Money Flow Trading Method along with Risk Management

You can NEVER lose trading Forex if you take a profit and are not greedy. At 2:02 PM today after the FED Rate decision came out I shorted 2 positions of US30 or the Dow and I closed ALL 3 positions including the one that I put on yesterday and now the markets have reversed after Janet Yellen spoke at her Press Conference at 2:30 PM and since she came across as uncertain and dovish the market turned around having been down 162 points , I was NOT GREEDY and locked in the 3 profits. That is a very important lesson to learn. You cannot ever lose taking a profit especially a good one.

I closed all three positions at 2:28 PM for a Net Profit of $2139.00 US and my out lay of funds was $3150.00 US

Not bad for 30 minutes work however I knew exactly what to do and why because I have been doing this 10 years and I know what to do to make money trading currencies.


More to come later as I read the research from my normal information sources. Have a nice evening. !!!

The Nightly Wrap Up - Daily

We now have another Forex Trader ready to get on the Money Flow Train. I told him just now that I would post the instructions here so that is what I am now doing. Welcome aboard the MONEY FLOW TRAIN - dttsomh

IMPORTANT ANNOUNCEMENT: I have 2 Forex Traders ready to open their Demo Account with FXCM UK and I will post some of the information for them here.

(4) You will open up a $50,000 US Funds Demo Account with FXCM UK
(5) You will email me your user name and password so that I can check your results daily.
(6) I will give you 30 days of my time and knowledge and at the end of the 30 days I will give you a grade out of 100 HOWEVER your real Grade will be if you show NET PROFIT or ROI(Return on Investment) of 5% or $2500.00.


The first 6 qualified persons that sign up and agree to the above conditions will be given my Private Email address so we can communicate. All QUESTIONS AND ANSWERS WILL BE PUBLISHED ON THIS THREAD IN ORDER TO HAVE FULL DISCLOSURE.

FULL DISCLOSURE: I used to be an Introducing Broker with FXCM in New York back during 2007 and 2008. I had a real funds account for a client located in Hong Kong and I was managing $125,000 US Funds. I have no current business arrangement with either FXCM in New York or FXCM UK in London.

I moved all my business to Ava Trade in Ireland and I am an Introducing Broker with them however I have recently decided to bring all my business back to Canada so I am not active with Ava Trade at the moment. I am working on putting up a website early next year during 2017 and I will have a 24 hour by subscription service charging no more than $50.00 US a month for full access. I used to use the services of Trade The News in order to have full voice news during the 24 hour Forex trading day. I today entered into an understanding with "Ransquak" to use their live platform under a subscription contract which my corporation will use and pay for. My email address is [email protected]

If any of the 6 initial persons here take my 30 day trading course and go through the 30 day period then when my website is up and running next year the 6 here will get a lifetime subscription at no cost. I plan to trade for at least 10 more years since I really love what I do and enjoy sharing my knowledge and skills with others.

To open a demo account with FXCM UK please go to their website and click on open practice account and select US Funds. Once you are on the platform I will help you set up the 18 symbols that I use.

As Promised !!!
My congratulations go to DavidRP who is the first Forex Factory trader that has opened his FXCM UK Demo Account.

I have logged into his account since as requested he has emailed to [email protected] his User Login and Password.

I now have organized for DavidRP the 16 symbols that I use on the FXCM UK Demo trading platform. DavidRP now has $50,000 US Dollars to trade with. I will show here what the 16 symbols that are used and in the order that they are on the platform in blocks of 6 symbols.

EUR/USD EUR/JPY USD/JPY GBP/USD USD/CNH USD/CHF

EUR/CHF AUD/USD USD/CAD USDOLLAR XAU/USD XAG/USD

US30 NAS100 SPX500 COPPER UKOIL BUND

You can all see that by having these 16 pairs you have an excellent view of the Money Flow between Asset Classes.

Congratulations DavidRP

You are soon ready for your first Forex trades with Capital of $50,000 US Dollars.

I just did some research and found this article on Zerohedge.

http://www.zerohedge.com/news/2016-0...-currency-2016

Snippet:
USDJPY correlation to S&P 500

The USDJPY is often seen as the currency pair to buy when the stock market is doing well and to sell when the stock market sinks. But how well has that relationship held in more recent years. I’ve had a look at the correlation between the S&P 500 index and the USDJPY exchange rate. I chose to look at the correlation for weekly and monthly close prices going back 10 years. I also looked at the weekly correlation for the periods going from July 2007 to March 2009 and from January 2000 to December 2002.

I chose to look at the most recent years as going back any further Japan was almost considered an emerging economy. The exchange rate for USDJPY in January 1975 was close to 300 yen to the US Dollar. The difference in economies was much greater then and more recent data is likely to reflect current economic conditions and correlations.


Author’s calculations: data from Yahoo finance & global-view
The above table shows a fairly strong positive correlation between the S&P 500 and the USDJPY exchange rate, for weekly and monthly closes. This correlation increases to 0.8441for weekly closes during the 2007/2008 crisis, 1 being perfect correlation. It would seem clear then that over the past ten years this correlation has held and increased greatly during market stress. Worthy of note is the fact that during the 2000/2001 crisis this correlation broke down and turned negative.

Current economic scenario and interest rate out look
The global economic outlook is not too rosy and has not been looking as good as it did several months ago. Fears of a hard landing in China and general economic weakness in developed economies are taking a toll on stock markets worldwide. To add to the specter of global recession is economic data that is not living up to expectations. This month’s Non-Farm payrolls came out a lot lower than expected at 151k with forecasts at around 200k. That was also the third successive decline in job creation. GDP growth rate has also been on the decline over the past 3 quarters with latest data in January at 0.70%.

Concerns expressed by Fed Chairwoman Yellen are rattling the markets further after the bumpy start to the year. Previously the stock market had taken a sharp stumble whenever it felt concern for interest rates being hiked too early. Now it’s getting shaken by the fact that the Fed is now admitting that the economy is not growing as fast as it should be. Technical analysis is now adding gasoline to the fire with signs of the recent correction turning into a bear market.

The Fed may or may not have raised rates too early but from recent statements it would seem like the current level will be set to stay until economic factors begin improving again. In Japan on the other hand interest rates have just been lowered to negative levels, and seem destined to remain there for some time. The positive effects hoped for of such a dovish monetary policy were short lived and the Nikkei dropped 5%.

What all this means for the USDJPY
As is well known interest rates can drive large moves in currencies as expectations of changes are played forward. The most recent example is the sustained rally experienced by the US Dollar against most currencies especially against the Euro or the Yen which already had very low rates. So in theory rising rates in the US and decreasing rates in Japan should see the US Dollar increase in price against the Yen.

That holds when all else remains equal and GDP growth is similar and so too is inflation. The negative interest rates in Japan may or may not have an effect; negative interest rates are completely new there and not very experimented in general. Negative interest rates usually happen with negative inflation, if not it simply would not be possible. The effect of higher rates of inflation is to depreciate the value of a currency. A currency where inflation is higher than another currency will see its value depreciate; if not the goods in the country with low inflation would become very cheap.

Over the past year while inflation in the US has risen from negative levels in the first half of 2015 and is now on the rise, in Japan inflation has been on the decline and has turned negative with MoM data at -0.1%. The chart below shows the crossover in Core Inflation for Japan and the USA.



source: tradingeconomics.com
During this period the USDJPY has halted its rise reaching its peak on June 5th 2015 at 125.68. It has since then experienced large amounts of volatility with a downward trend now in full play. Doesn’t that sound familiar to another well-known asset class? Which I shall not mention of course; the S&P 500.

Source Tradingview
Given the high positive long running correlation, a scissor effect in inflation and a likely rout in the broad stock market I see this currency pair taking a nose dive for 2016.
Attached Images
http://www.forexfactory.com/attachme...1&d=1481768390http://www.forexfactory.com/attachme...1&d=1481768390

http://wolfstreet.com/2016/12/14/yel...unges-but-why/
Snippet:

7th week of US Government debt “carnage” continues unabated.
Stocks sold off, starting at 2:04 PM, as the Fed’s slightly more hawkish stance was sinking in. The S&P 500 ended the day down 0.8%. Not even a tempest in a teapot. Gold sold off, now down 17.6% since July. Oil plunged over 4%, but unrelated to the Fed: the market is figuring out that nothing beyond wild jabbering by oil potentates is happening to contain the oil glut. But natural gas jumped nearly 3%, based not on the Fed, but on the weather. And bonds? Another opportunity to use the word “rout” or “carnage.”

