The swiss team’s latest report is below.
There is some caution in their latest report. They have opened the door to adjusting their model dependent on potentially “game changing moves” in the metals to Europe.
To my mind this is all part of the summer heat. Summer trading days are there to confuse the unlucky few that have to trade through these days. I believe the best clarity will emerge later in the month or early Sept. Volumes are very low at present and price is at its best as an indicator when participation rates are high.
This said, the key pivot level on the S&P at 1685 has been repeatedly hit and remains in play as a market defining price area. For as long as it holds a price extension to 1720 is very possible here, which i believe is spot on and indeed a likely event i believe. Sector wise i’ll leave the detail to the guys but i must confess to picking up sectors like the SOX as a trading entry to rejoin trend. It would be almost impossible to see a cyclical continuation here without the SOX leading. Apple has surged. If the SOX breaks her bull trend its a very important, informative event in my view so, trading, with trend, entries aside i would continue to monitor/chart the sox. Oil cyclicals also very interesting and also note that the divergence between the euro oil sector and US oil sector has narrowed considerably and whereas the US oil sector is on the verge of breakdown of her bull trend the euro oil sector is on the verge of a breakout of her bear trend. Historically the US index should be the lead as where the US goes the rest of the world generally follows so we watch that one with great interest as well.
Copper and Shanghai. I like the issue immensely as an indicator. Its early days on the copper breakout and she is very extended. The Shanghai remains a key cyclical driver and got a confirmed buy signal technically 2 sessions ago! http://www.stocktiming.com/Shanghai_Daily_Stock_Market_Updates/shanghai-index-update-tuesday.htm
I have taken that entry myself. I’ve chosen to take that medium term trade via the Chinese banks listed on the HSE (HK) (also as ADRs in the NYSE). China’s largest banks have collapsed in capital value terms. They are uniformly trading on forward pes of around 5 to 6. They pay good dividends and are significantly undervalued if the expected avalanche of Chinese bad loans don’t occur. Or, in my view, the day of reckoning is pushed back by policy makers in China. The shadow banking squeeze has been halted for now and inter bank liquidity improved. If China is to get a bounce the banks will bounce the most and possibly therefore provide the alpha play. At the very least a cyclical bounce will support the banks and they should provide a beta on the index. If the move reverses they may well also provide a beta to the downside of course though suspect not the alpha as participants have really beaten up these issues greatly.For info the issues i have entered are: China Construction Bank, Bank of China and Industrial and Commercial Bank of China. I also picked up exposure to Vietnam via the VNM etf listed on the NYSE, again, as a trading entry. The technical chart shows a base and the correction with cyclical China positive. I already Hang Seng Bank and picked up Standard Chartered on its weakness a few weeks ago in the HK markets. If the cyclical bounce call is correct Conooc and PBT and Sinopec etc should get a continued bid. The Ftse listed miners like ANTO, amongst others are strongly over bought albeit for very low levels. The commodity sector has got a bounce recently whether its a dead cat or something more remains to be seen.
The bullion asset class has been producing some very curious moves and particularly the thin silver markets whose volatility has spiked up and price rises have shown a strong bid returning to the metal. Price technically its a counter trend rally still well within a cyclical bear within the bullion’s long term secular bull market. But there are non price technical indicators that point to some dramatic events that might occur in the not too distant future. Both the comex and LBMA physical stores of gold are at very low levels and the LBMA is specifically in danger of being unable to meet gold redemption requests according to reports. The BOE also recently confirmed a significant collapse in its own stores of gold indicating lending rates have surged. There is immense backwardation in the gold futures markets indicating there is an immediate shortage of the metal in the markets at present. Premiums in Asia have risen strongly recently and a few days ago India again increases taxes for the third time on the metal due to surging imports of the physical. There is a huge divergence once again between the physical markets and the paper markets. At some point soon the two markets will need to converge and it could occur, given the news flow, at much higher nominal price level. As volatility is high the asymmetric trade entry on this phenomena remains expensive, for the moment.
I have multiple similar reports to post up from other sources and much more to say on the credit markets and divergence between US and Europe, etc etc. As well as FX where we see some key secular and cyclical levels in play. But I’m going to have to come back and update this as I realize many are waiting for the Swiss team’s latest report.
Without delay I attach the Swiss team’s report here:
And below a few slides etc that are noteworthy. I will update this report later today!
I recently commented on the short Aud trade and interest in the Australian economy. Someone has kindly forwarded to me the latest August RBA report on Asia and the Australian economy. Its a very useful and up to date chart pack. The short Aud trade is in full motion here and we are starting to see some yield de-compression for Aud reits etc. If the trend continues a macro medium to long term trade will develop which will be long defensive, strong balance sheet, yielding commercial Aud property assets. Its on the radar as a potential macro trade for q4 2013. Thanks again to the reader for mailing me this report.
And here the rising 30 year mortgage rates in the US today reaching 4.73%. This chart below shows the 30 yr rates together with the US mortgage re-finance numbers illustrating the collapse in the consumption enabling re-finance ongoing. Consumers re-finance when rates are lower than their current mortgage rates. As rates fell to May greater numbers have re-financed to take advantage of the lower rates. Since May the ‘refi’ numbers have collapsed. The consumption tail wind appears to be ending and could therefore become a significant headwind moving forward.
UK savings rates..
\UK consumer lending.. It never really falls it only increases but the issue is whether the increase is ahead of inflation or below it.
And post this slide we know that in q1 2013 consumer debt ticked up again in a dramatic way.
How can it be that the uk consumer has repaired his balance sheet by deleveraging even as his real disposable income falls to levels a decade ago. Savings rates are also back down to multi decade low levels. Sure zero interest rates and free deposit schemes can raise house prices in the short term but whether this strategy will be a long term wealth creator remains to be proved. The 2003 to 2008 attempt failed dramatically. Perhaps this time will be different. I think not.
Here yet another problem. The concentration of risk in the allocation of uk consumer debt.
http://calumjc.blogspot.com.es/2013/07/does-uk-have-household-debt-problem.html
(26 votes, average: 4.92 out of 5)
Loading...