Tuesday, December 6, 2011
AAPL
I always keep an eye on AAPL, it's a great consumer sentiment indicator and it's the most heavily weighted stock on the NASDAQ 100, AAPL can literally move the NASDAQ from red to green like no other NASDAQ component. So here's the latest update for AAPL which is looking toppy.
This is a possible AAPL Broadening top
However, I think a H&S top is more appropriate and volume largely confirms the h&S top. For confirmation, I have created a cumulative volume indicator so you can see volume's trend vs. price. In a healthy stock, volume rises and thus the line should rise with rising prices and contracts when price falls. To authenticate a H&S top you look for the exact opposite, falling volume in to rallies and increasing volume on declines, hopefully the cumulative volume line helps you see.
I have highlighted the chart above in red all of the places in which volume confirms a H&S top.
The long term linear regression channel is showing volatility now that is typical of a top
This is the most recent bounce on a 15 min 3C chart showing accumulation, confirmation in green or mark up and a negative divergence or distribution in red, a complete cycle.
The 30 min chart shows a leading negative divergence now and AAPL being halted today at resistance from yesterday's close.
The hourly 3C chart is also leading negative.
The daily 3C chart looks very typical of a top with a leading negative divergence.
MoneyStream also confirms what 3C shows with the first negative divergence in almost 3 years, right around the H&S top area.
Here's a 200 day moving average and if there's any doubt as to whether it's starting to roll over, I added a rate of change indicator to the moving average, you can clearly see it has lost momentum and is starting to turn down. The 200 ma has also acted as good support so if you have AAPL on your short watchlist, keep an eye on price and that moving average.
ES still plugging lower
While the markets are closed, except for the afterhours, ES is still plugging away lower.
The narrow trading range/triangle combined with declining volume made the consolidation/continuation pattern clear, the breakout in ES was on fairly light volume, the churning near the top of the run was on heavier volume and the decline is pretty heavy, likely doing what a head fake is supposed to do and put traders in the pain position.
This is what we look for in a head fake...
More charts coming, but it looks like we are getting what was expected.
HEAD FAKE?
That's what the original assumption was before the triangle even broke out, now it's looking a little dirty and more like a head fake.
I'm loading the 3C template now.
Like I said earlier
When it makes it to the pages of the Drudge Report, well....
There are at least 3 disturbing headlines in this capture alone
Many Greeks are draining their savings accounts because they are out of work, face rising taxes or are afraid the country will be forced to leave the euro zone. By withdrawing money, they are forcing banks to scale back their lending -- and are inadvertently making the recession even worse.
I couldn't have said it better, a banking/liquidity crisis is bad, a bank run during such a crisis is the nightmare scenario, expect news out shortly of Greek bank holidays, limits on withdrawals and other measures, clearly Greeks don't feel the upcoming EU summit is going to be to their benefit as they are no longer the core of contagion, but have successfully spread the disease to nearly every EU country , whether it be a tickle in the throat of Germany, a couch in France or a Fever in Italy, contagion has spread and in this respect, the EU has already failed as the pint was to control contagion.
Oh and if you couldn't make out the middle headline, the government is to access every tweet ever sent.
There are at least 3 disturbing headlines in this capture alone
Many Greeks are draining their savings accounts because they are out of work, face rising taxes or are afraid the country will be forced to leave the euro zone. By withdrawing money, they are forcing banks to scale back their lending -- and are inadvertently making the recession even worse.
I couldn't have said it better, a banking/liquidity crisis is bad, a bank run during such a crisis is the nightmare scenario, expect news out shortly of Greek bank holidays, limits on withdrawals and other measures, clearly Greeks don't feel the upcoming EU summit is going to be to their benefit as they are no longer the core of contagion, but have successfully spread the disease to nearly every EU country , whether it be a tickle in the throat of Germany, a couch in France or a Fever in Italy, contagion has spread and in this respect, the EU has already failed as the pint was to control contagion.
Oh and if you couldn't make out the middle headline, the government is to access every tweet ever sent.
Wondering why the market is up?
And why XLF broke out right after my last post?
It's the FT's 3 p.m. rumor...
Now the plan is to let the EFSF and the new bailout mechanism that was supposed to replace the EFSF, the ESM (confusing I know), to run side by side. The problem that remains, the ESM which is supposed to be $500 billion is not expected to come online with the $500 billions, but they hope it can borrow from the ECB and possibly other organizations.