The Fed increased its target rate for the second time in nearly a decade, after having done so a year ago for the first time. It raised it from next to nothing by nearly nothing to a little above nothing: a range of 0.5% to 0.75%. But according to its dot plot, whose reliability has become a joke, it will raise rates three times next year, up from the prior dot plot which indicated only two hikes.

At the press conference, Fed Chair Yellen explained the rate hike that everyone had taken for granted: “My colleagues and I are recognizing the considerable progress the economy has made toward our dual objectives of maximum employment and price stability….”

Whereby “price stability” is defined as 2% inflation as measured by Core PCE (without food and energy). The Personal Consumption Expenditures price index most often shows an inflation rate that is lower than CPI. So in terms of CPI, the Fed’s idea of “price stability” would be something closer to 2.3%. Then there’s the issue of excluding food and energy. If the oil sector sees its fervent wishes fulfilled, and the price of oil jumps, this will drive up energy costs, but it won’t be reflected in Core PCE. So in terms of CPI, including food and energy, the Fed’s target of “price stability” could be higher still.
Not to speak of the inherent inaccuracy of the CPI measure.

Then there’s this: 2% inflation as measured by Core PCE is the “target.” It’s not a ceiling. And the Fed will allow inflation to exceed that rate by a good margin, before cracking down.

At the same time, the Fed has not bought into the Trump campaign’s economic growth projections. Instead, in its own projections, it sees the same miserably slow growth that the economy has been mired in for the past few years:

1. 2016: 1.9%
2. 2017: 2.1%
3. 2018: 2.0%
4. 2019: 1.9%

And the bond market is beginning to smell a rat. If you bought 10-year Treasurys some time ago with at a yield of 1.8%, and inflation is heading to 3% or higher, you’re experiencing the joys of “inflation without compensation” – for years to come. Bond buyers hate that. They become reluctant, even as sellers become more eager.

So the 10-year Treasury yield jumped today, settling at 2.54% and then rising further in late trading, to currently 2.58%, up from 1.38% during the heyday in July (via StockChart.com):
http://wolfstreet.com/wp-content/upl...2016-12-14.png
The 2-year yield jumped to 1.26%, and then continued to rise to 1.29%, the highest since August 2009, and well over double the yield of 0.5% in July (via StockChart.com):
http://wolfstreet.com/wp-content/upl...2016-12-14.png
And mortgages followed, with the average 30-year fixed-rate mortgage sporting a rate of 4.27%. Mortgage News Daily provides some color:
Nearly every lender raised rates this afternoon – some of them multiple times. At first that took the form of mere increases in upfront costs (i.e. the contract rate itself wasn’t moving higher), but subsequent reprices added up to an eighth of a point in rate for several lenders. From a range of 4.125-4.25%, top tier conventional 30-year fixed quotes moved up to a range of 4.25-4.375% – well into the highest levels in more than 2 years.
So what is spooking bond markets and mortgage lenders? It wasn’t the rate increase. That was a given. It had been taken for granted by all market participants.

And it wasn’t inflation that caused this surge in yields. The upward trend of inflation has been established and confirmed. And people are starting to believe in it: The market’s inflation expectations as measured by the 10-year break-even inflation rate – based on the yield spread between Treasury notes and Treasury inflation-protected securities – has reached 2% for the first time since September 2014, up from 1.4% this summer, and up from 1.2% earlier this year.
Instead, what might be spooking bond markets and mortgage lenders is a Fed that, while slightly more hawkish than it had been, is not nearly hawkish enough to confront the inflation trajectory in time.

There’s something else that’s tripping up the US Treasury market: the largest foreign buyers of Treasurys – China and Japan – aren’t buying anymore. In fact, China’s foreign exchange reserves are dwindling, and it has been dumping Treasurys, not because of the Fed but because of its own struggles with capital flight and its impact on the yuan.

And the Japanese aren’t buying anymore. Net purchases of overseas bonds plunged 94% in November from October, to a mere $728 million, according to the Ministry of Finance. With typically 60% to 70% of these purchases in US Treasurys, it marks a sudden and huge shift from the buying binge earlier in the year, when Japanese NIRP refugees chased after better returns overseas. So far this year, Japanese investors bought $194 billion in foreign bonds, the most in the current data series going back to 2005. But that binge stopped in November.

Why did Japanese investors get spooked? They too see the rout in Treasurys and the potential losses lining up in the future. And it comes at a bad time: with their watered-down yen, they have to pay a lot for these bonds, and they have to pay fees to exchange their yen for dollars. It all adds up in what is still a low-yield environment, studded with a lot of unpalatable risks.
Despite the rout in Treasurys, junk bonds have soared for months, as the Hot Money returned to bet on Oil Nirvana. Read… Treasuries Melt Down, Junk Bonds Boom, Yield Spreads Collapse

Morning Thoughts - Daily

Good Day everyone. We are in a once in a lifetime financial situation as well as a geopolitical situation. I want to start off by having everyone read Zerohedge and a summary of what has happened overnight since the FED rate hike.

http://www.zerohedge.com/news/2016-1...ops+to+zero%29

This morning the world awakes to a landscape in which markets are frantically rushing to catch up to a suddenly hawkish Fed which not only hiked for the second time in a decade but, as per yesterday's Fed statement and Yellen press conference, realized it has been behind the curve all along, and the result has been a spike in the dollar across virtually all currency pairs with the USDJPY surging above 118.40, coupled with a jump in bond yields around the globe as bond (the US 10 Year is trading at 2.64%, the highest since September 2014) as traders dump any hint of duration.

The sentiment was notable in the analyst commentary this morning:

1. “The Fed is becoming a leopard with new spots,” said Stephen Gallo, currency analyst at BMO Capital Markets in London. “The Fed has shifted its 2017 bias away from supporting growth with ultra-stimulative policies towards keeping a lid on inflation risk.”
2. “Maybe Fed officials are more concerned about the prospects for a rise in inflation next year than they are letting on, given the potential boost a fiscal stimulus could bring, which was something they didn’t have to consider last year,” Michael Hewson, a market analyst at CMC Markets in London, wrote in a note.
3. "You had the Fed come in and be a bit more hawkish that many people, including us, were expecting," said TD Securities head of global strategy Richard Kelly. "It wasn't just the move in the dots, it was the language that was used. There was an acknowledgement that if Trump gets his plans moving through congress you could see the economy pushing higher."

DB's Jim Reid had a different angle: it will be all about the volatility in rates in the coming year, as the Fed has officially unleashed the inflationary genie out of the bottle.

People in my profession have perhaps been guilty of over analysing the Fed in recent years when every small nuance was over examined when in reality they really haven't done much over this period. However last night's statement and press conference was full of interesting remarks and certainly landed on the hawkish side with the dots edging up with the median dot now showing 3 hikes for 2017 rather than 2 beforehand. Last night's meeting broke a trend as prior to this, the last six FOMCs have seen treasury yields fall with the last seven seeing the dollar fall against the Euro. Not this time. The meeting fits in with our view that markets are vulnerable to a bond yield spike next year. Rates vol could be the main talking point of 2017.

In equities, after yesterday's drop, the biggest since the election, Asian stocks fell but European equities rose driven by financials while S&P futures are already getting the BTFD treatment and trying to make up for Thursday's drop .

It wasn't just the Fed tightening monetary policy. Shortly after the Fed announcement, virtually all Gulf Arab states followed suit out of necessity to keep their dollar pegs. As Bloomberg notes, policy makers in Saudi Arabia, the United Arab Emirates, Kuwait, Bahrain and Qatar raised borrowing costs within hours after the Fed raised its benchmark rate for the first time this year. The prospect of further increases in U.S. rates next year will complicate efforts to bolster economic growth and ease a cash squeeze among Gulf banks as revenue from oil exports, the region’s main source of income, plummets.

However, while stocks are modestly higher, the big story this morning is all about the Dollar, which continues its relentless surge higher, in the process pushing the USDJPY, as the Yen tumbles over 1%, and sending the pair to 118.30, the highet level since the start of the year...
http://www.zerohedge.com/sites/defau...y%20drop_0.jpg
... but more notably the Euro, which moments ago also plunged by 1% to 1.043, dropping to the lowest level since January 2003.
http://www.zerohedge.com/sites/defau...20plunge_0.jpg
The dollar also extended its advance against all major and emerging-market peers.
http://www.zerohedge.com/sites/defau...%20hikes_0.png
The bloodbath was not confined to FX, however, as global government bonds were left reeling this morning, with the 10Y Treasury spiking to 2.64%, the highest level in over two years, while European bonds likewise tumbled, sending 10Y yields surging as follows:

1. Spain +6bps at 1.46%;
2. Italy +6bps at 1.85%,
3. Portugal +4bps at 3.82%,
4. German +7bps at 0.37%;
5. Dec. bund futures -95 ticks at 161.51

This all follows this morning record crash in Chinese bond futures, which sent local 10Y yields higher by 22 bps, the most on record, to 3.45%, as a plunging yuan and hawkish Fed comments damped expectations of monetary easing in China.

http://www.zerohedge.com/sites/defau...INABOND1_0.jpg
In early trading, stocks were ignoring the momentous moves in FX and rates, and for now stocks in Europe and US futures traded higher, with the Stoxx Europe 600 Index rising 0.3 percent, led by banks.Randgold Resources Ltd., Fresnillo Plc and Centamin Plc fell more than 7 percent with declines in precious metals, while Electricite de France SA sank the most on record after saying profit will drop next year. The VStoxx Index declined 9 percent to the lowest level since September 2014, signaling traders are pulling back from hedging against swings in euro area shares.

In the U.S., futures on the S&P 500 Index were up about 0.2% after the equity gauge posted its biggest loss in two months on Wednesday, however should the bond collapse continue we fear the green will quickly shift to red.
* * *
Bulletin Headline Summary From RanSquawk

1. European bourses enter the North American crossover higher with financials outperforming
2. USD strength remains the key theme in FX markets with USD/JPY remaining north of 118.00
3. Looking ahead, highlights include SNB, Norges Bank, BoE rate decisions, US CPI, Philadelphia Mfg Index, NY Empire and Weekly Jobs

Market Snapshot:

1. S&P 500 futures up less than 0.2% to 2255.2
2. Stoxx 600 up 0.2% to 356
3. FTSE 100 down 0.2% to 6934
4. DAX up 0.5% to 11302
5. German 10Yr yield up 7bps to 0.37%
6. Italian 10Yr yield up 5bps to 1.84%
7. Spanish 10Yr yield up 5bps to 1.45%
8. S&P GSCI Index up 0.1% to 391.5
9. MSCI Asia Pacific down 1.7% to 136
10. Nikkei 225 up 0.1% to 19274
11. Hang Seng down 1.8% to 22059
12. Shanghai Composite down 0.7% to 3118
13. S&P/ASX 200 down 0.8% to 5539
14. US 10-yr yield up 2bps to 2.59%
15. Dollar Index up 0.67% to 102.44
16. WTI Crude futures up 0.4% to $51.23
17. Brent Futures up 0.8% to $54.33
18. Gold spot down 0.4% to $1,138
19. Silver spot down 1.7% to $16.56

Global Headlines

1. Molina CEO Tells Aetna-Humana Judge Company Isn’t ‘Trivial’
2. Exxon Names Darren Woods as New CEO to Replace Rex Tillerson
3. Laureate Said to Raise Over $300 Million From Apollo, Abraaj
4. Lonza Focuses on Health With $5.5 Billion Deal for Capsugel
5. Dubai Said to Plan $36 Billion Spend on World’s Biggest Airport

Asian equity markets traded mostly negative as the region reacted to the FOMC rate decision and steeper projected rate path. This pressured US stocks and dampened bourses across Asia with ASX 200 (-0.8%) led lower by commodity names after around 4%-5% declines in oil and iron ore, while gold slumped around USD 20. Hang Seng (-1.8%) and Shanghai Comp. (-0.7%) were also weighed by the developments across the Pacific and as regulators continued to impact risk appetite, with the CIRC seeking to lower the total proportion of equity assets held by insurance funds to 30% from 40%. Nikkei 225 (+0.4%) outperformed as downside pressure was overshadowed by JPY weakness which resulted to firm gains in large auto names, while 10yr JGBs saw spill-over selling from T-notes and fell below 150.00 as yields rose across the curve in reaction to the prospects of a steeper Fed rate hike path. However, prices were off worst levels following a 20yr JGB auction in which the b/c increased from prior and tail in price narrowed. PBoC injected CNY 140bIn 7-day reverse repos, CNY 45bIn in 14-day reverse repos, CNY 60bIn in 28-day reverse repos.
Top Asian News

1. Indonesia Keeps Benchmark Rate Unchanged as Rupiah Slumps on Fed: Decision was forecast by all but one of 21 economists surveyed
2. China Deploying Weapons on Artificial Reefs, Think Tank Says: China appears to be deploying weapons systems on all seven of the reefs it has reclaimed in the South China Sea, according to Washington-based Asia Maritime Transparency Initiative
3. Japan Said to Assess Risks Tied to Banks’ Treasury Holdings: FSA said to survey banks on their U.S. bond portfolios
4. Top Nickel Shipper Drags Out Mining Audit as Lopez Holds On: Final results of checkup are now due in January, Philippines Environment Secretary Gina Lopez says
5. Goldman’s Logistics Spat Fast-Tracked in Test for Indian Courts: Commercial court in Telangana to begin hearing case against an Indian logistics company on Dec. 29

European markets trade higher as analysts and traders digests the key points from last night's FOMC rate decision. Financials are outperforming at the top of the leader boards with 3 rate hikes touted for next year. The materials sector is feeling the pinch after the stronger dollar and low gold prices take their toll. In equity specific news Lonza Group (LONN VX) have confirmed they are to buy Capsugel for USD 5.5bIn this sent shares tumbling to the bottom of the SMI down as much as 10%. Fixed income markets have seen prices fall dramatically at the start of the session, Bunds currently trade near session lows at around 161.58 but north of the contract low seen at 159.91. This was largely inline with the moves seen in the T-Notes after the FOMC statement. Gilts are also underperforming down 120 ticks but we could also see some more volatility with the BoE also today. Note a full preview is available on our headline feed.
Top European News

1. EDF Sees Ebitda Falling to EU13.7b-EU14.3b in 2017
2. Metro Group to Demerge, Split Into Two Separate Companies
3. Lonza to Buy Capsugel for $5.5b
4. H&M Sales Miss Estimates in November, 4Q
5. SNB Joins Draghi in Warning of Dread for 2017 Political Calendar
6. VW Posts First Europe Market-Share Gain Since Diesel Crisis

In currencies, the dollar gained 0.5 percent to $1.0486 per euro as of 10:38 a.m. London time. A move through $1.0458 would make the greenback the strongest since 2003. The U.S. currency climbed 1 percent against the yen, reaching the highest level since February. The Fed lifted its target for overnight borrowing costs by 25 basis points, or 0.25 percentage point, on Wednesday to a range of 0.5 percent to 0.75 percent. Policy makers expect three rate increases in 2017, up from the two seen in September.
In commodities, gold for immediate delivery was down 0.4 percent to $1,137.79 an ounce, sliding to its lowest price since February. The commodity has lost 14 percent since the end of September. West Texas Intermediate crude was up 0.5 percent at $51.28 a barrel, after Wednesday’s 3.7 percent slide. Libya is preparing this week to ship the first cargo from its largest export terminal in two years.
Looking at the day ahead, the main highlight data wise will likely be the November inflation report. The market is expecting headline CPI to increase +0.2% mom and the core to also increase +0.2% mom, a view also shared by our US economists. Meanwhile, the latest weekly initial jobless claims data will be out alongside Empire manufacturing and the Philly Fed manufacturing reports for December. Lastly the NAHB housing market index reading will be out too. Away from the data, Japan PM Abe and Russia President Putin are scheduled to hold a meeting aimed at proposing economic cooperation between the two countries. The ECB will also publish the net take-up for TLTRO II. Finally EU leaders are also due to gather to discuss migration and security issues, as well as debate the Brexit process in Brussels this morning.
US Event Calendar

1. 8:30am: Current Account Balance, 3Q, est. -$111.6b (prior - $119.9b)
2. 8:30am: Empire Manufacturing, Dec., est. 4 (prior 1.5)
3. 8:30am: CPI m/m, Nov., est. 0.2% (prior 0.4%)
4. 8:30am: Initial Jobless Claims, Dec. 10, est. 255k (prior 258k)
5. 8:30am: Philadelphia Fed Business Outlook, Dec., est. 9.1 (prior 7.6)
6. 9:45am: Bloomberg Consumer Comfort, Dec. 11 (prior 45.1)
7. 9:45am: Markit U.S. Manufacturing PMI, Dec. P, est. 54.5 (prior 54.1)
8. 10am: Freddie Mac mortgage rates
9. 10:30am: Bank of Canada’s Poloz speaks in Ottawa
10. 10:30am: EIA natural-gas storage change

* * *

DB's Jim reid concludes the overnight wrap
People in my profession have perhaps been guilty of over analysing the Fed in recent years when every small nuance was over examined when in reality they really haven't done much over this period. However last night's statement and press conference was full of interesting remarks and certainly landed on the hawkish side with the dots edging up with the median dot now showing 3 hikes for 2017 rather than 2 beforehand. Last night's meeting broke a trend as prior to this, the last six FOMCs have seen treasury yields fall with the last seven seeing the dollar fall against the Euro. Not this time. The meeting fits in with our view that markets are vulnerable to a bond yield spike next year. Rates vol could be the main talking point of 2017.

The first takeaway was some of the subtle tweaks in the tone of the statement. The committee highlighted the “considerable” pickup in inflation compensation and also the “decline” in the unemployment rate. Risks were still referenced as being “roughly balanced” which is something DB’s Peter Hooper believes is the committee’s way of recognizing the fact that risks may never be perfectly balanced. Meanwhile, there was a subtle shift in the way the committee recognises how accommodative policy is now, toning down the extent to which it is accommodative by adding “some” to the observation that it is enough to support some further strengthening in the labour market. The signalling of a gradual pace of rate hikes was left as is.

The dots caused the most excitement however. As highlighted at the top the median dot for 2017 rose to 3 hikes from 2. In fact the number of committee members now forecasting just 2 hikes or less next year is only 6 out of 17. It had been 10 committee members at the last forecast. In other words 4 committee members shifted to 3 or more hikes. So a fairly convincing move. The 2018 and 2019 median dots were left at 3 hikes apiece while the longer run dot moved back to 3% after having been split between 2.75% and 3.0% last time out. Economic projections were a bit more of a non-event with growth and inflation forecasts revised up slightly and unemployment revised down.

Fed Chair Yellen’s press conference offered the final few interesting snippets. She made special mention in particular to the change in the dots being “really very tiny” which was seen as her way of softening the hawkishness of them. She also added that she never said that she favoured “running a high pressure” economy and wanted to make it clear that she has “not recommended running a hot economy as some sort of experiment”. A reminder that back in October Yellen had said at a speech in Boston that there might be benefits to temporarily letting the economy run hot with robust aggregate demand and a tight labour market to reverse adverse supply side effects. Meanwhile, when asked about fiscal stimulus Yellen said that “fiscal policy is not obviously needed to provide stimulus to help us get back to full employment”. When asked about the Fed’s response to fiscal, DB’s Peter Hooper highlighted that she did not explicitly say they would raise rates faster, but rather left that implicit in her response.

In terms of the market the immediate reaction function came in rates where the Treasury curve bear flattened in response. 10y yields smashed through 2.50% to close up +9.9bps on the day at 2.572% which is the highest since September 2014. 5y Treasury yields went through 2% and closed +13.9bps higher on the day at 2.049% which is the highest since April 2011. 2y yields finished up +10.4bps at 1.269% and the highest since August 2009. Futures also moved to price in a bit more than 2 rate hikes by December 2017. Also noticeable was the 2y Bund/Treasury spread which has now blown out to 205bps and the widest since 2000 while the 10y Bund/Treasury spread hit 227bps and is, amazingly, the widest since 1989. Currency markets weren’t to be ruled out with the US Dollar index touching highs last seen in 2003. That came largely at the expense of emerging market currencies which plummeted anywhere from -1% to -2%. Risk assets suffered meanwhile. The S&P 500 (-0.81%) had its worst day since October 11th while credit spreads finished wider with CDX IG nearly 2bps wider by the end of play. In commodities Gold (-1.35%) tumbled below $1150/oz while WTI Oil, weighed down by the rally for the USD and also some bearish supply data in the US, plummeted -3.66% and back to $51/bbl.

This morning in Asia the bond sell-off has continued with benchmark 10y yields in the antipodeans 10-11bps higher and 10y JGB yields also back up +2.5bps to 0.073%. Equity markets have followed the Wall Street lead and retreated. The Nikkei (-0.15%), Hang Seng (-1.69%), Shanghai Comp (-0.29%), Kospi (-0.04%) and ASX (-0.62%) all down. In credit the iTraxx Asia is 4bps wider currently.

Moving on. Today brings another central bank into focus with the BoE MPC meeting outcome due around midday. Both the market and our economists expect no surprises with current policy settings to stay as is. Indeed our economists expect the BoE to maintain the broadly neutral stance that they adopted at the November MPC meeting. Firstly, they highlight that the economy appears to be holding up well and consensus expectations for 2017 GDP growth have risen to 1.3%, albeit no higher than the MPC’s own forecast (1.4%). Secondly, sterling’s recent appreciation may reduce peak inflation marginally, although there is still a net 15% depreciation relative to late 2015 and recent data shows increasing evidence of pass through into core goods prices. Ultimately our colleagues think that the MPC will not rush to judgement this week and the neutral bias will remain. Their baseline view is that UK monetary policy won’t change in 2017 and sovereign QE will be allowed to end in Q1. However, with the real income shock coming they see a higher probability of the next move being an easing rather than a tightening.

Staying in the UK, yesterday Brexit Secretary David Davis spoke and didn’t rule out the possibility of a transitional deal ‘if necessary’ as a kind of ‘bridge’ for the UK leaving the EU. Putting him more on side with Chancellor Hammond, Davis also indicated that ‘an implementation phase’ could be a possibility. He also noted that the Government will not reveal Brexit plans before February. In any case the overall rhetoric from Davis clearly favours the recent move towards a softer exit. Sterling had initially been as much as half a percent stronger before the post-FOMC Dollar rally saw the Pound finish weaker.

Before we look at the day ahead, it was also a fairly busy day for economic data yesterday. In the US the primary focus was on the November retail sales report. Headline sales were up less than expected during the month (+0.1% mom vs. +0.3% expected) while the ex auto and gas component was also softer than expected (+0.2% mom vs. +0.4% expected). The GDP-sensitive control group component also missed (+0.1% mom vs. +0.3% expected) which will likely create some downside risks to Q4 GDP although by now the focus may have already turned to 2017 growth. Meanwhile there was also some softness in last month’s industrial production print (-0.4% mom vs. -0.3% expected) with capacity utilization also declining four-tenths to 75.0%. Elsewhere, producer prices were reported as rising more than expected. Headline PPI rose to +0.4% mom (vs. +0.1% expected) helping to raise the YoY rate to +1.3% from +0.8%.
In the UK the ILO unemployment rate was reported as holding steady in October at 4.8% although employment did decline a modest 6k with the statistics office noting that the labour market ‘appears to have flattened off in recent months’. There was better news in the earnings data however with average weekly earnings rising one-tenth to +2.5% yoy. Ex-bonuses rose to +2.6% yoy which is the fastest pace since August last year. Finally in France there were no last minute surprises in the November CPI report with consumer prices reported as unchanged during the month. For completeness in markets yesterday, European equity markets were generally weaker across the board with the Stoxx 600 finishing -0.50% prior to the Fed. Sovereign bond markets were firmer, albeit also pre-Fed clearly.

Looking at the day ahead the early focus in Europe this morning is on the December flash PMI’s where we’ll get manufacturing, services and composite readings. In the UK we’ll also get more data in the form of the November retail sales numbers while around midday the focus then turns over to the BoE MPC meeting outcome. No change in policy is expected there. Later on in the US the main highlight data wise will likely be the November inflation report. The market is expecting headline CPI to increase +0.2% mom and the core to also increase +0.2% mom, a view also shared by our US economists. Meanwhile, the latest weekly initial jobless claims data will be out alongside Empire manufacturing and the Philly Fed manufacturing reports for December. Lastly the NAHB housing market index reading will be out too. Away from the data, Japan PM Abe and Russia President Putin are scheduled to hold a meeting aimed at proposing economic cooperation between the two countries. The ECB will also publish the net take-up for TLTRO II. Finally EU leaders are also due to gather to discuss migration and security issues, as well as debate the Brexit process in Brussels this morning.

