A host of weekly “MM” reports from the major institution’s wealth and private banking teams.
There is much to add comment to these reports but under immense time pressure as we build to year end here.
FX and Equity to follow shortly.
Luck to all
Rich
The 2014 forecasts are starting to come thick and fast from the majors. Many more inc comments and Capsyn 2014 view to follow soon.
Multi mkts
& DB 2014 with a special focus on credit markets.Note 2014 is likely to provide some credit volatility if and when the Fed finally taper.
The price of credit drives all asset prices. If the secular bull market for credit is over and we are entering a secular bear market this is hugely meaningful.
Save the reports and we will return to these credit issues closer to the end of the year. Near term the UST is ok, in terms of levels, so for now benign.
All the best
Rich
Its that time of the week for the usual Swiss team’s run through. The headline is they maintain that any near term weakness is corrective in nature and part of a year end push higher.
This report is a bit thinner than usual but this fits with the theme of being patient for our year end Christmas present of a higher high in equity indexes.
They sight the cyclicals as the key beta performers and likely Finance, Tech and Housing within this.
To add a little weight to this market internal sector view, price wise, the semi conductors continue to look very strong as do the financials and industrial sector. Energy is lagging but the underlying WTI is back to nearly $100 so we should expect a bounce into year end should these oil underlying numbers sustain.
Of more note is the significant under performance of some European indexes. Italy had come off by a near -10% from her early Nov high. The UK ftse100 had lost -6% and the Spanish ibex -7%. On the plus side the UK ftse250 looks much healthier again and is approaching its year highs once more as the consumption based mini boom in the UK continues. European finance sector is down -7% from her highs. The European strategy (if there is one at all) appears to be a strong currency, tight private sector lending approach and fiscal prudence. (Its an unusual strategy in the world of fx debasement and endless liquidity programs). Nonetheless large cap Euro stocks, on a relative basis look cheap here.
Asian EM markets, as they rightly state, are looking much healthier. There is plenty of global strength occurring here and now. The Shanghai composite turning positive for the year and within striking distance of her year highs. The Hang Seng made a new year high a few days ago. Yes the Indian Sensex is making new highs as well but dollar adjusted things look rather different. Prices can always be made to rise if you are prepared to destroy your currency. Both Japan and India are good examples of this during 2013, note!
If all indexes fire together into year end it would be reasonable to expect the crb index to finally confirm the break out of her large continuation wedge pattern that she has been stuck in all year. She has a higher high and now needs to sustain some momentum to break out. If the US$ basket can sustain her recent downtrend it will become a bullish scenario for the commodities and inflation. The key question is whether we have ‘escape velocity’. If the UST breaks down and rates rise (inc key US mortgage rates) its easy to see how this threatened breakout of the commodities could die a sudden death as the US$ basket rebounds. Post YE clarity will likely emerge on these things would be my comment but for the next 3 weeks we are effectively in a window dressing “Santa” rally zone where price signals shouldn’t be taken too seriously, especially in these low volume days. In my view.
Here the commodity index:
Fixed income wise the UST threatened her support meaningfully this week but has bounced off yesterday and today. She remains under pressure but no alarm bells as yet triggered.
Here the Swiss team’s latest:
The market technical issues remain in terms of market breadth as well as investor sentiment extremes, volatility lows as well as continued declines in volumes.
A quick reminder of the market breadth weakness here below. Its not getting any better but Santa is coming ie the seasonals are very strong second half of Dec. Therefore things should hold and produce higher nominal highs for our year end numbers.
Here Yardeni’s latest:
Here more from Yardeni with some comfort for commodity speculators (and inflationists).
2013 has been a blistering year. If you are still in search of those last few percentage points there are trading candidates around at present especially in Europe, Asia having already moved in the main.
End of year aside, anyone who thinks anything has been resolved by the last 4 years of ultra easy liquidity and negative savings rates is mistaken, in my view. This has been a wonderful nominal bull market created by fiscal and monetary policy. Real incomes continue their decline as asset prices rise relentlessly upward. If only asset prices measured by fiat currencies were a real indicator of economic prosperity and health. Sadly nominal asset prices are all too easily manipulated upward in this fiat monetary system. All that has changed is their nominal number. In 2014 perhaps we discover the reality behind the mirage of recent ‘balance sheet’ wealth creation.
Here a chart to ponder.
All the best
Rich
Here some commodity and fixed income related reports.
Watch both markets very carefully here.
The UST is back over 2.8% at 2.86%. She is reaching a danger threshold area feeding into US mortgage rates etc.
The spread to junk is at extremes. The text book case is that rates rising are usually correlated to cyclical performance, during a standard economic recovery. But, I alert you to an important non confirmation of this at present. Rates rising are usually correlated yes to performance of the cyclical stocks and also rising inflation. Inflation is instead falling and not rising at all. This is not what is mean to be happening 5 years into a recovery. Commodities look sick and many have chart breakdowns at present.
Are the commodities sending us a signal that we have inflation in financial asset prices alongside real demand destruction as money velocity declines further?
If demand destruction is occurring financial asset prices will eventually mean revert and likely by asset prices sliding badly I’m afraid.
For now lets enjoy the seasonal ‘good will’.
Commerz-CommodityWkly-03-12-13
Rich
The summary from these ten reports below: Increased spending achieved via growth in consumer credit and reduced savings as income declines in real terms. Weak economic growth and from the jobs data lots of part time low skilled service jobs being created. Non standard monetary measures are working in that they are helping to sustain spending via credit growth and this is creating short term jobs as business investment continues to be weak. Business investment is weak for a hole host of reasons as we went through a few weeks ago. But its also weak as very few business leaders believe in the sustainability of this “recovery”.
& Here some regular reports from WF.
WF-Consumer Credit October_12062013
WF-PersonalIncandSpend_12062013
To start off with a great report here from MS wealth re macro and mkt comments feeding into their allocation models.
Note “S&P 500 is 23.8, which is 44.4% above its long-term average of 16.5″.
A useful report here from CS wealth. They remain bullish equities and make some equity picks here in this report. Cyclical stocks with a bias to tech inc Ciscos and Siemens.
They are surprisingly concerned on the ftse100 index but the concern is focused on technical MA issues and price chart pattern. Looking at the correlating instruments and indexes I tend to disagree for now. )I rather think its a relative buy, from a trading perspective but agree medium term if this doesn’t reverse its weakness).
Here below is a report from the 2nd of Dec. Its not a bad report but shows the issue of the pure price technical analysis in a nutshell. The report provides a nice price chart of the sp500 wedge with the breakdown area being the 1800 level to determine if more price weakness/correction was likely to follow. We got these lower price points this week all the way down to 1780 sp500 cash. And of course, once the stops were taken up we marched again. Its classic trading price action. This market is a low volume market still populated by institutions etc. There is very little real momentum so stops are always hunted down and price tech traders caught. Its been like this for the last 3 to 4 years. Whether it continues we cannot say but probably wise to assume it will sustain until it materially doesn’t!
Here the latest CS wealth weekly report on global asset markets. They remain pro cyclical and even pick out material and mining stocks, one of the most unloved sectors, as being a 2014 out perform. If we are in the end game of this stage of the cyclical bull market history suggests it could likely end with the material and mining sectors out performing as they usually do in end game moves. But against this we have deflation in many areas and the fed about to taper, eventually. This bull market could well be different from other historic bull markets due to how it has been created by non standard monetary means.
Here their daily report from Friday.
And, as it doesn’t fit neatly anywhere else, here BOAML picking up on the Bitcoin asset class. Please recall its globally a $14bn asset market. For comparison Samsung, as one corporate example, spends more each year on its marketing budget alone.
Rich
Its the start of the final month of the calendar year so here some of the latest institutional multi mkt considerations and YE strat.
UBSWealth-Dec14
commerz-stratwkly-04-12-13
A flash comment for my own book. I’m looking for a bottom in the cyclical sectors and indexes here. The IBEX has bounced in the last hour of a breakdown price point. It was a perfect trading entry, in theory. I would anticipate a re-test though of the level and even a slightly lower low is possible without correlating instruments breaking down as the markets are so thin. On the other hand the bounce is impressive and the dip down lasted no more than an hour in elapsed time. This indicates there are buyers at these levels. The reversal was swift. For sure we have increased volatility in the last 3 or 4 sessions and today yet more. So are close to an intermediate low, imo, for cyclical issues. For the wider s&p500 index there is likely a little more weakness to come over the next week or so before the index finds key support levels.
