Speculators find opportunity in swing trading as low valuation attracts buyers but market fear encourages profit taking. The conflicting factors, in addition of hot money, creates turbulence in equity stock market. The currency and commodities market are also affected as hot capital is looking for investment return. Bond market is safe heaven in short or long term aspect. Liquidity in capital market is tremendous but only small fraction is driving the real economy through lending to facilitate business operation.
Market should remain range bounded as market participants are still very cautious. After the strong rebound, many investors will realize profit and wait for another opportunity. Smart traders and market manipulators have already taken profit when market hovers near bottom. There is not yet sign of turning optimistic. There are still many uncertainties and coming news to drag down market. Overall participation in market activities remains low among household investors. Hedge funds are gradually accumulating stocks due to net inflow of capital and attractive market valuation.
Goldman Sees a 29% Return From Commodities Over 12 Months
Goldman Sachs Group Inc. said it expects a 29 percent return from the Standard & Poor's GSCI Enhanced Commodity Index over the next 12 months, with the biggest gains in energy and base metals.
Policymakers in Europe will be able to contain the continent's debt crisis, while recovery in the U.S. and China is set to continue, Jeffrey Currie, head of commodities research in New York, said today in a report. Returns on energy investments may be 41 percent in 12 months, compared with 23 percent in base metals and 18 percent in precious metals, while agriculture is forecast to lose 14 percent in the period, according to the report.
"Although the macroeconomic backdrop still remains uncertain, particularly in Europe, we believe that the sell-off in commodity prices is likely overdone and the price risks are shifting more to the upside," Currie wrote.
Bond Bubble Dismissed as Low Yields Echo Pimco's New Normal
Mohamed El-Erian knows why bond markets from the U.S. to Germany to Brazil, where yields have dropped to record lows even though debt has ballooned to more than $40 trillion worldwide, aren't a bubble waiting to burst.
The average yield on bonds issued by the Group of Seven nations has fallen to 1.120 percent from 3 percent in 2007, Bank of America Merrill Lynch index data show. Germany's two-year note yield fell below zero for the first time on June 1, while Switzerland's has been negative since April 24, meaning investors are paying for the right to lend the nation money.
Yields on government securities in the U.S., Germany, the U.K., Austria, the Netherlands, Finland and Australia tumbled to all-time lows this month as Europe's debt crisis intensified, manufacturing worldwide slowed and unemployment in the U.S. unexpectedly rose.
"You're not talking about a bubble because a bubble is about greed," Jeffrey Rosenberg, chief investment strategist for fixed income at BlackRock Inc. in New York, which has $3.68 trillion under management, said in a June 6 telephone interview. "That's not a reflection of ‘I expect prices to go higher and I have to jump in,' that's a reflection of ‘I want to preserve my principal.' Negative yields reflect fear."
Pimco officials point to Japan, which has been in and out of recession since the mid-1990s, as what the new normal would look like. Even though it has the world's largest debt load at more than $11 trillion, Japan has some of the world's lowest bond yields because of years of below-average growth.
"In many ways, we are replicating the Japanese experience," George Magnus, senior economic adviser in London at UBS AG, said in a June 5 telephone interview. "Banks and households have become overextended, and now we know governments have also become overextended. The problem is that the deleveraging means people are saving more. There is no sufficient spending and lending to boost the economy."
Central banks, including the Fed, ECB and Bank of Japan, have helped soak up the extra supply as policy makers injected money into their economies by purchasing government securities. The balance sheets of the world's six biggest central banks have more than doubled since 2006 to $13.2 trillion, according to Chicago-based Bianco Research LLC.
"Yields are extremely low for a very good reason, and that's fear," Stuart Thomson, a money manager at Ignis Asset Management in Glasgow, which oversees about $115 billion, said in an interview on June 1. "I don't see us heading into a bear market."
Citizenship for sale: Foreign investors flock to U.S.
Facebook co-founder Eduardo Saverin drew public ire last month following the revelation that he had renounced his U.S. citizenship, a move widely seen as a tax dodge. But thousands of wealthy foreigners are lining up to replace him, making investments here and putting themselves on a path to citizenship in the process.
The State Department expects to issue over 6,000 "investor visas" in the current fiscal year, which would be an all-time record. Other countries, meanwhile, are following the U.S.'s lead, keen to spur growth in lean economic times.
Under the government's EB-5 Immigrant Investor program, foreign investors can get conditional visas that allow them and their families to live, work and attend school in the U.S. To qualify for the visa, they must invest at least $1 million in a new or recently created business, or $500,000 for businesses in rural or high-unemployment areas.
Demand shows no sign of slowing down, either. International travel, banking and communication have become increasingly easy, while Asia, in particular, is minting new millionaires at a rapid pace.
