"A Key Technical Indicator Just Rang The Bell On The Cyclical Bull Market"

While the primary topic of Albert Edwards' most recent note is the question how long China can sustain its FX intervention before tapping out and letting the hedge funds win with their short Yuan bets once total reserves drop below the critical redline of $2.7 trillion (the answer incidentally is between 5 months and 10 months assuming monthly reserve burn rates of $130BN to $60BN), we will skip that part as we have discussed it extensively in the past, and instead will fast forward to some chart porn by the SocGenarian.

Here is Albert Edwards showing that the S&P had breached key moving averages normally seen at the start of a bear market.

Back in the mid-1990s I spent three memorable years working at Bank America Investment Management, among some of the industry’s finest. Having previously spent three years as an economist at the Bank of England, I was new to markets and I let my economic enthusiasm often get the better of me when making recommendations to fund managers.

I remember the head of fixed income explaining to me it was far better not to try and pick market tops or bottoms but to wait and observe the market turn, making the trade late rather than prematurely trying to pick the bottom or top.

So the chart below is notable, showing that key 200d and 320d moving averages for the S&P have just been breached to the downside. If one is looking for key technical indicators to ring the bell on the cyclical bull market- maybe it has just rung loud and clear.

A renminbi devaluation will only sever an already badly frayed safety rope.

Budget goodies for GIFT, markets likely

Ministry considering tax sops for India's first global financial centre, steps to liberalise futures and options markets.

Finance Minister Arun Jaitley and his team are believed to be considering steps to attract big names in investment banks and global brokerage and trading firms to the Gujarat International Finance Tec-City, known as GIFT City. On the banks of Sabarmati in Gandhinagar, Gujarat, the city has been positioned as a "global financial centre".

Conceived in 2007 by Prime Minister Narendra Modi, then Gujarat's chief minister, the city has had a slow start. The coming Budget could offer substantial tax breaks and possibly a 10-year tax holiday, sources familiar with the developments said, adding exemptions from securities transaction tax (STT) and commodity transaction tax were among the incentives being considered for the GIFT City. However, a decision has not been taken, an official said.

The finance minister is also likely to announce a number of capital market-related reform measures, including removal of STT and stamp duties on trading futures and options, clarification on tax treatment in the exchange-traded currency derivative markets and regulatory positions on participatory notes. Removing regulatory constraints on banks and mutual funds to participate in commodity futures, among others, were also being discussed, a senior government official said.

Classified as a special economic zone (SEZ), GIFT city is being set up on the lines of global financial and information technology services hubs like Shinjuku (Tokyo), Lujiazui (Shanghai), La Defense (Paris) and the London Dockyards. It is aimed at attracting firms to open offshore banking as well as insurance and capital market intermediaries. According to existing provisions in the Act, SEZs are already allowed duty-free imports and are exempt from indirect taxes, besides 100 per cent income-tax exemption on export income for units for the first five years, 50 per cent for the next five years and 50 per cent of the ploughed back export profit for another five years.

The developers and co-developers are given an income-tax holiday for 10 years under section 80IAB.

"The government will definitely have to provide tax incentives to attract units in GIFT. Dubai International Financial Centre, for instance, provides zero tax rates. I am not sure if that will be possible, but that is the global benchmark for international financial centres," said Rakesh Nangia, managing partner, Nangia and Co. The DIFC offers zero per cent tax rate on income and profits (guaranteed for a period of 50 years), free capital convertibility and wide network of double taxation treaties for UAE incorporated entities.

The GIFT City comes at a time when the government has announced phasing out of corporate tax exemptions. It has said that after March 31, 2017, sunset clauses with regards to tax exemptions will not be renewed. After that, no weighed deduction will be applicable for operation, maintenance and development of export units in SEZs. "It is yet to be decided whether they can exclusively incentivise GIFT," said the official quoted above.

