February 17, 2010

Progress Update:

Almost done with AC taxes for 2010. Should be done by end week if I can get appropriate advice and help on time. Currently evaluating all documentation and reorganizing. Once that is done It will be onto polishing the appropriate infrastructures. More importantly, developing consistent income generating strategies will be underway once the short term goals are tackled.

In terms of markets, I've been following loosely since the start of the year and have many notes that I wish to update later. However, its hard to figure out where to begin I guess the best way is to dive right in.

Many of my ideas from the end of 2010 have come to fruition i.e. Mainly

1.) The rise of WTI from low 80's
2.) Short Chinese Equities
3.) The Pound Remains fundamentally resilient
4.) 0.74 to - 0.75 Great buy-in/support levels on the NZD/USD

In Regards to . . .

1.)  I have been long since the technical consolidation seen in October 2010.

2.) I was painfully wrong for the last two Quarters of 2010 as Equities strongly rallied across the board. However, from a sentimental stand point I knew Asian equities was to break at some point. This came with the rise of Chinese interest rates. Prices reverted back to fundamental factors; relative world equities analysis indicated this back in mid 2010. Unfortunately technicals and sentiment can cause long periods of speculation. On the whole, I believe Chinese equities to be still good for more shorting opportunities in Q1 '11 (arbitrary time frame since I haven't analyzed or looked into this issue for awhile).

3.) Despite short term correlations, regionally the GBP/USD  held wide trading channels that I drew in June 2010. Whereas the volatility in the EUR continued to be ridiculously wide.

4.) Historical technical/fundamental studies showed the NZD was set to breach into a new frontier like the AUD, however regional correlations didn't hold as Q4 '10 showed high correlations between the AUD and the EUR while the NZD remained lagged in performance. However, eventually the NZD correlation strengthend with the majors and by early NOV and tested low 0.73's. In my notes, I've marked 0.74 -0.75 support levels for short term (week to week) plays. Though I was wrong on the upward breakthrough of .80 (which I know is still coming), I was at least right on the short term support levels in this time frame (end of Q4 '10 into Q1 '11).

Observations:

The end of 2010 correlations and relations have broken down (which is quite surprising IMHO). The high correlations amongst major assets classes seen in 2010 have changed going into 2011. Asian majors are seemingly inverse to western majors due to fundamental divergences (interesting the swiss franc seems to exhibit this inverse behavior as well). Dollar oriented thesis's are not enough to explain traditionally correlated assets. Gold fever seems to have subsided and people seem to be doing new home work AND/OR now having a new sickness of US equity mania. Some claim risk aversion, though to be honest, I see capital flows  to the US region as a fundamental reversion via sentimental catalyst of herd mentality (strong US economic expectations vs Questionable Asian economic expectations) . Even if it is speculation/sentiment is driving Q1 equities up in the US it perhaps can be for bullishly extended for the next few quarters as we saw with Asian equities second half 2010.

*side note*: despite bullish US equities Q1 '11, SPX technicals are showing a short term correction is needed for the health of the bull trend to remain. Daily price ranges are thinning out with volume consolidation. Look for 50 RSI support formation and a 5%+ correction if bullish.

Conclusion:

Apologies for my long absence as I needed much time to recollect my thoughts and get back in the game. Though I am not fully back as business operations are not fully restructured. I haven't talked about my bad calls made in 2010, hopefully I will cover them in my next post along with more updates.


Alexander Lê
Managing Partner
Analyze Capital LLC
AnalyzeCapital@gmail.com