BarCap,Commerz-Weekly Commodities & Credit & Bullion – “Paper Hard to Beat” 15th Nov13

The weekly commentary from BarCap combining Fixed income and commodities.

An interesting set of assets to combine here. Historic correlations and inverse correlations between the pair at different stages of the cycle. Worthy of comment and discussion in itself but another time and place.

Commodities are under price pressure here. The monetary tail winds are under threat in the US and China. The demand story remains under pressure from a struggling world economy. The combination has this week confirmed the price breakdown continuation of several commodities, copper included. Not what we would expect to see on the verge of theoretically tighter monetary conditions and the recovery reaching escape velocity. (Emphasis added!).

Here the report.

barcap-commoditiesfi-15-11-13

And here Commerz on the bullion technicals. Everyone is once again bearish the bullion. As Barcap put it perfectly, for now, “paper hard to beat”.

Commerz-BullionWklyTech20-11-2013

Bitcoins and paper the perfect digital virtual wealth creation world? Personally as an investor and trader I don’t mind where i make a margin from but please don’t ask me to believe in the sustainability of any of these current paper trends. (Print, pump, dump, is a more appropriate belief model, in my view).

All the best

Rich

BarCap Equity Strat & Picks – 18th Nov13

A couple of very useful weekly BarCap equity strat reports containing their equity recommendations and forecasts.

I hope to make these regulars

Barcap-equity2-11-11-13

barcap-equity-18-11-13

And here their monthly equity markets report with some good macro and sector internal work.

Barcap-macroequity-17-11-13

As i’m in a positional equity trade on the IBEX market here CS on the Spanish credit market.

cs-spaincharts-18-11-13

In spite of the jaw boning it remains bullish to YE. The IBEX fell 2% through her support but this is a minimal move in the volatile and illiquid Spanish equity market. If markets are to resume the ye push the Spanish market could well provide the beta alongside the EM markets. Nik225 up 2% last night. Asia 50 slightly down as was the SSE but the lack of movement showing sustained price support for the recent breakout given the dm market’s close. Fed minutes somewhat at odds with the recent testimony from Yellen and Bernanke.

All the best

Rich

 

Weekly Technical Analysis – “EM’s Relative Outperformance” 19th Nov13

Here below the award winning Swiss team’s usual weekly technical analysis of the world’s major asset markets.

We have breakouts in western markets and very promising developments in Japan and China. The Nikkie has scored a high momentum break out of her 6 month price distribution range and is threatening her May highs.

The Chinese SSE has broken out of her down pattern in the Swiss team’s view. By my price work I don’t have her there as yet but she is now very close and given the positive tail winds of long term correlated markets rising its reasonable to think the breakout can occur/sustain.

On China for a moment. In spite of all the doom and gloom on the Chinese credit problems the charts of the Chinese banks look very promising and have recently performed well. They are a positive beta on the wider Chinese market in fact which may surprise, given the headlines.

On US markets they make the case that its “bullish but limited upside” due to AAII sentiment survey. (The latest reading as reviewed a few days ago by JPM in their equity report, has fallen a long way, note! It is no longer at contrarian levels). The put call ratio is in contrarian territory. On Market breadth its more complicated than the team illustrate. Yes there was a non confirmation in market breadth for the NYSE and Russel2000 and Nas100 but the Dow and S&P500 and Dax and many other indexes did confirm. The market breadth picture is more positive that it was a month or two ago.  The large caps are price over bought but over bought levels can sustain for an extended period an ratios of over bought have  a poor record of being an accurate near term signal.

Dollar basket wise they sight the 81.48 cash level as a key ‘game changing area’ (81.6 on the dec DX futures contracts). The inverse correlation to risk assets could be meaningfully negative for equities, and gold!

Of the European Indexes the Spanish index, the ibex offers the most upside here and has a positive bull flag formation with 10,300 or so beckoning for YE window dressing which is a move of 7% or so from current levels. The IBEX fell today by 1.6% and is very close to the 9615 support level the team outline. (As a trading stock pick for the YE Banco Santander is providing a trading entry alongside the SX7P ‘euro finance index’ being at a trend line support. Whether she is the beta in the IBEX is another matter. Quite possibly a stock like Fomento de Constr y Contratas offers the +beta as its at a trading support, is cyclical component to the Spanish, apparent, recovery. As its a high volatility beta the downside risks are also greater. Higher risk higher return, of course.

Without more delay here the report :

Wklytech-19-11-13

Rich

 

 

MS & SC Weekly FX Reports – 15th & 19 Nov13

Here below the respective in house positions of MS and SC.

MS making the US$ case correlating the strength  to the deflationary backdrop. (Which is usually a dangerous cocktail for risk).

