Monday, October 24, 2016

Draghi and the ECB: indecision until December

ECB: the interest rate remains at zero.

In the early hours, Mario Draghi, president of the European Central Bank, the protagonist of the day in the markets, spoke. In summary, it confirmed that the interest rate remains at zero, as does the negative rate on deposits (-0.4%). He also reiterated the continuity until March 2017 (or beyond ... that if: without any abrupt cut) of the Quantitative Easing QE, postponing to December the decision whether there will be a gradual brake (the so-called 'tapering') to this program of purchase of debt, contradicting what suggested a few weeks ago. Everything will remain the same until the last annual meeting of the ECB on December 8th: ECB buying debt at an impressive rate of 80,000M euros per month (without achieving inflation so that the desired increase, as it remains at 0.4%, far from the planned 2% being very difficult in March to reach that target) and the rate 'zero interest' will continue to grow the tremendous bubble in the bonds, the one that Draghi claims not to see (!). To read so many conjectures and diverse suggestions of the private banks on this subject, and seen the poor results obtained until today in the eurozone, it is deduced, without needing to be expert in economy, that something does not go well with the ECB monetary.

As a result, the indices of New York SPX and European stock exchanges (DAX, FTSE100, CAC40) remain almost flat with a slight tendency to fall, but without major upsets. The FXE euro, which had expected the interest rate hike, has weakened against the dollar, and at this time the EUR/USD pair falls -0.40%. Last week his fall beat the three SMA averages (50,100 and 200) and today support @1.095. With the next, almost certain, Rate Hike of the FED in December, we could reach a 1:1 euro-dollar parity at the end of the year.

Problems with the euro, two weeks above the MA, in bearish territory.

Iran decided to be excluded from the OPEC pact

Iran decided to be excluded from the OPEC pact for a output cut, currently at 4.77M barrels/day, lowering the price of Crude Oil, returning it to around $50. OPEC plans to limit the daily production of its members to 33 million. As I mentioned in a previous post, one can not trust the Arab countries when they say something, the story says, besides that they do not fulfill the agreed quotas. The problem is that this Iranian attitude, the second largest member of OPEC, can cause a domino effect in other 'complicated' countries such as Nigeria or Libya, and who also knows Russia. On November 30th they meet to decide agreements. It is expected in these weeks, high volatility of the price of oil depending on how the news comes.

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Monday, October 17, 2016

Concerns in Libor Market

CPI data and the Rate Hike

The important inflation data of today (Consumer Price Index) was in line with the consensus 0.3% and higher than the previous month (0.2%), that is to say because it is so flat it does not contribute anything far-reaching to the discussion of the FED on Rate Hike. As I have been saying for a few days: Wall Street, in the immediate future, will no longer move on this issue because it already assumed it (that the Rate Hike will be given in December) but for other conjunctures: the result of the 3rd Clinton-Trump debate tomorrow, see the oil /CL breaks the psychological barrier of $50, and business results. On this last point, after the bad start of Q3 earnings with Alcoa AA, these come in strong rally with many 'beats'. Earlier in the day, Goldman Sachs GS joined the group of winning banks of the week by widely exceeding consensus EPS ($4.88 vs. $3.79), while the popular Netflix NFLX is around + 20% higher report considerable increase of its subscribers, among others. Therefore, the SP500 index SPX is around 1% at the moment.

ECB will continue its QE ?

Maybe it is a reason to keep an eye on other key markets such as the eurozone. So, this Thursday has the announcement of the European Central Bank ECB and its stimulus policy Quantitative Easing QE, being the only doubt: will it always extend until March 2017? If we compare it to what happened in the post-crisis USA, between 2008 and 2014, (see graph below) I would say that they still have the field to do it. Attentive to this news that moves world markets with force.

On the left, the direct effect that the QEs had on the NYSE. On the right the comparison of assets between the FED and the ECB: doing it with caution, the Europeans have place to extend it.

High inflation data in UK

And outside the eurozone, we have the United Kingdom: today the English CPI in September reported the largest monthly rise in inflation since 2014, reaching 1%, compared to 0.6% in August. The decline in i-rate and the QE of a few months ago seem to have had a rapid effect on the English economy, so much so that it is already worrying that inflation can reach levels of 3 to 4% for 2017 just in times that the pound passes through historically low levels and this may be what is causing the rise in prices of consumer goods, and not the QE stimulus. The expectation of Theresa May and her team is to reach the 2% inflation goal, trying not to exceed the growth rate of her population's salary (currently around 2%) and avoid these falling in real terms. They are the first visible effects of Brexit.

