Just as we saw yesterday afternoon, despite larger damage being done on 3-5 min charts which is unlike bounces of the past in which distribution wouldn't start for several days in to a new bounce whereas this started immediately on any price strength, the late afternoon positive divergences on the lower 1-2 min timeframes held the 3C concept of "Picking up where it left off the next day", true once again as openings looked like this which is exactly why I thought the intraday market maker/specialist/HFT timeframes were moving up, to continue a bounce and start with a gap up this morning.
However, overnight the damage continued on longer term, larger underlying flow charts like ES, NQ and TF 5 min charts.
As for our USO trade set up, USO Trade/s Set-up from yesterday, one of the things I expected was,
" Again, like Brent Futures, intermediate term charts like 10 min show near term accumulation for a bounce, I do think USO needs some more lateral trade to form a wider reversal process/short term base, but that's about it."
Remember the DUST position was closed yesterday on signals of a very short term oversold bounce in gold and GDX more specifically, Closing Friday's DUST Long For Now , thus far DUST is down just over 1% as the short term trade signal looks to be accurate, but it is short term at this point, perhaps a day, but we'll let the market tell us.
Overnight contagion in Portugal or Portugal's BES looks to be spreading, if you don't see the importance of this, the banking sector is a barometer of the broader economic environment just like Lehman really started the US economic collapse in 2008 and spread/contagion from there.
A non-financial arm of BES, Rioforte looks set to default on a $847 mn EUR laon payment due today to Portugal Telecom. Rioforte is trying to raise capital, it is said they can raise about $300 mn from the sale of their Tivoli hotel chain, but things still aren't looking good.
As far as the Bank Espirito Santo, their stock price and bonds have crashed.
Remember last week how quickly the default of a payment in the bank set contagion spreading within hours to sovereign country bonds on the periphery of Europe like Ireland, Greece, Spain, etc.
BES looks a lot like tinder or Europe's Lehman.
To add fuel to the fire, Portuguese Lending collapsed at a new record pace, coming in today at a decline of 8.23% m.o.m.
Other disappointing events in Europe included the German ZEW survey which missed at 27.1 on consensus on 28.2, prompting some European banks to claim the recovery (if there ever was one) is over.
The market initially reacted well this morning on the release of the Empire F_E_D survey which hit 4 year highs, but as always, the devil is in the details. The Business Outlook Survey fell the most on a month on month basis, the most in 3 years to 13 month lows. Employment expectations also declined as well as New Orders. Again, this was the worst Business Survey print in 13 months. Also falling was Cap-Ex spending which is something, despite the cheap loans and liquidity available, businesses have foregone, with many preferring financed stock buybacks rather than actually investing in their business, now Cap-Ex spending expectations are lower than the already stunningly low reality.
Retail Sales came in at another disappointing print after April and May, June printed at +0.2% vs consensus of 0.6%, ex autos came is at .4% vs consensus of +.5% and ex auto and gas came in at .4 missing expectations of +.5%. The Increase in retail sales is now at the slowest pace in 5 months showing there's a clear trend of decelerating spending. The only silver lining was May (as usual) was revised higher.
At last look Asia has closed with the Nikkei +.64%, Sanghai +0.18%, Hang Seng +0.49% and in Europe FTSE 100 -0.06%, DAX -0.08% and CAC 40 -0.09%.
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