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    Shadow Capitalism: Market Commentary by Naufal Sanaullah

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    Naufal Sanaullah
    The document provides commentary on recent economic and market events from the perspective of Naufal Sanaullah. Some key points: - The ECB extended liquidity measures but did not transition fully to an "exit strategy" as some expected. More permanent measures like unsterilized bond purchases may be needed to help peripheral countries access funding markets. - US economic data like jobless claims and home sales came in better than expected, strengthening risk appetite and weakening the US dollar. Stocks rallied further. - The euro strengthened on rumors of ECB bond purchases for peripheral countries and general US dollar weakness. But further gains face resistance at the 1.33 level. - Canadian and Swiss

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    Shadow Capitalism: Market Commentary by Naufal Sanaullah

    Uploaded by

    Naufal Sanaullah
    3K views5 pages
    The document provides commentary on recent economic and market events from the perspective of Naufal Sanaullah. Some key points: - The ECB extended liquidity measures but did not transition fully to an "exit strategy" as some expected. More permanent measures like unsterilized bond purchases may be needed to help peripheral countries access funding markets. - US economic data like jobless claims and home sales came in better than expected, strengthening risk appetite and weakening the US dollar. Stocks rallied further. - The euro strengthened on rumors of ECB bond purchases for peripheral countries and general US dollar weakness. But further gains face resistance at the 1.33 level. - Canadian and Swiss

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    The document provides commentary on recent economic and market events from the perspective of Naufal Sanaullah. Some key points: - The ECB extended liquidity measures but did not transition fully to an "exit strategy" as some expected. More permanent measures like unsterilized bond purchases may be needed to help peripheral countries access funding markets. - US economic data like jobless claims and home sales came in better than expected, strengthening risk appetite and weakening the US dollar. Stocks rallied further. - The euro strengthened on rumors of ECB bond purchases for peripheral countries and general US dollar weakness. But further gains face resistance at the 1.33 level. - Canadian and Swiss

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pdf or txt
    3K views5 pages

    Shadow Capitalism: Market Commentary by Naufal Sanaullah

    Uploaded by

    Naufal Sanaullah
    The document provides commentary on recent economic and market events from the perspective of Naufal Sanaullah. Some key points: - The ECB extended liquidity measures but did not transition fully to an "exit strategy" as some expected. More permanent measures like unsterilized bond purchases may be needed to help peripheral countries access funding markets. - US economic data like jobless claims and home sales came in better than expected, strengthening risk appetite and weakening the US dollar. Stocks rallied further. - The euro strengthened on rumors of ECB bond purchases for peripheral countries and general US dollar weakness. But further gains face resistance at the 1.33 level. - Canadian and Swiss

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    of 5

    Shadow Capitalism

    Market Commentary by Naufal Sanaullah

    Naufal Sanaullah ECB extends full allotment and continues SMP as euro rallies
    naufalsanaullah@gmail.com
    www.shadowcapitalism.com
    on ECB periphery bond purchases and growth-driven USD
    weakness
    The ECB voted to keep rates at 100bps today, as expected, but did little beyond that as it became
    clear that Frankfurt is still backtracking from its “exit strategy” rhetoric from a couple months ago,
    rather than transitioning from planned exit to future expansion in one fell swoop. As I’ve been
    stating, the market’s reaction to the Irish bailout suggests to me that mere liquidity will not be
    sufficient for the periphery to regain access to wholesale money market funding, and that the
    liquidity/solvency debate is very much the argument at the margin in markets currently.

    I continue to expect unsterilized purchases as the only “way out” for the Eurozone, although that is
    not to say the euro cannot have countertrend bounces before such an option is considered, but I
    will be watching the market’s willingness to provide bank paper access to the periphery under the
    guise of ECB liquidity easing their debt issues. As far as my take, as is evident, I don’t see any
    realistic way for the periphery to be weaned off of ECB liquidity, although as I said I will be
    watching the market’s perception as well, as only price pays. As a testament to the “kicking-the-
    can” nature of current Eurozone policies, Greece joined Portugal this week in having its credit
    rating put on CreditWatch negative by the S&P, with implications from the ESM’s post-2013 CAC
    contingencies being the proximate cause.

    In other news, US jobless data was mostly in-line this morning, while pending home sales gave risk
    a boost in early morning trading, printing a very impressive +10.4% MoM growth vs -1.0%
    expected. The combination of yesterday’s US equity breakout, (rumors of) ECB bids in periphery
    debt easing the euro, and such a strong beat in the big albatross in the US economy (housing)
    contributed to USD weakness across the board, extending gains in stocks and commodities from
    yesterday.

