Short recap
Asia up
Europe opening lower
Trump in China to ask
for China cutting financial ties with NoKo
US-Chinese companies signed USD 9 bln deals
USD impacted
by headwinds/slowdown related to tax reform (implementation in 2019)
As the tax cuts will spike the budget deficit and
will have only temporary effect on the economy (according to Fitch)
Brexit - EU
preparing tough transition terms for UK (duration, scope and obligations)
According to CME Bitcoin is a new asset
class, not crypto currency
ECB caught by
bad loans in Italian banks
More leaning towards hawkish side what may support EUR
Equities
Apple – EU
asked for details about tax structure
Monte dei Paschi in profit
after some one off items (Q3)
Qualcomm-Broadcom
merger under Chinese scrutiny
Valeant profits
up
Funo (BoJ) – Japan stock prices not overheating,
reflect global investments and corporate earnings
Nikkei 225 close to level last seen in 1992 on
relatively low valuations, profit growth and weak JPY
Are US stocks too high?
As mentioned few days ago, the sentiment index
(bulls/bears ratio) is close to 1987 highs what may be seen as bears completely
giving up. Would feel like there are no more bears left to be converted to
bulls and push the market higher. What’s next?
Yes, the valuations (S&P 500 with 19x forward
PE) are high but we need a trigger. Is it going to be a weakness in US economy
or substantial increase in rates? We believe that missing higher yielding
alternatives than dividends are behind all low volatility and investors not
caring. Of course US companies do well from earnings and revenue perspective
but we truly lack an alternative. Even thought Fed is on a hike path, the bond
yield remains flat, thus not attractive enough to trigger a cyclical rotation of
capital.
Techs (lately Apple) do support the rally heading
towards Christmas. A small correction or hesitation may come on the back of
Trump tax reform hurdles. US macro is good, EBITDA at higher than in 2007,
revenues growing almost 11% y/y as weaker USD gave a hand.
S&P 500 - we see a divergence on a daily chart,
moving higher in a narrow channel and any decisive break up/down can start the
correction.
Volatility is at extreme lows again prompting a
China story from Aug 2015 to our minds. If you feel so, check this out…
Warren Buffett’s favorite market metric suggests investors are
‘playing with fire’ link
…and you may get some chips off the table
now.
Bonds
10-yr Trys yield at 2.31% - very low, not
lending any support to USD vs EUR, JPY
10-yr Bund yield at 0.33%
Periphery saw rally yesterday with Bunds almost
unchanged
IT/PT to Bunds spread keeps declining
EURUSD
USD on negative, not helped by low US rates
As the yields remain low, USD need positive news
from data or tax reform effort
Otherwise the recent USD rally is due for
correction
H&S formation almost complete, Bear sitting
above 1.1600 level
Resistance at 1.1595 (55 HMA), 1.1605 (50.0% Fibo),
1.1615 (high from May 2016), 1.1623 (10 DMA), 1.1658 (200 WMA), 1.1670 and
descending trendline connecting the lows of Oct 2008, Jul 2012
Support at 1.1550, 1.1500, 1.1490 (61.8% Fibo)
USDJPY
Heavy activity expected above 114.00
As there are bids from lows and above 114.00
Nikkei 225 to test 23 000 level
Goldman Sachs looking to invest in Japan
Resistance at 114.40/50
Support at 113.82 (10 DMA)
Source: Saxo Bank
Oil
Crack on corruption and fight for power a new daily
norm in Saudis
Speculative demand for front end contracts
(backwardation) drives oil higher
While sellers sitting on sidelines and supply
unaffected
Be aware that this speculative longs may create a
misleading feeling about market tightening
Geo political risks to support oil further along
with likely OPEC cuts extension
Overnight corrected on lower China imports as
country is reducing production due to pollution over winter months
EVs can create a plateau in 2030
Gold
Stuck between 1263 (61.8% Fibo) and 1282 (50.0%
Fibo)
Sitting above 1277 (100 DMA) with further level of
note 1300/1306
Which may be in focus once 1282 is broken and net
sellers turn to buyers
Data/events
ECB Governing Council meeting
To watch any comment as more officials lean to
hawkish side
Are US rates dependent on the height of the Chair?
Enjoy... link
Should you have any questions feel free
to contact me anytime.
Good luck Champs!
Mr Hawk
DISCLAIMER: This material was created
for informational purposes only and represents the Land of Trading team’s view
of the past and current economic and capital market environment. It is not an
investment advice and should not be viewed that way at all, and the creators of
this material cannot be held liable for any potential losses resulting from
trading, where despite this disclaimer someone would consider this material as
an investment advice. All rights reserved ©2016. Contact:
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