Chart Update

     

 

 

Anecdotal Skepticism vs. Actual Data

About one month ago we read that risk parity and volatility targeting funds had record exposure to US equities. It seems unlikely that this has changed – what is likely though is that the exposure of CTAs has in the meantime increased as well, as the recent breakout in the SPX and the Dow Jones Industrial Average to new highs should be delivering the required technical signals.

 robot tradersThe bots keep buying…

Illustration via carolublog.wordpress.com

 

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The Sharp Move in the VIX Accelerates

In Monday’s trading session, the upward move in the volatility index VIX (which measures the implied volatility of SPX options) continued unabated, vastly out of proportion with the move in the underlying stock index. “Brexit” fears continue to grow, which has apparently been the driving force behind this move.

 

Una manifestazione a favore di Brexit a LondraThe “Brexiteers” are gaining support as the referendum date draws closer – global financial markets are getting somewhat upset over this.

Photo credit: Neil Hall / Reuters

 

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European Stocks Look Really Bad…

Late last week stock markets around the world weakened and it seemed as though recent “Brexit” polls showing that the “leave” campaign has obtained a slight lead provided the trigger. The idea was supported by a notable surge in the British pound’s volatility.

 

BunkerBattening down the hatches…

 

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Commercial and Non-Commercial Market Participants

The commitments of traders in gold futures are beginning to look a bit concerning these days – we will explain further below why this is so. Some readers may well be wondering why an explanation is even needed. Isn’t it obvious? Superficially, it sure looks that way.

 

kilogold-pamp-3

 

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Pros and Cons

The recent rally in commodity prices has surprised many market participants and has greatly supported the stock market’s rebound. It has also made bulls out of a number of former stock market bears, as one of its side effects was to cause an improvement in market internals. But does the rally actually make sense?

 

bethlehem steelThe original Bethlehem Steel Works in Bethlehem, Pennsylvania.

Photo via leggendaurbana.it

 

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Damned If You Do…

After waking up on Thursday, we quickly glanced at the overnight market action in Asia and noticed that the Nikkei had tanked rather noticeably. Our first thought upon seeing this was “must be the yen” – and so it was:

 

1-Yen, June, dailyJune yen futures, daily – taking off again – click to enlarge.

 

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The Inflation Illusion

We hear more and more talk about the possibility of imposing negative interest rates in the US. In a recent article former Fed chairman Ben Bernanke asks what tools the Fed has left to support the economy and inter alia discusses the use of negative rates.

We first have to define what we mean by negative interest rates. For nominal rates it’s simple. When the interest rate charged goes negative we have negative nominal rates. To get the real rate of interest we have to subtract inflation from the nominal rate, so to speak remove the illusion of inflation.

 

1-real FF rateThe “real” federal funds rate (effective FF rate minus CPI-U y/y rate of change)

 

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The Cracks in the Economy’s Foundation Become Bigger

Last week the Bureau of Economic Analysis has updated its gross output data for US industries until the end of Q4 2015. Unfortunately these data are only available with a considerable lag, but they used to be published only once every few years in the past, so the current situation represents a significant improvement.

 

decay-3Decay…

Photo credit: bargewanderlust

 

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Buy Low, Sell High?

It is an old truism and everybody has surely heard it more than once. If you want to make money in the stock market, you’re supposed to buy low and sell high. Simple, right?

 

mad_professor-600x399Successful stock market investing in two simple steps

Photo via slideshare.net

 

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Big Moves in Markets No-One is Paying Attention to

A lot of attention has been on equities and precious metals in the past week but the biggest movers right now are the softs [e.g. commodities like grains, oils, sugar, etc.).

 

wheat_field-1000x523We actually are in Kansas now, Dorothy!

Photo via agriculture.ks.gov

 

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Dismal Earnings, Extreme Valuations

The current earnings season hasn’t been very good so far. Companies continue to “beat expectations” of course, but this is just a silly game. The stock market’s valuation is already between the highest and third highest in history depending on how it is measured.

 

NYSE

Photo credit: Kjetil Ree

 

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Business under Pressure

A recent post by Mish points to the fact that many of the business-related data that have been released in recent months continue to point to growing weakness in many parts of the business sector. We show a few charts illustrating the situation below:

 

1-Total Business SalesA long term chart of total business sales. The recent decline seems congruent with a recession, but many other indicators are not yet confirming a recession – click to enlarge.

 

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