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Global Macro Update
Submitted by Nic Lenoir of ICAP
Following our update last week, Gold has continued its appreciation today. Overall commodities and emerging markets were the main driver. The key chart today is copper which broke out to make new highs on the year (and since August 2008 for that matter).
Given what we have been stressing on the triangle observed in the Shanghai composite and AUDCAD, this could be a major development. In parallel to this break in Copper, AUDCAD actually broke out of its triangle to the upside. Two things to keep in mind though:
a/ Flase breaks for triangle are extremely frequent
b/ Copper had a major false break into new highs in July 08 before experiencing a virtually uninterrupted 70% sell-off
A follow through in today's price action is therefore key, but as of now it seems the market is gearing up for the next leg higher in commodity prices and EM equities. We will use 0.9464 as the confirmation level on AUDCAD. If that level is bypassed the market will at least test parity, and we have upside targets getween 1.0680 and 1.840.
Good luck trading,
Nic
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Another conundrum this be with both the Baltic Dry & HARPEX Indexes failing to confirm the price action for commodities in both bulk & finished goods. The price action indicates the bubble trade vs. the demand trade. Careful Nic...
Is there any way of knowing whether lousy price action in these two indices reflects actual low demand, or rather, overbuilding of ships during the past few years? Also, Harpex looks awful, but the BDI seems to be at '06 levels. Am I missing something?
I would say both indexes reflect true demand for both the unfinished commodity & the finished products. If the Chinese have satisfied their stockpiling & infrastructure demand for bulk & their exports are declining on the finished, the price action reflects non fundamental causes like a liquidity bubble or ping-pong trading for whatever purpose.
My 5 yr BDI shows 2006 as a lean year for the index with 2007 & 2008 as the double bubble, back to back years. Overbuilding of the fleet is a factor as you mentioned. Here's an old weekly chart to show the double bubble:
http://i41.tinypic.com/id9h12.jpg
Note the 37 week PEI cycle of Martin Armstrong. Pi day is coming next week, so be aware of that timing point for continuation or reversal.
the banks are a fallin down!!!!
"U.S. banks face as much as $300 billion in losses on loans made for commercial property and development, according to the Congressional Oversight Panel, which monitors the government's efforts to stabilize the financial system.
Sheila Bair, the head of the Federal Deposit Insurance Corp., has said that losses on commercial real estate loans are expected to be the primary cause of bank failures this year, which are likely to exceed the 140 collapses in 2009."
Cheer up guys. At least we get free health care now ;)
what i dont understan is how can copper be near its 2007 bubble peak, how is that possibble
i dunno.. hardware stores are going to have to have a cop patrol the copper wire aisles soon
Apparently stockpiling copper is fairly accessable store of wealth for the average chinese citizen.
Whether that is a real contributing factor i couldnt tell you.
Headlines BHP, Rio & Vale have been having some success with their iron ore negotiations throughout asia. go figure.
Gold continues its perpetual sidewinding pattern like a snail in slow motion due to the flatulent fundamentals and the tepid technicals.
Oh yeah and also because the Cartel says so.
Current EUROYEN / EURO strength and USD weakness continues.
http://www.zerohedge.com/forum/latest-market-outlook-0
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