Tuesday, June 15, 2010

Weekly Update


Sp500
1110 seems to be a key level - with the current market meltup is consistent with low volumes - a sign that shorting near these levels is a tactically optimal play. The online blog commentary is suggesting shorting the EUR or AUD as they are offering greater risk/reward setups.
link

Last week's economic warnings came with retail sales, however was offset by confidence figures. Price action seems to reign in this volatile market - the price is responding to the oversold nature in recent days, and now seems to swing in the balance of being overbought.

Fundamentally it is very interesting to note that retail sales have hinted at what we have been discussing for a while now: the top of the economic cycle may be behind us. Julian Brigden's global liquidity index show that central banks around the world have halted the removal of liquidity, which is the only reason why equities have based. However it has been my contention that once the economic cycle rolls over, governmental tricks to avoid the unavoidable will be relatively useless. Let's watch closely if the markets can take the crisis to the next stage where liquidity in the system does not even matter. That would coincide with the case where money flows out of equities, maybe even out of Treasuries simultaneously, and into cash and gold.

AUD
falling to 78c ? - as long as we stay below 0.8575 we are bearish dynamic
  • Earlier we discussed- In last Thursday’s The Charts That Matter Next Week we detailed a number of factors which make us think the correction in AUD (i.e. AUD-weakness) is not complete:
  1. The double topping structure on AUDUSD hasn’t yet hit its ultimate target of 0.7759
  2. The bigger picture developments on asset markets (equities and commodities) still look negative…
  3. …specifically the S&P now sits just below a major resistance region from 1,103 to 1,108 (based on the cash)…
  4. …and is likely to post a negative candle pattern today following a test of this resistance region intraday
  5. Also as per the long-term charts we included in the chart pack on EURAUD, the currency pair has historically traded as an oscillator and sits right against the base of its historic range…
  6. …this would be a clear place for the market to base and at least rally correctively
Euro

Greek being downgraded again to junk status, saw markets rollover hard
Spain CDS at all time highs



Baltic index is crashing, not good for commodities



Australian Banks overvalued?
The housing bubble is at a precipice and the banks will suffer it the bubble decides to deflate.
Australia's economic warnings signs are ominous now.. I'm starting to change my mind on the resource players BHP, RIO, FMG