four
5,087 posts
msg #126771
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1/15/2016 11:45:52 PM
https://ja125.infusionsoft.com/app/linkClick/111133/5198601186edbea3/111253641/055dec3c70b5a8f3
Simpler Trading
401 Congress Avenue Suite 1540 Austin, Texas 78701 United States
(512) 266-8659
Raghee Horner
Today at 10:21 PM
The Chinese yuan devaluation and subsequent global equities sell off has exposed a lot of pressure points.....
How do we see when the tide is turning in the markets?
The fallacy is in the waiting for something to change rather than...
Trade what is happening!
The market generally has a bullish bias when it comes to most trading. Accept this because it will effect us throughout our trading careers. It's the buy and hold mentality that creates the volatility and the panic we are seeing now. The stock markets (Dow, S&P, Nikkei, and Nasdaq) are in downtrends. The DAX and FTSE are in real trouble. This means buy the yen into weakness.
The Two Warning Signs
The crude oil and copper markets are the "canary in the coal mine". Watch them closely. Each will tell you what you need to know about 1) Growth - nonexisitent - hence the copper downtrend and 2) Inflation - the Fed tells us there's not enough - so crude continues to sink. Both these downtrends will effect oil services stocks and mining stocks. Sell OIH and PICK on bounces.
Inflation Story Worldwide is Crude Oil
Crude oil is just another way of talking about all the reasons that every central bank on the planet has to wait to raise rates. Weak crude is going to effect every inflation trajectory no matter how well economic internals are in a country. Jobs were and are coming out stronger in a handful of countries - the U.S. and Australia - most recently. Yet neither the FOMC nor the RBA are in any hurry to raise rates. The inflation numbers simply cannot justify it. Think the Fed is going to raise rates four times this year? Think again. Fed Fund futures are hardly convincing. Fed Funds are showing the first hike priced in by September. Not before. Why? China has pushed the Fed timeline out. But don't think that the U.S. dollar is a sell, while it is rangebound, the eventual path of least resistance is up. This means the path of least resistance for the euro is down.
Commodity Currencies will Suffer the Most
Crude oil and copper markets are trending lower. Commodity exporting countries like Australia, Canada, and New Zealand will suffer most. It seemed for some time that the New Zealand dollar could buck that trend, but it has not been able hold with the China weakness story wreaking havoc in the markets. Sure New Zealand tourism is a positive and the dairy outlook - while dim - is not worsening. It's the China devaluation that reflects two problems for both New Zealand and Australia: China exports will be cheaper with a weaker yuan and China demand for commodities from Australia (iron ore, aluminum) and New Zealand (dairy) will be less. Decent news for New Zealand? China is still very dairy import dependent. Despite the growing dairy industry within China, it is still very fragmented. The New Zealand dollar is the second weakest individual currency story. The weakest is the Canadian dollar. Sell USD/CAD and (as long as the market remains risk averse), sell CAD/JPY.
The Five Markets that will Signal a Shift is Happening
The market will (eventually) find a bottom in stocks and commodities, but when? Look for the signs here:The Nasdaq has the most impactful weighting of "FANG" stocks: Facebook, Amazon, Netflix, Google. "FANG" is the new "BRIC". (Equities traders hope this acronym ends better...) When the Nasdaq finds support, it will be lead higher by interest in FANG. Each of these four stocks is correcting into weekly swing buys. My time horizon on these plays is minimum, one year. It's the interest in these four names that will reflect that risk appetite is returning.
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