Markets Continue Rally As Fed Minutes Reveal A Potential Change In Their Rate Path… Yesterday we continued the surge upwards in the global stock markets, as risk sentiment improves.Oil Frozen At Record High Supply…Where is the bottom and when will it stop? Where’s The FTSE Going…? We’re trading at levels that we were trading at in the 90s still and so far 2016 doesn’t look like it’s going to be too promising for UK blue chips. Make Or Break…The markets are sitting at a point where we could either see a big turn around or a massive drop further into bear territory.
Markets Continue Rally As Fed Minutes Reveal A Potential Change In Their Rate Path
18.02.2016 Yesterday we continued the surge upwards in the global stock markets, as risk sentiment improves. The charge upwards was also helped by the Fed Meeting Minutes, which although didn’t mention anything major, did show that the FOMC members are pretty much 100% holding tight at their next meeting in March. The FOMC members pretty much all agreed on the continued rate path, however showed that many of them were concerned about the recent market volatility and uncertainty regarding the global economic slowdown. According to the Minutes: “A number of participants were concerned about the potential drag on the U.S. economy from the broader effects of a greater-than-expected slowdown in China and other (emerging market economies),”. Markets on the whole took it in their stride, shrugging off any major movements following the minutes.
Currently the markets haven’t priced in any further rate increase in 2016. This in my opinion is very dangerous and most possibly incorrect. Although there is a current retracement occurring, with a small amount of optimism returning, the bears are still dominant and U.S rates remain on the incline. It looks like the Fed has lost credibility in the eyes of many market participants. Even though the FOMC members are still stating that they believe rates will be increased again in 2016 (potentially more than once), markets are ignoring this. For now the move higher looks like it may continue. We’re nearly at the 50% retracement in the S&P 500 from the move downward that began at the beginning of the year. This level (1944) was a strong support zone and so now has turned into resistance. If we can make it there, it wouldn’t be a bad idea to either hedge your portfolio or get short. When going short remember to stick to your stops and remain incredibly cautious. If we break and close above 2009 then we could go back into bull territory.
Oil Frozen At Record High Supply
17. 02.2016 One of the big questions going on regarding the global economy at the moment, is that of Oil. Where is the bottom and when will it stop? As we all now know, oil has been on a steady and continuous decline since this time last year. The causes are numerous, with the main contributors being an overall slowdown in global economic demand and of course the over supply caused by in large by the institution of U.S shale gas producers and a relentless Saudi Arabia, pushing output through the roof. On Thursday last week we had a bit of a bottom at $26 a barrel. Since then we have moved up over 15% to trade back around the $30 handle.
This week kicked things off with bullish sentiment regarding global crude prices, off the back of a potential agreement between Saudi Arabia and Russia to cut supply. Yesterday the deal was struck and it wasn’t as expected. Both governments decided to maintain the level of output at the current levels; which in effect are at an all time high. As a result we saw a drop off. So where to now…? I think it is dangerous to call a bottom and to be honest this market is still incredibly bearish, however we do have a nice reversal pattern on the daily; with a hammer and a morning star. For now it’s probably best to wait for a further pullback to begin buying, that is if you are into picking bottoms. Personally I’m inclined to wait for a test of the $25 handle to see how markets react.
Where’s The FTSE Going…?
15.02.2016 For today I thought I would take a closer look at the UK stock market. The FTSE had a hard time last year, ending the year slightly down despite the attempt to push higher beyond 7100. We’re trading at levels that we were trading at in the 90s still and so far 2016 doesn’t look like it’s going to be too promising for UK blue chips. When we talk about beating the market, the U.S stock market seems always to be the comparison. If we look at the FTSE however, UK investors that bought into the index have had a hard time over the last two decades.
With the bulk of FTSE stocks being those of which you would chuck in a dividend based portfolio, the gains have been severely limited. Last year the top performers were the following: DCC – up 62.39% Taylor Wimpey — up 51.71% Hargreaves Lansdown — up 50.8% Berkeley Group — up 49.01% Inmarsat — up 43.31% Direct Line Group — up 41.76% Provident Financial — up 37.99% Barratt Developments — up 37.66% Carnival — up 33.62% Persimmon — up 30.56% The macro play was to apply a simple process of elimination, cutting out all oil, mining, banking and supermarket stocks. The best performers were the property builders, due by in large to the lack of housing in the UK. Many are now saying it’s time to get back into the commodity based stocks. Personally I think we’re approaching a really good buy level for the entire index. we’ll most likely move slightly lower, and will probably knock on the 5300 level, which is a pretty major support level, coinciding with the 50% retracement from the 2008 low and last year’s high. For the long term buy and hold investor, it’s looking good. Keep an eye on this index and for now I’d be a scale in buyer with little if any leverage!
Make Or Break
12.02.2016 The markets are sitting at a point where we could either see a big turn around or a massive drop further into bear territory. Currently most of the developed world’s stock markets have recently entered bear territory with the exception of the S&P 500. Bonds are at record highs, with Japanese, German, Swiss, Irish and Spanish bonds all holding negative yields, Gold has been rallying to the point where we’re hitting overbought levels in all the major oscillators and both the Yen and Swiss Franc (our safe haven currencies) have been bought to the hilt.
Although I think we will no doubt move lower, as risk off sentiment is still dominant, we are at an interesting point where I think we could begin to see a retracement. It is the end of the week and markets are so oversold/overbought that a decent Retail Sales figure from the U.S has the potential to briefly turn things around. Markets don’t just go one way and consolidation is a necessary feature of any market. If we don’t see a retrace today, we’ll see one sooner or later, so if you want to get short I’d be waiting patently on the sidelines.