Report here

MS-WklyFX-15-11-13

Here SC retaining a ‘structurally bullish” position on the US and bullish the GBP vs US$ due to the positive “technicals and recent relative data”.

Here their latest report

SC-FXStrat-18-11-13

Rich

 

CS Wealth & SC Wealth – Weekly Mkts & Equity Picks – 15th Nov13

Here a couple of regular weekly reports from the respective wealth management teams at the above institutions.

CS remains concerned on world interest rates and expects the Fed minutes later this week to bring forward the taper discussion once again. That would be a head wind for equities.

Nonetheless they point out the strong seasonal and ye window dressing and make some good stock picks on this basis for their high net worth private clients.

On the commodities they pick up the same issue we did a week or so ago. Ie the narrowing of the WTO Brent spread.  To be played via trade ideas short Brent, long wti.  Or to capture the positive directional path, long wti for the bottoming of oil prices and the narrowing of the spread between the two.  The trouble i have with the directional trade is the US$ which CS wealth also consider may strengthen on the taper issue which would also be a headwind to oil prices. There are some key equity picks for the likely YE rally. Ill leave the detail of these picks to their report but we can pick up any individual stocks on the forum pages, as usual.

Report here:

CSWeath-WklyStrat-15-11-13

Next up SC wealth

They take the other side, to an extent. They don’t believe in the taper near term and are less hawkish than the CS team. They are more bullish equities than the CS team but nonetheless forecast a strengthening US$ and a weakening commodities sector.

Report here:

SC-WklyMkt-15-11-13

It seems the institutions are bullish equities and fairly bearish commodities no matter whether they forecast more or less ‘non standard’ monetary measures. To my mind this is a comment on the state of the ‘real economy’ and real demand which remains very weak here. A stronger US$ usually indicates less liquidity in risk asset markets as the US$ remains the world funding currency. YE seasonals remain strong so i remain long equities with no shorts in this market with some leverage. But post the YE window dressing and on specific sector over bought levels and or key resistances on individual instruments i’m taking profits. If the market breadth issues improve I’d stick with it but many technical issues remain with this market and the spread to the fundamentals is very significant now. Its a very unbalanced market which as the put call ratio suggests is an all in market with downside risks unrepresented. That makes it a market that is grinding higher but very susceptible to to downside surprises. Its all probabilities this. As its been a great year I’d rather be prudent here than go all in for those last few percentage gains.

All the best and the other Swiss team later today as usual.

Rich

 

Global Macro Monthly & Weekly Economic Reviews & Forecasts – WF,CS,BarCap,Scan

There is a lot of reading. Its for those with a bias to the fundamental data.

The data remains soft or weak recovery, at best. And as WF perfectly asks,

“Five Years, Three QEs and $3.5 Trillion Later, Where’s the Inflation?”

And consider this. In previous nominal bull markets usually occur alongside some rise inflation as money supply and money velocity expands. This years stellar performance has been a real performance that is quite remarkable as it has occurred alongside falling inflation which is registering a barely positive number. This is almost extraordinary, in fact. Of course, ‘non standard’ measures are likely to result in ‘non standard’ responses by asset markets so we should not be entirely surprised by these events.

First up here the excellent monthly economic report from the usually optimistic WF.

WF-MonthlyEconomicOutlook-15-11-13

Here their weekly report

wf-WklyEconomicy-15-11-13

And here the CS take on the US economy.

CS-Econ-US-05-11-13

And here CS on the critical fixed income markets with their linkage to economic fundamentals.

CS-Credit-chartpack-12-11-13

And here CS on the euro credit markets

cs-eurocredit-chartpack-11-11-13

Here Scandia coming at the FX markets from a fundamental perspective.

Scandia-fxstrat-13-11-13

Here a set of country specific economic reports from BarCap – Focus Japan.(Nik225 breakout intact,note)

BARCAP-Econ-japan-13-11-13

Part2 here –

BARCAP-Econ-japan2-13-11-13

And here WF with a sector focus from an fundamental macro perspective on commercial property.

WF-Commercialprop-13-11-13

A lot more reports to come but a lot of reading there above.

All the best

Rich

JP Weekly Equity Update – “S&P500 YE Target 1825”

I hope all had a good weekend. I apologize but we had a big electrical lightening storm here which wiped out the power for around 12 hours earlier today hence the delay in posting these new reports.

Here below the weekly equity report from JPM. Its an excellent report. The sectoral analysis is on the money. They are forecasting a strong end of year and raising their targets for the S&P500.

Their specific stock recommendations ill leave to the team.

One of their top picks is US Airways Group trading on a forward pe of 6.8. Recent fundamental analysis hereon the stock.

http://seekingalpha.com/article/1767112-us-airways-how-high-will-it-fly

What do we see, once again, its weak fundamentals vs the strong price technicals which indicate the likely YE “santa” extension to her strong 2yr 500% bull trend for US Airways and the wider indexes.

All sorts of parallels to the wider market can be drawn here, in terms of the divergence between the fundamentals and the price technicals as we have seen this for some time now. But as the perma bears have discovered to their cost positive price technicals can win over the disappointing earnings, higher taxes and weak markets breath issues for extended periods of time. As we have strong positive seasonals here its likely the positive price technical picture will sustain into year end as JP forecast.

On sentiment they are correct that the AAII survey has seen a big shift this week which is no longer showing an over bullish sentiment reading. Its back within the realm of normality and therefore this provides a positive tail wind into year end. Other sentiment work like the put call ratio hasn’t confirmed this AAII shift in sentiment but its one less red flag on the market which is positive development for the YE bulls.

On the market sectoral issues it remains strong stuff, especially in the euro zone. If you run a chart set across the euro sectors its hard to find fault with the euro price action across most of the sectors.

US wise, Finance has broken out with Banking with in this sector very close to a new price breakout which would be very supportive of an extension. Semi conductors the same. US health care remains on fire to the upside (Check the sector etf – IYH). The industrials and transports have already broken out strongly as have the energy sector in spite of WTI threatening her long term supports whilst Brent look better. (Its all part of the strong price action poor fundamentals situation this). Sector wise its very strong stuff and hard to find fault with. Even the US housing supplier sector HGX is starting to look more promising but still no breakout of her 10 month price distribution range.

Market breath wise the JPM don’t pick up on adequately in my view. I don’t want to pre-empt a report in the next few days on this subject but suffice to say that whereas the large caps were previously the weak link in the market now they are the strongest link. The smaller caps in the broader NYSE and Russel2000 are now the weakest link in terms of market breadth as the domestic economy has disappointed yet again and there is still much optimism on the euro recovery lifting world demand. Lets see. The large cap tech stocks remain a little unconvincing in terms of market breath on the nas100 but bring up wider indexes like the XLK and you will again see a beautiful chart breakout and very positive ye forecasts from all. Its that sort of market and in spite of the market breadth issues that remain i wouldn’t try and fight it!

Its a grinding higher market with few sellers. We get weakness in some sectors and the market rotates and grinds higher on each cycle of the rotation from sector themes to other sectors or large caps to mid caps etc. There is an awful lot of good will priced into this market now as earnings continue to disappoint but with Yellen at the Fed the tailwinds remain positive.

The US$ remains under pressure with a fairly strong week after the prior week’s considerable weakness. The eurusd remains unresolved for now. A strong US$ would present yet another fundamental head wind to US equity indexes so we must remain vigilant to this issue. Credit markets remain benign for now display rising rates albeit at very low nominal levels still. Deflation remains the more real threat for now so real interest rates are rising more quickly than the nominal rates display. This issue is not a market timing issue but is becoming an increasing headwind for the market.

Here the JPM weekly equity report:

jpm-wklyequity-15-11-13

Many reports to come inc the fundamental report updates.

All the best

Rich

 

 

MS Wealth – Macro Mkts Nov & CS “Core Strat 12th Nov13

Here a couple of “best practice” macro multi market reports containing a mix of fundamental and tech. Pulling all the various themes together.

First, the MS Wealth report. A walk through of the major issues and they include an interview with Jim Rogers, who is always worth listening to from a longer term macro.

Here MS

MSWealth-MacroMkts-Nov13

And here the CS Core strat report

cs-corestrat-12-11-13

We have breakouts in the major US indexes, Russel2000 aside. It feels like Christmas has already arrived.

Its strong price action again but we will be looking “beneath the hood” again this weekend to see if higher highs is leading to some tech strength which recently has been diverging from price greatly.

A raft of macro economic reports tomorrow.

Have a great weekend all

All the best

Rich

CS – Global Equity Strat & Asian Equity Review & Recommendations 14th Nov13

A couple of outstanding equity focused reports from the research teams at CS.

Some excellent and useful work here. The Asian report is outstanding and repeats the out performance of insurance we have seen in the dm markets recently.

Ill leave the detail to the reports. CS sees the risks of a near term pull back but the seasonal’s are strong now in the run up to year end close of books. Perhaps we can dispel the reality of the technical weakness to after the holiday season.

CS-Equities-12-11-13

I would dearly like to get my hands on more Asian detailed equity research papers like this.The demographics research is spot on. Credit to corporates has been strong in Asia but consumers have not taken to debt in the same way as in the western markets. Savings remain very high. A long secular trend for the Asian consumer can’t be far away. It would be a very positive event for global money supply.

