The JSE and finance forum for South Africa
General Category => Shares => Topic started by: Bevan on September 11, 2015, 12:35:23 pm
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If this chart doesn't scare the living crap out of you then.... ok, keep calm and put your money into the market as normal. :TU:
The reason is that momentum trend is negative (red line on bottom graph is in negative territory) whilst short term momentum (blue line) is above red line (which means it must turn down again). When this happens it will be in line with momentum trend and we will see the big concurrent moves. At the moment, momentum trend is negative and short term momentum is positive i.e. crosscurrent. This is why we're seeing choppy market conditions, like the chop on the water when the wind blows the opposite direction to the swell. It just so happens that this imminent concurrent move will co-incide with the Fed's decision to raise / not raise interest rates next week. The market is so confused right now that it doesn't know what to do i.e. it goes sideways in a choppy way. So what happens when fear and confusion reign in the market...? People sell to preserve cash. And that creates more negative sentiment which feeds on itself in a vicious downwards spiral, especially when the algo traders and bots get involved.
Expect the market to sell off big time into next week's Fed announcement in a classic "sell the rumour, buy the fact" trade. Markets will recover after the Fed announcement no matter what the result but how much will have been lost before then? Going to be a very interesting week.... Of course I could be completely wrong about all this... ;D
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I have no idea how to interpret that, but I think I'll just do as I always do, sit on the sidelines with my eyes closed and hope I come out the other end ok!
The last few months has felt like a continuous bloodbath. How much worse could it get?
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I have no idea how to interpret that, but I think I'll just do as I always do, sit on the sidelines with my eyes closed and hope I come out the other end ok!
The last few months has felt like a continuous bloodbath. How much worse could it get?
A lot worse.
Anyway...I am still new to investing but if there is one thing I have learned....a market going down is only bad for those who don't keep a cool head. For those who do, on the other hand, it means you are about to buy shares at daylight robbery prices. All you need to do is make sure you found yourself a couple of companies with good fundamentals and enjoy the sale.
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;)
Could you not have at least let me enjoy my fikkin week end :wall: :wall: :wall: :frustrated:
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Could you not have at least let me enjoy my fikkin week end :wall: :wall: :wall: :frustrated:
Markets ended just fine last week so your w/end should have been good. This quietness is like the calm before the storm.... I think by Tuesday we should have seen the market moving and volatility picking up before Thursday's big data release. If not, perhaps everything will be just fine, everyone will have had their valium and we all keep calm and keep buying....
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Currently the market is quite volatile, but in my opinion this largely due to 2 entities financial press and economists. So many articles are written warning of a dooms day which is eminent, and the economists who should be reading tea leaves rather than trying their hand at projections. Then on the other side of the coin you have the statisticians who also like to colour their predictions. So who do you listen to - well hopefully all of them, but just don't be led by them or heed too much what they are saying after all they are doing this as a job whereas as for us who invest in the market to gain in capital growth and get the benefit of dividends over the years. I have been investing in the JSE since 1968 and have been through pretty much every major downturn that has occurred on the JSE and still today it is an appropriate market to invest in. I believe there are too many retail investors who think of the JSE as a roulette wheel, it isn't in fact it is far more even handed than the roulette wheel.
The market indices as presently reflected on my broker platform shows ALSI 49338 and Top 40 43834 these 2 indices where at these levels on or about May 2nd 2014 but per April 24th they both reached all time highs of 55,298 and 49,038 respectively. So they have had a quite significant retracement which is healthy
So should you be nervous in this market - maybe, markets do gyrate over time so as an investor my view is that you need to sit these dips out. Those people who bought good quality shares in 2008/9 are probably all sitting with a gain of 40% on most of their holdings which means you can take a significant knock on your shareholding before becoming worried. So don't follow the herd and sell when there is noise in the market use it as a means of increasing your holdings in the performers
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Currently the market is quite volatile, but in my opinion this largely due to 2 entities financial press and economists. So many articles are written warning of a dooms day which is eminent, and the economists who should be reading tea leaves rather than trying their hand at projections. Then on the other side of the coin you have the statisticians who also like to colour their predictions. So who do you listen to - well hopefully all of them, but just don't be led by them or heed too much what they are saying after all they are doing this as a job whereas as for us who invest in the market to gain in capital growth and get the benefit of dividends over the years. I have been investing in the JSE since 1968 and have been through pretty much every major downturn that has occurred on the JSE and still today it is an appropriate market to invest in. I believe there are too many retail investors who think of the JSE as a roulette wheel, it isn't in fact it is far more even handed than the roulette wheel.
The market indices as presently reflected on my broker platform shows ALSI 49338 and Top 40 43834 these 2 indices where at these levels on or about May 2nd 2014 but per April 24th they both reached all time highs of 55,298 and 49,038 respectively. So they have had a quite significant retracement which is healthy
So should you be nervous in this market - maybe, markets do gyrate over time so as an investor my view is that you need to sit these dips out. Those people who bought good quality shares in 2008/9 are probably all sitting with a gain of 40% on most of their holdings which means you can take a significant knock on your shareholding before becoming worried. So don't follow the herd and sell when there is noise in the market use it as a means of increasing your holdings in the performers
:TU: Excellent post!
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Agree with Patrick, excellent post GCR, for a long term investor that is. I come from a commodities trading background and you trade commodities, not invest in them. So my bias is always going to be towards looking out for the inflection points for others who may have a similar style.
Markets have pretty much pinned everything on Thursday's decision now. I expect quite a bit of volatility still this week. If we see a sell-off we will need to see it later today or before Thursday's announcement at latest. After the announcement I figure all will be calm once more. Classic buy (or sell) the rumour and sell (or buy) the fact.
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So far I'm completely wrong about this week being a bloodbath, although I have to say that my predictions are always at least 1 or 2 weeks too early.... ;D Tomorrow is D-day so let's see what happens....
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Bevan - you say you are a commodities trader and not an investor - so I presume given the sensitivity of tomorrows announcement (the pundit will have us believe this) then you surely would be sitting on the side lines waiting for market direction. Or are you trading in commodities that you believe will return profits if Yelland increases the bank rate?
Also what triggers your buying/selling strategies - do you watch markets around the clock and all bourses or do you only watch a select few markets?
History is a great leveler, but if you look at what has rocked the markets over the last 30 years all were beyond anybody's control - because their was limited information in the market - even though the market knows everything - it didn't with the sub prime and 2001 debacles.
Not asking you to put together a thesis of what your decision making is based on but if you outline it in simple terms maybe I and many others may appreciate the thinking that goes on behind commodities trading
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Hi gcr,
I'm not an active trader anymore as I have another day job which is far more interesting. I used to trade professionally as an Energy & Metals desk head for a major investment bank in London and Sandton. I would deal in futures and OTC options and forwards and also underwrite finance deals for clients (producers, traders, consumers etc.) that required hedging or structured finance.
I will punt on Oil and Copper futures every now and again. I do enjoy watching the Dow or SP500 indices though as it gives me a snapshot of what is going on in the world at any one time. I use my momentum analysis of the wind and the current to try and predict turning points on these indices and sometimes I also trade on them. However, I am often too early by a week or two as I forget how slowly stock markets take to react and that their natural bias is upwards, at least 80% of the time whereas the spot price of a commodity has no natural bias and is only a function of supply and demand at that time. What is important in commodity trading is the forward curve and whether it is in contango or backwardation. Compare this to storage costs and interest rates costs and you can get an idea of the mood of the market.
See http://www.trafigura.com/research/the-economics-of-commodity-trading-firms/ for a great white paper on commodity trading.
Back to the mood of the market..... It would seem with hindsight that the Fed's decision was 100% dialled into the market and hence no major price activity last week. But the mood has somewhat turned now. The Fed is now so scared of a Chinese and emerging markets crash that it probably won't raise interest rates this year at all. But the market is no longer acting on the crazy notion that bad news means "risk on" because rates will therefore stay lower for longer. Now the market is starting to get real and get worried that the world is actually in a pretty crap way still and that the lifeboats from the 2008 crash are still out there whilst the next recession is looming. The US economy and stock market can no longer rally on thin air (and the promise of cheap Fed money) and I think this has started worrying professional investors now. The nice thing about commodities is that they signal the state of global industrial health and for some time now they have been signalling that all is not well in the world. It would seem that herd and trend investors are starting to wake up to this fact, and that the Fed is actually now making things worse by keeping rates low because there are no returns anywhere to be had anymore. Value investors on the stock market have all packed up their bags and gone home now. It's only the "dumb money" and long term pension money keeping things going now.... As many have been saying for a while now, when someone screams fire, make sure you are one of the first to get out of the doors of the movie we have all been watching.
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Bevan - interesting response. To my mind there is just one unknown quantity in all of this scenario - that of robotic trading - these machines have no fear or favour so don't have human emotion built into their dna so whatever the parameters are set (by humans of course)they just trade, and I believe they can move markets quite significantly to the detriment of a lot of people private investors and fund managers - as we are all fallible.
