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Analysis and Charts of Global Markets

written by Gary Dorsch, Editor and Publisher
China aims to Weaken the Yuan; Rattles markets
Aug 20, 2015
On August 11th, the Chinese Politburo surprised the global financial markets, by unilaterally devaluing the yuan against the US$, without any advance notice. Beijing quickly engineered a -3% devaluation of the yuan against the US$ in two days, in what it called a “one-off” operation. Still, the surprise move sent various financial markets around the world into a tizzy.
Bonds and Currencies Brace for BoE and Fed rate hikes
Jul 16, 2015
The Federal Reserve poised to hike short-term interest rates for the first time in nearly a decade, “The actual raising of policy rates could trigger further bouts of volatility, but my best estimate is that the normalization of our policy should prove manageable,” said the Fed’s “Shadow” chief Stanley on May 26th. Fischer gave no time frame for when the Fed will start its first tightening cycle since 2004-06, but he made it clear that higher rates are coming.
China’s Stock market Mania; How high can Red-chips fly?
Apr 2, 2015
According to the Chinese Zodiac, the year 2015 is called the “Year of the Goat.” People born in a Year of the Goat are generally believed to have strong inner resilience and excellent defensive instincts. Though they prefer to be in groups, they do not want to be the center of attention. They are reserved and quiet, most likely because they like spending much time in their thoughts. However, the share of good fortune for those born in a “Year of the Goat,” is not be very good. Instead, they often get involved in financial difficulties. Therefore, it’s advised that they should adopt conservative strategies when dealing with investments. They should try their best to increase their income, decrease their expenditure, and live within their means. They are advised to restrain themselves from gambling too much in order to avoid big losses.
The Raging “Currency Wars” across Europe
Jan 29, 2015
The theater of the absurd became even more bizarre on Jan 22nd, when the European Central bank desperate to extract the Euro-zone’s economy from the quagmire of deflation and stagnation, decided it would try its hand at the magic elixir of “quantitative easing,” (Q€). Starting on March 1st, the ECB will inject €60-billion of liquidity into the Euro-zone’s money markets, each month until the end of Sept 2016. The ECB is the last of the Big-4 central banks to unleash the nuclear option of central banking – QE, - starting about six years after the Bank of England, the Bank of Japan, and the Fed began flooding the world markets with $7-trillion of British pounds, Japanese yen and US$’s.
How to Recognize a “Bear Raid” on Wall Street
Oct 30, 2014
Wall Street has seen more than its fair share of so-called “Bear Raids” or sudden, sharp panic attacks, that frighten many investors into selling their shares in order to avoid losses to their retirement accounts. During a “Bear Raid,” quick footed short sellers seize upon news reports, such as a sudden and unexpected financial crisis that is rocking markets overseasThe objective of a “Bear Raid” is to make windfall profits within a brief time period through short sales. If operating in the US’s centrally planned market, where the Fed is actively intervening to prevent sharp downturns, the Bear Raider knows the gains from the short sale trade will eventually be reversed, and usually within short order. Once Bullish investors begin to realize that they were hoodwinked, and scared out at the lows, - they begin to pile back into stocks again at higher prices. What usually follows is an eventual recovery of all the previous losses that were engineered by the Bear Raiders.
