Macro Monday 52 - Vietnam – The Global Food Supply Giant Macro Monday 52
Vietnam – A Global Food Supply Giant & Diverse Manufacturer
According to a report by global wealth intelligence firm New World Wealth and investment, Vietnam is forecast to see a 125% increase in wealth over the next 10 years. This would be the largest expansion in wealth of any country in terms of GDP per capita and number of millionaires, according to the New World Wealth.
“Vietnam is positioned to see the sharpest increase in wealth growth in the world over the next decade as it cements its status as a global manufacturing hub” New World Wealth.
The GDP growth rate for Vietnam in 2024 is expected to meet the government’s target of 6.5% making it one of the fastest growing economies in terms of GDP growth, the GDP growth rate reached as high as 8% in 2022. Vietnam is also home to 100 million people with 70% of the population between the ages of 15 – 69 and 25% under the age of 15, offering some sustainability to the long-term workforce.
Vietnam’s top exports:
1. Electrical machinery and equipment: Valued at $187.1 billion (40.8% of total exports).
2. Machinery including computers: Amounting to $40.1 billion (8.7%).
3. Footwear: Contributing $33.7 billion (7.4%).
4. Knit or crochet clothing and accessories: Worth $21.5 billion (4.7%).
5. Furniture, bedding, lighting, signs, and prefabricated buildings: Totaling $21 billion (4.6%).
6. Clothing and accessories (not knit or crochet): Representing $20.1 billion (4.4%)
Footwear experienced the highest growth among these categories, increasing by 85% from 2021 to 2022. Additionally, machinery (including computers) saw a significant 66.3% advance in export sales during the same period. Nike and Adidas have established their main production bases in Vietnam. If there is one thing everyone needs, it’s a pair of shoes, a great staple for the country to specialize in.
Food Produce
In recent years, Vietnam has quietly transformed from a regional agricultural producer into a global food powerhouse. Its innovative food industry now plays a critical role in shaping the world’s food supply and that has not happened by chance. Vietnams food story is historic but has also been recently significantly leveraged through government incentives and investment. Vietnam’s impressive array of food exports includes rice, coffee, cassava, bananas, mangoes, and citrus fruits. These products not only sustain local communities but also have a substantial impact on feeding people worldwide.
If you ate rice recently or had a robusta coffee, there is an increasing probability that it came from Vietnam. Lets have a look at some of the main Vietnamese food exports that are critical to the global food supply
Rice
Vietnam will likely become the 2nd largest rice exporter in the world in the 2024/25 season, over taking Thailand’s current 2nd place export volume of 8.2 million tonnes annually. Vietnam exported approximately 7.6 million tonnes in the 2023 to 160 countries. This is expected to exceed 8.5 million tonnes in 2024/25. The Philippines remains Vietnams largest rice buyer, accounting for 45.5% of the country’s rice export turnover. It is interesting to revisit last weeks Macro Monday Country, the Philippines and their close trade ties with Vietnam. The Philippines is one of the largest producers of coconut oil. It is starting to look like South East Asia is a diverse set of critical food producers and disseminators.
India hold 1st place as the largest exporter of rice in the world, exporting 17 million tonnes annually. We must acknowledge China as the largest producer of rice in the world at 208 million tonnes, however China only exported c. 2.2 million tonnes, making China a lessor contributor to the supply of rice around the globe.
Coffee
Vietnam is also the 2nd largest coffee exporter in the world, exporting 1.5 million tons of coffee a year. It is their second most exported asset after rice. Vietnam is known as one of the world’s largest producers of the Robusta coffee bean. Remarkably, Vietnam contributes a significant 40% of the world’s overall Robusta bean production, renowned for its bitterness and suitability in well-rounded coffee blends.
Similar to the Ivory Coast, the largest producer/exporter of Cocoa in the world that we covered a few weeks ago, there is also a strong French colonial connection in Vietnam. Vietnam was colonised by the French between 1858 and 1900. This is relevant because the exploitation of natural resources for direct export was the chief purpose of most French investments post colonisation. The robusta coffee in Vietnam was introduced by the French during this period which is the only reason the region has the unique robusta coffee production and export ability. Whilst this could be perceived as having a good long term impact on Vietnams economy, there was a segment I came upon which outlined how rice production was significantly increased as early as the 1900’s, then pushed by the French colonists. This segment paints a tragic picture whilst helping us understand how these countries with favourable land and climates where forcefully farmed and natives subjugated;
“ Through the construction of irrigation works, chiefly in the Mekong delta, the area of land devoted to rice cultivation quadrupled between 1880 and 1930. During the same period, however, the individual peasant’s rice consumption decreased without the substitution of other foods. The new lands were not distributed among the landless and the peasants but were sold to the highest bidder or given away at nominal prices to Vietnamese collaborators and French speculators.” - Britannica Excerpt
Considering the above, it is easier to understand how these countries have become major producers but also major exporters for Rice, Coffee and Cocoa.
