Seven Days Ahead - Free Market Updates http://www.sevendaysahead.com/rss/ Free market updates from www.sevendaysahead.com en-us Tue, 24 Apr 2018 06:46:45 CEST Tue, 24 Apr 2018 06:46:45 CEST Seven Days Ahead - Market Updates 130 28 http://www.sevendaysahead.com http://www.sevendaysahead.com/assets/img/logo_cms.gif 15th April 2018- Whatever happens, oil wants to go higher http://www.sevendaysahead.com/market-updates/1685/15th-april-2018-whatever-happens-oil-wants-to-go-higher.html <h2>TECHNICALS:</h2> <p><span>MONTHLY CHART </span></p> <p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"><span>MONTHLY CHART </span></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"><span>&nbsp;</span></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"><span>The huge bull support from the null Head and Shoulder reversal in the month chart is still having a powerful effect.</span></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"><span>The minimum move implied by the pattern is clear </span><span><span>at least as high as $100.</span></span></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The market&nbsp; has bounced off the $40 level twice.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>DAILY CHART </span></p> </p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>And short-term there is a clear completed bull continuation triangle set to drive the market at least as far as $76.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Short and long-term the charts are in alignment: the bulls are in charge.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <h2>FUNDAMENTALS:</h2> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Over recent months the oil market has struggled to come to terms with the competing forces of the OPEC/Russia output cut designed to rebalance supply/ demand and the growing output from US shale reserves.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Although shale production costs have been falling that method of extraction is still more expensive than traditional production methods.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>So as the OPEC countries manoeuvred to drive prices higher, US shale producers benefited from the higher prices because they made expensive shale production more profitable. The result has been oil prices have risen but at a slower pace than during previous episodes of OPEC oil price manipulation.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The outlook for the oil market had anyway started to look bullish because the long- term aim of OPEC/Russia of running down the oil glut seemed finally to be coming to fruition as the IEA recently reported that oil stocks held in storage is set to drop below its five year average.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>There are other forces at work as well. The geopolitical situation in the Middle East is always fragile and regional conflict never seems far away. </span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>First, Saudi Arabia has been waging a war in the Yemen in support of the government against rebels backed by Iran.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Second, the civil wars in Iraq and Syria complicated by the so-called Islamic State. Although that group is all but defeated, the war in Syria continues.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>With Russia and Iran backing the Syrian government regime and the US backing the rebels trying to remove Bashar Al Assad from power, the prospect of a clash between the US and Russia has&nbsp; been a major risk. Though throughout this unhappy affair the US and Russia have tried to accommodate each other&rsquo;s interests and avoid direct conflict.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>That accommodation appeared at breaking point after the Syrian government, which is essentially fighting its own people as it seeks to retain power, launched a chemical weapons attack on a rebel held town last weekend.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The Russians warned they would shoot down any missiles or planes attacking Syria and will also would target the platforms from where they are launched.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Undeterred, the Allies anyway attacked Syrian military assets &ndash; though seemingly warned the Russians sin advance.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>We sense all sides will continue to try to avoid a wider conflict but the possibility of a miscalculation must mean that Syria remains a bull factor in the oil price</span><span> since a convincing resolution is far from clear.</span></p> <p>&nbsp;</p> Mon, 16 Apr 2018 00:00:00 CEST http://www.sevendaysahead.com/market-updates/1685/15th-april-2018-whatever-happens-oil-wants-to-go-higher.html 26th March 2018 - Has the Bund turned bullish? http://www.sevendaysahead.com/market-updates/1684/26th-march-2018-has-the-bund-turned-bullish.html <h2>TECHNICALS:</h2> <p><span>WEEKLY CHART </span></p> <p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"><span>WEEKLY CHART </span></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"><span>&nbsp;</span></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"><span>The bears were exultant when the horizontal supports from the Prior High at 160.69 were breached on the 3</span><span>rd</span><span> attempt..</span></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"><span>And when the market pushed beneath the Prior Low &ndash; especially 158.73 that established overhead resistance.</span></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"><span>The market will surely struggle to rally back through 160<span>&nbsp; </span>- where it failed recently&hellip;</span></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>DAILY CHART </span></p> </p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>&nbsp;</span><span>But though the bears feel relaxed, the market still has considerable freedom of action to trade higher&nbsp; - say to 160 &ndash; without smashing important medium and long-term resistance.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The short-term chart shows the rally from the recent low is well-advanced </span><span><span>and shows no sign of stopping in the short-term</span></span><span>.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>From the short-term chart only a break of 161 would destroy the bears&rsquo; case.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <h2>FUNDAMENTALS:</h2> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The ECB, at it&rsquo;s last meeting, dropped a key phrase from it&rsquo;s policy statement committing policy makers to extend their QE Bond buying if the Euro zone economy showed signs of cooling. That was because they judged the economic recovery had become sufficiently broad-based that the risk of relapse had virtually evaporated.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Indeed, over several months and quarters data has more than supported their recent decision. But since making a low in early February, the bund has not only rejected the lows, but begun what increasingly looks like a fresh leg of the long bull market!</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Why?</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>There is an argument to be made that some of the buying is due to safe-haven buying, induced by the sell-off in stocks that occurred after new Fed Chair Powell delivered his first testimony in Congress. That testimony was broadly construed as more hawkish than his predecessors stance, but we think there were other reasons for his hawkishness.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>About two weeks ago US President Trump lived up to his campaign rhetoric of America First by announcing trade tariffs on steel and aluminium imports as he judged they were unfairly destroying US jobs. Additionally, he alluded to imposing tariffs on car imports, saying that a trade war would be good and winnable.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Clearly this set off alarm bells in global markets and equities retreated further as investors/traders held their breath anxious that a trade war may indeed be about to break out.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>This week the outlook worsened as Trump slapped 25% tariffs on US$60Bn worth of Chinese imports, claiming unfair competition and threats to national security.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>In response, China has tried to show a degree of restraint, but announced tariffs of her own on US$3Bn of imports from the US. But where do we go from here? And why, you might ask, is the bund the only major bond market that seems to have acted so bullishly?</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>First, this looks like the beginning of a period when globalisation is rolled back. The US President fails to see the benefits to consumers that globalisation has brought and focusses on the downside which is the loss of jobs in certain uncompetitive sectors. This despite the fact that the US economy has been creating many new jobs over a period of years leading the Fed to fret that at almost full employment inflation is becoming a risk.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>For the bund, the Euro zone/Germany is the world&rsquo;s largest exporter running huge trade and Current account surpluses. If a trade war breaks out the Euro zone economy and German economy will be hit. The ECB would be forced to roll back on its limited attempts to move away from its emergency lax monetary policy and may indeed be forced to increase its QE program.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The sell-off seen to date in equity markets is therefore only a taste of what could happen if a trade war breaks out and investors are clearly already getting nervous, indeed the DJEUROSTOXX50 was already moving lower when the US S&amp;P was still making new highs.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>In any event, history tells us that trade wars ultimately benefit no one and often lead to conflict. The recent period of globalisation had two beneficial affects:</span></p> <div style="margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.19in; text-indent: -0.19in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span><span>&bull;</span></span><span>A positive impact on world trade and growth, </span></div> <div style="margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.19in; text-indent: -0.19in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span><span>&bull;</span></span><span>By interlinking the world&rsquo;s economies made military conflict less likely.</span></div> <div style="margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.19in; text-indent: -0.19in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><!--[if ppt]--><span><span>&bull;</span></span><!--[endif]--></div> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Where then, given the current trade war threat, does the bund go from here? We believe higher.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>&nbsp;</span></p> <p>&nbsp;</p> Mon, 26 Mar 2018 00:00:00 CEST http://www.sevendaysahead.com/market-updates/1684/26th-march-2018-has-the-bund-turned-bullish.html 19th March - What's holding Oil back? http://www.sevendaysahead.com/market-updates/1683/19th-march-whats-holding-oil-back.html <h2>TECHNICAL:</h2> <p><span>MONTHLY CHART</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The oil market is in the grip of a big H&amp;S reversal pattern that is set to drive it up to over a $100.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"><span>DAILY CHART </span></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"><span>&nbsp;</span><span>But the for that last two months the price action has been downwards or sideways.</span></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"><span>It well supported it seems at the Prior High horizontal from 58.66, but the rally from that level petered out.</span></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"><span>All is not lost though, for the bulls.</span></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"><span>The pause remains for the moment insignificant relative to the scale of the H&amp;S pattern that is encouraging the bulls.</span></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"><span>That is that a bull continuation triangle in the making? Watch carefully for a break of the falling diagonal at 62.50.</span></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"><span>And within that triangle is that a null falling wedge that has just completed?</span></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"><span>So we are close to completing two patterns that may reignite the bull momentum!</span></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"></p> <h2>FUNDAMENTALS:</h2> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The price action in oil over recent months has closely mirrored that of equity markets and specifically the US S&amp;P. As the S&amp;P rallied into January, making new all-time-highs, the oil market looked set for a renewed bull run, fuelled by the OPEC/Russia extended production cut intended to reduce the global oil glut and rebalance supply/demand.</span></p> </p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>But the rallies in equities and oil were cut short. The new Fed Chairman; Powell caused an upset when he testified in Congress shortly after taking up his new role, by sounding more hawkish on policy than his predecessor Janet Yellen. So much so that stocks suffered a steep sell off and oil followed suit.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The outlook for stocks is now confused because US President Trump has announced trade tariffs on Steel and Aluminium, declaring trade wars are good and winnable! History tells a different story and they often lead to conflict.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>But what of oil? Is the oil price tied to stocks or are there other dynamics at work?</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Clearly higher oil prices help US shale producers as the cost of extraction is higher than conventional oil extraction and that plays a big part in restraining oil prices. Add in the emergence of the US as the world&rsquo;s largest energy producer, over taking both Saudi Arabia and Russia and the </span><span><span>previous all time highs in oil look out of reach</span></span><span>.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Apart from the US shale boom, Trump has opened up areas for oil exploration previously off-limits and the IEA has recently forecast a steady increase in oil supply despite the OPEC/Russia cut backs.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>But there is another element to consider.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>No one knows how far Trump intends to pursue his America first policy. Are the recent tariffs on Steel and Aluminium the full story or just the beginning? He has already mentioned placing tariffs on car imports. And what of the response from America&rsquo;s trading partners?</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>So far it seems they have adopted a policy of wait and see. But if Trump intends to hit a wider range of imports then clearly the likes of Japan, China and the EU will respond. The IMF has already sounded a warning claiming a trade war would damage global trade and global economic growth and therein lies the threat to oil prices.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>A trade war may not be in play right now, but the signs are ominous. Trump has called on China to come up with a plan to cut her trade surplus with the US by US$100 Bn. </span><span>Iif</span><span> they do not presumably Trump will impose tariffs.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>But what Trump fails to recognise is the positive impact globalisation has had on global economic growth and wealth creation. If a full-scale trade war breaks out, growth will suffer, inflation will increase and demand for oil will decrease and at a time when the US is materially increasing the amount of oil it extracts, not just for domestic use, but for export too.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>For now, the Oil price is likely to remain in the doldrums due to the current price action in stocks. But in the medium and long term, the writing is on the wall: oil prices of US$100 look unlikely to be repeated and as the price of US shale extraction continues due to drop on technological advances. As wind power and solar power production increases, US$70 may be out of reach too.&nbsp;</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p>&nbsp;</p> Mon, 19 Mar 2018 00:00:00 CET http://www.sevendaysahead.com/market-updates/1683/19th-march-whats-holding-oil-back.html 12th March - Have US Bonds broken down? http://www.sevendaysahead.com/market-updates/1682/12th-march-have-us-bonds-broken-down.html <h2>TECHNICALS:</h2> <p>&nbsp;</p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>MONTHLY CHART</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The very long-term clearly defined&nbsp; bull trend support is close by, but yet broken.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p>&nbsp;</p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>On the other hand, there is powerful resistance above the market from the bottom of the old trading range at 122.07.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>DAILY March 2018 </span><span>Eurostoxx</span><span> CHART </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The breakdown through the bottom of that trading range which has been in place since 2014 was emphatic, and created massive overhead resistance in the band of horizontals at 122.71-123.01.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p>&nbsp;</p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span><span>Note how there was a retest of the breakout level which was quickly repulsed.