Category Archives: Morning Market Commentary

10Apr/13

Morning Market Commentary – US$ impact on stocks & Sector rotation, into cyclicals, materials, mining

Automotive, FORD, Metals, Morning Market Commentary, Oil, Gas & Energy, Toyota, VW

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.

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09Apr/13

Morning Market Commentary US$ impact on EPS, EUR/US$ reversal

Commodities, Currencies, Metals, Morning Market Commentary, Oil, Gas & Energy

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.

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04Apr/13

Morning Market Commentary – US Markets Technical Deterioration

Currencies, Gold & Precious Metals, Morning Market Commentary, Oil, Gas & Energy

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.

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27Mar/13

Morning Market Commentary – BDI, NDX, AAPL

Apple, Morning Market Commentary, Technology

When stocks began to peak from a substantial seasonal run that began in October of that year, the Baltic Dry index is rising as cyclicals, such as energy and materials, are weakening. The BDI provides an assessment of the price of moving the major raw materials by sea.  The diverging activity of the price of shipping materials versus the price of companies valued based upon materials they produce is made without conclusion, other than the fact that underlying fundamental influences that typically drive these cyclical sectors higher at this time of year are still occurring. Manufacturing and industrial production typically increase into the Spring, driving the BDI higher as more goods are shipped, and customarily giving strength to Materials and Energy. However, the fading relative performance of these cyclical sectors suggests that investor demand to hold these stocks is clearly absent, despite the positive fundamental influences. Once again, warning signs are beginning to emerge. With AAPL still commanding a large percentage of the Nasdaq 100 , the short trade is in AAPL.  Now after it completed it’s 10 % recovery from its lows of US$418, we are advising to short AAPL, with our next price target being US$ 380, then over the 9 – 12 months time period, we stick to our AAPL price target of US$ 320.

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22Mar/13

Morning Market Commentary

Commodities, Currencies, Gold & Precious Metals, Morning Market Commentary, Oil, Gas & Energy

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 →

15Mar/13

Morning Market Commentary – Natural Gas Breakout

Currencies, Gold & Precious Metals, Metals, Morning Market Commentary, Oil, Gas & Energy

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.

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13Mar/13

Morning Market Commentary – EU Budgetary

Metals, Morning Market Commentary, Oil, Gas & Energy

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 →

08Mar/13

Morning Market Commentary – GDP improvements, US$ Weakening

Currencies, Gold & Precious Metals, Metals, Morning Market Commentary, Oil, Gas & Energy

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 →

01Mar/13

Morning Market Commentary – Time to go long on the EURO again

Currencies, Gold & Precious Metals, Morning Market Commentary, Oil, Gas & Energy

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.

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28Feb/13

Morning Market Commentary March favorable for stocks; VE reiterate “buy”

Commodities, Morning Market Commentary, Veolia

Historically, the month of March has appositive seasonal bias for US and global equities’ indices. March has had the fourth best seasonal impact for US equities and particularly on the S&P 500, when looking back 50 years. The Dow’s and the fifth best performing month for the Dow Jones Industrial Average and the eighth best performing month for the NASDAQ Composite. Average gains per period were 1.1% for the S&P 500 Index and Dow Jones Industrial Average and 0.6% for the NASDAQ Composite. Most of the gains were recorded in the second half of the month.

We think that for 2013, March will be another strong month, ahead of the seasonal “Sell in May & Go Away” phenomenon.

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25Feb/13

Morning Market Commentary & Weekly Charts Bullish on Oil, Gold,

Commodities, Currencies, Gold & Precious Metals, Morning Market Commentary, Oil, Gas & Energy

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.

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22Feb/13

Morning Market Commentary US$, US Market Charts, SSES, Italy, Greece

Apple, Currencies, Morning Market Commentary, Technology

European Economic Outlook for 2013.  Clearly, …………………………………………………more mixed macro news ahead.

We see technical evidence for the long-term bullish trend to remain intact until there are greater odds of a looming recession. Or until stocks become overvalued. Neither is a real concern right now. Not even with the government cost cuts from the sequester going through post March 1st.

So, we are recommending to add towards Asian, and European equities if, and when the correction increases in velocity.

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20Feb/13

Morning Market Commentary EUR/USE;US$/YESN;SSEC;AAPL

Apple, Currencies, Gold & Precious Metals, Morning Market Commentary, Technology

Apple stock continues to look for a lower price. The gap down from January is a major sign of more selling volume to possibly join the carnage in the once biggest stock in the world. Shares of Apple have not moved above its 50-day moving average since September of last year, precisely when the new iPhone and iPad were launched.

