Posted 01 February 2016 - 08:25 AM
Gene Inger's Daily Briefing (highlights) - for Monday, February 1, 2016
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Rationales to Friday's powerful thrust - run the gamut from return of central banker domination of markets; to the end of corrective market action running a slew of short-sellers; to ideas that things are so bad thus low rates will reinstate a push on risk-averse investors to chase yield again; to new glory times and a full recovery of what often the same guys called a bear market days ago. (Of course latter arguments defy the earnings recession issue as now prevails, and would persist for some time 'even if' currency devaluations were halted.)
You know what's missing from that list, or the loss of attached behavior to Oil at least in Friday's session? The reason we were wary all week about an upward move that related to 'Pension Re-balancing', which had to occur on Friday (and had forecast the upside relief rally from the low day over a week earlier). Yes interest rates continue to fade; and yes that reflects 'disinflation' as they prefer to call deflation; while all of this inflames the 'global currency war', which cannot end well. Should proper reaction (redacted for subscribers only: the purpose of highlights is to give you an idea of our approach; touch on where things stand; reserve projections; in hopes we can enhance your own investment style).
For instance; how well has Japan done with the race to zero; now below zero? If there's a laboratory experience on easy rates and Quantitative easing; it's the Tokyo experiment. What's also not focused upon is how these moves, if by any chance they actually triggered a dramatic economic recovery and inflation; by definition would accelerate the destruction of wealth that's gone on for years. In a sense consumers (or those not dependent on inflation-adjusted income) have actually seen a relative retention of purchasing power during deflationary times. Perhaps that's why not everyone is happy central banks want to build debt to a level that only a runaway inflation and currency debasing could resolve.
A celebration of monetary stimulus, against the backdrop of Debt they created, coming in the form of a rapid recovery, of course would be counterproductive in terms of the consumer (and the CPI); and would reverse the Dollar's gains. So, that would improve export profitability, but diminish the Dollar's buying power. But on Friday the Dollar and S&P were strong, as we expected (as well as our warning of danger if one tried fading the rally as it was Pension Re-balancing juiced by the BoJ move), which now suggests
(More.)
San Francisco Fed President Williams gave a talk during market hours Friday. He in no way endorsed Japan's move. In fact he said the United States was strong enough to withstand what's going on in Asia; suggesting (discussed).
Technically- Friday's rally finally achieved our 'relief rally' objective, with March S&P futures finishing, in case you smiled; at an interesting number: 1929.
Our ideal projection ten days ago from the low-day ('war of -Cash S&P- 1812'), as I'd expressed surprise we didn't get there sooner, was the low-to-mid 1900's; roughly S&P 1920-1950. Well finally we're in that range. And also approaching the next time-zone when (prospects for the week ahead explored).
I've heard a few analysts both 'push' buying stocks and others suggesting fade rallies; so this suggests a tussle that won't be over instantly; (outcome noted).
Speaking of that Volatility; the characteristics of sudden leaps and smashes for the S&P or other indexes, is reflective of illiquidity, not solidly liquid investment conditions. Expect to see more of this in what will likely be a lot of (more).
Either way it encourages investors to chase rallies for 'yield', not for profitability of companies people invest in. And therein lies the rub of 'Earnings Recession' in US stocks, partially-exacerbated by (fuller discussion reserved).
Hope to regenerate a repeat upward cycle now seeming hinges on the FANG stocks. Doesn't that say how bereft the market is of broad leadership?
We look forward to interesting trading swings coming right up; as there's now a growing contradictory debate about upward moves versus fading the rallies. So you probably get both; I've even noticed pundits trying to have it both ways, by pushing investors to chase stocks rebounding, while saying fades will be tried.
(Sic) the former should provide existing opportunities for a lot of investors and managers who were insufficiently proactively sidelined or hedged, ahead of our projected 'brick-wall of resistance' pummeling to start-off 2016 (more).
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Daily action - has actually been addressed already; and in both videos. Let's allow you to focus on those; as we'll be looking forward to the rumble (more).
Prior highlights follow: (very limited for courtesy highlight readers)
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The 'eye of the storm' - is being navigated through; with realization no matter how hard one tries to avoid what spins around the 'zone of calm', the other side likely features (reserved for our regular membership).
To-sum-up: there are major ongoing concerns which are not alleviated by the anticipated 'snap-back' relief rally. The S&P (redacted technical commentary).
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Of course dramatic intervention run-shorts temporarily, without changing a likely evolution of equities (redacted) global realities. (In this case Japan's intervention combined with Re-balancing, to achieve our ideal relief-rally goals for an S&P 'reflex rally' rebound projected from the prior week's Wednesday washout. Now, it promises to be a rough ride for investors; great for scalping.)
Join us for the new trading month!
Gene
Gene Inger
www.ingerletter.com
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