2017-03-20 Week - Gold - AUD - Share Market Pullback Expected - Investing in The Future
Markets This Week
March madness will be more critical to the news cycle this week than the stark reality of underlying fundamentals are to markets.
There are not many news releases this week, so big moves will come from unexpected places. Many traders will be breathing a sigh of relief, but probably shouldn`t do so. Markets will be expecting lower volumes outside of position consolidation. Some of these changes to position may be at sufficient size to overrun quite markets. Use caution when trading (keep stops in market, but wide).
The precious metals space has gained strength, so expect some selling pressure to come into those markets. There is still upward potential but for gold, when price gets high enough, shorts will slam it to knock price back down. If gold won`t move, they will target silver to try to get a price move lower. Use caution if you have a bloated long position in precious metals. There is still plenty of upside to gold and silver, so don`t exit that position…. Just use caution.
AUD has been strong against the USD since the New Year. This is true even after the USA pulled out of the TPP (Aussies were getting a bad deal out of that one). This week, the RBA gets to talk about their feelings. By that I mean that they will release their policy statement. Expect them to indicate trying to cool the housing market without collapsing the economy. It is unlikely that they will have any success in cooling the market, and they most certainly will not be able to do so without collapsing the economy. Too many fortunes are wrapped up in real estate, debt and debt derivatives markets. Many of these fortunes are held by pension funds and major banks. So expect feelings that won`t carry into markets longer term. In the near term, expect a bit of a wiggle out of the AUD, but don`t expect that wiggle to last past a couple of days.
Share Market Pullback Expected
Now that the quadruple witching is past, as well as the Fed rate move, look for markets to become complacent. Expect that the market will pull back, now that a massive amount of options have closed.
The VIX has decoupled from the market since the November USA elections. Once, the VIX was used to hedge against market risks; Now, it is often used to jam markets higher. A quick sell on the VIX has the algos buying futures. The VIX no longer represents hedging for risk. It is used by so many leveraged ETFs, ones that will have to scale higher to meet 2x and 3x returns, that when the markets start moving lower and the VIX higher, then expect that buying in the VIX will help jam futures lower.
Longer term, earnings Per Share are down in 2017 and expected to stay that way. The share prices, however, have been moving steadily higher. With low interest money available, many major corporations released bonds and bought their own shares. This in turn boosted share prices and gave executives fat bonus checks. As that debt comes due, with dropping earnings, then the choice is to refinance at a higher rate or to tighten the belt. Most company executives don`t want to tighten the belt, so look to accounting tricks and bond issuances to boost earnings. 2017 will be the year that most companies don`t rate a beat on their quarterly results, even though they dodgy-up the estimates to do so.
Investing in The Future
There are many companies that are trying to improve the world. Some are still getting started and are looking for capital. Others have proven their technologies are looking for capital. Don`t put all of your wealth into high risk project, but some risk capital allocation will likely yield better than expected results.
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YOU ARE AN ADULT and must make your own decisions. ONLY YOU know what level of experience you possess. ONLY YOU know what level of risk you are willing to take. ONLY YOU know what your financial goals are, and to what lengths you are prepared to go to meet those goals. You will be the one to wear your losses, so trade with caution and do your own research.
Henry Ledyard is an independent trader. He has NO affiliations with banks, brokerages, funds, trading houses or markets. He trades for himself and posts trading ideas merely to share information. He does NOT want your money, advice or opinions. He does NOT want your unsolicited emails. If you require further financial advice, seek it elsewhere. Henry`s opinions should be considered as addled as his blog site: