Sunday 5 February 2012

What does Better (Global PMI + US payroll data) equates to?

(Posted Monday 250am)

The equation,

Better (Global PMI + US paroll data) = RISK ON!


As you probably know, PMI data coming from US, China, UK, etc has been better than expected. Global equity markets extended their weekly climb with the exception for Mexico, Australia, KL and Japan, just to name a few.

Some of you may not have realised that the US market had been stronger than expected. With the latest US data, the Non Farm Payroll and Unemployment data lowering to 8.3%, the Fed Chairman’s monetary policy of holding the Fed fund rates to end of 2014 is a question mark!

This is interesting. Did you know that the Dow Jones IA closed last week at a 3 ½ year high breaching the Q3 2008 high before the Global Financial Crisis (GFC). It broke my resistance level of 12,800! And the S&P Golden cross is evident! Do we need QE3?

VIX and the dollar Index. The US dollar index met resistance at the 81.5 resistance and reversed course following lower global growth worries. Couple with better France, Spain, Italy bond auctions after S&P downgrades France, the volatility index, VIX plunge to levels below 20.

I don’t need any stinking QE3. With the above, the probability of QE3 may be lowered. As Gold is the primary beneficiary for monetary easing or QE3 prospect, spot Gold plunged!

On Friday, the Europe crisis prolongs with high yield Portugal bond auctions and extended Greek talk with the Trioka. As a result the Euro plunged after climbing against the US dollar after the payroll data. On the other hand, commodity currencies like the Aussie rose to the highest level as carry trades is attractive in a low VIX environment.


Updated 6th Feb 0630 am. Greece PM and the Trioka agrees on Deal Framework. Details of framework to commence later Monday Greek time vs China’s Lowest Lunar Sales Since 2009. What I wonder which side would Asian investors mindset be focus on?

 
If you were to realize the above, it is EVIDENT that global equity markets are temporary disconnected with the prolong debt situation in Europe. I think global investors are NUMB (by now) but I speculate there will be one more possible dip before end of month. This would be another possible buy-on-dip.

The after effects of a better than expected US payroll data had not been reflected by Asia. There is a possibility that the US might pass the rally baton to Asia or would Asia markets fade towards the European markets opening because of a prolong Greek-Trioka meeting?

I have a personal interest in Indonesia and am eagerly awaiting their GDP data, due Monday with a better than expected GDP data!

If you’re a global investor, you may probably know that inflation had receded in most countries and most Central Banks has lowered interest rates to support growth rather than battle inflation. Particularly of interest are in Emerging markets as well as BRIC. The yield curve is leaning towards being normal. As such, it is a no-brainer that BRIC economies like Brazil, Russia, India and China resulted in a better performance than developed economies YTD.

WARNING. Do not be too greedy. Expected the unexpected if you are not following closely on the Baltic Dry Index and its possible consequences!

For new audience joining my blog, we welcome you. You may also be interested to know that this is probably the ONLY blog to speculate that markets

·         Would fall three months before the DOW plunge a 2011 low prior Oct 4th 2011 and

·         Would rise three months before the DOW breached a 3 ½ year’s high of current!

Please feel free to read Market Trends, Investing commencing May June 2011 and Oct Nov 2011 for my speculative posting.

If you find the blog beneficial to your investments or risk management planning, you may ‘like’ me or subscribe to my emails (FOC). If you feel the post may benefit your friends, feel free to forward the articles.


9 comments:

  1. So Patrick, are you reducing your exposure in equities in anticipation of the market correction?

    ReplyDelete
    Replies
    1. Hi Ray/All,

      From the above post the sentiment is risk on. Noises from Europe is capping global markets. However, do not be disturbed by the volatility as the TREND is sloping upwards.

      At the moment, I am riding on gains and still riding on gains. There is a possibility of increasing my exposure INSTEAD of reducing.

      My philosopy is to ride gains and cut(not reduce) lost if support levels are broken. This requires a strategy and a lot of discipline.

      Meanwhile, i'm taking notes with the weak performance of the BDI and respective GDP data which is rather alarming. Thirteen countries are reporting negative growth for the quarter while ONE may experience a technical recession, that is having two quarteres of negative growth!

      Having an understanding of what's happening globally would reduce the 'expect the unexpected' event. It would also assist me to measure global sentiment before the market corrects.

      Happy Investing!

      Delete
  2. Hi Ray,

    Will post the blog when appropriate.

    Regards...

    ReplyDelete
  3. Capitaland is climbing fast but I felt it's overbought already. Don't feel right chasing it. Any thoughts? :)

    ReplyDelete
  4. Patrick,

    Also, how is the current situation different from a "bull trap" as blogged by you during June 2011?
    see http://seettpat.blogspot.com/2011/06/dont-fall-into-bull-traps.html

    ReplyDelete
    Replies
    1. Ray,

      Most of the bull traps we speculated were indeed bull traps.

      In late Oct/Nov 2011, i didn't post any possible bull traps. On the other hand, I speculated we're out of the bear markets.

      This is a value add service, i extend to my valued clients who will always benefit from this service. Afterwhich i share this with the audience. In other words, i have a trade secret which benefit my clients first. Got it?

      Delete
  5. Hi Ray,

    Let's discuss this over a cup of coffee sometime this weekend. On you, of course!

    You can contact me at seettpat@gmail.com for further queries.

    ReplyDelete
  6. ha ha, I know you're a wealth planner but I'm a poor family man with alot of obligation. Only got some peanuts to invest so I'm not part of your clientele, unfortunately. Maybe one day, when I earn enough.

    ReplyDelete
    Replies
    1. Ray,

      If you need 'serious' answers/advise, would you

      tell a lawyer that you would not need his service because you have a lot of obligation and you'll handle the court case by yourself?

      tell a surgeon that you'll delay the surgery when you earn enough?

      Please note that i offered a no obligation free discussion over a cup of coffee! I did not mention to meet me at my office! that's a costly assumption!

      No offence for the above but you need to know/weigh the costs/fees over the problem.

      For e.g. if your investment (NAV) for year 2011 made a loss of 15% compared with another investor who encoutered a 3% loss (including professional fees), which would you had prefered given the hindsight?

      Delete