Dax in the Evening

[Oscar Reed]

Can we get 10,700 before month end.

ECB are effectively paying banks to take up liquidity, while they get the secondary kicker of also being paid by consumers to on-lend. The measures announced have moved the goalposts from indirectly targeting a weaker euro, and in turn increasing competitiveness and domestic demand, to compel the commercial banks to extend credit and hopefully boost inflation. European banks have and should continue to outperform from here.

Also with Easter coming up and sell in May.

Perfect recipe,

 

[swissy]

Hi @swissy

Geographic location is a big advantage for Australia.
So close to Asia and possible customers.

I'm based in the Gold Coast.
We have the Commonwealth Games in 2018 , so there is a lot spending going on here at the moment.
Not sure what will happen after the games.
Mainly a holiday location.
At the moment it's cheaper to buy rather rent.
We have a friend trying to rent on the coast and you getting 20 to 30 people turning up to rent the same place. Some will pay 12 months rent up front just to get the place.

And what I here it is the same in Sydney, Melbourne and Canberra.
I think the house market got more legs in yet, just on the supply and demand issue.

Been to China 3 times in the last 2 years and still lots of building going on there.
And lot more TV and phone shops.
With the government trying to lift people from lower class to middle.

Have a good weekend
Oscar

Hi Oscar,

Gold coast is a nice spot but I must admit I prefer the Sunshine coast - but as I'm freezing in the UK atm I'd be happy with either.

I have lived all over Oz and have always considered the house prices have borne no relation to peoples incomes in the urban areas - particularly Sydney. Talking about the Gold Coast I have friends who bought apartment's some years back who lost money as they were under the illusion that property was a one way ticket to make money (then oversupply and GFC) - so watch out.

Scratch the veneer in Oz and you will see that the country is divided by those that own (and rent out property) - the have's and the have-nots (the renters for the most part). This has been perpetuated with "negative gearing" and tax breaks for the "have's" - who are a very powerful lobby of voters, which has distorted the property market and created an underclass - no surprises there, add overseas investors coming in and the so called mining boom and the mix - boom and bust, which is highly localised in different states can be very toxic. Gold coast will have a mini-boom in the run up to the Commonwealth games but after that...??(as you say).

Sydney is possibly an exception due to HNW foreign investors (mainly Chinese but also other's), parking their money overseas.

I remember talking to a couple in the QF business lounge in Melbourne in 2006, I hadn't been in Oz that long and they asked what I thought of Australia I said "very pleasant place but the houses are way to expensive, how do people afford them on their current incomes?".
They seemed quite affronted and told me I was talking rubbish and that was the end of the conversation. A few years later I saw their faces in the newspaper and they were the CEO and his wife who owned "Storm Financial Group" in Qld - say no more - if you don't know the story worth a google.😱

The point I'm making is that Australia has only had good times for the last 20 years and a lot of the workforce that rent are from overseas on 457 visa etc that are essentially temporary. If the work dries up they are the first to go and before you know it in certain areas the rental market (built on greed) has tanked and the spiral starts.

Anyway as they say in trading with predictions...."lets see" (I'll be back over in a year or so and would be delighted to pick up cheaper property to live in)

Kind regards.

Swiss

 

[Oscar Reed]

Yesterday at the DAX open, the market shot out of the gate.
Had 5 or 6 goes getting in a limit order on a pull back.
Kept moving the order’s higher with the market.
All failed with a couple within 1 point of being filled.
Ended up playing in and out of the market at around 10,000 and above.
Done okay for a Monday, but should have been a top day, also got bored after an hour.
But there was a lot of points missed from 9,875 to 10,000
Maybe got to bite the bullet and just enter with a market order on fast moving market.
But not get sucked into a possible high in the current range.
Guess I thinking too much before the open and where to buy on the pull back at the open and could not get the blinkers off and change my mind.
When there was no pull back and never going to be one.
It’s a weakness of mine and something to think about.
But then maybe thinking too much before the open done me in on the day.

 

[counter_violent]

Desperate Draghi running out of ammo now.
Remind me again why we want to be part of the failed club Europe !

On a brighter note, the dale are marching on.
Oldham next victims 😆

http://www.bbc.co.uk/sport/football/teams/rochdale/fixtures

 

[Oscar Reed]

Desperate Draghi running out of ammo now.
Remind me again why we want to be part of the failed club Europe !

On a brighter note, the dale are marching on.
Oldham next victims 😆

http://www.bbc.co.uk/sport/football/teams/rochdale/fixtures

Good looking bananas.😆

https://en.wikipedia.org/wiki/Commission_Regulation_(EC)_No._2257/94

 

[Oscar Reed]

The Fed Dot Plot of the future rate trajectory saw projected rate hikes for 2016 drop to 2 from a previous 4, and real GDP to grow at 2.2% this year, 0.2% lower than their forecast in December. This was far more dovish than markets had expected, resulting in sharp rallies in commodities, emerging markets and commodity-related currencies. This has clearly hurt US financials, which were hoping for a steepening of yield curve, but the rest of the US markets have taken the news well and pushed into positive territory.

Asia is looking to open strongly in the wake of the Fed decision. The Aussie (+1.2%) and Kiwi (+1.8%) dollars have both rallied sharply in the wake of the decision and ahead of the release of New Zealand’s 4Q GDP and Australia’s February employment figures. If both economic releases beat estimates that is only going to put further gas behind the currencies strengthening moves. Iron ore added another 1.9% overnight, and BHP and CBA’s ADRs both gained over 2%, pointing to a strong day for the ASX.

The Fed decision is particularly bullish for Chinese markets, as corporates with heavy USD-denominated debt burdens (particularly Chinese property developers) will relish the USD weakness. But this also greatly eases FX outflow pressure on the Chinese central bank. If global central banks wanted to stave off a destabilising Chinese currency devaluation, they could hardly have planned a better reaction from the ECB, BOJ and the Fed. Euro and yen strength alongside US dollar weakness is likely to shrink Chinese capital outflows in March. While no explicit Plaza Accords II decision emerged from the G20 meeting in February, the major central banks do seem to have become far more attentive to the global repercussions of their monetary policies. And markets should welcome this development as it greatly lessens the need for an imminent devaluation of the CNY and the global deflationary impact it would have.

FOMC

Market pricing for a June rate hike by the Fed dropped significantly in the wake of the release, with the WIRP probability for June dropping from 53.6% yesterday to 37.4% today. The Fed downplayed the recent economic improvement in the statement and also in their economic projections. This perhaps reflects their awareness of the global ramifications of Fed policy, arguably evident in the addition of this new sentence: “However, global economic and financial developments continue to pose risks”.

What is most surprising is the Fed’s very low expectations for the path of inflation. The Fed is forecasting Core PCE inflation to continue in a band of 1.4-1.7% for 2016, yet Core PCE inflation in January was already running at 1.7%, the upper end of that forecast. Janet Yellen mentioned in the press conference that she believes this inflation increase was primarily due to transitory factors and expects it to ease again. But this, in my view, is probably the greatest risk to the current interest rate trajectory and probably the key US data point to watch in the lead up to the June FOMC meeting. And one of the main factors that could upset this forecast is oil, which had a very strong performance overnight in the wake of the weekly DOE inventories release and weak USD.

Oil

Oil has been such a key input into equity market performance for the past couple of months that the big 5% jump in WTI overnight should be taken as a strong positive for markets today. The announcement from Qatar’s energy minister that oil exporting countries would be meeting in Doha on 17 April to talk about capping production helped provide some upside to the price. The Fed’s dovish statement and corresponding USD weakness also helped the price.

But the weekly US Department of Energy report was particularly strong. Crude oil inventories grew by 1.3 million barrels, less than the 3.2 million barrel consensus and gasoline inventories declined for the fourth week in a row. With the Baker Hughes crude oil drill rig count below 400 and at levels not seen since the GFC, the prospects for inventories to reach their cyclical peak over the next month or two appear to be growing. WTI is likely to break back over US$40 again in the lead up to this meeting in Doha, but if the oil price spends a significant period of time above $40, inventories could start to build again possibly leading to a nasty reversal.

 

[Oscar Reed]

https://www.youtube.com/watch?v=niWFdglGlVU&feature=youtu.be

 

[Oscar Reed]

Plenty of market deviation out there.

