Monday, March 20, 2017

Surprising market response after new Rate Hike 1%

Rate Hike in levels 0.75-1%.

It never ceases to amaze me the reaction of the market to the results of the Rate Hike announced today by the FED. It is not normal that before a Rate Hike the market rises so strong, however it seems to have interpreted a dovish tone in Yellen's message. However, I do not think this is the start of a new rally, but I see it as a new sign of the complacency and emotion of the market. Do not be surprised that in a few days the stock market corrects, because the truth, nothing is going to change much in the US economy with the announcement of the FED.

In summary:
- Yellen estimates that there has been a steady growth in the economy, improvement of the labor market, and therefore inflation towards the desired target of 2%.

- This justifies the rate increase this month, which is given at levels of 0.75-1.00%, that is to say what is expected. And they will be, for the moment, three and not four increases, the total of them in the year. With this, a certain margin is taken in case the previous criteria falter or Trump disturbs the economy with his next fiscal policy, even without detailing. Is this dovish? I see it more realistic.

- The bond portfolio is maintained until the economy shows clearer, that is, until Trump is defined.

- The fact that only 3 rate increases are planned this year, moved the market higher, the SPX +0.84, and the dollar /DX down to levels of -0.8%, its highest annual daily fall .

 It remains for your files, the main indexes closed through their etf, after the FOMC session.

From top to bottom, left to right: SP500, Gold, Russell2000, Oil and Bonds at 20 years, 
all in strong rise, while the sector Finance XLF, which expected 4 rates hikes, fell.

Gold: best commodity for speculation during FOMC decision

As I have already written, I do not trade with futures, but if I follow them daily, because they are the basis of all my analysis. And for that reason, I still think that the best asset to speculate when there are FOMC meetings or declarations from FED members is gold. Yesterday was no exception: it exploded at 1pm when the decisions of the FED were announced, also supported by technical factors that comment on Friday, such as the rebound from the 50% Fibonacci. As soon as the immediate fall of the dollar /DX and the rise of the TLT treasury bonds, were seen, gold became a safe haven. The triple speed etf JNUG went up to 30% in a few hours (!!) with an impressive volume of trades of more than 100M shares !

The Recommended Reading

Continuing with the comments on the gold, its rise today does not necessarily imply the beginning of a rally in the golden metal, you have to be careful here. Review this interesting analysis by Myra Saefong, in Market Watch, about it. She makes reference to the statements of Ross Norman, an executive of Sharps Pixley, who believes that today a short squeeze (immediate cover of shorts when starting to raise gold) could have occurred today, which helped close at + 1.87%.
Gold yesterday rebounded after the announcement of the Fed,
but I recommend caution there, in the short term.

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Tuesday, March 14, 2017

Sure Rate Hike on Wednesday

It is sure, almost 100%, that this Wednesday will be the first Rate Hike of 2017. The question today is, how much it will be (today it is in the range 0.50-0.75%) and how many more there will be this year (for the moment it was said three until December, I think that if that number is maintained the immediate response of the market would be upwards, four Rate Hikes might make it fall). Yellen has the answer and the markets await your message this Wednesday, exclusive topic of this week, as I comment here on Friday.

On the same day, the figures of the EIA Report on crude oil /CL in the US, the other exclusive issue of the week, will be given, where we will see if rigs and drilling platforms continue to increase, in clear detriment to what was agreed by OPEC. The summary economic events of the week, summarized below, taken from

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Wednesday, March 8, 2017

Impressive Job Report means next Rate Hike?

Good Job Report: Rate Hike on Wednesday?

After the impressive result of private employment ADP on Wednesday (298k compared to the expected 183k), it was expected that the Job Report data follow that line, because they are generally aligned, and that was it: I greatly exceed the consensus (200k) to be placed in 235k, while the unemployment rate remained flat, as seen in the chart.

The market had an undecided reaction in the first hours, with the SPX instead of falling (which was logical because they do not want the Rate Hike) opened strong, perhaps supported by the Hourly Income data that did not exceed the expected 0.3%. Also, for this reason, the dollar /DX had an illogical behavior as it closed at -0.49% after such good employment data. At the end of the day the SP500 index closed at + 0.21%, a moderate rise, which means that the markets remain complacent once again.

The SPX futures received the Job Report well (in shaded the extended hours). It is surprising if today's fall of the dollar (and the consequent rise in the price of US bonds) in the face of such good employment data.

Gold could continue its correction

Gold also looks interesting this next week, because given that it reacts contrary to the dollar /DX, this week can continue its correction that comes from two weeks ago if the expected Rate Hike is given (today the odds are around 90%). Technically /GC seems to be bouncing on 50% of its Fibonacci, although the last word will be on Wednesday the FED at its FOMC meeting, and the global geopolitical situation.

As you can see, gold seems to be bouncing around 50% of its Fibonacci, although
its future behavior will be defined by the FED's decision this Wednesday.

Draghi and the ECB Meeting

At the ECB meeting, Draghi focused, as expected, on the tapering, the end of the QE and the possible rise in interest. Although the interesting thing came later when Bloomberg quoted that there are members of the ECB (the Germans, in fact) who are already asking for this rise, even before the QE ends. This would bring down the prices of the bonds, already artificially high in its bubble of many years, and if we assume that the tapering may end in December this year, the explosion there may be of global consequences.

I don´t believe in Snapchat

I see little future in stock exchange to this fashion company in the long term. And my reasons are not without techniques or fundamentals (very premature yet), but more than anything intuitive: it seems to me a purely juvenile product, too much for my taste (see the lower picture). And it is not that I distrust young people, but I do not trust their ease with which they move from one gadget or from one fashion to another. And that can happen to Snapchat SNAP when the next successful and youthful computer application appears. Today, for now its value is falling 11% ...

Personally, I bought some shares the first minutes of the IPO, product of the novelty for its departure and the strong promotion with which it was preceded. Knowing the typical behavior on the first day of an IPO, I sold them within minutes of their exit for an acceptable gain: that is, pure speculation, but valid for a trader. Today I have SNAP in my watchlist as a potential sell (without going into short yet), because I believe that the stock and its price are overvalued. I also suspect that internet tigers like Facebook FB should be waiting for their price to reach $ 15-16 levels to bid for it ...

Youth is, for the most part, the most interested in Snapchat as an app and in acquiring shares. I see as a stock more to speculate for a few months, and unattractive for a long-term investor.

Next "buy the dip": Deutsche Bank

Deutsche Bank DB. It continues to fall (-10% in 2 sessions) after its announcement of restructuring and capital increase (8,000M euros through the issuance of 687M of shares), a decision not very well received initially by investors, due to the intention of not selling its retail division Postbank, which has 14 million customers. After two years of losses and scandals, I think the decision of the bank is good, in view its previous reduction of costs did not work. I have it on my watchlist as a next 'buy on the dip', even this week.

Since 2016, Deutsche Bank's stock usually recovered strongly after a few days of a drastic fall. This time the same thing can happen, because the decision to increase capital is not bad idea.

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