Euro rally a one day wonder? (Maybe three?)
Today’s rally in oil and other commodities that pushed the entire stock market higher was built on a weak dollar and a stronger Euro.
Right now this looks like just a euro bounce. A one (or at most a few days) wonder.
The Euro is still well below its 200-day moving average, which indicates that the trend for that currency still points down.
But the Euro has tumbled so far and so fast that technical indicators are pointing to the strong possibility of a short-term rally.Such a rally isn’t likely to go very far given the big problems still facing the Euro and the continued fighting between Greece and the countries that would have to lead any concrete rescue attempt, France and (most conspicuously) Germany.
If the dollar is set to resume its strength after a short-term Euro rally, then investors who have been looking for an opportunity to reduce commodity positions should sell into this rally. It might be the best opportunity they get for a while.
Unless that is you believe that when China’s leaders return from their New Year holiday next week, they will make a sudden announcement saying that attempts to reduce bank lending and slow economic growth from late January until mid-February were simply a mistake by a junior level clerk who acting without the permission of superiors.
Not likely. (See my how to worry post http://jubakpicks.com/2010/02/16/how-to-worry-and-when-in-2010/ for what I regard as more likely scenarios.)
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Jim, I love this thought. Sell on strength, buy on weakness. We all need to be reminded of this.
Personally, I sold some more gold today after buying a few days ago…
You want to “rent” stocks in this environment, not own! Especially, at this stage in the rally…
Any specific commodity sector you think investors should unload on??
My personal thought is metals look a bit top heavy but the likes of POT, YARIY, are in much better shape for long term holds.
I’ve been selling positions in BHP, but think VALE and TC are in better spots to continue to run.
Here’s a 50 billion dollar question though…. IF the Chinese government stops buying US bonds….. What are they buying???????
My guess: Stocks and commodities…… Anyone else offer some theories on this?
Oy! Is Yara a sell, too??
Jim,
Thank you! I’ve been watching my commodities go up (specifically gold, oil, and palladium) and wondering if I should sell or hold. You answered that question.
Jim,
Now that I think about it, how does this impact BRF? Are we looking for a short term drop in it? Or is this a point where we should look to get out of it completely?
“Wednesday, February 17, 2010
Higher prices bring old and new iron ore miners into focus
by Lawrence Williams, Mineweb.com”
http://www.proactiveinvestors.com.au/companies/news/4991/higher-prices-bring-old-and-new-iron-ore-miners-into-focus-4991.html
Overall IMPORT PRICES probably rose about 1.0% in January reflecting a sharp rise in natural gas prices and milder gains in other components of the fuel category. Non-fuel import prices have posted 0.4% increases in each of the last five months, and we see no reason to expect anything different in January. The trade-weighted value of the dollar has generally been trending higher over the last two months, but core prices are still reflecting the lagged impact of earlier weakness and commodity price indexes rose again last month.
With big January 2009 declines in both total and core prices dropping out of the calculation, the YOY comparisons will keep rising. The YOY increase in the all-items index figures to go from 8.6% to 11.2% and that of the core measure should go from 0.4% to 1.6%. The Street consensus for the overall index is +0.9%, with the middle 50% of forecasts falling in a range of +0.8% to +1.1%.
That was from
Ried Thunberg ICAP
Old news…
Reduced Foreign Buying of Treasuries in December, China Big Seller
Ried Thunberg ICAP
Treasury reported foreigners’ holdings of Treasury securities rose a modest $17.0 bln in December after increasing $99.0 bln in November. That is well short of funding the trade deficit which was -$40.2 bln. One month does not make a trend however but read on. Foreign official institutions (central banks) were net sellers, reducing their holdings by $30.3 bln, selling or redeeming $52.3 bln of T-bills (which was evident in the weekly bill auctions during the month and which we have noted of late). Such more than offset the buying of $22.0 bln of notes and bonds. Private foreign institutions were net buyers of $47.3 bln of Treasuries, purchasing $48.0 bln of notes and bonds but reducing their holdings of bills by $0.7 bln. The largest buyers during the month were the U.K. at $24.9 bln, Japan $11.5 bln, Luxembourg $9.2 bln, and Hong Kong $6.7 bln. The largest net sellers were China $34.2 bln, France $10.0 bln, Russia $9.6 bln and India $2.0 bln. The net selling by China is the largest we can recall of any country doing in one month and would seem to have been intentional. (India’s almost surely was intentional given that it has announced it intends to decrease its holdings of dollar-denominated assets and has bought gold). Such sized selling by China, if continued, will put upward pressure on U.S. interest rates as not only does the selling have to be absorbed but it takes the largest owner of Treasury securities out of the mix when Treasury financing needs are unprecedented.
Treasury Securities
November December
Total $99.0 bln $17.0 bln
Bills -18.9 -53.0
Private -7.5 -0.7
Official -11.4 -52.3
Notes & Bonds 117.9 70.0
Private 86.7 48.0
Official 31.2 22.0
DJ,
Thanks for sharing that info.
The part about China selling off treasuries I read yesterday. I’ve been researching emerging market bonds (and bond funds) as a possible investment. I still haven’t decided.
Wall Street Helped Mask (European) Debt:
http://www.nytimes.com/2010/02/14/business/global/14debt.html?pagewanted=1
Run26.2,
I guess the moral of the story is: If you’re Greek, beware of Goldmans bearing gifts?
Ed:
Or that governments are not any better than private companies about manipulating their balance sheets.
And yes… always beware of any “help” from GS
Run26.2,
Actually, I’d say governments are worse, due to lax voter oversight. At least companies CAN fail (assuming governments don’t bail them out), and they have to answer to their stockholders (sometimes) and government regulators (usually, not always). Ok, maybe you’re right…