For the month of August, we are expecting for a historical repeat for bond prices around the world to have their best month of the year. So far, for the past week, investors have been evaluating the deteriorating macro news, and re-allocated new money into the bond markets, just as we were predicting. Strength in the bond market, utilities and real estate over the past week signaled that investors are coming around to our views that the Federal Reserve is likely to postpone its first increase in the Fed Fund rate beyond September, which in return, will be a positive influence for equity markets.
Category Archives: Oil, Gas & Energy
Morning Market Commentary & Weekly Charts
As we had highlighted in several publications since March 2015, Global GDP Growth is set to slow across a growing number of the world’s largest economies, including the US and China. China’s worries have spread to oil, which is adding to last week’s -5% drop. Global economic growth slowed during June, led by a significant contraction in emerging market output. The global economy is struggling with secular stagnation. Too much fiscal and monetary intervention by governments an their central banks and now with even more of these policies, things will get increasingly worse, not better. For now, we are expecting for Europe to temporarily slow over the next 2 months again, before gaining macro momentum in late September until the end of the year.
Morning Market Commentary & Weekly Charts
We are seeing increased technical evidence that world equity markets and most sectors remain in a corrective phase since mid-May. Short and intermediate technical indicators for most equity markets and sectors are oversold but continue to trend down. The latest survey of investors’ sentiment conducted by sentix has revealed that investors’ feel relief after the turn in the Greek debt drama. From an already high level, sentix Sentiment rises once more by over 10 percentage points and signals a party mood. In contrast, commodities command investors’ respect. Here, fears that the whole sector is in a free fall dominate. Meanwhile, the US$ benefits.
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Morning Market Commentary & Weekly Charts
The EU and Greece have secured debt restructuring and medium-term financing. We are not expecting for “Greece’s no vote” to have a substantial impact for equities, either for bonds or foreign exchange. For both equities and bonds, early signs of a peak in summer volatility have appeared. Now is the time to prepare for seasonal buying opportunities. However, we are seeing increased technical evidence that world equity markets and most sectors remain in a corrective phase since mid-May. Short and intermediate technical indicators for most equity markets and sectors are oversold but continue to trend down.
Morning Market Commentary & Weekly Charts
Valuations for European equities are even more very favorable since the usual sell-off in May began, both on an absolute and on a relative basis. We are expecting for the ECB to make a decision whether to continue providing emergency liquidity assistance (ELA) to Greece at a meeting today. Consequent to the continued geo-political uncertainty in Europe regarding Greece and implications on the rest of the Eurozone, and the US, we do continue to expect for the US Federal Reserve not to raise the Fed Funds rate in 2015.
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Energy Strategy Update: United States
Traders have been focused on domestic inventory oil storage levels that have been drawn down over the past few weeks. Continued drawdowns support higher prices. In their view, the inventory drawdown of the past few weeks reflects the early stage lag effect of production pressure as a consequence of declining drilling activity dating to last fall. Nonetheless, up to now, advancing technology is enabling U.S. oil production to remain at a record pace despite the declining well count. Traders are likely to be taken by surprise when inventory levels begin to rise within the next few weeks and push prices lower. In our judgment, any sell off in WTI crude due to a rise in inventory storage levels will prove temporary as the surge in imports subsides just as quickly. Oil-related stocks can be expected to decline in sympathy. As investor sentiment washes out, we would use such a pullback as a buying opportunity to establish positions in global oil producers (especially oversold domestic drillers) in anticipation of an earnings recovery (and subsequent increased merger & acquisition activity) on higher oil prices.
2015 Q3 Global Investment Strategy & Equities Outlook
10-Year US and European Bond yields will turn lower one more time. The US$ will decline further. Oil & Commodities will move higher. Global Equities will correct,
but then recover sharply towards end of Q3 into Q4. EAFE to continue to outperform US equities.
Stocks have the seasonal tendency to outperform bonds from mid-November until the end of March, a trend that we see to continue in 2015. As in prior reports, we do think that the current stagnation-type economic environment, impacting two-thirds of the global economy, namely the US and Europe, and Japan, is going to provoke most long-term investors to conduct a major switch from “negative-return based” bond investments into high-yield equities with stable and defensive cash flow generative outlook.
Morning Market Commentary & Weekly Charts
European 10-Year government bonds are entering their period of seasonal strength from mid-May until end of August. After the short-term current correction in US, European and Japanese 10-Y
treasuries, which we expect to last for another few days, we are expecting for further yield compression between French, Italian, Portuguese, Spanish 10-Y Government bonds and the German bunds to materialize over the coming 2 – 3 months, and are advising for investors to increase their weightings into Spanish, Italian, Portuguese, Irish 10-Year bonds into the current correction.
Morning Market Commentary & Weekly Charts
Economic focus this week in the US is on the FOMC meeting results to be released on Wednesday. Earnings and sales by S&P 500 companies during the next two quarters remain a concern. Intermediate and technical indicators for most equity markets and sectors remain overbought and trending down. Short-term technical indicators (mainly momentum indicators) for most equity markets and sectors are trending up.
CGI Morning Note
We believe that the past 5 days sell off in US and European 10-year Treasuries is overdone, and that current market prices constitute a clear “buy” signal. We are advising for investors to step up investments into 10-year US and European bonds, which sold off excessively in the past week, on nothing but a bit of improving, but still mixed, and not sustainable macro data from Europe and the US in the past three days.
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CGI Morning Note & Weekly Charts
“The Federal Reserve should defer raising interest rates until there are greater signs of wage or price inflation than are currently evident”, the International Monetary Fund said today. The IMF now took the GDP growth outlook for the US down to 2.5%. This is still way above our 2015 forecast for the US of 2.2% GDP growth, which we are likely going to revise down in the coming months, if growth does not kick in massively in the current quarter, which we do not see in most of the aggregate data, which
we use in our assumptions.
Morning Market Commentary
As we predicted since our 2014 Global Investment Strategy, the $SSEC has been the star performer in 2014 and 2015 y-t-d, hitting our very aggressive 2015 price target of 4,900 last Friday, outperforming the S&P 500 Index by around 40%.
