Monday November 9, 2009 - 14:55:51 GMT
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Black Swan Capital - www.blackswantrading.com
Risk takers take back control
German output surge caps strong Q3 rebound (Reuters)
Central banks call for gradual support withdrawal (Reuters)
â€śTear down this wall.â€ť
FX Trading â€“ Risk-Takers are Getting Back in Gear
Enough is enough. The correction in risk-appetite trades has gone on long enough.
Maybe the logic goes a little something like this:
- Global economic growth is improving ...
- But itâ€™s not recovering all that fast.
- And periods of low growth will necessitate further fiscal and monetary stimulation ...
- Which means interest rates will stay low.
- Easy money will support asset prices ...
- And continued risk-taking will act in a self-fulfilling manner to drive up prices.
Ok. Good. Stop there. Go take risks!
Because if we carried through on this logic ladder it might look something like this:
- Rising asset prices threaten more bubblicious markets ...
- And such asset bubbles might require tighter monetary (and maybe fiscal) policy.
- Tighter policy would hamper recovery growth ...
- And asset prices would likely plunge ...
- Because weâ€™d once again be staring over-indebtedness (and deflation) in the face without the comfort of stimulative money policies.
The second part leaves a little different taste in your mouth, Iâ€™d imagine.
Inflation â€“ good! Deflation â€“ bad!
We all know thatâ€™s the bet gold bugs are throwing their chips on. And hey: why not? If the market is stopping at the early rungs on the logic ladder then thatâ€™s how we can expect prices will behave, for now.
As for this morningâ€™s â€śright nowâ€ť report, the US dollar is getting hammered again. Todayâ€™s move is testing the US Dollar Index daily low set back in October and effectively wipes away the correction in between. [Chart not available in text format.]
Stocks are sharply higher. Gold is cranking. All the major currencies are rocking and rolling.
Thank you G-20 ...
There was no talk about the dollar or currencies; the main idea taken away from the latest G-20 rendezvous this past weekend was much the same as the last time these brainiacs joined forces:
Weâ€™re going to keep stimulating our respective economies until we can feel comfortable that a healthy pace of growth has returned.
Yay! Thank you G-20 â€“ how would investors know whether to buy or sell risk-appetite without your stellar guidance and decision-making? No matter how wrong and disastrous your policies might prove to be in time, you make everything feel so right in the short-run!
How many people are currently wondering whether policies being implemented around the globe are just rebuilding another house of cards on the same faulty foundation that allowed the global financial structure to come crashing down in the first place?
I could ask: where is all the skepticism? But I run into quite a bit of it in my research, so maybe I should ask: is anyone paying attention?
Perhaps paying attention is a foolâ€™s game ...
[Chart not available in text format.]
Technically, the 61.8% Fibonacci retracement level seems to be posing no resistance, implying that the recent correction was simply that â€“ a correction.
It would seem a test of the highs is imminent, if not a quick breakout above the highs entirely.
Get your dollar bear claws out if you havenâ€™t already ...
John Ross Crooks III
Black Swan Capital LLC
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