Just found this interesting tool related to MA here
Attachment 3614
Attachment 3615
Attachment 3613
Printable View
Just found this interesting tool related to MA here
Attachment 3614
Attachment 3615
Attachment 3613
Concerning to this market analysis for EURUSD before nfp - read 2 posts on this thread ...
same template from that thread but + Vanga forecasting indicator :
Attachment 3632
same template from that thread but + WmiFor30 indicator :
Attachment 3633
same template from that thread but + NearestNeighbor_v1 indicator :
Attachment 3634
Hi Newdigital,
Nice work, so which indi calculation is better?
I like Vanga indicator ... but those kind of indicators do not work during high impacted news events sorry
Future MA indicator
Attachment 3648
Attachment 3649
Attachment 3650
Aussie Dollar Focused on China Growth Bets, Fed Taper Outlook
Attachment 3860
Fundamental Forecast for Australian Dollar: Neutral
- Australian Dollar Looks to HSBC PMI Data to Help Establish China Growth Outlook
- FOMC Minutes to Drive Aussie Volatility as Risk Trends Respond to QE Taper Bets
The Australian Dollar managed to reverse all of its intraweek losses to close Friday’s trade with a slight gain as risk appetite firmed following supportive comments from Fed Chair nominee Janet Yellen in her confirmation hearing yesterday. The would-be successor to Ben Bernanke said she saw dangers in ending QE too early, saying the Fed must not remove policy support while the recovery remains “fragile”. She added that there is “no set time” for tapering asset purchases. Investors took the remarks as confirmation of Yellen’s dovish credentials, speculating that her ascendancy will translate into a longer-lasting “full-sized” QE3 effort.
News-flow out of also China helped as the official Xinhua news agency began to unveil the details of the reforms agreed-upon at the third plenary session of the Communist Party that concluded on November 12. A wide range of initiatives is to be undertaken, with some of the most notable including: establishing more free trade zones, granting permission for private investors to set up small banks, easing of the one-child policy, and loosening the “hukou” system (which eats away at disposable incomes by denying access to social services to migrant workers, forcing them to pay for them out of pocket). The deadline to implement these policy objectives has been set to 2020.
Looking ahead, a quiet domestic economic calendar is likely to see the same forces in the forefront. Indeed, minutes from this month’s RBA meeting amount to the only bit of noteworthy Australian event risk. The release tends to fall closely in line with the policy statement released at the time of the original rate decision announcement, meaning traders are unlikely to find anything materially game-changing in the text to spark Aussie volatility. In China, all eyes will be on HSBC’s November flash Manufacturing PMI report. A close relationship between Chinese GDP growth expectations and the Australian unit suggests signs of slowing factory-sector activity are likely to weigh on the currency, and vice versa.
On the risk sentiment front, all eyes will be on the release of minutes from last month’s FOMC meeting as Fed “taper” speculation continues. Investors will carefully comb through the language of the release to help establish the extent to which Fed officials saw fiscal drag from October’s US government shutdown delaying a cutback in asset purchases. Recalling the ultimately unfounded fears of fiscal retrenchment from the payroll tax hike and “sequester” spending cuts on the US recovery earlier this year, Ben Bernanke are unlikely to have been especially concerned, at least absent concrete data arguing otherwise. This may boost the US Dollar and weigh on the Aussie after Yellen primed the market for a dovish policy lean once again. Retail Sales and CPI releases headline the US data docket.
Is the Gold Rebound Over? Techs Suggest No, FOMC to Confirm
Attachment 3863
Fundamental Forecast for Gold: Bullish
- Gold Follows Through on Inside Day Trade Setup
- Gold Prices Forecast to Fall Further
- Commodities: Crude Oil, Gold Look to US Jobs Data for Direction
Gold prices snapped a two week losing streak with the yellow metal up a fractional 0.02% ahead of the of New York close on Friday. Despite the rather negligible change on the week, prices did see a good deal of volatility as waning strength in the greenback helped gold mount a counteroffensive off key support earlier in the week. Note that the Gold/USD inverse correlation hit its strongest levels since early 2012 this week and USDOLLAR price action may continue to offer guidance as we move deeper into November trade.
Investors will be closely eying economic data as the US docket picks back up with retail sales, existing home sales, and minutes from the latest FOMC policy meeting on tap. In the wake of the stronger than expected NFP and GDP reads earlier this month, the prints could offer some volatility as improving US data continues to limit the Fed’s scope to maintain its ultra-accommodative stance. As such, look for strong US metrics to possibly limit this near-term advance in the meantime as traders look to the Fed for further clarity on future policy.
Aside from the data, look for central bank rhetoric to shift broader market sentiment with 8 of the 12 voting FOMC members scheduled to speak over the coming days. With the market’s central focus fixated on central bank forward guidance, all eyes turn to the FOMC with a barrage of speeches from the likes of Rosengren, Dudely, Evans, Bullard, Powell, George, Tarullo and the Fed Chairman himself. As Fed Chair nominee Yellen refrains from undermining the taper-timeline laid out by Ben Bernanke, fresh developments from the FOMC Minutes / Fed speeches may heavily impact gold prices next week as market participants weigh the outlook for monetary policy. Look for a more dovish stance to sustain the recent rebound off key support – while a more hawkish tone would likely offer a pullback into favorable long entries in the near-term.
From a technical standpoint, gold failed to break below key support at $1268/70 and with inside day made on Wednesday, the risk of a more meaningful rebound higher here remains our focus. As such, our near-term bias shifts to the topside above key support noting resistance targets at $1299, $1306 and the 61.8% retracement from the decline off the October high at $1323. The broader outlook remains bearish below the November opening range highs at $1327. A break / close below $1268 puts the broader decline off the October high back into play with targets eyed at the 61.8% extension taken from the August high / the October low at $1249/50, and a key Fibonacci confluence at $1233/34.
EUR/USD weekly outlook: November 18 - 22
Attachment 3913
The euro rose to one week highs against the dollar on Friday as comments by Federal Reserve Chairwoman nominee Janet Yellen were seen as supportive of the bank’s monetary stimulus program.
EUR/USD ended Friday’s session at 1.3497, up from Thursday’s close of 1.3457. For the week the pair rose 0.66%.
The pair is likely to find support at 1.3417, Thursday’s low and near-term resistance at 1.3525.
The greenback turned lower after testimony from Federal Reserve Vice Chairwoman Janet Yellen on Thursday was seen as cementing the view that the bank will keep its USD85 billion-a-month asset purchase program in place until early next year.
Ms. Yellen said it was "imperative" that the Fed does everything in its power to ensure a robust recovery. She said the quantitative easing program would not continue indefinitely but the timescale for reducing it would be data dependent.
The comments came during a Senate confirmation hearing to take over from Ben Bernanke as head of the central bank in February.
Sentiment on the greenback was also hit by unexpectedly weak U.S. manufacturing data on Friday.
