 Right, good afternoon, ladies and gentlemen. Welcome to this week's monthly webinar with myself, Michael Houston, and my colleague in Canada, Colin Sazinski. And this is generally our weekly, not our weekly, our monthly sort of chat where we sort of dissect what's been going on in the markets and what to expect over the course of the next two to three weeks. Unfortunately, recent events have given us an awful lot to talk about with you guys. Certainly an awful lot to dissect with respect to what to expect from central banks, what to expect from UK, US, and European economic data, Japanese economic data. I'm just going to do a quick risk warning. Just try and quickly get that out of the way before we get started. And then we'll have a look at a quick outlook which Colin has kindly sort of drawn up where we'll discuss the outlook for this year. And certainly I think if the first 15 days of this year have been any guide, I think it's going to be a rollercoaster ride. Philadelphia Fed is missed by a country mile. It's coming at 6.3. Expectations were for 18.7. So Empire manufacturing was slightly better than expected. Philadelphia Fed was significantly worse than expected. So try and take the bones out of that particular one. I think this is indicative of everything we've got going on this year, Michael, in terms of that we're getting a lot of conflicting data. A lot of things are going in different directions and there's a lot of uncertainty as we go through transition phases. And I think with the surprises we've seen today and just generally I think we're looking at a year of a lot of volatility. Well, if the first two weeks have been any guide, then we're going to see quite a lot of volatility for the remainder of the year, which in a way is good, but in other ways it's very, very bad because it doesn't really give you any certainty as to the direction of the way markets are going. So to get started, let's start with our pariah of the day and that's Mr. Thomas Jordan of the Swiss National Bank who basically decides to pull a rug out from pretty much everyone in the markets today after insisting not less than probably a week ago that they remained committed to defending the peg or the cap in the Swiss Bank, the Swiss National Bank came out this morning and basically pulled it, catching everyone the wrong way and sending the Swiss Bank to record highs in the space of about five minutes and you can certainly see that on this one hour chart here. I mean it really makes the rest of the data on this chart pretty much irrelevant and I think the biggest question now really is where do we go from here and to be quite honest, I think the direction is likely to be further Swiss gains. It's probably going to trade between 0.95 and 1.05 and I think cast your mind back four years ago when they first brought the cap in we were trading around about parity then or just above parity around about 103. Obviously we've gone completely through that and beyond and hit a low of 0.85 and we need to have basically look at some of the reasons behind why the SNB felt compelled to pull a peg or pull a plug depending on how you want to analyse it and some of the reasons for the decision are I suppose eminently sensible but I think it's the way it was done that's really rankling in the markets at the moment. No warning and the fact is they've completely gone back on some of the statements they've made earlier this year and that for me more than anything is a very bad thing because it basically means that how can anyone in the market trust anything a central bank or a central banker says in the future. Let's talk about the reasons. I think a large part of one of the reasons was the fact that the Swiss franc was seeing an awful lot of inflows of Russian money because of the crisis in Russia and it was costing the Swiss National Bank an awful lot more money just to defend the peg. There was another reason and I don't think you need to be a genius to figure out what the other reason is and that was this week's announcement from the European Court of Justice that pretty much rubber stamped a potential QE programme from the European Central Bank. The fact is if the ECB has been given the green light then I think it's quite likely that Mr Draghi picked up one of his various mobile phones and decided to give Mr Jordan a quick call and said excuse me governor but your peg we're going to be launching a big QE programme shortly and to be quite honest we're going to roll right over it so you might as well just pull it and cut interest rates even deeper into negative territory and I think that's what we're seeing here. I think Swiss National Bank has been given an ultimatum by the ECB saying they're getting ready to do QE and that the peg as we know it is history. Why didn't the markets see this coming? I think really they believe the rhetoric from the Swiss National Bank and now we are where we are. So essentially what does that mean? Well I think it probably means gold goes up because to my mind it's not behoven to central bankers promises or lack thereof and as such I think we could well see further Swiss strength because I think there is a determination or a race to the bottom in terms of countries once a week in their currencies and everyone wants to do the same thing. Have you got anything else to add Colin? Yes, in particular also the rally in the gold and I'll show it to you on the slide a little later on that one of the main things that gold has been tracking over the last few years has been a European money supply and both up and down from the ECB and now with gold taking off it looks like they're getting ready for a big increase in the ECB balance sheet again and it's important to remember also gold hasn't just taken off against US dollar it positively exploded breaking after breaking out over Euro 1000 last week so gold is moving up against multiple currencies here. The other thing