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How Watching Market Psychology Can Help You Time the Market

Elliott wave patterns in price charts reflect the struggle between the bulls and bears
By Elliott Wave International

 

Two economic reports hit the newswires Thursday morning (March 6). Both were important, yet each one had the opposite implication for the trend. The market chose one report over the other, and the question is, why — and what can we learn from that? Read more.

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Investment Markets Overview — W/E 5th September 2014

They say that it’s a sign of madness repeating the same thing again and again, despite it not working, and that’s just what the ECB President, “Super Mario” Draghi did this week. In a desperate attempt to re-flate Europe, by slashing the Euro-Zone’s main refinancing rate by 66% from 0.15% to 0.05%, smacks of both desperation and panic, he has effectively repeated his “answer” to the Zone’s de-flationary bias of the past few years, despite continued falling inflation, dormant economic growth and little demand to borrow or lend. Furthermore, the amount charged to banks, to deposit cash via the ECB deposit facility rate, was doubled from 0.1% to 0.2%, despite very little result from the 0.1% introduction of only June this year, as some crack-pot attempt to force banks to lend. A well known editor of a well know financial publication, who will remain anonymous to save blushes, observed, “Draghi’s not daft and whilst he may not admit that he’s targeting the exchange rate, he is,” going on to say, “a weaker currency can help a lot. Britain avoided deflation in the last few years mainly by crushing the pound via quantitative easing (QE). Whilst we wouldn’t disagree that Draghi’s objective is to devalue the Euro, as the UK, the US and Japan are also trying to do, we show an interesting chart with supporting comment under the E-Z section below that states the facts, not fiction.

5 Sept 14

Subscribe to the Full Investment Markets Overview Newsletter which contains the following:-

Additional Commentaries:
•US economic data . . .
•Euro-Zone . . .
•The UK . . .
•Out East . . .
•The $US index . . .
•Within the commodities complex . . .
•Economic data due next week includes . . .

So, unable to inflate by liquidity creating operations alone, Draghi has kow-towed to “QE” but in a devious manner …..

Charts:
1.Indices Weekly
2.US NFP V US Private Sector Jobs
3.UK QE V UK CPI and £/$US
4.OZ Retail Sales V OZ GDP
5.Commodity 1 Week Moves

Table:

13 Indices, 11 columns of detailed information, for accurate analysis

Wisdom comes from hindsight, not the actual act of falling on your face

Click Here to view Details of the full version of this Newsletter which includes full text and detailed Charts for each section

 

Ailing-Nomics

Shinzo Abe was re-elected as Japan’s Prime Minister in December 2012, a post he had held in 2007, on promises to revive the country’s sluggish economy by way of a 3-point plan, dubbed, “three arrows,” consisting of a massive fiscal stimulus, aggressive monetary easing via the Bank of Japan and structural reforms needed to improve competitiveness. The plan was immediately labelled Abernomics.

The results so far?

Well, the stock-market is not the economy, but it’s a leading indicator of it and also a bell-whether of collective social mood, so let’s first look at that:-

4 Sept 1

Initially the market soared by 50% over the five-months following Abe’s election, aided and abetted by a 20%+ debasement of the Japanese Yen, since when both metrics have moved sideways on falling volumes, (note the blue dashed lines.) Abe achieved the currency fall by heaving out the incumbent Central Bank Governor, Masaaki Shirakawa, and replacing him with someone more prepared to sacrifice the Bank’s independence and crank up the printing press, akin to their counterparts in the US and the UK.

What about the Economy?

The first quarter of 2013 showed promise as measured by GDP, not surprising given the sentiment-induced stock-market boost shown above, but after the subsequent side-ways move, it’s looking decidedly iffy. Just one month after the Japanese government raised its assessment for the economy, the provisional Q214 GDP number slumped by -6.8% annualised rate against Q1’s +6.1%, a huge reversal which has co-incided with the introduction of an 8% sales tax and higher energy costs, an unfortunate by-product of the Fukushima disaster of March 2011 and the closing of Japan’s Nuclear power plants, replacing its need by more expensive imported energy.

Two decades of deflation has vastly depleted household savings and the money in circulation, as shown by the nation’s M3 money-supply. It’s interesting to note the correlation between money-supply and GDP and although not shown, M3 has been in a falling trend since 1990, albeit that it enjoyed a rally post 2006, including the spike on Abe’s appointment but it’s now declining once more.

4 Sept 2

Recent economic data out of Japan has been disappointing to put it mildly, including falling small business confidence, housing starts in July slumping by 14.1% year on year after June’s – 9.5% and lower retail sales. Unemployment rose to 3.8% in July whilst overall household spending for the same month contracted by 5.9% after June’s – 3%. As one would expect, there is a close relationship between the latter two variables, particularly for an ageing population, holding over half of their financial assets in cash.

4 Sept 3

Aside of a reduced work-force, which is experiencing a fall in real wage’s, the ¥1,000,000,000,000,000 of public debt, which needs to be serviced as the printing press is ratcheted-up yet another gear, not to mention the plans for a further hike in the sales tax, consumption, the engine of Japan’s GDP, is unlikely to increase any time soon.

Ailing-Nomics is perhaps a more fitting term.

 

Investment Markets Overview – W/E 29th August 2014

Whereas last week’s overview commented on the fractures appearing within certain Central Banks,’ this week has seen further cracks appear within the European Union. Hot on the heels of “Super Mario’s jib at German dictated austerity reforms,” French President Hollande, with an approval rating of just 17% and faced with record unemployment in Europe’s second largest economy, felt obliged to sack his industry minister, Arnaud Montebourg, the chief critic of the budget cuts made to allow for a reduction in payroll taxes for business. Meanwhile, the new kid on the European block, 39-year old Italian Prime Minister ,Matteo Renzi, is using Italy’s six-month presidency of the 28-nation EU to make a stand against the German-led drive to clamp down on spending, finding support from both Spain and Greece and even within Merkel’s SDP coalition partner. Adding to the mix is Super-Mario’s determination to drive down the value of the euro, by way of QE, the latter deemed to be illegal by German law-makers, not to forget that European banks account for about 75% of total foreign bank lending to Russia, $US180BN, as increased sanctions against Russia are being considered by the EU.

29 August 14

Subscribe  to the Full Investment Markets Overview Newsletter which contains the following:-

Additional Commentaries:
•US economic data . . .
•Euro-Zone . . .
•The UK . . .
•Out East . . .
•The $US index . . .
•Within the commodities complex . . .
•Economic data due next week includes . . .

Returning to the cracks appearing within the EU, it isn’t just the political class who are dividing  …..

Charts:
1.Indices Weekly
2.US Personal Incomes and Spending V US GDP
3.German Business Confidence V E-Z M3 MS
4.Japan Unemployment V Japan Household Spending
5.Commodity 1 Week Moves

Table:

13 Indices, 11 columns of detailed information, for accurate analysis

Best laid plans do not always have the desired effect, particularly when political

Click Here to view Details of the full version of this Newsletter which includes full text and detailed Charts for each section

Unintended Tax-losses

UK unemployment jumped from 5% in 2008 to a high of 8.4% at February 2012, thanks to the shedding of labour following the 2007/09 financial melt down. Since then, there has been a marked turn-around, with unemployment falling to the current 6.4%, much to the surprise of most economists’, analysts and the Bank of England boss, Charmer Carney.

If one digs a little deeper within the employment data, you very quickly realise that roughly two – thirds of new jobs created since 2008 are classed as self employed, with the trend escalating over the past year or so to the highest level within the past 14-years, at 15% of the workforce. According to figures from the Office for National Statistics, or ONS, of the 1.1m new jobs, 732K are self employed, with the number aged over 65 doubling during the period.

29 August 14 blog

This is good news at first glance, but, has had unintended consequences, in that it also answers the confusion as to why UK average earnings are not rising. In fact, as can be noted within the chart above, earnings are now falling both in nominal and real terms.

Average UK earnings, excluding bonuses, have fallen from 4.5% annualised in 2007 to -0.2% now, dragged lower by average incomes of the self- employed, which have collapsed by 22% over the same period.

Aside of also explaining just why the rate of economic recovery has been sub-par, despite UK GDP allegedly being the strongest within the G7, the aforementioned has a further unintended consequence on the Government’s finances. The De-Flation of earnings has reduced the tax-take to HMG, plus the self-employed have more control over how and when they pay taxes. This would suggest that taxes in the round will have to rise, as the cost of running the public sector shows very few signs of falling.

