Founder & Chief Market Strategist - SAV Markets, SAV Markets

Shyam Devani

Founder & Chief Market Strategist - SAV Markets

Provide Comprehensive Analysis & Commentary

SAV Markets

SAV Markets aims to provide comprehensive analysis & commentary on foreign exchange and asset markets. The approach is multi asset as markets are typically interlinked. Cause and effect are always at work, even if those effects take time to manifest. As nothing is permanent we strive to get ahead of the curve in an ever changing world.

Cross Asset Strategy

<ul>
<li>Price action across different markets warn of some short term trouble</li>
<li>This includes developments in Gold, Oil, USDJPY and US Treasuries</li>
<li>Continue to watch the Dow Jones closely as a short term wobble may soon arrive</li>
</ul>


Price action across different markets warn of some short term trouble
This includes developments in Gold, Oil, USDJPY and US Treasuries
Continue to watch the Dow Jones closely as a short term wobble may soon arrive


Equities - A Small Negative Wave Arriving?

<ul>
<li>The stock market comparison with the last pandemic 100 years ago is serving us well as a guide. Warning signs are emerging for the near term on the Dow Jones</li>
<li>The rally in the Gold price is important and further gains will likely be seen from here</li>
<li>Gold is expected to outperform the Dow Jones by double digit percentage moves over the coming weeks and possibly months</li>
</ul>


The stock market comparison with the last pandemic 100 years ago is serving us well as a guide. Warning signs are emerging for the near term on the Dow Jones
The rally in the Gold price is important and further gains will likely be seen from here
Gold is expected to outperform the Dow Jones by double digit percentage moves over the coming weeks and possibly months


The Proper Measure of the Stock Market & The Rally in Gold

Chief Economist & Political Strategist, CrossASEAN Research

Prasenjit K. Basu

Chief Economist & Political Strategist

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Macroeconomics

All the inflation gauges in the US are far above the Fed's 2% inflation target. Headline CPI inflation is at a 13-year high of 5.4% YoY, headline PCE inflation at a 30-year high of 4.4% YoY, and the GDP deflator was up 5.7% QoQsaar in 3Q 2021; the Fed's preferred gauge, the core PCE deflator was up 3.6% YoY in July-August 2021, while the core CPI inflation rate was 4% YoY in September. The reason for the inflation surge is something that we have been predicting since last year -- the excessively rapid increase in money supply (M2), which was up 13% YoY in September 2021, on top of the 24% YoY rise a year ago; it is increasingly clear that the Fed effectively has a M2-growth target of 11-13% YoY, which it has maintained since April 2021. (As we keep stressing, this is much faster than M2 growth in 2009-10, which peaked at 11% YoY because the money-multiplier was depressed at a time when banks were choosing to hold large excess reserves). See our June 2020 insight <a href="https://www.smartkarma.com/insights/labour-market-slack-remains-but-fomc-will-need-to-tighten-by-mid-2021" target="_blank" data-smartkarma-citation="insights:40185" rel="noopener">Labour Market Slack Remains but FOMC Will Need to Tighten by Mid-2021.</a>The ECB's rapidly-shrinking credibility took a massive further hit when the first read on October 2021 inflation showed CPI (HICP) inflation at 4.1% YoY -- after the ECB's policy council chose to keep policy unchanged, stating that its analysis after "a lot of soul-searching" about "inflation, inflation, inflation" had led it to conclude that there was no basis for the market's expectations of even a minuscule rate hike in 2022. The ECB formally targets headline (not core) inflation, and with average inflation in Jan-Oct 2021 already above that (and more than double that target in October 2021), it is ludicrous for the ECB to still be pursuing its PEPP, even at a moderately slower pace. The likely outcome will be near-term appreciation of the Euro -- and sharp unexpected tightening in the Eurozone over the next half year. We would recommend being Underweight Europe, but particularly Italy, Greece, Cyprus and Spain. Near-term Euro strength will likely give way to a strong dollar by March 2022, as the Eurozone faces a new debt crisis with the tightening of monetary conditions in the Eurozone.

