Weekly Game Plan - 30.8.2015

1. Themes for the week

1. Will be interesting to view the takeaways from Jackson Hole and the likely implications for US rates and USD. Vice Chair Fischer’s (much desired) remarks suggest September is still in play. Obviously a hawkish slant if compared with market pricing and the consensus take on Dudley earlier last week. Should be Usd bullish. At the same time, Carney kept a "turn of the year" rate hike in the card. Could be bullish Gbp (although tomorrow is a UK bank holiday).

2. A gradual recovery in China and oil prices should stabilise the emerging market turmoil. Should be more upside in equities.

3. US and Euro growth data still robust. In particular, we will see if NFP lends a hand to the rate hike scenario or the delay scenario. EurUsd likely weaker in the coming days.

4. External developments (weak commodities, China jitters, etc.) to add pressure for more QE from the ECB - although no move is expected in this week's meeting - point to lower yields short term. Euro could be under some additional pressure.

2. Charts illustrating those themes

Vix between 20 and 40 is "risk neutral" territory...not risk averse

and not complacent. We're heading higher although still just above 20.

This means equities are likely to be in "retracement" mode before another

attempt at the downside.

I like the S&P/Dow for playing the retracement move higher;

I like the Dax for playing any kind of rotation downwards.

What do you know! Crude is finally showing a decent bounce!

Momentum is to the upside but we're not out of the woods yet.

Buy dips for now...but as we bump up against key levels, 

watch for the reaction. More weakness is still possible.

So long as Crude rallies, equities are easier to buy as the 

"emerging market slowdown" fears get reconsidered.

Watching EurUsd and AudUsd to the short side, and UsdCad to the long side.

Good Luck!

What's Hot 28.8.2015

Best looking charts for today:

EurGbp 4H

UsdJpy 4H

With UsdJpy, as usual, keep an eye on risk sentiment via equities. 

Can aid the trade planning & execution. So here are the
key levels for Dax:

Dax 4H 

With Jackson Hole happening over the weekend, it might be sound

to keep any fresh positions "small" today. And definitely don't place 

any trades (in FX anyway) after EU lunchtime...participation is already

poor as we stand.

Good Luck!

Weekly Game Plan - 23.08.2015

1. Themes for the week

- Increasing Focus on Emerging Markets (and various investment banks have been releasing reports on EM lately, and are likely guiding attention there). FED rate hike expectations and China slowdown/FX intervention are once again responsible for jitters in EM space. This time round we also have declining commodity prices which are increasing the weight on EM FX and the weaker economies (liek Brazil and Russia). What can change market sentiment? Surprizes in Chinese data maybe...rallies in Comodities...and the "technical oversold market" excuse.

- Another potential round of easing by the PBOC - keep your eyes peeled...this will feed into the risk off scenario if it surfaces.

- Fed Liftoff? Jackson Hole will be quite influential this week. That said, with all the risks to global growth, and the lack of inflationary pressures, there really is NO reason for the Fed to hike in September. The markets have likely NOT priced in the delay in rate hikes yet.

- Deflationary Impact of Commodity decline (has been hurting Cad & Aud) but bond markets are also worth watching. The decline in commodity prices can have two implications for inflation. First, we could see a temporary dip back into deflation in the  EU in coming months while US inflation stays around the current level of 0.2% for longer. Second, the projected rise in core inflation will be more subdued. This implies that it will take longer for the Fed to reach the 2% inflation target and thus underpins that the tightening cycle will be very gradual.

- Better EU data + hedging mecchanics (European boards down = Euro up) suggest potential continuation to the upside for the Euro. This could be exacerbated if the Fed hints at postponing the rate hike to December.

2. Charts Reflecting the Themes

Tough to ignore the bearish momentum and 

risk-off tone in equities. So long as we maintain  this tone,

selling rallies is the best plan.

Crude is sinking still...and taking the other commodities for a ride.

This undermines inflation, and keeps the Cad and Aud in check.