I wanted to highlight Michael is we've got the DAX back up at 10,000 again in fact it's just trying to peak above it so we're certainly seeing an explosive move up again for well every major European index except Switzerland which has obviously gone 10% the other way. Well that sort of makes sense and in the note that I put out this morning I suggested that while the Swiss market index is going to suffer because essentially Swiss exports are going to get that much more expensive so if you haven't bought your lint Easter eggs yet I suggest you go out and clear the shelves now because in about four or five weeks time they're going to be a hell of a lot more expensive but more than that the Euro is going to get a hell of a lot weaker which is going to be particularly good for German companies, Spanish companies and other European countries and so you can find that on the news and analysis section of the CMC markets website more importantly than that that gold breakout that we've seen on my daily chart here would seem to suggest that we're probably going to get a strong move higher over the course of the next few days and weeks it's just about breaking above the 200 day moving average and it's also broken above this triangular consolidation here. Now one of the key things in terms of price targeting with respect to triangles is you basically take the base of the triangle which is this distance between here where my mouse is and the base here and you project it up from the breakout point so that would seem to suggest if we close above the 200 day moving average and we don't come back within the triangle then we're going to probably test this upper line here around about $1,300 an ounce irrespective of what you think about the direction of US rates which Colin and I will talk about quite shortly as well because we disagree on that. Don't we young man? Absolutely but I don't think the US rates is going to have a huge impact on gold anyways I think this is a Euro play this year I think that the Euro is going to be the big driver. Okay so we've talked about the Swiss franc obviously this is a race to the bottom in terms of rates you've got negative yields basically and all of the main or approaching negative yields in some of the short end of German bonds, Japanese, JGBs and also there's a likelihood that we could actually start to get those sorts of non yields if you like in some of the shorted dated French debt as well because that is also trading at record yields. So let's talk about your outlook young man because I think that's what we really need to talk about and that's what we're here for and in the context of that you can talk me through it. So we'll talk about the Forex trading outlook and we'll start with your first slide here. So off you go and I'll chip in as and when you want me to. Thanks very much Michael. So there is a few things I had looked at that might impact Forex trading in 2015 and number one and it's one that I think really is going to work its way through global markets throughout the year. Number one thing is followed from the crude oil price crash. What we've seen over the last week is a generational decline in crude oil that we last saw back in the mid 1980s and this could have wide ramifications for a long time and it's been driven by a price war which makes me think that crude oil is going to stay down for a while and it's going to take probably the better part of the year for people to figure out A what's happened and B how to deal with it. So in currency markets this is the Canadian dollar, Norwegian Krona and the ruble. Plus it can have an impact on equity markets and certainly we're seeing it on energy stocks as well. The second one, will the ECB get serious about monetary stimulus this year? Well I think everything we've seen over the last week or so running into today suggests that they finally are and so what did I had here? This is a presentation I did last week by the way that we're continuing on with and broadening a bit. So Gold, Euro, Swiss and I had put the Swedish Krona in there just in terms of that it can affect the other European currencies as well. The third one could the Fed and Bank of England raise interest rates this year and if so when, that's one of those points where Michael and I both done a lot of work on this and come up with very different conclusions. So it's a good one for debating. Increase political and economic instability and defensive posturing. Gold, yen and Swiss, well we're certainly seeing that play out today and then the other factor is China and the demand for commodities. We've been seeing a little bit of that playing out in Asia-Pacific trades this week off of the China trade numbers, Aussie jobs and things like that. Could we go to the next slide please Michael? Perfect, so how low can crude go and how long can it stay down? So I put up this slide here on crude oil and some of the major declines in recent years and where I had done the date level broken was I had taken on a monthly close when crude oil fell 30% off its highs and some of the major price levels. So for example in January 1986 it broke $25 and it didn't go back above it until August of 1990. It broke it again in January of 1991 and didn't go back up until December of 1996. So if you look there, that was a period where, except for five months during the, when Sudan, Hussein invaded Kuwait, oil went under $25 and stayed down for almost 11 years. So that's huge, but even if you look at, and then some later ones, oil broke 20 and was under for two years and then oil broke 30 in 2000 and stayed under for almost two years. Even the more recent one in 08, which was more of a V-bottom for crude oil, broke 100, was below it for 30 months, broke 80, was below that for 18 months. And even more recently, the previous time, oil had broken $100 in May of 2012, was down for 15 months. You're talking about a decline that likely, the $100 