Market news & insights

On GFC’s 10-year anniversary, one cannot help but wonder about the current dispersion in the financial markets. Developed Markets (DM) equities are now divided between US and non-US, with the US outperforming every other major market. S&P is hovering around its all-time highs whereas DM are still well below their 2018 highs.

S&P 500 (White Line) Vs DM (Orange Line) In the Emerging Markets (EM) space, a problem that began with a select few countries managed to end the golden performance of 2016-17, creating an emerging market rout. Based on MSCI EM index, emerging markets were down by almost 21.5% from February highs to the mid-lows in September. MSCI EM Index In line with EM equities, the EM currencies have seen some significant moves.

Argentine Peso, Turkish Lira and Brazilian Real are all down by 49.97%, 39.62% and 18.29% respectively against the greenback (year-to-date) at the time this report was prepared. EM Worst Performers Commodities have been interesting too. Whilst a higher USD pushed commodities down in general, oil has remained relatively strong and is now trading close to a 3-year high.

Thompson Reutters Core Commodity Index (White line) Vs WTI Oil (Orange Line) Given the above mix, in this article we take a look at the levels and catalysts traders need to watch. US Equities: In the past few weeks, prominent market timing indicators called for a correction in the US markets. The first was issued in late August by Tom Demark, whose indicators and analysis are closely watched by the institutional traders, and the second, which was released a couple of weeks ago by Jason Goepfert from Sentiment Trader, in which he drew attention to the emergence of the so-called Hinderberg Omen pattern.

This pattern gauges indecision in the markets and is designed to predict a market correction within 40 days. The yellow dots in the chart below represents the occasions when this indicator has issued warnings. Hinderberg Omen on NY Composite Index For S&P to decline, there needs to be a catalyst.

In our view, this catalyst will likely have something to do with Trump and his trade tariff war. JP Morgan has recently undertaken an interesting exercise - they used the latest text mining algorithm to scan through 7000 earning transcripts and conference calls. The exercise concluded that companies are now more worried about the trade war and its impact on their bottom-line rather than that the usual suspects: tax cuts, macro headwinds., etc.

Therefore, we would be closely following the US-China trade war developments now that China has announced an additional set of tariffs on $60b worth of US imports. For the time being, the trade war doesn’t seem to have had much impact on S&P 500. However, since there is a confluence of technical warnings (both fundamental and technical), we would be looking at the 2860 area in the S&P daily chart (below).

Should this level be broken in the next 2-4 weeks, prospects for a correction can increase significantly. S&P 500 An interesting point in the chart above is the abnormally high volume on last Friday’s close, which happened to be a down day. Volume spikes at the peak of a trend are traditionally signs of inflection points.

Emerging Markets: Still a Concern Given that EM economies are often interdependent and share the same attributes, analysts did not see the EM developments in isolation and were quick to talk about a contagion risk when Turkey followed Argentina only three months later. Today, a problem that began with a select few countries has turned into an overall EM issue. The combination of a higher USD (driven by higher rates in the US) and issues such as the trade war, sanctions and domestic matters in EMs have created a vicious cycle.

On one hand, risk-averse investors are selling their emerging market assets due to economic downgrades, slower growth and trade war risks. On the other hand, by repatriating their investments back to the funding currencies (mainly USD), they force emerging market currencies to go lower, which in turn would intrigue more EM assets sales as investors fear their EM asset returns to be diminished by currency depreciation. Emerging Market Index (Orange Line) Vs US dollar index White Line) EM Short Term Rebound: Emerging markets, along with most risk assets, have recovered somewhat over the past couple of weeks.

However, we believe this recovery is mainly due to profit taking as opposed to a change of fundamentals. For the trend to reverse, we want to see the EM index to stabilise above 1100. MSCI EM Emerging Markets and Risk currencies The reason FX traders need to be aware of the EM developments is that the EM rout has a direct negative impact on high beta DM currencies such AUD and NZD.

This is shown in the chart below, where the orange line is the EM index, the blue line is AUDUSD and the red line is NZDUSD. Emerging Market index (Orange and AUDUSD (Yellow) and NZDUSD (Blue) Therefore, as long as the EM rout exists, one should expect further depreciation in the price of AUD and NZD against the USD, and other safe-haven currencies such as JPY and CHF. NZDCHF in particular looks very interesting, with a clear medium-term downward trend.

