Archive for the ‘Commentary’ Category

Thoughts From A Busy Tech Day ($APRN, $AMZN, $NFLX)

By: ispeculatornew | Date posted: 07.18.2017 (6:10 am)

Blue Apron (APRN) was going to face an uphill battle no matter what as part of being the lead player in a rather risky and expensive new business but it’s difficult to imagine a worse timing for the company to go public isn’t it? It did so a few days before Amazon’s (AMZN) announcement that it would buy Whole Foods and now Amazon seems intent on directly competing with APRN after filing for a trademark related to meal delivery. I don’t think the risks are overblown here. I don’t believe APRN can currently survive competition from AMZN so the current move does not seem overblown to me:

Impressive Numbers From Netflix

Netflix was expected to add a bit over 3m subscribers in the last quarter but it did much better than that by adding over 5m (4.14 intl and 1.07 domestic) which is highly encouraging. I will try to write more about it but I personally continue to be a believer in NFLX’s long term business even though its current financials are not great. Netflix should continue to focus on user growth and international expansion.

Technical Analysis Weekly Overview

By: ispeculatornew | Date posted: 07.17.2017 (3:30 pm)

As of July 10, 2017, the USD showed a 2-sided trade in the previous week yet still closed higher. The USD index was strong at the beginning of the week reaching its weekly high after the Federal Reserve released minutes of its June meeting. It still managed to get back to positive even after a setback in two days caused by the Friday release of the US Non-Farm Payrolls report.

Major events expected in the coming weeks will provide speculators with an insight into growth or global economy. We expect the Claimant Count Change and unemployment rate in the UK to be published this week. On Wednesday, BoC will release its interest rate and Janet Yellen will give her testimony before the US Congress on Thursday. US CPI will publish its retail sales on Friday. These are some of the events expected to have an impact on global economy and the forex market as well.

Technical analysts show the EUR/USD floor pivot points with a 3rd sup of 1.1198, 2nd Sup of 1.1255, 1st Sup 1.1325 and Pivot 1.1382.

Source: https://www.fxempire.com/forecasts/article/weekly-forex-technical-analysis-july-10-july-14-2017-419873

Looking at the EUR/GBP

Technical analysis shows that the EUR and GBP are once again at a crossroad. The two currencies have been on a 164 pip trading range for quite some time and only broke higher after the surprises of the June 9the election day. On June 12th, the swing highs reached 0.8865 and 0.8858 on Friday. See the chart below for other EUR/GBP swing highs and swing lows in this period.

http://www.forexlive.com/technical-analysis/!/forex-technical-analysis-eurgbp-at-cross-road-again-20170710

The chart shows that the EUR/GBP pair has gone through many ups and downs leaving us at a major cross road. Both EUR and GBP have been banging against significant resistance ranging from 0.8850 to 0.8879 on each day’s chart for the last 10 months. They are banging on a ceiling of 0.8858 and a floor of around 0.8834. Anything lower than the 0.8832 to 0.8834 range could be a reason to beware.

Strength and comparison of other currencies

Overall, the currency strength table shows the EUR being the strongest at the moment while the JPY is the weakest. The last week has brought some key changes with the GBP suffering a 3-point loss and the CHF enjoying a 2-point gain. Other currencies more or less stuck at the same level throughout the week with maximum strength changes of 1 point.

On the basis of Currency Comparison Table and the currency classification for the last 13 weeks, some of the interesting currencies worth going long on include EUR, CHF, and NZD. The 3 currencies are Strong or Neutral options when you look at them from a long-term perspective based on currency classification for the last 13 weeks. The same analysis is still relevant for going short term with the JPY, AUD, GBP, and USD being the best choices. These are Neutral or Weak currencies if you look at them from a long-term point of view. Currencies such as the CAD have a high deviation and less predictable therefore not very interesting to trade.        

Is Gold a Good Safe-Haven Investment Now?

By: ispeculatornew | Date posted: 07.09.2017 (8:21 pm)

Every time speculators get cold feet about equities, people flock to gold as a safe-haven investment. For the week ending Friday, July 7, 2017, markets were thrown for a loop. A large-scale tech stock selloff on the NASDAQ precipitated fears that Wall Street is on the decline. Pundits were saying that years of strong gains must certainly culminate in a market correction, or a dramatic long-term reversal.

