Bonds & Interest Rates

Is The Low in Interest Rates in Place?

Posted by Jack Crooks - Black Swan Capital

on Monday, 17 December 2012 08:51


“One of the elementary rules of foreign policy is when you are in a hole, stop digging. But judging by their recent behavior, Beijing’s foreign policy mandarins and national security establishment are clearly in violation of this rule.”- The Bullies of Beijing: China’s Image Problem, The Diplomat 

Commentary & Analysis

Italian 10-yr benchmark yield at 4.56%; is the bottom in place?

European periphery country bond yields have plunged, after peaking in late November 2011. The catalyst seems two-fold: 1) the success of the European Central Bank’s (ECB) long-term refinancing operations (LTRO), which force-fed money into European banks to better match ongoing liabilities, and 2) the edict by the ECB that it would do all to save the euro and that includes “unlimited” bond buying if necessary.

Screen Shot 2012-12-17 at 7.41.46 AM

Italian 10-year yields peaked at around 7.3% back in November 2011 and now sit comfortably at 4.56% today, after hitting a low of 4.4% on December 4th . December 4th was when Italy’s Economy Minister Vittorio Grilli said Italy was on track to hit its deficit targets for 2013 and 2014, Reuters reported. On Sunday, Italy’s central bank Governor, Ignazio Visco, said the country doesn’t need the ECB to handle market tensions now that market access has been restored.

Screen Shot 2012-12-17 at 7.43.03 AM

In short, these are quite optimistic statements from Italy’s economics team given the Eurozone recession is still in full swing and likely deepening (S&P warned Italy’s rating could be cut if the recession continues). Plus, there is potential for a leadership crisis to rear its ugly head in Italy now that Mr. Monti has stepped down, and Mr. Berlusconi, in some form or fashion, has stepped up.

A whole lot of money has been made by those gutsy enough (and deep-pocket enough) to have bought Italian bonds early this year and held on tight for a wild ride. The question we always ask: Is everyone that wants to be in this trade already positioned or are there good reasons why it makes sense for more money to flow into Italian bonds?

Technically, there seems a little bit for both sides to support their respective fundamental view (there usually always is):

10-year Benchmark Italian Yield Daily: 1) An A-B-C correction is almost complete; or 2) a classic head and shoulders setup that suggest a test of those old lows at 3.6%?

Screen Shot 2012-12-17 at 7.49.02 AM

Traders will likely be focusing on the Dec. 4th, 4.4% low. They rarely make this stuff easy so stay tuned.

Black Swan Forex Service:

We would be happy to provide samples of our forex trading service upon request. And if you have further interest, you are welcome to a free trial of the service. It is not a service for the novice, but if you are a serious trader looking for ideas, or another view to bounce against your own, I believe you will enjoy Currency Currents Professional.

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Monthly global macro analysis and longer term trading ideas using ETFs. We are still seeking subscribers who prefer a dose of crowd skepticism delivered with their analysis. At only $99 per year this thing is a real bargain. If you would like to see a sample, please let us know.

Jack Crooks
Black Swan www.blackswantrading.com info@blackswantrading.com


Black Swan Capital’s Currency Currents is strictly an informational publication and does not provide personalized or individualized investment or trading advice. Commodity futures and forex trading involves substantial risk of loss and may not be suitable for you. The money you allocate to futures or forex trading should be money that you can afford to lose. Please carefully read Black Swan’s full disclaimer, which is available at http://www.blackswantrading.com/disclaimer 



Gold & Precious Metals

This White Metal Is Getting Red-Hot!

Posted by Sean Brodrick: Uncommon Wisdom

on Monday, 17 December 2012 08:34

This 'Rodney Dangerfield of Metals' Deserves Your Respect

Gold and silver may be the metals of kings. But if you're looking for potentially royal returns on bullion bars and coins, you may want to consider adding a "noble" (that is, durable) metal to your collection: palladium.

Investors increasingly seeking refuge in bullion as personal stores of wealth have pushed gold and silver prices ever-higher. Meanwhile, platinum is 15 times more-rare than gold, and palladium is even more rare than platinum, at 30 times rarer than the yellow metal. And yet, palladium costs less than half of gold's current price!

I like to think of palladium as the Rodney Dangerfield of metals, because it doesn't get the respect it deserves. This presents us with a terrific opportunity to buy while no one else is looking.

If you're looking to add some diversity to your precious-metals portfolio, palladium looks like an investment that's as durable as the metal itself. Here's why ...

This White Metal Is Getting Red-Hot!

Palladium demand is rising, as more of it is purchased for use in catalytic converters, its No. 1 use.

At the same time, supplies from mines in Russia and South Africa remain tight.

According to experts at Johnson Matthey, the gap between supply and demand for palladium this year is near 915,000 troy ounces, as production dropped 6 percent. That means palladium stockpiles are down ... and dropping.

Next year, a growing shortfall in supply could send prices another 20 percent higher, according to analysts.

And while most of palladium demand currently comes from the auto industry, there is also plenty of demand from the investment community.

Nearly 1.9 million ounces of palladium are held by ETFs, the COMEX metals market, banks and other funds that make their holdings public.

Considering that only 6.6 million ounces of palladium are produced by mines every year, that's quite a bit of investor interest.

Johnson Matthey expects prices to range between $550 and $750 per troy ounce in the first part of 2013. One troy ounce currently costs in the high-$600 range.

Screen Shot 2012-12-17 at 7.20.58 AMOne reason for palladium's investment appeal is steady demand among jewelry buyers, where the research group anticipates sales will be "relatively strong" at 45,000 ounces in North America, and 450,000 ounces worldwide.

Why Palladium Shines as the Metal to Buy 'Now'

Many in the jewelry industry call palladium the "Now Metal," as consumers are increasingly turning to it for a unique, high-quality piece of jewelry, but without the hefty price tag.

Unlike gold, palladium is naturally silver-hued without the need for alloys such as those found in white gold. And unlike silver, palladium does not tarnish or lose its shine.

The Best Way to Get Invested

How do you determine a fair price to pay for this white, and white-hot, metal? The ETFS Physical Palladium Shares Fund (PALL) is a great starting place, as it represents one-tenth of palladium's per-ounce spot price.


Updated chart)

Looking at a weekly chart, you can see that the physical palladium fund PALL seems poised to rise to overhead resistance. If it can push through that resistance, it could head up to a target of $92. And on the bottom of the chart, you can see that palladium has outperformed gold recently.

But with palladium itself trading at a substantial discount to gold, about $1,000 less per troy ounce, you may want to consider buying the metal outright. Here's how ...

Consider Buying Palladium Bullion in Bars, Ingots or Coins

One place to buy palladium bullion is at your local gold dealer. Just check the price of palladium at an online website like Kitco.com to make sure you aren't being charged too high a premium.

Buying from a dealer is an extra level of security, because your dealer should check on the authenticity of the bullion before passing it along to you.

There are plenty of reputable online dealers. But one thing I DO NOT recommend you do is buy palladium or any precious metal on eBay. It's too easy to get ripped off when the chain of custody of the metal you want to buy is in question.

I think diversification is key when investing in palladium. The metal's future is shaping up to be a very bright one. And for those who own it in one of its many physical forms, it could serve as an attractive store of wealth for generations to come.

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Timing & trends

The Bottom Line - “The trend is your friend”

Posted by Don Valiloux - Timing the Market

on Monday, 17 December 2012 02:10

Most equity markets in the world and major sectors currently are in intermediate uptrends. As the saying goes, “The trend is your friend”. Preferred strategy is to accumulate favoured sectors on weakness for an intermediate rally that is likely to last at least until Inauguration Day in the third week in January.


The Fiscal Cliff remains the top issue influencing equity markets. Most likely scenario is a resolution before the end of the year, but in two steps. The first step will handle issues with a deadline at the end of the year (e.g. tax rates on dividends and capital gains). The second step will focus on the “Grand Plan” that will include Tax Reform on the personal and corporate level as well as entitlements and the debt ceiling. Equity markets will respond favourably when the first step is announced (but not with a big upside move) because short term uncertainties are removed. The second step is by far the most important and is likely to create the greatest volatility in equity markets. Will Obama moved toward the middle of the political spectrum during the second step? If he does, confidence in the corporate community will be at least partially restored and large cash position will start to be employed in ways that will help the U.S. economy. On the other hand, if Obama maintains his current antagonistic attitude against capital enterprise, the large cash positions will be employed in other ways (e.g. share buy backs, employment of capital outside of the U.S.). Unfortunately, some corporations already are starting to choose to employ their large cash positions by issuing special dividends and by announcing share buy backs. The completion of the second step will determine the direction for equity markets in 2013.

Historically, the strongest three week period for North American equity markets is from December 15th to January 7th. According to Thackray’s 2012 Investor’s Guide, average gain during the period since 1950 was 2.0%. The gain by the NASDAQ Composite Index was better. Average gain per period since 1971 was 3.0%. As the book says, “Santa arrives early and leaves late”. One of the reasons for the Santa Claus rally is the end of tax loss selling pressures (particularly in the gold equity sector this year). Other reasons include upbeat reports released by the investment community predicting encouraging prospects for the next year, lower than average institutional volume and a buoyant mood by individual investors during the Christmas holiday period. This year, the first step toward resolution of the Fiscal Cliff provides an extra “kicker”.

Sectors with positive seasonality at this time of year continue to outperform the S&P 500 Index including Agriculture, forest product equities, lumber, industrials, semiconductors, biotech, Europe, base metals, silver equities, platinum and copper.


