US Dollar Bear

US Dollar Bear

The scene is set for a sharp move lower in the US dollar. Sentiment on USD is bullish and the Commitment of Trader report is reflecting a large speculative net long position in the dollar. The Trump administration is watching as his tax cut plans and surge in fiscal spending now take effect. The US budget deficit will exceed $1 trillion in 2019 or 5% of GDP, while the US economy operates near full capacity.

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Fund Managers Call Time on Global Economic Expansion

Fund Managers Call Time on Global Economic Expansion

Bank of America Merrill Lynch recently surveyed their global fund manager clients asking them the following question: “How do you think the global real economy will develop over the next 12 months? Interestingly, a majority now expect the global economy to weaken next year. While some may take this as a contrary indicator, the fund manager universe has actually been quite accurate at forecasting global economic slowdowns in the past.

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Waiting on the Fed

Waiting on the Fed

The Federal Reserve meets next Wednesday and will in all likelihood raise short-term interest rates another 25 basis points to 2.25% in an effort to take control of rising inflation rates percolating in the United States. Bond markets are taking note. 2-year treasury yields have doubled over the last 12 months, while 10-year yields are back above 3.0%. This trend cannot persist for long before something breaks.

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Bitcoin Bear

Bitcoin Bear

Last May, in Crypto Volatility, I noted that the cryptocurrency bubble had finally burst and I expected 'bitcoin' to trade under $4,000 (down from $8,700 back then) before it could entertain any thoughts of breaking higher again and the vast majority of the other digital coins would disappear into the ether. I followed up with another COTD in June reiterating my price target after bitcoin had dropped -23% to $6,700 (MoneyConf Comes to Town) and the market cap of the sector had dropped $100 billion from $400 billion to $300 billion…

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Scanning the Indicators

Scanning the Indicators

Each morning I scan a wide range of technical indicators covering the major exchanges in the US, Canada and the UK. As the markets ebb and flow, a range of bullish and bearish technical indicators provide valuable data for investors searching for clues as to the market's overall health and trend. Patterns emerge over time that tip the scale in either a bullish or bearish direction. As of the close on Friday 14th September, the following bullish technical indicators triggered…

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Trouble Brewing for Chinese Banks

Trouble Brewing for Chinese Banks

Crescat Capital recently published a chart showing the growth of the banking systems of China, the US, Japan and the Eurozone since the global financial crisis of 2008. The growth in Chinese bank assets is off the charts and has reached $39 trillion or nearly 300% of Chinese GDP. Unprecedented isn’t the word. There has been a lot of ink spilled about the actions of the Federal Reserve and ECB bailing out their banking systems but their efforts pale into insignificance when compared to China.

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Dollar Top, Commodity Bottom

Dollar Top, Commodity Bottom

After suffering a multi-year bear market, commodities are starting to perk up, possibly reacting to an intermediate-term top in the US Dollar. Commodities can run aggressively higher and if we start to see more signs of inflation in the US as a result of tight labour markets and loose monetary and fiscal policy, I think this sector could get up a head of steam quite quickly.

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The Year of Divergence

The Year of Divergence

While the S&P has added +12% in local currency terms this year, the United States is the only major market in positive territory year-to-date. European stock markets are rolling over while many emerging markets appear to be grappling with developing crises. The technical indicators I follow are confirming the weakening trend across equity markets. Perhaps we are experiencing another correction before the bull market resumes…

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Peak Volume

Peak Volume

The NYSE Advance-Decline Volume Index captures the cumulative total volume flowing into advancing and declining stocks over time. It often peaks ahead of price and signals a change in direction of the underlying market trend. The Relative Strength Index (RSI) at the top of the chart also tends to peak and trough at the same time. The RSI surged at the end of 2017 but has failed to register similar readings in 2018.

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Scanning the Indicators

Scanning the Indicators

Each morning I scan a wide range of technical indicators covering the major exchanges in the US, Canada and the UK. As the markets ebb and flow, a range of bullish and bearish technical indicators provide valuable data for investors searching for clues as to the market's overall health and trend. Patterns emerge over time that tip the scale in either a bullish or bearish direction. Let's take a look. 

