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The G20 Was A Dud, So What Now?
From Nic Lenoir of ICAP
Surprise surprise, the G20 was a flop. At least the Brazilian delegation had the good taste of not wasting the use of a private plane, a few suites, and that meant more hors d'oeuvres for Tim and Ben. Nothing was achieved, the final statement was about as non-committal as the fine print of any official document nowadays. German officials actually called out the US hypocrisy of talking down currency intervention when excessive monetary largesse has for only consequence an implicit devaluation. So if anything we know that we can't really count on any cooperation in the future. And Japan reminded everyone it would do whatever is needed to prevent excessive appreciation of the Yen, though people still wonder where the BOJ was at when USDJPY printed new lows. Markets jumped the gun and initially looked at this as a "risk-on" / status quo opportunity. However I am not so sure we can see much more in that domain until the Fed lets the cat out of the bag for good. After all equities had a run up of 10% over the last couple months, the dollar index has sold of 12% since June, and a lot of that move has been driven by quantitative easing expectations, so would seem to me a bit ambitious for traders to turn around and add to positions or initiate fresh ones one week ahead if the actual announcement (unless Ben spilled the beans over a harvest of Korean BBQ this past weekend). Gold, if it breaks above 1,350 will clearly make a case for further extension of the QE trades that drove the market the past few weeks and as long as 1,328 is not violated on the downside it is possible to view the price action here as constructive. For the reasons mentioned above I would wait for a break rather than try to front run the herd front-running the Fed. The Shanghai composite also looks like it peaked its head above resistance and triggered a bullish exit after flagging but that market is tricky enough and uncorrelated enough to Western equities that I would gladly wait to see some follow through being endorsed more broadly than just take that Index's price action at face value.
That is why I walked in this morning a bit suspicious of the price action overnight and I will remain so until we see a clear reversal of the buy signal in the VIX (see chart), crude oil breaking out above 84.5/85 (in which case traders should definitely get long), or the DXY make a fresh low. USDCAD seems to me like it is consolidating after the initial impulse. EURUSD and AUDUSD are a bit difficult to read. In terms of Elliott they don't really exhibit too much bearish characteristic but they are so choppy it would not be surprising if they consolidate more and have wide trading swings. The Dax is very interesting. After indicating the 6,675/6,750 as a potential topping area last week, we tested the lower end of this range this morning and left an inauspicious candle on the highs after gaping up. Should we gap down at or below 6,634 on open tomorrow in fact we would have an island reversal which is quite bearish to say the least.
Treasury futures' behavior was a bit peculiar today. After going vertical off of the the H&S neckline/support, the market reversed quite abruptly in the afternoon following the TIPS auction which was the first ever negative yield print. While I really like the idea of owning TIPS in case the Fed cannot manage the impossible task of successfully creating inflation without it being hyper, one thing occurred to me: the coupons are based on CPI which is the most manipulated data series out there or close enough to a tie with NFP. According to shadow stats reading were north of 6.5% during the last Fed hiking cycle if one used the definition prevalent in the 80s (stated from memory, facts might not be absolutely accurate but definitely the idea is there, apologies for the slight lack of precision). However your coupon would have paid you based on the much lower official reading of the CPI. While in the case of hyperinflation it would be hard to use enough gimmicks to mask the extent of the robbery taking place, you're still getting robbed of a solid 4% on your coupons... And to believe the Fed and the Treasury have input as to how the CPI is calculated when it precisely impacts the interest paying burden of the country or the credibility of its policies is of course a wild assumption made by ill-advised conspiracy paranoids... or is it? Food for thought. Even though you will probably get robbed owning TIPS, it could turn out to be a lesser evil if the dollar starts moving below the key 74.90 support and if anything today's auction's results might have made the longs of Fixed coupons a bit more uneasy at these yields levels.
Good luck trading,
Nic
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The status quo is still intact. Begger-thy-neighbor is still the working model, although no one want to just quite the system altogether.
Want to vote &/or quite the system altogether ...
The “catalyst” … gold & silver is money.
Do something. Get some.
Was it really a dud? Looks to me as the battle lines have been more firmly drawn. It's sort of a big deal for Germany to call the USA a currency manipulator and Asia basically telling the USA to go to hell. The doomsday weapon is still in Zimbabwe Ben's hot little hands but it looks like some are willing to at least point out he is holding the doomsday device.
> The G20 Was A Dud, So What Now?
Let's wait patiently for Dow 12000 and 11% unemployment.
How abouts just have another one?
So what now?
Just hunker down, and wait for Friday.
Possible top on ES futures today.
Fire away!!
At least post one of your patented chick pics to represent this chart! (I know it won't be easy to find chix with pineapple-smooth skin)..