The pound at its worst in 31 years, and the FTSE100 reaching all-time highs. 
While therefore, inflation is fast moving ... and the Brexit hard is coming

Concerns in the Libor market because increase in its rate

With respect to the Libor market, there is concern over the excessive rise in its rate, which is a reference in many financial transactions and short-term derivatives worldwide, in clear contradiction with the FED and the majority of global rates that remain stable throughout 2016. It lends itself to suspicions about the history of 2011 where manipulation of this rate was detected to benefit 16 world banks (if not: Bank of America, JPMorgan, Deutsche Bank, Barclays, HSBC, among others ... Their greed has no limits.

This time, the 'official' explanation for this fact is that this month we must complete the implementation of Money Market reforms by the SEC, the US Securities and Exchange Commission. It stipulates moving active millionaires from large international banks to government ones, to be used only by government instruments. They argue that the very high demand of these funds in these months in international banks, has raised the Libor rate. Sounds nice, but... we believe the bankers ?

Similar increase in the LIBOR than in 2011, the year of the uncovering 
of the fraudulent management of this rate ...

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Wednesday, October 12, 2016

BVL, la Bolsa de Valores de Lima: Perspectivas 2016-II

Como habrán notado, comento muy poco la bolsa local. Es debido al enfoque de mi blog (Wall Street) y a las sabidas limitaciones de la BVL, que simplemente no van con mi gusto y estilo de trading: poco dinamismo al ser muy pequeña, pobre volumen diario negociado con escasas transacciones, alta volatilidad, pocas compañías tradeables, ausencias de
options como medio de inversión, pocos brokers online, excesiva dependiencia de un solo sector industrial (minería), poca influencia de nuestro acontecer político y económico local en el movimiento diario, etc. Es curioso, pero el país lleva años de crecimiento en todo aspecto y mientras tanto la BVL sigue manteniendo en esos años su iliquidez inalterable, tan es así que estuvo a punto de pasar a mercado frontera hace solo unos meses.

A que se debe? Creo que hay un desconocimiento general sobre que es y cuales son las ventajas del Mercado de Valores. Por otro lado, las Sociedades Agentes de Bolsa independientes poco pueden hacer frente a las principales SAB que son manejadas por los principales bancos locales, lo cual no es malo, pero lamentablemente ellos le dedican nula promoción a su linea bursátil, como si lo hacen con sus otros productos como depósitos a plazo fijo, préstamos o cuentas de ahorro (!).  El principal acceso del ciudadano común con excedentes de dinero que desea invertir en la bolsa, es vía los fondos mutuos de renta equilibrada y variable, o también el fondo 3 de las AFP. Olvidaba agregar el "genial" impuesto de 5% a la ganancia en acciones desde el 2013, desmotivante para cualquier inversor. Complicado panorama para ponernos a la par de otras bolsas latinoamericanas. 

También se hace evidente que algo tan importante como es el análisis técnico de acciones para las empresas listadas en nuestra bolsa, es aquí una ilusión. Aquí solo se compra/vende acciones según el análisis fundamental: una gran limitación. A través de confiables brokers online norteamericanos (Ameritrade, E-Trade, Scottrade, TradeKing, etc) si se puede hacer análisis técnico de empresas peruanas... pero solo de las que cotizan en la NYSE, y que son solo seis (!): Cementos Pacasmayo CPAC, Graña y Montero GRAM, Buenaventura BVN, Credicorp BAP, Southern SCCO y Fortuna Silver FSM, ademas del ETF que las agrupa, el conocido EPU.

Dicho lo anterior, paso a hacer un breve análisis técnico del indice general de la Bolsa de Valores de Lima. Sigue en el rango lateral con tendencia a la baja que comenzó a fines de julio, con el inicio del nuevo gobierno, pese a que no hay ninguna relación ente ambos eventos. Mas bien, se explica ello en la inédita alza del primer semestre (60% !), que obligó a un necesario retractamiento. Técnicamente se completó en esa fecha un claro bear divergence en el MACD, del que aun no recupera, ademas de haber roto hace poco el soporte de SMA50, acercándose peligrosamente al SMA100 como se ve en el gráfico inferior. Lo interesante es que el indice Stochastic (no se muestra) está en terreno de sobreventa, por lo que puede esperarse algún rebote pronto, cuya magnitud dependerá, como siempre, de los precios de los commodities mineros: el oro (ya comentamos ayer: en caída), el cobre (flat hace meses)  y especialmente de la plata (fuerte caída -16% desde julio) entre otros.

