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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 16th September 2016

£1,000,000,000,000…..is the stated deficit within UK defined benefit pension schemes, pushed ever higher by plunging UK yields and increased levels of Bank of England QE nonsense. These pension schemes require an annualised 6% return or more to match assets against liabilities, but with near zero yields available you do not have to be Einstein to see the problem. This is a global concern, created in the main by the Central Banks’ and aside of it threatening future pension expectations, places pressure on company retained earnings and dividend payments as they face increased contributions to fill the gap. Whilst Global in nature, the Bank of England deserves a special mention as it came under criticism this week from the former pensions minister, Lady Altmann. Whilst Governor Carney shows a self-congratulation condescension in respect of his policies, encouraging the prudent including pension schemes to move up the risk-scale into iffy corporate debt and equities, the B of E defined benefit scheme has remained near-fully invested into the low/zero yield “perceived safe havens,” according to Lady A. Furthermore, as a typical private employer struggles to cap its 5-10% typical contribution due to the widening deficit, the Bank of England pension scheme, funded by the UK tax-payer, last year contributed, thanks to the said tax-payer, the equivalent of 50% salary to the tune of £90m including the Governor, to make up the shortfall required to keep it in surplus whilst the Bank of England employees make no contribution at all.

A wild 5-day for the S&P 500 was saved by Apple, which had its best week in 5-years. More on the markets’ main events are listed below:

16-sept-2016

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 . . .

 Text book investing recommends that investors’ hold a diversified portfolio, usually between differing asset classes and where one is only holding stocks to diversify across market capitalisation ……

Charts:
1.  Indices Weekly
2. US Small Bus Optimism V US Consumer Sentiment
3. UK Unemployment & Wages V UK CPI
4. Japan PPI V  Tokyo Condo Sales
5. Commodities Weekly

Table:

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

                               “History continues to teach, assuming that one is open to learn.

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

 

Fed Cert Alert

It was just about a year ago that I warned via the overview, “Reaction Time at the FOMC,” that US interest rates were set to rise. In the event the warning was a month too early before the Fed duly obliged by raising its Fed funds rate by 0.25%.

The FOMC meet up again next week so let’s see if an improvement on the timing of the next rise can be made. Dangerous that it is to go out on a limb, particularly when the herd are still minded that the Fed will wait until December before it moves, here goes for a bold prediction:

The Fed Funds Rate will be hiked Next Week and here’s why:

Kindly observation that central banks’, as evidenced by the FOMC in this case, have never made a pro-active decision in their lives, only re-active. The Fed Funds Rate (FFR) has followed the trend of the 2-year Bond yield, not the other way round and the No 2 is now higher by 400% since its 2011 low.

14-sept-2016-2

Note also that the 3-month MM rate is also 400% higher than its 2014 low and that the FFR slavishly follows these two metrics, both up and down. The fact that US CPI is trending lower once more, despite the enormous amount of stimulus, is irrelevant.

Bottom line: Forget the Fed rhetoric; forget CPI data and the herd.

Just look at the chart, as charts don’t lie, hence a Fed cert alert seems fitting.

 

 

 

 

 

 

 

 

 

 

Investment Markets Overview — W/E 9th September 2016

$200BN per month…is the estimated amount of quantitative easing that global central banks are creating in their futile effort to re-stoke economic growth within economies that are already loaded with debt and with the debt acting as a drag-anchor to GDP. The “herd” have been hanging on every word uttered by the central bank elite, still believing that the CBs’ actually know what they are doing. There is ample evidence that the policies just aren’t working and in our own small way the evidence has been shared via these overviews, the latest one being, “Watch the Velocity of Money — Not Their Mouths’,” published last week. There has been a lot of talk by the “talking heads” on the financial media shows in respect of “risk on and risk off,” suggesting that asset-allocators or private investors’ just flick a switch to move between the perceived risk areas such as stocks and commodities, moving across to the perceived safe-havens such as bonds or gold. That used to work…until the CBs’ started to manipulate the markets with obscene amounts of stimulus. The negative correlation between certain asset-classes, in particular between stocks and bonds are breaking down, leaving no place to hide except cash, which is the last thing that the CBs’ wish to see.