I'm so far not really seeing how this is much different then the leveraged EFSF of the last "LAST CHANCE TO SAVE EUROPE" summit. The EFSF was supposed to be leveraged up to a trillion+ Euros, but the only and most noteworthy bond issuance by the EFSF was scheduled for a mere $10 billion Euros, once the banks let the EU know there was no appetite for that amount, they reduced it to $3 billion Euros and even at that level, the auction only looked successful because the underwriters retained nearly half of the bonds issued. In other words, they were going for a trillion plus and couldn't credibly raise $3 billion!
How this time is different, I don't know except that the ESM might be able to borrow from the European Central Bank, which has been opposed by Germany, but somehow this is supposed to be more palatable because of treaty based mechanism, but even the article which so far is a rumor, is fair in saying that this is all very controversial.
Europe keeps looking for Hank Paulson's 3 page proposal for a Bazooka, and the EU keeps coming up with pellet guns. At some point the world is just going to have to realize that if these problems were solvable, they would have been solved long ago and as I said in 2007 in what I expected, before any of this started in earnest, I said in the 5 part video series that it's like having food poisoning and sometimes the only way to feel better is to go ahead and throw up all the toxins, yes it is unpleasant, yes it will be difficult, but we need a new start and propping up failing/failed banks and countries is just prolonging the inevitable and making the suffering all the worse.
It's the FT's 3 p.m. rumor...
Now the plan is to let the EFSF and the new bailout mechanism that was supposed to replace the EFSF, the ESM (confusing I know), to run side by side. The problem that remains, the ESM which is supposed to be $500 billion is not expected to come online with the $500 billions, but they hope it can borrow from the ECB and possibly other organizations.
I'm so far not really seeing how this is much different then the leveraged EFSF of the last "LAST CHANCE TO SAVE EUROPE" summit. The EFSF was supposed to be leveraged up to a trillion+ Euros, but the only and most noteworthy bond issuance by the EFSF was scheduled for a mere $10 billion Euros, once the banks let the EU know there was no appetite for that amount, they reduced it to $3 billion Euros and even at that level, the auction only looked successful because the underwriters retained nearly half of the bonds issued. In other words, they were going for a trillion plus and couldn't credibly raise $3 billion!
How this time is different, I don't know except that the ESM might be able to borrow from the European Central Bank, which has been opposed by Germany, but somehow this is supposed to be more palatable because of treaty based mechanism, but even the article which so far is a rumor, is fair in saying that this is all very controversial.
Europe keeps looking for Hank Paulson's 3 page proposal for a Bazooka, and the EU keeps coming up with pellet guns. At some point the world is just going to have to realize that if these problems were solvable, they would have been solved long ago and as I said in 2007 in what I expected, before any of this started in earnest, I said in the 5 part video series that it's like having food poisoning and sometimes the only way to feel better is to go ahead and throw up all the toxins, yes it is unpleasant, yes it will be difficult, but we need a new start and propping up failing/failed banks and countries is just prolonging the inevitable and making the suffering all the worse.
For some outside perspective...
Many of you have known me since the days of Trade-Guild.net and before WOWS, so you probably know I DO NOT WATCH CNBC unless I'm waiting for a F_O_M_C announcement, you know that while I believe in being a lifelong student of the markets, I like to do my own homework and not let the pundits tell me what to expect. The reason is that even the most disciplined mind will tend to let outside influences, especially emotional ones, enter the picture and I don't want that. So even though I am and alway will be a faithful husband, I simply don't put myself in situations in which there's temptation. While I am a diligent student of the market, I try to keep outside influences from interfering with my analysis which I have specifically crafted to be "out of the box" and away from the main stream.
However, one in a while there are things that can be learned, they don't have to take the shape of market opinions, but general learning experiences.
I have found some of Graham Summers articles to be insightful and many of the issues that I watch and pay attention to, he addresses in a more direct way then I can. So it's with this in mind that I give you another perspective from Phoenix Capital's Graham Summers.
For certain, all eyes are on Europe where Merkel and Sarkozy continue to claim they have reached new agreements, only for it to be revealed that in point of fact they haven’t come up with anything new, nor are their proposed solutions A) viable or B) palatable to other EU members. It should be pointed out the nature of this next EU summit this week, it is obviously, unlike all of the others, a German-Franco led game and it seems they don't care who doesn't like it. I said the other day, "It seems that Germany is about to accomplish what it couldn't over two world wars, exept instead of using bullets, they are using the EU Crisis, which reminds me of one Rahm Emmanuelle and his statement that one should never "Let a good crisis go to waste".