Apart from GIFT City, the budget-planners are said to be looking at measures to make India's equity, commodity and currency futures more competitive and liberalising them further. Some other measures could include lifting specific bans on any market segment, participant or product, making trading and clearing rules nationality-neutral and participant-neutral, allowing access to all foreign participants, as long as they meet financial action task force requirements, and over a longer-term period, getting in uniform know-your-customer norms, internationalising the rupee, and moving to a residence-based taxation regime.

The genesis of these suggestions is a report by the standing council on international competitiveness of the Indian financial sector. The council was set up in 2013 and its report was made public only in September. The finance ministry had requested various financial regulators, including the Reserve Bank of India (RBI) and Securities and Exchange Board of India, to examine the report. "The regulators are coming back to the finance ministry with suggestions on which recommendations can or should be implemented. The suggestions on which there is agreement among all stakeholders could be part of the Budget," said another official.

Regarding STT and stamp duty, the report had said that since the two levies add to transaction costs in equity derivatives, "STT should be removed. Stamp duty should not be applicable to cash-settled products such as index derivatives, as there is no delivery of the underling (product) taking place."

STT, announced by then finance minister P Chidambaram in the first Budget of the earlier government, is now levied on all sale transactions on futures and options. It is 0.01 per cent of the traded price of futures and 0.017 per cent on options premiums. A 0.125 per cent STT is payable on the settlement price by the buyer of an option that is exercised. If STT is paid, there is no long-term capital gains tax. But, if it is not paid, the latter is levied at 10 per cent.

The panel's report had divided its recommendations into three categories - short, medium and long-term - based on the nature of the reforms and the time that may be required to implement them. Longer term measures included internationalizing the rupee.

Internationalization refers to a state where exporters from other countries agree to take payment in rupees and where the currency risks in international borrowings are borne by lenders rather than borrowers in India. According to RBI, countries that can borrow in their own currency are less susceptible to international crises. "Consider a time-bound plan for internationalization of the rupee, in line with the plans of the Chinese government for internationalization of the renminbi," the report had stated.

MARKET BOOSTERS

• FM may announce tax breaks, 10-year tax holiday for GIFT City on the lines of the existing special economic zone rules
   
• Other capital market-related announcements aimed at further opening up of derivatives markets
   
• Removal of securities transaction tax and stamp duty on futures & options being considered
   
• Removal of constraints on banks and MFs to participate in commodity futures
   
• Longer-term aim of internationalising the rupee could be announced

Gold price jumps to 3 month high

Hedge funds positioning themselves for further upside

With weakness returning to equities and crude oil on Monday, gold futures trading in New York attracted brisk buying from investors eager for alternatives amid all the market turmoil.

In afternoon trade gold for delivery in April, the most active contract, was exchanging hands for $1,129.30 an ounce, up $12 or more than 1% compared to Friday's close and at its its highs for the day.

Thanks to safe haven buying gold’s trading at a 3-month high and is now up 7.5% since hitting a near six-year low mid-December.

Across 24 commodity futures markets money managers entered a net long position for the first time in five weeks

Large futures speculators or "managed money" investors such as hedge funds dramatically raised bearish bets on gold during the final months of 2015. Net short positioning – bets that gold could be bought back at a lower price in the future – hit a record 2.4 million ounces during the final trading week of 2015.

This year however hedge funds have been non-stop buyers pushing overall positioning firmly back in the black. According to the CFTC's weekly Commitment of Traders data released on Friday speculators added to long positions – bets that prices will rise – and trimmed short positions, leading to a more than 10-fold increase in net longs.

Speculators also added 55% to net silver long positions while copper bulls came roaring back trimming overall short position by a third. Platinum longs were increased and shorts cut, but bullish palladium bets declined from the previous week. Both PGMs remain in small net long positions.

Across 24 commodity futures markets money managers reduced bearish bets, entering a net long position for the first time in five weeks according to data by Saxo Bank.

