The Swiss team once again repeating the ‘don’t chase this rally’ line. The technical weakness remains with more issues than not below their 200 day mas. Only the US mega caps are holding thee indexes up and these are looking weak especially when we see renewed US$ strength again. On the upside this rally could extend without breaking any technical levels to 1370/1390 (SP500 cash). On the down side the 1330 (SP500 cash) level must hold for the rally to sustain. Currently at 1345 (sp500 cash). Its a ‘narrower’ report this week. No mention of pms, fx, fixed income.. but i guess all holds from last week as very little has changed.
Macro wise, we appear to be disappointed, yet again, by policy makers, in spite of all their efforts. We have had pledges of support for the IMF to the tune of $450bn, also the Fed’s warm noises as regards to extending operation “twist”. As also the BOE swap loans for increased bank lending. Also the ECB’s $120bn for Spain’s banks. And China (and several other states inc Brazil) have pitched in domestically with rate cuts and capital reductions for their banks. Its all positive monetary action. We cannot ignore this macro news flow but is it enough to halt the slide in economic activity? Some of the above changes impact markets immediately but many are slow to feed into the global money supply. To my mind risks continue to increase with every day that passes in spite of these latest measures.
Its the time, therefore, to review the portfolio of instruments and assets that you hold. Consider the downside risks of currency and asset holdings given the different scenarios. Now is the time to consider the deleverging downside not thee leverage upside, in my considered opinion. Risk mitigation is key here and now and i do mean risk in her broadest sense.. ie cash, bonds, precious metals, equities.. there is no such thing as a “safe” asset class any more. There are simply different risk profiles for each asset class so a more balanced approach is useful in times of turbulance.
Luck to all