FX Technical Analysis – Fitzpatrick Citib – “$ Bullish Across The Board” 24th Jan14

Tom Fitzpatrick is the technical analysis guru at Citi. He is widely known and quoted.

He presents a strong US$ strengthening theme and concern that US equities are over valued.

Here a couple of his most recent reports. Fitzpatrick has turned bullish on gold and forecasts $3000 to $3500 an ounce for 2014. I arrived to a very similar view a month or two ago and wrote at the time about the confusion that this twin set of events would create for the auto allocators that depend on these historical correlations and inverse correlations. This event, if or when it occurs, will create much confusion and confusion in financial markets equals extreme volatility as a price discovery process takes place. And price discovery and volatility equals, in turn, a deleverging as participants reduce balance sheets until clarity emerges from the price discovery process.

Anyway without more delay here Fitzpatrick and his team.

Citi-fxtechwkly-16-1-14

And here his latest report below. He forecasts a likely strengthening move by the US$ lead by the $ vs the Eur, note. Draghi’s latest comments and data look at odds for this although ‘off risk’ capital flows do look likely to support the view. When/if the ECB do finally press the ‘OMT’ button it would send the move into over drive. Without more delay here his latest report:

Citi-fxtechwkly-23-1-14

All the best

Rich

Multi Market, Equities,Credit,Commodities, Economics, GS,JP,MS,WF,CS – 26th Jan14

Here the much publicized GS weekly “mm” report.

The week prior to this release they announced US equities were slightly above “fair value”.

In this report issued last Friday they discuss the client feedback and reaffirm their case.

GS-MMstrat-17-1-14

And here is this week’s latest view:

GS-MMstrat-22-1-14

And here JP’s latest “MM” report:

JP-MMrisk-24-1-14

And here the usually/perma bullish US equity team from JP:

JP-USequity-24-1-14

They are sticking to their bullish calls for 2014 and sighting the fundamental case. The fundamental case rests on Central bank policies rather than much else as far as I can tell, for the moment. Until expansion of the money supply is taking up by either corporates or consumer or government rather than the Fed its hard to see how ‘gdp’ can grow. Money velocity could rise again but without faster real inflation its hard to see how, for the moment. I would tend to agree though with the team that post this likely hard sell off an over weight equity strategy for the remainder of 2014 is best course of action. (Of course, subject to news flow, etc, etc).

And here the CS Asian equity team.

Tough job selling Asian equities to clients at present, note! US$ adjusted even harder.

CS-Asiastrat-24-1-14

And briefly here, the fixed interest credit markets appear benign for now. The UST has stepped back from the 3% level and is back below the 2.81 prior res. Credit is attracting higher prices again as a ‘safe’ asset.We should not forget that central banks are creating new liquidity across the developed world, expanding their balance sheets, to buy these assets from the finance community and so continuing to sustain high prices for this asset class, ie low yields.

Here JP with their useful technical analysis view of the FI mkts:

JP-FItech-22-1-14

And here CS:

CS-FIstrat-16-1-14

And here the latest CS FI view:

cs-fi-24-1-14

And herethe MS house view:

MS-FIstrat-14-1-14

Its all fairly benign stuff for the moment. Higher rates remain the forecast but so long as volatility doesn’t spike up the asset markets and therefore allocators can ‘handle’ the issue.

And here some specific ‘special’ reports.

Firstly one of the UK here from WF and, in spite of Carney’s jaw boning at Davos, their higher rates soon view. I tend to agree that The UK is enjoying a practically mono super asset price boom that will soon get out of control unless higher rates are brought into being. Policy could get ‘messy’ or clumsy (ie extremely volatile uk asset markets and see sawing policy just as it did in the 1970s in the UK). This is not likely tomorrow but is likely, in my view, during sometime in q3 or q4 2014.