Morning Market Commentary & Weekly Charts
Seasonally, rates typically decline during the summer months as investors “de-risk” from equity markets, however, the potential for the Fed to raise rates sometime this year has the market fleeing this asset class, putting some temporary uncertainty into the success of this seasonal phenomena.
Morning Market Commentary & Weekly Charts
Total global debt is up 40% since 2007 to US$ 199 TRN according to a study by Mc Kinsey. As a percentage of GDP, debt is now higher in most nations than it was before the crisis of 2008/2009. On average globally, it is 286% now vs. 269% in 2007. Despite the economic rebound since 2009, the debt of households, corporations and especially governments continues to rise. Governments in advanced economies have borrowed heavily to fund bailouts in the crisis and offset demand in the recession. The danger is far larger and more imminent than commonly admitted, as evidenced in the chart below.
Morning Market Commentary
Seasonally, inflationary pressures are the strongest in Q1, attributed to the seasonal rise in commodity prices. Investors should keep in mind though, that there is increasing macro evidence, as today’s disappointing ADP data, whereas the US created 169,000 private- sector jobs in April, after a downwardly revised 175,000 jobs were created in March. Companies with 500 or more employees had the slowest growth, the firm said. The economist consensus is for the US to report 233,000 nonfarm jobs created in April on Friday.
Morning Market Commentary & Weekly Charts
If the current slow GDP trend continues, and all signs we see point to this, then the level of earnings for the S&P 500 could be the lowest seen in two years. Q1. We are convinced by the initial data that this year’s Q2 will not be nearly as strong; we maintain our 2015 forecast for +2.2% GDP growth. It is time to make a few portfolio adjustments.
Morning Market Commentary & Weekly Charts
European, US and Japanese equity markets period of seasonal strength is starting now. Hence, why we recommend reducing equity weightings in those markets, and advising investors to wait for better prices for re-allocating money in late summer.
Morning Markets Commentary & Charts
Historically, when stock prices went up, bond prices went down and when stock prices went down, bond prices went up. This market phenomenon did not hold true in the past 7 years, since most global central banks have been turning up the floodgates. Thanks to most Central banks monetary policies around the world, financial markets are booming in virtually all corners of the world. Most global equity markets are trading at all-time record highs. Global real estate is booming at the same time, with record valuations in many countries, including both residential and commercial properties. Art collecting too is in vogue among the world’s wealthiest citizens.
Morning Markets Commentary & Charts
In the US, the economic data fails to negatively impact the equity markets so far, particularly given the Fed’s continued accommodation. . The energy sector remains in a period of seasonal strength through May.
Morning Market Commentary & Weekly Charts
International events could have an impact on equity markets this week. The Greek government is close to running out of international currency to pay its debts. Negotiations continue. Discussions about framework of the Iran nuclear agreement continue. Venezuela is close to government breakdown. Terrorist hot spots seem to surface on a regular basis. Economic news this week is expected to show a slight recovery in the US economy in March from the weather related slowdown in February. Focus is on March Housing Starts to be released on Thursday.
Morning Market Commentary & Weekly Charts
Seasonal influences turn strongly positive (possibly due to anticipation of good news released by CEOs at annual meetings when they release “difficult” first quarter results e.g. stock splits, share
buy backs, dividend increases). We are advising investors to accumulate seasonally attractive economically sensitive North American and internationals equities, with the exception of Japan
(due to March 31st being end of fiscal year, and a consequent -8% – 10% historical sell-off affecting Japanese equities from April – July) on weakness this week for a seasonal trade lasting until at least May.
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Morning Market Commentary & Weekly Charts
International events will influence financial markets including the election in Israel and evolution of events in Greece. Economic news globally this week is expected to show a mild improvement relative to comparable reports released at the same time in February. US economic focus this week is on the FOMC meeting and news conference on Wednesday. In the US, stocks drifted lower on Friday as investors jockey for position ahead of this week’s FOMC meeting. FOMC meetings where a quarterly press conference has followed are thought to be the most probable time for the Fed to announce its first rate increase; the next opportunity won’t be until June 17, therefore it is no wonder that investors have been reacting in the equity, currency, and treasury markets much more
significantly than past meetings.
Morning Market Commentary & Weekly Charts
We are not fearful of a Fed rate hike, as that is typically good for stocks given that it means the economy is in good shape and stocks stay on the uptick for 2-3 years after. Plus, worldwide government bond competition will lead more investors to US Treasuries to keep a lid on rates and thus continue to make stocks look attractive by comparison. Our views for 2015 (as for 2014) of the global investment world differ substantially from consensus, and applied by other investors on Friday. Yet when level heads prevail, however, it may take the market 3 – 4 months, as it has
in the past years, we think that more people will come around to our investment views and conclusions. As such, we believe that this is a buyable dip for US 10-Year government bonds with higher highs on the way for 2015. For now, US bonds are still more attractive to investors than US stocks.
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Morning Market Commentary & Weekly Charts
We continue to advise investors to increase allocations towards Japanese equities and towards the $NIKK in particular, as we see the structural changes made by Abe’s government gaining traction and delivering tangible results, and Japanese investors increasing exposure into domestic equities. Historically, the N-225 is in a period of seasonal strength from January until early April (in part due to fiscal year end {March 31st} window dressing related performance).
As we had been expecting, European benchmarks have been outperforming US benchmarks since the beginning of the year, mainly due to the much lower valuations attracting investors (P/E; P/CF; much higher dividend yields) but also benefiting from the accommodative monetary policies enacted by the ECB. We see increasingly technical evidence of the strength in European equity markets set to continue, following historic seasonal strength patterns that run through to the start of May, which is coinciding with the end of annual dividend pay-out period.
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Morning Market Commentary & Weekly Charts
Equities globally rallied on today, boosted by news that Greece has reached a deal to secure a loan extension with its creditors. The German DAX 30 and the Dow Jones Industrial Average charted a new all-time closing high, following the S&P 500 Index and Russell 2000 Index, which charted all-time highs earlier in the week.