Euro markets hating the strong Euro
Suck it up Mario, welcome to Japan sorry Europe.

US markets loving weak US dollar.
The chicken nation.

Commodity currencies loving the weak dollar.
Aussie and Kiwis will save the world again.

What Masquerade will the DAX wear next week.

 

[Oscar Reed]

Not a bad interview.

Liked this interview, so thought I would check out his traders club.
Signed up for free with e-mail.

Few videos on there but all very poor standard,
The stuff done by Timsk is leagues above.

They offer more with a paid service, but won't be going down that path.

 

[Oscar Reed]

 

[Oscar Reed]

The Asia revival

With 10 days until the end of the first quarter of 2016, some interesting capital market patterns are emerging; US markets in the green for 2016 (as most developed indices are), USD falling, JPY rising, CNY strengthening and AUD having its best start to a year since 2011.


China has ‘reinvigorated’ its margin lending markets. Policymakers in China have decided to relax the controls put on margin lending after the collapse in Chinese markets last year. Margin loans will be offered on terms of seven to 182 days and rates will be as low as 3%. Shenzhen small caps had their best week on record last week on this rumour and volumes returned to pre-control levels. The correlation between margin lending and Chinese equities is highly correlated – this will be a positive.

The third largest intraday appreciation fix in the CNY last Friday sent the offshore CNH on a trip to the moon and raised plenty of eyebrows. Although this may have reduced expectations of a short term devaluation in the CNY, it does increase expectations that the People’s Bank of China will continue to ‘over-tweak’ the currency despite saying it won’t.

AUD hit 76.8 cents, and the question is how far up it can go? The Fed has added to our ‘perfect storm’ scenario for the AUD. The overly dovish dot plots, the downgrade to US GDP expectations and ‘transient’ inflation expectations means the hawkish pricing in the USD will likely unwind further. This will drive the aaa-credit rated, 250 plus basis point bond to expose the aud higher still. Note: nothing in currencies is linear, therefore AUD weakness may be an opportunity to go long over the coming three months.

ASX is looking to another test of 5200 point mark. SPI futures are suggesting a 0.6% increase on the open, the iron ore price is a cyclical sector positive adding 2.5% on Friday and is holding above US$50 a tonne, crude, however, lost 1.9% conflicting the leads.

We continue to ask whether there is reason for the ASX to breakout and leg higher? We cannot see it currently – maybe it’s the China leverage news or the fact that the Fed is unlikely to raise rates anytime soon but in the main we see sideways trading.

The JPY is hammering the Nikkei (NKY). The USD/JPY is at its lowest level since October 2014 thanks to the Bank of Japan’s call on rates and the Fed’s dovish view of the world.

All that work from Kuroda and co have gone in the blink of an eye. The question is how much will the JPY hurt the economic turnaround Abe has been pushing for over the past four years? If the Nikkei and the trade balance are any gauges, both are showing signs of strain already.

The Asian equity revival is a positive; it has allowed funds to flow back into the risky parts of the market. However, what I am also noticing is fund flows have begun to slow in the past week, suggesting the next leg is also being questioned by capital flows.

 

[Oscar Reed]

Couple of good points in the video.

 

[Oscar Reed]

Keep Buying the A dollar dips

The Turnbull effect

Prime Minister Turnbull’s decision to load the chamber to pull the trigger for a double dissolution election might be a politically interesting event, but from a strategist point of view, it’s adding to the ‘Perfect Storm’ we see facing the AUD.

Bringing forward the May Budget to coincide with the May Reserve Bank of Australia (RBA) meeting has seen the interbank markets pricing a May rate cut at just 24.6%, down from 35% just before Turnbull’s announcement yesterday.

With the May Budget taking the May RBA meeting out of the equation, we look to June and December meetings, which was when the market was pricing in the strongest chance of a rate cut.

June has moved from a chance of 57.6% a month ago to 33% at the close of business yesterday. December has moved from 77.9% a month ago to 62% now. Now time value is also in play for the December price, meaning the likelihood of a cut is actually under 50% for most of 2016.

AUD/USD retested 76c in the US session, hitting 76.2c as expectations of a rate cut in Australia are slashed.

