Analysis and Charts of Global Markets

written by Gary Dorsch, Editor and Publisher

"Sell in May, and Go Away" Strikes Again

May 10, 2012

On Wall Street, it’s been the “Least Loved Bull" market in history. Yet at the same time, the current Bull market, that’s grown up in the shadow of the worst financial crisis since the Great Depression, is the seventh best percentage gainer in market history. It’s also the first Bull market to double in value in less than three years. However, there are also frightening “Corrections” that rattle investors’ nerves, along the way. Since 1928, there’ve been 94-corrections of -10% or more, leading to upheavals in the stock market, about once in every 11-months. Seasonally, US-stock markets usually see a strong start to the New Year, but begin to flatten out in the second quarter. Often there’s a early summer swoon that ends with a losing month in September. Traders call it “Sell in May and Go Away!”

Minefields that can Blow-up Global Stock markets in 2012

Apr 11, 2012

It takes a long time for the entrenched “conventional wisdom” to lose its power of persuasion. “A trend in motion will stay in motion, until some major outside force knocks it off its course.” Along the way, there are sudden and nasty shakeouts in the markets that cause many traders to quickly lose their nerve and close their bets, fearing big losses. However, the true skill of the Macro Trader is to distinguish between daily price swings, and instead, to anticipate and correctly time, the major changes in market sentiment, that can lead to violent price moves in the opposite direction and quickly wipe-out the market’s excesses.

Global “Oil Shock” Could Sink Obama’s Re-Election bid

Feb 27, 2012

In nine of the last ten US-presidential elections, if the price of gasoline was higher at the end of the incumbent’s term in office, than when it began, the incumbent lost the election. Regardless of the cause, the president of the United States gets an inordinate share of the blame anytime there is a spike in gasoline prices. As the Fed inflates the value of the stock market, with its ultra-easy QE money policy, - one of a dangerous side effects is sharply higher oil prices. If the Fed is aiming to inflate the value of the Dow to the 14,000-level in advance of the upcoming presidential election, as is widely expected by equity traders, it also runs the risk of jettisoning oil prices to $150 /barrel.

The Fed is Engineering Obama’s Re-Election Campaign

Feb 6, 2012

Mitt Romney is now starting to aim most of his fire on President Obama, instead of attacking his Republican rivals. However, Romney’s strategies for winning the presidency are not likely to overcome the efforts of Obama’s top campaign manager, - the Federal Reserve. The highly secretive Fed is actively working to help Mr Obama get re-elected, and the fruits of the Fed’s labor is just beginning to sprout in the political arena.

Wild Gyrations in Commodities & Gold – what’s Next?

Jan 4, 2012

Each day, the world’s population increases by 225,000-human beings. The middle class globally is growing at 70 million people a year, so just the marginal demand for these commodities is enormous and being driven by the major emerging markets. Such massive demands on the earth’s finite resources will eventually outpace supply and lead to severe shortages of many commodities worldwide. Tighter supplies would be rationed through much higher prices.

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Dow Jones Industrials Rocked by Upturn in Spain's Bond Yield above 6-percent

Updated 4:41 PM, May-10, Thu

In an eerie sense of déjà vu, the US-stock market is beginning to get a bit wobbly again, and has tumbled lower in the month of May, for the third year in a row. Two years ago, the Dow Jones Industrials topped out on April 26th. There was the infamous May 6th “Flash Crash,” when the Dow Industrials fell as much as -1,000-points lower within a few hours hours, wiping out about $1-trillion in market capitalization at one point, before recouping 600-points of its losses within 20-minutes of trading. -------------------------- Last year, the “Least Loved Bull” rally began to run out of steam on May 2nd, 2011. Over the next two months, the Dow stumbled -1,000-points lower to the 11,900-level. There was a last gasp rally to the 12,650-level that fizzled out on July 26th, when stock markets across Europe were rattled by an upwards spiral in Italy’s 10-year bond yield, which suddenly jumped +145-bps higher to above 6-percent. The upward spiral in Italian bond yields triggered a meltdown in the Dow Jones industrials, knocking it -2,000-points lower. --------------------- This time around, “Sell in May and Go Away,” was ignited by an upward spiral in Spain’s 10-year bond yields to above 6-percent. There’s mounting evidence that the Euro-zone trading bloc is sliding into a severe economic recession, and it won’t be easy to pull out of the quagmire anytime soon. Nagging problems originating from Europe have a knack for whacking Wall Street and global stock markets in the May to June quarter, with uncanny timing. Bullish traders on Wall Street had figured they could put the Euro-zone’s debt crisis to rest, after the ECB’s recent injections of €1-trillion into the Euro-zone’s banking system. Yet following the second LTRO installment on Feb 29th, Spain’s bond yields ratcheted upwards. -------------------------- “Sell in May, and Go Away,” is unfolding for the third year in a row. This time around, - Spain at the epicenter, following similar acts of instability brought upon the world markets, by Italy and Greece in the previous two episodes. The first correction knocked the S&P-500 index -17% lower. The second correction extended for a -21% loss. The corrections get bigger, if they begin from a higher plateau. But traders are conditioned to expect intervention from the Federal Reserve to stop the markets’ slide, whenever risky bets go sour. Rescuing the stock market from natural corrections has become the Fed’s de-facto third mandate. Traders are also conditioned to expect bank bailouts by the Euro-zone governments, with some help from the ECB that staves off a calamity, and keeps kicking the can further down the road. --------------------------------- What’s different this time around however, is the severity of the economic malaise in Europe, - a depression in Greece and Spain, and France and Italy teetering at the tipping point of a deep recession. Europe’s slump is dragging down the export sectors of Brazil, China, India, Korea, and Taiwan, and a host of other countries. A slumping global economy, signaled by weaker industrial commodity prices, would eventually be difficult for Wall Street to ignore. The odds of the Fed launching a third round of QE in the months ahead are slim to none, since the Fed can’t be seen electioneering for the Obama administration, while fending off strident attacks from the Republican opposition. In a bid to stay neutral, the most the Fed can do to help a slumping US-economy is to promise to keep the fed funds rate locked at zero percent and possible extend Operation Twist. “History doesn't repeat itself, but it sure does rhyme.”