Foreign holdings of US debt hit record high
Foreign demand for U.S. Treasury securities rose to a record high in April. China, the largest buyer of Treasury debt, increased its holdings slightly after trimming them for two straight months.
Demand for Treasury securities has remained strong despite the first-ever downgrade of the government's debt last August. Standard & Poor's lowered its rating on long-term Treasury debt one notch from AAA to AA+ following a prolonged debate in Congress over increasing the nation's borrowing limit.
Last week, S&P reaffirmed that rating and said it was keeping a negative outlook on the rating for the future.
Is High Frequency Trading Ruining the Market?
High-frequency trading (HFT) is a market-skewing, artificial form of speculation that places undo pressure on already fragile markets, which, by doing so, increases the risk of another flash crash or something much worse. HFT accounts for over 50% of all trading volumes, further distancing individual investors from the market and eliminating virtually any link between valuation and market price.
These trades are all based on picking up the next penny of a stock's move. The programs look for any indication of direction—be it order imbalance, momentum tells, or whatever else can be jammed into an algorithm—and jumps in front of the trade. The goal is to buy a few thousand shares ahead of a tiny move, and then sell when the move arrives. Repeat the process millions of times a year and it adds up to real profits for HFT firms.
The high-frequency trades run amok because there is no longer a market maker (read: human) in the middle of the trading process. The function of matching every buyer with a seller is fully automated, eliminating what Saluzzi calls a "shock absorber" for stocks. As a result, too many program trades can create vacuums where prices lurch beyond where they otherwise might be, as the HFT merrily picks off market orders made by actual people.
Contrarian Investing? Forget About It, Cramer Says
In the investment world, a contrarian is someone who takes a position that differs from the majority. If a particular sector is "hated" by most investors, a contrarian might want to buy in. After all, if few investors like the sector, a contrarian thinks there are few people left to sell, making it immune to big declines.
Cramer noted many industrial managers said things were weaker than people thought thanks to fears over Europe's ongoing debt crisis, which means they didn't meet their earnings estimates. Upon hearing this, the few investors who owned industrials sold their shares. The industrial stocks got hammered.
So even the contrarians think that Europe's economy is only getting worse and they couldn't take the pain, Cramer said, despite the fact they thought their contrarian trade would have been immunized against it.
It's Do or Die for U.S. Stocks
With major indexes rallying back to important short-term price ceilings, the stage is set for what may become the stock market's biggest collective decision of the summer.
Whether it is confirmation by Fed Chairman Ben Bernanke that he will print more money or the pending elections in Greece, the news should spark a technical breakout or breakdown, respectively.
10 Reasons to Be a Bull, From a Stock Market Bear
Finding reasons not to like the current stock market doesn't take much work, as the faltering U.S. economy, European debt crisis and looming fiscal cliff makes the job pretty easy.
But devising a list to be bullish - after one dismisses the usual "stocks are cheap" and "best house in a bad neighborhood" platitudes - takes some work, especially if your natural inclination is that the market is heading lower.
The list:
•10. Corporations are managing risk and doing more with less. Yes, a form of the "stocks are cheap" argument, but with acknowledgement that a pullback in earnings would still leave companies in solid shape profit-wise.
•9. Consumer confidence is still high. Friday's numbers indicated that consumer sentiment is beginning to wane, but remains strong.
•8. Gas prices are trending lower. Sure, $3.52 a gallon is still high, but it's 20 cents lower than last month.
•7. Forget Facebook, the capital markets are still open "if highly selective." The social network's initial public offering was a flop, but other deals, including Thursday's Felda Global Ventures $3.1 billion IPO, are raising cash.
•6. Mortgage rates still falling. Home borrowing rates at record lows are dragging the industry off its bottom.
•5. Mom-and-pop investors are making money, but with bonds. While we've been bemoaning all those fund flows out of equities and into fixed income, it's worked out well for the retail crowd, which now has money it can use to buy stocks.
•4. The "Self-Correcting Election." Colas sees the presidential race between President Obama and Mitt Romney as a win-win: If Romney wins, the market gets a market-friendly president; if Obama wins it's because the economy has recovered sufficiently to justify his re-election.
•3. China is OK, at worst. Despite the talk about a hard-landing, that would still entail 7.5 percent or so growth. Not bad.
•2. Lots of Bears. High levels of market sentiment in either direction are generally considered contrarian signals. The mass of doubters indicates that market still has room to rise.
And...the top reason for being bullish:
•1. "The end of the world only happens once - Monday probably isn't the day." Through recessions and depressions, flashes and crashes, we seem to persevere. "For all the well-publicized challenges facing markets and investors, financial Armageddon is still an unlikely occurrence," Colas writes. "And even if it does happen, what are the chances you really have enough gold coins, freeze-dried food and double-aught buckshot anyway?
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