The TSX Composite Index added 137.05 points (1.13%) last week. Intermediate trend changed from down to up on a break above 12,252.27. The Index remained above its 20 and 200 day moving averages and moved above its 50 day moving average. Short term momentum indicators are overbought, but have yet to show signs of peaking. Strength relative to the S&P 500 Index has changed from negative to at least neutral.

clip image006 thumb6


The S&P 500 Index fell 4.49 points (0.32%) last week. Intermediate trend changed from down to neutral on a move above 1,434.27. Next resistance is at 1,470.96. Support is at 1,343.35. The Index remains above its 20, 50 and 200 day moving averages. Short term momentum indicators are overbought and showing signs of rolling over.

clip image001 thumb8

The Dow Jones Industrial Average slipped 20.12 points (0.15%) last week. Intermediate trend changed from down to neutral when the average moved above 13,290.75. Next resistance is at 13,661.87. Support is at 12,471.49. The Average remains above its 20, 50 and 200 day moving averages. Short term momentum indicators are overbought and showing early signs of rolling over. Strength relative to the S&P 500 Index is at least neutral and showing early signs of outperformance.

clip image009 thumb3

The U.S. Dollar virtually collapsed last week after Congress and the President failed to negotiate a deal on the Fiscal Cliff and after the Federal Reserve unofficially confirmed a Quantitative Easing Infinity program. The Index plunged 90.84 (1.04%). The Index remains below its 200 day moving average and fell below its 20 and 50 day moving averages. Short term momentum indicators are trending down. The Index completes a massive head and shoulders pattern on a break below 78.60.

clip image020 thumb1-1

Crude Oil added $0.73 per barrel (0.85%) last week. Intermediate trend is neutral. Support is at $84.05 and resistance is at $90.33. Response to the OPEC meeting was negligible. Crude remains below its 20, 50 and 200 day moving averages. Short term momentum indicators are trending down. Stochastics already are oversold. Strength relative to the S&P 500 Index remains negative.

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Gold slipped $7.70 per ounce (0.45%) last week despite weakness in the U.S. Dollar. Intermediate trend is neutral. Support is at $1,672.50 and resistance is at 1,755.00. Gold remains below its 20 and 50 day moving averages and above its 200 day moving average. Short term momentum indicators are mixed. Strength relative to the S&P 500 Index remains neutral.

clip image030 thumb

The TSX Global Metals and Mining Index jumped 42.73 points (4.53%) last week. Intermediate trend is neutral. The Index remains above its 20, 50 and 200 day moving averages. Short term momentum indicators are overbought, but have yet to show signs of peaking. Strength relative to the S&P 500 Index remains positive. ‘Tis the season!

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.....much more (46 charts and analysis) HERE



Stocks & Equities

Looking for Key Turn Dates - Dec 14th

Posted by Victor Adair for Money Talks

on Saturday, 15 December 2012 11:37

In my short term trading accounts I try to benefit from price changes in various markets…trading what the markets are doing…not than what I think they should be doing. I try to align the time frame of my trading with the time frame of my analysis. I read a lot of research and watch a lot of markets. I try to gauge Market Psychology because I see it having a powerful impact on markets...either extending or reversing price trends. I use the term Key Turn Dates (KTD) to identify points in time when changes in Market Psychology, measured across a number of asset classes, causes a significant change in market price trends.

Sept 14 was a KTD and “risk assets” fell from that point…became “oversold” by Nov 16 and bounced…I’ve thought that the bounce was only a correction to the downtrend from Sept 14…I’ve been waiting for a confirmation that the bounce was over before re-shorting some of the “risk assets.”

It’s interesting to notice that “risk assets” may all turn (more or less) on the same KTD but some “assets” move substantially more than others…this could reflect “fundamentals” specific to one market and not to others…it could be a function of “riskier risk assets” having a higher beta than “less risky risk assets”…or other factors…this variance definitely influences my choice of which market to trade when I want to take a position.  

In most of the markets I watch the US Dollar is the common denominator…to get a different view (and perhaps a better understanding) of markets I will frequently construct charts where I take the US Dollar out of the equation…for instance, looking at the gold/silver ratio, or the EuroYen chart.   


The S+P 500 chart really has my attention…I’ve been waiting for the rally off the Nov 16 lows to run out of steam…that may be happening this week…but no real confirmation yet…


The German DAX has had one of the biggest rallies of any of the “risk assets” off the Nov 16 lows…easily taking out the Sept 14 KTD…this has happened in conjunction with a strong rally in the Euro currency as Market Psychology has become less negative on “Europe.”


Silver has been one of the weakest risk assets since the Nov 16 date…silver looks at risk of a breakdown.


