IFTA London - Power Hour - Day 3

welcome back and it's the final power hour of the this conference and I'm gonna hand over now to Adam saw up who's going to chair this session and he's the head of technical analysis analysis at seek US hedge fund management company and this power is called the chart most likely so over to you Adam thank you very much good morning everybody what we thought we'd try and do today is try and make it a little bit a little bit interactive so what you're going to hear first is some very brief presentations from my colleagues here on the panel and on covering a number of markets and then what I was hoping to do is to have at least half of the time afterwards to allow for much more of an interactive QA we have a access to multiple charting technology here so to the extent that we want to talk about other markets I mean it would very much encourage you to think about questions that you want to ask later on ok so we've got three speakers today three very old friend of mine I'm very pleased to say on my immediate right Nicole Elliot who for her sins went to the LSE with me well though she's a lot smarter she studied psychology instead of wasting her time doing economics like I did and she also got a better degree than I did but never mind professional technical analyst working in the banking industry since 1982 currently working as chief technical analyst on forex trading TV which in fact I took a look at yesterday I have to say it's very good I was quite impressed so I encourage you to all have a look at that some very interesting analysis being done their most famous perhaps I think for bringing Ichimoku charting to certainly the City of London and probably to the Western world she was very fortunate to work in the Japanese banking sector and for the famous Harada SONET and Mizuho and his teachings she very kindly passed on to the rest of us and I know it's a technique that I've been using for many years she's also a regular commentator on the media and I think it says something for her geographical reach she's regularly publishes in both the investors Chronicle but also the South China Morning Post and her conversation at her presentation today is really going to focus on fixed income Kitt's and and some ideas around deleveraging in a in a zero rate environment next another good friend Valerie guest LD from France an MBA graduate actually interestingly did her MBA at a relatively young age and started out in the sharp end as a equity options market maker and prop trader in France's largest stock broking company after doing that for several years she went into her own consolidation phase and became a mother and a gardener and I can't imagine what breakfast time was like but she was day trading at the same time as beginning kid the kids breakfast so had and how that worked but now very gladly back in to the profession working for the very successful and very famous day-by-day Research Group in Paris where she's senior technical analyst and strategist and she's going to look at the US dollar and really sort of tease out her thoughts on that in this current market environment and then Nick Lydon I thought I'd better get at least one man on the panel although I really was trying to boost it with as many women as possible so we could have some really solid ideas without any excess emotion but the emotional Nick glidin who interestingly is a microbiologist and a geneticist by training so there's anybody's got any questions on Ebola he's young man he got started in 1986 interestingly started out like a lot of people in the 80s drawing handwritten charts originally at climb words for for Steve Jarvis he was one of the famous Valeo momentum team that started out at Credit Lyonnais went on to Fleming's and then JP Morgan interestingly tells me about Fleming's it was a really great place to work apart from the bagpipes playing every morning but I don't know about the bagpipes but certainly was a very successful research group and very successful trading team founded red bound partners in 2003 with our handful of colleagues he's very successfully grown that into a hundred and sixty strong trading a research group and his conversation today is going to focus on the foot sea and more broadly I guess on equity markets and so hopefully we're going to be able to cover the whole waterfront and as I said we will have time for questions afterwards what I would ask is really in light of the kind regulatory environment in which we work we'd much rather to the extent there are questions we want to focus on current markets let's focus on indices commodities foreign exchange those kind of broader things rather than getting down into single stocks but with that I think I'll invite Nicole to kick off the proceedings thank you no hear me I'm going to rattle through this it's a really fast pace I've only got three charts and I've kept them as simple as I possibly can deliberately so I could see it's very long thin room this isn't it I do hope you can see them clearly and I'm focusing on interest rates I think this is absolutely key to the global environment not only today but over the last sort of decade or more so kicking off I've got the yield on the benchmark tenure German government Bund on the left-hand side of the chart we start off just after 1990 post unification Germany with a high of 8% this is a decade after yields in the states in the UK peaked so that's quite significant you've got a bit of a shift there we started off counting this in Deutsche marks organized by the Bundesbank it then morphed into a euro overseen by the ECB and from the sick man of Europe it turned into its powerhouse so here you have it a quarter century of a descending channel towards lower interest rates and now we are under 1% now this is not just a trend channel this is a DNA trend isn't it it's absolutely much much more steady than a