precious metal has cut through the resistance like a hot knife through butter. High volatility suggests that sellers were quick to bail out.As momentum traders jump in, the bullish breakout would lead to an extended rally towards 1900. An overbought RSI may cause a limited pullback. In that case, 1823 at the base of the rally may see strong buying interest.USOIL retreats from resistanceWTI crude edged lower after the EIA reported a slight rise in US inventories. The price’s swift recovery above the sell-off point at 83.00 is an indication that sentiment remains overall optimistic.However, the previous peak and psychological level of 85.00 seems like a tough hurdle to overcome for now. An overbought RSI has triggered a temporary pullback with a break below 81.90. In turn, this is deepening the correction towards 79.30.Trend followers may see the limited retracement as an opportunity to stake in.
Red Hot and Running

Red Hot and Running

Monica Kingsley Monica Kingsley 12.11.2021 15:44
S&P 500 really went through the brief pause in selling, but credit markets haven‘t stopped really. Their weakness continues, but is hitting value a tad harder than tech. Together with VIX turning south, that‘s one more sign why the bulls are slowly becoming the increasingly more favored side. Hold your horses though, I‘m talking about a very short-term outlook – this correction doesn‘t appear to be over just yet (the second half of Nov is usually weakner seasonally): (…) some treading the water before stocks make up their mind, is most likely next. The downswing doesn‘t appear to be totally over, but we have arguably seen the greater part of it already. … I‘m still looking for clues to the bond markets. There, it had been a one-way ride. TLT though is having trouble declining further, and that means a brief upswing carrying over into stocks, is likely. Primarily tech would benefit, and the ever more negative real rates would put a floor beneath the feverish precious metals run. Make no mistake though, the tide in gold and silver has turned, and inflation expectations aren‘t as tame anymore. In this light, there‘s no point in sweating the commodities retracement of late. True, the rising dollar is taking some steam out of the CRB superbull, but that‘s only temporary – I‘m looking for the greenback to reverse to the downside once the debt ceiling drama reappears in the beginning of Dec. Then, the Treasury would also have to start issuing more (short-term) debt, which would put a damper on any upswing attempts. Meanwhile, inflation would keep at least as hot as it‘sx been recently, and the Fed policy mistake in letting the fire burn unattended, would be more broadly acknowledged. What a profitable constellation for precious metals, real and crypto assets! Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook S&P 500 is bidding its time – the shallow very short-term consolidation continues, with the bears slowly running out of time (for today). Credit Markets HYG, LQD and TLT – weakness anywhere you look continues, but LQD is hinting at a possible stabilization next. Unless that‘s more broadly followed in bonds, any S&P 500 upswing would remain a doubtful proposition. Gold, Silver and Miners Gold and silver were indeed just getting started – a relatively brief pause shouldn‘t be surprising. Any dips though remain to be bought. All in all, PMs are firing on all cylinders currently. Crude Oil Crude oil bulls keep defending the $80 level, with $78 serving as the next stop if need be. The consolidation starting late Oct would though resolve to the upside in my view – it‘s just a question of shortening time. Copper Copper participated in the commodities upswing – not too enthusiastically, not too weakly. The volume seems just right for base building before another red metal‘s move higher. Bitcoin and Ethereum Bitcoin and Ethereum are still consolidating, and the relatively tight price range keeps favoring the bulls. Summary S&P 500 is looking at a mildly positive day today, but the correction isn‘t probably over just yet. With most of the downside already in, I‘m looking for bullish spirits to very gradually return. Precious metals will be the star performers for the many days to come, followed by copper and then oil. Crypto better days are also lyiing ahead. All in all, inflation trades will keep doing better and better. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
Will Evergrande Make Gold Grand?

Will Evergrande Make Gold Grand?

Arkadiusz Sieron Arkadiusz Sieron 12.11.2021 18:57
  Evergrande’s debt issues are a symptom of China’s deep structural problems. If the crisis spills over wider, gold may benefit, but we are still far from such a scenario. Beijing, we have a problem! Evergrande, one of China’s largest real estate developers and biggest companies in the world, is struggling to meet the interest payments on its debts. As the company has more than $300 billion worth of liabilities, its recent liquidity problems have sparked fears in the financial markets. They also triggered a wave of questions: will Evergrande become a Chinese Lehman Brothers? Is the Chinese economy going to collapse or stagnate? Will Evergrande make gold grand? The answer to the first question is: no, the possible default of Evergrande likely won’t cause a global contagion in the same way as Lehman Brothers did. Why? First of all, Lehman Brothers collapsed because of the run in the repo market and the following liquidity crisis. As the company was exposed to subprime assets, investors lost confidence and the bank lost its access to cheap credit. Lehman Brothers tried to sell its assets, which plunged the prices of a wide range of financial assets, putting other institutions into trouble. Unlike Lehman Brothers, Evergrande is not an investment bank but a real estate developer. It doesn’t have so many financial assets, and it’s not a key player in the repo market. The exposure of important global financial institutions to Evergrande is much smaller. What’s more, we haven’t seen a credit freeze yet, nor an endless wave of selling across almost all asset classes, which took place during the global financial crisis of 2007-2009. Given that the Lehman Brothers’ bankruptcy was ultimately positive for gold (although the price of the yellow metal declined initially during the phase of wide sell-offs), the fact that Evergrande probably doesn’t pose similar risks to the global economy could be disappointing for gold bulls. However, gold bulls could warmly welcome my answer to the second question: the case of Evergrande reveals deep and structural problems of China’s economy, namely its heavy reliance on debt and the real estate sector. As the chart below shows, the debt of the private non-financial sector has increased from about 145% of GDP after the Great Recession to 220% in the first quarter of 2021. So, China has experienced a massive increase in debt since the global financial crisis, reaching levels much higher than in the case of other economies. The rise in indebtedness allowed China to continue its economic expansion, but questions arose about the quality and sustainability of that growth. As Daniel Lacalle points out, The problem with Evergrande is that it is not an anecdote, but a symptom of a model based on leveraged growth and seeking to inflate GDP at any cost with ghost cities, unused infrastructure, and wild construction. Indeed, the levels and rates of growth of China’s private debt are similar to the countries that have experienced spectacular financial crises, such as Japan, Thailand, or Spain. But the significance of China’s real estate sector is much higher. According to the paper by Rogoff and Yang, the real-estate sector accounts for nearly 30% of China’s GDP. On the other hand, China has a relatively high savings rate, while debt is mostly of domestic nature. China’s financial ties to the world are not very strong, which limits the contagion risks. What is more, the Chinese government has acknowledged the problem of excessive debts in the private sector and started a few years ago making some efforts to curb it. The problems of Evergrande can be actually seen as the results of these deleveraging attempts. Therefore, I’m not sure whether China’s economy will collapse anytime soon, but its pace of growth is likely to slow down further. The growth model based on debt and investments (mainly in real estate) has clearly reached its limit. In other words, the property boom must end. Rogoff and Yang estimate that “a 20% fall in real estate activity could lead to a 5-10% fall in GDP”. Such growth slowdown and inevitable adjustments in China’s economy will have significant repercussions on the global economy, as – according to some research – China’s construction sector is now the most important sector for the global economy in terms of its impact on global GDP. In particular, the prices of commodities used in the construction sector may decline and the countries that export to China may suffer. Given that China was the engine of global growth for years, it will also slow down, and, with lower production, it’s possible that inflation will be higher. Finally, what do the problems of China’s real estate sector imply for the gold market? Well, in the short term, not so much. Gold is likely to remain under downward pressure resulting from the prospects of the Fed’s tightening cycle. However, if Evergrande’s problems spill over, affecting China’s economy or (a bit later) even the global economy, the situation may change. Other Chinese developers (such as Fantasia or Sinic) also have problems with debt payments, as investors are not willing to finance new issues of bonds. In such a scenario, the demand for gold as a safe-haven asset might increase, although investors have to remember that the initial rush could be into cash (the US dollar) rather than gold. Unless China’s problems pose a serious threat to the American economy, the appreciation of the greenback will likely counterweigh the gains from safe-haven inflows into gold. So far, financial markets have remained relatively undisturbed by the Evergrande case. Nevertheless, I will closely monitor any upcoming developments in China’s economy and their possible effects on the gold market. Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter. Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care.
MSFT, Johnson&Johnson and More Companies With Reports to be Released shortly

Weekly S&P500 ChartStorm - 14 November 2021

Marc Chandler Marc Chandler 15.11.2021 11:20
The S&P500 ChartStorm is a selection of 10 charts which I hand pick from around the web and post on Twitter. The purpose of this post is to add extra color and commentary around the charts. The charts focus on the S&P500 (US equities); and the various forces and factors that influence the outlook - with the aim of bringing insight and perspective. Hope you enjoy! p.s. if you haven’t already, subscribe (free) to receive the ChartStorm direct to your inbox, so you don’t miss out on any charts (you never know which one could change the whole perspective!) Subscribe Now 1. Vacciversary: Can you believe, an entire year has passed since the Pfizer vaccine announcement. Markets had a strong immediate reaction, and since then have chalked up some 34% in gains. Of course a bunch of other factors are also at play, and we also had delta along the way, but you have to think at some level if there were no vaccine that the ride in markets might have been a little rougher. Source: @LarryAdamRJ 2. Investor Movement Index: The IMX moved down slightly in October - this continues the pattern of movement downwards from the peak in optimism of a few months ago. This is typically not a healthy sign for sentiment indicators i.e. reaching an extreme and then leveling off. Source: TD Ameritrade 3. Investment Manager Index: On the other hand, the Markit IMI rebounded further in November with risk appetite surging to multi-month highs and expected returns reaching a new (albeit short history - newish survey) high. Source: @IHSMarkitPMI 4. Euphoriameter: Even my own Euphoriameter composite sentiment indicator has ticked higher so far in November as valuations and bullish surveyed sentiment remain high and volatility lulls back towards complacency. Source: @topdowncharts 5. Investor Sentiment vs Consumer Sentiment: But not all sentiment indicators are at the highs: consumer sentiment has been decidedly less optimistic. I mentioned in a recent video that the UoM consumer sentiment indicator was perhaps overstating the extent of the decline, but the other 2 consumer confidence indicators I track for the USA have also started to drop off recently. This has left quite the divergence between consumer sentiment and investor sentiment. A large part of this is probably down to the inflationary shock that is currently facing the global economy due to pandemic disruption to the global supply chain *and* unprecedented monetary + fiscal stimulus (remember: supply shortages/backlogs and the associated inflation surge don’t exist if there is no demand —> demand has been boosted by stimulus —> and stimulus helps stocks ——> gap explained). Source: @takis2910 6. Real Earnings Yield: Another effect of the surge in inflation has been a plunge in the real earnings yield: again this can be squared up by noting that stimulus has been a key driver of the inflation shock and a key driver of the surge in asset prices —> surging asset prices (stock prices) leads to a lower nominal earnings yield (again: gap explained). So is this a problem? Perhaps, but one way or the other it will probably be transitory (if you can read between the lines a little there!!). Source: @LizAnnSonders 7. Valuations: Valuations rising = risks rising... but then again it's a bull market, so POLR is higher (for now). n.b. “POLR” = path of least resistance: basic notion that in markets and life when a force is set in motion an object will not change its motion/trajectory unless another force acts on it... That means a bull market will carry on until something changes e.g. a crisis, monetary policy tightening, recession, regulations/politics, (or a combination of all of those!). Source: @mark_ungewitter 8. Household Financial Asset Allocations: We all know by now that equity allocations by households is at/near record highs. But one surprise: cash holdings have jumped and are apparently on par with debt (bonds etc) ...even as cash rates suck (and are even suckier when you consider the real interest rate). Probably an element of booking gains, stimulus payments, and precautionary savings. Recall though: the job of cash is preservation of capital (and optionality) vs generating returns, as such. Source: @MikeZaccardi 9. S&P500 Constituents Return Distribution: I thought this was interesting - especially the tails of the distribution - a lot of heavy lifting being done at the tails. But also that ”s” — tails (i.e. big dispersion between left and right tails). Source: @spglobal via @bernardiniv68 10. The Five Biggest Stocks: The bigness of the biggest stocks in the index is biggening more bigly. Serious though: the market is increasingly lop-sided, this means diversification may be diminishing as systematic risk will be increasingly driven by specific risk. Source: @biancoresearch Thanks for following, I appreciate your interest! !! BONUS CHART: Leveraged ETF trading indicator >> Click through to the ChartStorm Substack to see the bonus chart section https://chartstorm.substack.com/p/weekly-s-and-p500-chartstorm-14-november Follow us on: Substack https://topdowncharts.substack.com/ LinkedIn https://www.linkedin.com/company/topdown-charts Twitter http://www.twitter.com/topdowncharts
Getting Real on PMs and Inflation

Getting Real on PMs and Inflation

Monica Kingsley Monica Kingsley 15.11.2021 15:47
S&P 500 indeed rose but bond markets couldn‘t keep the encouraging opening gains. Can stocks still continue rallying? They look to be setting up for one more downleg of maximum the immediately predecing magnitude, which means not a huge setback. The medium-term path of least resistance remains up – the Fed is still printing a huge amount of money on a monthly basis, and it remains questionable how far in tapering plans execution they would actually get – I see the risks to the real economy coupled with persistently high inflation as rising since the 2Q 2022 (if not since Mar already, but most pronounced in 2H 2022).Stocks are still set for a good Dec and beyond performance – just look at VIX calming down again. It‘s that the debt ceiling drama resolution would allow the Treasury to start issuing fresh debt, and that would weigh heavily on the dollar. That‘s a good part of what gold and silver are sniffing out, and if you look at the great white metal‘s performance, it‘s the result of inflation coming back to the fore as the Fed itself is now admitting to high inflation rates through the mid-2022, putting blame on supply chain bottlenecks. Oh, sure. The real trouble is that inflation expectations are starting to get anchored – people are expecting these rates to be not going away any time soon.Precious metals are going to do great, and keep scoring excellent gains. Surpassing $1,950 isn‘t out of the realm of possibilities, but I prefer to be possitioned aggressively while having more conservative expectations. Not missing a dime this way. Copper is awakening too, and commodities including oil would be doing marvels. If in doubt, look at cryptos, how shallow the corrections there are.A few more words on yields – as more fresh Treasury issued debt enters the markets, look for yields to rise. Coming full circle to stocks and my Friday‘s expectations:(…) TLT though is having trouble declining further, and that means a brief upswing carrying over into stocks, is likely.TLT downswings would be less and less conducive to growth, so if you‘re still heavily in tech, I would start eyeing more value.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 and Nasdaq OutlookS&P 500 bulls are on the move, and let‘s see how far they make it before running into another (mild, again I say) setback.Credit MarketsCredit markets opening strength fizzled out, but the weakness is getting long in the tooth kind of. I view it as a short-term non-confirmation of the S&P 500 upswing only.Gold, Silver and MinersGold and silver are on a tear, and rightfully so – I am looking for further gains as both gold and silver miners confirm, and the macroeconomic environment is superb for PMs.Crude OilCrude oil bulls keep defending the $80 level, with $78 serving as the next stop if need be – after Friday, its test is looking as an increasingly remote possibility – the two lower knots in a series say. Anyway, black gold will overcome $85 before too long.CopperCopper ran while commodities paused – that‘s a very bullish sign, for both base and precious metals. The lower volume isn‘t necessarily a warning sign.Bitcoin and EthereumBitcoin and Ethereum are still consolidating, and the relatively tight price range keeps favoring the bulls – and they‘re peeking higher already.SummaryS&P 500 bulls are holding the short-term upper hand, but the rally may run into headwinds shortly. Still, we‘re looking at a trading range followed by fresh highs as a worst case scenario. Yes, I remain a stock market bull, not expecting a serious setback till probably the third month of 2022. Precious metals are my top pick, followed by copper – and I am definitely not writing off oil, let alone cryptos. Inflation trades are simply back!Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
Technical Analysis - Support And Resistance - Terms You Should Know

Key event risk and front of mind this week...

Chris Weston Chris Weston 16.11.2021 12:15
UK jobless claims (Tuesday 18:00 AEDT) and Oct CPI (Wed 18:00 AEDT) New home prices (today at 12:30 AEDT), Retail sales, industrial production, fixed-asset investment, property investment (all today 13:00 aedt) Aussie Q3 wage data (Wed 11:30 AEDT) RBA gov Lowe speaks (Tues 13:30 AEDT) US retail sales (Wed 00:30 AEDT), Fed speeches all week with the highlight vice-chair Clarida (Sat 04:15 AEDT) The inflation debate is still the hottest ticket in town – it is promoting higher volatility (vol) in rates markets and bonds, with a small pick-up seen in FX volatility (vol). Equity markets are still, however, calm, with the VIX at 16.3% with falling demand to hedge potential drawdown. This divergence in implied vol across asset class remains a key talking point, but there is no doubt that the boat is not yet tipping with correlations among stocks almost at zero, and cyclical sectors (of the S&P500) still holding up well vs defensives. If the US high yield credit spread accelerated above 273bp above the US 10yr Treasury (currently 267bp), then again, I think equities would be a better sell.  Now this dynamic may change, especially if the debt ceiling comes into play in mid-Dec…but what are the signs to look for over a medium-term?  A higher vol regime will make conditions far more prosperous for equity short-sellers and change the dynamics in FX markets, with renewed downside demand for high beta FX (AUD, NZD, CAD, and MXN). The USD will turn from one being driven by pro-cyclical forces – i.e. relative economics and rate settings - to one sought for safe-haven demand, with the JPY also benefiting.  (Implied volatility benchmarks across asset class) Firstly, I would start with the rates markets – we can see a bit over 2 hikes priced into US fed funds future by the end-2022, with rates ‘lift off’ starting in July. I think if we priced in over 3 hikes in 2022 it could become more problematic for risk assets. Looking out the Eurodollar rates curve, we see a reasonably aggressive pace of hikes in 2022 and 2023, but then the pace markedly declines with barely anything priced for 2024 and 2025. In essence, the market sees hikes as front-loaded suggesting the Fed are in fact not dramatically behind the curve – a factor that is one of the core debates in macro.  We see an 89bp differential between the Eurodollar Dec 2025 and Dec 2022 futures contracts – if this moves back to say 140bp then this could be the market feeling that inflation is going to be a far greater problem and rate hikes are being more aggressively priced throughout the next four years. (Orange – US 5y5y forward rate, white – Fed’s long-term dot plot projection) Also, if the US 5y5y forward rate (the markets view on the ‘terminal’ fed funds rate – now 1.94%) pushed above 2.50% (the Fed’s long-term dot plot projection), again, I think this would be a trigger for far higher volatility and risk aversion.  A move to 2.50% won't play out overnight, if at all, and we’ll need to see real evidence that the US labour force participation rate is not going above 62%, while unit labour costs stay elevated and supply chains heal at a glacial pace. However, if the forward rate was eyeing 2.5% I think this could be a factor many strategists will point to for the VIX to sustain a move above 20%. The gold market is perhaps one of the more classic signs of inflationary concerns – this is a play on US ‘real’ (adjusted for inflation expectations) rates though, where the combination of a better economy in Q4, record negative US real rates and rising inflation is one the gold bulls will seek out precious metals. The Fed may need to promote a move higher in real rates, but the knock-on effect is they risk the stock market finding sellers – notably in growth stocks. A downside break of -2% in 5yr US real Treasury’s could be the trigger for gold to push into and above $1900.  Many debate the linkage between inflation expectations and the real economy. I’m not sure it matters when people are feeling the effects for themselves, and much has been made of the recent NFIB small business survey and Friday’s University of Michigan consumer sentiment survey, which hit the lowest levels since August 2011.  Clearly inflation is not popular and is increasingly the key political issue – I’d argue if real rates break to new lows this could accelerate inflation hedges, while a move through 2.7% in US 5y5y inflation swaps (currently 2.55%) would also play into the idea that perhaps the Fed, at the very least, need to radically reduce the pace of QE in the December FOMC meeting.  Clearly, the US Nov CPI (released 11 Dec) is going to be a big event for markets to digest and the signs are price pressures will continue to build from the current 6.2% YoY pace.  Crude and gasoline also play a key role in shaping sentiment – Senate Majority Leader Schumer has called on President Biden to release an element of the US’s Strategic Petroleum Reserves (SPR). This is a factor that has been talked up since OPEC rejected the US’s calls to increase output by more than 400k barrels. However, the introduction of Schumer into the mix just adds fuel to the fire and this may weigh on crude. So, a few indictors I am watching that could spur the market into a belief the Fed are genuinely behind the curve – I’d argue the market isn’t there yet, but if the factors I mention don’t show evidence of dissipating then we could see forward rates move to levels that could highlight the Fed need to act far more intently – that is where risk dynamics could markedly change.
Biden Signs a Bill to Revive Infrastructure… and Gold!

Biden Signs a Bill to Revive Infrastructure… and Gold!

Arkadiusz Sieron Arkadiusz Sieron 16.11.2021 14:13
Gold rallied thanks to the changed narrative on inflation, and Biden’s infrastructure plan can only add to the inflationary pressure. Huge price moves ahead? I have a short quiz for you! What the government should do to decrease inflation that reached the highest level in 30 years? A) Decrease its expenditure to make room for the Fed to hike the federal funds rate. B) Press the US central bank to tighten its monetary policy. C) Deregulate the markets and lower taxes to boost the supply side of the economy. D) Introduce a huge infrastructure plan that will multiply spending on energy, raw materials, and inputs in general. Please guess which option the US government chose. Yes, the worst possible. Exam failed! At the beginning of November, Congress passed a bipartisan infrastructure bill. And President Biden signed it on Monday (November 15, 2021). To be clear, I’m not claiming that America doesn’t need any investment in infrastructure. Perhaps it needs it, and perhaps it’s a better idea than social spending on unemployment benefits that discourage work. I don’t want to argue about the adequacy of large government infrastructure projects, although government spending generally fails to stimulate genuine economic growth and governments rarely outperform the private sector in effectiveness. My point is that $1.2 trillion infrastructure spending is coming at the worst possible moment. The US economy is facing supply shortages and high inflation caused by surging demand, which choked the ports and factories. In short, too much money is chasing too few goods, and policymakers decided to add additional money into the already blocked supply chains! I have no words of admiration for the intellectual abilities of the members of Congress and the White House! Indeed, the spending plan does not have to be inflationary if financed purely by taxes and borrowing. However, the Fed will likely monetize at least part of the newly issued federal debt, and you know, to build or repair infrastructure, workers are needed, and steel, and concrete, and energy. The infrastructure spending, thus, will add pressure to the ongoing energy crisis and high producer price inflation, not to mention the shortage of workers. Implications for Gold What does the passing of the infrastructure bill imply for the gold market? Well, it should be supportive of the yellow metal. First, it will increase the fiscal deficits by additional billions of dollars (the Congressional Budget Office estimates that the bill will enlarge the deficits by $256 billion). Second, government spending will add to the inflationary pressure, which gold should also welcome. After all, gold recalled last week that it is a hedge against high and accelerating inflation. As the chart below shows, gold not only jumped above the key level of $1,800, but it even managed to cross $1,850 on renewed inflation worries. The infrastructure bill was probably discounted by the traders, so its impact on the precious metals market should be limited. However, generally, all news that could intensify inflationary fears should be supportive of the yellow metal. You see, the narrative has changed. So far, the thinking was that higher inflation implies faster tapering and interest rates hikes and, thus, lower gold prices. This is why gold was waiting on the sidelines for the past several months despite high inflation. Investors also believed that inflation would be transitory. However, the recent CPI report forced the markets to embrace the fact that inflation could be more persistent. What’s more, tapering of quantitative easing started, which erased some downward pressure on gold. Moreover, despite the slowdown in the pace of asset purchases, the Fed will maintain its accommodative stance and stay behind the curve. So, at the moment, the reasoning is that high inflation implies elevated fears, which is good for gold. I have always believed that gold’s more bullish reaction to accelerating inflation was a matter of time. It’s possible that this time has just come. Having said that, investors should remember that market narratives can change quickly. At some point, the Fed will probably step in and send some hawkish signals, which could calm investors and pull some of them out of the gold market. My second concern is that gold could have reacted not to accelerating inflation, but rather to the plunge in the real interest rates. As the chart below shows, the yields on 10-year TIPS have dropped to -1.17, a level very close to the August bottom. When something reaches the bottom, it should rebound later. And if real interest rates start to rally, then gold could struggle again. However, I’ll stop complaining now and allow the bulls to celebrate the long-awaited breakout. It’s an interesting development compared to the last months, that’s for sure! If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
The Elephant in the Room

The Elephant in the Room

Monica Kingsley Monica Kingsley 16.11.2021 15:42
S&P 500 is starting to run into a setback even if VIX doesn‘t reveal that fully. Credit markets going from weakness to weakness spells more short-term woes for stocks – a shallow downswing that feels (and is) a trading range before the surge to new ATHs continues, is likely to materialize in the second half of Nov. We may be in its opening stages – as written yesterday: (…) Can stocks still continue rallying? They look to be setting up for one more downleg of the immediately predecing magnitude, which means not a huge setback. The medium-term path of least resistance remains up – the Fed is still printing a huge amount of money on a monthly basis, and it remains questionable how far in tapering plans execution they would actually get – I see the risks to the real economy coupled with persistently high inflation as rising since the 2Q 2022 (if not since Mar already, but most pronounced in 2H 2022). Stocks are still set for a good Dec and beyond performance. The elephant in the room is (the absence of) fresh debt issuance lifting up the dollar, making it like rising yields more. Not only that these are failing to push value higher, but the tech resilience highlights the defensive nature of S&P 500 performance. Crucially though, precious metals are seeing through the (misleading dollar strength) fog, and are sharply rising regardless. Make no mistake, with the taper reaction, we have seen what I had been expecting (or even better given that I prefer reasonably conservative stance without drumming up expectations either way) – I had been telling you that the hardest times for the metals are before taper. And the magnitude and pace of their upswing casts a verdict on the Fed‘s (likely in)ability to follow through with the taper execution, let alone initiate the rate raising cycle without being laughed off the stage as markets force these regardless of the central planners. The galloping inflation expectations are sending a very clear message: (…) if you look at the great white metal‘s performance, it‘s the result of inflation coming back to the fore as the Fed itself is now admitting to high inflation rates through the mid-2022, putting blame on supply chain bottlenecks. Oh, sure. The real trouble is that inflation expectations are starting to get anchored – people are expecting these rates to be not going away any time soon. Precious metals are going to do great… Copper is awakening too, and commodities including oil would be doing marvels. TLT downswings would be less and less conducive to growth, so if you‘re still heavily in tech, I would start eyeing more value. Let me add the Russell 2000 and emerging markets to the well performing medium-term mix. Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook S&P 500 bulls didn‘t make it too far before running into another (mild, again I say) setback – so far, a sideways one. Credit Markets Credit markets renewed their march lower, and unless they turn, the S&P 500 upswings would remain on shaky ground (if and when they materialize). Gold, Silver and Miners Gold and silver remain on a tear, and even for the breather to unfold, it takes quite an effort. The bears clearly can‘t hope for a trend change. Crude Oil Crude oil bulls keep defending the $80 level, with $78 serving as the next stop if need be – these consecutive lower knots keep favoring the bulls, just when the right catalyst arrives. Whether that takes one or two days or more, is irrelevant – it will happen. Copper Copper ran into an unexpected setback, which however doesn‘t change the outlook thanks to its relatively low volume. I‘m still looking for much higher red metal‘s prices. Bitcoin and Ethereum Bitcoin and Ethereum are seeing an emerging crack in the dam that doesn‘t tie too well to developments elsewhere. The bulls should step in, otherwise this yellow flag risks turning into a red one. Summary S&P 500 bulls are now holding only the medium-term upper hand as the rally is entering a consolidation phase. Anyway, this trading range would be followed by fresh ATHs, which would power stocks even higher in early 2022. Precious metals have quite some catching up to do, and the long post Aug 2020 consolidation is over. Copper, base metals, oil and agrifoods are likely to keep doing great as inflation expectations show that inflation truly hasn‘t been tamed in the least. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
Bitcoin, a battle for freedom

Bitcoin, a battle for freedom

Korbinian Koller Korbinian Koller 17.11.2021 08:01
We find ourselves ensued in various battles. Environmentally, economically, and from a human perspective. As much as it is questionable if coal and oil, centralized money, and wars (attacks on ourselves) hold a prosperous future, change is typically avoided. There have been moments in history where rapid change happened. Most often introduced by a charismatic human being with a compelling principle at a defining moment when a change was needed. S&P 500 Index versus BTC in US-Dollar, Monthly Chart, bitcoin an answer to crisis? S&P 500 Index versus Bitcoin in US-Dollar, Monthly chart as of November 16th, 2021. The bitcoin idea was born as a response to the crash of 2008. In its principles, diametrical to fiat currencies. Bitcoin is decentralized, limited, deflationary and digital. There is no historical event where increased money printing has resolved economic turmoil. And yet, we have not come up with a better solution, or at least we have not implemented it yet. The chart above shows how shortly after the crash of 2008, the first transaction ever sent on the bitcoin blockchain was completed in January 2009.Coincidence? It took some time until the cryptocurrency’s pseudonymous creator Satoshi Nakamoto found traction with his idea reflected in bitcoin’s price rise. Still, it has not just caught up but outperformed the market by a stunning margin. BTC in US-Dollar, Monthly Chart, don’t underestimate powerful ideas: Bitcoin versus gold and silver in US-Dollar, Monthly chart as of November 16th, 2021. Covid provided like a steroid a means to illustrate many shortcomings in a magnified way. The chart above shows that bitcoin speculation was an answer to where many find a more prosperous future compared to precious metals. In addition to fundamentals and technical, the underlying idea and hope for a transitory future got traction when people were most afraid.   BTC in US-Dollar, Monthly Chart, sitting through turmoil with ease: Bitcoin in US-Dollar, Monthly chart as of November 16th, 2021. Dissecting markets like this in all their shades and facets is necessary for discovering underlying currents, motivation, and sustainability of trends. In bitcoins case, the found strength of application, beliefs, and principles inherent in bitcoin itself and its traders allows for sitting more easily through its volatility swings. Once the mind grasps reason, it tolerates easier, otherwise hardships to trade a volatile vehicle like bitcoin. With a battle ensured on this magnitude and for an expected long duration, one can accept deep retracements in a more tranquil fashion. The monthly chart above shows that bitcoin might face one of those quick dips that hodlers accept, knowing that the battle isn’t over yet. Bitcoin, a battle for freedom: Mills are grinding slowly. Change typically takes time, and those holding the reign over financial power will certainly not surrender such summoned energies lightly. While this world certainly needs a more adaptive behavior of humanity both for its wellbeing and the planet itself, it is unlikely that a shift, if at all, will be swift. This means that bitcoin is a continued struggle to establish itself. And this will result in continued high volatility for the years to come. As such, it will remain an excellent opportunity for the individual investor. Feel free to join us in our free Telegram channel for daily real time data and a great community. If you like to get regular updates on our gold model, precious metals and cryptocurrencies you can subscribe to our free newsletter. This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision. The views, thoughts and opinions expressed here are the author’s alone. They do not necessarily reflect or represent the views and opinions of Midas Touch Consulting.
Gold – USD Relationship Status: It’s Complicated

Gold – USD Relationship Status: It’s Complicated

Przemysław Radomski Przemysław Radomski 17.11.2021 13:27
  If the dollar goes through a corrective downswing, it’s more bullish for gold? Not if a decline in the euro caused gold to rise in the first place. Another day, another new yearly high for the USD Index. The U.S. currency soars just like it has since the beginning of the year, in tune with what I said at that time, (and against what almost everyone else said about its outlook). The rally accelerated recently, with the USD Index soaring by 0.78 this week – and it’s only Wednesday today. So, surely that’s bullish for the USD Index? - one might ask. No. “Bullish” or “bearish” relates to the future, not to the past. In fact, the rally in the USD Index might need a breather as all markets – no matter how bullish or bearish the situation is in them – can’t rally or decline in a straight line, without periodic corrections. The USD Index, gold, silver, mining stocks, and practically all the other markets are no exception from this rule. Even the real estate prices don’t increase over the long run without periodic downturns. As you can see on the above chart, the U.S currency index soared to almost 96 yesterday and it’s after an almost straight-up rally. This rally caused the RSI indicator to move above 70, and this has been a quite precise short-term sell signal this year. In fact, in all cases when we saw it, some kind of short-term correction followed. Based on the size of the current rally, it seems that the current situation is most similar to what we saw in early March and in late June. That’s when we saw short-term declines that took the USDX approximately a full index point lower. In the current case, it could mean a decline back to 95. This would be a perfectly natural thing for the USD Index to do right now, given that the previous resistance (which now serves as support) is located slightly below 95. The support is provided by the late-2020 high and the March 2020 low (not visible on the above chart). So, surely this corrective downswing in the USD Index would cause an even bigger rally in the precious metals sector, right? That’s where things get complicated. You see, the biggest (over 50%) part of the USD Index (which is a weighted average) is the EUR/USD currency pair. Let’s take a look at it. The Euro Index moved sharply lower last week and just like the RSI based on the USD Index flashed a sell signal, the RSI based on the Euro Index flashed a buy signal. Also, the Euro Index just moved to the lower border of its declining trade channel, which is likely to indicate some kind of rebound. Why am I discussing the euro here? Because that’s what’s complicated about the current USD-gold link. The euro recently declined and the prices of silver and gold recently rallied shortly after dovish comments from the eurozone. Namely, while the expansionary nature of fiscal and monetary decisions in the U.S. might be after its peak (with the infrastructure bill signed even despite high inflation numbers), the eurozone is far from limiting its expansionary (i.e., inflationary) policies, and it was just made clear recently. That was bearish for the euro and bullish for the gold price – as more money (euros in this case) would be chasing the same amount of physical gold bars. The point here is that it might have been the decline in the value of the European currency that caused gold to rally, and it had little to do with what happened in the USD Index. Don’t get me wrong, most of the time, the gold-USD link is stable and negative. In some cases, gold shows strength or weakness by refusing to move in tune (and precisely: again) with the U.S. dollar’s movement. But in this case, it seems that it’s not about the U.S. dollar at all (or mostly), but rather about what happened in the Eurozone and euro recently. I marked the recent decline in the euro and the rally in gold with a golden rectangle. The usual link between gold-USD would have one assume that lower USD Index values (due to higher EUR/USD values) would trigger a rally in gold. However, given how things worked and the fact that we saw/heard the news coming from the Eurozone, it seems like this “temporary” and “bearish for the PMs” interpretation would actually prevail. It could also be the case that we see some kind of mixed reply from the precious metals sector when the USD Index and the Euro Index correct. The PMs could for example fall only after the situation regarding the gold-USD link gets back to normal – that is perhaps after both currencies correct. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
European Gas Jumps, while the Euro and Yen Slump

European Gas Jumps, while the Euro and Yen Slump

Marc Chandler Marc Chandler 17.11.2021 15:31
Overview: The prospects that the 6.2% CPI will prompt the Fed to move quicker continue to underpin the dollar.  The euro fell to about $1.1265, its lowest level since last September, and the Japanese yen slumped to a fresh four-year low.  The JP Morgan Emerging Market Currency Index tumbled 1% yesterday, the largest decline since February.  A more stable tone is evident in Europe, as the euro has recovered above $1.13, and the JP Morgan Index is paring yesterday's losses.  The dollar is holding just below JPY115.00.  Asia Pacific equities did not fare well.  Only China and Taiwan markets, among the large regional markets, managed to rise.  Europe's Stoxx 600 is edging higher for the sixth consecutive session.  Recall it has fallen only once since October 27.  US futures are narrowly mixed. The bond market is quiet, with the US 10-year hovering around 1.62%.  European yields are a little softer.  Gold slid below $1850 yesterday but has snapped back today to test the $1860 area.  Crude oil is heavy, with the January WTI contract around $78.80, unable to resurface above $80 amid talk that the US and China may coordinate the release of strategic holdings.  Gas prices are up another 7% in Europe today after surging 16% yesterday and 9% on Monday. Due to "unplanned maintenance," a Belarus pipeline to Poland has been shut down, which may last three days.  Iron ore prices are giving back around half of yesterday's 1.2% gain, for the third loss in four sessions.  Copper is off for a third session, losing after dropping 2.2% in the past two sessions.   Asia Pacific Japan's October trade data disappointed.  Exports and imports were weaker than expected, and this resulted in a smaller deficit. Exports slowed to 9.4% year-over-year, down from 13% in September, defying expectations for a small double-digit increase.  Imports were up 26.7% from a year ago, off the heady 38.2% pace seen in September and below the 31.8% projected.  The resulting trade deficit of JPY67.4 bln was about a fifth of what economists anticipated (Bloomberg survey).  It is the third consecutive monthly deficit.  In the first seven months of the year, Japan recorded two deficits.  A year ago, Japan recorded a JPY840 bln surplus.   Reports suggesting that the possibility that the US and China coordinate the drawdown of strategic oil reserves are light on details, but the suggestion itself is enough to weigh on prices.  Still, the International Energy Agency yesterday echoed the broad assessment of America's EIA in anticipating that the tightness of the oil market could ease shortly.   Increased output in the US, Saudi Arabia, and Russia may account for half of the 1.5 mln barrel a day anticipated increase in supply. Nevertheless, the acting head of the EIA warned tapping the US Strategic Petroleum Reserve would have a short-term impact, for which other dynamics would quickly overshadow it.  Separately, note that the API estimated a slight build of 655k barrels in US stocks this past week, while gasoline inventories fell.   In other regional developments, Australia's wage price index rose a modest 0.6% in Q3 for a year-over-year pace of 2.2%.  This was in line with expectations.  It would seem to support the RBA's argument that it need not be in a hurry to raise rates.  The June 2022 T-bill yield settled last month at 69 bp and is now near 40 bp.  Separately, China appears to be allowing "high quality" property developments to return to the asset-backed securities market to raise capital after a three-month hiatus. Lastly, reports suggest Beijing is moving ahead with its import substitution plans to reduce dependency on foreign technology.    The dollar approached JPY115.00, where an option for almost $610 mln expires today.  The dollar has not traded above there since March 2017.  Since the dollar broke above JPY112.00, we have suggested that JPY114.50-JPY115.00 may mark the top of the new range.  While this has worked for the past month, the risk is on the upside.  A convincing break of around JPY115.50 would target the JPY118.00 area.  Initial support is now seen near JPY114.70.  Note that the upper Bollinger Band is slightly below JPY114.80.  The Australian dollar is trading near its lowest level since October 6, near $0.7265.  It is holding above a trendline connecting the August and September lows, which is found near $0.7250 today, but little stands in the way of a test on the $0.7200 in the coming days.  An option for a little more than A$800 mln at $0.7300 is set to expire today.  After posting a key upside reversal yesterday, the US dollar consolidated against the Chinese yuan today, and no follow-through buying materialized.  Instead, it seemed that the local market took advantage of the pop above CNY6.39 to sell the greenback, which is straddling CNY6.38 in late dealings.  The reference rate was set at CNY6.3935, just below the bank projections (CNY6.3936, according to the median in the Bloomberg survey).  We note that the yuan is also at its best level since 2015 against the trade-weighted CFETS basket the PBOC uses.   Europe On the heels of a strong employment report, the UK reported a larger than expected increase in the October CPI.  The preferred measure, which includes owner-equivalent housing costs, jumped to 3.8% from 2.9%.  The older measure rose to 4.2% from 3.1%.  On the month, consumer prices rose 1.1% rather than the 0.8% economists forecast (Bloomberg median). Flattered by increasing gas and electricity prices.  Core prices rose 3.4% year-over-year, accelerating from 2.9% in September and defying forecasts for a 3.1% pace.  Separately, producer prices, both input and output, also rose more than expected.  Lastly, UK house prices rose 11.8% year-over-year in September, up from a revised 10.2% in August.  The recent peak was 12.6% in June, which was the highest since 2004.    European gas prices are at one-month highs.  Belarus has stopped its pipeline to Poland, claiming unplanned maintenance issues, while the border tensions and earlier threats raise suspicions of a political move.  Separately, the German regulator suspended the certification process of the controversial Nord Stream 2 pipeline as corporate assets are rearranged.  Separately, a German court yesterday dismissed an environmental challenge to the pipeline.  Lastly, we note that the virus flare-up continues in Europe, and Germany and the Czech Republic reported a record number of cases. The euro surpassed our $1.1290 Fibonacci target and did not find bids until the $1.1265 area in Asian turnover.  The single currency has been in a tight range in Europe, holding above $1.1300.  Initial resistance is seen around $1.1330 now.  A move above yesterday's high, near $1.1385, is needed to lift the tone. We suspect the near big target is closer to $1.10.  Sterling slipped to a three-day low, slightly below $1.34, but shot up to the session high near $1.3375 on the inflation news. However, the momentum was not sustained, and sterling is little changed in late morning European turnover near $1.3430. The euro briefly traded below GBP0.8400 for the first time since March 2020 but snapped back.  An 840 mln euro option at GBP0.8445 expires today and another for about 620 mln euros at GBP0.8450 expires tomorrow.   America US retail sales surged last month, and the 1.7% rise was the best since March.  After slowing in Q3, consumption is off to a strong start in Q4.  Industrial production was also much stronger than expected, rising 1.6% compared with the 0.9% gain anticipated by economists (median, Bloomberg survey).  The US reports October housing starts today, and they are expected to have recovered from the 1.6% decline seen in September. Housing starts fell in Q3 but are seen rising in Q4, encouraged by an easing of some supply chain issues.   In fact, on several fronts, there are preliminary signs that the disruptions are dissipating.  Some reports suggest that the shortage of semiconductor chips may be passed, and US auto sales rose in October for the first time in six months.  Both the EIA and IEA have forecast a more balanced oil market, and some measures of shipping costs have moderated. The Los Angeles port has reportedly reduced the number of empty containers by around a quarter this month as six new sweeper ships have been brought into operation.  In addition, we note that the re-opening of US borders means immigrant workers may begin returning.  There is still much debate, of course, on the extent that the elevated price pressures are the result of supply chain disruptions.  A report by the Bank for International Settlements estimates that without the supply problems, US inflation would be closer to 2.5% and eurozone inflation near 1.5%. President Biden is expected to make his Fed announcements in the next few days, according to reports, but it could slip into early next week.  Powell is still the favorite, and he has Treasury Secretary Yellen's in support.  Yellen warns that action is needed soon on the debt ceiling.  Her efforts may be exhausted early next month.  Lastly, San Francisco Fed President Daly opined she was more bullish on the economy than a year ago.  This seems backward to us.  A year ago, the vaccine was announced, and fiscal stimulus was anticipated after the US election. Going forward, there will be less monetary and fiscal stimulus.  The pent-up demand ("excess savings") is projected to be exhausted by early next year, and, as we have noted, the doubling of the price of oil has preceded the last three recessions in the US. We suspect that there is sufficient stimulus and need to rebuild inventories to sustain reasonably strong growth for the next few quarters, but by the second half of next year, sub-3% growth will return as the norm.  Canada reports October CPI figures today.  The headline is likely to rise to 4.7% from 4.4% in September (Bloomberg median).  However, the base effect points to a further rise this month and December, when in 2020, the CPI rose 0.1% and fell 0.2%, respectively.   The underlying core rates are also increasing.  The Deputy Governor of the Bank of Canada cautioned about the high degree of uncertainty around potential structural shifts in the labor market that make it challenging to gauge full employment with any degree of confidence.  He pointed to economic areas that still show slack.  The market is expecting the first hike next March/April.  Note that tomorrow, the "Three Amigos" (Biden, Trudeau, and AMLO) meet in the US amid concern that the US "Build Back Better" has strong nationalistic elements, including for electric vehicles.     The US dollar posted an outside up day against the Canadian dollar yesterday, and follow-through buying has lifted it to around CAD1.2585.  At the end of last week, the high set was slightly above CAD1.2600, which close approximates the (50%) retracement of the greenback's decline since the September 20 high near CAD1.29.  The next retracement (61.8%) is found by CAD1.2665.  Still, we expect that a firm CPI report will lend the Loonie some support.  The session low, set in late Asia, near CAD1.2540, may be protected a CAD1.2545 option for $600 mln that expires today.  The greenback is consolidating against the Mexican peso today after rallying yesterday from about MXN20.56 to nearly MXN20.85.  The high from earlier this month was near MXN20.98.  It has not been above MXN21.00 since March.  Initial support is seen around MXN20.60.   Disclaimer
Investors Expect High Inflation. Golden Inquisition Ahead?

Investors Expect High Inflation. Golden Inquisition Ahead?

Arkadiusz Sieron Arkadiusz Sieron 18.11.2021 15:33
  Inflation expectations reached a record high. Is gold preparing a counterattack to punish gold bears? In a , nobody expects the Spanish inquisition. In the current marketplace, everyone expects high inflation. As the chart below shows, the inflation expectations embedded in US Treasury yields have recently risen to the highest level since the series began in 2003. Houston, we have a problem, an unidentified object is flying to the moon! The 5-year breakeven inflation rate, which is the difference between the yields on ordinary Treasury bonds and inflation-protected Treasuries with the same maturity, soared to 2.76% on Monday. Meanwhile, the 10-year breakeven inflation rate surged to 3.17%. The numbers show the Treasury market’s measure of average CPI annual inflation rates over five and ten years, respectively. The chart is devastating for the Fed’s reputation if there’s anything left. You probably remember how the US central bank calmed investors, saying that we shouldn’t worry about inflation because inflation expectations are well-anchored. No, they don’t! Of course, the current inflation expectations oscillate around 3%, so they indicate that the bond market is anticipating a pullback in the inflation rate from its current level. Nevertheless, the average of 3% over ten or even just five years would be much above the Fed’s target of 2% and would be detrimental for savers in particular, and the US economy in general. I’ve already shown you market-based inflation expectations, which are relatively relaxed, but please take a look at the chart below, which displays the consumer expectations measured by the New York Fed’s surveys. As one can see, the median inflation expectations at the one-year horizon jumped 0.4 percentage point in October, to 5.7%. So much for the inflation expectations remaining under control!   Implications for Gold Surging inflation expectations are positive for the gold market. They should lower real interest rates and strengthen inflationary worries. This is because the destabilized inflation expectations may erode the confidence in the US dollar and boost inflation in the future. So, gold could gain as both an inflation hedge and a safe haven. And, importantly, the enlightened Fed is likely to remain well behind the curve in setting its monetary policy. This is even more probable if President Biden appoints Lael Brainard as the new Fed Chair. She is considered a dove, even more dovish than Powell, so if Brainard replaces him, investors should expect to see interest rates staying lower for longer. So, inflation expectations and actual inflation could go even higher. Hence, the dovish Fed combined with high inflation (and a slowdown in GDP growth) creates an excellent environment for gold to continue its rally. After all, the yellow metal has broken out after several months of consolidation (as the chart below shows), so the near future seems to be brighter. There are, of course, some threats for gold, as risks are always present. If the US dollar continues to strengthen and the real interests rebound, gold may struggle. But, after the recent change, the sentiment seems to remain positive. Anyway, I would like to return to the market-based inflation expectations and the famous Monty Python sketch. With an inflation rate of 3%, which is the number indicated by the bond market, the capital will halve in value in just 24 years! So, maybe it would be a too-far-reaching analogy, but Monty Python inquisitors wanted to use a rack to torture heretics by slowly increasing the strain on their limbs and causing excruciating physical pain (luckily, they were not the most effective inquisitors!). Meanwhile, inflation hits savers by slowly decreasing the purchasing power of money and causing significant financial pain. With the inflation rate at about 6%, hedging against inflation is a no-brainer. It’s a matter of financial self-defense! You don’t have to use gold for this purpose – but you definitely can. After several disappointing months, and the lack of gold’s reaction to inflation, something changed, and gold has managed to break out above $1,800. We will see how it goes on. I will feel more confident about the strength of the recent rally when gold rises above $1,900. If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
Like Clockwork

Like Clockwork

Monica Kingsley Monica Kingsley 18.11.2021 15:44
S&P 500 took a little breather, and sideways trading with a bullish slant goes on unchecked. Credit markets have partially turned, and I‘m looking for some risk appetite returning to HYG and VTV. Any modest improvement in market breadth would thus underpin stocks, and not even my narrow overnight downswing target of yesterday may be triggered. The banking sector is internally strong and resilient, which makes the bulls the more favored party than if judged by looking at the index price action only. Consumer discretionaries outperformance of staples confirms that too. When it comes to gold and silver: (…) Faced with the dog and pony debt ceiling show, precious metals dips are being bought – and relatively swiftly. What I‘m still looking for to kick in to a greater degree than resilience to selling attempts, is the commodities upswing that would help base metals and energy higher. These bull runs are far from over – it ain‘t frothy at the moment as the comparison of several oil stocks reveals. Precious metals dip has been swiftly reversed, and it‘s just oil and copper that can cause short-term wrinkles. Both downswings look as seriously overdone, and more of a reaction to resilient dollar than anything else. In this light, gold and silver surge is presaging renewed commodities run, which is waiting for the greenback to roll over (first). And that looks tied to fresh debt issuance and debt ceiling resolution – Dec is almost knocking on the door while inflation expectations are about to remain very elevated. Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook S&P 500 bulls continue holding the upper hand, and yesterday‘s rising volume isn‘t a problem in the least. Dips remain to be bought, and it‘s all a question of entry point and holding period. Credit Markets Credit markets stabilization is approaching, and yields don‘t look to be holding S&P 500, Russell 2000 or emerging markets down for too long. Especially the EEM performance highlights upcoming dollar woes. Gold, Silver and Miners Gold and silver decline was promptly reversed, and the lower volume isn‘t an immediate problem – it merely warns of a little more, mostly sideways consolidation before another push higher. PMs bull run is on! Crude Oil Crude oil bulls could very well be capitulating here – yesterday‘s downswing was exaggerated any way examined. Better days in oil are closer than generally appreciated. Copper The copper setback got likewise extended, and the underperformance of both CRB Index and other base metals is a warning sign. One that I‘m not taking as seriously – the red metal is likely to reverse higher, and start performing along the lines of other commodities. Bitcoin and Ethereum Bitcoin and Ethereum bears may be slowing down here, but I wouldn‘t be surprised if the selling wasn‘t yet over. We‘re pausing at the moment, and in no way topping out. Summary S&P 500 bulls keep banishing the shallow correction risks, leveling the very short-term playing field. The credit markets non-confirmation is probably in its latter stages, and stock market internals favor the slow grind higher to continue. Precious metals remain my top pick over the coming weeks, and these would be followed by commodities once the dollar truly stalls. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
It’s the most important job in finance...

It’s the most important job in finance...

Chris Weston Chris Weston 19.11.2021 08:03
It’s the most important job in finance, but the focus falls on whether Jerome Powell, whose term as Fed Chair expires in Feb 2022, is reappointed or whether he is replaced by Lael Brainard, or perhaps even Raphael Bostic. The earlier talk was this decision was slated before Thanksgiving (25 Nov), but the WSJ reported this week that the nomination could be announced over this weekend. The question then of gapping risk for the Monday open is one traders should consider. As the well-used term goes, markets hate uncertainty – and a Brainard appointment, at a time of impending monetary policy change, represents a small rise in uncertainty that many in the market could do without – well, except for those who like volatility which is most short-term traders. A wild December Still, my base case is we are headed into a period of higher volatility regardless, with a wild December ahead of us. Where we see the US Treasury exhausting measures by mid-December and the US debt ceiling potentially becoming problematic, just as the FOMC meeting (16 Dec) sees the central bank likely announce they are accelerating the pace of tapering from $15b to $20-$25b. Expectations of volatility from the Fed meeting should increase after the Nov non-farm payrolls (4 Dec) and then the Nov CPI print (11 Dec) – the latter a genuinely market-moving event. With the Fed due to ramp up the pace of tapering and potentially closing out its QE program far earlier than prior calls for mid-2022, it sets us up for the Fed to start hiking in July or August. The markets currently price just over two hikes over the coming 12 months. Is this the time to change captain? The concern the market naturally holds then is whether this is really the time to be changing the captain of the ship when we’re charging towards choppy waters? And, if the public have such great disdain for inflation - and US inflation is only getting hotter - why replace Powell with someone who most know is slightly more dovish? Brainard, in some market participants minds, could further slow the reaction function of the Fed and rising talk of the Fed being “behind the curve” could see volatility rise. OK, we know Brainard is a Democrat, and we know she is genuine Fed chair material, but when inflation is probably the number one point of contention and the Mid-term elections is in our sights, surely it makes little sense to allow inflation to run even hotter. A Brainard appointment may change the focus to one where the employment mandate is aimed at a greater inclusion – so, despite the headline employment rate headed to 4% in Q1 22, there could be a shift towards more targeted groups and at a simplistic level that could mean keeping rates lower for longer. In some eyes, when inflation is running hot, not just through supply-side issues, but through demand and wages, then rates simply need to go higher, and Powell is more likely to address this sooner. I am not so sure I share the market’s concerns, and I feel Brainard would be no less dovish than Powell, but this is a widely held view in certain circles. Betting sites have Powell as the firm favourite We can see the odds of Brainard getting the gig have beefed up after what was seen as a very positive meeting with the President recently. And we know there have been calls for change at the helm given the recent spate of controversial trading cases at the Fed. While progressives want tougher financial regulation and a Fed that can use policy to address climate change. Despite Brainard’s odds increasing, the market is clearly leaning that Powell gets a second term, and for what it’s worth, I think he should get the gig. The betting markets have Powell as chair at 76% (69% on Predicit) and that is fair, but there is a non-immaterial chance that we do see Biden nominate Brainard, so it certainly needs monitoring. If Lael Brainard does get nominated then the first place to look is short-term US Treasuries, and I’d expect 2-year yields to fall 3-4bp. If yields drop then the USD should follow, especially vs higher beta plays (AUD, NZD, MXN), while we may see some selling in US500 and US2000, with outperformance seen in the NAS100. Gold would probably find buyers and may even take out the recent highs of $1870. Given recent moves in rates and the bull move in USD, I’d argue the market is strongly leaning on a Powell reappointment, so news of him getting the gig may cause limited moves on open – if we do indeed see it announced this weekend. Still, it’s a risk to monitor – but the real issue remains to navigate the event risk in December in what is typically a period of lower participation.
Monthly Macro Outlook: The transitory narrative continues to fall apart

Monthly Macro Outlook: The transitory narrative continues to fall apart

Christopher Dembik Christopher Dembik 19.11.2021 09:25
Summary:  The economist consensus anticipates inflation will start falling from early next year. We disagree. We consider the market to be too complacent regarding upside risks to the inflation outlook. The great awakening of workers and the steady rent increase (for the United States) are two of the factors which are likely to maintain inflation uncomfortably high into 2022, in our view. October CPI figures released earlier this week confirm that inflationary pressures may last longer than initially expected. Inflation reached levels which have not been seen for decades in the United Kingdom (+4.2% YoY), in the eurozone (+4.1% YoY) and in Canada (+4.7% YoY). In Canada, the jump in inflation is the strongest recorded in 18 years. For now, investors are confident. They believe the U.S. Federal Reserve and European Central Bank’s narrative that inflation will start to fall from early next year. This is far from certain, in our view. From supply chain bottlenecks to energy prices, everything suggests that inflationary pressures are far from over. Expect energy prices to continue increasing as temperatures will drop in Europe from next week onwards. This will weigh on November CPI data which will be released next month. The peak in inflation has not been reached. We fear investors are too complacent regarding upside risks to the inflation outlook. Every economic theory says inflation will be above 2% next year : ·         The Phillips curve is alive and well : workers are demanding higher salaries, amongst other advantages and their expectations are rising. ·         Monetarism : the global economy is characterized by large deposits, desire to spend and to convert cash into real assets. ·         Commitment approach : the U.S. Federal Reserve (Fed) and the European Central bank (ECB) have a dovish bias. This is confirmed by their new inflation strategy (symmetric 2% inflation target over the medium term for the ECB and inflation of 2% over the longer run for the Fed). ·         Fiscal approach : high public debt and fiscal dominance (central banks need to remain dominant market players in the bond market to avoid a sharp increase in interest rates). ·         Supply-side approach : supply bottlenecks due to the zero Covid policy in China and central banks’ trade off higher inflation for a speedier economic recovery (the ECB especially). ·         Green transition : this is basically a tax on consumers. What has changed ? The wage-price spiral has started. In countries where the labor market is tight, workers are asking for higher salaries. In the United States, the manufacturer John Deere increased salaries significantly : +10% this year and +5% in 2023 and in 2025. It also agreed to a 3% bonus on even years to all employees, for instance. But this is happening in countries where the unemployment rate is high too. In France, the unemployment rate is falling. But it remains comparatively elevated at 7.6% in the third quarter. Earlier this week, the French Minister of Economy, Bruno Le Maire, called for higher salaries in the hospitality industry. A survey by the public investment bank BPI and the pro-business institute Rexecode show that 26% of small and medium companies are forced to propose higher salaries to find employees. Those which are reluctant choose to reduce business activity. The pandemic has fueled a great awakening of workers, in our view. They are demanding more : better job conditions, higher wages, more flexibility and purpose from work. This is more noticeable in countries facing labor shortage. But it is also visible in all the other developed economies to a variable extent.   U.S. steady rent increase is a game-changer. Until now, supply bottlenecks were the main driver behind the jump in prices. Now, housing costs (which represent about a third of living cost) and prices in the service sector are accelerating too. The rental market is tight, with low vacancy rates and a limited stock of available rentals. Expect rents to move upward in the coming months. According to official figures, owner’s equivalent rent, a measure of what homeowners believe their properties would rent for, rose 3.1% YoY in October. This certainly underestimates the real evolution of rents. Based on data reported by real estate agents at national level, the increase is between 7% and 15% YoY. All in all, this reinforces the view that inflationary pressures are proving more persistent than expected. The moment of truth : Expect investors not to question much the official narrative that inflation is transitory, for now. But if inflation does not decrease from 2022 onwards, investors will have to adjust their portfolio to an environment of more persistent inflation than initially anticipated. This may lead to market turmoil. In the interim, enjoy the Santa Claus rally which has started very early this year. The new inflation regime in the United States
Covid Wave Knocks Euro Down and to new 6-year Lows Against the Swiss Franc

Covid Wave Knocks Euro Down and to new 6-year Lows Against the Swiss Franc

Marc Chandler Marc Chandler 19.11.2021 13:58
Overview:  Concerns about the virus surge in Europe cut short the euro's bounce and sent it back below $1.1300 and are also weighing on central European currencies, including the Hungarian forint, despite yesterday's aggressive hike of the one-week deposit rate.  Austria has reintroduced a hard 20-day lockdown.  Germany's health minister warned that the situation deteriorated and vaccines were not enough to break the wave.  He was explicit that a lockdown cannot be ruled out.  The US dollar is trading broadly higher.  Only the yen is resilient on the day, but sterling is the only major currency that has edged higher this week.  The Scandis and euro are off more than 1%.  Speculation that Turkey may announce measures over the weekend to stabilize the lira may be helping to deter new sales today after yesterday's rout.  In the nine-day drop through today, it is depreciated by almost 15%.  The JP Morgan Emerging Market Currency Index is off for the fourth consecutive session to bring this week's loss to more than 2%, the most in five months.  Equities do not know of the consternation in the foreign exchange market.  Disappointing Alibaba results weighed on the Hang Seng (~-1%), while most other large regional bourses but Taiwan and India closed the week on an up note.   Europe's Stoxx 600 snapped a six-day advance yesterday. It was only the second loss since October.  It began firmer today but has reversed lower, putting at risk the six-week rally.   US futures are mixed, with the NASDAQ outperforming.  Bond markets are in rally mode as well.   The US 10-year yield is off three basis points to approach the week's low near 1.53%.  European bonds are off mostly 3-5 basis points, even in the UK, where retail sales surprised on the upside.  Gold is steady, finding support near $1850.  Oil initially extended yesterday's recovery but is reversing lower, leaving the January WTI contract set to test yesterday's low near $76.45.  This is the fourth consecutive weekly fall in crude oil.  European natural gas (Netherlands benchmark) is off 4.4% today, the third drop in a row, and pares the week's gain to almost 19%.  In Singapore, iron ore prices jumped 5.7% to break a five-week slide that saw prices tumble by about 28%.   Copper is firmer and paring this week's loss to around 2%.   Asia Pacific There were two developments in Japan to note.  First, October CPI was largely in line with expectations.  Surging gasoline prices (seven-year highs) helped keep the headline rate positive for the second month (0.1% year-over-year).  Excluding fresh food, the core rate was steady at 0.1%.  However, the deflationary forces are evident when fresh food and energy are removed.  The measure deteriorated to -0.7% from -0.5%, the most since June (-0.9%).    Second, Prime Minister Kishida unveiled an overall package of JPY78.9 trillion (~$690 bln). It is larger than the previous two pandemic packages. "Fiscal measures" refer to spending, investment, and loans, and this is seen worth about JPY55.7 trillion.  It is not clear yet, how much represents new spending as opposed to the reallocation of funds from earlier budgets that were not used. However, it appears to be about JPY32 trillion of new spending.   The Chinese yuan, up a modest 2.1% for the year, is the strongest currency.   Against a trade-weighted basket (CFETS), the yuan is pulling back from a six-year high set earlier this week as the euro recovers a cent.  Consider that the yuan has appreciated by more than 9% against the euro and 11.5% against the yen this year.  That means that investment in China has the same tailwind as the dollar and is compensated a bit for the relative lack of transparency and liquidity.  The Financial Times estimates that foreign holdings of Chinese bonds and stocks rose to around $1.1 trillion at the end of September, about a 13% increase this year.  China's stock market has underperformed this year, and the CSI 300 is off around 7% this year.  On the other hand, China's bonds have fared well.  It is the only 10-year bond that has not weakened this year.  China's figures show foreign direct investment has risen by almost 18% this year through October to nearly $142 bln.   The dollar is posting an outside down day against the Japanese yen by first rising above yesterday's high before reversing and taking out yesterday's low. It is approaching the week's low near JPY113.75 in the European morning.  Below there, support is seen around JPY113.60.  A break would warn of a return to JPY113.00.  The Australian dollar has been sold to its lowest level since October 6, when it recorded a low of almost $0.7225.   It has broken the trendline that connected the August and September lows (~$0.7250).  The September low was around $0.7170 and maybe the next important technical target.  The dollar is trading with a firmer bias against the Chinese yuan, but the greenback remains in the range set on Tuesday (~CNY6.3670-CNY6.3965).  The dollar gained on the yuan four sessions this week, the most since July, but the net gain of less than 0.2% still shows an extraordinarily steady exchange rate.   With the yuan near six-year highs against its trade-weighted basket (CFETS), the PBOC warned against one-way moves and encouraged financial institutions to bolster fx risk management.  It set the dollar's reference rate at CNY6.3825, slightly above expectations (Bloomberg survey) for CNY6.3822.   Europe The stronger than expected October retail sales capped the week's data that points to a rebounding economy and boosts the chances of a rate hike next month.  A strong jobs report was followed by a larger than expected rise in CPI and PPI.  Retail sales jumped 0.8% in October, and the September series was revised to flat from -0.2%. It was the first increase since April.  Pre-Xmas sales were reported.  Separately, the UK government reported that the cost of servicing the national debt has risen more than three-fold over the past year, leaving the budget deficit higher than anticipated.  It appears that the swaps market is pricing in a 15 bp hike at the December 16 BOE meeting, though some are talking about a bigger move.    Several ECB officials, including President Lagarde, have successfully pushed back against expectations of a 20 bp rate hike next year that had appeared discounted by the swaps market earlier this month. The market has pushed it into early 2023.  The implied yield of the December 2022 Euribor futures contract has fallen 20 bp this month.  The December 2022 Eurodollar futures contract is moving in the opposite direction.  The implied yield has risen by about 4.5 bp this month.  The net result is the US premium has increased to over 125 bp, the highest since last March.  In late 2019, the premium was around 180 bp.  This is recognized as a factor helping lift the dollar against the euro, and it appears to have become more salient recently.   The euro's bounce yesterday, its first gain in seven sessions (since the US CPI shocker), stalled near $1.1375, where a 780 mln euro option expires today.   The euro traded quietly in Asia before being sold aggressively as news of the virus hit the wires.  The euro traded through $1.1285 before catching a bid.  Resistance now will likely be encountered around $1.1320.  The euro is posting its first back-to-back weekly of more than 1% since March 2020.  Sterling is also sliding back toward the week's lows, just above $1.3400.  A break could signal a test on the $1.3350 area, but it appears stretched on an intraday basis.  While the euro-sterling cross is practically flat, the euro has punched below CHF1.05 for the first time in six years.  It would not be surprising to learn that the SNB has been intervening.  There appears to be little chart support until closer to CHF1.0250. America The nonpartisan Congressional Budget Office offered its evaluation of the Biden administration's Build Back Better initiative.  It sees $1.636 trillion in spending over the next decade and almost $1.27 trillion in revenue.  That leaves a deficit of $367 bln.  A notable difference between it and the administration is how much more revenue will be generated by increasing the number of IRS agents.  Even if it passes the House of Representatives, it will likely be marked up in the Senate.  The jockeying for position and spin around it will likely dominate the session, which sees no US economic reports outside of the rig count later today.  The Fed's Clarida and Waller speaker today.  It seems that most market participants still see the Fed behind the curve and disagree with our idea that to secure the ability to respond to a wide range of possible outcomes, the Federal Reserve may accelerate its tapering starting in January.   It is not clear exactly when the debt ceiling will be reached, but it is being played.  The Democrats do not want to lift it through the reconciliation process, though they have forced the Republicans to do so in the past.  The Republicans appear to have the discipline and will to oppose.  No one seems to think the US will really default, and getting even this close seems undignified.  Yet, the desire to avoid being caught out encouraged investors to demand a high yield on the four-week bill sold.  Yesterday's auction saw the yield more than double to 11 bp (annualized).  It is the highest yield since July 2020.  In contrast, the eight-week bill, which is thought to be beyond the shenanigans, yield slipped to 4.5 bp from six previously and a higher bid-cover ratio.   Canada reports September retail sales figures today.  After a 2.1% rise in August, some weakness is expected.  Ahead of it, the Canadian dollar is trading at new lows for the week, though it is faring better than the other dollar-bloc currencies.  The US dollar is approaching the (61.8%) retracement objective of the decline since the CAD1.29 level was tested on September 20.  The retracement level is near CAD1.2665, and a break would target CAD1.2700-CAD1.2750.  The upper  Bollinger Band is found near CAD1.2655 today.   The Mexican peso is also under pressure.  It, too, has fallen to a new low for the week today.  The greenback looks set to test the eight-month high set earlier this month near MXN20.98.  Note that the central bank's Deputy Governor warned that inflation was accelerating, and it could rise to 7% this month and 7.1%-7.3% next month.  In October, the CPI stood at 6.24% year-over-year.  Banxico meets next on December 16, the day after the FOMC meeting.  Lastly, we note that the Brazilian real is off for four consecutive sessions coming into today.  The dollar closed above its 20-day moving average against it yesterday and looks poised to probe above BRL5.60 today. The high for the month was closer to BRL5.70.   Disclaimer
The Wild Card Is Back

The Wild Card Is Back

Monica Kingsley Monica Kingsley 19.11.2021 15:58
S&P 500 rose, once again driven by tech and not value. That‘s still defensive, mirroring the weak credit markets posture. While waiting for bonds to turn – not that there wouldn‘t be an optimistic HYG open yesterday – the Austria lockdown news sent markets into a tailspin, the fear being good part of Europe would follow suit rather sooner than later. Oil has taken the crown of panicked selling, stocks held up better, and precious metals weren‘t changed much. Sure, any crippling of European economic activity would take a toll at the most sensitive commodities, but in light of energy policies across much of the Western world, it‘s my view that oil prices would be affected only in the short-term. This isn‘t a repeat of the Apr 2020 liquidation sending black gold negative. Rest of the world would be happy to step in, U.S. included, as we‘re entering winter with comparatively very low stockpiles from oil to copper – and don‘t get me started on silver. If you want green economy, these metals are essential, and oil is still in huge demand in the interim. Fed money printing hasn‘t vanished, debt ceiling awaits, and dollar is so far still solidly underpinned. Banking sector and emerging markets performance isn‘t panicky, but some time for stocks to come back at ATHs, is needed. Precious metals resilience is encouraging for commodities, which need the most time to recover (eyes on energy). Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook S&P 500 bulls have the upper hand, but short-term volatility and uncertainty is creeping in. Still, there is no sinking the bull right here, right now. Credit Markets Tentative signs of credit markets stabilization are here, and HYG turnaround to last, is the missing sign. I‘m though not looking for risk-off slant to disappear, which would slow down the coming rise in yields. Gold, Silver and Miners Gold and silver are still consolidating, and the more time passes at current levels, the less opportunity the bears have. The chart remains very bullish as precious metals are anticipating inflation to come. Crude Oil Crude oil bulls are facing spanner in the works today, and it‘s my view the sellers wouldn‘t get too far. I‘m looking at oil sector to presage that. Copper The copper setback was soundly bought, and commodities hardly sold off, the same for other base metals. I still like the chart posture – favors the bulls. Bitcoin and Ethereum Bitcoin and Ethereum bears took the gauntlet, and another opportunity to pause might be here. I‘m not yet optimistic prices would hold out before the upleg resumes. Summary S&P 500 bulls keep hanging in there, as if waiting for bonds to come to their senses. The credit markets non-confirmation being probably in its latter stages, was my yesterday‘s point – but with corona panic returning, all short-term bets are off. Looking at the big picture, energy hasn‘t been fixed, precious metals are set to rise sharply, and inflation hasn‘t yet knocked off stocks or the real economy. Look for VIX to keep rising from the current 17.50 level. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
Fixed income market: the week ahead

Fixed income market: the week ahead

Althea Spinozzi Althea Spinozzi 22.11.2021 14:23
Summary:  This week it's all about a surge of Covid-19 cases and inflation. The debt ceiling issue will keep long-term yields in check in the United States while spurring volatility in money markets. Lack of collateral and new lockdown measures are also compressing spreads in the Euro area. Yet, policymakers' engagement to the idea of less accommodative monetary policies on both sides of the Atlantic indicates that yields will not remain rangebound for long. Once the lid is lifted, inflationary pressures will push yields higher. Therefore, it's safe to assume a continuous bear flattening of yield curves. US Treasuries: volatility in money markets will keep long-term yields in check. Yet, inflation concerns continue to grow, pointing to higher rates once the debt ceiling issue is resolved. This week, investors will need to focus on the Fed Minutes released on Wednesday, inflation numbers, and the White House's announcement concerning the Federal Reserve Chair nomination. The Fed’s minutes might unveil details regarding the decision that led to tapering this month and whether FOMC members begin to fret about inflationary pressures. Last week, several Fed’s speakers opened up about accelerating tapering and hiking interest rates in 2022. Among them, Fed Vice Chair Richard Clarida called for a discussion to expedite tapering to enable the central bank to hike interest rates sooner. At the same time, if Biden nominates Leal Brainard as Fed Chair, it could advance inflation worries. Brainard is known to be more dovish than Powell. In the case of her nomination, the market could anticipate interest rates to remain low for longer, implying stickier inflation, provoking a selloff in bonds. The Personal Consumption Expenditure Index, one of the inflation data most looked at after the Federal Reserve, will be released on Wednesday. The PCE core deflator index YoY is expected to rise to 4.1%, the highest in more than 31 years. As we mentioned in earlier editions of “Fixed income market: the week ahead”, we expect inflationary pressures to continue to rise and higher rents, housing and wages to make inflation stickier, putting at odds policymakers’ transitory narrative. Therefore, although the US yield curve has already flattened substantially, we cannot expect anything else than more flattening. The only difference is that once the debt ceiling issue is resolved, long term yields will need to rise together with short term yields, putting at risk weaker credits. The debt ceiling will be a crucial topic for December. Janet Yellen has said that the US Treasury will run out of cash soon after the 3rd of December if an agreement over the debt ceiling is not found. However, money markets have started to price a default during the second half of December. Indeed, last week's 4-week T-Bills auction was priced with a yield of 0.11%, more than double the Reverse Repurchase facility rate. We expect volatility in money markets to continue to remain elevated until the debt ceiling is lifted or suspended. Until then, the long part of the yield curve will serve as a safe haven causing yields to remain compressed. Yet, once the debt ceiling hurdle has cleared, long-term rates will resume their rise. European sovereigns: lack of collateral and a surge in Covid-19 cases will keep yields compressed. Yet, something is changing among policymakers. In Europe, governments are imposing new lockdown measures due to increasing Covid-19 cases, causing yields to drop significantly. Yet, inflationary forces have already been set into motion. Another lockdown might exacerbate inflation further as consumption will switch from services to goods, putting more pressure on prices. Meanwhile, policymakers have started to open to the possibility that upside inflation risk might remain throughout winter. Therefore, near-term hikes expectations are unlikely to reverse despite new lockdown measures. Yet, lack of collateral in the euro area contributes to keeping short-term yields compressed across the euro area, including the periphery. At the same time, swaps with the same maturity have widened as the market prices earlier interest rate hikes. Demand for collateral will remain strong until the end of the year. However, 2022 opens up to widening risk, as demand for bonds will start to wane, and the front part of the yield curve will shift higher according to interest rate hikes expectations. Source: Bloomberg and Saxo Group. However, it looks too early to call for higher yields in the Euro area, as a lot still depends on yields in the US and December's ECB meeting. Suppose more governments across the euro area impose lockdown measures. In that case, the central bank might look to extend the PEPP bond-buying program after March, compressing yields further. The next few weeks preceding Christmas are going to be critical to set direction in European sovereigns. Economic calendar: Monday, the 22nd of November  Spain:  Balance of Trade United States: Chicago Fed National Activity Index, Existing Home Sales (Oct),  2-year Note Auction, 5-year Note Auction Eurozone: Consumer Confidence Flash (Nov) Tuesday, the 23rd of November Germany: Markit Composite, Manufacturing and Services PMI Flash (Nov) Eurozone: Markit Composite and manufacturing PMI Flash (Nov) United Kingdom: market/CIPS Composite, Manufacturing and Services PMI Flash (Nov) United States: Markit Manufacturing PMI flash (Nov), NY Fed Treasury Purchases TIPS 7.5 to 30 years, 2-year FRN Auction, 7-year Note Auction Wednesday, the 24th of November New Zealand: Interest Rate Decision, RBNZ Press Confidence France: Business Confidence Germany: Ifo Business Climate (Nov), 15-year Bund Auction United States: Durable Goods Orders (Oct), GDP Growth Rate QoQ 2nd Est (Q3),  Continuing Jobless Claims, Corporate Profits QoQ Prel (Q3), Durable Goods Orders (Oct),  Goods Trade Balance (Oct), Initial Jobless Claims, Jobless Claims 4-week Average, retail Inventories Ex Autos (Oct), Core PCE Price Index (Oct), Michigan Consumer Sentiment Final (Nov), PCE Price Index (Oct), Personal Income (Oct), Personal Spending (Oct), FOMC Minutes, 4-week and 8- week bill auction Thursday, the 25th of November New Zealand: Balance of Trade Japan: Foreign bond Investment, Coincident Index Final, Leading Economic Index Final (Sep) Germany: GDP Growth Rate YoY Final (Q3), GfK Consumer Confidence (Dec) Sweden: Monetary Policy Report, Riskbank Rate Decision France: Unemployment Benefit Claims Canada Average weekly earnings YoY Friday, the 26th of November Australia: Retail Sales MoM Prel (Oct) South Korea: Interest Rate Decision France: Consumer Confidence Switzerland: GDP Growth Rate YoY (Q3) Italy: Business Confidence (Nov)
Article by Decrypt Media

More Public Debt Is Coming. Another Gold’s Rally Ahead?