Robusta Coffee Background
Coffea canephora, commonly known as Robusta coffee, has its origins in central and western sub-Saharan Africa. Dutch botanists discovered it in its native form in the former Belgian Congo, and it was later introduced to Vietnam in 1900 after specific coffee rust disease devastated separate plantations in Ceylon(Sri Lanka) and Java (Indonesia). You might recognise these names for the famous name sakes, Ceylon Tea and Java Coffee (Arabica). It appears South East Asias has a strong history of production in not just tea, but coffee also.
Coffea canephora boasts several unique features. First, it contains nearly twice the caffeine compared to Arabica beans, contributing to its bold flavour and strength, making it ideal for espresso-based drinks and commercial blends. Second, Robusta plants thrive at lower altitudes (typically below 800 meters) and in hotter climates with ample rainfall. Their resilience against diseases and pests makes them a popular choice for coffee farmers in tropical regions. Lastly, Robusta beans deliver a pronounced bitterness and are less aromatic than Arabica beans, appealing to those seeking a powerful coffee experience.
Now lets have a look at The Vietnam Stock Index which is valued in Vietnamese Dong.
The Vietnam Stock Index - HOSE:VNINDEX
- You can clearly see a long term ascending triangle and a rising 10 month moving average. The targets and trade structure is clear and presents a great long term potential upside over 5 – 10 year time horizon.
VanEck Vietnam ETF - HOSE:VNM
For a shorter term play, and to take advantage of this growing economy, you could invest in the VanEck Vietnam ETF between now and 2026.
- Ideally you would want the price to break out above the red line (POC) and find support above the 200 Day SMA (Blue Line). Once the 200 Day SMA is sloping upwards it would be a matter of riding the trend.
- Given price has been gradually making higher lows since 2020, we can presume that this is a long term increase in demand gradually pressing up price. We have a stop placed with a 6.5% downside risk with potential for 77% return or an earlier exit if you wish with lessor percentage gained.
- The structure for the trade is clear on the chart and it is there to be played. We have economic information that suggests that Vietnam is going to have a good decade.
Based on all our information above and the positivity around the Vietnamese economy, there is ample opportunity over the next few years to establish a good long term allocations in the above indexes or specific stocks in Vietnam. Getting exposure to South East Asia in general is starting to seem like a smart choice. The Vietnam economy, similar to the Philippine economy we covered last week, and the South Korean economy we covered weeks ago, are all signalling that they are likely entering into golden era’s of significant growth.
All these charts are available on my TradingView Page and you can go to them at any stage over the next few years press play and you'll get the chart updated with the easy visual guide to see how the Vietnamese stock market has performed.
I hope it’s helpful.
Globalmacro
Macro Monday 26~Global Indexes Breaking OutMacro Monday 26
Global Index’s Breaking Out
As its Christmas Eve I wanted to do an early release for tomorrow and share something positive and Christmassy but at the same time share something of value, so here is a look at some of the major global ETF index’s and how promising they appear towards the end of 2023. A clear sector stands out.
Vanguard Total World Stock Index ETF - AMEX:VT
In brief this Exchanged Traded Fund (ETF) seeks to track the performance of the FTSE Global All Cap Index (the “Index”) which consists of 99% stocks. The top three portfolio components consist of:
1. 61% in U.S. stocks – The top 5 holdings within this segment are Apple, Microsoft, Amazon, Nvidia and Future on E-mini S&P Futures.
2. 7.6% stocks in the Eurozone
3. 6.1% stocks in Japan
The overall VT portfolio is typically weighted as follows: Cyclicals (34%), Sensitive (46%) and Defensive (20%). This ETF attempts to provide an economy weighted global ETF product by leveraging the worlds largest economy, the U.S. with some protection against downside risk with defensive and cyclical plays taking up over 50% of the portfolio exposure.
FYI – This index is extremely similar both on the chart and in price to the iShares MSCI ACWI ETF ( NASDAQ:ACWI ). This ETF aims to track the MSCI All Country World Index also. You can look this up and add it to your ticker list for a general sense of the direction of global markets much like the Vanguard Total World Stock Index ETF covered here today.
The Chart - chart features in heading of this article
Again, in brief you can see that we have a major breakout of a 3 year long pennant which is a bullish formation. We are also above the 200 day moving average which is slanting upwards (positive).
