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Stoxx50

Longer ViewTrading is not gambling. Gotta have long and short views at the same time. L'histoire se repete. From this principle, it's always good to think that crude and gold used to be cheap. Even with inflation/GDP-growth adjustments, market values sometime can still make no sense. However, Barrick Gold once made a press announcement that production price for gold is around 940-980 USD in September 2015 just when trading around 1080 level, then around the same time Soros long on Barrick and Deutsche raised its rating to outperform. While for oil, some economists argued that 10% drop can stimulate 0.1-0.5% economic growth. But apparently, oil price gotten too low will just increase default probability of oil companies with large contribution to the economy (e.g. employment) and raising deflation risk. Sudden bullish moves on both gold (as classic volatility indicator before the VIX) and crude can remind of pre-2008 crisis. But what if this is just plain market mechanism, a simple under-valued adjustment? Too bullish is not good, but neither is too bearish. I would rather use both fundamentals and technical in my trading strategy, one for short view and the other for the long view. Anyway, have a great weekend!
FX:XAUUSD
by giorsims
The irrational marketNews: www.bloomberg.com There is a clear relationship between oil and prices. As the main source of energy in production activity, an increase in oil can lead to a lower consumer prices, thus, deflation. With central banks mandates to adjust interest rates to inflation level and expectation that the rate will go up when there's inflation, correlation with oil prices suddenly became higher lately and it impacted the stock market too. As lower interest rate means that bonds with lower variance will gets higher prices and investors will switch their investment from stock to fixed income market. Currently, we are in earning seasons. But with lower price expectation, companies now faced two-sided pressures: lowering finished good prices and the inelastic production costs, especially from employee salary. Being squeezed, valuation analysts have to recheck their valuations with the latest oil development and it's very likely many stocks were overvalued As some of you noticed, IMF cut its forecast on the same day of the oil bull run last week. But the market didn't pay attention to it. It is on the edge and try to get a grip on anything they can, even the false news published that Russia and Saudi had cut a deal. Even if they had, it's not stopping production, but keeping the production capacity as it is. Market has always been irrational most of the time and that's how there's arbitrage. As front-month future price has breached it's BB-Band top-line (20 days, 4 std dev) and OVX (oil volatility index) started to increase, I would go short at this moment on market on general. I confirmed the same pattern on SPX/VIX and STOXX50/VSTOXX. And I also spotted quite the same thing for CBOE 10Y swap rate/SWVIX as well (www.cboe.com). Good luck and godspeed next week!
CShort
by giorsims