Sunday, 25 January 2015

Weekly Update - Week Ended 23 January 2015

Market Summary and Technical 
·        Euro continues downtrend on larger than expected QE purchases
·        US equities remain in a narrow range
o   Some improvement in market internals, with intermediate trends turning neutral
·        Gold reaches $1,300 level!



[Market Summary]

[Trend Watch] 

[Selected Charts]


[Market Breadth]



 Readings and Trends 
·        QE in Europe begins
o   pace of €60bn a month from March until at least September 2016, higher than the €50bn a month expected
·        Long term bonds rise as inflation expectations get lower (FT)
o   rally in government bonds has pushed the yield on the 30-year US government bond to its lowest on record at 2.35 per cent last week
·        Fight against ISIS – funding difficulties with low oil prices (FT)


 Investment Implications and Opportunities 

·        How does the world get away from QE and low rate addiction?
·    Hold some gold – it looks relatively better compared to fiat currency which continue their perpetual loss of value 



Saturday, 17 January 2015

Weekly Update - Week Ended 16 January 2015

Market Summary and Technical 
  • Euro the big loser this week, especially against the Swiss  Franc
  • US equities down slightly – still ranging; smallcaps testing support
  • Gold on uptrend?
  • US dollar correction not yet in sight 

[Market Summary]


[Trend Watch]




[Selected Charts]






[Market Breadth]



Readings and Trends 
  • Possible trends which could drive gold higher (Hebba Investments)
    • Turmoil in eastern Europe
    • Turmoil in the middle east
    • Anti-EU shift in Europe
  • Risk of bank run in Greece as banks ask for emergency funds from ECB (NYtimes)
  • I previously noted that this year will likely see monetary policy continue to be loose – events this week reinforce this view
    • Asia’s central bankers lean towards looser policy (FT)
    • On Thursday the RBI announced a surprise25-basis-point cut to its repo rate, its benchmark interest rate. Raghuram Rajan, RBI governor, cited a sharp fall in inflation in India as the main reason for the cut. Analysts also pointed to weak demand and slowing growth
    • the Bank of Korea chose to leave rates on hold, but lowered its 2015 forecasts for both growth and inflation
    • QE likely to be announced by ECB next week (FT)
    • Swiss central bank gave up defending the ceiling of the franc against the euro in anticipation of QE by the EU
  • China completes Beijing-Shanghai electric car charging route (FT)
    • When the Chinese state is determined to do something, you don’t bet against it…
  • Kaisa Group Holdings, a Chinese property development firm, defaulted on $23 million in interest payments on offshore bonds (Diplomat)
  • Copper down significantly this week on Chinese hedge fund selling (FT)


Investment Implications and Opportunities 
  • Check your broker’s solvency!
    • Alpari entered bankruptcy; FXCM had to get an emergency loan from its parent (The Globe and Mail)
  • Watch for contagion risk in Eurozone due to Greece and in China property developers
  • Long gold position has paid off so far – expect the trend to carry on in 2014
  • Opportunity in copper?
  • Pure play on electric vehicles in China – Kandi (KNDI)
    • I have been long for a number of years
    • See these articles (Tom Harrison; Michael Nguyen)
    • high risk high reward stock
      • listed in US through a RTO
      • countless short attacks
      • however, I have been following the business for long enough to be comfortable that this company is the real deal
  • Just to clarify, despite a possible correction in US equities in the short to medium term, I tend to agree with Jeff Miller that a bear market is not yet in sight, in part because of continued central bank accommodation this year and lower oil prices

 [Disclosure: I am long KNDI]

Sunday, 11 January 2015

Weekly Update - Week Ended 9 January 2015

Market Summary and Technical 
  • S&P500 fell below 2000  in midweek but quickly rebounded on ‘buy the dip’ mentality
  • Gold again  shows strength despite dollar strength
  • FXE continues going down on expectations that QE is coming soon
  • My trend model indicates that US equities are bearish for the intermediate term while emerging markets, gold and silver indicate bullish behavior

[Market Summary]

[Trend Watch] 

[Selected Charts]


[Market Breadth] 


Readings and Trends 
  • Low oil prices trigger both demand and supply response – economics 101?
    • Demand side – higher US car sales, especially big guzzlers (FT)
    • Supply side - Rig numbers cut (FT)
  • A number of key events in the EU this January (Gavyn Davies)
    • ECJ preliminary opinion on legality of central bank bond purchases
    • ECB decision on size and type of “sovereign” QE
    • Greek elections
  • Tim Duy’s take on employment figures which showed solid job gains and decelerating wage growth
  • Spot the trend (FT)



Investment Implications and Opportunities 
  • Nobody predicting decline in S&P500 in 2015 – a warning sign? (Mish
  • Was Friday beginning of a dollar correction? Dollar ended lower despite good employment numbers

Saturday, 3 January 2015

Weekly Update - Week Ended 2 January 2015

Market Summary and Technical 
  • Looks like breakout in S&P 500 and Russell 2000 might have failed
    • Divergences apparent
  • Gold again  shows strength despite dollar strength – in Friday’s session, UUP up 0.96% and GLD up 0.44%
  • Euro down significantly on Friday as Draghi  hints that QE is coming soon

[Market Summary]

[2014 Performance]

[Trend Watch]

[Selected Charts]


[Market Breadth]


Readings and Trends
  • 2014 Trends (FT)
    • Winners include the US dollar, long dated US Treasuries, S&P 500, European bonds, Shanghai Composite
    • Major losers include the energy complex and Russia
  • China PMI slips in December
    • Official PMI - slipped to 50.1 last month from November's 50.3
    • HSBC PMI - 49.6 in December from 50 in November
  • Restrictions being eased in Chinese housing market (Forbes)
  • US Manufacturing PMI - fell to 55.5 in December from 58.7 in November (CNA)


Investment Implications and Opportunities 
  • Pace of US dollar rise is unsustainable
    • EU QE could be a case of sell the rumour,  buy on the news ie official launch of QE in EU could be turning point for dollar
    • Pace of growth in US unsustainable – Manufacturing PMI fell in December
  • Breakout in US equities seems to have failed – to maintain hedges
  • 2015 could be the turning point for metals and gold (see my recent article)
    • In particular – gold on Friday showed remarkable resilience despite US dollar being up significantly