Good Morning

We now have three demo accounts open with FXCM UK. I want to welcome our third Forex Trader.

Hello Benjaminis,

Opened an account with FXCM as required.


Dildubai

Now what I need you to do is to set up the 16 currencies pairs that we use. If you have any questions just post them here and if need be I will access your platform and help you. For the moment we are standing clear until the dust settles. One of my TOP Trade Plans is to short US 30.

When your pairs are in place please post here and I will suggest your first Trade Plan. Each Trade Plan is using in groups of three positions so when I give the green light to SHORT US30 (Dow) then your first position will be scaled in and you will enter a STOP LOSS of $1000 US so you know your MAXIMUM LOSS and if you were to lose your DEMO FUNDS on your 3 positions YOU KNOW in advance your MAXIMUM LOSS is $3000 US which is 6% of your Total Trading Capital.

If and when the Dow goes to 19,000 probably during 2017 then your profits will approach $10,000 US a Trade Position. Of course we do not need to be greedy so once your position is entered you enter a Limit Out and then go enjoy your day instead of sitting in front of your monitors 8 hours a day.

Here is the 5 Minute chart on the US30 (Dow) from Finviz

http://finviz.com/futures_charts.ashx?t=YM&p=m5

http://seekingalpha.com/article/4030...aise-tiny-hike

Snippet:

Summary
Fed surprised markets by doing something they said they wouldn't do. They raised their rate targets for next year.
Before today Fed officials have said they need to see fiscal plans before they update their monetary policy.

The Fed's press conference slipped out an important change from Fed Chair Yellen that they raised their targets partly based on 'site unseen' fiscal policy.
https://staticseekingalpha.a.ssl.fas...0204562073.png
Markets (NYSEARCA:SPY) knew the Fed would raise their key rate yesterday. We even thought they could raise some of their economic expectations. But their raising the number of hikes next year due in part to unknown fiscal policy was as negative a surprise as you can get from a pretty steady-handed Fed. We'd guess foreign markets (NYSEARCA:EFA)(NYSEARCA:EEM) don't like that because they are trying to ease. That could ultimately affect US markets.

Change in Fed Funds Targets For 2017 A Surprise
In the adjunct disclosure to their famous release the Fed periodically gives their annual targets. The Fed raised their GDP assumptions by .1% for 2017. No biggie. They lowered their unemployment rate expectations for 2017 by .1%. No biggie. They did not change their inflation target for 2017.
But they increased their Fed Funds target from 1.1% to 1.4%. Instead of two rate hikes next year they now expect three.

The Fed constantly says their targets are always wrong but the change in rate assumptions was a surprise. To markets it was a negative surprise.
More than stocks, bonds (NYSEARCA:TLT) and gold (NYSEARCA:GLD) sold off hard with the expectations of more rate hikes. How many more? We can't know but the Fed's move hints at more.

The Fed Chair Janet Yellen tried to play down the move by saying the following at her press conference,
"I want to emphasize that the shifts that you see here are really very tiny."
The Fed unexpectedly raised their Fed Funds target for next year but the Fed said don't worry it's "really very tiny."
It wasn't so "tiny" when you consider what the Fed said coming into this meeting. In fact it's a major "tiny" change.
Here's what NY Fed President William Dudley just told CNBC a little more than a week ago:


"So even if I thought fiscal policy stimulus were probably going to be moving in a more expansive direction, it would be hard to translate that in terms of what it means for monetary policy. So I would like to see more detail myself."

"Again I think it's too early to make strong judgements about 2017... So personally for me this is on the horizon a little further [out]."
The Fed was not expecting at that time to raise their rate forecasts for next year because they did not know what the fiscal policy was going to be.
Now listen what was one reason Fed Chair Janet Yellen gave yesterday for the raise in their rate forecasts for next year,
"Some of the participants but not all of the participants did incorporate some assumption of a change in fiscal policy into their projections and that may have been a factor that was one of several that occasioned these shifts."

This "tiny" little shift was very unexpected. Keep in mind they only raised their GDP target by .1%. Their inflation expectations for next year did not change. But they raised their rate assumptions?

That's not so "tiny." That's glaring.
The problem here is that Fed officials are typically good poker players. This move though showed their cards that fiscal policy is starting to bother them.
Listen to Fed Chair Yellen's clear inflationary comments for next year even though they did not raise their inflation targets,
"I would say at this point that fiscal policy is not obviously needed to provide stimulus to help us get back to full employment."
You can do the mental math. A major tax cut and a trillion dollars in spending are "not obviously needed to provide stimulus."
So if it's not needed to drive stimulus it will most likely drive inflation. If policy does not drive growth it drives prices.

This raise in rate targets is a "slip." Let's explain.
They could not quantify the change in inflation so they left that assumption alone. They wouldn't have raised their rate target for their small .1% GDP boost or their .1% unemployment boost.
They certainly would not raise rate targets if they honestly thought there would be no change in inflation targets (which they left unchanged).
They raised their rate targets because of their unquantifiable fear what over-stimulus will do. Again, they showed they don't know how to model it in their targets. Nonetheless, they raise their rate assumptions.

Market Reactions
Foreign markets can take this news worse than US markets. For one, the EU and Japan are easing and buying bonds. A further tightening in the US will offer higher yields, causing money to flow away from foreign central banks' easing efforts over to the US. That will hurt growth overseas.
The dollar jumped. Foreign currencies and markets should likely see a negative impact of worry by the Fed's early and "tiny" concerns about coming "not obviously needed" fiscal policies.

Into year-end the market still has the ability to hold up as portfolio managers protect performance and hold off from selling. Thereafter, unless we have a pickup in growth, markets could worry about inflation and higher rates.

Conclusion
The best poker players in the world just slipped. They had no choice. Even though they didn't officially expect more inflation they did raise their rate assumptions. That's a scary move because it's a message that they don't really know where things are going (not raising their inflation targets) but nonetheless directionally they want to prepare. If the Fed flinched, we expect markets can flinch too at some point. Into year-end markets probably hold up.

Yesterday's moves can affect markets next year.

https://mishtalk.com/2016/12/15/anot...is/#more-42845


Snippet:
The crisis in Greece goes on, and on, and on, and on, and on.
Greece still needs another debt relief extension, but as expected in this corner, another battle is brewing. Talks are cancelled.
This time, the battle is over pensions.

Please consider European Bailout Chiefs Suspend Greek Debt-Relief Measures.
European bailout monitors have suspended planned debt-relief measures for Greece in response to the surprise move by Athens to spend an additional €600m on poorer pensioners in breach of its international commitments.
European finance ministers this month agreed to a series of short-term debt relief measures that would cut Greece’s debt-to-GDP ratio by up to 20 percentage points.

But Athens’ announcement last week that it would allocate €600m to more than 1m low-income retirees and halt a planned VAT increase “appear to not be in line” with Greece’s commitments under its €86bn bailout programme, a spokesman for Jerome Dijsselbloem, eurogroup president, said on Wednesday.
Under the terms of its bailout, Greece is obliged to notify euro area authorities of such changes to its spending plans, something it failed to do in this case.
Greek 10-year government bond yields surged more than 30 basis points to 7 per cent after the suspension, their highest level in three weeks, while Athens’ benchmark stock index fell 3.5 per cent.

Hans Michelbach, one of several sceptical parliamentarians in Ms Merkel’s CDU/CSU bloc, on Wednesday told the Bundestag that they could no longer accept Greece’s “orgy of empty promises”.

The clash also adds to the complications around an ongoing policy review of the Greek programme that needs to be concluded before the IMF can decide whether to join in with the bailout.

In a blog post this week senior IMF officials reiterated warnings that they fear Greece’s debt is deeply unsustainable and that the best course would be to rethink key aspects of the programme.

The post sparked a backlash from Athens and euro area policymakers who accused the fund of being unduly pessimistic.

Peculiar Setup
Not that I like the IMF (in fact I cannot stand them), but the only player halfway in Greece’s court is the IMF.
The IMF has been arguing for seversal years that Greece needs debt reduction.
Curiously, Greece wants the IMF out of the picture. Why? Is Greece going to win a battle with Germany on its own?
Something is going on that does not add up. But what?
Snap elections are a possibility.

https://mishtalk.com/2016/12/15/refl...sh/#more-42853

Snippet:
Pater Tenebrarum at the Acting Man Blog pinged me with interesting comments regarding my recent article War On Cash Escalates: Australia Proposes Ban on $100 Bill; No Cash Within 10 Years?