There is a price for kicking the can time and again: every day Germany continues to play with the idea of backstopping Europe is a day it creeps closer to losing its AAA rating. Germany already sports a real Debt to GDP of 200% (when you include unfunded liabilities) and has yet to recapitalize its banks. Again, the concept of kicking the can down the road, where has all the F_E_D intervention got us? An equity market that is artificially inflated? What about unemployment, what about credit, what about falling wages, what about the growing gap between the have and have nots, what about shrinking GDP? What has the F_E_D really done with a trillion plus dollars that has bettered our economic situation. This reminds me very simply of the multi-day 3C charts that show the market in a place that is about as ugly as any I have seen in all the tops of the last century I have studied.
Moreover, the German populace will not tolerate either Eurobonds or money printing from the ECB. So all proposed ideas so far won’t fly with German voters anyway (to say nothing of other EU members who will not be too excited about a German-lead Europe).What can be said, the Germans don't want to return to the inflation of the Weimar Republic, it is seemingly more haunting to them then any event in Germany over the last century and why would the Germans want to see their standard of life dragged down in trying to maintain governments that they largely don't like? In the same breath, why would the US tax payer want to send their hard earned money to Europe?
However, one in a while there are things that can be learned, they don't have to take the shape of market opinions, but general learning experiences.
I have found some of Graham Summers articles to be insightful and many of the issues that I watch and pay attention to, he addresses in a more direct way then I can. So it's with this in mind that I give you another perspective from Phoenix Capital's Graham Summers.
For certain, all eyes are on Europe where Merkel and Sarkozy continue to claim they have reached new agreements, only for it to be revealed that in point of fact they haven’t come up with anything new, nor are their proposed solutions A) viable or B) palatable to other EU members. It should be pointed out the nature of this next EU summit this week, it is obviously, unlike all of the others, a German-Franco led game and it seems they don't care who doesn't like it. I said the other day, "It seems that Germany is about to accomplish what it couldn't over two world wars, exept instead of using bullets, they are using the EU Crisis, which reminds me of one Rahm Emmanuelle and his statement that one should never "Let a good crisis go to waste".
There is a price for kicking the can time and again: every day Germany continues to play with the idea of backstopping Europe is a day it creeps closer to losing its AAA rating. Germany already sports a real Debt to GDP of 200% (when you include unfunded liabilities) and has yet to recapitalize its banks. Again, the concept of kicking the can down the road, where has all the F_E_D intervention got us? An equity market that is artificially inflated? What about unemployment, what about credit, what about falling wages, what about the growing gap between the have and have nots, what about shrinking GDP? What has the F_E_D really done with a trillion plus dollars that has bettered our economic situation. This reminds me very simply of the multi-day 3C charts that show the market in a place that is about as ugly as any I have seen in all the tops of the last century I have studied.
Moreover, the German populace will not tolerate either Eurobonds or money printing from the ECB. So all proposed ideas so far won’t fly with German voters anyway (to say nothing of other EU members who will not be too excited about a German-lead Europe).What can be said, the Germans don't want to return to the inflation of the Weimar Republic, it is seemingly more haunting to them then any event in Germany over the last century and why would the Germans want to see their standard of life dragged down in trying to maintain governments that they largely don't like? In the same breath, why would the US tax payer want to send their hard earned money to Europe?
In other words: so far no one has any REAL solutions. So unless someone is about to unveil a REAL new proposal, stocks are misguided in their enthusiasm here.
Regardless, this is a very dangerous market environment and one that needs to be traded with extreme caution. Only those in the know can guess the Fed’s day to day moves. We’re not in that crowd.
However, big picture, nearly every indicator is pointing towards trouble ahead. The issue is whether we’re going to see another intervention before the stuff hits the fan. But things have reached a critical point in Europe. And we’re now getting some staggeringly bad data out of China as well. Barring more interventions, the trend will likely be down.
Financials Update
Financials have been underperforming all day and have also been in an obvious consolidation/continuation pattern, except they haven't broken out yet, but with the Euro moving higher, they should see a similar breakout to the S&P, which I still believe will be resolved as a head fake move.
Financials surprisingly have been flat and in the red most of the day, but this pattern is way too obvious as well.
The 1 min 3C shows recent moves in to a positive divergence on the intraday chart, but...
The more important 15 min trend, has been leading negative badly like almost everywhere we look. So again, I expect a probable breakout and a probable head fake on the breakout.
Credit/Risk Update
Not a whole lot of movement here either, but a few issues are moving.