I’ll leave the individual picks to CS but i would comment that large caps are the only place to be in the Chinese market do to risks of accounting standards etc. Listings via the HK market are safer than some adr listings in the US. Link Reit is a nice Reit  I do hold. The Indian listing we must be very careful with any domestic themes due to the obvious fx risks.

CS-Equity-Asia-14-11-13

Much more to come

Rich

 

CS Global Macro Charts, FX Strat & Tech 14th Nov13

Here a run through from CS of the global asset markets.

Here last weeks global macro chart pack from them which is a useful quick ref report i find:

CS-MacroChartswkly-07-11-13

Here this week’s latest report on the same format:

CS-MacroChartswkly-13-11-13

And here the usual CS weekly FX tech report, below. A good global view this and standing at odds to the UBS view. I.E. they remain long usd, long gbp, short euro.

The GBP is really fascinating at present. Inflation is relatively stronger in the uk than elsewhere and the BOE’s target of 7% unemployment is now within 60 basis points. The inflation report is starting to take a more hawkish stance on rates and removal of stimulus. Or at least that’s how the market is starting to read things in the UK. Given the euro zone appears to be moving more in the opposite direction sterling could have upside indeed. Technically the cyclical bear vs sterling for the euro could get one more down draft. This wave could result in a lower low and that would be a superb result for those who have stuck to the long sterling position.  I no longer like sterling as I don’t believe Carney will raise interest rates and or stop QE. If an exist can be found on more strength this would be a superb ending to the long sterling and long uk equity trade. The next 6 months is critical to find the exist from the gbp in my view. Pre the market calling Carney’s bluff.

CS-WklyFX-13-11-13

Here their global macro strat inc bearish eurusd looking for 1.30.

CS-globalmacro-13-11-13

All the best

Rich

Commodity Update – CS,Commerz,Nomura,etc.. 14th Nov13

Here a group of reports on the commodity asset class. They have badly under performed as an asset class from mid 2011.

UBS have turned bullish due to a renewal in weakness for the US$ (they believe) and the out performance of the cyclical themes.

The dollar basket monetary issue is key, i believe, until we get Asian/China revival on the demand side.

Here an excellent overall review by the CS team.

CS-commodities-12-11-13

Here a nice technical analysis set of charts from the commerz team

Commerz-commoditiestech-12-11-13

Here commerz on the tech charts for the commodity currencies.

commerz-wklycommodityfx-13-11-13

Here CS and Commerz & Nomura technical comments on the Bullion markets.

Commerz-Bullionwkly-12-11-13

CS-Bullion-07-11-13

Nomura-bulliontech-12-11-13

Many more reports to come later today.

Rich

 

 

Weekly Technical Analysis 12th Nov13 – “SP500 1775/1780 Possible Extension to 1850”

Here below the multi award winning Swiss team’s report.

Despite the “Lowest Bearishness in the US Since 1987″ the Swiss team have issued a fairly bullish report proposing a final leg up to close the year end books.

Its certainly a possibility as price isn’t showing any obvious weakness here.

Their medium term view hasn’t altered. They predict the most likely path is some near team sp500 weakness followed by a final leg up into year end and early q1 with a correction to follow of between 7 to 10% in Q1 2014. The bull market likely has further to run into 2014. They favor a renewal of US$ weakness and over weight allocations to commodities and related themes for out performance.

A quotes from the this report:

“With the strong Friday bounce the US market negated the
bearish Thursday daily candle, which is impressive”.

“With a significant break of the September high we would get a
next projected target in the Dow Jones Industrials at
16328″.

“Gold below 1433, the yellow metal remains in a problematic pattern set up and in this
context we reiterate our worries about the poor medium term
structure in gold, which still suggests the risk to see
another negative surprise in gold and gold mines into
Q1. Generally, a break of the June low at 1180 would
imply another bear move towards 1032 to 1020″.

“Buy China”.

As a general comment, the spread to my own view and the Swiss’s team’s view hasn’t been so wide for some time. I.e. Seasonally i realize we are approaching the run up to the Santa rally period. It would certainly be an unusual time to be short the markets but we have lots of warning signals here flashing. The team this week have failed to cover market breadth issues. They haven’t much mentioned momentum either and the market internal work on sectors is weak again. On the fixed income side of things we see rates are starting to rise even as inflation falls implying real interest rates are rising quickly! What I want to say is that there are many weeks where this bull has previously provided pretty clear signals for a continuation. But alas that is not the case today and the spread or disconnect between price and other indicators has seldom been so wide. In terms of risk on off and chasing price higher a little respect for these issues, at the least, is in order. In my view.

Lets watch the US$, UST 10yr, commodity prices, China and if we can achieve higher highs for the weaker Russel2000 and Nas100.

Without delay here the report.

Wklytech-12-11-13

All the best

Rich