US economy misleading data

Posted: March 11, 2019 in Uncategorized

The latest reports on the US data point to a sharp slowdown.

While this could be the real case I would urge not to make assumptions.

January and February have had two large abnormalities.

The longest ever government shutdown. 35 days in which employees would economize and look for part time jobs.

The polar vortex. With temperature of -20 degrees definitely would not go out shopping unless it’s necessities. Definitely not for a new car (auto sales tanked).

So while it could be bad…it also could be the bottom. We simply do not know.

Calendar base (so not analysis) there is always a March low and a good April (April statistically is the best month for US equities).

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Markets: and now what?

Posted: March 7, 2019 in Uncategorized

This is the million dollar impossible question.

After the worst December from 1931, we have the best rally since 1991. What did change? Essentially, you can see the arrow, That was the 4th of January where the US Chairman Powell declared in an interview that the FED will be more data dependant (meaning probably at least a pause in the rate hike) and that the balance sheet run-off (the drainage of liquidity due to the end of QE) is not set on an automatic course. Powell even admitted: “We’re human, we make mistakes but we’re not going to make mistakes of character”, in response to a question on whether the change in policy was a result from pressure from the White House.

The issue is that, as new Chairman, he wanted to show the markets that he was different than Chairman Yellen and he was sideblinked by the market for his arrogance. (My December newsletter title – Central Banks errors was correct indeed).

The situation is confusing to say the least.

Technical Analysis.

The violence of the down move graphically asks for a re-test of the bottom around SP500 2,300. The top of the current move should be somewhere about 2,802/2,817 and 2,873/2,920. The base of this move 2,742/2,710. A break of that level will open Pandoras box.

The end of cycle target is still SP3,200 or above. Adaptive analysis indicates that this current rally could still last for 30-60 days (end of May).

Economic Data (which are a bit confusing as the winter was really cold in the US) point to a real slowdown in the US economy (not a collapse), which indicates that this is a Bear Market Rally.

The intervention of the FED in January (and the other reserve banks in February) mixes up the cards a lot. There is an old saying in Wall Street – don’t fight the FED.

It simply says that the FED has too much money and power and you better not bet against it.

On the other side there are the USA/China trade wars (or US vs world trade wars, as President Trump is trying to renegotiate 40% of the world trade holds the other 50% of the rally). The market has been propelled higher by “positive leaks” about the trade talks (although there are still quite large differences especially on Intellectual Property and surveillance). But leaks are not agreements. There was even a funny (or not funny) moment where one of Trump’s senior advisers had to explain what was a Memorandum of Understanding to Trump, on national television.

In March there will be the first serious test of this rally:

-The Federal Reserve notes will show what their future outlook is that will influence the yield curve (the inversion of a part of the yield curve was one of the causes of the December selloff as it is reputed as one of the few real indicators of a sure recession).

-The outcome of the US/China trade talks – while I think that both President Trump and President XI both need a positive outcome, implementation will be key. If the media believe them, everything will be fine (well the media believed that US/North Korea summit was positive and the market relaxed – in reality nothing really changed –  US satellites are still picking up activities at nuclear sites – apart the absence of bellicosity).

-The economy: The Q4 earning season (January-February) was not as bad as feared – over 90% US companies have reported EPS growth over 14% year on year (versus 9% forecast). While good, it is way down 20% and the companies beating expectations have declined. Companies need to be able to improve to sustain gains. Q1 2019 is upon us.

-Technical Analysis – we are at a major barrier, but most investors have missed out on the January/February rebound as they divested heavily in December. The Relative Stength Index is overbought so it warrants caution. But there could be a last leg as there is still a lot of cash on the sidelines (or as they say in Wall Street FOMO – Fear Of Missing Out) and the market feels robust ignoring the negative news.

Battle 2741

Posted: February 12, 2019 in Uncategorized

As wrote the 5th February, the battle rages on. There has been an attempt the 5th and 6th February, but it has been defeated.

Now until we stay above 2680/2990 it is a continuation of this battle.

A lot verges in the President Trump/President Xi communications and what the media say about it.

My personal opinion (not analysis) is that they will talk on the phone and then meet in March (there is too much to organize between now and end of month as there is also the meeting President trump/President Kim (South Korea).

In that case the sanctions will not be increased March 1st and the market would be happy and it would move the battle to 1780/1820.

Consolidation is at 2,650.

The support is at 2,600.

We are still in a Bear Market Rally scenario – but often with the negativity in the media and in the financial institutions the market likes to defy expectation. It could be even prepping in a buy the noise sell the news situation (graphically consistent with a top of this move in late April/early May).

The Royal Banking Commission just told us the truth: The banks running a monopolistic empire on Australia.

In one hit they succeeded to go away unscathed and destroy the competition of the mortgage brokers..

Oh yes…they will not be able to charge dead people.

Bank Answer to Royal Commission

CBA +5.06%

NAB +4.97%

ANZ +7.18%

WBC +8.2%

Translation F……off

Stock market: battle 2741

Posted: February 5, 2019 in Uncategorized

As my clients knows the pivot battle of this counter rally is 2,741 (SP500- MDA 200).

This is critical for the market as at this stage is a Bull Trap market with a top extension to 2,810 before rolling over again with target 2,350/2,200.

Time will see if favourable outcome just make it range bound 2,800/2,600, but ta the moment that is what the chart say.

Markets: A pivotal point

Posted: January 9, 2019 in Uncategorized

We are at a pivotal moment for the market.


SP500 and NASDAQ nailed an IMPORTANT resistance (2,581 and 6,903) as an intraday and this is the first well balance effort to return to the Bull market since October. This matches resistance/support of May and February 2018.
IF it clears and specially SP above 2,600 it will be BULL again.
But we need to get clear these hurdle to be sure (there are 65% chances it will do so. It is a textbook bull case 20:1 positive days since 26 January and also bad news are not so bad anymore (eg samsung disappointment lost only -1.68%…if it was December it would have lost 10%).

Nasdaq rally attempt has even a better internals than SP.

Market:the reign of the machines

Posted: December 28, 2018 in Uncategorized

If you wonder why the markets now normally swings 500 points +, I have an answer.

In this holiday period 85 to 90% of trading is done by machines robo advice and automatic rebalancing.