NZDCHF Commodities: While commodities in general will be heavily affected by USD, oil may remain the exception. Many analysts previously believed that cutting Iran out of the production line (as Trump’s deadline is approaching) would only have a minimal impact on the markets – this is because Iran’s relative oil production was deemed to be “just a drop in the ocean”, with Saudi Arabia and other oil-rich countries promising to pick up the shortfall immediately. However, we’ve now seen that these analyst estimations were only good on paper, where what actually is happening is far from theory.

The story went like this: Saudi Arabia announced to the world back in April that they could increase their output to 12.5 million barrels a day to fill in Iran’s gap. The reality is different: Saudi Arabia is presently only producing 10 million barrels a day. To get to the 12.5 million barrels mark, they’ll need to do a lot more drilling, and sooner rather than later.

Elsewhere in Russia, production has gone up by 250,000 barrels a day, but this won’t be enough to fill in the 2 million barrels a day gap which would be created when Trump’s sanctions on Iran becomes fully functional. Production in other OPEC countries hasn’t yet increased much either. Therefore, purely from a basic supply-demand point of view, risks seem to be on the upside rather than the downside.

From the technical point of view, oil is now in a strong and healthy bullish channel, which if it remains intact (a likely scenario), an $80 WTI won't be out of sight. WTI Crude

MELBOURNE, AUSTRALIA – 18 April 2019. GO Markets is pleased to announce its expansion into the Middle East and Northern Africa (MENA) region, operating as GO Markets MENA DMCC in Dubai, UAE. Located within the economic ‘free zone’ of the Dubai Multi Commodities Centre (DMCC), GO Markets MENA DMCC has obtained its membership with the Dubai Gold and Commodities Exchange (DGCX).

GO Markets CEO Christopher Gore said: “Establishing a presence in the MENA region has been on our wish list for some time, so I’m very happy to see things finally coming together. What we’re trying to achieve here is somewhat different to what we’ve done elsewhere, and I believe we’ve got the technology and talent on the ground to make it happen. The DMCC and DGCX have given us a great opportunity and we hope to be a strong contributor and innovator for them in the years ahead.” GO Markets MENA DMCC is applying for its Securities and Commodities Authority (SCA) license and in the process of establishing a physical presence in the UAE to service its new and existing clientele.

GO Markets has established a solid global reputation as a trusted and reliable CFD provider, and this expansion will help traders access a wider range of quality instruments with competitive rates. About GO Markets GO Markets is a provider of Forex and CFD trading services, offering Margin FX, Commodities trading, Indices and Share CFDs trading to individuals and wholesale clients globally. GO Markets holds an AFSL (Australian Financial Services License) with the Australian Securities and Investments Commission (ASIC).

Media Enquiries Zoher Janif +61 3 85667680

MELBOURNE, AUSTRALIA – 27 March 2019. GO Markets is pleased to add ASX shares to its CFD product range, increasing the number of instruments available to more than 250. With a previous focus towards Margin FX (Forex), CFD commodities and Indices, the move is expected to open the door to traders seeking multiple assets within a single platform.

Traders can now trade popular ASX Shares such as Rio Tinto, Commonwealth Bank, Telstra and more, with margin requirements starting from 5%. CEO, Christopher Gore said: “It’s been a long time coming, and all part of our central plan to have an all-inclusive offering for our clientele. Over time, we hope to be launching an even greater variety of global markets, with NYSE and NASDAQ stocks flagged for Q2 2019.” Head of Trading, Tom Williams stated “GO Markets has worked tirelessly behind the scenes over the last 12 months to upgrade its technology and infrastructure, making this exciting new offering possible.

New and existing clients can start trading ASX Share CFDs on the GO Markets MT5 Trading Platform, while we continue to optimise and prepare for the launch of NYSE and NASDAQ stocks.” Traders can take both long and short positions on Share CFDs and can also diversify existing portfolios using one platform. About GO Markets GO Markets is a provider of Forex and CFD trading services, offering Margin FX, Commodities, Indices, and Share CFDs trading to individuals and institutions globally. GO Markets holds an AFSL (Australian Financial Services License) with the Australian Securities and Investments Commission (ASIC).