we may not see for five years or more and 80 we may not see for two or three years easily in the context of previous declines. So what are we seeing in this? A number of factors are starting to happen. Number one, I was reading an article on Bloomberg this morning talking about layoffs in the oil patch and keep an eye out on Schlumberger earnings tonight after the U.S. markets close, because the first thing that usually happens, drilling activity slows and the producers put the squeeze on the service companies. So we'll be keeping an eye on that today. That's the first impact. In the longer term, you do get a positive impact on other areas and you get a rebalancing into other sectors, particularly consumer spending. Last night I went out and put gas in my car and it was just under $30 and a few months ago it was more like $50. So it is a big difference, but it takes a while for people to figure this out and to figure out the impact. No, it isn't just down for two months and it's going right back up. It's down to stay and to change their behavior can take a little bit of time, but overall this is a big story that certainly is going to impact a lot of countries, a lot of economies, a lot of currencies is a rebalancing of what happens in the new lower price crude environment and it's interesting too with Japan and with Europe, areas that are particularly more oil importing than perhaps other areas. On top of the stimulus programs that are coming, this is huge and this is a major raise for people and on top of that in some ways it's even better than QE because it's money that's directly going into people's pockets, not just going to the banks and we hope it trickles through. This is hard cash going into people's pockets. Which sort supports my argument that rates are likely to remain lower for longer, not the other way around. I think you're going to go a little different way, at least in the States, but we can talk about that a little after. You go ahead, Michael, did you want to add anything here? No, basically what I was saying is you basically made the argument that oil prices are going to stay lower for longer. Usually there's a lag effect with respect to oil prices. If you look at where crude oil was in say 2008 where it bottomed out, it bottomed out around about $35 a barrel on Brent, $36. Inflation here in the UK went from 4.5% in December 2008 to 1.1% in September 2009 and then it started to go up again. So essentially what I'm saying is that inflation took 10 months before it started to edge higher and that was after the oil price basically bottomed out. Now your saying, in your view, is that oil prices have got further to go. So that suggests to me that if that is the case and then there's a nine month lag time on crude prices then the likelihood is inflation expectations are likely to remain well below 2% well into the end of this year and possibly into the beginning of next year. Which sort of suggests to me that we're not going to see a rate hike firstly here in the UK, this side of the election or the end of this year either but also in the US as well. Especially given the fact that we saw a very, very poor US retail sales number yesterday and pretty much that December figure wiped out the entire game's Q4. So basically US retail sales despite the fact that consumer confidence is at record highs were flat for the fourth quarter. They were worse than the Q1 when they had the polar vortex. So that suggests to me that the US consumer despite what people are saying is saving money or reluctant to spend it. Despite the fact that since September we've seen a net fall in oil prices of around about 30%. Gas prices have dropped from around about $3 a gallon to around about $2 a gallon yet consumers aren't spending it. So for me that makes it much less likely that the Fed is going to raise rates and risk tipping the economy or slowing the economy down. That's my argument for basically saying that US rates are unlikely to rise and furthermore if the Fed doesn't want a stronger dollar the last thing it wants to do when everyone else is cutting like mad is to start nudging rates higher because there will be an export effect in terms of the strength of the dollar on the S&P 500 companies and given the fact that about 40% of the S&P 500 do have an energy exposure that's going to be a factor as well. That's me I'm done. It's a great case here that you're making and certainly I think there's a lot more ramifications of Crudel and it's a good point you made also about the companies, the S&P companies that we've already had this big increase in the US dollar and something to watch for as we go through Q1 earning season is what is this going to do for guidance going forward. And interesting when Target decided to woke up this morning and decided to pull out of Canada completely they had come in with 100 stores less than two years ago and they've just pulled the plug on it. They weren't doing that, they were struggling as it was but what's going to happen to overseas operations of US companies where all of a sudden the US dollar's gone up and those earnings are coming back in at lower levels and what's that going to do for guidance? That's something I'm keeping an eye on in particular this quarter. So I thought we'd with that by the way and how low could Crudel go? I agree with you Michael, I think we're going to retest and then eight lows at least. For the short term it looks like it's trying to find a floor here somewhere in the 45 to 50 area but just from the talk we've gotten and the previous low I don't see how we're going to get through this year without retesting that. So let's go on to the next one. ECB balance sheet and the gold price. So we had touched on this one a little bit earlier but I wanted to highlight in particular the blue line which was the ECB and the green line which is gold or well the two lines at the bottom which are the gold price. Golden