</span></span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>DAILY CHART</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The March 2018 future shows how the trend has been in place for rather longer than the continuation charts suggest, since mid-December. Here the rally of early February can clearly be seen to have failed very quickly.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span><span>There are few grounds for optimism for the bulls short, medium or long-term.</span></span></p> <h2><br />No fundamental analysis - John Lewis is away</h2> <p>&nbsp;</p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"></p> <p>&nbsp;</p> Mon, 12 Mar 2018 00:00:00 CET http://www.sevendaysahead.com/market-updates/1682/12th-march-have-us-bonds-broken-down.html 5th March - The relative vulnerability of European stocks http://www.sevendaysahead.com/market-updates/1681/5th-march-the-relative-vulnerability-of-european-stocks.html <h2>TECHNICALS:</h2> <p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"><span>MONTHLY CHART</span></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"><span>The lack of ambition in the market has been evident in the way the market has failed to get back above the Prior High in 2015.</span></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>DAILY March 2018 </span><span>Eurostoxx</span><span> CHART </span></p> </p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The rally since the sell-off of late January has been muted: it failed at the first important resistance from the Prior Low at 3455 (never closing above the 50% retracement resistance)</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The fresh sell-off looks likely to threaten the Pivot from the low in August of last year.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>If the market were to break beneath the pivot at 3390 </span><span><span>a top would have clearly formed</span></span><span> encouraging </span><span><span>still more selling.</span></span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <h2>FUNDAMENTALS:</h2> <p>&nbsp;</p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Prior to the February sell-off US equity markets had enjoyed a strong rally setting several new all-time highs.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>But the story in EUROSTOXX had been quite different.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The market made a high late October, early November, and then sold off, contrary to the price action in the US S&amp;P. It then recovered and revisited the highs in January, before the February sell off, but </span><span><span>never enjoyed the same strong bull run as its US counterpart</span></span><span>, which was surprising given the strength of Euro zone fundamentals.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>In the Euro zone, data has for many months been indicating and confirming a strong recovery is finally under way. The various Euro zone PMI surveys have been strong, GDP reports have confirmed that strength and the ECB has been considering how and when to further reduce its QE Bond buying program.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The two factors that are causing it to delay are 1) the relative strength of the Euro, especially against the Dollar, and 2) still low inflation; the ECB has a target of 2.0%, the current level is around 1.3%.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>So given these strong fundamentals why the underperformance of the EUROSTOXX market?</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p><span>Clearly </span><span><span>sentiment has a part to play</span></span><span>. That sentiment has emanated from the US as traders re-assessed the likely changes to US monetary policy. moreover that assessment had been made more difficult by the change of Chairman at the US Federal Reserve. No one really knew what the new man&rsquo;s policy stance would be, that was until Tuesday this week when he delivered his first testimony as Chairman at the Senate</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>But there are other dynamics playing out in the Euro zone:</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <div style="margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.19in; text-indent: -0.19in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span><span>&bull;</span></span><span>The German election took place in the Autumn of 2017, but the new coalition government has only just been agreed and even now there are tensions as Merkel gave away powerful ministries to the SPD as the price to be paid for them to agree to a grand coalition.</span></div> <div style="margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.19in; text-indent: -0.19in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><!--[if ppt]--><span><span>&bull;</span></span><!--[endif]--></div> <div style="margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.19in; text-indent: -0.19in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span><span>&bull;</span></span><span>An election is due soon in Italy and there are candidates standing that are seen as a threat not just to Italy&rsquo;s continued membership of the Euro, but the EU itself.</span></div> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Although it is assumed that those outcomes are unlikely, just look at the result of the referendum on the UK&rsquo;s continued membership of the EU. And the unlikely election victory of Donald Trump in the US. One can no longer simply dismiss these populist politicians as having little chance of gaining power.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>These domestic factors are the underlying reason for this markets underperformance together with negative sentiment from the US.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>So, now, with fresh bearishness from the US fuelled by </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <div style="margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-indent: -0.25in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>1.</span><span>Fed Chairman Powell&rsquo;s testimony on Tuesday which has led to traders increasing the number of US rate hikes they expect the Fed to deliver this year.&nbsp; </span></div> <div style="margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-indent: -0.25in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><!--[if ppt]--><span>●</span><!--[endif]--></div> <div style="margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-indent: -0.25in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>2.</span><span>the newly arisen talk of a trade war with the US over steel and aluminium tariffs is an additional negative.</span></div> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>We expect European stock to be hit relatively harder that the US</span><span>.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p>&nbsp;</p> Mon, 05 Mar 2018 00:00:00 CET http://www.sevendaysahead.com/market-updates/1681/5th-march-the-relative-vulnerability-of-european-stocks.html 17th February - The particular threat to the UK Bond market http://www.sevendaysahead.com/market-updates/1680/17th-february-the-particular-threat-to-the-uk-bond-market.html <h2>TECHNICALS:</h2> <p>&nbsp;</p> <p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"><span>WEEKLY EFT CHART </span></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"><span>&nbsp;</span></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"><span>The triple failure at the 50% retracement at the 58.5 level set the tone for the market over the year so far.</span></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"><span>Now attention is focusing on the Support from the Prior High at 56</span><span> and the possible breakdown beneath the Prior Low at 55.5.</span></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"><span>A break of both would set the bear seal on both the long and medium-term market.</span></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"><span>The market </span><span><span>did</span></span><span> close beneath 56.0 but </span><span><span>not</span></span><span> beneath that 55.5 low this week.</span></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"><span>What is the scope for retracement?</span></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>DAILY Gilt future CHART </span></p> </p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The day chart is being driven by the parallel Flag that completed in early January.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The next key short-term bear trigger was at the end of the month when the market broke beneath the Prior Low at 122.5 from the end of November 2017.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Note the rally on Friday last: the first resistance lies above the market at 122.5.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span><span>Unless that resistance can be overcome the market remains bearish.</span></span></p> <h2><br />FUNDAMENTALS:</h2> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The long Bull market in government bonds driven by the era of globalisation and very low inflation, seems to be drawing to a close.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>As the emerging market economies developed, especially China, the developed world was able to enjoy a period of solid expansion with exceptionally low inflation as they outsourced production to these very low-cost manufacturing centres, but all good things eventually come to an end. </span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>China is now the world&rsquo;s second largest economy and still expanding and labour costs are no longer so cheap. In fact, the authorities there are concerned about the their negative demographics, which led them to abandon their One Child policy.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>There are other factors that are also working against the environment that has for so long fostered exceptionally low Bond yields.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <div style="margin-top: 2.88pt; margin-bottom: 0pt; margin-left: 0.19in; text-indent: -0.19in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span><span>&bull;</span></span><span>In the US, Trump&rsquo;s election as President has seen the US challenge the established world order it had established after WW11 with his America first policy which is essentially protectionism.</span></div> <div style="margin-top: 2.88pt; margin-bottom: 0pt; margin-left: 0.19in; text-indent: -0.19in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><!--[if ppt]--><span><span>&bull;</span></span><!--[endif]--></div> <p></p> <div style="margin-top: 2.88pt; margin-bottom: 0pt; margin-left: 0.19in; text-indent: -0.19in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span><span>&bull;</span></span><span>In the UK, the country has voted to leave the EU, an institution with a massive single market that the UK has belonged to for 40 odd years. The exit negotiations between the UK and EU have not been easy. The negotiations to establish a new trading relationship are looking no easier and judging by some recent comments coming from the EU look like being more difficult yet. In fact, one might think the two were long-standing enemies rather than close trading partners.</span></div> <div style="margin-top: 2.88pt; margin-bottom: 0pt; margin-left: 0.19in; text-indent: -0.19in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></div> <div style="margin-top: 2.88pt; margin-bottom: 0pt; margin-left: 0.19in; text-indent: -0.19in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>For the Gilt, the prospect of economic dislocation goes deeper. The decision to leave the EU may turn out to be a positive move long term, it is far too soon to know. But short/medium term it has caused the UK economy to go from the strongest best performing in the Group of 7 developed economies to being the weakest, with stubbornly high inflation.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Add in the threat to the City of London which has enjoyed a position as the World&rsquo;s pre-eminent financial Centre, contributing significantly to UK GDP and providing the UK Government with a hefty chunk of its tax revenue and traders/investors are concerned about the outlook for the UK&rsquo;s fiscal health if the new trading arrangements do not include services and the City, something the EU side is actively seeking.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Then there is domestic monetary policy. The Bank of England now judges the UK economy&rsquo;s growth potential has dropped from about 2.3% to not much above 1.5%. As a result, the current rate of growth which is about 1.5% is not seen as a barrier to the Bank raising interest rates as it seeks to bring CPI down from its current level of 3.0% to its target of 2.0% in two years time.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Clearly much of the UK&rsquo;s current difficulties are caused by the uncertainty of Brexit which has seen Sterling suffer a steep devaluation, pushing up inflation, driving real wages into negative territory and causing businesses to delay or abandon investment decisions.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Consider all of this against the backdrop of negative international sentiment towards government bonds since Trump&rsquo;s tax cut agenda was voted into law in the US adding at least one Trillion Dollars to the US budget deficit, driving up US bond yields in expectation of rising US inflation and the international environment for bonds has turned negative. Especially the UK Gilt.</span></p> </div> <p>&nbsp;</p> Mon, 19 Feb 2018 00:00:00 CET http://www.sevendaysahead.com/market-updates/1680/17th-february-the-particular-threat-to-the-uk-bond-market.html 26th January - Watch Cable http://www.sevendaysahead.com/market-updates/1678/26th-january-watch-cable.html <h2>TECHNICALS:</h2> <p><span>MONTHLY CHART</span></p> <p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"><span>&nbsp;</span><span>It is hard to exaggerate the importance of the break up through the series of long-term resistances that has taken place in the last month.</span></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"><span>The band arising from the succession of lows from 1992, 2001 and 2009<span>&nbsp; </span>might have been powerful resistance.</span></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"><span>It has been smashed.</span></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"><span>The Fibonacci retracement resistance coinciding with the low at 1.3677 might have been powerful resistance.</span></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"><span>It has been smashed.</span></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"><span>Note though, the<span>&nbsp; </span>Fibonacci resistance at 1.43 &ndash; it&rsquo;s totally plausible that the market may at least pause there (as it did when first testing the cluster of fib levels at the 1.3677 level).</span></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"><span>And possibly reverse.</span></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>MONTHLY CHART</span></p> </p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Here is a word of warning:</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>If the chart is redrawn using the closes of the Prior lows from 1992, we see that the band of resistance shifts significantly higher &ndash; it now rests between 1.41 and 1.43.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>It now can be seen that the price action, far from breaking the long-term resistance, </span><span><span>has merely re-entered it.</span></span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The logic of re-drawing the lows is to reflect more clearly the weight of price action that formed those lows. The absolute lows were in each case materially lower than the cluster of closes that formed the low.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>In addition note that if the main Fibonacci retracement resistance is re-drawn, the market is right up against the 38.3% resistance&hellip;.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Expect the market to struggle to go higher from here.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <h2>FUNDAMENTALS:</h2> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Over recent days the Pound has achieved levels that many, including us, thought it couldn&rsquo;t reach during the &ldquo;BREXIT&rdquo; process due to the many uncertainties associated with the negotiating process. But with a transition agreement and trade deal yet to be negotiated, the Pound has driven higher and higher especially against the Dollar. Why?</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>As 2017 drew to a close the UK Government&rsquo;s position on the so called &lsquo;divorce&rsquo; payment began to soften. Starting with the PM&rsquo;s speech in Florence late summer and through to the end of last year the government began to steadily concede ground.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>First of all, it accepted a payment in respect of its liabilities would be paid, culminating in an agreement with the EU in December on an outline deal and amount payable that satisfied not only the EU&rsquo;s BREXIT negotiator, but also the EU Council of leaders and the EU Parliament.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Moreover the EU agreed to a UK request that a transition period be put in place covering a 2 year period starting from the UK&rsquo;s official leaving date, offering business some much needed certainty.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>However, that is only part of the story. In the final quarter of 2017 various UK economic data releases have been pointing towards a better economic performance than most feared would be the case.