Balamory technical charts... central banks.... the weak us dollar and sector rotation 17 sept 2012

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Technical Chart Comments

“Central Banks....the weak US Dollar and Sector Rotation”


Technical Comments• The Fed announced that it will purchase $40 billion a month in mortgage

backed securities which adds to its holdings of long-term securities and ushers in another round of quantitative easing (QE3).

• Global equity markets have reacted positively to this announcement.• Emerging markets, commodities and miners should be the direct beneficiaries

QE 3.• Basic Materials could now well enter a 6-month up cycle, as the rising trendline

for the U.S Dollar Index going back to August 2011, has now been broken to the downside.

• This recent sharp fall in the dollar will directly benefit commodities, and especially precious metals.

• Our preferred precious metals basket is gold, silver and platinum.• Industrial metals have lagged the stock market since June, but are now

starting to play catch up in September. LME copper has rallied 10% from its lows in early August.


Technical Comments• Copper and equities are positively correlated, and the recent upward push in

the copper price is positive for equities.• We continue to like cyclical themes, particularly commodities (metals &

miners) and would use any price weakness over coming weeks to add.• Big cap diversified miners (AGL, BIL, ARI), platinum producers (IMP, AMS, LON),

coal miners(EXX), iron ore (KIO) and copper (PAM) are all starting to show some technical improvement.

• The rotation out of defensive stocks into cyclical shares seems to be underway.• Money flows are indicating that money is moving into the risk-on trade

(emerging markets, commodities, Euro, AUD and CAD). • The risk-off trade now looks to be topping out, (consumer staples, utilities,

healthcare, U.S. 10-Year Treasury Bond Yield, U.S. Dollar, and the Yen.• On the JSE, profits are being booked aggressively across high momentum

sectors (general retailers, food and drug retailers, healthcare, banks, tobacco, and beverages).


Technical Comments• Based on our bearish call on the U.S. dollar, we are bullish gold, and gold

is now moving up from a 4-year cycle low, and we expect further upside from gold.

• Since breaking out of a triangle price pattern in the middle of August, gold is up over $103.

• On a short-term basis, the next upside targets for gold are $1770 and then the March high at $1791. However, we do caution that gold is getting increasingly overbought on both our daily and weekly chart timeframes. We would recommend waiting for a pullback to open new longs.

• On our Gold/Silver ratio chart, silver looks set to outperform gold, and a tactical bet would be to go long silver via an ETN/ETF or through exposure to Billiton.

• In terms of other industrial metals, we would recommend going long platinum, palladium and copper, and to continue building long positions with exposure to these metals via the big cap diversified miners.


JSE All Share Index <> Best & Worst – 2012


JSE Top40 Index <> Best & Worst - 2012


S&P 500 Index


US Dollar Index


EUR vs USD


Dollar Falls & Commodities Rally


Reuters/Jefferies CRB (Commodities) Index


LME Copper $…….starting to move higher


US Dollar Gold Price


US Dollar Silver Price


Silver / Gold Ratio Chart


Standard Bank – Silver ETN


GLD: Newgold


JSE All Share Index


BHP Billiton


Investec Plc (INP)


FirstRand


Barloworld


Wilson Bayly Holmes (WBO)


PPC

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Balamory technical charts... central banks.... the weak us dollar and sector rotation 17 sept 2012

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