Expectations of a rate cut were one of the only headwinds to be suppressing the AUD in 2016. With the election now putting the RBA slightly to one side, the AUD is likely to move higher still. With the Fed stepping back from rate hikes and Europe and Japan holding the line on negative rates, it will be with a broad brush that the AUD moves positively against.

AUD’s ‘Perfect Storm’ rationale

Australian bond yields that are more than 250 basis points above rates in Europe, Japan and North America are a clear carry trade opportunity. The risk to the trade is back stopped by:
A sovereign nation with a AAA credit rating
A federal budget in better shape than forecasted (bond buying may ramp up after the May Budget)
Country GDP growth at the top end of the developed world
Commodities cycle forming a base, seeing upside pressure in AUD having being sold on expectations of a commodities collapse
China’s impossibility of falling, and a call on GDP reaching 6.5%. This will increase demand for industrial metals which puts further upside pressure on AUD
The RBA unlikely to move rates in either direction in 2016
An Australian election and a May budget will keep the RBA out of the market until at least 5 July at best if it is to move

The RBA may want an AUD at the lower end of 70 cents, and some even want it at 65 cents. However, in the coming three to four months, it is hard to see the AUD finding anything other than support when it weakens slightly.

 

[Oscar Reed]

Why a complacent VIX makes me nervous

The call put spread measure of the volatility index (VIX), sometimes referred to as the level of put protection, is back at pre-CNY devaluations levels.


The US VIX has declined from 30 to a low of 13.4 in two weeks. It has declined eight out of the last ten days and is trading a full standard deviation off the historical average, even as most point to the S&P and DOW being overbought and overvalued again.
The ASX equivalent XVI hit 13.7 yesterday, the lowest level since 20 July 2015. It has declined 55% since the 10 February capitulation. It’s also trading over a standard deviation from the historical average of approximately 19.5, yet the ASX has seen trade volumes fall to 27% below the 30-day moving average as buyer exhaustion hits
Intraday volumes through the US, European and Australian options markets have also declined by as much as 30% in the past 30 days. Put protection buying has plummeted to complacent levels.
Deutsche Bank’s ‘complacency index’ is at its highest level since the top of the market last year.

Complacency breeds laziness and roots out diligence, which is not great when macro risks are everywhere.

The Economist Intelligence Unit has ranked 10 macro risks that may cause what could be massive shocks to global equity markets.

Four out of the ten global risks stand out as near term risks:

Number one on the list is a China hard landing, which has been a risk factor for over 10 years. It still remains the biggest global risk and it would severely affect Australia if the GDP targets were to fail.
Number six on the list is Mr Donald J Trump becoming President of the United States. We are 117 days from the start of the Republican convention in Cleveland, and Mr Trump is on course for the nomination. Besides the social unrest he may create, the protectionism and trade risk that may arise would see gold having its best year since 2011.
The horrendous event in Brussels illustrates that the seventh item of terrorism will be an ongoing risk.
And the eight risk is the Brexit, with 71 days until the 2 June referendum. GBP was shelled overnight due to the Brussels attack. It is believed that this strengthened the exit campaign and according to several betting agencies, the odds of Brexit have now increased to 46%. As we get closer to the date, the Brexit will shift up the risk order and the VIX will go with it. The economic impacts have been exaggerated by both sides but it will have a major impact and it will fracture Europe further.

The VIX cannot continue this level of complacency for much longer. Increases in put protection will signal that buyer exhaustion is upon us and the fixed risk dates are beginning to impact short-term trade.

 

[counter_violent]

Why a complacent VIX makes me nervous

The call put spread measure of the volatility index (VIX), sometimes referred to as the level of put protection, is back at pre-CNY devaluations levels.


The US VIX has declined from 30 to a low of 13.4 in two weeks. It has declined eight out of the last ten days and is trading a full standard deviation off the historical average, even as most point to the S&P and DOW being overbought and overvalued again.
The ASX equivalent XVI hit 13.7 yesterday, the lowest level since 20 July 2015. It has declined 55% since the 10 February capitulation. It’s also trading over a standard deviation from the historical average of approximately 19.5, yet the ASX has seen trade volumes fall to 27% below the 30-day moving average as buyer exhaustion hits
Intraday volumes through the US, European and Australian options markets have also declined by as much as 30% in the past 30 days. Put protection buying has plummeted to complacent levels.
Deutsche Bank’s ‘complacency index’ is at its highest level since the top of the market last year.

