Weekly summary 20110605 - Gold strengthens further; US markets fall into 5th week

Equity markets closed lower last Friday, June 3^rd. US Stocks ended down for the fifth week (with the Dow experiencing its longest weekly slump since 2004), resulting from  

·         Wednesday's weaker-than-expected ADP employment report,

·         Friday’s Nonfarm payroll reports which came in lower than expected and

·         The unemployment rate climbing to 9.1%.

Asian stocks were also not spared as it records the longest losing streak since Lehman collapsed in 2008. The weak manufacturing and employment data had added more concerns about the strength of the global economy resulting in investors taking less risk.

In currencies, the dollar fell against the Yen and (a record) Swiss franc as investors sought safe haven assets as increasing concerns that the US recovery is slowing. The Euro also strengthened as a result of strong growth in the Euro zone, interest rate differential and another bailout for Greece.

As for commodities, Gold strengthened as investors seek safe haven status from a lower than expected Nonfarm payroll report and uncertainties over Greece’s potential bailout. Silver has weakened as investors have been dumping industrial Silver following reports of weaker Manufacturing data. Crude Oil declined as unemployment rate climbs to the highest level this year showing signs of slowing US growth and hence demand. Sugar dropped on speculation that supplies will be affected from Brazil (world’s largest producer) where the crop may fall short of estimates during the record harvest season in April.

I hope the above will draw your attention to where financial markets are currently and why it is trending in that direction. As it takes a lot of effort to compile the above from various financial providers and summarizing the herd’s mentality, the continuation of ‘weekly’ reports will depend on the statistical data of my readership. FYI, there will be Holidays: Monday in Australia (Perth), Hong Kong, New Zealand, South Korea, China and Taiwan.

Meanwhile, I hope your financial consultant had provided their ‘point of view’ and strategy. if you would like or need the benefit of a professional financial planner, I recommend you meet with one. Ask friends and family for recommendations, or visit the Financial Planning Association website.

The status of my Generals. My ‘Generals’ are not thought to speculate nor bargain hunting. In the Chinese Art of War, they will find a suitable climate, a suitable terrain and a suitable time. And unless there are more optimistic indicators, they would delay the War as long as possible. Meanwhile, the search for optimism and favorable terrain continues.

Summary of events since May 2011. Global markets peaked end April 2011. With my article date May 4^th on Profit taking, my initial speculation was profit taking. Following which, I suspected there was unwinding of carry trade in my article dated May 5^th on Further profit taking accelerates unwinding of carry trades.  My speculation was based on my theory, published May 11^th on Without news on QE 2.5, QE2 coming to an end accelerates unwinding of carry trades

A wise man once said, ‘There’s always a market tomorrow!’ Therefore, I find it reasonable to trade and invest when, where the situation is in our favor. This is explained on May 18^th on Investing (or Trading) is like going to WAR. However, as financial markets lack the optimism to go higher, I tried to find a reason by digging up the events, leading to the end of QE2 as published on May 19^th with Global Financial Crisis, QE1, QE2, Inflation, Higher interest rates. What’s next?

 The market does not close today. There’s always a market tomorrow!