Commodities are on the rise today, but still well off yesterday's levels.
Longer term they remain dislocated from the S&P.
High Yield Credit is pretty much in line with the S&P today.
Yields have dropped off, they have been selling off all day since the first update.
Longer term here's the dislocation in yields which have not been able to move higher then the Thanksgiving week highs.
Not a lot to go on here.
ES is pretty much in line, there was an 11:45 positive divergence, since the market has been moving up out of the triangle, ES volume has dropped off noticeably.
Not a lot to go on here.
ES is pretty much in line, there was an 11:45 positive divergence, since the market has been moving up out of the triangle, ES volume has dropped off noticeably.
Could that last post have been more timely?
Or accurate?
SPY 5 min triangle starting to breakout on volume.
The 1 min gives a cleaner view of the move.
It's still pretty early in the day, so we'll watch for signs of a false breakout as I would suspect this is and this is why quiet markets always force me to be extra aware.
It's still pretty early in the day, so we'll watch for signs of a false breakout as I would suspect this is and this is why quiet markets always force me to be extra aware.
SPY Triangle
With everyone looking for something in this dull market, I'm sure this SPY triangle is visible.
This would normally be taken as a downside continuation consolidation, but being it's so obvious, I'd watch for an upside breakout first as a likely head fake.
On the hourly "Demark" inspired indicator I created, we have our second sell signal in quite a while.
So far it remains quiet
As in the earlier update, just about everything is trading in line with 3C, except the DIA on a short term basis.
DIA 1 min negative divergence.
DIA 2 min slightly out of line to the negative
5 min DIA pretty much in line with a VERY slight negative bias.
In any case, don't let this lull fool you in to complacency. Keep on your toes. I'm going to browse some more charts.
In any case, don't let this lull fool you in to complacency. Keep on your toes. I'm going to browse some more charts.
Iran Tensions Build
This is a screen capture from the DrudgeReport, which is not the pinnacle of cutting edge news releases, but more a gathering of top stories, but when they have even picked up on this, there's obviously something going on.
For more, from the TeleGraph UK:
For more, from the TeleGraph UK:
Iran's Revolutionary Guards prepare for war
Iran’s Revolutionary Guards have been put on a war footing amid increasing signs that the West is taking direct action to cripple Iran’s nuclear programme.
An order from Gen Mohammed Ali Jaafari, the commander of the guards, raised the operational readiness status of the country’s forces, initiating preparations for potential external strikes and covert attacks.
Western intelligence officials said the Islamic Republic had initiated plans to disperse long-range missiles, high explosives, artillery and guards units to key defensive positions.
The Iranian leadership fears the country is being subjected to a carefully co-ordinated attack by Western intelligence and security agencies to destroy key elements of its nuclear infrastructure.
Recent explosions have added to the growing sense of paranoia within Iran, with the regime fearing it will be the target of a surprise military strike by Israel or the US.
Its ballistic missile programme suffered a major setback on Nov 12 after an explosion at the regime’s main missile testing facility at Bidganeh, about 30 miles west of Tehran.
Last week another mysterious explosion caused significant damage to Iran’s uranium conversion facility at Isfahan.
“It looks like the 21st century form of war,” said Patrick Clawson of the Washington Institute for Near East Policy, a Washington think tank, told the Los Angeles Times. “It does appear that there is a campaign of assassinations and cyber war, as well as the semi-acknowledged campaign of sabotage.”
Gen Jaafari responded to this directive by ordering Revolutionary Guards units to redistribute Iran’s arsenal of long-range Shahab missiles to secret sites around the country where they would be safe from enemy attack and could be used to launch retaliatory attacks.
In addition, the Iranian air force has formed a number of “rapid reaction units”, which have been carrying out extensive exercises to practice a response to an enemy air attack.
These are exactly the two explosions that have been talked about here at WOWS multiple times, they are simply way too ironic to have an advanced missle base destroyed as well as a component of their nuclear program. I posted the latest Stratfor Naval Update with a US Carrier Battle group sitting right off the coast, I'm sure there are a lot of tomahawk underwater assets in the area as well. If it seems a little too strange, there's probably something more to it then what we have been led to believe.
So far, here's USO's reaction...
USO vs the SPY-so far it's a pretty muted reaction, which has been very curious lately.
The market absolutely abhors uncertainty, thus the saying, "When the missiles fly, it's time to buy" as I have explained before, it's not because the market specifically likes war, it's just the build up to war creates uncertainty, and once it starts, the uncertainty is removed so we'll be watching for market reaction here as well. This could shape up to be a real December to remember!
THe GBP and England's Turn
In recent weeks there have been signs of deterioration in the UK, possible contagion issues and now the BOE (Bank of England) confirms that liquidity is becoming a problem in England now for the GBP.
Here's the link to the BOE's press release:
Some of the highlight's on the Introduction of the Extended Collateral Term Repo Facility include:
In light of the continuing exceptional stresses in financial markets, the Bank of England is today announcing the introduction of a new contingency liquidity facility, the Extended Collateral Term Repo (ECTR) Facility. This Facility is designed to mitigate risks to financial stability arising from a market-wide shortage of short-term sterling liquidity. There is currently no shortage of short-term sterling liquidity in the market. But should that position change, the new Facility gives the Bank additional flexibility to offer sterling liquidity in an auction format against the widest range of collateral. The introduction of the ECTR Facility underlines the Bank’s commitment to take appropriate measures to maintain UK monetary and financial stability.
The ECTR Facility will give the Bank the ability to ensure that the banking sector has a sufficient access to sterling liquidity to mitigate risks arising from unexpected shocks.
I haven't said this in a few weeks, but it's starting to feel like 2008 all over again, albeit on a much larger scale then just a $USD liquidity freeze.
Here's the link to the BOE's press release:
Some of the highlight's on the Introduction of the Extended Collateral Term Repo Facility include:
In light of the continuing exceptional stresses in financial markets, the Bank of England is today announcing the introduction of a new contingency liquidity facility, the Extended Collateral Term Repo (ECTR) Facility. This Facility is designed to mitigate risks to financial stability arising from a market-wide shortage of short-term sterling liquidity. There is currently no shortage of short-term sterling liquidity in the market. But should that position change, the new Facility gives the Bank additional flexibility to offer sterling liquidity in an auction format against the widest range of collateral. The introduction of the ECTR Facility underlines the Bank’s commitment to take appropriate measures to maintain UK monetary and financial stability.
The ECTR Facility will give the Bank the ability to ensure that the banking sector has a sufficient access to sterling liquidity to mitigate risks arising from unexpected shocks.
I haven't said this in a few weeks, but it's starting to feel like 2008 all over again, albeit on a much larger scale then just a $USD liquidity freeze.
While things are slow....
Right now it feels like the summer doldrums, of course whenever things are slow like this, it's usually the time to be paying the most attention and it always makes me edgy. In any case, this is about the most exiting chart I can find as far as today's trade goes..
DIA 2 min negative divergence.
So I thought I'd take a minute to work out some thoughts in my head about the EU summit Friday and all of the goings on of late (especially this week). Sunday night I mentioned the rumor floated by German Newspaper Die Welt that the House Republicans in their effort to block the IMF from bailing out the EU with US taxpayer dollars, could effectively be side-stepped by the "Independent" F_E_D loaning the money to the IMF, this of course (as I mentioned yesterday) seems like a slap in the face to the EU/ECB as that is what the entire world, led by the US have been pressuring the ECB to do, loan to the IMF to bailout Europe, something the ECB in recent statements has not been keen on, so this "rumor" as I said yesterday, seemed like a very sarcastic attempt by the US to humiliate the ECB in to action. I believe I was right, as I published yesterday, an ECB member (Jens Nowotny) came out with several comments that in a round about way addressed the rumor, such as:
NOWOTNY SAYS EUROPE CAN SOLVE CRISIS ITSELF
NOWOTNY SAYS NOT NECESSARY THAT USA `HELP OUT' EUROPE
NOWOTNY SAYS SMP CAN'T BE COMPARED TO FED, BOE PROGRAMS
These quotes were all from yesterday after the F_E_D rumor came out, so it seems the US hit the nerve they were looking to hit and now as of today, the main US agent provocateur, is making his rounds with ECB members and EU leaders, which is ironic because the last time he was there, he didn't really receive a very warm welcome and more of a, "Who invited you? Keep your opinions to yourself" type of welcome (I do believe a few quotes were nearly verbatim). So I find the F_E_D liquidity line a little ironic in its timing, it certainly did nothing to regain the confidence on the banking sector as they continue to park record amounts of cash at the EB, while weaker banks are borrowing near record amounts due to a liquidity freeze in both $USD and Euros.
