What a week it has been for our asset markets.
Few points to note when taking decisions either for long term investments or trading opportunities.
- In the charts we track - large caps already have been trending down since November 2010. But a number of selected MIDCAPS were trending up justifying the phrase - A stock pickers market. These midcaps have started correcting now on weekly timeframe as well. Hence, its becoming very difficult making money on the LONG side of the trade.
- Indian analysts are now missing the earnings estimates and RBI is concerned about lack of any policy reforms since last few months.
- Sectors which have a large exposure of earnings to West like IT or for that matter houses like Tata Motors are getting clobbered. Primarily due to the fact that until there is a stimulus coming from Obama, things monetarily and economically would not improve, as suggested by LEI. As far as Europe is concerned, though they are buying Italian and Spanish Bonds - thus providing liquidity for sustaining the short term funding and spending needs - the problem of bankruptcy for banks and nations remain. Its to be seen what poilcy measure comes in to satisfy the global markets that they believe, atleast for short term the problem has been avoided and they start to rally henceforth. US markets had a disastrous week and Bernanke is going to make a speech this week. Combine that with the possiblity of a dead cat bounce, we might have a tradable rally next week.
Gold is moving very strongly as a signal of the markets suggesting the mistrust of the way the affairs of nations are handled everywhere. But by the looks of the chart, large traders are reducing their positions - we need to see if this is enough to have some correction in gold or not. That would be a fantastic buying opportunity. Anyways we are in seasonally strong period for Gold and at the end of year we should be higher.
Silver technically is healing itself and has closed very strongly at the close of the week. Alot of money at this moment that things Gold relative to silver has become expensive will be moving into Silver markets, thus providing us a period where Silver should start outperforming gold for some duration.
USD remains in larger downtrend. The fact that Bernanke will be speaking this week with USD at the supports will be a further confirmation that FED has abandoned this baby and you need to move into real assets real fast. Risk off money having accepted this fact now is not moving in USD, but seemingly in Gold and CHF. When they think that GOLD/ SILVER ratio makes Silver great value in terms of GOLD - then they will move in that direction as well.
Despite all the issues cropping to media attention lately, Euro has been able to hold itself in a trading range. Does this suggest that selling might come when Euro Bonds are introduced, since that would signal the destruction of Euro's PP but unity now fiscally of EuroZone.
Even after Japanese Central Bank intervention, JPY does not want to weaken against USD. Did you ever find central banks turned hedge funds with unlimited corpus trying to skew the markets so helpless. See the JPY chart.
Like Euro AUD is holding strongly. Economically China slowing down, we need to see any signs of weakness for AUD.
CHF is the best currency out there even in terms of Gold
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