Keeping an Eye The S&P:

This is an important to all traders and investors. The S&P500 looks to be in danger as the trend heads downward.  This market analysis video points out the danger quite clearly.

The video runs two minutes and 18 seconds and shows you one key element that I think can make or break the S&P 500 market.

Our Trade Triangle technology is neutral on the SP500 but it could turn any day now and this is what I want to share with you today.

All the best,
Adam Hewison
President of INO.com
Co-founder of MarketClub.com

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BlogCatalog – Finance

11, August 2010

The Dollar strengthened overnight after the Fed took steps to try and bolster the fragile US economy, saying they will maintain their holdings of securities to stop money from draining out of the financial system. (see Tuesday’s post) In a bid to avoid a double dip recession, The US central bank said it would reinvest between $200-300m of proceeds from maturing mortgage bonds from the first $1.2 trillion QE cycle.

It left its policy rate unchanged and renewed its pledge to keep rates low for an extended period. Following the fed announcement, treasuries surged and stocks pared losses as markets anticipated a renewed round of asset purchases should the economy slow further. Figures since the last FOMC meeting in June indicates that the pace in recovery in output, manufacturing, retail, employment and housing has slowed significantly.

The pound fell against the Dollar to its lowest level in more than a week after data signalled Britain’s economic recovery may be slowing. A UK housing market gauge showed the first decline in prices in a year in July, while a separate survey reported stores showing slower sales growth in July.

UK consumer confidence dropped in July, a third month in a row to its lowest level in 15 months. The biggest budget cuts since World War II, faster inflation and resilient unemployment have undermined consumer confidence.

This morning’s Bank of England inflation report accompanied by the usual speech from Governor Mervyn King will be closely watched along with UK jobless claims. Other data released today is this evenings US trade balance along with a monthly budget statement.

Report by Tim Lewis

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Currency Market Updates

BlogCatalog – Finance

10, August 2010

Speculation over the announcement of QE2 at tonight’s Federal Reserve meeting is reverberating around the market at present. The consensus seems to be that that additional liquidity will be added to the system through reinvestment of maturing assets already on the Fed balance sheet, rather than return to fully blown quantitative easing.

The recent surge in commodity prices after Russia placed a halt on exports of grain is a worrying development for the Fed, it will need to consider that further down the road after it may find certain parts of the economy experiencing inflation at the same time as others are suffering from rampant deflation. This is why this Fed meeting is seen as so important– we wait to here which way the inflation/deflation needle is pushed (unless we end up waiting until next month!).

Sterling continued its climb against the Dollar yesterday as momentum from Fridays disappointing US jobs figures continued in early trading. But the Dollar has regained some ground this morning after the announcement from the Royal Institute of Chartered Surveyors that UK house prices have declined for the first time in a year.

The Bank of England has announced it is to overhaul its macroeconomic model (excitingly named the Bank of England Quarterly Model) after a glut of large revisions to GDP figures and because inflation has been above target for 42 of the 51 months, triggering seven letters from BOE Governor Mervyn King to the Chancellor over the same period.

A chat over three pints of warm lager and a packet of crisps are no longer deemed an acceptable method of assessing the health of the UK economy and the Bank plans to spend £3.5 million (or 350,000 magic eight balls) on overhauling and improving their forecasting model.

The announcement has led some commentators to suggest the markets may start to lose credibility in the Banks ability to forecast inflation – this could feed into Sterling weakness, but since the story broke Sterling has hardly budged and along with us, the market probably sees the announcement as good rather than bad news. UK trade balance figures were better than expected

The release of better than expected German June trade data helped the euro remain on a firmer footing for most of yesterday against the US Dollar . The strong 3.8% m/m increase in exports aided the idea of a Germany export led recovery. It is also worth noting that the rise in imports was better than expected; a factor which may support growth elsewhere in the Euro zone. On the data front later today we have the Nationwide & ABC consumer confidence surveys from the UK and US respectively.

Report by Alistair Cotton

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Bulls and Bears

The battle between the Bulls and the Bears continues with negative news pushing the market lower and positive earnings pushing the market higher and helping the Bulls.

So who’s going to win?

In this short video, I show you two items that are important in this market. I also point out where support is and why this is a crucial level to watch this coming week.

The Battle Continues

Our Trade Triangle technology is neutral on the SP500 but it could turn
any day now and this is what I want to share with you today.

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BlogCatalog – Finance

09, August 2010

In the final session of trading on Friday, US Employment fell for a second straight month in July as more temporary census jobs ended, as private hiring rose less than expected, pointing to an stunted economic recovery and a potential requirement for further Quantitative Easing. The main points were as follows: Non-farm payrolls fell 131,000 the Labor Department said on Friday, as temporary jobs to conduct the decennial census dropped by 143,000.

Private employment, considered a better gauge of labor market health, rose 71,000 after increasing 31,000 in June. The government revised payrolls for May and June to show 97,000 fewer jobs than previously reported. Analysts polled by Reuters had forecast overall employment falling 65,000 and private-sector hiring increasing 90,000. The unemployment rate was unchanged at 9.5 percent in July for a second straight month, just below market expectations for a rise to 9.6 percent.

It was a similar sentiment in the UK as both consumer and business confidence dipped again. The most recent purchasing managers’ index from the services sector indicates that, while growth continues business expectations have suffered a fall of about 10% since Spring. Friday’s PMI data showed a rise in cost of 5% which is rather high and pulls inflationary pressures into focus.

The other area of alarm for most is the idea that whilst interest rates remain low and are expected to stay as such until 2011 there seems to be greater comment around the fact that when they start to move they are likely to move quickly. It is still a very fine balance to control inflation, implement spending cuts and tax hikes whilst in the meantime not cause a double dip.

The general market view seems to be that interest rate rises back towards more ‘normal’ levels can only be implemented if the economy grows confidently the idea of pushing an already fragile economy back into recession is simply not palatable.

This week we have Mervyn King also know as Merve the Swerve will be speaking and The Bank of England is expected to give a gloomy assessment of Britain’s short-term prospects this week, forecasting weak growth and high inflation. This has been the case viewpoint-wise for a while and they are quite correct the market was heavily positioned short and we have seen sterling recover dramatically; the popular view is we may see further gains before the market renews its negative view and momentum.

It’s a key week for the majors, with the Federal Reserve meeting on Tuesday for their monthly policy announcement with speculation intensifying of further support for the economy to be announced. Also in the US we await the release of July’s retail sales, June’s trade balance and the latest inflation report.

In the Euro zone we await the results of growth figures for Q2 with flash GDP estimates for April to June expected on Friday. In the UK, the BoE release their quarterly inflation report on Wednesday which will be watched very closely to see what effects the government’s tightening fiscal policies are having on the economy.

Report by Philip Ryan

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Currency Market Updates

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06, August 2010

The pound is heading for a fourth weekly gain against the Dollar and the Euro after the Bank of England left rates unchanged at 0.5% and kept the asset purchase program unchanged also. Focus will turn to the quarterly Inflation Report to be released on August 11 and minutes to be released on August 18.

The dollar is on the defensive after reaching a three and a half month low against a basket of currencies after weak U.S jobless claims figures heightened worries that Friday’s payroll data due for release this afternoon could paint a bleak picture of the U.S. economic recovery.

Yesterday U.S labour department reported that the number of Americans filing for initial jobless benefits rose 19k to 479k, the highest since early April. Markets are expecting non-farm payrolls to shed 65k jobs in July following the 125k jobs lost in June. The unemployment rate is forecast to edge up to 9.6%, up from 9.5% in the previous month, a weak reading could fuel talk that the Federal Reserve may consider additional easing steps.

ECB left rates unchanged at 1% for the 16th consecutive month as widely expected. President Trichet said in the press conference that current rates are “appropriate” and expects “price developments to remain moderate”. Economic data in Q3 were so far “better than expected” but Trichet warned again that recovery will be “moderate and uneven”. There is no change in markets’ expectation that ECB is in no rush to remove policy accommodation any time soon.

Today is all about US non-farm payrolls but firstly there are some UK and Eurozone numbers to negotiate. A large gap between producer input and output prices is expected to remain and industrial production is anticipated to have slipped from the previous month in both regions. Non Farms is anybody’s guess after the divergent numbers over the last couple of days. The market looks for an improvement from last month’s -125,000 but it will be from the Private Payrolls component that the markets will be hoping to see a strong out-turn.

Report by Tim Lewis

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Currency Market Updates

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4, August 2010

It makes a very refreshing change to see the pound leading the charge in the currency markets, outperforming all of the major currencies. Against the USD the pound hit and tested a Fibonacci retracement level at 1.5968- it did not break it but this will be the target again for today and beyond this the 1.60 level.

So what is behind the sustained turn in fortunes for the pound? A recent improvement in economic indicators has been a key driver and this has followed more recently with strong results in corporate earnings and banking results. In addition the global market sentiment has improved and the return to risk in the markets is always a boost for sterling.

HSBC, Lloyds and even Northern Rock have demonstrated a boost in profits and this is leading to sentiment that the recovery is gathering momentum with gains also posted in the FTSE. The pounds good run will also be supported by UK Halifax house prices rising 0.6% for July, however services PMI came in weaker than expected at 53.1 against a forecast of 54.5. GBP/USD slumped a touch on the news but is now starting to recoup those losses.

Overnight the Australian reserve Bank kept interest rates unchanged at 4.50%, the pace of growth is continuing in Australia in line with expectations allowing the reserve bank to slow the pace of rate rises following a succession of hikes.

Later today we have more feedback from the US economy with US personal income and spending, US factory orders and US pending sales. Economic data from the US will now be closely scrutinized for any further indications that the pace of growth is slowing. This has led to a sharp turn of fortune for the USD which has lost ground across the currency markets.

The Fed recently indicated that if growth stutters going forward then further stimulus measures could again be introduced. This would be negative for the USD especially if other major economies continue to grow ahead of the US economy.

Report by Phil McHugh

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Currency Market Updates

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2, August 2010

On Friday, the Dow Jones fell by as much as 120 points after annualised growth in gross domestic product (GDP) was found to have slowed from 3.7% in the first quarter to 2.4% in the second. That came on the back of growth of 5% in the final three months of 2009. (see Friday’s post)

The US was initially thought to have grown by 2.7% in the first quarter but that was revised upwards on a day of surprises for economists. The US Commerce Department also revised downwards GDP figures all the way back to the beginning of 2007. The second-quarter slowdown led economists to question whether the US might be poised to enter a period of negative growth later in the year, leading to a much-feared double-dip recession.

The Dow Jones fell sharply after the release of the GDP data before recovering ground to settle down 40.72 at 10,426.44 in lunchtime trading. Economists had predicted second-quarter growth of 2.5pc, but their disappointment was compounded by the revised data for the first three months of 2010.

The biggest concern in the City was the size of the downward revisions to previous years’ growth. In 2009 the economy was previously estimated to have declined by 2.4%, but the figure was revised to a drop of 2.6%. The disappointing growth numbers were compounded by the International Monetary Fund’s (IMF) annual report on the US economy. The IMF said there may be a need for the Obama administration to increase the amount of fiscal stimulus in order to boost the recovery, warning the “outlook remains uncertain”.

In the UK, George Osborne has said that banks must increase lending to businesses rather than boosting bonuses and dividends now that they have weathered the worst of the credit crisis. Britain’s Treasury chief told the Sunday Telegraph newspaper that banks “have an economic obligation to assist” small and medium-sized businesses. The statement comes in line with half-year figures released this week that are expected to confirm that the major institutions have returned to profit after two years of turmoil.

Lloyds Banking Group, which is 41% owned by the taxpayer, and the 84% state-owned Royal Bank of Scotland are both expected to post a profit. But Osborne questions the ability of British businesses to raise credit from the banks. “The danger is that, particularly next year, when there is a huge amount of refinancing required, that the small and medium-sized businesses suffer from a lack of access to working capital,” he said.

Osborne continued that British banks “are in no doubt that the government wants to see reasonable access to credit on reasonable terms in the small to medium-sized business sector.” The expected bank profits have boosted the recent Cable rally and we are now trading in the 1.58s and well on track to the key 1.60 psychological level.

As we look ahead this week, Interest rates will watched closely with monetary policy meetings taking place in several countries over the next 4 days. Tonight, Australia get the ball rolling followed by the UK, Eurozone and The Czech Republic all on Thursday. Following the softer than expected Australian CPI figure, the Reserve Bank of Australia are now deemed unlikely to move rates – a change away from the previously anticipated tightening – despite the stronger, but very volatile, manufacturing PMI number. No change from the BoE or the ECB is also on the cards but as usual, it will be the post-meeting press conferences that will draw the forex market’s attention.