This Chart/ETF product gives a broad based view on the global economy at present however is obviously strongly reliant on the U.S. economy with 61% of the portfolio in U.S stocks so we will also have a look at a few other index’s that are looking positive at present.
iShares Global Energy ETF - AMEX:IXC
This index seeks to track the S&P Global Energy Sector Index and appears is primarily invested in the Oil and Gas sector. This index is designed to measure the performance of 52 companies in the global energy sector. The company sectors include the following:
1. Oil & Gas Exploration and Production Companies
2. Integrated Oil & Gas Companies
3. Oil Equipment, Services & Distribution
Integrated Oil and Gas makes up 53% of the portfolio, with Oil and Gas Exploration making up another 22%, and Oil and Gas Storage & transportation 10%. The remainder of the portfolio is other Oil & Gas equipment, services and derivatives.
The Chart
As you can see the chart is forming an ascending triangle and has made a series of higher lows due to upwards price pressure. Should this continue we should eventually have a breakout above the ascending triangle. We are now above the 200 day moving average however it has plateaued and thus we do not want to lose the $39.41 level which would mean we have lost our most recent higher low and would also confirm we have lost the diagonal support line. For now it is positive and we have price pushing higher with higher lows each month.
Global X FinTech ETF - NASDAQ:FINX
The Global X FinTech ETF (FINX) is an exchange-traded fund that seeks to track the performance of the Indxx Global FinTech Thematic Index. These are companies that are involved in the development and use of financial technology (FinTech).
The ETF seeks to provide exposure to companies at the forefront of financial technology innovation, including those involved in payment processing, digital banking, blockchain technology, peer-to-peer lending, and other disruptive financial services.
Interestingly, Coinbase Global NASDAQ:COIN is its largest holding at 9%, then Intuit Inc NASDAQ:INTU at 8% and Fiserv Inc NYSE:FI at 6%. Other notables are PayPal, Fidelity and Block which are all in the top 10 holdings making up about 4 – 5% of the portfolio each.
This is a fascinating little index that gives you exposure to some of the more established financial entities whilst also providing exposure to the trending innovative financial tech plays. One extra thing I like about this tracked Index is that it is 51% exposed to Information Technology but then you have c.40% in Financials, something people just cannot do without.
The Chart
We have a breakout of a long running descending wedge. Price has fallen c. 65% from the highs made a series of lower lows and has now broken out of the wedge and strongly broken above the 200 day moving average. As I always say, an entry off the 200 DSAM is usually ideal but we have a long term potential change of direction here on the chart could be a signal for FinTech playing a major role over the coming decade in finance. This leads me to my last chart of the day.
Global X Blockchain ETF - NASDAQ:BKCH
The Global X Blockchain ETF ( NASDAQ:BKCH ) is an exchange-traded fund designed to track the performance of the Indxx Blockchain Index. This ) The ETF seeks to invest in companies positioned to benefit from the increased adoption of blockchain technology, including companies in digital asset mining, blockchain & digital asset transactions, blockchain applications, blockchain & digital asset hardware, and blockchain & digital asset integration.
Earlier this year I spotted a very promising opportunity in the Cleanspark Inc NASDAQ:CLSK Chart, I checked the major components of this ETF only to find CLSK as a top three holding making up 12% of the portfolio weighting in the ETF, this helped confirm my conviction to place a trade. Since investing and sharing the original chart this stock has increased >100%+. As I noted above, when you see large institutional indexes/or tracked indexes showing a lot of faith in a company and putting their money where their mouth is with these sorts of weightings, it can be a confirmation signal after finding a brilliant looking chart. Marathon Digital NASDAQ:MARA is the largest holding in the ETF at 17% and Coinbase comes at 2nd place at 14%. The remainder of the portfolio is collection of other blockchain related firms including PayPal, Block, Cipher Mining, Nvidia, Robinhood, Bakkt holdings, Galaxy Digital…I think you get the picture.
The Chart
This chart is very similar to the Fintech Chart however it has some subtle differences that make it a more favorable chart. The 200 DSMA is clearly on the ascend for a number of months and appears to have demonstrated itself as support. We have higher lows and now a higher high…. which says a lot. We also have the obvious breakout from the pennant. All in All this is beautiful looking chart however we should note that we had a strong pull back in summer 2023 and we could have another from the $60 level. If you are placing bids on this chart it should be for the long haul and as always, an ideal entry is off the 200 DSMA or your Dollar Cost Averaging for a long term hold.
These are a few of the charts that I track closely but rarely talk about, some of the major holdings in these stocks helped lead some of my investment decisions this year. If big money and funds are investing in a company or sector where the chart is also looking good, its was always an indication to me that money could be flowing towards these stocks, especially when making up such large positions within these large index funds.
If you enjoyed me covering index and the inferences drawn from them let me know and I’ll share some of the others I track.
Folks things are looking really good for the long term on all the above global indexes
Happy Christmas Everyone
PUKA
EUR set for 12th bearish week against the DollarHuge beat on US jobs number sent the Euro tumbling in afternoon trading. It did start the week positive and was actually green in pre-market trading Monday, but that didn't last long and after it closed the day down 113 pips it spent the rest of the week trying to recover.