We maintain our “Sell/Short” recommendation on AAPL, with our 3 – 6 months price target of US$ 320.

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13Feb/13

Morning Market Commentary – No sell signals yet NDX;AAPL;Currency Musings;Global Automakers

Automotive, Currencies, Fiat, GE, Gold & Precious Metals, Honda, Hyundai, Morning Market Commentary, Peugeot, Renault, Technology, Toyota

We continue to see one good investment solution to the problem of global currency wars:  Investors should continue to buy Gold.

We have been recommending for 3 years to “sell/short” the French OEM’s and also Fiat, in Italy, which in retrospect clearly was an alpha generating call for investors over the entire time period.

Given recent macro-dynamic changes, in monetary policies, impacting currency markets around the world, namely the Yen weakening substantially versus most currencies, particularly the US$, the EURO, but also mostly against the Korean Won, we have become bullish in September 2012 on Japanese stocks, calling for a major rise in the Nikkei, and implicitly seeing a bullish case in favor of Japanese car companies.

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11Feb/13

Morning Market Commentary & Weekly Charts-Currency Manipulation vs Gold

Commodities, Currencies, Gold & Precious Metals, Morning Market Commentary, Oil, Gas & Energy

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.

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24Jan/13

Morning Market Commentary AAPL, SPX, SSEC, N-225, DAX, CAC, FTSE

Apple, Morning Market Commentary

APPLE (NASDAQ AAPL US$ 469 pre-open ind.) We maintain our 3 – 6 months price target for AAPL at US$ 380.

We had a few interesting phone calls over the past 2 months from some clients, but also news reporters, and other critics, who used to receive our research, and/or download it from Bloomberg, but who do not pay us for our services, however, have put a lot of emphasis on taking the time and read and battle our forecasts and research, particularly as of late related to Apple and our call on October 2nd, to “sell/short” the beloved stock.

Let’s look at the facts, since then, we correctly predicted AAPL to fall from then US$ 685 to US$ 520, based initially on chart technical outlook changing.  Then, when AAPL hit our price target of US$ 520, we wrote in several daily reports, besides updates on Apple, that we were expecting AAPL to recover back towards US$ 585, which it subsequently did within the ten days after our US$ 585 target call. 

On December 5th, we reiterated our initial call, which was based in part on chart technical traditional Fibonacci basics, but also complementing the chart technical aspects with market research and looking at the dynamics that existed for AAPL’s most direct competitors, Nokia, Samsung, Sony, and considering all of our combined research, and logical sense, that AAPL’s investors euphoria had been fading.

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22Jan/13

Morning Market Commentary – SPX, DJIA, N-225, SSEC, FTSE, DAX, SI, CAC, GAS

Morning Market Commentary, Oil, Gas & Energy, Seimens

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 →

03Oct/12

Morning Market Commentary – Bull or Bear?

Apple, Commodities, Currencies, Morning Market Commentary, Oil, Gas & Energy, Porsche, Tesla, VW

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.

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21Sep/12

Morning Market Commentary -Technical Market Observations

BMW, Daimler Mercedes, Fiat, Morning Market Commentary, Peugeot, Porsche, Renault, VW

Technical Market Observations & Babbage

The weakest 3-week period of the year for North American equity markets is from September 16th to October 9th. The S&P 500 has dropped an average of 2.5% during this period. The TSE Composite Index has dropped an average of 4.0% per period. The weakness is related to negative guidance (earnings confession season) and analyst estimate reductions/downgrades during this period prior to release of third quarter results.

2012 so far:……

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19Sep/12

Morning Market Commentary – European Mega Banks “Big Split”

Banking, Currencies, Gold & Precious Metals, Metals, Morning Market Commentary

Discussions have been going on for some time, in Berlin and, most of all, Brussels, to proceed to split up “Mega-Banks”. The European Commissioner for Internal Market and Services, Michel Barnier, a former French cabinet minister with snow-white hair, is the most feared of the Brussels commissioners in European financial centers. He is already responsible for more than 30 EU regulations decreeing how banks and other financial market players are to do business in the future.

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12Sep/12

Morning Market Commentary – Temporary Euro Relief

Currencies, Gold & Precious Metals, Morning Market Commentary, Oil, Gas & Energy

“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.

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