The last time we featured companies in the Sin businesses was 2013 and the portfolio was rather profitable as was back in 2011 when we first featured it.
Tobacco and Alcohol are two perennial consumer “staples” that never go out of style, especially when the economy tends to stress people out … as it has been doing since last year.
Thus, we think it’s a good time to revisit the world of Sin & Vice again.
Get your copy here: Sector Report 1605 : Tobacco & Alcohol 2016
I am posting this early because I am leaving for my mid-year vacation this weekend. It has been a very busy and hectic first five months of the year and I really need this break. Besides the classes, there meetings after meetings regarding business, ventures, personal issues (theirs, not mine), one-to-one coaching, counselling, medical appointments (for both Lucy and me) … if I thought I had a day free, something would come up and busy me like car issues, medical stuff, the kids’ issues, administrative things … bah, you name it.
In spite of the busy busy busy, I still managed time to trade and I must say that May 2016 was merciful to my account. I also managed time to swim, work out and get back to fitness again. That meant the world to me. Since December last year, I was plagued with a neck injury that pinched a nerve in my left arm and caused a lot of muscle loss. I also sprained my right ankle in December. That brought on a gouty attack that cause the calf to lose most of its muscle mass because I couldn’t use that leg for a month. I have had to work really hard to put things back to normal since after Chinese New Year. My right leg is back, although lacking a little power compared to my left leg. My left arm is also almost back but the loss of my tricep is visibly obvious and it is a struggle to make 20 pushups. But I am getting there … bit by bit, effort by effort.
On Tuesday 24 May, I managed 50 laps (2.5km) in 65 minutes. That works out to more than a minute over my average 500m timing from last year. (No, its the the video above) In fact, around this time last year, I was doing a lot better than this.
On the whole, May has been a great month with new friends, more opportunities and definitely better trading.
On the weekends of May 6 to 8 and 13 to 15, PTT84 got their Pattern Trader Bootcamp (Weekend Tutorial) and it was a mind-busting bootcamp! Plenty of senior graduates, mostly from more than four years ago, returned to get hit with a wall of information. Not this bunch of highly energetic enthusiasts are going to get hit with another four walls of assignments over the nest two months! Happy Hunting you lot!
As the Tutorial evolves into its next phase of growth, I look forward to the challenges that the digital world will pose for me. As with everything, I intend to take each challenge on with the mindset of overcoming and bettering everything I do. I am coming back from my vacation recharged and ready to take on the last seven months of 2016!
However, as of writing this, Brent closed 4 cents lower than WTI on Tuesday 24 May and was trading 7 cents lower during the close session. This sort of “inversion” between Brent and WTI tends to bring major price swings as was the case in January this year when crude reversed from its deadly downtrend.
Crude traditionally tops out in May and consolidates in June.
Whether this inversion between /BZ and /CL is a signal of an impending downward reversal remains to be seen. But from experience, this inversion has rarely failed to bring a reversal in the trend.
The DOW and S&P may be holding above its year’s open but NASDAQ is still down for the year and flirting with its 200DSMA. The Transports are also down for the year and below its 200DSMA, implying that any joy for the DOW and S&P may be dragged by this working class index.
America’s economic fundamentals look like they’re holding up well and they are still showing to be gainfully employed with the unemployment rate at a seven-year low at 5%. If there are any chinks in its seemingly impenetrable armour, it would be be its Government Debt to GDP to 104.17%, its highest since WWII. This has broadly been the result of Ben Bernanke’s easing policies that brought 4,000,000,000,000.00 American Dollars into the system to keep it from failing.
What can’t be denied are the technicals behind the market’s weakness. When looking at the 10 and 20 month moving averages, it is obvious that the two long-term averages don’t cross for nothing. Every time these averages inverted, the economy went into a serious recession.
Looking at the DOW’s status on the monthly MACD, using the Russian Financial Crisis of 1998 as a benchmark, it is also obvious that the monthly MACD histograms don’t turn red for nothing.
Thus, something is brewing beyond our eyesight that is causing the 10 and 20 month averages to cross over on the DOW, S&P500 and the NASDAQ and for the MACD to be showing such a negative warning. One of the things I am keeping a close eye out for is the ever-tightening spreads on the yield curve.
