Archives of “July 5, 2019” day

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Gold drops $26 on Fed cut questions

  
Analysis, Gold / Silver

Interesting chart in gold

Interesting chart in gold
Gold is suffering on uncertainty about the likelihood of Fed cuts. A July 31 is still almost 100% priced in but the odds of 2, 3 and 4 cuts in the year ahead are falling and that’s taken gold with it.
At the same time, the rally in gold is largely about the global easing cycle and the ECB has left little doubt that it’s going to cut, while the BOE has signaled an openness to lowering rates.
Technically, you can see the uncertainty in gold. It’s formed a bit of a double top and is now feeling out last week’s low. I think a break in either direction is one to go with.

Nikkei 225 closes higher by 0.20% at 21,746.38

  
Analysis, Global Indices

Tokyo’s main index inches a little higher in light trading

Nikkei 05-07

Asian equities are posting cautious gains being sandwiched by the fact that US markets were closed yesterday and traders/investors are all anticipating the US jobs report later today. Chinese equities are also up by around 0.1% on the session, underscoring the more flat mood seen across multiple asset classes so far today.

USD/JPY holds at 107.90 currently but is trapped in a 13 pips range as we begin the session. All eyes are on the non-farm payrolls data but let’s see if there will be any interesting headlines that could shake things up in the European morning.

26 -W. D. Gann’s Never-Failing / Valuable Rules

  
Analysis, Education
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  1. Amount of capital to use: Divide your capital into 10 equal parts and never risk more than one-tenth of your capital on any one trade.
  2. Use stop loss orders. Always protect a trade when you make it with a stop loss order 1 to 3 cents, never more than 5 cents away, cotton 20 to 40, never more than 60 points away. (3 to 5 points away for stocks)
  3. Never overtrade. This would be violating your capital rules.
  4. Never let a profit run into a loss. After you once have a profit of 3 cents or more, raise your stop loss order so that you will have no loss of capital. For cotton when the profits are 60 points or more place stop where there will be no loss.
  5. Do not buck the trend. Never buy or sell if you are not sure of the trend according to your charts and rules.
  6. When in doubt, get out, and don’t get in when in doubt.
  7. Trade only in active markets. Keep out of slow, dead ones.
  8. Equal distribution of risk. Trade in 2 or 3 different commodities, if possible. (Trade in 4 or 5 stocks, is possible.) Avoid tying up all your capital in any one commodity or stock.
  9. Never limit your orders or fix a buying or selling price. Trade at the market.
  10. Don’t close your trades without a good reason. Follow up with a stop loss order to protect your profits.
  11. Accumulate a surplus. After you have made a series of successful trades, put some money into a surplus account to be used only in emergency or in times of panic.
  12. Never buy or sell just to get a scalping profit. Never buy just to get a dividend.
  13. Never average a loss. This is one of the worst mistakes a trader can make.
  14. Never get out of the market just because you have lost patience or get into the market because you are anxious from waiting.
  15. Avoid taking small profits and big losses.
  16. Never cancel a stop loss order after you have placed it at the time you make a trade.
  17. Avoid getting in and out of the market too often.
  18. Be just as willing to sell short as you are to buy. Let your object be to keep with the trend and make money.
  19. Never buy just because the price of a commodity or stock is low or sell short just because the price is high
  20. Be careful about pyramiding at the wrong time. Wait until the commodity or stock is very active and has crossed Resistance Levels before buying more and until it has broken out of the zone of distribution before
    selling more.
  21. Select the commodities that show strong uptrend to pyramid on the buying side and the ones that show definite downtrend to sell short. For stocks, select the stocks with small volume of shares outstanding to pyramid on the buying side and the ones with the largest volume of stock outstanding to sell short.
  22. Never hedge. If you are long of one commodity or stock and it starts to go down, do not sell another commodity or stock short to hedge it. Get out at the market; take your loss and wait for another opportunity.
  23. Never change your position in the market without good reason. When you make a trade, let it be for some good reason or according to some definite rule; then do not get out without a definite indication of a
    change in trend.
  24. Avoid increasing your trading after a long period of success or a period of profitable trades.
  25. Don’t guess when the market is top. Let the market prove it is top. Don’t guess when the market is bottom. Let the market prove it is bottom. By following definite rules, you can do this.
  26. Do not follow another man’s advice unless you know that he knows more than you do.
  27. Reduce trading after first loss; never increase.
  28. Avoid getting in wrong and out wrong; getting in right and out wrong; this is making double mistakes.

China reluctant to buy promised US agriculture until Huawei restrictions lifted

  
  Analysis

SCMP report

SCMP report
There are some fresh jitters about US-China trade and a warning that the truce could ‘fail immediately’ if the technology blockade on Huawei isn’t lifted, according to a new report in the South China Morning Post.
As part of the deal to restart talks, the US agreed to lift restrictions blocking US firms selling technology to Huawei in exchange for purchases of soybeans.
A source in the report says there is confusion about what was agreed and now Beijing wants “first to see how – and if – the Trump administration would ease the supply ban on Huawei, as promised by Trump.”
They’re expecting an announcement “in the next couple days” on the conditions about selling tech to Huawei. If so, China will commit to buying the agricultural goods. However if there is a hiccup, talks could break down immediately.
Overall, this is a poor start to what the US hoped would be a breakthrough. It doesn’t bode well
On the flipside, the reports says this:

Despite the difficulties, China remained cautiously optimistic that a deal would be reached, a source close to the Chinese government said.