The bulls will invariably run out of steam, and the bears will come out to maul markets – they say. But these naysayers are ill advised. The financial markets are not beholden to anyone, let alone speculative sentiment. Sure, a jolt hear or there will upset current trends but ultimately, it’s macroeconomic factors that determine what rises and what falls.

Tech Selloff a Blip on the Radar

Recently, the NASDAQ threw traders for a loop. A major selloff of tech stocks took place before the US Department of Labor released the June NFP data. And what a surprise it was: 220,000+ new jobs were added in the month – welcome news for stakeholders on Wall Street and abroad. Consider that economists were expecting 180,000 new jobs to be added, but the actual figures exceeded forecasts by a huge margin.

President Donald Trump wasted no time gloating about this news on Twitter, and his followers were quick on the uptake. More importantly, markets reacted favorably to the latest NFP data. By the end of the week, the Dow Jones Industrial Average (DJIA) was up 0.4% at 21,414.34.

Even the tech-heavy NASDAQ closed the week at 6,153.08 for a gain of 0.2%. The S&P 500 increased 0.1% to close at 2,425.18 for the week. These figures are especially encouraging since the bigwigs of the trading world were convinced that markets had topped out and were on an inexorable decline.

Trading Experts Weigh in on Market Activity

ECN Capital expert, Charles Wilson Sr. believes that the NFP data will have a profound effect on monetary policy, and equities markets. “Given the bullish sentiment on Wall Street as a result of the strong June NFP data, we are likely to see Fed chair Janet Yellen moving to unwind the $4.5 trillion balance sheet sooner, rather than later. Inflation concerns remain, owing to weakness in crude oil prices, but the Fed is likely to accelerate its monetary tightening. A dual approach in the form of asset sales and rate hikes to the federal funds rate will do the trick.”

A slight increase in hourly wages was also reported during June, up at $26.25, for an increase of 0.2%. This was marginally less than expectations, but nonetheless a positive sign. Over the past year, wages have increased modestly at 2.5%, which is behind the eight ball. As bond markets enjoy higher yields, a risk-off approach to equities markets kicks in. There is a sense that central banks are moving closer towards monetary tightening around the world, and this is keeping traders at bay. As bond prices fall, yields rise. Typically, people buy bonds when equities markets are in trouble, much like gold bullion.

How are Gold Markets Performing?

The current price of the precious metal is $1,212.82 per ounce, up slightly on Friday, 7 July. Over the past 30 days, gold has declined by 6.32%, or $81.50 on the back of strong USD performance and a risk-on approach to equities markets. Since gold is a dollar-denominated commodity, demand rises when the dollar depreciates. According to the US dollar index, which is now at 96.00, the USD is appreciating. Over the past 5 days, the US dollar index has gained 0.39%. This underscores the decline in gold demand.

However, for the year to date, the US dollar index is down 6.23% – a good sign for gold bugs. Mr. Charles Wilson Sr. believes that there is still a significant market for gold, possibly in different forms. These include ETFs, gold mining stocks and Gold IRA options. Presently, gold is languishing with steep losses. Increasing treasury yields and a stronger USD are hampering gold demand, but this also makes it a value-driven deal for long-term investors.

How will Deregulation Affect the Financial Sector?

By: ispeculatornew | Date posted: 06.20.2017 (6:46 am)

President Donald J. Trump has been mired in controversy since he was sworn into office. His agenda has been hamstrung by obstructionist Democrats and more than a handful of skeptical Republicans. His ambitious objectives such as building a border wall, imposing tariffs on foreign countries, repealing and replacing Obamacare, and deregulation have been stopped dead in their tracks, or have they?

While the media focuses its attention on drawing parallels between the Trump campaign and Russian election interference, the Trump White House has been quietly going about passing legislation to undo the Obama-era doctrine of extensive government involvement in most every aspect of corporate America.

Foremost among the changes sought out by Trump and the Treasury Department is the redrafting of Dodd-Frank. This comprehensive piece of legislation was passed in 2010 as a response to the global financial crisis that developed after Lehman Brothers collapsed. This set into motion a cataclysmic series of events that wiped out trillions of dollars from global markets and threatened to spiral into a global depression.

