- In Financial markets - one should focus on what market is doing and not what it should be doing.
- The Investing Theme: Weak Dollar.
- The Thinking: Sell Dollar and Buy everything else be it stocks, Gold or Yen. With US Fed Chairman assuring the market that only two rates hikes are on the table, instead of four - markets are pricing in more dollar weakness
- This is how much Gold miners have rallied in 2016. It started with fear trade, got bolstered by Negative rate noise and now weak dollar helping it.
- QE is History. Welcome to the new world of Negative Interest rates. No wonder money chasing stocks and other assets
- The Big Picture: S&P 500 now has solid technical support at 1820
- This is how steep the rally in S&P 500 has been since Feb 12. S&P500 is up 12% since the low it made on Feb 11 2016
- What does History say about this rally?
- There is real fear that vertical gains never sustain
Last 2 times the S&P 500 rallied in a vertical manner, the gains were fully retraced. 2016 case in TBD category. pic.twitter.com/ym65tsmSXQ
— Chris Ciovacco (@CiovaccoCapital) March 18, 2016
- What about Valuation? - PE at 16 times forward earnings in near zero interest environment cannot be called expensive. Also Dollar weakness = Higher non dollar revenues which is great news for S&P500 companies with International exposure
- The Dollar index now has a strong resistance at 100.5 and now selling seems to be picking up
- The weakness in Dollar means strength in other currencies. Yen has dramatically appreciated this year, much to the discomfort of Japanese policymakers.
- Even Chinese policy makers doing the adjustment for dollar weakness. PBOC raises yuan fixing by over half a percent; most since November...
- The above Chinese Yuan currency chart captures the extent of weakness Chines Yuan has seen since 2014.
- Even Ruble has appreciated pretty sharply over last 1.5 months
- One Big issue to keep an eye on: BREXIT.
- Chinese stock market trying to stabilize at 200 week moving average.
- Here's one country's stock market is rallying on HOPE that incumbent Govt cannot survive. The country is Brazil
- The iShares MSCI Emerging Markets exchange-traded fund (EEM) is up more than 10% over the past four weeks
- Liquidity chases performance
- Why many people are angry with the current rally? Because it's happening in stocks and assets where people were extremely bearish like commodities
- Here's one Central Bank that is fighting inflation in deflationary world - South Africa. The South African Reserve Bank today increased policy rates by 25 basis points to 7.0%
- T Mobile is destroying Net Neutrality with Binge on Service and customers are loving it
- Here's how Elnino crisis impacting rice...water intensive crop
- I hope you enjoyed the observations.
If we can gain a deep understanding of ourselves (wants, fears, hopes, desires) we can develop systems that are consistent w/ our beliefs.
— Michael Lamothe (@MichaelGLamothe) March 11, 2016
Japanese 10y yield sinks to record low -0.13%. pic.twitter.com/7iuCpD8Rvl
— Jamie McGeever (@ReutersJamie) March 18, 2016
SPX up 11.6% the past 25 days. Only happened twice past six years. Nov '15 down 1% a month later. Oct '11 down 7% a month later.
— Ryan Detrick, CMT (@RyanDetrick) March 18, 2016
Chart: The Russian ruble gains momentum; back at 68 to the dollar - pic.twitter.com/S8JxpuJ4fF
— SoberLook.com (@SoberLook) March 18, 2016
— CNNMoney (@CNNMoney) March 18, 2016
— Bloomberg Business (@business) March 11, 2016
Read Indian Market Observations::
March 17: Bhaiya ye deewar toottee kyu nahin
March 16: The Resistance intact, DIIs continue to Sell but action is Bullish
March 15: Bulls retreat after failing to take out 7540-7600 resistance
March 14: The Struggle with Resistance continues
March 10: Market encounters its first significant roadblock
March 09: Reading of Indian Market
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Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers