Weekly outlook for week commencing Monday 1st February 2016

God it is good to be able to use a keyboard again. Blogging from an Iphone is more tedious than it sounds. Anyway without further delay, I would like to share with you some of my views for the upcoming week:

China, from pain to pleasure?

One of the things that kicked off the massive sell offs in January was the Caixim Manufacturing PMI surprising markets with its softness. This month, things may be a little different. The timing of Lunar New Year holidays have the consequence of possible stronger factory output. Should this the case, it will add to the confidence emanating from firming oil prices and reinforce the impression that the turmoil of January is not representative of the year ahead. This could in turn have investors giving second thoughts to US tightening prospects, to the benefit of the USD.

March off the cards for the FED? Don’t jump to conclusions Yet!

Many have counted March out citing similar reasons that many used to say December would not happen. While I agree, that March may be less likely now, I will not rule out an increase. Some others may change forecasts very often, but I prefer consistency. Until we see the results of the NFP on Friday and hear
Fed Yellen’s testimony to congress later this month. It is too early to rule anything out. At least in my opinion.

AUD to weaken?

There will be AUD weakness when the RBA meets. In spite of opinions that the RBA will hold rates at present levels (90% chance they will), I expect softness from their statements. I believe that they will not want the AUD to value more than its current level as it kills their exports. Expect dovish of statements, even if the bank decides to hold. If chinese data is firm, it will bost the AUD due to the trade relationship between the two, creating the perfect situation to get sells in at higher levels.

Relief for pound imminent? Not likely but it will come soon.

The BOE inflation report is out this week. The BOE is expected to show that inflation has grown slowly and are likely to revise down their growth expectations for 2016. However, their growth expectations will still be well above 2% and I feel their inflation figure, while still far from their target (of 2%)will not be as soft as many expect. I have explained why in previous posts over the last few days, so do not wish to repeat myself again.

Sentiment on the UK is still also weak due to BREXIT concerns (not fully priced in as I believe it should also be affecting the Euro far more. After all, is the EU without the UK still so formidable?) and due to lack of trust in the BOE.

With that said, I am not too worried about our GBP bull positions at the moment, since:

1.) they cost nothing to keep open.

2.) Due to a dozen other green trades in Janaury, we have the firepower for more trades if needed.

3.) I expect the JPY and CHF to weaken further in the medium and longer term. So falls in the cable should not affect us as much, and our positions may still gain.

Euro to run out of steam? I think so.

Following the devaluation of the jpy, the EUR is currently stronger than the ECB would like and that is hurting exports. While the ECB do not meet until March , when I am sure they will take further action, expect Draghi to do his upmost in public speeches to weaken the currency.

Trade plans for the week?

Will take a wait and see approach till after Chinese manufacturing PMI data comes out tomorrow. (Both the official and the Caixan). This is very important as it is at the start of the week and will set the tone ahead of the BOE and RBA central bank meetings and the US employment data.

If all goes as planned above, then I will be looking to capitalise on EUR weakness, JPY weakness and AUD weakness over the week at appropriate times. I believe that these will be the themes and will be looking to exploit these with both options and trades.

Will also consider making some plus500 cfd’s buys on Japanese equities as I feel the market still has not appreciated how much they have the chance to rebound due to growth fueled by increased exports due to a cheaper yen and cheap capital expenditure provided by cheap loans. Again, Chinese data is the key here. Provided that it is not poor, Japanese equities will perform well in February on these two fundamental factors.

Personal Targets to achieve by Q1 2016 (April 2016):

I know that if I publicly declare these, then I will do my best to stick to them, so here it goes. Please note some of my goals have been delayed for obvious reasons, but I never abandon a project. Its not really in my nature to quit.

1.) Close Etoro account at a gain and move on.

2.) Start my social account up on anyoption (it already exists and is funded).

3.) Have a section of the site dedicated to plus500 equity trade ideas. (You can read more about this from my posts on the forum in December 2015).

4.) Expand this community.

An ultimate fantasy to achieve by the end of 2016:

To be able to do this full time. Will never know if I do not try.

Hope you all had a great weekend, and I really hope next week works as planned for us,

Mohammed

End of week update: 30th Jan 2016

Writting at 45,000 feet, would feel like a jet setting ceo were i not sitting in economy next to 2 football fans and a crying baby.Anyway it lets me pass the time by writting (slowly) about some issues now that the first month of the year has come to an end.
January was a one off and I do not think it all sets the tone for 2016. The risk aversion, panic and massive sells off did not sustain. Indeed solid employment data from the us, uk and stimulus from the BOJ and 6.8% growth from China shows that while things may not be as perfect as everyone had hoped, they are doing well and there is hope at the end of the tunnel. Proof of this s( and i believe numbers are the best evidence) should be the sharp turn around in January of our Etoro account that went from a -35% return for the month to a 25+% gain. Or our strong performance on HF which saw us post profits of 15% for our first month of trading there, despite all our problems.
Will the JPY lose its haven status in 2016?
The main thing I wish for you all to ponder over this afternoon (and i want to keep an eye out for this change as well) is what the BOJs latest action means. (N.b. Do not believe all the BS that it shocked the market, if someone as primitive as mysef has been calling this since November, do not believe for one second that any of the institutions were caught off guard). Returning to the mater at hand, the BOJ have made it clear they want a weak Yen. This is important to Japanese inflation, exports etc. when the USDJPY goes below 120 it hurts Japan at these fragile times and the boj has made it clear that they will keep cutting rates into further negative territory as required to leep the yen weak. In short the days of sustained yen strength are over and are unlikely to come back.
But what we have as a result of this is another issue. Where do haven seekers go from here? Haven seekers used to love the chf and jpy due to current accounts and status as a safe currency. When the snb made rates negative, the chf lost some of this status as investors do not want to effectivey be charged for holding a currency. The same will be true for the yen. Due to negative rates, it will lose some appeal as a haven refuge due to the cost of using it as such. (Incidentally longs against the yen will also refund larger amounts from now on as a result of these cuts).
The UK will outperformthis year
With regards to the UK. Inflaion due on Feb 16th will be firmer than expected in my estimation. I base this due to 1.) the price of sterling falling a lot which will negate the effects of oil somewhat. 2.) larger employment leading to more spending. 3.) the healthy housing market. When this happens people will see how cheap the Stering is and will likely buy it back to its fair value of about 1.50 (based spreads between two gear generic govt bonds). And before all the “pros” jump on this and start calling me wrong:

1.) you ridiculed me in august 2015 for saying the fed would hike in December. Who was right?

2.) you ridiculed me since Novemeber for saying the BOJ would act at its jan meeting. Who was right?

3.) you ridiculed me in december for saying the rnbz would cut. Who was right?
I am saying now that the Sterling will outperform the other majors in 2016 and thhe BOE will move at the end of the year. (You can begin ridiculing again)
Account safety:
Some people have been asking me if we could have avoided the events of December and the answer is no. And as for the other people on Etoro who want to claim they are different. Yes you are. There are NO other people like us on Etoro. We go for 1,000s of percent a year. We consider a 10% month a failure. Sure you may have lost only 15% in Demeber but these people make less than 5% on their best months. The sheer fact that someone on a 14% annul return was comparing his risk and drawdown to someone on a 2000% return should show you just how dellued these people are.
We can never be a 100% safe account. We can not go for 4000 percent in a year and not take big risks. I wish we could but we can not. Its easy for people like to critisize because they are not the same as us, they have never turned 10k into 300k. We try to make wealth, they try to guard it. The fact is they all laughed in December but had 15 random and most unlikely events not have unravelled at the same time, i would have made half a million dollars from 10k in less than 9 months. Something none of these people can even comprehend (hence why they are so eager to just get an extra 100 a month….). What went wrong, just to name a few (and all in those 6 weeks):
1.) russia going into syria

2.) turkey shooting down a russian plane

3.) russia threatening turkey

4.) sanctions on iran lifted

5.) oil hitting a 15 year low

6.) commodities doing the same

7.) circuit breakers in shanghai throwing the markets into panic (twice!) before being suspended.

8.) a warmer than usual winter.

9.) saudi tensions with iran.

10.) uk bringing forward the eu referendum.

11) boj easig in dec by a tiny amount and saying no more would happen (which we know now they did).

12) draghi losig control of the ecb in december and failing to deliver.

13) opec abandoning its quotas
How unlikely was just one of these things, let alone all 13… And there is so much more.
So no we can never be 100% safe because chasing insane returns means heavy investments that leave us exposed when freak things like this happen. Do not expect 4 figure returns with no risk. That is unreasonable and shows ignorance of markets and investment. 
Right, back to the movies,
Mohammed
P.s. From tomorrow will start writting a weekly outlook for the week ahead. Hopefully it will prove useful to the community.

Quick update: 29th Jan 2016

Man this is so troublesome to do from aphone, but here it goes:

Etoro:

Eurgbp closed at 10% profit on Etoro. Now all trades are closed except our two legacy gbpchf and gbpjpy trades which are doing much better. Having gained over 1500 pips recovery. The januarys losses of 35% have now been reversed into a gain of 14%. Which means we can now work towards recovery of December’s disaster.

Hf:

Account continues to be in the profit despite this being a harsh first month. We had some bad luck woth a large usdjpy trade, which sld and ate away into profits. Had it not Sl’d it would have been MEGA green (40k profit). But hats ok I guess it was a calculated risk which just did not come to fruition. None the less, we end our first month with gains in both balance and equity, which is remarkable considering everything worked against us in the first 3 weeks of the month. I would have been happy to break even, so a tw figure percentage profit makes me delighted.

Food for thought:

Boj has acted and cut rates to not only weaken Yen but also make it less attractive to hold. I suspect their intention was to reduce the appeal of the jpy as a haven asset much like the smb did with the chf by the use of negative rates. Is this perhaps the BOJs weapon of choice? Negative cuts to deter speculation on the JPY? If so i need to revise my usdjpy forecasts ( not in a straight line) for the year to:

Q1 2016 -123

Q2 2016 -125

Q3 206-127

Q4 2016 -130

I assume one further cut from the BOJ and 3 further rises from the Fed.

