Soft economic data is bullish for stock market

Soft economic data is bullish for stock market or high yielding assets or equivalent!

Huh? What kind of rubbish is this?

Yesterdays’ factory data and US private employment data came in weak. Coupled with previous weak economic data, the US stock market had risen 7 of the past eight trading session.

Huh, again!

Weak data capitulated global stocks markets to correction or bear markets territory in the month of August. How could weak data signal a strong stock market?

Here is my opinion. Have you heard of QE1 or QE2? As a result, US markets had risen more than 40% and 25% respectively, correct?

Who would recommend QE3 or equivalent on the table? Guess it right?

What are the criteria for QE3?

·         Weak economic data,

·         weak economy,

·         Global growth concerns, etc.

What is the difference between then and now? The difference is QE3 was not on the table then. There weren’t weak data, global growth concerns, weak stock market, capitulation, insufficient data, etc. We got it now and hence QE3 is a consideration.

While under consideration and weak data persists, the probability for QE3 or stimulus grows higher. Got it? Stock markets goes higher with a series of weak data!

If you are still concentrating on weak data and stand bearish, where do you stand now? You may have short positions and the markets are going against you. Once it reaches your critical point, if you still stand bearish and the market is going against you – short covering is the answer. And where does the stock market go? Further north!

In my opinion, the more weak data that is coming up, global speculators will be betting on a higher probability of a QE3 and vice versa. And the stock market goes further north!

Where do you want the stock markets to go next week? It really depends on how the data will be coming out this Friday – the Nonfarm payroll data and unemployment data!

Are you still bearish? Skeptical? Wait and see? Have you seen how HSI, BSESN, STI, KS11, etc compared to the third week of August?

What do you think fund managers would put their funds on the 1^st day of September after a terrible month of August? Reference is 2010 Sep 1^st report.

If you’re still puzzled, please do not hesitate to drop me a line/comment. If you like this post, share it by tweeting, Facebook or Google it. It would certainly reach a large audience. Thanks in advance! 

The only blog that had made brave speculation of

a market meltdown since May 2011

And a Buy call in mid August 2011!

Reference: Market trend PRE Jackson Hole

Aug 9th FOMC unfolded

The US confidence index deteriorated sharply to 44.5 from a revised 59.2 in July 2011 – another bad news. The current index is the lowest level since April 2009.  US markets fell the initial hour in a knee jerk reaction.

On Monday, US markets were up more than 200 points as the US Spending data exceeded the consensus.

As the minutes of FOMC was released for the Aug 9^th meeting, US major indices broke thru the 11,600 (Dow) 1,210 (S&P) and 2,560 (Nasdaq) resistance.

Briefly, though the Fed remains deeply divided on more easing the minutes showed that some Fed officials called for a more aggressive response to the economy’s slowdown. As you probably know, they announced to keep rates low till mid 2013 and agreed to consider more options at the next Fed meeting on Sept 20-21 2011.

We’ve had weak numbers for the past week – New Home sales, initial claims, GDP data but the market rose 5 out of the last 6 trading sessions. With a deteriorating consumer confidence data all the three US indexes closed on a positive note.

My reading is that US investors are focusing on the next FOMC meeting with high hopes of keeping rates low with additional stimulus for the US economy and any positive news while ignoring weak economic data. If you’re focusing on weak economic data prior to reading of US markets, you would have missed the boat.

You might be puzzled as to why the 'previous' weak economic data, global growth concerns, Europe debt siuation capitulated the financial markets for the past couple of weeks and that 'now' the weak economic data are ignored this week. Am i correct?

As i mentioned before, fundamentals and technicals are not the only tools to read the markets, investors psychology, mindset and the herds' mentality plays an important past.

The strength of the US markets as dictated by the cattle’s mentality is ‘hopes’ and ‘speculation’ that the Feds will add more stimulus to jump start the economy again. How much and for how long will depend on the data collection until September 20^th 2011.

Till the next FOMC meeting, the herd will be heading North and I personally will go along with the herd. Meanwhile, the Europe debt situation will be checking on these hopes and speculation.

I hope the above answer to some of your queries on why the financial markets react differently with the same set of (weak) data.

If you like this post, share it by tweeting, Facebook or Google it. It would certainly reach a large audience. Thanks in advance!

Market trend PRE Jackson Hole

Let’s recap on a series of events Pre Jackson Hole back to early May 2011

I shared my Insight to Financial Markets with a post Without news on QE 2.5, QE2 coming to an end accelerates unwinding of carry trades on 20110511. I closed the post with the following conclusion.

