4700 PIPS IN ONE TRADE?! (Premium Signals Service)

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+58% in 6 Months Return On Capital

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And a new start to the week has begun! Trade well guys

Prices and earnings. 2 bifurcating subjects that have baffled investors and money managers since the start of 2015, exactly when the Fed ended its QE program for good (coincidence or trigger?). For almost 2 years now, the correlation between forward earnings expectations and the broad market have broken down almost idiosyncratically.

More current developments have caused both prices (S&P 500) and consensus earnings expectations to go practically nowhere but in circular gyrations.

While the U.S. corporate sector is technically already in an earnings recession, equity prices have not caught down to the earnings-implied fair value, which makes us wonder how much more of the technical driven (short covering) rally there is left in the tank.

Tread wisely.

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Some interesting news from Puerto Rico today...

Most investors have never heard about Puerto Rican bonds but they now do. After a contentious period of internal strive, the Commonwealth state is now "almost certainly" set to default on more than $400mn in public debt, sending government bond yields soaring to record highs, spreads to record wides, and bond prices to record lows.

For every $1 invested in this series of 4.704% Puerto Rico bonds at par issue, they will now be worth 20¢, or 5 times less than principal. But then again, this analogy is besides the point — Investors will likely not get a single cent back assuming the treasury doesn't honor its 36¢ offered recover price. For those unhedged folks who haven't bought CDS protection, good luck.

We were killin' it back then too!

One of our old trades back in December that netted us 580+ pips, on the USDCAD no less!

This trade was made available to our clients on the Premium Signals Service - big profits for those who took it!

We covered the details and mindset behind the trade here:

"It was the EURNZD last week. Now it's the turn of the loonie. So far we've been hitting home runs week after week, helping many of our Premium Subscribers profit substantially just in time for the Christmas holidays. USDCAD closed Friday at the highs of the week, putting our 2 trades which are long the pair roughly 580 pips in the profit. Not many traders are able to accomplish this - adding to a base position with confidence, and holding on to a trade with conviction vis-à-vis choppy price action."

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Join the Premium Signals Service by Business Of Finance

+58% in 6 Months Return On Capital

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One more blast from the past...

A screenshot of our EURNZD trade made back late last year.

We were killing it back then too,together with our Premium Signals Service clients who took this trade and won!

Trades were discussed here:
http://www.businessoffinance.com/tra...0-pips-updates

Just a heads up....

While we have been writing extensively on the weakness of the U.S. dollar and resulting strength in commodities such as the precious metals (gold, silver, platinum), we can not give less of a damn when it comes to being realistic. Now is the time to be realistic, we feel.

Just on the technical side of the market (price action and market structure), the DXY (U.S. Dollar Index) is currently at its May 2015 lows which is a key technical support area. Gold and silver are conversely at their January 2015 highs which are both key technical resistance areas. Gold managed to trade briefly above the key psychological big figure of $1300.

Since their respective inflection points, the DXY is down -8%, gold up +24%, and silver +31%. These are some seriously big numbers that were talking about. 8% is a huge deal for a currency index, for the lesser learned of you.

We also note that positioning data indicates that large speculators (momentum chasers) are heavily long gold and silver, and have turned net short the DXY for the first time since 2012 (the most short USD in more than 3 years)...

We aren't bearish the precious metals or bullish the USD. In fact, if you've been following us, we have been advocating long exposures in the precious metals complex since early February, and have been shorting the USD since around the same time.

This is merely a heads up to traders and opportunistic folks, if you get what we mean. Trade accordingly...

The Japanese yen is extremely expensive relative to its spread-implied fair value. Spot USDJPY is trading at 106.50, a good 2000 pips below where the 2-year UST/JGB yield spread implies it should (126-129). This major decoupling started September or 2015 after the BoJ increased the size of its QQE program.

On the other side of the coin, the U.S. dollar has been rather well contained by real yields, as proxied by the 10-year TIPS yield (treasury inflation protected securities, basically CPI inflation-hedged treasuries).

Do you see an trade opportunity here?

Key NFP Report This Week


Last week was all about central bank activity. The U.S Federal Reserve unsurprisingly left interest rates unchanged, while the Bank of Japan shocked the world by doing absolutely nothing - sending whirlwinds through the global financial markets - including having a depreciating effect on the U.S. dollar.

The U.S. economy and the U.S. dollar will again be in the market's crosshairs this week, as April's Non-farm Payrolls
(NFP) report is set to be released this Friday morning, EST.

We preview Friday's key market event in today's Snippet, click below to get into our thoughts and analysis:
Dollar Eyed With Key April NFP Report This Week

AUD Plunges

The Aussie dollar is plunging today after the Reserve Bank of Australia (RBA) unexpectedly cut interest rates by 25bp from 2% to the current 1.75%. This follows last week's record low Australian core CPI inflation, and overall sluggishness in its economy.

On another note, if ‪#‎China‬ is what it really claims it is (soaring commodity prices and industrial profits) then why would Australia (China is Australia's largest trade partner) need to ease monetary policy? Think about that.

Record low inflation was the main reason why the RBA today cut interest rates to record lows of 1.75%, surprising most market participants as knelt 12 out of 27 analysts polled by Bloomberg has expected a cut.

AUDUSD (and other Aussie crosses) are still trading at their respective daily lows, as fresh selling slams the Aussie dollar much lower. A double whammy might even be in the books once we get a snappy bounce higher in the greenback and hence lower commodity (including precious metals) prices.

When the going gets tough, just floor the rates!

Smart Money Being Dumb....?

Truly unprecedented. 14 weeks in a row of selling by the so called "smart money", as the latest BofAML Client Flow report shows. "This has been the longest uninterrupted selling streak in our data history", going back to pre-Lehman days of 2008.

The funniest fact, as we've laughed about for the past couple of weeks? That the so called "smart money" trinity consisting of hedge funds, institutional, and private clients have been heavy sellers all while stocks have been ripping higher from their February lows. For any trader to do this professional, he would likely get the boot from his desk in a matter of weeks, if not days. But this group of clients can't care less.

Repeating ourselves, if "smart money" is selling, and retail money is most probably also selling (or at least staying in the sidelines), then someone has to be buying en masse. And that someone, or in this case something, has been the issuer of common stock, the companies themselves.

It's honestly getting tiresome for us to, week after repetitious week, to keep on blaring on this topic. Yea we know, it's both amusing and boring at the same time. Let's see how long this record "uninterrupted selling streak" lasts.

From BofAML:

"Last week, during which the S&P 500 fell 1.3% in its biggest weekly decline since early Feb., BofAML clients were net sellers of US equities for the 14th consecutive week, in the amount of $2.8bn. As we noted last week, this has been the longest uninterrupted selling streak in our data history (since ‘08)—previously the longest streak was 12 weeks (in late ‘10).

Net sales continue to be led by institutional clients, while hedge funds and private clients were also sellers. Buybacks by our corporate clients—which are seasonally light in April— decelerated last week, and are cumulatively tracking below levels we saw last April. Net sales last week were in large and mid-caps, while small caps saw net buying.

• Hedge funds have been net sellers on a 4-week average basis since early Feb.

• Institutional clients have been net sellers on a 4-week average basis since early Feb.

• Private clients have been net sellers of US stocks on a 4-week average basis since early January.

• The four-week average trend for buybacks by corporate clients suggests a pick-up in S&P 500 buybacks in 4Q15, but more recently, a seasonal slow-down."

Well done ECB, well done...

The ECB has mostly lost control of the euro, as deeper negative rates (NIRP) and an bigger bazooka (boosted PSPP or QE program) have not only failed to weaken the euro against major currencies but sent it rallying more than 400 pips post event.

This has led to massive underperformance in European equities. A stronger euro means bad for European stocks, and this chart illustrates that perfectly. Are central banks really out of ammo? The market believes so...

The havoc that both the Fed and BoJ have wrought is not to be joked around with. Whilst oil promptly soared to $45 (WTI) mostly on a weaker dollar, it has erased all of its gains and is now lower pre-Fed. Stocks have mostly gone down, and today's selloff is rather sharp. Treasures are largely unchanged although we're seeing high intraday volatility in yields. Gold is the only major asset that has held on to its impressive gains (again mostly on dollar weakness).

The scene is messy, very messy.

US Gas Prices

U.S. pump gas prices have surged 29% in the last 2 and a half months, and are at October 2015 levels. Although this is much less than the rise in crude prices, it has negatively affect consumer sentiment (confidence and outlook) in a sizable way.

It is important to have a good workflow...

Quoting from our article:

Maintain a proper workstation

This is a point many traders ignore, but what all successful traders have in similarity. Always make sure your work space is clear. Clutter and untidiness in and around your workstation (and home in general) translates to clutter in your mind. Imagine stepping into a filthy and messy room filled with air as stale as blue cheese?

Did you feel comfortable in that space? Hell no! Most of the highly revered modern architectural works usually look clean and organized. Sure, they can be chaotically artistic and busy in their own right, but complications doesn't necessarily equate to clutter.

You can have a workstation filled with whatever you need to trade properly, but make sure they are neatly organized and there is some structure to all of it. Clean up your space and your mind will become more focused. You may also want to hang up images on the walls of your workstation.

Images or works of art that inspire you towards your trading and life goals; something that inspires and motivate you to work hard. All these little additions serve as subconscious cues to help you remain progressive.

READ MORE: http://www.businessoffinance.com/tra...ike-a-business

t's not just the low and middle income group of Americans who are feeling discouraged that their economy is going nowhere despite the fiction peddled by their leaders that all is well. High income Americans (annual income above $75,000) are now staring to loose faith in their economy, too.

The Bloomberg High Income Americans Confidence index fell by the most since 2013, while the comfort of "rich consumers" declined substantially in April.

Perhaps of the stock market was able to continue rising, this group of better off Americans can be rallied to consume and spend more... There needs to be some work done.

Yen Selloff Imminent?

Is the yen ripe for a selloff (USDJPY rally)?

Despite an unprecedented amount of monetary easing taking place at the Bank of Japan, the yen has - since the middle of 2015 - been on a consistently strengthening trend versus the USD. As paradoxical as it may seem in a period when the Fed talked about, and then did raise interest rates coincident to the BOJ firing off ever more arrows, the strengthening yen has been the reality. That reality may be about to take a breather, though, as too many investors have moved to the same side of the boat in betting on yen appreciation while the “smart money” is net short the yen.

Note: Higher USDJPY = Weaker ¥ & vice versa

In the chart below we show the net commercial trader positioning on yen options and futures contracts. Commercial traders are the “smart money” in that times of their extreme positioning often coincide with inflection points in the markets. They are the opposite of small speculators, who often have extreme positioning at inflection points as well, except that it’s the wrong positioning.

At the moment, the “smart money” commercial traders are carrying a near record net short position on yen options and futures of about 68,000 contracts. Previous periods of positioning near this extreme level have usually coincided with with a pause in appreciation or a selloff of the yen.