Every one wants inflation?
China stocks continue to lead gains
The media has not talked much about the recent rise in Chinese stocks. Within a week, it has risen about 15%. When Chinese stocks go up or down, it happens quickly especially when the government puts their mind to it. We saw similar price moves in 2014-2015.
The BoJ has been buying local stock ETFs since 2010 and they probably own 9% of the entire stock market. It is capitalism of a different flavor. So far, it has done well for BoJ and the stock markets.
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The Fed does not want to admit they are buying stocks and they are not. But by buying corporate bond ETF’s through an SPV managed by BlackRock, they are indirectly supporting the stock markets. If things turn really south, it is left to only one’s imagination as to in what way the Fed will directly get involved in the stock markets. All central banks are trying to inflate something.
The world is getting seriously concerned about China’s recent territorial claims with many of its land neighbors and in the South China Sea. While India has banned all Chinese apps that they think are a threat to their internal security, they have also told all soldiers to delete Facebook and Instagram. Around 1.3 million military personnel have time until Jul 15 to act on it.
Equities
The Nasdaq is at an all time high while the S&P 500 and the Dow are below their June 8 high and their all time Feb highs. To compound that, the Russell 2000 index for small cap stocks has not exceeded its high made in Aug 2018. So the tension between all these major indices confirm that the trend is not broad based. We believe this anomaly should finally play out in a broad based weakness of all indices. A decline below 3000 in the S&P 500 and 25000 in the Dow between Jun 26-29 lows will be the first sign of a turn around.
Bonds
Bond prices have been choppy and volatile. It has threatened to move above 179^17 the high of Jun 30. As long as prices stay below 183^02 the high of Apr 22, the preferred view is for further weakness. The downturn can come very quickly.
Euro
The Euro continues to show persistent strength. The risk is increasing for a move above 1.1420 the June 10 high to complete a structure. A move below 1.1185 to 1.1165 should confirm the upside pressure is over.
Gold
Gold has clearly exceeded above the 1800 level to complete a structure across multiple time frames. A move down could start any time now.
Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund.