Global Shares, Dollar Gain after GDP Data Eases Fed Fears

The dollar rose and global equity markets gained for a second day in a row on Wednesday after a surprisingly sharp downward revision to first-quarter U.S. economic growth eased concerns that the Federal Reserve may soon begin to withdraw stimulus.

In addition, moves by China to calm bank fears and supportive signs from the European Central Bank on the need for continued stimulus helped to extend Tuesday's rebound after the global sell-off last week of stocks, commodities and bonds.

U.S. gross domestic product grew at only a 1.8 percent annual rate in the first quarter, the Commerce Department said in its final estimate, down from the prior estimate of a 2.4 percent pace.

"Despite all the rhetoric and fear about tapering, this will keep the Fed firmly planted in stimulus, which is a positive for the market," Michael Mullaney, chief investment officer at Fiduciary Trust Co in Boston, which oversees more than $9.5 billion, said.

"This is another example of bad news being good news," he said.

The S&P 500 was on track for its biggest two-day gain in three weeks, while European stocks gained close to 2 percent after the ECB's president, Mario Draghi, said an accommodative monetary policy was still appropriate. The bank's policy, he said, "will stay accommodative for the foreseeable future.

MSCI's all-country world equity index rose 0.79 percent, while the EuroStoxx 50 index rose 2.4 percent.

The Dow Jones industrial average (DJI) was up 89.49 points, or 0.61 percent, at 14,849.80. The Standard & Poor's 500 Index (SPX) was up 9.68 points, or 0.61 percent, at 1,597.71. The Nasdaq Composite Index (IXIC) was up 21.71 points, or 0.65 percent, at 3,369.60.

The S&P 500 advance followed a gain of nearly 1 percent on Tuesday, which came as U.S. data on durable goods orders, sales of new homes and consumer confidence all topped expectations.

A pledge by China's central bank, the People's Bank of China, to act as a lender of last resort was the real story of the day, said Fred Dickson, chief market strategist at The Davidson Cos. in Lake Oswego, Oregon.

"The global fears regarding the possibility of a Chinese credit situation spilling over and becoming very serious has eased off some," Dickson said. The People's Bank "is going to come in and make sure the Chinese banking system doesn't collapse."

Gold hit its lowest level in almost three years and was on course for a record quarterly loss. Prices could slide to levels below $1,000 per ounce, investors and analysts said.

Bond markets in Europe and benchmark U.S. Treasuries also continued to claw back ground, although investors remained worried that the rebound could give way with markets likely to need more time to acclimatize to the new environment.

The benchmark 10-year U.S. Treasury note was up to 2.554%.

"Having seen an incredibly violent sell-off in the Treasury markets that took everything with it, there is a certain amount of settling back going on," said Kit Juckes, a market strategist at Societe Generale in London.

Brent crude for August delivery fell 46 cents at $100.80 a barrel. U.S. crude fell 62 cents to $94.70 a barrel.

The euro was down 0.61 percent at $1.3004, stung by Draghi's comments on an accommodative monetary policy and the risks to growth in the euro zone.

"Juxtaposed against shifting Fed policy, (Draghi's comments) highlights that relative central bank policy will soon shift from supporting to weighing on the euro," Camilla Sutton, chief FX strategist at Scotiabank, said.

The dollar rose to a three-week high of 83.003 against a basket of currencies (DXY), buoyed mainly by solid gains against the euro. It later traded at 82.908.

June 24th, Daily Report

This week will continue marked by the downtrend that started last Wednesday after Bernanke's words. In addition, we have woken up in Europe with a sharp drop in China's stock market, which has fallen by -5%, the biggest fall since August 2009.

Sharp decline of the EUR/USD, from levels of 1.34 to 1.31. The market of raw materials is also heavily burdened by the sharp drop last week.

Bond yields are rising alarmingly. The American 10-year Treasury bond has risen to 2.6%, the highest since August 2011.

A bearish week is expected due to the fear that still exists about the end of QE, the liquidity crisis in China and the sharp fall in commodity prices. Despite some strong technical rebounds, the major trend remains clearly bearish.

Technical Analysis:

S&P 500

The falls are taking over Wall Street after Bernanke's words. The level of 1590 has been lost again, and we continue taking as reference the main bearish trend, which is still respected by the continued bearish raids. With volatility at fairly high levels, if the trend turns around, do not enter the index until it exceeds the 1590 points.

Nikkei 225

Laterality for the Japanese index. After falling in the Asian session, the price starts to set a side channel in the Fibonacci 50. With volatility at high levels, the indicators are not showing a clear trend, so we can not lose sight the yen and monetary policies. Continue to monitor the area of ​​12600 before taking bearish positions.

23 - 29 June, Weekly Calendar

Financial Markets Freak Out When the Fed Hints It May Slow Down QE

U.S. financial markets are exhibiting the classic behavior patterns of an addict.  Just a hint that the Fed may start slowing down the flow of the "juice" was all that it took to cause the financial markets to throw an epic temper tantrum on Wednesday.  In fact, one CNN article stated that the markets "freaked out" when Federal Reserve Chairman Ben Bernanke suggested that the Fed would eventually start tapering the bond buying program if the economy improves.  And please note that Bernanke did not announce that the money printing would actually slow down any time soon.  He just said that it may be "appropriate to moderate the pace of purchases later this year" if the economy is looking good. 

