Market Quips & Synopsis – Sept 18, 2020

Market Quips & Synopsis Some brief points about selected markets or assets and look for the links within for added musings.

About current markets, I’ll open up by saying..

I notice there is dangerous trading going on, market capitalisations in some companies are extraordinary.
For example, how does $1 billion market cap on revenues of $20,000 sound?

ASX scuttlebutt says, “shorts” are trying to pressure companies into raising capital, some are seeing increased stock “promotion” activity and there are many people in the market “that don’t know what they’re doing or shouldn’t be there”.

I see the AUD and XAU (Gold) in a holding pattern, (see the AUD chart below);
they need to hold 0.7240 and $1,902 respectively,
breaks above 0.7355 & $1,978 should see a new lurch higher

Also watching AUDJPY closely, need to hold 76.00 to confirm “more risk-off”,
A move above 0.7730 suggests “risk-on” and higher equity indices

Another indictor to assess the steam in a S&P 500 decline is whether Japanese 10 Year Bonds (JGB”s) trade below 0.00%.

The S&P 500 is down 6% from recent highs,
Indicators are not clear in calling a new downward trend, however I think 3,272 is the target (a further 2.5% lower).

The Nasdaq 100 has now fallen 11% since its September 2nd high.
Looking for it to ease a further 2.4% to 10,814 before determining the strength of the decline.
The decline wasn’t a surprise, as written by me on August 29 and September 3rd  

Global portfolios have a 3% short position in either (or both) the Nasdaq 100 or the SOX index

My ASX 200 target is 5,803, which is 1.2% below the price as I write.

I’m pleased with calling Oil down from $44 to $39.30. Brent held $39.30 for the past week, 
has since rallied 10% in past 4 days….quick rallies are not always a preferred scenario

VIX remains relatively high at a reading of 26, the call option phenomenon has influenced this increase

The De-Equitisation story combined with rising money supply & low interest rates leads to my thesis that higher equities is the dominant and over-arching long term theme.

While we accept near-term rates will stay Lower for a while,
I think the long end of interest rate curve will rise.

AAII Survey exhibiting narrowest bull/bear spread since June 11, which is when S&P 500 had a 8.2% decline.
Since March 5th, more retail investors have remained bearish (than bullish). This survey remains a reasonable contrarian indicator as markets bottommed on March 26th and never looked back.

Oil Rig count showing no meaningful change of increase, see attached, number of rigs in operation has halved

I remain long term bullish on the Oil price and continue to accumulate positions (proxies) to benefit from this opinion.
Incidentally, I have a view there is a coming crisis in energy prices which will stoke inflation (albeit it may be 18 months away) 

In another edition, I’ll expand on various investing themes and I hope to soon publish my bullish thinking about Platinum on my Linkedin page.

That’s all for now…

warm regards,
Rob

Can’t Help It – It’s Looks Bullish

I’m not writing this to convince or prove a case to readers, but experience and instinct tells me equity markets are still going to higher.

That’s not such a bold prediction in light of the fact that the general price of listed equities have risen for over a century, but in the window of the past and next 5 years, my view is that we haven’t seen the  end of the advance which commenced in March 2009.

We are seeing lower capital inflows to equities, lower overall volume and low retail investor participation. Media commentators are screaming “crash” louder and cite many “problems” which includes trying to identify “bubbles”.

and yet many market indices are hitting new highs.

Just saying………

Below is a chart of the daily volume of shares traded on the New York Stock Exchange since the March 2009 S&P 500 low of 666 points until today, where the S&P 500 sits at 1,500 points.

A market that has advanced on declining volume. Just saying….

So what happens next?

If the market has risen handsomely in the face of so much worry (remember Greece, Portugal, Arab Spring, Chinese slowdowns, Japanese Debt, Iranian & North Korea nuclear threats, The Fiscal Cliff, Debt Ceiling’s etc etc.) on so little volume, then what happens if “normal” volume actually returns to this market.

Logic may not help you figure this out.

If notable, sustained volume returns to this market, it may not resemble selling pressure as you would logically assume. Logic may led you to believe that the market rose on declining volume thus it MUST fall when volume returns to normal or at least rises.

Imagine if increased volume was a new wave of buying volume? Those who sat on the sidelines citing every doomsday pundit for the past 4 years to justify their position, may suddenly have a Fear Of Missing Out (FOMO).

The FOMO effect could see markets rise swiftly leaving the “unadjusted” hanging when a change in trend does occur.

Markets are cruel, so my read is the equity markets see a small decline in the near term, only to get the bears excited followed by a surge in prices into June-August 2013, which should be fun to watch. Many investors are very good at buying high and selling low.

Bring back the volume – where are they High Frequency Traders, when you need them!

NYSE Volume Jan 2009- Jan 2013

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