Now, I know that the S&P really ticked the administration off when the lowered the US credit rating and soon after, there was a congressional investigation of the S&P and their calls way back in 2007, seems kind of childish. In any case, it would be hard to make the case that the S&P is acting as an agent of the US, but the Credit Watch issued yesterday on 15 of 17 Euro zone member nations, including Germany and a possible 2 notch downgrade for France, couldn't come at a more appropriate time or perhaps inappropriate as the S&P is virtually driving policy in the EU rather then issuing credit ratings after the fact, they are in a way, very directly effecting the outcome of the summit on Friday with the threat of these downgrades. I don't see that as an appropriate role for a credit rating agency, after the summit if they were to chime in, that would be perfectly legitimate, but putting a dagger to the collective EU member nation's throats seems to be a role that is out of line for a credit rating agency.
It makes me wonder really how independent they are in this action?
Draghi has been a little unclear about what the ECB would do if the EU came up with the new tightly consolidated fiscal union that would give the EU or some branch of it, the ability to tell a sovereign nation that their budget is not only vetoed, but to punish them with punitive fines for breaking the new rules. I don't know how this will turn out, who will be willing to give up their sovereignty to an increasingly German and to a lesser degree, French EU, the days of 1 nation 1 vote are over.
In any case, the pressure has instantly been turned up on the ECB. It "seems" from the S&P warning, that the ECB no longer has the luxury of standing by and waiting to see what fiscal union is created on Friday and then decide what their appropriate role would be, but it seems more like the S&P is forcing the ECB to become part of the solution as of Friday's summit, which of course endangers the independence they seek to maintain.
It just strikes me as beyond ironic that all of these events have played out in the last few days, actually 24 hours as of Sunday. Talk about introducing volatility on top of volatility.
Even Luxembourg PM and EU Finance minister leader, Jean Claude Juncker said today,
“I have to wonder that this news reaches us out of the clear blue sky at the time of the European summit -- this can’t be a coincidence,”
And this is exactly what I was thinking about yesterday when I said I wanted to clarify my thoughts about this. It is still baffling. Was the S&P put in a corner by the US government and is now acting as an agent to increase the pressure that the US is obviously exerting and in a somewhat humiliating or degrading way?
It would be hard to imagine, but the more I think about it, maybe it's not all that hard to imagine when the US government already has you on their %*^% list?
I will say that it is very likely that we will see extraordinary volatility and you may want to prepare yourself in any way you need to because whichever way this goes and it's likely to go one way for a short period and then flip flop, just like the EFSF leveraging did, it's going to be a defining moment for volatility in an already insanely volatile market.
So I thought I'd take a minute to work out some thoughts in my head about the EU summit Friday and all of the goings on of late (especially this week). Sunday night I mentioned the rumor floated by German Newspaper Die Welt that the House Republicans in their effort to block the IMF from bailing out the EU with US taxpayer dollars, could effectively be side-stepped by the "Independent" F_E_D loaning the money to the IMF, this of course (as I mentioned yesterday) seems like a slap in the face to the EU/ECB as that is what the entire world, led by the US have been pressuring the ECB to do, loan to the IMF to bailout Europe, something the ECB in recent statements has not been keen on, so this "rumor" as I said yesterday, seemed like a very sarcastic attempt by the US to humiliate the ECB in to action. I believe I was right, as I published yesterday, an ECB member (Jens Nowotny) came out with several comments that in a round about way addressed the rumor, such as:
NOWOTNY SAYS EUROPE CAN SOLVE CRISIS ITSELF
NOWOTNY SAYS NOT NECESSARY THAT USA `HELP OUT' EUROPE
NOWOTNY SAYS SMP CAN'T BE COMPARED TO FED, BOE PROGRAMS
These quotes were all from yesterday after the F_E_D rumor came out, so it seems the US hit the nerve they were looking to hit and now as of today, the main US agent provocateur, is making his rounds with ECB members and EU leaders, which is ironic because the last time he was there, he didn't really receive a very warm welcome and more of a, "Who invited you? Keep your opinions to yourself" type of welcome (I do believe a few quotes were nearly verbatim). So I find the F_E_D liquidity line a little ironic in its timing, it certainly did nothing to regain the confidence on the banking sector as they continue to park record amounts of cash at the EB, while weaker banks are borrowing near record amounts due to a liquidity freeze in both $USD and Euros.
