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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 — Week Ending 25th July 2014

The cost for the US Treasury to borrow 2-year money has soared by 240% in less than three years, whilst the cost of it borrowing for 10 or 30 years have jumped by 80% and 34% respectively over the past two years, even allowing for the “bear market rally” in the 10 & 30-year yields since the start of 2014. Meanwhile, annualised US GDP has collapsed from the 3.3% rate of Q211 to a pathetic 1.5% rate as of Q114. For those of you trying to “join up the dots,” on what’s going on, which doesn’t include the world’s central banks, the world bank, the IMF and the myriad of other clueless, tax-payer funded entities, who when asked (infrequently if ever) why rates are rising reply by saying because “economic growth is recovering.” Really? One only has to look at the huge debt load bearing down on the United States and elsewhere, essentially the cause of the 2007 GFC, and massively compounded by policy-makers since, hence economic growth is collapsing once more whilst the borrowing costs are rising due to investor’ concerns on being repaid.

25 July 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 rise in borrowing costs, a short trip down memory lane is in order. In 1980 nominal  …..

Charts:
1.Indices Weekly
2.US Housing Prices & Durable Goods V GDP
3.UK Govt Borrowing V UK Debt/GDP
4.Japan GDP Consensus  V the Nikkei Dow
5.Commodity 1 Week Moves

Table:

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

Contrarianism isn’t just a word, it’s a way of life.”

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

Investment Markets Overview — Week Ending 18th July 2014

It’s becoming a bore commenting on the World’s leading Central Bankers, but as they are publically jaw-boning on an almost daily basis now, particularly on “policy guidance” and other such nonsense, together with the irrefutable sway that they appear to hold on the investment community, we will continue to interpret their machinations in an honest and frank manner. The bosses of the Fed, the Bank of England and the ECB were all on parade this week, appearing before their respective “political controllers.” First up was the comely Queen Yellen who had back to back testimonies in front of the Senate Banking Committee, where she raised concerns over smaller company stock valuations, having been oblivious to any “bubbles” just a short week earlier. Share prices of some the largest employers within the US duly tanked on the statement. The following day, appearing before the House Financial Services Committee, she said,” asset values aren’t out of line with norms and my general assessment at this point is that threats to financial stability are at a moderate level and not a very high level.” Clear as mud then, but at least stocks managed to recoup some of the losses. Meanwhile, Mario “I’ll do whatever it takes” Draghi, testifying before the European Parliament, announced a plan to become more “Fed-like,” by way of publicised minutes of meetings, which although in theory should provide greater transparency, will likely further politicise the 24 members of the ECB’s governing council, who all remain tied to their own member states. Finally, charmer Carney, appearing before the UK’s Treasury Committee, explained that the curbs on the housing market were introduced not because people would be unable to pay those loans, but to head off the impact of such high household indebtedness on the economy. This from the former Governor of Canada’s central bank, who presided over a jump from 142% to 163% debt to disposable income between February 2008 and June 2013 whilst there.

18 July 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 financial newswires were unanimous in their rationale for the increased market volatility witnessed this week and for Thursday’s market sell-off …..

Charts:
1.Indices Weekly
2.US Housing Starts V Prices V Confidence
3.UK Real Wage Growth
4.Singapore GDP V Electronic Exports
5.Commodity 1 Week Moves

Table:

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

Rational People OR Emotional Sheeple?.”

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.

Our “UK Housing Hints,” penned just over a year ago, highlighted the yawning gap between the Rightmove asking price and the average UK house price, stating that the monthly Rightmove survey is very useful for gauging “sentiment,” as opposed to any guidance as to where prices are going, particularly as it tends to “lag” the average house price index rather than “lead” it, when compared to the Halifax average house price index. At the time the gap stood at 33%, as shown below.

17 July Blog 1

We also noted that the correlation between the asking price and actual price were in lock-step before the bubble burst, which continued through the 2007-early 2009 rout, albeit not quite to the same degree, before they subsequently diverged, describing the gap as Hope versus Reality.

Fast forward one year and a heck of a lot of tax-payer assistance and what do we now see:

17 July Blog 2

Both prices have moved higher but the gap remains wide, at 32%, so no great difference between hope and reality.