The analogy about fire is not strictly true - I experienced such an event in my life and there herd mentality of getting out of an enclosed space at any cost resulted in many people being trampled and hurt in their headlong desire to get out. I got to a higher point and waited for the rush to die down - fortunately there were no casualties.
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Ke Nako. It is (almost) time.... Momentum really looking like it wants to break down here....
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Any input as to how the markets will react if/when the FED announces no rate hike in October?Could stocks get abit of a bump?
This is all assuming there won't be a market crash before then,
September is crash month so I am abit worried.
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Trying to be short equities is one of the most frustrating trades around. The market has an inbuilt desire to rally and it really looks like it has been supported these last few days, either by the Plunge Protection Team or the possibility of no-rate hikes this year. Which in itself is crazy i.e. the US thinks the global economy is too weak and therefore keeps rates down but equities rally. We really are living in la-la land these days. All of this reminds me of the madness before the dot-com boom where everyone convinced themselves that we were living in a "new normal" before the whole house of cards came crashing down. These artificially inflated markets also feel like a house of cards but hey, as long as they want to rally then it would be foolish to stand in their way....
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Any guess on what the market's reaction will be in October and December when/if the FOMC meetings results are the same as September,no rate hike.Will the JSE rally?Any idea?
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If I was an economist there would be a 50% chance that the market would improve, but, on the other hand there is a chance (50%) it could retrace through to December - thankfully I am not an economist so my views are not hedged.
Historically over the last 10 years of so December has been a month where indices move upwards and its normally related to some of the following reasons. December is a quite month from the perspective that traders generally take leave. U/T Fund managers report extensively per the quarter ending December and to prove their worth boost results in this quarter. A number of companies have year end reporting and because of thin trade in December the companies shares tend to increase (the better run companies of course) as management and staff generally are loose lipped about how well or poorly the company is likely to perform. Volumes of trades are pretty thin in December so it can move the price of a company which significantly - up or down. Retailers also come out with indications as to how well they perceive they will do over the Christmas period - these guys have got to move stock which they have or are currently importing for the Christmas period.
So generally December is a moving up market and in January and February is normally a good time to look to buying shares again as those who didn't do well over December will be punished through there share prices.
There are other factors but as I said I am not an economist so prefer to keep things short :))
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Seems like Glencore has had the bloodbath. The market is definitely fearful. Seems like the big, slow money is starting to get scared as well. The market now wants the FED to raise rates. Read the below analysis for a great insight. We're not out of the woods yet. Wish I could get my timing right and not always call things too early.
The herd is getting restless
Stock markets have not done well this year. They are well off the highs, some meeting the technical definition of correction and others creeping into bear territory, but there has never been a sustained heart stopping sell off. We are due for one, not simply because father time tells us so but because the drip, drip, drip of negative news will bring the ceiling down at some point.
The mood towards QE for example is turning. The drug is becoming less effective and the voices warning of a timebomb in the making are getting louder. Even stock market bulls can see that QE and low interest rates are artificial aids that can only work for so long before the side effects outweigh the benefits. Zombie companies are kept alive, risk is mispriced and savings and pensions devastated. Central banks are desperate for inflation to take hold. It is, but it is the wrong sort, consumer price inflation is desirable, asset inflation is not. Share prices are being hyped by share buybacks and M&A activity, not by thriving revenues and rising profits.
Europe make no mistake is in crisis. The Greeks will not implement their reforms and the Catalans may have wounded Spain's recovery after yesterday’s vote. The migrant crisis has opened up huge divisions within the EU. The Hungarian prime minister accuses Germany of "moral imperialism". President Hollande has all but invited Slovakia, Hungary, the Czech Republic and Romania to leave the EU saying that "Europe is a community of values. Those who do not share these values and principles have to question their presence in the EU". How about those countries with an aversion to paying taxes Francois, do you put them in the same boat?
Angela Merkel offering to take 800,000 refugees may win her humanitarian plaudits and prizes but it will not win her popularity amongst European electorates. It is the height of arrogance to make such an offer without consultation with the Schengen agreement in place. Germany may take 800,000 but once registered in the EU they can freely move elsewhere, hence we saw border restrictions imposed last week. This is another lady whose water walking abilities are beginning to fail her.
