Adrenaline Junkies

The appeal of a falling knife... The Philadelphia KBW Banking index could bounce up to 40%.

Equities MIGHT be close to a meaningful local bottom in either the following inerpretation, or under a scenario where there will be a shallow bounce from here, followed by a final (for a few months) decline to a marginal new low, which will be followed by a several month long advance (in a great wave 4).Strenght in risk is likely to coincide with a weaker Japanese Yen, which has already shown signs of weakness - it did not strengthen in the very latest period of stock market decline. Below is a chart of price weighted combination of AUDJPY and NZDJPY.

Finally, the USD and GBP appear set to weaken accross the board, with GBP likely to be the weaker of the two.

Equities at or near bottoms

Global equity markets, and European markets in particular are close to their bottoms.

It is possible that we may see the highs of 2009 challenged and taken out in the next 2-3 months.

Below is an hourly chart of the Dow Jones EuroSTOXX50.

BUY British!

Jim Rogers urges everyone to sell their sterling. I think it is almost time to buy.

Bonds down, JPY down

Bonds in Europe and the USA appear to have topped. I expect US rates to rise more than Euro rates.

In risk, JPY appears to have topped against at least the AUD and NZD - after a correction of about 1-2 days, NZD/JPY & AUD/JPY are likely to rally strongly. I expect the NZD to outperform the AUD in the medium-term.

GBP appears to have bottomed against EUR, CHF & JPY - I will be looking to buy GBP soon.

JPY crosses to strengthen soon

I believe that JPY crosses, in particular NZD/JPY, are to hit bottoms soon. This rally may coincide with strength in the equity markets, or it might not - at the moment, JPY crosses offer clearer patterns.

Equities correcting for 6-8 weeks.

In equity markets, the weakness from the highs of 2009 suggests that the high, for the next few months, is in. Of course, it is too early to plot the course of the consolidation to the falls of October/November 2008, but I expect that consolidation to last 6-8 weeks. It might take shape of a "flat", in which case we will see a sharp rally into April, or it might be a contracting triangle, in which case it will be almost untradeable for those 6-8 weeks.

Equities, for now, are on a backseat. I expect commodities and bonds to be the areas with most movement.