To view more articles click on Archive
Plain Vanilla Correction on Wall Street in Summer 2015; Rhymes with Summer 2011
Updated 9:02 PM, Oct- 7, Wed
In August, the S&P-500 index finally broke its 48-month streak of avoiding a "Correction" of more than -10%. That was the fifth-longest correction-free streak ever. The surprising downward spiral reached its nadir on August 24th, when the market witnessed the second edition of the "Flash Crash" in which the S&P-500 index opened slightly more than -100-points lower on the NYSE opening, while the Dow Jones Industrials opened -1,070. However, a few hours later, both indexes had recouped as much as 85% of their opening losses, a sign of clandestine intervention by the "Plunge Protection Team" . --------------------------------------------------------------------- However, based on past historical instances, the longer the US-stock market avoids a -10% correction, the deeper the slide when the downturn finally does arrive. Of the four other correction-free periods lasting longer than 36-months, three ended with declines of more than -20%, and one ended at -11%. Fed tightening ended the party and caused 3 Bear markets. Adding to the recent angst Carl Icahn; the King of Wall Street, released a video warning investors of the danger ahead. An analysis of the performance of the SPX after Monday’s close showed that 253-stocks – or more than half the index – were down more than -20% from their recent highs, putting them firmly in Bear-market territory, according to S&P Capital IQ. Nearly 86% of the SPX, or 430-stocks, were down more than -10%. About -25% of the SPX, or 121-stocks, were down > -30%. ------------------------------------ Still, the S&P-500 index’s drop from its May peak still is far cry from a full-fledged grizzly Bear market, or a drop of -20% or more from a peak. The key question, of course, is whether the current pain in the stock market gets worse, and pushes the S&P-500 index into its first Bear market since the last one that ended back in March 2009? Or wether the current correction is normal, and that the long-term Bull market will reignite once the dark clouds clear. Historically, US-stock markets have bounced back after corrections, periods of heightened volatility tend to be short-lived and that sharp spikes in pessimism and fear, are a contrarian signal and could signal a price rebound is forthcoming. ------------------------------------------------ A study of corrections from 1965-thru 2014 shows they strike about once every 18-months, on average, with a loss of -13% from peak to bottom, on average. The smaller corrections of less than -15%; lasted for 50-trading days from peak to bottom, and 75-trading days thereafter, to full recovery of the previous losses, on average. In almost every case, there was a sharp V-shaped recovery. What this implies is there’s very little bottom building or retracing. ---------------------------------- Looking at the deeper corrections of -15% to -19%; they showed a longer process. In those cases, the decline lasted for 85-trading days from peak to bottom, on average, and 107 trading days to full recovery amid weeks of high volatility and multiple new lows before a full recovery. So far, the latest SPX downturn (-11%) is just a lesser correction. ------------------------------------- Every correction in the US-stock market over the past several decades was ignited by the convenient excuse of some crisis occuring overseas. The Correction of 2015 was triggered by a -40% drop in the Shanghai Red-chip market. In the Summer of 2011, the "Correction" on Wall Street was triggered by the Euro-zone's debt crisis, most notably, the turbulence in the Italian and Spanish bond markets. However, each correction presented a better buying opportunity for long term "Buy and Hold" investors. In contrast, the two grizzly Bear markets that spooked investors in the past decade, where linke to homegrown events, that led to losses of roughly -50% each.
Archived Comments:
Plain Vanilla Correction on Wall Street in Summer 2015; Rhymes with Summer 2011
Sharp Decline in US Oil Production finally acts to Stabilize Oil prices
Updated 9:48 PM, Oct- 7, Wed
Amid booming US oil production and record high OPEC and Russian oil output, the benchmark price of Texas crude oil plunged from over $100 last year to as low as $38.50 /barrel on August 24th. However, technical analysts are becoming increasing hopeful that crude oil prices may have hit rock bottom, with the Nymex crude oil contract finding a solid base of support around the $44 /barrel level in September and early October. Helping to provide a floor for oil prices were signs that sharply lower oil prices has convinced many US-oil producers to cut their output. US crude oil output has fallen as much as 514,000 barrels a day from a four-decade high of 9.61-million bpd reached in June and July, Energy Information Administration data show. The number of rigs targeting oil in the US dropped to a five year low, Baker Hughes Inc. said October 2. -------------------------------------- The US Energy Department estimates that US-oil output will continue to fall another -500,000-million bpd from current levels and would reach a low of around 8.6-million bpd next year. Until the most recent decline, US oil output was growing at the fastest rate on record, adding about 1-million bpd of new supply each year thanks to the introduction of new drilling techniques that have released oil and gas from shale. -------------------------------------------------- Russian and North Sea supply is also forecast to shrink in 2016, according to the IEA. Overall, non-OPEC production should drop the most since 1992, when non-OPEC output shrank 1 million barrels after the USSR fell apart. Low oil prices are also sparking an increase in demand, IEA said. With pump prices well below $3 a gallon in most states, US-gasoline demand in the is at an eight-year high. The agency said demand in China is still growing, despite signs of economic weakness, as growing use of transportation fuels offsets lower industrial demand for crude oil. The agency forecast global oil demand would rise +1.7-million barrels a day this year, the highest in five years, and grow by another +1.4-million next year. ------------------------------ If prices stay low for a long time and oil production outside OPEC and the United States declined due to capital expenditure cuts, there was not likely to be any significant spare capacity left in the system. This could cause prices to spike upwards sometime next year.
Archived Comments:
Sharp Decline in US Oil Production finally acts to Stabilize Oil prices
Taiwan's Stock Index Plunges -20% to brink of Bear market; weighed down by weaker Exports
Updated 3:44 PM, Oct- 7, Wed
Archived Comments:
Taiwan's Stock Index Plunges -20% to brink of Bear market; weighed down by weaker Exports

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