Arkadiusz Sieron Arkadiusz Sieron 23.11.2021 15:13
  Democrats are not slowing down - the social spending bill follows the infrastructure package. Will gold benefit, or will it get into deep water? Will the American spending spree ever end? On Monday last week (November 15, 2021), President Biden signed a $1 trillion infrastructure package, and just a few days later, Biden’s social spending bill worth another $1.75 trillion passed the US House of Representatives. Apparently, $1 trillion was not enough! Apparently, we don’t already have too much money chasing too few goods. No, the economy needs even more money! Yes, I can almost hear the lament of American families: “we need more money, we already bought everything possible, we already own three cars and a lot of other useless crap, but we need more! Please, the almighty government, give us some bucks, let your funds revive our land”. Luckily, the gracious Uncle Sam listened to the prayers of its poor citizens. Given the above, one could think that the US economy is not already heavily indebted. Well, it’s the exact opposite. As the chart below shows, the American public debt is more than $27 trillion and 125% of GDP, but who cares except for a few boring economists? Of course, neither infrastructure nor spending bill will increase the fiscal deficits and overall indebtedness to a similar extent as the pandemic spending packages. These funds will be spread over years. Additionally, the fiscal deficit should narrow in FY 2022 as pandemic relief spending phases out (this is already happening, as the chart below shows), while the economic recovery combined with inflation tax bracket creep increases tax revenues. However, both of Biden’s bills will increase indebtedness, lowering the financial resilience of the US economy. What’s more, the overall debt is much larger than the public debt I focused on here. Other categories of debt are also rising. For instance, total household debt has jumped 6.2% in the third quarter of 2021 year-over-year, to a new record of $15.2 trillion.   Implications for Gold What does the fiscal offensive imply for the precious metal market? In the short run, not much. Fiscal hawks like me will complain, but gold is a tough metal that does not cry. Both of Biden’s pieces of legislation have been widely accepted, so their impact has already been incorporated into prices. Actually, the actual bills could be even seen as conservative – compared to Biden’s initial radical proposals. In the long run, fiscal exuberance should be supportive of gold prices. The ever-rising public debt should zombify the economy and erode the confidence in the US dollar, which could benefit the yellow metal. However, the empire collapses slowly, and there is still a long way before people cease to choose the greenback as their most beloved currency (there is simply no alternative!). So, it seems that, in the foreseeable future, gold’s path will still be dependent mainly on inflation worries and expectations of the Fed’s action. Most recently, gold prices have stabilized somewhat after the recent rally, as the chart below shows. Normal profit-taking took place, but gold found itself under pressure also because of the hawkish speech by Fed Governor Christopher Waller. He described inflation as a heavy snowfall that would stay on the ground for a while, rather than a one-inch dusting: Consider a snowfall, which we know will eventually melt. Snow is a transitory shock. If the snowfall is one inch and is expected to melt away the next day, it may be optimal to do nothing and wait for it to melt. But if the snowfall is 6 to 12 inches and expected to be on the ground for a week, you may want to act sooner and shovel the sidewalks and plow the streets. To me, the inflation data are starting to look a lot more like a big snowfall that will stay on the ground for a while, and that development is affecting my expectations of the level of monetary accommodation that is needed going forward. So, brace yourselves, a janitor is coming with a big shovel to clean the snow! Just imagine Powell with a long-eared cap, gloves, and galoshes giving a press conference! At least the central bankers would finally do something productive! Or… maybe shoveling is not coming! Although the Fed may turn a bit more hawkish if inflation stays with us for longer than expected previously, it should remain behind the curve, while the real interest rates should stay ultra-low. The December FOMC meeting will provide us with more clues, so stay tuned! If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
Tech Sell-Off Continues

Tech Sell-Off Continues

Marc Chandler Marc Chandler 23.11.2021 22:41
November 23, 2021  $USD, EMU, Federal Reserve, Oil, OPEC+, SPR, UK, US Overview:  The markets are unsettled.  Bond yields have jumped, tech stocks are leading an equity slump, and yesterday's crude oil bounce reversed.  Gold, which peaked last week near $1877, has been dumped to around $1793.  The tech sell-off in the US carried into the Asia Pacific session, and Hong Kong led most markets lower.  The local holiday let Japanese markets off unscathed, though the Nikkei futures are off about 0.4%.  Australia and India managed to post minor gains as the MSCI Asia Pacific Index fell for the fourth time in five sessions.  Europe's Stoxx 600 has slid around 1.5% today, its fourth consecutive decline, but has clawed back nearly half the gains.  It is the longest retreat in two months.  US futures are lower, with the NASDAQ leading the move.   Near 1.64%, the US 10-year yield is at the upper end of this month's range.  Last month it reached 1.70%.  European bond yields are mostly 4-6 bp higher, and peripheral spreads have widened a little.  The dollar is sitting in the middle of the major currencies.  The dollar bloc, sterling, and the Norwegian krone, which are the risk-on, levered to growth currencies, are weaker.  The euro, yen, and Swiss franc are little changed but firmer.  The dollar briefly traded above JPY115.00 in Asia, without Tokyo,  before being pushed back. The steady euro has taken some pressure off most of the regional currencies.  The Turkish lira has been in a virtual freefall following President Erdogan's spirited defense of his efforts to drive down rates.    There was around 10 lira to the dollar in the middle of November.  Today, at its peak, there is about 12.48 lira to the dollar.   Asia Pacific Over the weekend, Japan expressed willingness to cap its strategic reserves.  Press reports indicated yesterday that India is amenable to coordinating a release of some of its oil stocks.  South Korea may also participate.  It has been under consideration for a couple of weeks, at least, in the US, and China appears willing to repeat September's release of crude from its reserves.  However,  it seems naive to have expected OPEC+ to simply standby.  January WTI posted a bearish outside down day ahead of the weekend by trading on both sides of the previous day's range and settling below the previous session's low.  Follow-through selling yesterday took it down about $1.20 from the close, but when OPEC+ announced that a coordinated release of the oil could prompt it to reconsider its own plans.  It is to meet next week to review its strategy. Through yesterday's low, January WTI had retreated by nearly 11% from the October 25 higher near $83.85.   A band of resistance is seen between $78 and $80.   OPEC+ had previously agreed to boost output by 400k barrels a day per month to restore pre-pandemic output levels.  That said, not all the members can produce their quota, leading to a shortfall.  OPEC+, the IEA, and EIA all seem to agree that supply-demand considerations shift in next year, and the market will once again be in oversupply.  Moreover, OPEC+ argues that the real dislocation is not with oil as its with gas.   The US imports about 2.9 mln barrels a day, India, about 4.2 mln, and Japan, about 3.1 mln barrels a day.  South Korea imports around 2.5 mln barrels a day.  Together it is around 12.7 mln barrels a day of imports.   If together, 100 mln barrels are released, about eight days of imports would be covered.  This is a high estimate.  India, for example, has indicated it may release 5 mln barrels.   Australia's flash November PMI was better than expected.  Manufacturing edged up to 58.5 from 58.2, while services rose to 55.0 from 51.8.  This produced a 55.0 composite reading, a gain from 52.1 in October.  Recall, the pandemic and lockdown led to weakness in the economy in the May-August period.  The composite PMI bottomed in August at 43.3.  It has risen for three months but remains well off the peak in April of 58.9.  Separately, New Zealand real retail sales were hit in Q3 by the social restrictions, but the drop was not quite as bad as feared.  Reall retail sales fell 8.1% after a 3.3% increase in Q2.  Economists (Bloomberg median) had anticipated a 10.5% pullback.  The RBNZ meets the first thing tomorrow and is widely expected to hike 25 bp, to lift the cash rate to 0.75%. There is still a slight bias toward a larger move in the swaps market.   The dollar briefly traded above JPY115.00 for the first time since March 2017.  We note that Japanese dealers were on holiday and did not participate in the move.  As risk-off sentiment took over, the dollar was sold back to JPY114.50.  Resistance in Europe has been found near JPY114.80.  Note that there is an option for about $980 mln at JPY115.50 that expires tomorrow.  The Australian dollar initially edged lower to almost $0.7210, its lowest levels since October 1 before steadying. A break of $0.7200 signals a retest of the late September low near $0.7170.  Initial resistance is seen in the $0.7230-$0.7250 area.  The PBOC is sending plenty of verbal signals that it does not want to see strong yuan gains, and today's fixing underscores that point.  The dollar's reference rate was set at CNY6.3929, wider than usual above the market expectation (Bloomberg) for CNY6.3904.  The greenback is firm inside yesterday's range.  Caution is advised here as the PBOC could escalate its disapproval.   Europe The flash EMU November PMI was better than expected.  The aggregate manufacturing PMI rose to 58.6 from 58.3.  The market anticipated a decline.  The service PMI rose to 56.6 from 54.6, also defying expectations for a sequentially weaker report.  The composite snapped a three-month slide and rose to 55.8 from 54.2.   The cyclical peak was in July at 60.2.    A flash release is made for Germany and France.    German manufacturing slowed slightly (57.6 from 57.8) and held up better than expected (Bloomberg median 56.9).  Services actually improved (53.4 from 52.4).  The composite rose to 52.8 from 52.0 to end a three-month downdraft after peaking in July at 62.4.  French numbers were even better.  The manufacturing PMI rose to 54.6 from 53.6.  The service PMI rose to 58.2 from 56.6.   The composite improved to 56.3 from 54.7 to snap a four-month fall.  Recall that yesterday the Bundesbank warned that the German economy may practically stagnate this quarter and that inflation may approach 6% this month.   The UK's flash PMI was more mixed.  The manufacturing PMI had been expected to have slowed but instead improved for the second consecutive month (58.2 from 57.8).  Services were nearly as weak as anticipated slipping to 58.6 from 59.1.  The composite eased slightly to 57.7 from 57.8, ending a two-month recovery from the June-August soft patch.  Meanwhile, Prime Minister Johnson's rambling speech yesterday hurt people's ears, and in terms of substance,  the changes to social care funding that may result in lower-income people having to sell homes to pay for support did not go over well.  It is spurring talk of a possible cabinet reshuffle.  The euro has edged to a new low for the third session today, slipping to almost $1.1225 before catching a bid that lifted it back to $1.1275.  There is an option for around 765 mln euros at $1.1220 that expires today.  The nearby cap is seen in the $1.1290-$1.1310 area.   The euro may struggle to sustain upticks ahead of tomorrow's US PCE deflator report (inflation to accelerate).    Sterling met new sellers when it poked above $1.3400. It has ground lower in the European session, and sterling fell to almost $1.3355.  Note that the low for the year and month was set on November 12, slightly above $1.3350.  We see little chart support below there until closer to $1.3165.   America We suspect many pundits exaggerated the link between the renomination of Powell for a second term and the sell-off in US debt and technology shares.  First, it was not a surprise.  Second, it assumes a substantive difference in the conduct of monetary policy between Powell and Brainard.  There isn't.  The difference was on regulatory issues and on the role of climate change.  Third, the idea that the Fed may accelerate its bond purchases next month was sparked by the high CPI reading on November 10.  Yesterday, Bostic joined fellow Fed President Bullard.  Two governors (Clarida and Waller) also seem to be moving in that direction (Waller may be faster than Clarida). The fact or the matter, nearly all of the high-frequency data for October, including employment, auto sales,  retail sales, industrial production, and inflation, came in higher than expected.  The US sees the preliminary November PMI today.  It is expected to have risen for the second consecutive month after fall June-September.   The reception to yesterday's US two- and five-year note auctions was relatively poor.  The higher yields (compared with the previous auctions) did not produce better bid-cover ratios.  Today the Treasury comes back with $55 bln seven-year notes and re-opens the two-year floater.  Many observers see the debt ceiling constraint being likely an early 2022 problem rather than this year.  Still, tomorrow's sale of the four-week bill may be the test.  Recall that at last week's auction, the 4-week bill yield doubled to 11 bp.   Europe's virus surge and social restrictions became a market factor last week.  Many think that the US is a few weeks behind Europe.  The seven-day infliction rate in the US rose 18% week-over-week.  Several states, including Colorado, Minnesota, and Michigan, are being particularly hard hit.  Nationwide 59% of Americans are reportedly fully vaccinated. However, it leaves about 47 mln adults and 12 mln teens unvaccinated.  The risk-off mood and the drop in oil prices are helping the US dollar extend its gains against the Canadian dollar.  The greenback, which started the month below CAD1.24, is now pushing close to CAD1.2750 to take out last month's high.  A move above here would target CAD1.28 and then the September high near CAD1.2900.  Still, the market is getting stretched, and the upper Bollinger Band is slightly below CAD1.2730.  The risk-off mood does not sit right with the Mexican peso either.  The dollar settled above MXN21.00 yesterday, its highest close in eight months.  The same forces have lifted it to MXN21.1250 today. However, the anticipated gain in September retail sales (0.8% Bloomberg median after a flat report in August) may not give the peso much support if the risk-off continues. The high for the year was set on March 8 near MXN21.6360.   Disclaimer
Market Quick Take - November 22, 2021

Market Quick Take - November 22, 2021

Saxo Bank Saxo Bank 22.11.2021 10:04
Summary:  Equity markets closed last week somewhat mixed, but the Asian session was mostly strong on indications that the Chinese PBOC is shifting its attitude on monetary policy toward easing. Elsewhere, the difficult wait for the Fed Chair nomination news continues this week ahead of the US Thanksgiving holiday on Thursday. Crude oil bounced after finding support overnight, but the risk of SPR release and Covid demand worries still linger. What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - a new week following a new all-time high in US equities on the close on Friday, which is starting with Nasdaq 100 futures opening up higher trading around the 16,610 level in early European trading. Last week showed that investors and traders are utilizing the Covid-19 lockdown playbook selling off physical companies while buying online companies that are better equipped to navigate new lockdowns in Europe. With the US 10-year yield remaining in a range around the 1.55% there is nothing from preventing equities from extending recent gains. EURUSD and EURGBP – new Covid restrictions across Europe, which has become the center of the latest Covid wave, have crimped sentiment for the euro, as has the still very elevated power and natural gas prices. EURUSD has traded back down toward the lows of the cycle near 1.1265 overnight, with the next psychological magnet lower likely the 1.1000 area as long as the big 1.1500 break level continues to provide resistance. In EURGBP, last week saw the break of the prior major pivot low near 0.8400, with the next objective the post-Brexit vote low near 0.8275. USDJPY – threatened support on Friday on a spike lower in long US treasury, but a reversal of much of that action by this morning in late Asian trading is likewise seeing USDJPY trying to recover back into the higher range, with a focus on the recent top just short of 115.00. We likely need for long US treasury yields to sustain a move higher to support a major foray above this huge 114.5-115.00 chart area, which has topped the market action since early 2017. Meanwhile, if risk sentiment worsens further in EM and darkens the outlook for JPY carry trades there, while US treasuries remains rangebound or head lower, the JPY could squeeze higher as the speculative interest is tilted heavily short. Gold (XAUUSD) extended Friday’s drop below $1850 overnight, before bouncing ahead of key support in the $1830-35 area. The risk of a quicker withdrawal of Fed stimulus supporting real yields and the dollar has for now reduced gold's ability to build on the technical breakout. However, the price softness on Friday helped attract ETF buying with Bloomberg reporting a 10 tons increase, the biggest one-day jump since January 15. Gold’s biggest short-term threat remains the tripling of futures long held by funds during the past seven weeks to a 14-month. Most of that buying being technical driven with the risk of long liquidation now looming on a break below the mentioned support level.   Crude oil (OILUKJAN22 & OILUSDEC21) opened softer in Asia after Friday’s big drop but has so far managed to find support at $77.85, the previous top from July. The market focus has during the past few weeks shifted from the current tight supply to the risk of a coordinated reserve release, a renewed Covid-driven slowdown in demand and recent oil market reports from the EIA and IEA pointing to a balanced market in early 2022. Speculators who for the last six weeks have been net sellers of crude oil futures cut their combined WTI and Brent long to a three-month low in the week to November 16. Focus on SPR and Covid risks this week US treasuries (SHY, IEF, TLT). Government bond yields worldwide dropped as new lockdown measures were imposed in Austria on Friday. Ten-year yields tumbled to 1.55%, and they are likely to continue to trade range-bound as the debt ceiling issue will continue to compress long-term yields as volatility peaks in money markets. Investors will focus on this week’s PCE index, FOMC minutes and any news regarding a change of leadership of the Federal Reserve. If Brainard is appointed as Fed chair, the market will expect low rates for longer, thus inflation expectations will advance putting upward pressure on yields. Thus, it is unavoidable to continue to see the 5s30s continue to flatten. German Bunds (IS0L). We expect European sovereigns, in general, to continue to benefit from news related to a surge of Covid cases and lack of collateral as the year ends. Yet, the perception of inflation is changing among ECB members with Isabel Schnabel last week saying that the central bank will need to be ready to act if inflation proves more durable. Therefore, as we enter in the new year, and collateral shortages will be eased, we anticipate spreads to resume their widening. What is going on? Fed Vice Chair Clarida suggests faster Fed taper - in comments on Friday, suggesting that the December FOMC meeting could speed the pace at which the Fed will reduce its asset purchases. “I’ll be looking closely at the data that we get between now and the December meeting...It may well be appropriate at that meeting to have a discussion about increasing the pace at which we are reducing our asset purchases.” China’s central bank signals that it may ease policy. In a monetary policy report from Friday, the PBOC dropped language from prior reports, including phrase suggesting that the bank will maintain “normal monetary policy” and a promise not to “flood the economy with stimulus”. This comes in the wake of considerable disruption in the property sector as the government cracks down on an overleveraged property sector. Asian equities were mostly higher on the news, especially in Korea, although the Hang Seng index was slightly in the red as of this writing. Ericsson to acquire cloud provider Vonage in $6.2bn deal. This pushes the Swedish telecommunication company into the cloud communication industry seeking to add more growth to the overall business. Vonage has delivered 11% revenue growth in the past 12 months hitting $1.4bn with an operating margin of 10.4%. Global proceeds from IPOs hit $600bn in record year. This is the biggest amount since 2007 and almost 200% above the level in 2019 highlighting the excessive risk sentiment in equities. More confusing signals from Bank of England. Governor Bailey said in an interview for the Sunday Times that risks to the country are “two-sided” at the moment as growth slows and inflation rises, and that the cause of inflation problems is supply side constraints and that “monetary policy isn’t going to solve those directly.” Similarly, BoE Chief Economist Huw Pill said on Friday that the Bank of England said that the weight of evidence was shifting in favour of rate hikes but that he has not yet made a decision, encouraging observers to focus on the longer term rather than meeting-to-meeting decision. US shared intelligence with allies suggesting potential for Russia to invade Ukraine - according to Bloomberg sources. The intelligence noted up to 100,000 soldiers could be deployed in such a scenario, and that some half of that number are already in position.  Russian president Vladimir Putin denied Russia intends to invade, but seemed to pat himself on the back for “having gotten the attention of the US and is allies, which he accused of failing to take Russia’s ‘red lines’ over Ukraine seriously”, as the article puts it. What are we watching next? Who will US President Biden nominate to head the Fed next February? Powell is still seen as more likely to get the nod that Brainard by roughly two to one, and this Fed Chair nomination issue is hanging over the markets, as the current Fed chair term ends in early February and from comments made last week by President Biden, an announcement could come any day. One uncertainty that would come with a Brainard nomination is the potential difficulty of having her nomination approved by the Senate. The nomination news could generate significant short-term volatility on the choice of the nominally more dovish Lael Brainard over current Fed Chair Powell, though we see little difference in the medium-longer term implications for monetary policy, and the Fed is likely to get a prominent new regulatory role either way (under Brainard or someone else if she is nominated to replace Powell). Will Germany announce a Covid lockdown? - Friday saw some volatility on Austria’s announcement of a full Covid lockdown, with Germany’s health minister saying that a similar move in Germany could not be ruled out. Later that day, that was contradicted by comments from another minister. Meanwhile, resistance against Covid restrictions has turned violent in Netherlands. Earnings Watch – the number of important earnings is falling rapidly, but this week Tuesday is the most important day with key earnings from Xiaomi, XPeng and Kuaishou, both important Chinese technology companies. Also on Tuesday, US companies such as Medtronic, Autodesk and Dell Technologies are worth watching. Monday: Sino Pharmaceutical, Prosus, Zoom Video, Agilent Technologies Tuesday: Xiaomi, Kuaishou Technology, Compass Group, Medtronic, Analog Devices, Autodesk, VMWare, Dell Technologies, XPeng, HP, Best Buy, Dollar Tree Wednesday: Deere, Thursday: Adevinta Friday: Meituan, Pinduoduo Economic calendar highlights for today (times GMT) 0900 - Switzerland SNB weekly sight deposit data1330 – US Chicago Fed Oct. National Activity Index1500 – US Oct. Existing Home Sales1730 – ECB's Guindos to speak2145 – New Zealand Q3 Retail Sales2200 – Australia Nov. Flash Services & Manufacturing PMI0105 – Australia RBA’s Kohler to speak Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple Spotify Soundcloud Sticher
FX Update: USD remains firm, RBNZ taps brakes on expectations

FX Update: USD remains firm, RBNZ taps brakes on expectations

John Hardy John Hardy 24.11.2021 13:44
Summary:  The US dollar remains firm after the news of Fed Chair Powell getting the nod for a second term on Monday, but a more aggressive extension of its recent strength is avoided as US yield rises were tempered yesterday. Elsewhere, a less hawkish than expected RBNZ saw the kiwi sharply weaker as the market removed a chunky bit of forward rate hike expectation on the latest guidance. FX Trading focus: USD follows US yields higher in the wake of Powell getting nod for 2nd term The US dollar strengthening in the wake of President Biden’s announcement that he would tap Jay Powell for a second term as Fed Chair extended modestly yesterday and into this morning, somewhat tempered by a strong US 7-year treasury auction taking the steam out rises in yields yesterday – with the 7-year benchmark actually notching new highs for the cycle before retreating in the wake of the auction. The more widely tracked 10-year US treasury yield benchmark is still rangebound below the October pivot high of 1.7% and the post-pandemic outbreak high of 1.75%  from the end of March. This has kept USDJPY from extending notably above the sticky 115.00 area of the moment. Elsewhere, the euro remains relatively weak despite ECB Vice President de Guindos out speaking and hinting some concern on inflation rises: “the ECB is continuously pointingout that the inflation rebound is of a transitory nature....However, we have also seen how in recent months these supply factors are becoming more structural, more permanent.” But just this morning we also have the ECB’s Holzmann out saying that inflation is likely to slow from next year. Later today we will get the expected German government coalition deal (SPD’s Scholz as Chancellor with Green’s Baerbock reportedly set for the foreign minister post and importantly, the liberal LDP’s Lindner set to lead the finance ministry), with a press conference set for 3 p.m. EURJPY and EURUSD are heavy this morning and note that  the 128.00 level in EURJPY is a well-defined range low, while EURUSD doesn’t have notable  support until well below 1.1200 and arguably not until psychological levels like 1.10. With covid spiking and a galloping energy crisis, I don’t envy the new German leadership. Overnight, the Reserve Bank of New Zealand waxed a bit more cautious than was expected by the market, and not only by raising the rates 25 basis points rather than the 50 basis points that a minority were expecting to see. In the central bank’s new statement, the bank strikes a more cautious tone: yes, clearly further rate hikes are set for coming meetings, but the bank is clearly in a wait and see mode, given the tightening of financial conditions already in the bag and that which the market has already priced in: “the Committee expressed uncertainty about the resilience of consumer spending and business investment....(and) also noted that increases in interest rates to householdsandbusinesses had already tightened monetary conditions. High levels of household debt, and a large share of fixed-rate mortgages re-pricing in coming months, could increase the sensitivity of consumer spending to these interest rate increases.” Later today, we have a stack of US data releases crammed into today because of the Thanksgiving holiday tomorrow (and for most, Friday as well). The most important of these is the October PCE Infation data print. Not expecting much from the FOMC minutes later as all eyes are on whether we are set for an acceleration of the QE taper at the December FOMC meeting, with some arguing that Powell and company have more room to move and administer a bit more hawkish message, if they so desire, as the nomination news is out of the way and this reduces hyper-sensitivity to bringing any message that could risk cratering market sentiment. Chart: AUDNZDThe 2-year yield spread between Australia and New Zealand has risen sharply in recent days and especially overnight, where the more cautious than expected tones from the RBNZ inspired a 14 basis point drop in 2-year NZ yields. The price action in AUDNZD was sympathetic with the rally back toward local resistance near 1.0450, though the rally needs to find legs for a move up to 1.0600 at least to indicate we may have put a structural low in with a double bottom here. A brighter relative outlook for  Australia could be in the cards if China is set to stimulate and raise steel output, the anticipation of which has already sharply lifted iron ore prices this week, a key indicator for the Aussie. No notable expectations for the Riksbank tomorrow – as the central bank is expected to wind down its balance sheet expansion next year, while the policy forecast is thought to be in play (perhaps a late 2024 lift-off built into expectations, though the market is ahead of that as 2-year Swedish swap rates have risen close to 30 basis in recent weeks. This is the area where the Riksbank can surprise in either direction relative to expectations). The EURSEK rally has now reversed the entirety of the prior sell-off leg and double underlines the very weak sentiment on Europe, which remains “non-existential” in nature, i.e., so far the market is keeping this about policy divergence and dark clouds over the economic outlook, not about the longer term viability of the EMU, etc…, which in the past 2010-12 crisis inspired SEK upside as a safe haven. Table: FX Board of G10 and CNH trend evolution and strengthA bit of a relative pick-up in petro-currencies in the wake of yesterday’s oil rally, as the market bought the fact of US President Biden announcing a release of barrels from strategic reserves. Elsewhere, the NZD is losing relative altitude and the USD and especially CNH reign supreme. Table: FX Board Trend Scoreboard for individual pairs.Here, note AUDNZD flipping back to positive - a move that would be “confirmed” by a close solidly above 1.0450. Also note NOKSEK trying to flip positive on the latest oil rally, although beware the Riksbank meeting up tomorrow there. .Upcoming Economic Calendar Highlights (all times GMT) 1330 – US Weekly Initial and Continuing Jobless Claims 1330 – US Oct. Advance Goods Trade Balance 1330 – US Q3 GDP Revision 1330 – US Oct. Durable Goods Orders 1430 – UK BoE’s Tenreyro to speak 1500 – US Oct. PCE Inflation 1500 – US Final University of Michigan Sentiment Survey 1500 – US Oct. New Home Sales 1900 – US FOMC Meeting Minutes
Turkish Lira Is at Record Lows. How to Trade It?

Turkish Lira Is at Record Lows. How to Trade It?

Kseniya Medik Kseniya Medik 24.11.2021 14:20
USD/TRY belongs to the exotic group of Forex currency pairs, that’s why traders don’t trade it regularly. However, these days this pair is in the focus of all the trading community! What happened? The Turkish lira dropped to the all-time low of just over 13.00 as Turkish President Recep Tayyip Erdogan continued to defend the huge interest rate cuts by the central bank: three times since September. That drove up inflation to 20%. The Turkish lira has lost almost half of its value this year, making it the world's worst-performing currency. What’s next? Credit Suisse forecasts USD/TRY to reach 14.00 soon. The Central Bank of the Republic of Turkey (CBRT) needs to make a sizable rate increase to reverse the downtrend in USD/TRY. However, it is unlikely to happen soon. What else? Turkey is not the only country that will face an economic crisis. Indeed, the prospect for higher interest rates in the US is a negative factor for all these countries that have debt in US dollars. The Federal Reserve is expected to start slowing down the pace of its asset purchases already this month. Besides, the central bank plans to raise rates as soon as June 2022. It’s a bullish factor for the USD. Tech analysis USD/TRY has reversed down after rallying for so long and dropped. However, it has stopped ahead of the significant support level of 12.00. The pair won’t cross it on the first try. The most likely scenario is that it bounces off and turns to the upside. The move above 12.50 will clear the way to the resistance zone of 13.00 and 13.15. Support levels are 12.00 and 11.50. Download the FBS Trader app to trade anytime anywhere! For a personal computer or laptop, use MetaTrader 5!
Turkey gets a Reprieve before US Thanksgiving, but Capital Strike may not be Over

Turkey gets a Reprieve before US Thanksgiving, but Capital Strike may not be Over

Marc Chandler Marc Chandler 24.11.2021 14:28
November 24, 2021  $USD, Currency Movement, Germany, Japan, Mexico, RBNZ, Turkey Overview:  The dramatic collapse of the Turkish lira was like an accident one could not help look at, but it was not an accident, but the result of a disregard for the exchange rate and compromised institutions.  The lira was off around 15% at its worst yesterday, before settling 11.2% lower.  After falling for 11 sessions, it has steadied today (~2.7%)  but the capital strike may not be over.  On the other hand, the Reserve Bank of New Zealand delivered the 25 bp rate hike and seemed to give hawkish guidance, and yet the New Zealand dollar was sold and the worst-performing of the major currencies, off 0.65% through the European morning.  The tech losses on Wall Street yesterday weighed on Asia Pacific equities today, where the large markets fell but in China.  Europe's Stoxx 600 is less tech sensitive and is trying to snap a four-day air pocket, but early gains have been reversed. The US futures point to around a 0.5% lower opening.  The greenback has a firmer bias ahead of the full economic calendar ahead of tomorrow's holiday.  The yen is the notable exception.  The greenback rose to a new multi-year high near JPY115.25 but has come back offered and is straddling the JPY115 level in late morning turnover in Europe.  Emerging market currencies are mixed, though the JP Morgan Emerging Market Currency Index is firmer after six consecutive down sessions.  Gold is steadying after a four-day drop that took it from around $1870 to about $1782. Oil extended yesterday's recovery after the concerted agreement to release strategic reserves from six countries but is struggling to sustain the upside momentum.  The market was unimpressed with the new supply and had it (and more?) discounted.  European (Dutch) gas rose 8% yesterday and remains firm today.  Iron ore prices are higher for the fourth session, during which time it has risen by around 20%.  Copper is also firmer for the second session.  It is up about 4.5% from the middle of last week's low.   Asia Pacific The Reserve Bank of New Zealand hiked its cash rate 25 bp to 0.75%.  It was widely expected, and many had leaned to a 50 bp move.  The forward guidance saw the cash rate at 2.0% at the end of next year.  The swaps market had this nearly priced in as well.  This might help explain the profit-taking on the New Zealand dollar.  The 2-year yield fell 14 bp, and the 10-year yield eased by 5.5 bp.  New Zealand stocks defied the regional pressure and rose by about 0.6%.   Japan's economy is recovering. The economy contracted by 0.8% in Q3, but after a slow start, the vaccination program has been successful.  It has allowed a re-opening of the economy.  This is evident in the flash PMI report.  The manufacturing PMI rose to 54.2 from 53.2, and the services PMI improved to 52.1 from 50.7.  The composite new stands at 52.5 (from 50.7) and represents a new cyclical high.  Recall that it bottomed in August at 45.5.  The fiscal support being offered by the supplemental budget is pro-cyclical; it will accelerate the recovery.   The break of JPY115.00 has seen limited follow-through dollar buying.  It peaked near JPY115.25 in Asia and fell to around JPY114.80, where it has found a bid in European dealing.  The nearly $950 mln option that expires today at JPY115 has likely been neutralized (hedged/offset), and the one at JPY115.50 for $1.2 bln may be too far away to be impactful.  Our idea of a JPY113.-JPY115 range is being tested, but recall that earlier this month, the dollar has slipped to almost JPY112.70.  The range is not carved in stone, and some fraying is inevitable.  Still, a move above JPY115.50 would suggest that this consolidation since mid-October is over, and a new and higher range is likely.  Next:  JPY118-JPY120, maybe.  The Australian dollar leaked lower and briefly dipped below $0.7200 for the first time since October 1.  There is an option that is expiring today there for about A$355 mln.  It steadied after early Asia Pacific trading and approached the nearby cap near $0.7230.  A move above here would help the technical tone.  Officials appear to have broken the one-way trading in the yuan.  It has been alternating between gains and losses this week, but the movement has been small, and the yuan is virtually unchanged this week.  The reference rate was set at CNY6.3903, slightly more than the market expected (Bloomberg) of CNY6.3898.   Lastly, we note that South Korea is widely expected to hike the seven-day repo by 25 bp tomorrow, following a similar hike in August.   Europe It has taken the better part of the two months, but the new German coalition appears to have been agreed upon.  However, what the soon-to-be Chancellor Scholz is inheriting is a mess.  The Bundesbank warned recently that the economy may be stagnating this quarter (though the flash PMI yesterday did not confirm this), and inflation may be approaching 6%.  Moreover, the covid infection rate has reportedly doubled in the past two days.  The US CDC put Germany (and Denmark) on a heightened travel advisory.   As one would expect, this is taking a toll on sentiment.  The IFO investor survey showed this.  The current assessment fell to 99.0 from 100.2.  The expectations component eased to 94.2 from 95.4.  The assessment of the overall business climate stands now at 96.5, down from 97.7. After falling for the fifth consecutive month,  it is at the lowest level since April.   The euro's losses were extended to almost $1.12.  The weakness seems most pronounced in Europe, which lends credence to ideas that European financial firms are key sellers, which some related to year-end adjustments.  However, the three-month cross-currency basis swap has steadied since Monday, and pressure on the euro remains.   We note that the two-year US-German interest rate differential rose for the fourth consecutive session yesterday to reach 135 bp, the most since last March, but is steadying today.  Since the convincing break of $1.13, we do not see strong chart support until closer to $1.10.  Sterling made a margin new low for the year yesterday near $1.3345.  It remains stuck near there in quiet turnover.  The $1.3400 area offers nearby resistance.  Here we see little technical support until around $1.3165.  America The US holiday tomorrow is forcing a heavy data release schedule today.  Not all the data is of equal importance.  Of the first set of reports, the weekly jobless claims will command attention.  They have fallen for the past seven weeks and are at their lowest level since the pandemic (268k).  The November national employment report is due at the end of next week, and another 500k jobs were thought to have been filled.  The October trade balance and durable goods orders are notable.  Nearly all the October data has been reported better than expected.  Growth differentials warn of the risk of a wider trade shortfall.  The revisions to Q3 GDP (likely higher) are unlikely to capture much attention as it is too backward-looking.   The second batch of data may see a bigger market reaction, especially in the debt market.  The US is expected to report a jump in personal spending (consumption needs to accelerate if the economy strengthens this quarter).  Income is likely to recover a bit from the 1.0% drop reported in September.  The market may be most sensitive to the deflators.  Here inflation is set to accelerate.  The headline is projected to rise above 5%, while the core should peak above 4%.   Lastly, new homes sales surged 14% in September and maybe lucky to sustain those higher levels in October.  Late in the session, when many in the US may be winding down ahead of the holiday, the FOMC minutes from this month's meeting will be released.  The current focus is on the possibility that the Fed accelerates its tapering next month, and anything that sheds light on this could shape the market's reaction.    The US dollar reversed lower yesterday after reaching CAD1.2745.  It settled near its lows (~CAD1.2670), but there has been no follow-through selling, and the five-day moving average, which it has not closed below since November 15, held (~CAD1.2660). Initial resistance is seen now around CAD1.2700-CAD1.2720.  We note that Canadian bonds are under some pressure, and the 10-year yield is above 1.80%, the highest level since April 2019.  The dollar rose to MXN21.30 yesterday and remains firm, even if off the high today.  News that Mexico's President pulled the nomination of Herrera, the former finance minister, as the next central bank governor, injected some volatility into the peso.  Reports suggest that Herrera's nomination was retracted a few months ago but was kept confidential.  It is not clear what happens next.  Some suspect Herrera may still get the nomination.  It does not appear that any official statement or clarification has been provided.  The median seems to be playing up the likelihood of some announcement in the coming days.  Meanwhile, Mexico reports its bi-weekly CPI figures, and inflation is still accelerating.  Tomorrow's final Q3 GDP is expected to confirm that the economy contracted.  The dollar recorded the high for the year against the peso in March near MXN21.6360.   Disclaimer
Ahead Of The US CPI, Speaking Of Crude Oil And Metals - Saxo Market Call

Market Quick Take - November 24, 2021

Saxo Bank Saxo Bank 24.11.2021 09:53
Macro 2021-11-24 08:40 6 minutes to read Summary:  US equity markets bounced back from an extension of the sell-off from the highs of Monday, perhaps in part as a firm US 7-year treasury auction saw yields settling back lower, just after that particular benchmark had notched a new high yield for the cycle. Today sees a flurry of US data and the FOMC Minutes all crammed into the last day before the long Thanksgiving weekend in the US, where markets are closed tomorrow and only open for short session on Friday. What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - Nasdaq 100 recovered from steep losses late in yesterday’s session which has extended this morning on a positive session in Asia driven by improved sentiment in Chinese equities on good earnings releases. Nasdaq 100 futures are trading 1.4% higher than yesterday’s lows. The key thing to monitor is still the US 10-year yield and the USD for clues of where US equities are going. If Nasdaq 100 futures can extend their momentum today the 16,443 level is the natural gravitational point in this market sitting at the 50% retracement level over the past three trading sessions. USDJPY – The  USDJPY outlook is predominantly a question of “will it or won’t it sustain a break above 115.00?” And the answer to that question is likely coincident with whether long US treasury yields will rise above the 1.75% highs established earlier this year. After a strong 7-year US treasury auction yesterday, US longer yields dipped from session highs, drawing out the suspense on USDJPY direction here. AUDNZD – after the RBNZ meeting proved far less hawkish than the market has priced, it feels as if it will be difficult for the momentum in higher RBNZ rate expectations to return as the bank likely waxed a bit cautious overnight (more below) to give itself more time to assess how quickly the tightening in the bag and a few more planned hikes already priced in are affecting the NZ economy. In Australia, meanwhile, the economy is emerging from lockdowns and rate expectations could close the gap, with an additional possible source of support from China, where stimulus may be on the way, and where the anticipation of a rise in steel output has sharply boosted iron ore prices (Australia’s largest export). AUDNZD may have bottomed out now and we watch for whether this sharply rally off the bottom could have legs for at least 1.0600 as AU vs. NZ yield spreads mean revert. Gold (XAUUSD) trades higher after finding support ahead of $1781. The slump this week below  $1835 area was triggered by rising Treasury yields following the renomination of Jerome Powell as Fed chair. The oversized downside reaction, however, was caused by long liquidation from hedge funds who had been rushing into gold before and after the recent CPI shock. Gold’s short-term ability to bounce will mostly depend on whether the washout has triggered a big enough reduction of recently established and now loss-making positions. A sharp drop in open interest in COMEX gold futures and two days with double the normal trading volume could indicate most of the adjustments have now been executed. Crude oil (OILUKJAN22 & OILUSJAN21) jumped the most in two weeks yesterday after a US initiated release of strategic reserves underwhelmed in its size and details. Most of the oil being offered to refineries will have to be returned at a later date while international contributions were smaller than expected. Refineries are already processing crude near the seasonal pace so the market doubt how much extra oil they may need. Also, and more important, the OPEC+ alliance called the move unjustified given current conditions and as a result they may opt to reduce future production hikes, currently running near 12 million barrels per month. Ahead of today’s EIA stock report, the API last night reported a 2.3 million barrel increase with stockpiles at Cushing also rising US treasuries (SHY, IEF, TLT). At the beginning of the day, the yield curve bear flattened with 7-year yields breaking above 1.55% before the 7-year auction. It led many to believe that it could be a catastrophic bond sale as demand for Monday’s 2-year and 5-year Treasuries was weak. Surprisingly, bidding metrics were strong with the bid-to-cover ratio being the highest since September 2020, and the yield stopping through by 1bps at 1.588%. Following the auction, the yield curve steepened slightly amid lower breakeven rates and less aggressive rate hikes for 2022. We expect the bond market to continue to be volatile as the market adjusts expectations for rate hikes next year. Yet, the long part of the yield curve is likely to remain in check until a resolution to the debt ceiling is not found. Todays’ Personal Consumption Expenditures might revive inflation fears reversing gains in the Asia trading session. Italian BTPS (BTP10). Italian government bonds sold off for the second day in a row as German and French PMI beat expectations, hinting at the inevitable end of the PEPP program. To weaken sentiment in BTPS was also news that President Mattarella is going to vacate his position in January leaving a political vacuum. Parties are pushing Draghi to get that position to get rid of him and go to early elections. If that were to happen, the stability that Italian BTPS enjoyed since Draghi is leading the government will vanish provoking a fast widening of the BTPS-Bund spread. What is going on? EU gas prices surged back above $30/MMBtu (€90/GWh) yesterday in response to rising winter demand, low power production from wind farms and increased competition from Asia which is ramping up its LNG imports. The US imposing additional sanctions aimed at Russia’s Nord Strem 2 pipeline also received some unwelcome attention. Sky-high day ahead prices for power adding to the pain with some countries approaching record highs. Power plants are burning more coal which is cheaper and more profitable and it has helped drive the emissions future (CFIZ1) to a new all-time high this week above €70 per tons. RBNZ hikes only 25 basis points, statement somewhat cautious. The majority of market participants were looking for a 25-basis point hike from the RNBZ overnight, but enough were looking for 50 bps that the 0.25% hike to take the official cash rate to 0.75%  rate triggered a sell-off in the kiwi. But it was the guidance that was a bit more of a surprise than the rate move, as the RBNZ noted that, while further rate rises would be needed, “the Committee expressed uncertainty about the resilience of consumer spending and business investment....(and) also noted that increases in interest rates to households and businesses had already tightened monetary conditions.” The 2-year NZGB yield dropped 14 basis points overnight to 1.94% as the market lowered rate hike expectations out the curve. Turkish lira descent accelerates – yesterday was a wild day for the TRY, which fell almost 20% in a single day yesterday before stabilizing slightly, on fresh rhetoric from Turkish president Erdogan, who complimented the recent Turkish Central Bank decision to cut rates again and who continues to use belligerent rhetoric against the standard EM playbook for dealing with a devaluing currency (vicious belt tightening via rate hikes, etc.). Chinese equities are rebounding on good earnings releases. Yesterday’s earnings releases from Xiaomi, Kuaishou Technology, and XPeng  have lifted sentiment in Chinese equities. Kuaishou was a positive surprise given the technology crackdown in China and XPeng overtook NIO in Q3 on EV deliveries showing that the company can ramp up production. ECB Vice President Luis de Guindos says inflation drivers are becoming more structural. In a speech yesterday in Madrid, the central banker said that “the ECB is continuously pointing out that the inflation rebound is of a transitory nature....However, we have also seen how in recent months these supply factors are becoming more structural, more permanent.” Euribor futures far out into 2024 and 2025 are several ticks lower from recent highs, but also up a few ticks from yesterday’s lows, as the market is only pricing for the ECB to move back to 0% rates by around the beginning of 2025. What are we watching next? Busy US Economic Calendar ahead of long holiday weekend - the majority of US office workers take a long weekend that includes Thanksgiving Day tomorrow and the Friday as well, with a lot of the data that normally would have been spread out over the rest of the week all piled up into a heap in early US hours today. The key number to watch today is the October PCE Inflation numbers, where the headline “PCE Deflator” and “PCE Core Deflator” are expected to show year-on-year readings of 5.1%/4.1% respectively vs. 4.4%/3.6% in September, which would mean the hottest pace of inflation since the early 1990’s. Much later in the day we have the FOMC minutes from the November 3 meeting, which should be interesting for whether the debate on whether the Fed needs to tighten policy more quickly is becoming more heated. Earnings Watch – the rest of the week in terms of earnings will be quite light with today’s focus on Deere which sells equipment to the agricultural sector and thus is a good indicator on this sector. Wednesday: Deere Thursday: Adevinta Friday: Meituan, Pinduoduo Economic calendar highlights for today (times GMT) 0900 – Germany Nov. IFO Survey 1330 – US Weekly Initial and Continuing Jobless Claims 1330 – US Oct. Advance Goods Trade Balance 1330 – US Q3 GDP Revision 1330 – US Oct. Durable Goods Orders 1430 – UK BoE’s Tenreyro to speak 1500 – US Oct. PCE Inflation 1500 – US Final University of Michigan Sentiment Survey 1500 – US Oct. New Home Sales 1530 – EIA's Weekly Crude and Product Inventory Report 1700 – EIA’s Natural Gas Storage Change 1900 – US FOMC Meeting Minutes   Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple Spotify Soundcloud Sticher
Covid Strikes Back

Covid Strikes Back

Marc Chandler Marc Chandler 26.11.2021 12:44
November 26, 2021  $USD, Covid, Currency Movement, Hungary, Mexico, South Korea Overview: Concerns that a new mutation of the Covid virus has shaken the capital markets.  Equities are off hard, and bonds have rallied.  In the foreign exchange market, the Japanese yen and Swiss franc have rallied.  While there may be a safe haven bid, there also appears to be an unwinding of positions that require the buying back of the funding currencies, which is also lifting the euro.  The currencies levered from growth, the dollar-bloc and Scandis are weaker.   Oil has been knocked back by around  6.7%, with January WTI trading near $73. Led by 2%+ losses in Japan, Hong Kong, and India, and 1%+ losses in South Korea, and Taiwan, the MSCI Asia Pacific Index has slumped to its lowest level since July.   Europe's Stoxx 600 gapped lower and is off around 2.4% near midday.  US futures are sharply lower (1.25%-2.5%).  The US 10-year yield has dropped around 12 bp to nearly 1.50%.  While UK Gilts have kept pace with US Treasuries, continental benchmark yields are off 6-8 bp.  The US 2-year yield is about 15 bp lower (~0.49%), while European 2-year yields are mostly 2-5 bp lower.  The 2-year Gilts yield has shed about 12 bp, as the market unwinds some of the chances of a rate hike next month.   Key Development: A new variant of the Covid virus was found.  It is thought to have the most mutations to date.  The EU, UK, Israel, and Singapore have quickly banned travel from South Africa and five neighboring countries.  This is coming on top of and is separate from the outbreak in Europe, where Germany has reported a record number of new cases and several other countries have introduced new restrictions.  Almost a third of Shanghai flights were canceled as three local cases were found.  US infections are also on the rise.  Asia Pacific  As widely expected, South Korea hiked its key 7-day repo rate by 25 bp to 1.0% yesterday.   It follows a 25 bp hike in August.  Consumer inflation rose 3.2% year-over-year in October, while the core rate rose 2.8%.  Growth in Q3 was 4.0%.  With today's roughly 0.3% decline, it brings this year's loss to almost 9%.  Only the yen (~-9.4%) and the Thai baht (~-11%) have performed worse in the region.   Australia reported stronger than expected October retail sales.  The 4.9% month-over-month surge was more than twice the Bloomberg median forecast (2.2%) and follows September's 1.3% gain.  It underscores the recovery that is taking place. The preliminary PMI showed the recovery continuing into November.  The composite rose to 55.0, its highest reading since June.   The dollar was fraying the upper end of the range we anticipated against the yen, pushing against JPY115.50.  The momentum looked to have been at risk of stalling when the news struck.  The dollar was sold to almost JPY113.65.  An option for $710 mln at JPY113.70 expires today.  The price action appears to be stabilizing a bit in the European morning, and the greenback is hovering around JPY114.00.    The trendline connecting the September and the previous two November lows comes in today near there today.  The JPY114.50 area looks to offer initial resistance.  The Australian dollar had been leaking through $0.7200, and the risk-off move sent it slightly through $0.7115, just above the low for the year set on August 20, closer to $0.7105.  A break could spur a move toward $0.7050, which is the (38.2%) retracement of the Australian dollar's recovery since March 2020, when it hit a low near $0.5500.  The $0.7140 area may provide the initial cap for the bounce.   The Chinese yuan is a rock.  It has hardly moved despite the broader developments.  The greenback is slightly (less than 0.05%) firmer and still a little below CNY6.39.  The PBOC set the dollar's reference rate at CNY6.3936, a touch above the CNY6.3934 median projection (Bloomberg survey).   Europe Part of the limited reaction short-end of the European debt market derives from the fact that investors had not expected a change in ECB's monetary policy until the very end of next year, at the earliest.  The surge in the delta strain had already emerged as a weight on the euro.  We had put emphasis on the divergence with the US and saw it captured in the two-year interest rate differential between the US and Germany.  The US premium had risen from around 90 bp in mid-September to 140 bp in the middle of this week.  It has fallen back to about 128 bp today.  Some observers had focused on the year-end adjustments of European banks and the shifting of liquidity through the cross-currency swap basis.   The new German coalition has been announced, and it will have its work cut out.  A record number of new cases have been reported in Germany, and many countries are introducing new social restrictions.  Portugal will try something a bit different.  It is set to require people to work from home in early January for a week to avoid a spike in the virus after the holidays.   Hungary was more aggressive than expected yesterday.  It raised its one-week deposit rate by 40 bp to 2.90%.  Recall that on November 18, it had hiked the one-week deposit rate 70 bp to 2.50%.  Two days earlier, it lifted the base rate 30 bp to 2.10%.  The forint had fallen to a record low against the euro on November 23.   The euro's high was just shy of HUF372, and it fell back to about HUF364.80 yesterday before jumping back to almost HUF369.50 today.  It has steadied around HUF368 in the European morning.   The euro's downside momentum had begun easing as bids below $1.12 were being filled.  The virus developments have spurred what appears to a be short-covering rally that has lifted the single currency thought $1.1280, where a 460 mln euro option expires today.  Nearby resistance is seen near $1.1300 and then last week's high near $1.1375.  Sterling recorded a new low for the year near $1.3280 in late Asian turnover before finding support.  It recovered to about $1.3335 so far.  A move above yesterday's high (~$1.3355) could spur a move to $1.3400-$1.3425.    America The dollar's rally has been fueled by the prospect of a divergence of monetary policy that favored the Fed over the ECB and BOJ.  Indeed, since the November 10 surprise jump in the October CPI to above 6%, we had emphasized the likelihood that the Fed would have to taper quicker to give it the flexibility to lift rates earlier if needed.  Since then, 4-5 Fed officials and several large banks have also underscored this possibility. However, this scenario is being called into question today, which is evident in the swaps markets and the Fed funds futures.  The implied yield of the June 2022 Fed funds futures contract is 7.5 basis points lower, and the December 2022 contract implied yield is down 14.5 bp.  The US dollar rallied to CAD1.2775, its highest level since late September.  It tests a downtrend line connecting the August (~CAD1.2950) and September (~CAD1.2900) highs. A convincing break of the trendline would signal a test on those earlier highs.   We are inclined to see it hold but cannot be confident until CAD1.2720 yields.   The Mexican peso was trampled before today amid concerns about the implications of President AMLO pulling Herrera's nomination for central bank head.  Herrera is a seasoned hand, and although he worked closely with AMLO from the finance ministry, his appointment did not seem to jeopardize the independence of the central bank.  Perhaps the market has been influenced by developments in Turkey, but the nomination of a less experienced and less known candidate has weighed on sentiment.  The dollar, already bid, jumped to MXN22.1550, at its best level since September 2020.   It has pulled back to around MXN21.83, which leaves it up around 1.2%.  This would be the seventh consecutive decline in the peso.  Support is seen around MXN21.60.  Disclaimer
Sentiment Remains Fragile

Sentiment Remains Fragile

Marc Chandler Marc Chandler 29.11.2021 14:08
November 29, 2021  $USD, Covid, Currency Movement, Federal Reserve, Inflation, Japan Overview: The fire that burnt through the capital markets before the weekend, triggered by the new Covid mutation, burned itself out in the Asian Pacific equity trading earlier today. A semblance of stability, albeit fragile and tentative, has emerged. Europe's Stoxx 600 is up about 1%, led by real estate, information technology, and energy.  US index futures are trading higher, with the NASDAQ leading.  Benchmark 10-year yields are firmer.  The US 10-year Treasury yield has risen about six basis points to 1.53%.  European yields are mostly 1-2 basis points higher, while the UK Gilt yield is up four basis points. The dollar remains, as we say, at the fulcrum of the major currencies, but in an opposite way, with the funding currencies that rallied strongly before the weekend seeing their gains pared today, while the dollar bloc and Scandis trade firmer.  Among the emerging market currencies, the liquid and freely accessible currencies, such as the South African rand, Russian rouble, and Mexican peso are leading the recovery.  The Turkish lira and central European currencies, perhaps dragged down by the softer euro, underperform.  The JP Morgan Emerging Market Currency Index is slightly firmer after falling around 0.4% before the weekend.  Gold held support near $1780 but has been unable to resurface above $1800.  January WTI jumped by about 5% after the 13% drop at the end of last week.  Iron ore surged 6.5%, recouping in full the 5.6% decline in the last session to approach its recent highs.  Winter weather is beginning to be experienced in Europe, and natural gas (Netherlands) is up 7.75% after falling 4.8% ahead of the weekend.  Copper is recouping a little less than half of last Friday's nearly 4% fall.   Asia Pacific Faced with much unknown about the new mutation, several Asia Pacific countries are opting to close their borders to foreign travelers.  Initially, countries limited the travel ban to a handful or so of countries from Southern Africa.  It does appear that the omicron variant has been around before being sequenced in South Africa, and it is has been found in several countries. However, the origin is still not clear.  While some reports from South Africa suggest mild symptoms, there is good reason for the World Health Organization's caution.  If a new vaccine is needed for the variant, reports suggest it could take around 100 days.  Recall that Japan has lifted its formal emergency in late September, and the economy is rebounding as anticipated.  Today's data showed retail sales rose for a second month in October.  The 1.1% increase lifted the year-over-year rate to 0.9%.   Purchases of clothing and food surged by 9.2%.  Auto sales, still hampered by supply chain disruptions, was the only category that fell.  After a frustratingly slow start, Japan's inoculation efforts have been successful, and the vaccination rate is above 75%.   Before news of the new variant broke, the dollar was around JPY115.50.  It fell to nearly JPY113.00 before the weekend.  It recovered in early dealing to almost JPY113.90 before the weakness of the regional equities contributed to its push lower.  Bloomberg pricing data showed it recorded a JPY112.99 low near midday in Tokyo.  It bounced to almost JPY113.65 in late dealings and has been consolidating in the European morning.  The option for $350 mln at JPY113.40 that expires today has likely been neutralized.  The market appears to be waiting for a new development to push it out of the JPY113-JPY114 range.  The Australian dollar held the pre-weekend low slightly below $0.7115 and is making session highs late in the European morning near last Friday's high (~$0.7155).  Nearby resistance is seen in the $0.7180-$0.7200 area. Recall that last week's 1.55% decline was the fourth consecutive weekly loss and the largest in three months.  The greenback gave up its pre-weekend gain against the Chinese yuan and a bit more today.  It did not even trade above CNY6.39 today, settling above it at the end of last week.  As we have noted, it remains within the range set on November 16 of roughly CNY6.3670-CNY6.3965. The PBOC set the dollar's reference rate at CNY6.3872 and continued to set it above expectations (CNY6.3858, via Bloomberg).   Two issues seem to be receiving attention today.  First are the prospects of easing by the PBOC in the face of continuing weakening of the economy. The November PMI will be released starting first thing tomorrow.  Second, China's property developers have an estimated $1.3 bln in debt servicing next month, following $2 bln this month.   Europe Outside of the virus, two issues dominate investors' attention in Europe today.  First are the November inflation reports from Spain and Germany ahead of the preliminary aggregate figures tomorrow.  The other is the increasingly bellicose rhetoric between the UK and France over the channel crossings and fishing.   Spain's harmonized November CPI rose by 0.3% to lift the year-over-year rate to 5.6%.  It is the fastest pace since 1992.  It follows October's 1.6% increase and 5.4% 12-month rate.  Food and energy were the main drivers.  The increase was in line with forecasts.  In September, the central bank's chief economist had anticipated that November could be the peak in inflation and anticipated it falling back below the 2% target in 2022.  German states are reporting their November CPI figures, and the country's measure will be reported late today.  The states' measures are consistent with forecasts calling for the nation's harmonized measure to fall around 0.2%.  However, the year-over-year pace is projected to accelerate to 5.5% from 4.6% due to the base effect.  The EMU aggregate preliminary CPI is forecast (Bloomberg median) to be flat on the month for a 4.5% year-over-year pace (up from 4.1% in October).  The core rate is projected to climb to 2.3% from 2.0%.  The euro poked slightly above $1.1330 at the end of last week and settled just above $1.1315.  It traded near $1.1260 in late Asia/early Europe and caught a bid that brought it back to about $1.1290.  There is a 1.7 bln euro option at $1.13 that expires today.  The intraday momentum indicators are getting stretched, warning of the downside risk in early North American activity.  Sterling recorded a new low for the year ahead of the weekend, near $1.3280. It is trading in about a quarter-cent range today, around $1.3335, and staying within last Friday's range.  The pre-weekend high was closer to $1.3365.   After an eight-day rally, the December short-sterling interest rate futures contract is trading slightly heavier today.  The market expectations have shifted from a good chance of a hike next month to a bit more than a third of a chance.   America The US auto sales and jobs highlight this week, but Fed officials are out in force too.  Today Powell, Williams, and Hasson speak at an innovation conference, and Bowman discusses the central bank and indigenous economies. Tomorrow, Powell and Yellen testify before a Senate committee on the CARES Act.  Their prepared remarks are expected to be released later today that may also work for the testimony on Wednesday on the same topic before a House committee.    Tuesday, Clarida discusses the Fed's independence, while Williams will speak on food security.  The Beige Book, in preparation for next month's FOMC meeting, is due Wednesday too.  No fewer than five Fed officials speak in the second half of the week.  Our initial bias continues to be for faster tapering at the December FOMC meeting. It still seems to be the prudent course to maximize the Fed's ability to respond to a broad range of probable economic outcomes.  The US pending home sales and the Dallas Fed manufacturing survey, due today, are not typically market movers.  And today is unlikely to be an exception.  Canada reports its Q3 current account surplus (expected to be around C$5.7 bln, up from C$3.6 bln in Q2.  It also reports raw material and industrial prices for October.  The week's highlight is tomorrow's September and Q3 GDP, followed by Friday's employment report.  Mexico reports October unemployment figures (median forecast in Bloomberg's survey calls for a 4.07% rate, down from 4.18% in September). Concerns about President AMLO's appointment to the central bank lingers even though the peso may benefit from the correction to the 1.6% pre-weekend drop.   The US dollar spiked to almost CAD1.28 before the weekend.  It fell to nearly CAD1.2720 today.  The pullback was seen in Asia, and it has been consolidating since then.  Still, the greenback looks vulnerable to a further retracement of the pre-weekend gains. Initial potential extends toward CAD.2680-CAD1.2700.   The broader risk appetites may be the key today for both the Canadian dollar and Mexican peso.  The greenback jumped to MXN22.1550 amid the pre-weekend turmoil.  This now marks the high for the year.  It pulled back initially to MXN21.6850 in Asia, but the selling pressure eased, and it traded in an MXN21.7630-MXN21.9000 range in Europe.  We suspect the combination of the trajectory of US monetary policy plus the concerns about the central bank of Mexico boosts the chances that the peso underperforms generally.  Moreover, rising price pressures and a weak economy put officials in a difficult position, especially given AMLO's reluctance to deploy fiscal measures to support the economy.   Disclaimer
FX Update: Powell is now an inflation fighter, not a punchbowl spiker

FX Update: Powell is now an inflation fighter, not a punchbowl spiker

John Hardy John Hardy 01.12.2021 16:30
Forex 2021-12-01 15:25 4 minutes to read Summary:  Fed Chair Powell cemented recent evidence that the Fed has changed its stripes from a punch bowl refiller for the economy and the labor market to an inflation fighter at large. The market is finding it tough to absorb this message, given the recent market choppiness and virus distractions, but interesting that the US dollar has not found more strength on this momentous pivot. FX Trading focus: Hawkish broadside from Powell Fed Chair Powell cemented the impression that the Fed has shifted firmly into inflation fighting mode with an appearance yesterday before a Fed panel. The rhetoric was direct and of a make-no-mistake variety. Powell said that the end of balance sheet expansion would likely wind down a few  months sooner than originally foreseen, even with the current omicron variant of covid concerns. He also spelled out that it is probably time to retire the word “transitory” when discussing inflation, ad said that the risk of higher inflation has increased. Perhaps most interesting was a comment that persistent higher inflation brought a risk to getting the labor market back to where it was pre-covid. It is crystal clear at this point that the Fed has pivoted to inflation-fighting and tightening and will move in that direction as quickly as it can until the inflation numbers improve markedly. Of course, the market was already adjusting to clear signs that the Fed is moving into a far more hawkish stance early last week, only to be sidelined viciously by the omicron variant worries in recent days. Were it not for that interlude, Fed expectations would likely be at new cycle highs as yesterday’s signals from Powell make the Fed shift as clear as day. As it is, we have only clawed back a majority of the 2022 hikes priced in pricing of Fed rate hikes, still some 8 basis points to go for end of year Fed pricing (the “omicron discount” being perhaps 15 basis points or more?). The two curious things are that the US yield curve continues to viciously flatten and the market continues to price the terminal Fed rate for the coming hiking cycle at 2.00%. The inability for the longer yields to lift higher recently may be reining in the USD upside for. The other indicator besides yield-curve shifts that is making waves here on my radar screen of financial conditions is the measure of corporate credit, where spreads have blown wider, as discussed over the last couple of episodes of the Saxo Market Call podcast. The bluntness from the Fed yesterday may have driven the particularly bad day for junk bonds as the new style from the Fed could lead investors in the riskiest debt to conclude that they may be allowed to twist in the breeze down the road if inflation levels stay high, rather than receiving endless bailouts that keep zombie companies in business and able to forever roll forward their debts. We are set up for an interesting 2022 that will likely look very different from 2021. The shift in Fed rhetoric will make the market extra-sensitive to US data and developments that impact inflation, from energy prices, to the CPI/PCE data itself and the average hourly earnings data perhaps even more than the usual nonfarm payrolls change focus. Today’s Beige Book could be interesting for anecdotal evidence from interviews with companies on their impression of supply constraints, wage adjustments and issues finding qualified workers, etc. Today’s November ADP Payrolls was another strong 500k+ as expected. Chart: USDJPYUSDJPY was handcuffed by developments yesterday – on the one hand with the USD supported by a rise in Fed expectations, but on the other hand, JPY traders finding no fresh reason to bid up the JPY as the long end of the US yield curve remains pinned at quite low yields and there has been no shift in the Fed’s “terminal rate” – where the market sees the Fed rate hike cycle peeking out. So the price action bobbed well back above the 112.73 range pivot level that was broken yesterday, but has a steep wall to climb to threaten the 115.00+ cycle highs again, something that would likely require the entire Fed yield curve to lift, and more aggressively than expectations for policy normalization elsewhere. Source: Saxo Group Table: FX Board of G10 and CNH trend evolution and strengthAgain, the market is finding the reaction function increasingly difficult to the recent jolts in inputs. Note the huge momentum shift in SEK, where the market overdid the recent squeeze, but the strength there will likely only improve once the euro bottoms and the outlook for EU yields and fiscal improves. Table: FX Board Trend Scoreboard for individual pairs.Well entrenched trends are few and far between, but the EURCNH and EURCHF downtrends stand out, with the latter’s lack of volatility after recent direction changes remarkable. The Swiss franc does well as a safe haven and does well because the SNB can’t be seen weakening the currency when inflation pressures are rising. Upcoming Economic Calendar Highlights (all times GMT) 1500 – US Fed Chair Powell, Treasury Secretary Yellen to testify before House panel 1500 – US Nov. ISM Manufacturing 1530 – DOE’s Weekly Crude Oil and Fuel Inventories 1900 - Fed Beige Book 0030 – Australia Oct. Trade Balance
December Monthly

