Dollar Strength to Return?

Yet another FED day has come and gone, the dollar has been trending down and is approaching oversold levels and could trigger a risk off trade near term, here's how to play this:

1) Dollar Strength:

The dollar is oversold and is likely to bounce from oversold levels and strengthen against the Euro: 

Can play this via the Ultralong Dollar ETF UUP: 

 2) This should trigger a selloff in commodities like gold, oil and base metals which are overbought: 

Can play this via the ultra short basic materials ETF SMN: 

 3) The Volatility picture remains complacent suggesting a surge in volatility post the fed. 

Can play it via the ultra long ETF on volatility UVXY: 

 4) This could trigger a selloff in stocks, with the S & P 500 breaking down out of a massive rising wedge on the long term charts courtesy stocktwits.com: 

 Can play this via ultra short ETF’s

5) Collapsing High Yield:

A high yield collapse is just around the corner and can be played via the ultra short ETF SJB:

Interesting Market News and Views from Global Financial Markets-14

1) India’s markets lose their Modi mojo - FT.com

From www.ft.com - Today, 8:34 PM

Narendra Modi swept to election victory on a pro-business economic platform on May 16 2014, pushing India’s benchmark Sensex share index to a record high of more than 24,000 points.

2) Fed Sees Weaker Growth and Slow Inflation Rise; U.S. Indices at an On-and-Off Mode

From www.fxstreet.com - Today, 8:31 PM

The two-day Fed monetary policy meeting that ended on Wednesday was unlikely to stoke much volatility to the greenback, as it wasn’t followed by a press conference as usual.

3) How to Invest in Stocks During 2016's Extreme Volatility

From moneymorning.com - Today, 8:31 AM

With global markets experiencing wild swings in 2016, investors want to know how to invest in stocks. Here's our complete guide on how to invest now.

4) Stock Market On Verge Of Crash

From www.talkmarkets.com - Today, 8:26 AM

The developing cyclical downtrend in the stock market is on the verge of accelerating into a crash.

5) How The Fed is Suffocating The Economy | Clif Droke | Safehaven.com

From safehaven.com - Today, 8:18 AM

There are two established ways of killing forward momentum and induce economic recession. One is to sharply reverse monetary policy or margin maintenance policy from very loose to very tight.

6) Wednesday links: when markets fall

From abnormalreturns.com - Today, 8:18 AM

Book notes: Meb Faber’s Investing With the House: Hacking the Top Hedge Funds is a good introduction to hedge fund cloning. 

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: