GBR Market Wrap: Halftime Reports and Happy Fourth!

Posted on July 1, 2011 by Clemens Kownatzki, MBA

In this Week’s Issue: July 1, 2011

Weekly Snapshot
• Euro area seasonally-adjusted unemployment rate was 9.9% in May (Eurostat)
• Purchasing managers’ indexes in Asia and Europe at multi-month lows (Reuters)
• Japan’s Tankan survey shows sentiment worsened sharply after quake (WSJ)
• U.S. corn futures have suffered their steepest fall in 15 years (FT)
• The Fed ended its $600 billion bond-buying program (QE2) on June 30th (Reuters)
• The European Central Bank signaled rate hikes as inflation stays high (Reuters)
• Euro area inflation is estimated at 2.7% in June 2011 (Eurostat)
• BofA to pay $8.5bn to settle claims over mortgage-backed securities (WSJ)
• Greece passed an unpopular austerity plan critical to avoiding a debt default (Reuters)
• Christine Lagarde was named the new head of the International Monetary Fund (AP)

Market Barometers

Halftime Reports
Time flies they say. Yes, the first half of 2011 is already over. This calls for a mini-review of how the markets faired during the first six months of this year. Please find the charts below indicating the performance of the major stock markets as well as the returns of the major currencies and commodities. It has been an interesting and choppy first half so far. The curious investor’s mind is waiting to see what’s next…

Recommended Read/Audio
Here’s an interesting take on the inflation debate. Please consider: Recalculating the Consumer Price Index by David Gura.

Listen to this podcast.

Best wishes for a wonderful 4th of July week-end!

Clemens Kownatzki, MBA is an adjunct professor of financial risk management at the Graziadio School of Business and Management, as well as the founder and CEO of FX Investment Strategies, a Registered Investment Advisor. In addition to running his investment advisory firm, he is a contributing author at SeekingAlpha.com and BusinessInsider.com. He also authored the book, Money Music 101, available on Amazon and Kindle, in addition to publishing the popular investment blog www.fxinvestmentstrategies.com along with a weekly newsletter.Disclaimer

Neither the information nor any opinion contained in this communication constitutes a solicitation or offer by us to buy or to sell any securities, futures, options or other financial instruments or to provide any investment advice or service. Each decision by you to do any investment transactions and each decision whether a particular investment is appropriate or proper for you is an independent decision to be taken by you. In no event should the content of this communication be construed as an express or an implied promise, guarantee or implication by or from us that you will profit or that losses can or will be limited in any manner whatsoever. Past results are no indication of future performance. Please note that there is no requirement and no commitment to make any payments to FX Investment Strategies LLC in order to access our published information be it via email or via website publication. All information is publicly available without any required monetary consideration. Any payments or donations made by you are deemed to be voluntary and cannot be considered as payments for investment advice given to you.

GBR Market Wrap: June 10, 2011

Posted on June 10, 2011 by Clemens Kownatzki, MBA

In this Week’s Issue

Weekly Snapshot

• Dow sinks below 12,000; stocks had the sixth straight weekly loss (AP)
• China posted a smaller-than-expected trade surplus in May of $13.1bn (Reuters)
• The average U.S. homeowner now has 38% equity, down from 61% a decade ago (AP)
• Fed surpassed China as the largest holder of U.S. Treasuries (Reuters)
• ECB kept interest rates at 1.25% but signalled July rate hike (CNBC)
• Brazil increased interest rates by 25 basis points to 12.25% (Economy.com)
• Revised data showed Japan’s economy shrank 0.9% in the first quarter (Reuters)
• U.S. trade deficit narrowed by 6.7% in April to $43.7 billion (AP)
• Fitch warns: U.S. Treasuries could be rated junk in August (Reuters)
• Fed survey: Economy falters in several U.S. regions (AP)
• Euro area GDP rose 2.5% compared with the first quarter of 2010 (Eurostat)
• Bernanke signals that the Fed is not planning to ease monetary policy (FT)
• Industrial producer prices for April rose 6.7% y/y in Euro area (Eurostat)
• OPEC unexpectedly decides to keep oil production output unchanged (AP)

Market Barometers

Weekly Chart

QE2 (Quantitative Easing) is coming to an end this month. Sounds like a good time to assess some of the impacts of the Federal Reserve’s recent asset purchases. Please consider our weekly chart courtesy of Global Macro Monitor. In case you were wondering why interest rates are still at rock bottom, here is part of the answer. However, as many prominent names including PIMCO’s CEO Bill Gross have been asking: What happens when the Fed stops purchasing treasuries?

Lines In The Sand

Another week, another big sell-off and I can’t help thinking how much this market reflects the “June-Gloom” weather here in Southern California. We have been looking at the S&P 500 chart with a cautious approach for quite some time now and suggested that there is some considerable risk for a market correction. In one segment we referred to Barry Ritholtz who recommended drawing some lines in the sand. How much pain are you willing to take in terms of your portfolio?

There is some hope though in that the majority of traders seem to agree where that line in the sand is; 1250 on the S&P 500 has been the consensus for a major support. Most of the chartists seem to point to that level as a hard line in the sand. This also suggests a sort of self-fulfilling prophecy might be at play here—it is the main reason why technical analysis works in the first place. When enough people believe 1250 to be a strong support, it may actually come true.

The previous low earlier this year was 1249. This week, we came one step closer to that all-important support of 1250. Yet, the momentum is also slowing down, suggesting that the sellers have been reducing some of their positions recently.

What’s next for you? If your time horizon is short-term, you would have been stopped out of the market some time ago already. As for those who have a slightly longer investment horizon, you may want to draw your own line in the sand, perhaps not directly at 1250 but somewhere close enough below it. How much pain you are comfortable with determines your line in the sand.

Recommended Read

One month ago, we brought up the good old “Sell in May” rule which suggests to exit the stock market and wait until the end of summer to consider buying stocks again. So far it looks like the old saying is spot on and it shows that investors actually acted upon the rule. Please consider Michael Mackenzie & Michael Stothard’s FT article which notes that U.S. equity outflows are the largest in 10 months.

Good luck and good investing!

Disclaimer
Neither the information nor any opinion contained in this communication constitutes a solicitation or offer by us to buy or to sell any securities, futures, options or other financial instruments or to provide any investment advice or service. Each decision by you to do any investment transactions and each decision whether a particular investment is appropriate or proper for you is an independent decision to be taken by you. In no event should the content of this communication be construed as an express or an implied promise, guarantee or implication by or from us that you will profit or that losses can or will be limited in any manner whatsoever. Past results are no indication of future performance. Please note that there is no requirement and no commitment to make any payments to FX Investment Strategies LLC in order to access our published information be it via email or via website publication. All information is publicly available without any required monetary consideration. Any payments or donations made by you are deemed to be voluntary and cannot be considered as payments for investment advice given to you.

Market Wrap: June 3, 2011

Posted on June 4, 2011 by Clemens Kownatzki, MBA

GBR Market Wrap, June 3, 2011

In this Week’s Issue

Weekly Snapshot

• Moody’s sounds alarm over U.S. debt limit and deficits (Reuters)
• U.S. Dollar at yet another record low against Swiss Franc on Friday
• U.S. economy ads just 54,000 jobs as unemployment rises to 9.1% (FT)
• Brazil’s economy reported annual growth of 4.2% in Q1 of 2011 (Economy.com)
• Moody’s cut Greece’s credit rating by three notches to Caa1 from B1 (FT)
• Euro area annual inflation is expected to be 2.7% in May 2011 (Eurostat)
• The yield on the 10-year Treasury sank below 3% for the first time this year (AP)
• The Euro area seasonally-adjusted unemployment rate was 9.9% in April (Eurostat)
• U.S. consumer confidence index fell to 60.8 from a revised 66 in April (AP)
• India’s economic growth rate slowed again to 7.8% in Q1 of 2011 (Economist)
• U.S. home prices declined by 4.2% Q1 of 2011; lowest point since 2006 bust (AP)

Market Barometers

Weekly Chart

Friday’s employment report was a bit sobering. The U.S. economy was only able to create 54,000 new jobs, much less than the roughly 150,000 expected by economists. This is aggravated by the fact that the U.S. economy needs to add at least 100,000 new jobs each month just to keep up with the demographic trends of a steadily growing population. In real terms then, the U.S. economy actually lost about 50,000 jobs last month and that is of course disconcerting for the financial markets as well as the viability of an economic recovery already standing on rater shaky legs.

The chart below compares the job losses during the most recent recession with those of prior periods. Technically, the economic recession has been over for quite some time now. However, the employment recession still lingers on. The possibility of double-dip recession is very much dependent on the outlook for jobs. Let us hope that the slow but steady trend in this chart continues to improve.

Recommended Read

Please consider John Drzik’s guest column in the Financial Times: Price volatility is here to stay.

Recommended Video:

Here we are again with a short technical outlook on the markets. One day before the all important U.S. jobs report, Jeff Macke made a very good call when he suggested: “Brace yourself and if you are nervous about the markets, sell until you can sleep! “

Indeed, you had to brace yourself when U.S. equities nose-dived after a less than favorable jobs report on Friday. As John Drzik’s article above suggested, price volatility is here to stay. This is true not just for commodities but also for equities. Trading of shares, particularly individual stocks, continues to show signs of commodity-like price behavior. Brace yourself or better yet, wear a seat-belt when navigating the financial markets.

Good luck and good investing!

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Tag Archives: stock market

GBR Market Wrap: Halftime Reports and Happy Fourth!

GBR Market Wrap: June 10, 2011

Market Wrap: June 3, 2011

GBR Market Wrap, June 3, 2011