June 17, 2014

Is the Record Broken? Only the FED can say – Tuesday’s Chart, $NQ_F

bull-market-teshia-artI’m beginning to think that even the bulls are getting tired of this bull market.  Outside of the futures roll it there is nothing left to say other than which stocks will be forced higher under the thinnest of conditions.  Tuesday it was NFLX and TSLA that pushed towards the upper ends of their respective trading ranges.  Volumes were fairly solid in both and the upside failed to ignite a stronger more broad based rally within the major indexes and ETFs.  It’s the same story though; the markets appear to be headed lower as the outside world continues to cross the boundaries of reality and enter into the realm of the bull markets.  Frankly it no longer makes sense how the masses of traders can ignore the ugliness that is taking place in the Middle East and the Ukraine.


Just when I thought it couldn’t get any better I came across the following report    courtesy of www.zerohedge.com:

The report, to be published this week by the Official Monetary and Financial Institutions Forum (OMFIF), confirms $29.1tn in market investments, held by 400 public sector institutions in 162 countries, which “could potentially contribute to overheated asset prices.” China’s State Administration of Foreign Exchange has become “the world’s largest public sector holder of equities”, according to officials, and we suspect the Fed is close behind (courtesy of more levered positions at Citadel), as the world’s banks try to diversify themselves and “counters the monopoly power of the dollar.” Which leaves us wondering where are the central bank 13Fs?

While most have assumed that this is likely, the recent exuberance in stocks has largely been laid at the foot of another irrational un-economic actor – the corporate buyback machine. However, as The FT reports, what we have speculated as fact for many years now (given the death cross of irrationality, plunging volumes, lack of engagement, and of course dwindling credibility of central planners)… is now fact…

Central banks around the world, including China’s, have shifted decisively into investing in equities as low interest rates have hit their revenues, according to a global study of 400 public sector institutions.

“A cluster of central banking investors has become major players on world equity markets,” says a report to be published this week by the Official Monetary and Financial Institutions Forum (OMFIF), a central bank research and advisory group. The trend “could potentially contribute to overheated asset prices”, it warns.

The report, seen by the Financial Times, identifies $29.1tn in market investments including gold, held by 400 public sector institutions in 162 countries

China’s State Administration of Foreign Exchange has become “the world’s largest public sector holder of equities”, as the report argues is “partly strategic” because it “counters the monopoly power of the dollar” and reflects Beijing’s global financial ambitions.

In Europe, the Swiss and Danish central banks are among those investing in equities. The Swiss National Bank has an equity quota of about 15 per cent. OMFIF quotes Thomas Jordan, SNB’s chairman, as saying: “We are now invested in large, mid- and small-cap stocks in developed markets worldwide.” The Danish central bank’s equity portfolio was worth about $500m at the end of last year.

beatthebullHow long can it all go on – realistically everything has its limits – but as I’ve written several times in the past the markets will continue to push to new all time highs on a continuous barrage of negative input.  The primary reason remains interest rates being pushed lower around the globe as the global central banks contend with an ever-increasing problem of how to unload massive positions without disturbing the growing illusion of prosperity amongst the global economies.  Add into the mix the continued global dominance of the US dollar.

Thus, I continue to stress the importance of what sits at the top of the “food chain” interest rates. As long as the markets perception is that the US Federal Reserve will somehow reverse their current stated policy to taper monetary stimulus, bad news will continue to be interpreted as good news for the bull market to continue.  Ultimately though, it will reverse and the longer it is held higher the harder it will fall and at this point it may not take much to knock it off it’s current high perch.

Wednesday may start off slow and in a tight range until the FED releases the minutes of its latest meeting.  There remains a great deal of anticipatory energy which will initially produce some crazy moves within the futures markets as the algorithms attempt to be first to react to whatever the news is.


Steer the course and don’t compare yourself to everyone else.  You are not they and they are not you.  Remember to trust and believe what makes you unique at this moment in time and in this situation and allow others to choose for themselves.  Don’t be swallowed up by the chaos and false emotions swirling around.  Remember it’s just a number.


Three-keysTrading the number remains key to being able to reduce and separate the “noise” from opportunity.  This takes knowing and executing a well-defined strategy and allows you to see opportunities amongst the “chaos” and by trusting the mechanics of your strategy, be able to take advantage of them.


Opportunity continues to knock on our doors.  While it doesn’t come without risk, risk can be defined and more manageable. Volatility and broad moves are exactly what a day trader desires and being able to respond without questioning is a luxury many are unaware of.