The Bali experience has left me with a bit of a conundrum: where is going to be as good as that?! Travel is a personal thing, but you can perhaps relate at least in part to my take on an idyll: safe, friendly, rich in culture, beautiful nature, beautiful man-made, great climate, and a cheap cost of living for a bonus. Bali delivered on all fronts.

Bali is peculiar to Indonesia because it is Hindu, rather than Muslim, and the Bali form of Hinduism permeates everything here (95% of residents follow). Tiny offerings and statues of gods everywhere, at least three temples per village and in every building a shrine. 500 new shrines and temples are built every month – the religion is as current as it ever was, with the youth fully involved. A tremendous amount of rituals and ceremonies means the Balinese are often seen in traditional dress, with flowers a key part of the look and the offerings. The extension of Hindusim into Balinese behaviour is ‘ritualised self-control’, which in practice means modesty and restraint. In short, the religion is all-involving.

The religion merges into the culture as their religious devotion is echoed in their devotion to arts and crafts (on a large scale) and to architecture. The architectural themes of gated entrances, pavillions, water features, and of course shrines and statues have been studiously reflected in the hotels and villas on the island, giving the whole island a consistent feel, and beauty. The man-made beauty across the island is all the more impressive given that existence here is tough for many. Tourism now accounts for 80% of the island’s income, but 80% of Balinese still work in agriculture. Working in tourism pays little, working in agriculture less. Hence, it is not uncommon for parents to sell a rice field and send their kids to tourism school. Labour is cheap here – you could live here and have a maid, cook and driver all for $200 a month.

Despite the meagre earnings, the Balinese are a happy people and could not be more friendly. It’s not possible to be a faceless person on the island – all are involved, and this extends to tourists. Tourism has clearly had an impact on the island, but not in the kind of ruinous way whereby the original reasons for coming are slowly devoured. There is no problematic friction between locals and tourists (on which note, the Bali bombings were carried out by a Muslim terrorist group), and the Bali culture remains strong and dominant, rather than diluted and then packaged up for visitors in a less authentic way. To complete the picture, the nature is lush green, with tiers of paddy fields amongst the palms, and there are beautiful beaches, wild chickens and lizards galore.

Negatives? There are quite a lot of ill looking dogs around. The Balinese largely consider them scavengers in league with evil spirits, and as a result they have a difficult existence. There is a caste system, in line with Hinduism elsewhere, meaning not all are equal. You will see swastika symbols – but this is nothing sinister, in fact it means in harmony with the universe and precedes Nazism. And of course, as with anywhere that might be considered idyllic, greed naturally steps in, and some long-time visitors to Bali bemoan this. There are a few opportunists in the most touristy south (often coming over from neighbouring Java), big luxury hotel resorts have edged out old backpacker Bali, and Jakarta has taken its slice through shortening visas and applying a departure tax. As a first time visitor, I would say this: the mature Bali remains very attractive: crime remains very low, trust and friendliness reign, and the beauty and culture of the island rival anywhere I have been.

The majority of visitors to Indonesia go to Bali and Bali alone. On my current trip, that is also the limit of my dip into the 4th most populous nation on Earth too. So I will leave this post as a little Bali travel summary and not attempt a wider analysis of Indonesia and its markets. Some pics to finish then:

A Bali temple ceremony.

Rice field terracing.

There is no limit to what a motorcycle can carry here.

My wife gets a head massage.

My son relaxes at the beach.

I’ve suffered poor internet access this week, but have it now, so let me catch up on developments since last Friday. I will respond to comments and emails in due course, but first, analysis.

Conference Board leading indicator updates have been mixed. USA, France and Mexico slipped negative. Germany improved to flat and the general Euro area jumped into the positive. Australia also moved into the positive and China put in another good month. The summary table currently looks like this.

Source: Conference Board

So a continued picture of mixed fortunes, but with a rotation in leaders, and overall a picture of weak growth ahead, rather than recession. ECRI leading indicators for the US advanced from 3.5 to 4.4 last week and US economic surprises have picked up again the last couple of weeks:

Source: Ed Yardeni

Euro debt, which bothered the markets from mid-2011 to mid-2012, has deflated as an issue, to much more benign levels.

Source: Acting Man

The Dow theory divergence of mid-year, which was a potentially bearish signal, has been resolved, with Transports since resuming strength:

Source: Ed Yardeni

And cyclical stocks in the US continue to perform strongly, with breadth also healthy.

However, sentiment for US stocks has reached into frothy bullish territory in both NAIIM and AAII surveys:

Source: Sentimentrader

Source: Bespoke

Investors Intelligence and bullish percent over call put ratio both however remain in neutral territory, but overall risk aversion has reached very low levels:

Source: Big Picture

Meanwhile, the Shanghai Composite has pulled up in a more compelling bottoming fashion, as the drop beneath shown support now looks like a fake out.

Source: Cobra / Stockcharts

Treasuries have declined and yields have added credibility to a W-bottom:

Source: Stockcharts

Copper remains in a triangle, unprepared to give a diagnosis on the global economy at this point:

Source: Stockcharts

And crude oil ditto:

Source: Trading Charts

November’s global climate stats from NOAA came in at the 6th hottest on record, making the year to date (minus December) the 5th hottest on land since records began. That’s a continued support for agri longs, as extreme conditions persist. Yet, soft commodities are, as measured by a broad agri commodities ETF, just range trading of late. Despite China’s improving fundamentals, and the Euro strengthening against the US dollar (USD technically weak formation shown below), commodities as a whole are failing to ignite currently.

Source: SeeitMarket

The most surprising underperformer is gold, which currently looks like this:

It just dipped beneath the 200 MA, which has largely supported the secular bull since 2000. Is that a worrying development? It’s not great, but it is doing so on oversold RSI and a daily sentiment index reading of sub 10. Furthermore, gold miners have reached a bearish extreme in public sentiment. I still suggest that gold broke upwards out of its 11 month consolidation in August this year and has resumed its uptrend, albeit tentatively at this point. Gold seasonals, solar/secular history and negative real interest rates all support gold bouncing here and making that tentative renewed uptrend more concrete, but once again it is finely poised. I am happy with my exposure both to precious metals and to miners, but if i were underexposed I would choose now to buy both, based on the reasons I have aggregated here. In other words, I believe gold will bounce here and reclaim its 200MA (with the weak hands shaken out).

Today is the Mayan apocalypse, the Mayan hinge point, a miscalculation, or a falsehood. Tomorrow is a Bradley turn, which would mean today (due to market opening days). I do not buy in to the Mayan blogosphere phenomenon, and have found Bradley turns more miss than hit, but that said we do have some drama today, with fiscal cliff nerves helping bring about a big sell off this morning which at the time of writing has been semi-reversed. I place more weight on lunar cycles, and next week’s full moon typically spells downward pressure into it. However, this is balanced by positive seasonality which goes hand in hand with favourable geomagnetism at this time of year – the updated model shows an uptrend into early January:

It’s the morning session in Europe at the time of writing, and I don’t pretend to know how today is going to turn out, given the dramatic market action in the early hours. However, my stance is to stay put on my pro-risk portfolio currently. 1. Weakness in precious metals, 2. indecision in copper and oil, 3. frothy sentiment in US stocks, and 4. complacency in risk aversion, are all current flags. But I would contrast with: 1. oversold and overbearish readings in precious metals and miners, 2. improvement in China, leading indicators and renewed dollar breakdown, 3. good breadth and cyclicals performance, better technicals in European and Asian stock indices, and 4. money pulling out of treasuries which should seek out pro-risk assets (by solar/secular/cyclical history). Broken down into my 3 areas on involvement: I don’t want to exit stock indices longs yet because we do not yet see sufficient congregation of cyclical bull market top indicators; I do not want to exit commodity longs yet because I maintain by solar/secular history the parabolic peak is to come 2013/2014; and I do not want to exit treasury shorts yet because I believe a new secular bear market in treasuries is getting underway and a rise in yields (of some note) should be one feature of the end of the cyclical stocks bull.

Next week is usually a quiet week in the markets globally, due to Xmas, but there is the fiscal cliff deadline at the turn of the year, and so this period could be more volatile. My expectation is that agreement will be reached to prevent the fiscal cliff, and that markets will enjoy a relief rally when that occurs. However, there are no guarantees, so let’s see how things unfold. Next week I will be in Bangkok.