China has taken elaborate measures on Monday and Tuesday to shore up the economy
This had big impacts not only on the Chinese markets but for global markets as well. China meant business and they articulated their response in a document titled , “ Strengthen confidence and join forces to Foster Financial Support for Epidemic Control and the Real Economy “. It laid out the coordinated effort under the direction of president Xi and think it has become the “ put “ for global markets . One thing the world needs to be aware of is China has over $ 3 trillion in currency reserves , a pegged / artificially weak currency, and with global trade partners unwilling to make a concerted and combined effort to punish them. They can print Yuan and fund whatever they need or want to .
There are lessons to be learned from what what happened in 2009 . When Commodities were crushed under the weight of a global freeze and demand destruction, China came to the rescue as the big buyer . Commodities bounced sharply from the lows . With the global economy sucking wind from the failure of Lehman brothers , oil went crashing from $ 147 to under $ 30 and then running back up to $ 100 . With the above in mind , pls be aware , China is capable of switching gears any moment especially when their Cold War with US is building up by the day .
Equities
For the reasons described above and rumors about an antivirus vaccine being successfully developed for the coronavirus, the markets have taken to the moon .
We have witnessed three higher gap openings this week , the last two of which are relatively strong . The NASDAQ made new highs . As of writing now the S&P and Dow has also made new highs . This has forced probably all analysts to go back to their drawing board and review their analysis. If a new bullish scenario has emerged than the low on Jan 31 was a. Corrective low and we will go higher in a five wave sequence before we turn down again .
Bonds
Think bonds topped out at 164^05 on Monday . But we are lost for the next major direction . If bonds are starting a major move down which was our earlier contention , it should quickly break below 159^20 the Jan 8 high . Should it hold above 159^20 it runs the risk of making a new high above 167^18 . We should get better clues on the bond markets from the Equity markets and China ‘s actions . So do watch them closely .
Euro
We were circumspect about the Euro and it has dropped below our key levels . We will wait for a better picture to emerge .
Gold
As suspected Gold ‘s countertrend rally topped out at 1592 on Feb 03 . Think it should turned down sharply soon . Will be worried if it starts to move above 1611 .
Author: ©Abraham George, CEO, Founder at AllSeasonsPTL Capital Management Ltd.
