On a range of trends and topics these are unusual times we live in, and stock market volatility is no exception. As a matter of fact, market volatility in general is very low i.e. across asset classes, as discussed in the latest weekly report. Yet here is a somewhat unusual measure of volatility, which is coming in at a 22-year low. The indicator (red line in the first chart below) shows the running annual count of daily changes in the S&P500 that exceeded positive or negative 1%. To clarify, if the market was up e.g. 1.3% that would be counted, likewise if the market was down -1.4% for example it would also be counted. Up to Friday...
Last week, I discussed the issue of debt and why “people buy payments.” This article generated much discussion and several emails including the following. “You argue that rising debt levels lead to slower economic growth, but what if it is slower growth leading to rising debt levels?” This is essentially the “causation” or “correlation” argument which has been a point of contentious debate over the last several years as debt levels in the U.S. have soared higher. One of the primary problems, not only in the U.S., but globally, is that government spending has shifted away from productive investments that create jobs (in...
Previous: On Friday, trading on the euro/dollar pair closed up. Trading volumes were high, which was enough to hit a new 52-week high with an empty economic calendar. The euro/dollar rate rose to 1.1683. The general weakness of the US dollar, combined with investor confidence in the reversal of the ECB’s QE program, is pushing the price up. Day’s news (GMT+3): 10:30 Germany: Markit manufacturing PMI (Jul), Markit services PMI (Jul); 11:00 Eurozone: Markit manufacturing PMI (Jul), Markit services PMI (Jul); 13:00 Germany: German Buba monthly report; 15:30 Canada: wholesale sales (May); 16:45 USA: Markit manufacturing PMI (Jul), Markit serv...
The euro made a marginal new high in early Asia, but participants rightly drew cautious ahead of the flash eurozone PMI. The flash PMI was softer than expected, and although the composite fell to six monthly lows, it is more a reflection of how steady it has been at elevated levels. At the same time, it is consistent with one of our contentions; namely that the economic momentum that was so apparent in the first half is no longer accelerating. The euro was sold for half a cent before finding a solid bid near $1.1630. The pre-weekend low was about $1.1620. Recall that initially in response to the ECB meeting, the euro initially fell...
The first to suffer Beijing’s crackdown against China’s private merger-crazy conglomerates, wave was the acquisitive “insurance” behemoth, Anbang, whose CEO Wu Xiaohui briefly disappeared as the Politburo made it clear that the “old way” of money laundering – via offshore deals – is no longer tolerated. Then, several weeks later and shortly after the stocks of the “famous four” Chinese conglomerates plunged after China officially launched a crackdown on foreign acquirers amid concerns of “systemic risk”, it was HNA’s turn, which as we described last week, risks be...
The downfall of the dollar continues and today it is quite pronounced in the pair that usually best reflects US developments. USD/JPY is trading just above support at 110.60. The line formed part of the steep uptrend channel that the pair was riding on, all the way to 114.50. When the pair moved out of the channel, the pair began falling and falling. Further support awaits at 109.60, followed by the place where the line began: 108.80. The cycle low is 108.10. Resistance is at 111.80. Another technical factor to note is the death cross. Since the 50-day moving average slipped below the 200-day moving average, the pair is following the paral...
A new week begins with new weakness in the US dollar. USD/JPY is at the lowest in a month, USD/CAD is looking at the lows and even GBP/USD is recovering. The Australian dollar stands out with the largest percentage-wise gains. AUD/USD is trading around 0.7960, still below the spike high of 0.7987 that was recorded last week. Can it make it to the very round number of 0.80? The Aussie jumped higher on the hawkish meeting minutes from the RBA. An attempt to play them down did little harm to the Aussie. However, a risk for further advances may come from the central bank. They certainly do not want to see a strong A$. The RBA officials will h...
Commentary The S&P 500 (SPY) is soaring high since its impressive breakout two weeks ago. The S&P 500 (SPY) is holding onto significant moment since its last breakout: the upper-Bollinger Bands (BBs) define the latest uptrend. The Nasdaq and PowerShares QQQ ETF (QQQ) have charts very similar to the S&P 500. Unfortunately, the stall of the last two trading days happened to occur right at the edge of the overbought threshold. AT40 (T2108), the percentage of stocks trading above their respective 40-day moving averages (DMAs), closed at 68.2% on Wednesday, June 19th. AT40 got as high as 68.9% the next day. On Friday, AT40 closed at 64...
Last Thursday’s signals were not triggered as none of the key levels were ever reached. Today’s AUD/USD Signals Risk 0.75%. Trades may only be taken between 8am New York time and 5pm Tokyo time, over the next 24-hour period. Short Trade 1 Short entry following some bearish price action on the H1 time frame immediately upon the next touch of 0.8000. Put the stop loss 1 pip above the local swing high. Move the stop loss to break even once the trade is 20 pips in profit. Take off 50% of the position as profit when the trade is 20 pips in profit and leave the remainder of the position to ride. Long Trade 1 Long entry following some bullish p...
After opening the day marginally higher, stock markets in India have continued their momentum. Presently, they are trading near their all-time high levels. Indian indices are scaling new highs of late. And there’s a flood of liquidity pouring into Indian stock markets in search of higher returns. One of the key factors behind the above flow of liquidity is the downward trend in interest rates. And the demonetisation drive last November accelerated this trend. Indian banks were flushed with liquidity. At the same time, credit offtake was poor. This forced them to cut interest rates on deposits. Interest rates are a key macroeconomic ...