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24th Semptember

Week Recap

This week, financial markets have been led in their upward trend by the voices coming from Central Banks. On Tuesday, two ECB officials, Coeuré and Noyer, declared that the European Central Bank is purchasing in May and June larger amount of assets, in order to cope with the issue of scarce liquidity in the bond markets between July and August. This news pumped up all major European Markets as leading the dollar into a new surge, reaching EUR/USD 1.1009. During this week, a various number of meetings occurred between Greece and European officials. In Monday, Athens officials assured the public that a potential deal with IMF and creditors was likely to be reached. From Wednesday, rumors spread the news that Greece will not be capable of paying back the $305m tranche to the IMF, which in later days appears to be confirmed. I agree with the voices that see the Exit of Greece, the so-called Grexit, as a potential Lehman Brothers alike financial disaster. Not considering the political disaster the crash of the European Union would mean this event would shake up all assets classes very badly. The anomalies in the German Bond Market in the past few weeks showed how fragile the situation is by now. At this level of prices, especially in peripheral Europe, Grexit (in my opinion) would cost a 30% crash in the markets, and unquantifiable difficulties in the real economy. In Markets, sell-offs are more brutal and violent then upward movements. A CRISIS CAN BE ANY MOMENT AT YOUR BACK. Plan Carefully. On the Macro side, the ZEW Index, which measures the Economic conditions of Germany, based on economists’ consensus, was below expectations: Economic Sentiment at 41.9, EXP 49.0. Nevertheless, German DAX was able to report a weekly 3.21% settling at 11815. FTSEMIB closed at 23782, +1.31%, IBEX 11554, +2.1%, FTSE100 7013, +0.76%, CAC40 5143, + 2.99%, Lisbon PSI20 6102, -0.3%.

On the US market operators’ sentiment was mainly driven by earnings’ results coming from Retail Giants, and macro data. Wal-Mart Inc., failed in meeting expectations, quarterly EPS was 1.03, EXP 1,04. Home Depot beat the estimates with q. EPS 1.16, EXP 1,15. Target on Wednesday beat the estimates with q. EPS at 1.1, EXP 1.03. Lowe’s missed analysts’ expectations, reporting q. EPS at 0.7, EXP 0.74. Retail Earnings are very important in America because they mirror the consumer’s spending attitudes. Retail Sales on a macro level fell. Wal-Mart showed lower sales growth rate than expected. Consumers do not seem aligned in giving up money for spending. On the macro side, from the housing market, Housing Starts MoM increased 20.2% and Building permits MoM 10.1%. Real Estate data are a very important indicator of the soundness of the Economic recovery in US. Increased starts mean more contracts signed and more inflows of liquidity, making the market more flexible to meet demand and to expand one of the invoices of Consumer Spending. The FED published the minutes of the FOMC on Wednesday, in which FED officials observed that a rise in interest rates may be expected for the next semester. No major macro indicator is expected to be published next week. Volatility in the market will be triggered by developments of the situation in Greece. DJI closed at 18351, reporting a weekly -0.22%, NASDAQ 5085, +0.81%, S&P500 2126, +0.16%.

On the other side of the financial world, the Nikkei topped multi-year high reaching 20264 and a weekly performance of +2.69%. Wednesday, GDP data have been released. Abe’s Japan topped estimates: 0.6% increase on a Quarterly basis, EXP +0.4%, and +2.4% on a Yearly basis. This long rally lead the Index to levels never reached after 2000. The Hang Seng closed at 27992, with a weekly +0.39%. KOSPI closed at 2146, with a weekly +1.89%.

CAC40DAX30DJIIBEXNasdaqNikkeiS&P 500


Day Recap 1

Today, Monday 18th May 2015
European Equities experienced volatility in the first part of the day. The Italian FTSEMIB was the worst performer mainly due to the issuance of dividends. Around 50 companies, from various market segments, Large, Mid, Small Cap, issued dividends, which accounted for €7bn, pushing down the Index to -1,5% in the first hours of trading. The uncertainty about the outcome of the talks between Athens and European officials, who took place today, fueled a selloff around 12-13 that led all Indexes to their Intraday Low. FTSEMIB reached the short-term resistance point at 23000 before settling at close at 23198, -1.17%. German, French and English Equities remounted after testing intraday minimums, closing positive: DAX +1.29%, FTSE100 +0.12%, CAC40 +0.37%, EUROSTOXX50 +0.45%, IBEX +0,24%. I attribute the positive turnaround to the fact that markets have bet on a positive outcome of the talks between Greece and Europe. Today, Pierre Moscovici, the European Economic and Monetary Affairs Commissioner, said that a common understanding on the reforms to be backed to the new IMF rescue plan was in the route to be reached. The Athens Stock Exchange General closed +1.62%. If a deal will be reached between Greece and creditors, there is enough space for a further upward in European Markets. Macro data are improving in Italy, and France. Some Italian blue chips are still undervalued in my opinion, and there is also the opportunity to profit from the dividends issuance, by betting on the sounder companies who suffered the most price decrease. Personally, I took a small position on SNAM, an Italian utility company, who issued a dividend of €0.25 per share, when it was at 4.518, -5%.
On the Asian side, Nikkei 225 settled at 19890, at +0.8%,  KOSPI (Korea) 2113 +0.34%,  Hang Seng 27591 -0.59%. Japan stocks, after BoJ’s Governor Hikuroda reinforced its QE, have rallied very steeply. As of today, I count a yearly +42% of the Nikkei. Unfortunately, Japan economy is known for being unpredictable in terms of results, and Japan Stock Exchange is among the most volatile in the world. If QE will not succeed, turbulence will rise. I would STAY AWAY from trading this underlying, unless other clear signals manifest.
American Equities are in the wake of the earnings season. DJI closed at all-time high 18298 +0.14%, breaking the resistance point positioned at 18289, but volumes were less consistent then yesterday. S&P closed at high 2129 +0.3%, NASDAQ at 5078 +0.6%. Weeks ago, the NASDAQ broke the historical resistance point at 5000, Scylla and Cariddi of the dotcom bubble of 2000. Techs and Biotechs are boosting this bullish trend. Earnings and macroeconomic data will be the main focus of market makers. More specifically, some of the retail giants will publish their results this week. Wal-Mart Stores will open its books tomorrow morning. Retail sector is under particular focus considering the weak results in Retail Sales. Americans, despite improved economic conditions are not spending as much as expected. A turnaround in American Habits??? I do not think so. I would be cautious and see further movements before entering in long position. It is probable a downturn happening soon, for the most brave shorting the DJI could be a good move.
However, I WILL NOT MOVE A FINGER BY NOW!! CBOE VIX Index rise 2.83% at 12.73. The volatility, especially in Europe has been mounting up, with investors betting on riskier assets, as shown by the selloff on German Bunds. These markets change direction very quickly, BE CAREFUL.