As of the close of 24 May, the spread between the 5 and 10 year yields have closed to within 45 basis points. At this rate of closure, we might be looking at an inverted yield curve between the 5 and 10 by July this year.
Now that the close of May looms, it would be apparent that May 2016 did have a sell-off even if it does close to the upside. This is good news for 2017 only if the yield curve doesn’t invert.
June is the last month of Quarter Two and can be a rather bearish month. Traditionally, this is more so if May had sold off. June 2016 has 22 trading sessions. There are no public or trading holidays in June.
- June starts out well with the first two days of the month being rather bullish
- The first day of June has been up on the DOW 20 of the last 27 … however …
- … in 2008/2010 the first day was down -1.1% and 2011/2012 was down -2.2%
- The first week of June ends bearishly
- The second week is the exact opposite of the first – it starts bearish and ends very bullishly
- The Friday (10 June) before expiration week is the most bullish day in June
- The Monday of Expiration Week has seen the DOW go down 10 of the last 18
- 14 and 15 June 2016 is FOMC Policy Day (Wed 15 June, 14:00 EST)
- June Triple Witching Day (Expiration Friday) tends to be bearish but in recent years, it seems to have turned things around – DOW has been up 10 of the last 16
- The week after June Expiration has been down on the DOW 22 of the last 25
- Watch for Portfolio Pumping in the last week of Quarter 2 as fund managers illegally jack up the prices of their portfolio’s underperforming securities
- The last day of June has been bearish with the DOW going down 17 of the last 24 and down on NASDAQ for 6 of the last 10
- Crude consolidates in June
- Nat Gas moves lower
- Gold stays weak
- Silver bottoms out
- Copper sees strength
- Soya tops out
- Corn continues to decline
- Wheat bottoms and reverses in mid June
- Cocoa starts an uptrend
- Coffee continues its weakness
- Sugar finds a low and bounces into July
Just like that and we’re into the final month of the first half of the year. Time flies when you’re having fun.
I’d be mindful of Singapore’s economy more than the U.S. The island state is in a dreadful financial state as it battles a Government Debt to GDP ratio of 60.8% which is the highest level of household debt in its history …
… plus 18 consecutive months in negative inflation that has even caught the eye of the IMF.
Interesting times, these.
It has been too many years since we last featured this sector. Although now may not be the time to invest in this sector (seeing how everything is already overbought), I believe we can get a couple of nice cyclical trades out of them.
You’re not going to find a sector with this many fair-valued stocks (with PEs below 15) now so if the economy goes into a major correction, this may just represent some of the best-valued long-term investments that will be worth considering.
This month, we revisit the Homebuilders to see what opportunities this massive sector has in store for us come May and June this year.
Get your copy here: Sector Report, 1602: Homebuilders 2016
April 2016 was my busiest month of the year yet and if history is anything to go by, the back-to-back sold out batches may be indicating that the state of the economies of Singapore and Malaysia are getting worse. And these new Pattern Trader inclusions may just be the smarts ones who took action early.
The last time I was this busy with back-to-back sold out classes was in late 2007 and early 2008. If you signed up in December of 2007, you had to wait will May or June 2008 for your class. These days, the classes are more long drawn and the intake-per-batch is a little more than in 2008. So the wait is about three to four months at worst. I know I can do more by expanding the class size but that is not what the Pattern Trader Tutorial is about. A class with a limited intake of between 30 to 35 students allows for more interaction and quality time. The remaining space of around 15 seats are reserved for past graduates returning to re-sit.
PTTMY32 had their Tutorial over the weekends of 08 – 11 April and 16 – 17 April. This was such a memorable and eventful batch that I was left feeling very empty and lonely on the Monday morning of April 18. It’s a good thing to have friends who drop last-minute invites to have breakfast! Thanks MY32 for a great two weekends and thanks, Yap MG for a great Monday morning breakfast!
After that Monday’s awesome curry mee, on Friday 22 April, PTT83 completed their nine Tutorials in more than eight weeks. This was the third sold-out batch in a row since last year. Now they face the heavy-duty task of completing the Post Graduate Assignments that will hit them over the next four weeks. Good luck y’all, and thanks for keeping me on my toes!