Morning Market Commentary & Weekly Charts
Treasury bond prices are vulnerable to further technically corrective declines, particularly given that we are in the midst of the period of seasonal weakness for the asset class; negative seasonal tendencies persist through April. However, over the past 30 years, each time the long-term treasury bond has met up with this rising level of resistance, stocks have generally performed well in the months and years that have followed. However, we continue to advise investors to trade bonds according to their long-term trend channel dynamics. We see nothing fundamentally having changed over the past 2 months for that trend to change.
Morning Market Commentary
Despite the bearish oil report, and the significant headwind imposed by the stronger US$, the price of $WTIC closed firmly higher, breaking resistance charted around the 50-day moving average. Momentum indicators are starting to curl high after briefly rolling over in the month of February. A break above the February high around $54 would confirm a higher short-term low charted in recent days, providing a strong first step towards a series of higher-highs and higher-lows.
Morning Market Commentary
Early technical signs have surfaced that 10-Y US Treasuries are rolling over from overbought levels. However, as we noted repeatedly over the past 10 months, due to falling global
inflation, we see any temporary small correction of 10-Y Treasuries as another reentry point for investors, as we anticipate for the yield for the 10-Y Treasuries to fall at least towards 1.3% in the coming 2 quarters.
Morning Market Commentary & Weekly Charts
Stocks are trading at extremely high valuations against a backdrop of slowing economic growth and rising global financial and geopolitical instability. Market cap to GDP ratio is currently at twice its historical average. The Shiller Cyclically Adjusted P/E Ratio (CAPE) is at 1.7x its historical average. The forward P/E ratio of the S&P 500 is currently 16x versus an historical average of 14x .
Morning Market Commentary & Weekly Charts
We believe that the US$ impact is not at all factored in by sell side analysts, and will make for a nasty surprise in the coming quarters in 2015. The price of the long-term bond continues to bump against trend line resistance that has spanned the last 30-years. Should this trend line hold, the long-term treasury bond may succumb to selling pressures following the Fed announcement. International market ETFs including Emerging Markets and European equity market led world equity markets on the upside last week, and we are expecting for that trend to continue over the coming months.
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Morning Market Commentary & Charts
Asian and European financial markets, (currencies, equities and government bonds) were little changed as investors braced for the possibility of new quantitative easing measures from the European Central Bank (ECB). There’s a strong chance that tomorrow’s ECB announcement will boost Eurozone stocks, however not necessarily weaken the Euro further, as the parabolic rise of the $USD relative to most world currencies since June 2014 has been overdone in time and magnitude. The ECB move, in combination with the European-wide Juncker Plan, which will
bring an additional stimulus to particularly infrastructure projects in Europe, should be convincing investors to make further equities and bond investments into the Eurozone.
Morning Market Commentary & Weekly Charts
North American equity markets entered into a short-term corrective phase on December 29th. The corrective phase is expected to continue until end of the fourth quarter earnings report period (i.e. late January/early February). Thereafter, North American equity markets are expected to resume an intermediate uptrend as they normally do during a US Presidential Pre-election
year. We are expecting for equity markets around the world to be exceptionally volatile this week due to a series of economic/political news events.
Morning Market Commentary & Weekly Charts
US Equities are extremely expensive compared to its global peers, and have been overweighed & overheld for a very long time by foreign investors. The fact that foreign ownership of US stocks is at an all-time high, totaling 16% in 2014, the highest in 69 years since such records have been kept, is of additional concern. For 2015, we are advising US investors to increase their foreign holdings, and reduce US equities exposure.
Morning Market Commentary & Weekly Charts: 2014 Final Words
The yield on the benchmark 10-year Treasury bond ended the year at 2.17%, exactly at our 2014 target price, and down substantially from where it started the year at 3.03%. Despite the fact that the Fed ended its quantitative easing program in October 2014, we do see the long end of the Treasury curve likely to move lower in 2015 on the back of weak global growth, and the fact that “the Fed is boxed in” consequently, and eventually will become more accommodative one more time.
062314 – CGI Morning Market Commentary and Weekly Charts
062314 CGI Morning Market Commentary & Weekly Charts
Carlo Besenius provides his weekly strategy outlook and technical review of markets, commodities, and currencies.
052214 – CGI Seasonality Analysis
We review the seasonality factors impacting global debt and equity markets over the summer. Equities are expected to see a period of weakness, with good probability for an increase in volatility mid summer.
Morning Market Commentary – Buy Chinese Equities $SSEC bottoming, Euro equity benchmarks continuing to gather momentum vs SPX
Global manufacturing data remains strong and it cannot be ruled out that the data out of China is distorted as a result of the upcoming Chinese New Year. Manufacturing activity in China typically declines into the Chinese holiday, which this year is on January 31. Despite the unexpected data point from China, manufacturing numbers continue to show signs of improvement, both in the US and Europe. Overshadowed by China’s disappointing manufacturing PMI report, January Flash Manufacturing PMI in the Euro-Zone was reported at the highest level since June 2011 at 53.9, firmly in expansion territory.
Although gold is not presently within its period of seasonal strength, which runs from July through to September, the metal typically does benefit from strength in metal prices at this time of year due to improving manufacturing demand.
Morning Market Commentary – Buy International equities, Energy, Oil
Much higher 10-year rates in 2014. Buy Intl. equities, EAFE, Canada, Germany, France, Spain, Japan over US as EAFE entered period of seasonal strength.
Energy, Oil & Utilities are the only ones that tend to produce higher than seasonal average returns under extreme cold weather conditions.