Tuesday put in an interesting looking low, constrained to a 45 pip range followed by a defence of that low in the early hours of Wednesday morning. Once it rallied on the open I was able to take it long from 1.04690, scaling out as price broke 1.04850 with my final sell at 1.04950. I captured about 3/4 of the total move that day and as price ranged into the close I was happy with the profit.
There were more gains to be had however, with Thursday green in the New York session. The chop didn't allow me to take a position but coming into today I had a bias of reaching the weekly open and got long at 1.05521. The move was short lived and after moving to B/E I got hit just before lunch.
The jobs news dropped price over 60 pips and it's now trying to gather itself around 1.05050.
There are a few hours left before the New York close but it is looking very likely we'll be set for a 12th straight red week, an unprecedented slide and one that shows no sign of letting up?
I'll still be looking for longs into next week, if we can post a positive Monday then price may be able to build on that and start to recoup some of the losses. With the US closed for Columbus Day and with a light news schedule to start the week, it may be a prime time to take a position.
Dr Copper ~ Snapshot TA / Contraction x Expansion = InflectionIt ain't easy being DR CAPITALCOM:COPPER
Peaked in March 2022, only to crash -38% & bottomed-out in July 2022.
Since then it has fluctuated between Contraction (will Global Economy collapse?) versus Expansion (will Global Economy recover?), while also contending with outlook of China's Economy, yeesh lol.
Copper's price action has also been compressing, as descending trend-line squeezes current Trading Range against ascending Parallel Channel.
This suggests momentum will eventually need to "pop" in either direction...but it could also continue trading sideways a little longer while more data is disseminated by Market Makers to make a confident decision, TBC.
Tick tock, time is running out for the Doctor..
Boost/Follow appreciated, cheers :)
AMEX:COPX AMEX:CPER COMEX:HG1! COMEX:HG2!
Deciphering Divergent Signals The Complex Economic LandscapeThe global economy continues to face profound uncertainties in the wake of COVID-19's massive disruptions. For policymakers and business leaders, making sense of divergent signals on jobs, inflation, and growth remains imperative yet challenging.
In the United States, inflation pressures appear to be moderately easing after surging to 40-year highs in 2022. The annual Consumer Price Index (CPI) declined to 3% in June from the prior peak of 9.1%. Plunging gasoline and used car prices provided some consumer relief, while housing and food costs remained worryingly elevated. Core CPI, excluding food and energy, dipped to 4.8% but persists well above the Fed’s 2% target.
Supply chain improvements, waning pandemic demand spikes, and the strong dollar making imports cheaper all helped cool inflation. However, risks abound that high prices become entrenched with tight labor markets still buoying wages. Major central banks responded with substantial interest rate hikes to reduce demand, but the full economic drag likely remains unseen. Further supply shocks from geopolitics or weather could also reignite commodity inflation. While the direction seems promising, the Fed vows ongoing vigilance and further tightening until inflation durably falls to acceptable levels. The path back to price stability will be bumpy.
Yet even amidst surging inflation, the US labor market showed resilience through 2022. Employers added over 4 million jobs, driving unemployment down to 3.5%, matching pre-pandemic lows. This simultaneous inflation and job growth confounds historical norms where Fed tightening swiftly slows hiring.
Pandemic-era stimulus and savings initially cushioned households from rate hikes, sustaining consumer demand. Early retirements, long COVID disabilities, caregiving needs, and possibly a cultural rethinking of work also constricted labor supply. With fewer jobseekers available, businesses retained and attracted talent by lifting pay, leading to nominal wage growth even outpacing inflation for some months.
However, the labor market's anomalous buoyancy shows growing fragility. Job openings plunged over 20% since March, tech and housing layoffs multiplied, and wage growth decelerated – all signals of softening demand as higher rates bite. Most economists expect outright job losses in coming months as the Fed induces a deliberate recession to conquer inflation.
Outside the US, other economies show similar labor market resilience assisted by generous pandemic supports. But with emergency stimulus now depleted, Europe especially looks vulnerable. Energy and food inflation strain household budgets as rising rates threaten economies already flirting with recession. Surveys show consumer confidence nosediving across European markets. With less policy space, job losses may mount faster overseas if slowdowns worsen.
Meanwhile, Mexico’s economy and currency proved surprisingly robust. Peso strength reflects Mexico’s expanding manufacturing exports, especially autos, amid US attempts to nearshore production and diversify from China reliance. Remittances from Mexican immigrants also reached new highs, supporting domestic demand. However, complex immigration issues continue challenging US-Mexico ties.