Here the WF report on the UK

WF-UK-24-1-14

And here the WF weekly economic house view:

WF-Wklyecon-24-1-14

And here CS on the European economy. The direction of the euro economy is a matter of great debate. Many houses are forecasting an expansion in the area but are unable to really explain where this is expansion will come from. Export markets are in trouble especially in Asia and the EM countries. Private sector credit still shows no signs of expansion in the block, Germany aside. The Euro is not weakening. The ECB are undertaking a ‘tough’ banking review and whats more Draghi sees “no threat from deflation” in the block and therefore “OMT” appears off the agenda again in the near term. Personally I cant help thinking this is once again a massive misjudgement by the Euro policy teams. Without OMT and without new lending to the private sector where will money supply expansion ie GDP growth come from? Not from export markets it appears. I would love to be bullish on the Euro area but alas I can’t see the touch paper yet to spark growth from this troubled economic group.

cs-euroecon-21-1-13

Here finally the CS Commodities report which ties in to this weak EM view. The industrial metals are in trouble here technically. Copper is being treated alongside her base metals for now which is spilling over into silver for the moment. Gold is an entirely different asset class with severe supply issues in the near term and a hedge for risk, especially if US$ fails to strengthen on ‘off risk’ days.

Here their report:

cs-commoditity-23-1-14

More to come very soon..

All the best

Rich

FX Technical Analysis & Strategy (Updated 7pm GMT) – JP,SC,GS,NB,MS 26th Jan14

A slight change today. I have 30 reports or so to load up here throughout the day.

I’m going to update on FX and MMs and Econ when I have a time but i want to start the process so not to hold up members study time.

I also recognize that many members here are totally preoccupied by the near term given the step up in volatility we have seen. I totally appreciate the concerns and requirement for near term comment and analysis at this time.

On this basis, end of play today, Ill update across asset markets and bring some near term technical reports to attempt to define the near term most probable price moves in the next few days, inc levels and near term strat and tactics also inc instruments.

To start off with here a trio, for the moment, of fx reports with many more to come on updates throughout the day.

First up MS:

MS-FXstrat-17-1-14

Here SC:

SC-fxstrat-20-1-14

Here GS monthly FX:

GS-FXstratmnthly-20-1-14

And here a selection of the market leading institutional private client technical analysis view on the major pairs.

First up a trio of JP tech report with their evolving tactical calls:

JP-fxstrat-17-1-14

JP-FXstrattech-23-1-14

JP-FXstrattact-24-1-14

And here the CS latest technical view

CS-FXtactics-24-1-14

And here below the latest MS FX strat report as an update to the MS report above

MS-FXstrat-23-1-14

And turning to a couple of specific pairs, here Nomura’s fx technical analysis team on the USDJPY

nomura-usdjpy-24-1-14

And here on the usdcad

usdcad-24-1-14

Rich

Technical Analysis Update – SP500 <1815 Price Correction Confirmation - 24th Jan14

What a day it has been with price finally providing confirmation of an equity correction that the technical indicators had been suggesting for some time.

Here below a technical update due to the market conditions.

Here the four major US indexes.

We have got the long awaited price breakdown in the sp500 Dow and Russel2000 today. The Sp500 and the Russel are much less price convincing than the Dow’s move, in price technical terms. We can judge that this is a EM and Chinese related worry. China affects the Dow components more than she does the Russel and even Sp500. The Nas100 has not scored a price breakdown at all which is interesting. She remains in reasonable shape price chart wise.

The prior technical indicators of health of the indexes goes as said previously holds of course. Ie across multi indicators they are weak and looking to correct. It was always price that was the non confirming issue. Now we have partial confirmation so we must sit up and pay attention.

The question on the street amongst speculators minds is likely to be is this merely a corrective move post the Xmas rally to reset prices or could it become something more meaningful? I suggest, at least in the next month or two that, given the excessive bullishness, weak technicals, low volume and high leverage, it may be a more painful correction than many assume.  In my mind, the move to the downside is likely to be fast and harder than most imagine due to these technical issues now that price has confirmed the move.

Here the latest Yardeni briefings.

Yardeni-tech-24-1-14

And here Yardeni on earnings, stretch is the word

yardeni-24-1-14

If you buy into the view above that this could be a more meaningful and extended correction then the next question, if you are not already short from a higher level is where and how?

Sectors wise ill leave to another post but id like to focus on which price levels and which indexes and with which instruments.

Which US indexes first?

The Dow is the immediate weak link price wise with a clear breakdown of her price chart. So the dow has started this price technical breakdown move but will she be the beta to sustain the move from here? I doubt it. If the dow components struggle its usually a lead indicator on the world economy. The Dow components are struggling to keep revenues if not margins growing. The news from China over night fueled the concerns from the large caps due to earnings season and the forward looking statements.

The US centric Russel2000 companies are fairing better just like the ftse250 companies on the lse as domestically the monetary and fiscal policies stimulate local demand in the two economies. And the nasdaq and nasdaq100 is harder to define but clearly is an index, especially the nasdaq100, all about international business investment in technology. Yes, capex!