For now, the Fed is going to continue wildly printing money and injecting it into the financial markets.  So nothing has actually changed yet.  But just the suggestion that this round of QE would eventually end if the economy improves was enough to severely rattle Wall Street on Wednesday.  U.S. financial markets have become completely and totally addicted to easy money, and nobody is quite sure what is going to happen when the Fed takes the "smack" away.  When that day comes, will the largest bond bubble in the history of the world burst?  Will interest rates rise dramatically?  Will it throw the U.S. economy into another deep recession?

Judging by what happened on Wednesday, the end of Fed bond buying is not going to go well.  Just check out the carnage that we witnessed...

-Dow Jones dropped by 206 points on Wednesday.

-The yield on 10 year U.S. Treasuries shot up substantially, and it is now the highest that it has been since March 2012.

-On Wednesday we witnessed the largest percentage rise in the yield on 5 year U.S. Treasury bonds ever.  It is now the highest that it has been in nearly two years.

-It was announced that mortgage rates are the highest that they have been in more than a year.

-We also learned that the MBS mortgage refinance applications index has fallen by 38 percent over the past six weeks.

If the markets react like this when the Fed doesn't even do anything, what are they going to do when the Fed actually starts cutting back the monetary injections?

Please note that the Fed's statement on Wednesday says that the current QE program is going to continue at the same pace for right now. In another article below I posted the statement and a video of Bernanke's press conference (you can watch it right here).

So why doesn't the Federal Reserve just stop these emergency measures right now? After all, we are supposed to be in the midst of an "economic recovery", right?

Rick Santelli of CNBC asked him a question on Wednesday: "Ben, what are you afraid of?"

If you have not seen his epic rant yet, you should definitely check it out...

On days like this, it is easy to see who has the most influence over the U.S. economy.  The financial world literally hangs on every word that comes out of the mouth of Federal Reserve Chairman Ben Bernanke.  The same cannot be said about Barack Obama or anyone else.

The central planners over at the Federal Reserve are at the very heart of what is wrong with our economy and our financial system.  Bernanke knows that the actions that the Fed has taken in recent years have grossly distorted our financial system, and he is concerned about what is going to happen when the Fed starts removing those emergency measures.

Unfortunately, we can't send the U.S. financial system off to rehab at a clinic somewhere.  The entire world is going to watch as our financial markets go through withdrawal.

The Fed has purposely inflated a massive financial bubble, and now it is trying to figure out what to do about it.  Can the Fed fix this mess without it totally blowing up?  Most severe addictions never end well.  In a recent article, Charles Hugh Smith described the predicament that the Fed is currently facing quite eloquently...

One of the enduring analogies of the Federal Reserve's quantitative easing (QE) program is that the stock market is now addicted to this constant injection of free money. The aptness of this analogy has never been more apparent than now, as the market plummets on the mere rumor that the Fed will cut back its monthly injection of financial smack. (The analogy typically refers to crack cocaine, due to the state of delusional euphoria QE induces in the stock market. But the zombified state of the heroin addict is arguably the more accurate analogy of the U.S. stock market.)

You know the key self-delusion of all addiction: "I can stop any time I want." This eerily echoes the language of Fed Chairman Ben Bernanke, who routinely declares he can stop QE any time he chooses.

But Ben, the pusher of QE money, knows the stock market will die if the smack is cut back too abruptly. Like all pushers, Ben has his own delusion: that he can actually control the addiction he has nurtured.

You're dreaming, Ben, pushing QE has backed you into a corner. The addict (the stock market) is now so dependent and fragile that the slightest decrease in QE smack will send it to the emergency room, and quite possibly the morgue.

We are rapidly approaching a turning point.  We have a massively inflated stock market bubble, a massively inflated bond bubble, and a financial system that is absolutely addicted to easy money.

The Fed is desperately hoping that it can find a way to engineer some sort of a soft landing to avoid a repeat of the financial crisis of 2008.

Federal Reserve Chairman Ben Bernanke insists that he knows how to handle things this time.

Do you believe him?

I don't.

Asian Stocks Tumble: China PMI Hits Nine-Month Low on Weak Demand

Asian shares tumbled to nine-month lows on Thursday as slowing Chinese manufacturing activity exacerbated sentiment already unnerved by the U.S. Federal Reserve Chairman Ben Bernanke confirming the Fed would begin reducing its stimulus spending later this year.

The "flash" HSBC China Purchasing Managers' Index contracted further to 48.3 in June from May's final reading of 49.2, hitting its weakest level since September as new orders faltered, reinforcing signs of tepid economic growth in the second quarter.

"The Chinese data confirms views that the economy is vulnerable and could heighten the possibility of some policy action to ease investor jitters," said Hirokazu Yuihama, a senior strategist at Daiwa Securities in Tokyo.

"It doesn't help markets, with the data coming after the Fed reinforced worries about funds leaving this region and repatriating back to the U.S.," he added.

MSCI's broadest index of Asia-Pacific shares outside Japan slid 2.8 percent after the data, its biggest one-day percentage drop in 13 months and lowest since May last year. The drop was around 2.5 percent before the Chinese data. Australian shares tumbled 2 percent while South Korean shares fell to seven-month lows. Hong Kong shares fell 2 percent and Shanghai shares slipped 0.9 percent.

The Australian dollar took a beating, falling to a low of $0.9240 after the Chinese data, as China is Australia's largest export market. The Aussie had already been hit by Bernanke's comments, sinking more than 2 percent to below $0.9300 for the first time since September 2010. The Aussie has been sold not only as a commodity currency but also as a proxy for emerging markets.

Asian credit markets also tumbled, with the spread on the iTraxx Asia ex-Japan investment-grade index widening by 23 basis points, reflecting the rising cost of hedging against debt default.