Now, I know that the S&P really ticked the administration off when the lowered the US credit rating and soon after, there was a congressional investigation of the S&P and their calls way back in 2007, seems kind of childish. In any case, it would be hard to make the case that the S&P is acting as an agent of the US, but the Credit Watch issued yesterday on 15 of 17 Euro zone member nations, including Germany and a possible 2 notch downgrade for France, couldn't come at a more appropriate time or perhaps inappropriate as the S&P is virtually driving policy in the EU rather then issuing credit ratings after the fact, they are in a way, very directly effecting the outcome of the summit on Friday with the threat of these downgrades. I don't see that as an appropriate role for a credit rating agency, after the summit if they were to chime in, that would be perfectly legitimate, but putting a dagger to the collective EU member nation's throats seems to be a role that is out of line for a credit rating agency.
It makes me wonder really how independent they are in this action?
Draghi has been a little unclear about what the ECB would do if the EU came up with the new tightly consolidated fiscal union that would give the EU or some branch of it, the ability to tell a sovereign nation that their budget is not only vetoed, but to punish them with punitive fines for breaking the new rules. I don't know how this will turn out, who will be willing to give up their sovereignty to an increasingly German and to a lesser degree, French EU, the days of 1 nation 1 vote are over.
In any case, the pressure has instantly been turned up on the ECB. It "seems" from the S&P warning, that the ECB no longer has the luxury of standing by and waiting to see what fiscal union is created on Friday and then decide what their appropriate role would be, but it seems more like the S&P is forcing the ECB to become part of the solution as of Friday's summit, which of course endangers the independence they seek to maintain.
It just strikes me as beyond ironic that all of these events have played out in the last few days, actually 24 hours as of Sunday. Talk about introducing volatility on top of volatility.
Even Luxembourg PM and EU Finance minister leader, Jean Claude Juncker said today,
“I have to wonder that this news reaches us out of the clear blue sky at the time of the European summit -- this can’t be a coincidence,”
And this is exactly what I was thinking about yesterday when I said I wanted to clarify my thoughts about this. It is still baffling. Was the S&P put in a corner by the US government and is now acting as an agent to increase the pressure that the US is obviously exerting and in a somewhat humiliating or degrading way?
It would be hard to imagine, but the more I think about it, maybe it's not all that hard to imagine when the US government already has you on their %*^% list?
I will say that it is very likely that we will see extraordinary volatility and you may want to prepare yourself in any way you need to because whichever way this goes and it's likely to go one way for a short period and then flip flop, just like the EFSF leveraging did, it's going to be a defining moment for volatility in an already insanely volatile market.
Geo-Poltical Tensions must be keeping Stratfor busy.
Yesterday it was news of Argentina heating up the conflict over the Falkland Islands. Over the weekend, the President in waiting and "Man of Action Figure" complete with numb chucks, Hiking gear, a submarine and jet fighter, Putin, suffered a humiliating defeat in Parliamentary elections that saw his United Russia 9 think that's what they are called) party loose substantial seats and power as the communist party took the votes. Today students are protesting and shouting Russia without Putin.
It seems wherever you look on the globe, something is either cooking, is on simmer and will start cooking again or a new burner has been ignited. It's just a matter of time before a misunderstanding really heats things up.
I recently talked about how volatile the market was, just this week in fact, but do you notice how the entire world seems to be somehow in the middle of some brewing or long standing conflict in some manner? I don't ever remember a time like this.
It seems wherever you look on the globe, something is either cooking, is on simmer and will start cooking again or a new burner has been ignited. It's just a matter of time before a misunderstanding really heats things up.
I recently talked about how volatile the market was, just this week in fact, but do you notice how the entire world seems to be somehow in the middle of some brewing or long standing conflict in some manner? I don't ever remember a time like this.
Credit/Risk Basket Opening indications
So far pretty quiet here too with slight weakness pretty much throughout.
Commodities are slipping again today thus far in early trade.
High Yield Credit is about in line with the S&P on a short term basis, over a longer term view it is severely dislocated and much lower.
The market is a little ahead of the Euro with the Euro still not having taken out yesterday's afternoon highs and the market trading slightly above them .
It's still early, but there's a little decline in High Yield Corporate Credit.
Financials are slightly underperforming momentum wise, but not a big difference.
And Yields long term remain severely dislocated from equities as equities gravitates toward rates, on a short term chart of this morning, there's a little weakening in yields.
All in all, not too different from 3C and not too different then CONTEXT.
All in all, not too different from 3C and not too different then CONTEXT.
Opening Indications
So far not much to report on, everything is in line right now on the short end with a slightly firmer tone, but nothing is strong looking, no leading positive divergences or anything like that, just an in line opening thus far which is better then what we have seen the last few days.
CONTEXT is also in line with ES, I'm going to check for any changes in the credit/risk basket, although it is still very early.
CONTEXT is also in line with ES, I'm going to check for any changes in the credit/risk basket, although it is still very early.
The Midnight Upate
This is a new one! However I have been watching the market and CONTEXT and felt that it was worth the time of a post.
I have some feelings on the S&P rating action and Friday's EU summit that I will elaborate on as I think them through a little more. One thing is for sure, the pressure is on with 15 Euro nations on the negative downgrade watch and for the first time including Germany, the "possible" French 2 notch downgrade is a pretty big story as well. There have been quite a few very odd timed events leading up to the EU summit Friday, I'm still sorting out my thoughts, but I don't think they are coincidental.
As for ES tonight, it's leaking lower and the hourly ES chart looks like it's right on target and probably an effective timeframe.
Here's the hourly ES 3C chart, note the white accumulation area and remember what I say about accumulation and distribution, it typically occurs in a low volume environment as to not attract attention. Look at the volume f the accumulated lows. Furthermore the mark up period and the point where distribution began and where distribution is now all look about right in terms of volume and timeframe or in other words in terms of accumulated and distributed shares. The leading negative divergence on the hourly hart is a theme seen again and again in the averages, in major industry groups and in many stocks, so for me, it is believable here, it just would have a very ugly downside effect.
Here ES has been making a steady descent lower since the close and is now down close to 10 ES points.
Sine 9 p.m., every time I look at the CONTEXT model, it looks like this, the model (risk assets) are leading ES lower and ES is following.
We have a few hours until the European open, what I will be most interested in in the French 10 year bond rates followed by the German and finally the Italian rates. Being the ECB can't meddle in the French secondary market like they can with Italy, Spain and Portugal, I see French rates as the true risk metric in the EU. I see German rates as the speed and depth of contagion and I see the Italian rates as a possibly early game over signal. The Italian economy is at least twice the size of Greece, Ireland and Portugal combined, the EFSF can't raise money for Ireland credibly and at that auction I am speaking of, they were set to auction 10 billion euros in EFSF bonds, die to "market conditions" they reduced it to $3 billion and they couldn't even make that number without buying several hundred million in bonds themselves so the auction would not look like a failure; that's a long ways off from 1+ trillion dollars and if any of the major players lose their triple A, the EFSF becomes a dustbin which it has already been trading as if it were.
Expect some candy-coated EU rumors tomorrow to try to contain the fallout in rates from the S&P action today, while the ECB only spent about 10% of their allotted limit for secondary bond purchases, they are not going to want to try to drive the Italian BTPs back away from the 7% mark again.
We'll be taking a closer look at China tomorrow as well, I have a feeling things are worse there then they appear based on the way commodities and oil are trading.
I have some feelings on the S&P rating action and Friday's EU summit that I will elaborate on as I think them through a little more. One thing is for sure, the pressure is on with 15 Euro nations on the negative downgrade watch and for the first time including Germany, the "possible" French 2 notch downgrade is a pretty big story as well. There have been quite a few very odd timed events leading up to the EU summit Friday, I'm still sorting out my thoughts, but I don't think they are coincidental.
As for ES tonight, it's leaking lower and the hourly ES chart looks like it's right on target and probably an effective timeframe.
We have a few hours until the European open, what I will be most interested in in the French 10 year bond rates followed by the German and finally the Italian rates. Being the ECB can't meddle in the French secondary market like they can with Italy, Spain and Portugal, I see French rates as the true risk metric in the EU. I see German rates as the speed and depth of contagion and I see the Italian rates as a possibly early game over signal. The Italian economy is at least twice the size of Greece, Ireland and Portugal combined, the EFSF can't raise money for Ireland credibly and at that auction I am speaking of, they were set to auction 10 billion euros in EFSF bonds, die to "market conditions" they reduced it to $3 billion and they couldn't even make that number without buying several hundred million in bonds themselves so the auction would not look like a failure; that's a long ways off from 1+ trillion dollars and if any of the major players lose their triple A, the EFSF becomes a dustbin which it has already been trading as if it were.
Expect some candy-coated EU rumors tomorrow to try to contain the fallout in rates from the S&P action today, while the ECB only spent about 10% of their allotted limit for secondary bond purchases, they are not going to want to try to drive the Italian BTPs back away from the 7% mark again.
We'll be taking a closer look at China tomorrow as well, I have a feeling things are worse there then they appear based on the way commodities and oil are trading.
