There are concerns that a bailout for the country may not be enough to prevent a default. Moreover, it might even be replicated in other indebted nations. Stock market, however, behave as this were an unlikely outcome of the current crisis. Markets are also betting that a V-shaped recession has developed and economies are on the right path to recover. (With a lot of sovereign debt though that will impact on growth at least in western countries).
The Euro weakened, but continues to remain above 1.32. I have been expecting lower prices for quite a long time, but so far the breakout has not occurred.
The SPDR Gold Trust is moving above the trendline very close to its high, but underperforming the stock market. The dollar strength may have influenced this situation, but the perception of dollar as a safe have may have aalso decreased lately. It will come back, I am sure.
The emini S&P continues its up leg. Quite regularly and impressive! I am not following this bull market and not making money. This is quite frustrating but chasing prices is soething I do not like.
Even more impressive is the Nasdaq and tech stocks. With the emini at 2053 (see the weekly chart), we are not so far from the high of 2263 printed back at the end of 2007. What a great opportunity.
I am sure markets will surprise us again....
Wednesday, June 2, 2010
China's Multiple Bubbles
Received from Angelica as a comment to my post Too Much Optimism In this Stock Market, I am glad to publish it because I find it very interesting.
I am in the camp that believes that this so-called economic recovery over the past 12 months has been completely due to government spending and stimulus. Trading volume since January 1st of this year has been very light and definitely not indicative of strong buying by the general public. Who then is doing the buying? The Federal Reserve has representatives in the trading pits of the NYSE and commodity exchanges giving support to asset prices. I firmly believe we will experience years and years of deflation where everything goes down in value, yes, including gold and oil. Sorry for you commodity bulls but you are about to experience what happens to commodities when demand falls off a cliff. China has been experiencing that for the past year and a half but has been lying about its economic realities. Wait till that comes to full light. When China's multiple bubbles burst it will be something to watch. I keep a large portion of my portfolio in cash and it makes sense to speculate in reverse ETF positions on the indexes. I believe we will see some significant corrections in the next several months. Timing these major down moves is tricky business. Only the strong of heart and wills need apply.
I am in the camp that believes that this so-called economic recovery over the past 12 months has been completely due to government spending and stimulus. Trading volume since January 1st of this year has been very light and definitely not indicative of strong buying by the general public. Who then is doing the buying? The Federal Reserve has representatives in the trading pits of the NYSE and commodity exchanges giving support to asset prices. I firmly believe we will experience years and years of deflation where everything goes down in value, yes, including gold and oil. Sorry for you commodity bulls but you are about to experience what happens to commodities when demand falls off a cliff. China has been experiencing that for the past year and a half but has been lying about its economic realities. Wait till that comes to full light. When China's multiple bubbles burst it will be something to watch. I keep a large portion of my portfolio in cash and it makes sense to speculate in reverse ETF positions on the indexes. I believe we will see some significant corrections in the next several months. Timing these major down moves is tricky business. Only the strong of heart and wills need apply.
United States Natural Gas Fund, LP (UNG) Struggles For A Rebound
Working gas in storage was 1,756 Bcf as of Friday, April 9, 2010, according to EIA estimates. This represents a net increase of 87 Bcf from the previous week. Stocks were 64 Bcf higher than last year at this time and 246 Bcf above the 5-year average of 1,510 Bcf.
Storage Report
Expectations were for a better number. Unfortunately. I say unfortunately because I am still lon here. And it is painful again.
I read this article:
Natural Gas Futures Support Potential For Long Term Reversal Of The Natural Gas ETF (NYSE: UNG)
On April 1st, May natural Gas had powerful rally which on the daily chart reflects the potency of the longest time series support we have mentioned over the last several weeks. The six percent rally that day was a start to building cause for a major reversal in trend.
...prior to entering this ETF, waiting for trade over $4.45 basis May Natural Gas to confirm the change of trend would be wise or the equivalent of $8.09 on “UNG.” We caution against long term investors prematurely entering this market.