Report by Philip Ryan

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Currency Market Updates

BlogCatalog – Finance

30, July 2010

Of late, UK economic data has been extremely positive. However, since yesterday this trend has been broken. Overnight GfK Consumer Confidence fell by more than expected to -22 (consensus -20, previous -19). This follows yesterday’s news that house prices fell by more than expected in July, coming in at -0.5% m/m (consensus -0.3%, previous 0%).

It appears that concerns about the medium-term impact of fiscal austerity measures on personal finances is outweighing any potential optimism about the recent recovery’s momentum, thus keeping demand low. In other data, both mortgage approvals and mortgage lending in June fell more than expected and M4 money supply was unchanged for June.

Despite this negative development, sterling continued its recent surge against the US dollar and managed to close at levels not seen since February of this year. Significantly, sterling is well supported ahead of a key technical level, the 200 day moving average of 1.5543.

The euro has continued to push higher against the US dollar as optimism continues to spread throughout Europe following the release of numerous corporate earnings yesterday, all surpassing market expectation. Additionally, the narrowing of Euro zone sovereign debt spreads over recent days has boosted the single currency.

This positive sentiment was further helped by continued improvement in Germany’s unemployment data. For 13 months, the German unemployment rate has dropped consistently which has taken the level of unemployment back to 7.6%, its lowest level since Nov 2008. Yesterday we also saw German CPI which showed inflation coming out slightly higher than expected with inflation rising to 1.2% Y/Y in July from 0.9% in June.

On Thursday morning the Reserve Bank of New Zealand raised its policy rate 25 bps to 3.00% as widely expected. The central bank however was far more dovish in the accompanying statement than predicted stating future growth prospects had deteriorated considerably.

The US dollar has been on the slide for several weeks now and this negativity in the Greenback could continue further with the release of Q2’s QoQ GDP figure (consensus 2.5%, previous 2.7%) at 13:30 BST. Recent data from the US has been poor with manufacturing and durable goods numbers disappointing the markets.

This afternoon’s GDP figure will be key for the short to medium term trading levels of the dollar and views of it being a safe-haven could begin to fade.

Report by Tim Lewis

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Currency Market Updates

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28, July 2010

Sterling received another boost this morning after a leading think-tank announced that Britain will avoid a double-dip recession and its economy will expand at trend growth rates as early as 2012. In the latest forecast from the National Institute for Economic and Social Research (Niesr), it predicts GDP growth of 1.3% this year, 1.7% next year and 2.2% in 2012.

The news follows recent strong economic data over the past week where GDP and retail sales figures shocked the market on the upside. The pound has surged to 5 month highs against the dollar and the general consensus is Sterling will continue on a long term rise against the Greenback.

Merv “the swerve” King will be speaking today and as usual, I’d expect “doom and gloom” comments from the Bank of England chief. Most likely on his radar will be the GDP figures from Q2 which showed a rise of 1.1% QoQ (0.6% forecast).

The euro has risen against both the dollar and the yen once more this morning as improving demand for riskier assets continues to push European equities higher. The single currency remains near its strongest level against the dollar in more than two months after European stocks climbed. Eurozone M3 money supply rose by 0.2% Y/Y versus expectations for a 0.1% decline.

The Australian dollar dropped by the most in more than a week overnight as a government report showed consumer prices increased at a slower pace than economists had forecast, giving the central bank scope to keep rates unchanged in August.

The Aussie slid against all 16 of its most- traded counterparts as traders cut to zero the likelihood that Australia’s central bank will increase its key rate when policy makers meet on August 3rd. New Zealand’s currency also ended a four-day winning streak versus the yen as a report showed business confidence declined in July.

Today, the economic calendar contains the US durable goods orders and German CPI inflation data. The Reserve Bank of New Zealand will also decide on rates whilst the ECB publishes its Bank Lending Survey and the Fed will publish its Beige Book.

