Sunday, January 31, 2016 |
BOJ "Surprises" Market With Negative Interest Rates; Fed Preps To 'Clarify' Message on Monday
You would think the joke would get old after awhile... On Friday, the financial media feigned great "surprise" at the Bank of Japan's decision to use negative interest rates to spur more leverage in an already overleveraged country. (Who is surprised? Not FTMDaily readers. We told you to watch for "more monetary easing" at the BOJ meeting in our last Weekend Briefing.)
In the short-term, this may represent a buying opportunity. The Japan iShares ETF (Ticker: EWJ) is flashing a new swing trade entry signal in our trading software at around $11.65. But that's the short-term...
In the long-term, Japan will be one of the most epic short opportunities for smart traders. Even the most innovative and brilliant nations among us are still beholden to the laws of economics. Consider that Japan's total government debt to GDP ratio stood at a whopping 230% in 2014! And that figure just keeps rising as the Japanese economy stagnates.
Japan’s central bank already owns more than half of the nation’s exchange-traded fund (ETF) market.
I believe a future Japanese short could possibly be even more profitable than shorting the U.S. market in the next market collapse.
One way to short the Japanese stock market is to buy a put on the Japan iShares ETF (Ticker: EWJ).
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Meanwhile, the latest U.S. quarterly GDP growth figures confirm once again that trillions of dollars of Fed stimulus did little to provide meaningful and sustainable economic growth. Amid a painful slowdown in industrial production at home and economic uncertainties abroad, U.S. investors are beginning to frown on the Fed's announced intention for up to four more rate hikes in 2016.
The Fed knows that investors are anxious so they are sending out their big guns next week in Fed Vice-Chairman Stanley Fischer, to "clarify" the Fed's position.
On Monday, Mr. Fischer will speak to a group at the Council on Foreign Relations about "the economy and interest-rate policy."
Expect his words to be parsed and to influence markets Tuesday AM.
So, let's sum it up...
- While Japan may be a short-term buy, we will avoid long-term exposure and seek opportunity to short.
- The Fed's VP will clarify matters on Monday and will likely affect markets on Tuesday.
Enjoy the briefing!
U.S. STOCKS
S&P 500 Index - Trend Analysis
NOTE: U.S. stocks responded to new stimulus efforts announced by the Bank of Japan sending the S&P 500 index up sharply on Friday. While the Long-Term trend was downgraded to RED earlier this month, we are enjoying the mild rally we told you to expect in last weekend’s briefing. New resistance looms at $1972 with important support at $1909.
Major Support Level To Watch This Week: $1909
COMMODITIES/CURRENCIES
Chevron Disappoints Amid Sub-$30 Oil
NOTE: You know that the energy sector is suffering when oil giants like Chevron (Ticker: CVX) begin posting quarterly losses. Last week, Chevron posted a full-year 2015 profit of $4.6 billion, its lowest annual total in 13 years. Despite the weakness, I personally like Chevron (and its 5.1% dividend) and will look for a buying opportunity as oil prices stabilize.
Commodity/Currency - Trend Analysis
(Click a chart to enlarge)
TRADING SETUPS, IDEAS, AND COMMENTARY
REPLAY: Watch Last Friday's Trading Conference Call
NOTE: Our live trading conference calls are held every Tuesday and Friday morning for our Pro Trader community. As a Pro Trader, you are invited to attend these live training calls or watch them in replay mode.
Video Description
On last Friday’s trading conference call we discussed the Bank of Japan’s decision to introduce negative interest rates and provided several new swing and position trading setups.
Stocks/ETFs We Are Watching
(Click a chart to enlarge)
GDX - Position Trend View
FL - Position Trend View
Barron's Pick of the Week
BARRONS: Ctrip has 30% upside
Shares of Ctrip (Ticker: CTRP), the dominant online travel agency in China, are down 20% since November. Despite weakness in the Chinese economy, travel spending rose 19% in 2015 and could triple by 2020. While the Chinese already book most of their flights online, only a quarter of hotel reservations are made online, which Ctrip can exploit. Barron’s says that shares could rise 30% in the coming year.
The Week Ahead: Key Events to Watch
MONDAY
Iowa Caucus kicks off 2016 Primary Season
U.S. ISM Manufacturing PMI (Jan) (Exp. 48.0)
ECB President Mario Draghi Speaks
Google (now Alphabet) reports earnings after the market close
TUESDAY
Exxon Mobil, UPS report earnings
Kansas City Fed President Esther George speaks about the economy
Apple (Ticker: AAPL) reports after the market close
WEDNESDAY
U.S. Crude Oil Inventories
Bank of Japan Governor Haruhiko Kuroda speaks and will likely announce further stimulus
THURSDAY
ECB President Mario Draghi Speaks
The Bank of England announces its interest-rate decision
Dallas Fed President Rob Kaplan speaks about the global economy
IMF Managing Director Christine Lagarde speaks about emerging markets
FRIDAY
U.S. Unemployment Rate (Jan) (Exp. 5.0%)
Jerry Robinson - Economist/Author/Investor
About the Author
Jerry Robinson is a Christian economist, author, and investor. He has been trading stocks and options since the mid-1990's and wrote his first best-selling book, Bankruptcy of our Nation, in 2008.
His website FTMDaily.com has tens of thousands of monthly readers in 100+ countries.
Through his cutting-edge economic insights, geopolitical observations, and market commentary, Jerry provides much needed financial wisdom in a turbulent age.