weekly market update 9-21-16phoenixcapitalmarketing.com/pwa9-21-16.pdf · 2016. 9. 22. · trade...

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Weekly Market Update 9-21-16

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TheFedfailedtoraiseratesagaintoday.AtthispointtheFedhasbecomeapoliticalentityandnothingmore.WhatImeanby“political”isthattheFeddoesnothingmorethanpontificatetomaintainthenarrativethat“alliswell.”Intruth,theFedhasn’tactuallyMADEmorethanoneREALmonetarydecisionsinceQEendedin2014.Again,theFedisnowpolitical.FedPresidentsappearalmostdailytellingushowgreattheeconomyisdoing,onlytothenputoffhikingratesbecausetheeconomyistoo“fragile.”Thisis“haveyourcakeandeatittoo”nonsense.Iftheeconomyisinfactgreat,ratesshouldbenorthof1%,insteadofat0.25%.Youcannotmaintainratesat0.25%orlowerforsevenyearsandclaimtheeconomyisgrowing.Likeyou,I’mtiredofthisnonsense.AndintruthIthinktheFed’sdecisiontodayisaminorissue.TheBIGissuepertainstootherCentralBanksandtheircurrencies.Indeed,theworldhasmissedthebiggeststoryof2016.ThatstoryisthefactthattheCURRENCYmarketshavestoppedpayingattentiontoCentralBankpolicyandarenowdecidingthingsforthemselves.Forthosewhoareunfamiliarwiththesignificanceofthecurrencymarkets,abriefrecapisinorder.Thecurrencymarketsarethelargest,mostliquid,andmost“alert”marketsontheplanet.Globally,thestockmarketisroughly$69trillioninsizeandtradesabout$191billioninvolumeperday.Thebondmarket(includingcorporates)isalittleover$199trillionandtradesabout$700billioninvolumeperday,Thecurrencymarketsareunmeasuredinsizeaseverycurrencytradeisultimatelyapairstrade(meaningtobuyonecurrencyyouhavetosellanother).However,wedoknowthatthecurrencymarketstrade$5.3trillioninvolumeperday.Putanotherway,thecurrencymarketstradeover26timesmorevolumethantheglobalstockmarketeverysingleday.Assuchtheyarethemostliquid,sensitivemarketsintheworld.

WEEKLY MARKET UPDATE 9-21-16

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Iwanttoalsostressthatatthissize,thecurrencymarketismuchlargerthanCentralBanks.IfthecurrencymarketbeginstorevoltagainstaparticularCentralBank,thereisn’tathingsaidCentralBankcandoaboutit.Withthisinmind,thecurrencymarketsarethefirstmarketstopickuponmajorchangesinthefinancialsystem.ThefirstindicationthatCentralBankmonetarypolicywasnolongerdictatingcurrencymarketmovesoccurredwiththeEuroin2015.TheEuropeanCentralBank,orECB,wasthefirstmajorCentralBanktoimplementNegativeInterestRatePolicyorNIRP.TheECBcutratestoNIRPinJune2014andagaininSeptember2014.ThosefirsttwoNIRPcutswerethelasttimetheEuroreallyreacted.TheECBhassincecutratesfurtherintoNIRPonDecember2015andagainonMarch2016.BothofthosecutsfailedtoproduceasignificantreactionfromtheEuro.

Thiswasthefirstindicationthatthecurrencymarketswerebeginningtorevolt.However,itwastheBankofJapan’smovetoNIRPinJanuary2016,whichconfirmedthis.

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TheBankofJapanimplementedNIRPforthefirsttimeonJanuary28,2016.UnliketheECB,whichgotasignificantdevaluationfromtheEurowithitsfirstNIRPcut,theBankofJapangotNOTHINGfromtheYenasaresultofitsfirstforayintoNIRP.Indeed,theYenactuallybegantorallyassoonastheBoJwenttoNIRP.Andithasn’tstoppedsince!

TheYenhasappreciatednearly20%sincetheBoJwenttoNIRP.ThisisaHECKofamovebyamajorworldcurrency.AnditsendsaclearsignalthatthecurrencymarketsarenolongerreactingtoCentralBankpolicy.ThisiswhyIamnotinterestedinwhetherornottheFedraisedratestoday.Thecurrencymarketsarealreadyactingoftheirownvolition.Indeed,theUSDollarhasbeeninanuptrendsinceMay.Itjustbrokeoutofatrianglepattern,whichshouldresultinabreakouttothenewhighs.