‘In conclusion, unwinding of carry trades, had begun, that is, seeking lesser risk from high yielding assets to lower risk assets, namely the US dollar.

While I do not know how long this would continue, I would stay on the sidelines until volatility had simmered down’.

My next post was Global Financial Crisis, QE1, QE2, What's next? Part 1 dated 20110518. Here I shared how QE1 and QE2 boosted high yield assets and the consequences of the end of QE2.

On a related post to Global Financial Crisis, Global Financial Crisis, QE1, QE2, What’s next? Part 2 was posted on 20110609. What’s next was an introduction to inverted yields and the identification of countries that would be hit hardest.

By now, you would probably agree that the sequence of events took place as speculated. The hardest hit major benchmark indexes (till date) are Brazil, India and China amongst the top 5!

I was very concerned with the audience and subsequently shared my weak sentiments by posting Don’t fall into bull traps on 20110625.

On my post The worst has yet to come I warned the audience to BACK OFF dated 20110712 and shared that the US corporate earnings would not boost the US benchmark even though if the quarterly results were favorable.

As you probably know, all the above post was unfolded piece by piece. This also led to major benchmark indices subsequently falling into ‘correction’ or ‘bear markets’.

In my pursuit to Sun Tzu’s Art of War principles, constant monitoring and proactive management, my Generals who were sidelined did well. In other words, not one soldier died when capitulation was experienced.


If you agree that my speculation is not that bad, I hope you could give me a thumbs up by adding (+1) or sharing this post with your friends, relatives including those who may need Insights to Financial Markets sharing.

In my next post, the topic will be Market trend POST Jackson Hole! I'll discuss my speculation where the markets will be headed.

If you like this post, share it by tweeting, Facebook or Google it. It would certainly reach a large audience. Thanks in advance!

Does Buffett know something we don’t?

As you probably know, Warren Buffett gave BofA a $5 billion vote of confidence yesterday. That sent the US markets up north for a short while.

The other point to note is that the whole world is focus on Jackson Hole tonight.

What is puzzling is that

·         There had been no capitulation in the past week

·         The VIX index is not at its high

And the puzzling factor is his announcement of BofA vote of confidence a day before the Jackson Hole event.

While the whole world is rebalancing their portfolio, he makes a big investment before the Jackson Hole event.

Does he know something we do not know?

Is he losing his touch?

We’ll find out tonight and watch how the markets will react the following week.

I thought the above is worth pondering.

Who is speaking at Jackson Hole?

As you all are probably aware, Ben Bernanke is speaking at Jackson Hole. There is more than one speaker.

I like to share with you that J C Trichet will be speaking at Jackson Hole, too.

I noted that most fellow bloggers posted and the emphasis is on Ben Bernanke. I thought the audience should also share light on J C Trichet.

What does this mean? While Ben Bernanke speech concentrates on US issues, his European counterpart will deliver EU issues.

The crux of Jackson Hole will mainly depend on these two speakers.

If both of them deliver market expectations, financial markets will turn around and head north. IF they are not aligned, I regret to say what the outcome might be.

Hence, your strategy will depend on what is the outcome on Friday night.

If you’re speculating on Gold, you will need to take note if any stimulus or QE3 equivalent is in the pipeline. In other words, if there are hints of the above, Gold will continue to head North, break US 2,000 and henceforth. Otherwise, you might see Gold going back to the US$ 1,400 region.

So let’s get ready to make tons and tons of money! Meanwhile, please feel free to email me or drop any queries you might have. I’ll be too please to answer them.

Light at the end of the tunnel

It is dark when you are in the tunnel. But when you see light, would it be a

·         Light at the end of a tunnel or a

·         Runaway train?

The focus or turning point this year would be Jackson Hole.

Speculations and/or hopes for the Calvary had begun.

Briefly, if the Feds

·         Deliver what the market expects, this would be the turning point and markets will head north

·         Fail to deliver what the markets expects, the market will dive down another 15-20%

With this in light, which profile do you fall in

·         Conservative,

·         Moderate or

·         Aggressive.

Points to take note: Pre Jackson Hole

·         Be prepared for Jackson Hole,

·         Have a strategy.

·         Execute your strategy

·         Stick to your strategy

The other data on Aug 26^th besides Ben Bernanke speech at 830pm will be the GDP data. While both are equally important, Jackson Hole will have more weightage.

I stress again,

The focus or turning point this year WILL be Jackson Hole.

It is a 'Black Week'

We’ve heard of Black Friday, Black Monday… Black Thursday. Sum it all and we have a ‘Black Week’.

