There's a lot to go through today with China really coming out with a surprising admission of what the global economy has already been reacting to for sometime now.
China, one of the most economically (and otherwise) opaque countries in the world came out and admitted things were not just going south, but the entire country's structure is for lack of a better word and I appologize, "Screwed".
Oil did exactly as I suspected and gave up gains, while China was certainly the catalyst to move that ball, I think it would have happened any way, this doesn't change analysis in USO which is still on going, but it changes a lot of other things, for example, China is Europe's biggest trading partner and considering Draghi's very optimistic GDP revisions and inflation revisions, one has to wonder how he can say that without a sinking feeling that any credibility he may have had, just poured out of his mouth on to the ground.
TLT is doing as suspected, although this in the context of a global bond movement virtually the moment Draghi started talking, as a reminder to yesterday's Treasuries/Yields Leading Indicator Update post, Treasuries/yields are MATERIAL to market analysis and while most of you understand why, I'll sum it up in a single chart...
The point is yields tend to pull equity prices toward them, with a rally (which may be a bit too soon as it just popped this morning), yields fall and as a result, that pressures the market lower in a place where almost all of our analysis is already pointing LOWER.
Unfortunately, any one of these subjects and the knee jerk effects as well as the strategic effects could take up an entire day of posts.
If you didn't hear, this is a snapshot of the overnight developments in China while I'm waiting for the UNG knee jerk off just reported inventories to subside.
China Lowers Growth Target to About 7%
(If you have a problem getting the article and a note about subscription, simply Google the title of the article above and you'll be able to read it without a subscription)
Some bullet points from multiple sources...
Additionally noting, (this is where I suggested the tone was that of the entire country's "Structure is screwed..again my apologies for the vocabulary) ‘China’s economic growth model remains inefficient; our capacity for innovation is insufficient, overcapacity is a pronounced problem and the foundation of agriculture is weak’.
The risk from Deutsche Bank's perspective is China experiences a "mini-hard landing" this year.
Li put the slower economic growth in terms of, "The new normal".
I'm sure if you read the article, you'll note a very somber tone from Premier Li.
As Europe's largest trading partner, I think you can see how this effects the credibility of Draghi's very optimistic GDP forecasts, even when he himself has noted that QE will accomplish nothing without EU countries making structural reforms which he has been pleading for for years, this at a time when the anti-austerity or "structural reform" movement is gaining momentum avross Europe. Syriza's rise shows that momentum and thir failure, as suspected was largely the very heart of Europe being threatened and had nothing to do with Greece itself, but European banks.
Just yesterday, the IMF director Batista (part of the Troika) admitted the Greek Bailout was to SAVE German and French banks. What could possibly go wrong in the EU?
Transports have not confirmed the Dow for you purists.
In any case, this is some of the background the current market stands and events are coming at us fast and furiously. It's not my job to be a news source, I'm terrible at that, but it is important to understand how one thing effects another or the butterfly effect rather than just hearing each piece of news, putting together probable outcomes and testing whether the market is discounting these, that's more my job.
In any case, I'll have as many updates as I can get out there for you as well as opportunities.
Thus far, the market is not surprising considering the staging and signals.
SPY intraday...
So far, the continuation of the Week Ahead's forecast for weakness...
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