Wednesday, November 14, 2007

Timer Digest Market Commentary

Timer Digest Market CommentarySocialTwist Tell-a-Friend
Fari Hamzei

Well, we got our one day wonder (a bounce) yesterday and this cat showed a lot of life. The November Puts retail traders bought late last week became absolutely worthless, and now, the November Calls they bought yesterday should become worthless by tomorrow as the new reality will sink in when traders ask why FASB Rule 157 (Fair Value Measurements) got delayed for one year TODAY [two business hours before it went effective].

Stay SHORT.

Tuesday, November 13, 2007

Commodity Currencies Need a Break

Commodity Currencies Need a BreakSocialTwist Tell-a-Friend
Ashraf Laidi

The relationship between stocks and commodity currencies of Australia, Canada and New Zealand is taking an usual turn today, whereby equity indices are rising and these currencies are falling behind relative to the rally in EUR, GBP and CHF. One explanation is the weakening outlook for world growth, which is weighing on oil and gold prices. Talk of a potential supply hike from OPEC is sending oil below $93 per barrel while gold struggles just above the $800 figure.

We have already seen this broad weakness in commodity currencies last week after Fed Chairman Ben Bernanke predicted a “marked slowdown” in US Q4 growth. Another possible explanation is that currency traders are cautious from opening fresh dollar shorts ahead of this week’s G20 meeting of finance ministers in South Africa, where US Treasury Secretary Paulson is expected to receive considerable support for the “strong dollar policy”. Specifically, Canadian politicians have grown increasingly vocal in their complaints about the strong Loonie, which caused Canada the biggest burden of this year’s decline in the dollar. Last week, Canada’s Finance Minister Flaherty said he and Bank of Canada Chief Dodge will be having currency discussions with their G20 counterparts.








Considering the aforementioned risks against commodity currencies and our expectations for further erosion in US and global equities, we expect the unwinding of yen carry trades re-emerge against CAD and NZD and to a lesser extent the AUD (because Australia’s fundamentals are powered by an increasingly hawkish RBA).

November 15: Another August 15?

The next bout of equity selling could emerge on November 15, which marks the last day of the 45-day notice period at which clients should notify hedge funds to withdraw their money. With the broader market down nearly 7% since the beginning of the quarter, clients may take some money off the table as was the case in Q3 when August 15th was marked with massive selling across all equity indices. At the open of August 15, the S&P500 was down 5% since the beginning of Q3. Today, the S&P500 is down 5.7% since the beginning of Q4. In this case, we expect renewed rallies in the yen crosses and for the Aussie, Kiwi and Loonie to come under renewed pressure. The fact that the VIX measure of volatility stands at 2-month highs and the S&P500 is below its medium and long term averages (50, 150 and 200 day) underlines lingering preoccupation in the market. Given the technicals in the US benchmark indices and the ongoing repricing of MBS via credit rating downgrades, we expect the indices to retest their August lows. This means that another 5% decline in the S&P500 is in store.

Wednesday’s release of the October retail sales report is expected to show a 0.2% increase following 0.6% in Sep and a 0.3% rise in the core figure following a 0.4% rise. But given last week’s dismal reports on store sales, we do not rule out a decrease of as much as 0.2% in the headline rate, in which case will be the confirmation for Dr. Bernanke that the erosion in housing has begun to show in consumption. A resulting selloff in equities is likely to boost the yen and affirm the aforementioned forecast against high yielding/commodity currencies.

Monday, November 12, 2007

Timer Digest Market Commentary

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Fari Hamzei

THIS WAS SUBMITTED TO TIMER DIGET AFTER THE CLOSE ON FRIDAY, NOVEMBER 9th, 2007.


We have not observed the type of climatic selling one usually sees at the market bottoms. Volume is picking up each day as we discover new lower lows and volatility is increasing.







My best guess at this juncture is that we need to take out the August lows which correspond to 1370-1380 on SPX Cash Index and 12,500 on DJIA and then reassess the battlefield damage. Along the way, we have November Options X counter-trend move next week and that could create a short-term dead cat bounce. But longer term, the trend remains BEARISH and my outside target remains at about 1300 on SPX Cash Index which roughly corresponds to 12,000 on DJIA.




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