heartbeat it really is quite something now many say it's in a bubble territory particularly following the steeper decline in eels that we've had since 2008 now these are probably the same people that keep telling me that it's in bubble territory and are not to buy fixed income paper and they've been telling me this for five consecutive years as wait the way I see this is absolutely nothing erratic about this trend neither the little one nor the broad one we are yes at record lows but record low does not mean to say rock bottom what is rock bottom well this is the big question I think this is what we're really going to have to start facing up to over the next year or so we know that real interest rates can go negative we've seen our money confiscated time and time again courtesy of inflation haven't we the new thing now is that we have negative nominal yields I never thought I'd see this I thought it would be a one-off it's not a one-off is it we've got the Schatz the German two-year at - nought point six percent Swiss - year at - nought point eight percent and at the ECB if you want to park your money there and keep it out of the European banking system they're going to confiscate 20 basis points from you the other thing they say is oh well I don't really want to tie up my money for ten years well you're not tying up your money for ten years this is one of the most liquid cheap instruments to trade in the world I could turn it around just like that it's fantastic collateral I can repo it out time and time again and it costs nothing so I'm not tying it up but what I can do is save myself from a 20 basis points at the ECB earn about 90 basis points here and as soon as it looks a little bit smelly I just sell it out and off we go the other thing to ponder on this one and this is my final point oh by the way my target on this is 45 basis points by the way and the reason I say this is I think should be yielding what Swiss tenured US and Japanese tenured us already 45 basis points so in other words yields have still got another 50% to go from current levels the other thing to consider in a potentially deflationary environment ah negative nominal yields the way to compensate for the fact that money tomorrow is worth more than money today my second chart I'm gonna speed it up a bit if we got that one there there we go now this is the spread between us tenure and 2-year Treasury yields okay again going back to the 1990s twos tens in the jargon you will see that nearly all of the time it trades above zero okay three times we've gone inverted that was 1990 2000 and 2007 at times of extreme financial stress I think what's far more interesting is that it's capped at the top this is the merchant no it's not the right is it well let's go on to the next one but anyway twos tends just to come back to that we've got a bit of a nightmare here we've got sizing all wrong not to worry this should be the this should be the jgb yield yes it is in 1990 they yielded 8% Toby sorry about this folks in 1990 they too yielded 8% and then collapsed down to some 1% as the Nikkei collapsed too since then they've dropped in 2003 at 45 basis points again caused by the banking crisis in Japan when they were all bailed out since then you've hovered between 45 basis points and 2 percent ie pretty low steadily low in fact incredibly low 16 years of flatlining and I call it like a patient aroused upon a table lesson number one things don't necessarily recover lesson number two the central bank can set their rates but the fixed income market does whatever it wants there's a wonderful simile in Japan where they describe the yield curve as being like a fish a big fish caught on a hook on a fishing line and the head is firmly anchored on the hook and the tail can flip around as much as it wants and I don't care what mr. Draghi's got to say I've got my own ideas of where interest rates should be so there we have it and the reason I suggest that the buns are safe this one is going to just flatline I mean there's no point there's no point getting sighting or doing something too much about jgb right and it reflects a negligible or negative inflation that has been the case for all too long in Japan there we go sorry about the fast folks [Applause] good morning everyone even though we were under pressure to deliver in a very short time I will just take a minute to say that back in 1985 when I got my first job I was on the first day I was handed half a million dollars on a CBOT account to shop for options and a value line booked for the eldest ones here it was a fundamental analysis book with plenty of sheets fact sheets on 1,000 US companies and technical analysis explained by John Murphy and believe it or not I thought that technical analysis explained was a lot more useful than value line to shop for options and this is what you know it was a whole career that started there because of that book and there were a few other books that have been very very important in shaping my knowledge and those were Bob fresh sir what was it the tidal wave or something like that blue book and then came Alexander elder and the next step stone was Tony Plummer and they are all here today or they have been here and I cannot say how thankful I am to four of you because without you I wouldn't be here and also every day when the going gets tough and when I doubt about my own analysis about the market I can come back to what you have written and I think okay I may be wrong but if I apply the method that they have given nothing really bad can happen to me so as an analyst because today I act as an analyst I think it is very important to have a method to Anna strong method so having masters is something that is really helpful to go on every day when it's really tough so to go to a forecasting parts which will you know I'm right when I forecast about one side of twice so hopefully I will this will