A final chart compares net mortgage lending, which jumped to £2BN in May versus the £1.7BN witnessed for April against average UK house prices, this time courtesy of the nationwide.

17 July Blog 3

We see another yawning gap here, which poses the question, “spot the difference post 2007?” Either house buyers are finding other sources of funding or Johnny foreigner really is buying up with cash, but in downtown Bradford as well as prime London.

Whatever the reason, a chart like this suggests there will be a reversion to the norm. Either mortgage lending is about to rocket higher, after the stringent lending controls recently enforced, OR, hope will really meet with reality via a collapse in house prices that will make 2007/09 look like a tea-party.

Place your bets ladies and gentlemen.

Investment Markets Overview — Week Ending 11 July 2014.

Investor complacency, which has never been higher in respect of just about all investment asset-classes as measured by sentiment and volatility readings, took a hit this week thanks to concerns within both Portugal and Puerto Rica. Portugal’s second-largest bank, Espirito Santo, missed payments on commercial paper, sparking fears of further problems within the country’s banking sector and for the wider economy as Portugal tussles with a Debt / GDP ratio of 129%, the third largest within the Euro-Zone, whilst Portugal’s corporate Debt/GDP is at a nose-bleed level of 250%. Meanwhile, Puerto Rica’s debt, which ranks at No 3 of US states after California and New York has soared to $73 BN and more worrying is owned by about two-thirds of the US municipal bond fund sector. It took a turn for the worse this week as Puerto Rico’s Governor proposed changing the law allowing public utilities, such as the commonwealth’s main power authority, to negotiate with bondholders to reduce their debt loads. Ironically,after pumping $US Trillions into the financial system over the past few years, and thereby creating the morale hazard of investor complacency, the same central bankers now say they’re worried that it is increasing the likelihood of market instability, without a jot of responsibility in respect of their contributions to it.

11 July 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 . . .

Just as “crowd-funding” is transforming the means of raising business capital away from the banks, a new online business is reducing the cost of trading Gold and Bitcoins …..

Charts:
1.Indices Weekly
2.US Treasury Federal Budget Debt
3.UK Wages ONS V KPMG
4.Japan PPI V M2 Money-Supply
5.Commodity 1 Week Moves

Table:

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

When volatility is low, risks gets hidden.”

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

 

Investment Markets Overview – W/E 4th July 2014

Protestors,’ including local politicians, took to the streets of Hong Kong this week for the largest rally in a decade, seeking, “full democracy.” A recent “white paper” issued by Beijing appears to undermine the 1984 Sino-British agreement which allowed Hong Kong a semi-autonomous status for 50-years from the1997 handover date, thereby maintaining its capitalist system. Concerned over, “too many wrong views in respect of the one country, two systems principle,” a committee of 1,200 people are telling the city of 7m, they should “above all be patriotic with the city’s judiciary requiring the basic political requirement of loving the country.” Needless to say, the residents’ of Hong Kong, once the bastion of free-market capitalism, see the required patriotism as an endorsement of the communist party and system. Furthermore, whereas the Chinese government has re-iterated the promise to allow Hong Kong to select its new leader in 2017, it now insists it has no obligation to allow an open nominating process. Shock, horror, this sounds akin to the UK’s parliamentary process where the public can select which political party that it wishes to govern the country, but not the people selected for the party.

As we are now half-way through 2014, we show the H114 performance of the “runners and riders,” with the week’s return reported within each section below.

4 July 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 . . .

Delving deeper into those US employment numbers, the fall in the “official” unemployment rate to 6.1% in June, from May’s 6.3%, looks impressive, but …..

Charts:
1.Indices Weekly
2.US Unemployment V CPI
3.UK House Prices V Mortgage Lending
4.China V US Cement Useage
5.Commodity 1 Week Moves

Table:

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

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The Affordable care Act (Obamacare) = Part-time Jobs.”   