December Monthly

Marc Chandler Marc Chandler 02.12.2021 15:00
December 01, 2021  $USD, Macro The pandemic is still with us as the year winds down and has not yet become endemic, like the seasonal flu.  Even before the new Omicron variant was sequenced, Europe was being particularly hard hit, and social restrictions, especially among the unvaccinated, were spurring social strife.  US cases, notably in the Midwest, were rising, and there is fear that it is 4-6 weeks behind Europe in experiencing the surge.  Whatever herd immunity is, it has not been achieved.  Moreover, despite plenty of vaccines in high-income countries, inoculation efforts in many low-income countries won't begin in earnest until next year.   That said, the new variant has injected a new element into the mix, and it is with a heightened degree of uncertainty that we share our December outlook.  Given the unknowns, policymakers can choose the kind of error they are willing to make. They are trying to minimize their maximum regret.  The utmost regret is that the mutation is dangerous and renders the existing vaccines and treatment significantly less effective.  This will leave them vulnerable to accusations of over-reacting if the Omicron turns out to be a contagious but less deadly variation.   Meanwhile, there has been some relief to the supply chain disruptions.  Covid-related factory closures in Asia, the energy shortage, and port congestion are easing. Large US retailers have stocked up for the holiday shopping season, some of which chartered their own ships to ensure delivery. There are also preliminary signs that the semiconductor chip shortage may be past its worst.  Indeed, the recovery of the auto sector and rebuilding of inventories will help extend the economic expansion well into next year, even though fiscal and monetary policy are less supportive for most high-income countries.  The flash November US manufacturing PMI saw supplier delivery delays fall to six-month lows.   We assume that the US macabre debt ceiling ritual will not lead to a default, and even though it distorted some bill auctions, some resolution is highly probable.  The debate over the Build Back Better initiative, approved by the House of Representatives, will likely be scaled back by moderate Democratic Senators and Republicans.  Besides assessing the risks posed by the new variant, the focus in December is back on monetary policy.  Four large central banks stand out.  The Chinese economy has slowed the People's Bank of China quarterly monetary report modified language that signals more monetary support may be forthcoming.  Many observers see another reduction in reserve requirements as a reasonable step.  Unlike in the US and Europe, which saw bank lending dry-up in the housing market crisis (2008-2009), Beijing is pressing state-owned banks to maintain lending, including the property sector.   The Federal Reserve meets on December 15.  There are two key issues.  First, we expect the FOMC to accelerate the pace of tapering to allow it to have the option to raise rates in Q2 22.  The Fed's commitment to the sequence (tapering, hikes, letting balance sheet run-off) and the current pace of tapering deny the central bank the needed flexibility.  The November CPI will be reported on December 10.  The headline will likely rise to around 6.7%, while the core rate may approach 5%.  Second, the new "Summary of Economic Projections" will probably show more Fed officials seeing the need to hike rates in 2022.  In September, only half did.  The rhetoric of the Fed's leadership has changed.  It will not refer to inflation as transitory and is signaling its intention to act.  The European Central Bank and the Bank of England meet the day after the FOMC.  The ECB staff will update its forecasts, and the key here is where it sees inflation at the end of the forecasting period.  In September, it anticipated that CPI would be at 1.5% at the end of 2023.  Some ECB members argued it was too low.   It may be revised higher, but the key for the policy outlook is whether it is above the 2% target.  We doubt that this will be the case.  While the ECB will likely announce that it intends on respecting the current end of the Pandemic Emergency Purchase Program next March, its QE will persist. The pre-crisis Asset Purchase Program is expected to continue and perhaps even expand in Q2 22.  The "modalities" of the post-emergency bond-buying program, size, duration, and flexibility (self-imposed limits) will be debated between the hawks and doves.  With eurozone inflation approaching 5% and Germany CPI at 6%, the hard-money camp will have a new ally at the German Finance Ministry as the FDP leader Linder takes the post.  On the other hand, the Social Democrats will name a Weidmann's replacement at the head of the Bundesbank, and nearly anyone will be less hawkish.   While we correctly anticipated that the Bank of England would defy market expectations and stand pat in November, the December meeting is trickier.  The decision could ultimately turn on the next employment and CPI reports due 1-2 days before the BOE meeting.  The risk is that inflation will continue to accelerate into early next year and that the labor market is healing after the furlough program ended in September.  On balance, we suspect it will wait until next year to hike rates and finish its bonds purchases next month as planned.   Having been caught wrong-footed in November, many market participants are reluctant to be bitten by the same dog twice. As a result, the swaps market appears to be rising in about a 35% chance of a 15 bp move that would bring the base rate up to 25 bp.  Sterling dropped almost 1.4% (or nearly two cents) on November 4, the most since September 2020 when the BOE failed to deliver the hike that the market thought the BOE had signaled.   The combination of a strong dollar and the Fed tapering weighed emerging market currencies as a whole.  The JP Morgan Emerging Market Currency Index fell by about 4.5% in November, its third consecutive monthly decline, bringing the year-to-date loss to almost 10%.  It fell roughly 5.7% in 2020.  Turkey took the cake, though, with the lira falling nearly 30% on the month.  It had depreciated by 15% in the first ten months of the year.  This follows a 20% depreciation last year.  Ten years ago, a dollar would buy about 1.9 lira.  Now it can buy more than 13 lira.  The euro's weakness was a drag, and the geopolitical developments (e.g., Ukraine, Belarus) weighed on central European currencies. The central bank of Hungary turned more aggressive by hiking the one-week deposit rate by 110 bp (in two steps) after the 30 bp hike in the base rate failed to have much impact.  The forint's 3.1% loss was the most among EU members.   Colombian peso was the weakest currency in Latam, depreciating by almost 5%. It was not rewarded for delivering a larger than expected 50 bp rate hike in late October.  Bannockburn's GDP-weighted global currency index (BWCI) fell by nearly 1% in November, the largest monthly decline since June.  It reflected the decline of the world's largest currencies against the dollar.  Three currencies in the index proved resilient  On the GDP-weighted basis, China has immense gravity, with a 21.8% weighting (the six largest EM economies, including China, account for a 32.5% of the BWCI). It appreciated by about two-thirds of a percent. The Brazilian real managed to rise (~0.25%) too.  Since the day before the Omicron variant was sequenced, the Japanese yen gained a little more than 2%, reversing the earlier decline that had brought it to four-year lows.  It rose by  0.7% in November, making it the strongest currency in the index.  Among the major currencies, the Australian dollar fell the most, declining about 5.2%.  The Canadian dollar was next, with around a 3% loss.   As it turns out, the dollar (Dollar Index) recorded its low for the year as shocking events were unfolding in Washington on January 6.  The bottomed against the yen and euro the same day.   The greenback did not bottom against the Australian dollar until February, but it took it until early June to put in a low against sterling and the Canadian dollar.  The BWCI peaked in early June and, by the end of last month, had retreated by about 2.7%.  We suspect it may decline by another 2%, which would return it the levels of late 2019.  That, in turn, implies the risk of a stronger dollar into the first part of next year.     Dollar:  The jump in US CPI to above 6%, and a strong sense that it is not the peak, spurred speculation that the Federal Reserve would likely accelerate the pace of tapering at the December meeting. Several Fed officials seemed sympathetic, including San Francisco President Daly, who is perceived to be a dove. The minutes of the November meeting underscored the central bank's flexibility over the pace of tapering.  At the same time, most of the high-frequency data for October came in stronger than expected, lending credence to ideas that after a disappointing Q3, the world's largest economy is accelerating again in Q4.  The divergence of monetary policy and the subsequent widening interest rate differentials is the primary driver of expectations for dollar appreciation against the euro and yen.  The market had been leaning toward three rates hikes in 2022 before news of the new Covid mutation emerged and trimmed the odds.  Powell was renominated for a second term at the helm of the Federal Reserve, Brainard was nominated to be Vice-Chairman.  There is still the Vice-Chair for supervision and an empty governor seat for President to Biden to fill.  In addition to the changes in leadership, the rotation of the voting members of the FOMC brings in a somewhat more hawkish bias next year.   Euro:  In contrast with the US, eurozone growth is set to slow in Q4. After two quarters that growth exceeded 2% quarter-over-quarter, growth is likely to moderate to below 1% in Q4 21 and Q1 22.  Food and energy are driving inflation higher.  The EC continues to negotiate with the UK over changes to the Northern Ireland Protocol.  The dispute over fishing licenses and migrant crossing of the channel are also unresolved sources of tension with the UK. Tensions between the EC and Poland/Hungary over the rule of law, judicial independence, and civil liberties have also not been settled.  As was the case in the spring, Russia's troop and artillery movement threatened Ukraine, though the tension on the Poland/Belarus border has eased.  The ECB's leadership continues to maintain the price pressures are related to the unusual set of circumstances but are ultimately temporary.  Its December 16 meeting, the last one before Bundesbank President Weidmann steps down, is critical. In addition to confirming the end of the Pandemic Emergency Purchase Program in March 2022, and the expansion of the Asset Purchase Program, the ECB staff will update its inflation forecasts.  The focus here is on the 2023 CPI projection of 1.5%.  There was a push back against it in September, and a slight upward revision is likely. Nevertheless, it will probably remain below the 2% target.  The swaps market is pricing in a 25 bp hike in 2023.   (November indicative closing prices, previous in parentheses)   Spot: $1.1335 ($1.1560) Median Bloomberg One-month Forecast $1.1375 ($1.1579)  One-month forward  $1.1350 ($1.1568)    One-month implied vol  7.1%  (5.1%)         Japanese Yen:  Japan has a new prime minister who has put together a large fiscal stimulus package that will help fuel the economic recovery that had begun getting traction since the formal state of emergency was lifted at the end of September.  After a frustratingly slow start, the inoculation efforts have started bearing fruit, with vaccination rates surpassing the US and many European countries.  Unlike most other high-income countries, Japan continues to experience deflationary pressures.  Food and energy prices may be concealing it in the CPI measure, but the GDP deflator in Q2 and Q3 was  -1.1%. However, the BOJ does not seem inclined to take additional measures and has reduced its equity and bond-buying efforts.  The exchange rate remains sensitive to the movement of the US 10-year note yield, which has chopped mostly between 1.50% and 1.70%. With a couple of exceptions in both directions, the greenback has traded in a JPY113-JPY115 range.  The emergence of the new Covid mutation turned the dollar back after threatening to break higher.  A convincing move above the JPY115.50 area would likely coincide with higher US rates and initially target the JPY118 area.    Spot: JPY113.10 (JPY113.95)       Median Bloomberg One-month Forecast JPY113.30 (JPY112.98)      One-month forward JPY113.00 (JPY113.90)    One-month implied vol  8.2% (6.4%)   British Pound:  Sterling never fully recovered from disappointment that the Bank of England did not hike rates in early November.  Market participants had understood the hawkish rhetoric, including by Governor Bailey, to signal a hike.  The implied yield of the December 2021 short-sterling interest rate futures plummeted by 30 bp by the end of the month, and sterling has not seen $1.36, let alone $1.37, since then.  Indeed, sterling chopped lower and recorded new lows for the year in late November near $1.3200.  Growth in the UK peaked in Q2 at 5.5% as it recovered from the Q1 contraction.  It slowed to a 1.3% pace in Q3 and looks to be slowing a bit more here in Q4.  The petty corruption scandals and ill-conceived speeches by Prime Minister Johnson have seen Labour move ahead in some recent polls.  An election does not need to be called until May 2024, but the flagging support may spur a cabinet reshuffle.  The next important chart point is not until around $1.3165 and then the $1.30 area, which holds primarily psychological significance.       Spot: $1.3300 ($1.3682)    Median Bloomberg One-month Forecast $1.3375 ($1.3691)  One-month forward $1.3315 ($1.3680)   One-month implied vol 7.5% (6.8%)      Canadian Dollar:  The Canadian dollar appreciated by almost 2.4% in October and gave it all back, plus some in November.  Indeed, the loss was sufficient to push it fractionally lower for the year (-0.4%), though it remains the best performing major currency against the US dollar.   The three major drivers of the exchange rate moved against the Canadian dollar last month.  First, its two-year premium over the US narrowed by 17 bp, the most in four years.  Second, the price of January WTI tumbled by around 18.2%.  Commodity prices fell more broadly, and the CRB Index snapped a seven-month rally with a 7.8% decline.  Third, the risk appetites faltered is reflected in the equity markets. The Delta Wave coupled with the new variant may disrupt growth.  Still, the swaps market has a little more than two hikes discounted over the next six months.   The government is winding down its emergency fiscal measures, but the spring budget and election promises mean that the fiscal consolidation next year will be soft.     Spot: CAD1.2775 (CAD 1.2388)  Median Bloomberg One-month Forecast CAD1.2685 (CAD1.2395) One-month forward CAD1.2770 (CAD1.2389)    One-month implied vol 7.2% (6.2%)      Australian Dollar:  The Australian dollar fell by more than 5% last month, slightly less than it did in March 2020.  It did not have an advancing week in November after rallying every week in October.  Australia's two-year premium over the US was chopped to less than 10 bp in November from nearly 28 bp at the end of October.  The Reserve Bank of Australia pushed back against aggressive rate hike speculation.   The unexpected loss of jobs in October for the third consecutive month took a toll on the Australian dollar, which proceeded to trend lower and recorded the low for the year on November 30, slightly below $0.7065.  A break of $0.7050 would initially target $0.7000, but convincing penetration could spur another 2-2.5-cent drop.  The 60-day rolling correlation between- changes in the Australian dollar and the CRB commodity index weakened from over 0.6% in October to below 0.4% in November. The correlation had begun recovering as the month drew to a close.       Spot:  $0.7125 ($0.7518)        Median Bloomberg One-Month Forecast $0.7195 ($0.7409)      One-month forward  $0.7135 ($0.7525)     One-month implied vol 9.7%  (9.1%)        Mexican Peso:  The broadly stronger US dollar and the prospects of more accelerated tapering weighed on emerging market currencies in November, but domestic considerations also weighed on the peso.   The Mexican peso fell by around 4.1%, the most since March 2020.  The economy unexpectedly contracted by 0.4% in Q3.  There is little fiscal support to speak of, while monetary policy is becoming less accommodative too slowly compared with some other emerging markets, such as Brazil.  Price pressures are still accelerating, and the bi-weekly CPI rose above 7% in mid-November. The swaps market discounts nearly a 25 bp hike a month for the next six months.  The government's policies, especially in the energy and service sectors, are not attractive to investors.  President AMLO dealt another blow to investor confidence by retracting the appointment of former Finance Minister Herrera for his deputy to head up the central bank starting in January.  This is seen potentially undermining one of the most credible institutions in Mexico.  Lastly, Mexico's trade balance has deteriorated sharply in recent months and through October has recorded an average monthly trade deficit of nearly $1.2 bln this year.  In the same period, in 2020, it enjoyed an average monthly surplus of almost $2.5 bln, and in the first ten months of 2019, the average monthly trade surplus was a little more than $150 mln.     Spot: MXN21.46 (MXN20.56)   Median Bloomberg One-Month Forecast  MXN21.23 (MXN20.42)   One-month forward  MXN21.60 (MXN20.65)     One-month implied vol 14.9% (9.6%)      Chinese Yuan:  The Chinese yuan has been remarkably stable against the US dollar, and given the greenback's strength, it means the yuan has appreciated sharply on a trade-weighted basis.  Going into the last month of the year, the yuan's 2.6% gain this year is the best in the world.  Chinese officials have signaled their displeasure with what it sees as a one-way market.  At best, it has orchestrated a broadly sideways exchange rate against the dollar, mainly between CNY6.37 and CNY6.40. The lower end of the dollar's range was under pressure as November drew to a close.   Even though the Chinese economy is likely to accelerate from the near-stagnation in Q3 (0.2% quarter-over-quarter GDP), it remains sufficiently weak that the PBOC is expected to consider new stimulative measures.  It last reduced reserves requirements in July, and this seems to be the preferred avenue rather than rate cuts.  Yet, given the interest rate premium (the 10-year yield is around 2.85%), record trade surpluses ($84.5 bln in October), portfolio inflows, and limited outflows, one would normally expect a stronger upward pressure on the exchange rate.    Spot: CNY6.3645 (CNY6.4055) Median Bloomberg One-month Forecast  CNY6.38 (CNY6.4430)  One-month forward CNY6.3860 (CNY6.4230)    One-month implied vol  3.5% (3.5%)    Disclaimer
Hawks Triumph, Doves Lose, Gold Bulls Cry!

Hawks Triumph, Doves Lose, Gold Bulls Cry!

Arkadiusz Sieron Arkadiusz Sieron 02.12.2021 17:20
The hawkish revolution continues. Powell, among the screams of monetary doves, suggested this week that tapering could be accelerated in December! People live unaware that an epic battle between good and evil, the light and dark side of the Force, hard-working entrepreneurs and tax officials is waged every day. What’s more, hawks and doves constantly fight as well, and this week brought a victory for the hawks among the FOMC. The triumph came on Tuesday when Fed Chair Jerome Powell testified before Congress. He admitted that inflation wasn’t “transitory”, as it is only expected to ease in the second half of 2022. Inflation is therefore more persistent and broad-based than the Fed stubbornly maintained earlier this year, contrary to evidence and common sense: Generally, the higher prices we’re seeing are related to the supply and demand imbalances that can be traced directly back to the pandemic and the reopening of the economy. But it’s also the case that price increases have spread much more broadly and I think the risk of higher inflation has increased. Importantly, Powell also agreed that “it’s probably a good time to retire that word.” You don’t say! Hence, the Fed was wrong, and I was right. Hurray! However, it’s a Pyrrhic victory for gold bulls. This is because the recognition of the persistence of inflation pushes the Fed toward a more hawkish position. Indeed, Powell suggested that the FOMC participants could discuss speeding up the taper of quantitative easing in December: At this point the economy is very strong and inflationary pressures are high and it is therefore appropriate, in my view, to consider wrapping up the taper of our asset purchases, which we actually announced at the November meeting, perhaps a few months sooner, and I expect that we will discuss that at our upcoming meeting in a couple of weeks. What’s more, Powell seemed to be unaffected by the Omicron coronavirus strain news. He was a bit concerned, but not about its disturbing impact on the demand side of the economy; he found supply-chain disruptions that could intensify inflation way more important. That’s yet another manifestation of Powell’s hawkish stance.   Implications for Gold What does the Fed’s hawkish tilt imply for the gold market? Well, gold bulls get along with doves, not hawks. A more aggressive tightening cycle, including faster tapering of asset purchases, could boost expectations of more decisive interest rates hikes. In turn, the prospects of a more hawkish Fed could increase the bond yields and strengthen the US dollar. All this sounds bearish for gold. Indeed, the London price of gold dropped on Wednesday below $1,800… again, as the chart above shows. Hence, gold’s inability to stay above $1,800 is disappointing, especially in the face of high inflation and market uncertainty. Investors seem to have once again believed that the Fed will be curbing inflation. Well, that’s possible, but my claim is that despite a likely acceleration in the pace of the taper, inflation will remain high for a while. I bet that despite the recent hawkish tilt, the Fed will stay behind the curve. This means that the real interest rates should stay negative, providing support for gold prices. The previous tightening cycle brought the federal funds rate to 2.25-2.5%, and we know that after an economic crisis, interest rates never return to the pre-crisis level. This is also what the euro-dollar futures suggests: that the upcoming rate hike cycle will end below 2%. The level of indebtedness and financial markets’ addiction to easy money simply do not allow the Fed to undertake more aggressive actions. Will gold struggle in the upcoming months then? Yes. Gold bulls could cry. But remember: tears cleanse and create more room for joy in the future. If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
RBA Jettisons Yield Curve Control but Continues to Resist Market Pressure

RBA Jettisons Yield Curve Control but Continues to Resist Market Pressure

Marc Chandler Marc Chandler 03.11.2021 10:54
Overview: The third record close of the S&P 500 failed to lift Asia Pacific and European shares today.  In Asia, the large bourses fell, except South Korea, which rallied a little more than 1%.  Europe's Stoxx 600 is threatening to snap a three-day advance, while US index futures are soft.  The US 10-year yield is firm, around 1.56%.  European bonds are rallying.  Peripheral yields are off 8-9 bp, while core rates are 3-5 lower.  The Reserve Bank of Australia formally abandoned its yield-curve control, and the local debt market was quiet, but the Australian dollar is selling off and dragging the other dollar-bloc currencies lower.  Only the yen, among the majors, is gaining on the greenback.  Emerging market currencies are faring better, led by Asian currencies and most central and eastern European currencies.  The JP Morgan Emerging Market Currency Index is rising for the first time in five sessions.  Gold continues to consolidate within the range set before the weekend (~$1771-$1801) but is a bit softer on the day.  Oil prices are firm, and the December WTI contract is at the upper end of the $80-$85 range that has prevailed since mid-October.  Copper initially moved higher but reversed lower, and a break of $432 could signal another two percent decline.   Asia Pacific The Reserve Bank of Australia formally jettisoned its yield-curve control of targeting the April 2024 bond yield at 10 bp.  The market expected this after the RBA had been missing in action as the yield soared.  Today, the on-the-run 3-year yield fell six basis points after falling 21 yesterday.  It has now returned below 1%.  Governor Lowe did not fully capitulate but is trying to hold on to a middle ground.  He said the central bank will be patient on rates, and it is still plausible not to raise rates until 2024. However, he acknowledged rates could be lifted in 2023.  The swaps market is pricing in almost 80 bp of tightening over the next 12 months, with a 10 bp hike seen in six months.   European and American equities have recovered from the wobble in mid-September that sparked fear that Evergrande's losses would trigger a Lehman-like event.  Yet, the problem with Chinese property developers continues, even though Evergrande took advantage of its 30-day grace period, it serviced its debt.  China's high yield bond market is dominated by the property development sector.  The yields rose for eight consecutive sessions through yesterday and briefly rose above 20% last week.  Estimate debt servicing costs amount to around $2 bln this month.  House sales and prices are falling, a separate challenge to the economy than the energy crunch and high commodity prices.  It is still unclear whether Chinese officials are prepared to take more decisive action to support the economy, like a cut in reserve requirements.  New economic initiatives may emerge from the Communist Party's Central Committee meeting (November 8-11).  Officially it will focus on the achievements in preparation for the 20th Congress next year that will likely confirm another term for President Xi but possibly shuffle other senior posts.   The dollar rose to almost JPY114.45 yesterday and has come back offered today.  It has slipped below the 20-day moving average (~JPY113.55) for the first time since September 23.  Last week's low was closer to JPY113.25.  A break of JPY113.00 could signal losses toward JPY112.60 initially.  The price action is lending credence to the JPY114.50-JPY115.00 being the top of the new range. The lower end of the range is less clear.  The Australian dollar's 4% rally led the majors last month, but it stalled near the 200-day moving average (~$0.7555) and is breaking down today.  It has taken out last week's lows (~$0.7465) marginally, but the downside momentum has continued in the European morning.  There is near-term scope toward $0.7435 and maybe $0.7410.   The PBOC set the dollar's reference rate at CNY6.4009, firmer than the median (Bloomberg) forecast of CNY6.3986. The gap was slightly wider than it has been.  The last time the gap was more than 20 pips was October 20. So if it is a protest, it is still faint. Meanwhile, stricter virus curbs took a toll on Chinese equities. The greenback has risen above CNY6.40 on an intraday basis but continues to struggle to sustain it on a closing basis.   Europe The EMU final manufacturing PMI was slightly lower than the preliminary estimate, owing to a softer than expected Spain reading and a downward revision in Germany.  The aggregate stands at 58.3, down from 58.5 initially and 58.6.  It is the fourth consecutive decline, but it can hardly be considered weak.  Germany's manufacturing PMI was lowered to 57.8 from the 58.2 preliminary projection and 58.4 in September.  The French reading was tweaked up to 53.6 from 53.5.  It is still down from 55.0 and is the fifth straight loss.  Spain disappointed with a 57.4 report.  It was projected to be unchanged at 58.1, which seemed optimistic from the get-go.  Italy offered an upside surprise.  Its manufacturing PMI rose to 61.1 from 59.7.  Economists had expected some slippage.   Some pressure on the euro appeared to be coming from the cross against the Swiss franc.  Since the Fed met in September through the end of last week, the euro fell about 3.35% against the franc. Sight deposits rose steadily in October after falling in the first half of September.  Last week's increase was the most in two months as the euro broke below CHF1.08 for the first time since  May 2020. The rise in sight deposits is consistent with stepped-up intervention by the Swiss National Bank.  Yesterday, the euro fell against the Swiss franc, even as it rose against the dollar.  Clearly, the intervention is not arresting the euro's weakness. SNB is more likely moderating the decline.   Moreover, if the SNB also seeks to maintain a certain currency allocation of its reserves, it needs to acquire dollars after acquiring euros.  And if it does not want to grow reserves like Japan or China, it will sell some of the euros for dollars, minimizing the intervention effect on reserve accumulation.  The value of the SNB's reserves declined slightly in the year through September.    The pace of the euro's decline against the franc has accelerated in the past two sessions and closed below the lower Bollinger Band (two standard deviations below the 20-day moving average) for the second consecutive session.  Last year's low was set near CHF1.05 and yesterday, the euro pushed briefly through CHF1.0550.  It is now near CHF1.0570. The next technical support may be around CHF1.0250. However, speculators in the futures market see it differently.   They have the largest net short franc position (~19.3k contracts) since December 2019 and the smallest gross longs (~1245 contacts) since 2003.   French President Macron is holding back from imposing retaliatory measures against the UK over the fishing license dispute.  Reports suggest that Jersey is considering granting temporary licenses to French trawlers.  Separately, despite some confusing gas flows yesterday (from Germany to Poland), Russia says Putin's promise to boost gas shipment to Europe starting next week, after Gazprom completely rebuilding its domestic inventories, remains intact.  Look for results shortly of the auctions for pipeline capacity.   After falling a little more than 1% before the weekend, the euro bounced back yesterday and managed to close above $1.16. Follow-through buying was limited to about $1.1615, but it has struggled to sustain the positive momentum.  There is an option for 1.8 bln euros at $1.1585 that expires today.  A break signals a test on nearby support seen in the $1.1540-$1.1560 area.  Last week's low was about $1.1535, and the year's low is closer to $1.1525.  Sterling is off for the third consecutive session.  It reached $1.3630, the lowest level since October 14, which is about the (50%) retracement objective of last month's rally.  Some sales may have been related to the GBP316 mln option at $1.3650 that expires today.  The next (61.8%) retracement is by $1.3575.  America Today is the quietest day of the week for North American economic data. However, there is one feature, monthly autos sales.  Due to the supply chain disruptions, especially semiconductor chips, auto production has been crushed, and by extension, auto sales.  This is not limited to the US by any means.   Yesterday, Japan reported that October auto sales are off slightly more than 30% year-over-year in October. European auto registrations, a proxy for sales, were down 23.1% year-over-year in September.  Last week's Q3 GDP showed that growth was halved to 4% but the problems in the auto sector.  In September, US auto sales were about 25.5% below September 2020 sales.  Bloomberg's survey found a median forecast for October sales of 12.5 mln vehicles (seasonally adjusted annual basis), which would be the first increase since April.  Cox Automotive warns of another decline to 11.8 mln vehicles. The US Treasury unexpectedly boosted its Q4 borrowing needs to about $1.02 trillion, or around $312 bln more than it anticipated in August.  It appears to be largely a function of adjusting its cash balances and the calculations around the debt ceiling.  It is projecting Q1 22 borrowing needs at less than half of the Q4 sum.  Of course, it is assuming that the debt ceiling will be raised or suspended. Still, tomorrow's quarterly refunding announcement is expected to reduce its coupon offerings for the first time since 2016.  Separately, but not totally unrelated, the Democratic Party is still struggling to agree on the infrastructure initiative.   The US dollar continues to consolidate against the Canadian dollar but is enjoying a firmer tone today.  The Bank of Canada met on October 27, and it surprised the market by ending its bond-buying program and acknowledging the risk of an earlier hike.  The US dollar covered a range of roughly CAD1.2300 to CAD1.2435.  It has remained in that range since then. We note that speculators in the futures market switched to a net long position for the first time since early September in the week through last Tuesday.  The greenback is knocking on initial resistance in the CAD1.2400-CAD1.2410 area, and a break could signal a move toward CAD1.2430-CAD1.2450.  An option for about $900 mln expires tomorrow at CAD1.2450.  The greenback has a five-day rally in tow against the Mexican peso.  Earlier today, it pushed above last month's high (~MXN20.90), but it has stalled.  It is trading little changed on the session around MXN20.8500 as the North American session is about to start.   Still, unless it can break below MXN20.80, we look for higher levels.  That said, the pace of the dollar's rally is threatening the upper Bollinger Band (~MXN20.95)
Huge News! The Fed’s Tapering Is Finally Here!

Huge News! The Fed’s Tapering Is Finally Here!

Arkadiusz Sieron Arkadiusz Sieron 04.11.2021 15:04
The Fed has announced tapering of its quantitative easing! Preparing for the worst, gold declined even before the release - will it get to its feet? . Ladies and gentlemen, please welcome to the stage the one and only tapering of the Fed’s quantitative easing! Yesterday was that day – the day when the FOMC announced a slowdown in the pace of its asset purchases: In light of the substantial further progress the economy has made toward the Committee's goals since last December, the Committee decided to begin reducing the monthly pace of its net asset purchases by $10 billion for Treasury securities and $5 billion for agency mortgage-backed securities. Beginning later this month, the Committee will increase its holdings of Treasury securities by at least $70 billion per month and of agency mortgage‑backed securities by at least $35 billion per month. It’s all but a bombshell, as this move was widely expected by the markets. However, what can be seen as surprising is the Fed’s decision to scale back its asset purchases already in November instead of waiting with the actual start until December. Hawks might be pleased – contrary to doves and gold bulls. How is the tapering going to work? The Fed will reduce the monthly pace of its net asset purchases by $10 billion for Treasury securities and $5 billion for agency mortgage-backed securities each month: Beginning in December, the Committee will increase its holdings of Treasury securities by at least $60 billion per month and of agency mortgage-backed securities by at least $30 billion per month. The Committee judges that similar reductions in the pace of net asset purchases will likely be appropriate each month, but it is prepared to adjust the pace of purchases if warranted by changes in the economic outlook. So, instead of buying Treasuries worth $80 billion and agency mortgage‑backed securities worth $40 billion (at least), the Fed will purchase $70 billion of Treasuries later this month and $35 billion of MBS, respectively. Then, it will buy $60 billion of Treasuries and $30 billion of MBS in December, $50 billion of Treasuries and $25 billion of MBS in January, and so on until the last round of purchases in May 2022. This means that the quantitative easing will be completed by mid-year if nothing changes along the way. The announcement of the tapering was undoubtedly the biggest event; however, I would like to point out one more modification. The sentence “inflation is elevated, largely reflecting transitory factors” was replaced in the newest statement with “inflation is elevated, largely reflecting factors that are expected to be transitory”. It’s not a big alteration, but “expected to be” is weaker than simply “is”. This means that the Fed’s confidence in its own transitory narrative has diminished, which implies that inflation might be more persistent than initially thought, which could support gold prices more decisively at some point in the future. The Fed also explained why prices are rising: “Supply and demand imbalances related to the pandemic and the reopening of the economy have contributed to sizable price increases in some sectors”. Unsurprisingly, the Fed didn’t mention the surge in the money supply and the unconventional monetary and fiscal policies, just “imbalances”! Implications for Gold What does the Fed’s announcement of a slowdown in asset purchases imply for the gold market? Well, the yellow metal showed little reaction to the FOMC statement, as tapering was in line with market expectations. Actually, gold prices fell to three-week lows in the morning — right after the publication of positive economic data but before the statement. However, gold started to rebound after the FOMC announcement, as the chart below shows. Why? The likely reason is that both the statement and Powell’s press conference were less hawkish than expected. After all, the Fed did very little to signal interest rate hikes. What’s more, Powell expressed some dovish remarks. For instance, he said that it was a bad time to hike interest rates: “it will be premature to raise rates today” (…) We don’t think it is a good time to raise interest rates because we want to see the labor market heal more.” The bottom line is that gold’s reaction to the FOMC statement was muted, as tapering was apparently already priced in. The lack of bearish reaction is a positive sign. However, gold’s struggle could continue for a while, perhaps until the Fed starts its tightening cycle. For now, all eyes are on Friday’s non-farm payrolls. Stay tuned! If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
Bridge Too Far

Bridge Too Far

Monica Kingsley Monica Kingsley 02.12.2021 16:36
S&P 500 gave up sharp intraday gains on the first Omicron patient in CA. Corona packing punch still, and sending TLT far above yesterday‘s highs while the dollar remained unchanged. That‘s as risk-off as can be on a little surprising headline – the key difference is though that the Fed doesn‘t have the back of buy the dippers this time. The accelerated taper noises coupled with demand destruction thanks to Omicron, is delivering an inflation repreive. Make no mistake though, should demand be choked off too hard, fresh stimulus would have to come – for now in the heat increasingly being turned on, practically all asset classes suffer to varying degrees. The market isn‘t yet at a stage of sniffing out fresh stimulus countering the destructive policy effects which are being felt currently. Economic activity around the world hasn‘t been hampered, but markets are willing to err on the pessimistic side. For now and still – only when the riskier debt instruments such as HYG turn up to deal with the prior downswing, would be a reason to cheer for animal spirits returning. That idea sounds though hollow at this time. The bears have the upper hand unless proven otherwise – that is, by a close in the 4670s. Which is what the title says... Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook S&P 500 breaking below the 50-day moving average, and taking time consolidating below, isn‘t bullish at all. The reversal was broad based, arguably hitting value more. Yes, market breadth is dismal. Credit Markets Positive HYG divergence is gone – the broad underperformance of S&P 500 must be reversed first to make stock market upswings trustworthy. It remains unclear how much would HYG be able to rebound when quality debt instruments cool off. Gold, Silver and Miners Precious metals weakness remains, but isn‘t convincing enough to short the market, no. The coming reversal to the upside would be ferocious, but we aren‘t there yet. Crude Oil Crude oil plunge is slowing down, and it‘s more than black gold that‘s looking for direction here – this concerns the commodities complex as such. I‘m looking for copper to show the way, and oil to follow. Copper Copper is sitting at a rising support line, undecided yet whether to take the Fed and Omicron threats seriously or not. It‘s wait and see for now, but the bullish side has the medium-term upper hand. Bitcoin and Ethereum Bitcoin and Ethereum are cautious as well, but the bears are looking for an ambush – let‘s see how far they can get. Summary The ugly S&P 500 close concerns both value and tech – and there was no premarket upswing to speak of. The bears have the upper hand for today as markets look to be in the phase of sell first, ask questions later. Any reversal (in stocks or commodities) has to be accompanied by a credible upswing in riskier bonds, ideally with money coming out of the dollar as well. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
The Greenback Finds Traction ahead of the Jobs Report

The Greenback Finds Traction ahead of the Jobs Report

Marc Chandler Marc Chandler 03.12.2021 12:19
December 03, 2021  $USD, Australia, Canada, China, Currency Movement, EMU, FOMC, Inflation, Japan, jobs, UK Overview:  The Omicron variant has been detected in more countries, but the capital markets are taking it in stride.  Risk appetites appear to be stabilizing.  The MSCI Asia Pacific Index rose for the third consecutive session, though Hong Kong and Taiwan markets did not participate in the advance today.  Europe's Stoxx 600 is struggling to hold on to early gains, while US futures are narrowly mixed.  The US 10-year yield is a little near 1.43%, down around six basis points this week.  European yields are slightly softer. Core yields are off 5-6 bp this week.  The dollar is firm ahead of the jobs data.  The Antipodeans and Swedish krona are the heaviest, falling around 0.6% through the European morning.  The Swiss franc and euro are up about 0.1% and are the most resilient so far today.   The JP Morgan Emerging Market Currency Index is trading lower for the third session and is set to extend its losing streak for the fourth consecutive week.  Accelerating inflation is the latest drag on the Turkish lira.  The 0.6% decline today brings the week's drop to around 10.5%.  Gold is little changed within yesterday's range.  Last week, it settled a little above $1802.  Now it is below $1775  Oil is extending yesterday's recovery. Although OPEC+  unexpectedly stuck with plans to boost output by 400,000 barrels a day next month, it warned it could change its collective mind at any point.  January WTI recovered from around $62.40 yesterday to close at $66.50.  It is trading close to $68.20 before US markets open.  US natural gas fell nearly 25.5% over the past four sessions but is bouncing by around 3.7% today. European gas (Dutch) is stabilizing after yesterday's 5.6% decline.  Still, it is posting gains for the fifth consecutive week and is up more than 35% over the run.  Iron ore and copper prices are little changed.   Asia Pacific At the same time that Chinese officials are cracking down on the "variable interest entity" form of offshore listings for domestic companies, the US SEC is moving to enforce the 2002 laws that require foreign companies to allow greater scrutiny by US regulators.  Didi, the ride-hailing service, which listed in the US over local official objections, is now in the process of reversing itself.  The press reports that China and Hong Kong companies are the only ones to refuse to acquiesce to US demands.  This seems to be another facet of the decoupling meme.  Note that the NASDAQ Golden Dragon Index that tracks 98 Chinese companies listed in the US has fallen for five consecutive sessions coming into today, for a cumulative loss of about 10%.  China's Caixin service PMI was weaker than anticipated at 52.1, down from 53.8.  This, coupled with the softer manufacturing reading, shaved the composite to 51.2 from 51.5.   In contrast, Japan and Australia's flash service and composite PMIs were revised higher.  In Japan, the service PMI was revised to 53.0 from 52.1 and 50.7 in October.  The composite was revised to 53.3 from 52.5, to rise for its third consecutive month.  Australia's service PMI stands at 55.7, up from the flash reading of 55.0 and 51.8 in October.  The composite PMI is at 55.7, its third consecutive monthly rise as well.  Japan and Australia's PMI contrasts with the disappointment in China and Europe, and the US. This is because they are recovering from the long emergency (Japan) and lockdowns (Australia).   Trading remains choppy, and market confidence is fragile.  The dollar remains in the range set against the yen on Tuesday((~JPY112.55-JPY113.90).  Today's high has been just below JPY113.50, where options for $520 mln expire today.   Options for around $1.3 bln at JPY113.00 also will be cut today.  The greenback settled last week slightly below JPY113.40.  The Australian dollar has been sold to new lows for the year a little lower than $0.7050.  We have noted that this area corresponds to the (38.2%) retracement of the Aussie's rally from the March 2020 low near $0.5500.  The next area of support is seen around $0.7000.  It is the fifth consecutive weekly decline that began in late October above $0.7500.  The US dollar's two-day rise against the Chinese yuan is ending with a minor loss today. Similarly, the greenback posted gains for the past two weeks and has given it all back this week.  The PBOC set the dollar's reference rate at CNY6.3738, just below the median (Bloomberg survey) projection of CNY6.3740.   Offshore investors appear to have bought the most Chinese stocks today via the connect-link in a couple of weeks.  Also, note that China extended the tax exemption for foreign institutional investors from the interest tax through the end of 2025.    Europe German and French PMIs were revised lower, while Spain and Italy surprised on the upside.  The revisions shaved the gains initially reported for the service and composite PMIs.  Still, the German composite rose for the first time in four months to stand at 52.2 from 52.0.  The French composite PMI stands at 56.1, up from 54.7.  It is the first increase since June.  Separately, France reported a 0.9% rise in October industrial output, which is better than expected, but the September contraction was revised to -1.5% from -1.3%.   Spain's service PMI rose to \59.8 from 56.6 and was well above expectations.  The composite reading is 58.3, up from 56.2.  It is the first gain in five months and is the highest since August.  Italy's service PMI rose to 55.9 from 52.4.  Economists had expected something closer to 54.5.  The composite rose to 57.6 from 54.2.  It has softened in September and October, and the November reading is the best since August.   The UK's service and composite PMI were revised to show a slightly larger decline than initially seen in the flash report.  The service PMI slipped to 58.5, from 58.6 preliminary estimate and 59.1 in October.  The composite PMI was shaved to 57.6 from the 57.7 initial estimate and 57.8 in October.  The November weakness was disappointing after rising in September and October to snap a three-month decline.  The December short-sterling interest rate futures consolidated in a choppy activity this week after the implied yield fell for eight consecutive sessions previously.  The market is discounting about a 1 in 3 chance of a hike at the BOE meeting on December 16.  The euro slipped to a three-day low slightly above $1.1280 in late Asian turnover before resurfacing the $1.1300 area in the European morning.  Still, we suspect the upside is limited.  The 20-day moving average is near $1.1350, and the single currency has not traded above it since November 9.  The euro remains within the range set on Tuesday (~$1.1235-$1.1385).  Given the divergence of monetary policy, resistance looks stronger than support.  For its part, steering is holding barely above its three-day low near $1.3260.  It, too, remains within Tuesday's range (~$1.3195-$1.3370).  Recall that the $1.3165 area corresponds to the (38.2%) retracement objective of the rally from the March 2020 low near $1.14.  Meanwhile, the euro is pressing below CHF1.04.  It has not closed below there in six years.   America Fully cognizant of the irony here, but barring a shockingly poor report, today's US employment data may have little last impact on the market.  If there was any doubt about it before, since Federal Reserve Chair Powell spoke, there isn't.  The Fed has shifted from helping to facilitate recovery to preventing inflation expectations from getting entrenched.  That means that even a mediocre report today will be overshadowed by next week's CPI, which will likely show that inflation is still accelerating.  Conventional wisdom holds that the White House prefers doves at the Fed, but that does not hold now.  President Biden's public approval rating is low, and the Vice President's is lower still. Polls suggest that inflation is a knock against the administration.  When Biden announced the re-nomination of Powell and Brainard's nomination to Vice-Chair, both candidates reaffirmed their commitment to combat inflation.  What is true of the employment data also holds for the final services and composite PMI, factory orders, and the service ISM.  There may be headline risk but little implication for policy.  The Senate passed the stop-gap measures to keep the federal government funded through February 18.  Meanwhile, the debt ceiling is expected to hit between December 21 and late January.   Canada's labor market has recovered quicker than the US.  Today's another constructive report will likely solidify expectations that the Bank of Canada may hike rates in the March-April period.  The Bank of Canada meets next week.  Of course, it may be cautious with the unknowns surrounding the Omicron variant, but the economic recovery is solid after the weakness in Q2.  Trade tensions with the US are rising.  The US doubled its anti-dumping and countervailing tariffs on Canadian softwood imports (almost 18%).  US January lumber prices were limit up ($45) Wednesday and yesterday and have risen by more than 19% so far this week to reach five-month highs. There is a dispute over Canadian potato exports as well.  There are also disputes over some US initiatives' "Buy American" thrust, including electric vehicles.   The US dollar is at its best level against the Canadian dollar since late September.  It is pushing near CAD1.2840. The September high was closer to CAD1.29, and the late August high, which is also the high for the year, was near CAD1.2950. Barring a reversal, this will be the sixth consecutive week of the greenback's gains.  The swaps market has the first hike discounted for March 2022.  The US dollar began the week with a seven-day advance against the Mexican peso in tow.  It ended with a 1%+ pullback on Monday and again on Tuesday.  It consolidated Wednesday and fell another 1%+ yesterday.  It is little changed today near MXN21.29.  Next week, the November CPI will be reported.  It looks set to accelerate from about 6.25% to around 7.25%.  The central bank meets on December 16, after the FOMC meeting.  A 25 bp rate hike is the consensus, but an argument can be made for a 50 bp increase from the current 5.0% target.   Disclaimer
Weekly Close Out

Weekly Close Out

Luke Suddards Luke Suddards 04.12.2021 17:45
Omicron: In today’s weekly I’ll be dedicating some digital ink for the latest information on the new variant omicron. Ok so what are the major points of importance. New admissions to hospitals in Gauteng increased by 144% last week (hospitalisations lag cases by around 1-3 weeks). So far the early data shows the majority of these hospitalisations are from the unvaccinated (if that trend remains that’s positive). However, a recent study released from South Africa indicates reinfection risk is 3 times higher than previous variants. In terms of the deadliness of this variant, the early data looks good with Australia’s Chief Medical Officer Paul Kelly stating that of the 300 cases recorded worldwide all were very mild or had no symptoms at all. However, the sample size is too small so we can’t draw solid conclusions at this stage. The major vaccine makers have offered timelines of two to six weeks for assessing the vaccine escape properties of omicron via in-vitro lab tests. Interestingly, Moderna is less optimistic than Pfizer about expecting current vaccines needing to be tweaked to fend off the omicron variant. Volatility will remain high as the market remains on tenterhooks as new information drips through. Dollar Index (DXY): The greenback is flat on the week, with many quite perplexed by the lack of gains (particularly against the euro) given the hawkish Fed pivot and risk sentiment remaining on edge. The dollar coming in flat is a combination of gains against high-beta cyclical companies offset by losses against traditional safe haven currencies. Just take a look at the charts of USDJPY and AUDUSD. In terms of the euro, I’ll chat more about that below in the EURUSD paragraph. The big domestic news for the dollar this week was Jerome Powell’s hawkish rhetoric. The word transitory is to be retired as he admits the threat of persistently higher inflation has grown. On the QE purchases side of things, he remains open to it being wrapped up earlier than originally expected with a discussion on a faster pace taking place in 2 weeks at their December meeting. He elucidated his thoughts on the employment side of their mandate, stating that a great labour market requires a protracted expansion and in order to achieve this price stability has to occur. I see this as inflation now taking primacy over employment goals, indicating a shift in the Fed’s thinking with regards to inflationary pressures. The hawkish commentary from FOMC members this week such as Daly, Quarles, Barkin and Bostic would certainly suggest this is the case. STIRs are showing rate lift-off for practically June 2022 (96%) and over 2.5 hikes through December 2022. All attention now falls to the Non-Farm Payrolls number out today. The preliminary indicator such as ISM manufacturing index, ADP and jobless claims all pointing towards decent numbers from the jobs report today disappointed as NFP numbers missed expectations by a significant amount. Price moves have been muted as traders may be reluctant to place any fresh positions on and chase with the risk of adverse news over the weekend regarding omicron. Bottom line - traders should expect cross-asset volatility to remain higher over December. Next week we’ll receive November US inflation data, which is expected to remain elevated. DXY has regained the upper trend line of its ascending channel, putting some distance between price and its moving averages. The 21-day EMA continues to provide some dynamic support to price dips. The RSI has held above the key 55 level of support. Targets wise keep an eye out on the 96.5 on the upside and to the downside the 21-day EMA and former support around 95.5. EURUSD: So why did EURUSD strengthen on the market sell-off due to omicron on Friday and has remained fairly defensive throughout this week? It’s certainly not because the euro is a safe-haven currency in times of risk aversion. This price action has more to do with its use as a funding currency. Traders borrow euros to search for higher yield globally which is a decent strategy when risk conditions are favourable, however, when that risk dial flips in other direction we see the typical carry trade unwind, leading to flows back into the euro. Additionally, because expectations for rate hikes with regards to the eurozone are already significantly low, it’s at much less risk of a dovish repricing working favourably in terms of spread differentials with the dollar. Political pressure is rising on the ECB to act, particularly from Germany. A Reuters article out mid-week pointed towards some members wanting to rather hold off declaring their asset purchase intentions at this December meeting due to uncertainty caused by omicron. However, the ECB's Muller stated that he doesn’t think omicron is a reason to shift the scheduled end date for PEPP. Following this line of thought just today Madame Lagarde expressed that she feels certain that PEPP will cease in March as planned, saying markets require clarity in December. On the data front we had better than expected inflation prints from Germany (5.2% YoY) and the eurozone (4.9% YoY). It’s quiet in terms of economic data next week with the ZEW survey out as we lead up to a crucial ECB meeting in two weeks. EURUSD is drifting lower from its 21-day EMA. The RSI has stalled around the 40 level. Looking at the technicals clearly EURUSD is in a downtrend. Rallies in my opinion should be short lived with sellers coming in. Key levels to monitor in both directions are 1.135 (21-day EMA) and on the downside 1.12. GBPUSD: With a vacuum of economic data for the UK, the words of central bankers took centre stage. Bailey didn’t provide much meat at his speech this Wednesday. However, Saunders (leans hawkish) who spoke today has caused a repricing lower in the probability of a 15bps rate hike come December (only an additional 4bps now from around 8bps pre-speech). He expressed the need for potentially taking a patient approach with the uncertainty from omicron. Cable is lower as a result. On the virus front, the UK regulator has given the green light for booster doses to be offered to all adults. Additionally, the government has signed a contract for 114 million vaccine doses from Pfizer and Moderna, including access to modified vaccines if they're needed to tackle omicron and other future variants of concern. On the political front, domestically the Tories held the seat of Old Bexley and Sidcup, however, with a reduced majority. On Brexit, it’s been quiet of late with some optimism around the granting of additional fish licences to French fisherman in Guernsey, Jersey is the more important zone though prone to flare ups in tension. However, temperatures remain high between France and the UK on issues related to immigration. Next week sees UK October GDP data released. EURGBP has been moving higher on the back of dovish commentary (given he’s a hawk) from Saunders as well as benefiting from any souring in risk-sentiment. The 200-day SMA isn’t far aware, which has previously capped price gains. Cable continues to -plumb fresh YTD lows and is now nearing 1.32. The RSI is near to oversold territory but with some room remaining to eke out further losses. Moving averages are all pointing downwards. Targets wise, on the upside the 1.335 and above there former support around 1.34 (21-day EMA too). USDJPY: This pair continues to trade on US 10-year yield moves and now it’s status as a safe-haven currency has kicked back in. Early Friday morning has seen a bid coming in, which could be some pre NFP positioning on expectations of a move higher in the back end of the US yield curve. Put EURJPY on your radar, price is at a key support level around 128. USDJPY is finding support around its 50-day SMA, 113 round number and the 38.2% Fibonacci level. Price is trying to overcome resistance from the 50-day SMA. The former range support is providing some resistance around 113.5. The RSI is trying to get back into its range support around 46. Targets wise on the upside, 114 will be important and on the downside 112.5 (this week's lows). Gold: Gold has slipped below the $1775 support level as the hawkish fed leads to higher short term rates, kryptonite for the shiny yellow metal. Fears over inflation have failed to help gold stay propped up as well as risk-off fears from omicron. Inflation data out from the US next week will be a risk event for gold traders as well as the Fed meeting the following week. Today’s NFP hasn’t ignited much excitement in gold markets. Gold is trying to reclaim the $1775 support level. The 50-day SMA has made a very minor cross above the 200-day SMA. The 21-day EMA has been capping further gains. The RSI is in no man's land around 38. Targets wise, if $1775 is cleared then $1800 opens up (moving averages just below there). On the downside, $1750 comes into view. Oil: Crude fell sharply into a bear market this week as risk-off, Fed tightening, fears over further lockdowns and travel bans from the new omicron variant led to a repricing on the demand side of the equation. OPEC+ the main event for crude traders this week, decided to stick to their scheduled 400k bpd for January, but caveated this with the meeting remaining in “session”, meaning changes to the supply side could be made before their 4 January meeting if omicron causes a further deterioration. This led to yo-yo style price behaviour. Until there is more clarity regarding omicron, I expect oil’s price to remain choppy without a solid price trend. Backwardation spreads have narrowed, indicating a more balanced supply and demand equation. Iranian Nuclear Negotiations began the week positively, but sentiment turned pessimistic towards the end of this week, providing further short-term bullish tailwinds to crude’s price. JPM has some very bullish forecasts with the bank expecting crude to hit $150 by 2023. Oil is having a run at its 200-day SMA. The RSI has moved out of overbought territory and is a fair distance below its 50-day SMA (some mean reversion). Right now price will remain choppy within a range as omicron news flow prevents a trend from forming. Targets wise, on the upside the 200-day SMA and $73.50 dollar mark will be key. On the downside $68 support is important.
Ahead Of The US CPI, Speaking Of Crude Oil And Metals - Saxo Market Call

Market Quick Take - December 6, 2021

Saxo Bank Saxo Bank 06.12.2021 09:31
Macro 2021-12-06 08:45 6 minutes to read Summary:  Friday saw global markets weakening again in another violent direction change from the action of the prior day. With futures for the broader US indices up this morning, the damage is somewhat contained, even if nerves are ragged. At the weekend, cryptocurrencies suffered a major setback in what looked like a run on leveraged positions that erased 20 percent or more of the market cap of many coins before a bit more than half of the plunge was erased with a subsequent bounce. What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - despite the US 10-year yield pushed lower on Friday on the string of strong macro numbers, Nasdaq 100 futures are oddly weak in early European trading hours sitting around the 15,700 price level. The 100-day moving average down at 15,400 is the key price level to watch should the weakness in US technology and bubble stocks continue today. We see clear exposure overlap between cryptocurrencies and growth stocks, and with the steep plunge in Bitcoin over the weekend the risk-off might not be over. Stoxx 50 (EU50.I) - Stoxx 50 futures continue to be in a tight trading range sitting just above the 4,100 level this morning with little direction as traders are still digesting the US labour market report and Omicron news which at the margin seems to be improving somewhat, although expectations are still that jet fuel demand will be impacted. The weaker EUR is also short-term helping some of the exporters in Europe and generally leading to positive sentiment in early trading with European equities up 1%. USDJPY and JPY crosses – USDJPY closed the week near 112.50-75 support that was tested multiple times last week, but is once again rebounding overnight, while JPY crosses elsewhere continue to trade heavily, with the likes of AUDJPY, a traditional risk proxy, cementing the reversal back lower and GBPJPY closing the week near a significant zone of support into 148.50-149.00. Safe haven seeking in US treasuries at the long end of the curve are the key coincident indicator driving the JPY higher, with Friday’s weak risk sentiment driving fresh local lows in US long yields, with the 30-year T-bond yield at its lowest since January, below 1.75%. AUDUSD – the AUDUSD slide accelerated Friday in what looks like a capitulation ahead of tonight’s RBA meeting, where the feeling may be that there is a high bar for a surprise, given that the RBA has declared it would like to wait for the February meeting before providing guidance on its ongoing QE. Weak risk sentiment and uninspiring price action in commodities (with the partial exception of the very important iron ore price for the Aussie recently) are weighing and the price action has taken the AUDUSD pair to the pivotal 0.7000 level, an important zone of support and resistance both before and after the pandemic outbreak early last year. Crude oil (OILUKFEB22 & OILUSJAN21) trades higher following its longest stretch of weekly declines since 2018. Today’s rise apart from a general positive risk sentiment in Asia has been supported by Saudi Arabia’s decision to hike their official selling prices (OSP) to Asia and US next month. Thereby signaling confidence demand will be strong enough to absorb last week's OPEC+ production increase at a time when mobility is challenged by the omicron virus. For now, both WTI and Brent continue to find resistance at their 200-day moving averages, currently at $69.50 and $72.88 respectively. Speculators cut bullish oil bets to a one-year low in the week to November 30, potentially setting the market up for a speculative-driven recovery once the technical outlook turns more friendly. US natural gas (NATGASUSJAN22) extended a dramatic collapse on Monday with the price down by 7% to a three-month low at $3.84 per MMBtu, a loss of 31% in just six trading day. Forecasts for warmer weather across the country have reduced the outlook for demand at a time where production is up 6.3% on the year. A far cry from the tight situation witnessed in Europe where the equivalent Dutch TTF one-month benchmark on Friday closed at $29.50 while in Asia the Japan Korea LNG benchmark closed at $34. Gold (XAUUSD) received a small bid on Friday following the mixed US labor market report, but overall, it continues to lack the momentum needed to challenge an area of resistance just above $1790 where both the 50- and 200-day moving averages meet. Focus on Friday’s US CPI data with the gold market struggling to respond to rising inflation as it could speed up rate hike expectations, leading to rising real yields. A full 25 basis point rate hike has now been priced in for July and the short-term direction will likely be determined by the ebb and flow of future rate hike expectations. US Treasuries (IEF, TLT). This week traders’ focus is going to be on the US CPI numbers coming out on Friday, which could put pressure on the Federal Reserve to accelerate tapering as the YoY inflation is expected to rise to 6.7%. Yet, breakeven rates started to fall amid a drop in commodity prices, indicating that the market believes that inflation is near peaking despite we are just entering winter. It is likely we will continue to see the yield curve bear flattening, as the short part for the yield curve is adjusting to the expectations of more aggressive monetary policies, and long-term yields are dropping as economic growth is expected to slow down amid a decrease in monetary stimulus and the omicron variant. Last week, the 2s10s spread suffered the largest drop since 2012 falling to 74bps. The 5s30s spread dropped to 53bps. What is going on? COT on commodities in week to November 30. Hedge funds responded to heightened growth and demand concerns related to the omicron virus, and the potential faster pace of US tapering, by cutting their net long across 24 major commodity futures by 17% to a 15-month low. This the biggest one-week reduction since the first round of Covid-19 panic in February last year helped send the Bloomberg Commodity index down by 7%. The hardest hit was the energy sector with the net long in WTI and Brent crude oil falling to a one year low. Following weeks of strong buying, the agriculture sector also ended up in the firing line with broad selling being led by corn, soybeans, sugar and cocoa. Evergrande plunges 16% to new low for the cycle. The situation among Chinese real estate developers is getting more tense with Evergrande’s chairman being summoned by Guangdong government on Friday as the company is planning a larger restructuring with its offshore creditors. The PBOC has said that they are working with the local government to defuse risk from a restructuring and the regulator CSRC said over the weekend that risks into capital markets are manageable. This week another real estate developer Kaisa Group is facing a deadline on debt which will be critical for the Chinese credit market. US Friday data recap: Services sector on fire, November jobs report stronger than headlines suggest. The November ISM Services report showed the strongest reading in the history of the survey (dating back to 1997) at 69.1, suggesting a red-hot US services sector, with the Business Activity at a record 74.6, while the employment sub-index improved to 56.5, the highest since April. The November employment data, on the other hand, was somewhat confusing. Payrolls only grew 235k vs. >500k expected, but the “household survey” used to calculate the unemployment rate saw a huge growth in estimated employment, taking the overall employment rate down to 4.2% vs 4.5% expected and 4.6% in October. The Average Hourly Earnings figure rose only 0.3% month-on-month and 4.8% year-on-year, lower than the 0.4%/5.0% expected, though the Average Weekly Hours data point ticked up to 34.8 from 34.7, increasing the denominator. Twitter sees exodus of leaders. Part of Jack Dorsey stepping down as CEO at Twitter is a restructuring of the leadership group which has seen two significant technology leaders at engineering and design & research steeping down. The new CEO Agrawal is setting up his own team for Twitter which if done right could make a big positive impact on the product going forward. What are we watching next? Study of omicron variant and its virulence, new covid treatment options. Discovery of omicron cases is rising rapidly, with some anecdotal hopes that the virulence of the new variant is not high, but with significant more data needed for a clearer picture to emerge. Meanwhile, a new covid treatment pill from Merck (molnupiravir) may be available in coming weeks in some countries as it nears full approval. Next week’s earnings: The earnings season is running on fumes now few fewer important earnings left to watch. The Q3 earnings season has shown that US equities remain the strongest part of the market driven by its high growth technology sector. Today’s focus is on MongoDB which is expected to deliver 36% y/y revenue growth in Q3 (ending 31 October). Monday: Sino Pharmaceutical, Acciona Energias, MongoDB, Coupa Software, Gitlab Tuesday: SentinelOne, AutoZone, Ashtead Group Wednesday: Huali Industrial Group, GalaxyCore, Kabel Deutschland, Dollarama, Brown-Forman, UiPath, GameStop, RH, Campbell Soup Thursday: Sekisui House, Hormel Foods, Costco Wholesale, Oracle, Broadcom, Lululemon Athletica, Chewy, Vail Resorts Friday: Carl Zeiss Meditec Economic calendar highlights for today (times GMT) 0830 – Sweden Riksbank Meeting Minutes 0900 – Switzerland Weekly Sight Deposits 1130 – UK Bank of England’s Broadbent to speak 0330 – Australia RBA Cash Rate Target   Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple Spotify Soundcloud Sticher
Semblance of Stability Returns though Geopolitical Tensions Rise

Semblance of Stability Returns though Geopolitical Tensions Rise

Marc Chandler Marc Chandler 06.12.2021 12:39
December 06, 2021  $USD, China, Currency Movement, EU, Hungary, Italy, Russia Overview:  The absence of negative developments surrounding Omicron over the weekend appears to be helping markets stabilize today after the dramatic moves at the end of last week.  Asia Pacific equities traded heavily, and among the large markets, only South Korea and Australia escaped unscathed today.  Europe's Stoxx 600 is trading higher, led by energy, financials, and materials.  US futures are narrowly mixed.  Similarly, Asia Pacific bonds played a little catch-up with the large Treasury rally ahead of the weekend.  The US 10-year had approached 1.30% but is now up almost four basis points to almost 1.39%.  European yields are also a little firmer, though Italian bonds are outperforming after the pre-weekend credit upgrade by Fitch. The dollar is mixed.  The yen and Swiss franc are the heaviest, while the Scandis lead the advancers.  Among the emerging market currencies, most liquid and freely accessible currencies are higher, while India, Indonesia, and Turkey are trading lower.  The JP Morgan Emerging Market Currency Index has a four-week drop in tow and is starting the new week with a small gain.  Gold initially moved higher but is now little changed.  Iron ore and copper remain firm.  January WTI is trading firmly within the pre-weekend range, while natural gas, which collapsed by 24% in the US last week, extended its sell-off today.  European natural gas (Dutch benchmark) is trading lower after rising for the past five weeks.   Asia Pacific As tipped by Chinese Premier Li last week, the PBOC cut reserve requirement by 0.5%.  This frees up an estimated CNY1.2 trillion.  Many market participants had anticipated the timing to help banks pay back borrowing from the Medium-Term Lending Facility.  Banks owe about CNY950 bln on December 15 and another CNY500 bln on January 15.   Separately, several property developers have debt serving payments due and Evergrande is at the end of a grace period today.  Lastly, the US and a few other countries are expected to announce a diplomatic boycott of the Winter Olympics.  This is seen as largely symbolic as few diplomats were going to attend due to the severe quarantine imposed by Chinese officials.   China needs bargaining leverage if it is going to influence US policy.  It might come from an unexpected source.   While recent press reports focused on China's attempt to project its power into Africa, they have missed a potentially more impactful development.  Consider the Caribbean, which the US often acts as if it is theirs.  Barbados became a constitutional republic last week, though it is still a member of the UK Commonwealth.  The left-of-center government is friendly toward Beijing.  Under the Belt Road Initiative, Barbados and Jamaica have received several billion dollars from China.  Moreover, a recent US State Department report found that the two countries have voted against the US around 75% of the time at the UN last year.   This week, the regional highlights include the Reserve Bank of Australia (outcome first thing tomorrow in Wellington) and the Reserve Bank of India (December 8).  The RBA may revise up its economic outlook, yet, it is likely to continue to push against market expectations for an early hike.  The derivatives market appears to have the first hike priced in for late next summer.    India is expected to be on hold until early next year but could surprise with a hike.  China is expected to report trade figures tomorrow and the November CPI and PPI on Wednesday.  Lending figures may be released before the weekend.  Japan's highlights include October labor earnings and household spending tomorrow, the current account, and the final Q3 GDP on Wednesday.   The dollar's range against the yen on November 30 (~JPY112.55-JPY113.90) remains dominant.  It has not traded outside of that range since then.  The rise in US yields and equities has helped the dollar regain a toehold above JPY113.00.  The pre-weekend high was near JPY113.60, which might be too far today.  The Australian dollar traded below $0.7000 before the weekend and again today, but the selling pressure abated, and the Aussie has traded to about $0.7040. A band of resistance from $0.7040 to $0.7060 may be sufficient to cap it today.   The dollar has been in essentially the same range against the Chinese yuan for three sessions (~CNY6.3670-CNY6.3770).  If the dollar cannot get back above CNY6.38, a new and lower range will appear to be established.  The PBOC set the dollar's reference rate at CNY6.3702.  The market (Bloomberg median) had projected CNY6.3690.   Europe Germany's new government will take office in the middle of the week.  It has three pressing challenges.  First is the surge in Covid, even before the Omicron variant was detected.  Second, the economy is weak.  Last week's final PMI reading picked up some deterioration since the flash report and the 0.2 gain in the composite PMI more than 10.0 point fall in the previous three months. Third, today Germany reported dreadful factory orders.  The market had expected a slight pullback after the 1.3% gain in September.  The good news is that the September series was revised to a 1.8% gain.  However, this is more than offset by the 6.9% plummet in October orders.  If there is a silver lining here, it is that domestic orders rose 3.4% after falling in August and September.  Foreign orders plunged 13.1%, and orders from the eurozone fell by 3.2% (after falling 6.6% in September).  Orders outside the euro area collapsed by 18.1%.  The sharp drop in factory orders warns of downside risk to tomorrow's industrial production report.  Industrial output fell by 3.5% in August and 1.1% in September. Before today's report, economists were looking for a 1% gain.  Germany also reports the December ZEW survey tomorrow. Again, sentiment is expected to have deteriorated.  The third issue is Russia.  Reports suggest the US has persuaded Europe that Russia is positioned to invade Ukraine early next year.  US intelligence assessment sees Russia planning a multifront offensive.  Putin and Biden are to talk tomorrow.  Meanwhile, Putin makes his first foreign visit today in six months.  He is in India.  India is buying an estimated $5 bln of Russian weapons, including the S-400 anti-aircraft system that Turkey purchased to the dismay of Washington, which banned it from the F-35 fighter jet program.  India is a member of the Quad (with the US, Japan, and Australia), a bulwark against China.  A Russian official was quoted in the press claiming India sent a strong message to the US that it would not tolerate sanctions against it.  The regional alliances are blurry, to say the least. The US maintains ties with Pakistan.  India has had border skirmishes with China.  Russia and China have joint military exercises.   Before the weekend, Fitch upgraded Itay's credit rating one notch to BBB.  It cited the high vaccination rate, increased public and private spending, and confidence in the Draghi-led government's ability to spend the 200 bln euro funds from the EC prudently.  Recall that last week's composite PMI rose to 57.6 to snap a two-month decline.  The market (Bloomberg median) sees the Italian economy as one of the strongest in Europe this year, expanding around 6.3%.  The IMF sees it at 5.8%. The euro has been confined to about a quarter-cent range on both sides of $1.1300.  It is within the pre-weekend range (~$1.1265-$1.1335).  It was offered in Asia and turned better bid in the European morning.  Still, the consolidative tone is likely to continue through the North American session.  A move above the 20-day moving average (~$1.1335), which has not occurred for over a month, would help lift the technical tone.  Sterling tested $1.3200 before the weekend, and it held.  The steadier tone today saw it test the $1.3265 area.  It will likely remain in its trough today, though a move above the $1.3280-$1.3300 area would be constructive.   America Today's US data includes the "final" look at Q3 productivity and unit labor costs.  These are derived from the GDP and are typically not market-movers.  The US also reported that the October trade balance and improvement have been tipped by the advance merchandise trade report.  October consumer credit is due late in the session, and another hefty rise is expected ($25 bln after nearly $30 bln in September.  Consumer credit has risen by an average of $20.3 bln this year.  It fell last year and averaged $15.3 bln in the first nine months of 2019.  No Fed officials speak this week, and the economic highlight is the November CPI report at the end of the week.   Canada reports October trade figures and IVEY survey tomorrow.  The highlight of the week is the Bank of Canada decision on Wednesday.  It is not expected to do anything, but officials will likely be more confident in the economic recovery, especially after the very strong jobs report before the weekend.  The Canadian dollar's challenge is that the market has five hikes already discounted for the next 12 months.  Mexico reports November vehicle production and exports today.  The economic highlights come in the second half of the week.  November CPI on Thursday is expected to see the headline rate rise above 7%.  Last month alone, consumer prices are projected to have risen by 1%.  On Friday, Mexico is expected to report that industrial output rose by 0.9% in October after falling 1.4% in September.  Brazil reports its vehicle production and exports today and October retail sales on Thursday before the central bank meeting.  A 150 bp increase in the Selic rate, the second such move in a row, has been tipped and will put the key rate at 9.25%.  Ahead of the weekend, the IPCA measure of inflation is due.  It is expected to have ticked up closer to 11% (from 10.67%).  Lastly, we note that Peru is expected to deliver another 50 bp increase to its reference rate on Thursday, which would lift it to 2.5%.   The US dollar posted an outside up day against the Canadian dollar ahead of the weekend.  The risk-off mood overwhelmed the positive implications of the strong jobs data.  There has been no follow-through selling of the Canadian dollar today.  The pre-weekend US dollar low near CAD1.2745 is key.  Last Wednesday's range remains intact for the greenback against the Mexican peso (~MXN21.1180-MXN21.5150).  So far today, it has been confined to the pre-weekend range.   Initial support is seen near MXN21.16.  The cap around MXN21.50 looks solid.  Meanwhile, the US dollar closed above BRL5.60 for six consecutive sessions coming into today.   Disclaimer
Animal Spirits Roar Back

