1. For the year the S&P is up 10% and the CRB index is up 25%.
2. Gold is up 30% and Euro is down 8%.
3. Politicians and central bankers continue to say there is little or no inflation. (Jimmy Rogers says the governmental reporting agencies lie.)
4. China’s economic policy’s is to constrain commodity based / real estate inflation through restrictive monetary policy.
5. The EU stated policy is constrain deflation while staving off sovereign nation debt default.
6. The free lunch that diversification provided investors for the past 50 years vanished in 2010 with asset correlation* being the highest ever witnessed.
7. This asset correlation or “coupling” has now become a majority opinion and topic of the news media and is easy to see, it’s obvious.
8. The Flash Crash of 2010 was similar to the crash of 1987 in that it was the end of a decline not the beginning of a larger bear market.
9. In 2010 relative strength provided an idea of where smart money was flowing. During the “Flash Crash” cream rose to the top as gold and silver et al. advanced while the equity and financial assets crashed.
10. After two years where “commodities” were the better trading opportunity vs. the stock indices, the media and newsletter pundits are just starting to feature commodities in their broadcast. We are seeing on CNBC headlines “Commodity Craze” for a news segment as an example.
(At the risk of sounding like a shameless self promoter: I told you so! See my newsletter: “Food and Other Trading Opportunities” dated June 26, 2008).
11. Algorithmic (systematic) trading is now 43% of all the futures contracts per day, which includes financials and commodities. This remains a growing trend.
Looking into 2011 we know it’s better to expect something different from the immediate pass. We understand that straight line thinking does not work most of the time and that such thinking is best left to punters. Instead it is usually more profitable to look for a transition and for a change.
We think that the biggest change in 2011 will be that the bull markets, which began in 2009, no longer need a weak dollar to continue. The new drum beat will be that a bull market (circa 1990’s)in the dollar that reflects a strong US economy and a strong US economy as good for stocks and commodities. In 2011 the bull advance in the “risk markets” will do it on the back of a weak Euro not a weak dollar. The relative performance is expected to shift as well from commodities to world equity markets. I can say that we like the US markets this year, among others.
Regarding the super bear’s scenario which expects the capital markets to turn lower “anytime now” and now look back until the lows of 2009 are taken out. We feel their timing is off until 2012 at the earliest. See my recently released MarketMap™ 2011-2012. Besides, is is still way too is easy today to write a doom’s day book into a best seller.
On the other hand, we believe that there is a “new paradigm” – to coin a phrase – developing in “d2” – the second decade of the new millennium. This major shift is what will give the super bears a market decline because the transition will cause a fair number of dislocations to the current macro economics in the world. However, the new world order is just what the doctor ordered for our long term prosperity.
Here is the shift. If you have not already thought of this or heard of this, please make a note in your diary that you read it here first and remember it when we are in the next bear market as “relative strength” will show you where the smart money is headed.
That new macroeconomic order will see the developed nations (USA and EU) shift from a consumer driven GNP to a export based and savings driven (debt liquidation) economy (yes the US will become a saving’s nation) and the emerging economic powers (Brazil, Russia, India and China also called “BRIC”) will shift from export and savings driven GNP to a consumer driven economies (yes, China has a population that needs EVERYTHING and they will become the USA type consumer for many decades to come. SEE Charlie Rose 12/03/2010 interview with Paul Keating (former Australian PM): http://www.charlierose.com/view/interview/11328.
For 2011, I like the big swing trading strategies on the US equity markets and commodity markets. Day Trading systems on the markets that have such a high price that a 1% move translates into a significance dollar amount is ok to trade as well.
However, for those who can afford the larger account size – due to the higher broker margin requirement of carry a position into globex trading – I would go with the short term swing trading strategies. Most of them have average holding periods for 5 days +/- a day on average and I like the leading stock indices and commodity markets like the mini Russell, gold, silver, crude oil, unleaded gas to the Aussie dollar.
For market trading strategies developed by Bernard Jacobs and Chris Martin visit with our friends at AGemsCo, Limited, www.agemsco.com.
Happy New Year and we look forward to hearing from every one this year.
Since 1989, Creative Breakthrough, Inc. CTA