Well, I think we are headed for a seasonally volatile time in the market that occurs near the end of RRSP/IRA season and at the start of the year when investors try to ascertain global growth and the stance of central banks.
This year we have a strong, reflating, Japan looking at the end to their ZIRP, which has been the source of global liquidity for hedgies to store oil, NG, gold, copper and other commodities with almost no financing cost by borrowing in Yen. (and to paraphrase their finance officials: "we dont know to what extent funds have borrow in Yen"-yiiikes). This is occurring at the same time the Fed and other CBs are tightening-and doing so more than was originally expected, as if to make the same mistake as they have in the past: to tighten until something breaks.
The phenomenal performance of Jan 06 in the commodity shares must have many a manager sitting on nice returns and heading to cash if not there already. How many people think a repeat of 2000 when the Fed yanked Y2K liquidity from the system and popped the dotcom bubble could be possible? Don Coxe may be right, that it is different this time, but how much cash do you want to hold while you find out if the market agrees? And what if he's right but being out of the market for 3 weeks in March doubles your annual returns for 06?
I even wonder if PMs, and gold with its nice inverse relationship to Yen, are at risk here. HUI 280 seems to be around the corner to this investor.
So China's oil demand, a few percentage points of global, is one of the question marks. The news that Chinese copper imports dropped 37% YOY and a fund unloading positions nailed commodity stocks today. Also, oil shares were off more than the drop in crude would suggest, begging the question of whether the market might just be waiting for the other shoe to drop.
Was it mere coincidence all this occurred in the first week of the month of March?
I am going to 100% in trading accounts after playing this little rally here. I also want to watch for continued rotation into defensive names, tech.
I think for the long term investor it is fine to remain 100% invested, but I want to attempt to trade myself into exponential returns.
The following dates are as important (if not more so) as the Fed:
All Japan time:
March 8,9 BOJ Monetary policy (they may announce rate changes March 9)
Release of Feb minutes: March 14 |