Compare here the price charts of the Nas100 vs the Dow over the last 10days.

It therefore follows that we might expect the nas100 focused companies to be seeing more selling pressure than they might here. Especially given the run up they have enjoyed. The nas100 offers a current pe ratio of 26.5. The Russel more. The Nasdaq100 also demonstrates perfectly on the near term the divergence again between price and near term price momentum indicators. A higher high but fading and weak price momentum which reconfirms all the non price market breadth etc weakness that the nas100 also has been demonstrating better than the other indexes.

Cutting to the chase, is it the nasdaq100 that offers the greatest divergence between having some of the weakest technical indicators and the strongest price chart.

Here the 2013 performance of the different indexes

Here some technical charts on the market breadth issues within the nas100

What we should be looking for here is divergence between the two. And sure enough the latest higher high on price diverged perfectly from stocks moving beyond their prior 200 dma high.

Next up 52wk high.

Here, once again, new 52wk highs were unconvincing on the latest price breakout.

And next a near term indicator. Stocks making new 10 day highs.

The momentum in the nas100 was and is definitely fading. The medium term technical indicators have been weak and divergent for sometime.

The nas100 is therefore my target.

Since ive been typing this i see the nas100 is playing catch up with the other indexes. The sell off is widening and the nas100 is starting to join though she still offers the best price technical chart. Attacking price charts like this is usually not the correct tactical play at all. But I believe there is enough, more than enough, non price weakness in the Nas100 index so suggest she will offer the beta eventually to the US index correction. Only the Russel2000 can stand in her way to achieving the index alpha correction crown.

Instrument discussion must continue on the forum pages. I hit some technical issues in posting this report that has held things up so I’m out of time to run through the rational, for now.

I hold a mix of sp500 and nas100 etfs short and the weight of shorts are Feb and March future option puts out of the money at the entry by around 3%. Now less.  At present i’m 40% hedged or at 60% long on the account value but hold many defensive stocks rather than the cheer leading cyclical themes.

 

Bullion Market Technical Update – Close >1275 Opens 1375 24th Jan14

All sorts of alerts are flashing on the bullion markets again so we start monitoring closely again this asset class.

The gold miners have been attracting large positive fund flows as commented a few weeks ago. They have scored a technical price breakout amongst ever louder market rumors that the long awaited comex delivery problems are about to go public. (My long in green just prior to the breakout).

Bullion itself yesterday scored a classic price momentum breakout of a key level. The last 24 months or so have seen momentum entries to the upside fail badly as the bear has devastated the long side speculators. Historically speaking this cyclical bear market is not nearly as severe as the 1974 75 bear market in the bullion so there could well be more to come. But, for the moment, the bullion is showing price momentum again and is theoretically in a breakout price zone at a non over bought level.

In terms of correlating instruments yesterday was a severe risk off day. A day when we would expect to see the currency safety play (ie US$ strength) in full motion. In stead the US$ basket had a very bad day. Investors and speculators need a hedge. They must have a home for funds so if the US$ weakens as risk off momentum gathers then the bullion will attract inflows and there fore price appreciation. Note the algo bots allocate on historical models so the heads up human that has a grasp of economic history rather than short term cross asset class correlations has a distinct advantage, in my view. (These moments of advantage are rare and they wont last long as the super computers number crunch the implications of near term moves).

Here some now odd looking cross correlating instruments.


The delivery issues of the Comex and LBMA have been flagged for a long time. If risk off alongside S$ weakness plays out according to yesterday’s correlations alongside the Comex and LBMA issues going public then there targets on the bullion’s appreciation become absolutely meaningless. Instrument wise there is a window here for an asymmetric trade though you have to accept that 80% of asymmetric trades fail. This is fine as when you win you win very big but you must build that into the trading plan when designing your trade on this asset class.

Here the Commerz tech report, opening the door to 1375.

com-WkBulliontech-23-1-14

And a daily here picking up the continuing embargo on the asset class in India and apparent ‘jewelry demand’ from China?