be a good call but I was required to talk also about DNA market DNA so I thought that I would choose something that is really at the core of all markets and that's the dollar and where is and actually it's very interesting because you know the donut chart really looks like a DNA chart to me and this is maybe a dollar that you're not used to because it's via dollar index trade weighted dollar index as it is calculated by the Bank of England and it starts in 1975 so this is the child the chart that we will be looking at to begin with and my forecast is that we will live in a world with a strong dollar until at least 2018 and I'll explain you why so this is the dollar index chart and for a long time I've been sitting at you know watching the chart waiting for ideas to emerge for many years but then one day that's the magic of technical analysis everything became clear because I drew certain lines and those lines you know make it a lot easier to understand and I'm going to show you the lines that matter and this chart so I thought there's an uptrend to start with you know there's a major bottom in 1978 it rises into a top in 1985 I can see there's also a major bottom in 1995 rising into a top into 2002 what is also obvious is that 1995 1985 to 1988 is a major bear 2002 to 2005 is a major bear so what I'm left with or two periods that are you know ranges one from 88 to 95 and another one that started in 2005 and my projection has been four already several years that it would end in 2012 roughly so what I was expecting was somewhere in mid 2011 to 2012 I had to wait for for a while a new rally on the dollar so this may look like chance because we don't have much history you know whether the dollar is going to rise into 2018 or not but that was a starting point and I thought okay if you think that about the dollar you can check what we euro looks like because obviously they have to balance each other other currencies when you look at trade weighted indices you occur the other currencies are far less important so let's check the euro and the euro is really a very very easy chart because it is the Dutch mark previously and you know how regular and easy to forecast with German are they are very robust and this chart I think is very rubbish to now now that I've drawn my arrows can you see how easy it is you have a top in 1975 a bottom in 1985 a top in 1992 a bottom in 2002 and a top in 2009 so that's 17 years every time between each tops and buttons very basic but ok so I expect another bottom in 2019 because they are already spread by 17 years so for a long time I thought ok you know you've put numbers around but why do things move like this also remember I'm not a trader anymore I am an analyst and I have to sell stories if I don't have very strong elements to convince people about what I say you are not going to pay as much if I just tell a stoploss if I don't I think they can do it themselves so I have to give them a story that they can come up with themselves so as I said I am one of Tony plumbers bests fans and I work also on his methods on long-term cycles and this is a CPI cycle long-term cycle and well more or less that's we run one way rate of changes he exposed earlier this is what it looks like over yours that's a standard CPI cell cycle but the latest CPI cycle that ended in 2002 and started roughly after the war is in red on this chart and this is what it looks like and there are very important timings in the cycle it's very to intermediate lows that happen roughly 33% into a cycle and 66% in 66% into the cycle they are not perfectly on time but you know that's roughly when they happen and all of a previous kondratyev cycle those two bottoms happened in 1964 and in 1986 and the cycle as I said ended in 2002 and the new cycle that started in 2000 in 2002 it's supposed to end in 2019 2020 well to end not to end we will have a first very low point so deflationary period for the US economy possibly in 2019 2020 so now that you know I knew all those days and I just did a little homework and I'm going to show you this homework with all of these charts I mentioned the number of days and with or all the days that matter for the dollar for the Euro and for CPI so we said that we had a euro high in 1975 we said we had a in 1985 euro hi Yolo you know they are on this timeline well are of a dollar highs and lows so dollar low is 1978 1995 2011 dollar high 1985 2002 and my assumption is around 2018 but my first assumption was around 2018 and then where are the major CPI low that come up you know from the CPI analysis major CPI low were 2085 sorry 1985 2002 and I expect the next one to be in roughly 2019 so this is you know taking shape a little bit and if you check our relations you can see that there are 10 years every time between each euro high and low there are 17 years between each euro highs there are 17 years between each euro lows and there are 3 years between the Euro high and a dollar low and there are 17 years between each of the CPI lows so you know it all ties together so maybe my forecast has a little more than a 50 percent chance of being right and I can also what's nice is that I can also when all these charts are tied together I have a stole a sort of stop loss for analysis it's that all these charts will have to make sense together in the future in order to get the dollar high I will need to have a CPI low I will need to have a euro low and you know this will help me improve my timing in the future so also I know that usually CPI lows are spread apart by 18 years and not 17 so I am ready to wait possibly for a little longer when 2008 and possibly the dollar hi will come in 2019 or 2020 I'm open it's you know my window is a from 2018 to 2020 so you know I wanted to share this point of view with you I think it's going to be a very important part of my own analysis in understanding markets in the coming years and