Morning Market Commentary – Metals, Oil, Buy Intl. Equities
EAFE to continue to outperform US equities, Chinese equities bottoming, Metals, Platinum & Palladium moving higher. Buy Intl. equities, EAFE, Canada, Germany, France, Spain, Japan over US as EAFE entered period of seasonal strength. Continue reading
Morning Market Commentary & Weekly Charts – EAFE cont. to outperform US equities, Oil, Commodities,
Short and intermediate technical indicators for most equity markets and sectors remain overbought. Look for a renewed seasonal buying opportunity in economic sensitive sectors on weakness in the month of January. We continue to recommend to add towards sectors which continue to show seasonal strength such as… Continue reading
Morning Market Commentary – European Stocks to continue to outperform
European stocks gained after global regulators eased the leverage-ratio rule for banks. The Basel Committee on Banking Supervision diluted a planned debt limit for banks following a meeting in Switzerland yesterday. The committee said the leverage ratio, which penalizes low-risk financial activities and curtails lending, was adjusted after thoroughly analyzing bank data. Banking stocks posted the second-biggest gain on the Stoxx 600 after the news. Deutsche Bank and Barclays were among the big risers. We like the EURO STOXX BANKS Index at current levels, and are advising our clients to add towards European Banking stocks. Continue reading
Morning Market Commentary – $hanghai Index ready for a major breakout, Metals, Silver, WTI, NatGas
China became the world’s biggest trader in goods for the first time last year, overtaking the US for all of 2013 and finishing the year with record trade figures in December. Trade with the rest of Asia and increasing flows with the Middle East represent a shift in power away from the US, still the world’s largest economy.
Chinese imports of crude oil grew by the least in almost a decade in 2013, new government data show, posing a challenge to exporters from the Middle East to Africa who are competing to sell more oil into the world’s second-largest economy.
We are advising clients to allocate new funds towards Chinese equities. As the chart shows, there has been a tug of war between the bulls & bears for over 6 months now, and we believe the $SSEC is ready for a major breakout to the upside in the short term. Our 2014 price target for the $SSEC is 3,000. Continue reading
Morning Market Commentary & Weekly Stocks – Global Stocks enter positive seasonal period, German Stocks to outperform
German Equities are at an all-time high. The DAX 30 Index is +20% ytd, after +29% in 2012. Our CGI Global 50 includes 12 German stocks, of which all are in positive territory for 2013.
We think so, particularly when looking at the anemic bond yields that European, US and Japanese government and corporate bonds are offering. We are seeing but one way for German investors, namely to increase equities investments, albeit late, however not too late to the plate, and invest now in their own equity market. Continue reading
Morning Market Commentary & Weekly Charts – Energy, Gold, Precious Metals to improve
Our recommended investment strategy is to maintain a healthy cash position for possible entry into the favorable seasonal trade in October. Seasonally, equity markets hold up rather well during the first half of September, posting gains of 1.3% on average over the last 20 years. The weakest three weeks of the year occurs during the last two weeks of September and the first week of October. Declines over this three-week period reach 2.5%, on average, based on the same 20-year time-span. Contradicting this calendar tendency is the “Sell Rosh Hashanah and Buy Yom Kippur” tendency, which runs through to this Friday. Loss for the S&P 500 between these key dates on the Jewish calendar averages 1.25%. Whichever scenario plays out, caution is warranted as seasonal volatility fuels erratic returns over the weeks ahead.
Morning Market Commentary & Weekly Charts
Looking forward to the next couple of months, equity markets are entering the weakest period of the year. Over the last 20 years, the S&P 500 index has averaged a loss of 0.20% for the month of September; positive results were realized in only 11 of the past 20 periods. The weak return in September ties it for the third weakest month of the year, behind February and August. The month that September ties with is June as investor reallocate portfolios at the end of the second quarter, just ahead of earnings season at the start of July. A similar reason is culprit for lackluster returns in September as the third quarter concludes. The weakest stretch of the entire year is a three week period that spans the last two weeks of September and the first week of October as investors buy and sell positions ahead of the volatile and uncertain third quarter reporting season. Continue reading
Morning Market Commentary & Weekly Charts – Summer breeze to continue for global equities?
Equity markets have just completed a traditional period of strength from the last week in June to the third week in July. Since the low on June 24th, gains have been extraordinary. The S&P 500 Index gained 8.44%, the Dow Jones Industrial Average improved 6.82% and the TSX Composite Index advanced 5.76%. It’s time to take trading profits in equity index based investments. Sectors with traditional positive seasonality are the exceptions. Gold, gold equities, biotech and utilities are bucking the trend by moving higher as well as outperforming equity indices.
Morning Market Commentary – Gold to move higher
We have been advising clients since June 2nd to sell equities globally prior to the peak period of seasonal weakness ahead in September and October, and continue to do so. Seasonal tendencies once again turn positive for broad market indices at the end of October.
Morning Market Commentary & Weekly Charts – “Tough labor” Day ahead for investors
US equity markets reached an intermediate peak on August 2nd. Short-term momentum indicators for equity markets may rebound early this week from deeply oversold levels, but seasonal trends are expected to re-assert themselves in September. We advise our clients to maintain high cash positions for possible entry into favorable seasonal trades into increasing downside volatility between now and October. We advise our clients to continue to hold/accumulate precious metal and precious metal equity ETFs. They continue to move contrary to equity market trends.
Morning Market Commentary & Weekly Charts – What’s next for the remainder of the Summer?
US equities to continue to underperform, Asia, Emerging markets & European equity indices to outperform, Gold & Metals & mining to outperform, US$ to weaken & correct further.
Morning Market Commentary & Weekly Charts – Summer Doldrums for global equities
Emerging Equities & Europe to outperform US equities, Gold, Metals, and Commodities to outperform.
Morning Market Commentary & Weekly Charts – Global equity observations for August
Four major factors in Europe are improving: Euro GDP has bottomed, Consumer spending has bottomed (car sales show signs of improvement, Manufacturing starts to increase and Central Bank policy is becoming more stimulating. Hence, why we are recommending for our clients to increase weightings in European Equities.
Morning Market Commentary & Weekly Charts – Summer breeze to continue for global equities?
It’s time to take trading profits in equity index based investments. Sectors with traditional positive seasonality are the exceptions. Gold, gold equities, biotech and utilities are bucking the trend by moving higher as well as outperforming equity indices.
