Technically I have been looking at long positions and continue to hold a positive bias this week. I will look to add to longs on a break of 5293 (the 61.8% retracement of the 5457 to 5028 sell-off). Momentum and trend indicators are looking more compelling and seasonally the market performs fairly well this week, putting on 1% in 2012.
Political issues involving a corruption investigation have hurt the Lira and pushed USD/TRY to an all-time high. The trend is clearly very strong right now and bodes well for further upside, and despite the Turkish central bank announcing significant acceleration of FX selling to at least $500 million a day, the balance of risk is still to the upside.
The US market is looking fairly strong at present and like the ASX 200 could see further upside this week. At 00:30 AEDT we get November US personal spending and income (both expected to grow 0.5%). We also get core PCE (expected to tick up to 1.2% from 1.1%) and a strong number (say above 1.3%) could push up bond yields and in this case I feel could push down the equity markets.
All eyes on China’s money market rates today and I feel Chinese and regional Asian markets could be thrown around by what we see today in the repo market. On Friday we saw the interbank money markets fail to respond to liquidity injections from the PBOC, with the seven-day repo pushing up 116 basis points to 8.21%. The repo market is seen as a good barometer of confidence on lending between the banks; however it is clear the banks are hoarding money as we go into the New Year. Another spike in the repo rate today should have negative implications for the China A50 and Hang Seng.