The Pattern Trader Tutorial got its first taste of the all-new Post-Graduate Tutelage (replacing the 5-year old Coaching Tutelage). The traders were made to work together to research and plan various trades and investments on the many sectors, industries and securities that we could break down during this four-session (weekly) Tutelage. It was great fun and I am sure we’re going to make this better and better with each passing batch. Congrats to the first lot of Tutelage Traders!
The Dow Jones and S&P500 were a picture of health for April 2016. The Dow gained 0.50% for the month and is up 2.00% year-to-date. The S&P500 added +0.27% for the month to be up +1.05% for the year. NASDAQ, on the other hand, suffered a hit as a result of AAPL, GOOG, MSFT and TWTR headlining a disappointing quarter. The tech-heavy index dropped -1.94% for the month and closed down -4.63% YTD.
Things don’t look that much better when you consider the indices aren’t higher than a year ago. Dow is down -1.40%, the S&P lost -2.13% and NASDAQ is losing a whopping -4.94% from a year ago.
Earnings have been a mixed bag of hard-hitting losses and conservative beats while guidance has been mostly hawkish. This is not usual for Q1 earnings in a normal market. The main players have been largely disappointing (again) and most are pointing to a weaker future over the next couple of quarters.
As far as its economy and its corporate businesses are concerned, the picture doesn’t get any better.
The US economy expanded an annualized 0.5 percent on quarter in the first three months of 2016, lower than a 1.4 percent expansion in the previous period, and below market expectations of 0.7 percent growth, according to the advanced estimate released by the Bureau of Economic Analysis. It is the weakest performance since the first quarter of 2014 when the economy contracted 0.9 percent as consumer spending slowed, the drag from trade and business inventories worsened and business investment fell for the third straight quarter.
On the Central Banking front, the FOMC Statement on the 27th of April, contained no hints of a possible rate hike while the Bank of Japan followed the Fed on the 28th. The BOJ made no changes to its interest rate, but announced a JPY300 billion, 0%, lending facility for companies affected by the Kumamoto earthquake. That news rallied the Yen and send the currency markets into a frenzy.
Consecutive drawdowns on inventory levels saw WTI gain 20% for the month. On Friday 29 April, WTI hit $46.78pb before retreating to close at $45.99pb. WTI has not been at these levels since November last year. With May having a habitual tendency to force crude prices down, I am advising caution if you thought this might be the oil recovery that goes back to $70pb. I’d wait a while for that yet.
Asian markets after the close on Friday 29 April;
- Japan closed down in April -0.55% and -12.44% year-to-date.
- China finished April -2.18% and is down -16.98% YTD.
- South Korea ended the month -0.08% but is up +1.67% for the year.
- Australia bucked the trend in April by closing up +3.33% but is down -0.82% YTD
- Malaysia ended April -2.61% and down -1.17% for the year.
- Singapore ended a rock-and-roll month -0.08% and is down -1.53% YTD.
For a full perspective on Singapore’s economy and economic outlook, please read Debt & The Next Great Economic Collapse.
May 2016 has 21 trading sessions and one public holiday. May is notorious for having the year’s most fearsome correction. Some Mays in years past (most recently in 2012) are known to wipe out the whole year’s gain in a single month. May starts well but almost immediately goes into one of the most bearish weeks on the trading calendar.
However, if May doesn’t sell off, it is often seen as an omen for the following year which tends to be flat, volatile and/or negative. Such was the case when May 2014 didn’t sell off which resulted in 2015 ending flat after a very flat first eight months and three following months of extreme volatility. Similar occurrences were noted in 2003-2004, 2007-2008, 2009-2010.
For your information, May 2015 didn’t sell off either.
