Saturday, September 12, 2009

Market Update this Past week - Sept 12, 2009

General Update in no specific order:

Equities started to tank this past Friday, though I still am short term bull. Though I do expect some dollar strength over the next few weeks. Oil seems to be ranging 60- 70. It will be interesting to see how this is affection OPEC profit margins and how they will react to changing supply. Though this past Friday's drop in oil I felt was more related to new oil discovery finds in the South Americas. Perhaps getting some insight on financial statements of big oil players may hint at up coming fundamental changes.

Gold is seeing very interesting moves. Head and shoulder patterns? Strong tech resistance at 1000+? How much more can sentiment push levels on precious metals? CPI PPI number are still tame as ever, this inflation story perhaps is pre-mature (though Im not discrediting it).

In terms of Fund flows we are seeing strong fund flows to US bond markets in August and increased equity fund flows into EUR markets. Interesting we are seeing net out flows from emerging markets... this is all hinting to increased risk aversion. Are market participants getting more skiddish?

In terms of the ever evolving financial landscape the Chinese government is really stepping up their game. Opening up new funds in Switzerland(only denominated in yuan/renembi) and buying up oil assets in the Americas is just the start. Some colleagues of mine are speculating of the renembi being allowed to float in the time frame of 5 years or more. I would have to say against a strong sound financial infrastructure (other than primary markets)in China this could really change balance of economies out there. All in all I don't see America passively standing by and not using its political muscle prevent/slow this scenario from happening.

Speaking of change in Asia, huge political surprises seen in Japan. The win of the DPJ has American politician's shakin in their boots (but not really...). Obviously Japan will not be cutting ties to the US, but perhaps this is an opportunity for them to assert some true political independence in the globalizing arena. I have no doubt that the "being Greenest country" will be a big platform that the DPJ will use to assert themselves. That country could really use some serious restructuring and trade diversification.


If the dollar is leading things I'm sure we will see a pull back by the end back in equities by the end of this week or into next week (Im assuming short term dollar strength). In terms of trend overall short to mid term I'm bullish (1 - 2months). Though longer term technicals are still pretty bearish.

Within the major pairs we are seeing regional differences mainly in the EUR zone though overall most major pairs are inline to see some dollar strength in a 1 - 2 week time frame.

So how does this correlate to energy? Natural gas is still not correlated strong to markets but in the Group's view is experience a bottom. Oil interesting has gone lower this past friday, but overall I am personally still short term bull on oil.

Some colleagues feel a larger correction in equities markets need to be seen before continuing any bullish trends (assuming we are still in one). Doing some back testing a 5%-7% correction would be appropriate.

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