We continue recommending to “buy” EADS shares at the current price of EUR 44.34, and still continue to prefer EADS over Boeing, as we have for the past 6 years, since inclusion of EADS in the CGI Global 50. Our 12 months price target for EADS shares is EUR 54.
Morning Market Commentary – Mixed Signals for Global Equity Markets
We see three significant threats to impact equity market strength ahead, which we believe global investors have not taken adequately into account: Rising US$; Surging Interest Rates and Rising Crude Oil, prices.
Morning Market Commentary & Weekly Charts – Facts & Reality
Facts and Reality about currencies and trade deficits and current account deficits.
Morning Market Commentary & Weekly Charts
We are advising our clients to “sell/short” the US$ index against most major currencies at current levels of ($USD 82.59).
Morning Market Commentary – Global equities summer blues?
Markets opened in positive territory on Friday as the FTSE 100attempted to rebound after a dramatic three per cent drop the day before following the Federal Reserve’s announcement to scale back stimulus later this year.
London’s benchmark index tumbled an eye-watering 189 points on Thursday, falling 2.98% to 6,160 as markets reacted to comments from Fed Chairman Ben Bernanke, who said that quantitative easing could come to a complete halt in 2014 if the economic recovery gains momentum. Disappointing factory-activity data from China also hammered sentiment yesterday, sending the UK index to lows not seen since mid-January.
Equity markets outside of North America recorded significant technical deterioration.
Morning Market Commentary – Buy Agri-commodities, Corn, Oil, NatGas
The US$ had been tremendously overbought, both versus the Yen, but also against the Euro, as we had highlighted in our Q2 Global Strategy Outlook, and reiterated this fact “ad nauseum” since March 2013.
So, it is of no surprise to us that the US$ has entered the recent correction versus both the Yen, but as of later now the Euro too, on the contrary, we are expecting for the EUR/US$ to continue to its EUR/US$ 1,3650 resistance, and break above it, as the US$ has entered its weak seasonality period, between April and October.
Morning Market Commentary & Weekly Charts – What’s about that US$?
Or research shows the following sectors being attractive for seasonal trades this summer and showing signs of outperformance relative to the S&P 500 Index and the TSX Composite Index: Fertilizers, Energy and Gold. Continue reading
Morning Market Commentary – All about the Nikkei
Fundamentally and long-term focused however, we continue to advise our clients to add towards Japanese equities. Investors should focus on both domestic asset reflation stock plays in Japan, and on Japanese companies with strong exporting profiles, as the Yen weakness will continue to improve their overall competitiveness and earnings capabilities in the coming years. Continue reading
Morning Market Commentary Sell in May, AAPL reiterating sell/short; Gold & Silver to go higher
The period for seasonal strength in equity markets concludes on May 5th, after which a trendless market is the average. Economic events over the next few days, including central bank announcements and employment report releases, are likely to set the tone for the month ahead. The technical backdrop of equity markets has shown deterioration over recent months, particularly pertaining to momentum, and the likelihood is increasing that a market correction is near based on recent warning signals that have become prominent in April. Stocks have been up 6 months in a row. And April finished at a historic high of 1597.57.
Each May is different. And there have been some very profitable summers in years past. So it’s never wise to just take this saying at face value and truly walk away from the markets. The resilience of stocks to be pressing all-time highs after 3 straight weeks of soft economic reports (including a scary showing for Chicago PMI in contraction territory) is making it hard to say what exactly would make stocks go lower at this stage. Meaning that investors seem quite comfortable with the ebb and flow of muddle through economic growth. And as long as the Fed is on the side of investors, with all that QE, then there is no reason to walk away?
Morning Market Commentary & weekly charts SPX rolling over
Weekly Investment Conclusion: We are advising clients to use the temporary seasonal weakness to increase holdings towards select equity strategies, as equities are the better value asset class, versus cash, bonds, alternatives, combined with the lowest downside risk.
For our clients with a shorter term investment perspective, we recommend to take profits in equities sectors with seasonal weakness, as we see evidence of equity markets rolling over temporarily, and for bonds to enter their period of seasonal strength until mid summer.
Morning Market Commentary – Global/US equities sell off confirmed, Energy, Metals entering negative seasonal trend, EADS “buy”
Currently the number of US companies that have reported sales above estimates are at a mere 44.1% based on results released for the first quarter, thus far. The current quarterly revenue beat rate is the third lowest in over 10 years, beaten only by the fourth quarter of 2008 and the first quarter of 2009, just as the recession was beginning.
We believe that the actual data, whether it relate to the broad economy, to actual negative currency impacts, or to earnings, fail to catch up to expectations, a correction in forecasts may be in order, the result of which would likely lead to a correction of stock prices as well.
Again, we see more evidence in increasing metrics for investors to brace themselves for a 6% to 10% pullback in major global equities markets, and surely also for the US markets.
Morning Market Commentary & Weekly Charts – Global Equities running out of steam
This past weekend’s meeting of the G-20 has been described by some as highlighting that there is only minimal coordination between the main economic powers. Japan was not singled out for reprobation. The G-20 and the BoJ have made it very clear to the financial community that Japan has the green light regarding continued quantitative easing and resulting in continued Yen weakness. We expect the US$/Yen 100 level will fall soon, and moving towards our 2013 price target in coming months. Short term, we expect the US$ to run into resistance at the psychologically important US$/Yen 100 level, which it hasn’t crossed since April 2009.
Morning Market Commentary – AAPL “Sell/Short” reiteration, SPX Sell signals clear
Apple stock traded below US$ 400 for the first time since 2011, just prior to the exuberant and parabolic rise to US$ 705 in 1H 2012. Yesterday APPL fell 5.50% following a weak sales outlook from key chip supplier to Apple, Cirrus Logic. Shares of AAPL are down around 42% since the stock peaked in September of last year, when we put a “Sell/short” recommendation on AAPL at US$ 685, this amidst concerns that Apple is losing its market dominance.