Euro looking strong even if we still need to overcome the recent range.

Risk off = unravelling of equity investor hedges, which allows the Euro

to gain traction. We've also had some better fundamental data which

may continue this week. EurCad, EurUsd look like good pairs to watch,

alongside UsdJpy (short). Gbp will become interesting once we break this recent 

range.

3. Quick Quality Stock Selection

I like to combine some longer term fundamental filters, alongside attractive debt ratios and valuations. Here are some names from North America and Europe, to look into further if you're looking for quality names at a discount. (screener: Financial Times)

4. Momentum Stocks

Only 1 momo stock in this week's filter: IOSP (USA)

Weekly Game Plan - 16.08.2015

Time to get back in the game!  Took my first long pause in a few years and now I'm back for more fun & games. So thanks to all my readers for your patience..let's get to it!

The big guns will most likely not be back in action until the second week of September...but that doesn't mean there's nothing out there to position for. Fed rate hike...further CNY devaluation...commodity decline...there are some themes out there to play. They have been present for some time so we need to pick our spots carefully, but so long as the theme is present, it's worth milking.

1. Themes for the week

-  Risk on/Off (derives from the CNY devaluation moves...so further depreciation will most likely spark continued risk off).  What have we learned this week (via Danske Markets)?

1. Daily reference rate now market based: The main change is that the daily reference rate is now market determined on the back of quotes from 10-20 banks. They are instructed to base their quote mainly on the closing rate of the CNY the previous day. CNY will continue to be kept within a daily band of +/-2% around the reference rate.

2. A managed floating regime: While the CNY reference rate is now purely market based the PBoC will continue what they call a ‘managed floating exchange rate regime’ and intervene in the spot market to ensure ‘stability in the CNY and ensure it remains at a reasonable and balanced level’ as stated by Zhang Xiaohui, assistant governor of the PBoC at the press briefing on Thursday.

3. The PBoC sees no basis for continued depreciation: At the press briefing Zhang Xiaohui also stated that ‘From the international and domestic economic and financial situation, we can see no basis right now for continued depreciation of the renminbi exchange rate’.

- Fed Liftoff (CPI + Minutes will feed into this theme)

- Policy Divergence between US, UK and EU (US is heading towards a liftoff...the UK also wants to do so asap...whereas Europe is confined to easing for the moment)

- Monetary Policy in UK (CPI will tell us how much we can believe in a liftoff in November)

- Deflationary Impact of Commodity decline (has been hurting Cad & Aud) but bond markets are also worth watching. The decline in commodity prices can have two implications for inflation. First, we could see a temporary dip back into deflation in the  EU in coming months while US inflation stays around the current level of 0.2% for longer. Second, the projected rise in core inflation will be more subdued. This implies that it will take longer for the Fed to reach the 2% inflation target and thus underpins that the tightening cycle will be very gradual.

2. Charts Reflecting the Themes

Lots of chatter about the psychological 200 DMA on equities..

main message is that we're dipping a little too far on the Dow and the Dax..

CNY intervention can spark powerful temporary momentum so watch for it.

Crude is sinking still...and taking the other commodities for a ride.

This undermines inflation, and keeps the Cad and Aud in check.

Cad & Aud sort of consolidating in their protracted downtrend.

More to come? Possibly! Play the trend & theme while it lasts.

3. Quick Quality Stock Selection

I like to combine some longer term fundamental filters, alongside attractive debt ratios and valuations. Here are some names from North America and Europe, to look into further if you're looking for quality names at a discount. (screener: Financial Times)

4. Momentum Stocks

Of all the stocks around the world that Finviz tracks, only 1 passes a basic "quality" screen

and is also making new highs above the 52 week high (which is the gateway to momentum returns).

It's evidently expensive (42+ p/e) but that's normal...it's a momentum stock...and it's got some rather

attractive fundamentals. If you're looking for a potentially good mover for the next 30 days, this might be worth watching.