Animal Spirits Roar Back

Marc Chandler Marc Chandler 07.12.2021 16:47
December 07, 2021  $USD, Canada, China, Currency Movement, Germany, Hungary, Japan, Mexico, RBA, Russia, US Overview:  A return of risk appetites can be seen through the capital markets today, arguably encouraged by ideas that Omicron is manageable and China's stimulus.  Led by Hong Kong and Japan, the MSCI Asia Pacific rose by the most in three months, while Europe's Stoxx 600 gapped higher, leaving a potentially bullish island bottom in its wake.  US futures point to a gap higher opening when the local session begins.  The bond market is taking it in stride.  The US 10-year Treasury is slightly firmer at 1.44%, while European yields are 1-3 bp higher.  The dollar-bloc currencies and Norway are leading the move higher among most major currencies.  The yen and euro are softer.  Sterling struggles to sustain upticks. Among emerging markets currencies, the Turkish lira is bouncing, while most central European currencies are being dragged lower by the weaker euros.  The JP Morgan Emerging Market Currency Index is slightly higher after four consecutive losses.  Gold is trading within yesterday's narrow range.  Oil continues to recover, and the January WTI contract is up around 2.5% (after yesterday's 4.9% advance) and is above $71.50 a barrel.  US natgas prices dropped 11.5% yesterday and have come back firmer today, while the European benchmark (Dutch) is up 7% today (~+0.5% yesterday) to near last week's highs.  Iron ore prices jumped 7.7% today after 2.5% yesterday, perhaps encouraged by strong Chinese import figures.  Copper prices are also firm.    Asia Pacific The Reserve Bank of Australia stuck to its stance. It may take two years to reach the 2-3% inflation target, and the uncertainties surrounding the Omicron variant also favor a cautious approach. This was in line with expectations.  The swaps market still has about 75 bp of higher rates discounted next year.   The Australian dollar's gains reflect the risk-on mood.   Japan's economy is on the mend.  Household spending rose 3.4% month-over-month in October.  Paradoxically, outlays on medical care actually fell (-5.7%) year-over-year in October.  Meanwhile, Labor cash earnings rose by 0.2% year-over-year, the same as in September, but less than expected.  Households headed by a worker rose 0.5% year-over-year.   China's trade surplus fell to $71.7 bln in November from $84.5 bln in October.  The US accounted for a little more than 50% of the surplus (~$37 bln).  Exports rose by 22% year-over-year, less than the 27.1% increase in October.  But, what really stood out were China's imports.  They surged, jumping 31.7% from a year ago after a 20.6% increase in October.  Commodity imports were robust.  The 35 mln tons of coal imported was the most this year. Oil imports were at three-month highs.  Iron ore imports reached a 13-month high,  Gas purchases were the highest since January.  Copper imports appear to be a record.  Separately, China reported that the value of its foreign exchange reserves rose by a minor $4.7 bln to $3.222 trillion.  Economists (Bloomberg survey median) had expected around an $11 bln decline.   The dollar has forged what appears to be a solid base now around JPY112.55.  So far, today is the first session since November 26 that the greenback has held above JPY113.00.  It has been confined to a narrow range between JPY113.40 and JPY113.75.  The dollar looks poised to move higher but may stall around JPY114.00, where an option for around $865 mln expires today.  The Australian dollar rose about half of a cent yesterday and is up around another half-cent today to test $0.7100.  An option for A$1.04 bln expires today there ($0.7100).  It is also the (61.8%) retracement objective of last week's drop.  A move above there would target the $0.7130 area and possibly $0.7200.  The reduction in Chinese banks' reserve requirements and the divergence with the direction the Fed appears headed did not deter the yuan from strengthening.  The dollar held CNY6.38 yesterday and is near CNY6.3660 now.  The low for the year was set at the end of May near CNY6.3570.  The dollar's reference rate was set at CNY6.3738, a touch higher than the models (Bloomberg survey) projected of CNY6.3734.   Europe According to the proverb, for want of a nail, a kingdom was lost.  US intelligence warns that Russia is poised to invade Ukraine.  Beijing continues to act as a bully in the South China Sea.  US President Biden is hosting a "Summit for Democracy" December 9-10.   Reportedly 110 countries will be represented, even Taiwan, which the US officially does not recognize as a country.  All of the EU members have been invited but Hungary.  Hungary, like Poland, is in a serious fight with the EC over the rule of law.  It is being fined for failing to comply with the European Court of Justice over its harsh treatment of asylum seekers.  Poland, which is invited to the summit, is also being fined a record 1 mln euros a day for deviations from the EU standards of the rule of law.   Yet Hungary's exclusion is needlessly antagonistic.  Hungary will hold parliamentary elections in April (though possibly May), and the opposition is united behind the center-right Marki-Zay.  Most polls show him ahead of Orban.   It is an insult to the EU, and Orban used his veto to block the EU from formally participating and prevented it from submitting a position paper.  It is a vulnerable position for the US to be the judge and jury about democracy and the rule of law.   Laura Thorton, director of the Alliance for Securing Democracy of the German Marshall Fund of the United States, expressed shock and dismay in a recent Washington Post op-ed over developments in Wisconsin. She wrote, "If this [where the GOP is seeking to replace the bipartisan oversight of elections with just its party's control] occurred in any of the countries where the US provides aid, it would immediately be called out as a threat to democracy.  US diplomats would be writing furious cables, and decision-makers would be threatening to cut off the flow of assistance."  Separately, the US embassy in Tokyo warned Japan about "racially profiling incidents" following the closure of its borders to new foreign entries into the country.   The US response to the Russian aggression in Georgia in 2008 and the annexation of Crimea in 2014 was soft.  Despite bringing NATO to Russia's door in the Baltics, the US recognized by its actions that it is difficult to defend what Russia calls its near-abroad. Ukraine is different.  When Ukraine gave up its nuclear weapons, the Budapest Memorandum  (1994), Russia, the US, and the UK committed to respecting its independence and territorial integrity.  Russia clearly violated the agreement, but the US says it is not legally binding.  Nevertheless, reports indicate that the Biden administration is contemplating new sanctions against Russia and Putin's inner circle.  Reportedly under consideration is removing Russia from the SWIFT payment system and new sanctions of Russia's energy companies, banks, and sovereign debt.  In late April, the European Parliament approved a non-binding resolution to exclude Russia from the SWIFT if it attacked Ukraine.  Russia is a heavy user of SWIFT, as few foreign banks, including the Chinese, are willing to use Russia's own payment system.  After a dismal factory orders report, the market had been prepared for a poor industrial output report today.  Instead, Germany surprised with its strongest gain for the year.  Industrial output surged 2.8% in October.   It is only the third monthly gain this year.  Moreover, September's decline of 1.1% was halved to 0.5%.  It appears auto production (capital goods) may be behind the improvement in activity.  Separately, the ZEW survey was mixed.  The expectations component was stronger than expected, but still, at 29.9, lower than November's 31.7 reading.  The assessment of the current situation deteriorated sharply to -7.4 from 12.5.  It has been declining since September, but this is the lowest since June.  On November 30, the euro spiked higher and has subsequently worked its way lower.  Today, it reached almost $1.1250, its lowest level since November 30, low near $1.1235. The 20-day moving average (~$1.1320) continues to block the upside.  It has not closed above it for a little more than a month.  The low for the year so far was recorded on November 24 near $1.1185.  For its part, sterling remains in its trough. The low for the year was set on November 30, slightly below $1.32.  Before the weekend, it was in a roughly $1.3210-$1.3310 range and remains well within that range yesterday and today.  It has been blocked ahead of $1.3300.  There is an option for about GBP450 mln at $1.3250 that expires today.   America The US is expected to report that productivity fell in Q3 by 4.9% rather than the 5% that was initially reported.  Productivity increased by 2.4% in Q2 and 4.3% in Q1.  It averaged 2.6% last year and 2.3% in 2019.  Unit labor costs are the most holistic measure, including wages, benefits, and output.  Looking at a four-quarter moving average, unit labor costs rose 1.6% in 2018 and 1.45% in 2019.  They jumped to 6.25% last year and fell by an average of 0.85% in H1 21.  The initial estimate for Q3 was an 8.3% surge.   The US also reports the October trade balance.  The preliminary goods balance signaled a likely improvement from the $80.9 bln deficit in September.  The median forecast (Bloomberg) sees a deficit of slightly less than $67 bln.  Through September, the monthly average was nearly $71 bln, up from $53.3 bln in the same period last year and less than a $50 bln average in the first nine months of 2019. Late in the session, the US reports October consumer credit, and another substantial increase is expected.  It jumped almost $30 bln in September.  It has averaged $20.275 bln a month through September.  Last year was too distorted, but in the first three quarters of 2019, consumer credit rose by an average of $15.3 bln a month.    Canada reports its October merchandise trade figures today, ahead of the Bank of Canada meeting tomorrow  The median forecast in Bloomberg's survey call for a C$2.08 bln surplus, which, if accurate, would the be third largest surplus since 2008.  The June surplus was larger at C$2.26, as was the December 2011 surplus of C$2.12 bln.   Canada's goods trade balance through September swung into surplus with an average of C$703 mln.  In the same period in 2020, the monthly deficit averaged C$3.1 bln and  C$1.4 bln in 2019.  The merchandise surplus may be sufficient to lift the current account too.  Canada has been running a current account deficit since 2009.   The OECD forecasts a surplus this year of 0.3% of GDP and projects it to be in balance next year.  Canada and Mexico have expressed concerns about the credits for electric vehicles in the Build Back Better US initiative.  They claim it violates the USMCA.  Europe has expressed similar problems, and the EU Trade Commissioner Dombrovskis has reportedly sent a formal letter warning that the Biden administration's efforts may also violate WTO rules.  Meanwhile, there is talk that the initiative may be blocked this year.  If this is the case, the odds of passage next year seem even slimmer.  On a different front, Mexico's controversial energy reforms, which expand the state sector, over some objections by US energy companies, look to be delayed due to lack of support.  The US dollar posted an outside up day against the Canadian dollar before the weekend, despite Canada's strong employment report.  There was no follow-through yesterday, and the greenback recorded an inside day and settled on its lows.  The US dollar has been sold to around CAD1.2700 today.  Initial support is around CAD1.2675, but the more significant test is near CAD1.2640.  A break would strengthen the conviction that a high is in place.  Meanwhile, the greenback continues to consolidate against the Mexican peso.  It remains within the range set last Wednesday (~MXN21.1180-MXN21.5150).  Thus far today, it is holding above yesterday's low (~MXN21.1720), which was- above the pre-weekend low (~MXN21.1625).            Disclaimer
Alibaba Stock Price and Forecast: Why is BABA stock going up?

Alibaba Stock Price and Forecast: Why is BABA stock going up?

FXStreet News FXStreet News 07.12.2021 15:59
BABA stock rallies over 10% on Monday in broad rally. Chinese names have suffered as DIDI delisting hits sentiment. BABA and others rally on Monday as China cuts commercial bank reserve requirements. Chinese stocks are nothing if not volatile, and this continued on Monday with huge rallies in most names. The reason was that China cut the reserve requirement for commercial banks in an effort to try and pump liquidity into the system. This can be taken two ways, and investors chose to see the positives. China is struggling to contain problems in the banking and property sectors from spreading, and the travails of Evergrande Group have been well documented. Evergrande was due to pay $82.5 million on Monday, but we are still in the dark on whether it met this latest payment or not. Bloomberg is reporting that another Chinese developer, Kaisa Group Holdings, received a forbearance proposal from bondholders on Tuesday. A forbearance proposal would be a form of an agreed delay or reduction in repayments. If agreed by both bondholders and the company, it averts a formal debt default. BABA chart, 15-minute Alibaba (BABA) stock news BABA stock has been under pressure throughout 2021 as a wave of negative sentiment hit Chinese equities and in particular Chinese tech names. This was kickstarted by BABA itself as it had to shelve the proposed spin-off IPO of ANT Group late in 2020. China then began taking a more cautious approach to its tech sector as worries over the huge amounts of data generated by them escalated. Didi Group (DIDI) did manage to get its IPO off the ground in New York but now plans to delist to Hong Kong. Alibaba stock is down 47% so far in 2021 and 22% over the last month as the sell-off has accelerated. Alibaba (BABA) stock forecast Investors may rejoice at the current bounce in Chinese tech stocks, but this has all the makings of yet another dead cat bounce. Take a look at the monthly chart below. BABA has broken the huge $130 level, which was really the last hope of support. Now it is lookout below until $100. The longer-term view is strongly negative until $169 is broken to the upside. Alibaba chart, monthly Shorter-term traders will be aware of the 9-day moving average offering resistance at $127.56. The MACD, stochastics and RSI all remain in bearish territory. The 15-minute chart does show short-term support at $112 with a large amount of volume at that level on Friday that provided a base for Monday's rally. This may carry on for Tuesday as risk assets are due to bounce, but $130 will likely cap any further gains. Alibaba daily chart above and the 15-minute chart below. The 15-minute shows the large support volume at $112.  
Market Quick Take - December 8, 2021

Market Quick Take - December 8, 2021

Saxo Bank Saxo Bank 08.12.2021 09:06
Macro 2021-12-08 08:30 6 minutes to read Summary:  Equity markets blasted sharply higher yesterday as the market rushed to erase the concerns triggered by the omicron virus outbreak, as well, perhaps as due to the recent clear shift into a more hawkish stance from the US Federal Reserve. Overnight, the Chinese renminbi strengthened to match its strongest level this year versus the US dollar as China has been sending stronger signals that it is set to stimulate growth next year. What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - global equities were significantly lifted yesterday due to more positive evidence over the Covid-19 variant Omicron with Nasdaq 100 futures up 3.1% and extending the momentum today in early European trading hours. This was the biggest single day rally in US technology stocks in nine months. The key resistance level is at the 16,435 level which was the local resistance level a couple of times back in late November. USDCNH – The USDCNH rate has plunged to match the lows of the year just above 6.35 after yesterday saw the USD weakening sharply on a resurgence of risk sentiment. A break of the lows would shift the focus to the post-2015 foreign exchange regime shift lows of 2018. It is notable that China has maintained a strong renminbi policy even as the USD has strengthened recently amidst the more hawkish Fed shift and despite weak EM currencies elsewhere. The stronger price action since yesterday may be on hopes that China’s growth is set to pick up on its new apparent shift toward more stimulus and as omicron covid news has eased some of the initial uncertainties. USDCAD – the USD has turned lower on the resurgence of risk appetite after initial blows from the omicron variant news, that particularly hit oil prices hard, taking CAD and other oil-sensitive currencies down with it. The last two sessions have seen a sharp repricing of USDCAD from above 1.2800 to well below 1.2700 yesterday, ahead of today’s Bank of Canada meeting (previewed below). Whether USDCAD can continue to erase the rally off the sub-1.2300 lows will likely depend on the degree to which global markets can get back on track with pricing a stronger economic outlook and a full return of the commodities bull market, led by oil prices. The Bank of Canada will likely fulfill market expectations of hawkish guidance as it is likely warming up for a January hike. Gold (XAUUSD) trades higher for a second day but has so far found resistance at the 200-day moving average, currently at $1792.50. A general improvement in risk appetite has supported a steady but so far unimpressive recovery from last week’s slump. Focus on silver (XAGUSD) which is also trying to establish support at $22 following its recent 13% drop. Focus on omicron developments through its indirect impact on bonds and the dollar. Copper (COPPERUSMAR22) meanwhile remains stuck in a relatively tight range, but supported by Chinese trade data which showed a strong pickup last month. The metal’s loss of momentum during 2H-21 has seen the speculative long being cut to near an 18-month low. Crude oil (OILUKFEB22 & OILUSJAN22) trades lower after an industry report pointed to the biggest gain in US stockpiles of oil and products since February. Overall, the market has put in a strong performance since last week's slump in the belief the omicron variant is unlikely to derail the global recovery. Flare-ups around the world resulting in temporary lockdowns is however likely to prevent the market from returning to pre-omicron levels at this point. The API last night reported a 3.1-million-barrel build in oil stocks with a 2.4 million rise at Cushing helping send the WTI prompt spread down to just $0.2/b after trading close to $2 in early November. The EIA in its Short-term energy outlook lowered its 2022 Brent average price to $70 as the agency still sees a surplus emerging next year. US Treasuries (IEF, TLT). The front part of the US yield curve rose yesterday, with 3-year yields breaking above 1% ahead of the US treasury auction. The move helped to attract high demand from investors. The 3-year note sale was priced at 1%, the highest auction yield since February 2020. Following the auction, yields fell slightly with news concerning the debt ceiling contributing to this trend. The house passed a bill that makes the debt ceiling faster to raise, it will be necessary to have a simple majority vote at the senate. It decreases the chances of default in mid-December easing the compressing forces on long-term yields. However, the expectations of tighter monetary policies continue to put upward pressure on short-term yields, while long-term yields remain compressed by Covid distortions. Therefore, we continue to see scope for a bear flattening of the yield curve. Today, the focus is going to be on the 10-year US Treasury auction. What is going on? Pfizer covid vaccine offers partial protection from omicron variant, according to early study. Researchers in South Africa saw a very large reduction in the production of antibodies for patients who had received two doses of the Pfizer vaccine who were infected with the omicron variant of covid, suggesting that immune protection is far lower, but not completely lost. US President Biden warns Russian President Putin on Ukraine attack – in a video conference call lasting some two hours yesterday, Biden said that the US and its allies would support Ukraine with “strong” measures if attacked, both in the form of “defensive material” and economic measures while Putin blames NATO and its overtures to Ukraine for the tense situation. Sources indicate that the US could push to have the Nord Stream 2 pipeline shut off if Russia invades Ukraine. US House Approves Bill that would allow Senate to raise debt ceiling with a simple majority vote. This avoids the prospect of brinksmanship over the debt ceiling issue, as the Democrats can pass the vote in the Senate without Republican help. The debt ceiling issue was set to hit crunch time as early as next week and could theoretically have raised the specter of a US default. How high the Democrats could raise the debt ceiling via this process is not yet known. HelloFresh warns of lower operating profit in 2022. The fresh meal-kit company says that it sees FY22 adjusted EBITDA of €500-580mn vs est. €630mn expected by analysts driven by rising input costs. What are we watching next? Today’s Bank of Canada meeting, which is likely to tilt hawkish. With the US Fed having made a clear switch to focusing on inflation fighting, and after Bank of Canada governor Macklem penned an op-ed in the Financial Times on the need for a being ready to respond with the appropriate tools if inflation proves more sustained, the market is leaning for more hawkish Bank of Canada guidance at today’s meeting at minimum, with a minority of observers actually looking for a rate hike at today’s meeting, though most expect a “set-up” meeting for a rate hike in January. This week’s earnings: Today’s focus is UiPath which is part of the bubble stocks segment and the meme stock GameStop as both stocks are a good barometer on risk sentiment. Analysts expect UiPath to deliver 42% revenue growth in Q3 (ending 31 October). Wednesday: Huali Industrial Group, GalaxyCore, Kabel Deutschland, Dollarama, Brown-Forman, UiPath, GameStop, RH, Campbell Soup Thursday: Sekisui House, Hormel Foods, Costco Wholesale, Oracle, Broadcom, Lululemon Athletica, Chewy, Vail Resorts Friday: Carl Zeiss Meditec Economic calendar highlights for today (times GMT) 0815 – ECB President Lagarde to speak0830 – ECB’s Guindos to Speak1310 – ECB's Schnabel to speak1500 – Canada Bank of Canada Rate Decision1500 – US JOLTS Job Openings survey1530 – US Weekly DoE Crude Oil and Product Inventories2130 – Brazil Selic Rate Announcement2205 – Australia RBA Governor Lowe to speak0001 – UK Nov. RICS House Price Balance0130 – China Nov. CPI / PPI   Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple Spotify Soundcloud Sticher
Markets Calmer, Awaiting Fresh Incentives

Markets Calmer, Awaiting Fresh Incentives

Marc Chandler Marc Chandler 08.12.2021 13:51
December 08, 2021  $USD, Bank of Canada, Currency Movement, Germany, India, Japan, Poland, Russia Overview:  The capital markets are calmer today, and the fear that was evident at the end of last week remains mostly scar tissue. Led by gains in Japan, China, Australia, New Zealand, and India, the MSCI Asia Pacific Index extended yesterday's gains.  Europe's Stoxx and US futures are firm.  The US 10-year yield is softer, around 1.43%, while European yields are mostly 1-2 bp lower.  The Norwegian krone and euro lead major currencies higher against the greenback, but the New Zealand dollar and sterling are underperforming. Most of the emerging market currencies are enjoying an upside bias. The Turkish lira is giving back a little more than half of yesterday's 2.25% bounce.  Gold is edging higher and is near the 200-day moving average (~$1792).  January WTI is off $1 around  $71 after rallying around 8% in the past two sessions.  API reported a three million barrel drawdown in inventories but a big jump in Cushing.   US natural gas is consolidating and paring Monday's 11.5% drop.  Europe (Dutch) natural gas prices are rising for the third consecutive session and around 10% this week.  Iron ore has extended this week's rally and is at the highs since October.  Copper is flat.   Asia Pacific Australia has joined the US in the diplomat boycott of the winter Olympics in Beijing.  South Korea and Japan have not formally decided yet.  China's quarantine policies made it difficult for many diplomats to attend in any event, and many apparently will not attend.  Beijing threatens unspecified retaliation.   Japan reported an increase in its October current account, rising to JPY1.18 trillion from JPY1.03 trillion in September.  The swing in the trade balance from a JPY230 bln deficit to a JPY167 bln surplus more than accounted for it.  Japan also revised Q3 GDP to a 0.9% contraction (from -0.8%).  The composition changed.  Consumption was a greater drag (-1.3% quarter-over-quarter rather than -1.1%), and inventories contributed less (0.1% vs. 0.3%) and net exports were flat (rather than contribute 0.1 percentage points).  Business investment was less a drag (-2.3% vs. -3.8%).  Still, there is reason to be more optimistic about the outlook for the world's third-largest economy.  Social restrictions have eased, the vaccination rate is among the best, and the government is providing fresh stimulus.  The Kishida government is expected to finalize its fiscal efforts toward the end of the week. A key issue is the tax incentive (subsidy) for companies that boost wages by 3%, which has not happened since 1997.   India left its key rate corridor on hold today.  The repo rate is 4%, and the reverse repo rate is 3.35%.  Some observers saw the possibility of a hike in the reverse repo rate.  The monetary policy committee voted unanimously to keep the repo rate steady.  The reverse repo rate is a broader issue decided by the central bank, not the MPC.  The emergence of Omicron may have encouraged the central bank to maintain a steady hand, while the cut in the excise duty and VAT for petrol and diesel may help ease price pressures.  It made some technical changes in its liquidity management, which some see as a prelude to a hike in February 2022, when the central bank meets again.   The dollar is consolidating in a narrow 30-point range above JPY113.35 against the Japanese yen.  Yesterday's high was just below JPY113.80.  An option for about $550 mln will roll off today at JPY114.25, while there is a nearly $1.5 bln option at JPY114.00 that expires tomorrow.  The JPY114 area also holds the 20-day moving average, which the dollar has not closed above since November 25. The Australian dollar began the week flirting with the $0.7000 area.  It is rising for its third consecutive session and has reached almost $0.7145 today.  Last week's highs were set a little above $0.7170.  Despite words of caution by Chinese officials and the cut in reserve requirements, the yuan continues to march higher.  It is at new three-year highs today.  The dollar has been sold down to almost CNY6.3455.  Local dollar bonds and bonds below investment grade have rallied as officials signal a focus on supporting the economy.  Today the rate for re-lending to rural and small businesses was cut by 25 bp.  The PBOC has also been generous with its liquidity provisions.  The reference rate for the dollar was set at CNY6.3677, a little firmer than expected (CNY6.3665, Bloomberg survey).    Europe An era is formally over today as Germany's new government takes office.  The challenges it faces are profound.  The virus was surging even before the Omicron variant was detected.  The economy has been hobbled.  Inflation is high (6% on the harmonized measure in November) and without the fiscal stimulus seen in the US, where CPI is up 6.2% from a year ago (October).  This year, the German deficit is estimated to be about 5.8% and seen falling to 2.5% next year.  The US deficit is around 12.5% this year and is expected to fall to around 6.5% in 2022. Russia is amassing troops, and fears that it will invade Ukraine early next year are running high.  Germany reportedly will nix the controversial Nord Stream II pipeline if Russia carries through with its threat as part of the economic sanctions being considered.  Italy's Draghi has had a bit of a honeymoon, but that will change.  Two of the three largest unions will strike on December 16 to protest Draghi's budget, which must be passed by the end of the month.   Moreover, the selection of a new Italian president in January may mark the beginning of the political process that will lead to a new parliamentary election by the middle of 2023.  The president of Itlay is chosen by the Italian Parliament and regional representatives.  The current president, Mattarella, has declined to run for a second term.  Draghi does lead any political party, but the latest surveys show the center-left Democratic Party is in first place, polling a couple percentage points higher than it got in the last election at 21.4% support.  The Brothers of Italy on the right are in second place with slightly less than 20% support.  The Five Star Movement has seen its fortunes slip to about 15%.  Poland's central bank is set to hike its base rate today.  It will be the third consecutive increase.  The base rate was slashed from 1.50% last year to 10 bp.  It was hiked by 40 bp in October and 75 bp last month to stand at 1.25%. The headline CPI surged from 2.4% at the end of last year to 7.7% in November. Czech and Hungary have been more aggressive in raising rates.  Last month, Czech's central bank delivered a 125 bp increase to lift its key two-week repo rate to 2.75%.   It was at 25 bp to start the year.  Its CPI is near 6%.  Hungary has raised its base rate every month since June and taken it from 60 bp to 2.10%.  It has also taken its one-week deposit rate from 75 bp to 3.10%, with 130 bp delivered in the past three weeks. Earlier today, it reported that CPI rose to 7.4% last month from 6.5%.  Most look for a 50 bp increase from Poland's central bank today.   The euro briefly dipped below $1.1230 yesterday but recovered in the North American afternoon.  It is extending the recovery today and traded $1.1300 in the European morning.  The $1.1310-$1.1320 offers nearby resistance.  The UK government is being embarrassed by reports about its holiday party a year ago in violation of the social restrictions in place at the time.  It adds to the sleaze factor that has weakened it.  The latest polls show that the Labour Party is extending its lead.  Also, ideas that the BOE could raise rates next week have diminished and been pushed into next February.  Sterling is heavy, near $1.3200.  We have warned of near-term risk toward $1.3165, the (38.2%) retracement objective of the rally from the March 2020 low near $1.14.   America A deal appears in the works to lift the US debt ceiling.  The maneuver requires 60 votes to allow the debt ceiling to pass with a simple majority.  The Republican leadership appears willing to go along with this.  It will likely set a new precedent that will be used and possibly expanded when control of Congress changes.  PredictIt.Org shows that the Republicans are favored to win control of both houses in next year's mid-term election.   The US calendar today features the JOLTS report on job openings.  The week's highlight, the November CPI, is out on Friday, and both the headline and core rates are expected to accelerate.  Fed officials are in the blackout period ahead of next week's FOMC meeting.  Today's North American feature is the Bank of Canada meeting.  No one expects a change in rates.  It is more about the rhetoric.  Despite the uncertainty surrounding the Omicron variant, Bank of Canada officials are likely to be more confident about the strength of the recovery.  Last week's jobs data adds to the positive impulses.  Moreover, the government is providing more fiscal support.  The biggest challenge is that the market has discounted five hikes over the next 12 months.  This is aggressive and difficult for the central bank to get ahead of market expectations. Even after the strong Canadian jobs data at the end of last week, the US dollar closed firmly above CAD1.28, showing the Loonie's vulnerability to the risk-off wave.  However, as cooler heads have prevailed, the Canadian dollar has bounced back.  The US dollar closed below the 20-day moving average yesterday (~CAD1.2670) for the first time in a month and was sold to about CAD1.2620 today. The (38.2%) retracement of the greenback's rally since the October 21 low (below CAD1.23) is found near CAD1.2640. The next retracement (50%) is around CAD1.2570.  Initial resistance now is likely by CAD1.2680.  The greenback also closed below its 20-day moving average against the Mexican peso yesterday for the first time since November 9.  It has slipped below MN21.00 today for the first time in about two-and-a-half weeks.  With today's loss, the US dollar has retraced (61.8%) of its rally from November 9 low (~MXN20.2750). The move seems exaggerated, and consolidation is likely.  Nearby resistance is seen in the MXN20.05-MXN20.10 area.  Disclaimer
The anatomy of Fed tapering is different this time

The anatomy of Fed tapering is different this time

Peter Garnry Peter Garnry 08.12.2021 14:20
Equities 2021-12-08 14:00 8 minutes to read Summary:  Growth and bubble stocks celebrated its best day in nine months yesterday on good news about the Omicron variant, but the true underlying risk in the form of higher interest rates has not gone away. The Fed has acknowledged inflation which will give it less flexibility should tapering cause some wave splash in equities. Interest rate sensitivity will be a key theme in 2022 for equities and especially growth and bubble stocks. For those growth companies that can lift expectations for operating margin trajectory can mitigate the negative impact from higher interest rates, but those growth companies that fail to lift profitability will likely experience a tough 2022. Bubble stocks are back on positive Omicron news It was a blockbuster equity session like we have not seen in nine months with our NextGen Medicine, E-commerce, and Bubble Stocks baskets gaining between 5% and 6.6%. The culprit was of course the continued positive news flow suggesting that the new Covid-19 variant Omicron is less virulent than feared and today Pfizer announced that three shots with their vaccine protect against Omicron. Does that change the overall concern for growth and especially bubble stocks? In our recent equity note Interest rate sensitivity is back in town haunting technology stocks we show quantitatively how the Nasdaq 100 Index (US technology stocks) is significantly more interest rate sensitive than the S&P 500 Index and STOXX 600 Index (see chart below). This interest rate sensitivity is key to understand the underlying risk in growth and especially bubble stocks, and the risk of higher interest rates has gone away. The Fed will have less flexibility this time In fact the Fed has acknowledged that inflationary pressures are more rooted and broad based, and of concern for US households seeing their purchasing power declining. The Fed has three times since early 2013 tried to taper its bond purchases all with negative impact on financial assets. Every time markets hit a big enough pain point, the Fed reversed and restarted quantitative easing. This could be done because inflation expectations were low and well anchored. But fast forward and today’s inflationary outlook is very different and the Fed might not be in a position where it can go back to expanding the balance sheet. Tapering will be accelerated in the coming months and then rate hikes are coming and if the economy or financial markets are deteriorating the Fed might have to remain tight to control inflation. As we have said many times the past couple of months investors must balance their portfolios before the tighter monetary policy cycle kicks properly into gear. Investors should reduce exposure to growth and bubble stocks, while increasing exposure to themes that can provide some cover during inflationary pressures. The themes we think will do well during inflationary periods are mega caps (Microsoft’s recent price hike shows why), semiconductors, logistics, financial trading firms (bet on volatility), cyber security (business necessity), and the commodity sector. The fact that mega caps have reached unimaginable market power and are hugely profitable is bad for the overall economy, but it is likely going act as a cushion for the equity market when interest rates start rising. The chart below shows another important aspect of markets that we need to be aware of. The decade of the 2010s was the best decade in terms of earnings growth adjusted for inflation in the S&P 500 since WWII. It explains the multiple expansion under lower interest rates, but it also explains the rise of passive investing as the rapid earnings growth has lifted all boats. The 2010s is unlikely be repeated in the current decade and a higher inflationary outlook will likely give rise to a different investing climate in equities and active strategies might stage a big comeback. Higher operating margin will differentiate growth stocks in 2022 We recently modeled a growth stock which had a price implied expectation of four years into the future, meaning that the market value was derived by extrapolating consensus expectations of growth and operating margin until 2025. The interesting part of this analysis is to find out which parameter gives rise to the biggest change in market value. In this case it was not revenue growth unless it went down a lot, which would only happen under a recession scenario. An upside change to operating margin expectations drives a rather large change in value; in other words, growth companies that can raise operating margin faster than expected will get rewarded. But the most sensitive parameter to the market value was the interest rate. By moving up the 10-year interest rate by 100 basis point the company’s value fell 26% because the higher interest rate impact financing costs on debt and the cost of equity. The example above provide a glimpse into the important battleground in equities in 2022. Higher interest rates because of higher inflation combined with the fiscal drag will create an environment with higher discount rate on cash flows while likely lower overall growth. This will penalize a lot of growth and bubble stocks, these companies can only mitigate this impact by raising operating margin beyond current expectations. If they do not manage to do that, then we could see great losses in 2022 in these pockets of the equity market.
Oil influences FTSE 100 as it reaches 7611 GBP, USDJPY chasing 115.00

Oil extends recovery ahead of DoE inventory report

Walid Koudmani Walid Koudmani 08.12.2021 12:18
Oil prices are attempting to extend the recent upward move after dropping to multi month lows following news of the most recent covid variant. The market was initially shaken by this as it brought the potential for further travel restrictions, which along with several other factors, could have had a disastrous effect on the demand for oil as we already saw during previous lockdowns. Recent optimism has helped drive oil higher but as the price has now found itself in a short term consolidation range, today’s DoE inventory reports could shed some light on the ongoing supply and demand situation within the world's largest economy. If the report were to point to an unexpected increase, we could be seeing some pressure ease off while a bigger than expected drop in stocks could once again lead to supply concerns and influence sentiment in the short term. TUI report shows sustained growth despite global uncertainty Today’s TUI report showed encouraging results as the company was able to significantly improve its financial performance while it also attempted to recover from the impact of the pandemic. Investors could also be reassured by the company’s plans moving forward and by it’s mid to long term vision in which it will prioritize cash management, drive operating effectiveness and reduce debt to improve its balance sheet. While it remains to be seen if the company will manage to execute its plan fully, some steps taken this far could inspire optimism in some as general sentiment continues to improve.
What Happens After a Bullish Stampede?

What Happens After a Bullish Stampede?

Przemysław Radomski Przemysław Radomski 08.12.2021 15:14
  The bulls pumped up the market, but with fundamentals deteriorating and corporations largely responsible for the spike, regular investors will be left holding the bag. With investors betting on a Santa Clause rally despite the deteriorating fundamentals, the S&P 500 helped the GDXJ ETF (proxy for junior mining stocks) outperform on Dec. 7. However, with short-covering and corporate buybacks primarily responsible for the daily spike, another ‘Minsky Moment’ could be on the horizon. To explain, I wrote on Nov. 19: While European markets have largely ignored the recent coronavirus spikes, a sharp sell-off could be the spark that lights the S&P 500’s correction. To explain, the DAX 30 Index (Germany) and the CAC 40 Index (France) both closed slightly lower on Nov. 18. However, prior to Nov. 18, the DAX 30 had closed in the green for 13 of the last 15 trading days, and one-upping its European counterpart, the CAC 40 had closed in the green for 15 of the last 16 trading days. On top of that, the CAC 40 had an RSI (Relative Strength Index) north of 80, while the DAX 30 had an RSI north of 75. As a result, both indices are materially overbought at a time when Germany is implementing new restrictions. Thus, if a Minsky Moment strikes in Europe, don’t be surprised if the negativity cascades across the Atlantic. To that point, after volatility erupted on cue, the DAX 30 suffered an intraday peak-to-trough decline of 7.8%, the CAC 40 dropped by 7.3%, and the S&P 500 dropped by 5.2%. Please see below: However, with overzealous equity bulls back at it again on Dec. 7, the PMs benefited from the risk-on sentiment. However, with the fundamental problems still present, investors may have set themselves up for more disappointment. To explain, with hedge funds increasing their short bets a little too late, Goldman Sachs Prime Brokerage reported that last week, “US equities on the GS Prime book made up more than 85% of the global $ net selling (-1.4 SDs), driven by short sales and to a lesser extent long sales (9 to 1).”  In a nutshell: hedge funds increased their short bets at the worst possible time. Please see below: Thus, with the Dec. 7 rally driven mainly by a reversal of these positions, the profound short squeeze helped uplift the PMs. For example, Bank of America data shows that last week’s corporate buybacks were the highest weekly total since March. And by repurchasing nearly $3.4 billion of their own stock (focus on the first blue column from the left), their bids helped calm the S&P 500’s selling pressure. Please see below: What’s more, while Bank of America said that hedge funds and retail investors somewhat bought the dip last week (though, they’re still net-sellers over the last four weeks), corporations did much of the heavy lifting.  As a result, with retail investors running out of gas and hedge funds mainly closing out their shorts on Dec. 7, the S&P 500 should resume its correction. More importantly, though, mining stocks’ recent strength should wilt away as the drama unfolds.  Please see below: And now for the grand reveal: corporations' buyback blackout period begins on Dec. 10. And since they can't repurchase more shares until the New Year, the elephant in the room won't be able to support the S&P 500. Likewise, after hedge funds covered their shorts on Dec. 7, short-covering won't be able to support the S&P 500 either. As a result, mining stocks should suffer if the negativity resurfaces over the next few weeks. Please see below: To explain, the red line above tracks the hourly movement of the S&P 500, while the gold line above tracks the hourly movement of the GDXJ ETF. As you can see, the junior miners often follow in the S&P 500’s footsteps. And with the S&P 500 setting itself up for another drop, the GDXJ ETF likely won’t be far behind. To that point, with the headline Consumer Price Index (CPI) scheduled for release on Dec. 10 and the Fed’s next monetary policy meeting scheduled for Dec. 14/15, sources of volatility will arrive at a time when corporations are stuck on the sidelines.  For context, I wrote on Nov. 12: I’ve highlighted on several occasions how the Commodity Producer Price Index (PPI) often leads the following month’s headline CPI. And after the former increased by 2% month-over-month (MoM) on Nov. 9 – which is a material MoM increase – and by 22.2% YoY (a new 2021 high), it implies a headline CPI print of roughly 5.75% to 6.25% when the data is released on Dec. 10. Please see below: To explain, the green line above tracks the YoY percentage change in the commodity PPI, while the red line above tracks the YoY percentage change in the headline CPI. If you analyze the relationship, you can see that the pair have a close connection. In addition, after expectations for September were pulled forward to July, and then expectations for July were pulled forward to June, now, the probability of a Fed rate hike in May 2022 has reached ~69%. Please see below: Also noteworthy, St. Louis Fed President James Bullard said on Dec. 3 that “the danger now is that we get too much inflation.... It's time for the [Fed] to react at upcoming meetings.” He added: “the inflation numbers are high enough that I think [ending the taper by March] would really help us to create the optionality to do more if we had to, if inflation doesn't dissipate as expected in the next couple of months.” For context, Bullard reiterated that he expects two Fed rate hikes in 2022. The bottom line? While the bulls stampeded through Wall Street on Dec. 7, things aren’t as rosy as they appear. And while the PMs benefited from the renewed optimism, their tepid rallies are even more fragile. Moreover, with another inflation print on the horizon and the FOMC’s Dec. 15 decision including its Summary of Economic Projections, the hawkish revelations could rattle the financial markets. And with corporate buybacks starting their holiday vacation on Dec. 10, stock market investors are on their own to navigate what comes next. In conclusion, the PMs rallied on Dec. 7, as risk-on sentiment reigned supreme. However, with the S&P 500 rallying by more than 2% and WTI rallying by nearly 4%, the PMs’ daily upswings were relatively muted. As a result, precious metals investors sense that caution is warranted. And with their trepidation a sign of heightened anxiety, they likely realize that going long the PMs involves much more risk than reward. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Markets Turn Cautious Ahead of Tomorrow's US CPI

Markets Turn Cautious Ahead of Tomorrow's US CPI

Marc Chandler Marc Chandler 09.12.2021 12:34
December 09, 2021  $USD, Brazil, Canada, China, Currency Movement, Germany, Japan, Portfolio flows, UK Overview: The euro has come back offered after its seemingly inexplicable advance yesterday.  The dollar is firmer against most major currencies today, with the yen an exception after JPY114.00 held on yesterday's advance.  Most emerging market currencies are also softer, with a handful of smaller Asian currencies proving a bit resilient.  Most large bourses advance in the Asia Pacific region, except Japan and Australia.  Europe's Stoxx 600 is steady after retreating late yesterday while US futures are pointing to a softer opening.  After rising for the past three sessions (~18 bp), the yield of the 10-year US Treasury is consolidating by hovering a little below 1.5%.  European yields are 3-5 bp softer.   Gold is little change.  This week's quiet tone contrasts with the sharp moves in Bitcoin and Ethereum.  Oil is consolidating after the three-day advance that lifted January WTI by around 8.5%.  US and European natural gas is also softer after the rally over the last few days.  Iron ore, which rallied over 10% in the first two sessions this week, edged lower yesterday and is off 3% today.  Copper's three-day rally is in jeopardy.   Asia Pacific The number of countries participating in a diplomatic boycott of the Beijing Winter Olympics is growing.  In addition to the US, Lithuania, Australia, New Zealand, Canada, and the UK have joined.  While it may annoy Chinese officials, it is symbolic.  Given Chinese quarantine protocols, many diplomats were not going to attend in the first place.  Also, the impact on China's human rights will likely be negligible.  The moral righteousness is signaling to domestic constituencies.  Yet, treatment of the Peng Shuai and the jailing of reporters needless antagonized the already precarious situation.  China's consumer inflation rose less than expected while producer prices rose more.  Owing to a jump in vegetable prices (30.6%), November CPI rose 2.3% from a year ago. The median forecast (Bloomberg survey) was for a 2.5% increase.  It is the fastest pace since August 2020. The decline in pork prices (-32.7% year-over-year) is slowing.  Excluding pork, the CPI would have risen by 3%.  Service prices remain soft.  Excluding food and energy, the core CPI is up 1.2% over the past year (1.3% previously).  Producer price inflation slowed from 13.5% in October to 12.9% in November.  Economists had forecast a 12.1% pace.  Recall officials moved to boost supplies, including coal, helping to ease the strong upside pressures.   Officials have moved to a more pro-growth stance, which means that inflation will not stand in the way of further easing monetary policy (via reserve requirements even if not interest rates) next year. Meanwhile, Evergrande and the Kaisa Group have formally missed debt-servicing payments on dollar obligations. Still, unlike the end of the property bubble in the US and Europe, China is forcing banks to continue to lend. This keeps the proverbial treadmill going.   The lending figures for November, released today, illustrate it.  New yuan loans, which track bank lending, rose by 50%+ to CNY1.27 trillion from CNY826 bln in October.  Aggregate financing, which adds shadow banking activity to bank lending, rose to CNY2.61 trillion from CNY1.59 trillion.  Note that just before publishing this report, the PBOC announced a two percentage point hike in the reserve requirement for foreign currency deposits.  This will likely weigh on the yuan, initially.    Japanese weekly portfolio flows were unusually large last week.  Data from the Ministry of Finance showed that Japanese investors were large sellers of foreign bonds for the second consecutive week.  The JPY1.18 trillion in sales followed the divestment of JPY1.34 trillion the previous week. It was the most selling in a two-week period since February.  From a high level, most of the selling last week did not require net yen buying as Japanese investors essentially shifted into foreign equities, snapping up JPY1.2 trillion.  This is the most since the time series began in 2005.  Separately, foreign investors bought JPY2.0 trillion of Japanese bonds, which appears to be the second-highest on record (after the JPY2.57 trillion bought in early July).   For the third consecutive week, foreign investors were small sellers of Japanese shares.  The dollar approached JPY114.00 yesterday and was turned back, falling to JPY113.35 today.  The JPY114 area is "defended" by a $2.2 bln option at JPY114.10 that expires today and a $1.15 bln option at JPY114.25 that expires tomorrow.  A break of JPY113.25-JPY113.35 could signal a test on JPY113.00, but the market will likely be cautious ahead of tomorrow's US CPI report.  The Australian dollar's recovery faltered earlier today slightly above $0.7185, the 20-day moving average, which it has not traded above since November 4.  The first retracement (38.2%) of this week's bounce is near $0.7115, but initial support is seen in the $0.7140 area.  The greenback edged slightly lower against the Chinese yuan (~CNY6.3430) before steadying and turning marginally higher.  It is caught between two large options expiring today.  One set is for around $2.5 bln at CNY6.34, and another set is for about $950 mln at CNY6.35.  The PBOC's reference rate for the dollar today (CNY6.3498) was the largest gap with the median projection (Bloomberg, CNY6.3467) since the middle of October.   Europe Germany's October trade figures are maybe too dated to have much market impact, but the growth of imports and exports is a constructive development.  The 4.1% rise in exports, the most since July 2020, were well above expectations, as was the 5% jump in imports (most since August 2020).  For Germany, it translates into a smaller than expected trade surplus (12.8 bln euros).  The monthly average surplus this year through October is 15.5 bln euros, which is a little above the average for the same period last year (14.4 bln euros), but off average in 2019 (through October) of 19 bln euros.   On the heels of "party-gate," UK Prime Minister Johnson has announced Plan B in the face of the new infection surge that calls for people to work from home again.  It has created much furor. Businesses have called for more government support, and unions want the furlough program to be re-instituted.  Any lingering ideas of a rate hike next week by the Bank of England have faded.  The short-sterling interest rate futures contract expiring shortly is implying the lowest yield (11 bp) in three months.   Short-covering appeared to lift the euro to $1.1355 yesterday, and it settled above its 20-day moving average for the first time since November 3.  However, this was not a harbinger of a breakout, and the euro's gains are being pared today. Initial support is seen around $1.13 and then $1.1275 area.  Sterling recorded new lows for the year yesterday slightly below $1.3165, the (38.2%) retracement of the rally since March 2020 low.  Today, it is in less than a quarter-cent range capped near $1.3215.  It is consolidating weakly.  There are options at $1.32 that expire today (~GBP370 mln) and tomorrow (GBP600 mln) that are likely neutralized.   America The US reports weekly initial jobless claims, wholesale trade and inventories, and Q3 household net worth. These are not market movers, especially today. Instead, investors' focus will likely be on equities as it waits for tomorrow's CPI.  US inflation is still accelerating, and the headline CPI is likely to move closer to 7%, setting the stage for a hawkish FOMC meeting next week.  An acceleration in tapering and more officials will likely see the need for more hikes.  Recall that in September, the last time officials updated their forecasts, half did not see a need to hike rates next year.  The market has done much of the heavy lifting for the Federal Reserve.  The implied yield of the December 2022 Fed funds futures contract has risen around 50 bp since the September FOMC meeting.  The Bank of Canada left policy on hold yesterday, as widely expected.  However, the market was disappointed that it did not upgrade its forward guidance to reflect the strong data.  The swaps market is pricing in five hikes over the next 12 months, and the central bank said nothing to encourage such an aggressive stance.  This leaves the Canadian dollar somewhat vulnerable, we think.   Brazil did not disappoint.  The central bank hiked the Selic rate by 150 bp for the second consecutive month and signaled another hike of the same magnitude in February when it meets again.  It has lifted the Selic rate by 750 bp this year.  It is being driven by rising inflation, and the economy contracted in Q2 and Q3.  The Selic rate stands at 9.25%.  The IPCA inflation measure is due tomorrow, and it is expected to have risen to 10.9% (Bloomberg survey) from 10.67% in October.   Peru is expected to hike its reference rate by 50 bp to 2.5%. It would be the third 50 bp in a row.   Its November CPI, reported at the start of the month, is slightly above 5.6%.   Mexico reports its November CPI figures today.  It is expected to rise from about 6.25% to 7.25% and set the stage for another 25 bp rate hike next week in the overnight rate to 5.25%.   The US dollar is trading firmly against the Canadian dollar, and the heavier equities may be helping it.  While initial resistance is seen near CAD1.2700, we suspect there is scope toward CAD1.2730-CAD1.2750.  The greenback fell to almost MXN20.8860 yesterday, its lowest level since November 23, and the five-day moving average crossed below the 20-day moving average for the first time since early last month.  The move appears to have exhausted itself, but the dollar needs to resurface above the MXN21.05 area to boost confidence that a low is in place.  Disclaimer
Market Digest Friday 10 Dec; hold your breath, big elements to watch inflation, volatility and iron ore

Market Digest Friday 10 Dec; hold your breath, big elements to watch inflation, volatility and iron ore

Jessica Amir Jessica Amir 10.12.2021 10:34
Equities 2021-12-10 00:00 4 minutes to read Summary:  Markets are facing speed bumps again as investors await key inflationary numbers and the Feds meeting outcome, key catalyst that will ultimately change market dynamics, with fiscal stimulus being taking away. The US benchmark the top 500 stocks fell from record high territory, falling for the first time in 4 days, while the ASX200 fell for the second day, dipping below its 50 day moving average. Growth names are being sold down and safe haven assets, bonds, the USD, the JPY, are gaining appeal. It is for three important reasons. Here is what you need to know and consider, plus the five elements to watch today. Firstly, investors are holding their breath ahead of key events: Friday’s US inflation data (tipped to show inflation rose 6.8% YOY in November), plus we are also seeing investors pre-empt that the Federal Reserve next week, will map out tapering and interest rate hikes for 2022. A poll by Reuters showed that 30 of the 36 economists expect the Fed to hike rates sooner than thought, rising rates four times from the third quarter of the year 2022 to the second quarter of 2023 (expecting rates to be 1.25-1.50%). This explains why investors took profits from nine of the major 11 US sectors overnight. So growth stocks and sectors that thrive in low interest rates; consumer discretionary, real estate and information technology, saw the most selling as a result. From a stock perspective Tesla fell 6%, Semiconductor giant Advanced Micro Devices, and Etsy-the e-commerce vintage store, both fell 5%, and chip maker Nvidia fell 4%. If you look at Saxo Markets themes that we track, you can also see the most money on a month-on-month basis, has come out of semiconductors, while the other themes we track are posting monthly gains. Secondly, it’s critical to be aware, the UK Prime Minister announced restrictions to curb Omicron’s spread -  so the UK entered new work-from-home guidance, that could cost the UK economy $2.6 billion a month (according to Bloomberg). Meanwhile, a study by a Japanese scientist found the new variant to be 4.2 times more transmissible in its early stage than delta. As such some companies are responding like Lyft saying their workforce can work remotely in 2022, while Jefferies asked staffers to WFH. This means, travel and tourism stocks could see short term pressure, Australian and US stocks that are exposed to the UK could also see pressure, while oil could see demand weakness here. Plus, it could be time to again rethink exposure to the office property sector, as it’s a likely to remain squeezed, while industrial and logistics real estate remain supported given the likely new shift to WFH. Thirdly – be aware of volatility. A measure of this, VIX CBOE Volatility Index rose for the first time in four days, rising back above the 50 day average. Volatility has fallen from its 12-month high and remains contained right now as Pfizer said its vaccine can neutralize the new COVID strain Omicron after three doses (two doses offer protection again severe disease). However, keep your ears to the ground. If tomorrow’s inflation data from the US is worse than expected, expect volatility to spike, and growth stocks to see further selling and expect safe haven assets (USD, bonds, USDJPY) to gain more attraction. Aside from the above – here’s 5 things to watch today; Firstly - let's go over Fortescue Metals (FMG) 1.FMG’s CEO, Elizabeth Gains just announced she is standing down, right in the thick of iron ore having a murky outlook. It’s not been an easy 12 month for FMG holders. FMG trades 7% lower this year, but it’s a far cry from its all-time high, down 30% from its peak as iron ore price remains in a bear market (down 40% from May). 2. FMG’s trading range has been restricted for two weeks as the world holds its breath to learn more about China’s property sector. FMG shares have broken out above their 50 day moving average but its trading has been even more so restricted over the last three days as its stock hit a key resistance level awaiting news from China. If good news comes, FMG could break out higher. But it looks murky. Majority of FMG revenue (94%) comes from iron ore, and its majority sold to China (90%) (unlike BHP that now diversifies its sales to other countries). And now… we are getting mixed signals from China, making iron ore’s outlook look hazy. 3. On the positive side; week-on-week Australian iron ore exports are up. China has increased its monthly imports of Australian iron ore in November, more than expected. This has supported the iron ore price rising 8.9% this week. 3. But on the negative side - Evergrande, one of China’s biggest property developers was just officially downgraded -labelled a defaulter by Fitch Ratings after failing to meet two coupon payments after a grace period expired Monday. This may now trigger cross defaults on Evergrande’s $19.2 billion of dollar debt. Also at the same time JP Morgan downgraded its outlook for iron ore expecting the iron ore to fall 7% to $92, while Citi expects seaborne iron ore prices to fall 60-$80/t in 2022 on Chinese policy changes. 4. However, Fortescue has been in the news this week, for its shift to a green future. Was this a tactic? A smoke Bomb? Yesterday FMG announced its Future Industries department signed a pact with the Indonesia to explore hydrogen projects. The day before Fortescue Future Industries (FFI) and AGL Energy (AGL) teamed up to explore repurposing NSW coal-fired power plants and turning them into green hydrogen production facilities – to hopefully create renewable electricity production, 250 megawatts (which will generate 30,000 tonnes of green hydrogen per year). AGL and FMG will undertake a feasibility study to repurpose AGL’s Liddell and Bayswater power stations, that both accounted for 40% of NSW’s carbon dioxide emissions. Sheesh. Secondly  – Australian analyst rating changes to consider ANZ AU: Reiterated as a Bell Potter BUY, PT $30.00, RRL AU: Regis Resources Raised to Outperform at RBC; PT A$2.50 EBO NZ: EBOS Raised to Outperform at Credit Suisse; PT NZ$43.14 FMG AU: JPMorgan downgrades FMG from Overweight to Neutral, dropping its PT from $22 to $20. RIO AU: JPMorgan downgrades RIO from Overweight to Neutral, dropping its PT from 113.00 to 102. MIN AU:  Reiterated as JPMorgan hold/neutral, dropping its PT from $47 to $40 Thirdly  - what else to watch today Annual General Meetings: HMC AU, PDL AU, PH2 AU, SOL AU Other Shareholder Events: AOF AU, HMC AU THL NZ: Tourism Holdings Halted in NZ Pending Proposed Transaction ADPZ NA: APG Buys 16.8% Stake in Ausgrid from AustralianSuper EBO NZ: Ebos Successfully Raises A$642m From Share Placement Fourthly - Economic news out 8:30am: (NZ) Nov. Business NZ Manufacturing PMI, prior 54.3 8:45am: (NZ) Nov. Card Spending Total MoM, prior 9.5% 8:45am: (NZ) Nov. Card Spending Retail MoM, prior 10.1% Fifthly - Other news to keep in mind: Australia Seen Facing Steeper Borrowing Costs If Slow on Climate RBA Likely to Stick With QE Until Election Over, BofA Says      ---   Markets - the numbersUS Major indices fell: S&P 500 -0.7% Nasdaq -1.7% Europe indices closed lower: Euro Stoxx 50 lost 0.6%,London’s FTSE 100 lost 0.2% flat, Germany’s DAX fell 0.3%Asian markets closed mixed: Japan’s Nikkei fell 0.5%, Hong Kong’s Hang Seng rose 1.1%, China’s CSI 300 rose 1.7%. Yesterday Australia’s ASX200 fell 0.3% Futures: ASX200 hints of a 0.14% fall today Commodities: Iron ore rose 1.3% to $110.50. Gold fell 0.4%, WTI crude fell 2% to  $70.94 per barrel. Copper fell 1.4% Currencies: Aussie dollar trades 0.4% lower at 0.7146 US. Kiwi down 0.3% to 0.6788 per US$ Bonds: U.S. 10-year yield fell 3.5bps to 1.4871%,Australia 3-year bond yield fell 0.8bps to 0.95%, Australia 10-year bond yield rose 6bps to 1.68%
Tesla (TSLA) Stock Price and Forecast: Will Tesla fall to $900?

Tesla (TSLA) Stock Price and Forecast: Will Tesla fall to $900?

FXStreet News FXStreet News 06.12.2021 19:29
Tesla (TSLA) stock continues to slide as Friday sees 6% loss. Tesla (TSLA) now nearing key $1,000 support and pivot. Tesla (TSLA) is likely to move quickly to $910 if the stock breaches $1,000. Tesla stock continues to remain under increased selling pressure as markets take a risk-off approach in the current environment. The emergence of the omicron covid variant appears to have put the brakes on the latest rally but the move had become overdone anyway and some correction was necessary. While 2021 has been the year to buy dips, is this one different? We think not and reckon now is the time to wade back in but we take a differing approach here with Tesla (TSLA). The stock has had a standout 2021 and is likely to suffer from now into year-end. The temptation of profit taking is just too strong here. Technically $1,000 is key. Holding will put in place a bullish double bottom and make us change our call but we, for now, remain bearish and see $1,000 breaking, leading to a sharp acceleration to $910. Our daily chart for Tesla (TSLA) above shows just how much pain the stock has taken this past couple of weeks. Tesla was nearing gains of 80% for 2021 in early November but now is back to a gain of 45% for the year so far. Still a strong outperformance against the benchmarks. Tesla (TSLA) stock news The most anticipated of product launches, that of the cybertruck, has been delayed to the end of 2022 according to a Twitter post from CEO Elon Musk. He gave more details about the proposed cybertruck saying it will have four motors, one for each wheel, and will be able to crab sideways. Elon Musk will give more details on Tesla's next earnings call. China sees a recall for some Tesla cars with a report in Electrek stating "According to a statement from China’s State Administration for Market Regulation (SAMR), Tesla Shanghai filed a recall plan for 21,599 Model Y EVs manufactured in the country. The automaker cited issues pertaining to the strength of front and rear steering knuckles, stating they may not meet the automaker’s design requirements". Also of note is Elon Musk selling another $1 billion worth of stock, while Cathie Wood of ARK also is still trimming her funds holding in the name. Tesla (TSLA) stock forecast $1,000 is huge, break and it is likely straight to $910. Hold and we would expect more all-time highs before year-end. It is that simple in our view. This one is big. $910 closes the gap from the whole Hertz parabolic move and markets love to fill gaps. Holding on the other hand confirms a double bottom which is a powerful bullish reversal signal. We would need some confirmation with either a stochastic or MACD crossover or a bullish divergence from the RSI. So far we have none of these, making a break lower more likely in our view.
Another 4 Years of Gold’s Tricky Romance With Jay

Another 4 Years of Gold’s Tricky Romance With Jay

Arkadiusz Sieron Arkadiusz Sieron 10.12.2021 16:45
  “Do you love me?”, asked gold. “Of course, my dear”, replied Jay, but his thoughts were with others: asset purchases tapering and interest rate hikes. “It’s complicated” – this is how many people answer questions about their romantic lives. The relationship between gold and Jerome Powell is also not a clear one. As you know, in November, President Biden announced that he would reappoint Powell for the second term as the Fed Chair. It means that gold will have to live with Jerome under the same roof for another four years. To say that gold didn’t like it is to say nothing. The yellow metal snapped and left the cozy living room of $1,850, slamming the door loudly. In less literary expressions, its price plunged from above $1,860 on November 19 to $1,782 on November 24, 2021, as the chart below shows. The impulsive gold’s reaction to Powell’s renomination resulted from its failed dream about a love affair with Lael Brainard. She was considered a leading contender to replace Powell. The contender that would be more dovish and, thus, more supportive of gold prices. However, is a hawkish dove a hawk? Is Powell really a hawk? Even if more hawkish than Brainard, he still orchestrated an unprecedentedly accommodative monetary policy in response to the pandemic-related economic crisis. It was none other than Powell who started to cut interest rates in 2019, a year before the epidemic outbreak. It was he who implemented an inflation-averaging regime that allowed inflation to run above the target. Right now, it’s also Powell who claims that the current high inflation is transitory, although it’s clear for almost everyone else that it’s more persistent. I wouldn’t call Powell a hawk then. He is rather a dove in a hawk’s clothing. So, gold doesn’t have to suffer under Powell’s second term as the Fed Chair. Please take a look at the chart below, which shows gold’s performance in the period of 2017-2021. As you can see, the yellow metal gained about 34% during Powell’s first term as the chair of the Federal Reserve that started in February 2018 (or 40% since Trump’s November 2017 nomination of the Fed). Not bad! Actually, gold performed much better back then than under Yellen’s term as the Fed Chair. During her tenure, which took place in 2014-2018, the yellow metal was traded sideways, remaining generally in a corridor between $1,100-$1,300. I’m not saying that Yellen despised gold, while Powell loves it. My point is that gold’s performance during the tenures of Fed Chairs varies along with changes in the macroeconomic environment in which they act and the monetary stance they adopt. Gold suffered strongly until December 2015, when Yellen finally started hiking the federal funds rate. It then rebounded, only to struggle again in 2018 amid an aggressive tightening cycle. However, at the end of that year it started to rally due to a dovish shift within the Fed, and, of course, in a lagged response to unprecedented fiscal and monetary actions later in 2020. I have bad and good news here. The former is that the macroeconomic environment during Powell’s second term could be more inflationary, demanding more hawkish actions. The Fed has already started tapering of its quantitative easing, and bets are accumulating that it could start hiking interest rates somewhere around mid-2022. What’s more, the continuation of Powell’s leadership ensures more stability and provides markets with more certainty about what to expect from the Fed in the coming years. This is bad news for safe-haven assets such as gold. Last but not least, the composition of the FOMC is going to shift toward the hawkish side. This is because some strong doves, such as Daly and Evans, are out, while some notable hawks, such as George, Mester (and also Bullard), are among the voting members in 2022. Gold may, therefore, find itself under downward pressure next year, especially in its first half. On the other hand, the current FOMC expresses clearly dovish bias. With mammoth public debt and elevated asset prices, aggressive tightening would simply be very risky from a financial and political point of view. So, the Fed is likely to generally remain behind the curve. By the way, Biden not only reappointed Powell for the second term as Fed Chair, but he also appointed Brainard as Vice-Chair. We also can’t exclude that Biden agreed to Powell’s second term only if he conducts “appropriate” monetary policy. Democratic Senator Elizabeth Warren once called Powell “a dangerous man.” Well, in a way, it’s true, as powerful people can be dangerous. However, history shows that Powell doesn’t have to be a threat to gold. After all, he is not a hawk in the mold of Paul Volcker, but merely a hawkish dove, or a dove that will have to normalize the crisis monetary policy and curb inflation. In the upcoming months, gold may struggle amid prospects of more interest rates hikes and likely strengthened hawkish rhetoric from the Fed. However, precious metals investors often sell the rumor and buy the fact. So, when the US central bank finally delivers them, better times may come for the yellow metal, and gold and Jay could live happily ever after. The End. Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter. Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care.
Gold Stays Sedentary Whilst Silver (a Steal!) Skids Senselessly

Gold Stays Sedentary Whilst Silver (a Steal!) Skids Senselessly

Mark Mead Baillie Mark Mead Baillie 13.12.2021 09:18
The Gold Update by Mark Mead Baillie --- 630th Edition --- Monte-Carlo --- 11 December 2021 (published each Saturday) --- www.deMeadville.com Without looking... Think quick! What is the price of Gold right now? (HINT: If you read last week's missive, you already know the answer). "Uhh gee, mmb... in the 1780s?" Spot-on there, Squire, for the simplest reason that the price of Gold is always in the 1780s. Don't believe it? Feel free to verify the following, (you cannot make this stuff up): 'Twas in the 1780s ten years ago; 'twas in the 1780s ten months ago; 'twas in the 1780s ten weeks ago; 'twas in the 1780s ten days ago; and 'tis today in the 1780s -- 1783 to be precise -- as portrayed in the above Gold Scoreboard. That is just 44% of Gold's Dollar-debased value of 4015, even as honestly-adjusted for the increase in the supply of Gold itself. No kiddin'. Indeed should Gold have just died, an epitaph of solely "1780" is perfectly apt. "Charles, is this Gold's gravestone?" ... "That, my dear Dysphasia, is a rhetorical question." For just as the price of Gold was relatively "fixed" post-Issac Newton in the $18-to-$20 range, then again relatively "fixed" post-Bretton Woods in the $34-to-$35 range -- until 1971 upon Richard Nixon nixing such Gold Standard -- today we might say Gold is relatively "fixed" in the 1780s by "The M Word" crowd. Indeed, the "manipulation" motif is gaining more and more mainstream mention of late, the market depth of bids and offers rotating marvelously around 1780 as a centerpiece price. And it never being wrong, the market is what 'tis today: 1780. But broad buying sway can this allay: for Gold remains extraordinarily under-owned, an understatement at that. 'Course, the day to sell your Gold is the day everybody wants it, even at a five-figure price. But for now, why own a dense, ductile lump of rather incongruous rock when with a mere tap of the mouse one benefits many times over from an increasing array of shiny objects permeating the markets, be they earningless stocks or cryptocrap or even non-fungible tokens? Certainly they make one and all cocksure and feeling fine! (Until suddenly the objects vanish, but we're not supposed to say that). And how about Sister Silver of late? Hardly does she feel very great. Whilst Gold has been ad nausea sedentary in forever wallowing 'round the 1780s, and more accurately being -3.0% month-over-month, Silver senselessly has skidded -10.9%! Quite obviously, Silver has not been adorned in her precious metals pinstripes. So it must instead be that she is sporting her industrial metal jacket, right? For Cousin Copper clearly must be going over the cliff. But no, 'tisn't. Rather for the same stint, Copper is off but a mere -0.5%. What To Figure, eh? Last week we wrote of market dislocation: Silver has become so dislocated as to have been left naked! Here are the percentage tracks of our BEGOS Markets' metals triumvirate from one month ago-to-date (21 trading days): Further, guess what just crossed above 80x for its first occurrence since 29 September? Exactly right: the Gold/Silver ratio, which now is 80.3x. Its millennium-to-date average is 66.4x. Thus were Silver today (22.215) priced at the average, she'd in fact be +24.6% higher at 27.690. (Think means regression). Either way, by our math, Silver right now is a steal (!!!) So as Silver sinks even as Copper remains buoyant -- which makes no sense -- Gold sedentarily sits. In settling out the week yesterday at the aforementioned 1783, price on a points basis traced its narrowest week (since that ending on Valentine's Day 2020) in the last 22 months, and the narrowest week on a percentage basis since that ending nearly two years ago on 22 December 2019. So narrow was last week's trading range that it barely shows as the rightmost nub on the graphic of Gold's weekly bars from one year ago-to-date: Economically, the past week of incoming metrics were inflation-persistent. There was an upward revision to Q3's Unit Labor Costs along with a downward revision for the quarter's Productivity: that's Classic Stagflation, right there! Too, November's CPI remained stubbornly high with an +0.8% reading, (which for those of you scoring at home is an annualized pace of +9.6% ... are ya gettin' that with all the dough you've got sitting in the bank? Oh right, you put it all in the stock market). October's Trade Deficit backed off from that for September, whilst Consumer Credit eroded and Wholesale Inventories somewhat bloated. December's University of Michigan Sentiment Survey regained the 70 level, but remains below the COVID-era average of 77. Put it all together and the Economic Barometer lost of bit of tether: With further respect to rising everything ('cept the metals), Dow Jones Newswires during the week ran with "This Inflation Defies the Old Models. Neither supply or demand by itself is increasing prices; it’s an unusual combination of both." True enough: we've tons of money chasing not enough stuff, the cost of which to produce and supply is ever-increasing. This is what happens when the system is flooded with money. Everybody's loaded, so why the heck seek work? Especially given your shiny object investments see you retiring at 35. (Or as a French friend oft texts to us: "So gréat!") Meanwhile come 21 December (that's Tuesday a week), some 40% of StateSide obligations shan't be payable (per analysis from the Bipartisan Policy Center) given the debt ceiling then being reached. "Hey Shinzō, that you? Joe here. Hey listen: we may have to skip that next interest payment. My Janet who? Hello Shinzō? Hey! Are you still there, buddy?" Or something like that. Which leads us to three critical, succinct questions: â–  "Got Gold?" â–  "Got Silver?" â–  "Has the S&P crashed yet?" Just askin'. In fact speaking of the latter, our "live" S&P 500 price/earnings ratio is now 48.6x, (another of our honest calculations that the FinWorld elects not to perform). In fact, the "in" thing these days is to value a company -- should they not have earnings -- by revenues. (This is referred to as "Dumbing-down beyond stoopid"). For example, we read this past week that such valuation method is apparently touted for a shiny object called "Snowflake". Last year this object's top line was +$592M and its bottom line -$539M, a truly symmetrical snowflake swing of -$1.1B. Moreover, we read (courtesy of NASDAQ) that negative swings are to be again seen in '22, '23 and '24. And snowflakes do melt. (See 2000-2002). Just sayin'. 'Course to be fair, Gold's price as a function of valuation continues to melt. The U.S. money supply continues to rise, yet Gold's price remains hardly wise, (except in the guise to load up on this prize). To wit, our two-panel graphic featuring on the left Gold's daily bars from three months ago-to-date and on the right price's 10-Market Profile. The good news per the "Baby Blues" having just ceased their fall right at the -80% axis is that price's recent freeze in the 1780s may be the consolidative haunch from which to launch. And obviously, those incessant 1780s clearly dominate the Profile: Silver's like graphic shows both price and the "Baby Blues" (below left) clearly more skittish than Gold, whilst her Profile (below right) sees her singin' the blues. (But grab some Silver whilst you've nuthin' to lose!) Grab a glimpse too at The Gold Stack: The Gold StackGold's Value per Dollar Debasement, (from our opening "Scoreboard"): 4015Gold’s All-Time Intra-Day High: 2089 (07 August 2020)Gold’s All-Time Closing High: 2075 (06 August 2020)2021's High: 1963 (06 January)The Gateway to 2000: 1900+The 300-Day Moving Average: 1815 and fallingThe Final Frontier: 1800-1900The Northern Front: 1800-1750Trading Resistance: 1785 / 179510-Session “volume-weighted” average price magnet: 1783Gold Currently: 1783, (expected daily trading range ["EDTR"]: 22 points)Trading Support: 1777 / 177310-Session directional range: down to 1762 (from 1811) = -49 points or -2.7%On Maneuvers: 1750-1579The Weekly Parabolic Price to flip Short: 17282021's Low: 1673 (08 March) The Floor: 1579-1466Le Sous-sol: Sub-1466The Support Shelf: 1454-1434Base Camp: 1377The 1360s Double-Top: 1369 in Apr '18 preceded by 1362 in Sep '17Neverland: The Whiny 1290sThe Box: 1280-1240 And then there's next week. 15 metrics are scheduled for the Econ Baro. And the mid-week cherry? A policy statement from the Federal Open Market Committee. "Oh no, not again!" Kinda like those radio hits: good or bad, they just keep on comin'! So c'mon and get yourself some Gold, and don't forget the Silver too! Cheers! ...m... www.deMeadville.com www.TheGoldUpdate.com
Gold – Recovery ahead