dollars is the green and golden euros is the purple and I had done this a couple of weeks ago so I don't have the breakout on there of gold euro but it has actually gone back above the 1000 in the last week or so. But if we watch you here and the important thing is if we look at the trend historically most people have thought that gold trades against the US dollar that the gold is the premier hard asset US dollar is the premier paper asset and they basically oppose each other one goes up and the other goes down but if you look here over the last few years the Fed balance sheet has exploded and the first couple of years sure it followed everybody's balance sheet higher but the last two years when the ECB started running down their balance sheet through what I called the stealth taper which was every week these banks were repaying their loans that the ECB balance sheet came down a trillion euros and now that the ECB's been talking more seriously about rebuilding and putting that trillion euros back on the balance sheet gold had stabilized and had started to pick up and then over the last week or so there was a Friday when the trial balloon went up on a 500 billion euro QE program and the justice decision earlier this week and now this morning with the SNB everything's pointing to a massive serious QE coming from the ECB and I had called it their credibility problem because they had been talking about quantitative easing since May and really hadn't done a heck of a lot and through much of that the ECB balance sheet had actually shrunk but it looks like they're finally getting serious and most people are coming around to that so at this point they better get serious but certainly the SNB move today suggests that they are. Yeah it does but also it could just be a ploy to help drive the euro law. I wouldn't bank on the ECB going shock and all because for me there are still significant legal hurdles within Germany for a full blown quantitative easing program and I think if Mr. Draghi tries to steamroller through a large program you just watch the lawsuits come in. The European Court of Justice is essentially ridden roughshod over the German constitutional court and that ruling this week is non-binding so the court hasn't actually made its final decision so I think there also may be a little bit of kittology going on here with respect to the central bank so there's still scope for the ECB to disappoint next week. They may announce something without actually doing anything so be very, very cautious about having significant positions around that particular meeting because expectations now are so high that it's going to take something really substantial for the markets not to be disappointed by any announcement next week. I agree with you Michael. I think if they don't come in now with what's getting priced in, whether it's been priced into the Swiss, priced into the Euro, priced into the DAX, if they come in short of what are now extremely high expectations you could have some pretty major reversals next week so that's going to be a real crucible for a lot of markets. Okay, before we go into... ECB credibility problem. Yeah, we've talked about that and you can see the shrinking balance sheet, the incredible shrinking balance sheet. Okay, let's just quickly have a look at some of the charts. Is there any particular charts you want to have a quick look at because one of the things that I actually found quite interesting about is the divergence between cable and Euro dollar. We talked to this... Sure, let's take a look at that. Because Euro... Sorry, Euro pound has gone through the floor. So let's take a look at this. I mean, we looked at the twin lows around 117.50. We're way through that now. And I think that this is born out much more. This is much better by this particular chart here, the four hour chart. So we've broken out on Euro dollar. So at the moment, for me, I think any pullbacks to around about 117.50, which is essentially where the Euro was actually first launched, there or thereabouts, is probably going to find a significant amount of resistance. And up until quite recently, the pound was actually trading in a fairly similar fashion in the context of... After making its lows fairly recently, around about 150.35. And we're still trading in a little bit of an uptrend with a significant cap round about 152.80, 152.70. But we are in a little bit of an uptrend. So the pound is actually benefitting as a result of the weakness that we're seeing in Euro sterling. But I would also be a little bit cautious about being overly long the pound in the lead up to a general election because cast your mind back to 2010. In 2009, Cable peaked at around about 171. August 2009. And by the time of the May election, it was around about 142. When did Cable peaked last year? It peaked at around 171 in the summer of 2014. We now have another May election in 2015. And it's a very, very good chance. I think that the political uncertainty could undermine sentiment towards the pound and we could see a return towards 142 over the course of the next two to three months. It really depends... And I think a lot of it is down to political uncertainty, but it's also about US rate expectations as well. So I think the pound is a little bit hard of the call because I think the market is pretty much geared for a US rate rise at the moment that we may or may not get at the moment over the opinion that we probably won't get it this year. Colin seems to think maybe June or potentially in November, but at the moment, if you're positioned for a rate rise and the data continues to disappoint, the likelihood is that that rate rise will get put off. And the EFOMC Committee, which is due to meet at the end of this month, has a whole host of new voting members, well, actually four new voting members from the fall last year, and the two most hawkish members of that committee no longer have a