Sand Spring Advisors LLC
Update on a Disjointed World
August 17, 2003
by, Barclay T. Leib
Sometimes markets all move with a nice inter-market macro rhythm relationship to each other -- a logical ebb and flow existing between commodity, equity, fixed income, and dollar trends. And sometimes they don't. The current period would appear to be more of the latter. It is currently hard to read much from any one individual market's behavior to help predict another market sector. Instead, each chart must be looked at on a stand-alone basis. Clear macro themes across markets are within a "rotation" of sorts.
Back in early July, we commented about how bullish the long-term Wheat chart looked. Since that time, Wheat has vaulted higher on the back of a very hot summer in many parts of the world. Currently, the chart below of weekly Soybeans shows another agricultural market coming to life, with a clear longer-term Fibonacci rhythm that implies a yet-to-be-seen high up at 724.
Thus while we remain bearish such industrial commodities as copper, as updated last week, let's add Soybeans to our list of commodities that we are very friendly towards.
But within the financial sector, just as equities did not go up on the death of Saddam Hussein's two sons back on July 23rd., it is also notable that that the market did not use the excuse of last week's East Coast blackout to decline. Currently within a "quiet period" until pre-announcements of third quarter earnings start in September, one has to be cognizant that another push up to 1060 on the S&P remains possible in the short-term -- much to our longer-term distaste and chagrin. Please note, however, that even if such a move were to begin to transpire, we personally intend to remain short various equity index products and will simply add to our shorts if such a higher target level is reached.
Lastly, T-bond yields have now reached a 50% retracement of their 2000-2003 decline in rates. The 200-week moving average of yields also should offer some resistance near 5.47%. July's Armageddon to bond investors should at least take a pause.
Each of the above views is clearly a stand-alone view. There is little or no "macro" theme that ties them all together. From the technicals alone, we feel most strongly on our negative view of Copper, and our positive view of Wheat and Soybeans. Our next strongest view is for a period of reprieve for fixed income assets. We are least sure of what the short-term holds for equities, but ironically, a bearish view of equities remains our strongest longer-term view.
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