$tay tuned!!!

Trade Ideas

A new week is coming, with new trades ahead.

We can see that American Indexes have set their all time high, S&P 500 is at 2122, Nasdaq 5048, DJI at 18272, very close to the resistance at 18288 reached on the 2nd March 2015. American Indexes have been going through a lateral consolidation since many days by now, and finding a trend in the  mid-short term is very hard. I would recommend to stay in the range  of prices, selling at maximums, and waiting for selloffs to  enter in new long positions. All the fluctuations in merican equities will be driven by news from the real economy.

DAX, who is among the stock indexes who rallied the most after the announce of the QE on  22nd January 2015, reporting from December 2014 till the peak at 12374 on April 10th 2015, a 29% increase, found a support point in area 11250, a -9% from the peak, before remounting up till 11700 and settling at 11417 on friday. I personally took a long position on the DAX through a structured product called turbo certificate when the underlying was at 11270, made some trade and at the end I reported, in 4 days, a total gain of 60% of the position by selling the certificate at DAX 11620 (the certificate  price went up from €3.85 to €6.15). In my opinon, in the very short term I see a potential for downwards. After the below expectation GDP results (I have to say that even if below expectations, a yearly growth  of 1.3% is still remarkable in this particular moment in Europe, where Italy reported a yearly 0.0% growth), market makers and other  players have started to sell positions on German Equities. The index plummeted also due to the turbulence on the bond Market, where 30Y Bund yield rocketed  up to +27%, from 1.1% to 1.4%. Bill Gross, Janus Capital, said in previous days that he started  to accumulate short positions on German Government bonds. Now, yields have started to lower again. Factors which will influence the fluctuations of the DAX will stem from the situation in Greece, which is now running out of  liquidity. In the case of Grexit, i would run away from the markets. The exit of Greece  from the Euro would be an horrific nightmare in all markets, Fixed Income, Currency, Equities… This event have an approximately 30% possibility (my personal estimation) of happening. Any uncertainty over the  soundness of Greece cash reserve will create turbulence. 11000 is a good point for taking a long position on DAX. I would recommend taking a long position in that area. Macroeconomic data from US and China will also trigger some volatility. To sum up with, in the Long run German equities are BULLISH. Riding volatility, and finding the right entry point for a LONG position in DAX instruments ( I use certificates and warrants because I consider securitized derivatives more safe for mantaining adequate amount of capital and avoiding margin’s vicious circles) may lead to profit. $$

Po$t $criptum

I attached two files showing the chart of the DAX and a personal technical analysis on the Dow Jones. Both charts have been created using R. If you like them I will post others.

$tay Tuned!!!



Week Recap

This week has been moved by important macro-economic data.

Europe, 13th May:

Italy reported a better than expected GDP growth, 0.3% quarterly versus 0.2% exp., ending de facto the recession period. I expected improvements in the Italian economy, considering the increased industrial orders. FTSEMIB, the Italian blue chips Index, after the news reached the maximum intraday of 23401, before settling at 23211, with a 0.46% daily increase.

France reported better than expected GDP growth, 0.6% quarterly versus 0.4% exp. CAC40 went up to its max intraday at 5046, before closing at 4962 with a -0.26%.

Germany, considered as the engine of Eurozone growth, reported results below expectations, quarterly 0.3% versus 0,5 exp. DAX settled down 1.05% at 11351.

As a whole the EUROZONE reported a quarterly growth of 0.4%, and a yearly 1.0%.


US economy seemed to show slowdown the weeks before, reporting a quarterly 0.2% growth while economists expected 1%.  Retail Sales were below expectations, at 0.0% versus 0.2%. In America this indicator is very important due to heavy dependance of US’ growth on retail spending and consumption. Thursday, a good data from the job market woke up the markets, Initial Jobless claims were at 264k versus 275k expected. The news fueled a bullish upward in every major market. DJI rallied up to 1.06%, S&P 500 1.08%, Nasdaq closed at +1.39%.

Weekly performance are:

FTSEMIB, +0.69%, CAC40 -1.90%, DAX -2.24%, FTSE100 -0.98%, IBEX -1.12%, DJI +0.45%, S&P500 +0.31%, Nasdaq +0.89%, NIKKEI +0.57%

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