The Europe and US markets continued its downtrend yesterday. The latest trigger adding to insult is about the fears of the French banking’s sector exposure spilling over to US banks.

From my last post, I mentioned that the timing is ‘almost’ ripe to reap and take advantage when fear and capitulation takes centre stage. However, with this new event the harvest is delayed as the financial climate takes another turn.

The relief rally we saw on Tuesday in the US and following Asia on Wednesday is not considered a ‘bull trap’. I hope the following clarifies. We have known all along that global growth is a concern. It had been there for at least 1-2 months prior to Black Friday. However, there wasn’t a trigger.

Subsequently, the trigger that ‘woke up’ the bears were the weak US GDP figures (Q1 AND Q2) and global weak Manufacturing data which followed. I believe the US debt ceiling and S&P credit rating was ‘played well’ into camouflaging the weak economic data. The euphoric rally when the US meets its deadline on August 2^nd was obviously the last bull trap.

What the Fed unleashed ‘with low rates until mid 2013’ had NOTHING to do with resolving the concerns that triggered the downfall of the current global concerns. Hence, I interpreted the move as just a breather before high yielding assets continue its journey South.

With an hour to go before US close, I strongly believe that we will not see a repetition of US market rallying 600 points to close higher BUT I speculate the US markets will close at the lows of the days.

If this suspicion is correct, the Asian markets will open with weak sentiments and continue the downtrend.

I suggest we wait till Ben Bernanke make his delivery in Jackson Hole later into the month before making any move. Keep an eye on Europe’s banking concerns and further moves from China! In addition, watch the safe haven assets like Gold, JPY, CHF and VIX for further volatility.

Meanwhile, it’s a about time I go for another vacation while the bears fight it out!

Today will be a BLACK Friday.

It is of my opinion that today is BLACK Friday. I hope you had been following my post (all along) otherwise you will be caught in a very difficult position today! My previous hints were Don’t fall into bull traps and my last hint was the post Murder she wrote. And the market was subsequently murdered with a very silent Japanese sword at the touch of midnight!

Financial markets started to react just minutes into midnight. Europe and US benchmark indices crashed 3.4% and 3% respectively! The list of global events mentioned above had caused

·         All US and Europe major indices to break low for the year 2011 (risk off)

·         Crude Oil finally closed the gap of Feb 14^th 2011 (weak global demand) at US 87.30 from US$ 100. In a matter of 8 days! (Risk off). Still diving lower below US$ 87.

·         The Aussie touched a low of 1.05 from 1.10 in a matter of 3 days (risk off)

It is not surprising that the

·         USDX spiked to 75.32 from 74.02, today (risk off)

·         VIX peaked at 28.69 from 17.5 (on July 21^st, 2011, risk off)

·         The Baltic Dry Index (BDI) peaked just a month ago (indicator)

·        Gold spiked to a new high of US$ 1681 (safe haven) and subsequently reversed down to US$ 1640 (to fund equity losses).

For the benefits of new readership, we practice Sun Tzu’s Art of War as a principle to our investment strategies. Know your “financial climate” means how knowledge savvy do you understand inter market analysis to interpret the possible events about to occur. AND, it is time to go for war (I mentioned this on July 28^th, Are you ready for a financial war?).

If you recall, we had been risk off since early May. Our Generals have rested well. The way the market had moved for the past ten days indicates “FEAR”. When most traders, speculators and investors fear, that’s when it is timely and appropriate to move in. And the time is almost ripe.

Regardless of the ALL important nonfarm payroll and unemployment data due 830pm tonight, this is the time to reap your yield. The strategy will be in DCA formation. That is all I could share with my audience.

As the audience comprise of readers from all levels of risk profiling, broadcast recommendation is not appropriate. If you have

·         any queries with any of my post since early May

·         clarification of any post(s)

·         need a one-to-one NO obligation FREE discussion

·         outsource your investment planning

·         an opinion of your investment portfolio

I will be too pleased to have a listening ear.

Please note: If you

·         Do not monitor the market CONSTANTLY

·         Have no investment strategy

·         Do not know what your investment risk is

·         You are not investment savvy

·         You do not have experience in investment by education or practical experience

Please seek an investment advisor who has at ALL the above positive criterias. Having a solid background of more than 20 years in forex, commodities, intermarket analysis is preferred.

If you like the post, please feel free to twitter, share on facebook, Google or email to your friends such that it could reach a larger audience. Thanking you in advance. If you wish to receive my timely posts, follow by email and Feed burner will do the rest. Should you have any queries relating to my posts, feel free to drop me an email.

