The Central Bank of the Dominican Republic kept its Monetary Policy (Overnight) Rate unchanged at 6.75%, and held the Lombard Rate at 9.00%. The Bank said: “Domestically, economic activity and internal demand are moving as predicted by the latest Monetary Policy Report. Credit to the private sector is expanding at a rate similar to that corresponding to year-end 2011, while inflation expectations remain close to the 2012 target.”
The Bank also held rates unchanged at its previous meeting, and last raised the rate by 50 basis points in April, 25 basis points in March, and 100 basis points in February last year; the bank also reduced its Lombard Rate by 50bps to 9% in November last year.
Monday Sector Leaders: Education & Training Services, Apparel Stores
In trading on Monday, education & training services shares were relative leaders, up on the day by about 0.8%. Leading the group were shares of Archipelago Learning (ARCL), up about 21.9% and shares of New Oriental Education & Technology Group (EDU) up about 1.9% on the day.
Week Ahead Market Report: March 5, 2012
Investors will be digesting fresh data that is raising expectations of a European recession, as as as news that China would accept a slower growth rate. Good morning, this is Kristin Bianco with the Week Ahead Market Report for March 5, 2012.
Better ISM number cheers the markets
By TraderVox.com
The Euro recovered from the recent losses in the late European and early US session and is currently trading around 1.3220, up about 0.20% for the day. The support may be seen at 1.3210 and below at 1.3160. The resistance may be seen at 1.3260 and 1.3300. The pair has printed a high of 1.3240. ISM came better than expected at 57.3 above the expected value of 56.1.
Article provided TraderVox.com
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Unstable Currencies Experience Drop
Source: ForexYard
In addition to the euro’s weakness this morning we’ve also seen weakness from other riskier currencies. The aussie found itself losing ground to the greenback at a rate of 0.5% and is currently trading at $1.068. Additionally, the New Zealand dollar lost significant ground on the American dollar. As of now, the kiwi is trading at $0.8233 which marks a 0.8% drop from last week’s mark.
The drop in less stable currencies could very well be the by-product of market uncertainty surrounding the euro. As the euro loses investor confidence, the USD sees renewed strength.
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.
Investing in Bonds: Three Steps to Smarter Bond Investing
At our Oxford Club Chairman’s Circle conference at The Ritz-Carlton in Naples last week, I noted a decided optimism about the outlook for the bond market. This enthusiasm is almost certainly misplaced.
We’re at the tail end of the biggest 30-year rally in bonds the nation has ever seen. Recall that three decades ago, Fed Chairman Paul Volcker pushed the prime rate all the way up to 21.5% to squelch inflation. Long-term Treasury yields reached 16%. But from that pinnacle, long-term yields have plummeted to around 3% today. Bond prices have soared accordingly.
It isn’t just unlikely that today’s bond buyers will see annual double-digit returns going forward, it’s mathematically impossible. And yet I sense that many fixed-income investors don’t understand this.
It’s not unusual to meet an investor who has plunked money in a bond fund because “its long-term track record is excellent.” They don’t seem to realize that it’s also irrelevant. Never has the old saw, “Past returns are no guarantee of future results,” been more apropos.
This doesn’t mean you should avoid bonds altogether, of course. But if you’re going to buy bonds, now more than ever you need to be smart about it. Here’s what you should do:
- Ladder your maturities. You should buy two-year, five-year and 10-year bonds. If rates go up – as they will eventually – your bond prices will fall, temporarily. But you will get your principal back at maturity and be able to reinvest your principal at higher rates. And paltry as bond yields are today, they still beat the heck out of the 0.05% that the average money market fund is paying.
- Keep a close eye on expenses. In the world of fixed-income investing, keeping a Scrooge-like eye on expenses is essential. Why? Because it’s difficult to work magic in the button-down world of fixed-income investing. Managers rarely earn their fees. And 12b-1 fees can eat away at your returns like termites in an antebellum house. My advice is to stick with individual bonds, Vanguard funds (whose expenses are one-sixth of the industry average) and low-cost ETFs.
- Avoid leveraged bond funds. Ever wonder how bond yields can be so low and yet the yield on your closed- or open-end bond fund is higher, even after expenses? Open your eyes. Unless you’re holding junk bonds, your fund manager is using leverage, the fixed-income equivalent of buying stocks on margin. By borrowing cheap, he or she is leveraging the portfolio to add yield. This works just fine while bond prices are flat or rising. But when bond prices fall – as they will when interest rates rise – these shareholders will take a shellacking. Consider yourself forewarned.
