Market Report for Feb 2-5, 2010 by Bill Wermine !
Dear Traders,
The ruling elite of China have decided to reign in the explosive growth of the money supply to keep the inflation genie in the bottle. This should cause corrections in major stock markets/ commodities/ gold as players 
withdraw from the US Dollar/ Yen carry trade which fueled the stockmarket and commodity rally.
withdraw from the US Dollar/ Yen carry trade which fueled the stockmarket and commodity rally.Once the speculators are washed out China will resume their purchase of commodities to fuel their explosive growth. This is positive for our investments in the months ahead.
- They have the money to buy whatthey need because: Chinese banks were not affected by the sub prime mortage collapse and the toxic assets that US/ Europe and UK banks were exposed to. They still have the real hard cash unlike the weak European and American economies which are fueled by debt and money printing.
- China wishes to accumulate hard assets such as soybeans, gold and silver but at lower prices.
- China raised their reserve requirements to 16 % which means banks have less money to lend. This is a brilliant manipulation to panic the investment crowd. Other cental banks- Korea- Brazil- Australia and Russia have joined by raising interest rates to support the Chinese and this has added fuel to the fire. Expect Bank Negara to soon raise rates.
Attached is a weekly chart of the KLSE. Expect more selling in the weeks ahead to at least test the 1230 level. I have raised cash for my EPF and managed accounts and only hold a few closely held defensive blue chip dividend shares.
Notice the wide range black bar at the right edge of the chart. It has taken out 7 weeks of lows. This has caused panic and fear among the retailers. If you have shares you wish to sell wait for a snap back rally to close your positions. If price fails to take out the 1272 resistance expect lower prices.
Dolly and I just returned from a holiday to Labuan and Kota Kinabulu.
They are both beautiful islands with great scenery, exotic plants and animals, tasty and fresh seafood- all at very reasonable prices. Labuan is unspoiled and very few tourists. The clean beaches are all yours. They have a huge bird sanctuary filled with exotic birds including a bird of paradise. We stayed at the Waterfront Hotel overlooking the ocean. In the front of our hotel room on the ocean were many ocean going ships as Labuan is a deep water port.
We were escorted in both places by traders club graduates who made our journey memorable. Holidays are important to recharge your batteries and come back to face the markets with a clear head.
Have a good week ahead
Bill
no chinese new year rally?
1CNY rally had passed … in case you did not notice !
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