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

 

 

Investmentment Markets Overview — W/E 27th June 2014

It was bad week for the “A list ” of Central Bankers’, as the 3rd and final estimate of US Q114 real GDP slumped to an annual rate of – 2.9%, which is a heck of a turn-around from the + 2.5% reported for Q413 and the initial already gloomy estimates of 0.1% and – 1% made by the Bureau of Economic Analysis. Meanwhile, the German ifo survey signals that GDP growth within the Euro-Zone is set to slow during the second half of 2014, whilst for the UK, although the final Q114 GDP reading held-up at the earlier stated 0.8%, “Charmer Carney” at the Bank of England took a grilling in front of a treasury select committee on “inconsistent guidance.” As to “why is this bad for the CBs,” the short answer is that the curtain is being drawn ever wider to expose just how impotent they are in controlling these three major economies, not to mention their respective interest rates, which are about to play havoc with the financial markets and in particular real estate.

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 subject of Central Banks’ impotence in respect of “market interest rates,”Jan Loeys at JPMorgan Chase & Co. In it, JPM focus on the problems that individual investors could cause…..

Charts:
1.Indices Weekly
2.US New Home Sales V GDP
3.E-Z M3 MS V E-Z Economic Sentiment
4.Japan Unemployment V Household Spending
5.Commodity 1 Week Moves

Table:

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

_______________________

The Catalyst for Change is often only seen in hindsight.”

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

Central Bank Crook-ery

The banking sector is back in the news today and once again it’s in respect of alleged criminal activity. The New York attorney general’s office claimed that British bank, Barclays, has favoured predatory high-frequency traders in its dark pool activities giving these traders advantages over other investors.

“So what“ I hear you say, they’ll pay what seems to be a large fine, pass it onto clients and life moves on. Maybe, but regulators are introducing jail-time for fraud perpetrators now (that the horse has bolted.)

Of more interest, perhaps, is the role of Central Bankers within this regulatory and financial stability regime and in particular whether they are as corrupt as the banks under their charge?

We commented a little earlier this year, entitled An Honest Central Banker? which included a statement by Dallas Fed President, Richard Fisher, “the program of bond-buying has lasted too long, and there are signs it is now distorting financial markets and encouraging risk-taking, the stimulus is stoking asset-price bubbles thatmay result in tears’ for investors acting on bad incentives. ‘There are increasing signs quantitative easing has overstayed its welcome: Market distortions and acting on bad incentives are becoming more pervasive.”

Distortion appears to have turned into Deception, according to Dr. Paul Craig Roberts, a former Assistant Secretary of the Treasury for Economic Policy and associate editor of the Wall Street Journal and his colleague, Dave Kranzler, in their article, “The Great Deceiver – The Federal Reserve.”

CB Crookery 1

It would appear that between November 2013 and February 2014 tiny Belgium, with a GDP of $US480BN, purchased $141.2BN of US Treasury bonds, compared with a monthly average of just $US2BN over the previous two years. Furthermore, Belgium’s holdings of US Treasury securities has increased by $US201BN over five months from $180BN at the end of October to $381BN at the end of March, making it the third largest foreign holder after China and Japan. Dr PCR & Co query where Belgium got the money from, as it doesn’t have a budget surplus nor did it print the money required, as being a member of the Euro-Zone it cannot increase the money supply.

So where did the money come from?

The article’s conclusion is “the money came from the US Federal Reserve, and the purchase was laundered through Belgium in order to hide the fact that actual Federal Reserve bond purchases during November 2013 through January 2014 were $112 billion per month,” not quite the “official monthly tapering” alluded to by the Fed.

As to why would the Fed do this, the authors’ deduce that it was to replace a very large holding dumped by a country or countries but didn’t want anyone to notice. This makes sense to us as for the past year or two the only serious buyer of US Treasury debt has been the Federal Reserve. In fact they are the market.

CB Crookery 2

And, despite the ongoing myth, believed by the many, that Central Banks’, including the Fed, control interest rates (that matter to most people that is,) one look at the 10-year Treasury yield tells otherwise. The 10-year yield, which affects mortgage costs, pension annuities and a lot more besides, has doubled since its 200-year low of mid-2012, before retracing a typical 38.2% Fibonacci correction, as shown above.

The Fed has lost control of interest rates, if they really had any control in the first place, with the market set to drive those rates far, far higher than they are currently at.

But that’s an aside. IF the Fed and/or any other entity are caught manipulating the markets or laundering money, they should face jail-time like everyone else.

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