JNK NOT Weak

JNK, as a representative of the junk bond market is NOT weak this morning with stocks selling off early, and gold holding up while the miners surge.

Oil is down sharply, but the point with JNK is that this may be the bottom in oil, and the top in the USDollar.

gh

I must add: "so far!"

Soybeans

Soybean prices as a predictor of weak U.S. dollar?

The striking thing about the beans is the chart pattern, a rising triangle as a bottom formation. One of my favorites by the way.

But I've noticed similar patterns in the gold miners also.  Kind of...

And some of the other currencies are in a range, particularly the Japanese Yen.

It is about time for some respite from the "King Dollar" story for awhile. Some doubt must be allowed to fall.

gh

What Could Happen?

The US stock market rally, and the rally in the US dollar has been predicated on a strong US economy, and weakness around the world. We have ignored the weakness around the world, perhaps thinking we are continuing beneficiaries of American exceptionalism. Whatever the hell that is.

The markets are worried that the sharp decline in the price oil will destabilize the junk bond markets due to the debts taken on by shale oil and gas producers. But over the last weeks we seem to have rationalized that perhaps we can get by with any oil price around $50. And we get greedy over all those new dollars in peoples pockets that they will surely use to buy extra gadgets at Walmart.

But the whole thing is predicated on an economy that continues to grow, however slowly. What if that ain't so? Hidden in the employment numbers today, strong though they were, was that little thing about a lack of wage increases. If wages aren't going up, even a little, where is the demand for workers.
However it turns out. I am struck by the coincidence of the US Dollar starting it's clime last summer at exactly the same time that oil commenced it's own decline. What does the oversupply of oil have to do with the US Dollar strength. Particularly when demand for oil worldwide is reportedly not strong.

Perhaps someone can tell me the answer. It is probably simple. But it seems to me that it is altogether possible that oil is indeed part of a slowdown in the works, worldwide, not to exclude the Exceptional Americans.

Ignorantly yours,

gh

PetroBras?

Is this "THE" bottom in PBR?
Only time will tell. It acts like it may be one. For awhile....

Use caution. Scale in for a long trend change.
gh

Where Are the Banks?

Big rally in the indexes so far today. Undoubtedly a lot of short covering going on. Yet gold is holding up, so far.

But where are the banks. They are up in price, but I do not see the volume in the rally. Maybe later.
If you look at the price of the banks most of the big ones have gone NOWHERE since last fall. And the regional banks are worse.

I am looking for a rollover in the indexes near the end of the day....

We'll see.

control risk,
gh

1/7/15

Stock market averages up in the morning.

JNK as a representative of junk bonds up as well, but not so much volume. Volume is what matters. Perhaps the volume will come later. But not so far today.

The selloff in the junk bonds has been related to the plunge in the price of oil and the fact that a great many of the high yield corporate bonds are from the oil producers, explorers, drillers. It is uncertain how long the price of oil will stay low, or how low it may go due to Saudi production and world overproduction and lack of demand. And that uncertainty translates into uncertainty regarding the viability of companies in the earl bidness.

gh

AU

I am looking for a bottom in Agnico, as well as many of the gold and silver miners. Low energy will help with production costs and any slowing of the world economy will give another reason to print money worldwide.

Why not? This time may be different!

Control your risk. If a trade costs you more than a few percent on a small initial position, let it go. Trade the trend. Bottom picking is an exercise in catching the change in trend. It is an exercise in timing. In the case above, IF the price holds in this low range I will hold an initial 1/3 position. IF it breaks out above this range I will add another 1/3. And will consider more after a subsequent consolidation and a continuation higher. Then I will play it by ear. I think this stock has a good chance to make it to $15 in the next few weeks. How it gets there will determine my action from there.

control your risk,
gh

A Respected Voice

Bill Gross, the former head of Pacific Investment Management (PIMCO), the largest bond fund in the world, who left his former employer to go to Janus Funds has some sobering and to my way of thinking, commonsense advice for investors. When he left PIMCO there was talk of his abrasive style with employees, and, frankly, some talk of his grip on reality. I suspect his views on the future may not have been consistent with the views of the largest bond fund in the world. After 35 years of a bond bull market, or any long term bull market for that matter, attitudes become entrenched and investment advice becomes rote. This is the phenomenon that eventually puts "everyone" on the same side of the trade, and causes the massive dislocations in finance and economies with the unwind.

Gross may be right on the immediate future. That future for the next couple years. The action in the bond market, specifically US treasuries, and interest rates in Europe for the last few months have not been congruent with an economic recovery. Of course we have known for some time that the EU is in trouble, and the troubles keep recurring, think of Greece. But the hope has been that the U.S. economy would continue to be strong and eventually pull the rest of the world up with US. This has been a source of recent strength in the USD, and weakness in the other major currencies. Not to mention the intentional devaluations in other major nations and currencies, thinking of Japan recently and China for years.
But the world is facing headwinds that even zero interest rate policies may not overcome. First to mind is the demographic challenges on the order of the baby boom in the western world and most of Asia. And the large debt burdens of many countries must resolve eventually.
Timing is everything. I trade flexible positions but am always on alert for the direction of the markets in general. Such being a function of "sentiment" which is a complex amalgam of positions in place as well as outlook for the future.
The recent action in the precious metals, even with the recent strength in the US Dollar, may be a presentiment for the future. Whether that means US Dollar weakness in the future, or just another round of weakness for all currencies and flight to safety.

Listen to Mr. Gross:
William Gross

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When the other currencies of the world start to hold some value, the US Dollar is going to take a beating. And those things priced in the USD (worlds "reserve" currency) will require many more USD to be acquired. The day gets closer.

gh

Priorities

IN THE END IT IS IMPORTANT TO KEEP ONES PRIORITIES IN ORDER:

GO DUCKS!