While the financial media (and general media) has been focusing on the IMF and the Greek debt crisis, markets are still readjusting to the recent dramatic falls in commodities and really trying to decide whether this pullback is merely a healthy correction or the start of a more prolonged bout of bearish sentiment. We only have to look at last year “flash crash” in equities for a possible warning sign and similarities which saw the Dow fall from its high of 11177 in May to a low of 9600 in July, before starting its climb back into its recent rally. Of course, the start in the push higher for equities back in September 2010 did coincide with the FED’s QEase 2 programme and surprise, surprise was also the start of the present “bubble” in commodities, which was pricked so brutally a couple of weeks ago.
Fast forward to the present and once again traders and investos are waiting for the FED to see whether their QEase 2 programme is going to end in June so no wonder markets are nervous, jittery and more focused on the IMF and Euro soap opera while they wait for this important decision.
For the forex markets, the dollar index failed to build on its recent return to dollar strength and promptly rolled over at the 76 level on Monday – in fact the index needs to break and hold above 77 before we can be sure of a reasonable bull run for the US dollar. Against the eur0 the 1.41 level held on Monday and gave the eur usd a platform of support to trade, at time of writing, at 1.4269.
Finally, I want to end this post with a few thoughts about the upcoming Glencore IPO and ponder why such a secretive (and some would say “disreputable”) company have decided to come to the market and become more transparent? In other words what do they know that we don’t? As a totally unscientific rule of thumb, whenever such big beasts deign to walk amongst us it is nearly always a sign that something dramatic is likely to happen. For example, here in the UK just weeks before the financial meltdown Jon Hunt sold Foxtons estate agency for £390m. For Glencore,whose shares start trading on the FTSE on May 24th in London and May 25th in Hong Kong, failed to hold early gains in yesterday’s “conditional trading” session.