The Federal Reserve’s Empire state manufacturing index fell to -2.21 this month from 1.52 in October. Economists had forecast a rise to 5.0.
A separate report showed that U.S. industrial production fell 0.1% in October, after rising by 0.7% in September, compared to expectations for a 0.2% increase.
The euro’s gains were held in check after data on Thursday showed that the euro zone recovery slowed more than expected in the third quarter.
Euro zone gross domestic product expanded 0.1% in the three months to September, slowing from the 0.3% growth achieved in the second quarter when the euro zone exited a recession. Economist had forecast quarter-on-quarter growth of 0.2%.
The euro zone economy contracted at an annual rate of 0.4% in the third quarter, worse than expectations for a 0.3% contraction, after shrinking at an annual rate of 0.6% in the previous quarter.
In the week ahead, investors will be closely watching Wednesday’s minutes of the Fed’s most recent policy setting meeting. The U.S. is also to release data on retail sales and consumer prices.
The euro zone is to release data on manufacturing and services sector activity and the ZEW Institute is to release its report on German economic sentiment.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Monday, November 18
The euro zone is to release data on the current account balance.
The U.S. is to release private sector data on the outlook for the housing sector.
Tuesday, November 19
The ZEW Institute is to release its closely watched report on German economic sentiment, a leading indicator of economic health.
The U.S. is to release data on the employment cost index, an important inflationary indicator.
Wednesday, November 20
In the euro zone, Germany is to release data on producer price inflation.
The U.S. is to release a series of data including a report on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity. The nation is also to publish data on consumer inflation, existing home sales and business inventories.
Later Wednesday, the Federal Reserve is to publish what will be the closely watched minutes of its latest policy meeting.
Thursday, November 21
The euro zone is to release preliminary data on manufacturing and service sector activity, a leading indicator of economic health. Germany and France are also to release individual reports.
The U.S. is release data on producer price inflation, as well as the weekly report on initial jobless claims. The U.S. is also to release data manufacturing activity from the Philly Fed.
Friday, November 22
The Ifo Institute is to publish a report on German business climate, a leading indicator of economic health.
Where are the Stops? Tuesday, November 19: Gold and Silver
Attachment 3930
Below are today’s likely price locations of buy and sell stop orders for the active Comex gold and silver futures markets. The asterisks (**) denote the most critical stop order placement level of the day (or likely where the heaviest concentration of stop orders are placed on this day). See below a detailed explanation of stop orders and why knowing, beforehand, where they are likely located can be beneficial to a trader.
Attachment 3929
Stop Orders Defined
Stop orders in trading markets can be used for three purposes: One: To minimize a loss on a long or short position (protective stop). Two: To protect a profit on an existing long or short position (protective stop). Three: To initiate a new long or short position. A buy stop order is placed above the market and a sell stop order is placed below the market. Once the stop price is touched, the order is treated like a “market order” and will be filled at the best possible price.
Most stop orders are located and placed based upon key technical support or resistance levels on the daily chart, which if breached, would significantly change the near-term technical posture of that market.
Having a good idea, beforehand, where the buy and sell stops are located can give an active trader a better idea regarding at what price level buying or selling pressure will become intensified in that market.
The major advantage of using protective stops is that, before a trade is initiated, you have a pretty good idea of where you will be getting out of the trade if it's a loser. If the trade becomes a winner and profits begin to accrue, you may want to employ "trailing stops," whereby protective stops are adjusted to help lock in a profit should the market turn against your position.
Saxo Bank’s 2014 Outrageous Predictions :
- EU wealth tax heralds return of Soviet-style economy
- Anti-EU alliance will become the largest group in parliament
- Tech’s ‘Fat Five’ wake up to a nasty hangover in 2014
- Desperate BoJ to delete government debt after USDJPY goes below 80
- Brent crude drops to USD 80/barrel as producers fail to respond
- Germany in recession
- CAC 40 drops 40% on French malaise
Gold Sheds Nearly 3% on Fed Taper- Bearish Tone Set for 2014 Open
Attachment 4299
Gold was off sharply on the week with the precious metal plummeting more than 2.8% to trade at $1203 ahead of the New York close on Friday. Despite the magnitude of the weekly loss, bullion is set to close well off the lows of the week at 1187. Regardless, the metal is now set to post its first yearly decline in thirteen years and its largest yearly decline in 32 years. As the Fed begins to throttle down from its ultra-accommodative monetary policy stance, the outlook remains heavy heading into 2014.
The main event this week was the FOMC policy decision where in his last quarterly press conference as Federal Reserve Chairman, Bernanke announced that the central bank would begin tapering both Treasury & MBS purchases by $5 billion, effectively reducing QE installments by $10 billion a month. The news proved supportive for the greenback sending gold below support at $1209, its lowest level in over six months. Mr. Bernanke emphasized that tapering is not tightening and although the central bank will be reducing the amount of stimulus being injected in the economy, interest rates are likely to remain at exceptionally low levels as long unemployment remained above 6-1/2% and inflation below the 2% longer-run goal. Despite these “thresholds” the chairman continued to reassert that the move to tighten will be “data dependent” with the quarterly projections showing the majority of the committee expecting the first rate hike in 2015.
As the labor market continues to improve, more emphasis is likely to be put on inflation prospects as we head into next year with concerns over disinflation likely to support the Fed’s accommodative stance. With CPI data this week coming in below consensus, expectations for a prolonged ZIRP (zero interest rate policy) from the central bank may continue to be supportive for risk assets while the subdued inflation outlook remains heavy on bullion.
The release dealt a final blow to gold heading in to the close of the year as demand for the yellow metal continued to wane to the benefit of the greenback. As we head into next year, gold remains at risk amid an improving US economic backdrop and reduced Fed stimulus. With the threat of the fiscal drag also now subsiding, it’s difficult to see gold catching a bid as both equities and the USD press higher.
From a technical standpoint gold has continued to trade within the confines of a well-defined descending channel formation dating back to the August highs. Key support rests at $1179/80 with a break below this threshold putting the broader decline off the 2012 high into focus. Such a scenario looks to target support objectives at $1151/60, $1125 and $1091. Note that divergence has been identified in the daily momentum signature and suggests that a near-term correction higher may be in the cards as we open up 2014 trade. Bottom line: look to sell rallies / breaks of support with only a topside move surpassing $1268/70 threatening our medium-term directional bias.
The forecasting of currencies is very important for successful Forex trading. There are different forecasting techniques available with help of trading softwares but it very important to enter exact rates and times for which forecast is based upon.
Price of Gold in 2014: More Declines to Come?
Attachment 4476
This has been a terrible year for gold, with the SPDR Gold Trust and spot gold prices falling by more than 25%. Many gold-mining stocks have suffered even larger declines, as the Market Vectors Gold Miners ETF lost more than half its value this year. But with gold just barely hanging above the $1,200-per-ounce level, do investors have any reason to hope that the price of gold in 2014 will bounce back after the first losing year for the yellow metal since the turn of the millennium? Let's take a look at some of the factors that caused 2013's declines and see if they're likely to persist into 2014 and beyond.
What will affect the price of gold in 2014?
The biggest factor that could affect the price of gold in 2014 is the policy that the Federal Reserve sets. A big part of the weakness in gold prices in 2013 came from the Fed's moves toward tapering back on its quantitative easing, with even the threat of reduced bond-buying helping to push interest rates substantially higher. Low interest rates have supported gold prices for years, as investors haven't had to give up appreciable income-earning opportunities when they owned gold bullion. Now, though, as the 10-year Treasury yield has pushed back up 3%, gold investors face a rising opportunity cost when they choose to put their money into gold rather than income-producing assets.
Price projections on gold
UBS 2014 estimate $1,200 Goldman Sachs 2014 estimate $1,050 ANZ 2014 estimate $1,450 Morgan Stanley 2014 estimate $1,313
Source: Analyst projections.
Largely because of the prospects for reduced Fed intervention, analysts for the most part have become very unenthusiastic about gold's future. UBS, for instance, cut its gold-price forecasts earlier this month, dropping its guess for the price of gold in 2014 from $1,325 per ounce to $1,200, citing reduced interest among investors to buy bullion and an erosion of supporting factors like favorable technical-analysis patterns to keep prices up. UBS sees 2014 simply as the beginning of a long stagnant period for the metal, projecting $1,200 gold prices in 2015, rising to $1,250 in 2016 but falling back to $1,210 in 2017.
Goldman Sachs is even more bearish, arguing late last month that gold would have to fall at least 15% next year. At the time, Goldman's call implied a gold-price level around $1,050, but a 15% drop would push gold down even further based on today's spot prices.
Of course, the bearish view on gold isn't unanimous. Analysts at Australia and New Zealand Banking Group have called for gold prices in 2014 to rise to the $1,450 level, pointing to strong demand in China as potentially soaking up supply at new lower levels. Moreover, a recovery in India could go a long way toward helping support gold prices, even though an Indian government move to limit imports of gold hit gold purchases in the emerging-market nation hard during 2013.
Watch what the big players do
The other potential driver of the price of gold in 2014 will be what gold producers do. So far, decisions to cut back on exploration and production have arguably helped minimize the drop in gold prices, with industry giants Barrick Gold and Goldcorp among those scaling back their capital expenditures in efforts to cut overall costs. If mothballing projects results in falling supplies of gold, the resulting supply demand imbalance could put a floor under the price of gold in 2014.
On the other hand, gold miners might decide to protect themselves against further gold-price declines by hedging their production forward. Doing so would mark a big reversal from the stance that most miners took during the 2000s, as companies decided one by one to take off long-held production hedges in order to benefit fully from gold's unstoppable upward march. Such a capitulation among miners would be a big psychological hit to the market, but it could also mark a key inflection point from which gold could finally stage a solid recovery.
'Dr. Doom' Makes Sunnier Prognosis For 2014
Nouriel Roubini, labeled "Dr. Doom" when he correctly predicted a housing collapse would lead to the market crash in 2007, is out this week with a relatively optimistic forecast for global economic growth in 2014.
"After a year of subpar 2.9 percent global growth, what does 2014 hold in store for the world economy?" Roubini writes in an opinion piece on the Project Syndicate website. "The good news is that economic performance will pick up modestly in both advanced economies and emerging markets."
Roubini, who recently told Bloomberg News that he prefers to be called "Dr. Realist" rather than "Dr. Doom," says headwinds to global economic growth are easing:
"The threat, for example, of a eurozone implosion, another government shutdown or debt-ceiling fight in the United States, a hard landing in China, or a war between Israel and Iran over nuclear proliferation, will be far more subdued."
Led by the U.S., Roubini predicts that advanced economies will grow at an annual pace near 1.9 percent, after growing only 1 percent in 2013.
The U.S., which saw its economic recover pick up in the fourth quarter, can expect to benefit from the shale-energy revolution, improvement in the labor and housing markets, and the "reshoring" of manufacturing.
Outside the U.S., growth will remain anemic in most advanced economies, particularly in the European Union, where fundamental problems like public debt and high unemployment remain unresolved.
Meanwhile, emerging economies will grow faster in 2014 thanks to strong exports and a robust Chinese economy. He sees 5 percent growth across emerging economies, beating the 4.8 percent below-trend growth seen last year.
2014 Predictions
- Africa to develop its overall financial market, more exchanges to launch in frontier African markets, already saw growth in South Africa, new exchange in Zambia and Kenya in 2013.
- Leverage to be questioned, and more discussions in high leverage countries such as the UK and Australia about reducing it.
- HFT to play a strong role in FX markets both on retail and institutional level. Leading to enhancements in low latency software, messaging systems and aggregators across the board will put more emphasis on HFT auto trading
- I think we will see a lot of movement by the People’s Bank of China in the direction finance liberalization. There will be talks, if not actions, of letting the yuan float freely in the new Shanghai Free Trade Zone, allowing more IPOs in the stock markets and letting in big foreign institutional investors into the Chinese equity markets. All the news will lead to more people around the world wanting to hold the yuan and speculate on the time it will be allowed to float, and might increase as much as 30% overnight
Outlook For Gold In 2014
Gold had a rough 2013. With a loss of 28% on the year, the spot price of gold was down by nearly the same percentage that the S&P 500 was up. And I don’t expect gold to regain its shimmer in 2014.
Let’s take a look at the macro environment as we enter the new year:
- The inflation that gold enthusiasts have feared since the onset of the 2008 crisis is dead on arrival. The latest CPI figures show an inflation rate of just 1.2%, and energy prices are actually falling.
- The quantitative easing that fueled the inflation fears of the past few years is already being tapered, from $85 billion in bond purchases per month to $75 billion per month…with more tapering to come.
- The Federal budget deficit, though still far too high, continues to fall and is expected to be just 3.3% of GDP in fiscal year 2014.
- Gold miners are contemplating hedging their risk by selling their production forward, which will effectively cap the price of gold (and sends a very negative signal to the market).
- Hedge funds and other large institutional buyers—the driving force behind much of the rise in the spot price of gold in the past decade—appear to be abandoning gold if the outflows from gold ETFs are any indication. Gold ETF holdings are now at their lowest levels since 2008.
- Gold now has competition in the anti-establishment crowd from Bitcoin and other “virtual” currencies. (I think Bitcoin is a joke, mind you, but that doesn’t mean that it won’t continue to steal gold’s thunder for a while longer.)
EUR/USD Weekly Fundamental Analysis January 27 – 31, 2014 Forecast
Attachment 5034
The EUR/USD moved well above the 1.37 price this week but closed at 1.3686 up close to 160 points from Monday’s opening. The eurozone production figures and strong PMI print helped give the euro a bit of momentum as the dollar fell on lackluster data ahead of the Federal Reserve meeting this week. This week brought a series of reassuring news for the ECB: the peripheral rally continued amid massive demand for Spain’s new bonds; the Eurozone flash PMI indices improved to a level consistent with 1.5-2.0% annualized growth; and tensions in money markets eased somewhat, with Eonia ending the week below the ECB’s Refi rate (at 0.21% on Friday). Unfortunately, the latter factor in particular will only buy the ECB more time at best, before it needs to address the liquidity situation again, in our view, by acting either on quantity (SMP sterilization; reserve requirement; other ad hoc operations) or on price (policy rates).
Analysts look for the FOMC to continue with the taper process at its 29 January meeting, cutting another USD10bn from its monthly asset purchase program to USD65bn. Look for the FOMC to announce that it will add to its holdings of agency MBS at a pace of USD30bn per month and will add longer-term Treasuries at a USD35bn per month pace. No change in the Fed funds target is expected. The Fed seeks to rebalance its monetary policy toolkit away from QE towards forward guidance on policy rates.
EUR/JPY Weekly Fundamental Analysis January 27 – 31, 2014 Forecast
Attachment 5035
The EUR/JPY ended up lower for the week as the yen once again became a safe haven after traders abandoned equities are lackluster earnings data. The pair closed at 139.88 easing from the weekly high of 142.41 after the Bank of Japan held rates and stimulus at their monthly meeting. “There’s definitely some nervousness. The world is suffering from the emerging markets’ flu,” said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles. Worries over China’s growth surfaced after a disappointing manufacturing number spurred the S&P 500′s 0.9 percent drop on Thursday.
China’s efforts to contain a “financial excesses” won’t be positive for growth, Gibbs said. The next major psychological level for Aussie is the 2010 low near 80 cents, he said.
The China Banking Regulatory Commission’s order did not mention concerns that a 3 billion yuan (US$496 million) trust product distributed by Industrial & Commercial Bank of China may default after a coal miner that borrowed the funds collapsed, said the people, who asked not to be identified. Regional CBRC offices were told to also closely monitor risks from trust and wealth management products, they said.
The German IFO business climate for industry and trade will likely increase further in January as suggested by both the PMI composite and the ZEW economic sentiment. We expect the IFO business climate index to increase for the third consecutive month, to 110.2 after 109.5 in December. Our expectation is based on a continuous improvement in business expectations in the manufacturing industry since April 2013. Traders expect both the current conditions index and the expectations index to have increased (from 111.6 to 111.9 and from 107.4 to 108.1 respectively). Similarly, the European Commission’s Economic Sentiment Indices should post a further broad-based improvement in January as the recovery gathers momentum in several countries, including Germany or Spain.
USD/JPY Weekly Fundamental Analysis January 27 – 31, 2014 Forecast
Attachment 5036
The USD/JPY became a safe haven at the end of the week as traders worried about lackluster Chinese data and the upcoming FOMC meeting. After the Bank of Japan held rates and policy, traders moved into the currency pushing the pair as low as 102 and closing the week at 102.23. Demand for industrial materials is showing clear signs of recovery, with steel and cement production in 2013 in Japan hitting their highest levels in five years on the back of the building boom in disaster-struck regions and urban areas undergoing economic expansion. Production of paper and ethylene, used for a wide range of chemical products, has also increased for the first time in three years.
The Cabinet approved on Friday an action plan for the administration’s economic growth strategy, casting the next three years as an intensive implementation period. Under the action plan, ministers have been put in charge of promoting specific growth strategy fields while the Abe administration will submit 33 related bills to the Diet session that got under way Friday. The action plan was endorsed after negotiations among Prime Minister Shinzo Abe’s team.
The worse than expected HSBC China manufacturing purchasing managers’ index for January, announced Thursday, “made investors risk-averse amid growing uncertainty over the course of the global economy
NZD/USD Weekly Fundamental Analysis January 27 – 31, 2014 Forecast
Attachment 5037
The NZD/USD ended the week in the red after lackluster Chinese data upset global traders. The pair closed the week at 0.8244 after opening on Monday at 0.8254 and hitting a high of 0.8346. Speculators will pay close attention the central bank meeting and Chinese data along with the US Federal Reserve meeting on the 28th. New Zealand’s economy is beginning to boom, boosted by the post-earthquake rebuild in Canterbury and strong housing and dairy prices – Growth and inflation are running ahead of the RBNZ’s previous expectations, which we think will trump concerns over the price of the currency. The odds are turning in favor of a rate increase at this weeks meeting.
With these drivers in place, the RBNZ had already signaled, in its last official statement (12 December) that rate hikes would be needed by April this year. Since that statement, both inflation and growth have surprised the RBNZ on the upside and forward indicators also suggest that there is more momentum than the central bank was forecasting.
The challenge for the central bank is that the NZD still remains high and has also risen since then. But, in our view, the stronger economy and higher inflation are likely to trump concerns over the elevated exchange rate. The economy is already operating at capacity, demand is booming and inflation is ahead of expectations. Interest rates need to rise soon if the central bank is to meet its inflation goals.
AUD/USD Weekly Fundamental Analysis January 27 – 31, 2014 Forecast
Attachment 5039
The AUD/USD fell under the 87 price level to trade as low as 0.8660 on poor Chinese PMI data and growing inflation numbers. The Aussie closed the week at 0.8705. The HSBC purchasing managers’ index on Thursday showed Chinese manufacturing activity fell to a six-month low in January, with a reading of 49.6, down from December’s 50.5. The figure was weaker than expected and dipped below the 50 level which separates expansion from contraction. The Australian dollar had a rough night amid unease about emerging markets from Latin America to Asia, Westpac senior currency strategist Sean Callow said.
“It all kicked off on the China PMI reading,” Mr Callow said. “The Aussie seemed to be punished as a proxy for Asian regional sentiment.
Australian dollar has dropped below US$0.87 for the first time since July 2010 amid concerns about growth in China and the knock-on effects for emerging markets. China’s bank regulator ordered regional offices to increase scrutiny of credit risks in the coal-mining industry, according to people with knowledge of the matter. At the same time, emerging market assets were hit by worries about slowing growth in China as well as political problems in Turkey, Argentina and Ukraine.
The Aussie slid versus all 16 major currencies after the Wall Street Journal cited Reserve Bank member Heather Ridout as saying around 80 cents would be a fair deal for everybody.
GBP/USD Weekly Fundamental Analysis January 27 – 31, 2014 Forecast
Attachment 5040
The GBP/USD broke recent highs against the US dollar touching 1.6668 to close at 1.6504 after traders sold off to book profits after BBA mortgages missed expectations. This week the risks are clearly biased to the upside. As the BoE mentioned in its January minutes earlier this week, “the recent strength of both the business surveys and employment growth pointed to above-trend growth around the turn of the year”. The BoE highlighted upside risks to its staff’s forecasts of “a little fewer than 1% per quarter in the fourth quarter of 2013 and the first quarter of 2014”. Indeed, PMI indices suggest activity rose by 1.2% QoQ in Q4, but they tend to overestimate actual growth numbers. We expect the recovery to have been broad-based across sectors and expenditure components. In particular, business investment likely rebounded for the second consecutive quarter, driven by the dissipation of uncertainty, higher business confidence, enterprises’ solid cash buffers and improved credit availability.