Commerz-comdaily-24-1-14

I would suggest Chinese (and other) demand for physical bullion is something to do with this chart:

(Please read the latest Thunder Report for a more meaningful long term analysis). http://www.capitalsynthesis.tech/the-new-great-game-thunder-road-dec2013/

(Re the recent Etf Gld outflows, many institutions hold GLD etf positions. These are leveraged allocations for the institutions held on margin using their finance fractional balance sheets to hold these positions.  Selling ETF holdings and buying paper futures helps to resolve near term delivery problems. I therefore wouldn’t get too concerned by near term etf GLD fund flows).

We should not under estimate the paper markets ability to dent any momentum move to the upside but with each paper ambush the physical situation becomes ever more critical. It is inevitable that one momentum push to the upside will not be held back due to the Comex and LBMA supply issues. The cross asset implications of this issue going mainstream are meaningful and not positive for Neo Keynesian money supply strategies. Therefore we should expect plenty of push back from the non asset backed fiat currency providers. They have had time to consider their next move.

All the best

Rich

 

 

 

 

 

Weekly Multi Market “MM” Strat & Equity Rec Reports – CS,JP,SC,CommerzB 21st Jan14

Here are some of the latest reports from various market leading institutional wealth private banking and equity teams.

First up lets start with the usual weekly “MM” report from CS Wealth

CS-mmwealth-17-1-14

And here an excellent multi asset report from Commerz. “Dangerous optimism” is their opening line and i tend to agree. And note on record leverage and low volume. The cocktail continues to be very risky.

Commerz-mmstrat-20-1-14

And here

Sc-mmwkly-17-1-14

And here moving into equity strat and tactical recommendations.

First up the JP US Equity Team

jp-usequity2-17-1-14

(Its a word doc due to the file size of the pdf).

Here the JP Euro team under the Caz wealth banner:

JPcaz-euroequity-21-1-14

Now this is a considered report and due some comment.

They highlight the ‘push back’ from clients who are realizing that most, if not all, the good news is behind us. Are the tail winds becoming headwinds? The team run through some counter arguments which, to summarize consist of two points.

1) That the euro finance area may start lending again

2) That the euro firms will likely start investing again or at least use the increased credit availability to start m&a to cut costs.

In my view the latter is much more likely than the former as there are zero signs across the world of increasing capex from corporates. Quite the reverse. Indeed two of Europe’s main export markets ie Japan and EM’s inc China are struggling to maintain demand for euro products and services. The trade weighted euro has risen sharply over the last year. These are head winds not tail winds to euro corp capex increases.

So the key to the sustainability, from a strat perspective, of the euro equity run boils down to increasing bank credit. And there we must come back to the ECB for guidance. Two issues here:

A) How strict will they be on the ecb bank review progressing through 2014 to report end q3 or early q4.

B) “OMT” (or alternative non conventional monetary bazookas). Will the ECB fnally press the belated button on increasing euro money supply herself by creating euros to start expanding herself rather than stressing bank balance sheets to support money supply increases?

Of the two issues B is the stand out indicator due to the balance sheet stress the euro banks remain under. Of course clever accounting to mirror the UK’s BOE policies can also do a great deal but only if combined with OMT will the measures really set the euro zone “growth” and therefore earnings back on fire.

More reports:

Here the JP Asia equity team. Asian equities remain very beaten up. Some reits in the area are starting to look very tempting on a relative basis to US UK and even some selected euro reits.And also check the respective navs between the two zones (DM vs EM). The reallocation from west to east may be premature yet but the mean reversion investment is always worth taking especially if we get to extreme valuations on multiple metrics.

Here JP on EM equity.

JP-EM-Strat-17-1-14

And here the latest EM equity recs:

JP-EM-equitystrat-22-1-14

And here the Asian team on Asian equity themes.

jp-asia-equityrec2-20-1-14

All the best

Rich

 

 

 

 

 

 

Weekly Technical Analysis – “Cannot Rule Out A Final Overshoot Towards 1860” 21 Jan14

I’m afraid I’m traveling at present so I’m unable to make the usual comments on the Swiss team’s latest report. I know many speculators and investors follow their comments and analysis religiously so I release the report without comment for the moment.

Having said this, very briefly I add, we starting to drift here and the FX moves, rather than fixed income moves are starting to impact the US$ carry trade due to the recent dollar strength. I get a strong sense we are inside a medium term distributive top here subject to policy action as always. (Some Euro sectors are on fire to the upside and have excellent price technical charts, albeit they are heavily over bought on the near term). Multi index breadth, sector internal issues, sentiment and price I’ll come back in the next 48hrs to update this and try and cover some instruments as well. The usual multi market institutional reports and fx as usual to also follow.