"We knew Asia would be pretty shaky if Ben had shown any signs of wanting to taper sooner than later, and so yes our credit market is melting," a trader said.

U.S. stocks tumbled more than 1 percent on Wednesday and benchmark 10-year U.S. Treasury yield surged to 2.37 percent, a fresh 15-month high, while the dollar advanced broadly on the back of the rising yields.

Bernanke said on Wednesday the U.S. economy is expanding strongly enough for the Fed to begin slowing the pace of its $85 billion monthly purchases of Treasuries and mortgage-backed securities, with the goal of ending it in mid-2014. But he also noted the central bank would withhold from tapering if economic conditions deteriorated.

"Bernanke was more explicit than markets had expected. Rising U.S. yields will spur broad dollar buying. The dollar's direction is now set," said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo.

"Volatility may stay high until bonds and stocks stabilise, but once the initial round of reaction subsides, markets are left with a clear direction," Saito said.

He said the contrast between Fed's shrinking balance sheet and the Bank of Japan's rapidly expanding holdings would spark the dollar to resume its climb against the yen.

Bernanke first raised the idea of a sooner-than-expected tapering on May 22, triggering global financial market turmoil especially in emerging markets, as the Fed's massive bond-buying programme has been a driving force behind the rally in risk assets globally.

Investors have been unnerved by the prospect of emerging economies or risk assets such as shares being undermined by outflows of money as the Fed curbed its stimulus, but others have noted that a stronger U.S. economy will eventually underpin investor sentiment and global economies.

"(Reduction of stimulus measures) is something the market has to get over. You cannot ride on four-wheel bicycles forever," said Kim Hyoung-ryoul, a market analyst at Kyobo Securities. "In time, confidence in U.S. economy will be restored ... we may see some short-term volatility as money will likely flow to U.S. markets."

Japan's benchmark Nikkei stock average fell 1 percent.

The dollar was up against the yen at 96.53 after rising to a high of 97.03 yen on Wednesday, moving away from its 10-week low of 93.75 yen hit last week. It remained well below last month's 4-1/2-year peak of 103.74 yen.

The euro eased 0.2 percent at $1.3272, off a four-month high around $1.3418 hit on Wednesday.

U.S. gold futures for August delivery fell more than 2 percent to $1,338.60 an ounce in Asia on Thursday. Spot gold fell 0.6 percent at $1,343.51 an ounce.

U.S. crude futures were down 0.9 percent at $97.40 a barrel and Brent also fell 0.9 percent to $105.22.

FOMC Chairman Ben Bernanke Press Conference Live Streaming Video in HD

Watch the FOMC Press Conference with Chairman Ben Bernanke live at 2:30 p.m. ET on June 19, 2013.

PRESS RELEASE: Federal Reserve issues FOMC statement 

Information received since the Federal Open Market Committee met in May suggests that economic activity has been expanding at a moderate pace. Labor market conditions have shown further improvement in recent months, on balance, but the unemployment rate remains elevated. Household spending and business fixed investment advanced, and the housing sector has strengthened further, but fiscal policy is restraining economic growth. Partly reflecting transitory influences, inflation has been running below the Committee's longer-run objective, but longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic growth will proceed at a moderate pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate. The Committee sees the downside risks to the outlook for the economy and the labor market as having diminished since the fall. The Committee also anticipates that inflation over the medium term likely will run at or below its 2 percent objective.

To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.

The Committee will closely monitor incoming information on economic and financial developments in coming months. The Committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability. The Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes. In determining the size, pace, and composition of its asset purchases, the Committee will continue to take appropriate account of the likely efficacy and costs of such purchases as well as the extent of progress toward its economic objectives.

To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Jerome H. Powell; Sarah Bloom Raskin; Eric S. Rosengren; Jeremy C. Stein; Daniel K. Tarullo; and Janet L. Yellen. Voting against the action was James Bullard, who believed that the Committee should signal more strongly its willingness to defend its inflation goal in light of recent low inflation readings, and Esther L. George, who was concerned that the continued high level of monetary accommodation increased the risks of future economic and financial imbalances and, over time, could cause an increase in long-term inflation expectations.

Awaiting the FOMC's Meeting

Be careful of what Ben Bernanke will tell us about U.S. monetary policy. After the Fed's two-day meeting, the market will be very attentive to the words of the president of the central bank of the United States.

Expectations about reducing purchases of bonds in its QE program are high, fueled by Bernanke's own statements, both as members of the Fed, as Bullard, who recognized the need to unwind the stimuli.

The effect has been really impressive, as we have seen yields on bonds rose sharply. In the emerging markets, currencies have fallen sharply against the impact it may have less liquidity in commodities. In fact, countries like Brazil and Indonesia have been forced to intervene.

For all these reasons, the expectations of the Fed on the U.S. economy are more optimistic than in other meetings, and therefore this is positive for the dollar.

I believe that the USD/JPY has the most upward path, after corrections produced by doubts about Abenomics policies.



S&P 500

The world looks to Wall Street, again. The index has a distinctly lateral movement while waiting for the Fed's meeting. With an average of 50 sessions almost flat and support levels at 1590 and resistance at 1641, we can not lose sight of the decision of the monetary policy. In the short term, the movement is expected to be lateral, as it is clearly shown in the chart.

June 17th, Daily Report

Last week ended with falls in the major indices. This week's macroeconomic data have a mixed tone, so the stock markets are still waiting for the FOMC meeting (decision making of Fed) next Wednesday.

The week started in the Asia-Pacific region with widespread increases: the Japanese Nikkei ended the session with a rise of +2.73%. The session begins in the old continent with the same movement.

