Archive - Jul 2011 - Story

A snapshot of the US Afternoon Briefing covering Stocks, Bonds, FX, etc.

Market Recaps to help improve your Trading and Global knowledge

Europe is now closed, which means the ES no volume ramp into the close will likely be next, even as the RISK index trails and allows another 10 point divergence at EOD, for today's pair trade compression opportunity. We will demonstrate it when it appears. Of course, nothing has changed, and in fact things in Europe are getting exponentially worse, with contagion now squarely hitting Italy and Spain, both of which have seen their spreads and CDS blow out in both the past week and YTD. Below is a visual update of the massacre.

This is getting bad. The market, like the good Pavlov dog it is, will start associating the president's now daily appearance with market plunges. Oh well. Some comedy relief nonetheless for those (the majority) that is not watching the Tiger address at the same time.

Update: News Corp. pulls antitrust submission only for BSKYB but the bid remains in effect. Whatever, it's only a matter of time.

Casualty #2.

• NEWS CORP. WITHDRAWS PROPOSED UNDERTAKINGS ON BSKYB
• NEWS CORP. REFERS TO BSKYB COMPETITION COMMISSION REFERENCE
• BSKYB DROPS AS MUCH AS 11% IN LONDON

Next up: the WSJ

Done and done.

Unicredit, which was halted briefly before after hitting its down limit, has reopened, and the investing public welcomes this by total dumpage. Stock down as much as 10.5%. Expect Consob to elevate up its naked short selling ban to a ban of all financial stock shorting.

Oops:

• INTESA SANPAOLO SPA <ISP.MI> SUSPENDED FROM TRADING LIMIT DOWN
• UNICREDIT <UCG.MI> SUSPENDED FROM TRADING LIMIT DOWN

Bank holiday limit up?

The US embassy in Damascus, Syria, wass reportedly scaled by protesters on Monday. A US official says the Obama administration will formally protest the 'attack' on the embassy and may seek compensation for damage caused when a mob breached the wall of the compound before being dispersed by Marine guards, according to the Associated Press. This photo, posted on Facebook, purportedly shows protesters scaling the fence around the US embassy.

The schizophrenic EU once again confirms it has forgotten to take its daily dose of Geodon. Reuters reports that banks in the European Union face curbs on how much they can depend on ratings from credit agencies to calculate the size of their capital safety cushions. Michel Barnier, the EU's financial services chief, said he will make the proposals as part of his reform to bring EU bank capital requirements in line with a global accord known as Basel III that will increase the size of capital buffers. "To limit overreliance, we will be strengthening the requirement for banks to carry out their own analysis of risk and not rely on external ratings in an automatic and mechanical way... We will also make other concrete proposals before the end of the year to limit over-reliance to deal with insurance, asset management and investment fund sectors," Barnier also told the European Securities and Markets Authority (ESMA). Translation: banks will be told to .... police themselves. As for the basis of this move, it is all too clear: remove the influence of the ratings agencies on the fact that the European ponzi is unravelling faster than Lady Gaga's costume at next year's VMA. But wait, what about that AAA rating on the "CDO at the heart of the Eurozone." Oh, well, since that's an AAA, they are fine with that. Of course, if the CRA's say enough, and actually slap a rating that is truly appropriate with this reverse synthetic debt contraption, it's game over.

Just when it seemed things were shifting back to the optimists’ camp, Friday’s news about the state of the world threw another spanner in the works. In addition to a very disappointing US nonfarm payrolls report, Italy came into the spotlight in the European crisis. Subsequently, the earliest of the June data releases from China look somewhat of a mixed bunch too. China’s CPI came in at the high end of expectations and there was a notable rise in the trade surplus due to soft imports....I had been pretty strongly in the camp that the US recovery had only temporarily stalled during the past couple of months, and that higher food and energy prices, along with the disruption of the Japanese supply chain, were responsible for the softer data. But if Japan is witnessing a bounce back, it should be seen elsewhere too. I can’t see DATA.

From Reuters:

PRESIDENT BASHAR AL-ASSAD LOYALISTS BREAK INTO U.S. EMBASSY COMPOUND IN DAMASCUS-DIPLOMATS IN SYRIAN CAPITAL

And getting worse per RanSquawk:

French Embassy guards fire live ammunition to repulse crowd loyal to president Assad on Embassy compound in Damascus

At FMX|Connect we offer little variety in the technical analysis arena. We leave that expertise to Peter Beutel of Cameron Hanover fame, one of the preeminent energy analysts of our generation and someone with whom we are proud to partner. There are however two indicators that we feel quite comfortable with. These indicators are largely based on probabilities and volatility, areas we are much more at home assessing. The first one we’ve called our Trend-Vol Indicator. It measures the risk-reward in being short volatility through its cycles. Secondly, it often gives a low noise directional indicator which our readers may know we’ve used with some success during this Gold bull market. Its methodology is largely home-grown and proprietary: but suffice to say, it is a concoction of Bollinger bands, historical and implied volatility correlations, with a dash of skew thrown in. The second indicator we claim less ownership of, but have done some refinement to. It is something called the 6 Week Reversal signal, and if memory serves, was popular with Connors and Raschke for a while. Silver is entering an area right now that puts it on our radar for both indicators. This is extremely rare, considering the Trend-Vol system is used for breakouts, and the 6WR is for reversals. Before we get into it, some basic technical stuff we see in Silver.

The story of John Boehner's campaign contributions from Matt Taibbi earlier this year seems to have gotten a second wind with those who just now realize that politicians end up going to the highest bidder. Yes, it's funny because it's true. However, in order to bring some objectivity to the debate, below is a very quick comparison study in lifetime campaign fundraising between John Boehner and top democrat Harry Reid. The results speak for themselves.

This is getting serious boys and girls. Not even an hour ago we wrote about the EURCHF taking out the record 1.1801 low. Minutes later, and the pair has now tumbled another 100 pips and just hit 1.1695 without any indication it will stop. Follow this pair for the most liquid indication if the European house of cards will tumble today. And to celebrate the collapse of Europe's ponzi, Intesa Sanpaolo (remember them?) just got halted after tumbling over 6%.

Gold has risen to new record highs in pounds and euros as concerns about contagion in the eurozone and stagflation in the UK deepen. The euro has fallen sharply in international markets and is down 1.5% against gold so far this morning. European Council President Herman Van Rompuy has called an emergency meeting of top officials dealing with the euro zone debt crisis as concerns deepen over the sovereign debt crisis spreading to Spain and Italy. Spain’s 10-year yield spread over Germany widened to a euro-era record of over 300 basis points. Italian and Portuguese bonds are also under pressure with Portuguese 10 year yields surging to 13.4%. The risk of contagion affecting European and international banks and a new banking crisis rises by the day. Meanwhile, in the U.S., President Obama is seeking a massive $4 trillion in a deficit reduction package. Failure to do so may lead to a U.S. and global sovereign debt crisis.