Morning Comments 2/1/2011

Last night I talked about the underlying strength evident in yesterday's Australian market despite the flat result in the big market indicators (XAO and XJO). The smart money positioned itself yesterday for a big rise today.

Last night, U.S. markets were strong with the Dow Industrials up +1.25%, SPX up 1.67% and the Russell 2000 up 2.26%.

The Ozzie Dollar gapped up and looks strong. The effect on the Gold price in Ozzie Dollars is clear in the lower chart. While Gold in U.S. Dollars had a plus night (+0.71%), Gold in AUD fell -0.67%.

All of that sets the tone for the opening of the Australian market today.

The question now is: Will the Smart Money continue to buy today - or sell into any strength?

We probably won't know the answer to that until action in tomorrow's market.

Our market should be up early - then probably drift sideways into the close at the end of the day. If the Smart Money is selling into that strength, then there won't be any buyers left tomorrow - and the market will come off. That would then be the signal for us (not-so-Smart/not-so-Dumb) players to get out of the market.

No way of knowing.

Just a word of caution - well a couple of ideas:

• The Price of Bonds normally are in tandem with the Price of Stocks. They've been out of kilter for many months. Something's wrong - Bonds or Stocks? The Bonds players are usually savvier than the Stock players. The Bonds players work on economic fundamentals which determine direction - eventually. But the two Asset classes can diverge for long periods of time.
• The Dow Transports, despite a good night last night, is not confirming the recent moves in the Dow Industrials. That's a negative.

In the meantime,

Good Luck

Red