vote this year. And as such, the committee, I think, is going to be slightly more dovish in terms of its outlook and the context of when it's going to be safe to nudge rate expectations upwards. Can I mention something on the pound, Michael? Sure. So my thinking on Bank of England is twofold. When they do get around to raising interest rates, I think they'll probably do two increases and then stop, which is what he did in Canada a few years back, basically get it up to 1% and stop there and get the lay of the land. And finally, we've been sitting at 1% ever since for over four years now. The other thing is on when the UK might act, certainly definitely not before the summer, definitely not before the election. And finally, I think definitely not before the Fed. I think they're going to wait until the Fed has them covered to do it. So if the Fed goes delays, then certainly I think you'd see the same from the Bank of England, for sure. There's one other factor. I think the likelihood is we're going to see negative inflation between now and the summer, given the declines that we've seen in the oil price. The headline rate currently is at 0.5%. It's below the core rate, which is 1.3%. So the last time the headline rate below the core rate was guessed, 2009, when Brent crude prices will last at these sorts of levels. So on the basis that there's a nine month lag, the likelihood is that CPI inflation is likely to go into negative territory in the next five or six months, which means that unless you get a significant pickup in wage growth and wage growth at the moment is around about 1.4% on a three month basis, then it's very unlikely that the Bank of England is going to start raising rates because it has an inflation target of 2%. And that 2% will miles away from it. So if anything, if it needs to hit its inflation target, it needs to cut rates, it needs to do further stimulus. So I think people talk about rate hikes. It's way too premature for that. We're getting a good deflation because fuel prices are lower and food prices are lower. And while that remains the case, I think rate hikes are most definitely off the table. And the same applies to the US really, the same rationale. They're getting the same type of deflation. So I've got a question for you, Michael. How big of the UK economy is the oil and gas sector? It's a very, very small part of the UK economy. It makes up around about 8% or 9%. Slightly more in the Scottish economy, but as far as the UK economy, construction makes up about 6% or 7%, manufacturing 12% services around about 80%. Right. So we are a net oil importer, which essentially means that whenever there's an oil price rise or fall, we generally tend to fill the effects in terms of the inflation rate because when oil prices went up to $145 a barrel in 2010, the inflation rate hit 5.5%. And it stayed there for a while. And the Bank of England looks through it. So the Bank of England can't say that we need to ignore seasonality because of the transitory factors. On the one hand, when inflation is high, they can't then turn around and ignore it when inflation is low. Well, they can, but then they lose credibility like the Swiss national banks just done this morning. Because one of the places I think you and I differ or differing on our opinions is that I think the central banks are more focused on chlorinflation and I go back, I think, to 2008 when oil prices and WTI was going up $247 at a time that the Fed was actually cutting rates. And they kind of looked through that. And I think my feeling is that the central banks, in terms of the big swings up and the big swings down in energy prices, I think they looked through it. But where I do agree with you in part is that what we got to watch for with this one is the impact on employment because I was looking at U.S. jobless claims starting to peak up today and back above $300,000 and articles about big layoffs in the oil and gas sector. And that's an area where I do think you could see a delay. So perhaps can we go back to the slides and we'll go back to the last one. I can talk about the Fed scenarios. Sure, we can. No problem. There we go. Okay, so two more. Yeah. And one more. One more. Okay. So going back to a couple of weeks ago, this is what I had outlined for a Fed rate hike program. And what I did was, if you look at the little table at the bottom, I did the connecting the dots and I took the, where the Fed members had their forecasts for interest rates for the end of 2015 that they published after their December 2014 meeting. So of that you had two basically saying no change. I think we knew who they were. They were Coach Alacoda and Evans. Evans is voting this year. Coach Alacoda dropped off. So they kind of offset each other as the most dovish outliers and if you did see something, the dovish dissenter. Most of the group was in and around .75 to one and a quarter percent. There was nine members. And then there were six members that were a little more hawkish, all kind of staying in between one and a half to two percent. So I put together three scenarios and I said, okay, what would this actually look like as an example? So scenario one was the hawkish aggressive which said, two other things. In the Fed minutes, when they talked about being patient, the Fed chair Yellen came along and subsequently said, well, we mean a couple of meetings and when they asked her what does the couple mean, she said, well, we mean two. And the other thing she said was that the Fed would be prepared to move not just at meetings where they have press conferences but at any meeting. So I said, okay, fine. Well, if that's the case then we run a scenario where the first two meetings of the Fed does nothing which is basically what they said. So hawkish scenario number one would be, okay, fine. What if they do a quarter point increase every meeting starting in April? That gets you to 1.75 percent which puts