maybe you will be able to make use of it too so thank you for your attention [Applause] okay my name is Nick glidin I'm an European equity analyst just look at charts I don't believe in fundamental analysis at all this is a charge of the footsie 100 going back to 1996 we've made no progress whatsoever in the UK since 1999 the peak was six thousand nine hundred and fifty in 1999 I've been working for a stock broking firm all the way through all of these and let me tell you it's not been much fun it was fun in 96 97 98 but since then pretty dull I have to say not does the wrong word sorry pretty unrewarding I think for stock brokers that hasn't stopped me being a natural bull I have to confess I do have an envelope in built bias being a stock broker you've either got to be a massive natural bear like someone like Albert Edwards or you have to be I believe a natural bull so I thought I dunno about my my inbuilt bias here so apologies but my feeling is so feelings probably not a good word to use is it my view is is that if this does breakout above the seven thousand level that this is a massive consolidation obviously I haven't showed the chart before this but it came from the bottom of the floor so this is a sideways move after a massive 1980s bull market sideways for 15 years and I believe preparing to breakout after Robyn's talk with the market profile I did just check this out I was I suddenly wanted to check that there wasn't some gap in the in the market profile bell curve and there isn't so I don't think this has got to go down a long way to fill in any gap I think this is poised to break out and remember I'm talking long-term not short-term that the short-term outlook on the fitzy isn't quite safe isn't quite so lovely but I think we have to remember that it I don't think we should be surprised that the markets running into a little bit of trouble at this level because look how important a resistance level it is it's exactly where we stopped in 1999 and mm and so I believe it's very natural for the market to be having a little bit of a setback at this stage but when it breaks I believe it's going to be an enormous breakout now my when I say enormous I don't mean that lightly I think I've always sort of been brought up to believe that if you've had a 15 year consolidation when it breaks out or say 15 day or 15 wheat consolidation the breakout will be either 5 or 10 on some roughly using sort of Fibonacci levels really so I would believe a 15-day breakout you'd see 5 days very sharp out for 10 days very sharp up so I'm saying this is going to go up for the next 5 years once we're through this little shakeout were out at the moment if you do this on a point in Figure chart of course it all comes up into lovely columns and that the count the way that I do it which is slightly more wick off than than the traditional point and figure the count is for 20,000 as the target for fitzy so I'm gonna I'm gonna stand by that for now my footsie target is 20,000 in five years time hopefully that's foolish enough for most okay don't get me wrong there I'm not saying the UK is a great place in the world it's pretty disastrous frankly this is the MSCI UK against MSCI world we are making mold this is a very long term chart back to the 70s you remember how horrible it was in the 70s I should just say this is this is the ratio of the two this is what I do for a living as I look at ratios between stock prices and an index or one index and other sound trading relative strength this is a relative strength chart you can see the UK looks pretty terrible against the world breaking down to a multi-decade low in the short term actually there's some signs of a small base forming you can't sit on this chart but I'm not saying anything particularly positive about the UK relative to the rest of the world so I kind of think if the UK goes to 20,000 I should make up some doubt target but I'm not going to the Dow is probably still going about the form and what's going to be the best stock in the UK everybody hates the banks I kind of like the fact that everybody hates the banks because I'm although I'm naturally bullish I'm slightly contrarian very very long term I'm never contrarian short term but very long term I like it if everyone thinks I'm crazy this is Royal Bank of Scotland relative to the UK index using the AllShare here again a long term chart the current level it is it's not just 1/10 of where it used to be it's a twentieth of where it used to be relative to the UK market this isn't an enterprise value chart this isn't a market cap chart this is a price relative so the fundamental analyst would say well it's never going to get back up there again but I kind of like it when people say it's never gonna get back up there again anyway the key thing is nice sideways move triangle pattern trend lines all working pretty nicely it's now making its very nearly a 12-month relative high it's actually an 11 month relative high that's kind of good enough for me to say it's a confirmed breakout to the upside and what a beautiful triangle pattern so I didn't think I own 10 if I'm allowed to give actual stock recommendations but this is the kind of thing I like target isn't for it to quadruple but certainly SS that's it for me okay perfect and nicely on the half an hour slot so we have 30 minutes for questions and what I was going to suggest is you know to the assent we've got questions on any of the things that you've heard please put your hands up and and fire them in and to the extent you want to broaden the conversation and and ask about other markets and it would be very happy to address that - thanks Nick you just said we could have a correction in the short term how far do you see that going to look at that I'm actually not as bearish short term as everyone else's and I pass the problem is if we look at the Dax the Dax has broken so the Dax has broken