Better sentiment towards crude oil was the most notable feature of as bullish bets increased by 34% – the biggest percentage jump since 2010. Traders may be regretting the shift with US benchmark crude oil prices plummeting 6.2% to $31.50 a barrel on Monday.

At the start of the year, across all commodity futures net short positions increased to 112,000 lots, the highest since government records began in 2009.

Commodity Market Holiday Schedule 2016, LME COMEX NYMEX SHFE

Jan 01 2016	New Year's Day (Observed)	LME / COMEX / NYMEX / SHFE
Jan 18 2016	Dr. Martin Luther King, Jr. (Observed)	COMEX / NYMEX
Feb 08 2016	Spring Festival	SHFE
Feb 09 2016	Spring Festival	SHFE
Feb 10 2016	Spring Festival	SHFE
Feb 11 2016	Spring Festival	SHFE
Feb 12 2016	Spring Festival	SHFE
Feb 15 2016	Presidents Day	COMEX / NYMEX
Mar 25 2016	Good Friday	LME / COMEX / NYMEX
Mar 28 2016	Easter Monday	LME
Apr 04 2016	Tomb-sweeping Day	SHFE
May 02 2016	Labor Day	SHFE
May 02 2016	Early May Bank Holiday	LME
May 25 2016	Memorial Day	COMEX / NYMEX
May 30 2016	Spring Bank Holiday	LME
Jun 09 2016	Dragon Boat Festival	SHFE
Jun 10 2016	Dragon Boat Festival	SHFE
Jul 04 2016	Independence Day	COMEX / NYMEX
Aug 29 2016	Summer Bank Holiday	LME
Sep 5 2016	Labor Day	COMEX / NYMEX
Sep 15 2016	Mid-autumn Festival	SHFE
Sep 16 2016	Mid-autumn Festival	SHFE
Oct 03 2016	National Day	SHFE
Oct 04 2016	National Day	SHFE
Oct 05 2016	National Day	SHFE
Oct 06 2016	National Day	SHFE
Oct 07 2016	National Day	SHFE
Nov 24 2016	Thanksgiving	COMEX / NYMEX
Dec 26 2016	Christmas Holiday (Observed)	LME/ COMEX / NYMEX
Dec 27 2016	Boxing Day	LME
Jan 02 2017	New Year's Day (Observed)	LME / COMEX / NYMEX / SHFE
* COMEX/NYMEX early closing on any business day preceding a holiday.

MCX / NCDEX Holiday Schedule 2016

Particulars	Date	Days	Morning Session (10:00 AM to 05:00 PM)	Evening Session (05:00 PM to 11:55 PM)
New Year´s Eve	01-01-2016	Friday	Open	Closed
Republic day	26-01-2016	Tuesday	Closed	Closed
Mahashivratri	07-03-2016	Monday	Closed	Open
Holi	24-03-2016	Thursday	Closed	Open
Good Friday	25-03-2016	Friday	Closed	Closed
Dr. Ambedkar Jayanti	14-04-2016	Thursday	Closed	Open
Ram Navami	15-04-2016	Friday	Closed	Open
Mahavir Jayanti	19-04-2016	Tuesday	Closed	Open
Maharashtra Day/ May Day (Labour Day)	01-05-2016	Sunday	Closed	Closed
Buddha Pornima	21-05-2016	Saturday	Closed	Closed
Ramzan ID (Id-Ul-Fitar)	06-07-2016	Wednesday	Closed	Open
Independence Day	15-08-2016	Monday	Closed	Closed
Ganesh Chaturthi	05-09-2016	Monday	Closed	Open
Bakri ID (Idu’L Zuha)	13-09-2016	Tuesday	Closed	Open
Gandhi Jayanti	02-10-2016	Sunday	Closed	Closed
Dussera	11-10-2016	Tuesday	Closed	Open
Moharum	12-10-2016	wednesday	Closed	Open
Diwali (Laxmi Puja)	30-10-2016	Sunday	Closed	Open from (5 pm to 9.00 - 9.30 pm)
Diwali - Balipratipada	31-10-2016	Monday	Closed	Open
Guru Nanak Jayanti	14-11-2016	Monday	Closed	Open
Id-E-Milad (Prophet Mohammad´s Birthday)	12-12-2016	Monday	Closed	Open
Christmas	25-12-2016	Sunday	Closed	Closed

