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Ahead of the Curve provides you with analysis and insight into today's global financial markets. The latest news and views from global stock, bond, commodity and FOREX markets are discussed. Rajveer Rawlin is a PhD and received his MBA in finance from the Cardiff Metropolitan University, Wales, UK. He is an avid market watcher having followed capital markets in the US and India since 1993. His research interests includes areas of Capital Markets, Banking, Investment Analysis and Portfolio Management and has over 20 years of experience in the above areas covering the US and Indian Markets. He has several publications in the above areas. The views expressed here are his own and should not be construed as advice to buy or sell securities.

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Time Series Analysis with GRETL

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Friday 17 July 2015

Some Compelling Reasons Why the Next Move Down in Global Financial Markets is Just Around the Corner

There are some compelling reasons to believe that the next move down in risk assets across the globe is about to begin:

First and foremost even after the recent bounce the #Euro a good proxy for global risk appetite has completely broken down despite the perceived resolution to the crisis in Greece. The strong dollar could eventually cause the liquidation of carry trades.
Next the USD/YEN often a proxy for carry trades has refused to break significantly above the major resistance of 125 despite the recent up move in the market and has recently broken below the 113 mark.
USD/JPY (JPY=X)
#Oil and base metals like copper which are barometers of global economic strength have resumed major break downs:
United States Oil ETF (USO)
First Trust ISE Global Copper ETF (CU)
The S and P 500's last few highs have been marked by bearish divergences with non conformations in the transportation index which has not hit new highs in over 11 months and a major break down is under way out of a massive rising wedge:
S&P 500 (^GSPC)
Dow Jones Transportation Averag (^DJT)
Finally the #Vix is yet to take out it's 52 week lows and is heading  upwards taking out it's recent highs above the 25 level and reaching as high as 53. Currently it has closed near the 20 mark that still suggests complacency:

Yes oversold bounces in the S and P 500 and other indices are possible but the above developments taken together with market cycles peaking make for a possibility of a global market melt down in the not too distant future.
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Cash - 40%
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Fixed deposit - 20%
Gold - 5%
Stocks - 10% ( Majority of this in dividend funds)
Other Asset Classes - 5%

My belief is that stocks are relatively overvalued compared to bonds and attractive buying opportunities can come along after 1-2 years. In a deflationary scenario no asset class does well other than U.S bonds, the U.S dollar and the Japanese yen, so better to be safe than sorry with high quality government bonds and fixed deposits. Cash is the king always. Of course this varies with the person's age.