Morning Market Commentary – US$ impact on US equities, SPX, Nasdaq, RUT continuing to weaken;
The fact is, the US$ index is down over 33% in the past 35 years. Below we have added a few charts elaborating on a major subject which we clearly part with the “so called experts” on economics, and stock markets, who are now predicting a period of US$ strength, paired with simultaneous strength and outperformance of US equities:
Well, for those “experts” and their opinions, let’s see if they have a point, as we believe a few pictures are worth a few million (wasted) words. Let’s look at the chart of the US$ versus the S&P 500 going back to 1980.
Morning Market Commentary-Major breakdowns for US stocks, sectors, Oil, Gold, Silver, WTI, another -15% downside risk
Equity markets around the world recorded significant technical weakness yesterday. Much of the weakness was recorded prior to the Boston explosions. The explosions accelerated weakness near the close. The 9.1% one-day slump for the price of gold was the steepest fall in 30 years. Gold prices had recovered by as much as 2.0% this morning. The CME Group Inc. said yesterday it was the minimum collateral requirements for trading in benchmark gold, silver and other precious-metals futures contracts. The CME also raised the margin to trade palladium by 14%, and for platinum by 19%.
Morning Market Commentary & Weekly Charts – PROFIT TAKING in global equities; Commodities
Well, the profit taking has started. Despite continued resilience in the US equity markets, benchmarks around the globe have begun to trend lower, showing a series of lower-lows and lower-highs, a characteristic of a negative trend.
“Sell in May” has come early for equity markets in Canada, Germany, France, United Kingdom, and China. Negative pressures in equity benchmarks around the globe combined with significant declines in commodity markets is resulting in an increased probability that a top in United States equity markets is near, if not already realized. Trend line support for the S&P 500 is presently just above 1550, making this a logical point to trigger the conclusion to the seasonally favourable period for the market, which ends on May 5th, on average.
Morning Market Commentary – US$ impact on stocks & Sector rotation, into cyclicals, materials, mining
The Euro has realized rather pronounced declines since the start of February, but recently momentum indicators have diverged from the short-term price action, indicating that selling pressures were abating. The intermediate trend is noted to have changed, but a continuation of this short-term rebound is reasonable as the currency corrects an oversold condition. A retest of the 50-day moving average around 1.32, and even up to 1.3450 is increasingly probable as the currency exits a period of seasonal weakness that concluded at the end of March.
Euro strength has generally coincided with US$ index weakness, often seen as a positive catalyst for equity and commodity prices.
The US$ index is showing signs of rolling over from its recent positive trend. The US$ index is pushing towards its 50-day average as seasonal weakness in the month of April pressures the currency lower.
Morning Market Commentary US$ impact on EPS, EUR/US$ reversal
As per our prior warnings, sell side analysts have been like usual late to the plate with regards to currency adjustments for US companies.
For now, consensus estimates show that first-quarter earnings reports released by major US companies will be sluggish. Consensus earnings estimates for the 30 Dow Jones industrial average companies shows an average (median) gain of only 3.1 per cent on a year-over-year basis.
With 25% of S&P 500 earnings coming out of Europe, and 6% coming from Japan, we think that most sell side analysts are behind the curve on this. The negative impact on first quarter earnings by international companies due to strength in the US$ on a year-over-year basis will be mentioned frequently when first quarter reports are released during the next three weeks. The US$ Index averaged approximately 81.0 in the first quarter of 2013, up from approximately 79.0 in the first quarter last year. At the end of the quarter, the Index was at 83.14 versus 79.00 last year. However, the US$/Yen has fallen by -31.5% since September 2012, which is in line with our forecasts, and this will weigh significantly on EPS for Q1 and will continue to be a negative surprise for analysts throughout 2013, particularly, as we anticipate the US$/Yen to be at 1.12 by year end 2013.
Morning Market Commentary & Weekly charts
“Sell in May & Go Away” or is it “Sell in April”, like it was in 2012?
Japanese companies see the continued weakening of the Yen as an opportunity to increase investments abroad, and are buying foreign assets. European companies are generating more than 50% of their earnings from outside of the Eurozone, and for the Eurostoxx 600, about 30% of earnings are coming from emerging markets. Hence why we see better buying opportunities in Japanese and European stocks.
Morning Market Commentary – US Markets Technical Deterioration
Japan’s economy has been hurt by a variety of factors, not least decades of deflation or falling prices. Falling prices discourage people from spending and companies from investing, and that has trapped Japan in a cycle of sluggish growth and recession. Given the slowdown in Japan’s export sector in recent years, reviving domestic demand has become ever more crucial to spurring a fresh wave of economic growth in the country. Prime Minister Shinzo Abe has also said that stoking inflation is key to boosting domestic consumption. Under pressure from the government, the central bank had doubled its inflation target to 2%, earlier this year.
The YEN fell against the US$, and Tokyo’s Nikkei 225 index rose 2.2% on the central bank’s decision, indicating markets were reacting positively to the extent of the stimulus measures.
US equity markets are slowly rolling over, yesterday some significant technical damage was done. US equity markets started to roll over. Yesterday’s technical negative action increased significantly.
Morning Market Commentary & Weekly Charts
Cyprus deal done. Stocks advanced strongly on Monday morning after 11th-hour talks to save Cyprus from default resulted in a last-minute bailout deal with the Troika. Following a meeting of Eurozone finance ministers that lasted almost 12 hours, Cyprus agreed to a EUR 10 bn aid package that doesn’t include a controversial across-the-board bank-account tax but involves forcing big losses on uninsured depositors.
Cyprus is about as economically significant as the German city-state of Bremen, and yet the attention of citizens and politicians alike was focused on the debt-ridden country on the continent’s periphery last week and through the weekend. Since Cypriot parliament rejected the initial bailout plan, one crisis meeting followed the next in Berlin, Frankfurt and Brussels as concepts were presented, revised, rejected and resubmitted. In the end, the European Central Bank (ECB) imposed an ultimatum on the country. The message from ECB President Mario Draghi was that either Cyprus agrees to the bailout conditions or it could be the first member of the Eurozone to declare a national bankruptcy.
