The 3C charts weren't only positive in gold and negative the equity indices, but now gold has moved above Friday's close and is seeing a mini parabolic move, perhaps some news is out again
5 years ago
Sunday, March 24, 2013
THE WEEK AHEAD? THE HOURS AHEAD
If you have been following the Cyprus situation then you know it has been an absolute mind-numbing series of back and forths with every scenario you'd never have imagined playing out.
First as we closed up Friday on some of the lowest volume and average trade size of the year, we also saw the VIX higher on the week vs the SPX with protection being bid in the VIX (flight for safety), this especially the case going in to late Friday afternoon with a very uncertain weekend ahead that opens the new week with the threat of no more liquidity for Cyprus from the ECB if a deal is not reached.
Treasuries ended the week near their lows (flight to safety), copper was down -1.5% on the week (indicative of industrial demand and economic situation worldwide), transports are down on the week -1.49% vs the Dow down on the week -0.01%, transports have obviously come to their reckoning or reversion to the mean.
There was a Dominant Price/Volume Relationship in all four of the major averages as well as the NYSE composite (I don't have the NASDAQ Composite set up, but I'm sure it was the same), the relationship was "Price Up/ Volume Down", this is not the averages themselves, this is a count of the 4 possible price/volume configurations among all of the component stocks of each of the major averages. Price Up/Volume Down is the most BEARISH of the 4 possible relationships and it was dominant (which is not always the case) and among all the averages. It tells us that although price closed higher on the day, traders were backing away from jumping in the market and make commitments. The strongest relationship is Price Up/ Volume Up.
The EUR/USD ended Friday's trade by running up quickly (as we had discussed late last week) to the >$1.30 level and then quickly dropped back below before the week's FX trade closed out.
Going in to the weekend, I could have covered the events in Cyprus, but no one had any idea in the EU as usual and anything that came out would be denied 30 minutes later and nothing would have mattered as it all changed s quickly, just tiny footnotes in the history books.
Saturday's vote by Cyprus' Parliament was cancelled, but not before they voted for Capital Controls, the first in the history of the European Union as they desperately try to keep depositors from making off with their own cash, wow, isn't that a novel idea, take you own cash from a system that arbitrarily decides over the (last) weekend to arbitrarily take yours. Just wait, it won't be long before all of the EU implements capital controls to stop massive funds from Chinese and Russian depositors from fleeing the Union now that they have violated the trust of those clients.
Spain already announced this week a tax or bank levy (probably 0.2%) to be imposed on bank deposits, without details on which deposits will be affected or timing; thus the chance of sparking much broader deposit outflows across the union are rising quickly along with EU wide capital controls.
So Saturday's vote was pushed back, the vote was originally not re-scheduled (this was a vote to consider the same levy on bak deposits, although indifferent form-the same idea that received zero votes of support fro parliament the last time last week), then they said Parliament would meet after the 17 nation Fin.-Min. meeting on Sunday.
The new or next idea was a levy of 25% across the board on accounts above $100k Eur. so they can preserve the farce of EU deposit insurance (what we call our FDIC bank guarantees of $100k $USD). Talk about going down to the wire, the ECB made clear they would no longer fund Cyprus, forcing in to default and a probable Euro-area exit on Monday if an agreement wasn't reached by then, but only a day before the ECB ramped the market by saying they would provide Cyprus liquidity within the laws which is the caveat that most missed.
After it was known that the Parliament vote would be to enforce a levy of up to 25% on Popular Bank's deposits of over $100k (targeting many wealthy Russians and businesses), it seemed very imprudent as Russia could easily strike back through Gazprom and Europe would see the longest, coldest winter of what might be centuries given most have moved to gas heating and away from older technology.
Then this comment...
"“They will wait for many years before they see what percentage they will get back from their savings -- 30 percent, 40 percent, 50 percent, 60 percent, it will be seen,” Neofytou said during the debate in parliament."
The man said depositors could be impaired by as much as 60%!?!?!
Many things have happened since, "close on a deal", "No deal within sight", "arguments", endless meetings postponed or cancelled, etc, the typical EU bailout story.
Around 9 pm EDT tonight EU Finance Ministers agreed to terms of a deal struck by the Troika and Cyprus. What exactly this deal was, well?
However what we now now is that the Trokia managed to find a way to get around that pesky parliament that didn't agree with stealing money out of people's savings, yes, the deal, according to Germany's Fin. Min. ("I won't be black-mailed!") , Schaeuble, indeed says: No Cyprus Parliament Vote Needed.
