The Reversal of the Bernanke Put

Not long ago the Bernanke (DEF) put was in full force. It meant that if the economic news was bad the FED would cut interest rates and bail the market Out. If the economic news was good then stocks would go up on the good news. Fast forward to today and we have the first FED hike and the FED put is slowly but surely getting reversed with the FED funds rate still close to record lows. This is bad news for risk assets globally as the FED is now surely powerless to support asset prices with their monetary policy.

Update on Those Predictions for 2015

At the beginning of 2015 I made some predictions for grins. Here's how they played out:
The original post containing the predictions can be found here: 

1) Dollar strength continues after a brief pause against all major currencies except the yen. With the Euro decisively breaking the long term support of 1.20.
This indeed was the year of dollar strength with the Euro below 1.10 and the trend may continue well into 2016.

2) Yen strength should result in a bout of carry trade liquidation that is a major negative for risk assets such as emerging market currencies and commodities.
While the dollar was broadly strong against the yen, the Yen was relatively strong against most other majors and 2016 promised to be year of Yen strength. This year saw a massive down move in commodities as expected.

3) Despite slowing growth in most emerging economies, policy makers have their hands tied and spend a whole lot of resources defending their weak currencies unsuccessfully with higher interest rates.
Emerging market currencies saw major take downs ( The Real & Rand being notable examples) across the board and the trend is set to continue in 2016.

4) This in turn sparks a major exodus of FII money flows out of emerging economies like the BRIC countries which causes their stock markets to significantly under perform despite their terrific performance in 2014 and greedy analysts calls for more.
BRIC stock markets under performed significantly in 2015 except China and more weakness is likely in 2016.

5) Volatility surges in 2015 as the Vix index doubles following a major take down of stock market indices across the globe.
The Vix crossed 50 briefly in August before retreating. A big up move in the Vix is likely in 2016.

6) Risk free assets will be among the safer bets in 2015 as risk appetites significantly wanes with treasury yields continuing to plummet with QE forever still continuing but without the desired outcomes.
Risk free assets outperformed risky assets globally but US long term yields rose as the FED began tightening Monetary policy. Risky free assets will continue to outperform in 2016.

Happy New Year!

Trading Views for a Dovish Fed

The Fed is likely to be highly dovish in its rate announcement today. Some big moves are likely as the token rate hike gets priced in. Here are some short terms trend to consider:

1) The Dollar:

Attempts will be made to talk the dollar down which has been killing multi national profits, looking for some short term dollar weakness:

2) Counter trend up move in gold if the Dollar weakens:

3) Counter trend up move in Oil if the Dollar weakens:

4) The S&P 500 probably bounces to resistance near 1920:

Interesting Market News and Views from Global Financial Markets-9

1) SP-500 Weekly Rounded Top Pattern - Fearless Forecasters

From www.traders-talk.com -December 2, 8:52 AM

SP-500 Weekly Rounded Top Pattern - posted in Fearless Forecasters:"

Rajveer Rawlin's insight:

Rounding top nearing completion

2) Keeping An Open Mind About The U.S. Stock Market

From seekingalpha.com - December 2, 6:19 PM

Editor's note: Originally published at tsi-blog.com on December 2, 2015.I have kept an open mind over the past few months as to whether the July-September decline in US equities was the first leg of a..."

3) Watch these 3 charts when the Fed makes a rate move

From www.marketwatch.com - December 2, 6:19 PM

The Federal Reserve rate increase could come as early as December and there are still lots of factors that haven’t been priced into the markets, argue analysts at Société Générale."

4) This chart warns that stock market investors should be on high alert

From www.marketwatch.com - December 2, 6:20 PM

The long-term downtrend in the high-yield, or “junk,” corporate bond market, is suggesting that liquidity is drying up, which could be warning that the stock market is in danger."

5) 3 Numbers: Eurozone deflation risk receding, but only slightly

From www.tradingfloor.com - December 2, 6:18 PM

The consensus points to a 0.3% rise in Eurozone CPI, but there's enough downside macro risk to make it likely more stimulus will be unveiled in tomorrow’s ECB announcement."

6) The GDP In Charts: Deflation Helps Indian Economy Grow 7.4% But Nominal Growth at 6%

From capitalmind.in - December 2, 6:18 PM

India's GDP growth in the Sep 2015 quarter came in at 7.4%, which would be awesome, except that it's the "real" GDP, which is the number that you can see ("nominal" GDP) minus inflation."

Interesting Market News and Views from Global Financial Markets-7

1) Why terrorism has a limited impact on markets - The Economist (blog)

From www.economist.com - November 17, 6:28 PM

One-off attacks merely shift economic activity from one period to another; long-term campaigns are another matter"

2)Japan's Stock Market Shrugs Off Recession Worries - Bloomberg

From www.bloomberg.com - November 17, 6:30 PM

If Japan’s economy is in trouble, you wouldn’t know it from the stock market."

3) How the Stench of Deflation Fouls the Market Air - Investorplace.com

From investorplace.com - November 16, 9:49 PM

Deciding how the economy will react to an expected rate hike is difficult. Here's how we can invest while waiting for the Fed's details"

4) Investing For Income: Combining Preferred Shares With Bond ETFs - Seeking Alpha

From seekingalpha.com - November 16, 9:05 PM

Preferred shares can carry call risk or may have no final maturity.Investors can plan for the long-term yield from the shares, accounting for default risk, and avoid shares that trade at premiums to c..."

5) Putting Einstein to work for your investing future - MarketWatch

From www.marketwatch.com - November 16, 9:03 PM

No matter what your age, or how much or little money you have, you can put one of Albert Einstein's insights to work for you. Compound interest, which was famously cited by Einstein as one of the wonders of the world."

6) Jim Cramer: Why the Fed Is the Stock Market's Enemy Right Now - TheStreet.com

From www.thestreet.com - November 16, 9:04 PM

With heighten speculation the Fed will raise rates in December, Cramer weighs in on why the Fed is the market's adversary."