Overnight and In to the Open

Talk about a reversal of the sewing circle rumors, where yesterday it seemed Spain would be left hung out to dry on its own as Germany sought to preserve its Aaa status, overnight there are reports that Germany is pressing Spain to take a full sovereign bailout rather than just a banking system bailout. I will take a victory lap here because the day the banking bailout intensions were released, we saw the problems with debt subordination and said this would force Spain in to a worse situation in which the entire country would need a bailout. How is it that we could see this the same day the banking bailout was announced, but all of the brains of the EU couldn't?

Since Moody's downgraded the outlook of the purse strings of the temporary bailout mechanism in the EU, the EFSF, they also took the additional step of downgrading the EFSF outlook from stable to negative, talk is that Germany (and probably the other 3 countries that still retain their Aa rating) will not contribute as much to the bailout fund, more uncertainty in the market place.


UK GDP overnight dipped -0.7% instead of consensus on -0.2%, this is the sharpest fall since 2009, not one economist surveyed by Reuters even imagined a number so bad, one that firmly puts the UK in a Double-Dip Recession with 3 quarters of recessionary GDP.

However, just like the WSJ article yesterday released just before the close was nothing but a rehash of F_E_D commentary already public (but it was released just before the market closed so the headline was all that mattered), the ECB's Notwotny (kind of sounds like a Harry Potter character), said the ESM bailout mechanism "may" receive a banking license, this is old and dead news as well, but enough to keep the market interested. This is not an issue under discussion, it's not even an active issue, but the press release is all that mattered, even though the ECB has rejected the idea more than once.


This morning one of our core shorts, CAT beat on earnings, but downgraded their outlook, can anyone guess what the downgraded outlook was attributed to? If you said China, gold star for you. It seem there's still a lot of doubt about China's ability to engineer a soft landing, of course their opaque political system can do whatever they want, but I mean in reality.

Gold/GLD are both up this morning, I can only speculate that this has to do with the WSJ story from yesterday, THERE IS NOTHING NEW IN THE STORY, it was designed to lift the market on headline scanning algos and thus far it has, interesting how there were positive divergences before the story's release. In any case, gold acting as the sentiment indicator for future easing is up and I'm quit sure it's on the WSJ article that John Hilsenrath published as he is seen as the unofficial mouthpiece of the F_E_D.

Finally at 10 a.m. New Home Sales came out and missed...

Released On 7/25/2012 10:00:00 AM For Jun, 2012

Prior Consensus Consensus Range Actual New Home Sales - Level - SAAR 369 K 370 K 358 K to 389 K 350 K The debate about the Housing recovery goes on as the report missed 370k consensus coming in at 30k.  This is the first miss since OCTOBER OF LAST YEAR!!!! This is also the biggest miss to expectations since October of 2010. As for ES... ES from yesterday's close to the Euro open at the green arrow (3 am EDT) ES from the Euro. open to present. The thing that strikes me is the solid uptrend, despite the UK in a confirmed double dip recession, the positive divergences (short term) were there and they've already been fulfilled to some extent with the market moving higher instead of lower on AAPL and UK data. As I have mentioned before, when the Wall Street sets up a cycle, thy rarely let it fail. So now we look for the reversal of the short term cycle/noise in the downtrend, updates will follow...