【Pick up from Investment Salon】This week's market 2017/2/20～
This Week's Outlook: Will the Market's Turbulence Continue?
Release date: 2017/02/20 03:53
There is a site called Zero Hedge, and it reports that Canada's most famous investor, Prem Watsa, CEO of Fairfax Financial, incurred a loss of 1.1 Billion USD and closed his U.S. stock bear positions. It was also reported that George Soros, soon after Trump's election, suffered a sizable loss from shorts, and similarly many people ended up bears and incurred losses.
The firmness of U.S. stocks up to last week appears to have come from these funds cutting losses. They kept hitting new highs day after day, but that suggests quite a few people could not cut their shorts. The upside risk in stocks has, to some extent, been alleviated.
On the other hand, contrary to stock strength, U.S. interest rates fell and the dollar weakened, which is quite puzzling. Although Yellen, with differing opinions, showed a hawkish stance and strong economic indicators came in repeatedly, and an upcoming "astonishing" tax reform announcement was on the horizon, the dollar fell. At the same time, long-term yields fell as well.
The interest-rate market is a market for professionals. Therefore, compared with other markets, it hardly reacts incorrectly. If rates are falling before the tax reform is announced, it may be because details of the reform leaked and the content could be disappointing.
Recently, while watching CNBC, Speaker of the House Paul Ryan spoke and showed a fairly aggressive stance on border taxes. Given his strong support for border taxes, the House Republicans are in favor. However, if border taxes are truly decided, the market will likely go into a mini-panic.
This week there are not many indicators that require special attention. There will be economic data releases, but despite last week's consistently strong numbers, the market was unresponsive. I would like to see how this week's moves unfold.
I currently hold a USD/JPY short and EUR/USD long, but the decline in EUR/USD surprised me a bit. If USD/JPY moves higher, I might close it for now and sell again when it rises.
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【Michiko Kawai's Today's Strategy】
Today's Strategy
Release date: 2017/02/20 07:59
USD/JPY (as of 7:59: 112.94-96)
○ Be aware that USD/JPY may be bounced from support. Cross/Yen pairs may show a heavy upside.
USD/JPY has formed three consecutive daily bearish candlesticks, and the prior candle began to break below the 21-day moving average, deteriorating the daily chart. The 21-day line is at 113.33 as of 2/17. On the other hand, strong near-term support on the daily chart is at 112.50-60 and 112.00±0.10, and unless price closes below and breaks 111.50, the short-term trend will not change, so dollar selling should be approached cautiously.
Buy USD on dips around 112.50-60. If you want a shallow stop, exit at 112.30, then re-buy on a dip at 112.00-10. In this case, the stop would be at 111.40 to reflect further downside risk.
Sell USD is on hold for now.
Key daily resistance is at 114.00-10 and 114.60-70; support sits at 112.50-60 and 112.00±0.10.
The short-term trend becomes neutral if it breaks below 112.50, but as long as it does not break 111.50, neutrality remains. Conversely, if it clears and closes above the 114.60-70 resistance to extend into next week, or clears the 115.50-60 resistance, downside risk recedes and further dollar upside is more likely.
EUR/USD has formed a candle that erases the previous day's bullish range, so the short-term trend is slightly bearish. However, price remains above the short-term resistance line derived from 1.0829 on 2/2, and daily support sits at 1.0540-50, so unless it closes below this, there is risk of a downward spike. The short-term trend is weak, so buying is on hold. Sell on rallies around 1.0640-50. Stop at 1.0710 for now. If the short-term trend clears the 1.0750-60 resistance to move higher, it would return to neutral, but as long as price does not return to the 1.08x area on the daily chart, downside risk remains.
