A Parttime Pullback, - is that it?

"Never Bet

Against the Fed"

 It is an old saying and of course, every time they say it, we wonder whether it still holds true.  Despite the blatant FED intervention in currencies and capital markets, we forecasted a pullback of sorts, let's check and see:
At SingCapital, we run a best fund list (mutual funds), consisting of 97 funds, covering all asset classes and regions.  Out of these 97, 62 are in the red for the last week, including some bond funds. On a monthly return, almost half of them record a negative performance. 

The ones, which recorded peak performance recently are those connected to Global Resources, like Latin America and China, while Gold related funds had a wild ride up, only to break down rather quickly thereafter.  Remember my forecast of last week: the first effect to show up to confirm a major peak and turnabout was ...

"Gold prices to fall below $1338 per ounce."

We can tick this one off then.

In tandem, I expected a turn in the direction of the USD. The turn is there, the technical indicators (coloured circles) give rise to optimism: MACD, crossover at oversold levels=bullish; RSI, rising strongly,lingering midway= bullish yet a little tired; STOCHASTICS, crossover and rising fast = bullish. 

But the main hurdle has not been convincingly cleared: Ideally, US$ 1 should buy S$ 1.31, and €1.38 before I am comfortable with confirming a change in direction.

The fourth condition (STI to fall below 3000, and ASX to come below 4500) is still outstanding.

The fifth point, forecasting a downturn for large caps in Asia before anywhere else, however, appears to be falling into place.  The major "holdup" was the tremendous rally in the SSE 180 (Mainland China stocks), pushing the Hang Seng and the STI up, mainly, but generally giving rise to increasingly happy mood swings.

Here is an overview that tells the story:

The Asian Region certainly was hardest hit when it comes to equity funds, losing almost 2% in a week Other emerging countries experienced losses of similar magnitude, coinciding with the turnaround in gold prices versus USD.

Bonds, that is overseas bonds, suffered while US equities continued to rally - and currencies zapped the last bit of bond solidity.  A change in the fortunes of the USD might change this very quickly.

The last column on the right gives you a rough idea as to where I will place my investment emphasis when markets finally find a firm footing. Do we have to wait till after the US election? Am I making too much of the political huh ha? I wish I KNEW for sure.

From Seoul we hear that twenty heads vow to "keep" currencies steady, no war, no one-sided adjustment to obtain the economic advantage, everything to keep the US deficit in check.  HELLO! Ain't that sweet? Gold has fallen of its crest since Thursday, October 14th, - in premonition surely, because the twenty heads "agreed" to the Geithner terms only this Saturday-Sunday. I understand the urge to support the USD (after all it is in the reserve coffers of all Asian governments, hence it won't hurt our bottom line), but I don't see how it will do what Mr Geithner hopes it would, - reduce the US deficit. Can anyone help me with this? It is a serious question on my part!

When these twenty heads go back home today, the first thing they will do on Monday is to enact laws to fulfill their vows. No? If that results in the expected USD strength, US stocks are in for a fall, - ahem, just before the mid-term election? Is that what is intended? I know, I desperately need to take a big step back, - I am seeing it all cross-eyed.


Happy investing.