Almost every major asset class has peaked from a very high level and the descent will be protracted. The Fed is letting $50 billion a month run off their balance sheet. The ECBs QE program was carrying purchases of 30 bln euros a month through September, until October and November when purchases were reduced to 15 bln euros a month, purchases are supposed to go to zero in December. The Japanese Central Bank is shrinking their balance sheet simultaneously with the ECB and the Fed. The question is, how much will central banks shrink liquidity whilst assets fall?
VIX – watch the term structure
At the tail end of a particularly dismal month for global markets on October 26th the VIX broke 26 on the upside, a level not seen since last February. Since the start of November market volatility has begun to subside as equities rebound, but going forward investors should continue to focus on not only the VIX but also its term structure to gauge fear.
China: What's Next?
The Chinese Communist Party Politburo members recently released a statement via its state controlled news agency Xinhua, intended to placate tumultuous markets and turn around dejected sentiment. The Chinese financial markets are among the worst performing in the world this year, and it could worse.
Uranium – market reactions
Uranium prices were crushed by about 35% over the past three years, but more recently prices have been making a comeback. Market forces have punished uranium investors leaving many disillusioned with the industry’s prospects. However, a recent shift in supply and demand fundamentals, as well as a change in perception, have driven uranium prices to two year highs. If the inflection point has passed a long-term uptrend may be underway.
Gold – before the rush
Speculators waging short bets in the gold market may get caught offside very soon. The CFTC Commitment of Traders numbers show that speculators have loaded up on short gold contracts in unprecedented quantities. Oddly enough, as trader’s short interest has skyrocketed the price of gold has been firming, this positioning setup could lead to a major short squeeze. Usually, when short interest rises the price of an asset is pushed down, but recently gold has not been falling and this could be a contrarian indicator.
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