Luego del MACD bear divergence y superar el SMA50, el indice IGBVL se acerca a su siguiente soporte, el SMA100.
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Monday, October 3, 2016

Gold sinking, breaking supports

Wall Street October Focus

Wall Street starts the week with relatively flat indices with a downward trend, due to today's economic data and the fall of Deutsche Bank in its stock of Wall Street, given that today is Germany holiday. At this time DB is trading down more than 2%, and SPX is down -0.11%.

 This October that begins, the focus of Wall Street will be on five issues, to follow day by day, if you want to trade in the right direction:
- probable rebound in the price of crude oil.
- the comments of Yellen and the members of the FED on the increase of rates.
- the eve of elections in the US
- the start of the 4th season of business results, the Earning Season.
- the outcome of the Deutsche Bank theme and its repercussions

ISM and Construction Spending, diverge data

The relevant ISM index of manufactures, which is given at the beginning of each month, gave a value of 51.0, higher than the previous one of 49.4 and greater than the expected of 50.2, which puts the US economy in expansion zone. Point in favor for the hawkish of the FED. Good data for the dollar, and inversely, bad for gold.

And on the other hand, Construction Spending gave an opposite data: it was expected +0.2% and it was reported -0.7%. As several months ago, the index only rose in the multifamily buildings category, not in non-residential constructions, nor in single-family units. It is known that construction is the initial driver in the reactivation of an economy and this data of falling spending gives a signal of weakness. Although they measure different aspects, this data was expected to be aligned with the rise of ISM.

The ISM Manufacturas can resume the momentum that it lost last August in the following months.

As usual, I share the summary of US economic data that moves the week on Wall Street, taken from Keep in mind that just next week begins the attractive Earning Season.

Today's ISM stand out, on Wednesday ADP, the weekly crude oil data, and the key employment data on Friday.

Soon recover in Gold /GC ?

Tremendous fall of gold /GC today, closing at $1,269.70 and therefore of its popular etf GLD: up to -3.5% (!), With double volume of transactions than its average, making this its worst daily session since 2013.

This abnormal sell-off has not been for technical reasons as some traders speculate. The outcome has begun with the statements of Theodora May, the English Prime Minister, in the sense that is willing to apply a 'hard Brexit', i.e a clear departure from the European Community, abruptly and without contemplation, since March. This against currents within your government that prefer a 'soft Brexit' ...

That single statement drove the English pound to new historical lows of 31 years, and therefore reinforced the North American dollar. And we already know that the dollar and the gold move inversely. If we add to this the statements today of Jeffrey Lacker, hawkish official of the FED, who commented on the next strategies of the FED on the increase of rates, because it ended up giving more impulse to the impressive fall of today that ended up breaking several technical barriers , like the psychological level $1,300.

What can happen these days with the price of gold? As often happens in a sell-off, many see it as a great investment opportunity. I see very high volatility in these coming days and I prefer to play it safe: wait this Friday for results. Let me explain: technically I will see if today's fall still has field to continue falling, observing in /GC $1,210 level and see if there is a rebound, otherwise if that support is broken it can trigger a fall to 1,100 levels, which were its minimum in January. In the fundamental aspect, gold has the result of Friday's Job Report to recover its price, if a lower data than expected is given. The analysts' consensus for nonfarm payrolls (nonfarm payrolls) is at 169K for September, compared to 151K in August, while the unemployment rate is set at 4.9%. To be alert that day to that key fact.

Since 2013, whenever gold goes into oversold with good volume, it has had prompt recovery and rise. Today those two requirements were met ...

The Recommended Reading

It is difficult to find any federal official from the banking or governmental sector who openly commented that we are in a bond bubble. They deny it, disguise it, and as long as it does not burst, everyone happy. It is even more strange that a official of a Hedge Fund says it. We know hedge funds are the US risk bank that moves within the limits of what is allowed and that bases its existence on high-risk operations, but very lucrative when they prosper.

And if who says is the CEO of Tiger Management, one of the most popular in the US, is because the issue worries. I recommend this short article where they interview Julian Robertson. Comment on the nefarious negative interests and the unrealistic prices of bonds in the world today. To take note.

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