Rich
My desk is swamped with reports so better I post them up than delay before having time to make comments.
I’m afraid i’m under immense time pressure at present. I hope to make some more meaningful comments on the forum pages.
US$ strength is the renewed theme, it seems.
Rich
Ok its that time of the week again for the award winning Swiss team’s usual run through of the global asset markets.
Really this should be read alongside the comprehensive Sunday technical update. Ive little more to add other than picking up the Swiss team’s comments re the market internal sector issues.
We picked up a few weeks ago the recent divergence between oil producers and the under lying oil futures markets. The issue had to get, at least, partially get resolved. The oil producers have corrected. And recently, in the last couple of session, wti has performed well and so the mean is back into some alignment now. It was a well flagged move this one. They also picked up on the finance sectoral strength. This is a huge support to the market and the sector is looking to add weight into year end, a market positive. The fizz of the cyclical sectors seems to have come off a little in recent sessions but, for the moment, it looks more like a pause for the final assault on year end than much more. Indexes like the ftse20 and ibex are struggling here. No levels are broken just short term recently up trends so no alarm bells as yet but we must remain on the look out for a breakdown in the cyclicals as being an early warning alarm on the state of the market. Its hard to envisage a new YE higher high without the cyclicals really leading things. Semi conductors, Dow transports, Finance etc are the usual key sector indicators. Beyond these the international cyclical indexes of the ftse250 and ibex and also some EM indexes should be watched and traded if you have appetite.
Credit markets remain key to the health of all asset markets hence its correct to see the team picking up on the UST price moves. Across credit the talk of the taper is picking up rates again as inflation falls ie real rates continue to rise so the squeeze is on albeit at low nominal levels for now. Junk and corporate paper rates remain fairly benign for now though the 2.83% level for the UST is important and bulls desire that level to hold for a merry YE.
A credit set of charts here for those interested with some levels marked on.
Here a fixed income review from SC.
Bullion wise its been a depressing year for the gold bugs I must say. Its a fire and forget sort of allocation for me at present. Im happy to have the allocation albeit its nominal number is lower than it started the year at. The GDX miners have been a total disaster in 2013 thus far. If you demand the liquidity you are toast and there is little on the horizon (aside from very near term) to suggest fairer times soon. What we can say is that bullion could be sending us all a large signal that we have no conquered deflation as yet and that another wave could soon be around the corner for asset markets. If this is correct the gold dow ratio could be about to correct via a lower dow nominal number in early 2014. This isn’t ideal for leveraged gold holders but for physical holders its great as physical gold bugs look beyond the nominal fiat issues and prefer issues of real purchasing power.
Without more delay here the report.
All the best
Rich
Here a raft of technical comments and charts on the major fx pairs from the large institutional trading teams.
To start off here the usual SC Private Banking team’s weekly analysis
And here another excellent weekly view from the Citi fx team
Commerz here on the weekly em fx pairs.
Here an outstanding annual report from JP detailing their FX strat and forecasts for 2014
Here some daily briefing from CS
And here DB
We are 4 weeks from the end of the calender year of 2013. The end year usually provides a platform for the professional ‘expert’ forecasters to provide their respective views for the year ahead.
Here three 2014 forecast reports from JP Caz & the usual CS team.
First up CS:
Here JPCaz providing their view of the UK economy and equity.
And here the same JPCaz team providing their European equity views.
Many more 2014s forecasts to come as we wind down to year end.
Rich
December is usually an excellent month for equities. Its often called a window dressing month securing the year end bonuses for the staff within the financial services industry. This year very few indeed are on the short side here so we must assume there are very few that want lower equities to record lower year end numbers. In general terms the technical indicators are showing weakness in spite of this year end structural optimism, dow and dax aside.
Without delay here the various technical reports. Together they are a very powerful set of reports, in my view.
BARCAP-DEC-SEASONTRENDS-26-11-13
Yardeni-Techindicators-29-11-13
Read all the reports together in my view. If you are running a large book of equity longs then near term option puts out of the money are very cheap hedge, for obvious reasons.
Most will always expire worthless but given the divergence between price and everything else it a wise allocation in my view.
What price do you place on an easy night’s sleep is also a good question to ask.
Good luck and a prosperous final 4 weeks of 2013 to all.
All the best
Rich
