1. Is the downtrend over?
When one looks to S&P 500 fall over the last weeks the question is obviously when is this going to stop? Several studdies showed that ON AVERAGE markets tend to fall 12%-14% beloow the 20% watermark that defines the beggining of a bear market. Is this is the situation, we should expect S&P to fall to de 11 hundreds range very soon. I believe that market will find support at those levels, because recent down moves have showed lower volumes than those higher prices moves. So investors may start to feel that the support is just bellow us, so why to sell? Just stay in the market and wait the next move… In my view you need to wait for clear indications on the Global trader inidcator before decide to accumulate more stocks.
2. Global Trader Indicatos is bullish?
Some indicators that contribute to the overall indicator started to be more bullish in these last days. But all the markets are still in downtrend mood, as it are classified by trend indicators. Never go agains the trend, so I will recomend that all short positions need to be closed, but wait for some confirmation before open long positions. I'm still expectating a big sell-off in one of the next 5 or 6 sessions before the markets start a new rally movement (may be just another bear market rally…) that you may not want to loose.
3. European equity markets are good investments?
Yes!... If you are short. European equitties are weaker than US ones. ECB strategy may be better in the long term, but at short term, FED is giving more strength to the equity markets. Euro zone countries are between a rock and a hard place. Inflation pressures and weak consumer demand is lowering companies margins… A storng euro, a weaker US economy and a rising energetic bill are some of the risks. But don't forget that spain and uk will face the same problems that US face in the housing industry. There is one bubble to burst in each off these countries… with all the negative impacts on the financials…. I would runaway from spanish banks…
4. EUR/USD new records or the purchase power parity?
Short-term imbalances in the exchanges rates are allways possible… in the long term these rates must converge to the purchase power parity (PPP). In this cross rate the PPP is around 1.25… the current spot rate is 1.57! What is the long term movement? Dolar will get stronger. When? This is the hard issue. But there are some signal that imbalances are starting to be relevant. US exports are increasing very fast, european exports are being hurt be the strong euro, industrial production is become short of previous levels and entrepenerus confidence is bery low. By the other way, or in the other side of atlantic, US FED may be tempted to increase fed rate to 2% in order to give the message that inflation matters! ECB will not raise again rates soon as the eurozone economy gets stuck in recession.
5. Gold is a good protection againts inflation?
No, I really don't bellieve that. Gold is a commoditty so specullative as oil or wheat. When everyone is buying it will get price increases. Some bubbles can born in this process. When the process reverts proce will drop, and in this scenary: where is the protection? Don't be stupid… think by yourself and don't let someone to tell you some wrong rules. Analize, you will see that in the long term, and in the past, stocks are better protecting you agains inflation. For that look to companies that can increase prices to costumers.
6. Buy or Sell Oil?
The 1 million USD question. My view is buy natural gas. Why? There are two alternative views on oil. Or the oil is abundant and all these noise in the markets is caused by specullators that will run away as fast as they came to this market, or there is something like the 'peak oil', the theory that believes the oil is starting to be scarce. Under this theory, OPEC has only about 70& of all the reserves they claim to have, and most of the larger oil reservatoirs are starting to achieve lower yields, producing less and less oil. In this scenario oil prices should skyrocket. If this is not the case, oil prices will be half of todays values very soon. Both thing can happen meanwhile. Why natural gas? Prices have increased less than oil, and if there is really a oil problem, these prices will also increase sharply. So the risk reward is better in the natural gas, do you agree?