Complacency breeds laziness and roots out diligence, which is not great when macro risks are everywhere.

The Economist Intelligence Unit has ranked 10 macro risks that may cause what could be massive shocks to global equity markets.

Four out of the ten global risks stand out as near term risks:

Number one on the list is a China hard landing, which has been a risk factor for over 10 years. It still remains the biggest global risk and it would severely affect Australia if the GDP targets were to fail.
Number six on the list is Mr Donald J Trump becoming President of the United States. We are 117 days from the start of the Republican convention in Cleveland, and Mr Trump is on course for the nomination. Besides the social unrest he may create, the protectionism and trade risk that may arise would see gold having its best year since 2011.
The horrendous event in Brussels illustrates that the seventh item of terrorism will be an ongoing risk.
And the eight risk is the Brexit, with 71 days until the 2 June referendum. GBP was shelled overnight due to the Brussels attack. It is believed that this strengthened the exit campaign and according to several betting agencies, the odds of Brexit have now increased to 46%. As we get closer to the date, the Brexit will shift up the risk order and the VIX will go with it. The economic impacts have been exaggerated by both sides but it will have a major impact and it will fracture Europe further.

The VIX cannot continue this level of complacency for much longer. Increases in put protection will signal that buyer exhaustion is upon us and the fixed risk dates are beginning to impact short-term trade.

Brexit risk is an interesting one.
Whilst I'm sure that Brits would stand with it's European partners today and in times of trouble. I can't help but get the feeling that looking on at the situation in Belgium today, that this borderless ideal that they cling to, is a policy not fit for purpose. This whole movement of peoples thing is getting out of control now.

 

[Oscar Reed]

Brexit risk is an interesting one.
Whilst I'm sure that Brits would stand with it's European partners today and in times of trouble. I can't help but get the feeling that looking on at the situation in Belgium today, that this borderless ideal that they cling to, is a policy not fit for purpose. This whole movement of peoples thing is getting out of control now.

Big problem at the moment is that we have run out of buyers at these levels.

Need a pull back to tempt more fund managers back in the market.

Looking at the Aussie banks they are up 20% from the lows, even if you long term investor very tempting to lock some of that profit in.

Lucky the UK is an island must help with control, rather than being on the mainland.

In Australia they turn back the boats, not every one likes it but seems to work.

http://www.kaldorcentre.unsw.edu.au/publication/‘turning-back-boats’

 

[Oscar Reed]

DAX outperforming.

Most stocks in the green.

 

[Oscar Reed]

Some very good points in the video.

 

[swissy]

Big problem at the moment is that we have run out of buyers at these levels.

Need a pull back to tempt more fund managers back in the market.

Looking at the Aussie banks they are up 20% from the lows, even if you long term investor very tempting to lock some of that profit in.

Lucky the UK is an island must help with control, rather than being on the mainland.

In Australia they turn back the boats, not every one likes it but seems to work.

http://www.kaldorcentre.unsw.edu.au/publication/‘turning-back-boats’

Interesting link Oscar - its costs the Australian taxpayer 400,000 AUD per head to hold asylum seekers in offshore detention (3.3 Bn AUD 2013 - 14) - see link. That does not include operational security costs in mounting intercepts etc.

Don't think the EU can afford that policy! (not sure Australia can either when new public infrastructure/public hospitals/schools etc need upgrading - still that politics for you!)

http://www.kaldorcentre.unsw.edu.au...on-audit-report-cost-detention-and-processing

 

[Oscar Reed]

Interesting link Oscar - its costs the Australian taxpayer 400,000 AUD per head to hold asylum seekers in offshore detention (3.3 Bn AUD 2013 - 14) - see link. That does not include operational security costs in mounting intercepts etc.

Don't think the EU can afford that policy! (not sure Australia can either when new public infrastructure/public hospitals/schools etc need upgrading - still that politics for you!)

http://www.kaldorcentre.unsw.edu.au...on-audit-report-cost-detention-and-processing

We need spread betting in Australia.😆

Out of here over those green and red candles.

Have a good long long weekend.