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The various PMI surveys covering Services and manufacturing indicated a solid performance and even official Industrial production and manufacturing reports revealed industry had grabbed the opportunity presented by Sterling&rsquo;s devaluation and enjoyed a strong period of expansion.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>So the UK economy was out-performing expectations. So too was the US economy. Growth there has been around 3% annualised that is, double the UK&rsquo;s. The Fed has begun tightening monetary policy and started to shrink its bloated balance sheet and President Trump saw his Tax cut policy voted into law.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Why didn&rsquo;t this benefit the Dollar instead of Sterling?</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The Federal Reserve has stated it sees limited positive impact on US economic growth from the tax cuts, meaning it sees no reason to adopt a more hawkish tone with monetary policy, but traders do not seem to share their view.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>It is reliably estimated that the tax cuts will add at least US Dollars One Trillion to the already bloated national debt, and although future benefits to the economy are anticipated, the deficit will expand before any benefit is seen.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>In an economy already expanding at a solid pace with a fairly tight labour market, traders see the tax cuts are potentially inflationary. But still the Fed seems unconcerned. Perhaps they are relaxed because inflation is for now still relatively benign?</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>In any event, currency traders are less sanguine and the Dollar has weakened significantly against the other major currency&rsquo;s including the Pound.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Were does Cable go from here?</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> </p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>There remains a great deal of uncertainty about the eventual outcome of the BREXIT negotiations. But from recent comments and remarks from UK and EU politicians, notably France&rsquo;s Macron and Germany&rsquo;s Merkel, </span><span><span>all sides seem to want to do a deal that works</span></span><span>, That means a so called soft BREXIT. Add that to the better-than-expected UK economic performance and </span><span>Sterling could rally still further </span><span>against the weakened Dollar. </span></p> <p>&nbsp;</p> Mon, 29 Jan 2018 00:00:00 CET http://www.sevendaysahead.com/market-updates/1678/26th-january-watch-cable.html 19th January - Can the S&P rally extend further? http://www.sevendaysahead.com/market-updates/1677/19th-january-can-the-sp-rally-extend-further.html <h2>TECHNICALS:</h2> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>MONTHLY CHART </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>&nbsp;</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>In early December 2017 we wrote: </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>&lsquo;</span><span>Without a fresh continuation pattern to add impetus to the trend, it is vulnerable to retracement at the very least, if only to test the diagonal trendline support from 2008 which is far beneath the market because of the acceleration of the trend.&rsquo; </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>And that remains true. The rally has extended since then and now is pushing into a band of coincident Fibonacci resistances starting at 2800. </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>And so we think the likelihood of a retracement has grown still higher.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>DAILY CHART </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>A short-term retracement as -far as the band at 2667-2697.90 would be welcomed by the bulls; only a break of that band would suggest a more prolonged sell-off.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <h2>FUNDAMENTALS:</h2> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The long Bull run in the S&amp;P shows no sign of abating as the market makes a succession of new highs. What then is driving it and what are the risks that could halt the rally?</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>From the Bulls perspective the market looks supported by increasingly strong fundamentals:</span></p> <div style="margin-top: 2.88pt; margin-bottom: 0pt; margin-left: 0.25in; text-indent: -0.25in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>1.</span><span>The labour market continues to create a steady stream of new jobs, meaning there is work for those that want it,</span></div> <div style="margin-top: 2.88pt; margin-bottom: 0pt; margin-left: 0.25in; text-indent: -0.25in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>2.</span><span>Growth stands at around or just above 3.0% annualised,</span></div> <div style="margin-top: 2.88pt; margin-bottom: 0pt; margin-left: 0.25in; text-indent: -0.25in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>3.</span><span>Inflation on several measures is benign, and especially so on the Fed&rsquo;s Core PCE measure, and</span></div> <div style="margin-top: 2.88pt; margin-bottom: 0pt; margin-left: 0.25in; text-indent: -0.25in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>4.</span><span>The Fed&rsquo;s approach to normalising monetary policy remains somewhat dovish.</span></div> <div style="margin-top: 2.88pt; margin-bottom: 0pt; margin-left: 0.19in; text-indent: -0.19in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><!--[if ppt]--><span><span>&bull;</span></span><!--[endif]--></div> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Add in President Trump&rsquo;s much vaunted tax cuts and traders see an equity market ripe for yet more all time highs.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>What then are the risks that could blow the rally off course and cause traders to rethink?</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>We judge the Fed to be a significant risk. Currently policy makers are bemused by the lack of inflationary pressure in the economy, especially given the tightness of the labour market, and although they judge its absence is likely due to transitory factors, they are never the less taking a steady and gradual approach to both normalising interest rates and reducing their balance sheet, bloated by their QE bond buying policy.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>But what is even more interesting to us, is </span><span>the Fed&rsquo;s apparent ambivalence to the impact Trump&rsquo;s tax cuts will have on the economy.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>While traders/investors clearly see a positive impact, the Fed has said both in its last FOMC policy statement from their December meeting and in the minutes from that meeting that they see little impact on the economy from the tax cuts.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>We find that assessment curious, since it is estimated to add something in the region of US$1Trillion to the budget deficit. </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Surely this should concern the Fed when there is also likely to be an inflation implication!</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The argument put forward by Trump is the tax cuts will fuel growth, ultimately that may well be the case, but that will be a delayed reaction that might ultimately </span><span>outway</span><span> the deficit increase, </span><span><span>but the near term effect will be a hit to the deficit.</span></span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Until and unless the Fed changes its mind about the impact of the tax cuts and other spending increases proposed to both infrastructure and the military, traders/investors are likely to hold sway and take this market higher.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Why then is the Fed so relaxed?</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The Fed is set to get a new Chairman soon, Yellen as the out going Chairman perhaps wants to allow the new incumbent to make up their own mind. We shall see.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span><span>But for now this market is strongly bullish and we see it making significant new highs</span></span></p> Mon, 22 Jan 2018 00:00:00 CET http://www.sevendaysahead.com/market-updates/1677/19th-january-can-the-sp-rally-extend-further.html 4th December - Can the S&P rally extend? http://www.sevendaysahead.com/market-updates/1676/4th-december-can-the-sp-rally-extend.html <h2>TECHNICALS:</h2> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>MONTHLY CHART </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>&nbsp;</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The seeds of the dramatic bull leg we have seen since 2012 were set when the market overcame the two highs from 1999 and 2007. </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The pause in 2015 was best understood as a complex continuation Head and Shoulders, suggesting, when complete ,a move up as far as 2500 or so, as a minimum.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>We are now beyond that level. </span><span>Without a fresh continuation pattern to add impetus to the trend, it is vulnerable to retracement at the very least, </span><span>if only to test the diagonal trendline support from 2008 which is far beneath the market because of the acceleration of the trend.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>DAILY CHART </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The day chart is interesting, because there has been an increase in volatility without the short-term trend being tested ...</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span><span>Short-term, the band of horizontal support 2576-2594 is critical to maintain short-term bull momentum.</span></span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <h2><span><span></span></span><span>FUNDAMENTALS:&nbsp;</span></h2> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The rally in the S&amp;P has been fuelled by a combination of strengthening US growth and a still very accommodative monetary policy. </span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Although the Fed is likely to hike again at this month&rsquo;s meeting, it will surely be another 25bp move, meaning rates have only moved up by a total of 75bp over the last twelve month period.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>By contrast, the pace of growth has moved </span><span><span>up</span></span><span> throughout the same period and now stands at a very solid 3.3% annualised.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>During this period President Trump has been pushing Congress to turn his tax reform campaign pledge into legislation and that promise has also under-pinned the rally in the S&amp;P, as a tax cut for both companies and individuals would move growth up to another level.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The Federal reserve would obviously not sit idly by, since it is estimated the initial impact would be to add US$1.5Trillion to the deficit and risk driving up inflation, meaning the Fed would most likely react by tightening monetary policy more aggressively.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>However, all of that is clearly in the price, as the market has continued to make new all time highs.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; margin-left: 0.38in; text-indent: -0.38in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> </p> <p style="language: en-GB; margin-top: 2.88pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: restrictions; punctuation-wrap: simple;"></p> <p style="language: en-GB; margin-top: 2.88pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: restrictions; punctuation-wrap: simple;"><span>So what could rock the boat and undermine what has been an impressive rally?</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Throughout the twelve months of Trump&rsquo;s period in office, there has been much talk in the media and among politicians about Trump&rsquo;s campaign team having inappropriate contacts with Russian government officials, possibly to the extent that Russia influenced the outcome of the vote.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Although President Trump has consistently denied any Russian involvement or help during his campaign, Congress nevertheless appointed a special prosecutor to investigate.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Last week, the former National security advisor to Trump admitted that he had lied and had contact with Russian officials during the campaign.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The US Congress and indeed US public and the markets, will want to know what those contacts were, what their aim was and who else in the Trump team was involved and more important, was Trump aware and/or involved himself.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Clearly if the answer to those questions was that Trump knew and was involved and gained information from the Russians that can be proved to have had an affect on the out come of the vote, his Presidency will be in trouble and Congress would likely seek to impeach him.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>We had a </span><span><span>hint</span></span><span> of how the market would react to such an outcome on Friday when the Flynn story broke, imagine the reaction if the investigation leads all the way to Trump?</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>We judge for now the market is likely to steady and bounce back. These kind of investigations take time and impeaching a President is a serious business and requires solid evidence, it seems for now that evidence has yet to be discovered, if indeed it exists.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>In summary we judge the bull trend remains in place.&nbsp;</span></p> <p style="language: en-GB; margin-top: 2.88pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: restrictions; punctuation-wrap: simple;"></p> Mon, 04 Dec 2017 00:00:00 CET http://www.sevendaysahead.com/market-updates/1676/4th-december-can-the-sp-rally-extend.html 17th November - Oil, fundamental obstacles in the way of bullish charts http://www.sevendaysahead.com/market-updates/1675/17th-november-oil-fundamental-obstacles-in-the-way-of-bullish-charts.html <h2>TECHNICALS:</h2> <p>&nbsp;</p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>MONTHLY CHART </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The oil market is characterized by two dominating features: </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <div style="margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-indent: -0.25in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>1.</span><span>The solidity of the support (just beneath $40) from the Prior High in 2000. The market has already shown the strength of that level in the bounce in 2008.</span></div> <div style="margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-indent: -0.25in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><!--[if ppt]--><span>●</span><!--[endif]--></div> <p></p> <div style="margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-indent: -0.25in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>2.</span><span>The completed H&amp;S reversal over the years 2014-2017</span><span>.</span></div> <div style="margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-indent: -0.25in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></div> <div style="margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-indent: -0.25in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>WEEKLY CHART </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The detail of that H&amp;S pattern is clear: the break up through the neckline, the push through the Prior High at 55.24.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Watch carefully to see if 55.24, a prior High support, is strong enough to re-</span><span>energise</span><span> the bulls into beginning the next leg higher.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Minimum target? About $100.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>(which is where the market spent the years 2010-2014! It is a long-established area of congestion.)</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Only a failure back through the neckline currently beneath the market at $51.5 would change this bull outlook</span><span>.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <h2>FUNDAMENTALS:</h2> <p style="margin-top: 3.36pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Until recently the rally in oil, that began in the middle of June looked set to extend much further, because Saudi Arabia and Russia both called for an extension to the output production cut introduced earlier in the year by OPEC and Russia, designed to end the oil supply glut.</span></p> <p style="margin-top: 3.36pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 3.36pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>There was additional support derived from uncertainty caused by Saudi Arabia&rsquo;s internal crackdown on corruption.</span></p> <p style="margin-top: 3.36pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 3.36pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Add in the on going tension between Saudi Arabia and Iran, the struggle to defeat ISIS and more recently Lebanon after the Lebanese Prime minister unexpectedly resigned while visiting Saudi Arabia and an oil&nbsp; price range of US$60- $80 was coming into view.</span></p> <p style="margin-top: 3.36pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 3.36pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>But the rally has halted.&nbsp; Is it just a correction, or a potential change of direction?