The French and Germans may agree on how to respond to the migrant crisis but they are at loggerheads on fiscal union and it came out into the open again last week. French economy minister Emmanuel Macron speaking in London said that the eurozone will fall apart if Germany does not give up its opposition to fiscal union and transfers to poorer regions. He sees the battle lines as between Calvinists who he describes as those "who want to make others pay until the end of their lives" and Catholics. The gloves are off.
There will he argues be no convergence without fiscal transfers and if that does not occur the currency union might as well be dismantled. Difficult to argue with and as there will be no fiscal union without political union, and political union is inconceivable in the current nationalistic climate, there is only one conclusion to be drawn about the future of the eurozone. It will either limp along in its current format, rupture completely or shrink to a group of core zealots countries.
The last thing the European economy needed on top of everything else was a home-grown VW engineered corporate and sector crisis. Then there is China delivering another poor PMI as did Japan; Norway and Taiwan cutting interest rates; emerging market currencies at record lows against the dollar and the UK recovery faltering. The bulls have been restless for quite some time, nervously grazing but still inclined to buy dips. There is a scent in the air of a change in direction, of a stampede in the offing.
On Friday European markets rallied 3% after Janet Yellen signalled an interest rate increase is still on for this year. That means monetary divergence and a weaker euro. US stock markets were far less happy at the prospect of a stronger dollar eating into exports. The search for growth has come down to the dangerous game of robbing Peter to pay Paul. For the week as a whole stock indices for both regions were down.
Oil caught up in the mix
The atmosphere is febrile and oil is caught up in the mix driven by oil fundamentals one minute and macroeconomic fundamentals the next with cross currents coming from financial sentiment, currency volatility and technicals. Should any credibility be attached to Iran's claim that by the end of the year it will have added 500,000 bpd by the end of the year and 1 mbpd by next Spring? Perhaps not but we have been warned. With global stock levels at all-time highs and a huge ongoing excess of supply over demand now and through 2016 bullish inclinations need to be reined in.
There are positive straws in the wind from four consecutive weeks of Cushing stock draws, from falling US domestic production and from robust US gasoline demand but, whilst encouraging, the crude excess is so high that another substantial price fall cannot be ruled out. Cushing crude stocks for example have drawn by 3.7 million bbls in the last 4 weeks but in the same period total US commercial stocks have risen by 14 million bbls. Product stockbuilds are dwarfing the crude draw. It is significant that the large increase in WTI net speculative length over the last 5 weeks has far more to do with shorts covering than length being accumulated. The positive straws have persuaded shorts to take profit but not to go long.
What is apparent is a growing acceptance that oil prices are going to be lower for a much longer period than first thought and cloth has to be cut accordingly. The CEO of Total told investors last week that "we are preparing the group to face low oil prices for a long time". His policy cornerstone is to cut capital expenditure and costs so that Total can cover an unchanged dividend at $60 bbl in 2017 and at $45 bbl in 2019. Economic production has replaced production at any price as the watchword, which will be music to Saudi ears.
The forward price curve supports this view. At the end of last year the Brent futures forward curve was pricing 2015 on average at $61.73 bbl with 2016 at $68.85 and 2017 at $72.84. At last Thursday’s close the actual average price to date for 2015 was $56.78, only $5 bbl below the Dec 31 futures 'prediction'. However, 2016 had fallen to $52.83 (-16.02) and 2017 to $57.67 (-15.17). The price for 2020 has fallen from $78.89 to $62.96.
Oil prices emerged from last week unscathed, although not without a dip down to $47.70 on Brent and $43.71 on WTI. Gains on Friday left Brent +1.13 on the week at $48.60 and WTI + 68 cts at $45.70. There are clearly local trading issues at Cushing with the Oct/Nov cash roll rising to parity. That does not make any sense with Cushing stocks at 54 million bbls and 33.5 million bbls above last year’s levels, unless most is unsuitable for delivery into the WTI contract, an issue which the CME needs to offer more transparency on. The Nov/Dec WTI futures spread by contrast closed at -49 cts/bbl. The Baker Hughes rig numbers fell by 4 making it four consecutive weeks of small declines.
Gasoline was the week’s winner gaining 3.97 cts/gal with Heat + 3.18 cts/gal. It was the winner not only on price but in the battle with diesel. What price now on forecasts of diesel supply shortages? Peak diesel theories have been punctured by a classic black swan event.
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Very informative!!
Thank you
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And breathe out and relax.... if we rally from here it looks like a nice bubble-bath is on the cards for next few weeks. I don't get it myself but the market wants to rally. So be it.... Go long, be strong.