Saturday, 17 January 2015

Weekly Update - Week Ended 16 January 2015

Market Summary and Technical 
  • Euro the big loser this week, especially against the Swiss  Franc
  • US equities down slightly – still ranging; smallcaps testing support
  • Gold on uptrend?
  • US dollar correction not yet in sight 

[Market Summary]

[Trend Watch]

[Selected Charts]

[Market Breadth]

Readings and Trends 
  • Possible trends which could drive gold higher (Hebba Investments)
    • Turmoil in eastern Europe
    • Turmoil in the middle east
    • Anti-EU shift in Europe
  • Risk of bank run in Greece as banks ask for emergency funds from ECB (NYtimes)
  • I previously noted that this year will likely see monetary policy continue to be loose – events this week reinforce this view
    • Asia’s central bankers lean towards looser policy (FT)
    • On Thursday the RBI announced a surprise25-basis-point cut to its repo rate, its benchmark interest rate. Raghuram Rajan, RBI governor, cited a sharp fall in inflation in India as the main reason for the cut. Analysts also pointed to weak demand and slowing growth
    • the Bank of Korea chose to leave rates on hold, but lowered its 2015 forecasts for both growth and inflation
    • QE likely to be announced by ECB next week (FT)
    • Swiss central bank gave up defending the ceiling of the franc against the euro in anticipation of QE by the EU
  • China completes Beijing-Shanghai electric car charging route (FT)
    • When the Chinese state is determined to do something, you don’t bet against it…
  • Kaisa Group Holdings, a Chinese property development firm, defaulted on $23 million in interest payments on offshore bonds (Diplomat)
  • Copper down significantly this week on Chinese hedge fund selling (FT)

Investment Implications and Opportunities 
  • Check your broker’s solvency!
    • Alpari entered bankruptcy; FXCM had to get an emergency loan from its parent (The Globe and Mail)
  • Watch for contagion risk in Eurozone due to Greece and in China property developers
  • Long gold position has paid off so far – expect the trend to carry on in 2014
  • Opportunity in copper?
  • Pure play on electric vehicles in China – Kandi (KNDI)
    • I have been long for a number of years
    • See these articles (Tom Harrison; Michael Nguyen)
    • high risk high reward stock
      • listed in US through a RTO
      • countless short attacks
      • however, I have been following the business for long enough to be comfortable that this company is the real deal
  • Just to clarify, despite a possible correction in US equities in the short to medium term, I tend to agree with Jeff Miller that a bear market is not yet in sight, in part because of continued central bank accommodation this year and lower oil prices

 [Disclosure: I am long KNDI]

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