well, Gold has hit a high of 1005. Is it the short term top ? Interesting last week, Bernanke spoke and painted a gloomy picture, however expecting inflation to stay low short term, and inflation target of 1.5 to 2% long term.
Seemingly Gold believes in him and beat a retreat. Would inflation be contained in the future ?
Also Hillary ask the China to continue buying treasury, this would give support to USD, and stem any panic dumping of Treasuries.
Obamam is going announce a plan on cutting down fiscal deficits by yr 2012. That bodes well for USD. However the recent move of Gold is anti-Euro, aligned with USD strength.
If Gold rallies beyond 1030, then it would foretell a world when the FED and US is helpless.
Suspect that whenever Gold reaches 1000, the FED would come out to dump its Gold, or enter into some form of swap to sell its Gold.
As an investor, never never sell Gold nonetheless. Buying on dips is adviced.
Short term bottom may be found at 960, then 930.
From the recent chart moves, the support seem to be at 975, then 983. The last high was 1005, followed by 998. We may see another attempt to mount an attack towards 1000. The longer the interval between the attack, the selling pressure would mount.
I believe we have not seen the end of the current raly, however some form of pullback is in the cards.
Hence some more downside for Stocks is happening this week, before a climax. Then it would be a golden buying opportunity.
My take is that Euro would reach 1.2400, SPX to reach 680-700, and Gold to topout around 1050 within next 2 weeks.
Tuesday, February 24, 2009
Thursday, February 12, 2009
12 Feb Buying Time
yes, buying time is what Geithner is doing, he is not in a hurry to buy bank assets. As there is no demand out there, any asset sales would depress the market value further. He is keeping the details, so as to put the market on a leash. He would reveal bits by bits, literally buying time.
The are tools that Bernanke and Geithner can deploy, but they are deliberately taking their time.
Overall, when the time is right, they would give the final push to jerk the economy out of the doldrums. The next highlight would be the April G20 meeting. Till then expect the market to stuck in range, perhaps with a downward bias. Noting that the GM/Chrysler bill is up on the table for review in March.
Meanwhile, China market is quietly climbing without much fanfare. Hence expect the more resilient economies to pull out slowly, while Doom sayers keeping the hot air on US markets.
US companies, or for that matter financial institutions with substantial China/Asia exposure would thrive better than others.
Natural resources companies are also in the mode of merger and acquisitions in anticipation of the next demand cycle. E.g. Chinalco and Rio Tinto.
For investors, you can buy when you find the market suddenly making a dive the next morning. Any test of the low is a buying opportunity. But do not buy after a rally, as rallies would not be sustainable when the time is not ripe.
The are tools that Bernanke and Geithner can deploy, but they are deliberately taking their time.
Overall, when the time is right, they would give the final push to jerk the economy out of the doldrums. The next highlight would be the April G20 meeting. Till then expect the market to stuck in range, perhaps with a downward bias. Noting that the GM/Chrysler bill is up on the table for review in March.
Meanwhile, China market is quietly climbing without much fanfare. Hence expect the more resilient economies to pull out slowly, while Doom sayers keeping the hot air on US markets.
US companies, or for that matter financial institutions with substantial China/Asia exposure would thrive better than others.
Natural resources companies are also in the mode of merger and acquisitions in anticipation of the next demand cycle. E.g. Chinalco and Rio Tinto.
For investors, you can buy when you find the market suddenly making a dive the next morning. Any test of the low is a buying opportunity. But do not buy after a rally, as rallies would not be sustainable when the time is not ripe.
Friday, January 30, 2009
30 January Month End
The market going forward is largely crafted by Bernanke signal of deflation, the onset of Protectionism, and the Stimulus Package.
The odds are for further market weakness, albeit with weak rebound. USD is on the verge of a breakdown.
The crisis has past the Credit crisis, then economic recession and now to Trade war, and finally Depression is sealed.
From Elliot Wave perspective, SPX has completed its wave 4 retracement, and now going into Wave 5. If it pokes 740, then Wave 5 has fulfilled its criteria of completion, i.e. the most bullish view is a shortened aka truncated wave 5, the bearish view is a drop towards 640.
If market closes the month on 640 to 700, then going into Feb/March/April, we would be trading at a lower range at 700 to 800 (similar to current 800 to 900).
If market closes above 850, this gives the rally a bit more time to complete the C of a A-B-C retracement. The C may bring SPX back towards 940 to 950.
As for Euro, a completion of wave 5 is in sight with a rapid drop towards 1.2425 (1.618 projection of wave 4).
The fundamentals supporting the Euro is more of a American story: "buy America" slogan, anti-China protectionism, China cutting back on its Treasury holdings, Asia government redeeming treasuries for cash. All these points to a reverse flow of USD, i.e. selling USD into Asian currencies, Euro, GBP, Gold, etc.