The Pound eased as headlines from a speech of BoE governor Carney flashed on the screens. The BoE governor provided several reasons why a drop of unemployment below 7.0% shouldn’t trigger an immediate rate hike. Amongst other he also hinted to an improved inflation outlook in the UK. Next month, the BoE will also evaluate how to adapt guidance to changing circumstances. Last but not least, the BoE governor mentioned the strengthening of sterling as one of the headwinds for the UK economy. From a market point of view, it is clear that Carney wants to keep interest rates low for longer, whatever the outcome of the data
EUR/GBP Weekly Fundamental Analysis January 27 – 31, 2014 Forecast
Attachment 5041
The EUR/GBP remained in a fairly tight range closing the week at 0.8293 against Mondays close at 0.8246. The pair had ups and downs over the week but each move seemed to offset. There was exception jobs data released in the UK which sent the pound soaring but this was balanced the next day with eurozone PMI reporting higher than expected. The pair remains fairly well balanced. In addition, Draghi said the low inflation rates may just be a function that the eurozone has suffered a stark financial crisis. Similar fears were raised after the 1999 Asia crisis and the 2008 global financial crisis. Draghi praised those countries, such as Greece, which have made big strides over the past few years to get their public finances into shape.
European Central Bank president Mario Draghi laid out the hope that the ailing eurozone economic recovery will pick up steam over the coming months. He told delegates Friday at the World Economic Forum that a stream of “solid” survey data are pointing to better times ahead for a region that’s grappled with a debt crisis, recession and sky-high unemployment over the past few years. Recent surveys of purchasing managers and consumers have indicated growing buoyancy.
“The hard data are not however as uniformly good as the survey data,” said Draghi, who has been widely credited for helping to douse the debt crisis fires. “In a sense, this behavior reflects very similar behavior that took place in the United States a year, a year and a half ago.”
USD/CAD Weekly Fundamental Analysis January 27 – 31, 2014 Forecast
Attachment 5042
The USD/CAD climbed to a record high this week touching 1.1174 after the Bank of Canada meeting and lack of support from Governor Poloz. Oil and gold prices remain depressed and the overall economic situation in Canada is beginning to turn bleak with unemployment and GDP missing expectations. The Bank of Canada issued a very dovish policy statement in which it opted to keep interest rates where they are. Economists also interpreted the statement that accompanied that decision as a sign the bank is leaning toward lowering rates, not raising them, if and when it chooses to act. Finance Minister Jim Flaherty has made a point of noting that a weak dollar can spur economic growth by boosting exports — a boon for a government with its sights set squarely on balancing the books.
There used to be a much stronger link between U.S. spending and Canadian exports, but that link has weakened in recent years as the Canadian dollar has appreciated. And even though the dollar lost ten per cent of its value last year, we really didn’t see any notable benefit to Canadian export.” Bank of Canada Governor Stephen Poloz emphasized Wednesday that the increase in U.S. demand is more important for domestic economic growth than a weak loonie. The marginal boost of a lower dollar is just “the icing on the cake,” he said. But the bank’s language about the dollar has left some economists thinking it still sees the loonie as overvalued.
Crude & Brent Oil Weekly Fundamental Analysis January 27 – 31, 2014 Forecast
Attachment 5043
Crude Oil prices soared this week moving from the opening at 94.31 on Monday to close the week at 96.65 on implied demands and strong global growth after the IMF and the World Bank increased GDP for 2014 and 2015. The IEA also increased its forecast for demand over the balance of the year.
Brent Oil on the other hand declined at the end of the week. Brent oil prices tumbled below $107 a barrel, tracking a sharp sell-off in stocks and emerging markets as worries mounted over an economic slowdown in China. Expectations that the US Federal Reserve will taper its stimulus package next week were also weighing on prices. Brent, the international benchmark, accelerated its decline to fall 93 cents to $106.65, but was on course to end the week at its highest since December 20. It ended 69 cents lower the prior session after weak factory activity data from China US oil, or WTI, fell 35 cents to $96.97, after settling 59 cents higher on Thursday. It was still set to record its biggest weekly rise since December 6
China’s factory sector shrank in January for the first time in six months, a preliminary survey showed on Thursday, suggesting a weak start for the economy in 2014. Investors fled markets in Asia and Latin America, fearing the impact of slower growth in China and on expectations the Fed will cut further its bond-buying stimulus at a policy meeting next week. Brent and US oil futures had started the day strongly as bitter cold in the US sapped stockpiles of crude and distillates in the world’s largest consumer of oil and drew heating oil imports from Europe, Russia and Asia.
Gold Weekly Fundamental Analysis January 27 – 31, 2014 Forecast
Attachment 5044
Gold surprised investors turning upwards this week to end at 1265.40 against expectations for a decline to the 1220 level. Many Japanese investors are turning from the yen and buying gold as a hedge against inflation and wealth preservation as the Japanese economy turns towards inflation. Gold is on track to record a fifth straight weekly gain for the first time since September 2012. But investors are still wary of a market that took its biggest tumble in more than 30 years in 2013. The world’s largest gold-backed ETF, New York’s SPDR Gold Shares, said its holdings declined by 5.4 tonnes on Thursday, bringing its outflow for the week to 6.6 tonnes. It logged its first weekly inflow since early November last week.
Chinese demand eased, with premiums on the Shanghai Gold Exchange dropping to $10 an ounce from $12 the previous day. China in 2013 took over from India as the world’s leading consumer of gold jewelry, data from metals consultancy Thomson Reuters GFMS showed.
Gold premiums in India, the second-biggest buyer, fell more than 30 percent yesterday from earlier this week on speculation over a possible easing of restrictions on bullion imports.
This quarter, gold prices could rise five per cent to $1,330, owing to strong physical buying and robust fabrication demand, a Thomson Reuters GFMS study has said. “It is possible for gold to touch $1,330 before the current quarter is over. The gold market has not regained the sparkle of 2008-late 2011, and is not expected to do so this year, too,” the study said.
While private investors showed a voracious appetite for gold in the wake of a sharp drop in prices, professional investors were absent from active buying, a trend expected to persist through this year. But a short-covering rally in the first quarter of this year isn’t being ruled out and this could contribute to the recent stabilization at a little more than $1,185 Tapering of the bond-buying programme in the US by the Federal Reserve didn’t have a major impact on the gold market, as prices fell in the second quarter. The result was while exchange-traded fund (ETF) investors sold 880 tonnes through 2013, bar hoarding in East Asia, the Indian sub-continent and West Asia stood at 1,066 tons.