Without more delay here their latest report released a few hours ago:

Wklytech-21-1-14

All the best

Rich

FX Strategy, Technicals & Sentiment – CS,JP,ScotB,MIG – 20 Jan14

The FX markets are seeing an increase in volatility here. This volatility should start to spill over into other asset markets especially if the US$ sustains her recent strength. Participants are not currently positioned for volatility so if we do get a broadening here of price swings expect speculators to scramble for hedges and counter weights to their existing allocations. Remember this is in respect of all allocations e.g. even inc the short jpy position. Its just a risk adjustment this, initially.

Anyway here the latest fx reports from Friday and over the weekend. We pick up on the latest ‘mm’ reports in the next 48hr and Tuesday’s usual technical analysis run through.

Here first up Scotia picking up the FX Sentiment data.

ScotB-fxcharts-17-1-14

Here from Friday CS’s daily take on the fx markets and tech levels.

CS-FXdaily-17-1-14

And here JP with their usual fx strategy docs and picking up on the usdpln trade that some members are running at present.

jp-fxstrat-17-01-14

jp-fxstrat2-17-1-14

jp-usdpln-17-1-14

And here a useful couple of reports from the MIG team.

Here their daily

MIG-FXdaily-17-1-14

And here a very nice weekly report from the team with ‘mm’ spill over from the FX markets.

MIG-fxstrat-20-1-14

With earnings season upon us, the US$ making strengthening moves, FED members sounding the most hawkish they have sounded for some time and equity bullishness still at extremes we could be setting up for an interesting week.Tech wise, some key levels in the FX have already been crossed having been setting up for this move for some time now.

Good luck to all

Rich

 

 

 

 

Global Maco Multi Markets inc FX Strat Updates – HSBC,JP,CS,UB,GS,WF,Commerz, 17 Jan14

Here below a mix of multi market reports.

To start us off a purely visual great report from CS. Their brilliant macro chart update.

There is much to say on these long range technical charts. I can see several of them repeated on my own screens inc the eurusd long term chart. Also the secular bull market on US paper.

Its one of the best chart packs in the market aside from GS’s ‘charts that matter’ release. The GS release is proving hard to get on a regular basis. Here the CS release:

CS-MM-charts-10-1-14

Here their wealth team on the regular ‘mm’ weekly update.

CS-MM-17-01-14

I missed releasing this report from the JP global FX team and their strategy which was released a few days ago.

Its a comprehensive 2014 forward strategy looking report so not particularly a market timing but some useful data and thoughts.

jp-fxstrat-jan14

And ditto here from the HSBC global fx team

HSBC-globalfx-10-1-14

And here moving into equities the JP team on an update to their global equities spreadsheet.

JP-Globalstocks-17-1-14

And here on the Japanese banking sector. A sector and region I have previously been long and taken profit.

JP-Japanbanks-15-1-14

Bullion wise here the usual CommerzB team weekly technical report. The bullion hasn’t broken out but has some price support in spite of the recent $ strength. The miners are moving and have seen significant inflows of funds.

CommerzB-Bullionwklyytech-15-1-14

And here on the macro economic front, GS, Commerz & WF

GS-Econ-15-1-14

CommerzB-wkmacro-17-1-14

And here WF

WeeklyEconomicFinancialCommentary_01172014

And finally here if the euro is debased here and now then, in fact, one of the main beneficiaries may be Swiss equity. (Assuming the SNB hold the euro peg).

So here UB on Switzerland

UB-focusSwiss-10-1-14

Have a great weekend

Cheers Rich

 

 

 

Equity Recommendations Plus – JP 17 Jan14

A very quick and specific update here regarding equities that some members here hold.

Here the latest update from JP on Rio. Rio is now their diversified mining top pick. Rio is the mining giant listed on the UK Ftse and ASX Aud exchange.

Note the forward ratios into 2015 and cash flow nos. Impressive athough i agree that near term we may see more commodity weakness especially given the copper and cby indexe tech.

RIO

And here on the team on Standard Chartered or Stan on the FTSE and HK indexes.

JP-stan-jan14

And here JP on Sony.

 JP-Sony-jan14

I’ll update this post in a moment.

Thanks Rich

 

 

 

FX Technical Analysis – Strat & Tactics – CS,UB,JP,Citi,Barcap,Nomura – 15 Jan14

A look at the major foreign exchange pairs.

