This page has been archived and commenting is disabled.
Global Macro Update
By Nic Lenoir of ICAP
First of all: my bad. I was extremely happy after picking up the 1,040/1,045 bottom in S&P future despite being as bearish as just about anyone else on the street (380 long term target still stands). At 1,085 I thought we had a decent bounce, and fully expecting the entire world to pile on the market around the 200-DMA I figured I would recommend people to start squaring up and gear up to get ready to short the market. Clearly I had either too much faith in the bear community or misjudged the enthusiasm in the market.
Real money was clearly looking to fish for some opportunities around 1,040, which combined with a loss in momentum and bullish divergence allowed us to identify a local bottom. However funding has not really improved much, at least if one uses the 3M Libor as the benchmark of the USD money market's health (in this case though it's European banks creating the distortion). ECRI leading indicators are rolling over faster than I do on Sunday morning, most industrial surveys are starting to show disappointing numbers, and retail sales are hedging lower too. Meanwhile there is a new wave of mortgage refinancing that started this spring, Europe is insolvent and the current fix will only delay the collapse or at least partial break up of the union (which the market is well aware of if one believes the EURUSD price action). Truth be told we are starting to see the first fundamental signs of the economic cycle rolling over, and as evidence piles up this will provide the elements to convince long term investors using Q4 2009 and Q1 2010 earnings and earnings growth as a guide for the next 20 years that maybe not is all that well. That is what I expect to kick-start the next big avalanche, when fundamental investors' models start pointing south. There are a some fundamental bears out there but most of them don't have a pre-canned model spitting out a 500 S&P target easy to market. It was the same when there was no pre-existing model saying subprime defaults could actually hit 15% without breaking a sweat even though people who did their homework on the actual pools of loans and the underlying houses being bought actually found it was a foregone conclusion. Either way my point is that as we were getting the first signs of real economic deterioration, on top of distress in the financial markets observed over the past 2/3 months, the market suddenly decided to break out to the upside... I won't even mention the looming specter of financial regulation ready to bite 20 points out of the S&P without notice on an ill-thought announcement.
Technically there is no denying it we are breaking out, and the next resistance is at 1,150 in the S&P future. We had indicated 1.2154 as the resistance for EURUSD. We had a textbook test at 1.2152, then a break, and a retest at 1.2168 last night... It does not get much more friendly like this technically, and those who bought are now almost 2 figures in the money so they have a bit of room to hang in case of volatility. AUDUSD has also broken 0.8575. There is intermediary resistance at 0.8737 but just like EURUSD the 50-DMA seem very likely candidates for a retracement. The fact the market broke after a series of rather disappointing economic numbers and on no volume following absolutely nothing positive is precisely what worries me: people could end up chasing it and then chasing it some more because of the lack of initial participation... until another sign of the impending disaster crash creates panic again.
Commodities are well bid. While we did not have a clear techncial signal for crude ever since $70 was tested we favored upside, and the market is picking up pace here. Gold is the great unknown as it has had swings in correlation to risk of late. Personally I think that since all is driven ultimately by central bank liquidity being injected Gold should start rallying again. 1,237 is the acceleration level. Also look at Lumber which has pulled back close to a major support. We are bullish lumber here.
The one market that puzzles me on this break as it is not playing ball at all is US Fixed Income... The market is hardly selling off and in pact the red pack is trading up on the day. If there is any follow through to this return of risk appetite (see our piece last week) Fixed income should follow suite and go test the key support at 118-26/119-00. Looking at the hourly chart we see that since the lows of June 3rd we have had a bullish impulse and now we are shaping a triangle. We would pay quite a lot of attention when the market exits this triangle as the next move after this consolidation should have some decent legs.
Buying lumber and playing the breakouts in 10Y futures and gold are the only two really clear technical plays I see here as I remain too dubious about equities, probably only to see the market go make new highs... Oh well, I'd be very happy to get a chance to sell 1,300.
Good luck trading,
Nic
»
- 6339 reads
- Printer-friendly version
- Send to friend
- advertisements -
You people are nuts throwing your money out on the mafia table.
As of 1Q2010 combined federal and state spending (borrowing) constitutes 39% of GDP. Soon we won't have to worry about the private sector anymore. There won't be one.
Forget this risky investing shit, get a government job and steal all you want, risk-free.
Get a government job as a Regulator, such as the clowns at the SEC/CFTC. You won't have to steal. You will get paid a huge salary, benefits, perks, etc. AND receive backdoor and under-the-table payments to "look over there!".