    The S&P posted another impressive 1.28% rally today, and is less than six points from challenging
    2010 highs around 1227. Impressive retail sales figures are helping to stoke a holiday rally,
    although some leading stocks are showing some selling on strength and the VIX is heading back to
    price zones that have suggested complacency in the past. Still, December is shaping up to be a
    good month and I remain bullish on the US on a relative basis as the risks in global markets are
    stemming from Asia/EM and Europe currently.

    The Russell 2000 broke out another 1% today, into new 2010 highs, as the Russell/S&P ratio that
    I’ve been highlighting as bullish since late September is now at 2010 highs, showing the ample
    liquidity being the driving force behind this market rally. Along the same lines, I have also
    republished below a chart from Zero Hedge showing the striking correlation between US stocks &
    Fed holdings of USTs (via QE).

    December 2, 2010|1
    December 2, 2010|2
    EURUSD followed through on yesterday’s rally today, after initially selling off over a big fig on the
    “bare minimum” Trichet comments. Rumors of large ECB purchases of peripheral debt as the SMP
    continued led to a tightening in spreads and a sharp reversal higher in EURUSD. The euro traded
    about sideways from there against other crosses, but further USD weakness from the general risk-
    on sentiment sent EURUSD back to within 50 pips of the 1.33 level I’ve been mentioning. As I
    forecasted yesterday, EURUSD rallied back above its 200d, although the 1.33 level is the more
    pertinent level to watch in my opinion.

    The DXY Index also made it back down to the corresponding 80 level, before rallying, and I think
    the euro is back to favoring a downside bias from here, although some sideways choppiness is also
    possible. The solid 2.3x bid-to-cover in the Spanish 3yr auction earlier also helped to provide a
    bullish bias for EURXXX today, although the auction is in no way a sustainable funding
    environment, with a 371bps yield, and represents more of a pause than a reversal.

    Massive move in CAD today, as 2011 BoC rate hike expectations are meeting the high potential for
    an oil breakout that targets triple digit prices next year. The loonie broke out against several
    different currencies and given that the BoC has stated it doesn’t want a large divergence of
    Canadian borrowing costs from US yields and that Tsys look quite bearish for 2011, I expect the
    CAD outperformance to continue. Despite all of the USD strength, USDCAD is less than a big fig
    from 2010 lows and a breach below parity would send CAD flying.

    December 2, 2010|3
    CHF also looks quite bullish here and, as I was looking for in my piece last night, USDCHF found
    some selling today at the parity resistance level and sold off about 100 pips. The Franc looks bullish
    versus several currencies, including GBP & JPY, and as the ECB’s/Germany’s balance sheets get
    increasingly toxic due to bailouts and refinance operations (and potentially unsterilized bond
    buys), CHF should get regional safe-haven flows, with persistent domestic deflation risk not hurting
    the bullish case.

    One equity long I would like to point out today, in Canadian Natural Resources (CNQ), which is an
    energy play. I don’t know how I missed this breakout yesterday, but I went long this morning after
    noticing it and It continued higher again today for another almost 3%. After trading sideways for
    about a year, CNQ developed a very bullish descending triangle this past summer as it based with
    accumulative internals, and the breakout in October carried it to test 52 week highs, which are
    now broken due to yesterday’s action. Due to my bullishness on oil, Canada, and equities, CNQ
    appears to be the full package and its nice chart was very conducive for a timely entry. This stock
    could test summer 2008 highs in the next 15 months in my opinion.

    December 2, 2010|4
    Trades
    OPEN Long CLW | 80.80 | stop 78.50 | +2.13%
    Long IO | 7.03 | stop 6.64 | +7.54%
    Long VECO | 39.00 | stop 36.30 | +15.56% Long /ZW | 690.00 | stop 675.30 | +10.72%
    Long USD/JPY | 80.75 | stop 79.85 | +280 pips Long /ZC | 550.00 | stop 541.90 | +2.14%
    Long ACAS | 6.67 | stop 6.25 | +14.84% Long BHP | 82.55 | stop 80.90 | +5.91%
    Long CAD/JPY | 79.60 | stop 78.55 | +370 pips Long NZD/USD | 0.7440 | stop 0.7390 | +130 pips
    Short EUR/CHF | 1.3725 | stop 1.3490 | +600 pips Short GBP/SEK | 10.905 | stop 11.115 | +145 pips
    Long USD/HUF | 195.45 | stop 192.70 | +150 pips Short CHK | 22.00 | stop 22.70 | +1.68%
    Short ACOR | 28.00 | stop 28.70 | +6.46% Long X | 48.10 | stop 46.40 | +5.23%
    Short /HG | 4.06 | stop 4.15 | +2.22% Long PUDA | 13.60 | stop 12.35 | +21.10%
    Short AUD/USD | 0.9980 | stop 1.0075 | +220 pips Long MEE | 49.10 | stop 47.25 | +2.34%
    Long SGD/JPY | 63.60 | stop 62.95 | +25 pips Long BTU | 58.00 | stop 55.00 | +8.14%
    Long SNE | 33.70 | stop 32.30 | +8.49% Long SVM | 12.35 | stop 11.20 | +6.64%
    Long HIT | 47.35 | stop 44.80 | +3.72% Long AGQ | 130.65 | stop 117.00 | +5.60%
    Long /NKD | 9768.00 | stop 9686.00 | +4.37% Long RIMM | 60.50 | stop 57.70 | +3.62%
    Long EK | 4.79 | stop 4.30 | -1.04% Long XTXI | 9.35 | stop 8.95 | +1.82%
    Long AMR | 8.22 | stop 7.90 | +2.80% Long SWC | 19.80 | stop 17.85 | +8.10%
    Long N | 24.00 | stop 23.20 | +9.50% Long PRX | 37.30 | stop 35.50 | -1.47%
    Long TGA | 14.65 | stop 13.45 | +22.80% Long AIN | 21.80 | stop 20.80 | +3.26%
    Long NOG | 22.20 | stop 21.80 | +6.91%
    Long USD/SGD | 1.3085 | stop 1.3015 | +5 pips CLOSED
    Long AAPL | 307.50 | stop 295.35 | +3.52%
    Long CSTR | 63.45 | stop 58.15 | +1.29% Short APOL | 51.90 | cover 34.50 | +33.53%
    Long MAT | 25.25 | stop 24.80 | +1.27% Short BP | 42.40 | cover 41.00 | +3.30%
    Short ARG | 63.50 | stop 64.90 | -0.33% Short REV | 10.50 | cover 10.22 | +2.67%
    Long SNDK | 42.95 | stop 40.35 | +11.78% Long LVS | 49.30 | sell 50.65 | +2.74%
    Long CMCSA | 20.15 | stop 19.70 | +2.83% Long DG | 32.35 | sell 32.30 | -0.15%
    Long REGN | 29.25 | stop 28.35 | +0.79% Long SSYS | 33.50 | sell 34.00 | +1.49%
    Long VSAT | 40.75 | stop 39.90 | +2.80% Long DNN | 2.85 | stop 2.60 | +19.30%
    Long THRX | 21.65 | stop 20.55 | +16.77% Short JKS | 25.65 | cover 22.85 | +10.82%
    Long XEC | 81.00 | stop 78.15 | +5.96% Short EOG | 89.00 | cover 93.10 | -4.61%
    Long FWLT | 28.30 | stop 27.00 | +5.96% Short BAC | 11.20 | cover 11.40 | -1.79%
    Long GRA | 33.40 | stop 31.00 | +3.89%
    Long UAL | 28.10 | stop 27.00 | +0.39% NEW
    Long VSH | 14.15 | stop 13.30 | +5.94%
    Short GBP/USD | 1.5700 | stop 1.5850 | +80 pips Short AUD/CHF | 0.9700 | stop 0.9810
    Long CHF/HUF | 208.00 | stop 205.00 | +35 pips Long CNQ | 40.60 | stop 39.20
    Long NG | 14.05 | stop 13.50 | +3.06%
    Long SLW | 34.80 | stop 32.80 | +10.03%
    Long CIE | 10.85 | stop 10.10 | +5.81% If you would like to subscribe to Shadow Capitalism Daily Market Commentary,
    Long STT | 43.50 | stop 41.80 | +4.87% please email me at naufalsanaullah@gmail.com to be added to the mailing list.
    Long PCAR | 54.95 | stop 52.00 | +2.30%
    DISCLAIMER: Nothing contained anywhere in this commentary, including
    Short FRO | 26.10 | stop 27.00 | +0.84% analysis and trade ideas, constitutes or should be construed as investing or
    Short CCE | 24.00 | stop 25.75 | -5.71% financial advice, suggestion, or recommendation. Please consult a financial
    Long /CL | 85.00 | stop 82.80 | +3.53% professional and do due diligence before engaging in any purchase or sale of
    Short /NG | 4.33 | stop 4.55 | +0.00% securities.

    Long SINA | 63.75 | stop 62.05 | +6.65%


    December 2, 2010|5

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