But first a quick retrace of where we have come from.

The US$ index has been in a bear market trend since forming a double top price range in the period June to end July 2013. Conversely the Euro has enjoyed a reasonably strong bull market vs the US$ during the last 7 months or so. This recent cyclical bear trend of US$ weakness appears under pressure here and there are some signs this is more serious than prior attempts on trend support. This ties into the eurusd cross as the pair contributing pair to the $ index. The euro has seen a cyclical bear market vs the US$ from its 2007 peak value. This 6 year trend scored a sept2013 breakout for the euro to the upside. This breakout initially got support but has subsequently faded. The 1.35 level area of first trend line support and subsequently the 1.32 area must hold if this 4 month old breakout is to sustain.

Given monetary policy, economic growth divergence and private sector credit creation divergences its hard to envisage a macro scenario whereby the euro bull trend vs the US$ can hold in the coming months. The only macro way the US$ would once again come under immense pressure if the FED step back from their taper and even expand their monetary creation measures. Private sector loan growth in the US is positive but barely so as US consumer mortgage applications slow.

Are there grounds for a continuation or even increase of monetary creation measures?

Today the US released its latest inflation nos. The inflation rate has dropped to 1.5% as the annual rate. European inflation fell to 0.8% and the UK inflation rate fell to 2% or nearly half her 2.9% reading back in June and the lowest reading for four years.  Australian unemployment is the highest for four years as the slow down in EM countries countries and therefore demand for Australian commodities continues.

The divergence between developed and emerging markets is going ever wider. Stagflation is threatening many emerging markets whereas inflation threatens many EM states. Many Em currencies are plunging s the US$ now as a scenario of low growth and inflation hits many inc Turkey, Brazil, etc.

Assuming you are a neo keynesian and believe there exists a correlation between money creation and growth then yes there is certainly scope or more not less given the low growth and inflation recent data.

The asset price consequences of such measures are not central bank’s primary concern. Or so they tell us.

If we are to believe the recent speeches by FED central bankers tapering money creation does seem likely to continue in the coming months. US rates are rising and real rates are rising more rapidly still as rates rise and inflation falls.  This rise in real rates is likely to be very supportive for the US$ and GBP currencies should recent trends in inflation and bond prices maintain.

With this back drop in mind lets look at the latest reports.

Here Citi to kick us off on their weekly run through the FX major pairs.

Citi-wklyfx-13-1-14

And here Barcap with their own weekly

Barcap-fx-14-1-14

And here the CS team with their ‘FXcompass’ comprehensive doc from last week. (apologies for the delay)

CS-FXstrat-09-1-14

And here the UB team

UB-fx-14-1-14

And here JP with there daily FX technical strategy paper from the 14th:

JP-FXtechstrat-14-01-14

And here from 15th

JP-FXtechstrat-15-01-14

And here JP on the all important US$ credit (fixed income) markets.

And note the near term distribution at present, albeit within a higher 2014 rate environment. (Unless inflation jumps quickly and soon, real rates will rise faster).

JP-FItechwkly-14-1-14

Note, I want to make a very quick comment here on spreads between corporate paper, sovereign USTs and junk bonds. The spread is narrower than we have seen since the credit crisis. Why? Because the markets are on fire and heavy with the belief that this recovery is widening and that this year as opposed to 2013 earnings will rise for all and therefore the smaller cap, junk bond cos will do well. Either this is the reason or there is price momentum in a liquidity rich market and speculators are buying the chart rather than the fundamental view. I believe its the latter not the former! Otherwise why would the market breadth for smaller cap cos (nyse) be so poor. Why would so many smaller cap cos be missing this rally entirely were it not for the fact that so many are struggling. In this situation it appear the market may be totally mis-pricing the spread of junk bonds to higher grade paper.

Not that i trade cdfs for junk bonds (as mainly over thee counter) but if you are a asymmetric trader bets on junk bond insolvency is very cheap at present. The junk bond markets are booming again on a wave of optimism that the equity markets are not demonstrating. Either sme indexes are a screaming buy or junk bond insolvency protection is a screaming buy. The asymmetric traders may buy both on the basis that the probability of  the current ‘status quo’ remaining is next to zero!

