aarc

No-Brainer: Buying Yuan / Asia / EM and Selling Dollar / Euro / XLF

The US owns China now.

There is a saying borrow 1 million from the bank and the bank owns you. Borrow 100 million and you own the bank.

As for the US dollar. The Euro dollar exerts most of the pressure toward the weakness the dollar for more than 7 years that ended in mid-2008. Euro$ went up, US$ went down. Not after mid-2008 where the Euro$ dropped down like a stone. Extremely hard to recover from such a type of drop from a technical point of view. Fundamentals also not supporting a recovery in the price of Euro$/US$ in the medium to long-term.

Euro$ is now in a medium-term downtrend on the monthly chart and in a short-term corrective rally on the weekly chart . With no other currency expected to exert major pressure into the price of dollar vis-a-vis major currencies. The US$ is expected to go up in the next several months if not for several years as the Euro$ goes down.

I expect the US$ will start the next rally leg by late H2 2009 as the Euro$ goes down to an exchange ratio more likely in parity with the US$.

UUP should be able to reach close to if not greater than $30 as the Euro$ goes down to parity level with the US$.

Emerging Markets Performance in 2008 and Beyond

Have you look lately at the stock markets of emerging markets? Look at their respective weekly and monthly charts.

China's Shanghai and Szenshen indeces made a 6-months back to back rally since Oct 2008 while the US and Europe were digging fresh new grounds until March 2009.

What do you call that > "false rally", "temporary", "no way"?

Now look at India, Hongkong, Taiwan, Korea, Australia, and even Japan or even the tiny "american friend", the Philippines. Their stock markets were basically not going any lower since October 2008.

How could that possibly happen. When the US sneezes they got a cold. When the US got the cold, they got pneumonia. Was'nt that the fact?

The US sneezed hard Sept to Oct 2008 and they got not only cold but pneumonia including China.

Now that the US is in ER with pneumonia, their pneumonia turned into a cold and they are already up and running since Oct 2008.

What do you call that?

Chinese bloggers call that as "Economic Revival".

Can we say the same with the US stock markets and the economy with some green shoots and still lots of weeds to tackle with?

While the consumers, which are the lifeblood of the american economy, cowers in the dark corner.

We're still warming up for the blame game with faltering steps. I'm sure there will be lots of blame to pass around once it starts in earnest.

Too afraid to look into the mirror for too long?

Everybody trying to find a dark corner instead of finding the courage to help each other out?