What a nice start to the year with the end of the fiscal drama. I feel like Hollywood has gone to Capitol Hill and Wall Street these days given how enamoured the world is with reality TV these days.
On Singapore shores too we have GDP that missed recession. But is that a reason to get bullish ?
I confess I do not know. But I get paranoid when the year starts with a concerted bang. Because nothing in life is ever Up, Up and Away even though there is no law of gravity in finance. And in finance, the law of inflation ensures that prices will only get higher.
Take a look at the table of December vs the entire 2012. It does not look like the new normal. Shanghai gaining 15% and Nikkei 10% vs Silver -10% and Nat Gas -8%.
I dragged out the old correlation tables.
1. EUR has de-correlated with the S&P500, Silver and Gold.
2. USD increased it correlation to S&P500, Silver and Gold.
It is back to basics and could USD be the new risk-on currency ?
My personal superstitition is for happy endings at the end. And right now, in my opinion, we are seeing a false start, abeit a Hollywood inspired one. Will it be enough to carry us through ? Will a Japanese election win (pivotal turn point), holding off the fiscal cliff, Greece securing the bailout payment and slightly positive Chinese data, be enough ?
I will sell some more EUR/USD at 1.3250. Called the double top wrong last week but I suspect the correlations will start to change. US is no longer the problem and if u observe the 2 tables below. Correlations are unravelling.
Conditions are such that you cannot take your eyes off the screen for 5 minutes or you could miss out by a mile. Funniest quote i heard is out of Dr Ed Yardeni “The market has ADD. It gets obsessed with one distressing issue, until that gets boring and investors move on to another.” Central bank policies are creating more confusion than giving comfort, mostly adding uncertainty as they sell their Hollywood punchlines and the “happy ever afters”.
I say now that the “cliff” is over, we can move back to EUR bashing. No sense in wasting all the negative headlines of early December.
Publishing this a day late. Sorry for the EUR/USD level. I shorted some more at 1.3185 just now and will look to add. The downside target is still 1.30.
Have taken off my final USD/JPY tranche yesterday at 87.20 and am looking to buy only at 83.50 level.
Shorted WTI Crude at 92.70 and am looking for a correction to low 91 levels as a punt.
Will be adding the correlation tables later because I cannot seem to upload from here.