Month: November 2012

Source: ForexYard

The price of crude oil and gold tumbled yesterday, as concerns about the upcoming US “fiscal cliff”, a series of automatic tax increases and spending cuts set to take place if the US Congress fails to reach a budget deal, led to risk aversion in the marketplace. The safe-haven Japanese yen and US dollar both gained as a result of investor fears. Today, in addition to any “fiscal cliff” developments, the US Prelim GDP, Unemployment Claims and Pending Home Sales figures are all forecasted to generate market volatility during afternoon trading.

Economic News

USD – Dollar Advances Due to Investor Risk Aversion

While the USD/JPY turned bearish for most of the day yesterday, the greenback was able to post significant gains against its higher-yielding rivals due to fears regarding the upcoming US “fiscal cliff”. Against the Canadian dollar, the USD gained more than 20 pips during European trading, eventually trading as high as 0.9956. The USD/CHF advanced more than 30 pips before peaking at 0.9339. A slight downward correction brought the pair own to 0.9325 by the evening session.

Today, dollar traders will want to continue monitoring any developments in the budget negotiations between US Congressional leaders. In addition, the US Prelim GDP and Unemployment Claims figures, both set to be released at 13:30 GMT, followed by the Pending Home Sales at 15:00, all have the potential to generate market volatility. If any of the indicators come in above expectations, risk taking could result in the safe-haven greenback giving up some of yesterday’s losses.

EUR – Global Economic Fears Sends Euro Tumbling

The euro took heavy losses against both the safe-haven US dollar and Japanese yen yesterday, as uncertainties regarding a recent Greek bailout agreement combined with a possible upcoming US fiscal crisis sent led to risk aversion among investors. The EUR/USD fell more than 60 pips during the European session, eventually trading as low as 1.2879. Against the JPY, the common-currency gave up more than 40 pips during mid-day trading to reach 105.30, a one-week low.

Today, analysts are warning that the euro could take additional losses if the ongoing budget negotiations in the US remain deadlocked and investors continue shifting their funds to safe-haven assets. Additionally, traders will want to pay attention to the results of an Italian 10-year bond auction. If the bond auction shows that Italian borrowing costs have gone up, the euro could extend its bearish trend during mid-day trading.

Gold – “Fiscal Cliff” Fears Cause Gold to Slump

The price of gold fell by more than $30 yesterday, to reach a three-week low at $1705.85 an ounce, as fears regarding the US “fiscal cliff” and its potential to send the US back into recession caused investors to shift their funds to safe-haven assets. By the end of European trading, the precious metal saw a slight upward correction and was trading at the $1713 level.

Today, gold traders will want to pay attention to a batch of US data along with any developments in Congressional budget negotiations. Unless positive news is released, analysts are warning that gold prices could continue falling throughout the day.

Crude Oil – Oil Receives Minor Boost Following US Inventories Report

After falling by close to $1.50 a barrel to reach as low as $85.70 during European trading yesterday, the price of oil was able to stage a slight upward recovery following a lower than expected US Crude Oil inventories figure. US stockpiles fell by 300,000 barrels last week in a sign that demand has gone up. As a result, crude was able to bounce back to the $86.40 level during afternoon trading.

Today, oil traders will want to pay attention to the US Prelim GDP, Unemployment Claims and Pending Home Sales figures. Should any of the news come in above analyst expectations, speculations that demand for oil will go up may drive the price of oil higher.

Technical News

EUR/USD

While the MACD/OsMA on the weekly chart appears close to forming a bearish cross, most other long-term technical indicators show this pair range trading. Taking a wait-and-see approach may be the preferred strategy here until a clearer picture presents itself.

GBP/USD

The Bollinger Bands on the weekly chart are beginning to narrow, indicating that this pair could see a price shift in the coming days. Additionally, a bearish cross is close to forming on the same chart’s MACD/OsMA. Traders may want to open short positions for this pair.