Let them. The outcome will be a catastrophic downshift in the economy, or an eventual repudiation of the official money by the citizenry.

What these politician-morons don’t get: the average citizen is not as rich as they are. The “gray” economy is far bigger than they think, and without it, living standards of a vast swathe of the population will nosedive.
This soon affects the formal economy as well, because a lot of purchasing power then disappears. Instead of more tax revenue, they will collect less.

Why do you think all those reforms Renzi introduced in Italy could neither save the economy nor his ass? It all goes back to Monti’s shadow economy crackdown, which has continued. Ever since, Italy’s economy has been unable to get back on its feet (compare to Spain, where they have had the fastest growth of the big EZ countries for 3 years running now).

It is not the euro that is Italy’s problem, that is a mercantilistic fallacy. It is the fact that they have killed that part of the market that was free.

Indeed. The euro is a scapegoat for Italy’s real problem: over-regulation of everything. Greece has the same problem.
In India, a majority of the lower-class low-pay individuals misguidedly cheer the attack on cash. Those cheering will be the ones most affected.

The government will now find every penny. And government will tax that penny. And the poor will be worse off.
The same will happen in Australia and eventually the US.

The neighborhood kid, will have to pay Social Security on the $15 or whatever he gets for mowing the lawn.
If the home owner hires the same kid to mow the lawn, clean the garage, babysit, and help paint, is the kid now an employee or a business?

Mike “Mish” Shedlock

Hello everyone !!!

Chart of the Dow from Finviz

http://finviz.com/futures_charts.ashx?t=YM&p=m5

5 Minute Chart and I did one trade today after I saw it not going over 20,000 and risking $1050 US around 11:35 AM EST after Europe went home went short and covered a few hours later for a quick return of over $500 US.

I will post the trade later. I think it would be OK after Asia opens and closes and we see what Europe does to put on One Short Trade for $100,000 US to short the US 30. Please wait until after the Equity direction of the FTSE and the CAC and the DAX is known and MAKE SURE you enter your STOP LOSS for $1000 US to limit your loss worst case to 2% of your portfolio.

https://dailyreckoning.com/trump-fed...y+Reckoning%29

Snippet:
The most decisive factor in the implementation of the Trump economic plan is the reaction of the Federal Reserve. While a Fed rate hike in December was basically a certainty, the path of rates in 2017 following the December hike will be dispositive with regard to the success or failure of Trump’s plans.
The Fed can choose to be highly accommodative in the face of Trump’s larger deficits. In effect, the Fed will not anticipate inflation, but will wait until it actually emerges. Actual inflation is still well below the Fed’s target inflation rate of 2%. Since the Fed is targeting average inflation of 2%, it could allow inflation to run above 2% for a while, which would be consistent with 2% average inflation, given today’s lower level.

The Fed also seeks negative real rates as a kind of stimulus measure. Negative real rates exist when the rate of inflation is higher than the nominal interest rate. This condition can exist at any level of nominal rates. For example, inflation of 3% with nominal rates of 2.5% produces a negative real rate of 0.5%.
Likewise, inflation of 4% with nominal rates of 3.5% produces the same negative real rate of 0.5%. No doubt the Fed does not want inflation of 3.5%. However, they can achieve negative real rates at any level by using financial repression to put a lid on nominal interest rates.

This is done by forcing banks to buy Treasury notes even if the Fed’s balance sheet is stretched. It amounts to a kind of “shadow QE” using the bank balance sheets to park bonds instead of the Fed’s balance sheet.

This kind of accommodation to higher deficits is also called “fiscal dominance,” an idea sketched by former Fed governor Rick Mishkin and his colleagues in academic literature. The idea is that Fed independence is mostly a mirage and the Fed will do what is needed to facilitate the fiscal wishes of Congress despite protests to the contrary.

Under fiscal dominance, low inflation is allowed to persist for an extended period of time. It will gradually erode the real value of the dollar and dollar-denominated Treasury debt. This is how the U.S. reduced its debt-to-GDP ratio from 1946 to 1970.

The problem with this “high pressure” approach is that inflation is not purely a monetary phenomenon, but it is also a behavioral phenomenon. Money printing alone does not produce inflation. The money printing must be combined with the willingness of individuals to borrow, spend and invest.

Such willingness is largely psychological — dependent on Keynes’ animal spirits. However, once expectations shift from deflationary to inflationary scenarios, they are hard to shift back again. This could lead to a situation in which inflation expectations shift from 1% to 3%, but then shift quickly to 5% or higher.
The Fed assumes they can dial-down inflationary expectations from, say, 3% to 2%. But that may be wishful thinking. Any effort to raise rates to deal with higher inflation expectations may have the opposite of the intended effect as consumers view higher rates as a validation that inflation is getting out of control.

This is exactly what happened in 1974–81. The Fed started out behind the curve and stayed there until sitting Fed Chairman Paul Volcker’s extreme measures in 1980–81.

Alternatively, the Fed could choose to lean into prospective inflation from Trump’s policies by aggressively raising rates in 2017. This policy would be based on Janet Yellen’s reading of the Phillips Curve and the well-accepted notion that monetary policy acts with a lag.

With unemployment at post-recession lows and initial claims for unemployment benefits at all-time lows, Yellen’s analysis is that inflationary pressures from increasing wage demands are just a matter of time. Since monetary tightening works with a six-to-twelve month lag, it’s important to raise rates now to keep ahead of that inflation.

Independent of the state of the labor markets today, the Fed is desperate to raise rates as much as possible. This should allow it to have some dry powder available for rate cuts in the next recession.

By Fed reckoning, the euphoria in the stock market after the election of Trump counts as an easing of financial conditions. Such easing is the perfect cover for an offsetting tightening by the Fed. The Fed will pursue a delicate balance between easing (from stocks) and tightening (from rates) that will allow it to achieve its rate normalization goal without putting the economy into a recession.

The last wild card in this mix is the dollar. A tightening cycle by the Fed will make the dollar stronger. This is deflationary because the U.S. is a net importer and a stronger dollar makes imported goods cheaper for U.S. consumers and other participants in the global supply chain.

http://ca.investing.com/rates-bonds/...istorical-data

The yields on the 10 Year US Treasuries are now OVER 2,50% and this is what raises Interest Rates around the WORLD !!!

The FED really has No Control yet they INTERFERE and MANIPULATE !!! End the FED , Mr President - Elect !!!

Dec 16, 2016 2.5862.6002.6062.575-0.57%
Dec 15, 2016 2.6002.5802.6412.5651.30%
Dec 14, 2016 2.5672.4712.5862.4223.80%
Dec 13, 2016 2.4732.4682.4952.438-0.16%
Dec 12, 2016 2.4772.4892.5282.466-0.43%
Dec 11, 2016 2.4882.4662.4932.4660.88%
Dec 09, 2016 2.4662.4122.4782.3972.37%
Dec 08, 2016 2.4092.3452.4272.3402.77%
Dec 07, 2016 2.3442.3962.4012.342-2.01%
Dec 06, 2016 2.3922.3982.4032.374-0.37%
Dec 05, 2016 2.4012.3632.4482.3401.52%
Dec 04, 2016 2.3652.3542.3762.352-1.13%
Dec 02, 2016 2.3922.4372.4482.374-2.53%
Dec 01, 2016 2.4542.3972.4922.3772.68%
Nov 30, 2016 2.3902.2952.4102.2914.23%
Nov 29, 2016 2.2932.3122.3502.291-0.82%
Nov 28, 2016 2.3122.3392.3522.311-1.24%
Nov 27, 2016 2.3412.3592.3592.337-0.76%
Nov 25, 2016 2.3592.3822.4132.350-0.97%
Nov 24, 2016 2.3822.3822.3862.3821.15%

Nov 23, 2016 2.3552.3122.4172.2921.77%
Nov 22, 2016 2.3142.3032.3372.2870.00%
Nov 21, 2016 2.3142.3532.3572.303-1.66%
Nov 20, 2016 2.3532.3482.3602.3480.21%
Nov 18, 2016 2.3482.3222.3642.2672.22%
Nov 17, 2016 2.2972.2052.3062.1873.75%
Nov 16, 2016 2.2142.2262.2972.205-0.67%

The Election took place on November 8, 2016 and starting from November 9, 2016 the YIELD went up as there was OVER TWO TRILLION DOLLARS REAL LOSS AROUND THE WORLD IN BONDS (Fixed Income)

http://www.zerohedge.com/news/2016-1...03-billion-us-

Snippet:

One month ago, when we last looked at the Fed's update of Treasuries held in custody, we noted something troubling: the number had continued to drop sharply, declining by another $14 billion in one week, and pushing the total amount of custodial paper to $2.788 trillion, the lowest since 2012. One month later, we refresh this chart and find that in last week's update, there is finally some good news: foreign central banks finally bought some US paper held in the Fed's custody account, which following months of liquidation, rose over the past two weeks by $23 billion, the biggest two-week advance since November of 2016, pushing the total amount of custodial paper to $2.816 trillion, the highest since early October.

http://www.zerohedge.com/sites/defau...dec%2015_0.jpg
That was the good news, and we use the term loosely in as much as the custody account can be used as a proxy of foreign buying, which according to most rates watchers, it can.