</span></p> <p style="margin-top: 3.36pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 3.36pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>In recent days China has reported weaker growth, as the worlds 2</span><span>nd</span><span> largest economy that means a reduction in demand for many commodities, but specifically energy. But with the US economy recording solid GDP growth rates of 3% annualised, Japan enjoying it s longest sustained economic expansion in several years and the Euro zone economy too growing solidly at 2.5% year on year China&rsquo;s relative slowdown doesn&rsquo;t fully explain the sudden halt to the oil market rally.</span></p> <p></p> <p style="margin-top: 3.36pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Some other dynamic is at work ...</span></p> <p style="margin-top: 3.36pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The IEA has in the last few days issued a report forecasting a large and sustained increase in US gas and Oil production which is expected to place the US as the largest energy producer for decades to come.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The shale resources being tapped by the US is seen as outstripping both Russia&rsquo;s giant Siberian field and Saudi Arabia&rsquo;s new large oil field.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Clearly the US will not be dancing to the old OPEC tune. In the past OPEC, led by Saudi Arabia and more recently joined by Russia, have sought to control the oil price by manipulating production. Not so many years ago oil was trading at&nbsp; $100. </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The Saudi authorities, had adopted a policy of trying to drive US shale producers out of business by flooding the market and driving the oil price down beneath the costs of shale production. But US innovation has recently driven shale production costs down. So Saudi Arabia&rsquo;s current policy&nbsp; is to maximise profit&nbsp; by trying to drive the price back up through cutting production.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>But in this new era of plentiful US oil and Gas production Saudi Arabia/OPEC and Russia would need to cut </span><span><span>very deep </span></span><span>into their own output to drive the oil price significantly higher and we doubt very much they would be prepared to do that for very long.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Moreover ,the other OPEC countries have a history of cheating on their output quotas and would probably be unlikely to agree deep cuts to the production of the only resource they have to sell.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 3.36pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>We judge the oil price has likely peaked for now and a price range of US$40.&ndash; US$60 is now likely to dominate.&nbsp;</span></p> </div> Mon, 20 Nov 2017 00:00:00 CET http://www.sevendaysahead.com/market-updates/1675/17th-november-oil-fundamental-obstacles-in-the-way-of-bullish-charts.html 3rd November - Why the rate hike weakens the Pound http://www.sevendaysahead.com/market-updates/1674/3rd-november-why-the-rate-hike-weakens-the-pound.html <h2>TECHNICALS:</h2> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>MONTHLY CHART </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The most compelling chart of the Sterling against one of the majors is that against the Dollar.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>A very large multiple top has completed.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The rally back to the band of resistance from the successive lows is now testing that </span><span>reistance</span><span>.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Is there any evidence of the rally failing?</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>DAILY CHART </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>This short-term chart is </span><span>full of that evidence.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <div style="margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-indent: -0.25in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>1.</span><span>Note the cluster of </span><span>fibonacci</span><span> resistances just beneath 1.37 where the rally topped out.</span></div> <div style="margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-indent: -0.25in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><!--[if ppt]--><span>●</span><!--[endif]--></div> <div style="margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-indent: -0.25in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>2.</span><span>Note the clearly-defined bear rising wedge that is on the point of completing.</span></div> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Watch then, for a break and close beneath that rising diagonal today beneath 1.3057 or so to signal as fresh bear leg down driven by the continuation bear wedge.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <h2>FUNDAMENTALS:</h2> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The Bank of England delivered on the much-anticipated rate hike today, the first hike in 10 years. But, far from supporting the Pound, the exact opposite occurred: the Pound sold off against the Dollar and Euro. Why?</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The Bank of England has acted against a very difficult backdrop. On the one hand the economy has slowed in the last 3 or 4 quarters to an annual rate of GDP growth of just 1.5%, but inflation sits, as measured by CPI at 3.0% and rising.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>To make matters worse, productivity growth in the economy is weak and has been for a number of years. Prior to the </span><span>Brexit</span><span> vote economic expansion was sustained by a growing population driven by immigration.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Since </span><span>Brexit</span><span> immigration has slowed and if the Prime minister&rsquo;s pledge is to be believed, it will slow further. The result is unless productivity can be increased, the Bank of England believes the rate at which the economy can grow with out driving inflation has fallen from around 2.3% to the current 1.5%.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>However, although productivity is weak, so too is wage growth. The current rate of average earnings is around 2.1%, against a CPI rate of 3.0% the work force is experiencing a real pay cut. So it isn&rsquo;t pay that is fuelling inflation, it is the Pound&rsquo;s sharp devaluation since the </span><span>Brexit</span><span> vote. Assuming the Pound remains broadly around current levels, the inflationary impact of the devaluation will eventually drop out. </span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>But because there is much uncertainty about </span><span>Brexit</span><span> and what the eventual deal the UK strikes with the EU after she leaves, </span><span><span>the Pound very vulnerable to any fresh bad news and the new&nbsp; inflationary consequences of any further weakness.</span></span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The Bank of England Governor&rsquo;s tone at today&rsquo;s press conference didn&rsquo;t sound very much like the Bank is now embarked on a rate hiking cycle like the US Fed. In fact it sounded very much like the move amounted to no more than taking back the emergency 25bp cut the Bank delivered in August 2016 after the &ldquo;BREXIT&rdquo; vote to try and support confidence in the economy.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>In short, the Bank of England has done no more than clear the air after weeks and months of speculation over when and if a rate hike should indeed be delivered.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Look then, beyond the UK and assess the Euro zone, US and Japanese economies:</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <div style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span><span>&bull;</span></span><span>&nbsp;&nbsp; In the Euro zone there is a solid economic recovery taking hold with not just German, but French and the wider Euro zone GDP reports showing solid growth with moderate to low inflation, leading the ECB to moderate the terms of its QE program.</span></div> <div style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><!--[if ppt]--><span><span>&bull;</span></span><!--[endif]--></div> <div style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span><span>&bull;</span></span><span>&nbsp;&nbsp; In the US the Fed has begun to reduce is bloated balance sheet and continues to hike interest rates. Add in the corporation rate tax cut Trump finally looks like getting through Congress and an already solidly growing economy currently zipping along at an annualised rate of 3.0%, looks set to start growing faster yet.</span></div> <div style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><!--[if ppt]--><span><span>&bull;</span></span><!--[endif]--></div> <div style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span><span>&bull;</span></span><span>&nbsp;&nbsp; In Japan. Abe has just been re-elected and will continue to pursue yet more vigorous expansionary policies, aimed at driving up inflation and strengthening growth.</span></div> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Set against the UK&rsquo;s anaemic economic performance it isn&rsquo;t difficult to see Sterling trading much lower. And there is domestic politics: the government has no overall majority, is being rocked by a sex scandal with a hard-left led labour opposition waiting a chance to take power; the mix couldn&rsquo;t be worse.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>In summary, today&rsquo;s rate hike offered Sterling no support and the other dynamics mention will drive it lower.&nbsp;</span></p> Mon, 06 Nov 2017 00:00:00 CET http://www.sevendaysahead.com/market-updates/1674/3rd-november-why-the-rate-hike-weakens-the-pound.html 27th October - This looks like the Dollar breakout http://www.sevendaysahead.com/market-updates/1673/27th-october-this-looks-like-the-dollar-breakout.html <h2>TECHNICALS:</h2> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>MONTHLY CHART </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The multiple Top in the Euro completed some time ago at the beginning of 10265.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The market has moved sideways since then, save for a fast retracement back up to test the successive horizontal resistances around 1.20.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Because the resistance was rather diffuse, there was significant penetration up to the 1,20.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>But the last two months have seen a fall &ndash; </span><span>has the market turned against the Euro as we expect?</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>DAILY CHART </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>This short-term chart is </span><span>very encouraging for the Euro bears</span><span>.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>There are two nested bear H&amp;S reversal patterns : one completed, one on the point of completion.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The minimum target for H&amp;S1 of 1.16 is almost achieved.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>But the minimum target for H&amp;S2 is </span><span>very much lower </span><span>around 1.125.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span><span>The Euro bears and Dollar bulls are in charge.&nbsp;</span></span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <h2><br />FUNDAMENTALS:</h2> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The Dollar has been on a weakening trend against the Euro since early January as traders discounted the likelihood of Trump&rsquo;s campaign promises ever being implemented.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>As a steady stream of government officials left Trump&rsquo;s White House and the Russia scandal grew, the Dollar fell out of favour as traders turned their attention to the Euro zone and the strengthening economic recovery taking root there.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>But sentiment has shifted again. The US Federal Reserve has finally announced the start of its own balance sheet reduction and surprised observers by announcing that it would continue hiking rates, contradicting its own earlier and much-repeated policy guidance of leaving rates alone. At first, as policy makers began to unwind their massive emergency bond holdings, the policy shift offered the Dollar little or no support. </span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Yet, in recent weeks Trump has resurrected his tax cutting pledge and in recent days won a crucial vote in the Senate making that promise look likely to become government policy.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>This halted the Dollar&rsquo;s decline. A rally still looked unlikely and a period of range trading was beginning to look the most likely outcome.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>That was before the ECB stepped in. Having deliberated at some length what to do with their own QE program, ECB President </span><span>Draghi</span><span> announced at this week&rsquo;s press conference that the QE program would extend to September 2018, but with a taper.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The ECB&rsquo;s new Bond buying commitment would be reduced to E30 </span><span>Bn</span><span> a month and although this represents a large reduction, it is considered dovish due to the program&rsquo;s significant extension.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The impact of these three developments on the Dollar has resulted in a sharp turn around against the Euro and other major currencies. </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Trump&rsquo;s plan is to not only cut tax, but also spend big on renewing infrastructure and expanding US military capability, these policies will not only fuel growth, which is currently running at a more than respectable annualised 3.0%, but in the medium term at least, would expand the US budget deficit.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>In such an environment the Fed would hardly sit idly by, and would likely adopt a more aggressive policy stance. The Fed is already concerned that a reasonably tight labour market will ultimately lead to higher inflation. If Trump succeeds in getting his tax cut into law and his other spending policies through, faster economic growth would require yet more labour and in an already tight labour market salaries/wages would surely begin to rise placing upward pressure on inflation.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>We think the Dollar has experienced a turning point. We expect the Dollar to rally significantly from here against the Euro.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Note in addition that the ECB has publicly stated on several occasions that that it doesn&rsquo;t want to see strengthen much further from here, if at all. </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>It seems the discarded Trump trade is back!</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <h2></h2> Mon, 30 Oct 2017 00:00:00 CET http://www.sevendaysahead.com/market-updates/1673/27th-october-this-looks-like-the-dollar-breakout.html 19th October - Can Sterling Euro hit par http://www.sevendaysahead.com/market-updates/1672/19th-october-can-sterling-euro-hit-par.html <h2>TECHNICALS:</h2> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>MONTHLY CHART </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>&nbsp;</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The structure is clear: having broken out of the bear channel the market has some bull impetus that may take it to the band of Prior Highs 0.9412- 0.9803 &ndash; so, close to parity</span><span>.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>But there is no compelling long-term pattern driving that move &ndash; yet..</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Is there a shorter-term bear pattern for Sterling?</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>DAILY CHART </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The double failure at 0.9306-0.9365 was sufficient to send the market down to the support from the Prior High at 0.88.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>There has been a bounce. </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>But as yet there is no short-term pattern suggesting very much stronger Euro and a weaker Sterling.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <h2>FUNDAMENTALS:</h2> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The Pound&rsquo;s value against the Euro; Sterling/Euro, has become a barometer for BREXIT negotiations.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Since the referendum the Pound has suffered a serious devaluation against the other major currencies, especially the Euro, but has the Pound&rsquo;s weakness run its course or could it weaken further?</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>To make any sort of judgement it is important to analyse the &ldquo;BREXIT&rdquo; negotiations and the potential outcomes.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The UK government hopes for an orderly exit from the EU with a two year transition period followed by a comprehensive free trade agreement that gives the EU access to our market and ours to theirs in a way that is as close as possible to current arrangements, but negotiations have become bogged down by the so called &lsquo;Divorce&rsquo; bill.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>If the two sides fail to find enough common ground over what is a fair and reasonable payment for the UK to make to the EU in respect of liabilities it entered into while a member, the EU will not engage in talks about either a transition period or a trade deal.