Swing Trading and Market Outlook

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Watch this thread for frequent write ups about the US stock market, macroeconomic developments and snippets from our stocks watch list.

Leading index update

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Hans Ong
Analyst, Portfolioascent.com

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Global Macro Report - Asian equities

Initiated exposure into US-listed ADRs of SFUN and ATHM that will benefit from further monetary easing from Beijing


Full report below

The turnaround in policy stance by Chinese authorities, beginning with the RMB 1 trillion stealth QE program last month, has driven bullish sentiment much higher than expected by analysts. The H-share index has entered a new bull market, rising more than 20% since the March lows this year, on speculation that Beijing is finally turning to further easing to meet its widely-announced growth targets.

As mentioned, we have initiated some exposure to the Chinese market, namely property and automobile sectors, through US-listed ADRs of SFUN and ATHM that will benefit from any monetary stimulus moving forward. It is clear that fiscal measures have brought with them broad-based financial risks and targeted rate measures will likely be the policy tool of choice moving forward.

Also, we recognize the enormously cheap valuations in Chinese equities and will gradually become our focus over the longer term, next 5 years, as developed market economic policies currently remain the most accommodating.


Hans Ong
Analyst, Portfolioascent.com

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Global Macro Update

August inflation figures on Friday will play a significant role in the ECB's decision to enact new policy action to combat deflationary pressure. In last week's speech, Draghi gave a dovish outlook by commenting that the ECB could be edging closer to more Quantitative Easing. He cites a decline in inflation expectations at all horizons in August, as indicated by the financial markets.

True to his name in "doing whatever it takes", Draghi also stated that the shift in expectations is duly noted and that the Governing Council will use all available instruments within its mandate to ensure price stability over the long term. In the same vein, the French Prime Minister also reinforced the view that the Euro was still overvalued, and urged the ECB to do more in response to tackle excessive low inflation.

Draghi's Jackson Hole speech last week had already weakened the Euro significantly, which some believed has somewhat lowered the need for QE in the interim. However, we note that further QE is likely to place downward pressure on the Euro and boost market confidence.

Hans Ong
Analyst, Portfolioascent.com

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Global Vantage Report

Euro zone economic update

Economic data out of Europe has been nothing short of weak with Germany, the leading economy, now facing economic contraction as a result of the slowing recovery. While European services PMI data continues to hold up, manufacturing PMI is moving closer to the contraction level of 50.0, providing a bleak overall outlook for Europe. With the recovery now in reverse gear, the pressure is well and truly on the ECB to take further action in September.

Most commentators insist that the ECB prefers to remain on hold since previous policy measures will only be enacted in September, but several developments have occurred that potentially negates this. Firstly, Draghi’s preferred gauge on inflation expectations, the 5yr-5yr swap rate, has crossed the 2% Rubicon indicating a decline in medium term inflation outlook. Secondly, Draghi’s speech at Jackson Hole included a statement that was delivered off the cuff, excluded from the prepared text, which he said “The Governing Council will acknowledge these developments and within its mandate will use all available instruments needed to ensure price stability over the medium term.” In other words, ABS purchases or QE is a done deal, to be delivered over the following months.

A curious development we have observed in financial markets is such that the European sovereign bond markets, both core and periphery, seem to have been expecting these events all along, over the past few months. Yields have remained low, despite the equity market correction in July, and have now plumbed new all time lows. Clearly, the sovereign bond market has clearly always been expecting ECB QE, from here the equity markets should be next in its adjustment.

EU equities

As mentioned above, with ECB QE is more or less signed, sealed and soon to be delivered, European equities should regain their footing soon and perform strongly over the coming months.

Our focus currently remains on the banking sector due to the impending AQR stress tests and TLTRO take-up that will alleviate balance sheet concerns about European banks and promote capital investment in them. Some specific names we are looking at include Santander, ING Group, and Bank of Ireland, that currently have the best performance metrics. Overall, the entire banking sector should see a sustained lift over the coming months.

Hans Ong
Analyst, Portfolioascent.com

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Global Vantage Report

US Federal Reserve – FOMC at the next juncture

The headline news event over the past week for the Fed has been the Jackson Hole meeting, which has traditionally been used by global central bankers to make policy-changing announcements. With most market observers over-hyping the possibilities in policy stance by Janet Yellen, the result was almost certainly going to disappoint. Indeed so, as Yellen continues to remain neutral in her policy stance, with the pace of rate hikes determined by employment and inflation data. As neither of these data points has moved significantly recently, we expect the Fed to remain on hold until mid-2015 as is currently expected.

As such, this bodes well for US equities, with low inflation, strong earnings growth and low interest rates over the next year and places stocks in a sweet spot in this bull market.

Hans Ong
Analyst, Portfolioascent.com

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Tuesday Market Update

Reducing our overall exposure to 20% as high betas took a hit yesterday.
Out from positions BIDU and YY and let the rest continue to play out with stop losses as mentioned in our last report.

Despite yesterday's weakness in the market and in leading stocks, our subscribers continue to be in the green this year by timing market advances and exiting on signs of weakness.
Join us to find out more!http://goo.gl/rPJySp

Hans Ong
Analyst, Portfolioascent.com

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Wednesday Market Update

US Federal Reserve – FOMC at the next juncture

As pointed out previously, there continues to be an insistence by most market observers in over-hyping the potential for sooner than expected rate hikes by the Fed before the mid-2015 timeline as suggested by some Fed policy hawks. However, our current expectation remains that this is itself optimistic, given that Yellen continues to remain neutral in her policy stance, even as she had the opportunity to rubber-stamp the mid-2015 timeline at Jackson Hole but chose to resoundingly pass. Inflation growth remains below target and contrary to expectations, job growth has stuttered recently in last week’s Non-farm payrolls data, both of which will keep the Fed on hold.

As such, we reiterate from the last report that this bodes well for US equities, with low inflation, strong earnings growth and low interest rates over the next year and places stocks in a sweet spot in this bull market.

Equities Watchlist

Market leaders and other high betas in our portfolio seeing nice a rebound yesterday and holding positively post-FOMC minutes. Yellen's speech later on during the session and tomorrow might provide further catalyst to market movements this week

Hans Ong
Analyst, Portfolioascent.com

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Thursday Market Update

-Large caps leading the rebound from Tuesday to Thursday after a dreadful trading session on Monday.
-Leading US Market indices trading back towards October highs while the Russell lags badly behind.
-New momentum entries that have missed the run-up in high beta movers over the last 1 month will likely need some time before being able to demonstrate similar advances in price.

Join us to get the latest scoop in our next Global Vantage Report which will be released in a week's time! http://goo.gl/SHXHwe

Hans Ong
Analyst, Portfolioascent.com

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Monday Market Update

-Leading averages trading in extended territory and selling down on Monday after making new highs last week
-Gains in the market few and far between. Moving into cash and being selective over the next few weeks could prove favorable for the swing/momentum trader
-Moving into a full cash position since the early hours of the trading session

Hans Ong
Analyst, Portfolioascent.com

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