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January 2015 Market Recap

Significant volatility characterized the first month of the year as financial markets displayed significant instability across a broad spectrum of asset classes.  The decline in commodities has been relentless, specifically in oil.   After observing the decline in commodity prices, GFC must conclude that the specter of global deflation is becoming a reality.  Additionally, the month of January witnessed extreme volatility in the foreign exchange market as many different currencies underwent severe price fluctuations; most notably the Swiss Franc as the SNB severed it’s peg to the Euro.  Furthermore, interest rates around the world continued to grind lower with some even going negative!  U.S. equities faced strong headwinds this month as multinational corporate companies had to account for an exceptionally strong dollar as they repatriated capital earned overseas.  With so many economic indicators (particularly in Europe) signaling economic contraction, GFC considers it best to limit risk exposure at this time.

The dollar surged higher than we originally expected last month.  We currently view the US Dollar Index as overbought and are expecting a correction to imminently occur.  Additionally, our bullish stance on gold remains intact.  Gold has displayed extremely favorable price action in the face of a strong dollar.  We believe that when the dollar starts to correctively weaken, it should help sustain gold’s current countertrend bounce.  On Thursday of this past week, Gold spiked down $30 only to see the move almost fully retraced on Friday.   The spike down was a mean reversion move to the middle Bollinger band (20) line and also represented a test of the 200-day moving average.  The price action on Friday saw gold move swiftly higher.  GFC is expecting to see gold push higher above $1300 to the cited target range depicted on the chart.  We will keep you abreast of any significant developments related to this forecast.

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Finally, GFC is proud to report that on 29 Jan 2015, our proprietary Crude Contango Index indicator appears to have successfully triggered a buy signal in crude oil.  We subsequently entered into a long position inside our proprietary trading portfolio.  On that day, the Crude Contango Index spiked to a level of $18.33 which implies that banks are keeping oil stored on shipping vessels because they are hoping and waiting to sell at a higher price in the future.  So far, our long position has performed VERY well.  Friday’s price action saw a 7% increase in the price of crude oil.  The decline had become oversold and the RSI was displaying a bullish divergence.  Since the “short oil” trade has become so crowded in recent weeks, GFC expects a classic short squeeze to occur over the coming weeks.  As shorts unwind their positions by covering and taking profit, we expect oil to rebound rather sharply.  The initial target in our intermediate term long position is $51, followed by $59.  Longer term we expect oil to continue its trajectory lower to below $30 an ounce.  The low price of oil is undoubtedly going to have a negative effect on the North American labor force as mass layoffs are just starting to be announced.  Most of the job losses relating to this massive shift in oil prices are likely to be high quality, high paying, middle-class jobs.  Losing these types of productive jobs will be very detrimental to the economy overall, and independently, it will represent yet another notable aspect of the American economy failing to achieve economic viability.

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Phil Olson has been a devoted student of the financial markets since childhood. With over ten years worth of experience trading various investment products, he has developed an insightful way of discerning the price behavior of the market. His trading career took off when he proved to be on the correct side of the 2008 financial crisis by shorting stocks such as Lehman Brothers, Fannie Mae, and Freddie Mac. Since 2009, after capitalizing on the crisis-driven downdraft in financial stocks, he turned his attention to the foreign exchange market and became a successful currency trader. His extensive educational background in the areas of business and finance has afforded him the benefit of being able to apply two types of analysis (Technical & Fundamental) simultaneously to the market in order to identify high-probability trade opportunities. With his distinct and complementary approach to navigating the investment landscape, Phil became a trusted source for financial advice among his family, friends, and co-workers. Prior to partnering with Matthew to create GeoFront Capital, Phil Served as a Captain in the United States Air Force as a Contracting Officer responsible for authorizing, writing, and administering multi-billion-dollar contracts between the Air Force and the Aerospace Defense Industry. His successful experiences in handling large amounts of fiduciary responsibility on behalf of both Congress and the American tax-payer lend themselves well to the financial advisory services of GeoFront Capital.

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