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The result would mean the UK would have to fall back on WTO trade tariffs which are less advantageous than its current membership of the EU single market. And although the UK intends to negotiate new free trade deals with other non-EU countries, these cannot be agreed while the UK remains an EU member and even when the UK has exited will take several years to agree.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>&nbsp;</span><span>If the UK manages to reach an accord with the EU and agrees a transition period and negotiates a free trade deal where all are seamless, the Pound will probably recover a good deal of its losses. That is because the damage done to the UK economy and specifically the City of London will be minimal, as companies would be handed a playing field they are familiar with, allowing business as usual.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>On the other hand, if no deals are agreed and WTO tariffs become the fall back position, some businesses from the City of London and some manufacturing businesses will relocate to the EU causing a loss of key jobs and further harming economic activity. Clearly the impact on Sterling would be very negative.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>And although in time the economy would probably recover as new trade deals were negotiated the short/medium term would prove very uncomfortable indeed. For currency markets traders are mainly short-term focussed, meaning a so-called &lsquo;hard&rsquo; BREXIT would see Sterling sell off against the Euro as inward investment dried up and the UK&rsquo;s Sovereign credit rating was down graded further.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>But until we reach March 2019, the process is in a constant state of flux. Traders are reacting to the latest news leak. As the deadline draws nearer traders will begin to form an opinion about the most likely outcome. If it is to be a &lsquo;hard&rsquo; BREXIT they will sell the Pound.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Given the current log-jam in the negotiations a &lsquo;Hard&rsquo; BREXIT is becoming increasingly likely. The EU wants the UK to agree a financial settlement without it knowing what benefits to expect from a new trade agreement. UK government&rsquo;s stance is that nothing is agreed until everything is agreed. So the two sides look poles apart. If a compromise cannot soon be found we expect Sterling to renew its slide against the Euro towards parity.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>&nbsp;</span></p> Mon, 23 Oct 2017 00:00:00 CEST http://www.sevendaysahead.com/market-updates/1672/19th-october-can-sterling-euro-hit-par.html 14th October - the Nikkei's strength is set to continue http://www.sevendaysahead.com/market-updates/1671/14th-october-the-nikkeis-strength-is-set-to-continue.html <h2>TECHNICALS:</h2> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>MONTHLY CHART</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> </p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"><span>The market is on the point of overcoming two prior highs: from 2007 and another from 2015.</span></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline; mso-line-break-override: none; punctuation-wrap: hanging;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>WEEKLY CHART </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>&nbsp;</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The engine of progress for the Nikkei has been the completion (in September) of a complex Head and shoulders continuation pattern that is set to drive the market </span><span><span>a good deal further still.</span></span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The minimum move implied by the pattern? 24500</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Note too the push up through the Prior High at 20950.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>That level should now serve as support&nbsp; on any set-backs and thereby ratchet the market </span><span><span>higher still</span></span><span>.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <h2>FUNDAMENTALS:</h2> <p style="margin-top: 2.64pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The rally in the Nikkei index over recent weeks has drawn support from several factors:</span></p> <p style="margin-top: 2.64pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <div style="margin-top: 2.64pt; margin-bottom: 0pt; margin-left: 0.19in; text-indent: -0.19in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span><span>&bull;</span></span><span>A decline in risk aversion as the war of words between North Korea and the US has not only failed to produce conflict, but has gradually reduced in volume</span></div> <div style="margin-top: 2.64pt; margin-bottom: 0pt; margin-left: 0.19in; text-indent: -0.19in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span><span>&bull;</span></span><span>Inflation has nudged higher although still low</span></div> <div style="margin-top: 2.64pt; margin-bottom: 0pt; margin-left: 0.19in; text-indent: -0.19in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span><span>&bull;</span></span><span>Economic activity remains buoyant.</span></div> <div style="margin-top: 2.64pt; margin-bottom: 0pt; margin-left: 0.19in; text-indent: -0.19in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span><span>&bull;</span></span><span>The Yen has weakened against the Dollar,</span></div> <div style="margin-top: 2.64pt; margin-bottom: 0pt; margin-left: 0.19in; text-indent: -0.19in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><!--[if ppt]--><span><span>&bull;</span></span><!--[endif]--></div> <p style="margin-top: 2.64pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The decline in risk aversion is important because of the proximity of Japan, a key US regional ally, to its neighbour North Korea and therefore a likely target in any conflict between North Korea and the US.</span></p> <p style="margin-top: 2.64pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.64pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>&nbsp;Now tensions have eased, investors have turned their attention towards growth and according to a recent IMF assessment of the global economy, growth looks set for its best performance in all the major economic areas, including Japan for several years.</span></p> <p style="margin-top: 2.64pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.64pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Any increase in inflation no matter how small, is a measure of how successful the Bank of Japan&rsquo;s monetary policy is proving to fuel growth. But because progress towards the inflation target is proving painfully slow, the Bank of Japan must maintain its exceptionally loose policy settings and bond buying program which has a pass through impact on stocks.</span></p> <p style="margin-top: 2.64pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.64pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p></p> <p style="margin-top: 2.64pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>But probably the major factor in the Nikkei&rsquo;s rally is the weakness of the Yen against the Dollar:</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; margin-left: 0in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The close relationship between the Yen and the Nikkei has been a long-established. </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; margin-left: 0in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; margin-left: 0in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>As a major exporting economy, a weak Yen is seen as a key ingredient in promoting economic growth and it is certainly no coincidence that as the Yen rejected the highs against the Dollar in early September, the Nikkei simultaneously rejected the lows.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; margin-left: 0in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; margin-left: 0in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>How much further can the Yen weaken and the Nikkei rally? That rather depends on events in the US.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; margin-left: 0in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; margin-left: 0in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The Japanese authorities have their policy path firmly set as a loose monetary policy designed to drive up inflation and thereby fuel growth.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; margin-left: 0in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; margin-left: 0in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>In the US the situation is less clear. Since coming to the Presidency Trump has struggled to get any of his key policies in play. During the election campaign he promised to cut tax, spend on infrastructure renewal and increase the armed forces. But to date he hasn&rsquo;t managed any of these.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; margin-left: 0in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; margin-left: 0in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Recently he has restated his intension to cut corporation tax. The US Federal Reserve has in response embarked upon a course of balance sheet reduction and recently decided that interest rates do need to simultaneously rise further. In response traders have taken another bullish look at the Dollar and if Trump does succeed in pushing through his policies, which would grow the budget deficit and fuel inflation, thereby prompting the Fed to become yet more aggressive, the Dollar would surely rally against the other majors including the Yen.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; margin-left: 0in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.64pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; margin-left: 0in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>For the Nikkei this would serve to send the stock market higher still. Coupled with a bullish sentiment that would come from the US as a result of Trump&rsquo;s pro-growth policies we judge the Nikkei can extend the current rally further.&nbsp;</span></p> <p style="margin-top: 2.64pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> Mon, 16 Oct 2017 00:00:00 CEST http://www.sevendaysahead.com/market-updates/1671/14th-october-the-nikkeis-strength-is-set-to-continue.html 6th October - Watch Cable- it is set to weaken a lot further http://www.sevendaysahead.com/market-updates/1670/6th-october-watch-cable-it-is-set-to-weaken-a-lot-further.html <h2>TECHNICALS:</h2> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>MONTHLY CHART </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>&nbsp;</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The drama of this chart is difficult to exaggerate.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The multiple top established since the mid-eighties is bearing down on the market.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The spirited rally from the initial lows established by the onset of </span><span>Brexit</span><span> looks to be no more than a dead-cat bounce.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p><span>We see little upside from these levels given the succession of horizontal resistances from Prior Lows.<br /><br /></span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>WEEKLY CHART </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>This detail of the rally back from the post-referendum low found a coincidence of Fibonacci resistance close to Prior Low (1.3833)&nbsp; and diagonal resistance&hellip;</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p>&nbsp;</p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Cautious bears will want to wait for a conclusive breakdown through the very well-established rising diagonal at 1.30&hellip;</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <h2>FUNDAMENTALS:</h2> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Since the BREXIT referendum result Sterling has endured something of a roller coaster ride.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>There was an initial sell-off after the referendum result was known, then a further sell-off after May&rsquo;s Lancaster House speech earlier this year which seemed to point to a so called &lsquo;hard&rsquo; BREXIT. There followed a recovery following Prime minister&rsquo;s recent speech in Florence that sounded a more conciliatory tone on issues that have been blocking progress on the so-called divorce settlement such as:</span></p> <div style="margin-top: 2.88pt; margin-bottom: 0pt; margin-left: 0.19in; text-indent: -0.19in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span><span>&bull;</span></span><span>The sum the EU thinks the UK needs to pay to honour past agreed obligations,</span></div> <div style="margin-top: 2.88pt; margin-bottom: 0pt; margin-left: 0.19in; text-indent: -0.19in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span><span>&bull;</span></span><span>The rights of EU Citizens living in the UK after the UK leaves the EU, and </span></div> <div style="margin-top: 2.88pt; margin-bottom: 0pt; margin-left: 0.19in; text-indent: -0.19in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span><span>&bull;</span></span><span>The boarder between Northern Ireland and the Irish Republic.</span></div> <div style="margin-top: 2.88pt; margin-bottom: 0pt; margin-left: 0.19in; text-indent: -0.19in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><!--[if ppt]--><span><span>&bull;</span></span><!--[endif]--></div> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Following on from that speech all eyes were eagerly trained on the Conservative party conference held in Manchester this week. The expectation was that May would use her key note speech to reassert her authority over the party and her cabinet. This was to be achieved by laying out her vision for the government&rsquo;s domestic agenda. It was to be a political re-launch after the disastrous general election campaign in June when an opinion poll lead of 20 points not only vanished, but she lost the ruling Conservative party&rsquo;s overall majority in the House of Commons.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>However, the conference has not gone at all according to plan. The foreign Secretary; Boris Johnson has been airing his own views on &ldquo;BREXIT&rdquo; which appear contrary to the governments adopted line, that had led to calls for May to sack him and show she was still in control of her government.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p>&nbsp;</p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Yet that turned out to be the least of her worries.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>In her key note address to conference on Wednesday, it is fair to say the wheels well and truly came off.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>First she was presented with a P45 (notice of termination of employment) by a prankster, next she was plagued by a persistent coughing fit, and finally some of the platform behind her fell apart. Some might say where is the drama, but taken together with the general perception of a poor leader with bad political judgement, these events seemed to sum up her troubled period in office.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The result is Conservative MP&rsquo;s are now openly talking about challenging her leadership, or forcing her to resign as they see the party being damaged.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>From a market perspective these events serve to undermine Sterling. The EU exit negotiations are already fraught with delay. If the Conservatives force a leadership election and thereby install a new Prime minister, EU exit negotiations will lose yet more precious time while the new PM rolls out their vision of what BREXIT should look like. Worse still, Labour and Jeremy Corbyn could be in government.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Add in Trump&rsquo;s renewed attempt to introduce tax cuts in the US which is seen as pro-growth and Sterling/Dollar looks on the brink of a major move down. Against the Euro the Pound looks weak too, but maybe the crisis in Spain and the ECB&rsquo;s intention to leave its QE program largely as is until well into 2018, might just cushion the fall, but not by much.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>And even if the PM isn&rsquo;t removed in the immediate future, talk of her removal and Conservative party discontent will continue to weigh on the currency and we judge it is set for a period of renewed serious weakness.&nbsp;</span></p> <p><span>&nbsp;</span></p> Mon, 09 Oct 2017 00:00:00 CEST http://www.sevendaysahead.com/market-updates/1670/6th-october-watch-cable-it-is-set-to-weaken-a-lot-further.html 29th September - The bears are weighing on US Bonds http://www.sevendaysahead.com/market-updates/1669/29th-september-the-bears-are-weighing-on-us-bonds.html <h2>TECHNICALS:</h2> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>MONTHLY CHART</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span></span><span>The range is clear. There is no breakdown yet. Bears must wait for a push beneath 122.71 before gaining certainty.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>WEEKLY CHART </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The detail of the continuation chart reveals a critical diagonal resistance (prior support) that has driven the market back down.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p><span>The bears look to be in charge (in the medium-term) for a likely retest of the 122.71 low</span></p> <h2>FUNDAMENTALS:</h2> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Since the financial crisis US Bonds have been in demand, not least due to the Fed having bought trillions of them during its QE program, but also because US inflation has remained benign and until the Fed began to hike last December, interest rates were close to zero.