you in with those six more hawkish members. Given the data that we've had between the employment, the retail sales and other things, I think that scenario now is pretty much off the table. I think we can forget about that one. Scenario two was a more middle of the road scenario where I said, okay, fine. Well, the Fed starts in June which is what most people have been thinking for a while and they do one increase, interest rate increase every other meeting. So they raise in June, September and December and that gets them to 1 percent which puts them kind of in the middle with that group of nine as to where everybody's been forecasting. And then the third scenario was the late start where perhaps they hold off a little bit and then be more aggressive where they start raising rates in July and then go a quarter point every meeting. Even Evans when he was talking more recently from the beverage side said, I don't want to raise rates at all this year, but if we do do it, I want us to go slow. So that kind of still points towards some variation on scenario two where though they may do a short increase and then go from there but an increase and then pause and make sure it hasn't crashed anything and then go again kind of a scenario because my feeling is that if you look at core rates that they're still well behind the curve. The interest rate that the Fed uses is called the PCE core rate. It comes out with the personal spending and personal consumption data. And it was in December was at 1.4%, a little softer than the street which is another thing that says that they're not under pressure to move right away. But even if you look, we scroll down and I'm just looking at today's producer price numbers was that if we went X food and energy, so final demand for producer prices was 1.1% just above 1.0 for the street. X food and energy was 2.1%. There are still some inflation pressures out there. There's enough that if the US economy remains strong there's a case for them to just, if you go to 1% in either country you're still running below core inflation. Whereas if you... So the one I think the trigger would be could be the employment thing for a delay. If we do see a job growth start to slow jobless claims pick up because people are getting laid off in the oil and gas sector because that comes first. The cuts in the oil price sector comes first. The benefits of the lower gas price or here in Canada the lower Canadian dollar from the crash in oil prices, those benefits in other sectors take longer to work their way into the system. So that's one of these reasons I say we're in a transition phase in economies. So if we do see the Fed go later then I suspect it would be more on the employment side. I know the Fed has a dual mandate calling for employment and inflation but with wage growth sinking back irrespective of what inflation does I hardly think they're going to raise rates. I still think they might do it just because eventually they have to and the other part of which is that if you look at the oil price crashes and another thing was with the stock market historically oil price crashes have ignited the stock market. I don't have a slide for that but if you look at early 86 you then had a massive rally in the stock market and similarly in 98 you had an oil price crash in a Russian crisis and sounds kind of familiar to now and again and then in 99 you had a massive rally in the stock market so that's another thing to keep in mind in time it does ignite and even in 2003 after the second Gulf War you had a big drop in oil prices ignited the stock market and eventually ignited the economy and that was after that one where the Fed did actually start to raise interest rates so that's a reasonable conclusion but maybe it gets delayed too later in the year from mid-year but I can't rule out completely that they'll start to do it at some point or they run the risk of really getting behind the curve because the... I'm calling it because I think that's a distinct possibility and you said that they eventually have to raise rates well actually they don't because the Japanese haven't raised rates for 20 years so just because it really depends on whether or not you think the world is into a cycle of deflation and if it is and the likelihood is it could well be given what's coming out of China at the moment and what Europe is also exporting in terms of deflation to countries like Switzerland there's no guarantee that the US won't also be similarly afflicted by the fact that you've got all this deflation coming out from countries like Germany and Japan and China you know so I mean that's what's making me a little bit concerned anyway ladies and gentlemen ladies and gentlemen is there anything in particular you would like Colin and I to look at for you in the context of what we've been talking about obviously we're seeing looking at the moment the Swiss market index has dropped quite sharply today basically given up pretty much all of its gains for the last three months conversely the DAX has moated ahead but is there something also that you'd like me to look at Colin in terms of dollar CAD or the TSX-60 or something like that because we've done a lot of talking but we actually haven't done an awful lot of analysis and I'm sure the people who are listening would actually like us to actually look at some of the currencies and do a little bit of analysis. Sure, let's bring up dollar CAD because that's been interesting lately. I know what you're saying about Japan has had deflation for a long time and even oil prices have go up for a long time and stay down for a long time and even within these kind of larger trends interest rates and inflation do go up and go down depending on how the economies work I guess the disagreement is a difference of opinion is really on timing I do think that we will get at least a moderate rate at 0.25 forever but at the same time I don't see the Fed