Some fixed-income investors tell me they feel safe for now since Bernanke has pledged to keep interest rates low through 2014. Think again. The Fed has only announced its intention to keep rates low. (Future economic conditions could quickly change that.) The Fed is also keeping long-term bond yields artificially low by buying these instruments to goose the economy.
Inflation could tick up. The Fed could raise rates and/or quit buying long-term Treasuries. In the end, the Federal Reserve sets short-term interest rates, but not bond yields and prices.
Know this. Understand it. And act accordingly. Bond investors today should be in a defensive posture, capturing higher yields than what’s available in cash instruments, but prepared for that point in the future when bond yields will rise and prices will fall.
Good Investing,
Alexander Green
Article by Investment U
The U.S. Dollar & Oil Hold Clues About the Future
JW Jones – Free Weekly Options Reports & Analysis: www.Optionnacci.com
The past few months have been a difficult environment for anyone that was bearish. The next few months may prove to be difficult for everyone regardless of directional bias.
We live in a world where headlines can move the market in split seconds as high-frequency trading robots cause flash rally’s and flash crashes regularly.
As an example, the price action in the Market Vectors Short Muni Index (SMB) on February 28th demonstrates the impact that these high frequency traders have on illiquid underlying assets.
We certainly hope there were not any absent minded retail investors that got caught using market orders during the flash rally only to recognize losses as great as 5% or more in a matter of minutes.
The following chart illustrates a flash rally and the monster 40% plus rally witnessed in less than 1 minute. Can someone say fat-finger mistake?
Market Vectors Short Muni Index 1-Minute Chart
In addition to high-frequency trading, we have to constantly monitor the headlines coming out of Europe as one event or official statement has the potential to cause the Euro to rally or selloff almost instantly whether the information is fact or fiction.
We have traded small for the most part during the beginning of 2012 as market conditions have been volatile even if the volatility index (VIX) has not necessarily supported that view.
One after another, perma-bears have capitulated to the bullish camp and now we have pundits calling for the Dow Jones Industrial Average to move over 15,000 by the end of the year.
We both use strategies which in many cases would be considered contrarian by nature. Admittedly we will not get every move in the market correct, but what we will do is layout key areas that price action should migrate to in the form of key price levels across short, intermediate, and long term time frames.
Our objective is to provide readers and our members with actionable information which can be viewed objectively by both bulls and bears alike. With that said, the following viewpoint we have of the marketplace today runs contrary to the collective group of market pundits.
While most market pundits expect higher prices and stronger economic data, there is reason to believe that recent developments could be indicating that volatility may lurk ahead. Volatility could rise up and push equity valuations lower in the near term.
The daily chart of the Ipath S&P 500 VIX Short-Term Futures ETF (VXX) shown below illustrates that the VXX has seen strong volume in the past few weeks. Additionally the VXX appears to be trying to form a bottom.
With volatility at these levels, put protection is cheap and it would appear based on volume that the smart money is getting long volatility. Long VXX trades are designed to either act as a portfolio hedge or as a potential profit mechanism should a correction play out.
Ipath S&P 500 VIX Short-Term Futures (VXX) Daily Chart
By now most readers are aware of the rally that has been taking place in oil futures for the past few weeks. Nancy Pelosi came out with a statement blaming those evil speculators again while Republican Presidential hopefuls used higher oil prices as another key political topic against the current administration.
Just when the noise was starting to rise to a roar, the marketplace was quieted by a rally in the U.S. Dollar on February 29th. The daily chart of the Dollar Index futures is shown below.
Dollar Index Futures Daily Chart
Do readers find it rather odd that just about the time when oil was on the lips of every media personality in the United States that the Federal Reserve issues a reverse-repo to pull in liquidity? Do you find it at all coincidental or could it be that Mr. Bernanke was told to slow down the rally in oil prices?
After the reverse-repo was performed, the Dollar soared higher and was showing continuation to the upside on Friday afternoon during intraday trade. The Dollar is potentially forming a bottom presently and the fact that the Federal Reserve is aiding in that formation presents additional risk for downside in the S&P 500 Index and precious metals in the near term.
For the past several weeks the U.S. Dollar Index has pulled back and the S&P 500 definitely took notice. However, the Dollar is on the verge of carving out a weekly swing low which could have legs to much higher prices.
While many pundits routinely mock the Dollar and trash it, in the event of a major currency or credit event in Europe the Dollar will be one of the key safe havens that large sums of wealth will migrate too.
If the Dollar Index Futures can push through the downtrend line illustrated on the chart above with strong supporting volume a much larger move higher will likely play out. Should that scenario play out, the S&P 500 Index will likely begin to rollover.
It should be noted that the S&P 500 has struggled on multiple occasions to break above the key 2011 highs. The S&P 500 Index daily chart below demonstrates the resistance directly above current price action.
S&P 500 Index Daily Chart
We have been bearish on the S&P 500 since price was testing the 1,330 price level. After the subsequent breakout we targeted the key 2011 highs as a last stand for the bears. If the Dollar finds a bottom and rallies sharply higher from current levels a correction in the S&P 500 will likely play out.
The other possibility would be a breakout over current resistance levels which would likely see the S&P 500 move to the 1,400 level if not higher in a matter of a few weeks. We are not leaning in either direction in terms of price action currently, but we are expecting the VIX to move higher in coming weeks and months ahead.
In our most recent collaborative missive, we discussed the fundamental case for gold prices going higher over the long term. Cleary the price action this week (specifically the price action on Wednesday February 29th) has been bearish and we expect to see prices chop around with a potentially bearish view for the next few months.
Gold Futures Daily Chart
While gold has pulled back sharply, the likely move lower in coming weeks and months ahead will offer a strong buying opportunity for investors that are patient. If the Dollar breaks out to the upside which we anticipate, gold should move down into a significant low.
Should this scenario play out an entry point near the low will likely offer strong upside potential. In fact, it might be the last deep low before a prolonged period of choppy price action until the Dollar tops.
We firmly believe that as long as central banks continue to print money with wreckless abandon, the fundamental case for gold remains quite strong in the longer term.
We have received a lot of emails recently asking about our opinions on the future price action in oil. Even though the Dollar may breakout to the upside, oil has a risk premium built into the price already for potential geopolitical conflict. However, military action in the Middle East could easily push prices higher.
Should oil push higher and test the 2011 highs and breakout to the upside, the likely results will be a weakening in the domestic economy as gasoline and diesel prices would surge higher. A surge in oil prices has a direct implication to the domestic U.S. economy as the cost for nearly everything will rise. The daily chart of oil futures is shown below.
Oil Futures Daily Chart
Conclusion for what to expect next:
Ultimately we believe the two most critical assets to monitor at this time are the U.S. Dollar and oil futures. The U.S. domestic economy cannot handle significantly higher oil prices from the current levels without seeing business growth slow. Furthermore, if the Dollar rallies it could put pressure on the equity markets as well.
While the equity markets and the economy are not the same thing, it is important to note that higher oil prices at a certain point will become equity negative.
The VIX is sending a warning that market participants are too complacent and the Dollar is potentially forming a rounded out bottom. These two conditions paired with geopolitical risk in the Middle East represent additional risks to economic growth.
Furthermore, market participants cannot become complacent regarding the potential risk that Europe still poses. With the various risks listed above in mind, we are keeping position sizes small and are attempting to remain Delta neutral in our portfolios. Risk is beginning to elevate to extremes.
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This material should not be considered investment advice. J.W. Jones is not a registered investment advisor. Under no circumstances should any content from this article or the OptionsTradingSignals.com website be used or interpreted as a recommendation to buy or sell any type of security or commodity contract. This material is not a solicitation for a trading approach to financial markets. Any investment decisions must in all cases be made by the reader or by his or her registered investment advisor. This information is for educational purposes only.
Volatility Bounces Bottom Awaiting Bad News or Selling to Strike!
By Chris Vermeulen – Free Weekly ETF Reports & Analysis: www.GoldAndOilGuy.com
Over the past 5 months we have seen volatility steadily decline as stocks and commodities rise in value. The 65% drop in the volatility index is now trading at a level which has triggered many selloffs in the stock market over the years as investors become more and more comfortable and greedy with rising stock prices.
Looking at the market from a HERD mentality and seeing everyone run to buy more stocks for their portfolio has me on edge. We could see a strong wave of fear/selling hit the S&P 500 Index over the next two weeks catching the masses with their hand in the cookie jar . . . again.
If you don’t know what the volatility index (VIX) is, then think of it as the fear index. It tells us how fearful/uncertain investors are or how complacent they are with rising stock prices. Additionally a rising VIX also demonstrates how certain the herd is that higher prices should continue.
The chart below shows this fear index on top with the SP500 index below and the correlation between the two underlying assets. Just remember the phrase “When the VIX is low it’s time to GO, When the VIX is high it’s time to BUY”.
Additionally the Volatility Index prices in fear for the next 30 days so do not be looking at this for big picture analysis. Fear happens very quickly and turns on a dime so it should only be used for short term trading, generally 3-15 days.
Volatility Index and SP500 Correlation & Forecast Daily Chart:
Global Issues Continue To Grow But What Will Spark Global Fear?
Everyone has to admit the stock market has been on fire since the October lows of last year with the S&P 500 Index trading up over 26%. It has been a great run, but is it about to end? Where should investors focus on putting their money? Dividend stocks, bonds, gold, or just sit in cash for the time being??
I may be able to help you figure that out.
Below is a chart of the Volatility index and the gold exchange traded fund which tracks the price of gold bullion. Notice how when fear is just starting to ramp up gold tends to be a neutral or a little weak but not long after investors start selling their shares of securities we see money flow into the shiny yellow safe haven.
Gold & Fear Go Hand-In-Hand: Daily Chart
Looking at the relationship between investor fear/uncertainty and gold you will notice scared money has a tendency to move out of stocks and into safe havens.
Trading Conclusion Looking Forward 3 months…
In short, I feel the financial markets overall (stocks, commodities, and currencies) are going to start seeing a rise in volatility meaning larger daily swings which inherently increased overall downside risk to portfolios and all open positions.
To give you a really basic example of how risk increases, look at the daily potential risk the SP500 can have during different VIX price levels:
Volatility index under 20.00 Low Risk: Expect up to 1% price gaps at 9:30am ET, and up to 5% corrections from a previous high.
Volatility index between 20 – 30 Medium Risk: Expect up to 2% price gaps at 9:30am ET, and up to 15% corrections from recent market tops or bottoms.
Volatility index over 30 High Risk: Expect 3+% price gaps at 9:30am ET, and possibly another 5-15% correction from the previous VIX reading at Medium Risk
Note on price gaps: If you don’t know what I am talking about a price gap is simply the difference between the previous day’s close at 4:00pm ET and the opening price at 9:30am ET.
To continue on my market outlook, I feel the stock market will trade sideways or possibly grind higher for the next 1-2 weeks, during this time volatility should trade flat or slightly higher because it is already trading at a historically low level. It is just a matter of time before some bad news hits the market or sellers start to apply pressure and either of these will send the fear index higher.
I hope you found this info useful and if you would like to get these reports free every week delivered to your inbox be sure to join my FREE NEWSLETTER HERE:
By Chris Vermeulen – Free Weekly ETF Reports & Analysis: www.GoldAndOilGuy.com
China “Must Boost Consumer Demand”, ECB Forcing Europe “To Go Begging”, Gold Below $1690 Could Spark Fresh Selling
London Gold Market Report
from Ben Traynor
BullionVault
Monday 5 March 2012, 09:00 EST
DOLLAR gold prices briefly dipped back below $1700 an ounce Monday morning in London, as stocks, commodities and the Euro all fell before recovering some ground, following news that China has cut its official growth target.
Silver prices dropped to $34.06 per ounce – 2.2% down on Friday’s close – before making up some of the loss.
Gold prices did manage to stay above last week’s low of $1691 per ounce. Gold prices fell by $100 an ounce last Wednesday following Fed chairman Ben Bernanke’s appearance before Congress.
“We would expect fresh liquidation of long gold positions on a move below $1690,” says the latest technical analysis from bullion bank Scotia Mocatta.
Well-known investor and Gloom, Boom & Doom Report publisher Marc Faber has said that gold could fall below $1500 an ounce, though he remains a gold owner and dismisses the notion of a gold bubble.
China has lowered its official growth target from 8% annual growth to 7.5%. China was the world’s biggest gold buyer in the fourth quarter of last year, according to World Gold Council data.
“China’s economy is encountering new problems,” premier Wen Jiabao told the annual National People’s Congress in Beijing on Monday, adding that “expanding consumer demand” is his first priority.
