Archive for August, 2015

On bloomberg there was an interesting article in which it said that some Chinese agencies were starting to use Yuan to US at 7 by end 2015 and even 8 and 9 (currently 6.4) by end 2016.

I  think 8-9  is just a test to see what could happen, but 7 is possible (another 8% from here) and I saw other commentaries in similar pattern.

The high intensity crash has done its damage. The low of the SP500 has been 1,867.

Now should appear a low intensity crash zig- zagging but with a final target 1,840-1,820 (potentially even 1,800 on panic).

Anyway due to the technical carnage the market will need 4 to 6 weeks to regain confidence,

By the end of year this should be just a scare!


Stock Market…Apocalypse Now?

Posted: August 25, 2015 in Fed, Market Crash

Yesterday reminded the last word of Colonel Kurtz in Apocalypse Now…the horror the horror the horror.

This probably was the same words of the Fed Chairman Yellen, the Chinese and  many others.

Still reminded me of the Asian Crisis in 1998 (the SP lost 19% and then recovered everything in 3 months due to the rise of the USD and US interest rates – one major difference is that in 1998 the miracle Asian economies were a fad…now they are real).

But for the market to rip through a support (1970) with such ease is literally Global Financial Crisis.

This is what happen when, from 2011, various market forces do not allow the share market to take a breather…the elastic snap with powerful force.

Now most probably we can forget September hike…December will do. Currency, Oil and Markets are a bit too much of an headache.

So where to look for? The FED of course!

Remember China rout started in June and nobody had a problem with it…suddenly in September (the FED was due to hike the 17th) the market explode.

The real question is

Will the FED admit it cannot hike rates and is ready to start Quantitative Easing number 4 (or Quantitative Easing Infinite).

And will the market react keeping on inflating assets or suddenly understand that the FED is powerless to restart the economy and the markets are just a bubble.

Since the interest at stake (politicians, fund managers, Fed) I would stick with answer number 1 for a QE 4 and rally (from October)

Market crashing…what’s next?

Posted: August 24, 2015 in Uncategorized

We had a breach of key SP500 at 1980, so the breach must follow its course.

At this point as the move as been very violent, we probably will have “suckers” rally. The market will have a technical rebound from oversold where it “sucks” in the too eager investors and then make the real  bloodbath (maybe after the 17th September, Fed meeting or if A share 3,500 support gets taken out – OPS already done!) to finish its corrective business (1,830 – but if the FED starts hinting to Quantitative Easing 4 could finish up around 1,870-1,920) by early October.

Markets sell off

Posted: August 23, 2015 in Uncategorized

When the market sell off the plunge makes waves!

As I wrote a few weeks ago there is no volume so do not read in it too much…apart a warning shot. The SP 500 rested on 1980 so we can expect a bounce. It hovered tpo much around 2063 and 2040 …so it had to it.

Still I think the real scare will arrive towards end September early October with target 1820.

I did some system check and everything is confirmed, It looks like is a medium target force so it would be short and sharp ending by mid October.

ASX target is 4,400. Prepare for pain and hysterical media. But when the purge is finished attack without hesitation!

As I posted …the entrance of China in the currency wars (even if by a small amount compared to others) is wreaking havoc.

Specially EM currencies are dropping like ….stones

Vietnam Dong, Turkish Lira, Kazakhstan Tenge, South African Rand, Brasil Real, Thai Bath, Indonesia Rupia, Malaysia Riggit.

It is funny as an obscure country as Kazakhstan can have such an influence (left the peg and dropped 25%). But more than its importance of a country – it is a showcase of what is happening.

It is a massacre on the order of 25 to 50% plunge!

The Reserve Bank of Australia will not be able to stand and watch…probably will have to try and engineer a AUD/USD 65

In a post of few days ago I told you to pay attention as this rally has been sustained by just 5 stocks.

Yesterday Netflix got killed (-7.8%) and a few weeks ago Apple got seriously injured. Like a Game of Throne…they are falling (like apples!).

The big start is China and Emerging Markets in general and people are starting to recall the Asian Tiger Crisis.

Some other development.

Tsipras (Greek PM) resigned and called for snap election as early as 20 September.

