Monday, November 18, 2013 Hitchhiker's
VUE
General Information and Analysis
US
Today’s Stir J
Last Friday, the stock market in the US pushed to record
highs. The week finished with nice
gains, as investors appear to be giddy over Janet Yellen’s almost sure
appointment to Federal Reserve Chairman.
The Yellen effect should carry over this week. I suspect the bull run to continue even with
price and sentiment in unheard of overbought positions. This week will not see much financial news to
drive markets, and the Yellen effect should continue to drive the SPX (S&P
500) toward 1800 (and beyond maybe).
None-the-less, the markets are way into overbought
sentiment, and a small correction can take place. This often happens near highs. Irrespective of what may be said by the
talking heads, the stock markets’ price in the US is choppy.
Unless you are a very short-term trader (as opposed to investor), this
is a good time to observe. The market is
biased to the upside. Long term
investors in large well-capitalized companies should not be concerned, but they
should at this point start taking out insurance in case the stock market corrects
10% or more.
Stocks in futures and overnight trading are higher ahead of
the opening in NY. The DOW is inching
closer and closer to the 16,000 mark.
This will be a significant psychological resistance area. If you read a lot, you will know numbers like
this provide significant resistance or support.
Even numbers are important only because millions of investor and traders
react at them; not some magic.
The CBOE Volatility Indix (VIX) [known as the fear gauge]
made fresh multi-month lows on Friday.
There is little fear in the market, and therefore, there is little
demand for insurance (PUT protection).
This is an extreme reading and could lead to the small market
correction.
Gold is down, and the precious metal is also suggesting
there is little fear in the markets world-wide on any front.
Cisco was hammered last week and over the weekend by China’s
reaction to the NSA spy scandal. Cisco
tumbled 11% on Thursday, and continued down on Friday. China, however, has another bone to pick, and
Cisco seems to be getting the brunt of it.
“Lewis said Beijing may be targeting Cisco in particular as retaliation
for Washington's refusal to buy goods from China's Huawei Technologies Co, a
telecommunications equipment maker that the United States claims is a threat to
its national security because of links to the Chinese military.” Reuters
US Dollar
Before the stock market opening, the US dollar is weaker across all
major currencies. Along with the stock
markets, we could very well see a quiet week in the US dollar, and probably
most other currencies as well.
Canada
Canada will have a quiet news
week. Some 2nd tier data will
be released, and the loonie will likely follow the Australian dollar. The currency should recover some of the lost
ground against the US dollar.
Bank of Canada (BOC) Poloz will be
quietly trying to devalue the Loonie, as that would promote trade (in his
opinion). If he continues with his past
history (before being governor of BOC), he will be a big mistake for
Canada. However, that is just one man’s
opinion.
Canada has the ability at this
time to become THE major economic power of North America, Mexico and South
America if they take the approach China has taken with free economy, strengthen
the currency, and hoard gold.
Unfortunately, most of the finance people in power in Canada are of the
same mold as Keyesian Economists. What
politicians always forget about Keyesian’s prinicples: that while times are
reasonably good, they should put aside savings to bail out the economy when
times get rough.
Eurozone
Australia:
China
On Friday night, the Third Plenum
document [“The Decisions for Major Issues Concerning Comprehensively Deepening
Reforms”] was released. It outlines the
major reforms. Last week, the newsmedia’s
report was not much happened, and there were no details.
However, after I read through some
of it, it appears there are major league changes to a free-market approach
(over time). The document outlines China’s
top leadership pledging to remove the privileges granted and preserved by state
owned enterprise. The party will remove
barriers to competition. They will use
market action to price value of companies.
They state they will look to accelerate the deregulation of interest
rates. They will lower curbs on foreign investment.
Here is a biggee…. The party will
reform the fiscal system granting local governments the right to issue
bonds. Wow… that is a sweeping change if
they really implement it.
Japan
Japan seems to be going in the
opposite direction from China. Well,
Japan is desperate. They were once the best Capitalists on the block, and it
seemed they would end up owning most of the USA. But China comes in and starts competing
(along with Taiwan and South Korea), and the results for Japan’s economy were
bad.
Now, in desperation, they have
turned to JCB and Abeonomics, and it is going in the opposite direction from
China.
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