“We will vigorously adjust income distribution, increase the incomes of low- and middle-income groups, and enhance people’s ability to consume,” Wen said. Several economists have argued recently that China’s economy needs to rebalance towards domestic demand.
China’s new 7.5% growth target “indicates the lowest level that the government is comfortable with,” explains Michael Buchanan, Hong Kong-based chief Asia-Pacific economist at Goldman Sachs.
“[It] is also a signal to local officials that they shouldn’t solely focus on the rate of expansion…China’s trend growth rate is coming down but it’s still higher than [the new target], more like around 9%.”
Wen, along with China’s president Hu Jintao, is among seven members of Beijing’s nine member Politburo Standing Committee due to be replaced in October.
In Moscow meantime, Vladimir Putin has declared victory in Russia’s presidential election, a victory which would see him take over as president again after four years as prime minister.
“We won in an open and honest fight,” Putin told supporters, responding to allegations of electoral fraud.
Greece’s €206 billion bond swap was in doubt Monday with private investors appearing reluctant to participate, the FT reports. As part of its €130 billion bailout deal agreed last month, Greece’s private sector creditors have been asked to take losses of some 70% on their bond holdings.
If less than 75% of bondholders take part, Greece may have to resort to the collective action clauses inserted retroactively by the Greek government, which would force hold-outs to take part – a move which could yet trigger credit default swap payments. If less than 66% agree to take part, the CACs themselves would become invalid, putting the whole deal in doubt.
European banks, which collectively borrowed just under €530 billion from the European Central Bank at last week’s longer term refinancing operation (LTRO), deposited a record €821 billion with the institution over the weekend, ECB figures show.
Euribor interest rates, at which banks lend Euros to each other, have fallen significantly since the ECB conducted its first LTRO in December.
“Clearly money market conditions have stabilized,” says Barclays Capital interest rate strategist Moyeen Islam.
“If the ECB wants to play its proper role as a guardian against the risk of wholesale economic and financial ‘Eurogeddon,'” adds Holger Schmieding, economist at Hamburg –headquartered Berenberg Bank, “[then] Europe [would have] no need to go begging for ‘rescue shield’ money in China, Russia, Brazil or at the International Monetary Fund in Washington.”
The ECB’s Governing Council is due to announce its latest monetary policy decision this Thursday, as is the Bank of England’s Monetary Policy Committee.
The Eurozone’s purchasing managers index for services, which indicates whether the sector is expanding or contracting, fell to 48.8 last month – down from 50.4 in January – figures published Monday show. A PMI figure above 50 indicates sector expansion, while below 50 implies the sector is shrinking.
The difference between bullish and bearish contracts held by gold futures and options traders on New York’s Comex – the so-called speculative net long – rose by 9.9% in the week ended last Tuesday to its highest level since last September, according to the latest Commitment of Traders report from the Commodity Futures Trading Commission.
“The change in the net position was once again the result of speculative longs added,” says Marc Ground, commodities strategist at Standard Bank.
“Another mild increase in short positioning [however] detracted somewhat from the overall improvement.”
Gold prices fell sharply last Wednesday, the day after the period covered by the latest CoT report.
The next CoT is not due until late on Friday, but data from CME Group, which runs the Comex, show open interest in gold futures fell 6.3% between Tuesday and Friday last week.
The world’s largest gold ETF, the SPDR Gold Trust (GLD), saw its holdings of gold to back its shares grow by 0.7% to 1293.7 tonnes over the week to Friday, taking its holdings to their highest level since mid-December and just over 2% off their June 2010 all-time peak.
The iShares Silver Trust (SLV) meantime also saw a 0.7% rise in its bullion holdings last week. As of Friday, the world’s biggest silver ETF held 9763 tonnes of silver, 14.3% less than at its peak last April.
Gold value calculator | Buy gold online at live prices
Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.
(c) BullionVault 2011
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
Euro Slipping Against Dollar
Source: ForexYard
Following a week of ups and downs across the board, the euro is again finding itself in a downward slide. This morning the EUR/USD was traded at $1.3168, marking a 0.25% drop from the previous trading day. The decision last week by the ECB to inject capital into the euro-zone banking system had a positive impact, however, it is becoming clear that these impacts have since faded. Already investor confidence in the euro is showing signs of cracking and worries over the Greek debt crisis persist. Analysts are alerting traders of the possibility that the euro will continue to weaken against the dollar.
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.