Markets Downbeat — Big Time
The US market ended deeply in the red yesterday with the major indices losing well over 2 full percentage points. These are serious losses which are feeding off of two months of serious losses. Asia has followed suit with losses as well, though of a lower (under 1 full percentage point) magnitude. Surprisingly Europe has opened its wallet bringing in buyers and raising the values of all of the Eurozone equity indices across the board. This is an unusual phenomenon as the US is the most likely to step in and stop a fall in the markets by buying. Asia is a distant second in this regard with Europe rarely taking up the financial cudgel to buy into a fall.
The German stock index opened up this morning at 12120 and looks like it will continue moving up. We are looking for levels of 12140 to 121161 to take profits and exit the position. On the flip side between 12077 and 12054 is where we will take defensive positions should the current trend reverse. And let’s be clear: These are VERY turbulent markets where things can and do reverse easily and often. We are well into a worldwide stock market slide of serious proportions. These aren’t markets for the faint of heart. It however you can operate reasonably well in an environment of uncertainty and have a strong appetite for risk, then you are well suited to take profits out of this turbulence.
Coffee continues its secular decline that has been in train for exactly 2 years. From 174.50 to its current price 116.35, coffee has lost 32.06% of its value. We are at a fairly significant support level here and this is the third time in 2 years that the price has fallen to these levels. Significantly it did not penetrate them and fall lower. However in these 2 years we have not seen the volumes that are currently trading in this market. Average volume in this data set (i.e. time period) has increased by 27.49% lending significant “sentiment” or “momentum” to the current declines. We see prices falling further to the 95.50 zone before rebounding for any significant length of time.
The pair viewed either weekly or monthly on the chart looks like Mont Blanc, or Kilimanjaro: A very steep upward slope. In the last 18 hours of trading the pair has risen 1.35%. Low level compared the equity markets but enormous compared to the currency markets. This trend is hardly news to anyone watching as it has been in train fairly uninterrupted since 2005. Not breaking news. Nonetheless a terrific trade because it is reliable and persistent. The reasons are fairly obvious too. Erdogan has ensconced himself as Sultan for life. He has declared war on the Kurdish people, run the economy down, discouraged foreign investment and alienated a Europe he no longer pretends he wants to be part of. In short the makings of an excellent trade.