Tuesday, October 6, 2009

Wise Words from Pat Ambrus - Market Commentary - 10.06.09

Thoughts on Today’s Market Action

“Volatility is quality or state of being volatile; disposition to evaporate; changeableness; fickleness,” ( If you were long any type of financial product (except shorts) you are probably a happy trader today. Equity Indexes continued to run as the Dow Jones Industrial Average was up 1.47% led by XOM, CVX, IBM, JPM, and UTX, all of which gained more than 1% today. The S&P popped 1.4% led by producers of energy and raw-materials, up 2.1% and 1.9%. Specifically, Newmont Mining led the charge upping the ante by 7%. You already know all of this if you followed the markets today. However, if we examine the broader picture maybe we can find out what the hell is going on.

Treasury Auctions were oversubscribed to today (3 year bonds @ 1.445%). Anyone Bullish? The big story of the day was gold which sky-rocketed to $1,043.10 up 2.49%, reaching an all-time high. What can this tell us? This movement was probably a strict reaction to Australia’s decision to raise interest rates by 25 basis points to 3.25%. "It is now prudent to begin gradually lessening the stimulus provided by monetary policy," according to the Australian Reserve Bank. The movement upward can be viewed purely as an inflationary hedge. However, rumors came out today of Russia, China, Japan, France and Gulf States secretly talking about replacing the dollar as the chief currency for oil. If this happened the Greenback could seriously slide.

Oil was up 1.4% on the day $71.21/barrel. Crude is still trading in a technical range of $66-$73.50. I am staying away until I can figure out what my long-term goals are for the commodity. Nat Gas declined to $4.90 down $0.09 on the session. Not really sure where this is going on here but I will not play the UNG until it drops to more reasonable levels. I will look to get in around $10.50 with stops around $10.35

Gold check, Treasuries check, Oil check, weak Dollar check, Equities rally??? I am not happy about the direction of the S&P. I still believe markets will correct 5-10% and if it breaks support then we could be in for a free fall. Currently, if you want to trade .SPX, play the charts. I will look to get back in the SSO around $30-31.

Authored By: Patrick Ambrus

1 comment:

  1. Excellent Post, clean and concise to the point. I like your explanation of Gold reaction to Aussie, I didn't pick on that. But it totally makes sense since gold is a rather large export for AUS and Asia is a huge consumer of it. Also Interesting speculative stuff about replacing the dollar as the reserve currency. If that's the case Reverse carry trade anyone?


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