The markets have gone up markedly since I published that (Feb 7). Not clear when many of the realities listed will hit the fan, and we certainly have continued stagnation in jobs and wages, but probably not so much in highly skilled/in demand jobs with wage power. There are furcations in the economy, and the hot money into the markets is yet one branch (or funnel, as I term it). That hot money can continue to fuel bubbles without much improvement in stagnant areas or top line growth; the question is how long if these other factors do not experience inflection up. Ride the expectation wave for what it's worth.
Soaring volatility on the Nikkei isn't stopping investors from scooping up options "with something approaching glee," according to SIG's derivatives team (for the uninitiated, higher vols mean higher options prices). Most of the buying in the Japan ETF space is in the form of calls as dip buyers do what they've become accustomed to doing. Two popular ones, EWJ and DXJ are off nearly 10% since Wed. afternoon. [View news story]
Sunday night Nikkei futures, coupled with USDJPY and other pairs.
Stock index futures are shaky after an ugly session in Japan. Following its 7.3% plunge on Thursday, shares bounced nearly 4% as the yen resumed sinking. This soon reversed and shares plunged anew - dropping about 7% from their session high. The Nikkei eventually eked out a small gain as the yen (FXY) closed stronger again, dollar/yen falling 0.6% to ¥101.46. S&P 500 (SPY) futures -0.5%, Nasdaq 100 (QQQ) -0.5%. Japan: EWJ -2.6%, DXJ -3.7% premarket. Europe (FEZ) -0.5%. [View news story]
For those who want to take trading advantage of the bubble action, the Nikkei futures are a liquid vehicle. The drop from the high has been approx -12%. Looking at the chart, the '87 drop was about -20% and then screamed higher nearly double with few substantial declines. (Some alternatives: scale Everest, dive the Mariana, ...)
Hold Your Nose And Buy Caterpillar Here [View article]
Is the writer holding his nose and buying shares here?
CAT has been a swing trade from its lower range of 78-80. I'd look for a retest before entering this swing on the long side again. The floor may be higher this time, so watch the price action. In terms of fundamentals, the comments and company guidance indicate weak-neutral near term.
China's exports of rare earth metals have rallied in recent months, a trend attributed to low rare earth prices and Japanese demand. But Molycorp (MCP -2.9%), whose shares have jumped 30% in the past two weeks, says it might be premature to assume a firm turnaround in global demand: "Inventories have been built up over the past several years, and they are returning to more normal levels now." [View news story]
Investors (and potential investors) don't have clear visibility into MCP's mining production/refining yield and costs in each REE it processes (and ultimately sells on the open market). MCP is a trading vehicle.
The JPY weakening has coincided with USD strengthening, a clear trend trade that may not abate until USDJPY hits 125 (with 110 in the near term) and a dixie of 86+. Given these possibilities, dollar sensitive commodities can get cheaper.
The Housing Rebound And Why The Fed Should Begin Tightening [View article]
The U.S. mortgage market is essentially a nationalized enterprise fraught with moral hazards as prices melt upward - holding rates artificially low for an extended period of time only increases potential systemic problems. Private domestic investment (ex-residential), wages and real economic growth are relatively stagnant in this environment.
Nikkei - Foreshadowing A Move In U.S. Markets? [View article]
Plenty of dovetails driving market action, risk on or off.
Markets that move as sharply up as the Nikkei in the last few weeks are likely to experience sharp blow offs, but with the JPY depreciation on a determined tear this looks like a trend as yet unbroken. That hot flow of money is also coming into U.S. markets. These corrections are sharp and fast, so shorts have to be nimble, know to book profits and go long again.
"I'll take 'Kiss of Death Magazine Covers' for minus 7%, Alex," tweets a clever fellow as this week's The Economistcover shows Japan PE Shinzo Abe flying through the air like Superman. DXJ -6.9% premarket. [View news story]
China PMI shrinks for the first time in seven months, dropping to 49.6 from 50.4 in April, missing expectations. HSBC, who collect the data, didn't mince words in an appeal to Beijing: "The cooling manufacturing activities in May reflected slower domestic demand and ongoing external headwinds. A sequential slowdown is likely in the middle of Q2, casting downside risk to China's fragile growth recovery. Moreover, the further signs of labor market slackness call for more policy support. Beijing still has fiscal ammunition to do so." ETFs: FXI, GXC, PGJ, YAO, FCHI, PEK, CAF, YXI, XPP, FXP, MCHI, YINN, YANG, TCHI, CHXF; BONDS: RMB, DSUM, CHLC, CNY, CYB, FXCH[View news story]
Bouncing along a bottom. "Fragile growth recovery" is inapt given the rate their economy is still growing.
