(Posted Friday, Singapore time 330am)
When hopes and speculation for a favorable FOMC meeting brought global indices to one of their best week a week ago, the FOMC announcement reversed its course.
'Operation Twist' which was widely expected lowers longer borrowing cost. It doesn’t expand the balance sheet at all. There is no stimulus to push up the economy. Hence, market was disappointed and the bears took the stage. The problem here is that most investors follow (blindly) the herd without knowing the effects of such an announcement (operation twist). Classic bull trap.
Again, hopes and speculation for a Germany-Merkel vote which gives new powers to the EZ rescue fund was short lived. Not knowingly to most of you, the implementation would produce undesirable side effects, too!
Coupled with a better US GDP final revision for Q2 which came in better than expected, the US markets pared most gains with Nasdaq leading with more than 2% loss! Something is brewing up very bad!
Please do take note of my previous post on a China hard lending. The Chinese index broke a new low yesterday. Updated 1015. There would be a bunch of Chinese data due out, namely the China PMI and HSBC PMI. Hope the Baltic indicators come early!
(Updated Malaysian time 7 pm). The US data; Personal Spending, Chicago PMI and Michigan consumer confidence will be out in 1 1/2 hours, that is 830pm. My speculation is that the data will be lower than expected. As non farm payrolls was reported flat this month, Personal spending has a tendency to follow the same trend. Unless, there's a surprise, the US major indices may record a new low tonight. Be cautious, be very cautious!
(Updated Malaysian time 7 pm). The US data; Personal Spending, Chicago PMI and Michigan consumer confidence will be out in 1 1/2 hours, that is 830pm. My speculation is that the data will be lower than expected. As non farm payrolls was reported flat this month, Personal spending has a tendency to follow the same trend. Unless, there's a surprise, the US major indices may record a new low tonight. Be cautious, be very cautious!
Keep watch on Greece. Should Greece prolong its virtual default, the market should have a brief rally. Otherwise, global markets may try another bungee jump.
Hence, in my opinion, I wouldn’t buy or hold any equities now. If you’re into bonds, please make sure it is not related to Greece, Europe or financial institutions holding/related to Europe debts.
Some of you may preserve your investments by staying out of commodities or commodity currencies and heading for safe haven of US dollars or the Treasury. My generals and I have identified premium trades seeking higher yields instead of seeking safe haven. This is thinking out of the box!
Though volatile, the short term trend is very predictable. Be very cautious!
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