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Theinitialupsidetargetforthismoveis97-98.However,ifthe$USDreallybeginstomovewecouldseeabreakoutto99-100whichrepresentstheupperlineofthe$USD’stradingrangeofthelasttwoyears.

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Fewanalystsnotedit,butthe$USDactuallystageditssecondstrongestdayoftheyeartheFridaybeforelast.Theonlyotherdayinwhichthe$USDralliedmorewasonthedayofBREXIT,ablackswaneventthatfeaturedEXTREMEcurrencyvolatility.

ThismovetellsussomethingBIGisafoot“behindthescenes”inthefinancialsystemIbelievethatsomethingisabankingcrisisintheEU.TheclearsignaliscomingfromDeutscheBank(DB).DBistheproverbial“canaryinthecoalmine”forEurope.PerchedatopthelargestderivativesbookinEurope,DBhastiestomostmajorfinancialinstitutionsintheregion.WhichiswhyassoonasDBstartsnose-diving,youknowsomethingbigisup.DBsharesaredown16%sinceSeptember15thandnearly20%fromSeptember9th.Putanotherway,thisbankhaslostaFIFTHofitsmarketcapinlessthantwoweeks.

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DBisnottheonlymajorEUbankintrouble.CreditSuisse(CS)neverreclaimeditpre-Brexitlevels.Itisnowonthevergeoftakingoutitspost-Brexittrendline.

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ThesituationisevenworseforBarclays(BCS),whichhasalreadybrokenitspost-Brexittrendline.

DittoforUBS(UBS)

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Indeed,EUfinancials(EUFN)ingeneralappeartobestartingadowntrend.

ThisisaBIGproblem.TheEUbankingsystemis$46trillioninsize(threetimesthesizeoftheUS’sbankingsystem).IftheEUbankingsystementersacrisisitwillhaveasystemiceffect.I’mwatchingthissituationclosely,butthisisHANDSDOWNthesinglebiggestissueforthemarketstoday.OutsideoftheEUbanks,thefinancialmarketstooktheFed’sdecisionasareasontoramphighertoday.Thekeyissueisifthere’sanyfollowthroughhere.Idon’tthinktherewillbe.TheS&P500bouncedhard.Thenextlineofresistanceisat2,175.HoweverIwouldn’tbesurprisedtoseearetestofthehighs.

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Ithinkthisisalastbumphighertoshredtheshorts.Onceitcompletes,theS&P500isfallingto2,100ifnot2,040.

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EveryoneisgoingbananasaboutGoldtoday.Butthetruthisthatit’stakenoutitstrendlinefromtheJanuarybottomandremainswellbelowitsrecenthighs.

Silveralsoremainswellbelowitsrecenthighandwellwithintheconfinesofanestablishedconsolidationpattern.

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Understand,IamSUPERbullishonbothpreciousmetalslong-term.Butrightnow,Istillbelievewe’regoingtoseeafinalmovelowerwithGoldbreakingbelow$1300andSilverbelow$16.50.EvenifIamwronghere,we’renotmissingmuch.Whenthenextmajorlegbeginsforpreciousmetalsinthenext6weeks,we’regoingtoseeabsolutelystratosphericgains.Thiswillbeparticularlytrueforpreciousmetalsminers.However,fornow,GoldandSilverminersneedtocorrectmore.GoldMiners(GDX).

Silverminers(SILJ)

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Iwanttokeepthisupdateshortbutsweet.Therealityisthattoday’smarketaction,whilestrong,isn’tenoughtochangeourcentralthesis.Thatthesisisthatwe’renotdonewiththedownwardmomentumyetandnewlowsarecoming.Thehardestpartofinvestingisfilteringoutthenoise.Daysliketodaymakeyouwanttobelievethey’repartofsomethingbigger,butit’sfarmorelikelythisisjustnoise.I’mwatchingthemarketscloselyandwillissueupdatesassoonasIhaveclearBUYsignals.Butrightnoweverythingappearstobeinaconsolidationpattern.ThereisnoreasontocommitmorecapitalonewayortheotheruntilwegetaREALbreakout.Thisconcludesthisweek’smarketupdate.Barringanynewdevelopmentsyou’llnexthearfrommenextWednesdayinourlongermonthlyissueofPrivateWealthAdvisory.Ibelievethatbythatpointthemarketswillhaveclearedupanditwillbetimetoact.Untilthen…