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Relative Strength Waning in Europe

Relative Strength Waning in Europe

European stocks have been consolidating below multi-decade resistance for the last 24 months. I have written that a break out above 415 on the Eurostoxx 600 Index would be a very bullish development and I would take a position in EU shares in the Active Asset Allocator if a break higher was confirmed. European shares have so far failed to muster the strength to break out …

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Do You Remember Sun Microsystems?

Do You Remember Sun Microsystems?

As I watch Amazon, Apple, Microsoft and Google continue to rip higher week after week, I am reminded of a quote from Scott McNeely, CEO of Sun Microsystems back during the dot com mania of the late 1990’s. Sun Micro was one of the tech darlings back then and eventually reached a peak valuation of 10 times revenues, an incredible multiple, even for a high margin tech software company. A couple of years after the tech bust, McNeely made the following comment:

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Divergences Appearing

Divergences Appearing

The OEX is a lesser known stock market index in the United States, which comprises the top 100 stocks trading on the NYSE by market capitalisation. The OEX Index made new all times highs in August 2018 but as you can see on the chart, despite new all time highs,, the relative strength and momentum indicators are not confirming the move. Volume is also dropping off as the market rallies, suggesting the trend is running out of steam.

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Agricultural Commodities on Sale

Agricultural Commodities on Sale

In a world where many asset classes have been driven to valuation extremes as a result of record central bank money printing, a select few have been left behind. Agricultural commodity prices, in particular, are about as cheap as they have ever been. DBA, the Agricultural Commodity Fund ETF, hit new multi-decade lows in price this week.

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China Approaching Long-Term Support

China Approaching Long-Term Support

The Shanghai Stock Exchange Composite Index closed the week at 2,725, down -24% from the January 2018 highs and -47% from the highs of 2015. The Index has not yet reached long-term support, which would come in closer to 2,400, approximately -12% below current levels. I think we will get there and we will see then if China and the broader Emerging Markets Index can find a foothold and begin a longer-term rally.

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Wilshire 5,000 vs US GDP

Wilshire 5,000 vs US GDP

The Wilshire 5,000 captures the market capitalisation of all equity securities trading in the United States. Historically comprised of approximately 5,000 names, currently there are just under 3,500 equities listed in the Index. The Wilshire 5,000 Index has a market capitalisation today of approximately $29 trillion. The Index sports a trailing price/earnings ratio of 26 times and a price/book ratio of 2.7 times.

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Declining Trend in New Highs on NYSE

Declining Trend in New Highs on NYSE

Despite the recent breakout in US stock markets to all time highs, there are still a declining number of stocks making new highs on the New York Stock Exchange (NYSE) versus those making new lows. To date, this signals weakness in the broader rising trend. Things may change, but for now, I continue to advise caution, particularly as we navigate the historically volatile months of September and October.

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German Equities Leading

German Equities Leading

In 'Waiting for the Break', I showed the Eurostoxx 600 Index consolidating below a resistance zone that has capped European equities for almost 20 years. A break out on STOXX Europe 600 Index above 410-415 would be a very positive move for the region and the Active Asset Allocator will take a position in European Shares if it occurs.

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Summer Lull Coming to a Close

Summer Lull Coming to a Close

As stock markets continue to gently rise and volatility falls back to recent lows, investor confidence in the now-longest bull market in history is unshakable. Perhaps rightly so as many US equity indices are now breaking out to new all-time highs. While the US stock market continues to advance, European equities remain range-bound, while Emerging market equities are correcting sharply. 

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Flat as a Pancake

Flat as a Pancake

US 10-year yields are currently trading at 2.8%, while shorter-term 2-year yields have surged higher, more than doubling over the last 12 months to 2.6%. The difference between 2 and 10 year yields has reached a scant 20 basis points. The US yield curve is flat as a pancake. Typically, investors demand a higher rate of interest when locking up funds longer term, unless of course they are concerned about the future.

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