Mario's Market Take - Friday, March 19th....

Well no one can argue that the weakness finally shown in the market this morning should be there, but its a ridiculous statement knowing how much manipulation is going on…the last hour of the day could bring us another miracle “huh what?” rally…

Meanwhile, I’ve spent more time than usual this past two weeks studying and combing through expert analysis on both sides of the equation…I will heartily agree with analysts who say that for the next few weeks/months, gold is toast…..down down down, a worn story, then certainly back up to new highs as our global crisis is certainly not getting any better any time soon…

From my China perch, I continue to INSIST it will snow in hell before the Chinese govt revalues the rmb, laughing every time I read another space-wasting headline on the subject….

…they cannot jeopardize exports, etc and furthermore, now they will not ever do so causing them to lose face because the heat is on in the international press, the U.S. caused all these problems with their banking shenanigans, etc…which side is the global bread buttered on folks?..easy; the side with far more CASH….and this from a fresh MarketWatch article “He Ning, head of the Department of American and Oceanian Affairs at China’s Ministry of Commerce, said Friday that China’s purchases of the U.S. government debt have helped stabilize U.S. capital markets, and trade between the two nations has also created U.S. service jobs, according to Dow Jones Newswires. Ning was “basically warning the U.S. to back off as speculation mounts that it could be named as a currency manipulator by the U.S. Treasury,” analysts at Action Economics said.”…you bet that’s the message…

…the USD is fine…look at the chart which shows a perfectly normal chart pullback following the recent week’s rally, it will continue its swing upward, a bullish flag….european economy is weakest…more recently I discover AUD long / JPY short seems the fundamental 2010 play, because JPY decline, JPY equities will do well…..see the pattern right?…..the country’s currency goes down as its equities rise….In 2008, the USD declining/equities rising, now its the EURO’s turn; declining because they want it to, to help save the weak European economy/boost exports, then coming this year the JPY declining for the same reason…BUT european economy really really weak so no joy there for 2010….U.S. market sideways range…higher by year end, but not by much…..potential for KABOOM danger announcements everywhere everywhere….come June/July, Spain can’t rollover bonds and U.S. mortgage resets will bring the next nightmare

…..A very strange thing about gold…if gold is supposed to be a “safe haven” place away from devaluing currencies and unstable govt policies, then it should be behaving with other “risk off” assets,ie USD and JPY…but it hasn’t been…

Conclusion: still the same basic play for the first half of 2010 – long USD, short/sideways U.S. equities/gold/oil/euro…in addition long AUD / short JPY…and finally, China equities looking weak too with tightening/serious inflation/bubble threats, FXI at critical resistance at 42…

Of course, I could be right on every single item above, or on some, or on none…as I observe the talking heads for the sheep I find they mostly pick a set of positions they “believe in” but in fact, we’re back to Taleb’s Fooled By Randomness…who really knows? If I know or not, Bloomberg Television decided to interview me today on the China/Property Bubble/Sanya/Hainan story and it will air worldwide next week…mom and dad be proud

Enjoy the weekend, Mario

Mario Cavolo has been based in China for over 10 years. He is a professional speaker, writer and media event personality providing multinational and media industry clients with training, coaching, communication, market research and advisory services. Take advantage of Mario’s “on the ground” China insights by visiting www.mariocavolo.com, where you will find insightful articles and commentary on business challenges, communication, and global market advisory with a special focus on China business and culture.

Information in this article comes from sources believed to be reliable. Mario Cavolo is not a registered investment advisor and does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. His research, point of view and opinion are informational and educational only. The author may or may not hold positions in issues referred to in this article. No representations are to be taken as advice or recommendation by the author to buy or sell any asset. Copyright 2010, Mario Cavolo. All Rights Reserved.

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