All the inflation gauges in the US are far above the Fed's 2% inflation target. Headline CPI inflation is at a 13-year high of 5.4% YoY, headline PCE inflation at a 30-year high of 4.4% YoY, and the GDP deflator was up 5.7% QoQsaar in 3Q 2021; the Fed's preferred gauge, the core PCE deflator was up 3.6% YoY in July-August 2021, while the core CPI inflation rate was 4% YoY in September. The reason for the inflation surge is something that we have been predicting since last year -- the excessively rapid increase in money supply (M2), which was up 13% YoY in September 2021, on top of the 24% YoY rise a year ago; it is increasingly clear that the Fed effectively has a M2-growth target of 11-13% YoY, which it has maintained since April 2021. (As we keep stressing, this is much faster than M2 growth in 2009-10, which peaked at 11% YoY because the money-multiplier was depressed at a time when banks were choosing to hold large excess reserves). See our June 2020 insight Labour Market Slack Remains but FOMC Will Need to Tighten by Mid-2021.The ECB's rapidly-shrinking credibility took a massive further hit when the first read on October 2021 inflation showed CPI (HICP) inflation at 4.1% YoY -- after the ECB's policy council chose to keep policy unchanged, stating that its analysis after "a lot of soul-searching" about "inflation, inflation, inflation" had led it to conclude that there was no basis for the market's expectations of even a minuscule rate hike in 2022. The ECB formally targets headline (not core) inflation, and with average inflation in Jan-Oct 2021 already above that (and more than double that target in October 2021), it is ludicrous for the ECB to still be pursuing its PEPP, even at a moderately slower pace. The likely outcome will be near-term appreciation of the Euro -- and sharp unexpected tightening in the Eurozone over the next half year. We would recommend being Underweight Europe, but particularly Italy, Greece, Cyprus and Spain. Near-term Euro strength will likely give way to a strong dollar by March 2022, as the Eurozone faces a new debt crisis with the tightening of monetary conditions in the Eurozone.  

Inflation Is Entrenched, and Central Bank Credibility Is Sinking, Especially the ECB's

The FOMC is all but certain to formally announce the start of "tapering" at its next meeting in 6 weeks time (2-3 November 2021), i.e., the formal end to monthly purchases of US$120 billion of Treasury and agency securities. The FOMC statement after last week's meeting was about as clear as the FOMC ever is: "Last December, the Committee indicated that it would continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage‑backed securities by at least $40 billion per month until substantial further progress has been made toward its maximum employment and price stability goals. Since then, the economy has made progress toward these goals. If progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted."In reality, a moderation in the pace of asset purchases (as reflected in the overall size of the monetary base) has already occurred. In the latest 3 months, the US monetary base increased by a cumulative US$88 billion (i.e., far below the US$360 billion of total increase in asset purchases promised for that period).  This enabled M2 growth to decelerate notably -- from 20.6% YoY in March 2021 and 14.6% YoY in April to 12% YoY in July 2021. With US real GDP growing 6.3% QoQ (saar) in 1Q 2021 and 6.6% in 2Q 2021, M2 growth of over 20% YoY (following the previous year's 20%-plus growth rates) was clearly excessive. But with M2 decelerating to 12% YoY growth, the severity of upward pressure on prices has begun to ease somewhat -- and core CPI inflation moderated from 4.5% YoY in June 2021 to 4.3% in July and 4% YoY in August 2021. The further reining-in of the monetary base over the next few months (and a complete end to QE asset purchases no later than mid-2022) should contribute to a smooth transition to decelerating M2 (8% YoY by the turn of the year) and slightly lower inflation rates -- although both core-PCE and core-CPI inflation are likely to remain above 3% YoY for the rest of 2021. A gradual tightening of monetary conditions (already underway for 3 months, but being formalized in the period ahead) will steadily push bond yields higher and steepen the yield curve. The predictable steepening of the curve will be positive for banks, and the strengthening economic recovery will boost earnings across the economy. We remain wary of the long-term implications of CAPE (Shiller's cyclically-adjusted P/E ratio), which at 38.3x is at its highest since the 2000 peak. But near-term, the conventional P/E ratio will moderate (from 34x currently), so we are bullish about the equity market for the rest of 2021.

The FOMC is all but certain to formally announce the start of "tapering" at its next meeting in 6 weeks time (2-3 November 2021), i.e., the formal end to monthly purchases of US$120 billion of Treasury and agency securities. The FOMC statement after last week's meeting was about as clear as the FOMC ever is: "Last December, the Committee indicated that it would continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage‑backed securities by at least $40 billion per month until substantial further progress has been made toward its maximum employment and price stability goals. Since then, the economy has made progress toward these goals. If progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted."In reality, a moderation in the pace of asset purchases (as reflected in the overall size of the monetary base) has already occurred. In the latest 3 months, the US monetary base increased by a cumulative US$88 billion (i.e., far below the US$360 billion of total increase in asset purchases promised for that period).  This enabled M2 growth to decelerate notably -- from 20.6% YoY in March 2021 and 14.6% YoY in April to 12% YoY in July 2021. With US real GDP growing 6.3% QoQ (saar) in 1Q 2021 and 6.6% in 2Q 2021, M2 growth of over 20% YoY (following the previous year's 20%-plus growth rates) was clearly excessive. But with M2 decelerating to 12% YoY growth, the severity of upward pressure on prices has begun to ease somewhat -- and core CPI inflation moderated from 4.5% YoY in June 2021 to 4.3% in July and 4% YoY in August 2021. The further reining-in of the monetary base over the next few months (and a complete end to QE asset purchases no later than mid-2022) should contribute to a smooth transition to decelerating M2 (8% YoY by the turn of the year) and slightly lower inflation rates -- although both core-PCE and core-CPI inflation are likely to remain above 3% YoY for the rest of 2021. A gradual tightening of monetary conditions (already underway for 3 months, but being formalized in the period ahead) will steadily push bond yields higher and steepen the yield curve. The predictable steepening of the curve will be positive for banks, and the strengthening economic recovery will boost earnings across the economy. We remain wary of the long-term implications of CAPE (Shiller's cyclically-adjusted P/E ratio), which at 38.3x is at its highest since the 2000 peak. But near-term, the conventional P/E ratio will moderate (from 34x currently), so we are bullish about the equity market for the rest of 2021. 

US: Moving from Stealth to Formal Taper; Bond Yields Will Gently Rise

Chart based progressive global trading strategies, Chart Partners

Thomas Schroeder

Chart based progressive global trading strategies

Chart Partners

Chart Partners objective is to discover medium-term cycle turns and profit opportunities before they unfold, within structural trends while preserving capital with clear degrees of risk. We have real return ideas. 

Markets are dynamic and trading systems must reflect this. It is crucial to determine underlying correlations and lead-lag relationships within global markets and the impact on linked instruments. Our weekly Chartonics product gives you short-term trading strategies that can be applied within the medium and longer term macro trends that are mapped out in our strategy updates. 

Our methodology fuses global market variables and isolates drivers in trends. We specialize in FX, index trade in NY and Asia with a focus on Asian stocks. 

Technical Analysis

DJI break below 35k trendline support and SPX below 4,518 pivot support triggers for a September pullback with SPX 4,400/4,370 inflection support that if broken would see bear divergence dominate the cycle.Meaningful DJI trendline support break and did close below 34,700 price support. SPX met our 4,545 rally projection (reduce call) and broke our 4,518 pivot support (tactical pullback trigger). NDX broke pivot support at 15,500.SPX trendline support at 4,400 is the tactical must hold and buy support. What happens if this inflection support is broken? The weekly cycle sheds light on lower level support targets.

DJI break below 35k trendline support and SPX below 4,518 pivot support triggers for a September pullback with SPX 4,400/4,370 inflection support that if broken would see bear divergence dominate the cycle.Meaningful DJI trendline support break and did close below 34,700 price support. SPX met our 4,545 rally projection (reduce call) and broke our 4,518 pivot support (tactical pullback trigger). NDX broke pivot support at 15,500.SPX trendline support at 4,400 is the tactical must hold and buy support. What happens if this inflection support is broken? The weekly cycle sheds light on lower level support targets.

US Pivot Break, Buy/Bigger Inflection Level

United States

The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally the leaders in their industry. It has been a widely followed indicator of the stock market since October 1, 1928.

Dow Jones Industrial Average (INDU INDEX)

Dow Jones Industrial Average (INDU INDEX)

Equities - A Small Negative Wave Arriving?

Price action developments across various markets - from Gold & FX to Commodities & Fixed Income - are warning of a potential negative wave ahead...

Shyam Devani

The Proper Measure of the Stock Market & The Rally in Gold

The historical comparison on the Dow with the last pandemic 100 years ago is remarkably similar when the market is properly measured. An...

Shyam Devani

Inflation Is Entrenched, and Central Bank Credibility Is Sinking, Especially the ECB's

ECB retained its PEPP the day before the 4.1% inflation print. US too has overshot inflation targets, but taper guidance is clear. Near-term Euro...

Prasenjit K. Basu

US: Moving from Stealth to Formal Taper; Bond Yields Will Gently Rise

Base money rose just US$88bn in the latest 3 months, so tapering had begun but will now be formalized. As inflation edges lower but EPS growth...

Prasenjit K. Basu

US Pivot Break, Buy/Bigger Inflection Level

DJI 35k trendline support break/SPX below 4,518 pivot support triggers for a September pullback with SPX 4,400/4,370 inflection support that if...

Thomas Schroeder