The bad news came out with the release of latest monthly Treasury International Capital data for the month of October, which showed that the troubling trend presented one month ago, has accelerated to an unprecedented degree.
Recall that in mid-November, we reported that in the latest 12 months we observed a record $375 billion in Treasury selling by foreign central banks in the period August 2015-September 2016, something unprecedented in size.

Fast forward to today when in the latest monthly update for the month of October, we find that what until a month ago was "merely" a record $375 billion in offshore central bank sales in the LTM period ending September 30 has, one month later, risen to a new all time high $403 billion in Treasuries sold in the past 12 months.

As the chart below shows, there has never been such an aggressive selling of US Treasuries over a 12 month period in history.
http://www.zerohedge.com/sites/defau...%20month_0.jpg
The biggest seller, and keep in mind that TIC data is on a market-price adjusted basis, was once again was China, which in October "sold" a record $41 billion in US paper (the actual underlying number while different, as this particular series is adjusted for Mark to Market variations, will be similar), and a massive $125 billion in the last 4 months, bringing its total Treasury holdings to just $1.116 trillion, the lowest amount of US paper held by Beijing since 2010. In the process, China has now been overtaken by Japan for the top US creditor position in terms of total holdings with $1.132 trillion, for just the second time.
http://www.zerohedge.com/sites/defau...INATSY_2_0.jpg

It wasn't just China: Belgium, which has long been rumored to be the venue where China's keeps its "secret" offshore Treasury holdings couretsy of Euroclear, also dumped its TSY holdings, and in October its stated holdings (which again have to be adjusted for MTM), tumbled from $143Bn to $117Bn, the lowest since the summer of 2015.

http://www.zerohedge.com/sites/defau...ELGTSY_0_0.jpg
Furthermore, as we have shown previously, when superimposing China and Belgium's holdings together, these tend to allign almost perfectly with the monthly change in Chinese reserves, which as reported before, have been declining sharply in recent months as a result of China's aggressive attempts to prevent a sharp devaluation of the Yuan. This can be seen on the chart below, and confirms that at least when it comes to China, the reason for the selling of Treasurys has been due to reserve liquidation.

http://www.zerohedge.com/sites/defau...comibned_0.jpg
As we pointed out one month ago, what has become increasingly obvious is that both foreign central banks, sovereign wealth funds, reserve managers, and virtually every other official institution in possession of US paper, is liquidating their holdings at a disturbing pace, something which in light of the recent surge in yields to over 2 year highs, appears to have been a prudent move.

In some cases, like China, this is to offset devaluation pressure; in others such as Saudi Arabia and other petroleum exporting nations, it is to provide the funds needed to offset the drop in the petrodollar, and to backstop the country's soaring budget deficit. In all cases, it may suggest concerns about a spike in future debt issuance by the US, especially now under the pro-fiscal stimulus Trump administration.

So who are they selling to? The answer, at least until August, was private demand, in other words just like in the stock market the retail investor is the final bagholder, so when it comes to US Treasuries, "private investors" both foreign and domestic are soaking up hundreds of billions in central bank holdings. As we said two months ago when we observed this great rotation in Treasuries out of official holders into private hands, "we wonder if they would [keep buying] knowing who is selling to them." Well, last month this changed, and after private investors had been happily snapping up bonds for 4 straight months, in September "other foreign investors" sold a whopping $31 billion, bringing the total outflow between public and private foreign holdings to $76.6 billion, the second highest number on record. In October, while foreign official entities sold another $45 billion, at least the pace of selling by private entities moderated somewhat, to "only" $18.3 billion.

Meanwhile, while just four months ago yields had tumbled to near all time lows, suddenly the picture is inverted, and long-yields are surging on concerns that not only will the ECB and the BOJ soon taper their purchases of the long end, but that Donald Trump is about to unleash a $1 trillion debt tsunami at a time when the Fed will not be available to monetize it, now that the Fed is again hiking rates.

While it is unclear under what conditions foreign buyers may come back - after all TSY rates have already jumped high enough to where US paper should be more than attractive to foreign official institutions - one thing is clear: as of this moment the selling strike not only continues but is accelerating, and should the foreign liquidation of Treasuries fail to slow, Yellen will soon have to plan how to not only abort the current rate experiment which continues to pressure yields higher around the globe, but to start thinking how to launch QE4 instead.

Comment from Benjaminis: Things are VERY BAD NOW because of what the FED did yesterday and WE ARE IN THE MIDDLE of THE CURRENCY WAR !!! Things will change in 2017 when the RULES change VIA SDR !!!

USD/JPY

5 Minute Chart

http://finviz.com/forex_charts.ashx?t=USDJPY&tf=m5

http://www.zerohedge.com/news/2016-1...ops+to+zero%29

Snippet:
At the end of November, when the 10Y yield had just cracked 2.3%, Goldman, together with SocGen, JPM, RBC and various other banks, gave its answer to what may be one of the most important questions for the market right now: how high can 10Y bond yields go before they start to hurt equities? Goldman answered that "the equity market is still at a level that can cope with moderately rising bond yields. We estimate that a rise in US bond yields above 2.75% or probably between 0.75-1% in Germany would create a more serious problem for equity markets: at that point we would expect the correlation between bonds and equities to be more positive - i.e., any further rises in yields from there would be a negative for stock returns."


2.75% is also the level above which JPM's Marko Kolanovic said last week the 10 Year would begin to cause problems for stocks:
Going into US elections, macro systematic investors (such as trend followers and various Var-based strategies) were long bonds. While the performance of these strategies suffered, the risk on nature of the market reaction (bonds down, equities up) prevented a more rapid deleveraging. Yet this risk is not entirely eliminated, and should bond yields continue increasing (e.g. 10Y beyond 2.75%) this will risk an equity sell-off that usually triggers a broader deleveraging of var-based strategies.


Incidentally, according to other banks such as SocGen, the market is already in purgatory: at the end of November we showed an analysis by SocGen according to which at bond yields above 2.60%, stocks are rich relative to bonds.
In any case, fast forward to today when Goldman has refreshed its cross-asset modelling, and reports that "US 10-year rates have now overshot our 3-month forecast of 2.30%, and are now close to our Bond Sudoku macro measure of fair value, which is currently around 2.60%.


US Treasuries Have Reached our Sudoku Fair Value of 2.6%
http://www.zerohedge.com/sites/defau...0value%201.png
This is the first time since 2013 Goldman reports the "valuation gap" is completely closed.
The bank then notes that based on its bond impulse analysis designed to identify which bond market is leading the others the sell-off in global rates is solely led by the US.

http://www.zerohedge.com/sites/defau...20ex%204_0.png
But the Goldman punchline is that with US Treasuries now at the bank's measure of fair value, they are now "starting to become a problem for the risk complex." To wit:

As a result of the strengthening of the Dollar and the increase in long-term rates, US Financial Conditions are tightening on our preferred measure. The change in financial conditions since September is roughly equivalent to 70bp of cumulative Fed hikes. As we argued in a recent note, should US 10-year rates move above fair value, this would represent a threat to risky assets unless incoming data continue to sustain the optimism they now discount.


The problem is that incoming data, if anything, indicate that the Fed is now not only behind its own curve, but that of Donald Trump, whose hundreds of billions in fiscal stimulus will only push the envelope further, and force the Fed to tighten even more aggressively as Yellen hinted during the FOMC press conference.
For now, however, Goldman has issued its warning, although it is unclear if the hypnotized, euphoric market will even bother to listen.

