Market update
Nikkei: Down, fear of China’s policy
FTSE: Up. Bullish on miners, banks. (Rebound play)
EUR/USD: 1.3590 (hit a low of 1.3515) Bear trend detected.
Commodities went up. Copper up 1%, aluminium up 0.5%, nickel and lead went up 2%
Expect more uncertainty this week as market seeks to find grounds for the next rally.
Dow jones will be pressured by the strengthening of USD and I believe that it will retest 9850 before popping up for new highs in May.
In London Market, Barclays Bank (+4%) led the financials up as it announces that it will post ‘big profits’. However, other banks like Lloyds, HSBC did not rally much.
Sideway trading expected tomorrow. China’s policy tightening will continue to keep investors skittish.
Look for weakness in commodities and short them if they rally. Steel has been going up due to strength by Rio Tinto and BHP which received upgrades from Credit Suisse.
Apparently, Metals have received lots of brokers upgrades lately. They are no doubt a good play in this recovery, however, China’s tightening will take effect soon and this uplifting rally will be short lived.
Looking at BHP and RIO trading pattern in London today, a bearish gravestone doji was formed. That is a red flag for a short term bear trend testing lows again to confirm the support.
Expect commodities to retest their support once more before a real rally can emerge.
There is a rumor that China is concerned with the sudden price surge of commodities prices. She should be as China is the largest importer of commodities especially metals. China is starving for Iron as her Ores are low grade as compared to those found in Australia and USA.
This could be why China impose this monetary tightening to ease the demand of metals so that the price stops increasing or even decrease.
China is expected to close a deal for 2010-2011 contract pricing for metals. The market players know this and they may want to lower commodities prices lower in lieu of this rumor.
Short term trend for commodities sector is thus down.
Meanwhile, other sectors like Financials are heavily undervalued and Gaming sector is also still a good buy. Especially those casinos exposed to Macau.
Trading pick for February 16
Long Bank Of America Corp BAC
Long all Large Cap Banks – Wells Fargo, JPM,
Long MGM, LVS, WYNN, MPEL
Short United States Steel X, Caterpillar CAT
Neutral Alcoa Inc AA, CENX, Freeport-McMoRan Copper & Gold Inc FCX
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