It is expected tapering in the US will continue till the end of this year and by then, some interest rate guidance is expected to emerge. Improving economic fundamentals are expected to continue to improve investor appetite for risk and prevent hefty gold investment.
Natural Gas Weekly Fundamental Analysis January 27 – 31, 2014 Forecast
Attachment 5045
Natural Gas broke the $5.00 resistance level for the first time in many months as cold weather across the US and increased demand helped support prices while lower inventory stocks helped prices gain. Natural gas opened the week at 4.247 to hit a high of 5.024. Over the past couple of years, cheap gas has inspired many utilities to turn away from coal, a move that hurt railroads’ profits. And natural gas is becoming more widely used in transportation. More than 100,000 buses, trucks and other vehicles already run on it, although that figure represents only about 3 percent of the transportation sector.
Friday, the price in the futures market soared to over $5.00 per 1,000 cubic feet, up 10 percent to the highest level in 3½ years. The price of natural gas is up 29 percent in two weeks, and is 50 percent higher than last year at this time. Record amounts of natural gas are being burned for heat and electricity. Meanwhile, it’s so cold that drillers are struggling to produce enough to keep up with the high demand. So much natural gas is coming out of storage that the Energy Department says supplies have fallen 20 percent below a year ago — and that was before this latest cold spell.
The diesel-burning locomotive, the workhorse of American railroads since World War II, will soon begin burning natural gas — a potentially historic shift that could cut fuel costs, reduce pollution and strengthen the advantage railroads hold over trucks in long-haul shipping. Rail companies want to take advantage of booming natural gas production that has cut the price of the fuel by as much as 50 percent. So they are preparing to experiment with redesigned engines capable of burning both diesel and liquefied natural gas.
This sheet combines the bolli and 8&34 averages for forecasting. Only 20 hours.
Attachment 5081
Gold price 'to average $1,220 in 2014'
Some analysts expect price to fall below $1,000, while others are much more bullish
Attachment 5219
=============
The gold price will average $1,219 an ounce this year, according to a survey of analysts.
The analysts expect the gold price to range between $1,067 and $1,379 this year, a report compiled by the London Bullion Market Association (LBMA) found.
Yesterday's gold price according to the LBMA's afternoon London "fixing" was $1,248.
Gold ended 2013 at $1,202, 28pc lower than at the beginning of the year, bringing to an end 12 consecutive years of price growth.
The most optimistic prediction for the gold price this year came from Martin Murenbeeld of Dundee Capital Markets in Canada, who said the price could go as high as $1,550, although he put the bottom of its possible price range at just $1,075.
"With every central bank in developed economies hoping to boost inflation, there is sufficient room to speculate that the gold market will make a turn in 2014 and end the year higher than where it started," Mr Murenbeeld said. But he added: "The US dollar is likely to remain a headwind for gold in 2014."
Gold often moves in the opposite direction to the US currency, which is expected to strengthen as the Federal Reserve slows its money-printing policy of QE.
At the other end of the scale, three analysts said the price could fall as low as $950. One, Robin Bhar of Société Générale in London, said gold investors were "likely to remain big net sellers over the coming months and quarters".
The analysts who contributed to the report cited the possible strengthening in the US dollar, the reining in of QE, weak global inflationary pressures, oversupply of gold and further sales by investors who hold gold in exchange-traded funds or ETFs as factors that could restrain gold prices.
"But the price could be supported by continued strong demand from China, a relaxation in India’s import duties as well as the prospect that low prices could constrain mine output and supply of scrap," the report added. "So an increase in price cannot be ruled out particularly if such “positive” influences take centre stage."
Investors should treat the forecasts with caution, however – the predictions about last year's gold price were far too optimistic. The average analyst's prediction for the gold price in 2013 was $1,753, but the average actual price last year was just $1,411 – almost 20pc lower.
Separately, analysts at Morgan Stanley cut their gold price forecasts for 2014 by 12pc to $1,160.
People who invested in gold via funds suffered big losses last year. The popular BlackRock Gold & General and Way Charteris Gold Portfolio Elite funds lost half of savers’ money, while the Junior Gold fund declined by 65pc – the worst performance of the 1,500 funds available to British savers.
HOW TO INVEST IN GOLD
Gold Bars
Bars come in metric sizes, and are based directly on that day's gold price, plus a premium for manufacture and marketing. The smaller the bar, the bigger the premium.
Gold coins
Twenty-two carat gold sovereigns the favourite of British investors. Sovereigns dating from about 1887 and up to 1982 are currently considered the best investment. Bullion coins recognised as UK legal tender are exempt from capital gains tax.
Another coin option is to buy South African Krugerrands. The smallest is a 0.1oz coin, which costs about £125 at the time of writing.
The specialist website MoneyWeek has a directory of bar and coin dealers.
Exchange-traded funds
ETFs are funds, traded on a stock exchange like shares, that allow investors to track the performance of particular indices or a commodity, providing the investor with the same returns as this underlying market.
ETFs are available for gold, silver, platinum and palladium. ETFs can be traded daily – all you pay is the dealing charge of around 0.4pc, or £7 per trade. ETFs are increasingly the most popular method of gold investment.
Some hold physical gold while others depend on financial instruments such as derivatives. The former, seen as safer, are offered by companies such as iShares and EFT Securities.
Gold accounts
Gold bullion banks offer two types of gold account – allocated and unallocated. An allocated account is effectively like keeping gold in a safety deposit box and is the most secure form of investment in physical gold. The gold is stored in a vault owned and managed by a recognised bullion dealer or depository.
With an unallocated account, on the other hand, investors do not have specific bars allotted to them. Traditionally, one advantage of unallocated accounts has been the absence of storage or insurance charges, because the bank reserves the right to lease the gold out.
Shares and funds
You can of course buy individual shares of companies that either trade or mine gold. Several funds, such as BlackRock Gold & General, aim to pick the best of these shares.
Just a forecasting for GOLD (XAUUSD) D1 timeframe using WmiFor indicator :
Attachment 6754
Talking Points:
- Must You Know What Will Happen Next?
- Is There a Better Way?
- Strategies When You Know That You Don’t Know
“Good investing is a peculiar balance between the conviction to follow your ideas and the flexibility to recognize when you have made a mistake.”
-Michael Steinhardt
"95% of the trading errors you are likely to make will stem from your attitudes about being wrong, losing money, missing out, and leaving money on the table – the four trading fears"
-Mark Douglas, Trading In the Zone
Many traders become enamored with the idea of forecasting. The need for forecasting seems to be inherent to successful trading. After all, you reason, I must know what will happen next in order to make money, right? Thankfully, that’s not right and this article will break down how you can trade well without knowing what will happen next.
https://media.dailyfx.com/illustrati..._Picture_2.png
Must You Know What Will Happen Next?