Gold – Recovery ahead

Florian Grummes Florian Grummes 14.12.2021 13:26
https://www.midastouch-consulting.com/13122021-gold-recovery-ahead December 13th, 2021: The gold market is nearing the end of a difficult and very challenging year. Most precious metal investors must have been severely disappointed. Gold – Recovery ahead. Review 2021 started quite bullish, as the gold price climbed rapidly towards US$1,960 at the beginning of the year. In retrospect, however, this peak on January 6th also represented the high for the year! In the following 11.5 months, gold did not even come close to reaching these prices again. Instead, prices came under considerable pressure and only bottomed out at the beginning and then again at the end of March around US$1,680 with a double low. Interestingly, the low on March 8th at US$1,676 did hold until today. The subsequent recovery brought gold prices back above the round mark of US$1,900 within two months. But already on June 1st, another violent wave of selling started, which pushed gold prices down by US$150 within just four weeks. Subsequently, gold bulls attempted a major recovery in the seasonally favorable early summer phase. However, they failed three times in this endeavor at the strong resistance zone around US$1,830 to US$1,835. As a result, sufficient bearish pressure had built up again, which was then unleashed in the flash crash on August 9th with a brutal sell-off within a few minutes and a renewed test of the US$1,677 mark. Despite this complete washout, gold bulls were only able to recover from this shock with difficulty. Hence, gold traded sideways mainly between US$1,760 and US$1,815 for the following three months. It was not until the beginning of November that prices quickly broke out of this tenacious sideways phase and thus also broke above the 15-month downtrend-line. This was quickly followed by another rise towards US$1,877. However, and this is quite indicative of the ongoing corrective cycle since the all-time high in August 2020, gold prices made another hard U-turn within a few days and sold off even faster than they had risen before. Since this last sell-off from US$1,877 down to US$1,762, gold has been stuck and kind of paralyzed for three weeks, primarily trading in a narrow range between US$1,775 and US$1,785. Obviously, the market seems to be waiting for the upcoming FOMC meeting. Overall, gold has not been able to do much in 2021. Most of the time it has gone sideways and did everything to confuse participants. These treacherous market phases are the very most dangerous ones. Physical investors can easily sit through such a sideways shuffling. But leveraged traders had nothing to laugh about. Either the movements in gold changed quickly and abruptly or almost nothing happened for days and sometimes even weeks while the trading ranges were shrinking. Technical Analysis: Gold in US-Dollar Weekly Chart – Bottoming out around US$1,780? Gold in US-Dollars, weekly chart as of December 13th, 2021. Source: Tradingview Despite the 15-month correction, gold has been able to easily hold above the uptrend channel, which goes back to December 2015. The steeper uptrend channel that began in the summer of 2018 is also still intact and would only be broken if prices would fall below US$1,700. Support between US$1,760 and US$1,780 has held over the last three weeks too. The weekly stochastic oscillator is currently neutral but has been slowly tightening for months. Overall, gold is currently trading right in the middle of its two Bollinger bands on the weekly chart. Thus, the setup is neutral. However, bottoming out around US$1,780 has a slightly increased probability. Daily Chart – New buying signal Gold in US-Dollars, daily chart as of December 13th, 2021. Source: Tradingview On the daily chart, gold has been searching for support around its slightly rising 200-day moving average (US$1,793) over the last three weeks. However, eye contact has been maintained, hence a recapturing of this important moving average is still quite possible. Despite the failed breakout in November, the current price action has not moved away from the downtrend-line. A further attack on this resistance thus appears likely. Encouragingly, the daily stochastic has turned up from its oversold zone and provides a new buy signal. In summary, the chances of a renewed recovery starting in the near future predominate on the daily chart. In the first step, such a bounce could run to around US$1,815. Secondly, the bulls would then have to clear the downtrend-line, which would release further upward potential towards US$1,830 and US$1,870. The very best case scenario might see gold being able to rise to the psychological number of US$1,900 in the next two to four months. On the downside however, the support between US$1,760 and US$1,780 must be held at all costs. Otherwise, the threat of further downward pressure towards US$1,720 and US$1,680 intensifies. Commitments of Traders for Gold – Recovery ahead Commitments of Traders for Gold as of December 12th, 2021. Source: Sentimentrader The commercial net short position in the gold futures market was last reported at 245,623 contracts sold short. Although the setup has somewhat improved due to the significant price decline in recent weeks, the overall constellation continues to move in neutral waters. There is still no clear contrarian bottleneck in the futures market, where professional traders should have reduced their net short positions to below 100,000 contracts at least. Until then, it would still be a long way from current levels, which could probably only happen with a price drop towards US$1,625. As long as this does not happen, any larger move up will probably have a hard time. In summary, the CoT report provides a neutral signal and thus stands in the way of a sustainable new uptrend. However, given the current futures market data, temporary recoveries over a period of about one to three months are currently possible. Sentiment for Gold – Recovery ahead Sentiment Optix for Gold as of December 12th, 2021. Source: Sentimentrader Sentiment for gold has been meandering in the neutral and not very meaningful middle zone for more than a year. Furthermore, a complete capitulation or at least very high pessimism levels are still missing to end the ongoing correction. Such a high pessimism was last seen in spring of 2019, whereupon gold was able to rise more than US$800 from the lows at US$1,265 to US$2,075 within 15 months. This means that in the big picture, sentiment analysis continues to lack total capitulation. This can only be achieved with deeply fallen prices. In the short term, however, the Optix for gold has almost reached its lows for the year. At the same time, german mainstream press is currently asking, appropriately enough, “Why doesn’t gold protect against inflation? This gives us a short-term contrarian buy signal, which should enable a recovery rally over coming one to three months. Seasonality for Gold – Recovery ahead Seasonality for Gold over the last 53-years as of December 12th, 2021. Source: Sentimentrader As so often in recent years, precious metal investors are being put to the test in the fourth quarter of 2021. In the past, however, there was almost always a final sell-off around the last FOMC meeting between mid-November and mid-December. And this was always followed by an important low and a trend reversal. This year, everything points to December 15th or 16th. Following the FOMC interest rate decision and the FOMC press conference, the start of a recovery would be extremely typical. Statistically, gold prices usually finish the last two weeks of the year with higher prices, because trading volume in the west world is very low over the holidays, while in Asia, and especially in China and India, trading is more or less normal. Also, the “tax loss selling” in mining stocks should be over by now. Overall, the seasonal component turns “very bullish” in a few days, supporting precious metal prices from mid-December onwards. Typically, January in particular is a very positive month for gold, but the favorable seasonal period lasts until the end of February. Macro update and Crack-up-Boom: US-Inflation as of November 30th, 2021. ©Holger Zschaepitz Last Friday, inflation in the U.S. was reported to have risen to 6.8% for the month of November. This is the fastest price increase since 1982, when Ronald Reagan was US president, and the US stock markets had started a new bull market after a 16-year consolidation phase. Today, by contrast, the financial markets have been on the central banks’ drip for more than a decade, if not more than two. The dependence is enormous and a turn away from the money glut is unthinkable. Nevertheless, the vast majority of market participants still allow themselves to be bluffed by the Fed and the other central banks and blindly believe the fairy tales of these clowns. The Global US-Dollar Short Squeeze However, while inflation figures worldwide are going through the roof due to the gigantic expansion of the money supply and the supply bottlenecks, the US-Dollar continues to rise at the same time. A nasty US-Dollar short squeeze has been building up since early summer. The mechanism behind this is not easy to understand and gold bugs in particular often have a hard time with it. From a global perspective, the US-Dollar is still the most important reserve currency and thus also the most important international medium of exchange as well as the most important store of value for almost all major countries. Completely independently of this, many of these countries still use their own currency domestically. International oil trade and numerous other commodities are also invoiced and settled in US-Dollar. For example, when France buys oil from Saudi Arabia, it does not pay in its own currency, EUR, but in USD. Through this mechanism, there has been a solid demand for US-Dollar practically non-stop for decades. The US-Dollar system The big risk of this “US-Dollar system”, however, is that many foreign governments and companies borrow in US-Dollar, even though most of their revenue is generated in the respective national currency. The lenders of these US-Dollar are often not even US institutions. Foreign lenders also often lend to foreign borrowers in dollars. This creates a currency risk for the borrower, a mismatch between the currency of their income and the currency of their debt. Borrowers do this because they have to pay lower interest rates for a loan in US-Dollar than in their own national currency. Sometimes dollar-denominated bonds and loans are also the only way to get liquidity at all. Thus, it is not the lender who bears the currency risk, but the borrower. In this way, the borrower is basically taking a short position against the US-Dollar, whether he wants to or not. Now, if the dollar strengthens, this becomes a disadvantage for him, because his debt increases in relation to his income in the local currency. If, on the other hand, the US-Dollar weakens, the borrower is partially relieved of debt because his debt falls in relation to his income in the local currency. Turkish lira since December 2020 as of December 13th, 2021.©Holger Zschaepitz Looking, for example, at the dramatic fall of the Turkish lira, one can well imagine the escalating flight from emerging market currencies into the US-Dollar. Since the beginning of the year, Turks have lost almost 50% of their purchasing power against the US-Dollar. A true nightmare. Other emerging market currencies such as the Argentine peso, the Thai baht or even the Hungarian forint have also come under significant pressure this year. On top, the Evergrande bankruptcy and the collapse of the real estate bubble in China may also have contributed significantly to this smoldering wildfire. All in all, the “US-Dollar short squeeze” may well continue despite a technically heavily overbought situation. Sooner or later, however, the Federal Reserve will have to react and row back again. Otherwise, the strength of the US-Dollar will suddenly threaten a deflationary implosion in worldwide stock markets and in the entire financial system. The global house of cards would not survive such shock waves. The tapering is “nearish” It is therefore highly likely that the Fed will soon postpone the so-called “tapering” and the “interest rate hikes” until further notice. To explain this, they will surely come up with some gibberish with complicated-sounding words. All in all, an end to loose monetary policy is completely unthinkable. Likewise, the supply bottlenecks will remain for the time being. This means that inflation will continue to be fueled by both monetary and scarcity factors and, on top of that, by the psychological inflationary spiral. In these crazy times, investors in all sectors will have to patiently endure temporary volatility and the accompanying sharp pullbacks. Conclusion: Gold – Recovery ahead With gold and silver, you can protect yourself well against any scenario. In the medium and long term, however, this does not necessarily mean that precious metal prices will always track inflation one-to-one and go through the roof in the coming years. Most likely, the exponential expansion of the money supply will continue and accelerate. Hence, significantly higher gold and silver prices can then be expected. If, on the other hand, the system should implode, gold and silver will be able to play out their monetary function to the fullest and one will be glad to own them when almost everything else must be written down to zero. In the bigger picture, however, gold and silver fans will have to remain patient for the time being, because the clear end of the months-long correction has not yet been sealed. Rather, the most important cycle in the gold market should deliver an important low approximately every 8 years. The last time this happened was in December 2015 at US$1,045. This means that the correction in the gold market could continue over the next one or even two years until the trend reverses and the secular bull market finally continues. In the short term, however, the chances of a recovery in the coming weeks into the new year and possibly even into spring are quite good. But it should only gradually become clearer after the Fed’s interest rate decision on Wednesday what will happen next. A rally towards US$1,815 and US$1,830 has a clearly increased probability. Beyond that, US$1,870 and in the best case even US$1,910 could possibly be reached in February or March. For this to happen, however, the bulls would have to do a lot of work. Analysis initially written and published on on December 13th, 2021, by www.celticgold.eu. Translated into English and partially updated on December 13th, 2021. Feel free to join us in our free Telegram channel for daily real time data and a great community. If you like to get regular updates on our gold model, precious metals and cryptocurrencies you can subscribe to our free newsletter. By Florian Grummes|December 13th, 2021|Tags: Gold, Gold Analysis, Gold bullish, Gold Cot-Report, gold fundamentals, gold mining, Gold neutral, Silver, The bottom is in|0 Comments About the Author: Florian Grummes Florian Grummes is an independent financial analyst, advisor, consultant, trader & investor as well as an international speaker with more than 20 years of experience in financial markets. He is specialized in precious metals, cryptocurrencies and technical analysis. He is publishing weekly gold, silver & cryptocurrency analysis for his numerous international readers. He is also running a large telegram Channel and a Crypto Signal Service. Florian is well known for combining technical, fundamental and sentiment analysis into one accurate conclusion about the markets.
No Turnaround Tuesday for Equities?

No Turnaround Tuesday for Equities?

Marc Chandler Marc Chandler 14.12.2021 15:01
December 14, 2021  $USD, Canada, Chile, Currency Movement, EMU, Hungary, Japan, Mexico, UK Overview:  Activity in the capital markets is subdued today, ahead of tomorrow's FOMC meeting conclusion and the ECB meeting on Thursday.  The MSCI Asia Pacific equity index fell for the third consecutive session.  European bourses are heavy after the Stoxx 600 posted an outside down day yesterday. Today would be the fifth consecutive decline. Selling pressure on the US futures indices continues after yesterday's losses.  Australia and New Zealand bonds played catch-up to the large drop in US Treasury yields yesterday, while European benchmark yields are edging higher.  The 10-year US Treasury yield is around 1.43%.  The dollar is mixed against the major currencies.  The Canadian and Australian dollars and Norway are softer, while the Swiss franc and euro lead with around a 0.25%-0.35% gain.  Most emerging market currencies are little changed, though the Turkish lira is paring yesterday's intervention-fueled gains.  Led by the Hungarian forint ahead of the outcome of the central meeting, and helped by a firm euro, central European currencies lead the emerging markets.  The JP Morgan Emerging Market Currency Index is off for a second session after breaking a four-week slide last week.  Gold continues to consolidate and is within yesterday's range ($1782-$1791).  Oil is also trading quietly, with the January WTI contract in a $70.50-$72.00 range.  European (Dutch) natural gas is rising for the sixth session of the past seven, during which time it has increased by nearly a third.  US natgas has fallen by almost 30% in the past two weeks and is off for about 4.4% this week already.  Iron ore is paring yesterday's 6.5% gain, while copper is drifting lower and is extending its loss into the fourth consecutive session.   Asia Pacific Year-end pressures are evident in Japan's money markets, and the BOJ responded by arranging an unscheduled repo operation for the second consecutive session.  Yesterday's overnight operation was for JPY2 trillion (~$17.5 bln) after the repo rate rose to two-year highs.  The repo appeared to have been lifted by dealers securing funding for bill purchases.  Today the BOJ offered to buy JPY9 trillion of bonds under the repo agreement.   The US has offered to lift the steel and aluminum tariffs on Japan on similar terms as the deal struck with the EU.   A certain amount, based on some historical market share, can be shipped to the US duty-free, but over that threshold, a levy will be imposed.  Unlike the EU, Tokyo did not impose retaliatory tariffs.  Estimates suggest that Japan shipped around 5% of its steel to the US, though some might have made its way through Mexico.   The regional highlights for the week still lie ahead.  Tomorrow, China reports November retail sales, industrial production, new home prices, investment, and the surveyed jobless rate.  Retail sales are expected to have slowed, while industrial output may have firmed.  Investment in property and fixed assets may have stalled.  Japan has its tertiary index (October) tomorrow, a November trade balance on Thursday (it nearly always deteriorates from October), and the Friday BOJ meeting.  The BOJ is expected to extend some of its emergency facilities.  Australia reports its November jobs data first thing Thursday morning in Canberra.  After three months of job losses, a strong report is expected as social restrictions were lifted.   Today, the dollar is confined to about a quarter of a yen range above JPY113.50.  It has not traded above JPY114.00 this month so far.  Nor has it traded below JPY113.20 since last Monday.  An option for $760 mln at JPY1113.85 rolls off today.  The Australian dollar tested the session high near $0.7135 in the European morning but met a wall of sellers, perhaps, related to the nearly A$600 mln option at $0.7130 that expires today. It has traded down to a five-day low around $0.7090, which is the halfway point of last week's rally.  The next retracement (61.8%) is near $0.7065. The dollar continues to struggle to sustain upticks against the Chinese yuan. It is trading heavily today, its seventh loss in the past eight sessions.   Still, the greenback held above yesterday's low (~CNY6.3580).  It was unable to poke above CNY6.37.   The PBOC's dollar fixing was set at CNY6.3675, while the market (Bloomberg survey) anticipated CNY6.3666.   Europe The UK reported solid employment data.  The November claimant count rate eased to 4.9% from a revised 5.0% (initially 5.1%), representing a nearly 50k decline after the October decline was revised to 58.5k from -14.9k.  The pace of earnings growth slowed to 4.9% from 5.9% (three-month, year-over-year).  Employment rose by nearly 150k (three months) after a 247k increase previously.  Tomorrow, the UK sees November CPI and PPI.  Both are expected to have quickened from October.  Nevertheless, the BOE is now seen on hold until February.   Hungary's central bank is set to hike the base rate today.  A 40 bp increase would follow last month's 30 bp hike.  Today's move would be the sixth in a row.  The base rate began the year at 60 bp, and today's hike would lift it to 2.50%.  On Thursday, Hungary likely hiked the one-week deposit rate.  It has been hiked for the last four weeks.  It had been at 75 bp until June, when it was hiked by 15 bp.  It was lifted by 30 bp in July and again in August.  It reverted to 15 bp increases in September and October.  The one-week deposit rate was raised several times last month to 2.90%.  It is up another 40 bp so far this month, and it is expected to be lifted by another 20 bp this week.   In October, industrial output in the euro area rose 1.1% after a 0.2% decline in September.  The preliminary PMI will be reported on Thursday, ahead of the ECB meeting.  Activity likely slowed. The focus of the ECB meeting is on the guidance about bond-buying next year.  The emergency facility is expected to wind down at the end of Q1, but given that it will still be buying bonds, tapering may not be as necessary or pronounced as, say, with the Federal Reserve.  The ECB staff will also update forecasts, including a sharp upward revision to next year's while extending the projections to 2024.  There is also interest in what the ECB will do about its long-term loans (TLTRO).    The euro has firmed in the European morning but remains mired in a narrow range.  Indeed, the range over the past five sessions is a little less than a cent (~$1.1260-$1.1355). There is an option for nearly 500 mln euros at $1.1330 that expires today.  For the past month, the euro has been in a $1.12-$1.14 trading range, with the notable exception on November 24, when the low for the year was recorded (~$1.1185).   Sterling slipped below $1.32 in late Asian turnover but found bids lurking there, and Europe has extended its recovery toward $1.3235.  Resistance is seen in the $1.3260-$1.3275 area. Sterling has not traded above $1.33 since December 3, yet a move above there is necessary to lift the technical tone.   America The US reports November producer prices today.  The headline rate is expected to push above 9%, while the core rate pokes through 7%.  The market is understandably more sensitive to consumer prices than producer prices.  Tomorrow, ahead of the FOMC statement, the November retail sales (softer than the 1.7% headline increase in October) and the December Empire manufacturing survey will be released.   Although the Senate is expected to maneuver to lift the debt ceiling today, the Treasury is planning a large bill pay down (~$175 bln) to ensure it would have the space to settle the coupon auctions.  That said, the supply of bills is likely to improve through Q1 22, according to estimates.  By most accounts, the Treasury has overfunded itself, and this will allow it to cut back further on new supply, just as the Federal Reserve is expected to accelerate its tapering.   The Bank of Canada was told its inflation target remains 2% but that it can overshoot to support "maximum sustainable employment."  The central bank's language is important.  It said it would "continue" to support the labor market objective, suggesting that yesterday's adjustment to the mandate will have a minor operational impact.  In fact, with inflation (October CPI 4.7%, an 18-year high), Governor Macklem quickly indicated that this was not the situation when it could probe for the maximum sustainable employment.  Still, the new mandate requires that the central bank explain when it is using its new flexibility and how labor market outcomes are incorporated into monetary decisions.  Separately, Canada is proposing alternatives to the US proposed tax incentives for electric vehicles in the Build Back Better initiative.  Canada and Mexico claim that it violated the USMCA and throws a wrench in the 30-year auto integration.  The EU trade commissioner has also expressed concerns about whether the legislation would break the WTO rules too.   Late today, Chile's central bank is expected to deliver a 125 bp rate hike, the same as in October.  The overnight target rate began the year at 50 bp.  It was hiked by 25 bp in July and 75 bp in August.  With today's hike, it will stand at 4%.  More work is needed as November CPI was at 6.7%.  Chile holds the run-off presidential election this weekend.  In the first round last month, the conservative Kast drew 28% support while the left candidate Boris garnered 26%.  Chile's innovation during Covid was to allow people to withdraw funds from their pensions (yes, like a farmer eating their corn seed).  Three withdrawals were granted, but a fourth effort was rebuffed earlier this month.  The World Bank and the IMF expressed concern about the pension fund industry, which had been among the best in the region.  The Chilean peso is among the worst-performing emerging market currencies this year.  It has fallen nearly 15.5% and has only been "bested" by the Argentine peso (~17.3%) and the Turkish lira (-48%).   The Canadian dollar's retreat is being extended for the fifth consecutive session.  The greenback has largely held above CAD1.2800 and is drawing near the high seen after the employment reports on December 3 (~CAD1.2855).  We usually see the exchange rate is driven by 1) general risk appetite, 2) commodity prices, and 3) rate differential.  Here we note that Canada's 2-year premium has fallen from about 60 basis points at the start of last month to around 27 bp now.  Over the same time, the 10-year premium has wholly disappeared.  It was almost 20 bp on November 1 and currently is trading at a four basis point discount.  Meanwhile, the greenback is consolidating against the Mexican peso. For the fifth consecutive session, it has been mainly chopping in a MXN20.85-MXN21.08 range.   On Thursday, Banxico is expected to hike its overnight rate by 25 bp.  We continue to think it is more likely to hike by 50 bp than standpat.  Since June, it has lifted the target rate by 100 bp to 5%.   November CPI stood at 7.37%.     Disclaimer
Tough Choices Ahead

Tough Choices Ahead

Monica Kingsley Monica Kingsley 15.12.2021 15:51
S&P 500 declined on poor PPI data, with financials virtually the only sector closing in the black. Rising yields and risk-off credit markets, that‘s the answer – markets are afraid of a more hawkish Fed than what they expect already. While the central bank will strive to project a decisive image, I‘m looking for enough leeway to be left in, and packaged in incoming data flexibility and overall uncertainty. Good for them that the fresh spending initiative hasn‘t yet passed. Still, I‘m looking for the Fed to be forced during 2022 to abruptly reverse course, and bring back the punch bowl. Treasuries look serene, and aren‘t anticipating sharply higher rates in the near term – not even inflation expectations interpreted higher PPI as a sign that inflation probably hasn‘t peaked yet. This isn‘t the first time inflation is being underestimated – and beaten down commodities (with copper bearing the brunt in today‘s premarket) reflect that likewise. Only cryptos are bucking the cautious entry to the Fed policy decision, and decreasing liquidity, in what can still turn out as a lull before another selling attempt. I think that the overly hawkish Fed expectations are misplaced, and that the risk-on assets would reverse the prior weakness – both today and in the days immediately following, which is when the real post-Fed move emerges. Odds are that it would still be up across the board. Yes, I‘m looking for the Fed speak to be interpreted as soothing – as one that would still result in market perceptions that the real bite isn‘t here yet, or doesn‘t look too real yet. Big picture is that public finances need inflation to make the debt load manageable, and that ample room to flex hawkish muscles isn‘t there (as retail data illustrate). As I wrote in yesterday‘s summary: (…) Risk-off mood is prevailing in going for tomorrow‘s FOMC – the expectations seem leaning towards making a tapering / tightening mistake. While headwinds are stiffening, we haven‘t topped yet in stocks or commodities, but the road would be getting bumpier as stated yesterday. Select commodities and precious metals are already feeling the pinch late in today‘s premarket trading, but there is no sending them to bear markets. Get ready for the twin scourge of persistent inflation and slowdown in growth to start biting increasingly more – just-in producer price index (9.6% YoY, largest ever) confirms much more inflation is in the pipeline, and the Fed would still remain behind the curve in its actions. Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook S&P 500 had a weak day, but the dip was being bought – there is fledgling accumulation regardless of deteriorating internals, and tech selloff continuing. Credit Markets HYG even staged a late day rally – bonds are in a less panicky mood, not anticipating overly hawkish Fed message. And that‘s good for the markets that sold off a bit too much. Gold, Silver and Miners Precious metals downside appears limited here, and today‘s premarket downswing has been largely erased already. Much catching up to do on the upside, just waiting for the catalyst. Crude Oil Crude oil is on the defensive now – the weak session yesterday didn‘t convince me. I‘m though still looking for higher prices even as today‘s premarket took black gold below $70. Still not looking for a flush into the low or mid $60s. Copper Copper upswing didn‘t materialize, and worries about the economic outlook keep growing. The sideways trend keeps holding for now though, still. Bitcoin and Ethereum Bitcoin and Ethereum bottom searching goes on, yesterday‘s downside target was hit, but the bottom (at $46K BTC or $3700s ETH) might not be in just yet. Cryptos remain in wait and see mode. Summary Bears aren‘t piling in before today‘s FOMC – the Fed‘s moves will though likely be interpreted as not overly hawkish. Given more incoming signs of slowing economy, the window of opportunity to tighten, is pretty narrow anyway. Why take too serious a chance? Yes, I‘m looking for the weakness in real assets to turn out temporary, and for stocks not to be broken by inflation just yet – as argued for in the opening part of today‘s analysis. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
Considering Portfolios In Times Of, Among Others, Inflation...

Till the Dollar Yields

Monica Kingsley Monica Kingsley 17.11.2021 15:53
S&P 500 staged a very risk-off rally, not entirely supported by bonds. Value declined, not reflecting rising yields. Paring back recent gains on a very modest basis was palpable in financials and real estate, while (encouragingly for the bulls) consumer discretionaries outperformed staples. That‘s a testament to the stock bull run being alive and well, with all the decision making for the medium-term oriented buyers being a choice of an entry point. The brief short-term correction, the odds of which I saw as rising, is being postponed as the divergence between stocks and bonds grows wider on a short-term basis. Even the yield spreads on my watch keep being relatively compressed, expressing the Treasury markets doubts over the almost jubilant resilience in stocks. Make no mistake though, the path of least resistance for S&P 500 remains higher, and those trading only stocks can look forward for a great Dec return. Faced with the dog and pony debt ceiling show, precious metals dips are being bought – and relatively swiftly. What I‘m still looking for to kick in to a greater degree than resilience to selling attempts, is the commodities upswing that would help base metals and energy higher. These bull runs are far from over – it ain‘t frothy at the moment as the comparison of several oil stocks reveals. It‘s still about the dollar mainly: (…) The elephant in the room is (the absence of) fresh debt issuance lifting up the dollar, making it like rising yields more. Not only that these are failing to push value higher, but the tech resilience highlights the defensive nature of S&P 500 performance. Crucially though, precious metals are seeing through the (misleading dollar strength) fog, and are sharply rising regardless. Make no mistake, with the taper reaction, we have seen what I had been expecting (or even better given that I prefer reasonably conservative stance without drumming up expectations either way) – I had been telling you that the hardest times for the metals are before taper. Commodities and cryptos are feeling the greenback‘s heat most at the moment. It remains my view though that we aren‘t transitioning into a deflationary environment – stubborn inflation expectations speak otherwise, and the Fed‘s readiness to face inflation is being generally overrated, and that‘s before any fresh stimulus is considered. Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook S&P 500 bulls recaptured the reins in the very short-run, but it‘s the upswing sectoral internals that‘s preventing me from sounding the all clear. Credit Markets Credit markets look to be potentially stabilizing in the very short run – it‘s too early to draw conclusions. Gold, Silver and Miners Gold and silver declined, but the volume doesn‘t lend it more credibility than what‘s reasonable to expect from a correction within an uptrend. Forthcoming miners performance is key to assessing the setback as already over, or not yet. Crude Oil Crude oil bulls didn‘t got anywhere, and the oil sector resilience is the most bullish development till now. The absence of solid volume still means amber light, though. Copper The copper setback is getting extended, possibly requiring more short-term consolidation. Unless commodities swing below the early Nov lows, the red metal won‘t be a source of disappointment. Bitcoin and Ethereum Bitcoin and Ethereum crack in the dam is still apparent and open – the bulls haven‘t yet returned prices to the recent (bullish) range. I‘m though looking for a positive Dec in cryptos too, and chalk current weakness to the momentary dollar strength. Summary S&P 500 bulls leveled the short-term playing field, but the credit markets non-confirmation remains. Even though this trading range might not be over yet, it would be followed by fresh ATHs. Precious metals still have a lot of catching up to do, and will lead commodities into the debt ceiling showdown, after which I‘m looking for practically universally brighter real asset days - inflation expectations aren‘t declining any time soon. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
Great Santa Rally

Great Santa Rally

Monica Kingsley Monica Kingsley 16.12.2021 15:40
S&P 500 with pretty much everything else surged as the Fed didn‘t turn too hawkish. Predictably. The day of reckoning is again postponed as the central bank effectively kicked the can down the road by not getting ahead of inflation. Taper done by Mar 2022, and three rate hikes then, doesn‘t cut it. This illustrates my doubts about serious inflation figures to still keep hitting (hello latest PPI), and above all, their ability to execute this 1-year plan. If you look under the hood, they don‘t even expect GDP to materially slow down – 4.0% growth in 2022 with three hikes against 3.8% actual in Q3 2021 on no hikes. Something doesn‘t add up, and just as the Bank of England raising rates to 0.25% now, the Fed would be forced to hastily retreat from the just projected course.Yesterday‘s expectations panned out to the letter:(…) Still, I‘m looking for the Fed to be forced during 2022 to abruptly reverse course, and bring back the punch bowl. Treasuries look serene, and aren‘t anticipating sharply higher rates in the near term – not even inflation expectations interpreted higher PPI as a sign that inflation probably hasn‘t peaked yet. This isn‘t the first time inflation is being underestimated – and beaten down commodities (with copper bearing the brunt in today‘s premarket) reflect that likewise. Only cryptos are bucking the cautious entry to the Fed policy decision, and decreasing liquidity, in what can still turn out as a lull before another selling attempt.I think that the overly hawkish Fed expectations are misplaced, and that the risk-on assets would reverse the prior weakness – both today and in the days immediately following, which is when the real post-Fed move emerges. Odds are that it would still be up across the board. Yes, I‘m looking for the Fed speak to be interpreted as soothing – as one that would still result in market perceptions that the real bite isn‘t here yet, or doesn‘t look too real yet. Big picture is that public finances need inflation to make the debt load manageable, and that ample room to flex hawkish muscles isn‘t there (as retail data illustrate).Markets are interpreting yesterday as the punch bowl effectively remaining in place, and crucially, copper is participating after the preceding weakness. The metal with PhD in economics has been hesitating due to the darkening real economy prospects even though manufacturing data aren‘t a disaster. Consumer sentiment isn‘t though positive, and inflation expectations among the people aren‘t retreating as much as bond spreads would show. The red metals is balancing out the economic prospects in favor of participating in the renewed rush into commodities – the super (let alone secular) bull run isn‘t over by a long shot. Stockpiles are tight, and whatever the odds of the infrastructure bill being passed any time soon, copper isn‘t budging. That‘s great for real assets across the board.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 and Nasdaq OutlookS&P 500 reversal is to be trusted, and the advance was very solidly taken part in. With not too much willing sellers, the advance will likely moderate today, but still continue. The bull hasn‘t topped, has been my thesis for weeks.Credit MarketsHYG celebrations are ushering in the next risk-on phase – credit markets are confirming. The too hawkish Fed worry is in the rear view mirror, and many assets can run once again, the time is still right.Gold, Silver and MinersPrecious metals downside was indeed limited, and the solid upswing I called for, materialized. Now, let‘s wait for the reaction of this catalyst with more inflation, for the juiciest results...Crude OilCrude oil is once again readying the upswing – the conditions are in place for $72 to give in shortly. Similarly, oil stocks haven‘t peaked, and are merely consolidating.CopperKey vote of confidence is coming today from copper – the red metal would very willingly participate in a fresh commodities upswing. It‘s been ushered in already, actually.Bitcoin and EthereumBitcoin and Ethereum look to have found the bottom as well – what kind of corrective pullback would we get? I‘m not looking for one overly deep and testing yesterday‘s lows.SummaryBears have thrown in the towel, and rightfully so – another instance of the Fed crushing the puts. Being between a rock and a hard place, with midterms approaching, infrastructure bill birthing troubles, the central bank‘s room to act isn‘t really too large. FOMC has met market expectations, and still remained behind the curve on inflation. On top, I‘m looking for them to have to reverse course during 2022 – I‘ve argued the case macroeconomically in the opening part of today‘s report. Back to the inflation trades – long live real assets and the not yet having topped S&P 500 (don‘t look at me, Russell 2000)!Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
US Fed Actions 1999 to Present – What's Next?  - Part II - 15.12.2021

US Fed Actions 1999 to Present – What's Next? - Part II - 15.12.2021

Chris Vermeulen Chris Vermeulen 16.12.2021 08:53
Part II Let's continue to explore the past 20 years of US Fed actions. I believe the US Fed has created a global expansion of both economies and debts/liabilities that may become somewhat painful for foreign nations – and possibly the US. Reading The Data & What To Expect in 2022 And Beyond In the first part of this research article, I highlighted the past 25 years of US Fed actions related to the DOT COM bubble, the 9/11 terrorist attack, the 2008-09 US Housing/Credit crisis, and the recent COVID-19 virus event. Each time, the US Federal reserve had attempted to raise interest rates before these crisis events – only to be forced to lower interest rates as the US economy contracted with each unique disruption. The US Fed was taking what it believed were necessary steps to protect the US economy and support the global economy into a recovery period. Sign up for my free trading newsletter so you don’t miss the next opportunity! The following few charts highlight the results of the US Fed's actions to keep interest rates extremely low for most of the past 20 years. I want to highlight what I believe is an excessive credit/debt growth process that has taken place throughout most of the developing world (China, Asia, Africa, Europe, South America, and other nations). At the same time, the US has struggled to regain a functioning growth-based economy absent of US Federal Reserve ZERO interest policies and stimulus. Extreme Growth Of World Debt (excluding the US) This Rest Of The World; Debt Securities & Loans; Liabilities chart highlights the extreme, almost parabolic, growth in debt and liabilities that have accumulated since 2005-06. If you look closely at this chart, the real increase in debt and leverage related to global growth started to trend higher in 2004-05. During this time, the US housing market was on fire, which likely pushed foreign investors and foreign housing markets to take advantage of this growing trend in US and foreign real estate. This rally in speculative investments, infrastructure, and personal/corporate debt created a huge liability issue throughout many developing nations. Personal and Corporate debt levels are at their highest levels in decades. A recent Reuters article suggests global debt levels have risen in tandem with real estate price levels and is closing in on $300 Trillion in total debt. (Source: fred.stlouisfed.org) GDP Implicit Price Deflator Rallies To Levels Not Seen Since 1982~83 The rally in the US markets and the incredible rise of inflation over the past 24 months have moved the consumer price levels higher faster than anything we've seen over the past 50+ years. We've only seen price levels rise at this pace in the 1970s and the early 1980s. These periods reflected a stagflation-like economic period, shortly after the US Fed ended the Gold Standard. This was also a time when the US Federal Reserve moved the Fed Funds Rate up into the 12% to 16% range to combat inflationary trends. If the GDP Implicit Price Deflator moves above 5.5% over the next few months, the US Fed may be forced to take stronger action to combat these pricing issues and inflationary trends. They have to be cautious not to burst the growth phase of the markets in the process – which could lead to a very large deflationary/deleveraging price trend. (Source: fred.stlouisfed.org) We need to focus on how the markets are reacting to these extreme debt/liability trends and extreme price trends. The markets have a natural way of addressing imbalances in supply/demand/pricing functions. The COVID-19 virus event certainly amplified many of these issues throughout the globe by disrupting labor, supply, shipping, and manufacturing for a little more than 12+ months. The future decisions of the US Federal Reserve will either lead to a much more orderly deleveraging/devaluation process for the US and global markets – supporting the natural economic functions that help to process and remove these excesses. Or, the US Federal Reserve will push interest rates too high, too fast, and topple the fragile balance that is struggling to process the excesses throughout the global markets. What does this mean? I believe this data, and all the charts I've shared with you in this research article, suggest the US Fed is trapped in a very strenuous position right now. I'll share more information with you regarding my predictions for December 2021 and 2022 in the third part of this article. I will also share my proprietary Fed Rate Modeling System's results in Part III of this article and tell you what I expect from the US Federal Reserve and US stock markets. WANT TO LEARN MORE ABOUT HOW I TRADE AND INVEST IN THE MARKETS? Learn how I use specific tools to help me understand price cycles, set-ups, and price target levels. Over the next 12 to 24+ months, I expect very large price swings in the US stock market and other asset classes across the globe. I believe the markets are starting to transition away from the continued central bank support rally phase and may start a revaluation phase as global traders attempt to identify the next big trends. Precious Metals will likely start to act as a proper hedge as caution and concern start to drive traders/investors into Metals. If you need technically proven trading and investing strategies using ETFs to profit during market rallies and to avoid/profit from market declines, be sure to join me at TEP – Total ETF Portfolio. Have a great day! Chris VermeulenChief Market Strategist
Fading the Rally

Fading the Rally

Monica Kingsley Monica Kingsley 17.12.2021 15:44
S&P 500 made intraday ATHs, but the upswing was sold into heavily – pre-FOMC positioning raising its head? Bonds didn‘t crater, and the risk-off move wasn‘t all too pronounced. Tech weakness was the key culprit, with value barely hanging onto opening gains. Russell 2000 breaking below its Wednesday‘s open nicely illustrates how late in the topping process we are. What is needed for the upswing to go on, is tech leading the daily charge once again – and it remains to be seen for how long and to what degree would value be able to participate. I‘m taking today‘s S&P 500 weakness as squaring the prior quick long gains, which felt practically as a short squeeze. Now, we‘re working through the faster taper impact, not having shaken the news off yet. We‘re though getting there, if precious metals seeing through the fresh policy move inadequacy, and commodities likewise, are any clue. As I wrote yesterday: (…) pretty much everything else surged as the Fed didn‘t turn too hawkish. Predictably. The day of reckoning is again postponed as the central bank effectively kicked the can down the road by not getting ahead of inflation. Taper done by Mar 2022, and three rate hikes then, doesn‘t cut it. This illustrates my doubts about serious inflation figures to still keep hitting (hello latest PPI), and above all, their ability to execute this 1-year plan. If you look under the hood, they don‘t even expect GDP to materially slow down – 4.0% growth in 2022 with three hikes against 3.8% actual in Q3 2021 on no hikes. Something doesn‘t add up, and just as the Bank of England raising rates to 0.25% now, the Fed would be forced to hastily retreat from the just projected course. Markets are interpreting yesterday as the punch bowl effectively remaining in place, and crucially, copper is participating after the preceding weakness. The metal with PhD in economics has been hesitating due to the darkening real economy prospects even though manufacturing data aren‘t a disaster. Consumer sentiment isn‘t though positive, and inflation expectations among the people aren‘t retreating as much as bond spreads would show. The red metals is balancing out the economic prospects in favor of participating in the renewed rush into commodities – the super (let alone secular) bull run isn‘t over by a long shot. Stockpiles are tight, and whatever the odds of the infrastructure bill being passed any time soon, copper isn‘t budging. That‘s great for real assets across the board. The reason I quoted the above copper part, is the importance of its yesterday‘s move – not too hot, not too cold in pursuing the broader commodities. Keeping above $4.28 with ease today, would be an important signal that the bears aren‘t able to step in convincingly, including in stocks. Oil would sort itself out above $71 while gold and silver would extend their preceding gains today. All in all, stocks would join early next week, and apart from bonds not going more risk-off, Ethereum outperformance would be another confirmation of a broader risk-on upswing to happen. Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook S&P 500 downside reversal isn‘t to be trusted on a medium-term basis – but the downswing hasn‘t run its course, looking at volume. Good Nasdaq showing is sorely missing. Credit Markets HYG retreat while the quality debt instruments stayed more or less flat, is concerning for today – and for Monday, should we get follow through in bonds later on. Given the volume comparison, it‘s not certain in the least, which would set up conditions for a broader rally early next week. Gold, Silver and Miners Precious metals downside is clearly over, and a fresh upswing well underway. Correction in equities is marginally helping, and the reaction of Fed‘s underwhelming move with more inflation news, would be the juiciest catalyst. Crude Oil Crude oil is building up the springboard once again – the current consolidation including in oil stocks, would be resolved to the upside next week. We haven‘t seen a genuine trend change in Nov. Copper Key vote of confidence has come from copper – more willing participation from the red metal is called for next (as a minimum, not losing momentum vs. CRB Index). Bitcoin and Ethereum Bitcoin and Ethereum haven‘t kept Wednesday‘s gains, and could very well provide an early sign of buying appetite more broadly returning. Summary Bonds remain in wait and see mode, and aren‘t as bearishly positioned as stocks at the moment. Neither are precious metals or commodities, raising the odds of a bullish resolution to the S&P 500 rally that‘s been faded. The usual constellation is what‘s required – recovering bonds taking the pressure off tech, mainly. Ideally accompanied by solid HYG outperformance, value rising, copper extending gains, and Ethereum doing better than Bitcoin. Tall order, especially for today – but nothing unsurmountable for say Monday-Tuesday as argued for in detail in today‘s report. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
Gold and Silver Takeoffff... uh, No..

Gold and Silver Takeoffff... uh, No..

Mark Mead Baillie Mark Mead Baillie 20.12.2021 08:40
The Gold Update by Mark Mead Baillie --- 631st Edition --- Monte-Carlo --- 18 December 2021 (published each Saturday) --- www.deMeadville.com 'Twas a week of hope for the precious metals, Gold therein rising low-to-high from 1753 to 1816 (+3.6%) and Silver per same from 21.41 to 22.69 (+6.0%). But given Gold is never really supposed to stray too far from the 1780s, let alone Silver be allowed to do anything material but decline, both precious metals eked out immaterial weekly gains. Gold settled yesterday (Friday) at 1799, +0.9% net for the week, and Silver at 22.36, +0.7% net. Indeed a net snoozer of a week: â–  Even as the Swiss Franc saw its linear regression trend (21-day basis) rotate further to positive... â–  Even as the Bond's price moved to a two-week high... â–  Even as the S&P's MoneyFlow for the week values the Index 120 points lower than 'tis... â–  Even (more broadly) as the U.S. money supply since March 2020 has averaged an increase of $1 trillion every 93 trading days... â–  Even as the Federal Reserve again alerted the world that 'tis preparing to raise rates; (they can't be outdone by the Bank of England having just so done, even as the European Central Bank remains hand-wringing): we're actually thinking the Fed terminates the tapering and pulls the trigger in its 26 January Policy Statement... "Sorry folks, but we had to do it, else your stick of butter is gonna cost ten bucks." BOOM! And with respect to the latter, as you regular readers well know, the increasing of FedFunds rates was very precious metals-positive during 2004-to-2006 and on balance Gold-positive from 2015-to-2018. Yes even as we've all these historically very Gold-positive events in play, 'tis low that the precious metals continue to lay. "Well mmb, the dollar refuses to die..." Duly noted there, Squire. As we've been saying, market dislocations are the "in thing" these days. Fundamentals have been flushed down the loo, but at least we've quantitative and technical analysis to see us through. For again we quip -- even as goofball-wacko as market correlations have become -- prices are never wrong, their ebbing and flowing still in play, which for the trader we hope leads the correct way: "Don't dare think, else you'll sink!" (That of course courtesy of "The Trend is Your Friend Dept."). Either way, these are extraordinarily challenging trading days! Did you know that the EDTR ("expected daily trading range") of the S&P 500 right now is 67 points? The average annual trading range of the S&P from 1993-1995 was 47 points per year with an average annual percentage tracing of 11%: this year the S&P is tracing a range that averages better than 5% per month! Again analogous to a snake in its death throes. And yet the precious metals remain a disappointment, (save to "The M Word" crowd). Recall "Gold Forecast High Goes Bye-Bye" penned back on 02 October per nixing our 2401 price forecast high for this year: "...The more likely scenario shall well be Gold just sloshing around into year-end, trading during Q4 between 1668-1849..." We'd hoped to have been wrong about that, but with just two weeks to run in 2021, 'tis exactly what's happened. Indeed you can see it "happening" (or better stated "not happening") here across Gold's weekly bars from a year ago-to-date. A snoozer indeed, be it this past week or past year, the current parabolic Long trend (blue dots) completely bereft of price actually rising: And as an added holiday treat (hardly), here is our like (rarely posted) graphic for Silver, unable to maintain her short-lived parabolic Long trend, indeed now Short (red dots). Rather, a truly tarnished treat, one has to say, her appearing none too festive: But as crooned Neil Young back in '70 "Don't let it bring you down..."as we've a ray of technical hope for Gold into year-end; ('course, fundamental hope for Gold springs eternal). This next chart displays Gold by the day from mid-year-to-date. In the graphic's lower panel is a favoured technical study of the trading community, the mouthful MACD ("moving average convergence divergence"). Of interest is the MACD having just confirmed a crossing to positive. And whilst hindsight isn't future-perfect, it is a useful predictor in forming a reasonable near-term target for Gold, as follows. This is Gold's 13th positive MACD crossover since 26 March 2020. The "average maximum" price follow-through of the prior 12 positive crossovers is +87 points within an average signal duration of 27 trading days, (essentially within five weeks). Thus from the confirmation price of 1799, an average 87-point rise would put Gold at 1886; (more conservatively, the "median maximum" price follow-through across those 12 prior occurrences is +57 points, which if met on this run would find Gold at 1856). So with no formidably recent structural overhead resistance -- plus Gold's penchant to have put in positive Decembers in four of the past five years -- a run up to test the denoted 16 November high of 1880 makes some sense, prudent cash management, as always, taking precedence: 'Course, the biggest "positive" (if you will) of the week was the aforementioned Old Lady of Threadneedle Street raising her benchmark interest rate by 150% from 0.10% to 0.25%. (Dare the 1st Earl of Halifax -- one Charles Montagu, who in 1694 devised establishing William Paterson's 1691 proposal for creating the BOE -- flip his wig). Meanwhile across the channel, the ECB looks to curtail its "emergency" asset purchases, but nonetheless is assessing other stimulus measures. No rate hike there. Certainly neither in China as economic consumption and the property market continue to weaken. "Got Dollars?" For indeed as you already well know lest you've been in a hole, the StateSide FedFolks look to bring their Bank's Funds rate up into the 0.75%-to-1.00% target range by the end of next year. And as noted, we think they'll initially move on 26 January, barring an excessive bout of "Oh my! Omicron!" Oh, and from the "Oh By The Way Dept." President "Jumpin' Joe" Biden just signed the $2.5 Trillion Dollar Debasement Declaration so that TreaSec Janet "Old Yeller" Yellen can keep paying the nation's debt obligations and bills through most of next year. For some perspective: the U.S. money supply from 02 January 1998 to 09 September 2005 grew by $2.5 trillion, (a pace of $1 trillion per 802 trading days) during which time the price of Gold increased by 55%. Today (as previously noted), the money supply is increasing at a an average rate of $1 trillion per just 93 trading days, but terrifically under-owned Gold basically "ain't done squat" (technical term). Just in case yer scorin' at home. Speaking of scoring, the Economic Barometer's strength through November has run out of puff thus far in December as we see here: Notable Baro improvements from last week's set of 15 incoming metrics include November's Capacity Utilization and Building Permits amongst other higher housing measures; but the month's growth in Industrial Production slowed significantly, as did Retail Sales. And whilst December's New York State Empire Index marginally gained ground, the Philly Fed Index more than halved what November's had found. And oh yes, there was also wholesale inflation for November, the Producer Price Index recording an annualized pace of +9.6%: which makes the old riddle about "How many zeros can fit on a Zimbabwean banknote?" not as funny as once 'twas. But 'tis not to worry, the FOMC having just stated that "...Progress on vaccinations and an easing of supply constraints are expected to support continued gains in economic activity and employment as well as a reduction in inflation..." As to how many rising Baby Blue dots does a consistent trend make, let's turn to our two-panel graphic for Gold's daily bars from three months ago-to-date on the left and those for Silver on the right. The respective rightmost up turns from the -80% axes are generally harbingers of higher prices, (and to wit the MACD study for Gold earlier shown). But Friday's rejective price action does initially breed some cause for concern: "The M Word" crowd? The quadruple-witch? Both? We display, you assay: Next we've the 10-day Market Profiles for Gold (below left) and Silver (below right). To be sure, by this view Gold's infinite 1780s appear supportive, whereas poor ole Sister Silver's array is a congested display: Let's close with three mentions of inflation: â–  Dow Jones Newswires "reported" this past week that a factor in determining the duration of inflation is how we feel about it, which in turn shall guide the Fed's interest rate decisions; (folks are well-paid to write this stuff). Here's what we feel: be it cost-push or demand-pull or both, when the money supply increases 33% in less than two years, 'tis game over; â–  From the same creative bunch also came the notion that because increasing inflation effectively makes for negative real rates of interest, the FOMC by not (yet) voting to raise rates is therefore actually stimulating the economy. Yeah, we get that, but such rationale may be the biggest infatuative policy-wonk hot-air crush ever; â–  Speaking of which, here's an inflation-induced blast: we read that the rather wealthy Speaker of the U.S. House of Representatives is not supportive of a proposed ban on Congressional members from owning individual equities, her stating that "We’re a free-market economy": how's that for a 180° turn? (Maggie Thatcher, you don't know what you're missing). But don't you miss out in getting some Gold and Silver on the cheap before inevitably they leap. True, they had a rather feeble takeoff attempt this past week. But once they really get airborne, that'll be our kind of inflation, right there! Cheers! ...m... www.deMeadville.com www.TheGoldUpdate.com
Why I Like the Debt Ceiling

Why I Like the Debt Ceiling

David Merkel David Merkel 07.10.2021 05:22
Picture Credit: WyldKyss || The greatest mistake of economics is thinking we can influence the economy to make it do more over the long haul than it otherwise would do. I am not a liberal; I am not a conservative. I wish the Balanced Budget Amendment had been passed in the1970s, such that we would not be making such grandiose as a result of legislative/bureaucratic tinkering. I think the government should not try to solve economic issues, and should focus on Issues of justice. The US government has never done well managing the economy. Set some basic boundaries to define fraud, and then let the economy run. But in the present environment, i like anything that hinders the US Government from borrowing more. Most government spending reduces real GDP. You want infrastructure? Build it locally. Tax the area needing it, and see if they really want to pay the price. Don’t do it at the Federal level, where no one understands what is in any omnibus spending bill. It is all a waste, where those in Congress engage in a form of fraud telling their constituents what they got for them. If they really needed it, their state, county, or city should have done it. Projects should be done at the lowest level of government possible. Think of the situation regarding ports. We have spent 10x+ more money on ports on the east of the US rather than the west, and far more freight comes to the west. If these decisions were not federalized, we would not make such stupid choices. Bring back the sequester. Bring back anything that restrains the idiocy of the Congress and the last four Presidents. The high level of debt makes the economy unstable. You want more and more crises? Keep adding to the debt. The US and the World grew faster in real terms when the rule was balanced budgets and restrictive monetary policy. As such, I appreciate any measure that restrains the ability of the US government to borrow more.
Breaking up is hard to do

Breaking up is hard to do

David Merkel David Merkel 10.11.2021 04:04
Photo Credit: Chris Blakeley || Always optimistic when things are growing, and in the dumps when it falls apart Over the years, I have suggested that two firms should break up on a number of occasions: AIG & GE. Both are now in the process of completing their breakups. The news on GE dropped today, and I was surprised that the media did not pick up on one significant question on the GE breakup. Who gets the insurance liabilities that have been a real pain to GE even after selling off Genworth. As I tweeted: General Electric to Split Into Three Public Companies – WSJ https://t.co/BR8uXhhDVJ Notably missing from all the $GE press coverage is who has to pay off the insurance liabilities: Aviation, probably the weakest of the three. Could gore those relying on the guarantee… pic.twitter.com/qhT0y4gfXL— David Merkel (@AlephBlog) November 9, 2021 How could they miss this? I think I first suggested that GE should break up in a comment in RealMoney’s Columnist Conversation sometime back in 2005, but that is lost in the pre-2008 RealMoney file system, and exists no more. In terms of what I can show I will quote from this old post from 2008: 5) File this under Sick Sigma, or Six Stigma — GE is finally getting closer to breaking up the enterprise.� It has always been my opinion that conglomerates don’t work because of diseconomies of scale.� As I wrote at RealMoney: David MerkelGE — Geriatric Elephant4/27/2007 1:16 PM EDT First, my personal bias. Almost every firm with a market cap greater than $100 billion should be broken up. I don’t care how clever the management team is, the diseconomies of scale become crushing in the megacaps. Regarding GE in specific, it is likely a better buy here than it was in early 1999, when the stock first breached this price level. That said, it doesn’t own Genworth, the insurance company that it had to jettison in order to keep its undeserved AAA rating. Which company did better since the IPO of Genworth? Genworth did so much better that it is not funny. 87% total return (w/divs reinvested) for GNW vs. 28% for GE. A pity that GE IPO’ed it rather than spinning it off to shareholders… But here’s a problem with breaking GE up. GE Capital, which still provides a lot of the profits could not be AAA as a standalone entity and have an acceptable ROE. It would be single-A rated, which would push up funding costs enough to cut into profit margins. (Note: GE capital could not be A-/A3 rated, or their commercial paper would no longer be A1/P1 which is a necessary condition for investment grade finance companies to be profitable.) Would GE do as well without a captive finance arm (GE Capital)? It would take some adjustment, but I would think so. So, would I break up GE by selling off GE Capital? Yes, and I would give GE Capital enough excess capital to allow it to stay AAA, even if it means losing the AAA at the industrial company, and then let the new GE Capital management figure out what to do with all of the excess capital, and at what rating to operate. Splitting up that way would force the industrial arm to become more efficient with its proportionately larger debt load, and would highlight the next round of breakups, which would have the industrial divisions go their own separate ways. Position: none, and I have never understood the attraction to GE as a stock Over the years, I continued to write about GE and Genworth (I grew bearish over LTC after analyzing Penn Treaty. I was always bearish on mortgage insurance). I never thought either would do well, but I never expected them to do as badly as they did. Optimistic accounting ploys from the Welch years bit into profits of Immelt, as he was forced to reset accruals higher again and again. Overly aggressive financial and insurance underwriting similarly had to be reversed, and losses realized. After today, all but the successor firm for GE (Aviation) has a chance to do something significant, freed from the distractions of being in a conglomerate. They can focus, and maybe win. As for GE Aviation, because of the insurance liabilities they will probably receive a valuation discount. Maybe they will sacrifice and pay up, selling the liabilities to Buffett with significant overcollateralization. American International Group I first suggested that AIG break up back in 2008. Only M. R. Greenberg had the capability of managing the behemoth, and once he was gone, lower level managers began making decisions that Greenberg would have quashed, which led to short-term gains, and larger long-term losses. After AIG was taken over by the Fed, bit-by-bit they began selling off the pieces — Hartford Steam Boiler, ILFC, AIA, Alico (to MetLife), and more. They were left with a portion of the international P&C business, and the domestic life and P&C businesses. They are now planning on spinning off the domestic life companies, which will leave AIG as a P&C insurer with relatively clean liabilities (They reinsured Asbestos and Environmental with Berkshire Hathaway). Where do we go from here? Is there a lesson here? Avoid complexity. Avoid mixing mixing industrial and financial. Avoid mixing life and P&C. (Allstate is finally splitting that.) That said, there may be another lesson for the future. What of the extremely large companies that are monopolies? Some of them aren’t complex; they just dominate a large area of the economy as monopolies. Governments want to do one of two things with monopolies. They either want to break them up, or turn them into regulated utilities. Why? The government doesn’t like entities that get almost as powerful as them, so they limit their size, scope, and subject them to regulation. So be aware if you hold some of the largest companies in the US or the world, because governments have their eyes on them, and want them to be subject to the government(s). Full disclosure: long MET
An Estimate of the Future

An Estimate of the Future

David Merkel David Merkel 19.11.2021 07:49
Photo Credit: eflon || All in all, you’re just another brick in the wall… In some ways, the Federal Reserve is the whipping boy of Congress. Congress can’t decide on anything significant, so the Fed fills in the blanks, and keeps things moving, even if it creates humongous asset bubbles in the process. That is what we are facing today. Overvalued stocks, housing, corporate bonds, private equity, and more. Inflation in goods and services may be transitory, but asset inflation is a constant. Whether by QE or rate policy, the Fed tries to end the possibility of recessions by making financing cheap, and blowing asset bubbles in the process. What of the future? The Fed will be dragged kicking and screaming to tightening. It will follow the stupid Alan Greenspan highway of 25 basis points per meeting. It will be all too predictable, which has little to no impact until it is too late, creating pro-cyclical economic policy, something the Fed specializes in. The Fed will be surprised (again) to see that the long end of the yield curve does not respond to their efforts. Are they stupid? Yes. the yield curve hasn’t worked in the classical way for over 20 years. In an overindebted economy, long rates are sluggish. Can the Fed abandon the dead orthodoxy of neoclassical economics to embrace the reality of overindebted economics? I doubt it. I asked two Fed governors three years ago when the Fed would abandon the failed Neoclassical economics. They looked like dead sheep for a moment, before they gave some lame defenses of the theory that can’t account for financial markets or marketing. What I expect is that the Fed will tighten the Fed funds rate to 1.5% or so, the long end sinking, and then something blows up, and they return to the prior policy of 0% rates, and QE… failed policies that inflate asset bubbles and increase inequality. We’re in a “doom loop” where there is no way to purge this system of its errors. We would be better off under a gold standard, with stricter regulation of banks. Would we have a recession? Yes, but eventually the economy would grow again organically, without the pollution of stimulus. That said, the Federal Reserve is not the main problem. The main problem is American culture that will not tolerate severe recessions. We need recessions to liquidate bad debts that hinder the economy from growing rapidly in the future. We need to accept the boom-bust cycle, and not look to the government or central bank to moderate matters. Bank regulation is another matter, as loose regulation of banks led to extreme booms and busts, particularly between 1870-1913, and 2004-2008. Conclusion The Fed will tighten and fail, returning us to the same morass that we are in now. Financial repression via the Fed will continue to create inequality with no smoking gun. Stupid people will finger other causes, when the real cause is the Federal Reserve. We need to eliminate the Federal Reserve, and cause Congress and the Executive Branch to take responsibility for their failed policies. PS — there could be a currency panic, but I doubt it. Too many countries want to export to the US.
Estimating Future Stock Returns, September 2021 Update

Estimating Future Stock Returns, September 2021 Update

David Merkel David Merkel 16.12.2021 04:35
Image credit: All images belong to Aleph Blog This should be a brief post. At the end of the third quarter, the S&P 500 was poised to nominally return -0.64%/year over the next 10 years. As of the close today, that figure was -1.83%/year, slightly more than the -1.84%/year at the record high last Friday. The only period compares with this valuation-wise is the dot-com bubble. We are above dot-com level valuations. And if you view the 10-year returns from the worst time of the dot-com bubble to now, you can see that the results they obtained are milder than what I forecast here. Of course, a lot of what will happen in nominal terms will rely on the actions of the Fed. Will the Fed: Allow a real recession to clear away dud assets that are on life support from low rates? (Collapsing the current asset bubble)Change the terms of monetary policy, and start directly monetizing US Treasury debt? (Risking high inflation)Continue to dither with financial repression, leaving rates low, not caring about moderate inflation, with real growth zero-like. (Zombie economy — this is the most likely outcome for now) In some ways the markets are playing around with something I call “the last arbitrage.” Bonds versus Stocks. The concept of TINA (There is no alternative [to stocks]) relies on the idea that the Fed will be the lapdog of the equity markets. If stocks are high, the Fed is happy. Phrased another way, if the Fed maximizes wealth inequality, it is happy. And the Fed will be happy. They live to employ thousands of macroeconomists who would have a hard time finding real employment. These economists live to corrupt our understanding f the macroeconomy, justifying the actions of the Fed. The Fed just wants to scrape enough seigniorage to pay the staff, and keep Congress and the Administration mollified. All taken out of the hides of those who save. So with the last arbitrage… interest rates have to stay low to keep the stock market high, even if it means slow growth, and moderate and growing inflation. The likely change promulgated by the Fed today, raising the short rate by 0.75% in 2022 will likely flatten the yield curve, leading to a crisis of some sort, and push them back into QE and near-zero short rates. The stock market will have a pullback and a rally, but what of inflation? How will people act when there is no way to save for the short-run, without inflation eating away value? Brave new world. The Fed is stuck, and we are stuck with them. Gold does nothing, and would be a kinder mistress than the Fed. Better to live within strict limits, than the folly of an elastic currency. But as is true with all things in America, we are going to have to learn this the hard way. PS — As for me, I am living with value stocks, small stocks, and international stocks. Very little in the S&P 500 here.
Hot Pound can jump to 1.36 before the year ends, with a long-term target at 1.60

Hot Pound can jump to 1.36 before the year ends, with a long-term target at 1.60

Alex Kuptsikevich Alex Kuptsikevich 23.12.2021 14:24
The British Pound is gaining support from several drivers at a time, managing to add more than 1.5% since Tuesday to levels above 1.3400 in the GBPUSD pair, which we last saw a month ago. The British currency’s ability to show buyer support on dips below 1.32 earlier in December has attracted the attention of speculators, who come into play as financial market liquidity declines in the run-up to the Christmas holidays. Very often, there are more decisive moves in the thin market during pre-Christmas and between Christmas and New Year period, much of which the market recovers back in the first days after the holidays.The Pound also looks attractive for short-term buyers because it positively correlates with risky assets. Strengthening demand for equities as part of the Santa Rally has determined the direction in which GBPUSD will move in the short term.GBPUSD is also interesting from a tech analysis perspective. The British currency has gained support after a 50% pullback from May 2020 lows at 1.2070 to this year peaks near 1.42, and a 61.8% rally from the March 2020 lows. Globally, this reversal from support could be the end of a correction and the start of a new GBPUSD upside wave with a long-term target at 1.60. However, a move towards levels we last saw only in 2014 is only looking plausible if the Bank of England will repeatedly raise rates faster than the Fed and well above inflation, copying the policy of the early 2000s.A much closer target for speculators at the end of the year is 1.3600, around which the resistance area of the descending trading range of the second half-year passes. A sure exit above this would signal that not only speculators but also more structural forces are in play.
Gold christmas tree?

Gold christmas tree?

Arkadiusz Sieron Arkadiusz Sieron 23.12.2021 12:25
Santa Claus is coming to town! What will he give gold: a gift or a rod? During the holiday week, not much happens in the marketplace. Investors focus on two things right now: whether Democrats will be able to pass Biden’s spending bill in the face of Senator Joe Manchin’s opposition, and whether the coronavirus Omicron variant will trigger new restrictions and hamper economic growth. After all, this strain has already become the dominant one in the US, but its effects are not yet known. Like most of 2021, gold has been rubbing against $1,800 this week but did not have the strength to permanently rise above this level. Despite a surge in inflation and very low real interest rates, the yellow metal didn’t rally. Thus, we could say that gold was rather naughty this year and doesn’t deserve gifts from Santa. However, maybe it’s not gold’s fault, but our too high expectations? After all, gold had to compete with cryptocurrencies and industrial metals (or commodities in general), both of which performed exceptionally well during periods of high inflation. Despite all the Fed’s hawkish rhetoric and tapering of quantitative easing, gold didn’t break down. Hence, it all depends on the perspective. The same applies to historical analyses and forecasts for 2022. The bears compare the current situation with the 2011-2013 period. The 2020 peak looked like the 2011 peak. Thus, after a period of consolidation, we could see a big decline, just as it happened in 2013. On the other hand, gold bulls prefer to compare today with 2015, as we are only a few months away from the Fed’s interest rate hikes. As a reminder, gold bottomed in December 2015, so the hope is that we will see another bottom soon, followed by an upward move. In other words, the bears believe that the replay of the “taper tantrum” is still ahead of us, while the bulls claim that the worst is already behind us.   Implications for Gold Who is right? Of course, me! But seriously: both sides make valid points. Contrary to 2013, the current tapering was well telegraphed and well received by the markets. Thus, the worst can indeed be already behind us. Especially that the 2020 economic crisis was very deep, but also very short, so everything was very condensed. I mean: the Great Recession lasted one and a half years, while the Great Lockdown lasted only two months. The first taper tantrum occurred in 2013, while the first hike in the federal funds rate – at the end of 2015. We won’t wait that long now, so the period of downward pressure on gold prices stemming from expectations of the Fed’s tightening cycle will be limited. Having said that, gold bears highlight an important point: real interest rates haven’t normalized yet. As the chart below shows, although nominal bond yields have rebounded somewhat from the August 2020 bottom, real rates haven’t followed. The reason was, of course, the surge in inflation. However, if inflation eases, inflation-adjusted rates will go up. Additional risk here is that the Fed will surprise the markets on a hawkish side. The bottom line is that Santa Claus may bring gold a rod this time. Although gold’s reaction to the recent FOMC meeting was solid, the overall performance of the yellow metal this month is worse compared to the historically strong action in December. I don’t expect a similarly strong downward move as in 2013, but real interest rates could normalize somewhat in 2022, given the upcoming Fed’s tightening cycle and possible peak in inflation. The level of indebtedness will limit the scope of the move, but it won’t change the direction. Anyway, whether you are a gold bull or a gold bear, I wish you a truly merry and golden Christmas (or just winter holidays)! Let the profits shine, even if gold won’t! If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
Do you really need to understand economics to trade Forex successfully?

Do you really need to understand economics to trade Forex successfully?