INFOGRAPHIC: The periodic table of commodity returns

Courtesy of: Visual Capitalist

At the beginning of each year, U.S. Global Investors puts out a fantastic visualization called the Periodic Table of Commodity Returns. This year’s version has an interactive design that allows users to sort returns by various categories including returns, volatility, and other groupings.

For those keeping score, 2015 was a historically bad year for commodities in almost every regard.

Base Metals: The fact that lead was the best performing commodity with -3.5% returns throughout 2015 is not a good sign. However, compared to its fellow base metals such as copper (-26.1%), zinc (-26.5%), aluminum (-17.8%), and nickel (-41.8%), lead did wonderfully in comparison.

Precious Metals: Gold held in there as a relative top-performer with only a -10.4% dip. That said, it’s started off 2016 with a nice rally so far. Silver, platinum, and palladium did worse in 2015, all returning -11.8%, -26.1%, and -29.4% respectively.

Energy: The worst performing commodity of 2014 was the second-worst performing commodity of 2015. Oil was been routed in the last two years, with -45.6% and -30.5% returns respectively. Other fossil fuels have followed, with natural gas (-19.1%) and coal (-10.8%) both losing ground in 2015 as well.

Food: Corn was among the “best” performers, returning -9.6%. Wheat struggled more throughout 2015, returning -20.3%.

Deflating commodity prices also compounded with a strengthening dollar to hit currency markets hard, allowing Bitcoin to become the best performing currency of 2015 by far. Countries heavily reliant on commodity exports such as Canada, Brazil, Russia, Mexico, Australia, Norway, and South Africa had their currencies hammered in relation to the U.S. dollar.

Crude oil prices fall as much as 20% since beginning of the year

Crude oil prices continued a relentless dive early on Tuesday, falling as much as 20 per cent since the beginning of the year as analysts scrambled to cut their 2016 oil price forecasts and traders bet on further price falls.

US crude West Texas Intermediate (WTI) was trading at $30.98 per barrel at 0311 GMT on Tuesday, down 43 cents from the last settlement and more than 19 per cent lower than at the beginning of the year. WTI has shed over 70 per cent in value since the downturn began in mid-2014.

Brent crude futures fell 43 cents to $31.12 a barrel. Earlier they declined to $31.08, their lowest since April 2004. Brent has fallen 20 per cent in January and, like WTI, has declined on every day of trading so far this year.

Traders take record short positions

Trading data showed that managed short positions in WTI crude contracts, which would profit from a further fall in prices, are at a record high, implying that many traders expect further falls (see chart).

Analysts also adjusted to the early price rout in the year, with Barclays, Macquarie, Bank of America Merrill Lynch, Standard Chartered and Societe Generale all cut their 2016 oil price forecasts on Monday.

"A marked deterioration in oil market fundamentals in early 2016 has persuaded us to make some large downward adjustments to our oil price forecasts for 2016," Barclays bank said.

"We now expect Brent and WTI to both average $37/barrel in 2016, down from our previous forecasts of $60 and $56, respectively," it added.

$10/barrel?

But it was Standard Chartered that took the most bearish view, stating that prices could drop as low as $10 a barrel.

"Given that no fundamental relationship is currently driving the oil market towards any equilibrium, prices are being moved almost entirely by financial flows caused by fluctuations in other asset prices, including the USD and equity markets," the bank said.

"We think prices could fall as low as $10/bbl before most of the money managers in the market conceded that matters had gone too far," it added.