Navarro's Big Economic Picture
An Inflationary Hat Trick

This week's market report is a short story. The Fed's rate cut, a.k.a. the "Bernanke Put," continues to work its magic on the markets -- or so it seems at a casual bullish glance. The reality is a bit grimmer and bearish. Since the rate cuts, commodities are up by over 15%, gold has hit a 27-year peak, and the dollar has hit a record low. Add that all up and it is clear that the financial markets are betting on inflation. What remains unclear, however, is whether that inflation will be accompanied by a recession and add up to stagflation. That's the next big unfolding story in the market to watch. That's why the jobs report on Friday will be so significant. Last month, the jobs report was an ugly surprise, yielding a net loss of 4000 jobs. At least some analysts believe that this was an anomaly and that this next report will show a robust 100,000 jobs generated. So let's see what happens -- but don't have a lot of money on the table when that report is issued.

This Week's Big Market Movers

The jobs report does not come until Friday so that may augur low volatility during the week because that report is so important. Of the other major reports for the week -- the ISM index on Monday, auto sales on Tuesday, factory orders on Thursday -- only the ISM index has any kind of market moving potential. This index is a great measure of the supply side of the economy and is a pretty good leading indicator of any recession on the horizon.

Trade of the Week - Linktone (LTON) and Telestone (TSTC)

According to Market Edge, “Linktone, Ltd. provides telecom media, entertainment, and communication services to mobile and fixed phone users in the People's Republic of China. It engages in the development, aggregation, marketing, and distribution of consumer telecom applications for access by users.“ While I generally believe that China is a bubbles that at some point is going to burst, that doesn't meant you can make a few bucks on a few penny plays in the meantime. This is a penny stock with excellent technicals and well off its 52-week high. As for Telestone, Market Edge says: “Telestone Technologies Corporation provides wireless communications coverage solutions in Vietnam, Indonesia, Malaysia, Thailand, and India. Its wireless coverage solutions include research and development, and application of wireless communications technology.” This is an alternative penny play if you're worried about the China bubble. Caution: both stocks are relatively illiquid.

The International Scene - Technical Take

All of the ETF's tracked in this column for Europe are experiencing strong technical recovery, including even Germany. The general global picture is once again growing bullish

*Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Jordan, Korea, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey.

“Any trader or investor who ignores the power of macroeconomics over the world’s
financial markets will, sooner or later, lose more than they should—and if they are
trading on margin, perhaps more than they have.”
 -- If It's Raining in Brazil, Buy Starbucks

The Market Edge Market Summary from www.marketedge.com 

CONTACT INFORMATION
Peter Navarro
Irvine, California USA
Email  |  Website

DISCLAIMER: This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling, or holding of any financial instrument whatsoever. Trading and investing involves high levels of risk. The authors express personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The authors may or may not have positions in the financial instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future performance.