Summary for Week Ending 15th September 2007
I suppose the big news for the week is that Oil is back on the agenda with trading above $80.00. This is in itself significant news yet the market generally ignored this with all attention concentrating on what the Fed will do. Interest rates of course are very important at the moment as there is considerable offshore investment in US securities so a decline in rates could be seen to be sending a message that the Fed is now on a program of lowering rates which makes investing in US based securities much less attractive.
Taking the above ideas a little further, we can then look around and see who is sitting on massive US based investments. Popularly known are China, Japan and Saudi interests. It creates a curious scenario if you start to wonder what would happen if these countries started a program of liquidating USD based investments with a view to switching to Euro based investments. Obviously, the capital flight would put enormous pressure on the dollar which in turn would force a rising of interest rates. With this in mind, my guess is that if the Fed does drop rates, it will be short lived. There are simply too many players with a vested interest in the opposite occurring.
Reflecting back on the market, we have now seen 2 higher swing lows. This is a good look however we are t=yet to see any solid movement forwards. Is this a trap? Its very hard to say, as you can only go by what you can see, and in that context we have bullish intent. The 30 day mark happens this week and may prove more telling. A new high and then declines would see the low tested in early Oct which looks good for me. Once tested I think we will see bullishness into December and after that is anyone's guess.
I cant help but think that we are being set up for a mother of a hiding, but I cannot see where this will come from. caution is always a good approach, and with the turmoil yet to be sorted out, cautious I will remain.
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