RiskReturnOptimizer

China's Demand Makes Old Signposts Useless

Instead of buying more US treasuries that can only go down in value as US dollar depreciates, it makes perfect sense for China to buy commodities and the economy to generate the 8% growth it has promised to Billions of Citizens ...

The S&P 500: Fibonnaci vs. the Kool-Aid Man

Golden cross of SPY 50 day EMA > 200 day EMA is likely to occur sometime Wed-THur ... this will be viewed by BULLS as VERY BULLISH ... personally, I feel the market is very overbought ... perhaps a pullback to SPY 94 golden cross point could erase the "overbought" conditions on so many indicators ............

Key Market Factors: Global Melt-Up, Consolidation or Correction?

People looking for China market crash to bring down US equities are going to be disappointed ... FXI looks ready to make another run UP given Premier Wen's comments ...

Pullback in SPY will need to be triggered by another catalyst ... materials, industrials, and energy will continue to be strong if China continues the stimulus / easy money policy ...

possible sectors to bring down SPY: XLY (consumer discretionary), and XLF (financials).

Despite surging stock and real-estate markets which have some economists worried about another bubble, China's Premier Wen Jiabao says he will stick to the country's "proactive fiscal policy and moderately loose monetary policy." (ETF: FXI, PGJ)

In US, people say: "don't fight the FED."

In China, don't fight Premier WEN ... Communist Party will do everything needed to grow the economy (bubble or no bubble) ...

Long FXI at least until October 1 (60th Anniversary of People's Republic) ... there will be no problems (if there is, CCTV will not report it) until People's Congress in October ...

Sentiment Overview: Bulls Surge

Golden cross on SPY (using 50 day EMA > 200 day EMA) will likely occur around Wed-Thur ... this is long term bullish ... but market is very overbought, so perhaps the pullback will hit the 50 day EMA of around 95 on the SPY ... there will be a lot of buyers (those who missed the last rally) ... let's see if the buyers will step in to push the market to higher highs (above 102), otherwise, we may have seen the highs for this year.

Five Reasons the Market Could Crash This Fall

Seems like the big concern here is debt level of US economy -- perhaps you can play this two ways:

1. (80% probability) -- Long TBT -- US economy will be weak for years to come, so government will have to borrow more and more money for Stimulus II, III, etc, driving up treasury yield to satisfy China.

2. (20% probability) -- Long TBT -- US economy will recovery eventually, FED will raise interest rates, QE will end, and inflation expectations will be back, ..., all driving up treasury yields.

Friday Roundup: Commodities, Emerging Markets

For those more technically oriented, should the DBA chart be drawn to show rising channel of higher highs ($26, $27, $28), and higher lows ($22, $23, $24) focusing on Oct 08 to now ... if this is the right approach, perhaps the trade is an easy one, buy each time DBA pulls back to rising support line, and sell each time DBA pushes toward rising resistance line (parallel), with defined stop loss below higher lows line.

I'm using it mainly as hedge against falling dollar and rising treasury yield / inflation expectations, but is there another view on DBA from either a fundamental or technical analysis?

Any comments, anyone?

Economic Stimulus: So, Is It Working?

The real stimulus is 0% fed funds rate ...

which provides a steep yield curve that helps banks earn easy money while waiting for charge-offs to stabilize ... each month that goes by where unemployment rate gradually rises to any peak below 10.4% will be fine for the banks as stress test "adverse" scenario is already modeled in for tangible common equity ratios ...

likewise, any hint of inflation will drive investors away from 0% money market funds into anything that holds value -- commodities, foreign currency, TIPS, etc ...

best investment now include: TBT as hedge for rising yields, DBV to protect against falling dollar, and DBA / XLE as play on commodities.

Confidence Games and Ponzi Schemes: No Way to Run the World's Largest Economy

Very interesting analysis.

Suggest adding a chart of "Household Net Worth" (taking your Asset chart and subtracting Personal Liabilities) ... you will see a much steeper decline as Liabilities (Mortgage and Consumer Non-Mortgage Credit) didn't drop much in past 3 years ...

Drop in Net Worth is the factor that will determine how high the Savings Rate will eventually go ... now that unemployment rate increases have moderated .... government spending as we've seen will go directly to Savings as opposed to increasing consumer spending ...

of course, if banks starts doing mortgage modifications with principal reduction, then that's a whole different story ....

Jim Rogers: Focus on China

Long TBT as hedge against hyperinflation ... re-enter FXI and EWT on 10% pullback ... long DBA as long term play on China and weak dollar hedge ... long DBV to benefit from weak dollar and strong commodity currencies.

Amid a rough market for Treasurys, the Fed is expected to let its $300B bond-buying program wind down over the next six weeks - likely leading to higher yields and mortgage rates.

Long TBT until 10 year yield 4.0% (PIMCO "ceiling.")

Sentiment Readings Disturbingly Bullish

Watch sector rotation ... XLF (Financials) holding up this market ... any big reversal in JPM, BAC, WFC @ 2pm EST will determine the direction for the next few weeks ....

Double Your Profits When Treasuries Tumble

There are starting to be rumors of FED stop buying treasuries to bring down yield ... and more and more auctions rest of this year ... with any GDP growth, inflation expectations will increase, supporting rising treausry yields ... TBT looks great until $60 or 10-year yield of 4.0% (PIMCO ceiling) ... we can revisit this case when that price target is hit.

Nonfarm Payroll Reports Since the Start of 2008

Last 6 months, pattern in 2009 looks like pattern in 2008 ... so my bet is actuals come in stronger tomorrow (Aug 09 releast), followed by four months of coming in weaker (Sept to Dec 09 release) ... if we break the pattern, then expect unemployment rate peak to come in below 10% ... otherwise, look for it to approach 10.4% (stress test level).

$75 Billion in New Treasuries on Deck Momentarily

Long TBT until $60 ... or when 10 year yield reaches the 4.0% PIMCO Ceiling.