Investment Markets Overview – W/E 22nd August 2014

As liquidity starts to vaporise and volatility returns to the financial markets, policy-makers the world over, and in particular the Central Bankers, have moved into overdrive to extend the veneer that, “all is well.” The united front, however, is fracturing, as evidenced within the minutes of the latest policy meetings of the Federal Reserve and the Bank of England released this week and by “reading between the lines,” of a speeches made at the annual Jackson Hole economic symposium. More on this later, but as the Euro-Zone ground to a halt in Q214 it’s reassuring to note that the EU Commission has it’s priorities in place as it introduced more rules, four years in the making, that bans powerful vacuum cleaners, including many of the best in the market-place, citing climate change concerns and the cutting of Europe’s energy usage. The EU “experts” have restricted the power of vacuum cleaners to levels last seen in the 1960s, whilst manufacturers, who in the main disagree with the commission’s conclusions on power/efficiency, say it could also reduce cleaners’ ability to remove fine particles from the air they pump back into the atmosphere, potentially leading to health problems for allergy and asthma sufferers. The European Commissioner for Energy since February 2010 is Günther Hermann Oettinger, aged 60 and a career politician for half of his life, or should we say about 75% of his “working life,” latterly as a Merkal insider. Allegedly, Chancellor Angela Merkel nominated Oettinger as she wanted to appoint a German Commissioner who would not outshine her. Judged by the end result from that other climate-change initiative, energy efficient light bulbs, which provoked a backlash from consumers who said the newer energy efficient bulbs produced less light and were more expensive than the traditional ones, she will have achieved her objective, giving a whole new meaning to dimming the lights.

22 August 14

Subscribe to the Full Investment Markets Overview Newsletter which contains the following:-

Additional Commentaries:
•US economic data . . .
•Euro-Zone . . .
•The UK . . .
•Out East . . .
•The $US index . . .
•Within the commodities complex . . .
•Economic data due next week includes . . .

Returning to that “fracturing of the united front,” the latest Bank of England minutes showed   …..

Charts:
1.Indices Weekly
2.US PPI V US CPI
3.UK House Prices V Asking Prices
4.HK GDP V HK Unemployment
5.Commodity 1 Week Moves

Table:

13 Indices, 11 columns of detailed information, for accurate analysis

Perhaps the Biggest Bubble is in Government and Its Various Organs

Click Here to view Details of the full version of this Newsletter which includes full text and detailed Charts for each section

 

 

Spot the Difference – UK House Prices Resend

Apparently our July 2014 “Spot the Difference” blog on UK house prices failed to reach many of our readers, so we send it once again, together with recent data observed from UK mortgage group, HML, who state that, “almost half a million U.K. house-holds were in negative equity at the end of 2013, including 41% of borrowers in Northern Ireland and 16% in the North of England, with 53% of first-time buyers in the North East still submerged.”

Also, the latest Rightmove UK asking price has fallen by a near 3%, placing further pressure on the above.

22 August 14 blog

Investment Markets Overview—W/E 15th August 2014

It was a month ago this week that Portugal’s Banco Espirito Santo SA jolted global markets when it missed short-term debt payments and shares in Espirito Santo fell 17 percent in days as investors’ rushed to the exit door on concerns that financial problems within the Espirito Santo group were understated, despite the “reassurance on containment,” by policymakers including the Central Bank and the regulators. Investors’ were correct to bail -out (excuse the pun,) as less than a week later the group filed for protection from its creditors with liabilities far higher than first suggested. That said, the share price had already slumped by 90% since its March 2014 high and by 99% since its 2007 all-time high, when BES’s destruction was sown by it amassing far too much debt for acquisitions. This week it was African Bank Investments Ltd turn to have its shares suspended and to be “rescued,” by the South African Reserve Bank, after its share price collapsed by 95% over the previous week and by 99% from its more recent all-time high of April 2012. African Bank’s troubles apparently stemmed from its Rand 9.2BN acquisition of a furniture business back in 2008, which prompted losses and write-downs after sales fell, which is hardly surprising given the very high consumer debt levels within SA. We may learn of the full situation at leisure but the real moral of these two events are that most half-decent chartists would have recommended an exit from these companies way before the “news hit the fan.”

15 August 14

Subscribe to the Full Investment Markets Overview Newsletter which contains the following:-

Additional Commentaries:
•US economic data . . .
•Euro-Zone . . .
•The UK . . .
•Out East . . .
•The $US index . . .
•Within the commodities complex . . .
•Economic data due next week includes . . .

The George Clooney of the Central Banking world, Charmer Carney, was on parade this week   …..

Charts:
1.Indices Weekly
2.US Consumer Confidence V S&P 500 Stock-Index
3.E-Z GDP V German GDP
4.Japan M3 MS V Japan GDP
5.Commodity 1 Week Moves

Table:

13 Indices, 11 columns of detailed information, for accurate analysis

Just who regulates the Regulators?

Click Here to view Details of the full version of this Newsletter which includes full text and detailed Charts for each section

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