- The first trading day of May has been up on the DOW 13 out of the last 18
- The first two days of May are the month’s most bullish days
- The next three days are the most bearish
- The Friday (6 May) before Mother’s Day (Sunday 8 May) has been up on the DOW 14 of the last 21
- The second week of May tends to be uneventful with a little bullishness midweek
- The Monday (9 May) after Mother’s Day has been up on the DOW 15 of the last 21
- Expiration week tends to be a little bullish
- Monday (16 May) before May Expiration has seen the DOW gain 21 of the last 28
- May Expiration Friday (20 May) has been down on the DOW 14 of the last 26
- The week after Expiration Friday tends to be bearish
- Friday (27 May) before Memorial Day (Monday 30 May) has seen the DOW go down 8 of the last 15
- Monday 30 May is Memorial Day – Markets are closed
- The day after Memorial Day (Tuesday 31 May) has been up on the DOW 21 of the last 29
- May tends to end well but has been down on the DOW 11 of the last 19
- Oil tops out in May and begins a downtrend
- Nat Gas also tops out but tends to consolidate in May
- Gold sees weakness
- Silver tends to peak and reverse in Mid May
- Copper normally corrects in the middle of the month
- Soya peaks and starts declining
- Wheat continues its weakness
- Corn consolidates in a sideways fashion
- Cocoa also consolidates
- Coffee weakens
- Sugar consolidates at the lows
Seriously, since August last year, at all my talks, previews and classes, I have been urging traders to move into commodities rather than get stuck in equities or currencies. That’s where the money has been in the last nine months.
Since then, commodities have been going through their normal annual cycles with metals rallying from November into April (they stall out in May and sometimes even correct), agri-related issues did their usual run in August (although wheat and corn kinda stalled out midway), energy issues returned to their normal cycle of running up between November into May (they too, like the metals, stall and even correct in May and June) and every commodity counter fulfilled their annual obligation of running to higher highs in April.
Of course, it’s just a cycle and as with all cycles, they always come to an end. The question now begs if this “end” could trigger the next round of panic in the financial markets come May. Bonds have been seeing a fresh round of selling in April as yields rose across the board. The longer term maturities saw their yield rise as much as 16bps while the selling on the 2yr was limited to a 10bps gain. All in all, the yield continues to flatten way below par values signalling a move in the big money towards risk in April. However, with volumes in the equity space not improving by much, one can only guess where these monies have gone. Come May, we’ll see if the flight to safety returns as investors and traders brace for what could be a fierce sell-off in the equities space.
Apart from the bearish January this year, everything in the equity and commodities markets seem normal. The economic health of almost every major country however, is in trouble.
For those of you who haven’t yet read my report on Debt & The Next Great Economic Collapse should get to reading it this weekend to know the difference between a market driven recession and an economically drive one.
In 2013 and 2014, I did a series of public talks where I mentioned that the economies of the world may be sliding into a three-year decline as growth shrinks and revenues fall all over the world. This brought on queries as to why I thought that the economy would decline because stock valuations weren’t that high in 2013 and the market was certainly far from bubble levels compared to past market crashes.
My simple reply was that what I saw wasn’t in the market but in the economy. The market isn’t the economy and the economy certainly is not the market. Markets can rise even when the economy is obviously not doing well while the economy can be healthy even as the market makes a 30% correction. The two are not the same thing and there are comparable events to separate the two.
In my talks, I mentioned that the years between 2014 and 2018 could go into an economy-driven decline (recession) rather than a market-driven decline. Economically-driven declines last longer and hurt more than market-driven declines which are usually quick to fall and quick to recover like the ones we had in 2008, 1997 and 1987. Market-driven declines are noisy and spectacular while economy-driven declines are like a slow bleed that kills silently as were the ones between 2000 to 2003 and 1974 to 1985.
Between 2008 and 2012, America’s “recovery” and eventual “growth” was driven by more than US$4,000,000,000,000 that Ben Bernanke printed and pumped into the banks.
From that, along with the many other economies that followed suit, the world benefitted from this massive flow of new money. With the end of America’s cheap money in 2014 comes the reality of the pain it had been masking since 2008.
True to form, the markets that had become so addicted to cheap money, started to wane and falter, most noticeably, China. China then went all the way with its own money printing spree when it desperately tried to keep its markets from falling since 2014. This made us addicted to Chinese new money. Evidently, most of the Chinese spenders have retreated in the last couple of years … somewhat.
So now that the cheap money waterfall is drying up, the true colour of these economies are showing themselves to the world and its not a pretty economic picture.