The pandemic undoubtedly accelerated pre-existing workforce transformations. Millions older employees permanently retired. Younger cohorts increasingly spurn traditional career ladders, cobbling together gig work and passion projects. Remote technology facilitated this cultural shift toward customized careers and lifestyle priorities.
Many posit these preferences will now permanently reshape labor markets. Employers clinging to old norms of in-office inflexibility may struggle to hire and retain talent, especially younger workers. Tighter immigration restrictions also constrain domestic labor supply. At the same time, automation and artificial intelligence will transform productivity and skills demands.
In this context, labor shortages could linger regardless of economic cycles. If realized, productivity enhancements from technology could support growth with fewer workers. But displacement risks require better policies around skills retraining, portable benefits, and income supports. Individuals must continually gain new capabilities to stay relevant. The days of lifelong stable employer relationships appear gone.
For policymakers, balancing inflation control and labor health presents acute challenges. Achieving a soft landing that curtails price spikes without triggering mass unemployment hardly looks guaranteed. The Fed’s rapid tightening applies tremendous pressure to an economy still experiencing profound demographic, technological, and cultural realignments.
With less room for stimulus, other central banks face even more daunting dilemmas. Premature efforts to rein in inflation could induce deep recessions and lasting scars. But failure to act also risks runaway prices that erode living standards and stability. There are no easy solutions with both scenarios carrying grave consequences.
For business leaders, adjusting to emerging realities in workforce priorities and automation capabilities remains imperative. Companies that embrace flexible work options, prioritize pay equity, and intelligently integrate technologies will gain a competitive edge in accessing skills and talent. But transitions will inevitably be turbulent.
On the whole, the global economy's trajectory looks cloudy. While the inflation fever appears to be modestly breaking, risks of resurgence remain as long as labor markets show tightness. But just as rising prices moderate, the delayed impacts from massive rate hikes threaten to extinguish job growth and demand. For workers, maintaining adaptability and skills development is mandatory to navigate gathering storms. Any Coming downturn may well play out differently than past recessions due to demographic shifts, cultural evolution, and automation. But with debt levels still stretched thin across sectors, the turbulence could yet prove intense. The path forward promises to be volatile and uneven amidst the lingering pandemic aftershocks. Navigating uncertainty remains imperative but challenging.
EURCHF - Taking a chance on several daily rejectionsWhile the SNB hasn't really signals any policy change for short-medium term, considering that global inflation has started to cool down, there is quite a chance that they cannot keep hiking rate at some point. Meanwhile, the technical side of it shows a potential buying condition that hard to miss.
As you might see on the chart, based on those conditions, I prefer not to take an aggressive approach. Waiting for the price made a new high in lower timeframe, or at least a new daily high would be better before taking a long trade.
"Trading is NOT about how often you are right!! Trading is a mathematical calculation of the ratio of the results you WILL get to the risk you MAY spend!!!"
So, I looked at the CNY (Chinese Yuan or Juan) more, and..Check out my most recent publishing(s) referring to this particular exchange rate in the "Related Ideas" section below if your interested in the USDCNY.
I took a closer look at my in-depth analysis over the weekend and felt as though it needed some adjustments (additions*) + further complication..
but its for the better.. hear me out.
Ive been spending the last month or so, and will be spending as much time as necessary to catch up and become more and more familiar with what's appearing to become an even more disastrous real estate market than what we know to be the worst recorded event (in relativity) in capitalism history. ("the 2008 financial crisis")
This event could be worse, simply due to the fact that China is so powerful.. (which is good for us; the money managers!)
As a trader, its important to consider the recent upturn regarding political and socioeconomic gossip. IYKYK
There is plenty of public and freely available information on how to approach any market using fundamental risk management.
Save this, be patient, and ask questions.
Happy trading, and good luck!
SPX Forecast 22'-23' (Fibonacci Analysis)Notes:
Expecting financial markets to rally amid FOMC summer hikes.
Entering "Complacency" (June 06, 2022 - Feb 2023) in market cycle.
Entering "Anxiety" (Nov. 2022 - Oct. 2023) in market cycle.
Hedge Idea
(Long):
Entry Price: $3,923.00
Entry Date: June 06, 2022
Price Target: $4,500.00
Date Target: Nov. 2022
(Short):
Entry Price: $4,500.00
Entry Date: Feb. 06, 2023
Price Target: $3,600.00
Date Target: Oct. 2023
USDCNH Update - Major Breakout UnderwayIf you bought this pair when I first featured it here, you have made money. If you were leveraged 50:1 - which - often is the case in forex, you have likely returned more (% returned) in this trade than what you can expect in three years of investing in a vanilla benchmark-tracking 401K.
I remain long USDCNH and will continue to cover it for the foreseeable future.
