Global
The 1st half of the year, we witness EU region is hit badly by what could happen to Greece. and some of the European countries. This hit hard on Euro currency. On 2nd half of the year, these news disappear. Then the US will be introducing a series of stimulus measure to boost their employment rate and President Obama have also wanted to increase the export of US by 2X the current level. Obama have pull out troops from Iraq which also gain alot of support from his people.
In order to capture the votes of the unemployment, Obama and the Democratic Party now have to blame the cheap RMB for the US high unemployment.
RMB will become the long term political tussle between China and the US. However the actual fact is that when US exerted pressure on the issue, RMB would appreciate to record high, amd when US relented, RMB would weaken. China the number 2 economy in the world have bought USD 900 Billion of T bond from the US. In the effort of re-valute their portfolio, China have also buy more into Euro and Yen in their foreign reserve and sell USD. So that if the USD devalue against the RMB, China would not suffer a great lose.
Currency
USD have been depreciating as much as 10% since Jun 10. Imagine you have a 10 USD with you in Jun and right now it only worth 9 USD. Conversely, it is when the USD go weak that the commodities and the stock market went up. It attract foreign investors to buy their currency and invest in the US. This also helps to boost the country export. As most commodities are deal in USD, a cheaper USD would mean buying more of the commodities and also mean the supplier have to increase the price of the commodities to earn the equivalent of what they earn when the USD is stronger. Having said so the USD will remain weak as stimulus measure will be introduce and the want to increase export in the US.
China economy is growing tremendously but they do have their structural problem within their country. Premier Wen Jia Bao have stated that China have 4 stimulus that are going in the country 1 Massive public spending, 2 Adjusting and upgrading of industrial structure, 3 Scientific and technology to fuel everlasting growth 4 Improved social safety net. These measures would further enhance the growth of China economy. However, RMB would not appreciate in value overnight or in any shortterm. RMB would appreciate in the long run. China will bear in mind hw the Japanese suffer since they let Yen appreciate and in the long run if China is willing, RMB denominated treasury bills will become an important reserve currency of all the countries in the world.
Commodities
The CRB index (commodities research bureau index) have move up quite alot and near to the pre crisis level. The last time the CRB index have a great move up to the level is when Oil or the Energies are involved. For the past few months, you observed that the energies have not really taken part in this up move yet. Those commodities that have the major up move are the metal like gold, silver,copper, platinum, palladium, the grains like wheat, soy bean, corn, the soft like sugar, coffee, orange juice. Energy have not taken part in this up move as of a few months back. Right now you are seeing crude oil moving up about 10% since the end of Sept. Commodities price have still many room to grow as the world economy is growing.
Stock markets
The market for the past 2 years is driven by the USD. When USD is down the market is up and when the USD is up the market is down. Crude oil price too drive the stock market. However, we are seeing a over done in these market recently. USD is down too much which drive the stock and the commodities market up too high.(in my opinion) Thus we should see a correction soon. Rocktober is the beginning of the 4th Q and also the earning report of the 3rd Q, thus be cautious when trading. As I am typing these email, the USD is down again and we do not see a similar reaction on the stock market. Dow is in red now. This could mean that, it has been over done and it not as effective anymore or even a reversal is near.
From technical point of view, the indices have successfully go through the Head test in the head and shoulder pattern. However, a double top is near.My 4 years cycle have hint that a market drop is round the corner and my 5 weeks advance have predict that too. And what happen after the drop?? The market would rally 10% till the end of the year.
This is my own opinion only and do not use as an advise to execute any trade. My forecast can be totally wrong as past result do not represent future performance. Having said that, i have traded the market for 4 years and running.
