BOJ Digging Deeper

amazing

Photo: The not so distant ago – complete replica of events

  • Surprising stimulus package – somewhat desperate as Japan wants Inflation badly
  • Kuroda choose alternative WMD (Widely Massive Debt)
  • Central Banks chasing after negative interest rate – more to come in 2016?
  • Market holding up higher and cheered but then muted
  • End of month book squaring – concern of a rather negative candles
  • Risk on sentiment holding up rather well but for how long?

Currencies

US Dollar Index

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EUR/USD

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USD/JPY

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GBP/USD

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NZD/USD

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Equities 

FTSE

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STOXX

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CAC

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SPX

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Commodities 

Oil

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Copper

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Platinum

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Bonds

German Bunds

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DAX Review

FBL-WC-2014-FANS-GER-FEATURE-GERMANY-ECONOMY-STOCK

A German national flag is seen near a board displaying German index DAX at the German stock exchange in Frankfurt, western Germany, few hour before the FIFA World Cup 2014 football match USA vs Germany to be played in Brazil. on June 26, 2014. AFP PHOTO / DANIEL ROLAND

NO COMMENTARY

DAX

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Beyond FED Up

superman5.jpg

  • No commentary as market may stay muted before FOMC
  • Market expecting a dovish statement “Not Rocking The Boat”
  • Soothing words to help stabilize the market but has this all been priced in?
  • Perhaps strong words to reduce the current dollar strength may help alleviate the strain
  • Oil continue to in a ping pong fest with the low at $ 28 per barrel remain expose for a retest

Currencies 

Dollar Index

Weekly

USD/JPY

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EUR/USD

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GBP/USD

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NZD/USD

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Equities 

FTSE

Daily

CAC

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STOXX

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SPX

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Commodities 

Oil

4 hour

Copper

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Platinum

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Rate Hike Tantrum Ep. 1

China_cartoon_07.28.2015_large.png

Courtesy of Hedgeye

  • Oil prices continue to plummet after a mild recovery
  • Global Stock market merely took a breather on a Dead Cat Bounce
  • China Stocks in the headline again with 7 % plunge
  • Safe Haven demand continue to benefit with Gold & Silver holding steady
  • Market effectively holding Central banks at gun point “I dare you to hike”
  • Beware, Draghi “will not surrender” stimulus rally has run out of steam will the FOMC short and sweet relief help?
  • Overall market sentiment and behavior are changing on the reception of what Central banks have to offer
  • We cannot rule out that equities could continue short covering rally ahead of FOMC a
  • Market is betting on a dovish FOMC statement tomorrow
  • European Open started with a sell off but short covering ahead of US Open will get more interesting
  • US Consumer confidence and APPL earning today
  • API Weekly Crude Oil stocks and Weekly Cushing keeping oil traders on high alert

fear greed index.png

Currencies 

Dollar Index – Safe Haven demand continues and FOMC tomorrow may well unravel the move

Weekly

USD/JPY

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EUR/USD

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GBP/USD – Perhaps Sterling 4 hour move may replicate NZD/USD?

4 Hour

NZD/USD

Weekly

Equities 

Inverses everywhere

FTSE

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CAC

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STOXX

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SPX

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Commodities 

Oil

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Copper

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Platinum

4 hour

 

 

 

Gold Unfazed Ahead of FOMC

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Gold started off very well in 2016 and as we approach the end of January, it has certainly performed much better compared to Silver. Price action in the yellow metal is very much technically oriented while the fundamental perspective has been supportive for higher prices.

We take a closer look at the possibility of further upside on the basis of the following:

  • Fundamentally strong and positioned for higher prices
  • CFTC report confirmed that Longs are building position and reducing Shorts
  • Signs of life in Gold ETF – SPDR seen some inflow (safe haven buying)
  • A higher low and higher high – perhaps its on its way for another higher high to $ 1130

To reach $ 1130, the short term recipes are:

  • Need a daily break and close above the weekly 100 ma which coincide with the daily 20 ma
  • A clean break and price acceptance above previous high
  • A dovish FOMC report this coming Wednesday and perhaps a size-able pullback in the US dollar strength

The risk to the downside may remain limited within the upward channel (see below):

  • Price action may continue to range trade for higher high and high low
  • Only a clean break out of the channel will indicate that the dominant bearish trend continues (bear flag confirmation)
  • Unless the FOMC statement veered to the Hawkish side, then downside is limited
  • Global equity is still in recovery mode but remain jittery

Gold Weekly

Gold Daily

Blame Last FOMC?