Obama and his team sought out legislation to prevent banks from over lending, by requiring them to meet with minimum stress test requirements. In early June 2017, landmark legislation was passed by the House of Representatives to radically transform the manner in which the financial system operates in the United States. The banking system remains the structural bedrock of the US economic engine. Too many changes and lackadaisical regulations may seriously undermine the performance and the credibility of the US financial system.

Banks and Financial Institutions Abuzz with Trifecta of Policies

Banks are strong when they promote lending, investment and saving – those are the 3 tenets of economic growth and prosperity. Back in the 1930s, the Glass-Steagall law was passed which recognized the separation between investment banks and commercial banks. That has since eroded, and the law was repealed in 1999. Banks have turned the corner when it comes to liquidity and credibility since the passage of Dodd-Frank in 2010. The stringent regulatory requirements inherent in the legislation ensure that banks will not over lend and are capable of withstanding significant stresses in the economy.

These measures also enhance client protection and ensure that a modicum of solvency, respectability and structural strength remains intact. Any failure in the performance of the economy or the bank should not adversely affect the economic system overall. There are now calls for the stress tests to be revisited, amended, and updated to meet current market conditions. We see evidence of renewed interest in bank stocks according to  Lionexo options trading experts. The financial sector is buzzing with the multi-pronged approach to revamping it in the form of Fed rate hikes, deregulation, and decreased taxation.

What Sort of Legislation Would Be Beneficial to the US Banking Sector?

Banks will be well served by determining issues like share buybacks and increasing dividends once the stress test results have been acquired. Banks are also currently limited in the amount that they can invest for the own profit/loss portfolio. Fortunately, the global community has toiled long and hard to create a standard to prevent a return to the conditions that precipitated the global financial crisis.

Unfortunately, US regulatory agencies have dismissed global standards as insufficient and have gone further to impose strict limitations and performance criteria on US banks. This has negative ramifications and could result in the US financial system being defunct. The CEO of Morgan Stanley (MS), James P. Gorman, believes that the US financial sector should take the time to digest the current rules and double down on what the economy requires to generate job growth, investment, and increased savings.

If Le Pen Wins, Here’s What Assets You Should Keep an Eye On…

By: ispeculatornew | Date posted: 05.05.2017 (5:21 am)

The U.S. equity market has been up over 1%, the week of the release of the first round of the French Presidential election results. Now, the SPDR S&P 500 ETF (NYSEARCA: SPY) was up 1.49%, the iShares Russell 2000 ETF (NYSEARCA: IWM) was up 1.35% and the SPDR Dow Jones Industrial Average ETF (DIA) was up 1.87%, the week of the French Presidential election first round results. Now, this was primarily due to Macron’s slight lead, and traders and investors began to put risk back on the table. That said, safe havens have been down significantly after risk-on sentiment was back. Although traders and investors have shifted away from safe haven assets, the results of the final round of the French Presidential election on May 7, 2017 could surprise the markets, if Le Pen wins. Now, there are some exchange-traded funds (ETFs) that investors might want to keep an eye on ahead in an event of a Le Pen win.

Gold-Related ETFs

The SPDR Gold Shares (NYSEARCA: GLD) was down just over 1% on the week, as of April 28, 2017. The SPDR Gold Shares aims to provide investors with investment results corresponding to the price of gold bullion. Since gold is seen as a safe haven asset, in the event of a Le Pen win, there should be an increase in political risk, and in turn, gold prices should rise. This should drive GLD higher, if Le Pen wins.

According to trader Jason Bond, “Another asset traders might to keep an eye on is the Market Vectors Gold Miners ETF (NYSEARCA: GDX), which I’m currently long. Now, this a long-term play and I think the price of gold should rise in an event of a Le Pen win, and this should trickle down into GDX.”

Source: TradingView

If you look at the performance of GLD and GDX on the hourly chart shown above, these two ETFs trade in tandem, and could both benefit in an event of a Le Pen win.

Euro-Related ETFs

The euro could experience a high degree of volatility before, and after, the final round of the French President election. Now, the Guggeinheim CurrencyShares Euro Trust (NYSEARCA: FXE) aims to track the price of the euro, and if Le Pen wins, this ETF should fall significantly. We’ve seen FXE rise 1.75% over the past week, after Macron led the first round of the French Presidential election.