below its August lows I don't think that's the most important index to look at in in Europe I think the Euro stocks 50 is let's face it that's the one where the the futures traders are that has not broken okay it's not looking great volumes picked up on this on this decline it is actually they're just holding above the August lay and it might be my natural bullish bias is making me look at the charts that are that aren't as bad as the others and I have to confess that you know whilst the Russell's been collapsing I've been saying this is not the market the Russell is small flipping micro cap stocks it is not the market so I will confess that I have not been as Farish as I as everyone else everyone else an exec all the Russell the Russell's all that I care about I've kind of been saying look if the S&P breaks that 19:03 level which is the August layer then I have to admit that's a top pattern but my short-term view actually is 19:03 has held the euro stocks 50 is held fits in the dax I agree look pretty bad the Russell I agree looks terrible terrible but let's face it everyone knows that so actually sticking America I think there's corrections over maybe one more down day on Monday but if we have that I would be pretty keen on a turnaround Tuesday kind of thing so I don't want to be really bearish but at all and that's not just my own belt verse if it says people who are less bullish perhaps anyone want me to put another one up here to answer that question anything I do I think the markets are going to be much more differentiated over the next few years so by geography I really split them into you know to mean the sort of up and comings that Southeast Asia I think it's looking far more polish than anything in Europe and I think this u.s. is terribly expensive at the moment so I wouldn't lump all the industries together at all no so this is this is Shanghai Composite hands up if you think that's a Down trend yeah it's not a Down trend is it yeah yeah but it'd run a longer jar yeah good call yeah good call it's a sideways thing yeah but it's interesting isn't it you know everyone everyone says you know China's China's our disaster well it it's had its disaster the disaster was 2007-8 it's gone sideways since then so I find it very hard to be bearish about a chart that looks like that you may argue that the Hang Seng is is perhaps more relevant and that's not a that's not a to me that's not a good looking chart so P okay who likes P is no sorry I know I'm in a slightly biased environment here but my view on stocks and p/e ratios is your job is if it's going up you should own it don't tell me what the P is if it's going down you should be short it that's so I type my first some views you actually make more money in in high peace talks particularly actually though someone talking about management meetings with management I really liked someone said that they're pointless and I actually think it's quite nice to meet the manager because if you know that they're crooked you've really got the mess of it you should be long obviously because if they're crooked they can make the stock price double much quicker than someone who's telling the truth so and also but most importantly basically as soon as the chart rolls over and breaks your stop loss level you are out of there whereas the the reason I think most second allows lose money once they're in a stock that's quadrupled they've got their stuff last and it breaks the summarize it but it's a great management they've quadrupled my stop you know they'll turn it and they'd forget to use their stop-loss as if you believe the management or wonderful so much better to ignore P ratios investment comes away you know the management of crooks but use your stop-loss I just probably sit down and I'm another question I was going to say to Nicole I enjoyed your review on the bundles where do you see other European bond yields such as btp in the bono spreads to burns tightening further yeah indeed I think one of the things that people forget is that you usually measure these as a spread but what you should be doing now is measuring them as a ratio yeah so for example the BTP yields two and a half times bund so to Spain roughly yeah tenure there's a spread not right yes you see that's my point my point is it's the ratio basically Italy and Spain are absolutely scuppered if they've got to borrow money a two and a half times Germany they're never gonna catch up never do you notice I mean it's just hopeless so something's got to be done there I can see Draghi's problem and as I say most of these sovereign the sovereign paper is is is is is is really easy to trade yeah the other thing as a bank as a banker as an ex-banker may I say is I'm not gonna get 20 basis points slapped on me off me courtesy of the ECB I am just not going to do it that gives me 20 basis points of leeway so I can pile into anything that yields more yeah I've got 20 basis points there to play with Bob's your uncle it's fierce it's absolutely obvious the the next one I was going to say on a my two stens child went all wrong is that this is the situation in the States this is what should be happening in the States US Treasurys tenure 2.3 percent currently yield two and a half times bunt in a global market do all you've got to think about is the current exposure which is dead easy to hedge yeah so that's why I think twos tens is gonna really narrow in and it should start trading my target is 30 basis points and if my us two year is going to be at about 50 basis points my target for us tenía is 80 basis points I've managed to get that's Germany Germany all divided by Spanish field what other way around it's yes the Spanish field is point four sorry Germany also point four times difference it's a whopping great big difference isn't it and again this is where we've got to start using ratios more because when all our RRR prices get