Here, the government owned, RBS moving back into the high risk junk market.

http://www.bloomberg.com/news/2014-01-16/rbs-to-ubs-boosting-junk-debt-teams-once-gutted-credit-markets.html

Risk taking whether in equities or the art market or here junk bonds is the vogue now again given the central bank’s zero interest rate and monetary creation policies.

http://www.bloomberg.com/news/2014-01-15/firms-tripling-junk-returns-lure-most-since-07-credit-markets.html

Never mind the taper, rising real interest rates and falling inflation. High risk junk $ bonds keep rising and issuance keeps accelerating.

http://www.moneynews.com/InvestingAnalysis/junk-loans-Kroger-Harris-Teeter/2013/12/23/id/543394

I mention these things as the US$ is the funding world wide currency for most credit markets. And especially in junk bond markets! Ie if the US$ strengthened rapidly these excesses of risk taking illustrated by the spread to corporate paper would evaporate over night. High risk junk bond markets are very liquid as are many equity markets even now. Volumes are light even as prices reach record levels and momentum is high. This mix of factors sets the stage perfectly for a higher US$, higher real rate, risk off, crash. I’m not forecasting a crash but the factors that could create one are one by one forming!

Back to Fx pairs

Here CS and their FX strategy released today

CS-FXstrat-16-1-14

And here the Nomura technical trading team with their near term analysis of the eurusd and usdjpy. I agree that the euro is under enormous pressure here technically. She is at her trend line within a trend up vs the US$ that has lacked momentum for most of the move. If she slips beneath her price supports, as above, the sept13 breakout will be failed a breakout. From failed moves come fast moves! We also have very likely news events very close inc the German court ruling on OMT as well as new ECB unconventional measures. If/when the ECB does announce some monetary measures expect technically the euro to collapse vs the GBP and US$. The technical jigsaw is in place to allow this to occur. Macro wise official deflation is very close now and private sector credit creation c0ntinues to slide in most member states Germany aside.

Nomura-eurusd-fx-16-1-14

And here on the USDJPY. I left the trade at 1.05 and change and happy to be out. You can always chase trades for more but i prefer to take the “easy money” off the table and come back when the risk reward is more favorable for a long term entry.

Nomura-usdjpy-16-1-14

My own book is long US$ and long GBPs. I am borrowing euros to fund the few euro long equity positions i still hold. Its a fairly defensive position. I have no asymmetric option positions on FX or bullion at present though i believe a long US$ option call vs the euro and or some em currencies taking a 3 month view could well be a wonderful position especially where 3 month volatility is low.

I do still hold some cad assets fully cad funded. I am reviewing whether this should be funded via borrowed cads, long us$s given the AUD’s recent fall and the general strong US basket scenario as above.

Here finally CS with a view on the cad for 2014.

CS-FX-cad-0114

2014 is shaping up to see increased volatility return to the FX pairs. This is good event for traders and should feed into volatility for all asset markets. Increased volatility implies lower risk taking and leverage which is bad for asset prices generally. Time will tell but these are the omens for now.

All the best

Rich

Latest “MM” & Equity Reports – BarCap,Citi,JP,CS,GS 14 Jan14

Here are a selection of some of the latest multi market reports from the major institutions.

CS here:

CS-MM-10-1-14

And here CS Global Macro

CS-GlobalMM-13-1-14

And here the Citi global wealth team with their mm views and allocations:

Citiwealthwkly-14-1-14

And least we forget, here Goldman’s on the near term correction report they issued a few days ago care of zerohedge.

http://www.zerohedge.com/news/2014-01-11/did-goldman-just-kill-music-sp500-now-overvalued-almost-any-measure

Here the GS team with their FI and related instrument insights :

GS-FIwkly-10-1-14

Here cheer leading the bull market the US equity research team from JP.

JP-USequity-14-1-14

And here the JP Asian team with their latest recs.

JP-Asiaequity-14-1-14

And here the UK branch of their investment team formally Cazenove & Co.

Equity strategy here:

JPCaz-equitystrat-13-1-14

And here a special from the same team on the Energy equity picks.

JPCAZ-Energyequity-10-1-14

And here Barcap with their latest equity recommendations:

Barcap-equityrecs-13-1-14

I would just add here that if you are taking leveraged longs here in my view id keep tighter stops than usual as we are deeply over bought on most time frames now and many indicators are suggesting a correction could occur. Its not in itself a reason not to take longs but it is a reason to use stops off the tech charts.

All the best, FX to come very soon.

Rich