0 Global Macro: The Bernanke Floor

Since the inception of Quantitative Easing, many have debated its diminishing returns quality. Although easing does manipulate true market action, this is not to say it harms it. Speculation surrounds what will happen when it is all said and done, but currently, QE has brought into existence a Bernanke Put of sorts. The Fed was initially created to aid in times of crisis, in order to limit its effects. With the macro picture as it stands, the Fed looks to provide liquidity and limit loss. Diminishing effects implies a lesser pop on announcement, but a pop is superior to a downturn. Markets turned higher today on dovish tones...

0 Global Macro: A Volatile Environment

The Macro outlook is currently littered with uncertainty, yet it contains a hint of predictability too. The decisions to be made over the next month are primarily concerned with political action. Bernanke meets in Jackson Hole on Friday, and there is the belief that he may reveal his hand. The ECB meets throughout September, but the date on which a solution will be presented has less clarity. Along the same line, there is an idea that China may intervene to compensate for the East's recent string of bad data. All events are known to be pending, but their outcomes are unknown. With the overhang of uncertainty, the call for volatility is...

0 Global Macro: The Macro Trade Requires Eyes On All Markets

The macro trade currently requires a three pronged approach. The only way to navigate is to keep a keen eye on US, China, and European revelations. Markets spiked on the idea that the Fed could stimulate, but backed off when they questioned its probability. The biggest wrench in the easing debate currently, is whether economic data has improved enough to not warrant it. However, the minutes were clear, enough so to diminish much of the perceived vagueness. There was a call for substantial and sustainable economic data growth in order for the Fed to back off further easing measures. The data to date has been sporadic, and looking at indicators...

0 Global Macro: The World Awaits Stimulus And Deals With Uncertainty

Although speculation and waiting are still the name of the game in both Europe and the U.S., China is feeling the pain now. Its exports have weakened and its equity markets are in decline. The chart below shows Chinese equities (FXI) underperforming World Indexes (VT) for upwards of three years. This indicator has seen great resistance for years due to the perceived risk of Chinese equities, as well as the fear of a hard landing for its broader economy. With lowered inflation and the fear of what global weakness could bring, look for China to turn toward easing soon. The country has been quick on the trigger over the past few years. Whether...

0 Freeport-McMoRan Looks Toward Chinese Stimulus

A few days ago I appeared on the George Jarkesy show and recommended his listeners take a look at Freeport-McMoRan Copper and Gold Inc. (FCX). I intend for this article to be the look they were hoping for. This company trades at the will of its macro environment, thus calling for a macro picture to be painted. Uncertainty has littered the markets recently, so to say I write this article with a long term approach in mind is unfair. I do believe in the impending strength of the company, but a swift exit/profit taking is similarly advised. The first chart below shows the strength of Chinese Equities vs. the Vanguard World equity index . Strength...

0 Weekend Global Macro: Resistance Approaches Macro Risk Assets

The current rally has been questioned on its validity for weeks now, but the internal indicators have been telling a different story. The gradual decline of the VIX (VXX) has done the opposite of diminish fear in the market. At its current levels, many traders have begun to speculate that a potential deep cliff is possible in equities. This trade is improbable due to the existence of ready central banks. September looks to be the month that reveals the true nature of foreshadowed stimulus. A major drop is likely to stimulate immediate action, most likely in China. They have been quick to the trigger on easing policy lately, and with...

0 Global Macro: Low Volumes Equal Price Exaggeration

A truly macro approach is needed to derive some sense out of the market's action recently. Treasuries have shown great strength even in the face of higher equities; this somewhat compromises the move itself. However, a developing trend is that of 10 year yields (IEF) outpacing US equities (SPY). I use an equal weighted index of equities (RSP) in order to show the true nature of the trend. As seen below, in early August the indicator broke out to the upside. This is very bullish for stocks and hints that a downside barrier has at least been put in place by stimulus speculation. Another way of looking at this is by saying the height...

0 Equity Strength In The Face Of Traditional Weakness

An interesting development crossing the headlines recently has been the lack of leadership in traditional bullish signals. The indicators in question are Russell 2000 (IWM) vs. Russell 1000 (IWB) and Transports (IYT) vs. Industrials (DIA). The divergence has just recently taken shape within the past year, and points to the fact that we are in a defensive rally. The lack of confidence seen in the markets seems to be a culmination of various factors. First is the volatility created by mishaps and market uncertainty. The presence of competing with and trying to outguess central bank actions has investors on edge, as well as market manipulating...

0 The World Awaits Stimulus

The current macro trade hinges on the move of central bank stimulation. Markets have become exuberant at the thought of accommodative monetary policy that should support risk assets. The current economic factors that have sustained this belief come in the area of weak inflation data, followed by weak inflation expectations. With Germany also showing weakness in recent economic releases, there could be more proof that a catalyst is in order. click to enlarge images When monetary policy becomes accommodative, assets such as commodities should show signs of appreciation. The equal weight CRB index (CCI) tracks the very commodities that will...