A p r i l 2 6 , 2 0 1 1



1



Naufal Sanaullah

naufalsanaullah@gmail.comwww.shadowcapitalism.com

Datamissesleadtosmallrangeinrisktoday,whilesilverlookstoppishafteralmosthittingkey$50/ozlevel

Shortpiecetodayduetothelackofbigaction.MoreweakUShousingpricedatawerereleasedtoday,asMarchnewhomesalescomeinat300kSAAR,amountingto11.1%MoMgrowthvs12.0%expected.AnupwardrevisiontoFebruary’sfigureledtotheMoMfiguremissingestimates,whiletheabsolutefigurebarelynudgedpastexpectations.Further,DallasFedactivityforAprilcameinatalow10.5,belowexpectationsof13.7.AfterweakreportsfrombothPhilly&DallasFedindices,itappearstheISMreportdueoutearlynextmonthmaybeinforsomefurtherdownwardrevisionsinexpectations.Thoughoutputdataweredownsignificantly(thoughgrowthinabsolutetermsisstilloccurring,asrepresentedbythepositivefigures),employmentcomponentsshowedpositivesignals.ISM&GDPreportsthisweekwillbebigandwilllikelymovemarkets.TheS&Ptradedonlyaboutsixhandlestoday,toenddown0.16%.Thebigger-picturechartpatternsremainastheywere,withtheinvertedhead&shouldersbeingthedominantdriverfromatechnicalperspective.Earningscouldliftthemarketthroughrecenthighs,which(asInotedinlastnight’spiece)targetsasizable100-pointrallyintheS&P.TheFedpressconferenceonWednesdaywilllikelybringmorecatalystsformorepriceaction.Iwouldnotbesurprisedtoseethemarketrestabitmoreatcurrentlevels,butmyexpectationsfornewhighsinthenextfewweeksremainsintact.

Shadow Capitalism

Market Commentary by Naufal Sanaullah

A p r i l 2 6 , 2 0 1 1



2



Inlastnight’spiece,Ilaidoutmybearcaseforsilver,andaftercomingwithineighteencentsofthe$50/ozlevelIhavebeenwatching,silverhasfallendramatically,downalmost10%fromintradayhighs.CMEhikinginitialandmaintenancemarginsby9%surelyhelpedthefall.MyovernightshortIpostedinlastnight’scommentaryisworkingoutwell.Itisstilltooearlytobetop-calling,butwiththesignificantvolumetoday(>360%averagevolumeintheSLVETF)andthespinningtopcandle,thechartissuggestingatopmaybeinandIamholdingshort.ThekeywillbethesuccessorfailureofMayphysicaldeliverythatisapproachingfast.Eitherway,thelongupsidetailintoday’scandleisverybearishandsuggeststhatsilvermayhavealotofdownsidetogofromhere.Thedivergencebetweensilverandminerequitiesmayendupbeingtheharbingermanyhavebeenclaimingitis.IshortedsomePAASaswelltoday.Coppercontinuestobethelaggingcommodity,whichcouldspellmoredownsideforrisktocome.Afterfailingatthe$4.40/lblevel,copperhasputinalowerhighandispoisedforabigmoveonewayortheother,asitsitsrightonitstrendlinesupportandquicklyapproachesitstriangleapex.TheimplicationsonChinese&Australianmarketswilllikelybedramatic,whicheverwaycoppermoves.Volatilitylookssettoexpandinthecomingweeks.

A p r i l 2 6 , 2 0 1 1



3



Geopoliticalnewswasablazeovertheweekend,withSyriaseeinganall-outmassacre,resultinginover100civiliandeaths,duringpost-Fridayprayerprotests.PresidentAssadcontinueshiscrackdownonprotestors,orderingtanksintoDaraa,resultingintwentymoredeathstoday.ItisevidentthatMENAriskstocommoditiespricesarenotgoingawayanytimesoon.AddreportsofChinaplanninganewfundtodiversifymoreofitsFXreservesintocommoditiesandpreciousmetals,andthecurrentoilbullmarketappearspoisedforfurtherupside.Resistancearound$113-114/bblloomsheavilyoverhead,anditmaytakeseveralweeksofrestandconsolidationbeforecrudemakesarunfornewhighs,butIdon’texpectamovebacktodoubledigitsanytimesoon.ChineseinternetandmobilesecurityproviderQihoo360,arecentIPOfromlatelastmonth,is joiningtheranksofotherChineseADRswithitsbullishchart,whichisflaggingrightbelowserieshighs.WithSOHUbreakingoutanother8.83%today,andavarietyofotherbullishChineseissues,QIHUcouldbeabelow-the-radarcandidateforsomebiggainsifriskcontinuesascending.OvernightsellingintheShanghaicouldprovetobebearish,however,asthe3000levelseesanotherfailure.