While knowing what would happen next would be helpful, no one can know for sure. The reason that insider trading is a crime that is often tested in equity markets can help you see that some traders are so desperate to know the future that their willing to cheat and pay a stiff fine when caught. In short, it’s dangerous to think in terms of a certain future when your money is on the line and best to think of edges over certainties when taking a trade.
https://media.dailyfx.com/illustrati..._Picture_1.png
The problem with thinking that you must know what the future holds for your trade, is that when something adverse happens to your trade from your expectations, fear sets in. Fear in and of itself isn’t bad. However, most traders with their money on the line, will often freeze and fail to close out the trade.
If you don’t need to know what will happen next, what do you need? The list is surprisingly short and simple but what’s more important is that you don’t think you know what will happen because if you do, you’ll likely overleverage and downplay the risks which are ever-present in the world of trading.
- A Clean Edge That You’re Comfortable Entering A Trade On
- A Well Defined Invalidation Point Where Your Trade Set-Up No Longer
- A Potential Reversal Entry Point
- An Appropriate Trade Size / Money Management
Is There a Better Way?
Yesterday, the European Central Bank decided to cut their refi rate and deposit rate. Many traders went into this meeting short, yet EURUSD covered ~250% of its daily ATR range and closed near the highs, indicating EURUSD strength. Simply put, the outcome was outside of most trader’s realm of possibility and if you went short and were struck by fear, you likely did not close out that short and were another “victim of the market”, which is another way of saying a victim of your own fears of losing.
https://media.dailyfx.com/illustrati..._Picture_3.png
So what is the better way? Believe it or not, it’s to approach the market, understanding how emotional markets can be and that it is best not to get tied up in the direction the market “has to go”. Many traders will hold on to a losing trade, not to the benefit of their account, but rather to protect their ego. Of course, the better path to trading is to focus on protecting your account equity and leaving your ego at the door of your trading room so that it does not affect your trading negatively.
Strategies When You Know That You Don’t Know
There is one commonality with traders who can trade without fear. They build losing trades into their approach. It’s similar to a gambit in chess and it takes away the edge and strong-hold that fear has on many traders. For those non-chess players, a gambit is a play in which you sacrifice a low-value piece, like a pawn, for the sake of gaining an advantage. In trading, the gambit could be your first trade that allows you to get a better taste of the edge you’re sensing at the moment the trade is entered.
https://media.dailyfx.com/illustrati..._Picture_5.png
James Stanley’s USD Hedge is a great example of a strategy that works under the assumption that one trade will be a loser. What’s the significance of this? It pre-assumes the loss and will allow you to trade without the fear that plagues so many traders. Another tool that you can use to help you define if the trend is staying in your favor or going against you is a fractal.
If you look outside of the world of trading and chess, there are other businesses that presume a loss and therefore are able to act with a clear head when a loss comes. Those businesses are casinos and insurance companies. Both of these businesses presume a loss and work only in line with a calculated risk, they operate free of fear and you can as well if you presume small losses as part of your strategy.
Another great Mark Douglas quote:
“The less I cared about whether or not I was wrong, the clearer things became, making it much easier to move in and out of positions, cutting my losses short to make myself mentally available to take the next opportunity.” -Mark Douglas
Happy Trading!
---Written by Tyler Yell, Trading Instructor
More...
Dollar Forecasts for 2014 and 2015: EURUSD And GBPUSD Exchange Rate Falls Predicted
The US dollar (USD) is forecast to retain a solid footing through the remainder of 2014 and into 2015 suggest the majority of analysts we follow.
The 2014 dollar rally had long been predicted, however a poor winter in the United States saw the currency falter in the first half of the year putting paid to these predictions.
After a decent summer of gains we ask whether the USD is about to restart its stalled longer-term climb again?
For your reference, here are the latest spot rates at the time of this article's latest update:
- The pound dollar exchange rate is 0.66 pct lower on a daily comparison at 1.6618.
- The euro dollar exchange rate is 0.35 pct lower at 1.3317.
Attachment 9208
Martin Schwerdtfeger at TD Securities tells us why he is predicting a stronger USD: "Our G10 FX forecasts are largely unchanged this month. Our baseline view of a stronger dollar on improving US data is gaining support and is expected to remain a key theme in the year ahead. However, while for now we maintain our end 2014 targets for GBP/USD (1.68) and EUR/USD (1.32), downside risks are more evident."
"Rapidly improving economic fundamentals are likely to help US growth performance lead the G7 pack as Japan and the Eurozone lag, allowing the Fed to begin paring back monetary policy sooner," say TD Securities in the their latest analysis of the US economy.
As we see from M5 chart below - the uptrend is started after correction finished - the price was stopped by 44.97 resistance.
- if the price will break 44.97 resistance level on close M5 bar so the primary bullish will be continuing (good to open buy trade)
- if not so we may see the secondary ranging or correction inside the primary bullish
Attachment 10605
Resistance Support 44.97 44.76 n/a 44.65
Attachment 11257
Near-term, Deutsche Bank thinks that the recent pause in EUR/USD drop could extend into year-end with market positioning very extended, real yield fair value still in the high 1.20s, and ECB expectations running ahead of what was delivered at its December meeting last Thursday.
Going out to next year, DB sees more downside to the currency with the risks being skewed to greater, rather than lesser weakness. DB outlines 3 reasons behind this view:
- First, ECB QE remains our baseline most likely delivered in January. The intended effects are likely to be larger and more protracted than equivalently-sized policies in the US or Japan due to the presence of negative rates.
- Second, we expect Fed rate lift-off to materialize over the course of H2, with the dollar historically showing a strong appreciating trend into the first central bank rate hike.
- Finally, we believe next year will mark the beginning of broader capital flow shifts into the US fuelled by persistent growth and increasing monetary policy divergence.
In line with this view, DB targets EUR/USD in 2015 at 1.22 for Q1, 1.20 for Q2, 1.18 for Q3, and 1.15 for Q4.
the source
Cheap Oil: Too Much Of A Good Thing?
Attachment 11411
The 40% drop in oil prices over the past 6 months has garnered a lot of attention recently, most of it focused on the economic stimulus lower oil prices should provide the global economy, the impact on currency and fixed-income markets and the increase in economic pain suffered by exporters such as Iran and Russia. In this article, I draw on historical data to assess the potential increase in geopolitical tail risk that lower oil prices may represent. I believe this is an overlooked consequence of lower oil prices that, while low probability, would have an outsize impact on the global economy - a classic "fattening of the tail". I look at monthly and aggregate data to smooth out daily fluctuations and avoid having us mistake the forest for the trees.
