Signs of the Times:
"Market's
Best Start In 25 Years"
~ Financial Post, January 20
The probability of a rising, but
choppy stock market from October until around January seems to be working
out.
"China's
December home prices posted their worst performance last year. New home
prices in the nation's four major cities declined for a third month."
~ Bloomberg, January 20
"The Bank of
Japan will maintain its zero interest-rate policy."
~ Bloomberg, January 20
This policy has been in effect since
1990 with little effect.
"About one of
every 125 retired federal civilian workers collects more than $100,000 in
benefits annually."
~ Bloomberg, January 19
And that is from a pension system
that faces a $674 billion shortfall.
Perspective
Last week's view was that the rally
in stocks, commodities, corporate and municipal bonds could continue into
February.
Choppy action ended at Christmas when
a rally developed. This week's slide in the dollar (finally) is adding to
confidence as European downgrades become so "last month".
Some technical "alerts"
have registered on the stock market and we are watching for key excesses.
Credit Markets
Financially speaking, grave concerns
through Christmas prevented a "Joy to the World" condition. With
Italian bonds, for example, plunging in yield "Joy" has arrived.
However, it is selective as Portuguese yields soar to new highs. Charts
follow.
Longer-dated spreads for corporates
continued their favourable trend. The price rise
includes the strong rally in Municipals - enough to register a weekly Upside
Exhaustion. It could take a few weeks to complete the move, but the first
slide says "game over".
Even the dreadful mortgage-backed
bonds are coming back into favour. The one we
follow has rallied from 38 in October to 51. Risk is back on.
The shorter end of the market such as
Libor and the Ted-spread turned positive at the end of December.
The chart action in Municipals could
provide the technical sell signal on all of longer-dated risk stuff.
Currencies
It took a few weeks for the DX to
roll over and the decline could run into February. With this the Canadian
dollar has bounced up to par with the US.
Commodities
Agricultural prices (GKX) continue to
work on the test of the high of 445 set at the beginning of the month. The
rally has been weak, but it could firm up as the dollar slides.
Base metals (GYX) have performed well
since mid-December and momentum has surged up to 74 on the RSI. This is close
to the level that has ended such rallies in the past.
Crude oil has been likely to
consolidate for a while yet. Saber-rattling by Iran will continue to prompt
"good days". Seasonal strength will follow.
Natural gas has enjoyed a sharp rally
to the 20-day moving average and some consolidation is likely. The advance
could run through February.
Ross's January 14th review of the
extremely oversold condition has been very timely.
JOY!
Italian Bonds
 
OOOPS!
Portugese Bonds
Bob Hoye
Institutional Advisors
The opinions in this report
are solely those of the author. The information herein was obtained from various
sources; however we do not guarantee its accuracy or completeness. This
research report is prepared for general circulation and is circulated for
general information only. It does not have regard to the specific investment
objectives, financial situation and the particular needs of any specific
person who may receive this report. Investors should seek financial advice
regarding the appropriateness of investing in any securities or investment
strategies discussed or recommended in this report and should understand that
statements regarding future prospects may not be realized. Investors should
note that income from such securities, if any, may fluctuate and that each securitys price or value
may rise or fall. Accordingly, investors may receive back less than
originally invested. Past performance is not necessarily a guide to future
performance.
Neither the
information nor any opinion expressed constitutes an offer to buy or sell any
securities or options or futures contracts. Foreign currency rates of exchange
may adversely affect the value, price or income of any security or related
investment mentioned in this report. In addition, investors in securities
such as ADRs, whose values are influenced by the currency of the underlying
security, effectively assume currency risk.
Moreover,
from time to time, members of the Institutional Advisors team may be long or
short positions discussed in our publications.
Copyright
© 2003-2008 Bob Hoye
|