The fall of crude hasn’t helped. Countries that have been using crude as a reserve have fallen into consecutive negative contractions; Brazil (6 out of 7 quarterly contractions), Venezuela (-7.1%), Russia (5 consecutive contractions), Iraq (-2.2% YonY), Norway (-1.2%), to name a few.
To date, four nations desperate for liquidity have adopted negative interest rates policies; Switzerland (-0.75%), Denmark (-0.65%), Sweden(-0.5%) and Japan(-0.1%). It is rumoured that more European nations are planning to take this route to flush out liquidity. Some have already gone to zero on their interest rates.
Twelve economies that are on zero interest rates include; Eurozone, Germany, France, Italy, Spain, Netherlands, Belgium, Austria, Finland, Ireland, Greece and Portugal.
Ten countries are in consecutive months of negative inflation-rate/deflation; Greece (37 months), Switzerland (19 months), Poland (21 months), Spain (19 of the last 21 months including the last 8 straight months), Israel (19 months), Singapore (17 months), Thailand (15 months), Ireland (2 months), Italy (2 months) and France (2 months).
Deflation is a general decline in prices, often caused by a reduction in the supply of money or credit. Deflation can also be caused by a decrease in government, personal or investment spending. In the current case of Singapore, it’s the latter because the CPI is still near record highs. It is generally accepted that deflation is a problem of the modern economy because it increases the real value of debt and may aggravate recessions that lead to a deflationary cycle. The CPI and the Inflation Rate should never be confused as being the same thing.
This negative inflation/deflationary situation is clearly seen in our extraordinarily high prices (CPI) of almost everything. On the 10th of March this year, the Economist Intelligence Unit (EIU) declared Singapore the world’s most expensive city for 3rd year running. Knowing that we have the most expensive cars in the world and amongst the most expensive housing prices, the report’s ranking of the island state was based largely on the prices of food, toiletries, clothing, domestic help, transport and utility bills.
Personally, I wonder why all our food products and consumer goods are so damn expensive considering every commodity price had fallen between 2013 and 2015 and many are still at their multi-year lows. Nevertheless, the CPI is just below its record highs.
And that is in spite of falling housing prices since Q4 of 2013.
It is quite mind boggling as to where all this extra spending (to drive prices so high) has come from considering our stock market hasn’t made higher returns now when compared to four years ago. Salaries, by and large, haven’t risen considerably in that time either. Businesses haven’t been faring well in the last three years as their earnings would attest.
Thus it doesn’t surprise me when I see borrowings at its highest in the country’s history. The greatest increase in these borrowing have also been over the last seven years.
This has made the island state one of the highest personal-debt-laden countries in the world. Singapore’s current Household Debt to GDP is at 60.80% of its GDP …
… and its GDP is now at Zero.
The current “negative inflation” situation has truly been turning up the heat on those who have been over-leveraged on debt. In the months to come, we’re going to see more of such cases surfacing as they default and begin fire-selling. The smart ones already bailed out of their super-expensive homes and dumped their exotic sports cars before this all came to pass. Others will follow as sure as more jobs are lost.
The job market on the Little Red Dot has gotten tight. Companies are chopping and hacking while others are adopting a hiring freeze and engaging contract workers only.
On 08 April, Singapore’s Trade Minister, Mr Lim Hng Kiang put out a hawkish note that was featured in the Business Times on the country’s future three to five years down the line;
Noting that the International Monetary Fund has been downgrading its global growth forecast almost every year since the Global Financial Crisis, Mr Lim said Singapore is now in a “paradigm of slower growth“. “Meanwhile, there are significant global rebalancing forces that must work themselves out over the next three to five years,” he said.
“The government is watching the situation very closely, and we are prepared to take further action, if necessary,” he added. Uncertainty over global oil prices will destabilise the global economy in the coming years, said Mr Lim.
This is due to too much investment in oil, which has resulted in an oversupply. As a result, global oil supply and prices will continue to adjust. China’s economic transition is another issue that will be a drag on Singapore’s growth, noted Mr Lim, while Singapore’s demographic challenges will see the economy having to adjust to a tighter supply of labour.
Now that the Trade Minister’s outlook matches my outlook from 2013/2014, the question is what kind of direction will the market take?
