Back After the Holidays

"The Story of Christmas Is a Chorus, Not a Carol is republished with permission of Stratfor."

Interesting Chart - Dec 17, 2015

Breakpoint Trades

What if the Fed Raises Rates and the Long End of the Bond Market Falls?

In a fascinating report Paul Mylchreest of Admisi asks a pertinent question. What if rates decline on the long end of the bond curve when the Fed raises the short rates? 

Admisi

The above chart shows the negative correlation between the Repo Rate (rate charged on Open Market Operations - the mechanism the Fed uses to alter short term rates) and the 10 year Treasury Yield.

If this negative correlation continues to hold, the Fed could invert the curve, and push real rates further negative and benefit different economic sectors than originally assumed (weak dollar, strong commodities, strong bond prices, weak stocks).

Interesting Chart #2 - Dec 14, 2015

Ed Yardeni

Gasoline demand in the US should stay strong as light truck sales are trending higher. 

Interesting Chart #1 - Dec 14, 2015

Seasonal Charts

Crude oil tends to bottom in early December. With sentiment so negative, the short covering rally could reach double digits.

Interesting Chart #3 - Dec 10, 2015

Capital Economics

Interesting Chart #2 - Dec 10, 2015

Confluence Investment Management

Interesting Chart #1 - Dec 10, 2015

Kimble Charting Solutions

Will the area of key support in the 2008 meltdown hold?

What If the Fed Does Not Raise Rates?

I fully expect the Fed to raise rates in December, even though being Scrooge is no fun. But what are the implications for the USD if they do not?

The below chart shows that the USD tends to sell off after the first rate rise, before rallying over the next twelve months.

Evergreen Gavekal

When the ECB did not become as aggressive as expected this month the EURO rallied 3 cents on the day. That is a huge move in the currency world.

www.stockcharts.com

Will the sell the news become even greater? The USD has had a hard time breaking through 100 on the Dollar Index. Is that just tough resistance or a tell?

www.stockcharts.com

Interesting Chart Dec 7, 2015

www.stockcharts.com

Is this a double bottom?

Interesting Chart - December 3, 2015

Business Insider

Will the Saudis make the indicator come true?

What does a collapse in the Saudi economy suggest for their oil production? Will they ramp up and potentially damage the reservoirs? Or will they cut and maximize return?

India...What if?

The IMF recently stated that India's GDP expanded at 7.6% annual rate, growing faster than China for three straight quarters. India has overtaken Japan to be the worlds third largest economy in 2014. India's oil imports have surged, across all product categories, on low prices. India consumes 3.7MM barrels/day vs. China's 9.9MM barrels/day. However, India only produces 980,000 barrels/day vs. China's 4.5MM barrels/day. 

Wells Fargo has recently asked if India's GDP growth can be sustained and Wyatt Investment Research has recently asked if India will be Apple's next big market for smart phones.

During the previous decade China grew at about 10% while India grew at about 7%. However, in 2011 India was growing about 5% and China at 9.5%. By 2022, India is expected to have the worlds largest population.

What if the world's second and third largest economies grow at 7% (India) and 5% (China), with America growing at 2.5% over the next decade?

Compare this to the 2000-2010 period, where the American economy grew at about 3%, Japan, the second largest economy over that time, at 0%, while Germany who started this period as the third largest economy grew at sub 2%.

What will this do for commodity demand? One might suggest the negative sentiment and cuts in capital spending are not considering this possibility.

Interesting Charts - No 30, 2015

Commodity sentiment is back at Great Recession lows, while the USD peaked for a few months after the 1994, 1999 and 2004 tightening campaign. Could a short reprieve in the commodity downturn be at hand?

Leuthold Weeden Capital Management

Charles Schwab

Update on Chart #2

CME Group

Even with the drop today WTI oil finished up on the week. The big question is will the lower Bollinger Band hold? It has previously, but....

Interesting Chart #2

CME Group

This chart of the weekly WTI contact poses a interesting question. The price of WTI looks to finish positive for the first time in a month and third time in the past two months. The weekly candle is bouncing off the lower Bollinger Band. The bands width is contracting suggesting a big move is in the future, while the Accumulation/Distribution has made a V bottom while the Coppock Curve is rising.

If WTI tests the mid-point of the Bollinger Bands that would suggest a price of around $50. What I am curious about, would a $50 price just be current prices plus a geopolitical risk premium? Or an actual rally in oil, which could eventually also include a risk premium and test that upper Bollinger Band around the high $50's.

Alternatively, the price could break down out of the range.

Either way it seems a sizable move in WTI prices is on the horizon.

Interesting Chart #1

Business Insider

Capital spending is expanding faster in non-oil sectors than the contraction in the oil sector. The level of CAPEX has surpassed the late 2008 peak and is approaching the peak of 2012. This seems to suggest higher GDP the next few quarters.

Interesting Chart

The employment situation is tightening. Wage Growth is accelerating seen in the  Average Hourly Earnings charts, which shows Wage Growth at the highest since the 2007-2008 Recession and the Phillips Curve is predicting further increases going into 2016.

Wells Fargo

I have to admit I forgot where I saved the second chart. I will reference it when I find the source.