Where is that cesspool of promised liquidity?

  • Kuroda-san doing a Mark Carney – delaying the promised stimulus that market sought after
  • Abe-san might take the helm next week to perhaps surprise market with a large stimulus package – part of his so called three arrows that have many many three arrows within (http://fortune.com/2016/07/27/japan-stimulus-shinzo-abe/)
  • It is easy to talk up further stimulus to fight deflation but the larger question remained if all this stimulus is actually working?
  • Stopping a patient bleeding is fine but if the blood banks runs out or prove ineffective the patient will eventually die
  • The introduction of QE happened in Japan since 2001 and yes we purposely BOLD IT UP (http://themarketmogul.com/brief-history-quantitative-easing/) ended in 2006 then restarted
  • See chart below but even Pokemon can’t help the Nikkei higher

Seasonality for (Nikkei)

NIKKEI 225 Index (^N225) Seasonal Chart

Seasonality for month of August (SPX)

August Forex Seasonality Sees USD & Gold Strength, SPX Weakness

Seasonality for month of August (Gold)

August Forex Seasonality Sees USD & Gold Strength, SPX Weakness

 

 

 

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C. Banks Delaying The Inevitable

  • 2015 – 2016 correction was allowed and c. banks react with various stimulus pledges
  • 2016 June post-Brexit correction was short-lived and stopped before the “true” damage has been priced in
  • Our concern is that market was stimulated to the current elevated condition that risk the same inevitable drop
  • It is perhaps c.banks interest has not been met – surprised by the Exit vote and went to panic mode to shore up global equity
  • The simple analogy is to see c.banks as a drunkard dude in the bar-levitating and enjoying the highs but soon going nowhere before the puking begins

Stages of the Global Equity Market

  • Drinking higher (Baby is the market) (Beer is the stimulus)

It has impulsive moves, irrational at times but financial media has found ways to justify the run higher despite knowing whatever it was jabbing was pure BS.

  • Drinking towards one direction

Image result for drunk phase

The market is drunk but it is heading straight for heaven but the fundamental for heading higher means it is not thinking straight after all.

  • Making sense of the inevitable results

After it peaked at its high, the process of going lower takes time.

  • Final stage of a drunkard

Image result for drunk puke

Sometimes, too much of the good stuff given by c.banks have its consequences.

The next worry is as follows:

  • if drinking is no longer fun or working – what other tools does c.banks have?
  • does c.banks have more tools after exposing itself to jump in too quickly during Brexit vote?
  • how will it react if the market pukes?

Disclaimer: NO BABY OR INDIVIDUALS WERE HURT OR DRUNK WHILE WRITING THIS ARTICLE

 

 

Expect The Unexpected – FOMC & BOJ

FOMC

  • Policymakers to remain largely dovish and uncertain on the timeline for a minimal rate hike
  • Confidence remain low and Brexit will be the topic used to suggest that a rate hike is not imminent
  • Optimistically suggest and forecast better numbers ahead – maintain inflation outlook and maintain the status quo that everything is “as awesome as it gets”
  • Perhaps a hawkish remark could turn the market upside down – a September rate hike could trigger market reaction

BOJ

  • Overwhelming expectation of a large stimulus package 10t? 20t or 30t – Further clarification needed
  • Market expects something from the BOJ – otherwise a potential tantrum could happen
  • USD/YEN on the agenda – helicopter money will not happen for now but will be lightly mentioned
  • Revision on inflation and growth target
  • Waiting for lift-off – currency weakness could be their main priority

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Platinum 4 hour

Where are the Yields? Gold Appeal

  • In search of better yield, fund managers and investors are piling on ETF investments
  • Negative yield and negative interest rate posed a big problem
  • US equity market is chugging higher amid TINA (There Is No Alternative) and FOMO buying
  • Against this backdrop, money flow into commodities sector remains healthy – money put to work to generate better return
  • Pre-ECB, FOMC and BOJ – all eyes on additional stimulus measures or rate cut but FOMC could come under pressure to introduce a hike

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Losing Its Appeal? Gold & Silver

fear greed index

  • US equity is the best out of a bad neighborhood
  • Gold failed to rally higher – priced in Turkey failed coup and Nice terror attack
  • Gold daily posed a bearish double top formation
  • Gold weekly posed a bearish engulfing candle
  • Specs long could use this opportunity to reduce exposure
  • Investors maintain ETF investment – short term supportive
  • Gold/Silver ratio indicate a possible pullback in favour of gold rather than silver
  • Silver broke below $20

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