JS Global Macro Notes

[AK100]

I agree with your and the other fellas China analysis. But Dr Goebbels of China (asiaprop) won't like this one bit.

This is an excellent example realtime example of where fundamental information will probably turn out right but at present it's no time to short.

So it's important to blend the fundamentals with the technicals and right now the technicals say stay long, and/or take profits or go flat - don't go short.

If the fundamentals do eventually turn out to be correct then let the technicals guide us, and you can bet there will be plenty of good short signals coming............

 

[darkhorse]

Quote from AK100:



This is an excellent example realtime example of where fundamental information will probably turn out right but at present it's no time to short.

Yup, agree (as that's pretty much exactly what was said)...

 

[darkhorse]

Macro Comment: Yes Virginia, There is Food Inflation

In case you were skeptical (and apparently some still are) -- a quick roundup on the food inflation front.

Read full comment here

 

[darkhorse]

Global Macro Notes: What Next For Long Bonds?

If only from a chart perspective, long-dated treasuries are at an interesting juncture here.

As you can see from the weekly chart, TLT has retraced approximately 50% of its upward thrust for 2010, finding support at the 50 week EMA (exponential moving average).

In further note, TLT saw a big reversal on Wednesday, closing higher on strong volume after fighting off a sharp decline. This reversal, and the price / volume action in the days preceding, offers possible hint of exhaustion selling.

Long bonds had sold off heavily in multiple sessions over the past week, no doubt in response to "QE2" and the prospect of inflation's return. But is the return of inflation (and higher interest rates to go with it) really such a lock?

Maybe not...

Go here for full notes

 

[darkhorse]

Weekender: Shanghai Noon

The big news in the week that was? The huge whackage in commodities.

Stocks took their biggest lumps in three months, but the CRB index took its hardest punch in 18 months.

On Friday, gold, silver, oil, copper, grains, and sugar all got killed. (For a quick mental snapshot of the carnage, pull up $CRB, DBA and SGG.)

One can imagine trend following commodity CTAs and "peaceful easy feeling" bulls looking like a Jackie Chan movie poster right about now.

So was Friday's action a surprise? Yes and no...

Full weekend comment here

 

[darkhorse]

QE Explained

Awesome...

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[darkhorse]

Global Macro Notes: The QE2 Inflation Trade is Collapsing Like a House of Cards

On Monday, an old friend of mine -- a mechanical systems trader in Europe -- emailed to request my thoughts on gold (and the general state of markets).

It should be noted we still have long gold and silver positions on -- with partial profits taken and stops above breakeven -- as a modest hedge against our growing short book.

That said, this was my out-of-consensus reply:

In the past few weeks a number of commodities (silver, sugar, cotton, possibly gold) have demonstrated anecdotal evidence of parabolic peaks. At the same time, the $USD has shown signs of bottoming.

This is partly a function of the blowoff "QE2" euphoria that has been building. The huge day for commodities was actually the day after the Quantitative Easing 2 announcement, when Bernanke published an op-ed in the Washington Post basically admitting the Fed had aims to manipulate the stock market.

The mass consensus had become heavily tilted towards bullish stocks, bullish commodities, and bearish $USD as a result of QE2. On top of this we saw the highest bullish sentiment readings since Jan 07 and Citi analysts talking of a "super-Goldilocks" environment for emerging market equities...

Go here for full Global Macro Notes

 

[m22au]

Quote from darkhorse:

Global Macro Notes: The QE2 Inflation Trade is Collapsing Like a House of Cards

Thanks again for your analysis Darkhorse.

I agree that over a period of days / weeks (maybe months) that peaks could be in for gold, silver, Chinese equities, US equities and other risk assets.

However, as you well know, Bernanke was quite open in his desire for higher equity prices. Let's assume that the S&P 500 falls below 1,100 before the next meeting.

Do you think that the size of QE2 will be increased, and/or the asset purchased changed to include other asset classes such as munis or corporate bonds?

For what it's worth, as I've posted in my journal, I am long gold, but short S&P 500 as a "risk-off" hedge.

 

[darkhorse]

Quote from m22au:


Do you think that the size of QE2 will be increased, and/or the asset purchased changed to include other asset classes such as munis or corporate bonds?

For what it's worth, as I've posted in my journal, I am long gold, but short S&P 500 as a "risk-off" hedge.

No idea what Bernanke will do... the plot has thickened considerably, though, by way of the unprecedented Fed backlash.

Bernanke doesn't have to respond to such public pressure as he is facing now, but nor can he exactly ignore it. In the poker game of markets, the Fed's independence is the one poker chip "the Bernank" cannot afford to lose.

Also, re, hedges etc... the odd thing at this juncture is commodities (and China) appear much weaker than the S&P 500 itself (or equities in general). From a chart perspective the weakness appears directly concentrated in China and commodities. I have hunches as to why this is but nothing firm...

 

[darkhorse]

Weekend comment: Mind the Gaps

Charts neither lie nor tell the truth. They simply reflect the collective judgments of the marketplace.

As Bruce Kovner has said,

Technical analysis tracks the past; it does not predict the future. You have to use your own intelligence to draw conclusions about what the past activity of some traders may say about the future activity of other traders.

Chart patterns do have powerful merit, though, in respect to the interplay of human behavior and emotion that creates those patterns.

When you look at a chart you can see fear and greed... confidence and uncertainy... euphoria and despair... the pathos of the markets on full display.

Read full comment here