Between 2000 and 2003, the Dow Jones made a three-year decline (green line) that was extremely painful for investors, especially those who jumped in on every dip in those three years.
In 1966 (blue line), the Dow collapsed and seemingly recovered by 1969 only to get hit by the Nixon Shock (1972) and the Oil Shock (1974) and continued its sideways and volatile trend till 1985. For most of that period, the U.S. was in Stagflation.
Whether the market goes sideways, downward or swing wildly, one thing is for certain – it’s not going up without more pain and pressure even if the economies break out the printing presses once more. No amount of masking is going to work this time and it is apparent that the central banks of the world are out of ideas and out of ammunition.
There’s another thing I mentioned in those talks – this could be the precipice of a global monetary change. Money as we know it, may go through another evolution as it did in 1933, 1945, 1972 and the mid 1980s. But that’s a posting for another day.
For now, if my three-year forecast still holds water, we’re halfway there with 2015 having gone nowhere and Q1 of 2016 looking no better. Thus, if Negative Inflation/Deflation magnifies the level of debt, (and there is so much of it out there now) then this may just be the straw that breaks the camel’s back. With things in the economy as they are and if they don’t improve, I am expecting the drop in Q3 and Q4 and a possible bottom in 2017. Whether the market takes the same route is something the market will decide. I am only bearish on the economy for now.
During one of my Facebook Ad Campaigns, a reader asked if anyone had attended the Pattern Trader Tutorial to give some information about whether it was “useful” or not. To that query, several past graduates and a few current ones responded …
To which, another graduate responded …
And this from a student who needed that little bit more to get going …
It’s stuff like these that keeps me going. It is the best feeling ever to be appreciated.
So thanks to all of you for the appreciation!
Nine years after the launch of the Original Candlestick Patterns Quick Reference Cards along with a 5-hour workshop, I am proud to announce that the much-loved Candlestick Cards and Workshop are now available as an app!
Introducing The Pattern Trader Tutorial’s Candlestick Patterns Mobile App!
The app comes complete with all 72 patterns in its original Quick Reference tutorial as well as Hi-Res Videos of the Candlestick Patterns Workshop. Each pattern is well indexed and numbered so that making Quick References is now easier and faster than ever!
Definitely a must-get for all technicians and pattern-loving traders! Get yours now at:
LIMITED TIME LAUNCH PRICE!! US$39.99
Usual Price US$49.99.
Offer ends Friday 18 March 2016
(Expiration Friday) at midnight.
That’s right! After years of pushing and pulling, we finally have a product we can be proud of!
Introducing The Pattern Trader Tutorial’s Breakout Patterns Mobile App!
The app comes complete with all 36 patterns in its original Quick Reference tutorial as well as Hi-Res Videos of the Breakout Patterns Workshop. Each pattern is well indexed and numbered so that making Quick References is now easier and faster than ever!
Definitely a must-get for all technicians and pattern-loving traders! Get yours now at:
LIMITED TIME LAUNCH PRICE!! US$39.99
Usual Price US$49.99.
Offer ends Friday 18 March 2016
(Expiration Friday) at midnight.
February 2016 for me will be remembered as the month we celebrated Chinese New Year for the third time in my home for the three years we’ve been staying here. Thanks to everyone who showed up and made it memorable!! We’re definitely doing it again next year! Huat Ah!!
In January this year, I developed a strange sensation in my left arm like a “buzzing” that went all the way down to my thumb, fore and centre fingers. The back left shoulder was in tremendous pain and my neck felt like it was being pulled from the inside. I saw a physio and my regular TCM doctor and had it fixed somewhat but then I developed an excruciatingly painful Tennis Elbow a week later. So back to the physio who took care of the Tennis Elbow but the pain in the back persisted. After much tolerance, there was no improvement even after a third visit to the TCM doctor.
Thankfully, I had help in the form of my current batch student, who offered his advice as he is a pain management specialist and with his recommended medication, the pain eased up. But I had to have the problem addressed properly so I got myself MRI’ed on Tuesday 23 and once again the following day because the original scans didn’t come out too clear. Then on Thursday, my fears were finally put to bed when it was confirmed that it was nothing more than a pinched nerve as a result of my C6 and C7 discs pressing down on a nerve root as a result of wear and tear (nice way of saying ‘getting old’). This is going to take a long time to heal but as of writing this now, the pain is not as bad and the arm is not as weak as it was three weeks ago. It still gets tired quickly but at least there’s strength.
Learn more about your spinal threats:
Then on the final weekend of February on the 26th, 27th and 28th, The Pattern Trader had its first ever Commodities & Futures Trading Workshop. There was a nice turnout and I must say, they were a very enthusiastic, hard working and cooperative class. It was a good exchange of ideas and concepts.
The DOW looks to have completed a Double Bottom while the S&P and NASDAQ are looking like having completed a left shoulder and head of an Inverted Head & Shoulders pattern. It can be argued that S&P and NASDAQ are still in confirmed downtrends. But there is no doubt that all three benchmarks remain under their respective 200DSMAs for the second month running. As of the close of 26 February 2016, the DJI is down 4.52% YTD, the S&P500 is down 4.69% YTD and NASDAQ has lost 8.33% YTD.
The coming months of March and April should give the markets a little leg up for some temporary relief. But I will need more than just an uptrend to convince me to buy anything for the long term. If the FOMC is hawkish, that’s all the more reason I won’t be dovish.
In the mean time, Gold continues its “Dead Man Walking” march up the charts. It stalled for a bit but looks set to climb higher in its parabolic march up the charts in March.
It is an ominous long-term sign that Gold has gone parabolic over the last 13 weeks while completing a Rounding Bottom. If this rally continues for another month or two, it could be a warning of a severe crash ahead. Historically, Gold has made 4 to 5 month parabolic rallies just before a major crash when it regarded U.S. issues such as the 1987 Housing Crisis, 2001 Dot.com and 2007 Sub-Prime. Issues not regarding the US saw Gold make 2 to 3 month rallies before a crash as was the case with the 1997 Asian Financial Crisis and the 1998 Russian Financial Crisis. By the way, Gold falls harder than the market when the market crashes.
March 2016 has a total of 22 trading sessions and one public holiday. March is known as a bullish month especially towards the middle of the month. March starts well and can end poorly. It is the last month of the first quarter and is known for its December Low indicator where if the market closes above the low of the previous December, the year is likely to end higher and vice versa.
Recent years have seen a change in the end-of-quarter window dressing that used to rally the market in the last week. These days, March ends poorly especially since 2008 as fund managers’ participation in the equity space has dropped off significantly post Sub-prime.
- The first trading day of March has seen the DOW go down 5 of the last 9 (last year up)
- However, it was up 9 out of 11 between 1996 and 2006
- The first week of March tends to swing wildly
- The third day of March (3rd) tends to be very bullish.
- The second week of March is usually mildly bullish and uneventful
- Sunday 13 March 2015 – Daylight Saving Time Begins. U.S. market will open at 21:30SG henceforth.