Be prudent on shorting GBP, as any hint if ressurrection of GBP as a world prime reserve currencies at the coming April G20 meeting in London, would fan a massive short covering rally in GBP. SWF has been snapping up UK bank assets for example.
As for GOLD, it has resumed its bull trend, thanx to either Deflationary or Inflationary talk.
Remembered that after 1332 depression, we have the WWII in 1940. Holding physical Gold when you are fleeing your country would save your life and that of your family. Stay away from Gold futures or mining companies.
Today GDP would be key to trigger the completion of the massive A down move since OCT 2007, or the bulls may want to sustain the rally a bit longer.
The risk is a massaged GDP figure that spring a surprise, with the Market Makers pushing up to trigger a massive short covering. Most long positions are long term buying positions. While shorts are more vulverable.
Then we would need to argue if it is a A-B-C bear market rally to complete a wave 4, or wave 5 has been completed at Nov low and a new 5 waves has begun with wave 3 in progress.
Judging from the record high unemployment claims, a >-5% GDP is more likely.
Let us see if Euro can drop 400 points towards 1.2425 within 9 hours, now at 1.2888.
Or the GDP would be the trigger.
Good luck.
Monday, January 26, 2009
26 Jan Lunar New Year
Today is the first day of the Chinese New Year of the OX. And it happens with a partial lunar eclipse visible over most part of Asia. It is a bad omen for the Chinese.
The gruesome decapitating of a Chinese student in Virginia Polytechnic University US, and a van reversing on its own and run over a few Chinese kids in NY Chinatown are all happenings revolving around the Chinese.
China bashing is going to escalate with Geithner comments on Obama susepcts China of manipulating currencies. Trade wars are just about to erupt.
Governments in trouble are withdrawing their deposit with the US treasuries to bring home and save their economy. Hence a top in US Treasuries has come. With the selling of US Treasuries, we would see a sharp drop in demand of USD.
The selling of Treasuries may lead to diversification into Equities and Commodities.
A plunge of sort has come, this time in terms of USD. Most unexpectedly, US Equities may rally for no reason at all, bços of this reverse capital flows.
how would China fare ? With its 400 Billion USD stimulus plan ? Would China market/HK market fare better than US ?
The gruesome decapitating of a Chinese student in Virginia Polytechnic University US, and a van reversing on its own and run over a few Chinese kids in NY Chinatown are all happenings revolving around the Chinese.
China bashing is going to escalate with Geithner comments on Obama susepcts China of manipulating currencies. Trade wars are just about to erupt.
Governments in trouble are withdrawing their deposit with the US treasuries to bring home and save their economy. Hence a top in US Treasuries has come. With the selling of US Treasuries, we would see a sharp drop in demand of USD.
The selling of Treasuries may lead to diversification into Equities and Commodities.
A plunge of sort has come, this time in terms of USD. Most unexpectedly, US Equities may rally for no reason at all, bços of this reverse capital flows.
how would China fare ? With its 400 Billion USD stimulus plan ? Would China market/HK market fare better than US ?
Friday, January 2, 2009
2 Jan MiddleEast
I have quite a lot of subscribers who are from the middle-east. Possibly of my contrarian views. I got a question from a middle-easterners on the prospect of middle-east market. Here is my answer:
Middle-East thrives on Oil, no doubt about it. It has tried to diversify, e.g. with its massive infrastructure projects. Most commendable is the establishment of the King Abdullah University with which I have the opportunity to deliver some lectures on financial engineering as well.
However these project takes time to fruitation, much like trying to plant lavender in the desert. Incidentally, there was a plan to curve out a canal through the desert.
However danger is lurking around the corner. With US pulling out of Iraq, Iraq oil reserve (the second largest in OPEC) would be keenly contested by the Shiites and Sunis. And with the current Israel bombing of Palestine, we just have a new episode in the Middle-East turmoil.
In other words, the Middle-East equities are capped by geopolitical events. Oil having plunged from 147 to 34 would not rebound in a whiff. With the coming reorg of the CFTC (US Commodities and Futures Commission), we would see speculation in Oil or Commodities a tougher task.
We would see a change of leadership from US market to Asia market, primarily China/HK market in 2009. Not bços China has the largest capilitalisation or the most instruments. As US and Europe market would languish in market negative growth, monies would flow into Asia one more time.
Middlest East monies would flow out as well. Hence middle-east equities are not the best deal even how low it is now.
However I would not pile into China equities now, bços come February, March, April, we are going to see a deepening of the China crisis before the government monies take effect.
Shanghai Composite has so far been holding around 2000, even since it flirted with 1500. If it ever goes to 1200 to 1500 once more, it is a buy.
However the China market is only for trading, not long term investment. Bços come 2011-2012, we have the burst of a bigger bubble again.
Middle-East thrives on Oil, no doubt about it. It has tried to diversify, e.g. with its massive infrastructure projects. Most commendable is the establishment of the King Abdullah University with which I have the opportunity to deliver some lectures on financial engineering as well.
However these project takes time to fruitation, much like trying to plant lavender in the desert. Incidentally, there was a plan to curve out a canal through the desert.
However danger is lurking around the corner. With US pulling out of Iraq, Iraq oil reserve (the second largest in OPEC) would be keenly contested by the Shiites and Sunis. And with the current Israel bombing of Palestine, we just have a new episode in the Middle-East turmoil.
In other words, the Middle-East equities are capped by geopolitical events. Oil having plunged from 147 to 34 would not rebound in a whiff. With the coming reorg of the CFTC (US Commodities and Futures Commission), we would see speculation in Oil or Commodities a tougher task.
We would see a change of leadership from US market to Asia market, primarily China/HK market in 2009. Not bços China has the largest capilitalisation or the most instruments. As US and Europe market would languish in market negative growth, monies would flow into Asia one more time.
Middlest East monies would flow out as well. Hence middle-east equities are not the best deal even how low it is now.
However I would not pile into China equities now, bços come February, March, April, we are going to see a deepening of the China crisis before the government monies take effect.
Shanghai Composite has so far been holding around 2000, even since it flirted with 1500. If it ever goes to 1200 to 1500 once more, it is a buy.
However the China market is only for trading, not long term investment. Bços come 2011-2012, we have the burst of a bigger bubble again.
Saturday, December 27, 2008
27 Dec Euro moves
FOREX COMMENTARY
If there is no concerted effort to penetrate 1.4700 in coming week till 7 Jan, we may see Euro dropping back to test 1.3000, or even 1.2000.
Though I may not rule out an immediate drop to 1.3500 then rise again to test 1.4700, with target 1.5000-1.5200 and then drop back to 1.3000, this moves have to be executed in short timeframe and thin liquidity. (Probability low).
Hence a likely scenario would be a slow deterioration of Euro, dripple down to 1.3800, then 1.3500, and then sharp moves below 1.3000 again, gunning for 1.2000 this time. This would be accompanied by a Gold now at resistance 880 (slopping downtrend channel) into 800.
If Gold can hold 800, then Euro test may just stop at 1.3300-1.3500.
If Trichet signals more cut coming for Euro to 1%, then differential between all currencies would diminish making holding USD preferable in the short term.
Long term view is still for USD to drop, bços of Democrats inclination to weaken currency to jerk export, which eventually leads to the next wave of commodity bull markets.
Hence Oil and Commodities still have quite sometime to consolidate before the next wave begins.
EQUITIES COMMENTARY
Checked the monthly SPX, the averages just crossed down, i.e. we are in for a long long Bear Market, with further plunge. The deeper the plunge, the shorter the recovery period.
With all the intervention, bailouts of Autos, FED buying of mortagage securities, eventually corporate debts (to alleviate the Commercial Real Estate market), further sharp plunge is more remote by the days. Looking at the CDS market, CDS prices on Equities have been dropping. TED spread narrowing.
The Bulls and Bears looking for the retest of the bottom, for the Bull to go into short term long, and Bears to take short term profits. Hence a significant retest would not be forthcoming. Plunge and Rally would be short lived. Essentially the market is in a trading range of 800 to 950 for next few months.
Critical time would be end March towards April, when the Obama Euphoria wears off and the world turn attention to the next G20 meeting in April.
It is better to hold cash in the right currencies.
SURPRISE
The bond market bubble may just burst and monies flow suddenly into Commodities, metals, Crude.
China is embarking on big Infra building, as well as its next fleet of Aircraft Carriers, the demand for metals would be immense. When China start importing metals,
(it is already importing agriculture,and setting price bottoms to protect its domestic production).
Protectionism would rear its ugly head in 2009, where exports of commodities would be disrupted. Hence we may see the next Commodity Rally, which leads to the next Hyper Inflationary Cycle (justified by the monies supplies).
Economies may just toggle into Hyperinflation at the flick of a switch. Speculators would capitalise on the reduced capacities to mount the next crude rally. Probably they would allow another 3 months for the deflation cycle to play out.
If I am a large Speculator, I would not want to fight the FED with its promise of using all possible tools to support the economy. I would just turn around and ride the wave of liquidity promised by Bernanke and other central banks.
We would see Slow or Zero growth and Inflation by end of 2009.
If there is no concerted effort to penetrate 1.4700 in coming week till 7 Jan, we may see Euro dropping back to test 1.3000, or even 1.2000.
