Dow 17,000?

And now I'm back.

FTSE 100 5911.13 -20.12 -0.34%
Dow Jones IA 12977.57 -2.73 -0.02%
NASDAQ 2976.19 -12.78 -0.43%
DAX 30 6921.37 -20.40 -0.29%
CAC 40 3501.17 1.44 0.04%
GBP/USD 1.583 84/25 0.00 0.07%
GBP/EUR 1.20 03/09 0.00 0.14%
EUR/USD 1.319 11/39 -0.00 -0.05%
USD/CHF 0.914 41/63 0.00 0.18%
USD/JPY 81.7 61/81 -0.02 -0.02%
GBP/JPY 129.4 92/55 -0.01
Gold $/oz 1710.9 0.40 0.02%
Silver $/oz 34.75 0.05 0.14%
Platinum $/oz 1691.77 -0.65 -0.04%
Palladium $/oz 709.23 -2.77 -0.39%
Brent Oil $/barrel 123.58 -2.21 -1.76%
WTI $/barrel 106.55 -2.36 -2.17%


I have remained on the sidelines of the markets for the past 6 months. Despite the trend for earnings to continue beating estimates, I was wary of the ongoing political uncertainties regarding the Greek bailout situation, and I did not anticipate a high probability decision from Merkel either for or against further bail outs which could have resulted in sharp shocks to the market (and a potential chain reaction taking the market substantially lower).

The LTRO program has helped keep equity markets supported, and paved the way for a subsequent rebound in European Banking stocks. There are still fears of a disorderly default by Greece. Although further cuts have been agreed to, it remains to be seen whether social unrest that has been building in Greece will allow this to be a practical solution.

The Italian 10 yr below 5% now, seems to be a sign that the European banks are playing ball and buying soveriegn debt.

US economic data has continued to beat expectations. With US GDP revised up to 3% for Q4, with Bernanke acknowledging the improvements and making QE3 less likely in the near term (which saw a sharp drop in Gold to the low 1700's).

My bias is to be look to go long the Dow, with the next catalyst to move higher likely to be Q1 earnings season. For the coming week with numerous Central Bank statements, and Non farm payrolls on Friday, the market is likely to remain range bound. 13,000 has proved a difficult number to remain above. And I think the market is due a 2/300 point sell off to bring itself back to trend line.



Questions?

1)I will look to analyse, whether the longer term pattern of long the dow sell the dollar will be suitable in this next potential bull phase of the dow. Given that LTRO is likely to be inflationary in the eurozone (even with the offset of declining growth) and the ECB more likely to be the one cutting rates, this may be a potential time for the long awaited (by myself anyway) positive correlation of the Dow and the Dollar.

2) At what oil price will oil and the Dow become substantially negatively correlated?

3)I saw an interesting interview with Peter Schiff on CNBC lately, where he asks what happens when interest rates rise?

Jeremy Siegel's looking for 17,000 in 2 years? However to what extent will this be due to the devaluing of the dollar?


http://video.cnbc.com/gallery/?video=3000075553#eyJ2aWQiOiIzMDAwMDc2Mjc3IiwiZW5jVmlkIjoibXk1VGpTNE5lVWZKK0NOc2o1MU54QT09IiwidlRhYiI6InRyYW5zY3JpcHQiLCJ2UGFnZSI6IiIsImdOYXYiOlsiXHUwMGEwTGF0ZXN0IFZpZGVvIl0sImdTZWN0IjoiQUxMIiwiZ1BhZ2UiOiIxIiwic3ltIjoiIiwic2VhcmNoIjoiIn0=