Additionally, he also said the Troika is to contact Russia, I suggest they use the red line as Russia has seen Germany and the EU call open season on Russian deposits, mark my words, THEY WILL RESPOND WITH DISPROPORTIONATE MEASURES (and that seems like a stretch to match what the EU is doing, but I'd bet Gazprom and EU energy prices next winter will be the front page headlines with pictures of frozen Europeans in their own homes).
What we know so far is the market initially responded to the sounds of a deal as that ECB Monday deadline was not going to be a picknick and after running the stops, the SPX and NDX futures shot up, as you saw in to a growing, large leading negative divergence in EUR/USD as well as the EUR shot up above the $1.30 level and is holding in a , well, a holding pattern in lateral trade.
From the EuroGroup:
First as we closed up Friday on some of the lowest volume and average trade size of the year, we also saw the VIX higher on the week vs the SPX with protection being bid in the VIX (flight for safety), this especially the case going in to late Friday afternoon with a very uncertain weekend ahead that opens the new week with the threat of no more liquidity for Cyprus from the ECB if a deal is not reached.
Treasuries ended the week near their lows (flight to safety), copper was down -1.5% on the week (indicative of industrial demand and economic situation worldwide), transports are down on the week -1.49% vs the Dow down on the week -0.01%, transports have obviously come to their reckoning or reversion to the mean.
There was a Dominant Price/Volume Relationship in all four of the major averages as well as the NYSE composite (I don't have the NASDAQ Composite set up, but I'm sure it was the same), the relationship was "Price Up/ Volume Down", this is not the averages themselves, this is a count of the 4 possible price/volume configurations among all of the component stocks of each of the major averages. Price Up/Volume Down is the most BEARISH of the 4 possible relationships and it was dominant (which is not always the case) and among all the averages. It tells us that although price closed higher on the day, traders were backing away from jumping in the market and make commitments. The strongest relationship is Price Up/ Volume Up.
The EUR/USD ended Friday's trade by running up quickly (as we had discussed late last week) to the >$1.30 level and then quickly dropped back below before the week's FX trade closed out.
Going in to the weekend, I could have covered the events in Cyprus, but no one had any idea in the EU as usual and anything that came out would be denied 30 minutes later and nothing would have mattered as it all changed s quickly, just tiny footnotes in the history books.
Saturday's vote by Cyprus' Parliament was cancelled, but not before they voted for Capital Controls, the first in the history of the European Union as they desperately try to keep depositors from making off with their own cash, wow, isn't that a novel idea, take you own cash from a system that arbitrarily decides over the (last) weekend to arbitrarily take yours. Just wait, it won't be long before all of the EU implements capital controls to stop massive funds from Chinese and Russian depositors from fleeing the Union now that they have violated the trust of those clients.
Spain already announced this week a tax or bank levy (probably 0.2%) to be imposed on bank deposits, without details on which deposits will be affected or timing; thus the chance of sparking much broader deposit outflows across the union are rising quickly along with EU wide capital controls.
So Saturday's vote was pushed back, the vote was originally not re-scheduled (this was a vote to consider the same levy on bak deposits, although indifferent form-the same idea that received zero votes of support fro parliament the last time last week), then they said Parliament would meet after the 17 nation Fin.-Min. meeting on Sunday.
The new or next idea was a levy of 25% across the board on accounts above $100k Eur. so they can preserve the farce of EU deposit insurance (what we call our FDIC bank guarantees of $100k $USD). Talk about going down to the wire, the ECB made clear they would no longer fund Cyprus, forcing in to default and a probable Euro-area exit on Monday if an agreement wasn't reached by then, but only a day before the ECB ramped the market by saying they would provide Cyprus liquidity within the laws which is the caveat that most missed.
After it was known that the Parliament vote would be to enforce a levy of up to 25% on Popular Bank's deposits of over $100k (targeting many wealthy Russians and businesses), it seemed very imprudent as Russia could easily strike back through Gazprom and Europe would see the longest, coldest winter of what might be centuries given most have moved to gas heating and away from older technology.
Then this comment...
"“They will wait for many years before they see what percentage they will get back from their savings -- 30 percent, 40 percent, 50 percent, 60 percent, it will be seen,” Neofytou said during the debate in parliament."
The man said depositors could be impaired by as much as 60%!?!?!
Many things have happened since, "close on a deal", "No deal within sight", "arguments", endless meetings postponed or cancelled, etc, the typical EU bailout story.
Around 9 pm EDT tonight EU Finance Ministers agreed to terms of a deal struck by the Troika and Cyprus. What exactly this deal was, well?
However what we now now is that the Trokia managed to find a way to get around that pesky parliament that didn't agree with stealing money out of people's savings, yes, the deal, according to Germany's Fin. Min. ("I won't be black-mailed!") , Schaeuble, indeed says: No Cyprus Parliament Vote Needed.
