Equity Market Outlook 07/13/2009

July 13, 2009 · Posted in Strategic Insight

There is no substantive change from our outlook a week ago. World equity markets are correcting and should continue to correct for some time. The US dollar is in a consolidation range forming a symmetrical triangle. This will still take a little more time to resolve but investors should pay close attention to how the USD price and the down sloping 50 day MA interact. Watch precious metals in-turn as their future and the USD future are linked.

China has not quite begun its correction yet but the extreme overbought nature of the market and the massive increase in bank lending make one wonder if China s not in bubble territory. According to Bloomberg, emerging market stocks have now regained the lofty valuations they attained in 2007 just before plunging. As we have stated before, we believe China’s impending correction will exacerbate ours.

As for US equity markets we see the downside pressure continuing broken by periodic consolidation days. We remain net short in the areas of real estate and commodities while maintaining a large cash position. Additional detail is provided in the commentary on the individual price charts below.

US Dollar Index 07/10/2009

Shanghai Index 07/10/2009

Australia All Ordinaries 07/10/2009

Bovespa 07/10/2009

S&P 07/10/2009

For those who are following the looming dollar crisis we urge you to read our free post Watch Out For Sterling where we raise the case that a precipitous fall in Sterling could serve to elevate the dollar near term and trash trading positions betting on an imminent dollar collapse.

Readers should take a look at our post The Most Important Question Facing Investors to understand the risks we are currently facing.

We wrote recently in “The Character of the Dollar Collapse” on the risks to investors in any asset of a dollar collapse.

Murdock Global Insight began discussing the dollar’s impending demise in January when the dollar was still generally strengthening How the US Dollar Will Lose Reserve Status. Now, in June, the idea that the dollar is destined for significantly lower levels at some point has entered the mainstream. The US fiscal position is increasingly being seen as untenable. Interest rates are surging for a variety of reasons but he massive debt issuance by the US is one primary cause. We have established the Murdock Strategic Portfolio for the purpose of growing our wealth in the face of a dollar collapse/surging China scenario The Strategic Portfolioand we have written about the risks that a free fall in the dollar could cause to those investments The Most Important Question Facing Investors.

To find out the details look at our strategic portfolio scorecard. The Strategic Portfolio is how we are investing in the global trend of dollar depreciation and Asian recovery and trading around that trend to ensure we stay profitable. Take advantage of the Free Two Week Trial and read it. We have also update the scorecard for today’s action.

The Strategic Portfolio

Portfolio Scorecard 07/10/2009

In addition, we strongly recommend reading The Most Important Question Facing Investors as recent action illustrates directly what we are faced with if the dollar decline turns into a free-fall.

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The following additional posts are highly relevant:

The Strategic Portfolio

The Most Important Question Facing Investors

On the Edge of the Empire, Dollar Influence is Declining

The Dollar and Gold Near Term

How the US Dollar Will Lose Reserve Status

Chinese Gold British Debt

China: Part 2 - Bonds, Dollars, and Inflation”.

“The Fed and The Bond Market - Will Intervention be Effective?”

“The Coming Bond Debacle”

Fundamental Trends