Report by Tim Lewis

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Currency Market Updates

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26, July 2010

…As Stress Tests Prove Inconclusive

The results of the Eurozone bank stress tests were eventually released on Friday evening showing only 7 of the 91 banks tested were deemed to have failed, and the capital shortfall was estimated at €3.5 bn. Both are very much at the lower end of consensus forecasts, raising questions over the credibility of the tests.

Interestingly, a sovereign default or restructuring scenario was not included, as media leaks earlier in the week had suggested. At the press conference, ECB Governing Council Member Constancio justified this decision by noting that “instruments have been put in place precisely to avoid that scenario”.

Nevertheless, as the leaks had suggested, many participating banks voluntarily disclosed their sovereign debt holdings, and this has brought some improved transparency on sovereign debt exposure. This seems to have averted any euro selling pressures as the single currency continues to trades close to Friday’s 1.29 range against the US dollar.

From a data perspective, the euro had already managed to move higher on Friday morning after stronger than expected German business sentiment data. The German IFO business confidence index recorded its strongest rise for 20 years in July.

The closely watched index rose to 106.2 points from 101.8 in June. Germany’s economy shrank by almost 5% last year, but has been recovering due to strong exports. The result was much better than expected, with most economists having expected a slight fall.

The British pound managed to stage a rally on Friday, gaining over 1% versus both the US dollar and euro after the release of very positive Q2 GDP figures. The Office for National Statistics showed gross domestic product jumped 1.1% q/q, its fastest rise in four years. On the year the level was 1.6%, beating the projected 1.1% and the first positive reading in two years.

The release, which showed Britain’s economy grew almost twice as fast as expected in the second quarter of this year was propelled by a sharp rise in the services sector (expanding 0.9% q/q) and the largest contributor to the increase, construction, which leapt 6.6% on the quarter, its fastest rate since 1963.

Market traders and investors welcomed the positive data release, with many now focusing on the increased possibility of an interest rate hike before the end of the year which would suggest the prospect of further monetary stimulus is now looking less likely.

Report by Tim Lewis

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Currency Market Updates

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23, July 2010

Sterling advanced yesterday as stronger than expected retail sales data helped ease fears over a double dip recession in the UK. The headline number came in at 0.7% month on month against expectations for a 0.5% increase.

These figures provided some good news about the state of the UK economy, following recent disappointing housing and public finances data. Q2 GDP data was released moments ago and provided another boost for Sterling with a 1.1% QoQ rise, the highest figure since Q1 2006.

The forex market appear to be getting Very Stressed over this afternoon’s publication of the financial resilience of the 91 largest Eurozone banks. The Committee of European Banking Supervisors (CEBS) will release the results of the testing ‘on an aggregated basis’ at 5.00pm this afternoon.

Immediately afterwards, the banks and/or their national supervisory authorities will release the individual results and at 5.30pm, the CEBS will release a summary of results, bank-by-bank, sorted by country. Basically, all the data will be released after close of business in Europe and the UK leaving just the US Friday afternoon market to deal with any surprises.

The concerns here are really 2-fold. Firstly, that the results may consist solely of a ‘pass’ or ‘fail’ indication for individual banks rather than anything more substantial, thus leaving far too many questions un-answered. Secondly, there is a fear that it is not that too many banks will fail the test but that too many will pass thus rendering the whole process as unreliable.

Therefore, rather than the headline pass/fail rate, the key things to look for are the level of disclosure and the comparability of the results across the whole spectrum of the tested banks. We are therefore reliant upon the CEBS to ensure that this whole process has been conducted properly and that the results are meaningful.

Report by Tim Lewis

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Currency Market Updates

BlogCatalog – Finance

21, July 2010

This week is all about the euro and the approaching stress test results which will offer much needed feedback on the health of European banks. The euro has experienced a significant turn of fortune from its June 4 and half low against the USD gaining over 10 cents to test the 1.30 level.

One reason that the euro has gained is simply that the market was significantly over short in the euro and naturally alot of these short investors paired their positions leading to a short squeeze higher. In addition some comfort has come back into the euro approaching Fridays stress test results as comments in the run up from members of the IMF and the ECB have been bullish – we will see!

Recent gains have led to EUR/USD testing the 1.30 level and GBP/EUR falling back into 1.17 territory. The results are due out from 5pm GMT on Friday. Good feedback should push EUR/USD over 1.30.