Morning Market Commentary
Global equity markets have had a very mixed performance so far, the question begs, is it time for the inevitable correction?
Or is there a bit more room on the upside?
If all the BRIC countries are struggling, that is a big concern. Maybe the SENSEX rallies from here. The chart above shows a very important pattern that usually identifies major tops. Taiwan and Singapore are starting to soften on the ETF’s. Most of the commodities looked like they were at a pivotal point too, be it related to the US$’s recent temporary strength. The Rest of the World dragged down the US market in 2011. If commodities, and emerging markets are not rallying from here onwards, then we see cause for a softening of US equities in a rather large move down through the summer. $COPPER would suggest the move is to the downside. US housing starts and Transports would suggest the move is to the upside.
We do not say that the trend for global equity markets has reversed, but surely a correction of 5% – 8% is not far ahead, and we are advising our clients to add towards strategic equity positions when it will occur. When looking at aggregate performance since January 1st 2012, the Nikkei 225 is up 48%. In the last three weeks alone, the Nikkei has risen 8%. Frankfurt’s Xetra Dax is second best, with a gain of 36%. The Nasdaq is next, followed by the S&P 500. Continue reading
Morning Market Commentary – Natural Gas Breakout
The energy sector was buoyed by a breakout in natural gas prices. Natural gas prices surged by 3.59% to US$ 3.812 mBTU’s after the Energy Information Administration reported that inventories fell by 145bn cubic feet last week, 18.5% below the same level last year. The consensus estimate was for a 137bn cubic-feet fall. Nat Gas prices have risen by over 9% month to date, with the market betting on a tighter supply and demand situation following a cold winter season, signs of a recovery in the US economy, a drop in drilling rigs, growing uses for the fuel, and a shift away from coal-fired plants.
Morning Market Commentary – EU Budgetary
In the past 6 months, we have been advising our clients to increase weightings towards equities, at the expense of reducing weightings in bonds. We repeatedly have reiterated this call, in the face of many other strategists who have called for a major 7% – 10 % correction for equities since late January 2013.
Several short term technical aspects are showing further evidence that this outperformance for equities might continue, well into the seasonal period of weakness starting in May, “Sell in May & Go Away”, when particularly European Balanced Fund managers are switching from particularly high-yielding equities, which are paying their annual dividends (unlike the US and UK corporates which are paying quarterly dividends) from late February – late June. Continue reading
Morning Market Commentary & Weekly Charts – Global Equity Markets
Weekly Investment Conclusion:
Strength in US equity markets last week triggered by surprising strength in economic indicators was unexpected. US equity markets quickly regained short term momentum. Positive psychology related to the Dow Industrials reaching all-time highs also helped. This week, economic data is expected to be positive again and the S&P 500 Index (a more significant US equity index) will have a chance of reaching its all-time high at 1,576.09, despite short and intermediate technical indicators once again have returned to overbought levels.
Selected sectors with favorable seasonality at this time of year remain attractive purchases candidates on weakness. The trigger could be a rollover of the US$ from a highly overbought level. When it happens, and we do think this will happen within days, commodity stocks including metals & mining, energy, coal and steel stocks will come alive. All recorded exceptional gains on Thursday and Friday.
Morning Market Commentary – GDP improvements, US$ Weakening
More support for global equities due to slowly but gradually improving global economic expectations and economic outlook.
GDP in the Euro area as a whole, we think might surprise on the upside and are expecting a +0.2% GDP number for 2013, and +1.0% GDP for 2014, as we are seeing more evidence of government policies in Europe, but also around the world starting to make progress, and hence why we are expecting for global GDP growth to accelerate in 2014, albeit slowly for Europe, the UK, the US, but more rapidly in Japan, China, India, Africa, Brazil, Russia and emerging economies like the Philippines, Thailand, Turkey, Poland. Continue reading
Morning Market Commentary & Weekly Charts – Currency Wars Musings
We still see the current US$ temporary strength as a good opportunity for investors to increase equity holding in international companies. The current temporary strength of the US$ and its inverse impact on global commodities prices as a good opportunity for US institutional investors to increase their weightings in foreign equities and commodities, and particularly to those benefiting from a seasonality point of strength, we advise investors to add towards the following equity markets and sectors: …..
Morning Market Commentary – Time to go long on the EURO again
The Euro is in oversold territory. We expect the Euro to reverse it’s latest weakness, as the “Italian Job” damage is done, and investors will focus on the macro aspects which matter most at this stage.
The current temporary Euro-weakness has enabled European governments and corporates to initiate hedging positions for the next 18 months, which will ensure their global competitiveness, and so we are advising investors to buy the Euro at the current levels of 1.30. We maintain our 3 – 6 months price target for the Euro at EUR/US$ 1.38. The Euro typically enters a period of strength form April – July.
Morning Market Commentary & Weekly Charts Bullish on Oil, Gold,
Weekly Investment Conclusion: The current, and shallow correction between now and the end of March will provide investors with an opportunity to accumulate sectors on weakness that have a history of seasonal outperformance until the traditional “Sell in May & Go Away” period, which may start this year, again like in 2012, ahead of its usual acclaimed season. Last year, we did forecast the “Sell in May & Go Away” equities peak correctly as of April 2nd.
Morning Market Commentary & Weekly Charts-Currency Manipulation vs Gold
As we have written in the past years, most countries are artificially pushing down their exchange rates in an attempt to obtaining competitive advantages at the expense of others. And if they all manipulate their own currencies, all sides will end up losing out. At the EURO summit, as well at other Central Banker policy meetings as of late, we have heard over and over that currency wars are impacting policies and inherent competitiveness issues.
Global Markets Strategy & Equities Outlook – Bullish on Japan & China
As you know we turned very bullish on Japan and China in September 2012, and have been advising to overweight allocations towards the Nikkei and the Shanghai Indices, as we recognized major turning points in those markets due to changes in government leadership and implicitly new and improved stimulus policies going into effect as of Q4 2012.