Media Enquiries Zoher Janif +61 3 85667680

It was only one month ago when oil was the most hated commodity in the market. Analysts were pessimistic and forecasts for oil with a $10 handle were circulating in the financial media. However, against all odds, oil suddenly managed to hold losses and surprisingly recovered by some 53% from a 12-year low in February.

Given this sudden and strong change of direction, the obvious question traders now face is whether the recovery is going to continue. To be able to answer this question, we should first discuss the chain of historical events that drove oil prices lower and then see if anything is changed. The Days Of High Oil Prices The price of oil has significantly increased over the past 18 years.

It first went from being $10 a barrel in 1998 to $145 in 2008. This equates to a 1350% return which is way above the 75% return in stocks (represented by S&P500) during the same period. Then during the Global Financial Crisis, it got sold off heavily and declined by approximately 78% before finding a bottom in late December 2008.

Then from 2009 to May 2011, thanks to a global recovery in asset markets and pick up in the global demand, oil outperformed stocks again and rose by 276% to grab everybody’s attention on Wall Street. At this point, oil was only 24% lower than its all-time highs in 2008. The Technology Behind Oil Production The prolonged high prices encouraged further investments and developments in production methods previously deemed uneconomical.

By 2013, not only these methods (namely Shale and Fracking ) were profitable but they also helped U.S producers to significantly boost their production capacity. Based on the chart below, oil production in the U.S jumped from an average of 6,200 barrels per day (b/d) in 2012 to an average of 7,400 b/d in 2013 and continued going higher until 2016. US oil production since 2000 A Race To The Bottom As Oil Price Slips In the meantime, in response to the threat of new oil supplies from the U.S and to push those competitors (who mainly had higher production costs) out of business, the Persian Gulf oil rich countries, led by Saudi Arabia, decided to pump as much oil as they could to push the oil prices lower and keep their market share.

The combination of the above factors flooded the markets with so much oil that the world’s total daily supply exceeded the demand by a considerable amount. In January 2016, the International Energy Agency (IEA) warned that the world could “drown in oil” and markets may be left with a surplus of 1.5 million barrels a day in the first half of 2016. Average Daily Oil Surplus per quarter since 2012 The imbalance between supply and demand created such pressure that not only the price of oil dropped against USD, but according to the chart below, it significantly dropped against other major currencies as well.

Oil vs. Major Currencies Red line: oil in USD, Blue line: oil in Yen, Green line: oil in Euro and the black line is oil in AUD The Price Reversal No trend can last forever in the financial markets. At some stage during the life of any trend, prevailing market drivers will be replaced by new drivers that not only stop the trend but they reverse it.

In the case of oil, extremely low prices seem to have finally started to push higher oil producers (e.g. Shale oil companies) out of business. In their most recent report, the IEA suddenly changed their tone and said they now estimate that production outside of the Organization of Petroleum Exporting Countries (including the US) will decline by 750,000 barrels a day due to lower oil prices.

Less production is exactly the force needed to stop and reverse the bearish trend. U.S dollar coming off from its highs in both February and March was another factor that helped oil. Traditionally, commodities are measured against the greenback, so any weakness in USD will naturally put upward pressure on them.

Oil (the red line) vs. U.S Dollar (the black line) How far can the oil rally go? To answer this question, let’s take a look at the chart showing oil‘s major historical swings since 1992.

Eye catching in this chart is GFC’s 78% downwards move followed by a 276% rise. Collectively, between 2013 highs to the February 2016 lows, oil dropped by some 75% which is almost similar in size to the down move seen during the GFC. Whilst the size of the current move is similar to the GFC, it doesn’t make much economical sense to compare the aftermath of the GFC with the current situation, and target another +276% price increase.

Post GFC, asset markets in general embarked on a massive price appreciation wave driven by trillions of dollars of stimulus packages across the world. We don’t have the luxury of those market aids these days. If you exclude the GFC and get an average of the size of the uptrends that immediately followed pullbacks of 35% or more since 1992, you will get an average recovery rate of 151% from the downtrend lows.