towards zero yeah whether it's a commodity whether it's corn that the gentleman was mentioning do you know to me when your prices are getting towards zero the mass must adapt another question a question for the second speaker the Japanese yen what's helped you for yen versus dollar and get yen worse is you earth so interval post say direction how much further it can weak against US dollar and one will be the next turning point and also a broccoli I'm also quite interested interested to know why just as you explained about CPI in the previous slide thank you well why not the US dollar yeah thank you for your question although I don't have a charts of a trade weighted US yen with me so I can't show you I have a target and I think it is it has moved already but my target must be the equivalent more less of 120 on us yen so but will be maybe another seven eight percent down for the yen but I I haven't cracked any specific pattern to Yen yet maybe I will find one later you know I've got one for a dollar in for the euro I don't know what moves the yen up to now I'm doing research in the Japanese economy but there is not enough data to to have strong conclusions on the really long term but you know looking at a standard US dollar against yen this chart you know we had a break out after a long consolidation and it should be rising further and then you can start laying your Fibonacci retracements of a very long term and so on so if you can drove a 120 target me yes I won twenties up here so that will be my first target it should go you know the dollar should rise fervor against the yen in time but just follow the trend you know you got the reversal levels I don't know how to set targets with technical analysis there are pattern targets but pattern targets are always fall short of the end target so it's so easy when you have a trend you just have to rely on you know the definition of what a bullish trend is and pick your last low in the trend and let's just stop loss and you hold on to your trade until you stopped and there's no comment to do in the trend I can only speak when your reversals which is where I add value the rest is you can leave it to a machine really so as to you euro yen so we have two competing very weak currencies who's going to win the game right now there is no clear indication it's just you know going sideways and what can I say there's a little more upside potential for the euro versus V yen potentially but this is not a cross that I would put forward into any you know roadmap but I will put to my clients you you shouldn't be trading that spread because the two currencies are both of them much too weak so it's better to have fun on emerging market currencies or things like that when you're a yen just on the yen dollar 120 is also there Fibonacci retracement of the decline from 98 to 2011 120 makes sense to me it's a bit consensus there is it a bit consensus 120 target in the heart of a trend everybody's right so we don't we don't worry about consensus it's a bit of another question am I allowed to sorry am I allowed to broaden the matters on discussion out as anybody look at Gann numbers because 7200 and on the footsie would be to me a clear multiple of the compass of through the round from six degrees anybody him yeah I've read a lot back Gann when I was younger but I don't use it currently the only thing that the S&P peak obviously recently 2000 was exactly three times the six six well I think the six six six low might have been some kind of Gann number but also obviously exact tripling from the low on the S&P when it when it hit that that did send little alarm bells but I haven't looked at Cardinal Lena the squared numbers I haven't done that for a long time I'm afraid part of the problem of course is there's so many indices these days you know do you did on that I mean know that the Bob Beckman book was brilliant on the FT 30 or so is Elliott Wave rather than gone but this is a problem we have with num unit analysis of actual numbers these days there's so many indices is the Dow more important than the S&P is the footsie more important than the all-share should will we soon be switching to just using the ETS you know instead of watching the Nikkei will we watch EWTN that WisdomTree one that John was talking about so trying to find exact levels using ganz squares I think it's pretty you've got to know which index if you want to concentrate on well I think again is very useful when you have IPOs because as technical analysts we cannot comment on my videos but you know that where are you going to have the price are you going to double it that's my use again another question yes the dollar bull market is clearly pretty negative or at the developing world from e/m equity space or EMF X which currency is a local most bearish and on the other side are there any economies that can survive this outcome I'll just put the Russian ruble up for you bull that resident bull on in this case it this is an amazing chart look so going up obviously is dollar strength I just loved the way that this this broke out here I can't remember the level thirty seven point something failed breakout first time second time wasn't anyone else generally about currency markets at the moment many politicians and central bankers have a policy of a rush to the bottom they want their currencies weaker yeah it's a way of getting out of deflation it's a way of increasing your exports yada-yada-yada so quite frankly I can see this all kicking off again and I think it started already I mean the ruble is a bit of an exception it is a managed exchange rate do be careful with this one and yes it's got specific problems they're bigger than most of the other emerging markets have at the moment but you are seeing the other ones that are very weak at the moment the Indonesian Rupiah looks as if it's about to break out over something like a twin five years straitjacket and I think you know is it a good thing is it a bad thing well it depends on where you're coming from what you're trying to achieve but certainly I think that the Euro ironically in its favor has deflation that's a plus for the euro yeah so it's not so clear at the moment and I just think an awful lot of emerging market currencies are looking very precarious right now I was gonna add to that I mean I think the Chinese remember a is a very interesting carousel relationship for us to keep it on over the next few years that seems to have started to sort of move out a trend as well and if you put a see my chart yeah I'd say what you want they the Chinese removing cn8 shall CN y sr yeah that's Taipei use a longer term in downtown okay that's back to 99 there we go the real question I think is your Twitter is that is that garlic and let that currency do value of the next four five years all right here's this thing just gonna carry on going and I know it's not something that people can easily trade but I do think it's probably going to be something that's worth watching this is this is the JP Morgan emerging markets currents index it did break a few weeks ago and that's our targets is another 4% down yeah well this is this is emerging markets relative to knowing you can see I've got rather a lot of trend lines on that one this emerging markets relative to thee you can see I watch this a lot emerging markets relative to the world is it bouncing at a support level here I kind of think it is but I nearly used the word hope there actually any said I hoped it is and that's always bad isn't it but I think it's out a support level but I can't believe I said hope that's its disaster another question my natural invoke bullishness has not applied to commodity advances it's only to xt markets the neck t market volumes that's okay obvious and the other thing obviously with the oil and gold being quite big not the interesting what how they think that could affect yeah everything else okay I have a slight problem with oil in that I don't really know if this 2012 Lowe is real or not it depends how you do the rollover the Philip futures contracts this is WTI but if I do it for um for Brent you'll see that we kind of touched it this week so yeah this is the mm and this is that this is the way that everyone who uses Bloomberg looks at it but I'm told that this low has been broken if you do continuous rather than continuous contracts the updater guys are the people to to speak to about this when I look at this chart I go it's definitely not a down I mean so it's definitely doesn't uptrend it is a downturn but is it holding it at a support level I do however my I'm not I know I'm not very good at oil particularly well they don't spot prices yes it's called USC odd something isn't it here we go this one that's a good point right so this is this is US spot that's not broken the other one that I do quite like is this is an interesting chart this is u.s. petrol at the pumps in fact someone sorts someone put this chart up earlier on in the week and that does look like a top pattern building to me that looks like a big head and shoulders top but obviously it's not broken but the the petrol price could be about to break lower I haven't answer your question I don't know is the point here but if you look at the trend which really looks very very heavy and if you think about the CPI chart where in three promising that we will not see any inflation and we are heading into deflation well you know you can wait for as long as possible until you fill up the tank and you know every time because they are doomed to go down oil prices we will have the occasional bounce because of your political reform geopolitical geopolitical reasons but in terms of demand I think that all charts are pointing down and we have no element to say that it's over so you know follow the trend once again and sell all the basses for the time being and for a few more years I would also like to add that let's not forget that most wholesale commodity markets are priced in u.s. dollars so if Valerie is correct and the dollar is going to strengthen by another whatever 10 15 20 percent every commodity price should lose 10 15 20 percent per go and off right and so it's not necessarily oil that's good or bad I'd also like to point out that in the very long term chance that Nick brought up and you can see it there you have this ridiculous rally in whatever it was Oh 708 and all the rest of it do you know to me and what we're doing we're in a holding pattern for crude both Brent and the wholesale gasoline and the NYMEX okay so you're actually in a holding pattern a very very giant symmetrical triangle and I don't know about you but I don't consider $90 a barrel cheap it's a triangle I guess this sort of thing it's broke okay let's let's let's have another question this is good just keep keep it moving over then yep I come in terms of your target forty notes and 2.8 I don't really quite want to think about what the US economy is doing at that point so a couple of questions does your view of stocks and the dollar I up with that thought process and in terms of the twos tends flattening what do you need to see that it would actually be the twos outperforming he'll terms driving flat so the alternative opposite view could you repeat the second part please so the fact the first part is if if 10 years are gonna yield yields will be 0.8 so significantly lower oh boy we are now does that tie up with your SP and dollar view what would they be and the second question is what do you need to see that you would actually get two year yields driving higher an outperforming that would drive the flattening thank you in terms of my view on stocks us indices are more cushioned than some of the others okay so if we're going to go into a bear market and I think we are the u.s. indices will lag and drop by