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Even now inflation remains benign and interest rates are still very low by historic standards, but the Fed has changed course. At last week&rsquo;s FOMC meeting the Fed made it known it was set to begin reducing its boated balance sheet by not re-investing all the proceeds from its bond holdings as they mature, but in truth that was broadly expected.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>What wasn&rsquo;t expected was the Fed&rsquo;s announcement that interest rates would likely rise again this year with additional increases next year. When the Fed first began preparing the market for a balance sheet reduction program, its stance on interest rates was that they needn&rsquo;t rise during the initial stages of the balance sheet reduction program.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>One of the reasons was benign inflation. But more recently the Fed has adopted the view that benign inflation is likely transitory and will likely be pushed higher by the tightening labour market.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>In her speech this week Yellen spoke of inflation and the need for policy to be adjusted, but that adjustment mustn&rsquo;t now be too gradual; another departure from the Fed&rsquo;s previously long held position.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>But there is another factor at play that determines the price of US Bonds.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>When Donald Trump was first elected President there was much talk and excitement in the financial markets about the so called Trump trade. As part of his policy platform Trump wanted to renew crumbling US bridges, renovate dilapidated school and Hospital buildings, rebuild the military and at the same time cut corporate and personal tax. </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The reaction in markets was a Dollar rally as traders judged the result would be a growing budget deficit, rising inflation and a more active Fed, but Trump so far has been unable to deliver, leading traders to un-wind their long Dollar trades, as until recently, the Fed stuck to its familiar approach to gradual monetary policy adjustments.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>H</span><span>owever, just as the Fed has decided the time is now right to reduce its balance sheet and continue raising interest rates, Trump has resurrected his tax reduction plan and announced his intention to reduce US Corporation tax.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The impact on US T notes has been clear to see; they have started to sell off. </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>With the Fed no longer holding the market up at the same time as Trump potentially begins growing the budget deficit, Bond yields will surely rise.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>If Trump was planning to cut tax, and at the same time cut spending, the market would be relaxed. But that isn&rsquo;t his plan. Can he get his policy into play? That is the question.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The coincidence of a more aggressive Fed and an administration focused on cutting tax while growing spending is a negative development&nbsp; for bonds. This market could be on the verge of the long-anticipated Bear market.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The ball is in Trump&rsquo;s court!</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> Mon, 02 Oct 2017 00:00:00 CEST http://www.sevendaysahead.com/market-updates/1669/29th-september-the-bears-are-weighing-on-us-bonds.html 21st September - Wait and watch for a Dollar break http://www.sevendaysahead.com/market-updates/1668/21st-september-wait-and-watch-for-a-dollar-break.html <h2>TECHNICALS:</h2> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Dollar Euro Spot monthly chart</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The penetration of the successive horizontal resistances fro Prior Lows has been impressive&nbsp; - but the market hasn&rsquo;t escaped the clutches of those resistances yet...</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The balking at the 1.2040 level is clear...</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Dollar Euro Spot weekly chart</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The hesitation&nbsp; at 1.2040 is clearly a congestion area, no doubt.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>But the Euro bulls will point to the massive support for the Euro beneath the market from the Triple Bottom reversal already in place!</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The horizontals from the Highs at 1.17&nbsp; and 1.16 will be </span><span>powerful support on any pull-back.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>So wait for the Dollar to break out of the band 1.16-1.21 before taking a stance.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <h2>FUNDAMENTALS:</h2> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The Dollar has had something of a roller coaster ride over the past 10 months or so. When it looked like Trump was set to become President in the final run up to the US Presidential election, the Dollar enjoyed a strong rally against the other major currencies, especially the Euro.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>At that time the ECB was fully engaged in its own QE program as the focus for the ECB remained driving inflation up towards its 2% target and trying to turn a fledgling recovery into a self-sustaining one.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>By contrast, traders and investors looked at the US and saw a President with pro-growth policies designed to:</span></p> <div style="margin-top: 2.88pt; margin-bottom: 0pt; margin-left: 0.19in; text-indent: -0.19in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span><span>&bull;</span></span><span> rebuild decaying infrastructure, </span></div> <div style="margin-top: 2.88pt; margin-bottom: 0pt; margin-left: 0.19in; text-indent: -0.19in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span><span>&bull;</span></span><span>invest in hospitals and school buildings, and </span></div> <div style="margin-top: 2.88pt; margin-bottom: 0pt; margin-left: 0.19in; text-indent: -0.19in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span><span>&bull;</span></span><span>expand the military. </span></div> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>All of which would have meant an increase in the budget deficit and a likely inflationary spurt, requiring the Fed to become more aggressive with monetary policy.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>In the event, President Trump has struggled to get his policy agenda into play, as he has been troubled by a scandal centred on whether or not his campaign team had inappropriate contacts with Russian government officials, which many claim helped win him the election.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>As a result traders lost patience and the Dollar bull trade faded and unwound, allowing the Fed to stick with its policy of slow and gradual adjustments to interest rates.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>To make matters worse for the Dollar, the Euro economy has finally begun to expand at a rate sufficient to allow the ECB to begin reducing its QE Bond purchases and although a decision is yet to be made, action is anticipated in the final quarter of this year.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Back to the US. The Fed recently made it known that policy makers want to begin the process of reducing the Fed&rsquo;s bloated balance sheet, but they had also indicated that interest rates would likely remain steady during the initial phase of balance sheet reduction due to the unexpectedly benign inflation environment, despite a robust labour market.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Going into yesterday&rsquo;s FOMC policy meeting market consensus was broadly centred on the Fed announcing the start of balance sheet reduction, but at the same time indicating interest rates were likely to remain steady throughout the year.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>That wasn&rsquo;t the message the Fed delivered yesterday! The message was that the Fed is set to begin reducing its Bond holdings from October, as anticipated, but the surprise was that interest rates would likely rise again this year, probably in December and that they would continue to nudge rates higher next year, along side balance sheet reduction.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The impact on the Dollar was clear to see, it rallied against the Euro, but can it hold and extend those gains? The Fed acknowledged yesterday inflation remains surprisingly benign, but justified its stance by claiming that was likely to prove transitory, but what if inflation remains subdued, and Trump remains embroiled in scandal unable to get his policies in place, and the Euro zone economy continues to move up through the gears prompting the ECB to begin scaling back its own QE program?</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>In short, we judge the outlook for the Dollar, especially against the Euro is no clearer, and will likely remain that way until Trump gets his policy agenda in play and or the Russia scandal is resolved.&nbsp;</span></p> Mon, 25 Sep 2017 00:00:00 CEST http://www.sevendaysahead.com/market-updates/1668/21st-september-wait-and-watch-for-a-dollar-break.html 8th September - How far can Gold go? http://www.sevendaysahead.com/market-updates/1667/8th-september-how-far-can-gold-go.html <h2>TECHNICALS:</h2> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Gold futures weekly continuation chart </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The move to the top of the trading range is clear.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>But the bulls will need a breakup through the 1380.90 level to be convinced that the bullishness has another leg to go.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Gold Dec 2017 daily Futures chart</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>This is a powerful short-term move up through a well-established horizontal resistance fro the two Prior Highs.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>On any pull-back expect 1307 to be powerful support.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <h2>FUNDAMENTALS:</h2> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Much of the value of Gold </span><span>liesd</span><span> in its role as the ultimate safe haven or hedge in times of extreme economic dislocation, distress and recession, but also at times of heightened geopolitical tension.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>As the turmoil caused by the financial crisis subsided and the major economies returned to economic growth, Gold sold off from the all time highs of around US$2,000 and settled into a broad trading range.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Earlier this year, we expected Gold to drift lower, as the Federal Reserve began to reverse its exceptionally accommodative monetary policy and growth began to pick up in the Euro zone, leading to speculation that the ECB too would start to taper its own QE policy.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>But in recent months those considerations have taken a back seat. The regime in North Korea has pushed on with its program of developing a range of missiles that threaten not only regional US interests and her allies, but also, it seems, the US mainland itself.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>More worrying still, the North Koreans have also developed their nuclear capability , sooner than anticipated. In recent days they have tested a device thought&nbsp; to be a Hydrogen bomb that they claim can be fitted to an ICBM capable of reaching most of the mainland US.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>This has understandably caused great concern in the US. The US and UN have already applied economic sanctions on North Korea in an attempt to force them to abandon their pursuit of developing these weapons, but to no avail.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The North Koreans are a very poor state, national GDP is around a negligibleUS28.0B and their people are at famine levels. But the Regime cares more about its own survival than feeding the Korean people.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The US has responded to the new heightened threat via President Trump&rsquo;s rhetoric about unleashing &ldquo;fire and fury&rdquo; etc., which is a departure from the tone of previous US Presidents.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Although Trump has said all options, including military, are on the table, launching a pre-emptive strike against the North is fraught with all sorts of dangers. The North would almost certainly attack the south, causing massive loss of life, and would most likely attack Japan. If their claims about their nuclear capabilities are true they drop a nuclear weapon on a major US city.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The basic question here is this; is Kim prepared to commit suicide and risk an over whelming US response that would effectively wipe out North Korea, or is he grandstanding for not only domestic, but foreign consumption designed to secure his Regime?</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>However, if Kim is serious, and he has developed his weapons of mass destruction at a much-accelerated pace compared to his father, and thinks he can attack the US and somehow survive, the consequences do not bear thinking about. He would surely hit his Southern neighbour and Japan and the fall out would not only be a humanitarian disaster, but an economic one too, sending the US and global economy into a deep recession.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Although we think the risk of Kim launching an attack is not as great as his rhetoric sounds, we are equally concerned about Trump thinking he can attack Kim, which would likely miss some key installations and provoke Kim into retaliating. </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>In summary, although we think the risk of a nuclear exchange is still small, we judge the consequences of one occurring argue in favour of Gold making further gains and if the worst happens the market would make significant new highs.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>&nbsp;</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The road ahead looks bumpy indeed!&nbsp; &nbsp;</span></p> Mon, 11 Sep 2017 00:00:00 CEST http://www.sevendaysahead.com/market-updates/1667/8th-september-how-far-can-gold-go.html 13th June - General Election review http://www.sevendaysahead.com/market-updates/1666/13th-june-general-election-review.html <h2>TECHNICALS:</h2> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Dollar Sterling</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The market has fallen over the last three years, but since the first impact of the </span><span>Brexit</span><span> referendum results Sterling has rallied.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The result of the recent General&nbsp; Election saw a sharp sell-off of Sterling. But in the wider context, the size of the move can be seen to have been </span><span>negligable</span><span>.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Most chartists will have seen the rally before the election as a retracement&nbsp; within a very bearish scenario : the successive lows above the market have created a horizontal band of resistance between 1.35-1.41 that looks formidable.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The closer the market edges to the 1.35 level, the better the selling </span><span>oppurtunity</span><span>. But the election may have ensured that the market gets no closer to 1.35 before selling off</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>FTSE JUNE 2017 Weekly Futures chart</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>After the election the FTSE remains powerfully bullish like most World stock markets.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The broad picture is of a market that has overcome the Prior Highs of 1999 and 2007 and when it has shown recent weakness has found those levels to be tremendous support and bounced.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>After the election there was a small sell-off and then an immediate bounce further encouraging the bulls.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <h2>FUNDAMENTALS:</h2> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The snap General election called by Theresa May produced an outcome very few saw coming. Even during polling day, Thursday June 8</span><span>th</span><span>, both Labour and Conservatives were expecting the Prime minister to secure a larger majority, but as we know she didn&rsquo;t. The result was a hung Parliament as no one party is able on its own to command a majority.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>&nbsp;</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>However as the leader of the party that won the most seats and gained the most votes, Mrs May has remained PM and is forming a minority government with the support of the 10 DUP MPs.&nbsp; What does all of this mean for the markets and more importantly what does it mean for BREXIT and will Mrs May remain PM over the course of the negotiations?</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>&nbsp;</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The answer to the last question is unknown. As the leader of a minority government she could lose a no confidence vote at any time and if the leader of the opposition Labour party failed to construct a coalition with an overall majority there would have to be a fresh General Election.