Our Thanksgiving holiday weekend wasn't as quiet as we had hoped. News broke early Wednesday about Dubai World's request to hold off payments on its roughly $60 billion in debt. As one of the emerging economies, Dubai's economic health is a thermometer of whats to come from the European nations. Volatility has increased dramatically, and the most notable move was in the Japanese Yen, breaching levels we haven't seen since 1995. Japans unemployment rate dropped from 5.3% to 5.1% in October, and consumer prices have dropped 2.5% from a year ago. The Japanese Finance minister noted that the government may have to intervene if prices continued to be skewed, which has put a cap on the move for the time being.
Action through tomorrow will have to be analyzed to see whether the moves we saw over the past couple 'thin' trading sessions were legitimate or not. Dubai's economic woes have been noted since early summer, and the rapid recovery with respect to stocks may indicate that the news has already been accounted for. Emirate banks have increased liquidity, and the Dubai economy should be able to sustain this drawback. Nonetheless, we are traders and need to tread cautiously with respect to support/resistance levels, regardless of fundamentals. Fundamentals can prove to be the catalysts of new technical trends.
--Arman Vahdatinia
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