EU and US futures are recovering after the slide that followed the decision of the central bank of Japan.
Surprisingly, the central bank of Japan has revised the tolerance threshold of the ten-year bond yield to 0%-0.5%.
Some monetary policy adjustments have been talked about in recent days. Still, most economists expected that the most important announcements would come later, closer to the end of Governor Haruhiko Kuroda's mandate.
In the press release, the Bank of Japan confirmed interest rates at -0.1% and anticipated a temporary increase in bond purchases for January to 9,000 billion yen a month from 7,300 billion.
What does it mean in practical terms? There is room for a rise in interest rates on Japanese ten-year government bonds. Previously the maximum range was 0.25; now, it is 0.50.
It is the first sign after a long time of a possible end to Japan's ultra-expansionary policies.
Nasdaq 100 Futures, S&P 500 Futures, DAX Futures, FTSE MIB, IBEX 35: As written in previous articles the indices have exhausted their strength and are starting to go down.
The recession, which will lead to a substantial decline in earnings, is not yet discounted by the markets. This means there is plenty of room to descend.
Markets always anticipate a recession three months in advance so that we will see the real market crash in January.
The ideal instrument in these cases is the VIX - the S&P 500 volatility index - that usually scores excellent returns with a global recession at the door.
I will shortly open a buy operation on this instrument with a $35-36 target.
Natural gas: As predicted in previous articles, the crash has arrived. There is a clear difference between the short run and the long run right now. In the long run, the situation is interesting.
Europe will need even more LNG to replace Russian volumes next summer as the continent reloads storage as Chinese demand recovers from lockdowns and offsets lower imports from other Asian buyers. In the short term, one must be careful to avoid impulsive purchases.
There are big doubts about the reopening of the export plants, which have been offline for some time now and which are creating domestic excess supply, potentially negative for prices along with the seasonality.
Furthermore, the price cap on the TTF, set at 180, even if quite high considering thatfour4 years ago, the TTF was quoted at 20, will certainly put a stop to speculation by lowering prices, exactly what we are seeing now.
This is also indirectly affecting American natural gas as it is very likely that next year American gas will be increasingly the protagonist in Europe with the exit of Russia.
I will evaluate a gas entry only in the 4.50-5 area, prices that I expect between the end of December and the beginning of January.
Crude oil proves very solid despite the collapse of the indices. Two main reasons are behind the excellent performance.
- The price cap, although not penalizing Russia, could lead to an increase in demand for American oil, which is very positive.
- Chinese oil demand, held back by COVID, will pick up in 2023.
All this is combined with the fact that oil stocks are at their lowest in 20 years, with countries like Russia reporting sharply declining production, a factor that is good for prices as it creates a shortage of oil. I remain positive over the long term with a target of $85-90.
Amazon (NASDAQ:AMZN): As written in previous articles, prices were too high already at the beginning of 2022. I'm still pessimistic, the profitability of the group has practically disappeared, and the prospects for 2023 are negative.
According to my model, the stock is worth $70, so it can go further down.
Tesla (NASDAQ:TSLA): Bad period for the stock is destined to continue. There are problems in China, with lower prices, due to a weakening demand which means lower margins, and competition in Europe with Stellantis NV (NYSE:STLA) is increasingly threatening.
Also, Elon Musk is increasingly distracted by Twitter. As written early in 2022, according to my model, the stock was worth $170 and was already very expensive at the beginning of the year.
My current positions: I currently have a buy position on the Dax index, which is about to close in profit.