The Dow Jones Industrial Average fell 358.41 points overnight, that's more than 3%, closing at 11,453 pts. I had previously said support was around 11,680 pts, however these things are not cut and dry. Support can come at the tip of candle wicks, or at the candle bars themselves. The market is in an interesting position because:
1. The Dow fell a great deal, and it closed at a support level
2. The Dow closed at its low for the day
I consider this information as inconclusive, so I will be looking for a strong OR weak day from the Dow overnight. The Asian market can only take its money off the table, or try to anticipate what will happen based on the trading action in today's trading action. Might Fed chairman Ben Bernacke try to comfort the market with talk of a rate cut, or oil prices might rally further. Actually in trading oil prices have fallen back to $138/barrel. The USD is mixed in cross trading. The gold price is looking good. Might have to wait for the US market to open. I expect it to hold, but if its breaks the next support is 11,000 pts.
------------------------------------------------
Andrew Sheldon
www.sheldonthinks.com
The US market took a big tumble overnight as the oil price raced over $140/barrel. There seems no reason it won't go higher unless there is a severe squeeze on the global economy, or if India and China don't curtail demand with the removal of subsidies. The reality however is that the oil price is being pushed to speculative highs by the Fed policy on interest rates. It makes you ask whether Bush has a deal with his oil buddies to push oil to $200/barrel. Why? Well if oil went to $200/barrel, the oil executives would do very well, the US government might be forgiven for a market-sponsored slowdown, and he might be able to secure a lot more funding from oil companies for his presidential campaign. Well, its just a conspiracy theory. But its not like he needs to identify the implicaitions as such. He need only convey to Bernacke that lower interest rates are required to hold up the economy.
Higher interest rates are the surest way to reduce demand for oil. Not just physical demand but speculative demand. As soon as the Fed starts raising rates we will see a fall in oil prices because the speculators will see a downward path for oil. No doubt that would be another basis for a Dow Jones rally, though not likely to be sustained. The Fed is waiting for bad news to take the Fed rate down to 1%, then I think it will be looking for bad inflation to raise it. The USD strength is surprising me.
-------------------------------------------------
Andrew Sheldon
www.sheldonthinks.com
If you like equities, you might want to take a look at the Dow Jones and various indices that correlate with it. The Dow Jones is hanging just above 12,000 pts. This is a support level, though it might be broken, so its worth waiting for news that would sustain a rally. The market might yet fall to 11,680 pts, its previous support. I am not all to gether negative on equities. There are several reasons for this:
1. Some markets like Australia, Canada, South Africa have a considerable exposure to commodities, so it goes without saying that those markets will be positively impacted by the bouyancy of commodity prices.
2. Broader equities will be hurt by higher interest rates, but they will be bouyed by inflation and industry consolidation, ie. takeovers & mergers.
For this reason I see equities going sideways. Might the Dow and other indices slip to a lower rung of 'hell'? Possibly, but I dont see that happening without higher interest rates or the failure of a large financial institution. So at this point its worth looking for evidence of a turn around. A rally to 12,400 pts would be pretty convincing evidence at this point.
------------------------------------------------
Andrew Sheldon
www.sheldonthinks.com
[Gaijin 06] Gold is still under the $930 levels you were tipping it at earlier in this thread.. and not all equity markets are down that much - Topix is down just 5 or 6% this year. Pretty similar performance to gold.... with a lot more upside risk in the long term.
Here is my response to some negative sentiment towards gold...
Firstly I am tipping $2400/oz gold price, but that is subject to 'some' revising as events unfold, so I think this Japan Forum writer is responding to someone else. Most things dont happen overnight. Equities are holding because companies are actually making money from inflation, ie. inventories & plant are revalued up by inflation, and because of all the money floating around, consumer sentiment is actually holding up quiet well. It is not until you see sustained strong inflation that will demand higher interest rates that you will see stronger gold prices. At the moment the Fed is giving priority to holding asset prices rather than reining in inflation. It is of course silly to hold asset prices because that actually would result in less inflation later, but governments like stealthy destruction of purchasing power (by inflation) rather than debt liquidations, foreclosures, etc. The reality is - the result is the same, just the timing is different.
Job levels are still high, and interest rates are still low, so that is helping to hold equity markets. Over the long term equities will go sideways, but you can trade the rallies. Just dont buy & hold.
Gold will do very well yet.
----------------------------------------------
Andrew Sheldon www.sheldonthinks.com
The Dow Jones has reached my 13,000 point target, and I see oil prices are back over $120/barrel. I know there is some optimism that the market is going to keep going, but I dont think so. I am expecting the broader market to fall back, a weaker $US, and stronger commodity prices. Industrial metals will trend sideways, but precious metals will shine.
I see the Dow Jones falling back to 11,800 points. Too negative you think. Well try oil prices at $130/barrel, and the prospect of higher interest rates to compensate for higher inflation. There is scope for negative news from China too. I do see this rally as an opportunity to get out of base metals at the right time. Not that they will be terrible, just not as good as gold. There are somew great emerging projects that deserve your attention. I will mention some in coming posts. See my spec blog.
