Saturday, 27 December 2014

Weekly Summary - Week Ended 26 December 2014

Market Summary and Technical 
  • US equities edged slightly higher
    • Divergences remain apparent in market breadth indicators
    • Divergence in HYG
  • Waiting for confirmation of whether breakout in S&P 500 and Russell 2000 is genuine
  • Gold again  shows strength despite dollar strength – chart suggests bottoming process 

[Market Summary]  

[Trend Watch]

[Selected Charts]

[Market Breadth]

Readings and Trends 

  • Saudi budget deficit for 2015 expected to widen to 5 percent of gross domestic product (Bloomberg)
    • Projected revenue will drop more than 30 percent next year to 715 billion riyals
    • Oil boom in recent years hasn’t resolved problems such as high youth unemployment, where the rate was almost 30 percent in 2012
  • US GDP growth in Q314 was an annualized 5 per cent (FT

 Investment Implications and Opportunities 

  • To remove TWM hedges if breakout in S&P 500 and Russell 2000 confirmed
  • Oil Price Rebound in the next 2 years likely
    • OPEC producers will have to watch their budgets and for social unrest at current oil prices
    • US producers have been announcing capex cuts
    • Some analysts are predicting a prolonged period of $20 oil
  • US growth when it returns to trend will not replicate the growth rates of the past 2 quarters
  • Global growth likely to benefit from supply induced lower oil prices as central banks ease further or delay tightening (Gavyn Davies)
  • 2015 could be the turning point for metals and gold
    • Interest rates to stay low
    • Global growth could benefit from lower oil prices
    • US dollar correction likely
    • Favourite Plays – to follow up with individual pieces (hopefully can find time)
      • Iron Ore – VALE and BHP
      • Gold – TGD
      • Copper – FCX 

 [Disclosure: I am long call options in TWM; long VALE and TGD]

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