EUR/JPY ended with a slightly large-bodied bearish candle, indicating downside risk. Within this range, there is strong upside resistance at 121.10-20, limiting rebound potential. The medium-term trend remains bullish, and weekly charts show strong lower support in the 116 area, so selling around that level should be cautious. For EUR selling, consider selling on rallies at 120.40-50. If there is a spike, upside could reach around 120.80-90. Stop loss should be placed at 121.60 to return the short-term trend to neutral. Buying is on hold.
GBP/USD has fallen back. The daily chart has deteriorated; price dipped below the 21-day moving average at 1.2514, but there is some support at 1.2360-70, suggesting a potential rebound. For buying, stay neutral for a day or do a light dip-buy around 1.2360-70. Stop at 1.2340 for a shallow exit. If hit, we return to neutral. For selling, stay on the sidelines or do a light pullback selling around 1.2480-90. Stop at 1.2560.
GBP/JPY continues to fall. The daily chart shows somewhat higher downside risk, but the 200-day moving average sits at 139.57 and the 120-day around the 137 handle, and the medium-term trend is not broken, so unless it breaks below 136, selling should be cautious. The short-term trend is weak and downside risk is higher, so buying is on hold. Sell around 141.20-30 on a rebound. Stop at 142.10.
AUD/JPY continues to fall. The daily chart has worsened, and a near-term top in the 88-yen area may have formed, but the downside support at 86.10-20 remains intact, so AUD selling is on hold. Buy on dips around 86.50-60 or lower. Stop at 85.90.
（USD/JPY）
Upper resistance: 113.30-40, 113.70-80, 114.00-10, 114.30-40, 114.60-70
Lower support: 112.50-60, 112.00±0.10, 111.60-70, 111.50, 111.00-10
【Tetsuo Inoue: Market Currents】
Trend 224: Is Nikkei's upside chasing difficult in the near term?
Release date: 2017/02/20 07:55
Friday's U.S. Dow rose for the seventh straight day, but intraday gains were only 4.28 points, following the previous day's 7.91-point gain. From Wednesday last week, the intraday highs over three days were, in order, 20620.45, 20639.87, and 20624.05, leaving the Dow hovering around the 20600 level.
In response to this seven-day rally, four overheating signals lit up for the Dow. Including the unlit 25-day moving average deviation, the numbers are: 25-day MA deviation: 2.68% < 3% (not lit); Fast Stochastic %K: 97.467% > 90% (lit); Fast Stochastic %D: 97.679% > 90% (lit); Slow Stochastic %D: 98.089% > 90% (lit); RSI 14-day: 83.008% > 80% (lit). This means the RSI lit up as I noted last weekend.
Last time Dow had five signals fully lit was on 12/8 of last year. After Trump’s rally, markets surged and consensus suggested a pullback; I noted that “five signals lit historically lead to further consolidation before the next rise,” so I advised against easy selling. Dow closed at 19,614 on 12/8 and closed at 19,974.62 on 12/20, rising further, and this strong market trend since then validates that advice.
If, this time, five overheating signals light up again for the Dow, I intend to repeat the same argument. However, for this signal to fully light on the post-holiday U.S. market on 2/21, the Dow must close above 20,719. A rise of about 95 points from Friday’s level would be required.
However, regarding the Japanese market, up to now there has been a “government-driven market” and “buyback of Nikkei futures + more TOPIX futures buying” repeated gently by Goldman Sachs, plus algos that move without direction or market feel, maintaining a high price level. Soon, I anticipate a pattern of relative underperformance versus the U.S. market. One fundamental reason is that since the big jump on 1/4, foreigners have not been buying spot Japanese stocks at all. (I will break down this component-driven behavior between October last year and the second week of January this year in this week's notes.)
At the start of last week, the Dow showed only a modest rise on Thursday and Friday, and the VIX rose slightly—11.76% and 11.49%—but did not return to the 10% range. It feels the VIX, which has traded at historically low levels, is approaching a time for an autonomous rebound.