If you apply this recovery rate to the closing price of the February low, you would get a target price of $65.16 which is only $3 shy of 50% Fibonacci retracement line drawn between 2013 high and the February low. Therefore, oil seems to have a fair bit to go. Daily WTI Crude Oil Closing prices Impact of Oil on Equities Usually higher oil prices equate to higher input costs that in turn lead to lower profit margins which is obviously not a good thing for the equity markets.

This time however, it is different and higher oil prices are actually supportive of the stock markets. The reason behind this is that during the crash days, investors got nervous about probable bankruptcies in the energy sector and their follow-on impact on the overall market. The energy sector is very capital intensive in nature and companies usually take on large amounts of debt to carry on their operations.

In the face of the sharp decline in oil and gas prices, these companies went under tremendous pressure to service their debts. Market noticed this pressure in mid-2015 and started pricing a wave of defaults amongst the energy sector. The fear of a potential credit crisis pushed up the correlation between stocks and oil to a degree that the pair started to move in lock steps from November 2015 up to now.

Higher oil price takes some pressure off the oil companies and helps markets restore confidence. Therefore, for now, higher oil is a good thing for equity investors. Stocks and Oil moving together since November 2015 Red line: oil, Black line: S&P500, Blue line: ASX 200 Impact of Oil on the Australian dollar Higher oil price can positively impact the Australian dollar on two fronts.

First, as discussed earlier, higher oil can restore confidence back to the markets and can create a risk on environment. Given that the Aussie dollar is mainly accounted as a risk on asset, higher oil can be supportive of the AUD (please refer to our last month’s article for a detailed explanation of risk on/off status). Second, being a commodity driven currency, the Australian dollar has a direct relationship with commodities, including oil.

The chart below shows AUD and oil. As you can see, the pair is highly correlated. Further up moves in oil can take Aussie higher.

AUD (black line) vs. oil (the redline) The Headwinds As discussed throughout this article, at the moment, the main driving force behind oil prices is coming from the supply side. Any new piece of information that explicitly or implicitly implies a production cut (increase) will immediately benefit (hit) oil significantly. Since Iran’s sanctions were lifted in late 2015, it has been desperately trying to increase daily production by 1 million barrels a day (b/d) to get back to pre-sanction levels of 4 million b/d.

So far, Iran’s production increase has been slower than predicted. However, any future news on Iran’s success to increase production is likely to have severe price implications on oil. What are the trading opportunities on Crude Oil?

Taking a look at the Light Crude Oil contract on a weekly chart, it is amazing to see the journey it has taken since mid-2014. The initial drop in the first 34 weeks saw an incredible 57% of the value wiped off the contract, dropping from around $107 to $45. It goes without saying, the trend is down but the recent price action on the weekly chart has seen the price pop its head above the longer term moving average.

In this case, we are using a 26 period moving average on the weekly chart. The key thing to note on the weekly chart is the successive lower highs and lower lows, and despite the impressive rebound over the last 6 weeks, Crude has been unable to break old highs. So right now, the weekly chart is well and truly showing overbought in the midst of a very strong downtrend.

We can also see 2 lines of support/resistance around the $40 level and the $45 mark. As we write this, Crude has broken above the first level of resistance and looks like a continuation in place to target the $45 level. We are seeing some distributive selling over the last 2 weeks, as nervous longs take profits off the back of this nice rally.

On the daily chart (shown below) we can see some previous highs getting broken and the lows rising as well. This is a positive sign in the short term, but all traders should keep aware of the bigger picture and identify the potential trading opportunities accordingly. Generally speaking, we look for two key factors, which are time and price.

Right now we have had a lot of price movement in a short space of time. Crude has the potential to consolidate at current levels whilst time catches up. It would not be unusual to see price hover around the $40-$42.50 mark for a few weeks before this next major move is underway.

Having said that, we are talking about one of the most volatile and active contracts of 2015-2016, so predictions are considerably challenging at best. You will notice the stochastics indicator showing overbought on the daily chart as well but the chart continues to hit higher highs. In addition, we are starting to see some bearish divergence as price heads higher but the stochastics slowly trends lower.

