Morning Musings From Art Cashin - And The Only Mention So Far Of The Brewing Middle East Conflict
From UBS Financial Services
Dollar And Dow Try For Trial Separation – The lock-step inverse relationship between the dollar and the stock market appeared to take the day off Monday.
Pre-opening, the dollar had backed off slightly in the face of new rumors of a Greek rescue package. Stock futures and oil firmed in reaction. Gold refused to get out of bed.
As U.S. markets opened, the dollar began to firm on the lack of any details of the rumored package. The dollar rally failed to even dent the rally in stocks and crude.
Around noon, the dollar (DXY) rally topped out and the greenback began to weaken. Stocks and crude did not appear to even notice.
Some traders claimed that other assets did not react to the dollar rally because of its relative level. The DXY rally failed to reach the levels it hit in the hours after the Discount Rate hike. It was a nice theory but failed to explain the afternoon selloff in crude that accompanied further weakness in the dollar.
After the extensive discussion, most traders chalked it all up to a simple, temporary disconnect. The rally was thought to have benefitted from mergers and the calendar. The first trading day of the week has produced rallies frequently this year.
As we noted yesterday, the first day of the month often benefits from inflows.
Although the rally again came on soft volume, it did some nice things for the bulls. The Dow and S&P climbed above their respective 50 day moving averages. That could be the setup for the rally to resume. The next couple of days may tell us a lot.
I Guess I Missed This In The Times – The Abu Dhabi media website “The National” ran the following report under the headline “That was a war council in Damascus”:
The three-party meeting that took place in Damascus on Friday gathering the Syrian president Bashar al Assad, the Iranian president Mahmoud Ahmadinejad and the Hizbollah chief Hassan Nasrallah was a war council to devise counterattack plans and assign tasks in the event of an Israeli offensive on one or all parties, wrote Abdelbari Atwan, the editor-in-chief of the pan-Arab newspaper Al Quds al Arabi.
“The timing of the meeting, the way it was undertaken and the ensuing press conference that was held at its conclusion, all point to a strategic coalition being reinforced. This is the build-up of a new front that will spearhead the confrontation with the US-Israeli alliance and whichever Arab countries that may, expressly or implicitly, be affiliated with it.”
The Iranian president said he expects war to break out somewhere between spring and summer of this year. Meanwhile, the Hizbollah chief vowed to strike the Israeli capital, its airports and power stations if Israel dared to attack Beirut’s critical infrastructure. “Indeed, we are being exposed to a new discourse here, an unprecedented sense of self-confidence and an unheard-of preparedness for retaliation.”
Separately, Stratfor suggests the U.S. is close to an untenable position relative to Iran. We seem unable to impose effective sanctions and military resolution may be unworkable.
Stratfor suggests the U.S. may have to completely rethink its posture and, perhaps, negotiate some resolution with Iran. And you thought Greece was the problem.
Cocktail Napkin Charting – Monday’s rally easily took the S&P up through the initial resistance at 1106/1110 and into secondary resistance at 1114/1119 (high 1116). A push to close above 1120 could set the stage for a return to the January highs (circa 1150). For today, the napkins suggest support around 1102/1106. Resistance looks like 1118/1123.
Consensus – Bulls have regained control of the ball and attained some new momentum. Can they close above 1120? We’d love to see some volume. Stay very nimble.
Answer - The word with the silent "ch" that we thought of is "yacht" (unless you pronounce like Ralph Cramden).
Today’s Question - "Please be quiet" - I'm working!" Lots of letters beside "E" can be silent. The "B" in Dumb; the "H" in Myrrh; "M" in Mnemonic or "Z" in Pince-nez. There is one letter that is never silent. (Hint - It rhymes with "B" or "Z".)
On this day (-1) in 1917, markets were roiled by news about Mexico. The news also helped to decide World War I (or so some think). Now don't get upset you little historian, you. We know that you know that America had not yet even entered the war (or even officially picked a side). But that's what today was all about.
As you recall, World War I was rather a mess even for a war. The European powers had spent nearly four years pummeling each other and bankrupting themselves. The net result was millions of soldiers and civilians dead but no winners....nobody even had a clear lead.
So, bloodied, bruised and frustrated, both sides looked toward the U.S. - rich in resources, factories and ambulatory young men (draft bait). They figured whoever could get American productivity (and maybe manpower) on their side could win.
Thus, the games began.
The Germans set up plans for dummy U.S. corporations to buy up various strategic materials. They even thought about setting up a major defense plant…..under an America style name…..“General” this or that…..then taking huge orders (and money) from the French and British and then either not delivering....or....shipping sabotaged armaments.
The Brits staged mass propaganda efforts, blaming every accident or problem in America on German espionage. The Germans tried to foil the Brits by performing actual espionage. It worked well. Even after the sinking of the Lusitania and the explosion at Black Tom, the U.S. remained neutral. (At the time, German was the most frequently spoken second language of much of America, very much like Spanish today.)
So the Brits shifted to high gear. They leaked to the Germans (anonymously) that America was leaning British. The Germans bought. The German Foreign Secretary, Arthur Zimmerman sent a cable to their Washington Embassy suggesting that if America budged, the Germans should offer Mexico lots of money and….post victory....offer the return of New Mexico, Arizona, Texas, California, etc. The Washington office sent a confidential telegram to their Mexican Consulate, suggesting the offer.
The Brits decoded the message but obviously couldn't give it to the U.S. without revealing that they had broken the German code. So....the Brits contrived a way to claim they found the note. President Wilson was outraged and on this day he released the secret German message. But the public thought it was just a British setup. That is...until two days later....when Western Union broke 60 years of tradition and released the telegram to Mexico. The public was outraged...America joined the war....and the rest is history.
The markets will be looking for a message today but we’re pretty sure it won’t come in a telegram. It could come in an international cablegram, however. We’re not sure whether the post-mark will be Athens, Berlin or, maybe, London.
- advertisements -