DBA Agriculture ETF is nearing all time low

It is to blame the overproduction. Just to start with: FAO Cereal Supply and Demand Brief

Real GDP and Historic Trend

Great chart on advisorperspectives.com

Flipping the trade

Sometimes shortly after entering into a trade the price action suggests that I'm on the wrong side. Sometimes the feeling of being wrong is very strong. I have such a conviction that I rarely experience when not being in a position. The best one can do in these cases is to reverse the trade with no hesitation even if it requires realizing a loss. I need to put my ego aside by quickly admitting that I was wrong.

Gold and Gold Miners divergence

In August 2016 opposite divergence resulted in a reversal for gold. 

USD: Daily bullish engulfing at a major resistance suggests a reversal

Chinese monetary conditions are tightening

From ForexLive:

Also from ForexLive: Moody's: China's economy faces heightened risks from a potential future property downturn

CB Consumer Confidence at 16 year high

EUR: the two things that could boost the consumption and therefore the core CPI

EU Wage Growth (y/y) is at 1.60%

EUR Private Loans (y/y) is at 2.3%

German Ifo Business Climate highest since July 2011

EUR and CHF break important levels

Dollar selloff continues

Healthcare bill failure sent DX to mid November level erasing the Trump trade gains.

GDB is heading to a potential short squeeze. The 1.3000 area could be very important as a good place for long term stops.

JPY with Gold are the biggest gainers as risk-off sentiment also builds up. 107.50 is the next strong support for the Yen.

German PMI lifts EUR

BOJ Kuroda: BOJ won't raise yield target

On ForexLive a good summary of Kuroda's speach. Main takeaways:

- BOJ won't raise yield target in response to rises in overseas long-term rate rises
- BOJ reviewed its policy framework several times but no change to our stance of aiming to hit 2 pct inflation at earliest date possible
- If Japan inflation accelerates sharply in the future, BOJ may consider adjusting its yield target
- Don't know if inflation will hit 2% during my current term that ends in April next year
- See no need to change now either -0.1 pct short-term rate target, 10-yr jgb target of around zero pct

He is clear that the inflation is the key driver of the monetary policy. National Core CPI y/y:

JPY sees some bids after the news but the impact is muted and price stays bellow a major resistance that was broken a few days ago.

Brett Steenbarger's video

The video is on vertical split in personality and trading.

The two main reasons behind the dollar selloff

There are two areas where the market is questioning the consensus that prevailed since the election.

1. Market is becoming less optimistic whether Trump will be able keep its promises.
The federal budget proposal doesn't seem to be as expansionary as the market have thought. The border tax is still a big question-mark, seemingly there isn't a consensus even among the Republicans regarding this proposal.

2. Policy divergence is less obvious (Divergence Theme Questioned)
The inflation is increasing elsewhere as well. The economic picture is improving in the developed world.

These were the two main themes that underpinned the USD Trump rally. 

Equities also started a correction as market is becoming less optimistic about Trump.

It seems that we shouldn't wait even for 100 days to get closer to the reality....

GBP: CPI is shooting over 2%

GBP CPI y/y at 2.3%

Core CPI is 2.0%

GBP is making higher high.

Junker hints a hard Brexit scenario, RBA meeting minutes

Junker: "No. Britain's example will make everyone realise that it's not worth leaving."He added: "On the contrary, the remaining member states will fall in love with each other again and renew their vows with the European Union."

I read this as a sign that the EU want to create precedent with UK. This clearly could fuel hard Brexit expectations. EUR strengthened against the GBP, but the move did not seem to be decisive.

RBA meeting minutes:
- build-up of risks in the housing market
- weak wage growth

- rising AUD would complicate economic transition

- Higher commodity prices could last longer than first thought given firmer global demand

AUD is a major resistance now:

NZD Credit Card Spending y/y:

Factset earnings update

Factset updated its Earnings Insights: 

Earnings Growth: For Q1 2017, the estimated earnings growth rate for the S&P 500 is 9.0%. If 9.0% is the actual growth rate for the quarter, it will mark the highest (year-over-year) earnings growth for the index since Q4 2011 (11.6%).

Valuation: The forward 12-month P/E ratio for the S&P 500 is 17.8. This P/E ratio is above the 5-year average (15.0) and above the 10-year average (13.9).

It is worth also to take a look at dshort.com earnings analysis Just to put this into a longer term context:

I think one important factor is not taken into account here, the historically low interest rates. We know from CAPM that it must result in higher P/E ratios. This post on Damodaram Online suggests an alternative approach in this ultra low yield environment, comparing stock P/E to Bond P/E.

This suggests that we aren't on a bubble territory yet.

CNY: had it landed softly?

Summary

 

 Central Bank and rates

Economic Activity

DGP growth rate seems to stabilize at 7%.

Fixed Asset Investments

Caixin Manufacturing PMI

Inflation

   

Consumer

Retail Sales

GBP: Brexit impact is yet to be seen

Summary

Apart from the Brexit risk the UK economy is doing very well. Potential impact of Brexit is net yet reflected in the data.

 

 Central Bank and rates

"The Bank of England's Monetary Policy Committee (MPC) sets monetary policy to meet the 2% inflation target, and in a way that helps to sustain growth and employment. At its meeting ending on 1 February 2017, the Committee voted unanimously to maintain Bank Rate at 0.25%. The Committee voted unanimously to continue with the programme of sterling non-financial investment-grade corporate bond purchases, financed by the issuance of central bank reserves, totalling up to £10 billion. The Committee also voted unanimously to maintain the stock of UK government bond purchases, financed by the issuance of central bank reserves, at £435 billion."

Economic Activity

Inflation

Labour Market

Unemployment rate is well bellow the pre-crisis level and still declining. 

  

Consumer

Retail sales data is one of the strongest in the developed word, but the last few readings suggested some weakness.

AUD: inflation and labor market cast doubts

Summary

 

Central Bank and rates

RBA expects the return to reasonable GDP growth in Australia expected in q4 2017. RBA says CPI expecting to pick up over 2017 to be above 2pc, but it expected to remain low for some time.

Economic Activity

Australian GDP growth rate has been one of the highest in the developed word.

Although, private capital expenditure q/q is still in the negative territory. 

Inflation

 Annualized inflation is around 1.50% and doesn't exhibit upticks what we see elsewhere. 

Labor Market

Unemployment is way above the pre-crisis level and was increasing int the last few readings. 

 Consumer

 Retail sales trend is one of the strongest in the developed word.