By Biiwii
So now the dust settles on global markets that were given quite a stir yesterday by the ECB’s proclamation “We are ready to act if needed. We are open to a whole menu of monetary policy instruments.”
These things come on a nice, neat menu now? As if they are codified, tried and true and simply ready for implementation?
Well, if the US – where they showed ’em how it’s done – is a good example then yes, it is as simple as that. I used to write about Ben Bernanke’s big brain as he took policy innovation (interference?) to previously unheard of levels. It was ‘Check out the big brain on Brad Ben’…
What it actually is is a global deflationary whirlpool sucking things toward the drain. But the valiant fight is kept up by our policy heroes in a sometimes competitive, sometimes alternating fashion. Right now they are alternating.
For instance, rate hike Kabuki dance (i.e. stall, jawbone hawkish, delay, jawbone dovish and when all else fails, send in the clown car and do both at once!) aside, QE in the US has been set aside for now and policy makers are going to tighten any day now (oh wait, did Draghi just tighten for them again?) BoJ stood down at its last meeting, as it sees a break in the deflation over there (Japan after all, was heading for the drain for many years while the rest of the world was having an inflation-fueled speculative party), China is wax on, wax off as the flagging economy demands and India, with bullets in its gun compliments of the ever rational Raghuram Rajan, is actually easing.
But the headlines today are for Mario Draghi and the ECB, and this brings up a trade from one year ago (Q4 2014) when NFTRH got bullish on (Euro hedged) European stocks thanks to an ECB QE jawbone that came amid a seemingly coordinated cluster of them (Bullard runs to a mic and jaws ‘QE 4’, China Central Planning eases, BoJ torpedoes the Yen). The question now is, should Europe be taken as seriously as the US was post Op/Twist, post QE3? The message of this chart is yes, for the short-term at least.
The green arrow is the implied pattern target and there just happens to be a gap there to be filled. I was going to use this as an NFTRH+ chart highlight (using the Euro-hedged HEDJ), but in doing a little digging there is more I want to cover, including European economic data and speculative indicators. In other words, I want to see if we have a solid macro trade shaping up here, rather than just fly by with a quick chart spec. It’ll be in this weekend’s NFTRH 366.
But for all you chart pattern fans, there it is and there is its target (stop loss below 3200). Have fun, not compliments of me, but compliments of Mr. Draghi’s asset appreciation policy. I call it that because a quick look at the economic data has me wondering why they need QE? But then, we all know why Europe is doing it, just as the US did before it. Never mind the economy, which is secondary, it’s asset markets über alles and the ECB is going all in.
[edit] see yesterday’s post at NFTRH.com regarding gold’s lack of trend change vs. stock markets, confidence implied to be intact and HEDJ’s target.
In the US QE continuum, the 3rd time truly was the charm. I was bullish before basically everybody (that I knew of) at the end of 2012 (ref. the Fiscal Cliff sentiment reset and right on its heels, the Semiconductor equipment industry’s ‘canary in a coal mine’ leading economic indicator) but I will also admit, confess, self-flagellate that I completely misread just how bullish the post-2012 phase would be.
Moving on, I want to read Europe clearly. To do that, we need to break out the monetary, the economic and the inflation/deflation/prices dynamics.
As with the original view on the US, I do not read any of this as remotely healthy in the big picture, but if the US situation taught us one thing it is that ‘healthy’ and ‘bullish’ are two completely different things. One is macro fundamental and the other is prices subject to varied stimuli.
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