Markets ended their two-month snooze with a vengeance on Friday and it was not limited to stocks. Bond prices, commodity indexes and the FX space all witnessed increased volatility on their way to lower prices. “All the same markets label it well.”

9-sept-2016

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 . . .

 After four years of ever lower interest rates and $20,000,000,000,000 of stimulus failed to stoke inflation and economic growth, the ECB in 2014 initiated perhaps one of the riskiest gambles of modern finance  ……

Charts:
1.  Indices Weekly
2. US Manu & Services PMI V US GDP
3. E-Z Retail Sales Vol V E-Z GDP
4. China SOE V  GDP of Major Economies
5. Commodities Weekly

Table:

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

                         “History can be a great lesson, if understood

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Watch the Velocity of Money — Not Their Mouths’

I promised last time to write on the “velocity of money” in an informatative and interesting manner (yawn, yawn) so here goes.

The Velocity of Money… measures the rate at which money goes from one transaction to another in an economy, and is usually measured as a ratio of GNP to a country’s total supply of money.

Here is a very long-term measure of it, courtesy of the good folk at Hoisington investment management from a couple of years back:

8-sept-2016

At the time, in Q314, real US GDP was annualising at a meagre 2.2% annual rate which appeared to confirmed economist Irving Fisher’s observations within his famous 1933 paper “The Debt-Deflation Theory of Great Depressions”, that falling money velocity is a symptom of extreme over-indebtedness.

Whilst former Fed Chief, “Helicopter Ben,” who had spent his whole academic career studying the 1930’s global depression, saw no relationship here and plowed on creating ever more debt, along with his compatriots at the other major Central Banks, a simple-soul such as myself couldn’t help but observe the similarities with the 1920s V the 1980/90s, when velocity boomed, only to be followed by its collapse, despite the ballooning of CB balance sheets…both then and now.

Fast forward to today, ironically as Draghi the ECB boss is droning on about how he’ll continue to expand his balance sheet to kick-start CPI and economic growth, it’s time for a second observation :

8-sept-2016-2

For all of the velocity of “jawing” by the CBs the facts point to a collapse of the global velocity of money, similar to that shown for the US above. US GDP is now annualising at just 1.1% with CPI dead.

A third and final chart shows the US velocity of money once more, as a like-for-like with the first chart but this time since the pre-financial crisis in 2006. Overlaid is the obscenely bloated near $5 Trillion Fed balance sheet, inverted to better show the relationship.

8-sept-2016-3

It pictorially shows just how the Central Bank activities have compounded the post financial crisis debt problem and confirms that you should watch the charts and not their respective mouths.

 

 

 

 

 

 

 

Investment Markets Overview — W/E 2nd September 2016

EU…“Bad Apple(s)”…have included many of America’s finest as alleged tax-cheats, including Microsoft, Amazon, Google, Starbucks Facebook, the list goes on and now includes the largest company on the planet, Apple Inc. 35-years after choosing Ireland as its European headquarters, with Apple confirming an investment of £7m to create 700 jobs (no pun intended Steve,) the EU Competition Directorate announced this week that it wished to take a $14.5BN bite out of Apple’s huge cash pile, ordering the company to pay it to Ireland’s Treasury , not as a fine but as back taxes. It is not the task of this column to debate the “rights or wrongs” of multi-nationals gaming the international tax-systems by way of “legal loopholes,” isn’t that anyway akin to say the UK MPs expenses scandal, where the guilty were united in their defence that they “abided by the rules” whilst fleecing the tax-payer. Of perhaps more interest is the “why now,” rather than at anytime during the past 14-years, the period over which the EU says the tax underpayment covers. The fact is that Governments’ and the organs of it are cash-strapped and massively indebted, hence they are on a collective tax-grab. Furthermore, combinations of ill-thought through policies such as zero and/or negative interest rates are decimating pension schemes globally, particular within the public sector, coinciding with the vast increased demand from the baby-boomer retirement bulge.

