Monday, September 22, 2014

Emerging Markets Weakening

We have a little post opex hangover, with the down futures.  But it is really minor considering the weakness we have seen from the emerging markets.  China is looking to roll over again, the liquidity injection to the banks didn't move the needle, and we are back to the lagging China, stalwart US trade.

The Chinese property prices are sinking for the past few months, it seems we are on the other side of the mountain, known as the China property bubble.  Unlike in the US, China has a much bigger percentage of its economy tied to construction and housing.  It is the main driver of domestic demand and investment.  If housing crashes in China, you have a headless dragon.

Other than China, I see no bear catalysts.  That is the only bear catalysts out there.  Europe is fine, with QE coming down the pipe.  US is always fine.  And nothing else matters.  Rate hikes are way way out in the horizon, so that will have no effect.  It is clear blue skies, except for China, and even the IPOs are not going to have much of an effect with M&A deals and stock buybacks easily neutralizing the excess supply.

So if you're going to short, short China, otherwise, wait for a dip to buy S&P. I am a bit bearish on bonds, not enough to take a position, though.


MM111 said...

You think we may go down to 1950's still or is 1990's best we will get?

Market Owl said...

I am waiting for 1960s on SPX, or about 1953 to 1963 on ES. About 1 percent below.