Tuesday, October 20, 2009

GLOBAL MARKET OUTLOOK CHEAT SHEET 10/20: Valuations? What Valuations


- Stocks: Monday: Asia mixed, Europe, US up, Tuesday morning Asia closing mostly up, Europe opening mixed

- FX: Monday higher equities, bias against safety currencies [JPY, USD, CHF in order of safety appeal] in favor of risk currencies [AUD, NZD, CAD, EUR, GBP in order of risk appetite appeal], USD falls against most everything

- Main events today: AUD: Monetary Policy Meeting Minutes, USD Building Permits, PPI m/m:, major earnings Tuesday: BIIB (biotech), CAT (building equip.), DD (chemicals), PFE (drugs), SNDK (tech), SYK (medical), CO (consumer), UALUA (airlines), YHOO (internet), CAD: BoC Rate St., Overnight Rate, , GBP: BoE Gov. Speaks, WEDNESDAY: GBP: MPC minutes, US earnings

- Big Theme: Rising risk appetite as latest big name earnings of AAPL and TXN overall please markets. Further gains in risk assets will depend on how mkt responds to earnings & if leaders can show increasing revenues and upbeat Q4 guidance, as markets are continue to shake off bad US employment and banking news.


US: (Briefing.com) Broad-based but low volume buying helped stocks bounce back from a dip at the open to log fresh highs for 2009, but the S&P 500 met resistance when it hit the 1100 mark, which was last seen just over one year ago. AAPL's post market announcement set up Asia for a higher opening as it blew away expectations with 47% earnings increase and revenues up to $9.87B vs. $9.2B estimates

S&P unable to crack 1100 resistance-yet. Tech bellwether TXN also beat expectations for sales and revenues, though both were lower than in Q3 08, yet the current stock price is much higher. VALUATIONS, ANYONE??

Asia: Up Tuesday morning after US earnings,

Europe: Opening mixed: rising commodities vs. weaker banks fight to set market direction

ASIA- MIXED N225I -0.21% HS +1.23 % SSEC +2.07 FTSTI +0.13% AORD -0.84 %

EUROPE - UP FTSE +1.12 % DAX +1.90% CAC +1.60 %

US- UP S&P +0.94% DJIA +0.96% NASDAQ +0.91%

TUESDAY MORNING N225I +0.98% HS +0.78 % SSEC +1.52 FTSTI -0.01% AORD -1.06 %

FTSE -0.45 % DAX -0.12% CAC -0.25%

COMMODITIES: Gold nearing record highs, oil breaching $80 on rising stocks, sinking USD.

Oil: In rose over $80/bbl Tuesday in Asia, extending a 2 week rally as positive US earnings news boosts confidence, next resistance around $83/bbl, but no major price resistance until $95, though it will need continuing rally from stocks to get there. SEE DAILY 4 DETAIL

Gold: Gold surged past $1,060 an ounce on Tuesday and headed back toward last week's record highs, boosted by a falling U.S. dollar. The dollar sank to near 14-month lows after currency investors bet the Federal Reserve would hold U.S. interest rates near zero well into 2010. Gold is regarded as a hedge against the weakening value of paper assets due to currency depreciation

CURRENCIES: Dollar struggles, euro not far from 14-month high Analysts say Fed thought likely to keep rates low Market watches euro zone meeting for FX comments. Trichet & other EZ finance ministers expressed concern over the USD weakness vs. the EUR after a meeting of EZ MoF's in Luxembourg Monday. Trichet & other EU officials will travel to China soon to push China to revalue the Yuan, a move which China thus far has resisted.

USD: The dollar hovered near a 14-month low against the euro on Monday as investors bet the Federal Reserve will hold U.S. interest rates near zero well into the coming year. Though the U.S. economy is expected to have exited recession in the third quarter, investors expect rising unemployment will keep the Fed from lifting interest rates quickly. That would diminish the dollar's appeal.