-----------------------------------------------
Andrew Sheldon
www.sheldonthinks.com
The Dow Jones is fast approaching another resistance level at 13,000 points. After a good rally from 11,800 pts the Dow is set to return to those levels in coming weeks. I dont see it breaking 13,000 points. The reason is high oil prices and likely flagging consumer & business sentiment.
It is possible that the market might be encouraged by the prospect of Ben Bernacke not immediately raising interest rates, irrespective of whether this easy money is not supporting any new lending, not to business at least. What else can you do with easy money but speculate. Surely this money is going to end up driving gold prices higher, and probably oil, despite it at some point collapsing due to economic malaise. I would not be surprised if the market shrugs off high oil prices, higher inflation numbers and rallies through resistance.
----------------------------------------------
Andrew Sheldon
www.sheldonthinks.com
Some interesting developments in markets of late. The real yields on long-winded treasuries have broken their downtrend after the US Federal Reserve engaged in subsidising of the banking system for a time. Does this herald a period of rising interest rates? If you are worried about gold investments, result assured that inflationary pressures will keep Ben Bernacke well behind the curve. I suggest these rates will pull back when new inflation numbers are presented. I think the Fed is not likely to raise rates just yet, and I think these yields will fall once again.
---------------------------------------------
Andrew Sheldon
www.sheldonthinks.com
I congratulate Ross Gittins on his article “
Everything's coming up roses” in the SMH Online (23/4/08) where he identifies the positive outlook for the Australian economy. There were several omissions though I would like to add:
1. He saids nothing about the positive outlook for Australian food exports, which will add to the glowing outlook for Australian minerals demand
2. Gittins and a number of other people talk about the 2 billion Indians and Chinese people as if they are one market. The notion that half the world’s population is growing at 10% is alluring I am sure, but lets not forget that a great many of them are living the same way as they always have. There is likely one member of the family working in the city sending back a paltry $1/day, given the higher cost of living in the city. The cultural difference between these regions is actually more important than the political boundaries.
3.
We might wonder where the metal will come from to give the Chinese and Indians the equivalent standards of living in 20-30 years time. We can also be sure that they will achieve prosperity faster than any economy before. We should not forget however that some of that ‘productivity bonus’ will arise because we are using more compact electronic devices, which cost less but also use consume much less metal. Might we also expect higher recycling levels as we see greater standardisation of computer components. These are the aspect of the ‘growth story’ which are not discussed so much. Everyone only talks the upside. But these are great times for Australia to be sure.
In all other respects this is a good article and it should be read for some insights, or just as a reminder of Australia’s place in the world.
It was just last night I was discussing with someone why we shouldn't have
taxation. Taxation = coercion = no accountability. More surprisingly still is when a journalist does some critical thinking, so my hat goes for to Michael West at the Sydney Morning Herald. If only they gave his looser deadlines so he could do some investigative journalism, so he might have exposed this story before the failure of yet another financial services company. See
ASX & ASIC Disclosure.I am well versed with the ASX's lack of interest in disclosure rules or guidelines, so it does not surprise me that they should have slipped up. I have just one experience dealing with ASIC. I registered a complaint against a company CEO for misleading the market in an attempt to raise capital. ASIC said there was no case to answer. I suggest because the evidence was not conclusive enough. The problem is that few resources are going to regulating compliance because it all goes on welfare statism which includes corporate subsidies as well. So in this case the best I could do was make this CEO hyperventilate at the company AGM. I doubt that will slow him down. He struck me as the type of guy with friends in the right place.
What a turgid, fascist world we live in....never mind the rhetoric that we have never been freer. The animal has just changed its chamouflage.
-----------------------------------------------
Andrew Sheldon
www.sheldonthinks.com
I see the Australian All Ordinaries Equities Index consolidating over the next week. I dare say there will be some volatility, but the market index will likely go sideways. The broader market will likely be weaker, but the resources sector should hold up reasonably well.
I actually see the current market as a good time to buy 'spec' resources, while I would be trading out of blue chips to re-enter the market in a few weeks. I made the point about 8 months ago that this was a traders market. Alot of volatility. This is NOT a market for the 'buy & hold' strategy.
------------------------------------
Andrew Sheldon
www.sheldonthinks.com
Investment Strategy
If you are investing for the long term, you still need an investment strategy. Dont be fooled by the rhetoric of fund managers. The reason they advise you to 'buy & hold' is because they dont want to compete with you in sell-offs. Markets and industrial sectors are cyclical, so they demand trading to get the best returns. Fund managers actually cant hope to match the performance of small investors (if you are half good) because they have to manage huge amounts of funds and charge you a fee besides.
MY ADVICE is (i) look at a range of market indices and decide upon what level of correction would give you the justification you need to get in & out of the market. It might be a 5-10% retracement or a break of trend. (ii) Diversify if you dont have an intimate knowledge of the company or management. More than 30% in one company is aggressive.
The Dow Jones Industrial Average fell 358.41 points overnight, that's more than 3%, closing at 11,453 pts. I had previously said support was around 11,680 pts, however these things are not cut and dry. Support can come at the tip of candle wicks, or at the candle bars themselves. The market is in an interesting position because:
Posts