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>&nbsp;</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>All of this adds to the already existing uncertainty surrounding BREXIT and we have seen already how the currency reacts to that: it once again sold off.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>&nbsp;</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Before the election Mrs May was vague about her negotiating stance, other than to state no deal is better than a bad deal, but in her now weakened position can she still maintain that stance? We don&rsquo;t think so.</span></p> <p></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>&nbsp;</span><span>What we think the election result conveyed to politicians is: yes the UK wants out of the EU, both Conservative and Labour manifestos stated that commitment, but the PM was seeking to leave the single market, the customs union and end all free movement of people from the EU to the UK.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>&nbsp;</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>By delivering a hung Parliament the British people appear to have rejected that stance, but if access to the single market is to be retained, then free movement and a contribution to the EU budget goes with it and that negates the whole rationale for leaving the EU and leaves the UK without a voice in decision-making.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>&nbsp;</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>We think the Pound is in for a period of volatility since negotiations will likely need to be referred to Parliament. As a result the economy is likely to remain weak as business either cancels or postpones investment due to increased uncertainty.&nbsp; That has implications for monetary policy and probably means the Bank of England facing the need to keep policy at current low levels for an extended period.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>&nbsp;</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>As for the UK Gilt, a weaker economy will mean lower tax revenues and either higher taxes which will be negative for already weak growth, or public spending cuts that are unlikely to pass through the current parliament, or more, likely increased borrowing. That is negative for the Gilt. And if inflation continues to rise due to Sterling weakness, doubly negative for Gilts.&nbsp; And yet, and yet, if the Bank maintains its current QE policy due to economic weakness the downside for gilts could be limited.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>&nbsp;</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Turning to stocks, the FTSE could be a beneficiary here as a weak Sterling inflates the value of overseas companies listing on the London exchange, meaning a weaker Pound would likely continue to support the FTSE, at least medium term.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>&nbsp;</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>In summary, the position the UK is in now is very different to where it was just a few days ago. </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>&nbsp;</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The UK government has moved from a position of strength with a working overall majority in the House of commons to a position of fragility and weakness where the Prime minister may very well find herself continually reporting to parliament and seeking approval from parliament as the &ldquo;BREXIT&rdquo; negotiations unfold. That will probably lead to an even more protracted negotiation and heightened uncertainty. Something Mrs May said she wanted to avoid during &ldquo;BREXIT&rdquo; negotiation.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>&nbsp;</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The road ahead looks bumpy indeed!&nbsp; &nbsp;</span></p> Mon, 19 Jun 2017 00:00:00 CEST http://www.sevendaysahead.com/market-updates/1666/13th-june-general-election-review.html 7th April - Can the US T Note go still higher? http://www.sevendaysahead.com/market-updates/1665/7th-april-can-the-us-t-note-go-still-higher.html <h2>TECHNICALS:</h2> <p>US TNote 7-10yr Total Return</p> <p>index</p> <p>Looking at the index over the</p> <p>last twenty years it is</p> <p>remarkable how well-defined</p> <p>the bull channel has been.</p> <p>Equally, it is clear that that</p> <p>channel has broken down.</p> <p>Note too, that the first</p> <p>horizontal support has been</p> <p>broken</p> <p>US Treasury 10 Yr T Note</p> <p>monthly yield chart</p> <p>This is not so clear.</p> <p>The market has certainly</p> <p>bounced off the same 1.4% yield</p> <p>level twice.</p> <p>But the recent Prior High yield of</p> <p>3% needs to be overcome the</p> <p>bond bears would be convinced</p> <p>that a yield bottom was truly in</p> <p>place and they were in charge</p> <p>&nbsp;</p> <h2>FUNDAMENTALS:</h2> <p>As the reality dawned in November 2016 that Donald Trump would be the next US</p> <p>President, markets began taking his campaign rhetoric seriously and what it would</p> <p>mean for the US economy, assuming campaign sound bites became policy.</p> <p>It didn&rsquo;t take long before traders drew the conclusion that Trump&rsquo;s plans to spend</p> <p>heavily on infrastructure renewal, increase defence spending and cut tax would</p> <p>pump up the US economy while at the same time threatening to drive up inflation.</p> <p>The impact on markets was clear:</p> <p>US and global stocks rallied</p> <p>US Notes sold off</p> <p>And although the rally in equity markets lasted throughout the first quarter of this</p> <p>year, the sell-off in T Notes bottomed in mid December 2016, leaving that market in a</p> <p>clearly defined trading range. But in recent weeks T Notes have begun testing the</p> <p>top of the range, while the rally in equities seems to have stalled. Why?</p> <p>The answer is that Trump&rsquo;s first attempt to get a key piece of policy passed through</p> <p>Congress and into law failed. The inability to repeal and replace &ldquo;Obama care&rdquo; left</p> <p>traders wondering if that might prove to be the fate of much of Trump&rsquo;s other policy</p> <p>objectives.</p> <p>If that was to be the outcome, then the economy would probably plod along at its</p> <p>current moderate pace and inflation would remain relatively benign, meaning a</p> <p>relaxed Fed.</p> <p>That assessment didn&rsquo;t last long. The Trump Presidency remains very much in the early</p> <p>days, and it is far too soon to judge how successful he will be. In fact, White House aides</p> <p>have been in talks with Congressional leaders only this week in an attempt to revive</p> <p>Trump&rsquo;s healthcare plans.</p> <p>So is the T Note about to beak out of the trading range to the upside?</p> <p>We don&rsquo;t think so.</p> <p>T Notes have held in as well as they have because of the degree of uncertainty about</p> <p>Trump&rsquo;s ability to progress his policy agenda, especially when he spent much of his first</p> <p>few weeks in office pre-occupied with the media and so called fake-news.</p> <p>But because he is a businessman turned politician he is learning that politics is done</p> <p>differently to business and recently he is beginning to sound more like the US President</p> <p>than a property mogul.</p> <p>Our view is Trump will push through his agenda. His plans for infrastructure spending on</p> <p>roads, bridges, tunnels schools and hospitals could be in the region of US$1.Tn. Given</p> <p>his intention to bring jobs back to the US, nearly all of that money will be spent in the US</p> <p>and US Companies will be big beneficiaries which must be stock market bullish.</p> <p>Since that spending will be financed through higher borrowing, the Fed will soon have to</p> <p>shift up a few policy gears and become more hawkish as inflation rears its head and that</p> <p>will be T Note bearish.</p> <p>Once traders draw that conclusion, which we judge they soon will, the Trump trade will be</p> <p>back on and T Notes and Bonds generally will be making new lows in price terms and</p> <p>higher highs in yield terms.</p> <p>&nbsp;</p> Mon, 10 Apr 2017 00:00:00 CEST http://www.sevendaysahead.com/market-updates/1665/7th-april-can-the-us-t-note-go-still-higher.html 23rd March - How weak is the Dollar? http://www.sevendaysahead.com/market-updates/1664/23rd-march-how-weak-is-the-dollar.html <h2>TECHNICALS:</h2> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Dollar Euro monthly&nbsp; bar chart </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Within the long-term weakening channel of the Dollar, the </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>price action since 2004 has looked like a top formation for the Euro with the succession of lows around 1.20 looking&nbsp; like formidable resistance to any Euro rallies.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>One result of that resistance has been the creation of a possible bear continuation Triangle beneath 1.20 which, if completed, would drive the Euro weaker and weaker - or so the Dollar bulls thought. </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>But the Triangle hasn't&nbsp; convincingly completed. Look more closely- at the weekly </span><span>chart.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Dollar Euro weekly bar chart</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>In the weekly chart, the dithering&nbsp; and general reluctance to sell-off through the lower diagonal of the possible Triangle is clear.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Indeed, there is a possible Reverse Head and Shoulders in the making!</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>That could push the market up as far as 1.13...</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Certainly back into the trading range of the last two years.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Even so, the market would have to break 1.20 on the upside to be at all convincing about a sustained&nbsp; and continued weakening of the Dollar.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <h2>FUNDAMENTALS:</h2> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>After the surprise election win of Donald Trump, the market chatter quickly focussed on what his economic policy agenda would mean for the Dollar.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Trump campaigned on a platform that included: big increases to defence spending, </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>a big boost to spending on infrastructure renewal, and corporate and personal tax cuts.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The conclusion analysts and traders drew was that a spike in the budget deficit and inflation would result, and provoke the Fed to adopt a more hawkish stance with monetary policy.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>But only two months after Trump took office, the Dollar rally has not only stalled, but looks set to go into reverse.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Why?</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>At last week&rsquo;s FOMC meeting the Fed delivered the much-anticipated 25bp rate hike, the first of three flagged for 2017, but disappointed currency traders by not adopting a more hawkish tone in response to Trump&rsquo;s economic policy agenda.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>In fairness to the Fed, Trump has yet to roll out his economic policy agenda, and it is by no means certain he will receive the cooperation of Congress, meaning he may yet only manage a watered-down version, so the Fed could simply be keeping its &ldquo;powder dry&rdquo;.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>But so early in Trump&rsquo;s term of office, are traders and analysts justified to call time on the bullish Dollar trade?</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>What seems to have unnerved traders over recent days is the uncertainty over healthcare reform. In his election campaign Trump made much about repealing Obama care, but as yet it isn&rsquo;t clear what will replace it. Traders and analysts have extrapolated this lack of clarity into other policy areas, notably his economic policy. This, together with the Fed&rsquo;s unchanged policy tone has fed directly into the Dollar.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Add in the recent declaration by ECB President </span><span>Draghi</span><span> that the EC has won the battle against deflation and the Dollar is coming up against a firmer Euro.&nbsp; All of this has taken the Dollar to a point where it looks as though it could weaken much further.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>But, as already said, these are early days in Trump&rsquo;s Presidency.&nbsp; It is much to soon to write off his policy objectives as unattainable. We think the current spell of Dollar weakness is a correction not a trend reversal.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Looking at Dollar/Euro, the ECB has succeeded in driving inflation back up to target, but they haven&rsquo;t yet achieved a self-sustaining recovery, otherwise why they are maintaining their policy stance until at least year end. </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> </p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>As for the Fed, we do not expect them to maintain their current stance. Trump is not a typical politician, he is a business man used to getting his own way and he will kick hard against a Congress that tries to thwart his plans. Once the Fed gets a strong handle on this, as his policies unfold, we expect the Fed to adopt a more hawkish tone.<span>&nbsp; </span>That, taken together with the reality of rising US inflation, a bigger budget deficit and a still-torpid Euro zone economy, will see the Dollar rally.</span></p> Mon, 27 Mar 2017 00:00:00 CEST http://www.sevendaysahead.com/market-updates/1664/23rd-march-how-weak-is-the-dollar.html 9th March - Gold is looking vulnerable http://www.sevendaysahead.com/market-updates/1663/9th-march-gold-is-looking-vulnerable.html <h2>TECHNICALS:</h2> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>MONTHLY GOLD FUTURES CONTINUATION CHART</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Support is clear at two levels the Prior High 1033 and the 50% retracement of the bull run just beneath 1100.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>A band of support has been created.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The market has bounced of that support once -<span>&nbsp; </span>is it about to retest it?</span></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>GOLD WEEKLY FUTURES CONTINUATION CHART </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Note the failure of the recent rally since November to break the resistance from the Prior Low at 1242.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>So the bear trend remains solidly in place.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Note too, the moment of failure at 1242 was accentuated by </span><span><span>a weekly Key Reversa</span></span><span>l ( a higher high and lower low established inside a week ending at the low)</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The bear momentum is established.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span><span>A revisit of the supports tested in November 2015 looks likely.</span></span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <h2>FUNDAMENTALS:</h2> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The gold price has proved remarkably resilient over recent years. After the initial sell-off from the heady highs made during the financial crisis, it has continued to attract buyers seeking a hedge against lingering doubts about the robustness of the global economy, that have kept Gold in a fairly broad trading range.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Those concerns were derived from weak economic growth in virtually all the major economic areas, despite monetary policy being set at extremely loose levels which included aggressive QE programs in the US, Japan. UK and the Euro zone.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Since the </span><span>mddle</span><span> of 2016 the US has produced growth deemed strong enough for the Fed to begin slowly tightening monetary policy, but other economies have faired less well. Euro zone growth has begun to firm over recent months, with CPI moving back up to 2.0%, but the ECB remains committed to its QE program and apart from Germany, the other big economies of France and Italy have continued to struggle generating growth much above 1.0%.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The UK had stood out as a strongly-growing economy. But after last years BREXIT vote, a period of economic under-performance remains on the cards. Then there is Japan. An economy which suffered lost decades of growth, dogged by deflation, has in recent months seen CPI turn positive, but at only 0.4% year on year, it is still to early to declare victory over deflation .</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>But the US has elected a President with an economic program intended to boost US growth. His policies include a defence build-up, infrastructure spending and measures to encourage business to repatriate &ldquo;lost&rdquo; well-paid US jobs.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>All of this comes at a price, which will be&nbsp; bigger budget deficit and rising inflation. In his recent speech to Congress, President Trump restated his policy ambitions and he has since said the extra US$54.0B he wants for defence will come from budget cuts else where, but that doesn&rsquo;t look too credible.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>In reality, if he is able to implement his policies, the Fed will likely become more aggressive with monetary policy as it tries to cap inflation. The combination of hoped for faster growth and tightening monetary policy will ultimately feed into the Dollar which we expect will enjoy a strong rally against the other majors.