• Comments for February 6, 2017

    The slightly negative NFP report of Friday relieved the markets of any fear about a possible Fed rate hike. This basically means that everything is fine for equities, which should push higher despite valuations in the stratosphere.



    We can see below that the Mammoth sector still supports the current market.



    Biotech looked relatively weaker, while XLV was still strong.





    Big drug companies experienced an impressive positive money flow:



    We can detect some negativity in the NQ100 Futures and the S&P500 Futures (the emini).





    Copper is weakening, which I cannot explain, as the US$ is also weak. Is copper down just because the big construction projects will only start many months down the read?





    The 20 Year Treasuries are moving down, which does not show fear.



    The Cumulative Tick has jumped, indicating that "animal spirit " is back.



    Conclusions:

    There is a lot of doubt regarding the future of Europe because of the coming elections in France and Germany. This situation should continue to weigh on the Euro, whatever Trump or other politicians say.

    What I am most puzzled about was last week's declaration from the Japanese government that it will create jobs in the US and invest in US infrastructure projects. The real goal is probably to avoid import duties on Japanese products, but this investment will require money from Japan. We all know that Japan has to print such money, which means that pressure will be put on the Japanese Yen. It also means that Japanese rates could rise and/or that the BOJ will step up its purchase of Japanese bonds.

    If Japan's experience holds, then more money will be flowing in the US economy and probably also in US equities through ETFs and the S&P500 index.

    We could be witnessing the birth of a new Centralbanks.bubble.