And actually UNG is struggling to build a base to project prices toward $8.50, a first possible objective. If I manage to close this break even I swear I will never trade UNG any more.....
I was in Qatar a few weeks ago. You know that the country is a big player expanding its production.
The fuel’s value is falling as Qatar raises liquefied natural gas output 44 percent this year and new supplies from North American shale rock cut U.S. imports to their lowest in more than a decade last year.
Algeria, Africa’s biggest exporter of natural gas, is getting no help from Russia and Qatar in curbing production to increase prices.
To know more about the situation you can read:
Gas OPEC Boosting Output Sends Prices Lower for Worst Commodity
Algeria’s Khelil said March 16 in Vienna that users are reducing the volumes they take under multiyear contracts in favor of more spot gas. He called for a reduction of sales on European spot markets, such as the U.K.’s National Balancing Point, and said a gas price of $13 to $14 a million Btus was the “target” with crude oil near $80 a barrel.
Storage Report
Expectations were for a better number. Unfortunately. I say unfortunately because I am still lon here. And it is painful again.
I read this article:
Natural Gas Futures Support Potential For Long Term Reversal Of The Natural Gas ETF (NYSE: UNG)
On April 1st, May natural Gas had powerful rally which on the daily chart reflects the potency of the longest time series support we have mentioned over the last several weeks. The six percent rally that day was a start to building cause for a major reversal in trend.
...prior to entering this ETF, waiting for trade over $4.45 basis May Natural Gas to confirm the change of trend would be wise or the equivalent of $8.09 on “UNG.” We caution against long term investors prematurely entering this market.
And actually UNG is struggling to build a base to project prices toward $8.50, a first possible objective. If I manage to close this break even I swear I will never trade UNG any more.....
I was in Qatar a few weeks ago. You know that the country is a big player expanding its production.
The fuel’s value is falling as Qatar raises liquefied natural gas output 44 percent this year and new supplies from North American shale rock cut U.S. imports to their lowest in more than a decade last year.
Algeria, Africa’s biggest exporter of natural gas, is getting no help from Russia and Qatar in curbing production to increase prices.
To know more about the situation you can read:
Gas OPEC Boosting Output Sends Prices Lower for Worst Commodity
Algeria’s Khelil said March 16 in Vienna that users are reducing the volumes they take under multiyear contracts in favor of more spot gas. He called for a reduction of sales on European spot markets, such as the U.K.’s National Balancing Point, and said a gas price of $13 to $14 a million Btus was the “target” with crude oil near $80 a barrel.
iShares Silver Trust (ETF)(SLV) Sell Off
Silver short-term trend changed after Friday's sell off of 4%. The Force Index indicator in fact turned negative.
You can see that gold and silver have printed the same performance since the beginning of the year.
Many analysts see a grim future for precious metals after Goldman Sachs' event.
Read on Zerohedge:
Net Gold Commercial Positions Surge To Multi-Month High Short Exposure
Of course, Friday's action does not change much to the sideways market that we have seen since the beginning of this year in silver and gold. However, it is interesting to note that they underperformed stocks. Should a correction of equities start they may be vulnerable, although gold could eventually be seen as a safe haven. For European investors the exchange rate of the dollar could help their performance, as the dollar should appreciate in that situation.
You can see that gold and silver have printed the same performance since the beginning of the year.
Many analysts see a grim future for precious metals after Goldman Sachs' event.
Read on Zerohedge:
Net Gold Commercial Positions Surge To Multi-Month High Short Exposure
Of course, Friday's action does not change much to the sideways market that we have seen since the beginning of this year in silver and gold. However, it is interesting to note that they underperformed stocks. Should a correction of equities start they may be vulnerable, although gold could eventually be seen as a safe haven. For European investors the exchange rate of the dollar could help their performance, as the dollar should appreciate in that situation.
Types of Trade Talk
On Daily Speculations this is one of the best posts published lately by Victor Niederhoffer.