ChiefMarketStrategistPhoenixCapitalResearch

BestRegards,

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OPEN POSITIONS

US DOLLAR CARRY TRADE PORTFOLIO

POSITION SYMBOL BUY DATE

BUY PRICE

CURRENT PRICE

GAIN/ LOSS

UltraBullishDollarETF UUP 5/23/11 $21.79 $24.7714%

UltraShortEuro EUO 4/10/15 $27.68 $23.94 -14% UltraShortYenETF YCS 5/27/15 $94.48 $59.54 -37%

RELATIVE US STRENGTH PORTFOLIO

POSITION SYMBOL BUY DATE

BUY PRICE

CURRENT

PRICE

GAIN/ LOSS

NuveenMuni.Fund NIO 1/2/14 $13.12 $15.97 39% Wal-Mart WMT 7/30/14 $74.78 $72.19 2% Exxon XOM 9/24/14 $95.82 $83.30 -8% RPXCorp RPXC 8/5/15 $15.48 $10.50 -32% Apple AAPL 9/11/15 $114.21 $113.55 1%

Pricesasofmarket’scloseon9/21/16Priceincludedividends

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INFLATION PORTFOLIO

POSITION SYMBOL BUY DATE

BUY PRICE

CURRENT PRICE

GAIN/ LOSS

Gold 3/17/10

$1,120$1,337.00

19%

Silver* 3/17/10

$16.23$19.93 23%

UraniumETF URA 6/8/16 $15.49 $13.56 -12%*Avg.priceof$17.50and$14.97

RETAILMELTDOWNPORTFOLIO

POSITION SYMBOL BUY DATE

BUY PRICE

CURRENT

PRICE

GAIN/ LOSS

Amazon(SHORT) AMZN 2/25/15 $484.19 $789.74 -63% AmericanEagleOutfitters(SHORT) AEO 5/26/16 $15.36 $18.40 -20% *Avg.priceof$385.37and$583

Pricesasofmarket’scloseon9/21/16Priceincludedividends

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MARKET HEDGE PORTFOLIO

POSITION SYMBOL BUY DATE

BUY PRICE

CURRENT

PRICE

GAIN/ LOSS

UltraShortNikkeiETF EWV 1/6/15 $67.46 $39.81 -41% UltraShortEmergingMarketETF EEV 1/20/16 $24.03 $14.83 -38% UltraShortChinaETF FXP 1/20/16 $59.95 $29.23 -51% UltraShortBrazilETF BZQ 1/20/16 $74.40 $19.72 -73% UltraShortFinancials* SKF 2/10/16 $56.82 $39.60 -30% UltraShortRussell2000ETF** TWM 2/10/16 $47.92 $29.20 -39% UltraShortGoldETF GLL 5/26/16 $82.75 $68.58 -17% UltraShortSilverETF ZSL 7/20/16 $29.20 $26.63 -9% UltraShortS&P500ETF SDS 7/27/16 $16.60 $16.51 -1% RioTinto(SHORT) RIO 8/12/16 $31.08 $32.04 -3% SilverJuniors(SHORT) SILJ 8/31/16 $15.39 $17.00 -10% *Avgpriceof$60.95and$51.69**Avgpriceof$52.94and$42.90

EU BANKING CRISIS PORTFOLIO

POSITION SYMBOL

BUY DATE

BUY PRICE

CURRENT

PRICE

GAIN/ LOSS

EuropeanFinancialsETF EUFN 7/5/16 $14.86 $17.50 -18%CreditSuisses CS 7/5/16 $10.30 $13.19 -28% Santander(SHORT) SAN 2/3/16 $4.13 $4.51 -9% Barclays(SHORT) BCS 7/5/16 $7.92 $8.92 -13% FranceETF(SHORT) EWQ 9/16/16 $23.38 $24.02 -3% ItalyETF(SHORT) EWI 9/16/16 $10.78 $11.05 -3%

Pricesasofmarket’scloseon9/21/16Priceincludedividends