With absolutely no conscience the fact that you will have taken virtually the SAME oath as our military men/women, you will not even consider it stealing when you are paid for NOT doing your sworn duty.
You reading this Bart Chilton, you f**king compromised/corrupt Wall Street WHORE!?!?!
Yeah, but we don't get any of that. My cousin at JPM and my broke ass neighbor who's defaulted on his mortgage are the ones getting all your treasure. Not me.
I am totally new to this, but this type of post from seeking alpha is total bunk.
4:05 PM Market recap: Stocks surged all day after a string of mostly favorable economic reports and roared to a strong close, with the S&P breaking through its 200-day moving average and all 30 Dow components posting gains. But the biggest gains were on the Nasdaq, as Best Buy's (BBY) report noting strong PC sales boosted techs. The euro rose past $1.23, reflecting more confidence in Europe's handling of its debt crisis.
well, since you're new to this you probably don't know that numbers released early -- 8:30 and 10Am, -- age like fine wine, and no matter how bad, by noon the media declares them "positive" "strong"..."robust" is also a descriptor they like.
rest assured, since no one ever reads beyond a headline, the rest of the market is completely unaware of the fact the ground is, in actual fact (something out of style these days), evaporating beneath our feet.
invest happily, merrily and secure in the knowledge that about five people look at the real numbers or remember that they were actually bad....and they are short, and burnt out by two o'clock.
Again, I remind you, the last "rally" in 2009 to the April highs was based upon earnings beating consistently due to easy comps and inventory builds. We don't have that this time around.
Already, we've seen a couple of pre warnings due to European sales slack. We saw Best Buy, a strong consumer barometer, miss by a mile. We see home builders pretty damn pessimistic. We have an oil gusher in full spew mode. On and on.
These issues weren't in the forefront during the last "rally". I don't think we'll see 1150. Actually, I wouldn't be surprised at all to see us close right back below that 200 dma tomorrow.
While you can argue that end Q window dressing will pull us higher, I think reality will trump.
Harry, what happened to you? Your mom dont make kool-aids for you anymore?
Let them chase, chase, chase to their heart's content or until their lungs explode from absorbtion of hydrogen sulfide and the VOCs wafting in from the GoM. At least it will be a quick death.
It is not a requirement to participate in market at all times.
The stock markets will improve because the economy isn't really getting worse anymore for the common investor.
And why would you sell? the market will go up anyway so that's why the market dryd up and went up.
also the Nikkei is ticking much higher.
And why would you buy? The market WILL go up until it reaches its point of no return, and with no kleenex to cover the spill, youre looking at one nasty puddle of cum downward.
I have GM paper from the 30's, 40's and 50's that prove you wrong.
This is the start of " The Great Reflation, Phase Deux: The Euro Goose".
Methinks the surging Euro is the follow-on to last year's surging dollar. Lots of liquid roquette fuel and shots of Red Bull are being doled out at the Euro banks so that they too can "earn their way out" of their gaping black holes.
Trichet Geithner Bernanke: same difference. They conferred over some Fois Gras and Veuve Clicquot and POUFF! We have effervescence! All thanks to ongoing debt monetization redistributed through prop desks all over Euro land. It's the PLaza Accord without any record of an accord!! It's The Entente Coordiale 2.
Soon enough the evil side effects of liberal liquidity will be felt. Not just stocks rise, but energy and raw materials too all of which ultimately translates to higher business inputs and cost of living. Look for mini bubbles to form in certain stocks too (underway). The Double Whammy Economy will only get worse as housing hasn't got a chance in hell of avoiding slow deflation as does employment, real wages and now retirement assets. Everything you own: Down! Everything you need: Up!
To your point, Oil is climbing daily again, approaching 80. A natural regulator on real economic recovery.
So machines are buying equities and people are buying fixed income?
Exactly!
How much of this is III witching non-sense?? Stock Traders Alm says today would be bullish, it was. By this Friday we have a lot of economic numbers piling on.
The STA says Friday III W, Dow is up 4/6. Last year is was down 1.8% on the day. Good luck.
Eerie when the market moves on no news, yes, suggesting the default focus is the USD problem.
Does anyone wanna take a crack at why Commercial Real Estate (IYR) soared again today after the world's largest electronics retailer put a steaming pyramid of shit on the carpet? If they can't sell at a profit then what is of the small businesses?
It's ran up 12% since lunch-break on Tuesday and got jacked again. I know it's manipulated like hell...but...come on.