- The third week of March is the month’s most bullish week
- The Monday before March Expiration Friday has been up on the DOW 21 of the last 28
- March Triple Witching Friday has been mixed in the last 28 years – DOW down for the last 5 out of 7
- The fourth week starts rather bearishly but ends bullishly
- The week after Expiration Friday has been down on the DOW 17 of the last 28 but has been up 8 of the last 12
- Friday 25 March is Good Friday – Markets are closed
- The day after Easter is the Second Worst (bearish) Post-Holiday session
- The last session of March has been down on the DOW for 16 out of the last 21
- Mon 29 Feb
- Australia – Building Approvals m/m, RBA Rate Statement
- China – Manufacturing PMI
- Tue 01 Mar
- UK – Manufacturing PMI
- US – ISM Manufacturing PMI
- Australia – GDP q/q
- Wed 2 Mar
- UK – Construction PMI
- US – ADP Non-Farm Employment Change
- Australia – Trade Balance
- Thu 3 Mar
- UK – Services PMI
- US – ISM Non-Manufacturing PMI
- Australia – Retail Sales m/m
- Fri 4 Mar
- US – Non-Farm Payrolls, Trade Balance, Unemployment Rate,
- Wed 9 Mar
- UK – Manufacturing Production m/m
- China – CPI y/y
- Thu 10 Mar
- Euro – ECB Press Conference
- Fri 11 Mar
- US – Prelim Consumer Sentiment Survey
- Sat 12 Mar
- China – Industrial Production y/y
- Sun 13 Mar
- Japan – Monetary Policy Statement, BOJ Press Conference
- Mon 14 Mar
- Australia – Monetary Policy Meeting Minutes
- Tue 15 Mar
- US – Retail Sales, PPI m/m
- Wed – 16 Mar
- UK – Annual Budget Release, Average Earnings Index 3m/y
- US – Building Permits, CPI, FOMC Economic Projections, FOMC Statement, Fed Funds Rate, FOMC Press Conference
- Australia – Unemployment Rate
- Thu 16 Mar
- UK – MPC Official Bank Rate Votes, Monetary Policy Summary, Official Bank Rate
- Fri 18 Mar
- US – Philly Fed Manufacturing Index
- Tue 22 Mar
- UK – CPI y/y
- Euro – German ZEW Economic Sentiment
- Wed 23 Mar
- Euro – German Ifo Business Climate
- Thu 24 Mar
- UK – Retail Sales
- US – Durable Goods Orders
- Fri 25 Mar
- US – Final GDP q/q
- Tue 29 Mar
- US – CB Consumer Confidence
- Wed 30 Mar
- US – ADP Non-Farm Employment Change
- Thu 31 Mar
- UK – Current Account
- Australia – Building Approvals
- China – Manufacturing PMI
- Crude strengthens in March
- Nat Gas also stays strong
- Gold sees some weakness in March
- Silver tops out and starts its decline till April
- Copper moves up in March and April
- Soya stays strong
- Wheat and Corn continue their declines
- Cocoa tops out and starts weakening
- Coffee corrects
- Sugar also stays weak
The US economy doesn’t seem worse for wear as their economic numbers have not shown much in terms of weakness and employment is still buoyant. But cracks in its apparent “soundness” have become more obvious. Although the US reported that its GDP expanded by 1% y/y, it is actually a second q/q contraction on its GDP. And the 1% expansion was not really good news as inventories grew while imports slowed – never a good state of the economy for the US.
The word now is “negative interest rates” as Janet Yellen hinted in her last minutes. You have got to wonder what that will do to an import-based economy like America. At a time when the country needs some real liquidity, this might just prompt an exodus of dollars in a capital outflow tsunami.
As for the rest of the world, most of the other major economies are staving off recession while some have already fallen behind on their numbers.
Singapore registered its 15th consecutive month in negative inflation (or deflation) setting a new record for the longest time in negative inflation since the Oil Shock period of 16 months between October 1975 and January 1977.
The island state, however, managed a 6.2% q/q growth and expanded 1.80% y/y. That’s great news!
So why is the market (STI) down by more than 7% YTD and down 20% from a year ago?
Why have property prices fallen for 9 straight quarters (-8.5% in 27 months)? The duration of this decline rivals the decline in property prices during the 1984 to 1986 period when the price index fell as much as 35%.
Why are so many people finding it hard to get a job after getting laid off by the thousands over the last two months? Why are car owners increasingly defaulting on their car loans while home owners are being lined up by the banks as their mortgage payments start waning? Why are credit card companies so busy issuing letters of demands and threats of writs especially over the last four months?
Why have I become so busy over the last year counseling an increasing number of people in these predicaments?
The answer is simple; The markets lead the economy by about six months. And this economy is still living in denial.
I do wish governments stop lying to us and treating us like robots. I pray for leadership who will tell it like it is. I dream of the day ministers become honest and upfront about everything. Yes, I know, it is an impossible dream. A dream that is as unreal as the economic nightmare they are hiding from us.
Looks like the big one is coming. If it is, then it’s timely that we look on the safe side of trading to see if we can find safety or even a quick buck from one of the most defensive sectors there is, Consumer Staples.
This sector has proven to be a winner on many a downturn so we’re going to take a look at the not-so-obvious choices available for the retail investor to stay safe and viable.
Subscribers can get their report here: Sector Report 1601 : Staples