By Doug Noland
Credit Bubble Bulletin
With the (king) U.S. dollar index trading Friday above 100 for the first time since 2003, the unfolding EM – ongoing “global reflation trade” – unwinds broadened and turned more disorderly. Brazil is now lurching toward crisis. Friday trading saw the Brazilian real slammed for 2.6% to the low since April 2003, boosting y-t-d losses to 18.2% (down 27.2% y-o-y). Brazil sovereign CDS surged 13 bps Friday to 302, the high since early-2009. Notably, Brazil’s dollar yields surged 23 bps Friday to a multi-year high 5.08%. For the week, Brazilian (real) yields jumped 43 bps to 13.40% (traded as high as 13.79% intraday Friday).
May 13 – Bloomberg (Filipe Pacheco and Paula Sambo): “Bonds and stocks of Petroleo Brasileiro SA fell after a newspaper reported that the company is in talks with creditors to extend a deadline for publishing audited results and avoid a possible acceleration of payments. Petrobras’s $2.5 billion in bonds due 2024 declined 2.7 cents to 90.55 cents per dollar, the biggest daily drop since Jan. 30. Yields on the notes jumped 0.45 percentage point to 7.74%. The preferred shares of the company at the center of the nation’s biggest corruption probe slid 2.5%… extending this week’s slump to 10%. The Rio de Janeiro-based oil driller has held negotiations with about 15 banks and investment firms in the past few weeks to extend the deadline, Folha de S. Paulo reported…”
Continue reading EM Contagion & A New Z.1
 Might as well add in some of our own $.02 on the yield curve, S&P 500 and gold… Risk ‘ON’ –NFTRH
With the caveat that I am very far from the most proficient bear trader around, we note that the short against the EM’s (via EEV) is being covered this morning.
NFTRH/NFTRH+ recommended a bounce to the SMA 50 as a lower risk short entry (I had personally entered sooner) for those interested, and today EEM is getting to a point where I’ve got to take the profit (EEV roughly doubles the percentage). It’s moving too far from the EMA 10, and could be subject to a snap back soon. Cash is my favorite thing right now so it is also by far my most heavily held thing.
There are a lot of things in play today, including a notable rise in the gold-silver ratio concurrent with USD (finally, these two are both working together, which would be a component of our favored macro plan for future economic contraction, stock market troubles, etc.). But the point of this update is to further the point we made last week about the Emerging Markets’ potential breakdown nominally and in relation to the US market.
Continue reading NFTRH; EM’s vs. SPY, GSR, USD, etc…
Since we routinely cover the emerging markets and also their ratio to the US stock market, I thought I would update some notable changes.
Continue reading NFTRH; Emerging Weakness
Guest Post by Mark Galasiewski
We have for many years observed a relationship between extremism and bear markets in the stock markets of Muslim nations. For example, this chart shows the deadliest Islamic terrorist attacks graphed against the MSCI Emerging Markets Index since the start of the index on December 31, 1987. Notice that many the attacks occurred near lows in the index.
Continue reading Emerging Market Stocks & Islamic Extremism
The Emerging Markets ETF has been tracked in NFTRH and for the last several months, during its ongoing bounce. I am and have been long EMF, my preferred fund for EM’s. The critical resistance is as noted after a nice trend line break.
While the EM’s still look okay by daily chart (series of higher highs and higher lows) they are starting to break down in SPY units (bottom panel). It looks like a little bear flag formed at the SMA 50. Those rooting against the US but cheering for other areas may be disappointed.
Here is a bigger picture view like those NFTRH has been following for months now. There is a lot of resistance up there.
Continue reading Emerging Markets ETF