What are the many types of people who disseminate their views about the market?
Of all the characters this is the one I like the most, because I think these guys populates the web and the blogosphere:
There's the would be manager, the personage without funds who wishes to impress you with his knowledge and ideas so that you will put money up with him.
There were excellent comments. This is my favorite:
Mike
What about the lone sailor, who everyday has to keep going, no matter how big or flat the seas may be, sometimes finding big treasures and maybe losing them in a big storm, or finding nothing at all. No one to blame for his loses or wins but himself.
The seas have him forever, maybe its the thought of more treasure that drives him, or the chase, but whatever the reason he can not go back to dry land.
He may have been net way ahead, in terms of his wealth, if he only he worked for the city, but such insanity would be 100times worse than trying to navigate the seas.
So with no other options everyday he sets sail, working to navigate today a little better than yesterday.
I felt to reply:
Paolo Pezzutti
Mike,
your comment is very insightful. May be it is so close to my profession… There is an incredible similarity between the sea and the markets. You navigate to see something new, unexpected. Because stability and routine are harmful to morale. Because you see life as a continuous search. You can find treasures or storms. Most of the times, you do not get rich, but that is not the purpose. The purpose is the search, the quest, the chase of the prize.
What are the many types of people who disseminate their views about the market?
Of all the characters this is the one I like the most, because I think these guys populates the web and the blogosphere:
There's the would be manager, the personage without funds who wishes to impress you with his knowledge and ideas so that you will put money up with him.
There were excellent comments. This is my favorite:
Mike
What about the lone sailor, who everyday has to keep going, no matter how big or flat the seas may be, sometimes finding big treasures and maybe losing them in a big storm, or finding nothing at all. No one to blame for his loses or wins but himself.
The seas have him forever, maybe its the thought of more treasure that drives him, or the chase, but whatever the reason he can not go back to dry land.
He may have been net way ahead, in terms of his wealth, if he only he worked for the city, but such insanity would be 100times worse than trying to navigate the seas.
So with no other options everyday he sets sail, working to navigate today a little better than yesterday.
I felt to reply:
Paolo Pezzutti
Mike,
your comment is very insightful. May be it is so close to my profession… There is an incredible similarity between the sea and the markets. You navigate to see something new, unexpected. Because stability and routine are harmful to morale. Because you see life as a continuous search. You can find treasures or storms. Most of the times, you do not get rich, but that is not the purpose. The purpose is the search, the quest, the chase of the prize.
Europe Weakness Is The Main Reason For A Strong Dollar
As difficulties in Greek bailout continue and it is evident how in Europe the issue of sovereign debt will play an important role in the next months, the dollar has developed a rebound in the past days goi back up to 1.369. The weakness of Europe is a theme that will be recurring. Although the situation of debt in the US is very serious, in Europe it is a problem TODAY and will not go away. I think there are the elements to see a stronger dollar.
US Dollar Is To Gain Strength
Technically, the dollar is developing 5 waves to the downside and now it is in wave 4. We should see the rest of 1.327 and hopefully a breakout.
US Dollar Is To Gain Strength
Technically, the dollar is developing 5 waves to the downside and now it is in wave 4. We should see the rest of 1.327 and hopefully a breakout.
Amazon Inc (AMZN): Prices Could Go Down To $100
Can you see the big open gap printed on 23 October? Is it time to fill that gap? Amazon is a great company and the stock performance has been excellent in the past years (price moved up from $30 to $140!). Technically, there are elements to believe that the long run up could be over, at least for some time. A double top may be printed with major negative divergences of indicators. The Force Index indicator still signals an up trend and indeed it will take some time before a corrective scenario is recognized as such. However, a 30% correction could be possible from here if this scenario plays out correctly. We will see in the next days if AMZN develops negative patterns that would confirm this view. A first objective could be the test of the $115 level, the low of recent down leg completed 2 months ago, in February 10.
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