less okay they have a safe haven type status embedded in them there's a there's like an option in their young there's a bit of optionality in them but I do think that too many indices are too expensive at the moment in terms of the yield curve and I know my view on the Treasuries is totally out of kilter from everything you've been hearing from you know but I the US economy is far more fragile than most people are currently thinking it is I do think that some members of the Federal Reserve are aware of this and many central bankers I've last learned that a they are not God and B they've got a really really difficult long task ahead of them this is a very serious long-term problem and is all to do with too much debt and these debt has got to be got rid of one way or another and that they're there three ways to do it the neat way and the hard work way which is paid off in tiny installments so you've got to have rock-bottom interest rates forever the other way to do it is just walk away and I think they're an awful lot of people in Europe and the states who will walk away from money they've borrowed there's a lot more coming still young and finally the other way to do it is just to declare yourself bankrupt which really hits hard in the banking sector yeah one way or another the financial sector is very fragile indeed still and I think it's going to take another ten years for it to sort itself out another question yes Nick you've shown the footsies likely to underperform what other sorry sorry is the question is there a European index I think it's gonna out which which in Europe where the leadership could come secondly what do you think yeah that the tax is underperforming at the moment this is Dax relative to Europe here so it's been a big winner over the last ten years it's now broken down relative I think actually I haven't checked this in the last few days but yeah I see I kind of think maybe Spain looks pretty good France doesn't I mean it I mean actually footsie doesn't look bad relative to Europe it's your it looks so bad that that's you know even that's not a great chart I know it's not gonna be this either is it this is Greece relative to Europe that's not gonna be good no it's not it's not a disaster it's not struggling then I'm struggling yeah here we go Ireland sweets in Ireland yes this is Switzerland relative to Europe and if you look at the biggest stock I'm not allowed to do stock names so figure stuff and citizens making relative highs I don't think UK looked that bad relative to Europe is the is the quick answer we've got time for some more questions if you want to ask across other markets or if you want to ask more varied and broader tangential questions around techniques you name it seems to me it's quite interesting tens versus 30s and given obviously the policy but let's just focus on the chart here what your thoughts are on a 10 and 30s curve and jujubes I tend to focus on the 10 year in Japan because it's so much more liquid and the 30 year is very much more a niche market so do you know ii mean if you wanted to take the DNA stick to the tens and then see the 30 year has been sort of you know the slightly skittish one or whatever but what's also happening in in certain fixed income markets is you've got total lack of supply now I mean it's ironic isn't it you've got massive supply and it is all locked up so I mean how much are they buying every month I don't even know I mean it's just ludicrous isn't it and all of those will be I'm certain held to maturity because the central bank won't dare sell them out before maturity just in case they have to take a loss yeah so all this paper it's gonna be locked up and the market you can see it particularly in the u.s. already where the repos are failing all the time massive just terrible failures all the time where certain issues are in such short supply that the rates just go out the window and so the market is really creaking and I think this will get worse rather than better so when you see a market that's very much subject to shortages and obviously then squeezes you know take it all with a big pinch of salt yeah yeah plenty of wide parameters I would suggest and the 30 is one of those issues in in Japan I say okay so we've just got a very little bit of time at the end and what I thought we'd do we thought we'd run a poll and ask you across the three main asset classes we've been looking at and what I'd like to do is have everybody who thinks will do we're gonna cover 10-year yields we're going to cover the dollar and we're gonna cover the stock market as defined by the footsie 100 the main stock market of the world as we all know so put your hands up if you think 10-year yields over the next year will be higher than where they are now oh I shouldn't do this and if you think they'll be lower than where they are now so I think that's probably to be fair think that's probably a forty sixty in favor of lower right okay footsie 100 hands up if you think it's going to be higher than where it is now in a year's time yeah and if you think it's gonna be lower again I would start defecting I'd say that was 50/50 got a bunch of economists in and the US dollar has defined by the dollar index higher over the next 12 months dangerous consensus trade and lower [Laughter] thank you very much okay I think that's probably ninety ten ninety nine make a record ease into the next iftar conference in Tokyo we can remind ourselves just how prescient we've got a cone-like currency very concisely that's saying I'd like to thank very much behind this for joining me today and wish everybody on the panel and indeed in front of us good luck over the next year trading and thanks very much for this [Applause]

Channel: Society of Technical Analysts (STA)

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Id: PsK5SDQasL4

Length: 62min 30sec (3750 seconds)

Published: Thu Nov 01 2018