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Naturally, all the above will have implications for Gold. Trump&rsquo;s policies of military build-up and infrastructure spending will clearly result in faster economic growth, create new jobs and eventually improve productivity.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Investors will want to buy Dollar assets. Stocks related to companies and sectors involved in his spending spree will rally, bond yields will rise as the budget deficit expands, inflation rises and the Fed tightens and the Dollar will rally as investors seek to buy in.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The implications for Gold then are clear: it will trade lower. Since gold offers no return other than a capital gain, the allure of other assets will be hard to resist. And since Gold benefitted from the fall out from the financial crisis, which resulted in ultra low yields and sluggish global growth, its usefulness as a hedge will have run its course.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>In summary, we are bearish of Gold. As Trump begins to roll out his policies others will be too. The Fed holds its FOMC meeting next week and a rate hike is almost certain, but watch what they say in the policy statement, any hints of a more aggressive policy stance will feed directly into the Dollar and weigh on Gold.&nbsp;</span></p> Mon, 13 Mar 2017 00:00:00 CET http://www.sevendaysahead.com/market-updates/1663/9th-march-gold-is-looking-vulnerable.html 23rd February - What is driving the Bund up? http://www.sevendaysahead.com/market-updates/1662/23rd-february-what-is-driving-the-bund-up.html <h2>TECHNICALS:</h2> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>WEEKLY CHART </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>&nbsp;</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The market&rsquo;s </span><span>bull trend is well-established.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The latest test of the support for the trend at 161 found it to be very strong.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>WEEK CHART </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>&nbsp;</span><span>There is a well-formed bull H&amp;S reversal in place that is set to drive the market a good deal higher &hellip; up as far as 170.50&hellip;.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <h2>FUNDAMENTALS:</h2> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>As 2016 drew to a close the bull market in government bonds, including the Bund, was widely considered to be over due to two factors:</span></p> <div style="margin-top: 2.88pt; margin-bottom: 0pt; margin-left: 0.25in; text-indent: -0.25in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span><span>&bull;</span></span><span>The election of Donald Trump as US President and his economic plans to ramp up spending and cut tax meaning a bigger budget deficit, higher inflation and higher interest rates, and</span></div> <div style="margin-top: 2.88pt; margin-bottom: 0pt; margin-left: 0.25in; text-indent: -0.25in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span><span>&bull;</span></span><span>The improving performance of economic activity in the US, but also in the Euro zone which fed strongly into equity markets, resulting in several global equity markets making new highs.</span></div> <div style="margin-top: 2.88pt; margin-bottom: 0pt; margin-left: 0.25in; text-indent: -0.25in; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><!--[if ppt]--><span>●</span><!--[endif]--></div> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>By December 2016 the Bund had sold off by nine big figures and traders were anticipating the start of a full-scale bear market. But it never happened. In fact, the Bund steadied and slowly staged a recovery which to date has seen the market recover by around five big figures. What has changed?</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The main answer is political risk.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>After the UK voted to leave the EU voices in other EU Countries that had been ignored or dubbed extreme began to gain greater attention. In Holland there are calls for a referendum on continued EU member ship, albeit with only limited public support. In France, Presidential elections are due and the Far right candidate Marine Le Penn is mounting a serious challenge to the status quo.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Her policies include withdrawal from the Euro, crackdown on immigration and a potential EU membership referendum. In Germany too, elections are due and Chancellor Merkel is facing a stiff challenge as a result of her open door immigration policy.</span></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>For the Bund, the main current dynamic is the uncertainty thrown up by the looming French election. Although Le Penn is forecast to do well in the first round of voting she is expected to lose in the 2</span><span>nd</span><span>.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>But then no one thought Trump would be US President and few thought the UK would actually vote to leave the EU. </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>These surprises make forecasting the outcome in the French election less reliable. If Le Penn were to become the next French President and she held an EU referendum on continued membership, resulting in France leaving not just the Euro zone, but the EU, the whole EU project would be dead.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The main reason for the EEC/EU was to bind France and Germany together to stop them serially waging war on each other. It is that fear, however remote that may rationally seem, that has sent the Bund higher as traders seek protection from such an improbable, but paradigm-changing event.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>If the EU were to see France leave, the dismantling of the post WW11 world order would be almost complete. The US under Trump is questioning the value of NATO, an alliance that has kept the peace in Europe for 72 years. The UK has decided the EU is hindering it rather than helping it and is leaving to engage with a wider world that has changed massively since it joined in the early 1970&rsquo;s. If France elects Le Penn the unravelling would be almost complete.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 2.88pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>So, although Le Penn is still the outsider in France&rsquo;s election and will probably not become President, after the events in the UK and US in the last several months, traders are not taking anything for granted.&nbsp; They have sought the relative safety of the Bund.&nbsp;</span></p> Mon, 27 Feb 2017 00:00:00 CET http://www.sevendaysahead.com/market-updates/1662/23rd-february-what-is-driving-the-bund-up.html 16th February - The bulls are still in control of the S&P http://www.sevendaysahead.com/market-updates/1661/16th-february-the-bulls-are-still-in-control-of-the-sp.html <h2>TECHNICALS:</h2> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>WEEKLY CHART </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>&nbsp;</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The market has not looked back from breaking the Prior Highs from 2000 and 2007. </span></p> <p></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Look closer at the pause throughout 2015 and 2016.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>DAILY CHART </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Was that a parallel Fag? </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Or a continuation Head (Double- Headed) and Shoulders? </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Much of the move has happened&hellip; the minimum target is about 2400. </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>We would be profit-takers at that level and above.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <h2><span>FUNDAMENTALS:</span></h2> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Since the low made on November 4th last year, days before the US Presidential election, the S&amp;P has been a solid bull market and although it entered a period of consolidation for much of December and January, in recent weeks the market has moved on to make new highs. </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Why has a change of President had such a positive impact on the market, when during campaigning he was clearly not seen as Presidential material? </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The main reason is his proposed economic policies. </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Apart from threatening to tear up various free trade agreements negotiated by Obama that have seen US jobs exported to the likes of China, he is also intent on renegotiating the NAFTA trade deal agreed under Bill Clinton&rsquo;s tenure. Although this has alarmed many of Americas trading partners, taken together with his pledge to spend on renewing infrastructure, such as Schools, Hospitals, roads and bridges and at the same time cut corporation tax and personal tax, his package is seen as pro-growth. </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The US Federal Reserve sees this too, but is concerned about the potential inflationary impact and has already said interest rates are set to rise three times this year, but the S&amp;P has brushed those concerns aside. </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Although stock markets prefer a falling or stable interest rate environment, rising interest rates are no good reason to sell stocks if the back drop is one of strong growth and rising employment which is now the case in the US. In fact President Trump has inherited a sound economy.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The thrust of Trump&rsquo;s policy-stance is to bring back high value manufacturing jobs to the US which he says have moved abroad as a result of globalisation. He argues that while middle class Americans have lost employment opportunity, countries such as China have grown rich as US multinationals have moved production abroad. </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Obviously US consumers benefited from cheaper prices, and although the mantra has been &ldquo;we are all consumers&rdquo;, consumers need well-paid jobs. </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Whether or not Trump&rsquo;s plan will succeed remains to be seen, there is a risk that his policies will fuel the budget deficit and inflation to an extent that it outweighs any pro-growth benefits; hence the Fed&rsquo;s leaning towards hiking interest rates as early as its March FOMC meeting. </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>And that concern is currently holding the Dollar back. </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>But if Trump is right and he implements his policies, US productivity could be set for a longer-term improvement. Successful economies need good infrastructure, a well-educated workforce and a competitive tax regime. In the US, Corporation tax rates are very high, roads, bridges, Hospital and School buildings in a bad state of repair after years of neglect. </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Then there is his plan to expand the military. Since the US only buys its home-built kit, an expansion of the Navy, </span><span>Airforce</span><span> and Army after years of retrenchment will benefit manufacturing and create and support well-paid jobs. </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>In summary, for us the jury is out on whether or not he can deliver and crucially whether his alleged connections to Russia will prove his undoing, but for now the plan has excited </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>investors and will drive the S&amp;P higher still.</span><span>&nbsp;</span></p> <p>&nbsp;</p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>&nbsp;</span></p> Mon, 20 Feb 2017 00:00:00 CET http://www.sevendaysahead.com/market-updates/1661/16th-february-the-bulls-are-still-in-control-of-the-sp.html 23rd January- Ignore the short term wobbles, FTSE has huge potential http://www.sevendaysahead.com/market-updates/1660/23rd-january-ignore-the-short-term-wobbles-ftse-has-huge-potential.html <h2>TECHNICALS:</h2> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Monthly&nbsp; futures continuation chart</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The market has broken up above the Prior Highs of 1999, 2007 and 2015. if the market can sustain this move at by&nbsp; closing above, say, 7085 at the end of January, the band of closes will become support on any subsequent pull backs.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The creation such a solid underpinning and the likely ratchet effect on the market that will begin the FTSE's next bull leg is probably the most important single chart event to happen in the last 20 years.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>WEEKLY OIL&nbsp; FUTURES CONTINUATION CHART </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The band of support created from&nbsp; three Prior Highs beneath the market can be seen in greater details now.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>But note too, the clear Head and Shoulder Reversal pattern that completed in July this year.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The minimum move implied by that pattern, discovered by projecting the depth of the 'Head' above the Neckline is around 7400.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>For chartist this pattern was the catalyst for the break up through 7000.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>And the market has further to go before the bull influence of that pattern&nbsp; begins to diminish, around 7400.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <h2>FUNDAMENTALS:</h2> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>The UK economy has remained resilient, even strong, in the post BREXIT vote period despite predictions from mainstream economists, the Government and the Bank of England.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>A strong economy would generally equate to a well-supported currency and a solid stock market so&nbsp; in normal times there would be no surprise that the FTSE has in recent weeks and months made several new highs.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>But the UK has voted to leave the EU, the Pound has taken a hammering .</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>One might argue that the uncertainty being generated by not knowing what deal the UK will get when it finally departs should be enough to hit growth and undermine not only the Pound, but the FTSE 100 too?</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Yet for the moment UK manufacturers are enjoying the benefit of a Sterling devaluation. The PMI Manufacturing survey has over recent months continued to indicate strong growth and recent industrial production and manufacturing output reports are also recording solid to strong growth.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Of course manufacturing accounts for around only 15% of GDP, so of itself is insufficient to keep the economy on its current growth path. The key to the continued strong performance has been the resilience of the consumer. Consumer spending/demand has out paced virtually all forecasts and remained strong. Unemployment has remained at very low levels and the housing market continues to see price inflation when the opposite was expected by the mainstream.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>All this is good news for stocks. But the FTSE 100 isn&rsquo;t just a domestic market. Due to the status of London as a pre-eminent financial centre, many foreign companies have chosen to list on the London stock exchange.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Since those foreign companies report in a currency other than Sterling, even though their listing on the FTSE 100 would be in Sterling, the value of those foreign companies is inflated by the weakness of the Pound, to the extent that their capital value, income and dividends all benefit from the current bout of Sterling weakness.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>Has the rally in the FTSE exhausted? We don&rsquo;t think so. </span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>In the current environment, the UK economy looks set to maintain current growth levels throughout this year and although forecasters are predicting a slowdown in 2018 as the exit date looms larger, we are not convinced; they have already been proved wrong.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>However, given the degree of uncertainty that surrounds the terms of the UK&rsquo;s &ldquo;divorce&rdquo; settlement and a total lack of clarity about what will replace EU membership, despite PM May&rsquo;s recent speech, which for now is a wish list, currency markets are likely to remain nervous about the Pound.</span></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"> <p style="margin-top: 0pt; margin-bottom: 0pt; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> </p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"></p> <p style="language: en-GB; margin-top: 0pt; margin-bottom: 0pt; text-align: left; direction: ltr; unicode-bidi: embed; vertical-align: baseline;"><span>In summary we are bearish of Sterling over the short, medium and long term on the lack of &ldquo;BREXIT&rdquo; clarity. That weakness will continue to fuel the rally in the FTSE. So the combination of solid growth and weak Pound is a powerful driver in the FTSE 100. </span></p> Mon, 23 Jan 2017 00:00:00 CET http://www.sevendaysahead.com/market-updates/1660/23rd-january-ignore-the-short-term-wobbles-ftse-has-huge-potential.html