During today's session we will not know any data of particular importance, except for what may be happening in the G8 meeting, which starts today in Ireland (where it is treated, among other things, global growth, trade situation of international markets and the consequences of the monetary policies of the various Central Banks).

In the United States, we will know this afternoon the Empire State manufacturing index that measures the health of the manufacturing sector in the state of New York, which is expected to improve slightly from -1.4 to -0.5.

The most important event of the week is the Fed meeting and subsequent statements by Ben Bernanke. I expect some volatility during the previous days, but there should not be significant movements before knowing the position of the Fed.

INDICES:

S&P 500

Attention to the main bearish trend in the SP500, as we could see the index in the bottom of the channel again and there could be a rebound. The 200 day moving average and the indicators continue to show a bearish trend for the index. Volatility is also increasing and there are high levels of uncertainty in the market.

Dax 30

From the technical standpoint, the German index is in a bearish channel on the 4 hour chart. Indicators are giving signals of a downward trend, so it can give us important opportunities for opening short positions. The 200 day moving average has a positive slope still, so be attentive at last week's lows of 7964 points.

Ibex 35

The area of 7.950 points (last week's minimum) will be the reference point to consider. The price marks highs and lows since the top of the channel, but if we add the loss of the 200-day SMA, we find the index in a bearish technique situation.

16 - 22 June, Weekly Calendar

June 14th, Daily Report

After sharp falls in recent days, yesterday's session began with some bearish tone, but improved during the second half of the day, and the major United States indices finished with an average increase of +1.25%. Good data on retail sales and falling unemployment claims (reduces up to 334,000 people) catalyzed the rebound from support areas. The session in Asia-Pacific region was marked by the bounce in the U.S. The Japanese Nikkei added early this morning 1.94%. The other indices of the region in a very similar line half rose around 1%.

During today's session, in Europe, we remain attentive to the publication of data on the labor market (not too relevant, but it can say something about the community employment and monetary policy expectations) and CPI data last month , is expected to rebound slightly from +1% to +1.2%. In the United States remain vigilant to the publication of data on industrial production last month, with an expected surge of light. We will also know the preliminary consumer confidence data from the University of Michigan is expected to remain stable. If they are positive, the rebound may continue during the session, but market situation in general is unstable and doubtful pending a decision by the Fed next week. No relevant data are expected during the weekend, however, in such a volatile market, holding positions from week to week could be dangerous.



S&P 500

Key moment for the American index. After highs of last session, the price is in the top of the bearish channel again, which has been drawing since it scored a high of 1685 points. Therefore, with all indicators giving bearish signals, be attentive to the behavior in the top of the channel, because if the bears take control again, the index can return to offer an opportunity to take short positions.

Nikkei

Technical rebound this morning that has led to increase in value by more than 2.5% after the huge declines in recent sessions. This stop of falls, which coincides with the 50% Fibonacci, presents a technical aspect. Therefore, despite possible rebounds due to growth measures, I still value high chances of falls in the Japanese index, so we should be attentive to the next support level in the 11500 area, precisely in the Fibonacci 38.2.

June 13th, Daily Report

More falls, volatility and an important attack to support areas. These are the players we have in a market with fear of a return to economic normality, without central banks' cheap money.

The United States indices cut yesterday, on average, nearly -1%. The reduction in growth forecasts by the World Bank for the vast majority of economies (also emerging) has led to a significant increase in volatility and a decline in equity markets. In the Asia-Pacific, the Japanese index Nikkei has fallen -6,35%. Meanwhile, the rest of region indices also show widespread cuts, but less pronounced (-1.9% on average).

The session begins in the old continent with sharp declines in all indices. We will not have significant macroeconomic references in Europe, but in the U.S. remain vigilant to the publication of requests for unemployment, which are expected to be placed in 345,000 requests compared to 346,000 last week (this may be the most relevant data of the session, so it can lead to significant movements both in equity markets as at junctions of dollar). We will also know, this afternoon, the retail sales in the U.S. last month, which are expected to improve slightly. The downward movement has been, and is being, very important: increase attention to relevant support levels, because if they resist we are seeing some discounts really interesting in the stock market.

S&P 500

The American index is framed in the bearish channel that I had already presented. After recent declines, we must remain vigilant to the support of the channel, because if bulls do not return to take control again, the index may descend more, but we have to see if there is a rebound, which I think is possible to happen, as this 3-day losing streak has already been the worst of the year.

Nikkei

New crash in the Japanese index. The tremendous declines of this morning have made stop the value in the 50% of Fibonacci. However, I continue to see a clearly bearish outlook and quite likely that, with maximum volatility, the index may reach the level of 11500 points. While not returning to ​​the bullish trend, there is a high probability of new crashes in the Nikkei.

The Bundesbank Generates Volatility and Uncertainty

Yesterday's session in the United States was marked by sales and volatility. The German Constitutional Court's deliberations and more especially the statements of the president of Bundesbank (German Central Bank), who allied himself with the usual doubts about the stability of asset purchase programs in the United States and Japan and left the major U.S. indices with average cuts of almost 1%.

What is worrying is the Bundesbank attitude of permanent and frank opposition to the initiatives of the ECB to overcome the crisis, being against any flexibility and realism that the economy is needing. Given the technical and intellectual respect that the Bundesbank deserves, I fear that their position is spreading distrust towards the ECB, fueling euroscepticism in German media and among the public opinion.

In the Asia-Pacific region, the session has been marked, one more day, by volatility. The Nikkei, which started downwards around -2% during the session and closed with a cut of -0.21%.

