Market sentiment chain of events; chart updates July 9, 2009
Posted by Warren in Central Bank, Energy, FX, Government, Metals, Stocks.add a comment
Cyclical recovery and commodities have dominated the news since Q1, but prices have experienced a near collapse during the past month; this is a very drastic change in market sentiment. My take on the chain of events impacting market sentiment this year is as follows: (i) Fed/government props up market via historic stimulus/bailout, (ii) inflation fear prematurely turns into hyperinflation fear, fueling risk-taking, (iii) stocks recover and green shoots sprout everywhere, (iv) an optimistic and inflation-fearing Fed/government prematurely indicates plans to roll back historic stimulus/bailout, (v) hyperinflation fear turns into deflation fear, curbing risk-taking, (vi) stocks sell off and green shoots are put into doubt, (vii) ???. As for subsequent chain of events, I expect the Fed/government to realize its premature mistakes and eliminate any doubt of economic recovery (while at the same time implementing much needed additional fiscal/monetary stimulus). Consequently deflation fears will dampen and risk-taking will resume. As for timing, I expect the Fed/government to act before the current stock sell-off gains serious momentum (so pretty soon). It is interesting to note that despite the drastic sell-off in commodities during the past month, the dollar index has not moved all that much; the current currency devaluation trend is still very much in play.
Dollar index: 9-month (this chart gives me comfort that commodities prices are currently oversold)
Silver: 6-month (back to 12.80! BUY!)
Crude: 6-month (down $14 since last week’s scandal; could hit 55 but 60 seems to provide strong support)
Treasuries: 6-month (breaking out; rates have room to go lower while commodity prices (and inflation expectations) recover)
Time Out! Buy gold & silver, buy it all… May 1, 2009
Posted by Warren in Government, Metals, Strategy.add a comment
I’ve recently become bearish on gold for short term techincal reasons, but I just could not ignore the flurry of political uncertainty as of late. Namely, I’ve become very wary of recent political developments surrounding the Chrysler/GM bankruptcies, bank stress tests and new tax plans (to shut down tax havens). After a couple months of shutting up, the government is back at it again. I’m also seeing signs of recovery in gold and silver’s role as the anti-dollar. As I said, I’ve been short PM for techincal reasons, but putting these new thoughts together, I decided to cover my gold/silver shorts and flipped back to long. One may think that I’ve been flip flopping with PM way too much, but hey it’s that kind of market, and it’s all about catching a trend before it gets too crowded (whether it’s down or up).
Gold: 3-year (I’ve been focusing too much on short term charts…here’s a look at the bigger picture)
March payrolls are misleading April 5, 2009
Posted by Warren in Government.add a comment
For every unemployment data release during the past 6 months, each of the previous month’s payroll number was revised much lower, allowing the BLS to (i) smooth out the overall decline in payrolls and (ii) keep the data release aligned with market expectations. While discussing March payrolls with a friend, it was noted that this week’s reversal of safe haven trades may not be such a surprise considering that recent economic data have been signaling a deceleration of the recession. Because March payrolls came out within market expectations, with no revision in February payrolls, one could argue that the rate of decline in payrolls has been slowing down, signaling a bottoming. BUT it turns out the folks at BLS sneaked in a SECOND revision in Jan payrolls: initially 598k revised to 655k, then revised this month to 741k. So net of revisions, March payrolls actually declined by 747k, showing no signs of a bottom.
From the BLS release:
Time out! March 9, 2009
Posted by Warren in Government.add a comment
Looks like other countries are taking a more prudent approach (also note Australia’s decision to hold rates last week). Another reason why we may see a dollar sell-off in the intermediate term.
Citi: effectively nationalized February 27, 2009
Posted by Warren in Government.add a comment
US Treasury to take 36% Citi stake; no fresh government money for bank.
C: pre-market action (down 40%)
TIMMAY~ February 10, 2009
Posted by Warren in Government.add a comment
I just saw Geithner’s speech…he basically said: the government is ABSOLUTELY CLUELESS (I will explain this in my next post). Markets didn’t really move all that much throughout his speech, but I’m certain stocks will close much lower…if not today, then tomorrow; there’s no way anyone in their right mind would want to be long equities right now.