The data shows that in the 1980s, the most-cited oil price war, the average price of oil dropped from approximately $28/barrel in 1985 to a low of $11.58/barrel in July 1986 (US Energy Information Administration data for monthly average front month futures contract price). This would be analogous to a drop from $60/barrel to $25/barrel in 2014 prices, using the US Bureau of Labor Statistics CPI calculator. Prices subsequently rebounded almost 60% from that July 1986 low, ranging between $16/barrel and $20/barrel for the rest of the 1980s. (There were a few months in that 4 year timespan where the average dropped below $15/barrel, but I want to focus on the big picture in this article.) Inflation-adjusted to 2014 price levels, oil prices ranged between $29/barrel and $37/barrel.
Attachment 11408
Then something dramatic happened. Between July 1990 and October 1990, prices nearly doubled from approximately $18.50/barrel to $36/barrel. You have probably deduced by now that this was when Iraq invaded Kuwait. For the next 3 years, $20/barrel went from being a ceiling for oil prices to being a floor. Subsequently, prices dropped in the rest of the 1990s until doubling and then tripling in the 2000s for reasons that are beyond the scope of this article.
Fast forward 25 years and we are again seemingly in the middle of a price war with no bottom in sight. This time, though, it may indeed be different. It would be foolish to assume the Russians do not remember the impact of the 1980s oil price collapse on the Soviet Union, then one of the largest producers in the world. At over 10 million barrels per day, Russia today rivals Saudi Arabia in terms of production, with each country representing approximately 10% of global supply. Iranian oil exports, which had only just begun to recover thanks to the loosening of sanctions, are now being hit by lower prices. At 2+ million bpd of exports, a $40/barrel drop in price means Iran is "losing" over $25 billion/year in badly-needed revenue. This is not small potatoes for a country whose GDP the World Bank estimated was only $366 billion in 2013.
Attachment 11409
Note that both Russia and Iran have shown a willingness to act unilaterally at great cost. From annexing Crimea to visibly increasing bomber patrols in Northern Europe and the US Gulf Coast, the Russians have proven they are no wilting flowers. Indeed, some would say they rely on European dependence on Russian natural gas to get their way. The Iranians have consistently refused to actually dismantle existing nuclear facilities. There has been a great deal of talk about talking, but centrifuges continue to spin.
It does not take a rocket scientist to deduce that any increase in geopolitical instability which increases the price of oil benefits Russia and Iran. It is worth pondering the implications of that statement. I am emphatically not stating that the two countries will act irresponsibly to raise the price of oil. I am just pointing out that, for both countries, lower oil prices may have subtly shifted their calculus and their thinking around the risk-reward of their actions.
Attachment 11410
We do not need to ascribe nefarious intentions to large oil producers to understand how low prices can have significant geopolitical impacts. Smaller producers such as Venezuela and Nigeria, battling social instability at home, are being hit hard too. As much as the two countries may seem removed from mainstream Western consciousness, the world does not need a new source of volatility in Latin America or increased volatility in a West African region already grappling with Islamic militancy. Lower oil revenues do not help the Nigerian army, guardians of millions of barrels per day of light sweet oil, to procure weapons and train troops to combat secessionists and Islamic militants.
Of course, prices may drop another $30/barrel. The broader point of this article is that lower oil prices have potentially "fattened the tail" by altering probabilities, risk-reward calculations and, as the global economy adjusts to lower prices, the impact of an increase in the price of oil from here. Wearing my trading and portfolio management hat, I personally would not buy oil futures or even outright buy long-dated calls. The probabilities, in my mind, are not high enough to justify the potential losses. But I have begun looking at low-cost, high-payoff options structures such as vertical call spreads and butterflies to see if they make sense as tail hedges in a potentially more geopolitically volatile world. Note that these are not trading recommendations in any way, shape or form. Just a way of articulating my thoughts.
So, is cheap oil too much of a good thing? In terms of raw numbers, it is a very good thing. In terms of fat tails, perhaps not.
the source
So with the advent of global QE, and zero interest rates, have central banks unlocked the key to perpetual bull markets? Let’s just say, I doubt it.
They have managed to stretch some of the multi-year cycles, and hold off the bear much longer than most have anticipated, but I don’t think they have discovered the secret to infinite prosperity.
As I said, the implementation of global QE has stretched some of the longer term cycles, and that is the first thing I’m going to explore in this article. Prior to 2000 there was a very clear four year cycle in the stock market. Roughly every four years stocks would move down into an exceptionally vicious decline, usually associated with either a recession, or some kind of financial debacle.
Attachment 12391
After 2002 central banks, in their hubris, decided that they could abort the normal business cycle by adjusting interest rates to zero and printing an infinite amount of currency units. At that point the four year cycle in the stock market morphed and evolved into a 7 year cycle.
Attachment 12392
As you can see in the next chart, it’s getting very late in this seven year cycle, so we can probably expect the top sometime this year.
Attachment 12393
From this point on I’m going to convert to the chart of the NASDAQ as technology is driving this bull market, and the chart of the NASDAQ will tell us when to expect the top.
For more than a year now I’ve been saying that this bull market would not end until the NASDAQ at least retested the March 2000 highs at 5132. The perma bears that have been trying to call a top for years just don’t understand how major bull markets top. They almost always top on a breakout. Take the top in 2007 for instance. Notice how the market initially tested the 2000 high in the summer of 2007, and then printed a final top on a marginal break out above the old high (major bottoms also form in this pattern).
Attachment 12394
The big money institutions manufacture these topping and bottoming patterns as it gives them a breakout to sell into at a major top, and a breakdown to buy at a major bottom. Understanding how big money constructs tops and bottoms is critical in preparing for the next bear market.
Given the fact that we are now six years into this bull market with the expectation for one of those seven year cycle lows sometime in the spring or summer of next year, then we can look at a chart of the NASDAQ and come up with a game plan for exiting this bull market. I’m guessing sometime over the next 2-4 weeks we’re going to get that retest of the all time highs, or at the very least, a retest of 5000. To be followed by a sharp intermediate degree decline.
Attachment 12395
The bottom of the next intermediate cycle low in May or June is probably going to be the last great buying opportunity on the long side until 2016 (there is a lower probability scenario where the market just continues down into that intermediate cycle low over the next 2-3 weeks). As stocks come out of that yearly cycle low sometime this summer, this will be the period where the big-money banks manufacture a breakout to sell their positions in preparation for the move down into that seven year cycle low next year (economic conditions are already starting to weaken). We want to ride on their coattails for this last move back up, and then hop off the train before it goes over the cliff and the market starts down into its seven year cycle low sometime next fall.
Attachment 12396
At this point it’s too late in the seven year cycle to expect a sustained breakout above the all-time highs, so I think we should assume that that major resistance level is likely going to cap this bull market.
Attachment 12397
Now what can we expect at a seven year cycle low you ask? I think I can say with a fair bit of confidence that the S&P will break the multiyear trend line, and likely retest the 2000 & 2007 highs. The bears will be calling for the end of the world, and a move back down below 666 by this time.
Attachment 12398
the source
I just used nearest_neighbor_-_weighted_corr indicator from this post to understand about where EURUSD will go to the future.
Attachment 12918