Finance Press Release Finance Press Release 29.12.2021 10:14
The biggest financial market in the world is the forex market. To begin trading Forex, you must have a working grasp of the current state of the global economy. You need to be aware of the significance of this news and happenings in the forex market and how they will affect your transactions. If you want to be at the top of the list, you may invest some time studying what this economic news and activities truly imply in simple words.   Understanding the fundamentals of global economics may aid in your Forex trading success. A wide range of economic variables affects the exchange rates of different currencies all around the globe. The following are some of the factors:   Interest rate changes by a country's central bank Spending by both the government and the general public There is both public and private debt. GDP and CPI are two measures of the economy. a currency's supply of money and demand   The movement of currencies throughout the globe is affected by any change in money flows. Understanding the rules of trading is more important than being an expert in economics. But, having a fundamental comprehension of the economic principles that regulate the movement of money throughout the globe and a high-level understanding of Forex trading as well, would be ideal.   In order to build a strategy that fits your personality it is crucial to be familiar with the market structure, order flow and algorithmic movement. Those people who are new in this industry need to get more information about how to learn forex trading, to avoid losing money and being a victim of financial frauds. For forex traders, there is always a piece of economic data due for publication from at least eight major currencies that may be used to make smart bets. However, It is also worth noting that in reality, the eight most closely watched nations provide statistics on an average of seven days a week (excluding vacations). There are several prospects for people who trade news.   It's more difficult to trade the news than it seems. Both official and unofficial estimates (whispers) and adjustments to earlier reports are critical to determining a consensus figure. According to both the relevance of the nation providing the data and the importance of this release in comparison to other data releases, certain releases are more relevant than others. How To Start Forex Trading - Basic Guide If the value of one currency rises or falls relative to the other, then forex trading is successful.   Even if the price may rise tomorrow, a trader may decide to acquire a currency now and sell it for a profit at a later date. We call this "going long."   Another option is to sell a currency and then purchase it back later at a lower price if they believe its value will fall. Going short is a term for this.   Inflation, interest rates, and political events may all have an impact on the value of a currency. Find a forex broker first to obtain access to the market.   You may establish a forex trading account online after you've chosen a broker and are ready to begin trading.   Before making an investment, it is essential to verify that a broker is regulated by the Financial Conduct Authority (FCA).   The Financial Conduct Authority (FCA) maintains an online database of all regulated brokers traders could trust. So, there is a risk that a broker that isn't listed is a fake company that is willing to defraud you for money. That’s the reason why you should always be vigilant and informed while making a choice.   Depending on whether you are buying or selling, the same currency pair will have somewhat different pricing.   There is a bit of a learning curve, but it's worth remembering that prices are always given in terms of the forex broker's viewpoint, rather than yours.   From the viewpoint of a broker, prospective purchasers must make an offer if you are selling currency. Consequently, When you purchase a currency, you'll have to pay the seller's asking price.   Using leverage, traders are able to borrow money from a broker so that they may trade higher quantities of money.   The broker will cover the remainder of your investment once you make a modest initial deposit known as a margin.   Depending on the broker, the amount of leverage available varies. If the investment is successful, leverage may help you enhance your profit, but it's crucial to keep in mind that trading higher quantities of currency can also raise your chance of loss.   Before employing leverage, make sure you understand all of the dangers and potential losses. This is because, unlike conventional investments, where you can only lose your original investment, leverage leaves you exposed to an almost limitless amount of risk.   As currencies fluctuate in value, it's difficult to maintain track of your transactions 24 hours a day in the forex market.   To minimize the danger of losing money if the market does not move in your favor, there are certain automatic methods that you may set up in your forex account   Stop-loss orders restrict the amount of money a trader loses if a currency's value rises over a specified threshold. An investor may select a minimum or maximum price at which they want to purchase or sell a currency pair. When you use limit orders, you don't have to keep an eye on currency rates and automatically purchase or sell a currency when the price reaches your target.   You need to exchange big amounts of money in order to see a profit on the forex market. However, even while leverage raises the amount of currency you trade, it substantially increases the chance of you losing money, so much so that you stand to lose more than your starting capital. So, before you start trading forex, make sure you do your homework and figure out whether you can afford to lose your money.
Fear May Drive Silver More Than 60% Higher In 2022

Fear May Drive Silver More Than 60% Higher In 2022

Chris Vermeulen Chris Vermeulen 22.12.2021 23:17
As the US and global markets rattle around over the past 60+ days, many traders have failed to identify an incredible opportunity setting up in both Gold and Silver. Historically, Silver is extremely undervalued compared to Gold right now. In fact, Gold has continued to stay above $1675 over the past 12+ months while Silver has collapsed from highs near $30 to a current price low near $22 – a -26% decline. Many traders use the Gold/Silver Ratio as a measure of price comparison between these two metals. Both Gold and Silver act as a hedge at times when market fear rises. But Gold is typically a better long-term store of value compared to Silver. Silver often reacts more aggressively at times of great fear or uncertainty in the global markets and often rises much faster than Gold in percentage terms when fear peaks. Understanding the Gold/Silver ratio The Gold/Silver ratio is simply the price of Gold divided by the price of Silver. This creates a ratio of the price action (like a spread) that allows us to measure if Gold is holding its value better than Silver or not. If the ratio falls, then the price of Silver is advancing faster than the price of Gold. If the ratio rises, then the price of Gold is advancing faster than the price of Silver. Right now, the Gold/Silver ratio is above 0.80 – well above a historically normal level, which is usually closer to 0.64. I believe the current ratio level suggests both Gold and Silver are poised for a fairly big upward price trend in 2022 and beyond. This may become an exaggerated upward price trend if the global market deleveraging and revaluation events rattle the markets in early 2022. Sign up for my free trading newsletter so you don't miss the next opportunity! I expect to see the Gold/Silver ratio fall to levels below 0.75 before July/August 2022 as both Gold and Silver begin to move higher in Q1:2022. Some event will likely shake investor confidence in early 2022, causing precious metals to move 15% to 25% higher initially. After that initial move is complete, further fallout related to the deleveraging throughout the globe, post-COVID, may prompt an even bigger move in metals later on in 2022 and into 2023. COVID Disrupted The 8~9 Year Appreciation/Depreciation Cycle Trends In May 2021, I published an article suggesting the US Dollar may slip below 90 while the US and global markets shift into a Deflationary cycle that lasts until 2028~29 (Source: The Technical Traders). I still believe the markets will enter this longer-term cycle and shift away from the broad reflation trade that has taken place over the past 24+ months – it is just a matter of time. If my research is correct, the disruption created by the COVID virus may result in a violent reversion event that could alter how the global markets react to the deleveraging and revaluation process that is likely to take place. I suggest the COVID virus event may have disrupted global market trends because the excess capital poured into the global markets prompted a very strong rise in price levels throughout the world in real estate, commodities, food, technology, and many other everyday products. The opposite type of trend would have likely happened if the COVID event had taken place without the excessive capital deployed into the global markets. Demand would have diminished. Price levels would have fallen. Demand for commodities and other technology would have fallen too. That didn't happen. The opposite type of global market trend took place, and prices rose faster than anyone expected. Markets Tend To Revert After Extreme Events As much as we may want to see these trends continue forever, any trader knows that markets tend to revert after extreme market trends or events. In fact, there are a whole set of traders that focus on these “reversion events.” They wait for extreme events to occur, then attempt to trade the “reversion to a mean” event in price action. My research suggests the COVID virus event may have created a hyper-cycle event between early 2020 and December 2021 (roughly 24 months). My research also suggests a global market deleveraging/revaluation event may be starting in early 2022. If my research is correct, the recent lows in Gold and Silver will continue to be tested in early 2022, but Gold and Silver will start to move much higher as fear and concern start to rattle the markets. As asset prices revert and continue to search for proper valuation levels, Gold and Silver may continue to rally in various phases through 2028~2030. Initially, I expect a 50% to 60% rally in Silver, targeting the $33.50 to $36.00 price level. For SILJ, Junior Silver Miners, I expect an initial move above $20 (representing a 60%+ rally), followed by a follow-through rally targeting the $25.00 level (more than 215% from recent lows). I believe the lack of focus on precious metals over the past 12+ months may have created a very unusual and efficient dislocation in the price for Silver compared to Gold. This setup may present very real opportunities for Silver to rally much faster than Gold over the next 24+ months – possibly longer. If my research is correct, the Junior Silver Miners ETF, SILJ, presents a very good opportunity for profits. Want to learn more about the movements of Gold, Silver, and their Miners? Learn how I use specific tools to help me understand price cycles, set-ups, and price target levels in various sectors to identify strategic entry and exit points for trades. Over the next 12 to 24+ months, I expect very large price swings in the US stock market and other asset classes across the globe. I believe the markets are starting to transition away from the continued central bank support rally phase and may start a revaluation phase as global traders attempt to identify the next big trends. Precious Metals will likely start to act as a proper hedge as caution and concern start to drive traders/investors into Metals. If you need technically proven trading and investing strategies using ETFs to profit during market rallies and to avoid/profit from market declines, be sure to join me at TEP – Total ETF Portfolio. Pay particular attention to what is quickly becoming my favorite strategy for income, growth, and retirement - The Technical Index & Bond Trader. Have a great day!
Awaiting US CPI And Speaking Of Disney and Uber. SEK And PLN As Central Banks Moves

US Fed Actions 1999 to Present – What's Next?

Chris Vermeulen Chris Vermeulen 15.12.2021 09:48
I find it interesting that so much speculation related to the US Federal Reserve drives investor concern and trends. In my opinion, the US Federal Reserve has been much more accommodating for the global economy after the 2008-09 US Housing Market crash. The new US Bank Stress Tests and Capital Requirements have allowed the US to move away from risk factors that may currently plague the global markets. What do I mean by this statement? US Fed Continues To Maintain Extremely Accommodative Monetary Policy Over the past 12+ years, after the 2008-09 US Housing Market collapse, the US Federal Reserve has acted to support the US and global economy while the US Congress and US Federal Reserve have acted to build a stronger foundation for US banking and financial institutions. The most important aspect of this is the Capital Requirements that require an operating US bank to hold a minimum amount of reserve capital (Source: Federal Reserve). The US Federal Reserve installed this program to prevent US banks from over-leveraging their liabilities based on the 2008-09 Housing Market Crisis lessons. Sign up for my free trading newsletter so you don’t miss the next opportunity! There are still risks associated with a complete global economic collapse – where consumers, banking institutions, and economic activity grinds to a halt because of some external or unknown factor. Yet, the risks of a US-based collapse based on excessive Banking or other financial institution liabilities are somewhat limited in today's US Economy. Although, globally, the risks have accelerated over the past 12+ years while the US Federal Reserve maintained a very accommodative monetary policy. Historical US Federal Reserve Actions Let's review some of the most significant US Federal Reserve actions over the past 25 years. Early/Mid-1990s: The Fed raised the FFR from 3.0% to 6.5% to 7.0% as the DOT COM Rally continued to build strength. 1998/1999: The Fed dropped the FFR to 4.0% as the DOT COM bubble became frothy and started to fracture/burst. Early 2000: The Fed raised the FFR from 4.0% to 6.86% over just five months, pushing the cost of borrowing above 7.5%~8.5% in the open market. Late 2000/Early 2001: The September 2001 Terrorist Attack on the US pushed the Fed to lower the FFR to 1.0% by December 2002. Before the 9/11 attack, the Fed lowered the FFR after the DOT COM bubble burst rattled the US economy and output. 2004/2006: The Fed raised the FFR from 1.0% to 5.5% (more than 550%) while the US Housing Market boom cycle pushed the US economy into overdrive. This was the biggest FFR rate increase since the 1958-1960 rate increase (from 0.25% to 4.0% - more than 1600%) or the 1961-1969 rate increase (from 0.50% to 9.75% - more than 1950%). 2007/2008: The Fed decreased the FFR from 5.5% to 0.05 (Dec 2009), effectively setting up a 0% interest rate while the US attempted to recover from the 2008-09 Housing Market Crisis. 2015/2020: the Fed attempted to raise the FFR from 0.08% to 2.40% as the US economy transitioned into a strong bullish breakout trend. When the US markets collapsed in early 2020 because of the COVID-19 virus, the Fed moved interest rates back to near 0% and have kept them there ever since. The deep FFR discounts/rates that started after the 1999/2000 DOT COM/9-11 events pushed foreign markets to borrow cheap US Dollars as a disconnect of capital costs and a growing foreign market economy allowed certain economic functions to continue. Borrowing cheap US Dollars while deploying that capital in foreign economies returning 4x to 10x profits allowed many foreign companies, individuals, and governments to build extremely dangerous debt levels – very quickly. (Source: ST Louis FED) Now, let's get down to the core differences between pre-1990 and post-1990 US Fed actions and global economy functions. US Fed Added Rocket Fuel To An Already Accelerating Global Economy Before 1985, foreign markets were struggling to gain their footing in the global economy. Larger global economies, like the US, Japan, Europe, and Canada, could outsource manufacturing, supplies, and labor into foreign nations that provided a strategic cost advantage. After 1994 or so, after the Asian Currency Crisis settled, the growth of manufacturing and labor in China/Asia started booming at an exponential rate. This prompted a 2x to 5x growth factor in many Asian nations over 10+ years. The 9-11 terrorist attacks briefly disrupted this trend, but it restarted quickly after 1994~1995. This high-speed growth phase in China/Asia after 1999 created a massive demand for credit and expansion as Asian consumers and economies grew at exponential rates from 1997 to now. The US Fed inadvertently promoted a global growth phase that resulted in the fastest global economic increase in history. Multiple foreign nations were able to take advantage of cheap US Dollars. At the same time, the US Fed acted to support the recovery of the US economy after 9-11 and the 2008-09 Housing/Credit crisis. Those cheap US Dollars continued after the COVID-19 turmoil in early 2020 and likely pushed already at-risk debtors over the edge as bond rates have started to price extensive risk factors. The result of these crisis events and the US Federal Reserve's continued easy monetary policy has been the fastest growth of assets the planet has seen in over 80 years. Not only have global economies grown in a parabolic phase, but the US stock market has also moved higher and higher after the 2010 bottom and the 2015-2016 shift towards higher US corporation earnings/revenues. Once the COVID-19 virus event hit in early 2020, the US Fed moved rates back to near 0% - supplying a nearly unlimited amount of rocket fuel for the global markets (again). The problem this time was the global COVID shutdowns essentially took the spark away from the fuel (capital). Now, we are waiting for the US Fed statements to close out 2021. I'll offer this simple hint to help you prepare for what's next – more volatility, more big trends, and more deleveraging throughout the global markets. In Part II of this research article, I'll share my thoughts on what I expect from the US Fed and what I hope for in 2022 and beyond. Want to learn more about how I trade and invest in the markets? Learn how I use specific tools to help me understand price cycles, set-ups, and price target levels. Over the next 12 to 24+ months, I expect very large price swings in the US stock market and other asset classes across the globe. I believe the markets are starting to transition away from the continued central bank support rally phase and may start a revaluation phase as global traders attempt to identify the next big trends. Precious Metals will likely start to act as a proper hedge as caution and concern start to drive traders/investors into Metals. If you need technically proven trading and investing strategies using ETFs to profit during market rallies and to avoid/profit from market declines, be sure to join me at TEP - Total ETF Portfolio. Have a great day! Chris VermeulenChief Market Strategist
2022 and Gold

2022 and Gold

Arkadiusz Sieron Arkadiusz Sieron 30.12.2021 17:54
  2021 was bad for gold. Unfortunately, 2022 doesn’t look any better, especially at the beginning. The end, however, gives the yellow metal some hope… Bye, bye 2021! It definitely wasn’t a year of gold. As the chart below shows, the yellow metal lost 5% of its value over the last twelve months, declining from $1,887.60 on December 30, 2020, to $1,794.25 on December 29, 2021. Thus, the gold bulls won’t miss 2021, I guess. What about me? Well, I correctly predicted in January that “gold’s performance in 2021 could be worse than last year”. However, I expected more bullish behavior. I thought that rising inflation would be more supportive of gold prices. I’m fully aware that gold is not a perfect inflation hedge, but historical analysis suggests that high and accelerating inflation should be positive for gold prices. After all, inflation lowers the real interest rates, the key fundamental factor in the gold market. However, rising inflation has prompted the Fed to tighten its monetary policy and speed up the tapering of its quantitative easing. Expectations of hikes in the federal funds rate in 2022 also strengthened. In consequence, as the chart below shows, bond yields rose, especially those short- and medium-term, creating downward pressure on gold prices. Thus, we’ve learned two important lessons in 2021: don’t just count on inflation, and don’t fight with the (hawkish) Fed. As you can see, bond yields haven’t returned to their pre-pandemic level yet. Although they don’t have to fully recover, they do have room for further increases. The issue here is that when inflation peaks and disinflation starts, inflation expectations could decline, boosting the real interest rates. Actually, market-based inflation expectations already peaked in November, as shown in the chart below. This indicates that worries about inflation had calmed and investors had regained some confidence in the US central bank’s ability to contain upward price pressure.   Implications for Gold Will 2022 be better for gold than 2021? It’s possible, but I’m not an optimist. I mean here: macroeconomic conditions will turn more bearish for gold. Despite the spreading of Omicron variant of coronavirus, 2022 could mark the end of the global Covid-19 epidemic with a full economic recovery and a return to normal conditions. Fiscal policy will tighten, while the Fed will adopt a more hawkish monetary policy than in 2021. Supply shocks are easing, so inflation may peak, while real interest rates go up further. Moreover, the US dollar may strengthen against the euro, as the ECB is slower with its monetary policy tightening. On the other hand, there are also some factors that could support gold prices. In 2021, GDP rebounded greatly after the economic crisis of 2020, and financial markets also recovered robustly. 2022 may be more challenging for economic growth and the financial sector, though. One thing is the base effect, while another is central banks’ policy normalization and rising interest rates. With massive public and private debts, the Fed’s tightening cycle could deflate asset and credit bubbles and even trigger a recession, or at least a market correction. However, there are no signs of market stress yet, so a financial crisis is not in my baseline scenario for the next year. 2023 (or even later) is a more probable timeframe. Hence, I believe that the end of 2022 may be better for gold than the beginning of the year, as mere expectations of the Fed’s tightening cycle could be replaced by worries about the consequences of interest rate hikes. Anyway, 2021 is (almost) dead. Long live 2022! I wish you a return to normalcy, shining profits and all the golden next year! If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
Bitcoin and Ethereum are staging a daily comeback

Bitcoin and Ethereum are staging a daily comeback

Monica Kingsley Monica Kingsley 30.12.2021 15:49
S&P 500 bulls stood their ground nicely, and the key sectors confirmed little willingness to turn the very short-term outlook more bearish than fits the little flag we‘re trading in currently – it‘s a bullish flag. Given the continued risk-off turn in bonds, the stock market setback could have been more than a tad deeper – that would be the conclusion at first glance. However, high yield corporate bonds held up much better than quality debt instruments, and that means the superficial look would have been misleading. Likewise as regards my other 2 signs out of the 3 yesterday presented ones – tech held up fine, and cryptos have practically erased yesterday‘s hesitation during today‘s premarket. The Santa Claus rally indeed hasn‘t yet run its course, and the slighly better than a coin toss odds of us not facing more than a very shallow correction, look to be materializing. As I wrote 2 days ago – What‘s Not to Love Here – we‘re entering 2022 with great open profits in both S&P 500 (entered aggressively at 4,672) and crude oil (entered with full force at $67.60). Both rides aren‘t yet over, copper is primed to catch up in the short run to the other commodities, gold is well bid at current levels, and together with silver waiting for a Fed misstep (market risk reappreciation) and inflation to start biting still some more while the real economy undergoes a soft patch (note however the very solid manufacturing data) with global liquidity remaining constrained even though the Fed didn‘t exactly taper much in Dec, and nominal yields taking a cautious and slow path towards my 2022 year end target of 1.80-2.00% on the 10-year Treasury. As I wrote prior Monday, we‘re looking at still positive 2022 returns in stocks – of course joined by commodities and precious metals. The path would be though probably a more turbulent one than was the case in 2021. We had a good year of strong gains, and I hope you have benefited. Thank you for all your appreciation and best wishes sent my way throughout all of 2021 and now by email or via Twitter – I would love to wish you a very Happy New Year – may 2022 keep bringing you happiness, success and good health. Enjoy the New Year‘s Eve celebrations, and see you again on Jan 03, 2022! Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook S&P 500 consolidation is still shaping up finely – and does so on solid internals. Particularly the tech resilience is a good omen. Credit Markets HYG could have indeed declined some more, but didn‘t. While I‘m not reading all too much into this signal individually, it fits the (still bullish) mozaic completed by other markets on my watch. That‘s the strength of intermarket analysis. Gold, Silver and Miners Gold and silver got on the defensive, but the bears didn‘t get too far – and the chance they could have, wasn‘t too bad. Rising yields were though countered by the declining dollar. Crude Oil Crude oil is likely to pause today, and will rally again once risk-on returns broadly, including into credit markets. For now, backing and filling above $76 is my leading very short-term scenario – Monday though will be a fresh day. Copper Copper is pausing, but the downswing didn‘t reach far, and was bought relatively fast. More consolidation above $4.40 looks likely, and it would come with a generally bullish bias that‘s apt to surprise on the upside. Similarly to precious metals though, patience. Bitcoin and Ethereum Bitcoin and Ethereum are staging a daily comeback, and as long as mid-Dec lows don‘t come in sight again, crypto prices can muddle through with a gently bullish bias. Summary Santa Claus isn‘t willing to give much ground, and the table is set for this nice rally to modestly continue today – somewhere more pronouncedly (S&P 500, cryptos) than elsewhere (commodities and precious metals). I‘m still looking for a positive first day of 2022 trading to help make up for end of this week‘s headwinds – it has been great that the bears couldn‘t find more strength yesterday. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
"Gold is in the 1960s"

"Gold is in the 1960s"

Arkadiusz Sieron Arkadiusz Sieron 31.12.2021 14:05
  Although your calendar may say otherwise, gold is in the 1960s. The question is whether we will move into the 1970s or speed-run to the mid-2010s. Did you go overboard with your time travel and lose track of time? Probably not, but just in case, I assure you that the current year is 2021. To be 100% sure, I fact-checked it on a dedicated webpage for time-travelers. However, the authority of science is being questioned, and there are people who say that, from a macroeconomic point of view, we are approaching the 1970s, or at least the 1960s. There are also voices saying that the gold market is replaying 2012-2013. Although appearances point to 2021, let’s investigate what year we really live in. The similarities with the 1970s are obvious. Just like then, we have high inflation, large fiscal deficits (see the chart below), and easy, erroneous monetary policy. Fifty years ago, the Fed blamed inflation on exogenous shocks and considered inflation to be transitory too. The new monetary regime adopted by the US central bank in 2020 also takes us back to the 70s and the mistaken belief that the economy cannot overheat, so the Fed can let inflation run above the target for a while in order to boost employment. The parallels extend beyond price pressure. The withdrawal of US troops from Afghanistan reminded many of the fall of Saigon. The world is facing an energy crisis right now, another feature of the 1970s. If we really repeat those years, gold bulls should be happy, as the yellow metal rallied from $35 to $850, surging more than 2300% back in that decade (see the chart below). However, there is one problem with this narrative. In the 1970s, we experienced stagflation, i.e., a simultaneous occurrence of high inflation and economic stagnation with a rising unemployment rate. Currently, although we face strong upward price pressure, we enjoy economic expansion and declining unemployment, as the chart below shows. Indeed, the monthly unemployment rate decreased from 14.8% in April 2020 to 4.2% in November 2021. The current macroeconomic situation, characterized by inflation without stagnation part, is reminiscent of the 1960s, a decade marked by rising inflation and rapid GDP growth. As the chart below shows, the CPI annual rate reached a local maximum of 6.4% in February 1970, similar to the current inflation level. Apparently, we are replaying the 1960s right now rather than the 1970s. So far, growth is slowing down, but we are far from stagnation territory. There is no discussion on this. My point was always that the Fed’s actions could bring us to the 1970s, or that complacency about inflation is increasing the risk of de-anchoring inflation expectations and the materialization of a stagflationary scenario. In the 1960s, the price of gold was still fixed, so historical analysis is impossible. However, it seems that gold won’t start to rally until we see some signs of stagnation or an economic crisis, and markets begin to worry about recession. Given that the current economic expansion looks intact, the yellow metal is likely to struggle at least by mid-2022 (unless supply disruptions and energy crisis intensify significantly, wreaking havoc). Do we have to go back that far in time, though? Maybe the 2020 peak in gold prices was like the 2011 peak and we are now somewhere in 2012-2013, on the eve of a great downward move in the gold market? Some similarities cannot be denied: the economy is recovering from a recession, while the Fed is tightening its monetary policy, and gold shows weakness with its inability to surpass $1,800. So, some concerns are warranted. I pointed out a long time ago the threat of an upward move in the real interest rates (as they are at record low levels), which could sink the precious metals market. However, there are two key differences compared to the 2012-2013 period. First, inflation is much higher and it’s still accelerating, while ten years ago there was disinflation. This distinction should support gold prices. The peak in the inflation rate could be a dangerous time for gold, as the disinflationary era would raise interest rates, putting downward pressure on the yellow metal. Second, the prospects of the Fed’s tightening cycle are probably already priced in. In other words, the next “taper tantrum” is not likely to happen. It implies that a sudden spike in the interest rates similar to that of 2013 (see the chart below) shouldn’t repeat now. Hence, the answer to the question “what year is it?” should be that we are somewhere in the 1960s and we can move later into the 1970s if high inflation stays with us and stagnation sets in or if the next crisis hits. However, we can leap right into the 2010s if inflation peaks soon and the hawkish Fed triggers a jump in bond yields. It’s also possible that we will see a temporary disinflation before the second wave of elevated inflation. So, gold could continue its struggle for a while before we see another rally. Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter. Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care.
Quiet Start to New Year

Quiet Start to New Year

Marc Chandler Marc Chandler 03.01.2022 14:10
January 03, 2022  $USD, autos, Canada, China, Currency Movement, Inflation, jobs, Mexico, PMI, Trade Overview:  The New Year begins slowly.  Japan, mainland China, Australia, New Zealand, and the UK markets remain closed.  While Hong Kong shares traded heavily, Taiwan, South Korea, and India moved higher.  Led by consumer discretionary and staple sectors, Europe's Stoxx 600 is up about 0.6%.  US futures are 0.4%-0.6% higher.  European yields have drifted lower, with the periphery doing bettter than the core.   The US 10-year yield will begin the local session at 1.51%.  The dollar is mostly firmer, after weakening broadly at the end of last year.   The Norwegian krone and New Zealand dollar are the most resilient,  while the Canadian dollar is off nearly 0.3% to pare the year-end gains, followed by the euro, which is in the middle of its $1.1335-$1.1380 range.  The greenback is holding above JPY115.00.  Emerging market currencies are mixed but mostly softer.  Higher than expected inflation is weighing on the Turkish lira. The South Korean won leads the other softer EM currencies. It is off about 0.25%.  The South African rand (~0.7%) and Russian ruble (0.5%) lead the advancers.  The JP Morgan Emerging Market Currency Index rose by about 2.5% in the last two weeks of 2021 and is slightly firmer today (~0.2%).  Iron ore is higher for the third consecutive session and rallied more than 45% from the middle of November through Xmas, before falling 5.3% last week.  Copper has a four-week 4.6% rally in tow but is slightly softer today.  Gold is stalling near $1830, the (61.8%) retracement of its sell-off from $1880 mid-November high.  Oil rallied for the last two weeks, with February WTI gaining about 6.2%.  OPEC+ meets tomorrow and WTI is up a nearly 1.5% to push above $76.  US natural gas gained slightly more than 1% in the past two weeks and is hovering around little changed level.  Recall that diverted shipments from the US and Asia to Europe saw natural gas prices collapse from above 180 euros on December 21 to 65.5 euros at the end of last week.   Asia Pacific China's property developers remain in the spotlight. Bloomberg estimates that the sector's debt servicing costs, including deferred wages, and maturing obligations are at $197 bln this month.  Evergrande shares were suspended in Hong Kong.  When the problems, bubbling below the surface for some time, emerged last September, global risk appetites were shaken, and many observers made comparisons to the Great Financial Crisis.  However, so far, the problems seem localized and unlike the US and Europe, new lending has not frozen.   The macro data highlights include China's Caixin PMI after the official one surprised on the upside. The preliminary PMIs for Australia and Japan steal the thunder from the final report. Japan's weekly MOF report on portfolio flows may be noteworthy. Foreign investors have been on a buying spree, buying the most Japanese bonds over the first three weeks of December in at least 20 years.   The dollar has risen for the past four weeks against the Japanese yen.  It closed the last two sessions slightly above JPY115.00 and remains above it today.  Recall, last year's high, set in late November, was near JPY115.50.  Today's high thus far is about JPY115.35.  The market may be reluctant to push the dollar much higher before Tokyo returns.  The Australian dollar advanced almost 2% in the second half of December.  It is stalling near the (50%) retracement of its decline from around $0.7555 in late October, found close to $0.7275.  Support is ahead of $0.7200.  Thin trading on New Year's Eve saw the dollar plunge to its low for the year near CNY6.34 before settling slightly above CNY6.3560.  Chinese officials have signaled their desire to avoid further yuan appreciation. If the divergence of monetary policy and higher fx reserve requirements are not sufficient, investors must be wary that other tools can be deployed.   Europe The uptick in Germany's December manufacturing PMI was revised away, leaving it unchanged from November at 57.4.  The flash estimate put it at 57.9.  In contrast, the French reading was revised up to 55.6 from 54.9.  This pared the decline from 55.9 in November.   Italy's manufacturing PMI held in better than expected, slipping to 62.0 from 62.8, the post-Covid high.  Spain, on the other hand, disappointed, with its manufacturing PMI falling to 56.2 from 57.1, its lowest since last February.  The net result was the flash aggregate estimate of 58.0 was sustained (58.4 in November).   The final Eurozone aggregate PMI is of passing interest. The main takeaway from the preliminary estimate continues to resonate:  the economic activity was slowing. The flash estimate put the composite at 53.4 (down from 55.4), the lowest since March. It has risen once in the last five months. More notable for the market will be the preliminary estimate of December inflation. Consumer prices are expected to have stabilized after reaching 4.9% year-over-year in November (2.6% core).   The Turkish government has tried to absorb the currency-risk that it has unleashed by forcing the central bank to cut key interest rates by 500 bp since mid-September.  It managed to spur a powerful short-covering squeeze in the lira, which saw the dollar fall from around TRY18.36 on December 20 to nearly TRY10.25 on December 23.  The greenback recovered to nearly TRY14.00 today, its sixth consecutive advance.  Today's CPI report blew away expectations.  Just in the month of December, Turkish consumer prices jumped nearly 13.6%.  This sent the year-over-year rate to almost 36.1%.  The core rate rose about 31.9% year-over-year.  Short covering helped lifted the euro a little more than 1.1% over the past two weeks.  It reached about $1.1385 on New Year's Eve.  It has not traded above $1.14 since mid-February.  Ahead of this week's two key economic reports (EMU CPI and US employment), the market may not have the conviction necessary to extend its year-end gains.  Sterling gained about 2.1% in the last two weeks.  It reached $1.3550 at the end of last week, its best level since mid-November.  It is little changed today.  The $1.3575 area corresponds to the (50%) retracement of its sell-off from $1.3835 area in late October.  Initial support is seen in the $1.3455-$1.3465 area.   America The US economic diary is jammed packed to begin the New Year. The highlight is the jobs report at the end of the week. The median forecast (Bloomberg survey) calls for a 400k increase after being disappointed with the 210k increase in November. The unemployment rate is expected to ease to 4.1% from 4.2%, and average earnings growth likely moderated. At the end of last year, an article in the Financial Times made two important observations. First, the uniqueness of the covid-impact renders seasonal adjustments suspect. The response rate was less than two-thirds, the lowest for the month of November in more than a decade. In November, the raw establishment survey showed a 778k gain in nonfarm payrolls, but the BLS adjustment cut a record 568k. Second, also complicating the data is the participation by businesses. The response rate was less than two-thirds, the lowest for the month of November in more than a decade.   The monthly auto sales report seems under-appreciated as a broad economic indicator. The supply chain disruptions depressed auto production and, in turn, auto consumption (not just in the US). However, late in the year, there seemed to be some improvement. The median forecast (Bloomberg survey) December US auto sales (seasonally adjusted annual rate) at 13.1 mln, which would then be the most since July. Elsewhere, the preliminary goods trade balance, like the flash PMI, is the real new news. The final reading tends not to be very meaningful. In any event, the trade deficit will widen considerably. The goods deficit widened to a record $97.8 bln from $83.2 bln.   Lastly, the FOMC minutes will be looked at especially for clues about the timing of the first hike. March? It is unreasonable to expect Canada to match the nearly 154k job increase reported for November. The median forecast is 25k. Canada also reports November trade figures. Canada's trade balance has steadily improved since March 2020, and the 12-month moving average through October was the highest in around six years. The swaps market has a little more than half of the first hike (25 bp) priced in at the January 26 Bank of Canada meeting.   Mexico's data highlights include worker remittances, which could be the most important source of private capital inflows. Without meaningful fiscal support and in the face of tightening monetary policy, the economy lacks much momentum. The December CPI is expected to have edged higher toward 7.5%. Monetary policy is where the drama will be as the new central bank governor takes the reins (Rodriguez). The 50 bp hike in December lifted the overnight target to 5.5%. If the market is concerned about a policy mistake or possible erosion of its independence, you would not know it from looking at the peso. It was the strongest currency in the world in December, rising almost 4.5% against the dollar.   The Canadian dollar rallied about 2% over the past two weeks.  This saw the US dollar retrace half of its rally from the mid-October low below CAD1.23 that peaked on December 20 by CAD1.2965.  That retracement came it near CAD1.2625.  The momentum indicators are still headed down, but the greenback is recovering today.  Initial resistance is seen around CAD1.2700.  A move above CAD1.2750 warns that a low may be in place.  The Mexican peso has rallied for the past five weeks, and despite the poor close at the end of the year, it is bid today.  The US dollar was sold from near MXN20.55 to MXN20.45 in the European morning but has found a bid near midday.  The low from New Year's Eve was set around MXN20.3070 and the 200-day moving average is closer to MXN20.27.    Disclaimer
A Look At Markets Around The World: US CPI, Sweden Riksbank EU Yields And More

Taxes, UK Equities, Global Shipping and Pandemic in "Charts of 2021: Honorable Mentions" by Callum Thomas

Callum Thomas Callum Thomas 03.01.2022 14:13
Last week I shared with you some of my Best Charts of 2021 (as well as my Worst Charts of 2021 and then also my favorites!) -- so this week I wanted to follow up with what I would say are the "honorable mention" charts of 2021...       These charts were worthy of mention but didn’t quite fit into any of the previous categories -- but were definitely worth including and highlighting both due to how they proved useful in the past year or so, but also in terms of the outlook into 2022.       These charts were featured in my just-released 2021 End of Year Special Report -- check it out (free download as a holiday treat!).       Enjoy, feel free to share, and be sure to let me know what you think in the comments...           1. Expect Higher Taxes: This chart arguably points to higher tax rates ahead given that government debt as a % of GDP has doubled over the past decade while effectively economy-wide tax-take has gone sideways.       chart of developed economy fiscal outlook - higher taxes forecast           2. Global Food Crisis? Stagnant capex by food producers contributed to a perfect storm for food prices (along with actual storms, pandemic disruption, rising costs).                 3. UK Equities: In the wake of Brexit & pandemic woes, UK equities moved to decade-low valuations vs their European peers. From crisis to opportunity?                     >>> These charts were featured in our 2021 End of Year Special Report.               4. Global Shipping Capex: Shipping sector investment stagnated for a decade – contributing to the global supply chain chaos. Ironically it likely rebounds after banking windfall profits from the surge in freight rates.                 5. Global vs US Earnings Cycles: A key driver of the long-term cycles of relative price performance of global vs US equities has been the cycles in relative earnings. That cycle will need to change for the price cycle to change.                 6. Pandemic Progress: the global rollout of vaccines, rising immunity, societal adaptations, and therapeutics have helped result in a series of lower highs in deaths – I like the look of that trend. The light at the end of the tunnel, though flickering at times, does seem a little brighter now…                     Thanks for reading!           This is an excerpt from my 2021 End of Year Special report - click through to download a free copy of the report.       Best regards       Callum Thomas   Head of Research and Founder of Topdown Charts           Follow us on:   Substack https://topdowncharts.substack.com/   LinkedIn https://www.linkedin.com/company/topdown-charts   Twitter http://www.twitter.com/topdowncharts
SEC Rejects Valkyrie, Kryptoin Spot Bitcoin ETF Applications

Bitcoin price eyes higher high, Ethereum price to revisit crucial barriers

FXStreet News FXStreet News 03.01.2022 16:07
Bitcoin price bounces off the $45,678 support level, suggesting a higher high is likely. Ethereum price looks primed for a sweep of the $4,133 resistance level to collect the liquidity resting above it. Ripple price might head lower to retest the 3-day demand zone, ranging from $0.704 to $0.778 before it triggers a run-up. Bitcoin price has been stuck, ranging between two crucial levels since the December 3 flash crash. This consolidation is setting up the base for a long-term volatile move, but for now, BTC is likely to retest the range high of this sideways move. Ethereum and Ripple will promptly follow the big crypto and see short-term gains. Bitcoin price eyes higher high Bitcoin price bounced off the $45,678 support floor for the fourth time and is currently hovering at $46,921, just below the 200-day Simple Moving Average (SMA). A surge in bullish momentum that overcomes this hurdle is likely to propel the pioneer crypto to tag the $51,993 resistance barrier, coinciding with the 50-day SMA. A sweep of this level will collect the buy-stop liquidity resting above it. This 13% upswing is likely to face profit-taking at this level, leading to a reversal. However, in some cases, the buyers could flip this level to a support floor, suggesting that Bitcoin price might head higher and retest the $57,030. BTC/USD 4-hour chart While things are looking up for Bitcoin price, a breakdown of the $45,678 support floor will reveal a weakness among buyers. This move will crash BTC by 9% to retest the December 3, 2021 swing low at $41,672. Here, Bitcoin price has another chance to make a comeback and will likely restart the upswing. Ethereum price to revisit crucial barriers Ethereum price revisited the $3,640 support floor for the third time on December 31, 2021, triggering a 5% ascent to where it currently trades - $3,800. Unlike the big crypto, ETH is comfortably trading above the 200-day SMA. A potential spike in buying pressure is likely to propel Ethereum price to retest the $4,113 resistance barrier, coinciding with the 50-day SMA. This run-up would constitute an 8.4% ascent and is likely to see the short-term upswing capped. If the buyers continue to pile on the bid orders, ETH might slice through the said hurdles and make a run for the $4,435 ceiling, representing a 16% gain. ETH/USD 6-hour chart In some cases, Ethereum price might revisit the $3,640 barrier before heading to the immediate resistance barrier. A breakdown of this level, however, will lead to a retest of the December 3, 2021 swing low at $3,456, where buyers have another chance to restart the uptrend. Ethereum primed for 50% breakout to $6,300 Ripple price could head lower Ripple price is hovering above the 3-day demand zone, ranging from $0.704 to $0.778 and is likely to retest it before it decides to head higher. A dip into this area will replenish the bullish momentum, allowing the XRP price to climb higher. The $0.892 resistance barrier will be the first hurdle the remittance token will tag, beyond which it is likely to collect the liquidity resting above the $0.939 ceiling. In some cases, Ripple price could extend its run-up to $1, where it will face immense selling pressure. XRP/USD 4-hour chart Regardless of the recent run-up, if Ripple price slices through the 3-day demand zone, extending from $0.704 to $0.778, and produces a decisive close below it, the bullish thesis will face invalidation. In which case, the XRP price could slide lower to revisit the $0.656 support floor. XRP price to present long opportunity for Ripple bulls at $0.87
Let's have a look at S&P 500, Crude Oil, Nasdaq and Credit Markets. Cryptos are still bullish above mid-Dec lows.

Let's have a look at S&P 500, Crude Oil, Nasdaq and Credit Markets. Cryptos are still bullish above mid-Dec lows.

Monica Kingsley Monica Kingsley 03.01.2022 15:57
S&P 500 pared prior steep gains, but thanks to the credit markets message, I‘m not reading into Friday‘s weakness much. There is still more in this rally – value held better than tech, and high yield corporate bonds didn‘t really slide. The year end rebalancing will likely give way to solid Monday‘s performance. While VIX appears to want to move up from the 17 level, it would probably take more than one day to play out. As the Santa Claus rally draws to its close, the nearest data point worth looking forward for, is Tuesday‘s ISM Manufacturing PMI. It‘ll likely show still expanding manufacturing (however challenged GDP growth is on a quarterly basis), and that would help commodities deal with the preceding downswing driven by energy and agrifoods. Both of these sectors are likely to return to gains, and especially oil is. As stated on Thursday, the open profits would still keep rising. Precious metals were the key winners Friday, paying attention to the dollar and nominal yields retreat the most. The red metal‘s upswing certainly helped – such were my latest words: (…) copper is primed to catch up in the short run to the other commodities, gold is well bid at current levels, and together with silver waiting for a Fed misstep (market risk reappreciation) and inflation to start biting still some more while the real economy undergoes a soft patch (note however the very solid manufacturing data) with global liquidity remaining constrained even though the Fed didn‘t exactly taper much in Dec, and nominal yields taking a cautious and slow path towards my 2022 year end target of 1.80-2.00% on the 10-year Treasury. As I wrote prior Monday, we‘re looking at still positive 2022 returns in stocks – of course joined by commodities and precious metals. The path would be though probably a more turbulent one than was the case in 2021. Finally, cryptos look to be in agreement with not reading too much to Friday‘s downswings – both Bitcoin and Ethereum are turning up as $46K in BTC held up once again. Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook Nasdaq got a little oversold relative to S&P 500 – this is not the start of a fresh downtrend. Once financials and consumer discretionaries turn up, the rally will be on better footing again. Credit Markets HYG could have declined some more, but tellingly didn‘t. Bonds aren‘t ready to turn to risk-off just yet. Upswing attempt next shouldn‘t be surprising in the least. Gold, Silver and Miners Gold and silver are looking at a much better year than was 2021. Stock market volatility, GDP growth challenges and persistent inflation would help the metals and commodities rise. Crude Oil Crude oil is about to move up again as gains were taken off the table on Friday. With the omicron response and related pronouncements coming in lately from the U.S., what else to expect – a great deal of destroyed demand doesn‘t look to be ahead. Copper Copper undid the prior pause, and looks ready to keep defending the $4.43 area. The long consolidation that started in May, would be eventually broken to the upside. Bitcoin and Ethereum Bitcoin and Ethereum may be short-term undecided, but don‘t look willing to decline. Cryptos are still bullish above mid-Dec lows. Summary First trading day of 2022 is likely to extend prior gains, resolving the prior sideways move. As risk-on faltered on Friday, S&P 500 and cryptos are likely to catch up, and oil would probably outperform copper today while precious metals digest very solid New Year‘s Eve gains. We‘re nowhere near the good days ending just yet – turbulence would come once Fed tapering gets really noticeable (post Olympics), with VIX trending higher well before that already. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
Can't skip S&P 500 (SPX) and Nasdaq

Can't skip S&P 500 (SPX) and Nasdaq

Monica Kingsley Monica Kingsley 04.01.2022 15:53
Very good S&P 500 entry to 2022, and the HYG intraday reversal is the sight to rejoice. In the sea of rising yields, both tech and value managed to do well – the market breadth keeps improving as not only the ratio of stocks trading above their 200-day moving averages shows. Likewise VIX refused to reach even 19, and instead is attacking 16.50. This is not complacency – the bulls were thoroughly shaken at the entry to the session yesterday – but a buying interest that convincingly turned the tide during the day. As I wrote yesterday: (…) thanks to the credit markets message, I‘m not reading into Friday‘s weakness much. There is still more in this rally – value held better than tech, and high yield corporate bonds didn‘t really slide. The year end rebalancing will likely give way to solid Monday‘s performance. While VIX appears to want to move up from the 17 level, it would probably take more than one day to play out. As the Santa Claus rally draws to its close, the nearest data point worth looking forward for, is Tuesday‘s ISM Manufacturing PMI. It‘ll likely show still expanding manufacturing (however challenged GDP growth is on a quarterly basis), and that would help commodities deal with the preceding downswing driven by energy and agrifoods. Both of these sectors are likely to return to gains, and especially oil is. The only sector taking a beating yesterday, were precious metals. While inflation expectations were little changed (don‘t look for inflation to go away any time soon as I‘ve been making the case repeatedly), the daily rise in yields propelled the dollar to reverse Friday‘s decline, and that knocked both gold and silver off the high perch they closed at last week. Still, none of the fundamental or monetary with fiscal policy originating reasoning has been invalidated – not even the charts were damaged badly by Monday‘s weakness. As economic growth gets questioned while fiscal policy remains expansive unlike the monetary one, volatily in the stock market together with persistent inflation would be putting a nice floor beneath the metals. Even cryptos are refusing to yield much ground, the Ethereum to Bitcoin ratio keeps trading positively, and I‘m not even talking the rubber band that commodities (crude oil and copper) are. Very good for our open positions there, as much as in the S&P 500 – let them keep bringing profits. Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook Really bullish price action in both S&P 500 and Nasdaq – that was the entry to 2022 I was looking for. Embellished with prior downswing that lends more credibility to the intraday reversal. Credit Markets HYG refusing to decline more, is the most bullish sign for today imaginable – let it hold, for junk bonds now hold the key, especially if quality debt instruments keep declining steeply. Gold, Silver and Miners Gold and silver look to have reversed, but reaching such a conclusion would be premature. The long basing pattern goes on, and breakout higher would follow once the Fed‘s attempting to take the punch bowl away inflicts damage on the real economy (and markets), which is what the yield curve compression depicts. Crude Oil Crude oil is about to launch higher – and it‘s not a matter of solid oil stocks performance only. Just look at the volume – it didn‘t disappoint, and in the risk-on revival that I expect for today, black gold would benefit. Copper Copper swooned, but regained composure – the stop run is over, and we‘re back to base building for the coming upswing. Broader commodities certainly agree. Bitcoin and Ethereum Bitcoin and Ethereum are very gently leaning bullish, but I‘m not sounding the all clear there yet thanks to how long Bitcoin is dillydallying. Cryptos aren‘t yet out of the woods, but their posture has improved thus far noticeably. Summary First trading day of 2022 extended prior S&P 500 gains, and the risk-on appetite is improving as we speak. Commodities are reaping the rewards, and we‘re looking at another good day ahead, including in precious metals taking a bite at yesterday‘s inordinately large downswing. Nothing of the big factors ahead for Q1 2022 as described in today‘s analysis (I wholeheartedly recommend reading it in full for the greatest benefits – there is only so much / little that I can fit into a one paragraph summary), and that means we‘re looking at further stock market gains as the bull runs (including in commodities and precious metals, yes precious metals), aren‘t over in the least. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
Bitcoin (BTC), Ethereum (ETH) and Crude Oil are ones you're likely to watch

Bitcoin (BTC), Ethereum (ETH) and Crude Oil are ones you're likely to watch

Monica Kingsley Monica Kingsley 05.01.2022 15:55
Another daily rise in yields forced S&P 500 down through tech weakness – the excessive selloff in growth didn‘t lead buyers to step in strongly. More base building in tech looks likely, but its top isn‘t in, and similarly to the late session HYG rebound, spells a day of stabization and rebalancing just ahead. I‘m not looking for an overly sharp move, even if the very good non-farm employment change of 807K vs. 405K expected could have facilitated one. Friday though is the day of the key figure release – till then a continued bullish positioning where every S&P 500 dip is being bought, would be most welcome. The same goes for high yield corporate bonds not standing in the way, and for credit markets to reverse yesterday‘s risk-off slant. Likewise the compressed yield curve could provide more relief by building on last few days‘ upswings in the 10- to 2-year Treasury ratio. VIX has been repelled above 17 again, and keeps looking ready to meander near its recent values‘ lower end. That‘s all constructive for stock market bulls, and coupled with the fresh surge in commodities (and precious metals), bodes well for the S&P 500 not to crater soon again. Another positive sign comes from the dollar, which wasn‘t really able to keep intraday gains in spite of the rising Treasury yields. Cryptos though remain cautious (unlike precious metals which moved nicely off Monday‘s oversold levels – on a daily basis oversold), so we‘re in for a muddle through with a generally and gently bullish bias this week… until non-farrm payrolls surprise on Friday (and markets would probably interpret it as a reason to rise). Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook S&P 500 keeps respectably treading water, waiting for Nasdaq to kick in – odds are we won‘t have to wait for a modest upswing in both for too long. Credit Markets HYG is the key next – holding above yesterday‘s lows would give stocks enough breathing room, and so would however modest quality debt instruments upswing. Gold, Silver and Miners Gold and silver are leading miners, but the respectable daily volume makes up for this non-confirmation. The table is set for the floor below gold and silver to hold, while a very convincing miners move has to still wait. Crude Oil Everything is ready for the crude oil upswing – even if oil stocks pause next, which can be expected if tech stages a good rally. Until then, it‘s bullish for both $WTIC and $XOI. Copper Copper is keeping the upswing alive, and any pullbacks don‘t have good odds of taking the red metal below 4.39 lastingly. Still, copper remains range bound for now, and the pressure to go higher, is building up. Bitcoin and Ethereum Bitcoin and Ethereum lost the bullish slant, but didn‘t turn bearish yet – this hesitation is disconcerting, but it would be premature to jump the gun. It‘s still more likely that cryptos would defy the shrinking global liquidity, and try to stage a modest rally. Summary S&P 500 internals reveal tech getting hurt yesterday, and at the same time getting ready for a brief upswing of the dead cat bounce flavor. And if HYG kicks back in, odds increase dramatically that the tech (and by extension S&P 500) upswing won‘t be a dead cat bounce (please note that I‘m not implying vulnerability to a large downswing) – that‘s my leading scenario, which should materialize by Friday‘s market open. Yes, I‘m looking for non-farm payrolls to be well received once the dust settles. Till then, commodities are paving the way for further stock market gains, with precious metals turning out not too shabby either. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
Will 2022~23 Require Different Strategies For TradersInvestors Part II

Will 2022~23 Require Different Strategies For TradersInvestors Part II

Chris Vermeulen Chris Vermeulen 06.01.2022 00:19
Is The Lazy-Bull Strategy Worth Considering? Part III started this article by highlighting how difficult some 2021 strategies seemed for many Hedge Funds and Professional Traders. It appears the extreme market volatility throughout 2021 took a toll on many systems and strategies. I wouldn't be surprised to see various sector ETFs and Sector Mutual Funds up 15% to 20% or more for 2021 while various Hedge Funds struggle with annual returns between 7% and -5% for 2021.After many years in this industry and having built many of my own strategies over the past decade, I've learned one very important facet of trading strategy development – expect the unexpected. A friend always told me to "focus on failure" when we developed strategies together. His approach to strategy design was "you develop it do too well in certain types of market trends and volatility. By focusing on where it fails, you'll learn more about the potential draw-downs and risks of a strategy than ignoring these points of failure". I tend to agree with him.In the first part of this research article, the other concept I started discussing was how traders/investors might consider moving away from strategies that struggled in 2022. What if the markets continue trending with extreme volatility throughout 2022 and into 2023? Suppose your system or strategy has taken some losses in 2022, and you have not stopped to consider volatility or other system boundaries as a potential issue. In that case, you may be looking forward to a very difficult 12 to 14+ months of trading in 2022 and 2023.Volatility Explodes After 2017Current market volatility/ATR levels are 300% to 500% above those of 2014/2015. These are the highest volatility levels the US markets have ever experienced in the past 20+ years. The current ATR level is above 23.20 – more than 35% higher than the DOT COM Peak volatility of 17.15.As long as the Volatility/ATR levels stay near these elevated levels, traders and investors will likely find the markets very difficult to trade with strategies that cannot properly adapt to the increased risks and price rotations in trends. Simply put, these huge increases in price volatility may chew up profits by getting stopped out on pullbacks or by risking too much in terms of price range/volatility.Sign up for my free trading newsletter so you don’t miss the next opportunity!The increased volatility over the past 5+ years directly reflects global monetary policies and the COVID-19 global response to the crisis. Not only have we attempted to keep easy money policies for far too long in the US and foreign markets, but we've also been pushed into a hyperbolic price trend that started after 2017/18, which has increased global debt consumption/levels to the extreme.2022 and 2023 will likely reflect a very strong revaluation trend which I continue to call a longer-term "transition" within the global markets. This transition will probably take many forms over the next 24+ months – but mostly, it will be about deleveraging debt levels and the destruction of excess risk in the markets. In my opinion, that means the strongest global economies may see some strength over the next 24+ months – but may also see extreme price volatility and extreme price rotation as this transition takes place.Expect The Unexpected in 2022 & 2023The US major indexes had an incredible 2021 – rallying across all fears and COVID variants. The NASDAQ and S&P500 saw the biggest gains in 2021 – which may continue into early 2022. Yet I feel the US markets will continue to transition as the global markets continue to navigate the process of unwinding excess debt levels and potentially deleveraging at a more severe rate than many people expect.Because of this, I feel the US markets may continue to strengthen as global traders pile into the US Dollar based assets in early 2022. Until global pressures of deleveraging and transitioning away from excesses put enough pressure on the US stock market, the perceived safety of US assets and the US Dollar will continue as it is now.(Source: www.StockCharts.com)Watch For Sector Strength In Early 2022 As Price-Pressure & Supply-Side Issues Create A Unique Opportunity For Extended Revenues/ProfitsI believe the US markets will see a continued rally phase in early 2022 as Q4:2021 revenues, earnings, and economic data pour in. I can't see how any global economic concerns will disrupt the US markets if Q4:2021 data stays stronger than expected for US stocks and the US economy.That being said, I do believe certain sectors will be high-fliers in Q1:2022 and Q2:2022 – at least until the supply-side issues across the globe settle down and return to more normal delivery expectations. This means sectors like Automakers, Healthcare, Real Estate, Consumer Staples & Discretionary, Technology, Chip manufacturers, and some Retail segments (Construction, Raw Materials, certain consumer products sellers, and specialty sellers) will drive a new bullish trend in 2022.The US major indexes may continue to move higher in 2022. They may also be hampered by sectors struggling to find support or over-weighted in symbols that were over-hyped through the end of 2020 and in early 2021.I have been concerned about this type of transition throughout most of 2021 (particularly after the MEME/Reddit rally phase in early 2021). That type of extreme trending usually leads to an unwinding process. I still don't believe the US and global markets have completed the unwinding process after the post-COVID extreme rally phase.(Source: www.StockCharts.com)Will The Lazy-Bull Strategy Continue To Outperform In 2022 & 2023?This is a tricky question to answer simply because I can't predict the future any better than you can. But I do believe moving towards a higher-level analysis of global market trends when the proposed "transitioning" is starting to take place allows traders to move away from "chasing price spikes." It also allows them to position for momentum strength in various broader market sectors and indexes.I suspect we'll start to see annual reports from some of the biggest institutional trading firms on the planet that show feeble performance in 2021. This recent article caught my attention related to Quant Funds in China.I believe we will see 2022 and 2023 stay equally distressing for certain styles of trading strategies while price volatility and an extreme deleveraging/transitioning trend occur. Trying to navigate this type of choppy global market trending on a short-term basis can be very dangerous. I believe it is better to move above all this global market chop and trade the bigger momentum trends in various sectors and indexes.Part III of this research article will focus on Q1 through Q4 expectations for 2022 and 2023. I will highlight broader sector/index trends that may play out well for investors and traders who can move above the low-level choppiness in the US and global markets.WANT TO LEARN MORE ABOUT THE TECHNICAL INVESTOR AND THE TECHNICAL INDEX & BOND TRADING STRATEGIES?Learn how I use specific tools to help me understand price cycles, set-ups, and price target levels in various sectors to identify strategic entry and exit points for trades. Over the next 12 to 24+ months, I expect very large price swings in the US stock market and other asset classes across the globe. I believe the markets are starting to transition away from the continued central bank support rally phase and may begin a revaluation phase as global traders attempt to identify the next big trends. Precious Metals will likely start to act as a proper hedge as caution and concern start to drive traders/investors into Metals.I invite you to take a few minutes to visit the Technical Traders website to learn about our Technical Investor and Technical Index and Bond Trading strategies and how they can help you protect and grow your wealth.Have a great day!
Honeymoon Is Over?

Honeymoon Is Over?

Monica Kingsley Monica Kingsley 07.01.2022 16:03
S&P 500 didn‘t shake off the post-FOMC minutes selloff in the least – and credit markets don‘t offer much short-term clarity either. Probably the brightest sign comes from the intraday reversal in financials higher – but tech still isn‘t catching breadth, which is key to the 500-strong index recovery. Bonds remained in the count down mode, as in not yet having regained composure and risk-on posture.The bottom might not be in, taking more time to play out – if we see a really strong non-farm payrolls figure, the odds of Fed tapering and rate hiking seriously drawing nearer, would be bolstered – to the detriment of most assets. So, we could be looking at a weak entry to today‘s S&P 500 session. But as the data came in at measly 199K, more uncertainty is introduced – will they or won‘t they (taper this fast and hike) – which works to drive chop and volatility.We‘re looking at another risk-off day today – and a reflexive but relatively tame rally in quality debt instruments. Crude oil is likely to be least affected, followed by copper as the red metals takes a second look at its recent weakness going at odds with broader commodities strength. Precious metals look to be a better bet in weathering the tightening into a weak economy storm than cryptos.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 and Nasdaq OutlookNeither tech nor value offered clues for today‘s session – the downswing overall feels as having some more to go still, and that‘s based on the charts only. Add in the fundamentals, and it could get tougher still.Credit MarketsHYG upswing solidly rejected, and not even high volume helped the bulls – the dust doesn‘t look to be settled here either.Gold, Silver and MinersGold and silver feel the heat, and it might not be yet over in the short run, miners say. Still, note the big picture – we‘re still in a long sideways consolidation where the bears are unable to make lasting progress.Crude OilCrude oil bulls are enjoying the advantage here – firmly in the driver‘s seat. Pullback are being bought, and will likely continue being bought – the upcoming maximum downside will be very indicative of bulls‘ strength to overcome $80 lastingly.CopperCopper‘s misleading weakness continues, and similarly to precious metals, it‘s bidding its time as no heavy chart damage is being inflicted through this dillydallying.Bitcoin and EthereumBitcoin and Ethereum are in a weaker spot, and the bearish pressure may easily increase here even more. This doesn‘t look to be the time to buy yet.SummaryS&P 500 still remains on edge and under pressure until convincing signs of turnaround develop – yesterday‘s session didn‘t qualify. With further proof of challenged real economy, a fresh uncertainty (how‘s that going to weather the hawkish Fed, and are they to listen and attenuate, or not?) is being introduced – short-term chop would give way to an increase in volatility. In the non-farm payrolls aftermath, markets haven‘t yet made up their minds – it‘s the riskier end of the asset classes to take the heat the most here (starting with cryptos). Don‘t look though for a tremendous rush into Treasuries – tech decoupling from the rising yields would be a first welcome sign of a local bottom.Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
We might say interest rates became Topic #1

We might say interest rates became Topic #1

Przemysław Radomski Przemysław Radomski 11.01.2022 14:10
  The imminent interest rate hike by the Fed is almost certain. Are investors' concerns justified and will it mean trouble for the precious metals?  While the S&P 500 and the NASDAQ Composite recovered from sharp intraday losses on Jan. 10, investors’ mood swings signaled heightened anxiety. With the PMs whipsawing alongside the general stock market, more volatility should materialize in the weeks and months to come. To explain, with the Fed on a hawkish warpath to fight rampant inflation, JPMorgan CEO Jamie Dimon told CNBC on Jan. 10 that a resilient U.S. economy could prove problematic for the financial markets in 2022. “The consumer balance sheet has never been in better shape; they’re spending 25% more today than pre-COVID,” said Dimon. “Their debt-service ratio is better than it’s been since we’ve been keeping records for 50 years.” As for inflation and the Fed: “It’s possible that inflation is worse than they think and they raise rates more than people think. I personally would be surprised if it’s just four [interest rate] increases [in 2022],” he added. How would the financial markets react? Source: CNBC Singing a similar tune, the International Monetary Fund (IMF) warned on Jan. 10 that the Fed’s rate hike cycle could slaughter emerging markets. Its report revealed: “For most of last year, investors priced in a temporary rise in inflation in the United States given the unsteady economic recovery and a slow unravelling of supply bottlenecks. Now sentiment has shifted. Prices are rising at the fastest pace in almost four decades and the tight labor market has started to feed into wage increases.”   Volatile Days Ahead While I warned for all of 2021 that inflationary pressures were bullish for the U.S. dollar and U.S. Treasury yields and bearish for the PMs, the IMF stated: “Faster Fed rate increases in response could rattle financial markets and tighten financial conditions globally. These developments could come with a slowing of US demand and trade and may lead to capital outflows and currency depreciation in emerging markets.” As a result, even the IMF is anxiously bullish on the USD Index: For a good reason. With September, July, June, and May all gone by the wayside, now, the market-implied probability of a Fed rate hike in March has risen to nearly 83%. For context, the probability of a March liftoff was less than 10% in early November. Please see below: Likewise, the market-implied probability of four rate hikes by the Fed in 2022 has risen to nearly 87%. Again, the probability was less than 50% in early November. Please see below: Why the material shift? Well, while I’ve been warning for months that rampant inflation would elicit a hawkish about-face from the Fed, investors are finally coming around to this reality. With inflation still running hot, market participants understand that pricing pressures won’t subside without policy responses from the Fed. As a result, the “transitory” narrative is dead, and investors have lost one of their staunchest allies. This means that predicting silver and gold at higher levels in the medium term might not be the best idea. To that point, Bank of America’s dove-hawk spectrum shows that the dovish brigade has lost several soldiers. With the hawks now on the offensive, the officials preaching monetary patience are few and far between.  Please see below: For context, Bank of America still places San Francisco Fed President Mary Daly in the dovish bucket. However, I noted on Dec. 23 that she has materially shifted her stance in recent weeks: Source: The New York Times Furthermore, with inflationary pressures still bubbling, the Manheim Used Vehicle Value Index hit another all-time high of 236.2 in December, as “wholesale used vehicle prices (on a mix-, mileage-, and seasonally adjusted basis) increased 1.6% month-over-month.” Please see below: On top of that, the cost of shipping from Shanghai, China, is still increasing. With the U.S. importing more goods from China than any other nation, the inflationary impact on the U.S. economy is material. Please see below: Finally, while the GDXJ ETF benefited from the NASDAQ Composite’s intraday reversal on Jan. 10, I warned on Oct. 26 that monetary policy tightening would eventually upend the junior miners. I wrote: To explain, the green line above tracks the GDXJ ETF from the beginning of 2013 to the end of 2015. If you analyze the left side of the chart, you can see that when Fed Chairman Ben Bernanke hinted at tapering on May 22, 2013, the GDXJ ETF declined by 32% from May 22 until the taper began on Dec. 18. Moreover, the onslaught didn’t end there. Once the taper officially began, the GDXJ ETF enjoyed a relief rally (similar to what we’re witnessing now), as long-term interest rates declined and the PMs assumed that the worst was in the rearview. However, as the liquidity drain caught up to the junior miners over the medium term, the GDXJ ETF declined by another 36% from when the taper was announced on Dec. 18, 2013 until the end of 2015. To that point, with part one already on the books, the second act will likely unfold once the Fed formally begins its taper in “either mid-November or mid-December.” Thus, history implies that the GDXJ ETF still has plenty of downside left. While the junior miners' ETF has declined by more than 11% since Oct. 26, Goldman Sachs has come around to our way of thinking. Please see below: To explain, Goldman Sachs told its clients last week that the yellow metal has been following its ominous path since 2013/2014 (as you may recall, I’ve been writing about the 2013-now analogy for months). For context, the red line above tracks gold’s price action from July 2010 until December 2014, while the blue line above tracks gold’s price action from July 2019 until now. If you analyze the symmetrical overlay, you can see that the pair have been in sync for some time. Moreover, if you focus your attention on the red line’s plight as time passes, it’s clear why Goldman Sachs is warning its clients about “further downside risk”. To that point, with the investment bank forecasting a real (inflation-adjusted) interest rate regime change in 2022, gold is poised to suffer along the way. To explain, the various bars above track gold’s monthly returns when the real U.S. Federal Funds Rate (dark blue), the real U.S. 5-Year Treasury yield (green), and the real U.S. 10-Year Treasury yield (light blue) begin with positive/negative values and then increase/decrease. If you focus your attention on the bars furthest to the right, you can see that when the real U.S. 5-Year Treasury yield and the real U.S. 10-Year Treasury yield are negative and then rise, gold suffers its worst monthly performances. Moreover, with the current fundamental environment presenting us with precisely that, similar results will likely materialize over the medium term. The bottom line? While investors desperately bought the dip on Jan. 10, the more than 2% intraday swing in the NASDAQ Composite screamed of monetary policy anxiety. With another hot inflation print poised to hit the wire on Jan. 12, the reprieve will likely be short-lived. Furthermore, with the PMs suffering from a similar fundamental affliction – as both the PMs and technology stocks are extremely allergic to rising interest rates – volatility is likely here to stay. As a result, the Fed should continue to break investors’ hearts over the medium term. In conclusion, the PMs rallied on Jan. 10, though their fundamental outlooks remain profoundly bearish. With interest rates poised to rise and the USD Index still undervalued, more headwinds should confront gold, silver, and mining stocks in the coming months. As a result, long-term buying opportunities are likely still a ways away. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
US Fed Playing With Fire - Bubbles May Burst While Bond Yields & Metals Rally

US Fed Playing With Fire - Bubbles May Burst While Bond Yields & Metals Rally

Chris Vermeulen Chris Vermeulen 12.01.2022 16:59
The US Federal Reserve's tightening monetary policy from a historically low-interest rate has slowed the US stock markets. As a result, traders quickly attempt to adjust their capital allocation levels as risk assets, technology, and US major indexes roll lower because of expected Fed Rate Hikes and other Hawkish activities.We will explore how the US Fed's comments and potential future actions may prompt significant market trends in 2022 and beyond. We'll also attempt to identify how and when the US Fed may disrupt the US markets. We know the actions of the US Fed will prompt some significant trends over the next 12 to 24 months. We know certain assets will likely rise in value as fear settles into the markets because of rising interest rates and deflating asset bubbles. It is just a matter of understanding how the speculative asset bubble of the past 8+ years and how the US Fed may move to pop these speculative bubbles soon.Asset Bubbles Everywhere, The Global Markets Continue To FrothAsset bubbles, such as those created in Cryptos, the US stock market, US Real Estate, and the art/collectible market over the past 5+ years, have visualized the US Fed's easy money results in terms of bubbles.Take a look at this chart showing the growth in certain asset classes since the start of 2019. It is incredible to think that these asset classes have rallied so far and so fast in just over 35 months: The Grayscale Bitcoin ETF rallied more than 1200%. The Technology sector rallied more than 200%. Real Estate rallied more than 85%. The S&P 500 rallied more than 94%. The US Federal Reserve's move to lower interest rates after the 2018 market collapse, which resulted in a December 24, 2018, Christmas Bottom, prompted an incredible rally phase where traders followed the US Fed in piling into assets. As long as the US Fed continued buying assets and kept interest rates near zero, global traders had no reason to fight the US Fed.(Source: StockCharts.com)Is The US Fed About To Pop The Bubble From The Stratosphere?Our research suggests the US Federal Reserve is changing its policy a little late into the game. However, it appears the US and global markets have already "rolled over" in terms of growth trends and expectations. This SPY to QQQ ratio chart highlights that the US markets entered a peaking phase in late July/August 2020 and reached an ultimate peak in February 2021.(Source: TradingView.com)S&P 500 PE Ratio Suggests Investors Are ALL-IN For The Next 90+ YearsIn other words, it appears traders have reached their ceiling in terms of what they believe the US Fed is capable of doing at this stage in the rally. For example, the PE Ratio of the US Stock market ending in 2021 ended just below 30, with a historical high for 2021 near 37. The historical mean is 15.96 – which is still relatively high for the US stock market.Remember, a PE level of 15.96 means any investor buying in at those levels would need a minimum of 15.96 years of a company handing over "every penny of revenue" to the investor (excluding all costs, payrolls, taxes, fees, and other operating expenses) to cover the PE multiple of the investment. So a PE level of 30, as we see at the end of 2021, suggests that stock price valuation levels are at least 60 to 90+ years ahead of real returns.The only thing that can change this historic level of speculation in the markets is a deleveraging/revaluation event.(Source: multpl.com)From the US Fed's Actions To How Traders Should Prepare For Shifting MarketsThis first part of our ongoing research into the US Fed's actions and where they are telegraphing their intents will continue. Part II of this article will investigate how traders should read into these shifting markets and where we're attempting to highlight what has taken place over the past 3 to 5+ years.We've managed to live through an incredible event in history. I can only think of one other time when a global superpower extended this type of credit and support for the worldwide economy. That was the Roman Empire many thousands of years ago.What we experience over the next 20 to 40+ years could be the biggest and most incredible opportunity of your lifetime. The process of deleveraging all this debt and working all this capital through the global markets over the next few decades may present one of the most incredible investment/trading opportunities anyone has ever seen in over 1500 years.Look for my Part II to this article, and we'll continue exploring the current shifts in the US and global stock and asset markets.Finding The Right Strategies That Will Help You Navigate Through Bulls & BearsIf you have struggled with finding opportunities over the past year or so and want to know which are the hottest sectors, or how to protect and grow your capital, then please take a minute to review my Total ETF Portfolio - Triple-Strategy Trading Plan to help you profit from these big market transitions.Learn how I use specific tools to help me understand price cycles, set-ups, and price target levels in various sectors to identify strategic entry and exit points for trades. Over the next 12 to 24+ months, I expect very large price swings in the US stock market and other asset classes across the globe. I believe the markets are starting to transition away from the continued central bank support rally phase and may start a revaluation phase as global traders attempt to identify the next big trends. Precious Metals will likely start to act as a proper hedge as caution and concern start to drive traders/investors into Metals.I invite you to learn more about how my three Technical Trading Strategies can help you protect and grow your wealth in any type of market condition by clicking the following link:   www.TheTechnicalTraders.com 
US Federal Reserve - Playing With Fire Part II

US Federal Reserve - Playing With Fire Part II

Chris Vermeulen Chris Vermeulen 14.01.2022 22:49
The US Federal Reserve has recently taken steps to communicate a change in future policy – suggesting raising interest rates and acting more aggressively to combat inflation. Throughout the last few weeks of 2021 and early 2022, these comments and posturing by the US Fed have created some very big downside price moves in the US major indexes. As a result, the US markets' volatility levels (VIX) have moved to a recent average between 17~21 – nearly 3x historical normal levels.US Fed Likely To Move Very Slowly On RatesOne thing that I believe has become evident to many people is that we have moved past the COVID stimulus conversations of the past 24+ months. Inflation, rising prices, constricted supply-chains, and an excess of capital throughout many global markets appear to have shifted how the US Fed interprets future risks. The Fed is telegraphing these concerns to investors very clearly right now, which means traders/investors are shifting their focus away from high-flying Growth stocks.Even though traders are attempting to shift capital away from certain risky sectors in the US and global markets, I still believe we have about 60 to 120+ days before the bigger market shift takes place.The US Federal Reserve will likely start addressing inflationary concerns by reducing their balance sheet assets – not by aggressively raising interest rates. I feel the US Fed will navigate Q1:2022 and Q2:2022 by reducing balance sheet assets while allowing the global supply-chain issues to attempt to resolve themselves. By June/July 2022, or later, I believe the Fed may start to consider rate increases as a means to slow inflation.Fed Comments Shift Investor Sentiment – Metals In Focus For Later 2022This move away from Dovish/easy-money policies will push traders to consider more traditional hedge investments – like Gold and Silver. I'm sure you've read some comments over the past 24+ months about Gold being an extremely undervalued asset as the US Fed poured trillions of stimulus dollars into the economy? These comments were made concerning the fact that Gold rallied from $1450 in 2019 to almost $2100 in 2020 – over 12 months (over +43%). Could a big move in Gold/Silver happen again in 2022 or 2023?My research suggests a Double Pennant/Flag formation in Gold suggests the $1675 support level becomes critical soon. It also indicates a Breakout/Breakdown move may start to happen before March or April 2022 – near the APEX of the current Pennant/Flag formation.Sign up for my free trading newsletter so you don’t miss the next opportunity! The key APEX range is currently between $1785 and $1830. This represents a very tight price range where Gold may attempt to consolidate as we move towards the March/April Apex. My research suggests a move to levels near $1740 to $1750 may happen just before the Apex Breakout/Breakdown initiates. So, watch for a bit of downside price volatility in Gold before the end of February 2022.Junior Gold Miners May Rally +45%, Or More, On A Gold Price RallyThe Junior Gold Miners (GDXJ) Weekly Chart shows a firm support level near $37.35 that should act as a floor for price. My research suggests the next 45+ days will see GDXJ prices stay below $44 to $45 – trading in a reasonably tight range before starting to rally higher near the end of February 2022.I believe Metals and Miners are aligning for a late February 2022 or Q2:2022 rally. The reason is that I believe the positioning by the US Fed, and expectations related to later 2022 (a mid-term election year), may prompt quite a bit of concern for the US and global equities. This will likely push investors and traders into “old-school” hedge instruments – like Gold and Silver.That means Junior Gold and Silver Miners maybe about 55+ days away from an explosive upside price trend.SILJ May Rally +70% to +100%, Or More, On Fed ActionsNear the end of 2022, I published a research article highlighting the incredible opportunity in Silver – focusing on how the Gold/Silver ratio had recently reached another peak level and had started to decline: Fear May Drive Silver More Than 60% Higher In 2022. This move suggests the disparity between the price of Gold to the price of Silver shows Gold is appreciated (and holding greater value) than Silver over the past few years.The COVID virus event, and the subsequent Fed/Government stimulus, shifted investors/traders focus away from precious metals and into the equities market speculative rally. Now that the US Fed is starting to warn of more aggressive rate increases and other actions, precious metals are suddenly much more important as a hedge against future risks.This SILJ Weekly Chart highlights the incredible base level, near $12, that continues to offer traders a fantastic hedge against a sudden Fed move. Using a simple Fibonacci Price Extension, we can see a $20 target level (+61%) and a $25.64 target level (100%). If the $12 level holds as a base/support, SILJ may be one of the easiest and best hedges against a sudden Fed move right now.The US Federal Reserve is, in my opinion, playing with fireThe COVID Virus Event pushed global debt levels higher by more than $19.5 Trillion Dollars (Source: Bloomberg ). The rush to attempt to save the global economy has created a massive surge in global debt levels – pushing the global debt to GDP level to well above 356% (Source: Axios).Why is this so important right now? Because the US Federal Reserve is talking about an attempt to move interest rates and Fed decision-making back to near-normal levels. In my opinion, this was the one fault of Alan Greenspan in 2006-07. The thought that we can raise rates to “near normal level” at any time when we have grown debt levels excessively throughout the world is failed thinking and ignorant, in my opinion.The US Federal Reserve is trapped and almost backed into a corner. I believe the US Fed will find any rate increases above 1.00 before the end of 2023 will significantly disrupt the global speculative bubble. Any attempt to move rates to levels near or above 2.00 would represent a nearly +2000% rate increase in less than 12 to 24 months. If you want to see a shock to the global markets where global debt to GDP is closing in on 400%, try raising the FFR by more than 2000% over a short period of time. That is what I call “playing with FIRE.”.(Source: Axios)2022 and 2023 will be filled with significant market trends and increased volatility. Right now, traders and investors need to understand the global markets are attempting to quickly transition away from a speculative/growth phase as the US Federal Reserve attempts to telegraph future rate increases. So it's time to start thinking about how to prepare for unknowns and how to protect your capital more efficiently.Growth sectors and US major indexes may continue to move higher for the next 30 to 60+ days, but my research suggests Q2:2022 may represent a "change in thinking" related to a late-2022 Fed shift. We are starting to see the markets move away from the speculative bubble-type trending we saw in 2020 and early 2021. Keep your eyes open and learn how to prepare for the big trends over the next 3+ years. The Fed is playing with fire right now. One wrong move and the markets could start a drastic price correction/reversion.Finding The Right Trading StrategiesIf you have struggled with finding opportunities over the past year or so and want to know which are the hottest sectors, or how to protect and grow your capital, then please take a minute to review my Total ETF Portfolio – Triple-Strategy Trading Plan to help you profit from these big market transitions.Learn how I use specific tools to help me understand price cycles, set-ups, and price target levels in various sectors to identify strategic entry and exit points for trades. Over the next 12 to 24+ months, I expect very large price swings in the US stock market and other asset classes across the globe. I believe the markets are starting to transition away from the continued central bank support rally phase and may start a revaluation phase as global traders attempt to identify the next big trends. Precious Metals will likely start to act as a proper hedge as caution and concern start to drive traders/investors into Metals.I invite you to learn more about how my three Technical Trading Strategies can help you protect and grow your wealth in any type of market condition by clicking the following link:   www.TheTechnicalTraders.com 
Another One Bites the Dust

Another One Bites the Dust

Monica Kingsley Monica Kingsley 20.01.2022 16:36
S&P 500 gave up opening gains that could have lasted longer – but the bear is still strong, and didn‘t pause even for a day or two. Defeated during the first hour, the sellers couldn‘t make much progress, and credit markets confirm the grim picture. There is a but, though – quality debt instruments turned higher, and maintained much of their intraday gains.And that could be a sign – in spite of the bearish onslaught driving the buyers back to the basement before the closing bell – that more buying would materialize to close this week, with consequences for S&P 500 as well. I would simply have preferred to see rising yields once again, that would be a great catalyst of further stock market selling. Now, the wisest course of action looks to be waiting for the upcoming upswing (one that didn‘t develop during the Asian session really), to get exhausted.Remember my yesterday‘s words:(…) The rising yields are all about betting on a really, really hawkish Fed – just how far are the calls for not 25, but 50bp hike this Mar? Inflation is still resilient (of course) but all it takes is some more hawkish statements that wouldn‘t venture out of the latest narrative line.Anyway, the markets aren‘t drinking the kool-aid – the yield curve continues flattening, which means the bets on Fed‘s misstep are on. True, the tightening moves have been quite finely telegraphed, but the markets didn‘t buy it, and were focused on the Santa Claus (liquidity-facilitated) rally instead – therefore, my Dec 20 warning is on. The clock to adding zero fresh liquidity, and potentially even not rolling over maturing securities (as early as Mar?) is ticking.And the run to commodities goes on, with $85 crude oil not even needing fresh conflict in Eastern Europe – the demand almost at pre-corona levels leaving supply and stockpiles in the dust, is fit for the job.With SPX short profits off the table, crude oil consolidating, and cryptos having second thoughts about the decline continuation, it‘s been precious metals that stole the spotlight yesterday – really great moves across the board to enjoy!Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 and Nasdaq OutlookS&P 500 buyers are nowhere to be seen – what kind of reflexive rebound would we get next? The odds aren‘t arrayed for it to be reaching very high – yields are catching up even with financials...Credit MarketsHYG is likely to pause a little next, and the degree of its move relative to the quality debt instruments, would be telling. Rates are though going to keep rising, so keep looking for a temporary HYG stabilization only.Gold, Silver and MinersGold and silver keep catching fire, and are slowly breaking out of the unpleasantly long consolidation. The strongly bullish undertones are playing out nicely – these aren‘t yet the true celebrations.Crude OilCrude oil looks like it could pause a little here – the stellar run (by no means over yet) is attracting selling interest. The buyers are likely to pause for a moment over the next few days.CopperCopper is paring back on the missed opportunity to catch up – the red metal will be dragged higher alongside the other commodities, and isn‘t yet offering signs of true, outperforming strength.Bitcoin and EthereumBitcoin and Ethereum really are setting up a little breather, but I‘m not looking for bullish miracles to happen. Still, the buying interest was there yesterday, and that would influence the entry to the coming week (bullishly).SummaryS&P 500 upswing turned into a dead cat bounce pretty fast, and while we may see another attempt by the bulls, I think it would be rather short-lived. Think lasting a couple of days only. Not until there is a change in the credit markets, have the stock market bulls snowball‘s chance in hell. Commodities and especially precious metals, are well placed to keep reaping the rewards – just as I had written a week ago. For now, it‘s fun to be riding the short side in S&P 500 judiciously, and the time for another position opening, looks slowly but surely approaching. Let the great profits grow elsewhere in the meantime.Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
Gold: Technical Analysis, Fundamental Analysis, Macro Influences - The Latest "As Good As Gold" Is Here!

