Tuesday, March 2, 2010

Weekly Forecast - Forex, Energy, & Chinese Equities - 03/01/2010


USD is the name of the game.

EUR post 2.26.10 <-- Click Here
EUR post2.25.10 <---
EUR post 2.24.10 <---

Last week we examined EUR/USD movements quite closely. As my consolidated post show I am bearish on the EUR going forward into next week. Most of my arguments come from technical analysis. Though there is plenty of fundamental news to support a weak EUR thesis. Uncertainty looms with the Greek Debt situation, inflation is rearing its ugly head to an extent, and jobs are not getting better in the short run.

Of course this is relative to the US, who have raised discount window rates, and has RELATIVE mild economic (reports, though bearish overall on any accounts). The key being the relative expectation.

I will be updating the blog periodically throughout the week to report on my performance and progress.


1.35 is looking like a strong support/consolidation level, and she be a key indicator moving forward. In a weekly time frame I don't see levels going higher than 1.37 (by friday). I expect prices to trade within a high 1.34 to mid 1.36 range.


Alexander Lê
Managing Partner
Analyze Capital LLC


Crude Outlook


Since January 4th WTI Crude oil has traded between a range of $83.12/barrel reached on January 6th and $71.15 reached on February 5th. That equates to 14% range from peak to trough prices. Today Crude rallied 1.3% to $79.68 a barrel in New York. WTI Crude needs to rally only 4.14% or more in order to reach a new high for 2010. I predict Crude will trade in a range of $74.50-$82.5 until it breaks resistance at $83.12.

Fundamental Analysis

•Crude Oil prices rallied over the past month in large part due to colder temperatures in the Northern Hemisphere.

•A strong United States Dollar has hurt prices in February

•The Chinese central Bank has asked its lenders to boost bank reserve requirements , leading to fears of the Chinese economy overheating

•Global demand for Oil is projected to grow by 800,00 barrels/day for 2010

•Bullishness in the tanker market continued in January and spot freight rates have increased on all routes.

•U.S. commercial oil inventories fell by 3.0 million barrels/day in January to 1.05 million/day

•U.S. commercial oil inventories are 32.0 million barrels/day above a year ago and 61 million barrels/day above the five year average.

•In OECD countries, the recovery has been sluggish and remains largely dependent on fiscal stimulus and Quantitative Easing

•United States CPI Inflation remains low and economists project an increase of only 2% in 2010

Technical Analysis

•As you can see from the USO 3 year daily chart, the 50 and 200 day Simple Moving Averages crossed briefly in July but look to converge once more.

•The tape continues to move inside and outside of the 50 and 200 day SMAs as they may act as near term resistance and/or support.

•RSI might have formed a double top with the first at the end of 2009 and the second top in January 2010.

•Volume has stayed at consistently low levels since the beginning of global asset rally in March of 2009.

Conclusion: The fundamentals for $100 oil are not present, not even 90$ oil. Global Demand is not great as The United States and Euro area continue to slowly drag themselves out of recession. A stronger dollar going forward will not help Crude sustain this high a price range. However, if the Chinese economy continues to grow at 10% annually, expect to see prices stay around $85/barrel.

Prediction: If the USO fails to test $40 (coinciding with a test of $83 for Crude; see above) on this next leg up I would be bearish.


Patrick Ambrus
Managing Partner
Analyze Capital LLC


The Chinese word:

Chinese Stock Index Trend, before & after Spring Festival

2009-10-28 ~ 2010-03-03 - Graph 1

2010-02-01 ~ 2010-03-03 - Graph 2

The first graph above is the candlestick chart of Shanghai Stock Index from Oct 28th, 2009 to Mar 3rd, 2010, whereas the second one shows the trend from Feb 1st to Mar 3rd this year. The Graph 1 shows that the market started recovering at the beginning of February this year, and maintained a growing trend. Due to the traditional holiday: Spring Festival in China, the stock market was closed during Feb 13th ~ Feb 21st. Although the graph shows two slight pullbacks during the first two days after the holiday, the index went back up again quickly and kept a trend as the start of this year in lunar calendar.

2009-10-28 ~ 2010-03-03

2010-02-01 ~ 2010-03-03

MACD graph of the index illustrates the same idea that candlestick chart are telling. The increase in trading volume indicates that investors are much more activate than last year. A buy-in signal appeared right before the market close for Spring Festival, and after moving averages cross, the trading volume and price will become a pretty positive correlated relationship.

Furthermore, most stocks in the market have been following the index closely this year, especially in February. Since the index is having a pretty good trend, it is likely that most stocks will go to a higher price level in March as well. For instance, alternative energy stocks, such as LNRY or HTY for solar energy, have been moving along with the index most of the time. Therefore, if the index sticks to an up trend in the next few weeks, then there is a great possibility that the market will do much better than previous months, because of heavy weighted stocks will move up the index.
Lastly, plenty of positive reactions from investors before and after the holiday have made a great impact on investor sentiment in a good way throughout the year. Nevertheless, March will determine whether the market will become stable with growth or go back down to about 3000pts, where has been trapping investors for quite a long time.


Clark Chu
Managing Partner
Analyze Capital LLC


  1. Can you elaborate on what you mean by inflation? CPI in the Euro area (January) is currently only 1.0% and 2.4% in Greece (January). However CPI in the U.S. is 2.7% as of December.

  2. "inflation is rearing its ugly head to an extent"

    "The key being the relative expectation."


    I wasn't making a comparative analysis in that statement but simply commenting that inflation be it in EUR or USD economies gives more bearish evidence for the currencies and economies in general.

    As I said it is relative expectations. And you must remember the nature of these numbers. the 12 month rates, the adjusted, the unadjusted and the month to month... perhaps we should consider how meaningful those differential rates are if you want to do comparative analysis.

    To be more specific:

    When I say inflation, it is an increase in price levels that remains positive. Any change to the downside in prices level is NOT "deflation" if the rate stays > 0. That effect is simply disinflation. Deflation being only when the rate goes below zero.


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