going much past 1% either and I do think those farther out forecasts where they were looking at 3-4% a couple of years down the road those I think are going to come down but I do feel that my feeling is probably that they'll at least start to do something but probably more like the scenario of what Canada did where they went to 1% just sat there. Sure, I just don't think the bond market is surprising indeed at the moment if you look at the 10-year treasury it's around 1.8% it's the lowest it's been since I think when we had Mr. Bernanke first announced the fact that he was going to start tapering because I think that was around about 2012 when US treasuries were around about 1.6% in terms of yield we had the taper tantrum and we're not back down there yet but we are at 1.8% and we've come down from around about 2.2% the bond markets and the Fed funds markets aren't actually pricing in a rate hike this year that's not to say it couldn't come back with some positive data but I just think that if you're looking for clues about what US rate expectations are look at the treasury market so you got your Canada sorry I wanted to talk about US dollar CAD and then I'd like to talk about the US 30 sure this is a daily chart for the CAD so this is running opposite of as oil prices have been going down dollar CAD has been going up so this is dollar strengthening CAD weakening but what's interesting here is we are getting up to about 120 and it's started to roll back a little bit I think you're looking at basically another pause here in a bigger uptrend you come back down maybe around 118 maybe a little under to test this trend support line and then you're still basically working higher and you've got to work off this overbought condition on the stochastic so you might get some sideways trading in this 118 to 120 range but you start seeing crude breaking 45 and US dollar CAD could still go higher could I talk to the US 30 Michael please sure let me just close that down bring up the US 30 one of the other things that's been happening is that all this is also playing out in the wake of the end of the US's QE3 program and it's something I talked about in the past with that QE programs because they jam so much money in the system have been known to artificially inflate stock prices and commodity prices in the past and that once these programs ended then you started to see things come back off so basically what I call a liquidity correction where markets had overshot come back more to where they should be now in the past on stock markets that had been a 10 to 15% correction and for quantities more than that and it is possible that some of the oil price declines may be a function of this exacerbating it or it may have been part of the issue but then there's all these other things like the price we're getting piled in and low demand getting piled in on top of the time when you were going to have a crunch anyways but I want to just highlight the US 30 here there's a head and shoulders top forming we had the one peak in early December the head in late December and now we've got another shoulder kicking in here in early January now the overbought conditions of yeast for a bit maybe this ends up becoming a sideways channel between say 17-100 and 18-100 but it is looking a little bit weak here we had an initial correction back in October but one of the outlook things I've been saying to people is this is the kind of year where you could see at different points in time you could have the S&P down 10% you could see the S&P up 10% I do think you're going to see more swings and more volatility as we finally as people are trying to figure out to make out of all the data and all the movement and all the changes and who's got credibility and who doesn't and what's happening with guidance and so on there's a lot of moving pieces particularly over say the next month or two then once the dust settles we may get a better idea of where things are heading but for now there's probably going to see quite a bit of choppiness I think speaking of credibility Citigroup have basically predicted that the FTSE 100 will go to 7700 by the end of this year I personally think they're probably been smoking something but they said that the FTSE 100 would hit 7000 at the end of last year so what do they know eventually they could well be right but for me I think the only way that you're going to get the FTSE 100 hit 7700 is if you get a significant turnaround in the commodity space so you get a rebound in not only precious metals but also copper and crude oil simply because the oil and gas sector and the mining sector make up at least 35% to 40% of the FTSE 100 and at the moment I think the more likelihood is the fact that we'll probably get a range trade between 6200 and 6900 but that's just my opinion but it's interesting to know what you said about the Dow it's pretty similar in terms of the S&P as well in solidation between 1975 and obviously the highs just below 2100 that's a little bit weaker of a head and shoulders than the Dow right now but it is the same kind of thing it's gotten stuck and the increasing volatility is indicative of just more uncertainty out there as to where things are heading and certainly today didn't do anything to reduce any uncertainty to it. Let's look at the DAX because I think this is quite important because we're right on this previous peak let me just get rid of that and let me draw a line through this peak here because on the same note this morning I suggested that we find a lot of goodbyes in the DAX as a result of this move by the Swiss National Bank and certainly we've seen a very very strong rally in the DAX over the course of the last couple of hours but we haven't as yet taken out those peaks that we saw in December around about 10900 we're still pretty much below them so for me at the moment I think we have to be very very cautious about being overly bullish on