EUR- The euro rose as high as $1.4965, according to Reuters data, and was last at $1.4942, up 0.3 percent from late Friday. Analysts said a test of $1.50 was still likely in the days ahead. "The global growth story is getting better. The U.S. economy has improved, so everyone is selling dollars and buying emerging markets. The data justifies the risk," said Sebastien Galy, senior currency strategist at BNP Paribas in New York. Traders were on the lookout for possible remarks on euro strength and dollar weakness at a gathering of euro zone finance officials in Luxembourg

JPY - Despite rising stocks, The USD was down 0.3 percent at 90.60 yen. Tuesday morning, as BoJ minutes suggest it's considering exit strategies.

GBP – Sterling had traded lower against the dollar and euro for most of the European session on Monday after a Bank of England policymaker said the central bank should continue its quantitative easing programme because the financial system has yet to fully recover. Sterling last traded up 0.1 percent against the dollar at $1.6368 SEE FX PAIR OF THE DAY IN DAILY ANALYSIS

AUD: The Australian dollar last traded 1.2 percent higher to $0.9276 after going as high as $0.9285, a 14-month peak, after a central bank official said a return to normal monetary policy was appropriateFundamentals are perhaps the best in the developed world, rate increases expected, but considered very overbought and vulnerable to pullback.

NZD: Like the AUD, considered very overbought and vulnerable to pullback, despite very positive economic news last week that increased the likelihood of rate increases coming sooner.

CAD: BoC Decision rate st. Today 2pm GMT could cause a great deal of volatility in the Canadian dollar. If the BoC emphasizes the damaging impact of their currency over the improvements in economy, we could see a near term peak in the Canadian dollar. Alternatively, if they downplay the constraints brought by a strong currency, the CAD could accelerate its move towards parity.

CHF: The USD slipped 0.6 percent lower to 1.0124 Swiss francs Tuesday morning. Despite poor fundamentals that include continuing deflation, rising unemployment, stagnant exports, and constant SNB intervention threats, the CHF has gained on the USD over the past months on sheer USD weakness from rising risk appetite and poor US employment figures which make US interest rate rises less likely.

CONCLUSIONS: Stocks shake off Friday pullback as earnings provides enough excuse to rise further. Stay w/ trend, but be ready for pullback SEE FULL VERSION FOR DETAILS ON TRADING OPPORTUNITIES IN CRUDE, GBP/USD, USD/CAD.

Trading Opportunities: Near term favors higher yielding and commodity currencies, but that could change fast if equities pull back, no trend continues forever. Thus: 1. be prepared to play a pullback in risk assets and get ready to sell stock indexes, commodities, and risk currencies, buying USD, JPY. 2. Trade the near term horizontal trading ranges that should hold until major news causes a change in risk appetite. 3. Those continuing to take long positions in risk assets should consider tight sell stops, though gold and crude may be approaching new breakouts. Crude oil breaches key $74 resistance, implying more upside unless stocks pull back on earnings disappointments. Always use sell stop orders.

Crude Oil

Near new highs at $80, up from $74 at the start of last week. OPEC officials have said before they are comfortable with up to $80/barrel, suggesting that playing the pullback is the higher probability play- beginning pullback Tuesday morning- watch it. ONCE IT BEGINS (NOT BEFORE).

FX Pair of the Day: GBP/USD

Made huge 10% + move, consolidating at upper BB, higher probability of some kind of pullback test (note on daily chart how the pair rarely stays long at the upper BB. News today for both pairs, earnings is the big one, though, and the GBP isn't much of a risk appetite play. Now that the short squeeze that fueled the move up is done, is overbought per the BBs AND if stocks pull in could GBP could drop hard against USD.


03 OCT 20

Also: USD/CAD: IF BoC st. does not show concern about CAD rise, the pair could drop about 300 pips to parity.



Trichet, Europe Finance Ministers Urge Stronger Dollar After Euro Advances

Financial Armageddon in Alabama Proving Parable for Local U.S. Governments


Jim Rogers on the Next 10 Years

The Greatest Depression Is Coming

How to Play the Next Great Bull - Matt McCall

Readers Pick the Top 20 5-Year Horizon Stocks

Is Crude Oil Breaking Out?


No comments:

Post a Comment