On another note:

Have got to say the fundamentals coming together the last two weeks has been great for my confidence and has helped me lunch the dozen new profit yielding trades you have seen in the last two weeks. After january’s opening i was left shattered wondering how my way of doing things that had worked for so long had been shattered. Then i realised it was quite frankly an anomaly and everyone got shattered (even those with 5-6 accounts doing different things), not just me.

Finally a long overdue purge of the community:

Going to permanent ban a few people who abandoned me this last month. Not ones who left because of choice (that is perfectly fine) but i mean the people who started jumping ship to the first spammers who started their nonsense ob my wall. That was very bad from them in my opinion to support such behaviour how they did and it was very painful for me to see that betrayal. As a result they are no longer welcome to the forums or any other services I do. Hope it was worth it for them. Will take care of it when I get back to Dubai.

To everyone else, hope you are having a great day. We are looking healthier and soon look ready to begin the ascent back to where we were and beyond.

Mohammed

Well not much to say on the move

Just that once again fundamentals proove right as the BOJ implements negative rates in line with our expectations for their crucial need to do more. We have been calling a Jan move since October for the BOJ to act and its fun to see ourseves prooved rigt again (after our accurate fed call in August last year). I guess this means the Score is:

Fundamentals 2, Recession kids 0.

More importantly, divergence between the BOJ and FED will now become more apprent as time goes on. Expect more raises from the Fed this year and expect more stimulus from the ECB. Also expect the BOE to surprise everyone. Divergence is here in a big way, just like we said. This is a great opportunity to make money. Let us hope we capitalise on it correctly,

Mohammed

Contemplating cutting the pound trades and staying away from sterling

All this months economic data confirmed our fundamental assumptions that the Uk economy is outperforming others in the developed world:

1.) Unemployment is at 10 year lows.

2.) Inflation is significanty better than expected.

3.) GDP growth is the highest among european countries and second highest in the developed world.

In spite of this sentiment is weak on the pound due to the lack of consistancy from Governor Carney and the BOE. The man who a few months ago rocked markets with comments of the time to raise rates in the UK coming closer and fastser than markets could anticipate now says the compleyte opposite despite the UK improving in that time. In hind sight the reason is clear. He is a media (word starts with wh) who craved attention when the FED were getting all the headlines after they began to declare intention to normalize rates. The pity is, i took his comments then at face value thinking hat there aas no way the govenor of a central bank like the BOE would be so petty. Unfortunately i was wrong and i see now tjat i should have realised that a man who wants to even stand out for serving 5 years instead of 8 as tradition states is more interested in being a rock star than a banker. Among these data leaks and a central bank that is more interssted in headlines than consistancy of monetary policy, is it any wonder that the pound is in turmoil?

Really considering cutting these trades at the earliest chance (even if it means a loss) and never touching sterling again. Out of our last 52 trades on etoro, 50 were profitable in under a week. The 50 that did not invovle the pound. I think im spotting a trend here in what throws the spanner in our analysis.

Sorry guys

Wont be able to post regularly here till Sunday. On the move again till then. Will be posting short snippets on twitter very often. On Sunday, things will go back to normal with regular day blog updates, trade ideas etc.

More misery for pound

Pound falls 100 pips in 100 seconds as us home sales beat expectations. The reason for sterling weakness is directly and solely due to Usd bulls buying the usd and selling the pound which is affecting all other pound crosses.

It seems the cable is headed for another test of 1.40 and lower as us bulls prefer to trade against the pound rather than the haven eur and jpy in the face of falling oil prices and central bank meetings this week.

Tide turns?

As of writting this, we have reversed the unrealised losses of Janaury (38% loss) into a gain in equity by 6% this month. In short, we are Substantially better off today than we were 3 weeks ago. 

While there is still a lot more work to do, this turning of a losing month into one with a modest gain is encouraging. We can effectively say that we have made a start to recovering from the damage done in December. Let us hope our fundamental views prove their endurance once again.

Maybe this year does not have to start so badly for us afterall,

Mohammed

Update: 26 jan 2016

Sorry for the brevity doing this on a mobile. Not much to say today but had a few good trades that closed in profit. Seems all our new etoro trades in 2016 (12 of them) have not been afflicted by the curse we suffered in December 2015, so I guess I still have my touch.

Our two legacy headaches from 2015 are looking much better though. Having gained 700 pips and 400 pips in the last week respectively. So overall I am optimistic.

Please be careful tomorrow. Fed and rbnz have meetings. Fed will hold and might be dovish paying attention to slower than expected manufacturing, oil prices and China. Rbnz will hold as well but be dovish on their outlook so nzd should fall (especialy after inflation was cut). Would love to tip you on a nzd pair to trade but not got my tools with me on the road. Maybe some of the foundation grads can leave some comments please?

With regards to the naysayers on etoro. Take what they say in relation to their background. Guys with only one month of green, spam patterns and multiple blown accounts were bound to be right eventually. It doesnt make the children experts. The world is not in recession. Gdp is growing. Employment is growing.

Regards,

Mohammed