Murder she wrote

Do you remember Angela Lansbury, the actress in “Murder she wrote”; I still remember watching her role in the murder-thriller-drama series till the very end till she unfolds the mystery. It consists of a very simple story - a murder. But the ‘who done it’ is the mystery.

Similarly, the focus or events surrounding the financial climate had unfolded. The US debt ceiling was the drama. The murder was the stock market. The “who done it” was the weak, global economic data – not the US drama!

Here is the drama. For weeks, the US debt ceiling was the main focus and center of attraction. August 2nd was the grand finale of the daily drama.

It all happened just nine days ago or 8 episodes away on July 22^nd 2011. (It is just like in the movies, it starts with the opening and screens back 8 days ago). The plot thickens with the US debt drama in focus. The Senate, the House with credit rating agencies as the main actors. The victim is the equity markets or risk-on!

Fast forward to last Friday, there was a series of bad, very bad economic data. Durable orders, Michigan sentiment and GDP came in weak- very weak. But this was overshadowed by the US drama. (Remember, I warned you in my previous post! The evidence was there. But, did you take this into account?)

On Monday, this week – US ISM and global manufacturing killed the Asian market rally. (Here, I enforced that the plot had diverted).

Yesterday, Personal spending (-0.2%) was lower than expected (+0.1%). The personal spending being lowered than expected was a no-brainer. Scroll back 4 weeks to July 8^th 2011. Nonfarm came in 18K versus 80K. Unemployment rose to 9.2% versus 9.1%.

Do you recall? This was a surprise. This data caught most, if not all, speculators with their pants down.

Do you see the link - Nonfarm, unemployment and Personal spending? Here’s the link if you still do not get it. With high unemployment, weak nonfarm payroll, this would only have one effect on Personal spending. Weak if not very weak Personal Spending.

If you had been following my post, I had already sent a warning, a signal. The market plot had changed. It is no longer the US debt ceiling. It is also not the US credit rating (not for now!). The plot had been diverted to global growth concerns via global economic data.

And the outcome of the Asian market at point of writing, 1240pm. Asian markets are generally weak with a loss ranging 1% to 2.75% (in South Korea). Similarly, the safe haven assets like Gold, Swiss Franc and Yen tells it all. The commodity currencies are down very badly. VIX is high. This is all about Inter market Analysis – Currencies, Commodities, Equities, Bonds, Economy, etc. Not just simple PER, book to value or valuations ratios.

Asian equities rally short lived, Dow breaks 12000!

Asian benchmark indices rallied strongly today, following news of a US debt ceiling deal. Benchmark indices rallied from 0.5% to as high as 1.83% (in South Korea). Europe and American indices rallied in the morning until US ISM data halted the rally.

The initial focus on trader’s sentiment was on a deal on US debt ceiling. By the time, the US opened, the sentiment has shifted over to economic data (Manufacturing). The US ISM manufacturing data came in at 50.9 which were lower than last month’s 55.3 in June. Economists were expecting a figure of 54.5.

From a global point, manufacturing indexes fell from Asia to Europe as global demand had weakened considerably. Factory growth from Europe to China lost momentum. As a result, there’s uncertainty of global growth from the previous recession.

In my opinion, economic data - Manufacturing data is the primary focus, followed by the Aug 2^nd deadline and nonfarm payrolls on Friday!

At point of writing, Europe indices that opened on a positive rally nosedived 1.5% to 2% in France and Germany respectively. US indices which opened up with a 3 digit rally reversed down 0.3 to 0.4%. It looks like this week is certainly going to be another volatile week!

Please note: I like to point out that the US debt ceiling and US credit rating are two different scenarios. As nothing can be guaranteed, there’s uncertainty if the deal can be passed through. If there is too much expectation of the deal being passed through, the outcome on the other side will create another earthquake. This had happened before when the TARP initiative did not pass through on September 29, 2008.

“The failure of the bailout package in Congress literally dropped jaws on Wall Street and triggered a historic selloff -- including a terrifying decline of nearly 500 points in mere minutes as the vote took place, the closest thing to panic the stock market has seen in years.

The Dow Jones industrial average lost 777 points Monday, its biggest single-day fall ever, easily beating the 684 points it lost on the first day of trading after the Sept. 11, 2001, terrorist attacks.”

Is US likely to avoid a Debt default? There’s no way I’ll answer this question. Well, if we have patience, we’ll know the answer in just a couple of days. Let’s be patient, won’t we?

Meanwhile, the situation is risky – very risky. Even if the deal is endorsed by the President, there’s also the situation if the United States would still hold its AAA rating. My generals are re-accessing the situation as trader’s sentiment had all together changed with the financial climate.