the DAX while we are below these previous highs because you could actually argue if we fail here this could actually potentially be a double top absolutely. It's an interesting one here Michael because that support line you had in if you break out you've got an ascending triangle breakout but if you fail you've got a double top and so you actually have two conflicting indicators going at each other here and we'll see so it's a real we're at a real turning point and I think for this one it'll be again the ECB meeting if they don't come through and they disappoint then look out below and if they actually manage to come through then that can support a pretty nice breakout so we are at a point where we could have a fairly significant move but it's hard to read which way. It is and I think one of the things that there's an awful lot of conflicting signals going on at the moment because we're starting to move into a world of negative interest rates and obviously the first port of call when you're searching for yield and central bank policy is loose is to move into stocks but we're at record highs in the decks we're just off record highs in the S&P and we're in an environment at the moment where growth is continuing to be very very difficult to come about to come by while bank yesterday counting its growth forecast commodity prices since 2011 have been going lower so you've got all these correlations that used to work well in the past they're no longer working in an allocate capital in an environment such as the one that we're operating in right now. Right, so we've got the decks it's interesting to note that the the cat current is well short of its previous highs in September of four and a half thousand and this is one of the things that bothers me a little bit with respect to some of these equity markets they're performing completely differently I mean it's not surprising that the decks is probably performing the best given the fact that Germany is the best economy I think what is a surprise I think is the outperformance today of the Italian market but again if you look at where the previous peaks are in June we're still well below that and for me the trend still remains lower for Italian markets despite the fact that we're rallying strongly today so again I think it's very very difficult to you can take one of two schools of thought here you can basically think well actually Italian markets have underperformed relative to the decks and maybe the easy trade is to buy Italian stocks but which you really want to take the risk with respect to you know what could happen next with respect to political instability you know it's a bit of a tough call but you know first and foremost we're traders you know and we trade the price action we don't trade what could happen we react to what does happen and I think any of us would have struggled to react to what the Swiss National Bank did today but certainly there is very very good support in the Italian 40 around about 17,640 okay let's have a quick look at dolly yen before we sign off gone over slightly I think over the course of the last few minutes but certainly the direction of travel here also seems to suggest that despite the fact that you know the Japanese central bank wants the yen to remain fairly weak I think the markets got a little bit ahead of itself and I think the downside risk in dolly yen is greater than the upside risk everyone is calling the dollar higher and as such I think that's why I think it's a little bit dangerous to be overly long of it unless of course you're looking to short euro dollar then it might be worth selling euro dollar on rallies and buying dollars against the euro yeah and the yen has also been strengthening quite dramatically against the euro lately as well the euro is the one that's really been going off the table here yeah yeah and obviously I think that also you know breeds into the narrative of a weaker euro not only do the ECB want a lower euro dollar they will also want a lower euro yen and at the moment it's a bit of a tug of war with respect to the central banks with respect to euro yen but this is actually quite interesting we're actually testing support on the euro yen at current levels at around about 135 and a half on the previous lows that we saw in 2014 so we're currently testing the 2014 lows on euro yen so we're at quite a key support level at current levels so I'll be interested to see how the market reacts at current levels with respect to euro yen the 2014 lows let me just draw them in it's around about 134.15 but really I think the key level is this upper line here because that's quite a long shadow on that candle and it is a weekly chart so for me I think the key level is going to be currently where we are now around about these series of lows here we've got a low there in August a low there in September a couple of lows there in October or less actually discount that low at 134.15 that was probably a whole load of stops getting triggered on the way down the quickest way to mitigate that is to just do that and that will give you a fair indication of where we need to close below for euro yen to actually accelerate an awful lot lower so that's an interesting chart certainly worth keeping an eye on over the course of the next few days but if no one's got any further questions that's it for this month and list update from myself and Colin I'd like to thank you all for your presence and hopefully you'll join us again next month I think on the 12th of February where we'll have a good old chin wag about whether or not everything that we've discussed has actually come to pass and hold us to account but otherwise thanks very much for listening guys we'll put it up on YouTube in the course of the next 24 hours if you want to listen to any of the points back thanks very much Michael and thanks everyone for joining us today thank you alright I'm going to stop recording