Wednesday, November 7, 2012

What now for the markets?

The market has been on a wild ride overnight since the election. It seemed as if Mr. Market couldn't decide if another four years of the Obama Administration was good or bad. Initially, ES futures sold off hard as the polls closed and Obama gained ground on Romney. It then rallied soon after Obama was declared the victor and the  USD weakened against most currencies. Most Asian and European bourses rose overnight. As the markets are poised to open on Wednesday, ES futures are deeply in the red and the USD has regained a bid.

Here is what I am watching. The graph below of the relative performance of SPY, representing equities and the risk-on trade, against TLT, representing long Treasuries and the risk-off trade, is forming a wedge - a sign of indecision for technicians.

Technicians often describe this pattern as a coiled spring. When it breaks out, it will typically break hard in the direction of the break.

Watch and listen to the message of the market.

Cam Hui is a portfolio manager at Qwest Investment Fund Management Ltd. ("Qwest"). This article is prepared by Mr. Hui as an outside business activity. As such, Qwest does not review or approve materials presented herein. The opinions and any recommendations expressed in this blog are those of the author and do not reflect the opinions or recommendations of Qwest.

None of the information or opinions expressed in this blog constitutes a solicitation for the purchase or sale of any security or other instrument. Nothing in this article constitutes investment advice and any recommendations that may be contained herein have not been based upon a consideration of the investment objectives, financial situation or particular needs of any specific recipient. Any purchase or sale activity in any securities or other instrument should be based upon your own analysis and conclusions. Past performance is not indicative of future results. Either Qwest or Mr. Hui may hold or control long or short positions in the securities or instruments mentioned.  


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Anonymous said...

Is the title of your post a rhetorical question? Do you doubt the Fed will step in if things deteriorate? Obama had already signaled before the election that he and Congress would address the fiscal cliff before Jan 1. Doesn't this look like a buying opportunity?