The Euro had a Key Weekly Reversal higher this week…a powerful chart pattern.  In my comments on the Euro last week I noted that the currency markets get thin and weird this time of the year…that as implausible as it may seem given all  the “troubles” in Europe…if the Euro rallies and takes out the triple top going back to the Sept 14 highs then it could run higher into year-end…here we go?


The Japanese Yen has fallen steadily from late September…some analysts have been predicting for the last couple of years that the Yen “had” to fall…it’s been the absolute weakest of the major “assets” since the Sept 14 KTD…huge short positions have been built…the Dec 16 election is expected to give Abe a clear mandate and he has been forceful in calling for the BOJ to ramp –up money printing to stimulate at least 2% inflation…will this be a classic “sell the rumor, buy the fact” story? Will Abe have to tone down his demands once in office to keep Japanese bond yields from rising?


The New Zealand Dollar has been one of the strongest “risk assets” since the Nov 16 lows…like the DAX it has easily taken out the Sept 14 KTD. It has “blown away” its sister COMDOLS the CAD and the AUD. Is this a case of “hot money” pushing up prices as it rushes into a small market…or has something fundamental changed in NZ relative to other risk assets? I’d go with the former…but beware thin year-end conditions in FX markets…note over the years how significant “V” shaped turns in currencies happen around year-end. This currency is definitely on my “watch list”…I may look to short it against the CAD or the AUD rather than the USD…once it gives me a sign that it has stopped rising…


The Japanese Yen against the New Zealand Dollar: this is the chart of the weakest currency (JPY) against the strongest (NZD) since early September…a move of about 12.5% or about 50% annualized. If Market Psychology were to turn negative across asset classes this spread could reverse big time.


The US Long Bond made a low on the Sept 14 KTD as risk assets were making highs…and made a high on Nov 16 just as risk assets were making lows…the US bond market has been the opposite side of the “risk on / risk off” teeter-totter.


Apple:  What a chart! Fortunes made and fortunes lost. Note that the All Time High for AAPL was made the week of the Sept 14 KTD…Market Psychology shows up all over the market…


Screen Shot 2012-12-15 at 10.37.46 AM

Victor Adair is a Senior Vice President and Derivatives Portfolio Manager at PI Financial Corp. He began trading over 40 years ago and has held a number of senior executive positions during his career...to go to his website go HERE (http://www.victoradair.com)


Timing & trends

Santa Claus Rally Then Hang On To Your Hat

Posted by Mark Leibovit

on Saturday, 15 December 2012 09:43

bull-bearMark Leibovit's perspective on the Stock Market is that we are in a trading environment rather than an investment environment. Mark's long term work right now tells him that we could be trading between 8,000 and 14,000 on the Dow for as much as another 5 years. In his opinion an environment similar to that we've seen from 2000 to 2012. In short he thinks it is just going to be big big swings back and forh between those two data points and the key to success is going to be catching the mid-term swings back and forth.

Mark thinks that a lot of what we are seeing in the indexes right now is a manipulation by the "Big Boy" money managers trying to hold the market up until they get paid at the end of each quarter and at the end of the year.

One factor in his calculations is that despite the bad news of fiscal cliff negotiations, and Western Governments soaked in debt, the markets are still holding up. A factor which persuades Mark that the market will still be moving a little bit higher through to the end of the year. After that he then expects a more bearish market from the beginning of 2013 through to the end of the first quarter 2013.

Mark looks at history and what he sees is that when Herbert Hoover and Franklin Roosevelt raised taxes back in the 1930's during the worst of all possible times, the way Obama plans to raise them in 2013, the net result was a  significant decline in employment, tax revenue and the stock market. So he sees these things as something that is definitely coming in 2013, but it just doesn't mean there can't be a Santa Claus rally beforehand.

The Bottom Line as Mark sees it is that with positive seasonality, money managers wanting to get paid, and the tendency for a Santa Claus rally will keep the markets up until the end of the year. After that rally we will then have to brace ourselves for what could be a big slump into mid-2013. That slump likely followed by a bottoming and another rally into year end 2013.

Again, Mark is not taking an investment point of view. He simply sees big tradable swings back and forth, or big money losing swings if you happen to get on the wrong side of them. In his opinion the key to success will be preservation of capital in this big swing kind of an environment he expects to take place for the next 4 or 5 years while all the negatives are getting washed out. All that has to occur before we will find ourselves in an investment market again, a buy and hold market if you will.


Ed Note: In case you missed our latest special bonus, ticket buyers will receive an exclusive opportunity to read the mid term and long term investment views of Mark Leibovit in his new newsletter, Wall Street Raw.
This will not be available to the public for another four months but World Outlook ticket buyers will immediately receive a weekly copy that Mark is writing exclusively for us.
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The Dollar-Commodities See-Saw!

If you are interested in commodities, which has been a hated and neglected asset class since 2008, you will like the following chart I shared...

- posted by Jack Crooks

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