Tuesday, June 22, 2010

Yuan, Yuan, BAM!



The Chinese govt has announced that it will allow 'flexibility' in the yuan, but let's have a closer look at the effects across the market.

Obvious quick econ 101 tells you that if a currency appreciates, it will have more purchasing power - thus the donkeys are quick to conclude that aussie miners will benefito from this policy manifesto.

Assumption 1 - China is slowing down, inflation needs to be curbed.

Assumption 2 - everyone is obsessed with china... as china goes, so does the world's perception of global growth prospects
Tradeable Theory - Brazil is an economy that displays similar growth prospects, but with a much more consumer orientated crowd - betting on the companies selling in Brazil may lead to excess returns.
research: CTRP, BIDU, CAAS, EDU, HMIN, BRFS, BAP, MELI, CPL, LFL, CBD, VIV, WHR, YUM, LVS, MCD, NKE, AAPL

Psychological Hypothesis
Market equity overreaction is overshadowing the mediocre economic profile globally , as markets go from euphoric to depressive intraday trading

China has reached full throttle, and it's slowdown is all but predicted by it's global economists - the next step to world domination is to appreciate its currency with hot money flowing in from expectations , and stop hoarding all the commodities, rather start buying up all the deflating assets in the US.


Intermarket themes are all converging at resistence/ turning points.

Oil at resistence, Gold trading back below the breakout level, AUD at resistence near 88c, ASX200 near the 0.5 fib retracement, euro back to the top of the downtrending channel.

All factors are now stretched towards either a massive market sentiment shift to the upside, or the market will crack and fall to greater depths.