Saturday, May 15, 2010

Weekly Wrap

Sp500
Markets started the week strong, but ended in a very bearish tone - virtually an inside week.
despite the improving economic data with retail increasing in april for a 7th straight month.
http://www.calculatedriskblog.com/2010/05/retail-sales-increase-in-april.html ; the markets are responding with muted buying - the bearish sentiment has taken a solid footing this week.

intraday market internals have been bearish with check on the cumulative TICK in the second link.
http://blog.afraidtotrade.com/may-14-update-market-sells-off-exactly-on-cue/

http://www.zerohedge.com/article/cumulative-tick-confirms-market-far-worse-shape-even-broad-index-will-have-you-believe


The bullish bounce did occur, but it didn't follow through with the conviction of past rallies, thus I've liquidated many of my higher beta related longs, and maintained some low beta longs.

China
Officially in bear territory - whether it be on the charting trendline perspectives, and also being down 20% on the year. A bright point is that Foreign investment in China up 25% in April amid growing interest in rebounding economy.

ASX
local stocks did close 3% higher, but this seemed more of an opportunity to sellout high beta stocks and set up some defensive longs, with a short bias over the coming week.

Gold

Gold has broken out to the upside ($1231) even as the U.S. dollar has done likewise on the back of a renewed flight-to-safety bid. What this means, of course, is that gold has managed to hit new highs even as, (i) the U.S. dollar has risen, which means gold is breaking out against all major currencies; and, (ii) other industrial commodities, such as oil and copper, have slumped from their recent highs. So what this all means is that gold is no longer being considered as part of a resource complex that is outperforming the segment but is increasingly being viewed as a currency of its own.

While I am concerned near-term that gold is overbought and could be ripe for a setback; however, unlike the equity market, bullion is in a secular bull market, which means dips, when they occur, are to be bought. Gold can trade down to $1,130 an ounce and none of the trendlines would be broken.

Oil
Also falling in line consistent with expectations of a slower euro economic recovery. Closed at week's lows $78.

Currencies
Euro breaks 14-month low as debt-cutting steps may hurt growth
Euro with its issues continues to remain in freefall mode falling to 1.2357 over the weekend.


AUD
Aud has now broken towards it's support 86c seems to be the next buy-zone stop - where I'll most definitely pick up some AUD. However
Morgan Stanley's is recommending investors short the Australian Dollar vs. both the U.S. dollar and Singaporean dollar. Their main concerns are that the government's new 'resource super profits tax' on mining companies, such as BHP (BHP), will destroy the mining industry's valuations and create a headwind for Australian economic growth
http://www.businessinsider.com/morgan-stanley-short-australian-dollar-2010-5#ixzz0nxhLWh1g
key question: high interest rates, decent economic growth vs lower retail spending, slowing housing data, china slowing slowing growth due to taxes