The fresh liquidity has stopped coming in. China to become a drag, not a boost. The bearmarket rally is over.

* Good news is being brushed off by the markets. Sentiment is turning.
Positive German data is getting brushed off. The market is increasingly focusing on finding negative pieces in the news.


* Chinas August credit supply has slowed down to CNY 250BN, equivalent of a decline by more than 60% compared to H1.
The commodity price correction seems to have to go further down since inventories are still at too high levels. Another argument for lower commodity prices is the very large speculative part in the commodity related financial instruments.

Higher inflation expectations has often been used as the incentive for this trade, but as the global output gap becomes evident, these trades will have to be reduced, generating increased volatility and violent stoploss related moves as speculative interests clears the deck.
On top of it, the market is long commodity currencies, short Jpy, short Usd,,,,,, go figure.

I am long Aud/Usd puts, Aud/Jpy puts, long Usd/Cad calls.



* The G20 is starting, with calls for regulation of renumeration - heavy for financials
Yet a reason to be short banks. The still lingering monster fundamental bad loans and asset issue aside, this is really bad news for banks, should it go through. France, Germany and likely UK seems to be running with this ball. If decided, the US might pay attention.

The aim for politicians will be to control the riskprofile of the financial industry. If they can control the renumeration, they can control incentives and hence the riskprofile of the financial industry. This will obviously have repercussions for the financing of any business model based on high leverage funding from commercialbanks. Expect lower earnings for longer as well as higher creditlosses for the financial industry. The insurance industry will also get a much harder time.

Shareholders will balk at this idea as earningsgeneration will become much reduced due to lower leverage. This will be visible especially in times of low volatility.

I am short banks via SEB puts.
I am short US banks via long ETF SKF Calls.


*Australia heading south - China being the marker.
Australian Q2 GDP came in at 0.6% vs 0.2% expected, way better than expected.
This generated a small bounce in the Aud/Usd, however, Australian data will not be the driver for the Aud here. China will. Further, theres market speculation re an early rate hike in Australia, but same thing there. Chinese developments will determine this, hence, I expect no Australian rate hike, it could actually become a cut! Australian domestic data is not the driver for Australias monetary policy for the time being.

This is not only the case for Australia. It will become applicable to most China dependent commodities, currencies and equities.

* New positions and position changes
-Took profit on my long Eur/Sek
-Took profit on my long Eur/Nok
-Took profit on my long Eur/Huf

- Bought Usd/Cad call
- Added to my long Gbp/Jpy put
- Added to my long Gbp/Usd put



As usual, good luck



The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.