Russian Bear and Inflationary Hydra Sent Gold to $1,840

Arkadiusz Sieron Arkadiusz Sieron 20.01.2022 17:24
  Gold soared as investors got scared by reports of an allegedly impending military conflict. Was it worth reacting sharply to geopolitical factors? Gold has been performing quite nicely in January. As the chart below shows, its price increased from $1,806 at the end of December to around $1,820 this week, strengthening its position above $1,800. Yesterday (January 19, 2022), gold prices went sharply higher, jumping above $1,840, as one can see in the chart below. What happened? Investors got scared of the Russian bear and inflationary hydra. President Biden predicted that Russia would move into Ukraine. The threat of invasion and renewal of a conflict weakened risk appetite among investors. To complete the geopolitical picture, this week, North Korea fired missiles again (on Monday, the country conducted its fourth missile test of the year), while terrorists attacked the United Arab Emirates with drones. The heightened risk aversion could spur some demand for safe-haven assets such as gold. The yellow metal tends to benefit from greater uncertainty. However, investors should remember that geopolitical risks usually cause only a short-lived reaction. Investors also recalled the ongoing global inflationary crisis. Some news helped them wake up. In the U.K., inflation surged 5.4% in December, the highest since March 1992. Meanwhile, in Canada, inflation jumped 4.8%, also the fastest pace in 30 years. Additionally, crude oil prices have jumped to around $86.5 per barrel, the highest value since 2014, as the chart below shows. The timing couldn’t be worse, as inflation is already elevated, while higher oil implies higher CPI in the future. Gold should, therefore, welcome the rise in oil prices. On the other hand, it could prompt the Fed to react more forcefully and aggressively to tighten its monetary policy.   Implications for Gold What does the recent mini-rally imply for the gold market? Well, it’s never a good idea to draw far-reaching conclusions from short-term moves, especially those caused by geopolitical factors. Risk-offs and risk-on sentiments come and go. However, let’s do justice to gold. It hit a two-months high, more and more boldly settling in above $1,800. All this happened despite rising bond yields. As the chart below shows, the long-term real interest rates have increased from about -1.0% at the end of 2021 to about -0.6%. Gold’s resilience in the face of rising interest rates is praiseworthy. Having said that, investors shouldn’t forget that 2022 will be a year of the Fed’s tightening cycle, rising interest rates, and also a certain moderation in inflation. All these factors could be important headwinds for gold this year. However, investors may underestimate how the Fed’s monetary policy will impact market conditions. After all, the Fed’s hawkish stance also entails some risks for the financial markets and the overall economy. Practically, each tightening cycle in the past has led to an economic crisis. As a reminder, after four hikes in 2018, the Fed had to reverse its stance and cut them in 2019. The Fed signaled not only a few hikes this year, but also a reduction of its balance sheet. Given the enormous indebtedness of the economy and Wall Street’s addiction to easy money, it might be too much to swallow. Importantly, when the Fed is focused on fighting inflation, its ability to help the markets will be limited. I thought that such worries would arise later this year, supporting gold, but maybe the gold market has already started to price in the possibility of economic turbulence triggered by the Fed’s tightening cycle. Anyway, next week, the FOMC will gather for the first time in 2022, and it could be an important, insightful event for the gold market. Stay tuned! If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
Technical Analysis: Moving Averages - Did You Know This Tool?

Gold Price Chart Might Make Some Investors Happy, US 30 With Reds

John Benjamin John Benjamin 21.01.2022 08:59
XAUUSD breaks resistance Gold surged over geopolitical tensions between the West and Russia over Ukraine. Following a three-week-long sideways grind, the break above the triple top at 1830 indicates strong commitment from the buy-side. 1850 is the next level to clear, which would lead to November’s peak at 1877. The RSI has shot into the overbought area, and some profit-taking could briefly drive the price lower. Buyers may see a pullback as an opportunity to join in. 1820 near the base of the recent rally is a key support in this case. AUDUSD seeks support The Australian dollar climbed back after the unemployment rate dropped to 4.2% in December. A surge above 0.7270 was the bulls’ attempt to initiate a reversal. As sellers covered their bets, the way might be open for a meaningful rebound. The follow-up correction met solid buying interest at 0.7170. Sentiment would remain upbeat as long as price action stays above this key support. 0.7290 is an important hurdle and its breach could trigger a runaway rally towards 0.7420. US 30 tests major support The Dow Jones 30 retreats as traders take profit ahead of next week’s Fed meeting. The index has given up all its gains from the late December rally and fell through the daily support at 34700. This bearish breakout could extend losses to the psychological level of 34000, a critical floor to prevent a deeper correction in the medium-term. The RSI’s oversold situation may attract some buying interest. Nonetheless, the bulls will need to lift offers around 35500 in a show of force, in order to turn sentiment around.
Crude Oil is Rapidly Climbing, the Rest Is Moving Down or Not At All

Crude Oil is Rapidly Climbing, the Rest Is Moving Down or Not At All

Monica Kingsley Monica Kingsley 24.01.2022 16:05
S&P 500 closed below the 200-day moving average – unheard of. But similarly to the turn in credit markets on Wednesday, the bulls can surprise shortly as the differential between HYG and TLT with LQD is more pronounced now. The field is getting clear, the bulls can move – and shortly would whether or not we see the autumn lows tested next. Now that my target of 4,400 has been reached (the journey to this support has been a more one-sided event than anticipated), 4,300 are next in the bears sight. The bearish voice and appetite is growing, which may call for a little caution in celebrating the downswings next. Relief rally is approaching, even if not immediately and visibly here yet. All I am waiting for, is a convincing turn in the credit markets, which we haven‘t seen yet. The dollar is likely to waver in the medium-term, and that‘s what‘s helping the great and profitable moves in commodities, and reviving precious metals. Crypto short profits are likewise growing – the real question is when the tech slide would stop (getting closer), and how much would financials rebound as well. Not worried about energy – the oil dip would turn out a mere blip. Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook S&P 500 buyers are nowhere to be seen, volume isn‘t yet at capitulation levels – rebound off increasingly oversold levels is approaching. Tech melting down faster than value is to be expected – look for consumer staples to do fine too, not just the sectors mentioned above. As written on Friday, the turn in bleeding in credit markets and tech may stop as early as Monday or Tuesday – I remain watching closely for signs of a high-confidence setup to perhaps take. Credit Markets HYG paused for a day while quality debt instruments rose – that‘s still risk-off, but symptomatic of the larger battle and buying interest at these levels already. Could presage a respite in stocks during the regular session next. Gold, Silver and Miners Gold and silver indeed paused a little – in spite of the miners weakness, that‘s no reversal. Most likely only a temporary correction within a developing uptrend. Crude Oil Crude oil bulls are finally getting tested, and by the look of oil stocks, it‘s not going to be a test reaching too far. Not even volume rose on the day – look for price stabilization followed by another upswing. Copper Copper had actually a hidden bullish day – a good consolidation of prior gains. While the volume isn‘t pointing the clearly bearish way, the amplitude of the move can be repeated next. Bitcoin and Ethereum Bitcoin and Ethereum Sunday rally fizzled out, and the downswing doesn‘t look to be yet over as another day of panic across the board is ahead. No signs from cryptos that the slide is stopping now. Summary S&P 500 bulls are readying a surprise – the long string of red days is coming to a pause. Credit markets turning a bit risk-on coupled with a tech pause and financials revival (not to mention consumer staples and energy) would be the recipe to turn the tide. We‘re in a large S&P 500 range, and got quite near its lower band at around 4,300. The short rides are to be wound down shortly, and that will coincide with another commodities run higher. Look to precious metals likewise not to disappoint while cryptos continue struggling at the moment. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
S&P 500 Declined, Gold Price (XAU/USD) Isn't Far From November's Levels

S&P 500 Declined, Gold Price (XAU/USD) Isn't Far From November's Levels

Monica Kingsley Monica Kingsley 25.01.2022 15:55
Tough call as select S&P 500 sectors came back to life, but credit markets are a bit inconclusive. Some more selling today before seeing a rebound on Wednesday‘s FOMC (I‘m leaning towards its message being positively received, and no rate hike now as that‘s apart from the Eastern Europe situation the other fear around). VIX looks to have topped yesterday, and coupled with the commodities and precious metals relative resilience (don‘t look at cryptos where I took sizable short profits in both Bitcoin and Ethereum yesterday), sends a signal of upcoming good couple of dozen points rebound in the S&P 500. Taking a correct view at the hightened, emotional market slide yesterday, is through the portfolio performance – as you can see via clicking the link, yesterday‘s setup needn‘t and shouldn‘t be anyone‘s make or break situation. Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook S&P 500 buyers stepped in, and carving out a nice lower knot today is the minimum expectation that the bulls can have. The reversal is still very young and vulnerable. Credit Markets HYG reversed, but isn‘t in an uptrend yet – there is just a marginal daily outperformance of quality debt instruments. More is needed. Gold, Silver and Miners Gold and silver are only pausing – in spite of the miners move to the downside at the moment. HUI and GDX will catch up – they‘re practically primed to do so over the medium-term. Crude Oil Crude oil bulls are still getting tested, and oil stocks stabilized on a daily basis. Some downside still remains, but nothing dramatic – the volume didn‘t even rise yesterday. Copper Copper declined, but didn‘t meaningfully lead lower – the downswing was actually bought, and low 4.40s look to be well defended at the moment. More fear striking, would change the picture, but we aren‘t there yet. Bitcoin and Ethereum Bitcoin and Ethereum reversed, but in spire of the volume, look to need more time to bottom out – and I wouldn‘t be surprised if that included another decline. Summary S&P 500 bulls would get tested today again, and at least a draw would be a positive result, as yesterday‘s tech upswing is more likely to be continued tomorrow than today – that‘s how it usually goes after sizable (think 5%) range days. The table is set for an upside surprise on FOMC tomorrow – the tantrum coupled with war fears bidding up the dollar, is impossible to miss. Best places to be in remain commodities and precious metals, and the coming S&P 500 upswing looks to be a worthwhile opportunity in the making, too – on a short-term and nimble basis. So, I‘m more in the glass half full camp going into tomorrow. Anyway, let‘s take the portfolio view discussed in the opening part of today‘s article. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
Financial Sector ETF XLF $37.50 Continues To Present Opportunities

Financial Sector ETF XLF $37.50 Continues To Present Opportunities

Chris Vermeulen Chris Vermeulen 26.01.2022 23:16
Recent volatility in the US markets ahead of the Fed comments/actions have prompted a relatively big pullback in almost every sector. Many traders are concerned the Fed may take immediate action to raise rates. Yet, a small portion of traders believes the Fed may be trapped in a position to act more conservatively in addressing inflation going forward. I think the Fed will continue to talk firmly about potentially raising rates. The Fed is more interested in decreasing the assets on their balance sheet before they risk doing anything to disrupt support for the global markets.Suppose my analysis of the Fed predicament is correct. In that case, the recent collapse of the US markets represents a fear-based emotional selloff of many sectors that may still represent a strong opportunity for a recovery rally in 2022. One of those sectors is the Financial sector – particularly XLF.I wrote about this on January 7, 2022, in this article: FINANCIAL SECTOR STARTS TO RALLY TOWARDS THE $43.60 UPSIDE TARGETI also wrote how the US Fed might be playing with fire regarding their stern positioning and statements recently in this article on January 14, 2022: US FEDERAL RESERVE - PLAYING WITH FIRE PART 2Critical Components Of Recent Inflationary TrendsIf you attempt to follow my logic as I read into the Fed's intentions. There are three critical components to navigating the rise of inflationary trends recently.The COVID-19 virus event created several disparities in the global markets. First, the disruption to the labor and supply-side markets began an almost immediate inflationary aspect for the global economy. Secondly, the US's stimulus and easy money policies have stimulated demand for products, technology, houses, autos, and other real assets. These two factors combined have increased inflationary pressures on the global markets.Rising consumer demand for real and virtual assets such as Cryptos, NFTs, and others has pushed the speculative investing cycle into a hyper-active rally phase. This was clearly witnessed in early 2021, with the Reddit/Meme rallies became the hottest trades, then quickly dissipated after July 2021. This speculative rally has pushed the post-COVID rally well beyond reasonable expectations over the past 16+ months.Excessive debt levels push a deflationary process to the forefront. Consumers are now starting to pull away from the excesses of the past 16+ months. The Fed's tough talk and recent deeper declines in various sectors over the past 12+ months show that inflationary trends are subsiding. Despite the supply-side issues being resolved, consumers continue to pull away from hyper-speculative activities. The markets will naturally revalue to support more realistic price levels, deflating excessive P/E ratios and recent extreme price peaks in assets.Possible Next Steps for the US FedMy interpretation of the global markets is that excess speculative trending and rising commodity prices, combined with excess debt levels and consumers who have suddenly become very aware of global market risks, are already acting as a deflationary process. Because of these underlying factors, which I believe are currently in play throughout the globe, the US Federal Reserve may be forced to wait things out a bit. The Fed may have to navigate these natural deflationary processes while attempting to provide monetary support for what I believe will be a downside/deflationary trend over the next 3+ years.Sign up for my free trading newsletter so you don’t miss the next opportunity! The US Federal Reserve may not have to take any aggressive action right now. Instead, it may decide to watch how the global markets contract as consumers pull away from inflated price levels and higher risks and attempt to navigate these natural deflationary price trends. If the Fed were to act aggressively right now and raise rates, they could push the global markets into a steeper collapse. This process would likely burst numerous asset bubbles very quickly and push many foreign nations into some type of debt default.This presents a new problem for the US Fed – going from inflationary concerns to global economic collapse concerns very quickly. So when I suggested the Fed is playing with fire – maybe I should have said “playing with the nuclear economic football”?Financial Sector ResilienceStill, I believe the US Financial sector is showing tremendous resilience near $37.50. I think it has a powerful opportunity to rally back above $42 to $44 if the Fed takes a more measured approach to let the global markets deflate a bit before taking any aggressive actions.The US Financial sector will likely continue to benefit from price volatility and consumer demand as these deflationary trends prompt consumers to engage in more normal economic activities. The Financial sector also has continued to stay under moderate pricing pressure since the 2008 highs. XLF is only 25.46% higher than the 2008 highs, whereas the NASDAQ is more than 575% above the 2008 market highs.The Financial Sector may be one of the strongest market sectors over the next few years. Deflationary trends push consumers and global markets away from excess debt levels and towards more traditional economic activities/trends.Want To Learn More About Financial Sector ETFs?Learn how I use specific tools to help me understand price cycles, set-ups, and price target levels in various sectors to identify strategic entry and exit points for trades. Over the next 12 to 24+ months, I expect very large price swings in the US stock market and other asset classes across the globe. I believe the markets are starting to transition away from the continued central bank support rally phase and may start a revaluation phase as global traders attempt to identify the next big trends. Precious Metals will likely start to act as a proper hedge as caution and concern start to drive traders/investors into Metals.I invite you to learn more about how my three Technical Trading Strategies can help you protect and grow your wealth in any type of market condition by clicking the following link:   www.TheTechnicalTraders.com 
NASDAQ, Non-Farm Payrolls, GBPAUD, Gold and More in The Next Episode of "The Trade Off"

Stock Market in 2022: Momentum on the Stocks in the Market Are In a Solid Footing

Finance Press Release Finance Press Release 28.01.2022 10:51
The year 2022 is seemingly a mixed bag, even as markets start reopening. The year looks promising, though, with issues like inflation and COVID to contemplate. Historic rallies in 2021 after lockdowns are looking to inspire trading in various industries, with some assets to look out for by investors. Growth will surely return at some point, but so will disappointing instances where tumbles will dominate trading desks. The S & P's historic gains of 30 percent dominated the press at the close of 2021, making investors using Naga and other optimistic platforms. The ended year had one of the longest bull markets. However, the Fed rate tightening and the direction the pandemic will take are some things to expect, notwithstanding that the stock market might grow by a whopping 10 percent in 2022. Trading Movements In Week One 2022 European markets have opened with a lot of optimism in 2022, the pan-European STOXX 600 closed at 489.99 points; this is 0.5 percent higher than the opening figure. The European benchmark was some percentage lower than the overall S&P 2021 performance, though with a surge of 22.4 percent. Record gains in the stock markets have relied on the positions taken by the governments during the pandemic. In the USA and Europe, increasing vaccination rates and economic stimulus measures have improved investor confidence. However, there are indications for more volatility in 2022, a situation investors must watch keenly. There has been little activity in London markets in the first week of 2022, while in Italy, France, and Spain gains of between 0.5-1.4 percent made notable highlights. European markets had diverse industries drive up the closing gains witnessed; the airline sector, in particular, has had a significant influence. Germany’s Lufthansa (LHAG.DE) had an impressive 8.8 percent jump while Air France KLM (AIRF.PA), a 4.9 percent gain. Factory activity is another factor to thank for the first week's gains all over Europe. Noteworthy, the Omicron variant influenced trading in the entirety of December, but the reports that it is milder than Delta has energized market activities coming into January. S&P and DOW Jones 2022 First Week Highs Across the Atlantic, the Dow Jones Industrial Average (DJI) and S&P 500 (SPX) closed at a record high, highlighting a similar aggressiveness as the European markets. While the jump was industrial-wide, Tech stocks continued to dominate, as Apple finally touched the $3 trillion valuation, though for a short time. Tesla Inc. (TSLA.O) posted a 13.5 percent jump thanks to increased production in China and an unprecedented goal to surpass its target. The US market, like the European market, is also in a fix; the Omicron variant of COVID-19 continues to cause concern with the wait-and-see approach, the only notable strategy. Currently, every country is reporting a jump in the number of Covid cases, with the UK going above 100K cases for the first time and the US recording some new records as well. School delays and increased isolation by key workers will surely debilitate the markets, with the global chip shortage another point to contemplate. However, markets can still ride on the increased development of therapies to help fight Covid. The U.S. Food and Drug Administration (CDC) has been quick, as now children can have their third doses as well. Industries to Look Out For In 2022 European automakers have seen early peaks, while the airline sector has also picked up fast. In the US, tech shares continue to dominate, and 2022 might witness new records never seen before. However, the energy sectors have also dominated the news in 2021, and in 2022; the confidence in them will continue to rise because of an anticipation of stabilization in energy prices. The same goes for crude oil prices. Regardless, shareholders will continue watching the decisions by the Federal Reserve, a review in the current interest rates will surely tame inflation. Conclusion 2022 will see its highs and lows in investments. Some assets will make the news and investors will be keen to use any information to make key decisions. Tech will continue to shine, but it is important to anticipate the direction of the pandemic, as it will be an important factor in investor decisions.
DXY Hits Level of July, 2020 and Affects EURUSD

DXY Hits Level of July, 2020 and Affects EURUSD

Alex Kuptsikevich Alex Kuptsikevich 28.01.2022 10:26
The US dollar rewrote its 1.5-year highs on Thursday, sending EURUSD under 1.1150. After the FOMC meeting, the pair fell in total by 1.5%, leaving a two-month consolidation with a sharp movement. Friday's small rollback from extremes is likely a local profit fixation by the end of the week and month. History suggests that the US currency begins to add about 2-3 quarters before the first rate hike and continues to be in positive territory for about the same time after. We believe that this long story should be adjusted to the new reality in which interest rates are the starting point. Namely, the first point of tightening monetary conditions is now the beginning of the curtailment of purchases on the balance sheet and not the first increase. The start of the dollar's growth last year was the beginning of a public discussion of curtailment. And now, seven months later, the dollar is halfway up with an 8.5% increase from the area of last year's lows. The second half of this wave is unlikely to be as powerful. We only assume that the dollar has a 3-4% growth potential in the area of 100.3-101 due to monetary policy changes. This will return the US currency to the area of steady highs in 2020, excluding two weeks of the most violent market crash. The EURUSD rate in this scenario may fall to 1.07-1.08 before finding a more substantial base of buyers. However, investors and traders should also remember that monetary policy is far from the only driver for currencies. The markets' attention can quickly switch to the debt sustainability of the Eurozone countries and the pace of economic recovery in the world.
Fed Comments Help To Settle Global Market Expectations

Fed Comments Help To Settle Global Market Expectations

Chris Vermeulen Chris Vermeulen 28.01.2022 14:59
The recent Fed comments should have helped settle the global market expectations related to if and when the Fed will start raising rates and/or taking further steps to curb inflation trends. Additionally, the Fed has been telegraphing its intentions very clearly over the past few months, providing ample time for traders and investors to alter their approach to pending monetary tightening actions. Read the full Fed Statement here.In my opinion, foreign markets are more likely to see increased risks and declining price trends for two reasons. First, at-risk nations/borrowers struggle to reduce debt levels. Second, foreign market traders/investors struggle to adapt to the transition away from speculative “growth” trends. I think the US Dollar may continue to show strength over the next 4+ months as the foreign traders pile into US economic strength while the Fed initiates their tightening actions. So it makes sense to me that global markets would recoil from Fed tightening while debt-heavy corporations/nations seek relief from rising debt obligations.Foreign Markets Struggle For Support Before US Fed Monetary TighteningIn a continuing downward slide, global market equity indexes continue to move lower after the US Fed comments this week. In this article, I wrote about this dynamic on August 3, 2021: US Markets Stall Near End Of July As Global Markets Retreat - Are We Ready For An August Surprise? At that time, I suggested the US markets were stalling while the global markets continued to decline.Now, nearly five months later, we've seen the US market trend moderately higher, attempting to struggle to new highs and exhibit deep downward price trends, while the global markets have continued to trend lower. As we move closer to the US Fed pushing interest rates higher, I expect these trends to become even more volatile and pronounced.US Equities May Find Support After The Fed Raises RatesThe current dynamic in the global markets is that capital is seeking investments where safety and profitable returns dominate over risks. As the global markets transition ahead of the Fed rate increases, I believe the US markets will continue to dominate global assets in opportunities, safety, and returns. Once the Fed starts to raise interest rates, a brief period of volatility throughout the global markets may occur. Still, that volatility should quickly settle as traders chase a stronger US Dollar, US Dollar-based Dividends, and a potential “melt-up” of the US Equity market (particularly the Dow Jones, S&P500, and possibly the Russell 2000).Sign up for my free trading newsletter so you don’t miss the next opportunity!Unless the US Fed takes very aggressive action in raising rates too quickly, I believe, at least initially, the US equity markets will continue to benefit from perceived strengths compared to many global equities/indexes.This means there will be many opportunities for traders and investors in 2022 and 2023 – we have to be patient in waiting for the chance to profit from these big trends. Jumping ahead of this volatility could be dangerous if you are on the wrong side of the price trend. Instead, wait for the right opportunities while you protect your capital from extreme risks. Let the markets tell you when opportunities are perfect – don't try to force a trade to happen.On December 28, 2021, I published this research article showing how my Adaptive Dynamic Learning (ADL) Predictive Modeling system expects price to trend in 2022 and early 2023: Predictive Modeling Suggests 710 Rally In SPY And QQQ Before April 2022. I strongly suggest taking a look at the recent downside price trends in relation to the lower range of the ADL Predictive Modeling expectations. If my ADL Predictive Modeling system is accurate, we may see a relatively strong recovery in the US stock market throughout the rest of 2022 and beyond.Strategies To Help You Protect And Grow Your WealthLearn how I use specific tools to help me understand price cycles, set-ups, and price target levels in various sectors to identify strategic entry and exit points for trades. Over the next 12 to 24+ months, I expect very large price swings in the US stock market and other asset classes across the globe. I believe the markets are starting to transition away from the continued central bank support rally phase and may start a revaluation phase as global traders attempt to identify the next big trends. Precious Metals will likely start to act as a proper hedge as caution and concern start to drive traders/investors into Metals.I invite you to learn more about how my three Technical Trading Strategies can help you protect and grow your wealth in any type of market condition by clicking the following link:   www.TheTechnicalTraders.com 
If It Had Been Basketball, We Might Say S&P 500 Had Been Blocked!

If It Had Been Basketball, We Might Say S&P 500 Had Been Blocked!

Monica Kingsley Monica Kingsley 28.01.2022 16:01
S&P 500 upswing attempt rejected, again – and credit markets didn‘t pause, with the dollar rush being truly ominous. Sign of both the Fed being taken seriously, and of being afraid (positioned for) the adverse tightening consequences. Bonds are bleeding, the yield curve flattening, and VIX having trouble declining. As stated yesterday: (...) It‘s nice to start counting with 5 rate hikes this year when taper hasn‘t truly progressed much since it was announced last year. The accelerated taper would though happen, and the following questions are as to hikes‘ number and frequency. I‘m not looking the current perceived hawkishness to be able to go all the way, and I question Mar 50bp rate hike fears. Not that it would even make a dent in inflation. Not even the shock and awe 50bp hike in Mar would make a dent as crude oil prices virtually guarantee inflation persistence beyond 2022. The red hot Treasury and dollar markets are major headwinds as the S&P 500 is cooling off (in a very volatile way) for a major move. As we keep chopping between 4,330s and 4,270s, the bulls haven‘t been yet overpowered. I keep looking to bonds and USD for direction across all markets. I also wrote yesterday: (...) All that‘s needed, is for bonds to turn up, acknowledging a too hawkish interpretation of yesterday‘s FOMC – key factor that sent metals down and dollar up. While rates would continue rising, as the Fed overplays its tightening hand, we would see them retreat again – now with 1.85% in the 10-year Treasury, we would overshoot very well above 2% only to close the year in its (2%) vicinity. That just illustrates how much tolerance for rate hikes both the real economy and the markets have, and the degree to which the Fed can accomplish its overly ambitious yet behind the curve plans. Still time to be betting on commodities and precious metals in the coming stagflation. Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook Another setback with reversal of prior gains - S&P 500 is chopping in preparation for the upcoming move. Concerningly, the bears are overpowering the bulls on a daily basis increasingly more while Bollinger Bands cool down to accommodate the next move. Direction will be decided in bonds. Credit Markets HYG keeps collapsing but the volume is drying up, which means we could see a reprieve – happening though at lower levels than earlier this week. Quality debt instruments are pausing already, indicatively. Gold, Silver and Miners Gold and silver declined as yields moved sharply up and so did the dollar – but inflation or inflation expectations didn‘t really budge, and TLT looks ready to pause. The metals keep chopping sideways in the early tightening phase, which is actually quite a feat. Crude Oil Crude oil isn‘t broken by the Fed, and its upswing looks ready to go on unimpeded, and that has implications for inflation ahead. Persistent breed, let me tell you. Copper Copper is in danger of losing some breath – the GDP growth downgrades aren‘t helping. The red metal though remains range bound, patiently waiting to break out. Will take time. Bitcoin and Ethereum Bitcoin and Ethereum are pointing lower again, losing altitude – not yet a buying proposition. Summary S&P 500 bulls wasted another opportunity to come back – the FOMC consequences keep biting as fears of a hawkish Fed are growing. Tech still can‘t get its act together, and neither can bonds – these are the decisive factors for equities. As liquidity is getting scarce while the Fed hadn‘t really moved yet, risk-on assets are under pressure thanks to frontrunning the Fed. The room for a surprising rebound in stocks is however still there, given how well the 4,270s are holding in spite of the HYG plunge. And given the recent quality debt instruments pause, it looks approaching. Look for a dollar decline next to confirm the upcoming risk-on upswing. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
Breaking up is hard to do - 31.01.2022

Breaking up is hard to do - 31.01.2022

David Merkel David Merkel 10.11.2021 04:04
Photo Credit: Chris Blakeley || Always optimistic when things are growing, and in the dumps when it falls apart Over the years, I have suggested that two firms should break up on a number of occasions: AIG & GE. Both are now in the process of completing their breakups. The news on GE dropped today, and I was surprised that the media did not pick up on one significant question on the GE breakup. Who gets the insurance liabilities that have been a real pain to GE even after selling off Genworth. As I tweeted: General Electric to Split Into Three Public Companies – WSJ https://t.co/BR8uXhhDVJ Notably missing from all the $GE press coverage is who has to pay off the insurance liabilities: Aviation, probably the weakest of the three. Could gore those relying on the guarantee… pic.twitter.com/qhT0y4gfXL— David Merkel (@AlephBlog) November 9, 2021 How could they miss this? I think I first suggested that GE should break up in a comment in RealMoney’s Columnist Conversation sometime back in 2005, but that is lost in the pre-2008 RealMoney file system, and exists no more. In terms of what I can show I will quote from this old post from 2008: 5) File this under Sick Sigma, or Six Stigma — GE is finally getting closer to breaking up the enterprise.� It has always been my opinion that conglomerates don’t work because of diseconomies of scale.� As I wrote at RealMoney: David MerkelGE — Geriatric Elephant4/27/2007 1:16 PM EDT First, my personal bias. Almost every firm with a market cap greater than $100 billion should be broken up. I don’t care how clever the management team is, the diseconomies of scale become crushing in the megacaps. Regarding GE in specific, it is likely a better buy here than it was in early 1999, when the stock first breached this price level. That said, it doesn’t own Genworth, the insurance company that it had to jettison in order to keep its undeserved AAA rating. Which company did better since the IPO of Genworth? Genworth did so much better that it is not funny. 87% total return (w/divs reinvested) for GNW vs. 28% for GE. A pity that GE IPO’ed it rather than spinning it off to shareholders… But here’s a problem with breaking GE up. GE Capital, which still provides a lot of the profits could not be AAA as a standalone entity and have an acceptable ROE. It would be single-A rated, which would push up funding costs enough to cut into profit margins. (Note: GE capital could not be A-/A3 rated, or their commercial paper would no longer be A1/P1 which is a necessary condition for investment grade finance companies to be profitable.) Would GE do as well without a captive finance arm (GE Capital)? It would take some adjustment, but I would think so. So, would I break up GE by selling off GE Capital? Yes, and I would give GE Capital enough excess capital to allow it to stay AAA, even if it means losing the AAA at the industrial company, and then let the new GE Capital management figure out what to do with all of the excess capital, and at what rating to operate. Splitting up that way would force the industrial arm to become more efficient with its proportionately larger debt load, and would highlight the next round of breakups, which would have the industrial divisions go their own separate ways. Position: none, and I have never understood the attraction to GE as a stock Over the years, I continued to write about GE and Genworth (I grew bearish over LTC after analyzing Penn Treaty. I was always bearish on mortgage insurance). I never thought either would do well, but I never expected them to do as badly as they did. Optimistic accounting ploys from the Welch years bit into profits of Immelt, as he was forced to reset accruals higher again and again. Overly aggressive financial and insurance underwriting similarly had to be reversed, and losses realized. After today, all but the successor firm for GE (Aviation) has a chance to do something significant, freed from the distractions of being in a conglomerate. They can focus, and maybe win. As for GE Aviation, because of the insurance liabilities they will probably receive a valuation discount. Maybe they will sacrifice and pay up, selling the liabilities to Buffett with significant overcollateralization. American International Group I first suggested that AIG break up back in 2008. Only M. R. Greenberg had the capability of managing the behemoth, and once he was gone, lower level managers began making decisions that Greenberg would have quashed, which led to short-term gains, and larger long-term losses. After AIG was taken over by the Fed, bit-by-bit they began selling off the pieces — Hartford Steam Boiler, ILFC, AIA, Alico (to MetLife), and more. They were left with a portion of the international P&C business, and the domestic life and P&C businesses. They are now planning on spinning off the domestic life companies, which will leave AIG as a P&C insurer with relatively clean liabilities (They reinsured Asbestos and Environmental with Berkshire Hathaway). Where do we go from here? Is there a lesson here? Avoid complexity. Avoid mixing mixing industrial and financial. Avoid mixing life and P&C. (Allstate is finally splitting that.) That said, there may be another lesson for the future. What of the extremely large companies that are monopolies? Some of them aren’t complex; they just dominate a large area of the economy as monopolies. Governments want to do one of two things with monopolies. They either want to break them up, or turn them into regulated utilities. Why? The government doesn’t like entities that get almost as powerful as them, so they limit their size, scope, and subject them to regulation. So be aware if you hold some of the largest companies in the US or the world, because governments have their eyes on them, and want them to be subject to the government(s). Full disclosure: long MET
An Estimate of the Future - 31.01.2022

An Estimate of the Future - 31.01.2022

David Merkel David Merkel 19.11.2021 07:49
Photo Credit: eflon || All in all, you’re just another brick in the wall… In some ways, the Federal Reserve is the whipping boy of Congress. Congress can’t decide on anything significant, so the Fed fills in the blanks, and keeps things moving, even if it creates humongous asset bubbles in the process. That is what we are facing today. Overvalued stocks, housing, corporate bonds, private equity, and more. Inflation in goods and services may be transitory, but asset inflation is a constant. Whether by QE or rate policy, the Fed tries to end the possibility of recessions by making financing cheap, and blowing asset bubbles in the process. What of the future? The Fed will be dragged kicking and screaming to tightening. It will follow the stupid Alan Greenspan highway of 25 basis points per meeting. It will be all too predictable, which has little to no impact until it is too late, creating pro-cyclical economic policy, something the Fed specializes in. The Fed will be surprised (again) to see that the long end of the yield curve does not respond to their efforts. Are they stupid? Yes. the yield curve hasn’t worked in the classical way for over 20 years. In an overindebted economy, long rates are sluggish. Can the Fed abandon the dead orthodoxy of neoclassical economics to embrace the reality of overindebted economics? I doubt it. I asked two Fed governors three years ago when the Fed would abandon the failed Neoclassical economics. They looked like dead sheep for a moment, before they gave some lame defenses of the theory that can’t account for financial markets or marketing. What I expect is that the Fed will tighten the Fed funds rate to 1.5% or so, the long end sinking, and then something blows up, and they return to the prior policy of 0% rates, and QE… failed policies that inflate asset bubbles and increase inequality. We’re in a “doom loop” where there is no way to purge this system of its errors. We would be better off under a gold standard, with stricter regulation of banks. Would we have a recession? Yes, but eventually the economy would grow again organically, without the pollution of stimulus. That said, the Federal Reserve is not the main problem. The main problem is American culture that will not tolerate severe recessions. We need recessions to liquidate bad debts that hinder the economy from growing rapidly in the future. We need to accept the boom-bust cycle, and not look to the government or central bank to moderate matters. Bank regulation is another matter, as loose regulation of banks led to extreme booms and busts, particularly between 1870-1913, and 2004-2008. Conclusion The Fed will tighten and fail, returning us to the same morass that we are in now. Financial repression via the Fed will continue to create inequality with no smoking gun. Stupid people will finger other causes, when the real cause is the Federal Reserve. We need to eliminate the Federal Reserve, and cause Congress and the Executive Branch to take responsibility for their failed policies. PS — there could be a currency panic, but I doubt it. Too many countries want to export to the US.
Estimating Future Stock Returns, September 2021 Update - 31.01.2022

Estimating Future Stock Returns, September 2021 Update - 31.01.2022

David Merkel David Merkel 16.12.2021 04:35
Image credit: All images belong to Aleph Blog This should be a brief post. At the end of the third quarter, the S&P 500 was poised to nominally return -0.64%/year over the next 10 years. As of the close today, that figure was -1.83%/year, slightly more than the -1.84%/year at the record high last Friday. The only period compares with this valuation-wise is the dot-com bubble. We are above dot-com level valuations. And if you view the 10-year returns from the worst time of the dot-com bubble to now, you can see that the results they obtained are milder than what I forecast here. Of course, a lot of what will happen in nominal terms will rely on the actions of the Fed. Will the Fed: Allow a real recession to clear away dud assets that are on life support from low rates? (Collapsing the current asset bubble)Change the terms of monetary policy, and start directly monetizing US Treasury debt? (Risking high inflation)Continue to dither with financial repression, leaving rates low, not caring about moderate inflation, with real growth zero-like. (Zombie economy — this is the most likely outcome for now) In some ways the markets are playing around with something I call “the last arbitrage.” Bonds versus Stocks. The concept of TINA (There is no alternative [to stocks]) relies on the idea that the Fed will be the lapdog of the equity markets. If stocks are high, the Fed is happy. Phrased another way, if the Fed maximizes wealth inequality, it is happy. And the Fed will be happy. They live to employ thousands of macroeconomists who would have a hard time finding real employment. These economists live to corrupt our understanding f the macroeconomy, justifying the actions of the Fed. The Fed just wants to scrape enough seigniorage to pay the staff, and keep Congress and the Administration mollified. All taken out of the hides of those who save. So with the last arbitrage… interest rates have to stay low to keep the stock market high, even if it means slow growth, and moderate and growing inflation. The likely change promulgated by the Fed today, raising the short rate by 0.75% in 2022 will likely flatten the yield curve, leading to a crisis of some sort, and push them back into QE and near-zero short rates. The stock market will have a pullback and a rally, but what of inflation? How will people act when there is no way to save for the short-run, without inflation eating away value? Brave new world. The Fed is stuck, and we are stuck with them. Gold does nothing, and would be a kinder mistress than the Fed. Better to live within strict limits, than the folly of an elastic currency. But as is true with all things in America, we are going to have to learn this the hard way. PS — As for me, I am living with value stocks, small stocks, and international stocks. Very little in the S&P 500 here.
Separate Processes

Separate Processes

David Merkel David Merkel 18.12.2021 06:16
Photo Credit: atramos || Inflation isn’t the most organized phenomenon, and investors often all want to be on the same side of the boat… I have a very irregular series called, “Problems with Constant Compound Interest.” Part of the idea of that series is that it is difficult to assure growth in capital in any sort of constant way. The simple models of the CFPs, and even actuaries that assume constant or near constant growth are ultimately doomed to fail if they try to exceed growth in nominal GDP by more than 2%/year. Because of the oddities in the current market environment, current interest rates and inflation have decoupled. They are separate processes. We all want to build value in real (inflation-adjusted) terms, but how do you do that in an environment where price to free cash flow multiples are sky high, nominal interest rates are low, and the prices of most commodities are high as well (leaving aside gold as an oddity). Mindless stock bulls talk of TINA [There Is No Alternative (to buying stocks)], as if there is no limit to how high stock prices can go when interest rates are low. I want to tell you about TIN. There Is Nothing (worth buying). This is the nature of financial repression. If you invest in short bonds, you get gouged by current inflation. If you buy long bonds, you run the risk that the Fed might start monetizing Treasury debt directly, and inflation really runs. With stocks you run the risk of any hiccup in the global economy (when is the omega variant coming so that we can move on to Hebrew letters?) can derail the market, particularly if it leads to higher interest rates. The Fed has gotten its wish and is forcing an asset bubble on the US to aid growth, however fitfully. All of the relationships of the present to the future are out of whack, because interest rates are too low. But if intermediate interest rates rose to the level of nominal GDP growth, we would see deficits grow even more rapidly as the US government would refinance at higher rates. The Fed is stuck in a doom loop of its own design ever since Alan Greenspan got the great idea to cut short recessions too soon. That has led us into a liquidity trap designed by the Fed. As I said to one of my clients this week (a bright man), “If you are not bewildered, you are not thinking.” About the only idea I can think of for investing at present is the intersection of high quality and low-ish valuations. As it says in Ecclesiastes 11:2 “Give a serving to seven, and also to eight, For you do not know what evil will be on the earth.” Diversify among safe-ish investments, with a few cyclicals that will do well if things run hot, and stable businesses, if things do not. That’s all.
Technical Analysis: Moving Averages - Did You Know This Tool?

(PLTR) Palantir Stock Went Down And Isn't Even Close To November's Levels

FXStreet News FXStreet News 01.02.2022 15:49
Palantir stock rises by nearly 8% on Monday. PLTR shares have suffered from the hawkish Fed and risk aversion. Palantir could see a rally as risk assets see inflows. Palantir (PLTR) is back on the minds of traders as retail interest stocks finally catch a bid in this new environment. Meme and retail interest stocks have been hammered so far in 2022. Most, if not all, of these stocks are high growth, unprofitable and highly speculative names, and the momentum has dried up in this sector in 2022. The Fed has pivoted to a strongly hawkish stance, and markets are pricing in five rate hikes this year. Palantir has fallen 25% so far this year and nearly 50%over the last three months. Palantir Stock News The meme and retail space staged a recovery yesterday as some end-of-month position covering saw some positive flows. Added to this was a more risk-on tone following from Apple's strong earnings late last week and in anticipation of more big tech earnings this week. AMC then whetted risk appetites further this morning when it released revenue numbers that were ahead of analysts' forecasts. AMC shares popped 14% and dragged many retail and meme stocks along with them. All this should contribute to more gains for Palantir on Tuesday as momentum is key for these names. Adding to this and more stock-specific is that Palantir and Satellogic (SATL) announced a strategic partnership. "Combining the forces of Palantir’s Edge AI technology with Satellogic’s frequent high-resolution imagery will give users actionable insight faster than ever, accelerating their operations from space to mud," said Shyam Sankar, COO of Palantir. "The holistic capabilities of Palantir's Foundry will be instrumental in helping Satellogic realize our mission to improve life on Earth through geospatial data,” said Matthew Tirman, President of Satellogic North America. “ Satellogic will provide Palantir’s US government customers with ready access to Satellogic’s high-resolution satellite imagery to drive analytical insights across a range of mission-oriented use cases.” Satellogic only recently went public via a SPAC deal, listing on the NASDAQ on January 26. We do not have details of the financial side of the partnership or the impact on Palantir's revenue streams. The partnership is for five years, and the companies already have an existing collaboration. All this makes it less significant in our view as it is merely an add-on to an existing relationship between the two companies. Investors are pushing the news aggressively on social media. Palantir Stock Forecast We do note the oversold Relative Strength Index (RSI) on January 27 with it dipping below 20. Oversold readings are usually below 30 for the RSI, but 20 eliminates false signals. This then worked well, and today's move is likely to see more gains. Breaking $13.61 gets PLTR shares above the 9-day moving average, and the next resistance is at $15 from both the yearly VWAP and 21-day moving average. The VWAP is the volume-weighted average price. Palantir (PLTR) chart, daily
S&P 500 Is Almost At New Record High, Will The Uptrend Continue?

S&P 500 Is Almost At New Record High, Will The Uptrend Continue?

Paul Rejczak Paul Rejczak 17.11.2021 16:15
S&P 500 got close to its all-time high, as market mood turned bullish again. But the index retraced some of the rally. So will the uptrend continue? For in-depth technical analysis of various stocks and a recap of today's Stock Trading Alert we encourage you to watch The S&P 500 index gained 0.39% on Tuesday, Nov. 16, as it closed slightly above the 4,700 mark. The market reached the daily high of 4,714.95 before retracing some of the intraday advance. It got close to the Nov. 5 record high of 4,718.50. Last week it fell to the local low of 4,630.86 and it was almost 88 points or 1.86% below the record high. The early November rally was not broad-based and it was driven by a handful of tech stocks like MSFT, NVDA, TSLA. The market seemed overbought in the short-term and it traded within a topping pattern. Then the index retraced some of that advance, as it fell the mentioned 88 points from the record high. The nearest important support level remains at 4,630-4,650 and the next support level is at 4,600. On the other hand, the resistance level is at 4,700-4,720. The S&P 500 broke below its steep short-term upward trend line recently, as we can see on the daily chart (chart by courtesy of http://stockcharts.com): Nasdaq Extended Its Short-Term Uptrend Let’s take a look at the Nasdaq 100 chart. The technology index broke above the 16,000 level recently and it was trading at the new record high. The market accelerated higher above its short-term upward trend line. But last week it retraced some of the advance and it got back to the 16,000 level. Since then it has been advancing and yesterday it got back closer to the record high, as we can see on the daily chart: Apple Above $150, Microsoft at New Record High Let’s take a look at the two biggest stocks in the S&P 500 index, AAPL and MSFT. Apple broke above the $150 price level yesterday. However, it remains well below the early September record high. Microsoft stock retraced all of its recent decline and it reached the new record high of $340.67 yesterday, as we can see on their daily charts: Conclusion The S&P 500 index is expected to open virtually flat this morning. We may see another attempt at breaking above the 4,700 level. However, the market will likely continue to fluctuate along that level following mixed economic data releases. Here’s the breakdown: The S&P 500 bounced from its last week’s local low and it got back above the 4,700 level yesterday. It still looks like a short-term consolidation. Still no positions are justified from the risk/reward point of view. Like what you’ve read? Subscribe for our daily newsletter today, and you'll get 7 days of FREE access to our premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today! Thank you. Paul Rejczak,Stock Trading StrategistSunshine Profits: Effective Investments through Diligence and Care * * * * * The information above represents analyses and opinions of Paul Rejczak & Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. At the time of writing, we base our opinions and analyses on facts and data sourced from respective essays and their authors. Although formed on top of careful research and reputably accurate sources, Paul Rejczak and his associates cannot guarantee the reported data's accuracy and thoroughness. The opinions published above neither recommend nor offer any securities transaction. Mr. Rejczak is not a Registered Securities Advisor. By reading his reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits' employees, affiliates as well as their family members may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
AMC Entertainment Holdings Stock News and Forecast: AMC nearly doubles debt raise

AMC Entertainment Holdings Stock News and Forecast: AMC nearly doubles debt raise

FXStreet News FXStreet News 03.02.2022 16:35
AMC stock slumped yesterday as debt raise news was digested. AMC now nearly doubles the raise from $500 million to $950 million. AMC is down over 40% in the last month and 43% for 2022. AMC Entertainment Holdings (AMC) stock is back on the news wires the last few days, but unfortunately for holders it has not been well received. AMC stock put in three consecutive green days before slumping over 8% on Wednesday. Risk aversion returned, but AMC also announced it was raising more debt to refinance its existing debt. The stock closed at $15.42 for an 8.5% loss on the day. AMC Stock News This morning AMC has nearly doubled its debt offering from $500 million to $950 million. There is also see a bit more detail on the offering. It is to carry a 7.5% interest rate and expires in 2029. The funds will be used to retire existing debt at 10.5% expiring in 2025. The extra $450 million sees AMC also redeeming some notes at 15-17% due in 2026. So AMC is basically remortgaging at a lower rate. This will reduce its interest payments. AMC needs to do this, however, as it carries too much debt. The company has $5.4 billion in long-term debt. AMC has about $1.6 billion in cash, but it spends nearly $100 million per quarter on debt repayments. So remortgaging makes sense, but it is not exactly comforting. CEO Adam Aron has been looking for ways to improve the financial position of the company, and investors baulked at more share issuances. This was the obvious next step but comes a bit later than optimal. Junk bond yields had reached a record low during the summer. The rate of 7.5% is more or less in line with the sector. CCC high yield corporate bonds are currently yielding on average 8.3%. This is up from 6% during the summer. Moody's reacted positively and changed its outlook to positive. AMC Stock Forecast For now, AMC shares are holding the support at $14.54, but risk aversion is growing after FB earnings last night and a suprisngly hawkish Bank of England this morning. Equity markets will suffer with high risk names getting hit the most. Expect $14.54 to break with the next support at $12.22. A break here and the lure of $10 will be obvious. Only beaking $21.04 ends this curent bearish trend. AMC daily chart
Gold Ended January Glued to $1,800. Will It Ever Detach?

Gold Ended January Glued to $1,800. Will It Ever Detach?

Finance Press Release Finance Press Release 03.02.2022 16:57
  Gold didn’t shine in January. The struggle could continue, although the more distant future looks more optimistic for the yellow metal. That was quick! January has already ended. Welcome to February! I hope that this year has started well for you. For gold, the first month of 2022 wasn’t particularly good. As the chart below shows, the yellow metal lost about $11 of its value, or less than 1%, during January. This is the bad side of the story. The ugly side is that gold wasn’t able to maintain its position above $1,800, even though geopolitical risks intensified, while inflation soared to the highest level in 40 years! The yellow metal surpassed the key level in early January and stayed above this level for most of the time, even rallying above $1,840 in the second half of the month. But gold couldn’t hold out and plunged at the end of January, triggered by a hawkish FOMC meeting. However, there is also a good side. Gold is still hovering around $1,800 despite the upcoming Fed’s tightening cycle and all the hawkish expectations about the US monetary policy in 2022. The Fed signaled the end of tapering of quantitative easing by March, the first hike in the federal funds rate in the same month, and the start of quantitative tightening later this year. Meanwhile, in the last few weeks, the markets went from predicting two interest rate hikes to five. Even more intriguing, and perhaps encouraging as well, is that the real interest rates have increased last month, rising from -1% to -0.6%. Gold is usually negatively correlated with the TIPS yields, but this time it stayed afloat amid rising rates.   Implications for Gold What does gold’s behavior in January imply for its 2022 outlook? Well, I must admit that I expected gold’s performance to be worse. Last month showed that gold simply don’t want to either go down (or up), but it still prefers to go sideways, glued to the $1,800 level. The fact that strengthening expectations of the Fed’s tightening cycle and rising real interest rates didn’t plunge gold prices makes me somewhat more optimistic about gold’s future. However, I still see some important threats to gold. First of all, some investors are still underpricing how hawkish the Fed could become to combat inflation. Hence, the day of reckoning could still be ahead of us. You see, just today, the Bank of England hiked its policy rate by 25 basis points, although almost half of the policymakers wanted to raise interest rates by half a percentage point. Second, the market seems to be biased downward, with lower and lower peaks since August 2020. Having said that, investors should remember that what the Fed says it will do and what it ends up doing are often very different. When the Fed says it will be dovish, it will be dovish. But when the Fed says it will be hawkish, it says so. This is because a monetary tightening could be painful for asset valuations and all the debtors, including Uncle Sam. The US stock market already saw significant losses in January. As the chart below shows, the S&P 500 Index lost a few hundred points last month, marking the worst decline since the beginning of the pandemic. Thus, the Fed won’t risk recession in its fight with inflation, especially if it peaks this year, and would try to engineer a soft-landing. Hence, the Fed could reverse its stance relatively soon, especially that it’s terribly late with its tightening. However, as long as the focus is on monetary policy tightening, gold is likely to struggle within its tight range. Some policymakers and economists have argued that the emergence from the COVID-19 pandemic is more like a postwar demobilization and conversion to a civilian industry than a normal business cycle. White House economists have compared the current picture to the rapid increases in 1947, caused by the end of price controls in conjunction with supply chain problems and pent-up demand after the war (“Historical Parallels to Today’s Inflationary Episode”, Council of Economic Advisers, July 6, 2021). The problem with this analogy is that it is only one instance from more than 70 years ago. More recent and more frequent inflation episodes have generally been ended by a recession or a mid-cycle slowdown. Price pressures have an internal momentum of their own and tend to intensify rather than lessen as the business cycle becomes more mature and the margin of spare capacity shrinks in all markets. If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
Price Of Gold Update By GoldViewFX

Price Of Gold Is Near The Level Of November 2010's

Alex Kuptsikevich Alex Kuptsikevich 08.02.2022 08:49
Tightening monetary conditions in developed countries are not hurting gold so far, and investors' switch from buying risky stocks generates demand for the safe-haven. The daily charts also clearly show gold being repurchased in downturns. Since late last year, impulsive drawbacks on hawkish Fed comments are pushing the price down, but this momentum is not turning into a trend. Buyer support comes from higher and higher levels, although these purchases are measured and tempered, typical for long-term buyers. Such buyers could be central banks, which could diversify away from the dollar and the euro. But there could also be funds that want to stay away from bonds falling in price (on rising yields) at a time of steep rate rises. We can see the increasingly higher lows from August last year on the monthly candlestick charts for gold. So far, high inflation rates and market caution have not allowed a sustained upward trend in the price. However, the presence of solid buyers could revive buying very soon. An important reason for this could be developments in the Eurozone. Rising market interest rates are hitting the region's debt-laden periphery countries twice as hard. Investors may be worried about a repeat of the sovereign debt crisis of 2009-2011. Back then, investors used gold as a protective asset, losing confidence in the debt of almost half of the eurozone countries. It is too early to say that a repeat of the debt crisis is imminent, but early signs of a jump in Greek and Italian bond yields are forming a support for gold. If this trend turns into a problem, active buyers of safe havens promise to become many times more numerous
Price Of Gold Update By GoldViewFX

Price Of Gold Hitting $2.000? Metal Seems To Feel Good

Florian Grummes Florian Grummes 14.02.2022 07:34
Given last week’s strong price action and gold’s intraday resilience, it is now very likely that gold indeed is breaking out of the multi-month consolidation triangle. Actually, this large and symmetrical triangle had been building for more than a year, at least. However, the correction in gold began on August 7th, 2020. Now it looks like the breakout is in process. Typically, traders tend to aggressively buy into such a breakout. And given Friday’s sharp spike higher, it actually looks exactly like this. Hence, expect more volatility and a sharp move higher as the direction of gold’s next move has become more obvious. Please note, that it is rather challenging to draw and determine the correct triangle, because gold has been in a tricky sideways market for such a long time and many trend-lines have been invalidated during this messy period. But at the latest, a weekly close above US$1,875 should confirm the breakout. This should unleash enough energy to push gold prices quickly towards US$1,900 and even US$1,950 within a few weeks. Obviously, that would fit very well with gold’s seasonal cycle, which is bullish until the end of February at least, but often saw gold rallying into mid of march, too. Consumer sentiment at 10-year low but Fed wants to hike and taper From a fundamental perspective, it leaves us speechless how the Fed can go on a hiking rampage while consumer sentiment is at a 10-year low. While the confidence in governments worldwide is collapsing and inflation is spiking higher, raising rates will have zero impact upon supply shortages. Instead, it will make these shortages only worse and bankrupt more companies in the supply chain. Also, it will bankrupt emerging markets, as the strong dollar has already been putting so much pressure on dollar indebted nations and creditors. It’s all a big mess, and we believe there is no way out. That’s why the warmongering industrial and military complex of the US is desperately trying to push Russia into an attack on Ukraine! Without showing any proof, the Biden administration and their mouthpiece “the mainstream media” have been pushing people’s focus on fears that Russia will soon invade Ukraine. Another noteworthy fundamental observation: Gold’s correction began in earnest when Pfizer & Biontech announced their vaccine on November 9th, 2020. In a first reaction, gold immediately sold off $150 on that same day. Many more similar large red daily candles followed over the last 16 months, destroying the confidence of the gold bugs and shifting millions of dollars to the short sellers. Now that more and more very serious questions about the vaccines are debated in the news, it would make sense for gold to run back to US$1,950. This was the level where gold was trading back on November 9th, 2020. Gold in US-Dollar, weekly chart as of February 13th, 2022. Gold in US-Dollar, weekly chart as of February 13th, 2022. On the weekly chart, gold has been slowly but surely progressing into the apex of the triangle over the last few months. It now looks like Gold is breaking out with vengeance. Theoretically, the resistance zone between US$1,850 and US$1,875 could still stop the bullish train. The weekly Bollinger Bands (US$1,864) sits right in this zone and should at least challenge the bulls for some days. However, the weekly stochastic has just given a new buy signal. On top, the oscillator has been making higher lows since March 2021. A measured move out of this triangle could take gold to around US$1,950 to US$1.975 until spring. The monthly Bollinger Band ($1,975) could become the logical target! Overall, the weekly chart is becoming more and more bullish, suggesting that gold can at least move around US$80 to US$100 higher. Gold in US-Dollar, daily chart as of February 13th, 2022. Gold in US-Dollar, daily chart as of February 13th, 2022. On the daily chart, gold has been struggling with the upper triangle resistance in November and January. Each time, the bears managed to push back. Now it looks like the bulls are finally successful. The fierce and sharp pullback two and half weeks ago had created a nice oversold setup which became the launching pad for the ongoing attack. Since then, the slow stochastic has been nicely turning around. This buy signal is still active and has not yet reached the overbought zone. Thanks to Friday’s big green candle, the bulls are now bending the upper Bollinger Band (US$1,858) to the upside. To conclude, the daily chart is bullish, and gold should have more upside. If the bulls continue their attack, we could see prices directly exploding for four to seven days. More likely would be a consolidation. Only with prices below US$1,835 the breakout would have failed. In that rather unlikely case, the picture could quickly turn ugly again. Conclusion: Gold is breaking out! In mid of December, gold made an important low around US$1,752. Back then, most gold bugs had enough and did throw in the towel after a very difficult and messy 16-month correction. Gold, silver and the mining stock had become the most hated asset. But actually, all that gold might have been doing was building an epic base and a launch pad to start the next leg higher within its bull market. Overall, we expect that Gold is breaking out after a short consolidation! The successful breakout above resistance between US$1,850 and US$1,875 should happen within the next few days or weeks. This should then lead to higher prices and gold will likely run towards US$1,950, at least. However, we are not sure yet whether this will also bring an attack towards the round number resistance at US$2,000. Given the fact, that gold usually starts to struggle somewhere in spring, the ongoing rally could still be just a counter-trend move within the larger ongoing consolidation/correction. Hence, we are short-term very bullish, mid-term neutral and long-term very bullish for gold. Feel free to join us in our free Telegram channel for daily real time data and a great community. If you like to get regular updates on our gold model, precious metals and cryptocurrencies you can also subscribe to our free newsletter. Disclosure: Midas Touch Consulting and members of our team are invested in Reyna Gold Corp. These statements are intended to disclose any conflict of interest. They should not be misconstrued as a recommendation to purchase any share. This article and the content are for informational purposes only and do not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision. The views, thoughts and opinions expressed here are the author’s alone. They do not necessarily reflect or represent the views and opinions of Midas Touch Consulting. By Florian Grummes|February 13th, 2022|Tags: Gold, Gold Analysis, Gold bullish, gold chartbook, gold fundamentals, precious metals, Reyna Gold, US-Dollar About the Author: Florian Grummes Florian Grummes is an independent financial analyst, advisor, consultant, trader & investor as well as an international speaker with more than 20 years of experience in financial markets. He is specialized in precious metals, cryptocurrencies and technical analysis. He is publishing weekly gold, silver & cryptocurrency analysis for his numerous international readers. He is also running a large telegram Channel and a Crypto Signal Service. Florian is well known for combining technical, fundamental and sentiment analysis into one accurate conclusion about the markets. Since April 2019 he is chief editor of the cashkurs-gold newsletter focusing on gold and silver mining stocks. Besides all that, Florian is a music producer and composer. Since more than 25 years he has been professionally creating, writing & producing more than 300 songs. He is also running his own record label Cryon Music & Art Productions. His artist name is Florzinho.
Fat or Flat: Gold Price in 2022

Fat or Flat: Gold Price in 2022

Arkadiusz Sieron Arkadiusz Sieron 15.02.2022 17:10
  Analysts' 2022 forecasts for the gold market are not overwhelmingly enthusiastic – they see it flat. However, maybe the opposite should be expected. The LBMA has recently published its annual precious metals forecast survey. In general, the report is neutral about gold in 2022. On average, the analysts forecast gold prices to be broadly flat this year compared to the year. The average gold price in 2021 was $1,799, and it is expected to rise merely $3 to $1,802. How boring! However, as the table below shows, the forecasts for other precious metals are much more bearish, especially for palladium. The headline numbers are the averages of 34 analysts’ forecasts. The greatest bears see the average price of gold as low as $1.630, while the lowest low – at $1,500. Meanwhile, the biggest bulls expect the average price of gold to be $1,965, while the highest high is expected to be $2.280. The three most important drivers of precious metals prices’ performance this year are the Fed’s monetary policy, inflation, and equity market performance. This is a huge change compared to last year, when analysts considered geopolitical factors, the impact of the COVID-19 pandemic, and the pace of economic recovery to be much more important. I agree this time, of course, as I always believed that macroeconomic factors are more relevant to the long-term trend in the gold market than geopolitical drivers. Generally, the pick-up in inflation, which will keep real interest rates in negative territory, is seen as a tailwind for gold. Some analysts also expect the greenback to depreciate as the global economic recovery gathers steam, which would also be supportive of gold prices. Meanwhile, normalization of monetary policy is considered the greatest headwind for the yellow metal, as the Fed’s tightening cycle will raise the opportunity cost of holding gold. However, the markets have probably already priced the interest rate hikes in, so gold doesn’t have to suffer during the tightening cycle. Last time, the price of gold began to rise after the liftoff of the federal funds rate. The analysts surveyed by the LBMA also doubt the central banks’ ability to raise interest rates as high as needed to crush inflation. Instead, they are expected to stay behind the inflation curve. This is because the forecasted tightening cycle could be too difficult for the asset market and indebted economy to stomach, so it will be moderate and short-lived, just like last time.   Implications for Gold What does the LBMA annual forecast survey predicts for the yellow metal? The report is neutral, probably because gold remains under the influence of opposite forces, which makes forecasting really challenging this year. Gold has been recently in a sideways trend, so it’s somewhat natural to expect simply more of the same, i.e., the flat market. Actually, the pundits always forecast more of the same. For example, the previous edition of the survey was bullish, as 2020 was a great year for gold. Thus, the analysts’ 2021 average forecast for the price of gold was $1,973.8, almost $200 above the actual level. Hence, please take the survey with a pinch of salt. OK, the analysts don’t predict a literally flat market. The forecasts concerned averages, but some experts see the first half of the year as more bullish than the second, while others, vice versa. I’d rather include myself in the latter group, as my view is that the expectations of Fed tightening will continue to exert downward pressure on gold prices in the coming weeks. However, the hawkish expectations have probably gone a little too far. At some point this year, they will be adjusted, as it becomes clear that the Fed will be forced to reduce the pace of its tightening or even reverse its stance in order to calm the market and avoid the next economic crisis. Such an adjustment will be positive for gold prices, especially since it might occur amid still high inflation, but gold bulls should remember that there is still a long way to go before that happens. If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
Is It Worth Adding Gold to Your Portfolio in 2022?

Is It Worth Adding Gold to Your Portfolio in 2022?

Arkadiusz Sieron Arkadiusz Sieron 17.02.2022 16:29
  Gold prices declined in 2021 and the prospects for 2022 are not impressive as well. However, the yellow metal’s strategic relevance remains high. Last month, the World Gold Council published two interesting reports about gold. The first one is the latest edition of Gold Demand Trends, which summarizes the entire last year. Gold supply decreased 1%, while gold demand rose 10% in 2021. Despite these trends, the price of gold declined by around 4%, which – for me – undermines the validity of the data presented by the WGC. I mean here that the relevance of some categories of gold demand (jewelry demand, technological demand, the central bank’s purchases) for the price formation is somewhat limited. The most important driver for gold prices is investment demand. Unsurprisingly, this category plunged 43% in 2021, driven by large ETF outlfows. According to the report, “gold drew direction chiefly from inflation and interest rate expectations in 2021,” although it seems that rising rates outweighed inflationary concerns. As the chart below shows, the interest rates increased significantly last year. For example, 10-year Treasury yields rose 60 basis points. As a result, the opportunity costs for holding gold moved up, triggering an outflow of gold holdings from the ETF. As the rise in interest rates is likely to continue in 2022 because of the hawkish stance of the Fed, gold investment may struggle this year as well. The end of quantitative easing and the start of quantitative tightening may add to the downward pressure on gold prices. However, there are some bullish caveats here. First, gold has remained resilient in January, despite the hawkish FOMC meeting. Second, the Fed’s tightening cycle could be detrimental to the US stock market and the overall, highly indebted economy, which could be supportive of gold prices. Third, as the report points out, “gold has historically outperformed in the months following the onset of a US Fed tightening cycle”. The second publication released by the WGC last month was “The Relevance of Gold as a Strategic Asset 2022”. The main thesis of the report is that gold is a strategic asset, complementary to equities and bonds, that enhances investment portfolios’ performance. This is because gold is “a store of wealth and a hedge against systemic risk, currency depreciation, and inflation.” It is also “highly liquid, no one’s liability, carries no credit risk, and is scarce, historically preserving its value over time.” Gold is believed to be a great source of return, as its price has increased by an average of nearly 11% per year since 1971, according to the WGC. Gold can also provide liquidity, as the gold market is highly liquid. As the report points out, “physical gold holdings by investors and central banks are worth approximately $4.9 trillion, with an additional $1.2 trillion in open interest through derivatives traded on exchanges or the over-the-counter (OTC) market.” Last but not least, gold is an excellent portfolio diversifier, as it is negatively correlated with risk assets, and – importantly – this negative correlation increases as these assets sell off. Hence, adding gold to a portfolio could diversify it, improving its risk-adjusted return, and also provide liquidity to meet liabilities in times of market stress. The WGC’s analysis suggests that investors should consider adding between 4% and 15% of gold to the portfolio, but personally, I would cap this share at 10%.   Implications for Gold What do the recent WGC reports imply for the gold market? Well, one thing is that adding some gold to the investment portfolio would probably be a smart move. After all, gold serves the role of both a safe-haven asset and an insurance against tail risks. It’s nice to be insured. However, investing in gold is something different, as gold may be either in a bullish or bearish trend. You should never confuse these two motives behind owning gold! Sometimes it’s good to own gold for both insurance and investment reasons, but not always. When it comes to 2022, investment demand for gold may continue to be under downward pressure amid rising interest rates. However, there are also some bullish forces at work, which could intensify later this year. If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
Bullish momentum remains strong

Bullish momentum remains strong

Florian Grummes Florian Grummes 20.02.2022 17:36
Even at the last important low (US$$1,750) on December 15th, 2021, the sentiment was still awful as the sector had become the most hated asset class. Now fast-forward, gold has been successfully breaking out of its multi month triangle and keeps sprinting higher. The bulls currently are bending the daily and weekly Bollinger Bands to the upside, and seasonality is still supportive.Gold in US-Dollar, weekly chart as of February 20th, 2022.Gold in US-Dollar, weekly chart as of February 20th, 2022.Looking at the weekly chart, it appears that gold not only broke out of a triangle consolidation pattern, but also out of a large inverse head and shoulder pattern. It’s not a textbook head and shoulder, but worthwhile noting. A measured move projection could theoretically take gold towards US$2,125! However, the monthly Bollinger Band, sitting at around US$ 1,975, might be a much more realistic target for the ongoing move. As you might remember, the zone between US$1,950 to US$1,975 is very strong resistance. We would not rule out a short-lived overshoot towards US$,2000, though.Overall, the weekly chart is not yet overbought and looks bullish. Hence, the rally has very good chances to continue for a few more weeks.Gold in US-Dollar, daily chart as of February 20th, 2022.Gold in US-Dollar, daily chart as of February 20th, 2022.As expected, the breakout above US$1,840 to US$1,850 has unleashed enough energy to quickly push gold prices towards the round psychological number of US$1,900. Fortunately, the daily stochastic has transformed its overboughtness into the rare “embedded status”, where both signal lines are sitting above 80 for more than three days in a row. Hence, the uptrend is locked-in and shorting this market would be fighting the uptrend.Of course, given the uncertain and complex geopolitical situation, events can and likely will strongly influence gold over the coming days and weeks. Speaking from a technical point of you, any pullback towards the breakout zone around US$1,845 would be a buying opportunity. However, prices below US$1,875 would already be a surprise in the short-term. On the contrary, it’s much more likely that gold will continue its run to at least US$1,930 over the coming days.In summary, the daily chart is bullish. Especially the bullish embedded stochastic oscillator likely will not allow any larger pullback, but rather a consolidation around US$1,900. Watch those two signal lines. Only if one of them would be dropping below 80on a daily close, the bull run might be over!GDX (VanEck Gold Miners ETF) in US-Dollar, daily chart as of February 20th, 2022.GDX, daily chart as of February 20th, 2022.Gold & gold related mining stocks often stabilize your portfolio during uncertain times and do act as a hedge. While the stock market continued its dive due to the crisis in Ukraine and the potential interest rate turnaround in the US, the GDX VanEck Gold Miners ETF is up more than 21.5% since its low in mid of December. Over the last two weeks, the leading gold mining stocks recorded some of their best days in the last 12 months. Last week, Barrick Gold ($GOLD) jumped up more than 7% due to good earnings, a dividend increase, and a new share repurchase program. Some smaller gold stocks like Sabina Gold & Silver ($SGSVF) went up even more (+15% Friday, 11th).Now that gold is on the rise, it’s time for the beaten down and undervalued mining stocks to catch up. Usually, it starts with the big senior produces like Barrick Gold, Agnico Eagle Mines ($AEM) and Newmont Corporation ($NEM), then the juniors like for example Victoria Gold Corp. ($VITFF) join and finally, the explorer and developers literally explode higher.However, the GDX has nearly reached its downtrend line as well as the 38.2% retracement of the whole corrective wave since August 2020. Hence, the big miners are running into string resistance and might need to consolidate soon.At the same time, note, that silver has been lagging. Silver always lags most of the time, but in the final stage of sector wide rally it suddenly passes all the other metals and shots up nearly vertically. That also typically is the sign that the rally in the sector is coming to an end. Obviously, we have not yet seen any strong silver days. Therefore, silver actually confirms that the sector has more room and time to run higher!Conclusion: Bullish momentum remains strongOverall, gold continues to look promising here as the bullish momentum remains strong. Hence, Gold is probably on the way towards US$1,950 and US$1,975, with a slight chance for an overshot to US$2,000. But of course, given the rather overbought daily chart, the risk/reward is not that good anymore. Silver and many of the smaller mining stocks, however, might still offer a chance to play the ongoing rally over the next few weeks. Once gold tops out in spring, expect a big pullback. Maybe even back towards the higher trending 200-day moving average (currently at US$1,808) at some point in midsummer. But that is all somewhere in the future. For now, the bullish momentum remains strong.Feel free to join us in our free Telegram channel for daily real time data and a great community. If you like to get regular updates on our gold model, precious metals and cryptocurrencies you can also subscribe to our free newsletter.Disclosure: Midas Touch Consulting and members of our team are invested in Reyna Gold Corp. These statements are intended to disclose any conflict of interest. They should not be misconstrued as a recommendation to purchase any share. This article and the content are for informational purposes only and do not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision. The views, thoughts and opinions expressed here are the author’s alone. They do not necessarily reflect or represent the views and opinions of Midas Touch Consulting.By Florian Grummes|February 20th, 2022|Tags: $GDXJ, Barrick Gold, GDX, Gold, Gold Analysis, Gold bullish, gold chartbook, gold fundamentals, Newmont Corporation, precious metals, Reyna Gold, Sabina Gold & Silver, Silver, silver bull, US-Dollar, Victoria Gold|0 CommentsAbout the Author: Florian GrummesFlorian Grummes is an independent financial analyst, advisor, consultant, trader & investor as well as an international speaker with more than 20 years of experience in financial markets. He is specialized in precious metals, cryptocurrencies and technical analysis. He is publishing weekly gold, silver & cryptocurrency analysis for his numerous international readers. He is also running a large telegram Channel and a Crypto Signal Service. Florian is well known for combining technical, fundamental and sentiment analysis into one accurate conclusion about the markets. Since April 2019 he is chief editor of the cashkurs-gold newsletter focusing on gold and silver mining stocks. Besides all that, Florian is a music producer and composer. Since more than 25 years he has been professionally creating, writing & producing more than 300 songs. He is also running his own record label Cryon Music & Art Productions. His artist name is Florzinho.
How the Russia-Ukraine crisis has reflected on the financial market so far

How the Russia-Ukraine crisis has reflected on the financial market so far

8 eightcap 8 eightcap 23.02.2022 12:11
Over the last several weeks, traders would have heard of and watched the unfolding Ukraine crisis. Russia built up a mass of troops and military hardware on the border, which started sending shockwaves through the markets that an invasion and new European conflict could be developing. This is not the first time we have seen Russian aggression towards Ukraine. In 2014 we all watched as Russia annexed Crimea after Moscow said it supported the liberty and backing the people’s free will as they wanted to rejoin Russia and break away from Ukraine. During this round, the situation felt and looked different due to the sheer build-up of the Russian military. Ukraine requesting to join NATO and the possibility of U.S./NАТО bases being built in Ukraine look like a flashpoint for the Russian side. Despite talks and negotiations, Russia continued to amass military close to the border, feeding invasion fears. Reasons continued to put out by the Kremlin, scheduled military exercises with Belarus. These failed to settle nerves as Western leaders continued to put forward prosed crippling sanctions that would be imposed if Russia invaded. The worst seemed possible late last week, and reports emerged of explosions and fighting in the two eastern parts of Ukraine. Russian tank numbers also increased, and we all thought it was just a matter of when we would see a Russian invasion. Biden offered Putin a summit only if he hadn’t invaded at the final hour. This is off the table now that Russia has once again pulled off another Crimea to a degree. Yesterday we heard that the two Eastern areas of Ukraine had voiced their right to become independent. The Kremlin supported them immediately and advised it had crossed the border to support a peaceful transition with a peacekeeping mission. In other words, a proxy invasion. President Biden has called this an invasion of Ukraine and announced sweeping sanctions on the Russian bank VEB and its military bank and cuts them out of any USD transactions. Individual sanctions, Biden said the adult children and members of Putin’s inner circle “share the corrupt gains of the Kremlin’s policies, and so they ought to share in the pain as well.” The sanctions on Russia’s sovereign debt expand upon Biden’s existing restrictions set in 2021 and prohibit American banks from trading shares in and or lending to several significant Russian sovereign debt funds. Prime Minister Johnson also made good on his threat of sanctions. The first tranche of sanctions would target Rossiya, IS Bank, General Bank, Promsvyazbank and the Black Sea Bank. The new sanctions also include three “very high net worth” individuals: Gennady Timchenko, Boris Rotenberg and Igor Rotenberg. Germany has halted approval of the Nord Stream 2 pipeline due to Russia’s actions, and the EU has agreed on sanctions to hurt Russia. The crisis had a significant impact on the markets. As you would expect, we have seen plenty of movement away from risk markets, but it hasn’t been totally black and white. Energy, oil has been driven higher during the crisis, and we’ve watched USOUSD (WTI) jump by 28% in the last three months. Price trading at $96 this week. Spot gas surged this week, hitting 6.70 but has pulled back to 4.31. Russia is a major energy supplier to Europe. This is a major card they hold. Traders will be watching oil and gas as any new aggression could cause oil to spike. We could even see $100 or higher reached again. The markets are a funny beast, and if they see the situation as calm, don’t be surprised if we continue to see price pullback. Sky-high oil prices could impact the FED. Crude prices can drive up inflation and slow down the global economy. A surge in oil could cause the Fed to rethink its pace of hiking due to growth concerns. FX, the USD and JPY have seen phases of demand during the crisis, but they have been far from dominant. Looking at this month’s trade so far, we can see that mainly the EUR has been most affected with falls to the two safe-havens. The GBP has been flat, and the AUD has been stronger. The AUD rallied yesterday as the situation developed and so far looks to be ignoring the situation. If we had seen an all-out invasion and this could still be a possibility, we would expect a traditional reaction on FX with the USD and JPY rallying on safe-haven demand. Gold has seen strong demand during the crisis. Traders jumping back into the metal as it moves back to a safe haven. This is not strange. Gold has always had multiple functions in the market, and in times of war or crisis, traders can look to it over fiat. Looking at the current month on the monthly chart, we can see this clearly in action as price has jumped by over 5%. The weekly shows a triangle breakout, but we will need to watch ongoing developments to see if buyer momentum remains. The Ukrainian crisis has hit stock indexes that could have been seen as overvalued. The Dax, in particular, has been hit hard. U.S. and Asian indexes haven’t been spared with heavy selling over the last two weeks. Markets fought back yesterday after the SP500 touched correction territory, and as mentioned above, traders will be focusing on the escalation of the crisis. If the situation intensifies, we would be looking for further lows, and if things continue to calm down, we could see counter-rallies and ranges set up. Cryptocurrencies have traded mainly lower during the crisis. Clearly, we can see at this point that they’re viewed as risk assets and are acting accordingly. It hasn’t been all one-way traffic, Kyber has added 38% YTD and so far has resisted the falls we have seen on the top 10 and top 25 indexes. Coins have been firmer since Tuesday’s updates, following other risk markets higher. Polkadot, Cardando were two top ten coins that hit new lows for 2022 before value buying returned this week. Again, we see the fortunes of most coins tied to risk demand. If things escalate, we will be looking for further declines across the top 10 and 25. The post How the Russia-Ukraine crisis has reflected on the financial market so far appeared first on Eightcap.
Stocks Fell Again – a Dip Buying Opportunity?

Stocks Fell Again – a Dip Buying Opportunity?

Paul Rejczak Paul Rejczak 23.02.2022 15:35
  Stocks were volatile yesterday and the broad stock market fell by another 1%. Was it a final decline or just another leg within a downtrend? The S&P 500 index lost 1.01% on Tuesday, Feb. 22, as it extended its last week’s Thursday’s-Friday’s sell-off. The daily low was at 4,267.11, and the market closed slightly above the 4,300 mark. We’ve seen a lot of volatility following the U.S. President Biden’s speech on Russia-Ukraine conflict. This morning the S&P 500 index is expected to open 0.7% higher. We may see more volatility, however it looks like a short-term bottoming pattern. The nearest important resistance level is at 4,350-4,400, marked by the recent local low and some previous support levels. On the other hand, the support level is at 4,250-4,300, among others. The S&P 500 index trades within its late January consolidation, as we can see on the daily chart (chart by courtesy of http://stockcharts.com): Futures Contract – Short-Term Consolidation Let’s take a look at the hourly chart of the S&P 500 futures contract. It extended the downtrend on Monday, but it managed to stay slightly above its late January local lows. For now, it looks like a short-term consolidation. It may be a bottoming pattern before an upward correction. Yesterday, we decided to open a speculative long position before the opening of the cash market. We are expecting an upward correction from the current levels (chart by courtesy of http://tradingview.com): Conclusion The S&P 500 index went below the 4,300 level yesterday, as investors reacted to the ongoing Russia-Ukraine crisis news. The market may be trading within a short-term consolidation and we may see an attempt at reversing the downtrend. Here’s the breakdown: The S&P 500 index will likely bounce or fluctuate following its late last week’s sell-off We are maintaining our yesterday’s long position. We are expecting an upward correction from the current levels. Like what you’ve read? Subscribe for our daily newsletter today, and you'll get 7 days of FREE access to our premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today! Thank you. Paul Rejczak,Stock Trading StrategistSunshine Profits: Effective Investments through Diligence and Care * * * * * The information above represents analyses and opinions of Paul Rejczak & Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. At the time of writing, we base our opinions and analyses on facts and data sourced from respective essays and their authors. Although formed on top of careful research and reputably accurate sources, Paul Rejczak and his associates cannot guarantee the reported data's accuracy and thoroughness. The opinions published above neither recommend nor offer any securities transaction. Mr. Rejczak is not a Registered Securities Advisor. By reading his reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits' employees, affiliates as well as their family members may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
S&P 500 At Tipping Point To Start  A Bear Market And What You Need To See

S&P 500 At Tipping Point To Start A Bear Market And What You Need To See

Chris Vermeulen Chris Vermeulen 03.03.2022 21:38
Is a bear market on the way? My research suggests the downward sloping trend line (LIGHT ORANGE in the Daily/Weekly SPY chart below) may continue to act as solid resistance – possibly prompting a further breakdown in the markets for US major indexes.As we've seen recently, news and other unexpected events prompt very large price volatility events in the US major indexes. For example, the VIX recently rose above 30 again, which shows volatility levels are currently 3x higher than normal levels.Increased Volatility & The Start Of An Excess Phase Peak Should Be A Clear WarningThis increased volatility in the markets, coupled with the increased fear of the US Fed and the global unknowns (Ukraine, China, Debt Levels, and others), may be just enough pressure to crush any upside price trends over the next few months. Technically, my research suggests the $445 to $450 level is critical resistance. The SPY must climb above these levels to have any chance of moving higher.Sign up for my free trading newsletter so you don’t miss the next opportunity! Unless the US markets find some new support and attempt to rally back towards recent highs, an “Excess Phase Peak” pattern will likely continue to unfold throughout 2022. This unique price pattern appears to have already reached a Phase 2 or Phase 3 setup. Please take a look at this Weekly GE example of an Excess Phase Peak pattern and how it transitions through Phase 1 through Phase 4 before entering an extended Bearish price trend.Read this research article about Excess Phase Peaks: HOW TO SPOT THEN END OF AN EXCESS PHASE - PART 2SPY May Already Be In A Phase 4 Excess Peak PhaseThis Daily SPY chart highlights my analysis, showing the major downward sloping trend line, the Middle Resistance Zone, and the lower Support Zone. Combined, these are acting as a “Wedge” for price over the past few weeks – tightening into an Apex near $435~440.If the US major indexes attempt to break this downward price trend, then the price must attempt to move solidly above this downward sloping price channel and try to rally back into the Resistance Zone (near $445~$450). Unless that happens, the price will likely transition into a deeper downward price move, attempting to break below recent lows, near $410, and possibly quickly moving down to the $360 level.SPY Weekly Chart Shows Consolidation Near $435 – Possibly Starting A Phase 4 Excess PeakTraders should stay keenly aware of the risks associated with the broad US and global market decline as the Ukraine war, and other unknowns continue to elevate fear and concerns related to the global economy. In my opinion, with the current excess global debt levels, extended speculative market bubbles, and the continued commodity price rally, we may be starting to transition away from an extended growth phase and into a deeper depreciation cycle phase.My research suggests we entered a new Depreciation cycle phase in late 2019 and are already more than 25 months into a potential 9.5-year global Depreciation cycle. What comes next should not surprise anyone.Read this article about Depreciation Cycle Phases: HOW TO INTERPRET & PROFIT FROM THE RISKS OF A DEPRECIATION CYCLE Traders should stay keenly focused on market risks and weaknesses. I expected the conflict in Ukraine to have been priced into the US markets over the past 7+ days. However, I believe the markets were unprepared for this scale or invasion and will attempt to settle fair stock price valuation levels as the conflict continues. This is not the same US/Global market Bullish trend we've become used to trading over the past 5+ years. Looking Forward - preparing for a possible Bear marketMarket dynamics and trends are changing from what we have experienced over the past 40 years for stocks and bonds. The 60/40 portfolio is costing you money now. Traders need an edge to stay ahead of these markets trends and to protect and profit from big trends.The only way to navigate the financial markets safely, no matter the direction, is through technical analysis. By following assets and money flows, we identify trend changes and move our capital into whatever index, sector, industry, bond, commodity, country, and even currency ETF. By following the money, you become part of new emerging trends and can profit during weak stock or bond conditions.Want Trading Strategies that Will Help You To Navigate Current Market Trends?Learn how I use specific tools to help me understand price cycles, set-ups, and price target levels in various sectors to identify strategic entry and exit points for trades. Over the next 12 to 24+ months, I expect very large price swings in the US stock market and other asset classes across the globe. I believe the markets are starting to transition away from the continued central bank support rally phase and may start a revaluation phase as global traders attempt to identify the next big trends. Precious Metals will likely start to act as a proper hedge as caution and concern start to drive traders/investors into Metals.I invite you to learn more about how my three Technical Trading Strategies can help you protect and grow your wealth in any type of market condition by clicking the following link:   www.TheTechnicalTraders.com 
Gold Likes Recessions - Could High Interest Rates Lead to One?

Gold Likes Recessions - Could High Interest Rates Lead to One?

Finance Press Release Finance Press Release 11.03.2022 16:52
We live in uncertain times, but one thing is (almost) certain: the Fed’s tightening cycle will be followed by an economic slowdown – if not worse.There are many regularities in nature. After winter comes spring. After night comes day. After the Fed’s tightening cycle comes a recession. This month, the Fed will probably end quantitative easing and lift the federal funds rate. Will it trigger the next economic crisis?It’s, of course, more nuanced, but the basic mechanism remains quite simple. Cuts in interest rates, maintaining them at very low levels for a prolonged time, and asset purchases – in other words, easy monetary policy and cheap money – lead to excessive risk-taking, investors’ complacency, periods of booms, and price bubbles. On the contrary, interest rate hikes and withdrawal of liquidity from the markets – i.e., tightening of monetary policy – tend to trigger economic busts, bursts of asset bubbles, and recessions. This happens because the amount of risk, debt, and bad investments becomes simply too high.Historians lie, but history – never does. The chart below clearly confirms the relationship between the Fed’s tightening cycle and the state of the US economy. As one can see, generally, all recessions were preceded by interest rate hikes. For instance, in 1999-2000, the Fed lifted the interest rates by 175 basis points, causing the burst of the dot-com bubble. Another example: in the period between 2004 and 2006, the US central bank raised rates by 425 basis points, which led to the burst of the housing bubble and the Great Recession.One could argue that the 2020 economic plunge was caused not by US monetary policy but by the pandemic. However, the yield curve inverted in 2019 and the repo crisis forced the Fed to cut interest rates. Thus, the recession would probably have occurred anyway, although without the Great Lockdown, it wouldn’t be so deep.However, not all tightening cycles lead to recessions. For example, interest rate hikes in the first half of the 1960s, 1983-1984, or 1994-1995 didn’t cause economic slumps. Hence, a soft landing is theoretically possible, although it has previously proved hard to achieve. The last three cases of monetary policy tightening did lead to economic havoc.It goes without saying that high inflation won’t help the Fed engineer a soft landing. The key problem here is that the US central bank is between an inflationary rock and a hard landing. The Fed has to fight inflation, but it would require aggressive hikes that could slow down the economy or even trigger a recession. Another issue is that high inflation wreaks havoc on its own. Thus, even if untamed, it would lead to a recession anyway, putting the economy into stagflation. Please take a look at the chart below, which shows the history of US inflation.As one can see, each time the CPI annul rate peaked above 5%, it was either accompanied by or followed by a recession. The last such case was in 2008 during the global financial crisis, but the same happened in 1990, 1980, 1974, and 1970. It doesn’t bode well for the upcoming years.Some analysts argue that we are not experiencing a normal business cycle right now. In this view, the recovery from a pandemic crisis is rather similar to the postwar demobilization, so high inflation doesn’t necessarily imply overheating of the economy and could subsidy without an immediate recession. Of course, supply shortages and pent-up demand contributed to the current inflationary episode, but we shouldn’t forget about the role of the money supply. Given its surge, the Fed has to tighten monetary policy to curb inflation. However, this is exactly what can trigger a recession, given the high indebtedness and Wall Street’s addiction to cheap liquidity.What does it mean for the gold market? Well, the possibility that the Fed’s tightening cycle will lead to a recession is good news for the yellow metal, which shines the most during economic crises. Actually, recent gold’s resilience to rising bond yields may be explained by demand for gold as a hedge against the Fed’s mistake or failure to engineer a soft landing.Another bullish implication is that the Fed will have to ease its stance at some point in time when the hikes in interest rates bring an economic slowdown or stock market turbulence. If history teaches us anything, it is that the Fed always chickens out and ends up less hawkish than it promised. In other words, the US central bank cares much more about Wall Street than it’s ready to admit and probably much more than it cares about inflation.Having said that, the recession won’t start the next day after the rate liftoff. Economic indicators don’t signal an economic slump. The yield curve has been flattening, but it’s comfortably above negative territory. I know that the pandemic has condensed the last recession and economic rebound, but I don’t expect it anytime soon (at least rather not in 2022). It implies that gold will have to live this year without the support of the recession or strong expectations of it.Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter. Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care.
Binance Academy: THORChain (RUNE) - What Is It?

Top 3 Price Prediction Bitcoin, Ethereum, Ripple: Crypto markets in disarray

FXStreet News FXStreet News 14.03.2022 15:57
Bitcoin price loses momentum as it slides back into consolidation along the $36,398 to $38,895 demand zone. Ethereum price slides below a symmetrical triangle, hinting at a move below $2,000. Ripple price remains bullish as bulls eye a retest of $1 psychological level. Bitcoin price continues to tag the immediate demand area, weakening it. Despite the sudden bursts in buying pressure, BTC seems to be in consolidation mode. Ethereum price has triggered a bearish outlook while Ripple price shows signs of heading higher. Also read: Gold Price Forecast: Lower lows hinting at a steeper decline Bitcoin price moves with no sense of direction Bitcoin price dips into the $36,398 to $38,895 demand zone for the fourth time without producing any higher highs. This price action is indicative of a consolidation and is likely to breach lower. A daily candlestick close below $36,398 will invalidate the demand zone and knock BTC to retest the weekly support level at $34,752, which is the last line of defense. A breakdown of this barrier will open the path for bears to crash Bitcoin price to $30,000 or lower. Here, market makers will push BTC below $29,100 to collect liquidity resting below the equal lows formed in mid-2021. BTC/USD 1-day chart While things look inauspicious for Bitcoin price, a strong bounce off the said demand zone that retests the weekly supply zone, ranging from $45,550 to $51,860, will provide some relief for bulls. Ethereum price favors bears Ethereum price action from January 22 to March 4 created three lower highs and higher lows, which, when connected via trend lines, resulted in a symmetrical triangle formation. This technical formation forecasts a 26% move obtained by measuring the distance between the first swing high and swing low to the breakout point. On March 6, ETH breached below, signaling a bearish breakout, which puts the theoretical target at $1,962. A breakdown of the weekly support level at $2,541 is vital; a breakdown of this barrier will expedite the move lower. ETH/USD 1-day chart Regardless of the recent onslaught of bearishness, Ethereum price needs to produce a daily candlestick close above $3,413 to invalidate the bullish thesis. Such a development will also open the possibility of kick-starting a potential uptrend. https://youtu.be/-U0QTf_NwnI Ripple price maintains its bullish momentum Ripple price traverses a bull flag continuation pattern, a breakout from which hints at a continuation of the uptrend. This technical formation contains an impulsive move higher followed by a consolidation in the form of a pennant. The 55% rally between February 3 and 8 formed a bullish flag pole continuation pattern, and the consolidation that ensued in the form of lower highs and higher lows created the pennant. Together, the bullish setup forecasts a 31% ascent for XRP price, obtained by adding the flag pole’s height to the breakout point from the pennant. On March 11, Ripple price broke out from the pennant, signaling the start of the 31% uptrend to $1. So far, the retest seems to be holding up well, so investors can expect the remittance token to continue its journey higher to the $1 psychological level. XRP/USD 1-day chart A daily candlestick close below the immediate demand zone, ranging from $0.689 to $0.705, will create a lower low and invalidate the bullish thesis for Ripple price. In such a case, XRP has the twelve-hour demand zone, extending from $0.546 to $0.633 to support any residual selling pressure. https://youtu.be/rCFQmMHWJZ4
Bitcoin price undergoes sharp fade as bulls storm out of the gate

Bitcoin price undergoes sharp fade as bulls storm out of the gate

FXStreet News FXStreet News 16.03.2022 16:28
Bitcoin price action jumped 7% but fell back sharply in European trading.BTC price action looks to be set to jump above $41,756.61 once the US session kicks in.Expect to see a further continuation of this price jump throughout the week as long as positive signals come from the ongoing talks in Russia.Bitcoin (BTC) price action is performing a countercyclical move this morning as Asian bulls storm out of the gate on positive-speak from the Chinese government. From now on into the European session, gains are still present but have faded slightly. Expect to see a subsequent round of wins coming in during the US session and going further into this week as long as positive signals are communicated independently from both sides in Ukraine and Russia peace talks.Bitcoin price sees bulls swimming against the tideBitcoin price action seems to have awakened many investors who fell asleep staring at their television screen for the past three weeks on the Russian invasion of Ukraine. As they pulled out their money and went long cash, cryptocurrencies dried up a bit and were left to the mercy of bears. Today a few bears will be licking their wounds as bulls have gone in for a push higher as more positive signals come from both Ukraine and Russia on talks, and markets are getting used to the war headlines as everything looks to be priced in. BTC price action technically got rejected to the upside at $41,756.61, the base of a bearish triangle that formed a few weeks ago. Expect this fade in early trading to provide a window of opportunity for European and American bulls to join the rally and ramp up the price above $41,756.61, where a close above will be key this evening. If trading can start on Thursday with an opening price above $41,756.61, expect to see another leg higher by tomorrow evening, near $44,088.73 and even $45,261.84 by Friday.BTC/USD daily chartThe risk could be that the current fade, after the rejection at $41,756.61, could topple into a deeper loss if bears push the price below the opening price. This would trigger panic amongst bulls that got in and will have them remember the same scenario that happened exactly one week ago on Wednesday with a false breakout and a full paring back, and even eking out further losses the day after. Expect bulls to exit instantly once BTC price action prints red numbers, and this to spiral into a setback for BTC price towards $38,703.32 or even $36,709.19.
Despite Ultra-Hawkish Fed’s Meeting, Gold Jumps

Despite Ultra-Hawkish Fed’s Meeting, Gold Jumps

Arkadiusz Sieron Arkadiusz Sieron 17.03.2022 17:29
  The FOMC finally raised interest rates and signaled six more hikes this year. Despite the very hawkish dot plot, gold went up in initial reaction. There has been no breakthrough in Ukraine. Russian invasion has largely stalled on almost all fronts, so the troops are focusing on attacking civilian infrastructure. However, according to some reports, there is a slow but gradual advance in the south. Hence, although Russia is not likely to conquer Kyiv, not saying anything about Western Ukraine, it may take some southern territory under control, connecting Crimea with Donbas. The negotiations are ongoing, but it will be a long time before any agreement is reached. Let’s move to yesterday’s FOMC meeting. As widely expected, the Fed raised the federal funds rate. Finally! Although one Committee member (James Bullard) opted for a bolder move, the US central bank lifted the target range for its key policy rate only by 25 basis points, from 0-0.25% to 0.25-0.50%. It was the first hike since the end of 2018. The move also marks the start of the Fed’s tightening cycle after two years of ultra-easy monetary policy implemented in a response to the pandemic-related recession. In support of these goals, the Committee decided to raise the target range for the federal funds rate from 1/4 to 1/2 percent and anticipates that ongoing increases in the target range will be appropriate. It was, of course, the most important part of the FOMC statement. However, the central bankers also announced the beginning of quantitative tightening, i.e., the reduction of the enormous Fed’s balance sheet, at the next monetary policy meeting in May. In addition, the Committee expects to begin reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities at a coming meeting. It’s also worth mentioning that the Fed deleted all references to the pandemic from the statement. Instead, it added a paragraph related to the war in Ukraine, pointing out that its exact implications for the U.S. economy are not yet known, except for the general upward pressure on inflation and downward pressure on GDP growth: The invasion of Ukraine by Russia is causing tremendous human and economic hardship. The implications for the U.S. economy are highly uncertain, but in the near term the invasion and related events are likely to create additional upward pressure on inflation and weigh on economic activity. These changes in the statement were widely expected, so their impact on the gold market should be limited.   Dot Plot and Gold The statement was accompanied by the latest economic projections conducted by the FOMC members. So, how do they look at the economy right now? As the table below shows, the central bankers expect the same unemployment rate and much slower economic growth this year compared to last December. This is a bit strange, as slower GDP growth should be accompanied by higher unemployment, but it’s a positive change for the gold market. What’s more, the FOMC participants see inflation now as even more persistent because they expect 4.3% PCE inflation at the end of 2022 instead of 2.6%. Inflation is forecasted to decline in the following years, but only to 2.7% in 2023 and 2.3% in 2024, instead of the 2.3% and 2.1% seen in December. Slower economic growth accompanied by more stubborn inflation makes the economy look more like stagflation, which should be positive for gold prices. Last but not least, a more aggressive tightening cycle is coming. Brace yourselves! According to the fresh dot plot, the FOMC members see seven hikes in interest rates this year as appropriate. That’s a huge hawkish turn compared to December, when they perceived only three interest rate hikes as desired. The central bankers expect another four hikes in 2024 instead of just the three painted in the previous dot plot. Hence, the whole forecasted path of the federal fund rate has become steeper as it’s expected to reach 1.9% this year and 2.8% next year, compared to the 0.9% and 1.6% seen earlier. Wow, that’s a huge change that is very bearish for gold prices! The Fed signaled the fastest tightening since 2004-2006, which indicates that it has become really worried about inflation. It’s also possible that the war in Ukraine helped the US central bank adopt a more hawkish stance, as if monetary tightening leads to recession, there is an easy scapegoat to blame.   Implications for Gold What does the recent FOMC meeting mean for the gold market? Well, the Fed hiked interest rates and announced quantitative tightening. These hawkish actions are theoretically negative for the yellow metal, but they were probably already priced in. The new dot plot is certainly more surprising. It shows higher inflation and slower economic growth this year, which should be bullish for gold. However, the newest economic projections also forecast a much steeper path of interest rates, which should, theoretically, prove to be negative for the price of gold. How did gold perform? Well, it has been sliding recently in anticipation of the FOMC meeting. As the chart below shows, the price of the yellow metal plunged from $2,039 last week to $1,913 yesterday. However, the immediate reaction of gold to the FOMC meeting was positive. As the chart below shows, the price of the yellow metal rebounded, jumping above $1,940. Of course, we shouldn’t draw too many conclusions from the short-term moves, but gold’s resilience in the face of the ultra-hawkish FOMC statement is a bullish sign. Although it remains to be seen whether the upward move will prove to be sustainable, I wouldn’t be surprised if it will. This is what history actually suggests: when the Fed started its previous tightening cycle in December 2015, the price of gold bottomed out. Of course, history never repeats itself to the letter, but there is another important factor. The newest FOMC statement was very hawkish – probably too hawkish. I don’t believe that the Fed will hike interest rates to 1.9% this year. And you? It means that we have probably reached the peak of the Fed’s hawkishness and that it will rather soften its stance from then on. If I’m right, a lot of the downward pressure that constrained gold should be gone now. If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
Price Of Crude Oil And Price Of Gold Crosses Each Other

Price Of Crude Oil And Price Of Gold Crosses Each Other

Alex Kuptsikevich Alex Kuptsikevich 21.03.2022 12:14
Gold has remained in a one-and-a-half per cent range since last Thursday. The correction from a peak of $2070 to values below $1900 caused a brief aftershock, but it was not sustained. Gold has now stabilised above the peaks of May and June last year and is currently searching for further meaningful momentum. For short-term traders, gold has taken a back seat as markets try to assess the impact of disrupted supply chains and the amount of supply shortfall in raw materials and food. At the same time, medium-term traders should not lose sight of the fact that the current situation will not allow central banks to act adequately. As a result, the supply of fiat money will increase faster than the supply of commodities. In other words, we should expect greater tolerance for higher inflation from the CBs. In addition, governments should also be expected to provide financial support to the economy. In practice, that means more money supply and a higher level of public debt to GDP. And that is another disincentive for monetary policy, which is negative for the currency. It is also favourable for gold, which is used as protection against capital depreciation. Oil is gradually becoming the opposite of gold. After bouncing back to the trend support level of the last four months, Brent got back above $100 reasonably quickly and is adding 4% on Monday, trading at $109. Speculative demand for oil is picking up again amid discussions of a Russian energy divestment, which could be the agenda for the EU leaders and Biden meeting later this week. In addition, the US oil supply has been slow to rise, with data on Friday showing that the number of working oil drilling rigs declined a week earlier. Oil producers appear to be cautious about demand prospects with record fuel prices and are in no hurry to flood the market. This will fuel prices in the short term but is becoming an increasing drag on the economy in the medium term. Locally, we also risk suggesting that Europe will once again make it clear that it cannot substitute Russian energy, preferring to focus on sanctions against other sectors. And that could prove to be a dampening factor for oil later in the week. Oil prices above 110 still look unsustainably high, and a range with support at $85 looks more adequate for the coming months.
Bank of Japan will not keep the yen from falling

Bank of Japan will not keep the yen from falling

Alex Kuptsikevich Alex Kuptsikevich 22.03.2022 14:53
The Japanese yen has fallen for the third week in a row, and the amplitude of this decline has become rather scary on Tuesday. It seems yen traders' stop-lines have been blown as the markets have become increasingly aware of the monetary authorities' reaction to inflation and the outlook for the balance of payments. In addition, over the past three weeks, we have seen a careful return of investors to risky assets, which is causing the yen to sell-off.USDJPY is trading above 120.70, which was last seen six years ago, having gained more than 5% since March 7th, while GBPJPY has soared 6% and EURJPY is up 7%. Against the yen are new comments from the Bank of Japan, which shows no sign of a change in its monetary policy, while central banks in other parts of the world issue increasingly hawkish statements.The pressure on the yen is exacerbated by its dependence on oil and metal imports, which widens the trade deficit of the historically export-oriented country. The value of exports in February 2022 was 18% higher than in 2020, while imports soared by 49%. Booming prices for energy, metals, and agricultural products set Japan up for a further plunge into trade deficits.In former years, sustained surpluses helped the yen maintain its strength or even strengthen during periods of market turbulence, ignoring anaemic economic growth and rising government debt to GDP levels.The resulting crisis in commodity prices will force central banks to unambiguously choose their policy towards government bonds on the balance sheet and the general level of government debt. While the USA and Europe are tightening their rhetoric on interest rates, Japan is deliberately lagging. At the same time, the government maintains an apparent calm, pointing out that there are both disadvantages and advantages of a weak exchange rate. The yen problem is not bothering the authorities right now.We should wait and see if investor confidence in the Japanese currency is undermined. Losing control of the exchange rate would risk an escalation of selling into Japanese government debt more than 250% of GDP. The only realistic soft solution is to deflate the national debt by accelerating inflation, but only if the central bank remains a big buyer to prevent an appreciation of the national debt. Such a policy would lead to sustained pressure on the yen.
US manufacturing order books and inflation pressures are softening

Natural Gas Price Rises As Triggered By Putin’s Rhetoric That He Will ‘Demand Rouble Gas Payments’

Mikołaj Marcinowski Mikołaj Marcinowski 24.03.2022 12:47
According to Investing.com Russia could require gas payment in roubles what clearly affects both Forex pairs (e.g. EUR/RUB) and natural gas price (TTF) which has increased by 31%. What’s more MOEX is back to the game after such a long break. Some companies have gained significantly already and many would like to know what’s ahead. Generally speaking Russian currency and Russia-associated markets are really volatile at the moment and there are many assets to watch in the following days. Let’s begin with natural gas price. Obviously monthly chart (yes, it’s been one month since the warfare started) shows the fluctuations caused by the start of invasion which took place on February 24th We may say that the true rise came few days later, as negotiations of cease-fire haven’t changed a thing and sanctions have begun to impact the markets. Further developments containing some signals of a ceasefire appeared not to coincide with the reality heading price of natural gas to a next rise. Natural Gas Price Chat (TTF) – monthly 24/02-23/03 - +31% Natural Gas Price Chart (TTF) Daily 22-23/03/22 +18.5% Russian Roubel (RUB) – Forex Charts +11% Monthly chart shows a huge decline and strengthening of RUB. EUR/RUB Chart - Monthly +6% EUR/RUB Chart - Daily (24h) Source/Data: Investing.com, TradingView.com Charts: Courtesy of TradingView.com  
Falling Japanese yen suggests a changing world order

Falling Japanese yen suggests a changing world order

Alex Kuptsikevich Alex Kuptsikevich 24.03.2022 15:23
The collapse of the Japanese yen continues, and so far, there are no signs of a trend reversal. The rise in the Yen is often linked to capital flight from risky assets, and the weakening is a sign of increased demand for risky assets. But that explanation hardly fits with what is happening now. We likely see the start of a significant reassessment by the markets of Japan's position in the financial system. In a worst-case scenario, this may turn into a debt crisis in the Land of the Rising Sun and be an even bigger disaster for financial markets than the eurozone debt crisis of a decade ago.The starting point for the weakening of the Yen was at the start of February. At that time, equities were in demand as a haven for capital to maintain the purchasing power of investments. The flow into equities was interrupted by the war in Ukraine but accelerated in the last couple of weeks on signs that these events have hyped up the processes that were taking place before. And these processes are now most visible in the dynamics of the Japanese yen against those currencies where the central bank can respond adequately to inflation.Since the start of February, the USDJPY has risen by 6.5%, and almost all of this increase has taken place since March 7th, taking the pair back to levels last seen at the end of 2015. A much more impressive rally is taking place in the Aussie and Kiwi against the Yen. Since the start of February, they have soared by more than 12%. So far this month, the strengthening is the largest in 11 years for AUDJPY and in more than 12 years for NZDJPY.The interest rate differential game, which was so beloved by traders in Japan before the global financial crisis, has found a second life. Australia and New Zealand have the economic potential to raise interest rates, as they are experiencing a surge in exports due to the boom in their export prices. However, the situation in Japan looks considerably more alarming, as Japan's debt-to-GDP ratio has risen by 77 percentage points to 170% since the financial crisis. Permanent QE from the Bank of Japan has kept government debt costs down but doesn't solve the problem.In the last decade, Japan has turned into a net commodity importer due to its growing dependence on energy and metals and increasing competition from China and Korea. The exchange rate should act as a natural mechanism to stabilise trade in this situation.But this adjustment is difficult for debt-laden Japan because selling currency would de facto mean selling bonds denominated in that currency. Under these circumstances, the Bank of Japan will either have to openly accept that it will finance the government (i.e. increase purchases despite inflation) or soften QE. The first option risks triggering a historic revaluation of the Yen. The second option would deal a blow to the economy and finances by raising questions about whether Japan can service its debt.
Price Of Gold Nears $45k As Many Authorities Are Speaking Of Crypto

Price Of Gold Nears $45k As Many Authorities Are Speaking Of Crypto

Alex Kuptsikevich Alex Kuptsikevich 25.03.2022 08:52
Bitcoin is trading above $44.1K on Friday, gaining 2.4% over the past day and 8.2% over the week. Increased inquiry for BTC Yesterday, the first cryptocurrency was in demand during the Asian and American sessions. The current values of BTC are consolidating in the area of 2-month extremes. In contrast to the previous test of these levels, this time, we see a smooth rise in the rate, indicating that the bulls still have some momentum. Also, over the past 24 hours, Ethereum has gained 2.4%, while other leading altcoins from the top ten have strengthened from 0.5% (XRP) to 7.4% (Solana). The exception is Terra, which is shedding 1.8%, correcting part of its gains in the first half of the week. According to CoinMarketCap, the total crypto market capitalization increased by 2.3% to $2 trillion. The Bitcoin Dominance Index rose 0.1 percentage points to 41.8%. The Fear and Greed Cryptocurrency Index added another 7 points to 47 and ended up in the neutral territory. Cardano leads the last week in terms of growth among top coins (+39%) as Coinbase added the possibility of staking cryptocurrency with a current estimated annual return of 3.75% per annum. Countries assess the risks of cryptos Credit Suisse reported that Bitcoin doesn't pose a threat to the banking sector as an alternative to fiat money and banking services. The CEO of BlackRock, one of the world's largest investment companies, noted that military actions in Ukraine and sanctions against Russia will increase the popularity of cryptocurrencies and accelerate their adoption. Despite the rally in global stocks over the past two weeks, financial conditions in the debt markets continue to deteriorate due to rising interest rates and inflation. Largely because of this, El Salvador has postponed the issuance of bitcoin bonds in anticipation of more favorable conditions. Since very active steps to raise key rates are expected in the next year and a half, and Bitcoin is far from the highs, it is unlikely that such bonds will be issued soon. The Bank of England intends to tighten supervision of cryptocurrencies due to the financial risks that their adoption carries. However, the Central Bank urged commercial banks to exercise maximum caution when dealing with these extremely volatile assets.
Euro (EUR), Japanese Yen And Dollar (USD) Interactions. Dollar Index (DXY) Looks Quite Fine. A Year Full Of Fed Decisions...

Euro (EUR), Japanese Yen And Dollar (USD) Interactions. Dollar Index (DXY) Looks Quite Fine. A Year Full Of Fed Decisions...

Alex Kuptsikevich Alex Kuptsikevich 28.03.2022 12:44
There has been a lot of talk lately about the decline of the US dollar's reserve status. However, investors and traders should separate long-term trends from short-term market impulses. Reserve fund managers often prefer to refrain from active selling so as not to cause unnecessary market turbulence, so all reserve trends are stretched out over decades. As long as there is no real threat to the existence of the dollar and the solvency of the US government, managers will avoid making active moves to sell dollar assets. And all the revolutionary changes, such as switching to national currencies, will only result in CBs buying fewer new dollars. But it has little effect on the exchange rate. Right now, we are seeing the opposite picture, as the main competitors are under pressure. Investors are getting rid of the Japanese yen as the Bank of Japan accelerates its currency printing to buy bonds out of the market to stem rising yields. The local government is overburdened with debt, and the economy is still stalling. The only market solution is a devaluation of the yen, which would make exports from Japan more competitive and boost domestic spending. The single currency is suffering from a spike in energy prices and economic problems related to the war in Ukraine. Trading below 1.1000, the EURUSD pair is now where it was heading for the last six months before the pandemic. The medium-term outlook for the dollar is largely influenced by the extent to which the Fed will be able to implement policy tightening. More accurately, how Fed policy compares with the policy of the Bank of Japan, the ECB, or another major central bank. The Fed is clearly acting with greater amplitude, setting itself up for 7 rate hikes this year, which is far more than one would expect from Japan or the eurozone. Moreover, the US remains much further away from the war in Ukraine in business and trade terms than its biggest competitors, which means it can continue to benefit from capital inflows as a haven.
Welcome Back to 1994!

Welcome Back to 1994!

David Merkel David Merkel 23.03.2022 03:03
Image Credit: Aleph Blog with help from FRED || Believe it or not, I used FRED before it was a web resource — it was a standalone “bulletin board” that I woul dial into on my computer modem I’ve talked about this here: Estimating Future Stock Returns, December 2021 UpdateTime for Another Convexity Crisis?The First Priority of Risk Control (2009, this tells the story of what I did during the 1994 crisis.) And recently I have tweeted about it. Mortgage rates are surging faster than expected, prompting economists to lower their home sales forecasts https://t.co/IiX2gPlAnI 1994 scenario re-occurring. Falling prepayments makes MBS lengthen, leading indexed bond managers to sell low-coupon MBS forcing rates still higher— David Merkel (@AlephBlog) March 22, 2022 We may be in the 1994 scenario where mortgage durations are extending, dragging the long end of the yield, as those that hedge duration are forced to sell, setting up a self-reinforcing move up in yields.— David Merkel (@AlephBlog) March 22, 2022 The MBS coupon stack is a lot flatter in 2022 than in 1994. There is more than 4X the mortgage debt now than in 1994. Lots of pent-up negative convexity. I lived through that in 1994, and made money off it.— David Merkel (@AlephBlog) March 22, 2022 Then from the piece Classic: Avoid the Dangers of Data-Mining, Part 2 “In 1992-1993, there were a number of bright investors who had “picked the lock” of the residential mortgage-backed securities market. Many of them had estimated complex multifactor relationships that allowed them to estimate the likely amount of mortgage prepayment within mortgage pools. Armed with that knowledge, they bought some of the riskiest securities backed by portions of the cash flows from the pools. They probably estimated the past relationships properly, but the models failed when no-cost prepayment became common, and failed again when the Federal Reserve raised rates aggressively in 1994. The failures were astounding: David Askin’s hedge funds, Orange County, the funds at Piper Jaffray that Worth Bruntjen managed, some small life insurers, etc. If that wasn’t enough, there were many major financial institutions that dropped billions on this trade without failing. What’s the lesson? Models that worked well in the past might not work so well in the future, particularly at high degrees of leverage. Small deviations from what made the relationship work in the past can be amplified by leverage into huge disasters.“ Finally from the piece What Brings Maturity to a Market: Negative Convexity: Through late 1993, structurers of residential mortgage securities were very creative, making tranches in mortgage securitizations that bore a disproportionate amount of risk, particularly compared to the yield received. In 1994 to early 1995, that illusion was destroyed as the bond market was dragged to higher yields by the Fed plus mortgage bond managers who tried to limit their interest rate risks individually, leading to a more general crisis. That created the worst bond market since 1926. ================================================== I am not saying it is certain, but I think it is likely that we are experiencing a panic in the mortgage bond market now. Like 1994, we have had a complacent Fed that left policy rates too low for too long. Both were foolish times, where policy should have been tighter. This led to massive refinancing of mortgages, and many new mortgages at low rates. But when that happens with most mortgages being low rate, if the Fed hints at or starts raising rates, prepayments will fall and Mortgage-Backed Securities [MBS] will lengthen duration while falling in price. Bond managers, most of whom are indexed and want a fixed duration, will start selling long bonds and MBS, leading long rates to rise, and the cycle temporarily becomes self-perpetuating. This is likely the situation that we are in now, and it very well may make the Fed overreact as they did in 1994. All good economists know the monetary policy acts with long and variable lags. But the FOMC for PR reasons acts as if their actions are immediate. Thus they become macho, and raise their rates too far, leading to a crash. (Can we eliminate the Fed? Gold was better, if we regulated the banks properly. Or, limit the slope of the yield curve.) I’m planning on making money on the opposite side of this trade if I am right. I will buy long Treasuries after the peak. I am watching this regularly, and will act when it is clear to me, but not the market as a whole, which in late 1994 to early 1995 did not know which end was up. Anyway, that’s all. The only good part of this environment is that my bond portfolios are losing less than the general market.
Comparison of client’s profitability among European brokers 2021

Comparison of client’s profitability among European brokers 2021

Purple Trading Purple Trading 21.04.2022 12:14
How did we come up with this data? This comparison is based on publicly available data on the percentage of retail CFD accounts that were in loss and was collected within a one year span (between 1. 4. 2021 and 31. 3. 2022). Publishing of this data is mandatory for brokerage companies operating in the EU and they have to include them as a part of so-called "disclaimers". These can be found on all marketing materials (online banners, emails, ebooks), but also in the footer on their website. One of the subchapters of this article focuses on how and where to find this data.   What does ESMA request? Online Forex trading has come a long way since its wild unregulated beginnings, and while unregulated brokerage firms or those that are less tightly regulated can still be found, Forex traders of today can rely on a much greater degree of protection than their counterparts from the past. The European Securities and Markets Authority (ESMA) provides guidelines to regulators, for example, the Cypriot CySEC, and thereafter each regulator provides guidelines and restrictions to regulated firms. EU regulations are considered to be one of the strictest, caring for the protection of clients (retail traders) and guaranteeing them a high standard of security and transparency compared to other (for example, off-shore) regulators.   How regulation protects traders? For example CySEC requires a number of guarantees and client protection mechanisms from brokerage companies, below are some of the main ones.   Negative balance protection If a trader loses more money than he had in his trading account due to an accident, adverse market fluctuations, or leverage, he/she does not have to worry about possible debt. Thanks to the new guidelines, retail traders cannot lose more money than they put into their account, if they get into the red, the debt incurred must be paid by the broker.   Segregation of client bank accounts In the early days of online Forex trading, we could often witness many fraudulent brokerage companies using their clients’ funds to enrich themselves or pay for operating expenses. Brokerage companies operating in the EU must therefore deposit all client funds in bank accounts, segregated from the company's funds, and insured against bankruptcy. This way, traders have fewer things to worry about.   Disclosure of loss rate of client accounts Every 3 months, brokerage companies must publish the loss rate of their clients' trading accounts. This is stated as a percentage and is placed in small print on each advertising banner, image, or other promotional material. You can also find it in the footer on the brokers' websites in the so-called "Disclaimer" (see picture).   Figure 1: Percentage of profitability of client accounts in the footer of Purple Trading websites ~/getmedia/897c3636-9d3b-44f4-8420-35bc0c6b5065/P-ziskovost.png Table comparing the profitability of clients of European brokers - how did we do? Because the loss rate of clients’ accounts is information that brokers are required to disclose publicly in the EU, we decided to venture to other broker’s websites in order to see how our competitors are doing. The result completely exceeded our expectations.   Table No.1: Comparison of the number of profitable client accounts of leading European brokers *This number refers to CFD retail (client) accounts and is based on data for the period from 1 April 2021 to 31 March 2022) Broker Number of profitable accounts in 2021* 37 % 32 % 29,25 % 29 % 28,95 % 28,76 % 27,13 % 26,97 % 26,07 % 26 % 25,6 % 24,8 % 24 % 23 % 23 % 22 % 19,5 %   As you can see, Purple Trading is among the absolute top with more than 35% of client accounts ending up in profit. Which leaves behind a large part of the competition. To some, however, a third of profitable clients may seem like a low number. However, we must take this number in the overall context of the Forex industry.   Why a third of profitable clients are such a success? It should be noted that Forex trading is one of the most challenging disciplines and as such has a very steep learning curve. In particular, beginning traders must initially go through a number of educational materials if they want to make money in this discipline. And even then, the task of the most difficult remains ahead of them - to deal with themselves and set strict rules of risk management and thus avoid the psychological pitfalls of trading.   What could be the secret behind the profitability of our clients?   Ability to respond immediately to trading opportunities Thanks to LD4 Equinix servers in London, our traders can count on lightning-fast executions and thus adequately respond to trading opportunities. If you also want to start trading with a fair Forex broker who takes his clients seriously and provides them with all the means to be truly profitable, Purple Trading is here for you.   Comparison of client’s profitability among European brokers in 2021 What our competition doesn't want you to see The profitability of client accounts of European brokers is no longer a figure that you would have to decipher from a footnote written in fine print somewhere in the depths of the terms and conditions. All brokers operating within the EU follow ESMA (European Securities and Markets Authority) guidelines and must publish this number in a way that is as transparent as possible. Therefore, at Purple Trading, we decided to look at it in a more elaborate way and compare the profitability of our clients with that of our competition. And the result took our breath away!
Crypto Focus: Market Steadies but No Sign of Recovery

Crypto Focus: Market Steadies but No Sign of Recovery

8 eightcap 8 eightcap 20.05.2022 15:34
Let’s just say things have been a lot more settled this week than last week’s bloodbath. The top 10 and 25 indexes remain positive on Friday. But it’s very little pulled back compared to the damage done over the last 6-weeks. A few headlines that caught our attention this week, Ripple partnered with a Lithuanian firm for cross-border payments. Attention remains on Ethereum as it prepares to merge and just hangs on to the 2000 USD level. Tether is said to be partially backed by non-US government bonds. Is this meant to give us confidence after the stable coins fiasco last week? Talk emerging around debt defaults by El Salvador. The country famously made Bitcoin legal tender and was reported to have bought large parcels on the coin. The pressure continued this week as BTC fell below 29K. Price has moved back above 30K, but pressure remains on the country after this move. Ranges are the topic of a lot of the top ten at this point in the week. We discussed this in detail in our Bitcoin report earlier today, and it’s not really a surprise based on last week’s trade. We want to point out the weekly demand areas and support areas we are seeing holding on several coins. Definitely take a look at some of the top 10 on their weekly charts to see the areas and levels we have brought up. Continuing on from this, we want to show an example of this. As you can see below, Bitcoin weekly has held for now from the 28,600 – 30,000 area. Last week’s plunge failed to break this level, and it remains key weekly support for now. While this level remains in play, we will look for buyers to continue to consolidate.   The post Crypto Focus: Market Steadies but No Sign of Recovery appeared first on Eightcap.
Why do we voluntarily disclose our clients' loss ratios?

Why do we voluntarily disclose our clients' loss ratios?

Purple Trading Purple Trading 03.06.2022 09:12
Why do we voluntarily disclose our clients' loss ratios? Why rather click on an ad from a brokerage firm that states that 70% of their clients' accounts are loss-making than an ad from a broker that does not disclose this statistic at all? Come with us to delve into the ins and outs of broker licensing and learn what protections you are legally entitled to as a client. Broker's licence The operation of a brokerage company involves many minor acts anchored in legislation. From the operation of the broker as a firm with employees; arranging the opening of client accounts to handling client deposits and managing the online platform through which clients trade. For all of this, a broker needs a license. While this can be issued by almost any state authority, licences of some states are more desirable than that of others. And that is due to variety of reasons. Licenses issued in so-called offshore states allow brokers to provide their clients with very attractive trading conditions. For example, the financial leverage that allows a client to multiply his or her trading position and with it also potential earnings (as well as losses) can often go as high as 1:1000 for offshore licenses. However, when it comes to client protection, offshore licenses fall somewhat short. Client protection takes many forms and one of them is the wording of the mentioned disclaimer. Thus, if you see a disclaimer below the image of an advertisement that does not state the percentage of loss but only somewhat vaguely warns of the potential risk, it is very likely that the broker to whom the advertisement belongs has an offshore license. Image: Purple Trading banner ad (see disclaimer below the button) What is a disclaimer The short phrase "XY% of client accounts lose money" and its other small permutations, which you can see for example under our online advertisements, are part of the so-called disclaimer. The disclaimer takes many forms, from a single sentence under a banner ad on Facebook to a multi-paragraph colossus in the footer of the broker's website. The purpose of the disclaimer is simple - to highlight, to those interested in trading on financial markets, the potential risks of this activity and to disclaim broker’s responsibility for their client’s eventual failure. However, the overall message of the disclaimer might be written differently. Because sometimes we see loss percentages under the advertisement of Broker A, while Broker B's disclaimer merely tells us that trading is risky. No percentage, nothing more. Image: Sample of a shorter disclaimer on the broker's page Offshore vs EU license The European Union's legal environment is characterized by a much stricter regulatory approach. This applies to the control of pharmaceuticals, and foodstuffs, but also, for example, to the control of brokerage companies. This sector is dealt with by ESMA (European Securities and Markets Authority), to which the regulators of all countries within the EU have to answer (including the regulator of Purple Trading, the Cypriot CySEC). It is ESMA that takes it upon itself to protect consumers (in this case, investors and retail traders in the financial markets). And it does so in all sorts of ways. The aforementioned client account loss ratios on brokers' marketing materials are one of them.   Other ESMA protections include:   Reduced financial leverage Financial leverage is the ratio of the amount of capital a trader puts into an account to the funds provided by the broker. In simple terms, it is essentially borrowed capital from the broker, which is not reflected in the balance of money in your account, but allows you to trade a greater volume of transactions than you could with your own money. More experienced traders can use leverage to increase their profits many times over. However, as well as profits, leverage also multiplies losses, so less-experienced traders should be wary of using leverage generously. That's also why ESMA capped leverage limit for retail clients at 1:30 in 2018, and higher leverage (up to 1:400) can only be provided by brokers to clients who have met a number of strict criteria to qualify as a so-called Professional Client.   Protection against negative balance A key aspect of client protection. If a client's trade that he had "leveraged" fails and the multiplied loss puts him in the red, the broker will pay the entire amount that is "in the red" from his pocket. Thus, the client can never lose more money than he has deposited in his account and consequently become a debtor. Negative balance protection is compulsory for all brokers operating in the EU. It is not compulsory for offshore brokers, which, combined with the high leverage offered there, can lead to very unfortunate situations.   Segregation of client deposits Forex and online trading, in general, has come a long way since its beginning in 2008. Especially in the early days, the online trading environment was highly unregulated and it was not uncommon for brokers to use capital from client deposits to fund their operations. More than that, there were also cases where the client’s capital was outright misused to enrich a select few. Brokers operating in the EU are obliged to secure clients’ funds in many ways. One is depositing client capital in accounts segregated from the capital brokers use to finance their operations. What if the broker fails to provide his clients with these guarantees? Brokers subject to such strict regulatory authorities as CySEC (cypriot based regulator under ESMA) must undergo regular audits. As part of these audits, the regulator monitors whether all the measures resulting from the licence granted by the regulator are being complied with. Should this not be the case, the broker is usually subject to a hefty fine and often even the suspension of its licence. This means that broker cannot really afford not to comply with the client protection principles of the EU regulatory environment. Conclusion Voluntary disclosure of client account loss rates under broker advertisements may seem odd. However, it is a positive signal that lets you know that the broker in question is highly regulated. Therefore, if you choose to trade with them, you are protected by a number of legislative regulations that the broker will not dare to violate. See which EU broker has the best disclaimer number
Concealing Volatility

Concealing Volatility

David Merkel David Merkel 05.06.2022 05:24
Photo Credit: Marco Verch Professional Photographer || With some private investments, you can’t tell what the value truly is. Third party professional help occasionally assists dishonesty Part of my career was based on concealing volatility. I sold Guaranteed Investment Contracts. I helped design and manage several different types of stable value funds. Life insurance contracts get valued at their book value, regardless of what the replacement cost of an equivalent contract would be like presently. Anytime an investment pool with no current market price has a book value above the underlying value of the investments that it holds, there is risk to those holding the investment pool. The amount of risk can be small yet significant with some types of money market funds. It can be considerably larger in certain types of pooled investments like: Various types of business partnerships, including Private REITs, Real Estate Partnerships, Private Equity, etc.Illiquid debts, such as private credit funds, and notes with limited marketability, whether structured or not.Odd mutual funds that limit withdrawals because they offer “guarantees” of a sort. That applies to Variable Annuities with riders offering guaranteed benefits, if the life insurer becomes insolvent.One-off investment liquid partnerships that are secretive and unusual, like Madoff. The underlying may be illiquid, but the accounting may be fraudulent. Or, the accounting may be fine, but the assets listed are not what is in custody. (With small funds, analyze the auditor, trustees, and custodian.)The value of a company touted by a SPAC promoter may be worth considerably less than what is illustrated.Any investment in public equity or debt pool where the positions are concentrated, and they own a high percentage of the float, or a high amount of the securities relative to the amount that gets traded in an average month. Think of Third Avenue Focused Credit, or Archegos. I have consistently encouraged readers to “look through” their pooled investments, and consider what the underlying is worth. If you only have a vague idea of what the underlying investments are, look at their public equivalents. A rising tide lifts almost all boats, and a falling tide does the opposite. There is a conceit within private equity, private credit and private real estate funds that they are less risky; there is no volatility, because we cannot produce an NAV. They have the same volatility as the publicly traded funds, but the volatility is concealed. If trouble hits the public markets 50-75% of the way through the life of a private fund, it will have difficulty selling their investments at levels anywhere near the book value previously claimed by the sponsors. With consent of the limited partners, perhaps they extend the life of the fund to try to recover value, but that also imposes an opportunity cost on holders who were expecting proceeds from the fund on schedule. Remember as well that in a scenario like 1929-1932, private funds will be wiped out with similarly leveraged private funds. Aleph Blog has consistently warned about the possibility of depression, plague, war, famine, bad monetary policy and aggressive socialism. We have gotten plague, war, and bad monetary policy. Famine in a sense may come from the Ukraine war and trade restrictions on Russia, at least for the African countries that buy from them. Thus I encourage readers to avoid private investments that promise no volatility, like the stupid ads for Equity Multiple that run on Bloomberg Radio. All investments involve some type of risk. Just because you can’t or don’t measure the risk doesn’t mean that there is no risk. Don’t listen to investment sales pitches which tell you to avoid the volatility of the public equity and debt markets, when they are taking the exact same risks in the private market, and they cannot or will not measure the risks for you, no matter how thick or thin the “disclosure” document is. There is no significant advantage in the private market over the public market. Indeed, the reverse may be true. (Yes, I meant all of the ambiguity there.) Look to the underlying, and invest accordingly. Look at fees, and try to minimize them. Prize transparency, because it reduces risk in the long run. Those who are honest are transparent.
Estimating Future Stock Returns, March 2022 Update

Estimating Future Stock Returns, March 2022 Update

David Merkel David Merkel 14.06.2022 05:51
Image credit: All images belong to Aleph Blog Well, finally the bear market… at 3/31/2002 the S&P 500 was priced to return a trice less than zero in nominal terms. After the pasting the market received today, that figure is 3.57%/year nominal (not adjusted for inflation). You would likely be better off in an ETF of 10-year single-A rated bonds yielding 4.7% — both for safety and return. I will admit that my recent experiment buying TLT has been a flop. I added to the position today. My view is that the long end of the curve is getting resistant to the belly of the curve, and thus the curve is turning into the “cap” formation, where the middle of the curve is higher than the short and long ends. This is a rare situation. Usually, the long end rallies in situations like this. The only situation more rare than this is the “cup” formation where the middle of the curve is lower than the short and long ends. I will have to update my my old post of “Goes Down Double-Speed.” We’ve been through three cycles since then — bear, bull, and now bear again. People get surprised by the ferocity of bear markets, but they shouldn’t be. People get shocked at losing money on paper, and thus the selloffs happen more rapidly. Bull markets face skepticism, and so they are slow. What are the possibilities given where the market is now? When the market is expecting 3.57% nominal, give or take one percent, what tends to happen? Most of the time, growth at these levels for the S&P 500 is pretty poor. That said, market expectations of inflation over the next ten years are well below the 4.7% you can earn on an average 10-year single-A rated corporate bond. Those expectations may be wrong — they usually are, but you can’t tell which way they will be wrong. I am still a believer in deflation, so I think current estimates of inflation are too high. There is too much debt and so monetary policy will have more punch than previously. The FOMC will panic, tighten too much, and crater some area in the financial economy that they care about, and then they will give up again, regardless of how high inflation is. They care more about avoiding a depression than inflation. They will even resume QE with inflation running hot if they are worried about the financial sector. The Fed cares about things in this order: Preserve their own necksPreserve the banks, and things like themFight inflationFund the US GovernmentPromote nominal GDP growth, though they will call it reducing labor unemployment. The Fed really doesn’t care about labor unemployment, or inequality. They are a bourgeois institution that cares about themselves and their patrons — those who are rich. I know this post is “all over the map.” My apologies. That said, we in a very unusual situation featuring high debt, high current inflation (that won’t last), war, plague, and supply-chain issues. How this exactly works out is a mystery, especially to me — but I am giving you my best guess here, for whatever it is worth. It’s worth than double what you paid for it! Full disclosure: long TLT for clients and me