Europe on the brink, World on a Edge – Stocks Trading as a 15% correction Draws Near
Stock-Markets / Stock Markets 2019 Aug 30, 2019 - 08:32 AM GMTBy: QUANTO
These are brutal times. Stocks are still at highs while the underlying economy is slipping away sharply. United States is slipping into a recession which they can ill afford. The country runs a debt of over 20 trillion. CBO has forecast the future deficit to be in range of $1 trillion for the next 10 years. Never before has the country seen such extended budget shortfall. Over and above that, they cannot finance the deficit easily because of the existing debt. What the US desperately needs is a stock market correction to pummel money back into bonds which is exactly what is happening. Without a stock market correction, US may default on payments on its debt.
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In Europe things are getting worse. EUROPE centric funds are seeing record outflows. Never in the last 5 years has such a large amount of capital flown out of Europe based ETF.
That is the JP Morhan BBEU ETF and shows a 452 mil outflow. Record low yields and lower expectation on company earning is spurring the flow of capital.
Increasing candle size at the top of range is a dead giveaway of a brutal correction. We believe the index is on the edge of a precipice. We think the S&P could easily easily correct 15%.
The volatility index VIX is inside tight consolidation which could breakout upwards. That will happen along with S&P cracking 2800.
The GOLD:SPX ratio is at a 3 year high. Gold could rise further if S&P falls to 2820 and lower. This is a major moment for equity market and so for GOLD.
The utilities sector ETF is often a barometer of risk aversion in the markets. The above chart shows the flow of capital seeking protection rather than return. The sentiment had turned negative even the last year and stock market simply followed suit.
Austrian Bonds
The Austrian bond chart is almost unexplainable. The 100 year trading under 1 % yield. The 30 year is nearing 0%. The fear is unmissable as money piles into long dated bonds.
Gold chart
The gold:spx ratio shows a break higher could see Gold rallying further
This chart shows the companies exposed to china exports but citibank makes the point that those wanting to short these companies may have missed the boat.
Loan growth slows
The loan to private households and firms have slowed even while the money supply is rising. ECB plans to further increase supply may fail because of the lack of desire to lend.
USDJPY
USDJPY continues to muddle under the 9 EMA and once the green line catches up with prices, we will see new lows. This is a lovely setup and often has high degree of accuracy.
CADJPY
Similar to USDJPY, CADJPY looks set to fall even more to 77.5 and lower.
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Source: https://quanto.live/marketoracle/europe-on-the-brink-world-on-a-edge-trading-profitably/
By Quanto
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