Weekly Update: November 17, 2014

Investors View U.S. Market as Safe Zone

By just focusing on economic data that pertain to the United States, one would not only come to the conclusion that most sectors of the economy are progressing in the right direction -- but, given the recent strength of those data, that the rest of the world must be seeing at least modest improvement as well. However, fresh signs of slowing in Japan caught global markets by surprise, demonstrating that not all QE is created equal.

Last night, Japan's Nikkei stock index posted its biggest one-day drop since August after Q3 GDP data showed that country slipping into recession, with a decline of 1.6%. This comes on the heels of that market hitting a seven-year high following the Bank of Japan's announcement of stimulus measures a week ago. This latest report all but eliminates the possibility of a further sales tax that was slated to go into effect in Japan to help pay for QE. It also shows that current fiscal policy isn't working and it requires massive reforms to Japan's labor laws and public pension structure.


Bulls Feed On Extreme Stimulus from Japan

Weekly Update: November 3, 2014

With little to no notice, Japan's central bank, in conjunction with its main government pension fund, announced before the market opened on Friday that they will jointly pump trillions more yen into the country's sluggish economy to jump-start a fresh growth phase in a highly controversial move.

Facing fresh evidence of deflationary data, the fresh injection of stimulus comes with the full endorsement of Japanese Prime Minister Shinzo Abe, moving Japan into a new era of extreme stimulus that goes beyond prior accepted central-bank fiscal models. The move comes just at a time when markets were beginning to worry about the prospect of the U.S. Federal Reserve tightening its own policy.


Another Big Week Ahead for Market Bulls

Weekly Update: October 27, 2014

Coming off the best week in the past two years, in which the S&P 500 surged 4.1%, market bulls are in a tough spot to not just hold onto the heady gains, but to find justification to substantiate and support a move for the S&P to clear its September high of 2,020. The week ahead is chock full of potential market-moving headlines that will continue to keep volatility elevated.

Just for openers, West Texas Intermediate crude traded for the second time in as many weeks below $80 per barrel this morning. According to a Goldman Sachs (GS) report sent to clients over the weekend, unless 800,000 barrels per day are taken off the market, crude prices may well test $75 without geopolitical disruption, which always adds a premium to oil prices.


Visible Signs of Proactive Measures

Weekly Update: October 20, 2014

Investors have just come off the most volatile week in three years that included wild swings in the major averages, a steep correction in the oil sector, high-level anxiety of Europe sliding back into a recession, reports of ISIS about to invade Baghdad and the threat of the Ebola virus striking fear across global borders.

The week was capped with the Dow posting its second-largest gain of the year; buyers stepped in just as the S&P 500 came within a whisker of registering a 10% decline from the Sept. 18 peak of the 2,019 level, which marked the beginning of the current decline. By definition, the market has endured a four-week correction that, if contained to the lows of last week, will fall into the category of 'garden variety.'


Earnings Season is the Silver Lining

Weekly Update: October 6, 2014

The old saying of 'every cloud has a silver lining' comes to mind when describing the current investing landscape. Following a dramatic three weeks of market volatility, some of the white-knuckle sentiment associated with events in Hong Kong, Ukraine, Syria and Europe is abating. That either means there's improvement or the negative intensity is simply abating. Regardless, it's a welcome relief and couldn't come at a better time.

Last Friday's strong rally didn't erase the losses for the week, but did set the table for U.S. equity markets to make a follow-up move higher if the weekend came and went without some major geopolitical event unfurling at the seams. Conversely, the pro-democratic protests in Hong Kong subsided as students removed barricades so civil service employees could go to work amidst dwindling crowds that suggest the movement has been put on hold.


Volatility and the Rise of the Machines

Weekly Update: September 29, 2014

The month of September is living up to its long, well-documented reputation of taking investors for a roller-coaster ride. This was accentuated last week by triple-digit swings for the Dow every day of the week and then again today as ripple effects from several fluid situations trigger computer-generated buy and sell programs, with the selling more intense.

Hedge-fund chatter that the Fed is targeting a 3%-4% Fed Funds rate over the next couple of years made the rounds over the weekend, but there was no credible response by the Fed or any other newsworthy sources to shed any light on what can only be considered short-seller's rhetoric.