“Traders who are highly risk tolerant may want to keep an eye on the ProShares UltraShort Euro, in the event of a Le Pen win. I’m currently long this inverse leveraged ETF, and believe the euro could fall ahead of the final round of the election,” one trader stated.

The ProShares Ultrashort Euro (NYSEARCA: EUO) aims to provide daily investment results correspond to two times the inverse of the daily performance of the USD price of the euro. Consequently, this is considered a highly risk ETF.

Here’s how EUO and FXE performed recently, on the hourly chart:

Source: TradingView

The Bottom Line

The final round of the French Presidential election is coming up, and in the event that Le Pen wins, gold-related ETFs could see a rise, while the euro could fall. Consequently, GLD, GDX, EUO and FXE should be in focus both before and after the election.

Financial Advice And Its Role In Investment Success

By: ispeculatornew | Date posted: 04.27.2017 (3:31 pm)

Investmenting can be a daunting prospect. The choices, jargon and complexities can at times become overwhelming. We often justify waiting, but the only way to enjoy the long-term benefits is to get started. You could try go it alone by reading the latest investment news and keeping a close eye on market fluctuations, but consulting an independent financial advisor will most likely improve your chances of success.

The role of independent financial planners is to assist with long-term financial planning, using their experience and objectivity to help you achieve your goals. More than mere product pickers, they help you meet the full range of challenges you may face.

Avoid common investing mistakes

Independent financial advisors can help you make the right decisions for your circumstances and, most importantly, avoid the risks of investing on your own. These include:

  • Investing without a financial plan

A detailed plan is critical to your financial freedom. An independent financial planner can help you develop a realistic strategy, tailor made to your financial needs and goals.

  • Picking the wrong product

There are truly a mind-boggling number of investment products available, each with their own objectives and tax structures. An advisor will help you make the right choices to suit your circumstances.

  • Ignoring the effects of inflation

Inflation erodes the value of your money with time. An advisor can help choose the right product to achieve returns that, at the very least, compensate for the effect of inflation.

  • Not preserving your retirement savings when changing jobs

Don’t make the mistake of spending your retirement savings if you are retrenched or change jobs. It is highly likely that you won’t be able to retire with enough savings to live on. An advisor is able to compile and help you evaluate the best options available at the critical juncture.

  • Focusing on one asset class or market

Diversification is one of the keys to successful investing. As the saying goes: “ Don’t put all your eggs in one basket”. An independent financial advisor will help you to diversify your investment portfolio, broadening your exposure to different investment options.

  • Making decisions based on emotions

Investors are known to be emotional in their decision-making and poor timers of the market. They destroy the value of their savings by switching between investments at the wrong time. Advisors can help you avoid these emotional pitfalls and develop a more rational plan of action.

Questions you should ask your financial advisor

Your relationship with your financial advisor should be based on trust, so it is imperative that you feel comfortable before becoming a client. Not all advisors are equal so here are a few questions to consider when evaluating a financial advisor:

  • Are they independent?

There are two type of advisors, independent and tied agents. Independent advisors do not earn any commission off the products and do not work for a particular product provider. Tied agents are employed by product providers and may have incentives to sell certain products.

Ensure that your advisor is independent, since their objectivity will help set you on the road to your financial goals. They can help you differentiate between the numerous products available and select one that meets your circumstances and needs.

  • What are their qualifications?

The Financial Services Board (or FSB) must, by law, license all financial advisors. This requires that the advisor pass a regulatory exam and fulfill the Fit and Proper requirements, as set out by the FSB. These requirements include integrity, honesty and competency. An advisor’s maintenance and development of their professional competence is evaluated by the FSB on an ongoing basis.

Find out about your prospective advisors academic history or any other credentials. It is important to read and understand the disclosure documents provided by the advisors. This will inform you of which products your advisor is licensed to recommend and offer advice on.

  • What are their fee structures

Full disclosure and total transparency is very important. Make sure your advisor explains, upfront, what fees you should pay and how they work. Typically, fees are charged as a percentage of the investment’s value and there might be an initial fee, as well as an ongoing fee.

Some advisors charge directly for the advice they provide (typically an hourly rate). Make sure you understand the fee structure before agreeing to anything and do not pay any fees that you have not agreed to.

  • How can they help to grow your wealth?

Good financial advisors take the time to understand your needs and help to develop a plan that reflects your risk appetite and your goals. Advisors help you to gain more discipline and be more rational during the investment process.

Emotions often lead investors astray, causing them to buy and sell at the wrong time or switch between products, which could decrease the value of your investment.

Where can you find a good independent financial advisor?

Trust is one of the key considerations when it comes to choosing a financial advisor. They help you make some important life decisions so you shouldn’t take this process lightly. A great starting point is a recommendation from someone you trust and who’s judgment you value. Another option is to contact the Financial Planning Institute of Southern Africa (or FPI).

The Warning Signs Advise Investment Caution

By: ispeculatornew | Date posted: 04.02.2017 (3:00 am)

The election of Donald Trump was always going to mean the months ahead would be interesting. He is viewed variously in society as a businessman who would shake up the political community to a man who was a bully with little substance. He has insufficient knowledge to do the job his critics say. In his first weeks, he has already been confronted with questions about the selection of his key personnel, has backed down over healthcare despite having a republican majority in both Houses and now his financial ideas are about to be scrutinized.

Credit Issues

Credit strategists have observed contraction in bank lending; money supply has slowed and this is certain to have an impact on the economy. Already Trump has announced an increase in military spending and that will inevitably impact on the domestic budget because the Republicans certainly do not want to increase Federal spending.

The US Federal Reserve figures show that commercial and industrial loans hit their peak in December and have been falling since then. The rate of decline is the fastest since the same time eight years ago. With loans and leases declining as well, the action of the Fed. to raise rates has been met with surprise. This has yet to have a major impact on equity markets but credit has regularly been something that identifies trouble before it arrives.

Worrying Trend

Trump believes he can provide momentum and expansion to the US economy; after all he is an experienced and successful businessman his supporters point out. It is not going to be straightforward it seems. Experts from Morgan Stanley see this trend as worrying, pointing out that credit squeezes historically lead to recession. The current figures are bringing back concerns about another financial crisis, similar to the one caused by the Collateralized Debt Obligations that brought such devastation to Wall Street and beyond.

The IMF has studies over 120 recessions in the world’s richest economies over the last half century and slumps have inevitably been preceded by the slowdown of credit in the months leading up to them. Without necessarily concluding that there is a sure sign of recession ahead, the figures are nevertheless concerning.

Caution

Certainly investors should be cautious. Those who are nearing retirement and do not want to take any major risks with their funds should be especially careful and find safe havens for their money. A recent Markit PMI survey has identified that US business is weaker than it has been since before the election and growth is remaining elusive. There had been signs of a boom on the way last year but there is a strong argument that it may have already reached its peak.

Lack of Growth Policies

US business it seems has debt that has been used to pay dividends or buy back stock bonds rather than to create growth. Every dollar of new debt is generating a mere 17 cents of extra GDP, a quarter of what it did in the 60s. Certainly some business strategists will be waiting to hear what Donald Trump has in mind on taxation yet already there are questions about whether is policies are either sensible or achievable. The Markets appear to be taking a more positive view than some of the analysts but individual investors should be very careful.

Time is important; delay will only increase uncertainty and perhaps help in precipitating problems? The Republicans are keen on tax cuts but whether Trump delivers in line with his pre–election rhetoric is far from certain. There are certain to be battles ahead because there are many within the Republican Party who seem to be as opposed to Trump as they were to the Democratic Candidate, Hillary Clinton.

Business will go its own way. Decision makers looking at their financial figures and devising future strategy are likely to have a cushion in place for mistakes. Individual investors often have no such cushion and a poor decision can cause untold harm, especially for the average couple that is approaching retirement and building up a fund to provide a comfortable life. The coming months are likely to see volatility in society anyway; the important thing for people is to give plenty of thought about where to invest their money and minimize the risk.

 

Harald Seiz CEO of Karatbars International: Make Gold Great Again

By: ispeculatornew | Date posted: 04.02.2017 (2:55 am)

Who cares the most about you? Who knows the most about you? Politicians like to smile, kiss babies and make you feel special. But, in the end, you are free to live your life and only you can build your wealth.

There is no government program that will make you great. Even, if the United States becomes great again, that might not translate to your financial portfolio. Learn why you should concentrate on making gold great again.

Gold is Great

Throughout history, the leaders of the world have tried to control gold. American President Franklin Delano Roosevelt confiscated gold when the country was in the Great Depression. China forbade ownership of gold under the communists. Why do politicians seek to control gold?

Gold is money. Gold is power. The elite are just like you, they were born of a mother. They put their pants on, one leg at a time, just like you. What is the difference between the elite and you?

The elite own gold.

While the powerful have been holding down the price of gold, they have been purchasing it behind-the-scenes. The Russians and Chinese are now buying gold in droves. The Indians have always purchased gold for their Hindu weddings.

At the beginning of 2017, there are signs of the gold price rising again. Are the wise “making gold great again?”

Gold Does Not Rust

“Gold is the perfect metal. It is soft, does not rust and can be used for industrial purposes. It is also hygienic, which is why it is used in teeth.”, adds Harald Seiz CEO of Karatbars International.

During Brexit, the masses bid up the price of gold. Some are whispering about the return of the “Gold Standard.” This would lead to the increase of gold as people purchased the precious metal to conduct trade.

Be Great: Buy Gold

Mr. Harald Seiz believes that “everyone should have the opportunity to obtain good, solid financial protection.” The wealthy own gold and lease it out from Switzerland. This gives them a steady stream of income. Gold is basically indestructible.

Gold protects against the “ever-recurring financial crises,” which some say are rigged by the powerful. You can purchase Harald Seiz gold Karatbars and be part of the solution. If you want to be #1 and win the gold medal, then you must join in with the wise people who are working to “make gold great again

Crude Oil Is Not Yet in the Clear Despite OPEC’s Cut

By: ispeculatornew | Date posted: 03.15.2017 (3:00 am)

OPEC succeeded in getting its member nations and some other non-OPEC producers to agree to a deal to cut their oil output last year. The output cuts were necessary in order to halt the supply glut that has depressed oil prices for much of the last three years. The supply of crude oil has outpaced the demand due to the return of producers such as Iran and Libya as well as an increase in U.S. shale oil production.  However, it seems that the deal might be unraveling at the seams because some countries are not committed to holding their ends of the deal.

U.S. Shale oil cast dark shadows on the prospects of oil

Crude oil has managed to find support around $55 per barrel up from its $30 lows at the beginning of 2016. However, one would have expected OPEC’s deal to cut oil production to propel oil prices faster and higher towards the 2014 $100 per barrel price. The main reason oil prices haven’t spiked in tandem with OPEC’s move to reduce output is that the supply glut in oil is still persistent.

Interestingly, the supply glut situation has remained unchanged because U.S. Shale oil operators are now increasing their output from shale basins because of the uptrend in oil prices. Alex Poldoski an analyst at Saxon Trade observes that “the weak $30 price of oil made oil production unprofitable for shale oil drillers but the recent uptrend is encouraging shale operators to return to the markets.”

The U.S. Energy Information Administration said U.S. oil output increased by 1.7 million barrels in the week ended March 3. Interestingly, OPEC’s secretary-general Mohammad Barkindo acknowledges the influence of shale oil produces when he said “we did confess that we do not have sufficient understanding of how they operate and their impact on us.”

Saudi Arabia wants other countries to pick up the slack

Saudi Arabia oil minister Khalid Al-Falih expressed cautious optimism about the OPEC deal during his remarks at the CERAWeek that held earlier this month in Houston.  Al-Falih started by noting that the compliance level in deal to reduce output has outpaced the low expectations on OPEC’s ability to pull off the deal. In his words, “the market had low expectations, which we have exceeded by a large degree… We are definitely on the right track and are picking up speed in terms of delivery.”

However, the deal to cut production hasn’t done much to end the supply glut in oil; in fact, one can argue that OPEC’s supply cut is providing U.S. shale oil producers to increase their output. There are indications that OPEC might need to extend the deal to cut output beyond the first six months of this year if it really wants to end the supply glut in oil.

However, Al-Falih says there’s no point discussing the possibility of extending the deal beyond the first six months of the year if the other participants in the deal are not ready to uphold their ends of  the bargain. Last month, OPEC reported about 85% compliance in the deal to but the high compliance level was recorded because Saudi Arabia went out of its way to cut its output beyond its initial promise.

In Al-Falih’s words, “it is not going to be fair or acceptable that some countries will carry the burden for all… We’ve been willing to do it for the front end but we expect our friends and partners to pick up the slack as we move forward.”   Al-Falih’s also noted that Saudi Arabia “will not bear the burden of free riders… Saudi Arabia will not allow itself to be used by others. My colleagues have heard that privately, and now I’m saying it publicly.”

A House of Cards: Can Wall Street Remain Bullish?

By: IS | Date posted: 01.18.2017 (5:00 am)

January 2017 is proving to be a mixed bag for investors. Now that the New Year is well underway, some interesting trends are developing. For starters, the USD is struggling to maintain momentum against the JPY. The greenback was trading 0.3% lower against the JPY, at 115.64. Even the beleaguered EUR made some gains against the greenback as it rallied to $1.0626, before it dropped towards $1.0559. The heavily bearish GBP has also been gaining on the greenback, trading at $1.2167, from $1.2190 earlier.

The US dollar index is currently at 102.72, up 0.67%, or 0.68 points. The index has a 52-week high of 103.82. Simply put, this means that the US dollar is fractionally off its 52-week high, and well above its 52-week low of 91.92. The DXY measures the performance of the greenback against major global currencies including the JPY, EUR, GBP, CHF, CAD and the SEK. The most heavily weighted components of the DXY include the EUR at 57.6% and the JPY at 13.6%. The trading market cycles in January tend to reflect a rebalancing or repositioning of financial portfolios to accommodate the likely changes in the year ahead.

 

What’s Happening on Wall Street and Beyond?

Investors and traders are equally concerned about how high Wall Street markets can rally before correcting. Right now, we are seeing US stocks struggling to maintain their current levels. That the USD has come under fresh assault by leading currencies like the JPY and EUR is not to be taken lightly. Of course, a lot depends on what will happen once President-elect Trump is officially inaugurated on January 20, 2017. Traders remain highly bullish about a Trump presidency, and the massive fiscal stimulus that he has promised. Nonetheless, the mood of the moment is pensive. All major US indices are up, albeit modestly over the past 1 month. The Dow Jones Industrial Average has gained 0.88% and is now at 19,929.85, the S&P 500 index is up 0.55% at 2,272.05 and the NASDAQ composite index is up 2.06% at 5,556.80.

All major US indices have defied gravity, especially the Dow Jones which is moving ever-closer towards the critical 20,000 level. Across the pond, the all-share index in the UK – the FTSE 100 – racked up yet another consecutive day of gains. The FTSE 100 tends to perform strongly when the GBP is faltering. At last count, the FTSE 100 was at 7,310.32, up 5.12% over 1 month. The 1-year performance of the FTSE 100 index is extraordinary at +24.50%. The closest performing index is the DAX, with a 1-year return of 18.68%. For speculators, the 1-year performance of European bourses has been unprecedented. The Euro Stocks 50 PR has gained 9.57%, while the CAC 40 is up 13.77%

Factors Driving the USD Lower

Naturally, the positive performance of indices across the board is concerning. Any time an index rallies uncontrollably, the question has to be asked: Is this level fundamentally sound or is it driven by speculation? It is important to watch the performance of crude oil when trading equities. Brent crude oil reversed course and is now trading at $53.64 per barrel, after reaching $55.36 per barrel earlier on in the day. The reason oil prices are plummeting is news out of the latest US Baker Hughes Report that the rig count is increasing. As more WTI crude oil producers enter the fold, they undermine gains made by production cuts with OPEC members.

On Monday, 9 January, oil prices plunged 3.8%, raising concern that inflation expectations should be lowered. This had a negative effect on the USD which rallied on the back of its latest December jobs report. The USD is also being affected by inflation differentials in China. The PPI in China increased to 5.5% year-on-year, up from 3.3%, 2 months ago. This is being fueled by higher commodity prices (crude oil, natural gas, iron ore, copper etcetera) on a worldwide basis. Dollar-denominated commodities like iron ore, crude oil, and the like are negatively affected by a strong USD, and positively impacted by increased demand.