Additionally, he also said the Troika is to contact Russia, I suggest they use the red line as Russia has seen Germany and the EU call open season on Russian deposits, mark my words, THEY WILL RESPOND WITH DISPROPORTIONATE MEASURES (and that seems like a stretch to match what the EU is doing, but I'd bet Gazprom and EU energy prices next winter will be the front page headlines with pictures of frozen Europeans in their own homes).
What we know so far is the market initially responded to the sounds of a deal as that ECB Monday deadline was not going to be a picknick and after running the stops, the SPX and NDX futures shot up, as you saw in to a growing, large leading negative divergence in EUR/USD as well as the EUR shot up above the $1.30 level and is holding in a , well, a holding pattern in lateral trade.
From the EuroGroup:
- *DIJSSELBLOEM SAYS DEPOSITOR LOSSES STILL TO BE DETERMINED
- *REHN SAYS EU TO PERFORM NEW CYPRUS DEBT-SUSTAINABILITY STUDY
- *DIJSSELBLOEM SAYS LAIKI BANK TO BE RESOLVED IMMEDIATELY
Additionally,
Safeguard all deposits below EUR 100.000 in accordance with EU principles.
There will be an appropriate downsizing of the financial sector, with the domestic banking sector reaching the EU average by 2018.
Measures include the increase of the withholding tax on capital income and of the statutory corporate income tax rate. The Eurogroup looks forward to an agreement between Cyprus and the Russian Federation on a financial contribution.
The Eurogroup expects that the ESM Board of Governors will be in a position to formally approve the proposal for a financial assistance facility agreement by the third week of April 2013 subject to the completion of national procedures.This is another typical EU deal that is not a deal because the EU's ESM hasn't approved it, we see this every time and several countries always veyo these bailouts.
1. Laiki will be resolved immediately - with full contribution of equity shareholders, bond holders and uninsured depositors - based on a decision by the Central Bank of Cyprus, using the newly adopted Bank Resolution Framework.
2. Laiki will be split into a good bank and a bad bank. The bad bank will be run down over time.
3. The good bank will be folded into Bank of Cyprus (BoC), using the Bank Resolution Framework,after having heard the Boards of Directors of BoC a nd Laiki. It will take 9 bn Euros of ELA with it. Only uninsured deposits in BoC will remain frozen until recapitalisation has been effected, and may subsequently be subject to appropriate conditions.
While there's more, I think this is what is important, "Good bank, bad bank", good bank is the insured <$100k, bad bank is deposits over >$100k (largely Russian Money).
Here's what it means thus far, although as noted, "Depositor losses are still to be determined":
Bank of Cyprus uninsured 'savers' will face 40% haircuts and Laiki uninsured 'savers' as much as 100% (or total wipeout). Laiki is the same as "Popular bank, it's the largest lender, it has the bulk of Russian deposits.
If you didn't catch it, this entire deal to default was designed to bypass parliament as it is not considered a "tax", but a bank restructuring, clever right? WRONG, this deal is FAR worse than what was proposed last week.
Uninsured depositors or those with more than $100k could be TOTALY WIPED OUT!!! Depositors of $100K and under will be protected to avoid a pan-European bank run, Depositors who are uninsured (>$100k) at the bank of Cyprus may see as much as 40% of their money taken. EU officials confirmed to Bloomberg that depositors of >$100k at Popular bank or Laiki WILL BE LARGELY WIPED OUT!
Other than that, we have little more information than we did Friday afternoon as far as deal terms.
And SPX futures rise on this news? This could be one of the biggest Financial calamities we have seen in Europe this far, perhaps in the world and the market chooses to whistle past the graveyard with very little information, a scheme that bypasses the parliament and terms that are much more severe than last week's incredible announcement.
Hats off to the EU, they have done it once again, I would just tell you that I would not buy this at all, we will see what it looks like tomorrow, but this is the real potential black swan if I have ever heard of one and I was there through Lehman minute by minute.
Futures Frothy
My next post will cover the market in more detail, for now remember my last impression of the market for Monday, a thin shiny veneer with rot below that or a "Ginger Bread House"
ES futures open this week's trade with a gap down, running the sops and moves higher in to a deep 3C leading negative divergence
By contrast, gold futures opened lower and have a leading positive 3C divergence.
NASDAQ futures also did the same as ES, also have a leading negative 3C divergence.
The EUR/USD which obviously opened higher also has the expected negative divergence.
I think it will be a long, interesting night.
By contrast, gold futures opened lower and have a leading positive 3C divergence.
I think it will be a long, interesting night.