Something to consider: such a rapid deterioration of the Yuan is reason to speculate the Chinese economy is becoming increasingly decoupled from anything that resembles the last 10-12 years of price action. For example, if the Yuan were to surpass $7.20, I would start to suspect two possible (again I can't "predict" anything) situations:
1. The Chinese economy in severe distress (hopefully not).
2. Intentional disregard for participation in the global economy, as it exists currently (hopefully not).
Again, we are not there YET; all we can do is read the chart and analyze information / data as it becomes available.
Pray for peace.
God Bless
1929 ReduxI have been waiting for the moment where my confidence was high enough to say the top was in for most of 2021. The relentless grind upwards has kept providing moments that "could be the one", but all have been quickly bounced before any real technical damage could be done. Hence, we went almost a year from the last 5% SPX correction until now. This will be long-winded, because, well, this is as much a high timeframe macro fundamentals call as it is a technical one.
I called for the intergenerational top in January 2020 on SPX and NDX. The short trades I drew on those charts stayed below their stops heading into the pandemic crash, and that crash brought them to my 2nd TP target (of 3). I had not expected this crash to happen in a one-month straight-line crash, expecting instead a normal bear market for US equities lasting 1-2 years, but the pandemic was a genuine black swan catalyst.
My logic on that call was fairly straightforward - my indicators showed us looking like the 2000 top, a repo crisis in 2019 had the Fed pouring money into a what seemed like a leaking bucket, and valuations relative to GDP had matched 2000 levels almost precisely. TSLA and AAPL had gone parabolic out of nothing in a way that was deeply disconnected from fundamentals since that October 2019 intervention. It seems quaint now, but the "stonks only go up" meme had become prominent and fear-euphoria metrics were showing the most euphoric market since 2000.
...and then I've been wrong ever since and missed the longest, fastest bull rally in the history of US equities. Mea culpa. It turns out that it was actually possible for monetary and fiscal stimulus to plug the dam. The amounts involved were historically unprecedented, and they successfully stabilized the system. I'd argue that this is for the better of humanity too, given that an economic crash inside of the pandemic likely means immensely more death and suffering than if we timeshift the brunt of economic carnage until we're past COVID-19; though there's plenty of reason to be aghast at how little shared sacrifice was asked of and is still not being asked of elites relative to everyone else.
With hindsight, it was a substantial disadvantage that my background before ever touching trading was in graduate-level bioscience, meaning I actually understood how the pandemic was playing out, that it would likely last much longer than anyone but pretty much the scientists themselves was saying, and that governments were failing to get it under control by reopening too early. Thus, I was broadly correct about what happened in the real world while the market continued to trade a parallel universe consensus that everything was sunshine and rainbows.
I am too young to have my own memories of trading in 1998-2000 was like, and that's the only thing that appears comparable to the post-pandemic market structure. Fundamentals, at least at the macro level, completely stopped mattering, or really, they became inversely correlated as anyone who traded their disbelief on that basis got squeezed. Bears, and with them, all tethering to reality itself, have gotten drowned in liquidity. Leverage via the options market has gone frank parabolic. US equities inflows in the past year have totaled more than the net inflow of everything from the 2009 bottom to before that window combined. Meme stocks have gotten bid up purely because they can be, and then the inflows from index ETFs have sustained those bubbles. NKLA, a company where the CEO is outright indicted for fraud at this point, retains a $5B market cap because it's in the Russel 2000. The percentage increase in NDX bottom to top from 2009 to now is now a larger parabola in percentage terms than the one which led to the 2000 crash. Valuations have run well past 2000 levels and are now at 1929 levels.
We took a 2000-level tech bubble... and ran it up into a 1929-level total market bubble.
Meanwhile, the engine of growth for the past 30 years or so, essentially since the Nikkei topped out in 1989, has been the modernization of China. A country of 1.2B people has gone from being a mostly poverty-stricken agricultural society to the standard of living of Mexico - part of the global middle class but not a "high-income", "developed" country, a bimodal country with cities of developed-world wealth alongside rural areas that are very very poor, and a country whose further progress is heavily restrained by corrupt governance.
...and the China bubble is now popping right now in front of our eyes. That has become the probable catalyst for the end of this "supercycle" - its real estate sector is 30% of its GDP, amounts to a giant piggybank of unfinished, unlivable, ghost city buildings so poorly-constructed that they frequently just topple over. Its high-yield bond market is comprised primarily of debt from that sector. If this was going to stop at Evergrande, the system would absorb it just fine, but it's already not stopping there. China has been in a slow-motion financial crisis for several years now if you've been paying attention to the thinly-covered news about it, and the dam has finally broken. Much of this junk real estate debt is USD-denominated and ultimately, the CCP can't keep the party going any longer if it wants to, so it's now setting precedents whereby foreign bondholders get stiffed while domestic bondholders get the breadcrumbs that can be salvaged.