USD/JPY

The Williams Percent Range on the weekly chart has crossed over into overbought territory, indicating that this pair could see a downward correction in the coming days. In another sign of impending bearish movement, the Relative Strength Index on the daily chart appears close to crossing above the 70 level. Going short may be the wise choice for this pair.

USD/CHF

While the daily chart’s Bollinger Bands are beginning to narrow, indicating that a price shift could occur in the near future, other long-term technical indicators are failing to provide clear signs about what direction the shift will be. Taking a wait-and-see approach may be the best option for this pair.

The Wild Card

NZD/USD

The Bollinger Bands on the daily chart are narrowing, indicating that a price shift could occur in the near future. Additionally, the Slow Stochastic on the same chart has formed a bearish cross, indicating that the price shift could be downward. Forex traders may want to open short positions ahead of possible downward movement.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Source: ForexYard

Hey Everyone,

Below are some market trends for today.

Good luck!

-Dan

Gold- May see upward movement today
Support- 1714.16
Resistance- 1734.67

Silver- May see upward movement today
Support- 33.10
Resistance- 34.12

Crude Oil- May see upward movement today
Support- 86.09
Resistance- 88.10

Dax 30- May see downward movement today
Support- 7289.04
Resistance- 744.71

EUR/USD May see upward movement today
Support- 1.2892
Resistance- 1.3067

Read more forex news on our forex blog

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Source: ForexYard

Higher yielding assets, including the euro, gold and silver, took moderate losses during overnight trading before rebounding during the early morning session. Investor concerns regarding a lack of details in the recent Greek bailout agreement and the upcoming US “fiscal cliff, were largely responsible for risk aversion in the market yesterday.

The price of crude oil remained bullish throughout the Asian session. The US Crude Oil Inventories report, which indicated high demand among American consumers, resulted in the commodity advancing over $1 a barrel since afternoon trading yesterday.

Main News for Today

Italian 10-Year Bond Auction
• If the bond auction shows that Italian borrowing costs have gone up, the euro may take losses against its main currency rivals as a result

US Prelim GDP- 13:30 GMT
• The GDP figure is forecasted to come in at 2.8%, which would signal an improvement in the US economic recovery
• A higher than expected figure could result in risk taking, which would boost currencies like the euro and
AUD

US Unemployment Claims- 13:30 GMT
• The unemployment claims figure is forecasted to come in at 392K
• A lower than expected figure could help the USD vs. the JPY

US Pending Home Sales= 15:00 GMT
• Pending home sales are forecasted to have increased from 0.3% to 0.9%
• A better than expected figure today could help the US dollar against the Japanese yen

Read more forex news on our forex blog

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

By MoneyMorning.com.au

Yet again our stock markets are completely beholden to the decisions of a few men. The ‘fiscal cliff’ negotiations are the only game in town.

Last night the S+P 500 sold off through some important levels and looked pretty sick indeed, until US President Barack Obama and House of Representatives speaker John Boehner announced that they both felt confident that a deal would be reached sooner rather than later.

Suddenly, stocks spun on a dime and shot higher.
They rallied nearly 2% from the lows that they were trading at just before the announcement.

It almost feels like they time the announcements based on where stocks are trading. It wouldn’t surprise me if they really did…

‘Excuse me Mr President, but the stock market is currently down over one per cent. Could you make an announcement that the talks are going well? We’d really like stocks to finish in the green today.’

Perhaps my cynicism is going a little too far, but I feel confident that keeping the stock market afloat is top of mind for both the government and the Federal Reserve.

Fed chairman Ben Bernanke has quite frankly stated that the wealth effect from a rising stock market is something he’s trying to achieve through his relentless money printing.

For a bear like me this can make trading the stock market incredibly frustrating. I’m quite literally ‘fighting the Fed’. This is something most stock market pundits will say is suicide.

But as far as I am concerned the higher they coax the stock market the further it has to fall when reality strikes…

I read an interesting article by John Hussman on Mish’s global economic analysis blog (My favourite site for economic analysis) that stated:

‘Our estimates of prospective stock market return/risk, on a blended horizon from 2-weeks to 18-months, remains among the most negative that we’ve observed in a century of market data.