In Europe it begins with a mixed or red tone. CPI data known in Germany, Spain, France and Italy, without major changes.

This morning, we will know the employment data in the UK, which are expected to reduce unemployment claims, as the rate remains unchanged at 7.8% (this data can result in interesting movements in the pound against other currencies).

The Eurozone industrial production is expected slightly worse compared to the previous month (a reading better than expected could lead to an upward movement in a market that has endured heavy selling pressure over the past days).

In the United States, we will know the MBA mortgage applications of last week and data of last month's budget (not too relevant data). Remain vigilant to possible rebounds in equities after corrections we saw in the last two days, however, the bias seems to be confirmed as bearish.

It will be also remarkable the meeting of the Bank of New Zealand to be held this evening, although a cut in interest rates is not expected, but we should remain vigilant because it could result in significant changes in the currency and commodities.

June 12th, Daily Report

It seems that the situation does not improve. One reason is the few relevant macro news and data coming to the market, which are clearly worse than expected. If we add the American uncertainty regarding QE, it's clear that the market will continue with more falls. Despite Japan finished green, this is due more to the closure of short position in support levels that for a fundamental reason

Nikkei

It was a bullish day yesterday, but the Japanese index continues being bearish. Until it touches the 200 day moving average, which coincides once again with the Fibonacci 38.2, I see no reason to break short. Therefore, the price could go back to the area of 12500 points in the medium term. With high volatility and strongly bearish indicators, we should watch, as I said, the mean average and the Fibonacci 38.2.

S&P 500

Very attentive to the U.S. index. We continue on a downward trend, in which the price is at the top and where buyers are not able to take control. Therefore, I think it's an interesting opportunity to enter short on the value if the upward force can not exceed 1633 points, with a reasonable medium-term target around 1580 points, the bottom of the channel which is currently being drawn.

BOJ: "Expansionary Monetary Policy Has Limits"

The Bank of Japan has definitely confirmed that ultra expansionary monetary policy has limits.

After a meeting early this morning, they have not taken any decision even though the market was waiting to extend the terms of the loans at 0.1%, in order to calm the extreme volatility that is still produced in the bond market and threatens to cause damage to the income statement of banks.

The Nikkei has reacted to the floor and again we see that some yen short positions are sold.

If no immediate reaction and if, as presumably occur, bonds are still being sold, it will result in the opposite effect to that intended by the BOJ: the currency will be strengthened and the main crosses against the yen will remain under pressure in the near future.

EURJPY chart:

June 11th, Daily Report

The session today is expected slightly downwards due to the bad news that were released yesterday. Poor Chinese data, lack of news in Japan about possible new measures and an improved outlook to stable in the U.S. impelled downward in the opening. But the lack of relevant news seems that will not cause a very volatile session.

In the United States, the market has more doubts because yesterday the S&P 500 changed the economic outlook from negative to stable. Normally, this news should be taken positively, but the opposite happened for fear of a slowdown in QE. For today's session we should expect a bearish continuation. Yesterday the best was the NASDAQ that lost 0.01%, followed by the SP (-0.03%). The worst was the DOW, which fell 0.13%. The problem is that the three indices ended far from highs.

In the European market, the most important today will be the decision of German court on OMT program of ECB, and the British industrial production data. But these news don't seem to cause big changes in the session. Yesterday's session was mixed, with a rise of 0.6% of the DAX while the worst was the MIB with a fall of 0.6%. The IBEX lost 0.5% and is closer to a flat performance so far this year (0.7% increase in the 2013). On the other hand, fixed income remained steady yesterday.

In Asia, economic data in China continued its effect. In addition, the NIKKEI was affected by news of his country, which seems not to carry out more expansionary measures, and lost 1%.

With these behaviors, we should expect a bearish session for the stock market. In the medium and long term, I still forecast an upward movement.

INDICES:

S&P 500

Crucial moment for the Standard and Poor's. The bulls were unable to resist the bearish channel that is drawed. Therefore, it seems quite likely that the price will head back to the area of 1596 points, coinciding with the bottom of the channel. We should wait for the price confirmation when it breaks the average of 50 sessions.

Dax 30

Interesting moment for the DAX. As in the S&P, We see how the bulls were unable to resist the bearish channel that the index presented in the four-hour chart. With the downward pressure in the European exchanges, I see quite likely that the German index will approach back to the support area, around the 8000 points. This level coincides with the double top target that I explained last week. Indicators giving bearish signals.

Ibex 35

Bearish pressure for the IBEX. After falls in Japan, the red color turns to own the index, again. We must be vigilant to the closing today, because in case of closing below the support area presented, I really see a significant downside investment opportunity. Therefore, with the price below the averages and increasing volatility, I estimate that sellers will take control of the Spanish index.

Apple's WWDC: Big Updates Without Surprises

Apple (AAPL) spoke to members of its developer community at the company’s 24th annual Worldwide Developers Conference on Monday. The high-tech giant unveiled a music-streaming service called iTunes Radio, new versions of its MacBook Air laptops and Mac Pro desktop, new operating systems for the Macintosh and iPhone, and a simplified, flashier design that will span all of its products and services.

“We want to make the best products that people use more and love more than anybody else’s,” said Chief Executive Officer Tim Cook.

The product unveilings were embraced by the hooting and hollering fans who show up every year to pack San Francisco’s Moscone Center. Without any big surprises, however, the two-hour presentation most likely left investors and the broader public wanting. Apple’s stock is down 37 percent from a high set last September and was relatively flat in Monday trading during the conference, which was broadcast live online.