Therefore, as I wrote last week, I plan to employ a time decay strategy during the consolidation period, i.e., selling calls. During the consolidation, I also plan to sell puts to create a short strangle position in my portfolio. The March expiry premiums are small: 17 yen for the 20,250 strike call and 8 yen for the 20,500 strike call. By the way, for the April expiry, the 20,250 call is at 85 yen and the 20,500 call at 50 yen. There are more than 50 days to expiry, and I will continue to monitor these April premiums as well.
【天空の狐 Bitcoin Newsletter】
Weekly Report 1: 2017-02-20 – Winter Plum, Umbrella, and Toward Spring
Release date: 2017/02/20 12:02
1) Trading Diary Notes
Main Scenario: Market Tone
Dow: Short-term - rising to consolidation; Mid-to-long-term - rising
USD/JPY: Short-term - range-bound; Mid-term - corrective rise; Long-term - rising; watch the 110 line; scenario invalidates
Bitcoin: Short-term - upward tendency; Mid- to long-term - range; beware of reaching recent highs
Crude Oil: Short-term - range; testing higher levels; Mid- to long-term - rebound and rise; testing upper end of range
Gold: Short-term - upward trend with a pullback; Mid- to long-term - rising; bottoming; potential for a bullish market
Treasury Yields: Short-term - range; Mid- to long-term - rebound and rise; choppy; watchful
TLT: Short- to mid-term - consolidation range; long-term - decline; near-term neutral
Resource Currencies: Short-term - rise; Mid- to long-term - rise; bottoming; waiting for BOX UP
EUR/USD: Short-term - weak downtrend; Mid- to long-term - down; neutral with a weak downside bias; possible change date in April? April 10–15
Weekly Report 1: 2017-02-20 – Winter Plum, Umbrella
Since last week, market movement has been like a wintry plum blossoming—uncertainty rising
With fundamentals and technicals diverging,
Fundamental voices are pessimistic
Technicals show clean pullbacks that could become opportunities to add-on
If you map your own scenarios, be careful not to be swayed by the opposite scenario
Hold onto a strong conviction, as if keeping an umbrella handy to shield yourself
This week too, the market may be waiting under an umbrella for brighter skies
Spring’s arrival is very near; from Tuesday I expect the market to begin moving in earnest
As the moves lean toward month-end, and positions are being tidied, I expect a compass rose from the market to reveal future developments
There are reporters misled by fake news, but please ignore them
If someone says American politics are in turmoil and governance is failing, that is fake news
In traditional power-transition contexts, that is normal
This is a market for somewhat advanced traders
From the main scenario, adjust and decide where to enter. Stay calm
This year's market is expected to show higher volatility than last year
So even if you miss out, stay calm and proceed decisively
Looking at specifics,
Oil remains a focus. Will it break? It’s expected to drive market moves
Gold is in an adjustment phase while waiting for the next development
Commodity currencies are progressing well; in the near term, awaiting consolidation to lead the commodity markets
USD/JPY has recently shown a strengthening yen trend amid North Korea concerns. As long as the U.S. sustains healthy growth,
the baseline is a yen-down trend. After bottoming, it should rise; cross-yen pairs behave similarly
EUR/USD and other dollar pairs hold a neutral stance with a weak downside bias. Watch 1.082 and 1.148 as counter lines for EUR/USD. If the dollar starts pricing in rate hikes, a dollar surge could occur rapidly
Bitcoin seems to show strength as it tests higher,
Given Bitcoin's and Gold's dynamics, I would choose Gold as an investment
There are reports that Japanese money may flow in, but there is no solid basis
Therefore, pay attention to the moves from the recent highs reached
Dow remains solid and continues to lead the market
TLT stays in a range; I am waiting for momentum. I am treating the market as neutral
I am drafting the March monthly report; there are many events in mid-month
I expect these moves to be priced in this week
There is a possibility of a rate hike by the FOMC on the 15th, which could lead to a strong move
Spring has begun in Japan; until the market truly moves, enjoy the coming of real spring