‘On the valuation front, Wall Street has been lulled into complacency by record profit margins born of extreme fiscal deficits and depressed savings rates. Profits as a share of GDP are presently about 70% above their historical norm, and profit margins have historically been highly sensitive to cyclical fluctuations. So the seemingly benign ratio of “price to forward operating earnings” is benign only because those forward operating earnings are far out of line with what could reasonably expected on a sustained long-term basis.

‘On the basis of smooth fundamentals such as revenues, book values, dividends and cyclically-adjusted earnings, the S&P 500 is somewhere between 40-70% above pre-bubble valuation norms, depending on the measure. That’s about the same point they reached at the beginning of the 1965-1982 secular bear period, as well as the 1987 peak.’

‘We remain convinced that stocks are richly valued here. A fairly run-of-the-mill normalization of valuations in the course of the present market cycle would imply bear market losses of about one-third of the market’s value, without even establishing significant undervaluation. Then again, there’s no assurance that valuations will normalize, or that stocks will experience a bear market here. Maybe Wall Street is correct that profit margins will remain forever elevated and The New Global Economy™ will never again witness “normal” valuations on these measures at all. There’s no shortage of analysts who effectively embrace that view by focusing only on forward-operating earnings.’

Hussman is obviously talking about the very big picture there, and it would be foolish to actually trade the stock market today based on that view alone. The difficulty, as always, is in the timing.

Our resident small-cap fanatic, Kris Sayce, says no. He’s been in the stock market for the past few months telling his readers to punt on small-cap stocks, as many of them hit new low points. His view is that because of the big gains on offer, you only have to allocate a small part of your savings in order to get a big return.

And if things don’t work out, well, you’ve only lost a small amount of cash.

But I look at the stock market differently. My role isn’t to help traders with a small part of their wealth. I’m helping them manage their entire trading portfolio, which is usually many times larger than a small-cap portfolio.

And one thing I’m looking at currently which I find interesting is the deterioration in new capital goods orders (technically defined as the year over year change in Non-defence capital goods excluding aircraft):

The reason I find the recent fall so interesting is that this chart looks eerily similar to the long term chart of the S+P 500:

The only real difference between the two is that new orders have already rolled over and are falling, whereas the stock market is still near the highs. If I was a betting man I would have to say that the stock market is close to following the new orders chart lower.

Also it’s interesting to note that new orders haven’t had such a steep decline in the last 30 years without a concurrent recession, as noted in ZeroHedge.

When looking at the above my conviction increases that we may be getting close to a fairly sizeable fall in the stock market.

We may have seen a big spike in the stock market last night on hopes that the fiscal cliff issue will be resolved, but the fact is the Democrats and Republicans are still miles apart. If you’re interested in knowing where they actually stand then this quote from ZeroHedge gives you a good insight into where things are really at:

 

‘Any deal on the cliff requires an acceptance of the relative role of revenues and outlays in closing the budget gap. The official positions of the major players are miles apart. President Obama has proposed a roughly $4 trillion 10-year deficit reduction plan that is $1.5 trillion (or 40%) tax increases, mainly from allowing the Bush tax cuts to expire for upper income households. His plan has been roundly rejected by Republicans. They argue that most of the spending cuts are not real: his $4 trillion includes almost a trillion in savings that were already agreed to in the first part of the debt-ceiling agreement and almost another trillion in savings from the winding down of the war in Afghanistan. Stripping those items out, the tax increases become three-fourths of a $2 trillion deficit reduction plan.

‘By contrast, the two main House Republicans, speaker Boehner and Budget Committee chairman Paul Ryan, have suggested that spending cuts should account for all or the vast majority of the cuts. In his negotiations with the President in 2011, Speaker Boehner was apparently close to agreeing in principle on $0.8 trillion in tax increases, or 20% of a $4 trillion dollar plan. However, that deal quickly fell apart once it began to be fleshed out and vetted with the rank and file members in Congress. Moreover, the plan’s reliance on “dynamic scoring”- raising revenues by stimulating growth-has already been strongly rejected by Democrats. Paul Ryan has offered budgets in each of the last two years that include dramatic cuts in spending – including effectively eliminating all of non-defense discretionary spending – but no increase in taxes.