Defaults on this massive pool of USD-denominated debt is where the system is now finally breaking, since we've managed to defer the pain from the pandemic. Being the global reserve currency means that your money supply is, well, global - however safe US domestic debt may be, there's more USD-denominated bond debt being issued abroad than there is domestically and it is of far more dubious quality.
Google Trends for the keyword "inflation" blew up earlier this year. As per usual, the crowd is wrong, or at best, late to the party. Inflation has been running modestly hot in the US and EU by the standards of post-2008, and people appear to have completely forgotten what "normal" was before then. Over the past 2 years, it hasn't done much more cumulatively than make up for the weakness in first few months of the pandemic. If you've read this far and this paragraph seems wrong to you, then what I'll say to that is that the way most complaints about "inflation" miss the boat is by misunderstanding what the word is actually measuring and either cherrypicking things that have clearly gone up in what is a broad index with many things that change little and some that are quietly going down, or they're looking at "asset price inflation" and missing the point that this is specifically not something that conventional "inflation" measures at all. That low inflation has slowly juiced all asset prices which feels like "inflation" of asset prices is a difference between a technical and colloquial definition.
Thus, I'm calling for a deflationary bust at a time when this appears to be contrarian to, well, most everyone.
I've listed several targets on SPX and NDX taken from weekly and monthly charts using my ACAT indicator. I think the top is in, given the action of the past few weeks, but I've included a bit of wiggle-room for double-top if consolidation drags out a couple more months. I'd like to think I've patiently waited long enough and found a serious change in character in this market, but if I haven't, risk of further parabolic blowoff means macro bears would need to cut the loss quickly to live to try again another day.
The effect of passive flows on this market has been to accelerate the moves, so I've drawn this as a shorter duration bear market than might otherwise be the historical expectation, but if I'm correct, and this is 1929 / 1989 Nikkei, then basically people will get eaten buying the dip several times and this will end only when sentiment that the market is a guaranteed thing so long as you buy-and-hold is no longer church doctrine. Crashes on this scale have typically taken decades to retake the highs.
You should expect regulation to curb excesses and that will cap the insanity - because markets like this get this insane due to clear examples of fraud and abuse. So we'll respond to things like whatever the hell games TSLA has been playing with its accounting after it blows up Enron-style, and it will be the correct thing to do because the fundamental problem with "stonks only go up" is that a lot of why the economy feels perpetually poor to so many ordinary people is that we're allocating capital to Ponzi schemes instead of actual not-fraud, real world mathematically-sound and often not-sexy businesses that can sustainably employ people with steadily rising wages over decades.
EURNZD - Macroeconomic, Global Macro...EUR is the most inflationary currency, whereas NZD is the most deflationary.
Based on Micro Bias, Global Macro Bias, and other factors... My strognerst number was never assigned to this pair....
Consequently, I will maintain my short position in the EURNZD, and based on current information, we might continue in this manner for another week...
Someone among you who has been following the previous three transactions on the EURNZD, Continue reading and don't shut your browser! :)
NZD-USD Fundemental and Macro AnalysisThis weekend's market is expected to be relatively quiet.
They will not produce large effects or move, and they will most likely not affect all pairings.
We should proceed with caution, but the New Zealand dollar and the United States dollar have a very high possibility of gaining ground because of recent performance and statistics that I have obtained.
After that, I'm going to stick with this currency pair for the weekend.
Everyone should use caution, even if they have high expectations.
EURNZD - Macroeconomic, Global Macro...I will simply follow up on the previous two weeks with fresh and stronger knowledge, which I will get at the Microeconomic Information/Fundamental Analysis stage of the process.
Things are rather straightforward; I don't need to say much since figures speak for themselves, and you can see my previous notion, which I have already shared...
If you see the same things I do, please share your observations.
Thank you very much!
Global DXY - end of downtrend?!As you can see on the chart for 60 years, the US dollar has been downtrending, but since 2014 the index has come out from under the downtrend line, during the same time the US Federal Reserve interest rate fell from 18% to zero (and now they promise to raise it) What is it, a false breakdown or really from by raising the interest rate Mr. Dollar will start to rise in price until it reaches the level of 110-120?
Global Markets Falling Off A CliffChina, Europe, Asia, Africa could see a -10% to -22% collapse over the next 60+ days if consumers shift assets away from risks associated with the current COVID & debt/credit issues plaguing foreign markets. China, in particular, could be on the cusp of a "Great Recession". This could drive other foreign markets deeper into trouble in early 2022.
My opinion is the US markets may see some extended downside price volatility, but may quickly recover and trend higher if these global crisis events are somewhat isolated and contained. Certainly, traders need to be prepared for extreme volatility over the next 90+ days.