"I'll take 'Kiss of Death Magazine Covers' for minus 7%, Alex," tweets a clever fellow as this week's The Economistcover shows Japan PE Shinzo Abe flying through the air like Superman. DXJ -6.9% premarket. [View news story]
It had to happen, and it will happen again and again on the way to 125 (peaked before then).
Commodity Chart Of The Day: S&P - Key Reversal In S&P [View article]
With the $TRIN not substantially over 1 (it closed at 0.98), the selling may not be over. There was a small reversal to the long side in all the index futures before the close, with a continuation AH. This was a very profitable session for shorts, but many futures have shown substantial volatility in recent sessions netting substantial gains (or losses), on the short or long side. Tread carefully and get out if the trade is clearly going the other way (usual advice).
Where Is The Bubble? [View article]
The markets have gone up markedly since I published that (Feb 7). Not clear when many of the realities listed will hit the fan, and we certainly have continued stagnation in jobs and wages, but probably not so much in highly skilled/in demand jobs with wage power. There are furcations in the economy, and the hot money into the markets is yet one branch (or funnel, as I term it). That hot money can continue to fuel bubbles without much improvement in stagnant areas or top line growth; the question is how long if these other factors do not experience inflection up. Ride the expectation wave for what it's worth.
Soaring volatility on the Nikkei isn't stopping investors from scooping up options "with something approaching glee," according to SIG's derivatives team (for the uninitiated, higher vols mean higher options prices). Most of the buying in the Japan ETF space is in the form of calls as dip buyers do what they've become accustomed to doing. Two popular ones, EWJ and DXJ are off nearly 10% since Wed. afternoon. [View news story]
Stock index futures are shaky after an ugly session in Japan. Following its 7.3% plunge on Thursday, shares bounced nearly 4% as the yen resumed sinking. This soon reversed and shares plunged anew - dropping about 7% from their session high. The Nikkei eventually eked out a small gain as the yen (FXY) closed stronger again, dollar/yen falling 0.6% to ¥101.46. S&P 500 (SPY) futures -0.5%, Nasdaq 100 (QQQ) -0.5%. Japan: EWJ -2.6%, DXJ -3.7% premarket. Europe (FEZ) -0.5%. [View news story]
Hold Your Nose And Buy Caterpillar Here [View article]
Hold Your Nose And Buy Caterpillar Here [View article]
CAT has been a swing trade from its lower range of 78-80. I'd look for a retest before entering this swing on the long side again. The floor may be higher this time, so watch the price action. In terms of fundamentals, the comments and company guidance indicate weak-neutral near term.
China's exports of rare earth metals have rallied in recent months, a trend attributed to low rare earth prices and Japanese demand. But Molycorp (MCP -2.9%), whose shares have jumped 30% in the past two weeks, says it might be premature to assume a firm turnaround in global demand: "Inventories have been built up over the past several years, and they are returning to more normal levels now." [View news story]
The Biggest Loser Wins [View article]
The Housing Rebound And Why The Fed Should Begin Tightening [View article]
Nikkei - Foreshadowing A Move In U.S. Markets? [View article]
Markets that move as sharply up as the Nikkei in the last few weeks are likely to experience sharp blow offs, but with the JPY depreciation on a determined tear this looks like a trend as yet unbroken. That hot flow of money is also coming into U.S. markets. These corrections are sharp and fast, so shorts have to be nimble, know to book profits and go long again.
Commodity Chart Of The Day: S&P - Key Reversal In S&P [View article]
"I'll take 'Kiss of Death Magazine Covers' for minus 7%, Alex," tweets a clever fellow as this week's The Economist cover shows Japan PE Shinzo Abe flying through the air like Superman. DXJ -6.9% premarket. [View news story]
China PMI shrinks for the first time in seven months, dropping to 49.6 from 50.4 in April, missing expectations. HSBC, who collect the data, didn't mince words in an appeal to Beijing: "The cooling manufacturing activities in May reflected slower domestic demand and ongoing external headwinds. A sequential slowdown is likely in the middle of Q2, casting downside risk to China's fragile growth recovery. Moreover, the further signs of labor market slackness call for more policy support. Beijing still has fiscal ammunition to do so." ETFs: FXI, GXC, PGJ, YAO, FCHI, PEK, CAF, YXI, XPP, FXP, MCHI, YINN, YANG, TCHI, CHXF; BONDS: RMB, DSUM, CHLC, CNY, CYB, FXCH [View news story]
"I'll take 'Kiss of Death Magazine Covers' for minus 7%, Alex," tweets a clever fellow as this week's The Economist cover shows Japan PE Shinzo Abe flying through the air like Superman. DXJ -6.9% premarket. [View news story]
Commodity Chart Of The Day: S&P - Key Reversal In S&P [View article]
Commodity Chart Of The Day: S&P - Key Reversal In S&P [View article]