Yeah, 80% of stocks are now above their 50 DMA and 70% are above their 200 DMA. I'm just not sure it matters.
http://www.finviz.com/futures_charts.ashx?t=CURRENCIES
What now? Well, every major currency went green today. That's what now.
I mean, what the fucking fuck, man.
Deep breath, Funkadelic.
Deep breath.
Now, look at the chart and see what it is telling you, not what you want to see.
:D
what now? this QE2 story has best chances to be a "sell the fact" type of event.
the potential for disappointment is huge!
http://themacronavigator.blogspot.com
Won't happen. If the market is at all "disappointed" when QE2 is rolled out (this means the S&P doesn't go up by at least 5 percent; forget about going down, that's been outlawed), Ben will just up the ante and print some more Bernanke Bucks.
Totally OT, but I would love to see this...
They are trying to raise money to call out Krugman to debate one of the Austrian school's leading lights, Robert Murphy.
They are trying to raise $100K for charity to force Krugman to take the challenge, and are up to about $30K in six says, which isn't too shabby for an economics debate.
http://www.thepoint.com/campaigns/campaign-0-1240
Optimists collect gold and silver, pessimists collect guns and ammo, realists collect shoes and socks, 'cause we don't make them in America anymore.
Furthermore, TIPS spreads as an inflation indicator went out the window when the Fed started buying them with printed money.
Some form of this ought to be asked on economics department entrance exams with IMMEDIATE FAIL as the outcome for a wrong answer.
Global industrial output growth slowed to below its historical average rate in August 2010. The slowdown has been led by developing countries (excluding China), which posted a 1% contraction in the three-months ending August (3m/3m saar). Even in China, which posted third quarter GDP growth of 10 percent (saar), industrial production expanded at a modest 4.8 percent pace in the 3-months ending August 2010. Our baseline expectation is for IP growth to regain its historical trend. However, the depth and duration of the slowdown will depend significantly on final demand, the dynamics of which are mixed. Strengthening retail sales in Europe, the United States and Japan; slowly improving labor market conditions, and strong machinery and equipment sales point to firming demand. However, declining exports in Japan and Europe, and a still deteriorating housing sector in the United States point in the opposite direction.
http://blogs.worldbank.org/prospects/prospects-weekly-global-industrial-...
As Recovery Summer fades into The Fall of Recovery, one wonders what is next for us serfs.
(Capitalize where necessary.)
"While I really like the idea of owning TIPS in case the Fed cannot manage the impossible task of successfully creating inflation without it being hyper, one thing occurred to me: the coupons are based on CPI which is the most manipulated data series out there or close enough to a tie with NFP."
This just occurred to you? What the fuck planet do you live on, Nic???
At any rate, gold does need to move convincingly through 1350 for us to see more short term upside. I'm quite certain that it will between tomorrow and Thursday and it will then be allowed to move to 1365 by next Monday. Expect Blythe to throw the kitchen sink at it there so that she can paint the tape with a head-and-shoulders top.
From there, its all up to HellyBenny and the size of his QE.
just a nod / dig to the "protect-the-shield" types. middle finger to the haters. the weekend was very interesting in retrospect fx wise.
I have been buying gold and silver since 1995 or so. My family has been buying for 200 years. Discounting what hey have done, in my account I figure I'm up about 600% or so. Now what is intersting is I am not up 600%, I have only kept my wealth fromt he moment i purchased my precious.
I am not richer I have saved my savings - nothign more.
Wierd man, My family in 200 years never really worried much about gold/silver, tehy simply believed that they needed to accumulate so that sometime in the future they or their family would sell it to save their hides. Bribe guards to escape the country/prison etc, bribe a politicians etc. That sort of thing.
Little did i believe it woud happen in my lifetime.
May yoru moguls in the yard give you peace.
Now load up on guns, grub, and bitchez and hope we all do OK when the zombies come calling
Chart: ES
The top is in.
http://99ercharts.blogspot.com/2010/10/es_1494.html
http://www.zerohedge.com/forum/99er-charts
And to believe the Fed and the Treasury have input as to how the CPI is calculated when it precisely impacts the interest paying burden of the country or the credibility of its policies is of course a wild assumption made by ill-advised conspiracy paranoids... or is it? Food for thought.
which one of the basement dweller-haters is doing the dishes, bitchez?
If QE2 is a dud and they do not buy at least $2 T in MBS, this is going to be brutal...
What now?
Witness the colossal battle going on between the Swiss and the Japanese at the CHFJPY 83-level.
Will the Swiss or the Japanese be more successful at "debasing" their safe-haven currrency relative to the other, despite the G-19 suppositions? This is gonna be cool...
Step right up and place yer bets...
Orly