I believe China is in far worse shape than many people currently believe. These debt/credit issues are entrenched in finance/banking in China/Asia. I believe the more mature Asian economies could be headed for complete debt collapse over the next 2+ years.
Pay attention. Follow my research.
NDX by Chief MacroWith recent news of South Korea and Hungary hiking rates (even before this news), I am starting to more seriously consider the possibility that the *rest of the world* could lead asset tapering initiatives, ahead of the US. This would allow for Emerging Markets to stabilize, amid the $Dollar-driven commodity boom, thereby setting the stage for the next several years of global macro / monetary & fiscal policy.
US Indices: Lot's of money still coming in via accommodative monetary policy and continued deficit spending, not to mention the potential (likely) for *more attractive* debt issuance, following the post-covid-stabilization of the "rest of the world".
Just an idea and a theory - but even looking at the Nasdaq, we have seem to have stabilized above a 12-year range; which is typically a bullish indicator.... oh one more nugget: the biggest companies in the world are American companies. So in a way, the US has the ability to control dollars through corporate channels not available to other countries.
Is your money worth reading "maybe´s"Hello Trenders,
Been thinking a lot to or to not publish this signal. Many of you expect a deep on global level, therefore I here show you some mathematic forecast.
This may not be the end of the world, yet it is far worse than the most downbeat forecasts. The evidence to support this outlook is in plain
sight. Some sixth-grade math is a good place to begin the analysis. Make 2019 economic output 100 (the actual figure is $22 trillion; “100” is
100 percent of that number; a convenient way to measure ups and downs). Assume output drops 20 percent over the second and third
quarters of 2020 (many estimates project larger drops; 20 percent is a plausible if conservative estimate). A 20 percent drop for six months
equals a 10 percent drop for the full year, assuming the first and fourth quarters are flat on net. A 10 percent drop from 100 = 90 (or $2.2
trillion of lost output).
Since 1948, U.S. annual real growth in GDP has never exceeded 10 percent. Since 1984, real growth has never exceeded 5 percent. The
highest-growth years since the end of World War II were 8.7 percent in 1950, 8 percent in 1951, and 7.2 percent in 1984. An assumption
that real growth will occur in 2021 at a 6 percent annual rate is a generous if unrealistic assumption. Such growth would qualify as a Vshaped recovery.
If our new base is 90 (compared with 100 in 2019) and we increase output by 6 percent in 2021, this brings total output to 95.4. If we
enter 2022 with the new base of 95.4 and increase that base by 4 percent (so, 95.4 × 1.04), we come to 99.2 in total output by the end of
2022. Here’s the problem. Using 100 as a baseline for 2019 output, and assuming 6 percent real growth in 2021 and 4 percent in 2022 (rates
of growth that have not happened on an annual basis since 1984), the economy does not get back to 2019 output levels. The hard truth is
that 99.2 < 100.
Source : The new great depression (2021).
What about if we really have a second wave harder then the first with mutatied covid?
I want to add, is not my intention to spread panic or "maybe´s" but the study got my attention.
Even the legends will have trouble surviving if this happen.
So how can a trader survive in this case condition by trading as only source of income???
Perhaps agricultural commodities will always perform....
Aussie Is Like a Kangaroo in a CageThe Australian dollar has squeezed into an increasingly tight range all year. Futures traders may want to be ready in case a breakout occurs.
First, Bollinger Bandwidth is near long-term lows on both the daily and weekly charts. This isn’t necessarily bullish, however it’s interesting when you consider other positive forces at work. One of those items is the dovish Federal Reserve and weak U.S. dollar. Another is the ongoing rallies in materials like copper and iron ore. The Australian dollar typically follows those commodities.
Diplomatic tensions with China are currently holding back the Aussie. However, that creates the potential for a breakout if things improve.
Next, consider the stair-stepping price action since late March. AUDUSD held 0.76, calmly building support for three weeks. It then proceeded to the 0.77 area, where the currency spent another three weeks establishing itself.
Today it’s breaking the top of that range and is headed for its highest daily close since February 25. It could also have its second-highest weekly close since February 2018:
Finally, AUDUSD has found support at both its 50- and 100-day simple moving averages (SMAs).
Overall, the price charts in many global assets have stabilized recently after pullbacks in early 2021. If this trend continues, it could only be a matter of time before the Aussie starts moving again.
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Coffee, Global Agriculture Inflation BoomNotice the major multi-year higher low formed in 2019, followed by the rounding basing pattern and subsequent breakout outside of the multi-year triangle.
The higher low in 2019, before the Covid deflation crash, tells me the agriculture complex was already bottoming ahead of Covid and now has a full head of steam.
Corn, Soybeans, Sugar, Fertilizer have all been ripping to the upside like mad.
Way to play coffee is through the ETF NIB
Not investment advice. DYODD