Market response was muted. This was the end game of Merkel, so to elect a more pro European Government.

The vote has been called so fast in order not to let the Syriza party rebels or golden Dawn to organize themselves.

It is too early to call on anything – but reading Vouruvakis blog you can understand that the July Greek referendum did not go according to plan. It is now clear that the referendum should have said YES to Europe for an easy way out to Tsipras.

It did not work.

Around the globe there has been a rockets exchange between North and South Korea and Israel/ Syria…but that is “quite normal”.

The big headline  battle is on China and  to see if the Government can hold the A -Shares at 3,500  (my projections…not. the target is 3,000/3,150 in an extremely fast move).

The other more subtle, but more dangerous battle is in the US Corporate Bond. US Corporate Bond have seen massive losses augmented by the easy tradable ETFs.

The issues are two and quite complex.

US Corporate junk bond (eg energy bond) are required to demand the highest premium…but are held back by the fact that the FED has still the rates set at the lowest levels*

A big part of this stock rally has been the share buybacks. Most of the US companies used these “buybacks” to create high yield (junk) bond. And now we have an issue on some of those bonds.

The behaviour of the market is consistent with the De Mark signal I gave in October 2014. In essence The De Mark signals happened 3 times in history and the market got busted or went sideways for several years (my main theory – range SP500 1,800 -2,200)

*This scarily reflects a problem that I highlighted in a post in November 2014, that this was one of the risk of Yellen as Chairman nominee. That she would hold off rising interest rates for too long.

I really do not like how this September/ October (more precisely mid September) is shaping up.

September is usually a positive market, so things could be kept together till mid September.

On a technical analysis (SP500) we have a support at 2,063 – 2,040 and 1,970. If 1,970 goes…the first real support is around 1,820(!!).

The things that could make this happen are quite too many to mention. The first that come into my mind are Fed rising (or not rising if the market is in a bad mood), the MDA 200 on the SP200 has been crossed (Death Cross), oil can wreak havoc on oil nation- emerging market – energy high yield US bond market), USD strength could spark another 1997 Asian Tiger crisis.

On the geopolitical side there is the great unknown China, a Greek Government failure, a re heating up of Ukraine tensions (by the way, not in the media, but they started again using heavy weapons) or something unseen (Saudi Arabia, North Korea).

In all it should be a nasty short healthy correction – so as an investor you should not worry too much as it set up the market for a great rally into end of year!

I do not think that the FED will commit the same mega error of 1937*

*In 1937 hiked to early the rates sending the US markets and world economy in a secondary recession after the 29. And this was one of economic causes that created the perfect conditions for the start of the Second World War.

When a Russian saved the world

Posted: August 19, 2015 in Uncategorized

Today we celebrate the anniversary of the death of an unknown Russian hero.

If it was not for him we would not have to worry about the markets, children and anything else.

At the height of the Cuban missile he refused to start a nuclear war.

September could be a month o remember…or not.

While economists are pretty much focussed on a September hike…the jury is still out there.

In the data related market (options pattern, VIX, bond curve) there is nothing indicating a rise.

In the gold pricing structure and in the USD actually there is a “not hike” hypothesis.

If September does not happen the next most probable month is December.

So the Jury is not out and what the market thinks about it even less.

In doubt, do not bet!

Greece suddenly disappeared (again) from the world financial headlines.

But rest assured that it will reappear….my best guess is November/December.

The bailout has been approved, but at least 35 Syriza rebels are thinking to create their own party. Definitely not in August as everybody is at the beach! The bailout vote was approved with 118 (but if Syriza get a non confidence vote they would have failed as they need 120)

This would probably create a Greek government crisis in September / October and then to an election.

Greece is just not made for Europe. It is just there to keep the Euro low and favour the German.

By the way…Germany is the one that gained (yes gained) most from the Greek crisis since 2010. As everyone ran for cover they bought German Bunds and so driving German interest rates low ….so they saved Euro 109 billion (3% of Germany GDP) ( Leibniz Institute of Economic Research), call them stupid!

So next time the crisis hit, they could let it go…as they made more money than if Greece defaulted on the entire debt.

Long live the Fourth Reich!