First lets start here at home as it is earnings season and for the most part, besides a few big headline misses, earnings are coming in a bit better then consensus. Here's the secret of earnings, "What have you done for me lately" or better yet, "What will you do for me next quarter?"
It's little wonder earnings are coming in pretty good considering just about every report I have read was prefaced with a seemingly boilerplate statement that consensus has been lowered at least once if not several times before the company beat. Some companies aren't even beating lowered consensus, so in effect the bar has been lowered making it much easier for a company to beat lowered expectations. It doesn't stop there though, guidance, the important part of earning which tells investors what to expect for the next quarter (after all t doesn't matter if you beat this quarter is you are lowering your sales and EPS for the next quarter-why pay current prices for less performance?) is starting to move down, at the rate it is moving down, the 12 month EPS expectations are sitting around -8.5%.
Looking at the chart below, the last time this happened was Q4 of 2007 (if you weren't trading then, look at a chart to see what happened next).
I've laid out quite a few charts and recently several that show the very eery similarities between now and the last market crash. This is just one more piece of the puzzle to consider.
Now on to the event of the year, the EU bailout "PLAN". We have some strange after hours activity, so I checked the news and nothing good. Here's what I found:
As I said last night, the countries (really country now that France is at risk of losing it's Aaa rating) that are strongest and going to bat for the weaker countries that are pulling the EU apart are not as you would think, in a position of strength. They are now the ones being held hostage by the PIIGS. It didn't even take 24 hours for Ireland to start plotting and trying to figure out what they could get if the most misbehaved country in the EU, Greece, can get 50% of its private debt forgiven with so far, no consequences. Furthermore, while yields dropped today on the PIIGS meaning there was some bond buying (which was part of the goal of this whole exercise) , the powerhouse with the best credit, Germany saw their yields rise, which means they have to pay more interest to sell their debt because they have effectively backstopped this whole operation and that is now being discounted as investors demand more interest to buy their bonds, making Germany pay more for being a good neighbor (or so we are supposed to believe).
Meanwhile, back in Germany, as reported by the Telegraph, "Holes are emerging in the grand solution". Apparently,
"A trillion euro bail-out to save the EU’s single currency is in danger of unravelling after Germany’s central bank warned that the rescue measure was too dependent on the high-risk deals that caused the economic crisis."
WHAT?
"The concerns were led by Germany’s powerful central bank, which expressed fears that a plan to leverage a €440 billion eurozone rescue fund to amass a “fire power” of €1 trillion, or £880 billion, resembled the risky finance methods that triggered the crisis in 2008. Jens Weidmann, the president of the Bundesbank and a member of the European Central Bank, sounded the alarm over the plan to “leverage” the fund by a factor of four to five times without putting any new money into the pot.
He warned that the scheme could be hit by market turbulence with taxpayers left holding the bill for risky investments in Italian and Spanish bonds."
It appears, after all the due diligence Finance Ministers and EU leaders put in to this last minute effort, the very Central Bank in the country that led the charge (Germany) has some very serious misgivings. I wonder why this wasn't discovered earlier?
But the news doesn't stop there, hows this for gratitude?
Soooo... I guess there's a large contingent of Greek politicians that don't even want this monstrosity that was supposedly created to save them? It kind of sounds that way. Well, that should make raising that private capital a breeze when the sponsoring country's Central Bank says it's a bad idea and the sponsored country says they don't really want it to start with!"Greek opposition parties to the Left and Right united to condemn the eurozone deal amid mounting social conflict.
Antonis Samaras, the conservative opposition leader, said: “We are not closer to the solution but are faced with nine years of collapse and poverty.”
Dimitris Papadimoulis, a Left-wing MP, said new EU powers in the agreement to
impose austerity measures on Greece had a conflict of interest. “Those who
monitor us do not have our interests in mind,” he said. “Their priority is
that we pay back our loans.”
OK, well this is a mess that just gets messier the more you look at it, but I guess it's not bad for 3 days of work starting from scratch.
Technically speaking, today looks a lot like an Exhaustion Gap. I could explain it, but I'd rather copy and paste as I have a lot to get to.
Exhaustion Gaps:
tion gap)".
Sound Familiar?
It would also make for an excellent head fake move and after hours trade may be signaling just that!
This isn't the best example, but I needed something quick and I liked that this broke a technical level that would induce buying.
The part that is missing is the prolonged, parabolic uptrend.
Quickly let me touch on after hours because I have to be somewhere before 8 and then 'll be back to work.
There are 5 transactions I want to focus on. First we closed at $128.60, the 12:23 pm volume spike was 4,562,055 shares. There are 5 spikes in AH (A-E).
A) 12,033,900 shares @ $128.57
B) 5,001,224 shares @ $128.57
C) 8,596,262 shares @ $128.57
D) 3,010,376 shares @ $124.32-128.76 (In this case, this was an old trick I use to play as a day trader, put a ridiculously low bid and some sucker would come along with a market order and get screwed)
E) 5,001,917 shares @ $128.73
Those 5 transactions amounted to more then 10% of the regular hours total volume. From my experience, high demand, chasing a rally moves prices up big time in a thin market like AH. The fact prices barely moved seems like someone may have been offering what seemed like a lot of supply at a sweet deal. If you just got home from work and missed the move today and have the chance to buy at prices that are pretty fair on what looks to be a technical breakout, you would buy, wouldn't you? Or rather, most non-professional traders who know enough about technical analysis to get themselves in a lot of trouble would buy. Very fishy.
ES right now looks almost flat, it's actually down a hair, another strange chart.
As for the EUR/USD, I drew 2 trend lines-today was a parabolic move in the Euro, so the first was the late afternoon trendline that was really parabolic and the second was the trendline for the entire day which was parabolic on its own.
Here are the 2 trendlines for today, the most parabolic (afternoon) trendline was broken during regular hours, the second, which is the entire day is being broken right now.
I'll be back with more soon.
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