“There will be a deal at a time before Trump’s presidential election run, though the talks process will be painful,” the Chinese source said.

Samsung estimates operating profit down by 56% in second quarter

  
  Analysis
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Samsung Electronics estimated its operating profit more than halved in the second quarter, amid growing concerns over US trade sanctions on Huawei and Japan’s export controls of high tech materials to South Korea. The poor earnings guidance comes as the semiconductor industry is buffeted by the slowing global economy, the US-China trade war and US export controls on Huawei. The US campaign against Huawei has increased chip inventories as the Chinese telecoms maker is one of the Korean tech sector’s biggest customers.  South Korean chipmakers face a gloomy outlook following Japan’s decision this week to impose tighter restrictions on exports of key chemicals used for chips and smartphones amid political disputes over wartime labour compensation.  Operating profit at the world’s largest maker of memory chips and smartphones was estimated at Won6.5tn ($5.6bn) for the April-June period, down 56.3 per cent from Won14.9tn a year earlier. Still, Samsung’s guidance was better than market estimates of Won6tn provided by Reuters. Sales were estimated to have fallen 4.2 per cent year on year to Won56tn. The company is set to announce detailed earnings later this month.  Chip prices have continued to fall since late last year, but shares of Samsung have gained nearly 20 per cent so far this year on expectations of a second-half recovery in the chip cycle. However, the downturn is expected to continue through the second half as external headwinds grow.

US nonfarm payroll data due 1230GMT on July 5 2019 – preview

  
  Uncategorized
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The headline for the June NFP is at median consensus of +160K, after the previous in May at +75K.

for the unemployment rate
  • expected 3.6%, prior 3.6%
Average hourly earnings
  • expected 0.3% m/m, prior 0.2%
  • expected 3.2%, prior 3.1%
Average weekly hours worked expected unchanged on the month at 34.4

This now via Westpac from a Friday note, in brief:

  • anticipated to bounce back after a soft read in May (+75k in the month and the previous level revised down by 75k). Consensus for Jun is for a 160k increase in employment with the unemployment rate holding at 3.6%. 
  • The trend lower in average hourly earnings is seen to stabilise, edging up to 3.2%yr from 3.1%yr in May

US nonfarm payroll data – scenarios for the Federal Reserve’s FOMC interest rate decision

  
  Analysis
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ABN AMRO look at the implications for the next Federal Open Market Committee interest rate decision (meeting is on 30-31 July). ABN AMRO set the stage for Friday’s data:
  • Markets will be particularly sensitive to incoming data as we approach (the FOMC)
  • The key question for markets remains whether the Fed will cut 25bp or 50bp, rather than whether they will cut at all
  • a 25bp cut is fully priced by OIS forwards
  • a 50bp cut is 2/3 priced
The bank expects +175K, which is above consensus (160K), citing
  • the May number was a very weak +75k (the Jan-April average was +195k). 
  • … likelihood of some payback for the May weakness
OK, for Fed implications (bolding mine):
  • June nonfarm payrolls will therefore attract even more attention than usual
  • A somewhat weak print (120-150k) would not have a significant market impact, but if we were to see another sub-100k reading, markets would likely take it to mean a higher likelihood of a 50bp rate cut, at least as a kneejerk reaction
  • For the Fed, we doubt such a figure would be enough by itself to lead to a 50bp cut, and so we suspect such a market reaction would not last (by the same turn, we doubt a strong print would derail cuts).
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Hmmm. I reckon if its a sub 100K ABN AMRO might be surprised at the intensity of the market reaction. It would heighten the 50bp expectation again and see a lower USD in a  thinly trading (post July 4 US holiday) market.

France, Britain and Germany have set up a scheme to continue trading with Iran

  
  Analysis
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The scheme is not new news but it will be tested for the first time soon by France.

Instex is a barter trade mechanism
  • It aims to avoid direct financial transfers with iran
  • Sets up offsetting balances between importers and exporters on the European side
  • The making continuing trade possible between European Union members and Iran in the face of U.S sanctions
French Finance Minister Bruno Le Maire said (overnight Thursday) he hoped the first transaction would be completed in coming days.
There’s always a loophole …
The scheme is not new news but it will be tested for the first time soon by France.

Six reasons why US stock markets have trounced the rest of the world

  
Analysis, US Market
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The lessons of equity markets don’t apply universally

It’s the US independence day holiday and this chart should give Americans more to cheer about than any other.
The lessons of equity markets don't apply universally
It shows equity returns since 1985 and the S&P 500 absolutely crushes every other major global index. The only one that’s even close is the MSCI World Index and that’s partly because it contains a heavy weighting in US equities.
Corporate America  truly is the champion of the world.

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