Divergence is usually one of the most powerful signals in the market, so short term traders will be well advised to keep an eye on how that plays out. What are the prospects for the AUDUSD? The Aussie dollar has been one of the surprise packets in early 2016 as it tracked lower at an alarming rate, with an impressive push lower right on the New Year period.

In all fairness, it seemed like all the global markets were crashing then as well, but fortunately our Aussie battler managed to find some support and rally off those newly established lows. Given Australia’s ability to dig natural resources out of the ground and sell them internationally, it comes as no surprise to see the AUD rising this quickly when we consider how strong Iron Ore, Crude and Gold have been since the start of 2016. So the weekly chart shows the AUD breaking new recent highs, hitting higher highs and successive higher lows.

In the short to medium term this bodes well. If we take a look at the support and resistance lines, you can see resistance is pressuring the AUD around the 0.7600 mark with plenty of distributive selling happening over the last 2 weeks, much like we saw in the price of Crude. This resistance extends back to early 2015 and again in mid-2015, so there is plenty of reason to keep a very close eye on current levels and tighten your trailing stops or wait for a pullback for potential long entries.

We also notice the stochastics is showing overbought, but do note that in an uptrend, the stochastics will always show overbought as it is plotting where is today’s close in relation to the high and low over the last 10 periods. On the daily chart you can see clearly the resistance levels that the AUD has powered through, taken no prisoners for those who may have been short. It is likely the sheer volume of those short the AUD that had to cover (buy back the AUD), resulting in the rapid escalation to the 0.7600 level.

There is no doubt for those who played the emotions of the market during this time, that they would have been smiling and are likely to still be smiling. Poking its head above the 0.7600 mark has produced a bevy of interested profit takers, taking money off the table, following a hand 250+pip run in 10 trading days. Remember, we mentioned on the weekly notes above how many times this level formed support previously, only to be broken at the middle of last year.

In addition, we can see some bearish divergence on the daily chart with the stochastics trending lower from well overbought. Right now the short and medium term trend is up, so best not to fight with that. The longer term 100 period moving average has also started to trend higher, so traders will want to pay attention there as well.

Given the strong move in such a short space of time, it would not be a bad thing to see the market pull back and provide a potentially handy level of entry to the long side. Having said that, momentum is favouring the bulls, so bargain hunters may not get a chance at a lower price for entry. The opinions and information conveyed in the GO Markets newsletter are the views of the author and are not designed to constitute advice.

Trading Forex and CFD's, including Crude Oil trading, is high risk. Ramin Rouzabadi (CFA, CMT) | Trading Analyst Ramin is a broadly skilled investment analyst with over 13 years of domestic and international market experience in equities and derivatives. With his financial analysis (CFA) and market technician (CMT) background, Ramin is adept at identifying market opportunities and is experienced in developing statistically sound investment strategies.

Ramin is a co-founder of exantera.com which is a financial website dedicated to risk analysis and quantitative market updates.

As a serious trader, one of the key areas you must work on is to develop an awareness of the way the market affects your mind, and subsequently the decisions you make whilst in a trading situation. What are trading biases? People have inbuilt set of belief and value systems that develop over the years through learning and instruction from others and experiences.

Many of these developmental factors are outside the trading context but when the trader interacts with the market, these individual natural ways of thinking and feeling become part of decision-making. Some of these natural in-built responses may not serve you well and are termed ‘cognitive biases’. In many instances in the ‘heat of the action’ when in OPEN trades, these ‘cognitive biases’ take over from your written and planned ‘trading system’ and become the major influence on your market behaviour.

Results that you may produce from your trading can reinforce these in-built biases making them more acute, and so have and ever-increasing influence on what you may do when in the market, until finally they potentially end up destroying the capital and also confidence of the investor. There are several of these outlined in the “behavioural finance” research literature and we intend over a series of articles to look at the more commonly described of these. Loss aversion A loss aversion bias is arguably one of the more common trading cognitive biases.

The trader has an overt focus on avoiding taking a loss in a trade. Obviously, taking a loss, with of course risk management to limit any such loss to a tolerable level (often 2-4% of trading account size) is an accepted reality of trading practice. However, in those with a loss aversion bias, there are two potential behavioural responses when in an open trade that may be damaging to capital and ultimately sabotage the potential for on-going successful trading outcomes. 1.

