Today's chart of the day focus is on China, despite its currency theme. Basically, while everyone is too busy talking about Greece, EFSF, Italy, PIIGS, EU Banks and all sort of other "obvious" stuff - a surprise is brewing in the East. It seems that the current "conditions" (quote of the day below) indicate that China could be a large disappointment leading into 2012. It seems that various markets that depend on China including Copper, Coal, Soybeans, commodity currencies, Asian exporter's currencies, mining stocks, European luxury retailers, Macau casino stocks, Hong Kong property and many others are signalling that not all is well in China!
Next few charts of the day will focus on these markets and today we start with commodity currencies above. US Dollar seems to have failed to make a new low below the 2008 panic, against Loonie and NOK. This shows strength. At the same time, USD vs Aussie and Kiwi are setting up "bull traps" against commodity bulls (guys like me), as they fail to remain below 2008 panic lows. Luckily, I have been in cash for a long time expecting a move similar to this, as the US Dollar is now in the process of flushing out shorts and many weak hands.
I still hold an opinion and have already for a long time, that the US Dollar is "toast" in the long run and remains in a secular decline which started in 2002. Having said that, currently we are in a counter trend correction in this very long term move and I also happen to own some US Dollars and short precious metals (also considered currencies), with a plan to buy some more Dollars on pullbacks. Remember... the Dollar has rallied during every single US recession since the 70s.
Tiho:
ReplyDeleteDo you see in the near term China taking its foot off of its monetary brake?
I am not that smart in knowing what China will do next. I also make sure I'm following the market, instead of politicians or central bankers. I wouldn't pay any attention to that whatsoever, majority of the time. Everyone now than, just sit up and listen when they start printing money, and than protect yourself.
ReplyDeleteI tell you what, I was on the verge of shorting Hermes in France, who are heavily connected to Chinese / HK/ Asian luxury retail boom. I mentioned it on the blog a few times already as an idea for super bearish investors out there. It has now crashed over 15% in 2 weeks and technically, it looks like a disaster.
I look at Western casino business connected to the Macau. They are acting very very weak. Wynn Casino tumbled 8% last night, while the market was up. Than I look at a few coal producers like Alpha Natural Resources. The company is down 75% in 4 months, lowering its revenue guidance from Asian contracts. As you probably already know, Copper is in a bear market now.
I don't think you need anyone including Chinese politicians to tell you that something is not right and that central bank has now over tightened. If the economy there has accredit collapse due to speculative property bubble, they are not just going to "take their foot of the brake"... they are going to slam the brakes and than print money.
If China has learned anything from the West it is two things: a) they are now great at cheating actual economic results so you can't trust them, and b) they have learned the tricks of the trade from Helicopter Ben. Also, don;t forget that the Chinese invented paper, so I am pretty sure they will know how to "use it".
I hope for the sake of my beloved Argentina .. China, Brazil and other emerging markets continue to grow!
ReplyDeleteTiho:
ReplyDeleteIt has been a good sell off across the board.
I know you are looking for signs of a reversal in the markets.
One old saw is don't fight the Fed in the US. Still, we have experienced a hard sell off this past quarter in the face of the Fed's policies.
Your recent post show much excess in bearishness-yesterday's dump in the US may be more tied to quarter end reporting positions for the institutions. The low for the US market is still Aug 8 even with all of the excessive bearishness you have faithfully reported. It makes me think a reversal could actually be starting to take place under all this bearish smoke clouding the averages and headlines.
China loosening up I think would be psychologically a plus perhaps more than anything else and provide a lift?
We will soon learn, Monday should be very interesting day for the markets around the world.
Thanks for your thoughtfulness and good work.