‘To reach a deal, the two parties must not only bridge a huge gap in terms of the tax share-somewhere between 0% and 75% – they must also agree on the same accounting system.

A big precedent

‘The outcome in this initial round of negotiations could set the tone for future deals:

• What is the percentage split between revenues and outlays?
• What kinds of revenue increases are acceptable?
• Will the deficit reduction be “dynamically scored”?
• Will the austerity be relatively big or small?

‘Members of both parties feel that their leaders have given too much ground in the past. Democrats were upset when President Obama agreed to extend all the Bush tax cuts. Republicans are upset about extending the payroll tax cut and extended unemployment benefits. For different reasons, neither party was happy with the outcome of the debt-ceiling debate: for some fiscal conservatives, any debt-ceiling increase was wrong and neither party liked the sequester.

‘For Democrats, there will never be an easier time to raise upper-income tax rates, since they are set to go up automatically at year-end. This is why many liberal leaning politicians and analysts are arguing that it is better to let all the tax cuts expire-go over the cliff-and then offer to restore tax cuts for just low- and middle-income families. At the same time, if they raise revenues by closing loopholes, it will be harder to do comprehensive tax reform later. On Medicare, there are limits to how much payments to providers can be cut without seriously impairing service. Moreover, as we have seen with the “doc fix”, if the cuts are too big, they simply become part of the annual mini-cliff.’

It’s quite clear from the above that headlines announcing that a fiscal cliff deal is imminent are premature. It’s my strong view that the current rally will not last much longer and the potential downside once the downtrend reasserts itself will be very large.

My current target for the S+P 500 if things unravel is all the way down at 1266…a drop of more than 10% from the current level.

Murray Dawes
Slipstream Trader

From the Port Phillip Publishing Library

Special Report:
Retire Rich, Happy and Free From Money Worries

Daily Reckoning:
Nothing More than Feelings… For the Aussie Dollar

Money Morning:
Why I’m Bullish on These Beaten-Down Stocks

Pursuit of Happiness:
Make Sure You Have a ‘Preparedness Kit’

Australian Small-Cap Investigator:
Why Speculating On Small-Cap Stocks is Your Best Bet in a Rigged Market

Stock Market Rally Set to End: Imminent Stock Crash

By MoneyMorning.com.au

Most of America has suffered since the crash of 2007. Property values plummeted, unemployment soared and remained stubbornly high, the use of food stamps continues to set records. Pension plans are going broke and municipalities around the country are teetering on the edge of bankruptcy.

All this five full years after the crash.

A federal government stimulus armada led by Fed Chairman Ben Bernanke and Treasury Secretary Tim Geithner hurled trillions of dollars at the meltdown. Instead of green shoots, main street seems to be in the middle of seven lean years while Wall Street’s short memories inflate bubbles in junk bonds and government debt.

The Market Doesn’t Need Government ‘Help’

Left to its own devices, the economy’s healing powers are extraordinary. For instance, the depression of 1920 was a doozy. Unemployment jumped that year from 4 percent to nearly 12 percent, and GNP declined 17 percent.

Had the likes of Tim Geithner taken over as Treasury Secretary, who knows for how long the pain would have dragged on. But it was not a career bureaucrat that took the job but instead a 66 year old industrialist, Andrew Mellon.

By the summer of 1921, recovery was already underway. The following year, unemployment was back down to 6.7 percent and it was only 2.4 percent by 1923. By 1926, Treasury Secretary Mellon was able to say, ‘We are now at a very high tide of prosperity.’

Instead of bailouts, Mellow agitated for lower taxes and immediately went to work on peeling away America’s bloated post WWI debt. Mellon had built industrial dynasties in oil, steel, shipbuilding, construction, and banking. To take the Treasury job he resigned directorships at 60 companies.

His first day, as Mellon biographer David Cannadine relates, Mellon arrived for work at 8am, an hour before the staff. ‘Such a thing had never happened in the memory of any of the Treasury’s night watchmen.’

Mellon knew that if tax rates were lowered on businesses and individuals that money would be reinvested in the economy, creating jobs and promoting economic recovery. But he didn’t immediately get all he wanted. The farm bloc stood in the way of most of his tax agenda, but taxes were reduced and over time Mellon succeeded.

At the same time, Mellon was able to whittle down the federal debt that stood at $24 billion when he took office. By 1929 he had reduced it to $16 billion, saving the government millions a year in interest payments. He believed the domestic debt would be extinguished by 1942. A goal the Great Depression postponed.

The Pittsburgh industrialist believed countries like individuals should pay off their debts. To let debts linger was ‘a sign of debility and denoted an absence of the essential vigor and foresight which insure future success,’ Mellon said. ‘It was the policy of the thriftless, the ne’er do-well.’

A Career Bureaucrat Bails Out His Buddies

So while Mellon was a financial prodigy, Geithner, is a product of government. He began his career at Kissinger Associates, and then joined the Treasury Department in its International Affairs division.

He worked under Larry Summers and Robert Rubin at Treasury and there is some dispute as to which man was the primary mentor to Geithner. Next it was on to the Council on Foreign Relations and then to the International Monetary Fund.

At age 42 he was made President of the Federal Reserve Bank of New York, and then he was nominated to be Secretary of the Treasury. In his public life, Geithner has developed a knack for being in the centre of financial crisis, whether at the IMF, NY Fed, or at Treasury.

Wikipedia explains,

‘In March 2008, he arranged the rescue and sale of Bear Stearns. In the same year, he played a supporting role to Henry Paulson, Treasury Secretary and former CEO of Goldman Sachs, in the decision to bail out AIG just two days after deciding not to rescue Lehman Brothers from bankruptcy.

‘Some Wall Street CEOs subsequently expressed the opinion that decisions in which Geithner participated, especially the failure to rescue Lehman, contributed to worsening the global financial crisis. As a Treasury official, he helped manage multiple international crises of the 1990s in Brazil, Mexico, Indonesia, South Korea, and Thailand.’

Having never worked in the real world of commerce, Geithner is able act out his inner-sociopath at government posts.

In his book Bailout, TARP Special Inspector General Neil Barofsky explained that he could get Geithner to meet with him only by threatening to report the secretary’s behavior to Congress. When they did meet, Geithner was hostile:

‘As we parried back and forth, Geithner repeatedly reached a pitch of anger, regaling me with detailed expletive-filled explanations that established my apparent idiocy. He would then calm himself down and give me a forced, almost demonic smile.’

Barofsky’s psychiatrist wife told her husband Geithner might suffer from narcissism, ‘and therefore might be psychologically incapable of truly admitting that he made a mistake’.

Geithner did all he could to shovel money to Wall Street in the wake of the crash in the form of TARP, TALF, PPIP, and who knows what, and wanted taxpayers to step in to cover bondholders. In her book Bull By the Horns, ex-FDIC Chair Sheila Bair writes, the Treasury Secretary, ‘did not want creditors, particularly bondholders, in those large, failing financial institutions to take losses.’

Although Geithner circulated rumors to the press that he wanted Bair out as FDIC chair, he never said anything to Ms. Bair to her face. ‘Tim seldom engaged with me directly, she writes, ‘the main exceptions being when he was advocating for Citi and needed my help.’

Bair admittedly is not a fan of Geithner. She describes the news that Geithner was appointed Treasury Secretary as ‘a punch in the gut’.

She ‘did not understand how someone who had campaigned on a ‘change’ agenda could appoint someone who had been so involved in contributing to the financial mess that had gotten Obama elected. Tim Geithner had been the bailouter in chief during the 2008 crisis.’

If Geithner is the bailouter in chief, Andrew Mellon was just the opposite. As the country sank into depression, Treasury Secretary Mellon told President Herbert Hoover to,

‘liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate…it will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people.’

Two Solutions, Only One Works

And while Mellon spent most of life in the banking business, he didn’t want to prop up bankers, he advocated letting weak banks fail in order for the banking system to rebound and prosper.

While Geithner’s bailout riot has gone a long way to weaken the dollar, when called on it he has the gall to say. ‘We will never seek to weaken our currency as a tool to gain competitive advantage or to grow the economy,’ Geithner told the press in 2010, toeing the government line. ‘It’s not an effective strategy for any country, and it’s not for the US. We’ll never do that.’

While the 59th Treasury Secretary advocated for the gold standard and balanced budgets the current version advocates unlimited government borrowing.

Investors are getting no help for Washington and the ‘change’ candidate isn’t changing anything. The government doesn’t provide instructions to build wealth in these troubled times.

Douglas French
Contributing Writer, Money Morning

Publisher’s Note: This is an edited version of an article that originally appeared in Laissez Faire Today

From the Archives…

Why You Should Always Be Looking to Buy Small Cap Stocks
23-11-2012 – Kris Sayce

China is Now the World’s Biggest Gold Producer – and Consumer
22-11-2012 – Dominic Frisby

The Stock Market Gets Squeezed
21-11-2012 – Murray Dawes

Buy Quality Gold Stocks That Have the ‘Right Stuff’
20-11-2012 – Dr. Alex Cowie

Picking the Hot Commodity Stocks of 2013
19-11-2012 – Dr. Alex Cowie

Why the US Economy Needs Another Andrew Mellon — Not a Tim Geithner

By Central Bank News
Here’s today’s Central Bank News link list, click through if you missed the previous link list. The list comprises news about central banks that is not covered by Central Bank News. The list is updated during the day with the latest developments so readers don’t miss any important news.)

By Central Bank News
Here’s today’s Central Bank News link list, click through if you missed the previous link list. The list comprises news about central banks that is not covered by Central Bank News. The list is updated during the day with the latest developments so readers don’t miss any important news.)

By Central Bank News
Here’s today’s Central Bank News link list, click through if you missed the previous link list. The list comprises news about central banks that is not covered by Central Bank News. The list is updated during the day with the latest developments so readers don’t miss any important news.)

USDCAD remains in downtrend from 1.0055, the bounce from 0.9905 is likely consolidation of the downtrend. Resistance is located at the upper line of the price channel on 4-hour chart, as long as the channel resistance holds, the downtrend could be expected to resume, and another fall to test 0.9874 support could be seen, a breakdown below this level will confirm that the longer term uptrend from 0.9632 (Sep 14) had completed at 1.0055 already, then the following downward move could bring price to 0.9700 area. On the upside, a clear break above the channel resistance will indicate that the downward movement from 1.0055 is complete, then further rise towards 1.0100 could be expected.

Forex Signals

Nov 28th- David Banister- www.themarkettrendforecast.com

The SP 500 is likely to pullback from a 66 point rally off the 1343 pivots. Those pivots were right at a Fibonacci fractal retracement of 61.8% of the Summer rally.  That rally ran from 1267-1474 as we all know in hindsight, and the correction was a normal correction within a bull cycle.

Near term, we had a nice run to 1409 and met resistance there.  We would expect a pullback to the 1384 areas on the SP 500, if not a bit lower in the coming days.  The US Dollar is likely to get a bounce which will also pull down Precious Metals along with stocks near term.

We think this could be a opportunity to buy as we approach pivot pullback buy points, but of course we will monitor in the event the pullback becomes more dire than expected.

Below are charts of the US Dollar and The SP 500 Index and potential near term movements to monitor.  Over at our we closed out long positions in NUGT ETF with nice gains yesterday as well as stocks with trading profits while we watch the pullback action.

Consider joining our forecast service with a 33% coupon to get daily updates and keep you on the right side of the markets. Go to www.markettrendforecast.com to sign up for free weekly reports or the subscription discount.

David Banister- www.themarkettrendforecast.com