Market Crash.png

Depiction of a delayed RATE HIKE TANTRUM effecting the market.

FOMC Rate Hike

Recent US dollar strength, despite many runs of poor economic data – certainly indicate that the Federal Reserve may have to further delay the rate hike. 2015 FOMC press conference has a track record of “mood swings” as Yellen et al produce series event of volatility and uncertainty (going from a dove to a hawk then vice versa). What can we really expect to happen in the next FOMC press conference? We think that it will be very much dictated again by the market.

The latest Federal Reserve dot plot courtesy of Forexlive.com

dot-plot

Joking aside, top market analysts and economists remain split. Some in the camp are keeping with the projection that 4 rate hike will happen this year regardless of the economic situation. Their base argument is that US economy is fundamentally strong and will remain stronger going into the year – that China will recover. Skeptics on the other side played this down. Arguably, they are more flexible and deduced their prediction based on current economic climate that a maximum of 2 rate hike. On the extreme end, we have Ray Dalio of Bridgewater Associates who suggested that we must not discount out a QE 4 scenario to happen this year. Dalio added that “…a move to Quantitative Easing would bolster psychology”

The Tantrum

2016 is barely 4 weeks old but the global market has certainly taken a wild ride of roller coaster. There were real fear as trading volume start to return across the trading board. Big sums of wealth are lost in the equity market (see below). Top banks are advising clients to liquidate their positions away from stocks and moved to bonds. Safe Haven assets have really benefited – examples of this can be seen below.

Biggest mover post December FOMC rate hike (to name a few):

  1. USD/YEN – BOJ steadfast that no easing is required since the last press conference
  2. USD/CAD – recent Oil rout has weakened the CAD
  3. GBP/USD – poor economic data and BOE has no intention of an imminent rate hike
  4. XAU/USD – has gold priced in 4 rate hike in 2016?
  5. OIL – extreme capitulation and heavily shorted by Hedge Funds
  6. CHINA – SHCOMP  fall out of bed – high of 3300 as of 4th Jan and low of 2880 20th Jan

Chart courtesy of Zerohedge.com

zerohedge

Given such a big shift in global equity, outflow of money has to go somewhere and we have seen that going into safe haven assets and in particular a strong USD, Yen and Bonds.

Food For Thought

Tensions from Chinese Yuan devaluation and recent Geo-Political. 2016 will prove to a tricky year as traders will have to include much more volatility within their trading formula. We are not expecting an easy ride but a rather turbulent one given the recent changes that are happening around the world. A few food for thoughts:

  1. Relationship between China and Taiwan after recent poll win by DPP Tsai Ing-Wen
  2. Sovereign debt to mount across Oil developing economies?
  3. US presidential election could add more spice – Trump effect
  4. War in Middle East continues –
  5. Growing terror threat from ISIS
  6. Is 2016 an inevitable year that a market correction is coming? The extreme spectrum is a Global Recession
  7. Will we see the FED doing 4 rate hike? Can BOE move to a late December rate hike?
  8. More QE across Japan and China?

USD/YEN

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USD/CAD

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GBP/USD

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Oil

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SHCOMP

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Shanghai composite monthly.png

Expect More Of The Same? 

In the short term, the answer is no. Generally, the market may have hit rock bottom so a period of consolidation and heavy petting by central banks will alleviate some of the fear that terrorized the world in the last 3 weeks. We conclude as per our daily report on http://www.Globalbulliontimes.com that there has been a shift in the technical and fundamental picture. Risk reward has skewed in favor of a reversal type rally in the equity market while commodities will also see short covering rally. FOMC meeting will aim to offer soothing words to the market – thus a dovish remark may well be the case.