Saturday, March 07, 2009

China FXI is Decoupling finally from Financial Mess. FXI, INDU, SPX, TNR.v, CZX.v, HAU.to, RMK.v, SAX.to, CGH.to, SBB.v, OK.v, BTT.v, MGN, ASM.v

History still matters and Dow Theory for that matter, After Dow Theory pronounced Sell couple of weeks ago Dow hit a new multi year low. As we discussed our Gold and Silver Juniors are holding very well, showing further signs of divergence from Sell off in General markets, Grains HAU.to are under pressure as China FXI and Zinc CZX.v. We are considering it is an opportunity to accumulate. Going short at this levels is still very dangerous and rally could come from oversold positions at any moment once Obama will stop trashing Capitalism instead of individuals who's home is supposed to be a jail. Our waterfall target of Dow 5000 is "still" 25% below recent level, but hardly we will get there in one leg down. We are still expecting a Bear Market rally which will bring us above 9000 level. After that China should continue to Decouple in our positive scenario as a Country providing Stimulus with almost 2 trillion reserves from The Country with almost 2 trillion Budget Deficit where "bankrupt State is bailing out bankrupt banks." This chart is showing some support to our thesis: 25 stocks in China are making Higher Lows after November low, when Dow is falling without any hope in desperation. Chinese are comfortable with 8% growth and are not providing any further details on stimulus: markets went in a tailspin after rally on speculation about new initiatives to come. Who is leading Whom? Copper is recovering, Zinc is getting stronger with Lead. Let us not forget that all foreigners for China are strangers and outsiders, who has decided that they are so desperate to save US Corp? Maybe scenario with manipulation of real indicators affecting Commodity prices is more likely? Just consider their deals: supply of Oil from Russia secured at the "bottom price" valuations, strategic reserves in Copper and Zinc are build at distressed levels, stakes are taken in Majors at Debt pressing prices, Juniors are on the plate after recent panic selling like CZX.v. Should they pronounce a new bull before they are established in resource play at this rock bottom valuation of the End of the World or just continue to secure their future?

This relative picture which is as always better then a lot of words: China is making a new Highs relative to Dow desperate financial fever. How many of the icon 3o are plain vanilla Insolvent now? More money to come just to keep things together. It is now everybody is so easy on numbers: one trillion here - another one there. What is the magnitude of 2 trillion deficit of USA Corp?
1 million seconds = 12 days
1 billion seconds = 32 years
1 trillion seconds = 32,000 years (that’s approximately 30,000 years before Christ!)



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