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The Economist has an interesting piece out asking “which emerging economies are at greatest risk of overheating.” They explain the six factors that go into their “overheating” index: inflation GDP growth unemployment credit growth real interest rates change in current-account balance With 100 representing “maximum risk,” Argentina tops the charts. But the other members of [...] As we wait for Europe’s big weekend to unfold, here is an interesting thought, as generated by back and forth comments on recent pieces. In The Eurozone’s Wacky Plan, we noted the latest hail Mary hope of a “non-default default” — a way to roll over Greece without triggering a credit event, with attending invalidation [...] Things are really getting Alice in Wonderland in Europe now. Tragedy is rapidly morphing into farce. The latest burst of optimism — born of a supposed get together between Merkel and Sarkozy — is exhibit A as to why “rational economic man” is a completely mythical creature. How many times now have investors swallowed euro [...] Just a very quick observation as we prepare for a wild day (S&P down 35 handles in early trade, bonds and $USD up big. Portfolio contagion is kicking in too, with gold down nearly $40 per ounce.) So here is the observation (or rather question): Why would Japan sell Treasuries? Initial response to the catastrophe [...] While stock pickers have celebrated the demise of the “risk on / risk off” trade, some aspects of this dynamic are still alive and well. For example, there is a massive unappreciated “risk on” component of a weak U.S. dollar, and a corresponding “risk off” profile for a stronger buck. Meanwhile, oil prices busting through [...] A market narrative via annotated charts (below the jump). MSCI Emerging Markets (EEM) S&P futures (SP) Utilities Spdr (XLU) Netflix (NFLX) MGM Resorts (MGM) Volatility ETN (VXX) $USD Index ($USD) Copper futures (HG) Silver futures (SI) Excellent embedded graphic from The Economist (below) in a daily chart piece titled “Spreading Infection” — the infection, in this case, being the euro (or rather euro-related troubles). The inner contrarian in yours truly can’t help but look at ongoing euro strength — and corresponding $USD weakness — and salivate. The prevailing logic driving euro [...] The Egypt situation is, as they say, “fluid.” With the latest news that Mubarak is stepping down after all, crude oil is again dropping like a hot rock, a “risk on” profile has returned to markets in general, and gold stocks have turned tail to give up all previous gains on the day. Now that [...] In recent weeks bears have pointed out a lack of bullish confirmation in the transports (IYT, $TRAN). A multi-week consolidation period also suggested pending breakdown. Count that as an argument no longer. The transport pattern (as shown via IYT) had a clearly bullish resolution on Thursday. So a $10 million hedge fund picks up $850 million worth of gold contracts, the notional equivalent of South Africa’s annual production, and then blows out on the liquidation. What I want to know is: Who gave this guy $10 million? What kind of risk management plan is “quitting when you’re 70% down?” With skills [...] In last week’s global macro notes we noted that precious metals were looking tired. That observation was followed up with an immediate decision to go short (via the four instruments in the chart above). The Japanese have a proverb: “the reverse side also has a reverse side.” That saying comes to mind reviewing recent action in the $USD. As we noted last week, the dollar had registered an upside breakout from a multi-month channel, threatening to set the tone for the year with an early climb. But then the [...] As the old saying goes, they don’t ring a bell when a market tops. But sometimes it sure feels like it. Two quick examples: The first from my days as a wet-behind-the-ears commodity broker in 1998. I had come into the biz near the tail end of one of the most vicious commodity bear markets [...] The market giveth, and the market taketh away. In the final weeks of trading for 2010, gold and silver registered powerful “risk on” breakouts. Gold moved definitively to the upside from a short-term triangle pattern, and silver pushed above $30 per ounce. Soon after, however, both of those moves were swiftly negated. Rather than displaying [...] On Dec 23rd, Mercenary Live Feed members received the following pre-open comment: Elsewhere in the markets, gold and silver are at a critical juncture. Silver’s range has tightened significantly as volume has diminished, suggesting a breakout in either direction will come next. Then on Dec 28th, prior to market open, we added this: Back in [...] |
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