Stop losses are often moved downwards in a long position (and upwards in a short position) from that originally planned on entry. This is an attempt to regain a losing position with the hope that a price may move back in your desired direction. There may be multiple such “moves” of that stop, each potentially inflicting more damage on capital way beyond any planned maximum risk level.

Commonly, there will be an internal dialogue to justify staying in a trade. 2. Conversely, so potentially acute is the fear of losing a profitable trade that such trades are often exited prematurely throwing out of the window any pre-planned profit target or trailing stop system articulated within your trading plan. The internal dialogue we have occasionally heard form traders is “you will never go broke taken a profit”.

So, in practice these two factors result in a reversal of the traditional market wisdom of ‘keeping your losses small and letting your profits run’, in that losses are extended, and profits are cut short. The basis of such a bias maybe be multi-fold, including: • Previous losses in investments, • Lack of education and confidence, • Over-confidence in your ability beyond competence with a view that a loss in a trade meaning you were “wrong” (an underlying feeling of “I am better than that”), • Pre-set beliefs about how the market SHOULD move i.e. trading what you think not what you see, • taking on the “trades of others” without due diligence and perhaps against your plan (e.g. in forums, trading rooms), • Incorrect position sizing with a small initial trading capital where the effect of trading fees is more acutely felt. And it can get worse… One of the MAJOR problems with a loss aversion bias is that it becomes cyclical in its severity, as results continue to fall short of what you had hoped.

This is not only with individual trades where losses may become more extended and even smaller than possible profits taken. Desperation may eventually set in, with an obsession to get trading capital back, whilst account value continues to diminish until the trade reaches a point of “no more pain” and leaves the market completely. This unfortunately has double impacts - not only has there been a loss of a trading capital now, but in many cases have been sufficiently painful that the individual may never again return to trading (so eliminating any potential for future positive investment experiences).

What you can do If this resonates with you, then the purpose of this article is fulfilled, as recognising and “owing” that there is something that needs to be addressed is the VITAL first step in making a change. Obviously, there are steps you can take to address this (and you MUST). Here are some suggestions: a.

You have a complete trading plan that articulates trading actions once in trades i.e. an exit strategy. b. Start a journal. Sometimes the very process of formally recording what you are doing helps in doing the right thing more consistently. c.

Press the “reset button” on your trading account. What we mean by this is an acceptance that your trading capital is what it is now. Rather than a mission to regain your initial capital this needs to be replaced by a drive to achieve consistently positive trading results (and including that taking a loss within your tolerable level is a positive outcome).

The long-term reality is that through changing this focus as described, addressing the bias through developing that consistency in action, you could give yourself the chance for some sustainable results. d. Re-align with your trading plan prior to every trading session. e. Make it a mission to “challenge” your existing plan on at least a 3-monthly basis through gathering an increased weight of evidence that its component parts are working for you as an individual trader.

This breeds confidence in actioning a plan, enabling more disciplined trading. f. There are a couple of ‘unhealthy’ statements that fly around the investment world which you need to check to not become part of your thinking. The first, “do not invest with money you can’t afford to lose” although is from a well-meaning perspective, arguably can contribute to a mindset which gives some sort of permission to lose.

The second and more dangerous from a capital perspective is “it is not a loss until you take it”. This is a massive distance away from what is recognised as good trading practice and is completely contradictory to the positive idea that you should take a loss as soon as it hits your tolerable dollar level. g. Take regular breaks from the market during any session, particularly when trading shorter timeframes, to re-align with purpose and plan. h.

Ensure that you are trading within your level of competence, have a personal trading development plan that outlines your learning for the next quarter. i. Trade smaller positions until you have evidence of developing good consistent habits that break away from your bias. There are a few different ways to action this, reducing your tolerable risk level significantly e.g. from 3% to 1% of trading account capital, or trading micro-lots rather than mini-lots are a couple of examples.

Finally, be gentle on yourself in terms of your development, biases by nature are usually deeply ingrained and will take some work to replace. Our education programmes inluding the popular Inner Circle group are there to help you move forward in your trading and our team is there to support 24 hours a day, 5 days a week.