Morning Market Commentary & Weekly Charts
History shows that US equity markets in the year after a Presidential election move higher into the first week in February in conjunction with fourth quarter reports, weaken thereafter until the end of March and moves higher thereafter. Given political events scheduled in the US during the next two months, history is repeating. Continue reading
Morning Market Commentary & Weekly Charts
Global Equity Markets, what next? Overheated? Or much more to go? While funds continue to flow into stocks, as we were forecasting since mid-December, money continues to move away from the bond market; particularly treasuries that have seen yields spike almost 400 basis points since the start of December.
Treasury yields have broken firmly above a long-term declining trend line that had remained intact for almost two years, diverging from the positive trend of equity markets over the same period.
Morning Market Commentary – SPX, DJIA, N-225, SSEC, FTSE, DAX, SI, CAC, GAS
Time for a pause for global equities? The S&P 500 has posted gains in each of the past five sessions, pushing the large cap index well into overbought territory. Being overbought doesn’t necessarily conclude the positive trend, particularly on a longer-term time scale, but it does increase the probability of buyer exhaustion, leading into a retracement of some magnitude to follow. The S&P 500 Index is presently testing the upper limit of the rising trend channel that has been in place since the mid-November low. Relative Strength Index for the S&P 500 is now surpassing 70. Continue reading
Morning Market Commentary & Weekly Charts
Two unexpected events last week triggered a surprising upside move in equity markets last week, China’s $150 billion fiscal stimulus package announced on Thursday night and the ADP report showing a gain in US private employment in August instead of a loss. Gains were muted on Friday when the less than expected US employment report was released.
Morning Market Commentary – Bull or Bear?
Bull or Bear? and European Nuclear Power Plant Problems
The weekly chart below of the Dow Jones Industrial Average over the past few years shows a massive rising wedge formation, which has severe bearish implications should the price action break below the lower limit of this pattern. Given the easy money policy in the US and other parts of the world, a certain amount of skepticism of the bearish implications is warranted. However, the merit of this pattern is supported by a negative momentum divergence over the same period.
Morning Market Commentary & Weekly Charts
End of Q3
Now will there be a final spurt in Q4 2012?
We had the privilege to visit with some of Germany’s top corporate managements last week in Munich, plus get a glimpse at the Oktoberfest, where we were on a fact-finding mission with clients to assess the state of mind of the German corporate executives and that of the overall German consumer.
Morning Market Commentary & Weekly Charts – No Inflation?
Inflation adjusted gasoline prices in the US have soared in the past four months. The inflation-adjusted price for a gallon of unleaded is up over $0.50 since the end of June and has rarely been higher than current levels.
- Middle East crises are often associated with major swings in the price of gasoline.
- Gasoline price spikes also have often occurred prior to an economic downturn.
Middle East instability (e.g. Arab spring) and Middle East tensions (e.g. Iran) are ongoing. Continue reading
Morning Market Commentary & Weekly Charts
The Federal Reserve’s decision on Thursday to proceed with QE3 + was not a surprise to us, albeit for most of the market participants, and equity markets responded accordingly. Volume gains on Thursday and Friday were impressive. Additional follow through early this week is likely. However, news from the Fed came at a time when equity markets already were significantly overbought based on short and intermediate technical indicators. Technical action on Friday was an interesting “tell”. Equity markets moved higher at the open, dropped close to break-even just before the close and closed strong on end-of-day buy orders. Not an impressive follow through!
The weakest three week period of the year starts this week. The period is related to pre-third quarter earnings report news. The next three-week period historically is when negative guidance is most frequently released by corporations and when analysts reduce estimates and recommendations. The frequency of negative guidance since release of second quarter results has been unusually high this year. We see evidence of history to repeat during the next three weeks.
Morning Market Commentary – Temporary Euro Relief
“Saved by the bell” “Temporary Euro Relief”
The Federal Constitutional Court has rejected a petition to stop the ratification of the permanent euro rescue fund, the European Stability Mechanism. The decision clears the way for the ESM to go into effect. In a historically significant signal for the Euro rescue, the German Federal Constitutional Court on Wednesday ruled there are no grounds to stop the country from ratifying the European Stability Mechanism, the permanent euro bailout fund. However, the justices expressed some reservations.
Morning Market Commentary & Weekly Charts – Russia’s “Nukes of Hazard”
Weekly Investment Conclusion:
Downside risk exceeds upside potential in equity markets during the next six weeks.The breakout by the S&P 500 Index last week implies that depth of the downside risk is less than previous. Selected seasonal trades continue on the upside (gold, energy, software) and downside (transportation). However, many of these seasonal trades reach the end of their period of seasonal strength this month. September is a month of transition.
Morning Market Commentary & Weekly Charts
So Mr. Bernanke, Ready for a run down Corbett’s Couloir?
Following on from last week’s peak of the Federal Reserve Chairman Ben Bernanke’s closely watched speech at the Jackson Hole symposium, markets widely believe that further quantitative easing (QE) is now on the cards for the central bank’s next meeting on September 13th and 14th.
2Q10 US Equities Strategy
Included in this report is our 2010 Macro Outlook and Beyond, GDP Commodity Price Forecasts, Equities Indices Targets covering Currency Forecasts, Global Equities Sector Outlook, Global Equities Outlook per Country and Global Equities Indices Targets.
Veolia Environnment FY09 results
We are reiterating our “Buy” recommendation on Veolia Environnement at a current price of EUR 24.38. Our 3 – 6 months VE price target is EUR 30 per share.
Global Markets Technical Outlook
We see the current EURO weakness, and implicit US$ strength as a tremendous opportunity to add towards EU quality assets, and inversely, to reducing US assets, as we expect the US$ weakness to resume later in 2010. Please read our in-depth report on the US Economy , Chinese Economy, Japan’s Economy, European Economies, Emerging Economies, Currencies, Global Equity Markets and Commodities.
CGI 2010 Global Markets Strategy & Equities Outlook and 50 Recommended Portfolio
The Year of Capital Preservation?