The Swiss team are torn between near term mild over bought indicators suggesting some profit taking and the strong bullish internal technicals of increasing new 52 week highs and increasing volumes. Sector wise they are pro cyclical stocks advocating material themes.
“We see any near-term weakness only as a temporary pause, so that we would still use weakness to buy selectively. On the sector front our focus remains on cyclical/commodity themes”.
Fixed income wise they reaffirm their bearish stance toward the asset class.
“We reiterate our later August call and would use bounces to sell bonds”.
Very interestingly they are buyers of usd vs the jpy pair and predict an out performance for the Nikkie. This trade is dear to my heart which i entered again short the jpy yesterday via the Canadian dollar. If the Swiss team are right re the material themes i would expect the long cad to offer an out performance via the jpy.
Fundamentally these price technicals don’t gel so well with the ‘on the ground’ data coming through. But the history tells us price is always ahead of the news flow. The smart money is moving with is being demonstrated by the prices shown. 90% of the time its wrong to argue with price and so allocations need to reflect these strong market technicals. For those under allocated the Swiss team are still forecasting a deeper q4 set back so equities may well provide a better entry point than we see today.
For the first time in some time, I’m less bullish than the Swiss team. I see the price evidence but not the policy and data evidence for what the recent price moves. I’m maintaining more of a allocation stance somewhere between the SC team and the Swiss team but i am open to the strong cyclical call and as discussed last week will be playing it using cfds and futures on a tactical basis for the moment. I remain under weight material stocks for the moment though heavily over weight precious metal stocks and the underlying metals. My heart is struggling to join the materials trade strategically for as long as the Shanghai looks so weak.
http://www.stocktiming.com/Shanghai_Daily_Stock_Market_Updates/shanghai-index-update-monday.htm
Having acknowledged the above technicals the details of prior inflationary cycles should always be remembered. That is, rising prices can be purely a function on monetary expansion and the debasement of fiat money. Material prices can rise alongside demand destruction and indeed this is usually historically the case.
Before we become too wedded to the fundamental demand issues for materials we should remember our monetary history lessons so that we stay on the right side of this fiat debasement trade.
Here the report:Weekly18-09
All the best Rich
P.S. A fundamental chart run through via WF. The fundamentals are pretty dire but of course they are historic in nature.
(11 votes, average: 5.00 out of 5)
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