If Apple has been in a funk, it’s an extremely profitable funk. The company earned more than $22 billion in net profit during the six months ended in March. Still, investors worry that the company hasn’t produced any new hits since the iPad, especially with Google’s (GOOG) Android operating system gobbling up market share on mobile devices. Android ran on 74 percent of global smartphones shipped during the first quarter, vs. 16 percent for Apple’s iOS, according to research firmGartner (IT).

The changes to iOS, which runs on the iPhone, iPad, and iPod touch, were the highlight of Monday’s event. Cook called the iOS 7 “the biggest change to iOS since the iPhone.” Pioneered by design chief Jony Ive’s team, the operating system has a striking new look, including a new color palette and livelier backgrounds. The old real-world visual cues familiar to iOS users, like wooden bookshelves in the e-book app, are gone.

Apple is counting on having kept the system relatively familiar, though. “Installing iOS 7 on your phone is like getting a new phone, but one that you already know how to use,” said Craig Federighi, Apple’s senior vice president in charge of software engineering.

The mobile software, available this fall, comes with 10 new features, including multitasking for all apps and background updates for those used most frequently. Siri, the voice-recognizing virtual assistant, comes with new voices and can be integrated with services such as Twitter, Wikipedia, and Microsoft’s (MSFT) search engine, Bing.

Previewing other changes coming with iOS 7, Eddy Cue, Apple’s senior vice president for Internet software and services, introduced iTunes Radio, which will be built into iTunes on all Apple devices. Like Pandora (P), it allows users to stream collections of songs by similar artists. Apple recently signed licensing agreements with the three major music labels—Sony (SNE), Universal (VIV), and Warner. The free service is available in the U.S. and is paid for with ads.

Apple also introduced a new line of MacBook Air laptops, which use Intel’s (INTC) low-powered Haswell processor. The ultrathin computers are getting a battery boost and should now last more than nine hours on a single charge. The 11-inch and 13-inch models start at $999 and $1,099, respectively, and go on sale today.

Apple also previewed a dramatic new design for an upcoming generation of its Mac Pro desktop. The computer is shaped like a cylinder and colored a glossy black. “Can’t innovate anymore, my ass,” said marketing Vice President Phil Schiller, addressing Apple’s critics, to thunderous applause from the audience. The pint-size but high-powered Pro goes on sale later this year, and Apple said it will be “assembled” in the U.S.

Starting this fall, new Macs will run the latest version of Apple’s OS X operating system, called OS X Mavericks. (Previous releases, such as Mountain Lion and Cheetah, were named for cat species, but Federighi noted: “We do not want to be the first software release in history constrained because of a dwindling supply of cats.”) Mavericks comes with some new tricks, including support for multiple display monitors; better battery management; file tagging, so users can find stuff more quickly on their computer, and an update to Apple’s Safari Web browser.

The company is also bringing the iBookstore, its e-book catalog of textbooks, trade fiction, and nonfiction, to the Macintosh. Apple is currently squaring off with the U.S. Department of Justice, which brought an antitrust suit against the company, accusing it of conspiring with major book publishers to raise e-book prices.

ECB: A Bipolar Bank

ECB President Mario Draghi vehemently defended the actions of the institution he presides at the final meeting last Thursday.

And more specifically, the unconventional monetary policy, known by its acronym OMT, which are committed to purchase bonds of troubled countries if they previously request it.

Following a meeting in which they did not change interest rates and decided not to take any further action, President Draghi stated that in the absence of deflationary risks in the Eurozone (and the stability of peripheral debt markets), they decided to stay as they were.


Bond Purchases 'Only If Requested'

Mario Draghi defends bond purchases, although it has not been necessary yet, and it makes sense given the direct opposition exerted by the German representatives at the central bank and some of the politicians of that country. In fact, there is a demand in the German Constitutional Court, pending resolution, presented by German politicians, as they consider that this practice is illegal and outside the remit of the ECB.

But over-optimism, which is closer to empty triumphalism and, again, the feeling that conveys market inaction, or perhaps impotence, can be very harmful.


Risk Premiums Rising Again

In fact, after his statements, the peripheral European bonds fell and thus the risk premium was rising again.

The impression given in his appearance was to be more concerned about the approval of Germany, as he even expressed the hope that the German Constitutional Court would not oppose against the measure adopted by the central bank in Europe.

Fragmentation of the Market

If we add the setback in the talks about the banking union, another point that Mario Draghi stressed, and thus the impossibility of reaching monetary policies properly transmitted to the market, it is causing its fragmentation by uncertainty on the health of some financial institutions. And the result is pessimism.

Although estimates are made to improve the economy later this year, financial markets need a stronger action to restore confidence.

It is really worrying that bonds are being selled again, and risk premiums are rising, especially now that Japan, the country that has been active in this market and has given support to the debt, is floundering amid doubts about the effectiveness stimulus policies of the new executive.

Concerns Out

The European Central Bank needs to be more confident and more assertive in its statements. An independent central bank can not be worried about if its policy is approved in a country or a court.

The market expected a reinforcement in rate cuts that occurred in the previous meeting, and an explanation the promised measures to facilitate credit to SMEs.

What we don't need is indecision and timidity. The market is giving clear signals of what is needed to regain confidence, and if the ECB don't act, we could return again to unnecessary tensions.

China's Latest Economic Data Dump Stunk

The latest batch of economic data from China suggest that growth continues to be sluggish.

Let's walk through each of them.

First, industrial production climbed 9.2% on the year, slightly below expectations for a 9.4% rise. Industrial production in May was led by heavy industries, with steel products up 11.3% year-over-year (YoY), up from 8.1% in April. Auto production slowed to 15.7%, from 18.3%.

Second, fixed asset investment (FAI) was up 19.9% on the year, and year-to-date FAI was up 20.4% on the slightly below expectations for a 20.5% gain. Remember FAI is a good gauge of a country's investment activity.

A breakdown of FAI activity showed that manufacturing FAI eased to 16.5%, from 17.9% because of "sluggish" external demand. Railway FAI slowed significantly to 24.2% YoY, from 62% in April. But year-to-date railway FAI was up 24.5%, compared with -41.6% last year for the same period. Planned investment, which is a leading indicator of FAI eased to 15.4%, from 17.9%. And finally, property FAI fell to 19.4%, from 23.2% the previous month. For the month of May, the 2.9% fall in producer prices could cause real FAI to rise a bit.

Third, retail sales climbed 12.9% on the year, in line with expectations. Industries impacted by the government's crackdown on corruption, like the restaurant industry saw revenue rise 9.2%, from 7.9% in April. Gold and jewelry sales were up 38.4% because of weakness in gold prices.

Fourth, consumer prices were up 2.1% and producer prices fell 2.9%.

What does all of this mean?

The latest data suggests that Q2 GDP growth will be 7.6 - 7.7%, and quarter-over-quarter growth should be 1.8%.

But the government, that is looking for about 7.5% growth for 2013, is unlikely to announce new stimulus and is expected "maintain the current accommodative fiscal and monetary policy."

9 - 15 June, Weekly Calendar

All Eyes on Draghi: Euro Rises After ECB Holds Rates

The European Central Bank has voted to keep its benchmark interest rate on hold at a record low. Last month the ECB lowered the rate to 0.5% from 0.75% - the first cut in 10 months.

The decision not to cut rates further came despite an ongoing recession across the 17 countries that use the euro.

The ECB also revised down its forecast for eurozone GDP in 2013. The Bank now predicts a contraction of 0.6% over the year, compared to a previous estimate of 0.5%.

Downside risks

However, ECB President Mario Draghi told a press conference the bank had marginally revised up its 2014 forecast to 1.1% growth.

"The governing council continues to see downside risks surrounding the economic outlook for the euro area."

"They include the possibility of weaker than expected domestic and global demand and slow or insufficient implementation of structural reforms in euro area countries."

Draghi ducked questions about precisely how many members of the ECB's Governing Council voted to cut interest rates.

"Export growth should benefit from a recovery in global demand, while domestic demand should be supported by the accommodative stance of our monetary policy and by the recent real income gains due to lower oil prices and generally lower inflation."

Instead he said "the vastly prevailing consensus" was there had not been any events deemed significant enough to merit a cut.

The eurozone's gross domestic product (GDP) shrank 0.2% in the first quarter - the sixth quarter of decline in a row.

The rate announcement came shortly after figures showed unemployment in France rose to 10.8% in the first quarter of the year - its highest level since 1998. The jobless rate grew from 10.5% in the last quarter of 2012, the official Insee statistics agency said. The French economy went into a recession after seeing GDP fall by 0.2% in the first quarter.

6th, Daily Report

The session is expected slightly bearish although it could be a day of technical consolidation. Negative macro data in America, doubts in Asia and the uncertainty situation in Europe, so the stocks could continue to fall as this week. Even so, we must be aware of the bond auction in Spain, which could worsen slightly the risk premium. The unemployment data in the U.S. will mark the session because it normally anticipates payrolls data tomorrow.

In the United States, the market has fear of a possible reduction of QE. Especially since after the big spending, the primary goal has not been achieved fully, and they may soon decide to withdraw aid. The NASDAQ, which lost 1.2%, had the best behaviour, while DOW and SP fell 1.4%.

The European markets were affected by some doubts and uncertainty, making them went down together with a worst data of the 1st quarter GDP. There are many reasons that could have caused these falls. Again, the best was the IBEX with a decline of only 0.9%, while the CAC was the worst with a fall of 1.9%. It seems that the difference between peripheral and central Europe markets is more narrow, but we have to wait to see if this continues on rises or only relies on falls. Risk premiums slightly increased, with the Spanish one reaching the 293 points.

In Asia, the market has fallen again causing declines to levels of earlier this year. The NIKKEI fell but only 0.9% driven by the words of Abe yesterday.

For all this, for today's session I expect a technical bounce, but not for fundamental reasons. For the medium and long term, I still forecast a bull market.



INDICES:


S&P 500

Following significant declines, today we approach the projected target of breaking the triangle about I have been talking since several days. That level, placed in the area of 1590 points, is now much closer. It coincides with the Fibonacci 61.8, which is likely to show us a break of the correction and even a potential upside rebound. With the price below the average of 30 sessions and in a clear negative slope, we present an index with a significant downward trend for the short and medium term.

Dax 30

Slightly bullish opening for the German index. However, following the declines in the day yesterday (which made ​​the price pass through the average of 30 sessions), we continue with the double top and with a bearish forecast for the area of 8000 points. As we are waiting for the ECB decision, volatility starts to increase and some change is expected, so it can give us a high probability of declines in the medium term and the index should reach those levels.

Ibex 35

Bullish opening in laterality, but with a clear bearish trend, so we monitor the key area of 8175 points. With an average of 30 sessions in a negative slope and indicators pointing downward, little changes are expected today in the Spanish index until Draghi's speech. I continue considering a bearish trend in the medium term for the IBEX.

ECB's Banking Plan: More Bailouts & Customers Losses

The institution chaired by Mario Draghi is working on a radical plan to tackle the Eurozone crisis by acting on the European financial system, whose problems are slowing the banks lending and a possible recovery. The ECB will inspect, identify capital needs and where necessary, proceed to bail out banks with taxpayer participation, shareholders, creditors and customers.

As reported today in the German weekly Die Zeit, 140 European banks, about 80% of the market, will receive the visit of the ECB inspectors and private consultants, who will inspect balances of the entities in the Eurozone with national authorities.

The calendar is already decided and the accountants are ready to examine the books of financial institutions. The results of these new test should arrive in early 2014, as they need time to measure the ability of banks to weather a new downturn in the Eurozone.

Banks that are deemed not able to fill the potential 'holes' of capital should be bailed out by its member states. If they do not have money, the European bailout fund (ESM) will be able to lend it.

But according to Die Zeit, the burden will fall not only on taxpayers: shareholders, creditors and customers of affected entities must take first losses in the restructuring of the entities. Something similar to what has been done in Spain, but at the level of the Eurozone. There are still no details about possible losses on deposits.

However, the ECB's ambitious plan encounters problems, mainly from France and Italy, who do not accept external audits. Furthermore, the ECB can found another difficulty, since for early next year will not be ready bank resolution mechanism in charge of eliminating the non-viable entities, so you can not be too picky.

5th, Forex Analysis

After a corrective phase, there are several assets that could confirm bullish continuation patterns to implement the strategy 1-5. In the three charts that I have reviewed, the "modus operandi" would be the same.

- Wait an overcoming to higher levels from the point marked "4".

- The breaking of trend lines forming bearish figures would be a good clue too.

- If instead, points "3" are lost on each graph, the strategy would be annulled.

For the German index (Dax 30), the overcoming of 8396,5 would confirm the bullish strategy.

For the USD/JPY breaking the 100,43 level would give us the signal for an upward trend.

For the EUR/JPY, the key point is 131,42.

The Yen Distorts the Market

Japanese politics is causing distortions and uncertainties in the financial markets. Extremely volatile movements of Japanese bonds, caused by the inflationary expectations created by the BOJ, have warned the government of that country, which is trying to calm investors with ongoing interventions and the presentation of a growth program, in addition to monetary policy, which among other things include the possibility that the state pension fund could invest in riskier assets such as equity markets.

But the program has not convinced the market and the Nikkei has fallen back into a movement that has become intermittent, but unstoppable.

The movement of the currency, also very erratic, seems to be a turn of the trend. Therefore, it is highly likely that yen's crosses against the dollar and the euro definitely break the 100 and 130 levels.

In the case of euro, the movement could be larger if, as seems, there are disagreements over European banking union and the perception of risk is heightened.

EUR/JPY chart:

4th, Daily Report

A quiet day is expected today, due to the macro data to be published. Still fears about the decisions of the Fed, especially at the words of two members that made it clear that reducing stimuli could start this summer (presidents of San Francisco and Atlanta). Even so, the opening is expected bullish thanks to the bad American PMI data released yesterday (completely absurd), which makes it clear that more help is needed. In addition, the NIKKEI bounced back to 13000 points and Abe's words this morning surely encourage the stock market.

In the United States, the behavior is raised from a macro point of view very interesting, as the ISM manufacturing data, far worse than expected, boosted the stock market. This behavior (they go up when data are bad, and down when they are good) even contrary to normal, makes clear that the intervention does not help the markets in the medium and long term. In yesterday's session key U.S. indices rebounded with a rise of 0.9% of DOW, followed by SP and NASDAQ, which rose by 0.6% and 0.3% respectively.

The last session in Europe was slightly bearish at the opening but with a rebound that lowered the falls. The IBEX was the best index with a drop of 0.4% while the worst were the MIB and FTSE, which fell 0.9%. The rebound was thanks to PMI data, which had been better than expected. Moreover, in Spain, the Troika indicated an improvement in banking sector and that this is progressing well in his recovery. Finally, with the evil U.S. ISM data and downward revision in Germany's economic growth forecast, the market had a slight decline. The good thing about the session is that even with a worsening of the equity premium is still below the 300 bp (currently located in the area of ​​293pb) with bonds at 4.4%. As an important note, yesterday the Financial Times commented that it is very likely the ECB will not use its "bazzoka" in bond purchases, so the political intervention would be reduced.

In Asia, the Nikkei starts again the upward trend for two reasons. The words of Abe for a possible weakening Yen and a technical rebound in the 38.2% Fibonacci. The rise was 1.7%, which places it about 30% return so far this year.

Therefore, for today's session I expect an upward trend in the opening, supported on yesterday's increases in the U.S. and Japan. For the medium and long term we continue to expect a rise in the stock market.

INDICES:


S&P 500

The American index should reach its projection given by smashing the bearish triangle. Furthermore, this hypothesis is even stronger if you look at the hourly chart, and we see how the SP became stronger at the time of the break. With the indicators giving bearish bias, we continue with 1590 points target.

Dax 30

Again, upward opening on the German index. However, we must be careful about the double top I mentioned yesterday, as it leaves a bearish projection to the area of 8000 points. With indicators giving slight bearish bias, we will be attentive to the closing today, because this double top can be re-activated.

Ibex 35

Despite the bullish opening today, the Spanish index faces his umpteenth day in laterality with mild bearish bias. From the technical point of view, with the average of 30 sessions in a negative slope, we see that all indicators show also a clear laterality in the price. We must be careful because if it goes below the 8171 points, I seriously appreciate the possibility of going to lower supports.