Overnight and in to the open

The risk-on theme that started yesterday off the lows continued through the European session with financials leading the way. Sovereign spreads also tightened in Spain and Italy and EUR/USD recovered some of the deep losses that came with the Draghi press conference yesterday in which he punted rather than take the bold action that his statements of last week suggested he would take. Remember the FX post of two days ago that I brought up yesterday and said I believe it is correct, (yesterday I assumed the short term charts were skipped over and we went straight to the long term), today's Euro strength/Dollar weakness confirms that the charts of two days ago were absolutely correct thus far. I find it VERY interesting that these moves in the market are being telegraphed by 3C underlying action at least several days in advance! Market chatter is that there has been asset reallocation from fixed income (money has been bleeding out of stocks in to fixed income) back in to equities.

JPM did come out with a short Spanish 10 year bonds to 7.75% at which point they believe Spain will have no choice but to seek a bailout, we haven't talked much recently about how big of an event a Spanish bailout request would be, it's essentially the last domino as there is barely enough rescue funds to deal with what's already been promised and the permanent bailout mechanism still hasn't been activated or ratified and even if it was, it starts incrementally and the first envisioned incremental amount of $100 bn euros would be nowhere near enough to deal with a Spanish bailout as their banking sector alone is likely to need that. In addition, if Spain falls, it's more likely than not that Italy would be right behind them, at that point it is essentially game over for the Euro project and at a time when cooperation among the EU members is at an all time low-not that they could get anything done when they were all onboard.

Following the theme of the market telegraphing what is ahead through 3C in advance, today's US Non-Farm Payrolls beat big

Released On 8/3/2012 8:30:00 AM For Jul, 2012

	Prior	Consensus	Consensus Range	Actual
Nonfarm Payrolls - M/M change	80,000	100,000	70,000  to 165,000	163,000
Unemployment Rate - Level	8.2 %	8.2 %	8.1 % to 8.3 %	8.3 %
Average Hourly Earnings - M/M change	0.3 %	0.2 %	0.1 % to 0.3 %	0.1 %
Av Workweek - All Employees	34.5 hrs	34.5 hrs	34.4 hrs to 34.5 hrs	34.5 hrs
Private Payrolls - M/M change	84,000	110,000	80,000  to 180,000	172,000

The beat was 163k over consensus of 100k

Take a look at these two 3C charts...

 Yesterday's 3C positive divergence in to the lows of the day after GS calls for a Euro long despite both the F_E_D and ECB disappointing the market . Ironic that there were strong short term buyers at the lows in front of today' NFP beat.


Going back just a little further, 3C shows a leading negative divergence at the recent highs BEFORE DRAGHI Disappoints the market and sends it lower.

If I didn't know better 9which I probably do), I'd say someone is trading inside information, actually a lot of someones.

Even though we had a nice NFP beat today, this is VERY SHORT term good news, but for market participants, this is HORRIBLE news, KISS QE3 in September GOODBYE and that's the only positive hope left in the market.

I find it ironic too that this is what our charts wer saying clearly all day yesterday, short term price strength (Short term could be a half a day or a day or two), followed by severe price weakness, thus the "Let the trade come to you attitude of yesterday", nothing can be more disappointing to the US markets right now than no QE in September and with the elections it likely pushes any possibility in to 2013! Remember how bad news was good news? Just the same, good news is bad news as QE is the only game in town as far as the market is concerned and once again, 3C is telegraphing that and just for giggles, so was the FREE Goldman Sachs trading advice on the Euro! Oh yeah, this market is more rigged than a troop of puppets from Prague!


The SPY has gapped up about 1.5%-(nice number for a blow-off top) while the QE sentiment indicator, gold, has only moved up +0.21%. Also our VERY short term FB long from yesterday is up almost 2.5%.

The game is on, the signals are coming in clear right now and I'm happy.