Comment from Benjaminis: Watch the US 10 Year Bond Yields !!!

http://www.zerohedge.com/news/2016-1...ops+to+zero%29

Snippet:
[The following essay originally appeared in this month’s issue of The Casey Report.]
So, Trump has won the election. Of course anything can happen between now and his presumed inauguration on January 20. Maybe the Swamp Creatures will succeed in causing a recount in so-called Purple States that could change the number of electors in Hillary’s favor. Maybe they’ll somehow influence Trump electors to vote for Hillary. None of this would have been an issue if Baby Bush II, Jeb, had been the Republican nominee, as was supposed to have happened. It all just shows what a transparent (a word these people love to use) fraud “democracy” has become.
Let the hoi polloi cast a meaningless vote, so they have the illusion of being in control. Instead of seeing themselves as subjects, they’ll think they’re “we the people,” who actually have some say in what happens. That way they’ll pay their taxes willingly, enthusiastically sign on to aggressive wars on the other side of the world against people they know nothing about, and generally do as they’re told. Because it’s supposed to be patriotic. “Democracy” is a much more effective scam for controlling the plebs than kingship or dictatorship.
That said, the Establishment, the Deep State, was genuinely shocked and appalled by Trump’s victory. As Baby Bush the First would have said, they misunderestimated how angry the average voter was. That’s because the Coastal Democratic Elite are totally out of touch with the common man. But they needn’t fret too much. They’ll be re-installed, with a vengeance, in four years.
That will likely be true for two reasons:

1. Simple demographics. The groups that vote Democrat (e.g., blacks, Hispanics, urban dwellers, immigrants, Millennials) are growing in numbers faster than those who vote Republican. Republicans are older people, and the Boomers (born 1946–1966) and the Silent Generation (1926–1946) are dying off. More people are moving to the cities, and that influences them to vote Democratic. More people (still, idiotically) are pursuing higher education, and that also influences them to vote Democrat.
2. The Greater Depression. One definition of a depression is a period of time when distortions and misallocations of capital are liquidated. A time when bubbles caused by monetary expansion are popped. A time when unsound businesses fail. I re-emphasize this because the party on whose watch it happens is automatically kicked out. So, the Democrats actually got quite lucky not to be in office when the time bomb goes off. Trump could easily go down as Herbert Hoover II.

What could change things? A serious war, much bigger than the sport wars the US is currently engaged in, is the biggest danger. That’s much less likely with Trump than Hillary, but these things have a life of their own. My guess for the next president is either a left-wing general (because Americans love and trust their military), or a left-wing populist, like Elizabeth Warren.
But that’s crystal balling at this point. Let’s proceed on the assumption Trump is actually going to be the president for at least the next four years. Although problematical, he’s a vast improvement over Hillary. What will it mean for the US and the world? More importantly, what will it mean for your personal finances and freedom? Let’s look at the possibilities.
Bonds—With bonds, we’re at the peak of the biggest financial bubble in world history. This is a very big deal.

Interest rates move in very long cycles. They went up from the mid-1940s to the early ’80s, when long-term government bonds peaked at close to 16%, and T-Bills at over 16%. I thought they hit bottom years ago, but the cycle overshot.

My guess is that they’re headed up in earnest now. And Trump, as someone who understands business (even though he doesn’t understand economics), will likely (I think…) do what he can to send them higher. Why? He understands the country needs to save, to rebuild capital. And higher rates will encourage saving and discourage debt.

The risk is that, with all the debt that’s been put on in the last decade, debtors will be hard-pressed to service it. That includes the USG with $20 trillion of on-balance-sheet debt, and a lot more in the way of off-balance-sheet debt, guarantees, and contingent liabilities. Much of it will be activated if higher rates cause a lot of defaults.

What should you do? Sell all your bonds.

Real Estate—Property, at least in the English-speaking world, floats on a sea of debt. Interest rates go up, real estate prices go down. The economy goes down, so do property prices. Add to that the aging US population, which isn’t good for property; as people age, they downsize. Add to that the fact we’re in another real estate bubble, similar to what we saw in the mid-oughts. After bonds, property is likely the worst place to be. In fact, I’ll go so far as to say the great post–World War II property boom is at an end—but that’s a subject for another time. There’s not much that Trump can do to fix this.

What should you do? Lighten up on property. Make sure any mortgages you keep are at fixed rates.

Stocks—If Trump only follows through with his promise to cut taxes, and eliminate two old regulations for every new one, it would be wonderful for the economy. But the economy and the stock market are two different things; they only correlate over the long run. I suppose he’ll follow through with his promise to build lots of new infrastructure. Government deficits will soar, and only the Fed will be on hand to buy all that new debt.

Infrastructure companies will get a fat slug of the newly printed money. But I find it hard to get enthusiastic for the stock market. In terms of dividends, P/E ratios, or book value, it’s already at one of the highest levels ever. Bear in mind that well-selected stocks can still go up, even if the market as a whole goes down.

That said, I feel more comfortable with shorts than longs at this point.

Gold and Commodities—Frankly, where do you put your money when almost everything is overpriced? Commodities are coming out of a five-year-long bear market. They’re about the only thing that’s cheap. That’s true relative to their cost of production (farmers, ranchers, and miners are breaking even, at best, all over the world). And it’s true relative to their history (they’re down 50% from the peak of 2011).

In other words, commodities are a much safer place for your capital than stocks, bonds, or real estate (excepting agricultural property) for the foreseeable future. The problem is that it’s hard to hold a carload of wheat or ten tonnes of sugar.

Remember that gold and other commodities aren’t “investments.” An investment is something that acts to create new wealth. They’re simply assets. Sometimes they can be excellent speculations. Gold, however, is money, and will remain so long after the US destroys its currency.

I recommend, therefore, that you accumulate gold and silver instead of plunging into conventional investments. Check with the dealers we list in The Gold Book to see who you prefer to work with. [Editor's note: The Gold Book is exclusive to readers of The Casey Report, which you can sign up for at the end of today's essay.] But if you don’t have a significant position in the metals already, please get going.
A final thought. It’s usually a mistake to count on any head of state to make things in a country better. It can certainly happen—as with Erhard in Germany after WW2, Pinochet in Chile, Thatcher in Britain, or even Reagan in the US. Maybe it will be true of Trump. He’s got a much stronger personality than Reagan, for openers. But the bigger and older a State gets, the harder it is to change. It’s comparable to trying to stop a fully loaded supertanker.

http://www.goldchartsrus.com/chartst...nipulation.php

http://www.goldchartsrus.com/chartst...ationchart.php

https://yragharris.com/2016/12/15/breakfast/

Today I did an interview with Anthony Crudele, a trader’s trader, on Futures Radio. It was a fifteen-minute discussion about the Fed’s actions yesterday. Rather than writing up my thoughts I feel it is better for my readers to turn into listeners. This is an in-depth way to convey my thoughts, and, as with Rick Santelli, when a person of market intelligence asks questions the conversation is at a much higher level. If only Rick Santelli and I had this much time. Oh well, it’ s just a podcast away.
Click here to listen to the interview

Dear Fellow Traders who have not registered. I would love to communicate with you here on my Money Flow Thread and by registering with Forex Factory we can have an interactive discussion here. You have no downside in doing that so if you decide to, then please post any questions here and I will give you whatever information that you want or need.

Thank You and Good Day or Evening or Morning !!!


Benjaminis

WWW.JSMINESET.COM

Posted December 14th, 2016 at 5:14 PM (CST) by Bill Holter & filed under General Editorial.

Jim is travelling today and tomorrow on corporate business but wanted a post to stay in touch. The Fed action today changes nothing, it may in fact speed up what is going to happen. Either they get their reflation or they dont. The dont part is the scary part and would mean debt being crushed in a deflationary collapse. You must understand deflation is THE best environment possible to own gold. A deflation means a shrinkage of money supply, in the current case it will be a scarcity of CREDIT. Gold is money, according to JP Morgan himself, everything else is credit. Gold is also liquidity. The two best things to have in a deflation is money and liquidity.


Raising rates upon the shoulders of the greatest credit bubble in all of history is not wise. Every single past crisis was preceded by rising rateshere we go again. The odds of a deflationary mistake are rising along with interest rates. Know why you own gold or silver in the first place and know history. Never before in history has a fiat currency gained value versus gold in outright deflation.
Jim/Bill

http://finviz.com/futures_charts.ashx?t=GC&p=m5

Gold 5 Minute Chart - Gold Coming Back Up !!!

US Dollar Index

http://finviz.com/futures_charts.ashx?t=DX&p=m5