Archive for January, 2016

Bottom up Earning Per Share estimates for the aggregate of SP 500 companies is -4.7%.

This is quite a serious drop relative to the average  10 years (-2.2%) and also in other timeframes.

So there is a quite serious slowdown in the US economy. Not recession level, but considerable and in line with the current market falls.

As per market…unless it goes over 2043 we still are in a bear market rally.


Japan added to the list of “negative interest countries” and the markets are cheering.

Probably it will not save the market pattern…but it also means that at the moments of panic in this year the Gang of the Reserve Banks will come and save us.

No Fed for Old Rally

Posted: January 28, 2016 in Uncategorized

As the brutal Neo Western movie “No Country for Old Man” from the Cohen’s brother – the Fed did not came in to save the markets.

If you saw that movie – you know things will get quite ugly soon.

I examined long term the relationship between oil and stock market.

The correlation is there, but sometime it is “in range” instead of directional.

Let me explain

The markets really likes oil being between $75 and $112.

It has a positive bias until $40.

Under $40 or over $112 is incrementally negative.

The current status of the market so is negative and if oil goes to $20 or even $10….a bloodbath would ensue.

What is the consesus on oil from the oil traders and commodities futures?

A bottom in late February/March around $25/$20 and then a recovery around $50/$47 by October and December around $40.

So we can extrapolate for the market an overall weakness for the whole of 2016.

A crash would occur late February/ early March taking out the current low, which would be a perfect moment to buy.


All this reflects a Chinese market bottom around 2,500/2,400

Libya finally elected a Pro Western government. Soon they will call in for Western help and a coalition will support/invade Libya to get rid of IS Libya.

Syria the Americans are expanding and modernizing an airfield able to host CH 130 Hercules. It is not clear why,but it is an airport.

As predicted, we saw the intervention of the ECB and this week we will probably see the Fed and Bank of Japan.

The short squeeze, depending on strength, has targets area 1,920, 1,970 and then 2,050. (it would be ASX200: 5,350/5,400 approximately).

On a technical analysis point of view the graphs says “it’s a trap!!”.

Unless it clears the all time highs 2,130 – the targets between here and October at 1,785, 1650 and, on panic, a spike on the 1,550 (ASx200: 4,000 or lower!)

Yes the Reserve Banks could negate this pattern. And that is why I say “a game too dangerous”.

But it definitely looks scary

Quantitative Easing 4

Posted: January 22, 2016 in Uncategorized

All the Reserve Banks are intervening…something I spoke about…the 18 September 2015!

Well, quite ahead of time. Battle SPX 1870 has started!

This week will be a decision maker.

We just had Draghi speaking and China intervening. Now next week we wait for Yellen and the all important FOMC.

The issue is SP500: 1,870 and the algorithm trading.

If the Reserve Banks cannot stir the market decisively above  1,870 the machines can see two targets 1,785 in the near terms and 1,500 between here and October.

What is worst, as 2008, a lot of asset classes looks like linked…so not much protection there.

Scary picture, I know. very few places to hide.

Algorithm trading is really diffused in the US – not a fantasy or a conspiracy theory (there are several pieces of information even from the SEC – Security Exchange Commission -US). Last year they seem to have a momentum trading style (so pushed over and over the FANG – Facebook, Apple, Netflix, Google) – this year they seem to have changed style in a price/volatility.

Evercore data signals that on 101 momentum stock, only 5 have risen since start of 2016. Now Robotic buy/sell by quantitative machines has turned to price trend/volatility.

There are a few strategy to fight back – but overall, for the market, only the the Gang of Reserve Banks (US, China, Japan, Europe and England) can save it.

Definitely, if you are not aware of this, you have a problem.

Bloomberg – PBOC Injects Most Cash in Three Years in Open-Market Operations

The counterattack of the reserve banks is starting…next 7 days are critical.

Markets: a time for a kill

Posted: January 21, 2016 in Uncategorized

Well…what a night (in Australia).

If you remember my posts in Augusts, 1867 on the SP500 did not have the look and feel of a bottom.

Fast forward and there we have it.

Now the market will have to hold here (1785 to 1870) or we go to a situation worse than the GFC as Central Banks are running out of Ammo.

In the next week all the Government guns will come out from Draghi’s ECB to the Fed.

That will be The Point to Watch.

On a different note: if you worry re GFC2    you are focussing on the wrong issue.

If GFC2 arrives oil will drop to $10 or lower and Russia before going down will start a Third World War. Putin said it himself. Nuking Turkish infrastructure was his first  choice in a war. The Middle East will go down in flame and even China could act very aggressively (in dictatorships when things get problematic a war is often the solution).

So in effect please do not worry. 95% this is the low.
The 5% so scary it is not even worth considering.

PS. Even Saudi is getting worried re oil…it just introduced capital control. So the oil lows are near.