Yesterday was a telling day. The violence of the move (in relation to the crisis and data) has been stunning.

Telstra +6%, Iluka Resources close to -8%, Walmart +9% etc etc.

We are in a low volume period (between 15 August and 3 September, US Labor Day) and the machines are reigning supreme.

All commodities and related shares were under full pressure. Algos trading was around 85% of all trading
Why do I accuse the machines? Apart some data I am receiving – there are large discrepancy in the US/UK ADRs behaviors that are a tell tale – as the machines are working more on the US/UK markets.
BHP US  Australia -2.55% BHP London -5.22% and BHP US -4.82% (the difference is just the Pound vs USD)
Even more telling and with a real source is TENCENT
Tencent USA -10.22%
Tencent HK -3%
The only difference is that, as the China (and HK) market are down almost 30% – the Bank of China last week increased the deposits for short position in China related positions to 20% – so any machine attack in China has become 20% more expensive.
The Reserve banks should foollow China and regulate more the algos – or they will become the culprits of the GFC 2.
And as you know from the movies they will take no prisoners.
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Gold and China

Posted: August 7, 2018 in Uncategorized

Gold has crashed badly in these last months. And it is still full on shorted.

Very few people noted the correlation between Chinese Yuan and Gold.

 

This is because the Yuan is pegged to an SDR Basket that contains gold.

China let the Yuan devalue as part of the trade war – but now is reaching the hard limit imposed after the breach in reserves in January 2016.

This new pattern started today as China increased to 20% the obligatory reserves for Yuan denominated derivative trading. So the pattern could soon invert.Capture Yuan Gold

 

ScalaPrivateW_NEWSLETTER -July 2018

Capture tariff

I decided for a easier way to publish my newsletters directly from my blog,

ScalaPrivateW_NEWSLETTER -June 2018

Gold weakness

Posted: July 23, 2018 in Uncategorized

Gold has been one of the worst performing sector in July what happened?

 

There are several factors at play

  • All the metal conglomerate is under pressure from the potential trade war spill over.
  • June /July are typically weak month for gold and precious metals due to the North Hemisphere summer holidays
  • US Dollar strength (now in doubt as President Trump is looking into currency manipulation – specially the Yuan dropped like a stone).
  • Temporary subdued perceived geopolitical crisis ( I say subdued as satellites show an expansion of North Korea missile program structures and the new Iranian sanctions are due on 4th November).
  • The market has been so good that gold, the classic counter trade, fell. Be wary, crowded trades never worked the last two years.

So – weakness, but not uncommon. Interestingly gold miners are at one of the cheapest level in respect to gold price.

A similar theory applies to all precious metal sector.

Trade wars

Posted: July 12, 2018 in Uncategorized

Ttade wars are ratcheting up and, at least until the November Congress election, they will keep on being with us.

I explore more in detail in my newsletter, but it is a multi_faceted issue.

1 Part show for the mid term election

2. Part real – China 2025 is a direct attack to the US supremacy

3. Overdue as China is attacking the world since 1995.

The issue is that there is no negotiation as until now everybody thought is was a fake trade war.

About the market reaction – it is both bad and good. Why also good? It is one of the few thing that can stop the Fed rising interest. Interest rate, at the end, are the only real killer of bull markets.

On the side, and not talked about, the US Congress is trying its best to take away the tariff power from the President. Not an easy task with ann election pending.

Australian market strenght

Posted: July 2, 2018 in Uncategorized

Recently the Australian market has been on a tear. Notwithstanding lower growth and weak currency.

The reason behind the sudden move is due to the end  of financial year window dressing, but also to the US/China trade wars.

The large share fund with Asia ex Japan area of investment are moving away from the war zone -so exiting the markets more China – dependent to more China independent markets (Australia has a high correlation with China, but less than Hong Kong and Singapore, for example).