Markets were once again mega- quite for the first 4-days of this week, but then came Friday’s US non-farm payroll number and perhaps of more importance, its presumed effect on when the Fed hikes. The MS World Stock-Index gained 0.5% over the week, after advancing by 0.6% on Friday afternoon. You can do the maths:

2 Sept 2016 3

 

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 G20 bandwagon descended on Hangzhou, China, this weekend with the opening news snippets focussing on trade, or should we say the lack of it and the threats of even less of it? ……

Charts:
1.  Indices Weekly
2. US Ave Hours Worked V US Ave Hourly Earnings
3. UK Consumer Confidence V E-Z  Consumer Confidence
4. Japan Corp Sales V  Japan Corp Profits
5. Commodities Weekly

Table:

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

                               “Facts are only useful if they involve the truth.

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

 

Move over George — its Charlie’s Chart

I was all set to write on the “velocity of money” in an informatative and interesting manner (yawn, yawn) when an article on Bloomberg caught my eye.

In brief, a former Bank of Japan executive director, Hideo Hayakawa, is calling on Japanese policy makers to abandon their monetary base target by pointing to what traders call a Soros chart, named after billionaire investor George Soros, who long ago said that, “a burgeoning money supply would weaken the yen.”

2 Sept 2016

Mr Hayakawa goes on to observe that the correlation between the $US/¥ rate and the monetary base has ended and they are now moving in opposite directions.

So what do we deduce from that?

Observation one, often repeated throughout these posts is that correlations work, until they don’t! Observation two is that maybe, just maybe, it is a temporary break-down due to the unprecedented intervention and verbiage from the world’s Central Bankers’ of late, which actually was to be mentioned within the planned velocity of money overview (now you are getting excited.)

Either way, it piqued my interest to add a couple of addition’s to George’s observation, by way of Japan’s Nikkei Dow 225 stock-index and that of America’s finest, the S&P 500 stock-index, seen within a second chart below. Interestingly, the correlation between the S&P 500 and the other three variables also appears to have ended:

2 Sept 2016 2

Whether its temporally or otherwise, the near future will surely show, but there is an uncanny S&P target as set out within last week’s comment, “Reality Check – Historic Divergence.”

So move over George, this could be far more interesting.

 

 

 

 

 

 

 

 

Investment Markets Overview — W/E 26th August 2016

Jackson Hole….A spectacular valley set between the two mountain ranges in the American state of Wyoming has only one town, Jackson, but it’s also called Jackson Hole. Set at 2100m above sea level the term “hole” was apparently given by the beaver trappers who had to descend relatively steep slopes which gave them the sensation of entering a hole. With a population of circa 10,000ish, Jackson Hole’s main dependency is from tourism but for two days at this time of the year, the high-spending global Central Bank crowd descend in their private jets for an annual monetary policy symposium held by Queen Janet and the rest of her gang at the Federal Reserve. Regular readers of this column will be well aware of the growing disdain for this particular “political class,” despite their claims of independence, and for the damage to the economy that they collectively inflict, so here are a couple of comments from others on both them and this event:

Barron’s magazine: “Fed’s Jackson Hole Circus:” … Clowns to the left of me, jokers to the right.” Those may not have been the lyrics running through the head of Federal Reserve Chair Janet Yellen last week at the annual policy symposium in Jackson Hole, Wyo., but it might be understandable to have had thoughts along those lines.

Phoenix Capital: The Fed and other Central Banks are largely being run by academics with zero real world experience. For centuries leaders and their advisors have tried to generate perpetual growth but none have succeeded. So the idea that this current group of Central Bankers, isolated from the private sector for their entire careers, somehow understand economics better than any other group of humans in history is ludicrous.

Markets were so quite for the first 4-days of this week that you could hear the proverbial pin drop, but then the Central Bankers’ spoke:

26 Aug 16 .

 

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 “Central Bank” danger, outlined so eloquently by Phoenix Capital’s Chief Market Strategist, Graham Summers and published on the……

……

Charts:
1.  Indices Weekly
2. $US HPI V US Existing and New Home Sales
3. UK GDP V UK  Private Consumption
4. Japan GPIF Asset Wts V  Target Wts
5. Commodities Weekly

Table:

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

“There is something reassuring about an echo”

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