Archived Comments:
Dow Jones Industrials Rocked by Upturn in Spain's Bond Yield above 6-percent

Credit Crunch in Europe knocks EuroStoxx Index Lower

Updated 6:03 PM, Apr-11, Wed

China’s demand for iron ore, coal and natural gas, drove Australia’s terms of trade, or export prices relative to import prices, to a record high last year. But Australia unexpectedly posted back-to-back trade deficits in January and February, the first consecutive shortfalls in two years, as coal and metal prices slumped, sending the Aussie dollar lower and intensifying pressure on the Reserve Bank of Australia (RBA) to resume cutting interest rates, at the May 1 policy meeting, because overseas shipments account for about a quarter of gross domestic product. ------------------------- Exports fell in February to A$24.4-billion, the lowest level in a year. The value of coal exports, the nation’s second-biggest commodity export after iron ore, plunged -21% to A$3.4-billion, the least since March 2011. Overseas sales of goods and services to India, Japan and Korea, which buy about 25% of Australian exports, all declined, it showed. ----------------------- Australia’s metal miners are still stuck in a year long Bear market, with the ASX’s natural resource index tumbling towards the 3,800-level, or -27% below its 2011 high. Australia’s parliament passed laws for a 30% tax on the profits of iron ore and coal miners on March 14th, after a bruising two-year battle with mining companies, in a major victory for Prime Minister Julia Gillard and her struggling minority government. The tax will affect about 30 miners, including global miners BHP Billiton BHP.N, Rio Tinto RIO.N, and Xstrata XTA.L. The tax aims to raise about A$10.6-billion in government revenue in its first three years.

Archived Comments:
Credit Crunch in Europe knocks EuroStoxx Index Lower

Slumping Taiwan Exports Signal Global Economy Downturn

Updated 4:42 PM, May-10, Thu

Taiwan has the 17th largest economy in the world, and it’s the 14th largest exporter. It’s also one of Asia’s “Four Tigers” along with South Korea, Singapore and Hong Kong, known for the rapid growth of their economies. Taiwan’s economy barely crept out of recession in the first quarter, with a +1.1% gain, after suffering two quarters of contraction. Seventy percent of Taiwan’s economic output is linked to exports, so any global turmoil hits the country hard. Standing at the 7,550-level, the Taiwanese Stock market index is trading -17% lower from a year ago, and is weighed down by slumping exports to China, Europe, and the US. ----------------------Taiwan´s exports in April fell -6.4% from a year earlier to $25.54-billion. The Ministry of Finance expects exports to fall further in the next two months. Exports to the US fell -16.3% in April from a year earlier, deteriorating from March´s -8% decline. Exports to China, Taiwan´s biggest trade partner, fell -9.3% compared with the -7.1% drop in March, and those to Europe rose +3.5%, following a -11.6% decline in the previous month. Exports of communication products, including the popular iPhone and iPad, fell -16.8% in April from a year earlier, - worsening from March’s -6.9% decrease. --------------------------------------------

Archived Comments:
Slumping Taiwan Exports Signal Global Economy Downturn

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Analysis and Charts of Global Markets

Global Money Trends Audio Broadcasts Audio Broadcasts are uploaded Monday and Wednesday evenings, to our subscriber section, with the latest news and analysis moving markets

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