Today we have the BoE minutes which should not spring any significant surprises with a 7-1 vote expected- comments from policy members Posen and Sentance will be the highlight and naturally the market will be looking for future objectives from the Monetary Policy Committee. Posen is more dovish and sees UK rates moving lower, whereas Sentance is a hawk and is pushing for a hike to combat the threat of inflation.

Later today in the US we have Fed chairman Ben Bernanke delivering his semi-annual report to Congress. Recently the sentiment and the economic feedback from the US economy has turned bearish with consumer sentiment falling nearly 10 points last week. It will be interesting to see if the tone of Bernanke turns more cautious and dovish- if so we could see this turn into short term selling pressure for the USD.

Earlier today we saw GBP/USD fall off a cliff dropping 120 points at 8:00 am before retracing back up within 5 minutes…a crazy move which has been blamed on a Dutch bank- we seem to be getting more of these huge moves in the forex markets- could well be another case of a “fat finger” mistake triggering this move….

Report by Phil McHugh

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BlogCatalog – Finance

Market Club’s Adam Hewison takes an opposing view on the euro. In his short market analysis video he takes an in-depth look at the euro and its relationship to the US dollar. He believes the recent sharp rally in the euro, may be coming to an end.

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BlogCatalog – Finance

19, July 2010

The recent Euro surge finally ran into resistance on Friday, EUR/USD briefly traded above 1.30 before falling back and now sits in the mid 1.29.

This strength will be tested over the coming week for several reasons. Firstly, Ireland was downgraded from AA1 to AA2 by ratings agency Moody’s. They blame the worsening financial situation facing the government, weakened growth prospects & recognition of contingent liabilities in the SPV created to rescue the Banking system. Umbrella anyone?

Secondly, Hungary was denied a credit line of €20 billion from the EU/IMF over the weekend, a very unusual step, due to a lack in confidence in the new Hungarian government’s budget plans. The Florint has weakened off, but the extreme volatility some commentators were predicting in the markets today has not materialised as yet.

Lastly, Friday sees the long awaited publication of the EU stress test results. As mentioned before in this report, the tests are designed to shore up confidence in the EU banking system. The results all boil down to credibility.

If the market believes that the tests do not illuminate the health of the banks tested then expect investors to express this sentiment though selling the Euro as well as the bank stocks themselves.

The Dollar continues to weaken and shoot itself in the foot; reports now show that the market is now net short on USD, finally reversing the previous trends of net short Euro and Sterling. (see market analysis videos) Continuing fears over a double dip recession in the States and disappointing CPI and PPI data last week have a large drop in Dollar sentiment and it is this rather than positive data in the UK or Euro zone which has driven both pairs large moves.

A quite start to the week in terms of data, but on Wednesday we see the release of the Bank of England’s minutes, which will closely examined for any change in voting from MPC members. On Friday UK GDP figures are also released along with the results of the bank Stress tests.

Report by Alistair Cotton

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BlogCatalog – Finance

16, July 2010

The dollar hit a two month low against the euro and a basket of major currencies as soft inflation and manufacturing data added to concerns about the strength of the U.S economy. Data released showed a third straight monthly decline in producer prices and came just a day after the Federal Reserve meeting minutes revealed policymakers think they may need to do more to boost the economy if a stuttering recovery slows any further.

Euro/Dollar soared towards 1.30 while Sterling rose to 1.54 as investors removed their money from the safe haven currency. The dollar will remain under pressure if the current run on weak data continues. Today’s CPI and University of Michigan consumer confidence figures could foster some USD strength, though consensus is low.

Worries about the euro-zone’s fiscal crisis have been somewhat allayed by successful debt raisings by Greece, Spain and Portugal. Investors are anticipating that stress tests of European banks on 23rd July will paint a picture of a healthy regional financial industry. It is a slow day on the data front as we head into the weekend with Euro-zone trade data the only item released in Europe.

The British pound extended gains to a fresh 10-week high against the US Dollar , as data mentioned above from the US kept pressure on the dollar. Market reaction was limited as Bank of England policymaker David Miles said it was not appropriate to raise interest rates now.

He also downplayed the risk of inflation staying above target in a sustainable way without a pick-up in wage inflation. This view was, of course, different from BoE’s Sentance’s call for higher rates that he has reiterated several times of late.

Report by Tim Lewis

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