Though I may not rule out an immediate drop to 1.3500 then rise again to test 1.4700, with target 1.5000-1.5200 and then drop back to 1.3000, this moves have to be executed in short timeframe and thin liquidity. (Probability low).
Hence a likely scenario would be a slow deterioration of Euro, dripple down to 1.3800, then 1.3500, and then sharp moves below 1.3000 again, gunning for 1.2000 this time. This would be accompanied by a Gold now at resistance 880 (slopping downtrend channel) into 800.
If Gold can hold 800, then Euro test may just stop at 1.3300-1.3500.
If Trichet signals more cut coming for Euro to 1%, then differential between all currencies would diminish making holding USD preferable in the short term.
Long term view is still for USD to drop, bços of Democrats inclination to weaken currency to jerk export, which eventually leads to the next wave of commodity bull markets.
Hence Oil and Commodities still have quite sometime to consolidate before the next wave begins.
EQUITIES COMMENTARY
Checked the monthly SPX, the averages just crossed down, i.e. we are in for a long long Bear Market, with further plunge. The deeper the plunge, the shorter the recovery period.
With all the intervention, bailouts of Autos, FED buying of mortagage securities, eventually corporate debts (to alleviate the Commercial Real Estate market), further sharp plunge is more remote by the days. Looking at the CDS market, CDS prices on Equities have been dropping. TED spread narrowing.
The Bulls and Bears looking for the retest of the bottom, for the Bull to go into short term long, and Bears to take short term profits. Hence a significant retest would not be forthcoming. Plunge and Rally would be short lived. Essentially the market is in a trading range of 800 to 950 for next few months.
Critical time would be end March towards April, when the Obama Euphoria wears off and the world turn attention to the next G20 meeting in April.
It is better to hold cash in the right currencies.
SURPRISE
The bond market bubble may just burst and monies flow suddenly into Commodities, metals, Crude.
China is embarking on big Infra building, as well as its next fleet of Aircraft Carriers, the demand for metals would be immense. When China start importing metals,
(it is already importing agriculture,and setting price bottoms to protect its domestic production).
Protectionism would rear its ugly head in 2009, where exports of commodities would be disrupted. Hence we may see the next Commodity Rally, which leads to the next Hyper Inflationary Cycle (justified by the monies supplies).
Economies may just toggle into Hyperinflation at the flick of a switch. Speculators would capitalise on the reduced capacities to mount the next crude rally. Probably they would allow another 3 months for the deflation cycle to play out.
If I am a large Speculator, I would not want to fight the FED with its promise of using all possible tools to support the economy. I would just turn around and ride the wave of liquidity promised by Bernanke and other central banks.
We would see Slow or Zero growth and Inflation by end of 2009.
Thursday, December 25, 2008
25 Dec Positive News
On Tuesday, SEC has approved a UK company LCH.Clearnet Ltd to operate as a central clearing house for CDS. This is a milestone in containing the CDS monster, and provide transparency. This was long proposed by George Soros, he mentioned it during this year Davos economic meeting.
Hence the rougue Hedge Funds which terminated all the Investment Banks, bankrupted or near bankrupted Lehman Brothers, AIG and Citigroup now have lesser weapons on hand.
We have yet to see GM fall, as well as the Commercial Real Estate market.
With the G20 meeting in London in early April, GM viability dateline on 31 March. Obama inauguration on 20 January, expect market volatility to persist which is good for swing trading.
Over the Xmas period, some positive news have come out,
(A) Japan announcing a near 1 Trillion USD fiscal package,
(B) Biden said that the package is near done, and ready to be given to the Congress.
(C) GMAC now a bankholding company, eligible for FED loans
(D) SEC CDS clearing house in operation
(E) A better than expected US consumer spending
We are starting to see some lights, let see if there would be a January rally afterall.
You are most welcome to exchange views and discuss.
Hence the rougue Hedge Funds which terminated all the Investment Banks, bankrupted or near bankrupted Lehman Brothers, AIG and Citigroup now have lesser weapons on hand.
We have yet to see GM fall, as well as the Commercial Real Estate market.
With the G20 meeting in London in early April, GM viability dateline on 31 March. Obama inauguration on 20 January, expect market volatility to persist which is good for swing trading.
Over the Xmas period, some positive news have come out,
(A) Japan announcing a near 1 Trillion USD fiscal package,
(B) Biden said that the package is near done, and ready to be given to the Congress.
(C) GMAC now a bankholding company, eligible for FED loans
(D) SEC CDS clearing house in operation
(E) A better than expected US consumer spending
We are starting to see some lights, let see if there would be a January rally afterall.
You are most welcome to exchange views and discuss.
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