UK General Election Results 2010

Results are out, It looks like the UK ended up in a hung parliment with the Tory party missing over 20 votes for an overall majority. The Greek debt crises still looming, along with the fiscal uncertainty in the UK will not help stabilize the UK/EUR region.

For my perspective, I see a possible new lower dollar trading range vs. these major pairs as it will takes years of recovery from a fundamental perspective. Of course this is not taking into the account of speculation and over exuberance on the sentiment side. All in all though, I still say dollar strength for most of 2010. Will look for a more specific time frame and price range once finals is over.


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Alexander Lê
Managing Partner
Analyze Capital LLC
email: analyzecapital@gmail.com

Market Update: May 06, 2010

WHAT A MIND BLOWING DAY <--- click here

and

Yahoo finance market recap <-- click here

While stocks had looked to be headed for something awful, computer programmed trades quickly clicked to buy and drove the Dow back up several hundred points in a matter of minutes. The Dow closed almost 650 points above its session low, but it still lost nearly 350 points on the session. - via ^above

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and who said all that computer algorithmic quant trading was so bad...

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PS: This is the part where I say "I told you so" +%5 correction achieved! hurrah

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Alexander Lê
Managing Partner
Analyze Capital LLC
email: analyzecapital@gmail.com

RBA Interest Rate Decision- 05.04.10

At its meeting today, the Board decided to raise the cash rate by 25 basis points to 4.5 per cent, effective 5 May 2010.

Recently, forecasts for world GDP growth have been revised up again, and growth is expected to be at trend pace or a little above in 2010. Conditions in Europe remain quite weak, though recent data suggest growth is becoming more established in North America. In Asia, where financial sectors are not impaired, growth has continued to be strong, contributing to pressure on prices for raw materials. The authorities in several countries outside the major industrial economies have now started to reduce the degree of stimulus to their economies.

Global financial markets are functioning much better than they were a year ago, but sovereign risk concerns have escalated significantly in Europe over recent weeks. This has prompted additional efforts by policymakers to put fiscal policies onto a sounder footing and to provide support for Greece in the near term. To date, there has been very little contagion outside Europe.

Australia’s terms of trade are rising by more than earlier expected, and this year will probably regain the peak seen in 2008. This will add to incomes and foster a build-up in investment in the resources sector. Under these conditions, output growth over the year ahead is likely to exceed that seen last year, even though the effects of earlier expansionary policy measures will be diminishing. The process of business sector deleveraging is moderating, with business credit stabilising and indications that lenders are starting to become more willing to lend to some borrowers, though credit conditions for some sectors remain difficult. Credit outstanding for housing has been expanding at a solid pace. New loan approvals for housing have moderated over recent months as interest rates have risen and the impact of large grants to first-home buyers has tailed off. Nonetheless, at this point the market for established dwellings is still characterised by considerable buoyancy, with prices continuing to increase over recent months.

Recent data on inflation confirm that it has declined from its peak in 2008, helped by a noticeable slowing in private-sector labour costs during 2009, the rise in the exchange rate and the earlier period of slower growth in demand. In both underlying and CPI terms, inflation over the most recent 12 months was around 3 per cent. Nonetheless, the extent of decline from here may not be quite as much as earlier forecast and inflation now appears likely to be in the upper half of the target zone over the coming year.

With the risk of serious economic contraction in Australia having passed some time ago, the Board has been adjusting the cash rate towards levels that would be consistent with interest rates to borrowers being close to the average experience over the past decade or more. The Board expects that, as a result of today’s decision, rates for most borrowers will be around average levels. This represents a significant adjustment from the very expansionary settings reached a year ago.

The Board will continue to assess prospects for demand and inflation, and set monetary policy as needed to achieve an average inflation rate of 2–3 per cent over time.

(Comex Aluminum, weekly)

China grew at a pace of 11.9% in the 1st quarter of 2010. It is no coincidence that as China shifts to consumption to bolster growth instead of exports, Australia and other Asia Pacific countries will see benefits. In addition, the run-up in the price of Aluminum has surely bolstered Australian exports. Hence, growth in Australia is alive and well.

Patrick M. Ambrus
Managing Partner
Analyze Capital LLC
e-mail:ambrus.anlzgroup@gmail.com

Long Term: Long SPX, Short Crude, Long Dollar - May 03, 2010

Long Term = into Q3
Short term = 2 weeks



Here is more confirmation which would be inline with my thesis on the SPX and Crude (currently I would short the SPX within a two week time frame and be long into Q3 and also short crude into Q3). I point out the tight correlation from February to the end of March between ICE BRENT and the SPX. The correlation starts to break down at the end of march. If my thesis is correction one should expect a return to the correlation where the SPX should continue up and oil prices to fall.




As we see above; from the end of January 2010 the dollar continued to strengthen while oil prices diverged drastically. This is counter intuitive if currency markets are a significant factor in determining oil prices (unless supply factors outweighed weaker demand forces - e.g. opec decreased production to keep prices high since a stronger dollar would have curbed demand -> but I don't follow these number so I am not sure).

However this inverse correlation we see in the EUR/USD and ICE Brent can break down are start reverting back to positive correlation as seen back in early January and early December. Though, I can site no evidence to explain such an event, other than technical bearishness for oil (which has yet to happen) AND/OR the resolution to the Greek debt crises and a restoration in the confidence in the Eurozone with clear fiscal matters resolved for the next decade (which I highly doubt as the other PIGS, PIIGS and PIIGGS are still lining up to get lower sovereign debt ratings)

It would seem that the SPX/CB chart is more meaningful as there is greater evidence for a bullish SPX; fundamental and technical evidence (long term trend in tact with strong corporate earings etc...) and possible technical evidence for a bearish oil.



This last chart shows for the end of 09 into 2010 the story has been strong dollar and strong SPX. Currently there is strong fundamental evidence for a continued strong dollar and strong SPX which would confirm short oil as long as this relationship stays in tact.


Currently the big risk I feel is misjudging the timing of all these events to play out.



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Alexander Lê
Managing Partner
Analyze Capital LLC
email: analyzecapital@gmail.com

ICE BRENT Technical update: May 03, 2010

Short term for ICE brent seems short term bullish (currently against my short oil/long airline industry thesis), at least on the daily chart going into May... too bad I can't get a longer range on this bad boy.

It will probably take the rest of summer for my thesis to play out if I am correct, it is some what arguably topsy if longer term resistance is present.

What this chart needs is confirmation of the supply/demand balance, which my colleague Pat will inform us in detail after finals. If a supply shock occurs (more than expected oil supply due to overestimation) from OPEC due to the US oil spills, this could confirm lower prices as summer demand picks up and the economy shows more robust economic numbers... (look for those econ indicators where oil is inherently important - directly or indirectly)

SPX Technical Update: May 3, 2010

This one goes out to my buddy Sauros who loves reading those candle sticks.

Multiple confirmation on a bearish reversal.

Most significantly an old uptrend broken with long term resistance.

Though typically its not my style...

Two candle stick indicators confirm this bearish reversal: an abandoned baby (I wonder who names these things) along with a dark cloud cover followed by bearish price move confirmation and bearish volume confirmation.


Against my short thesis is the 50 SMA which could pose significant support and currently the 50 RSI support is holding. However, this would all be inline with my exceptions of an overall 5% correction on the SPX.

Lets see if prices continue down!



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Alexander Lê
Managing Partner
Analyze Capital LLC
email: analyzecapital@gmail.com

Market Take: May 3, 2010

To the end of 2nd Quarter into 3rd quarter:

Long:

Dollar
SPX
Airline Industry

Short:
Oil


Ideally, I think the SPX still has room to the upside given a relative stability we are seeing in the US markets with strong earnings (still questionable is the demand side of the story to continue this bottom line growth).

With dollar strength, again relative stability (too much political/fiscal issues vs major pairs EUR/GBP/JPY/ and even AUD).

Oil and Airline industry has seen huge divergence of higher oil and suppressed stocks prices over the past years. With current consolidation (UAL and cont), and summer season, demand will pick up for travel given a somewhat better off consumer. Considering demand won't outstrip higher cost from higher dollar of oil, I would expect oil to fall and the airline industry stock price level to increase. Higher profits from the larger merger and increased travel with cheaper oil.

One could Short oil and long airlines if one were looking for an intra-hedge idea if one was trading either side of the two.