Volatility has continued with all asset markets continuing to show large movements again in the last week. Currency markets have traded very well with very clear price signals. For my own book its been an exceptionally strong week for FX and with euro equities remaining strong and the IBEX35 breaking out strongly.
I going to update this report tomorrow am but until then i release the usual trio of reports with the remainder and comments tomorrow.
Here the Swiss team’s latest:
The gold comments particularly meaningful. The ftse100 secular bull market, yes, though much relies on the pound being debased.
Here Fitzpatrick’s bubble warning latest:
Correct. The central banks are working hard to ensure this is a historic asset price bubble.
Here note the UST (ten year treasury’s yield is back down to 1.88% post Yellen. US Mortgage rates are tumbling again providing more stimulus to the US economy. A personal comment would be to watch the 5yr rates vs the 10yr rates. No one in the market is really believing rates can go higher for very long. When Yellen finally moves to raise rates it almost guaranteed that the US yield curve will invert with all the issues that this will create.
Here GS’s usual tech report:
Of the conviction trades (aside from the USD vs most long running positions) they maintain their eurostoxx50 conviction 3 long.
Here below the continuation of the release.
First up the outstanding regular chart pack release from CS:
They are maintain their caution on most asset markets here inc equities, commodities, bonds & bullion. Note, a clean sweep across the asset classes near term. Even the US$, which they remain bullish on has few entries at this near term point. I’ve not seen a more neutral to bearish report from the guys for some time. Looks like CS traders are going to have a relaxing week.
And here a timely report from JP covering earnings projection changes:
When you look through the tables as to how earning projections have been revised downwards, once again, its hard to be convinced as the longevity of the current price trends. (Also worth noting earnings have consistently disappointed for every year I can recall of this ‘recovery’ secular bull market).
To repeat and reemphasize the JP report above here Yardeni with his latest earnings report:
Unless we are the verge of some renaissance in earnings this cyclical bull market is within months or her end. Even earnings per share (ie inc huge share buy backs) are negative year on year according to the latest forecasts.
Next up on the technical front (and with a similar bearish looking set of indicators) Yardeni’s technical indicator latest:
And on the macro front first up CS:
Note the correlations page. Bullion is puzzling for market timers. She is not showing much in the way of a high level of correlation to anything right now. The highest degree of correlation is to the UST, inversely on the monthly and quarterly. Interestingly the inverse correlation is double the ratio to the US$ relationship which is at a historically weak 0.3. This can be explained by the rest of the world easing rates more quickly than the rate at which the Fed is disappointing. World growth is slipping and rate rises look further away than ever in truth.
And here ML on the macro:
And here more from ML on the macro:
Here ML with a special report on the preferreds market, which has been great investment for those with an entry a few years ago.
And here ML with their equity analysis, sectors and picks:
Note “sp500 is close to our year end target and earnings growth is slowing down”. Correct, as above.
And here an equity view across the smaller cap components from ML.
Fitting the tech with the macro its very easy to understand why the smaller cap sp600 and Russel have performed so well recently. Simply put the world economy is struggling with negative surprises month on month. The US$ has risen dramatically and this is making earnings for large cap US dow and SP500 components reduce in dollar terms. The small caps do not have this fx earnings exposure so they are lagging the worsening global picture.
And here a trio of CS macro reports before we turn to the fx markets:
And here CS on the US macro
And here CS on the Euro economy
Next up a multitude of FX related reports and comment as a v3 release, later today.
But to kick us off here MS’s regular outstanding FX weekly report:
Q1 2015 note 1.12 now the forecast eurusd. GBP 1.38 by year end.
And note, “over recent weeks, we have reduced our USD exposure“.
GBP – “Selling on Rebounds”.
I would add almost no political risk is priced into the GBP at present.
And here CS on FX:
Here CS on a trade fx rec:
Here next commerce with a great fx run through
And here the outstanding and widely publicized call by HSBC for the end of the US$ bull run. I was myself in that trade, without having read this report. But here she is:
And here the latest cftc report care of Scotia.
It was all there.I quote:
“EUR bearish sentiment has built for a second week on the combined impact of freshly built shorts
and fading longs, a shift that left investors highly vulnerable to the subsequent turn in spot”.
The build up in long US$ positions ahead of Yellen and raised bearish euro positions. Finally the sterling shorters were stacking up for a continuation of the attack on sterling. When market participants saw weakness it attracted more weakness.
I hope all are making good returns here. So far its been a great year for active traders.
All the best
Rich