Oil down as dollar up ahead of G20

“Life must be lived as played.”

Plato

EMI QuickView Short Term Market Overview

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Overall View

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N - Neutral Bu - Bullish Br- Bearish CBu - Cautiously Bullish

CBr - Cautiously Bearish

The buy the rumor, sell the fact trade has taken a while to set in but so far this week the sell the fact part of the big three events from last week has set in a bit as just about every asset class has given back some of last week’s gains as the US dollar continues to firm ahead of the start of tomorrow’s G20 meeting in South Korea. The modest level of selling in risk asserts and the short covering rally in the US dollar are not a surprise and have been expected as I have been warning since last week. About the only surprise is the fact that it took until this week to set in. That all said so far the selling has only been modest as the market sentiment is still positive for all assets and negative for the dollar irrespective of what is discussed at G20. At the moment the dollar is the single major catalyst for all financial and commodity markets. If the dollar returns back to its defensive direction equities and commodities will move back to higher ground. I am still of the view that after the dust settles this week (after G20 is over) dollar selling will likely resume as the fundamentals of the dollar are simply bearish as the US Fed begins to print money to support its QE2 program.

Equity values have succumbed to a round of profit taking selling as shown in the EMI Global Equity table below. The EMI Index is now lower by 0.7% on the week narrowing the year to date gain for 2010 to 5.6%...still near the highs of the year. The Paris bourse slipped back into the negative column for the year leaving six bourses in the winners column. Germany regained the lead over Hong Kong as most Asian markets declined today on concerns that China’s inflation exposure will result in further tightening in the foreseeable future. In fact China reportedly told some banks today to raise their capital reserve ratios by 0.5% effective November 15th. China also posted a better than expected $27 billion trade surplus for October keeping the inflation concern at an elevated level. The selling in Asia spread to Europe with all of the main bourses modestly lower. European bourses have also been pressured by several companies earnings reports missing profit expectations. Overall the equity markets are a negative for oil and commodity prices in the very short term as is the firming US dollar. However, once the corrective actions are over, equities should rally on the back of a falling dollar resulting in the commodity rally continuing.

EMI Global Equity Index

11/10/10

Change

Change

2010 YTD

2010

From

From

Change

6:19 AM

Yesterday

Yesterday %

%

US/Dow Jones

11,347

(60)

-0.53%

8.8%

Can/S&P-TSX

12,917

(136)

-1.04%

10.0%

Lon/FTSE

5,863

(12)

-0.20%

8.3%

Paris/Cac 40

3,927

(18)

-0.46%

-0.2%

Germany/Dax

6,771

(17)

-0.25%

13.7%

Japan/Nikkei

9,830

136

1.40%

-6.8%

HongKong/HangSeng

24,501

(210)

-0.85%

12.0%

Aussie/SYDI

4,700

(41)

-0.86%

-3.7%

China/Shanghai A

3,263

(21)

-0.64%

-5.1%

Brazil/Bvspa

71,888

(770)

-1.06%

4.8%

EMI Global Equity Index

15,501

(115)

-0.74%

5.6%

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