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Overnight Futures, FX Fireworks Threatens QE2 Rally
Futures (and their driver - AUDJPY) have been spooked overnight by a circulating think thank report which claims that an Ireland bailout package is coming on Tuesday. Coupled with another rumor of a Chinese rate hike (China now down 6% in last two days) means Brian Sack's cronies had a very busy night. ES plunged as low as 1193 before recouping a whole 12 points, and was down just 6 at last check. It appears that just like in the flash crash, one of the key correlation catalysts is the EURUSD, which once dropping below 1.36, all hell breaks loose. For today, Ireland may be a rumor. Next week it will be a fact. And not even the Fed will be able to halt a multi-trillion selling onslaught.
Here is what the key metrics looked like overnight:
More importantly here is the top in the Shanghai Composite: Beijing is woefully behind on creating its own Plunge Protection Team.
And here is a recap of the think tank report:
- could be similar to Greece in that it will be sufficient to remove Ireland from the market for up to 3 years- combined with an IMF and EU adjustment program.
- may seek a substantial British contribution to the program, probably via the €60-billion European Financial Stabilization Mechanism
- ECB may step up bond programme
At the end of the day, all of this can be brushed away. Remember - new mega POMO begins today. Brian Sack is now fully in charge of your stocks.
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What? That looks perfectly normal to me. Someone hit the U-turn button.
So, Shanghia was down over 5% last night. My guess is that BIDU goes up another 3% today thanks to some of that hot, hot POMO lovin'.
Shanghai was down because PetroChina and Sinopec were up nearly 10%, which triggered the sell-off. If you invest in the Chinese A share market, you need to keep an eye on PetroChina and Sinopec. Every time these two are up sharply, it means a massive sell-off is imminent.
Someone hit the U-turn button.
Global CBs are reacting to the reaction; too much complaining about Ben's QE2, so they're gonna threaten us with a meltdown again. BOOOOOORRIIINNNGGGGG.
Ireland was the turd in the punch bowl at G20. Just another meeting of can kickers.
Did they show up uninvited and drunk again? Please tell me they didn't start a fight.
Hey, I resemble that remark...As this relates to gold, recall that gold is up 20% since the Greek "crisis" in May. Food for thought.
More later at (spam): www.tfmetalsreport.blogspot.com
Euro zone industrial production -0.9% vs +0.5% expected (huge)
Euro zone GDP 0.4% vs 0.5% expected....but all is well
Indian IIP dissapoints too....:
http://www.moneycontrol.com/news/economy/iip-data-disappoints-again-is-i...
Indian markets today had a huge sell-off......about 2 %.....slightly greater than yesterdays's sell-OFF....what happenned to that QE2 ..i thought it would set the EMs on fire.....:
http://money.rediff.com/
Of course, time to fuck on the US stock market brigade. Shorts about to overwhelm the Fed.
Glad I was sleeping....Ireland must be priced in the market by now!! Everybody knows its coming..
I caught this on reuters....Irish Finance Ministry is denying bailout.... ????
http://www.reuters.com/article/idUSLDE6AB0UA20101112
Reuters story
The Irish Finance ministry said market talk of a bailout package with EU was untrue, pulling the euro off its highs."A U.S. think-tank is saying Ireland will get bailed out next week," a London-based forex trader said.
Earlier a statement from France, Germany, Italy, Spain and Britain, issued at the Group of 20 summit in Seoul, said bondholders would not have to take a haircut under current debt rules. [ID:nTOE6AB04P]
Still, the euro has shed over 2 percent this week as long positions built before the Fed's bond buying decision last week have been unwound heading into the year-end book-closing season.
Today a rumor, tomorrow a fact
Today a Conspiracy Theory, tomorrow a fact
Today an official denial, tomorrow the opposite
Today an initial estimate data release
tomorrow an adverse revision
Today a bill to save the world
tomorrow the true benefactor
Today same promise, tomorrow same shit
all over again
Maybe it's the wine (it is already Friday evening here), but when the pundits say the Euro climbed back over 1.37 after trading as low as 1.357 because the Euroists said no existing bondholder has to take a haircut on Irish debt, I don't get it. Then again, accounting changes do tend to embolden the foolhardy.
Another rate hike for China ?
It’s China’s turn to pop a world-class asset bubble and smash the global economy
• China tried to pop its property bubble once before but the global economic catastrophe caused the US financial crisis aborted the effort in 2008
• This week China re-launched the crash phase of its Greenspan Credit Bubble with Chinese Characteristics
• Watch out for flying bricks
Why don’t central banks, and the governments they front for, ever learn? The only way to prevent macro-economic damage from a collapsed asset bubble is to not allow a bubble to develop in the first place. Once a government takes the path of winning popular favor with the temporary prosperity that’s produced by asset price inflation, there is no easy way out, as Japan re-discovered in the 1990s, the US found out again in the 2000s, and China will experience soon enough. As part of our project to map out the coming decade, this week we investigate the prospect of the collapse of the Greenspan Credit Bubble with Chinese Characteristics.
Monday China embarked anew on a treacherous program of rate hikes to end a property bubble that took root there in 2005.
Here is a game readers can play at home to simulate the genius of a central bank managing an asset bubble down via interest rate hikes.
Find a cinder block and a bungee chord. Place the cinder block on the far end of your kitchen table. Attach one end of the bungee chord to the cinder block and put the other end between your teeth. Kneel down so that your face is level with the tabletop and pull the chord until it is taught.
Now it’s time to begin “tightening” the way central banks try to, bit by bit, to bring an asset bubble to a benign end, or so they believe.
Pull ¼ of an inch. If nothing happens then pull another ¼ inch. If nothing happens then do it again, and again.
Silly game, you’re thinking. A child can see how this will turn out. Sooner or later that concrete brick will sing across the table and smash your face.
As obvious as the outcome might be to a 10-year-old, the brick-in-the-face lesson remains lost on central banks. They must be slow learners because repeat it over and over. Or perhaps there is a common institutional neurosis shared among central banker’s that compels them to repeat the same mistake, to recreate the experience of concrete on teeth.
For years I’ve referred to China’s asset bubble economy as a Greenspan Credit Bubble with Chinese characteristics. This week we find that not only the policies that created China’s bubbles but even the policy responses to attempt to tame them mirror Greenspan’s.
http://www.itulip.com/forums/showthread.php/17311-China-Crash-2011-Part-...
What happened to Mish?
http://globaleconomicanalysis.blogspot.com/
SEC probably got to him or something.....
I suppose, some admins got unionized !
A "Think Thank" report:
An effeminate version of a "Think Tank" report. Just thought I'd clear that up :)
Jeremy Grantham said that we were in a currency war. I think the battleground just spread, with the public opening salvo being spearheaded by GS in the equities arena. The UST bond rate spike at the end of Oct. Could be viewed as a shot across the bow for that asset class. Wonder when they will be dragged into the fracas.
From a dangerous peak perspective, the BSE Sensex (Mumbai) is trading very near it's all time highs. Ripe and ready for a smash. Not just a crash.
Of course, there is a TON of rigging here in India, not PPT or POMOesque, just old style pump and dump rigging, now floated by hot money from abroad.
And something is whispering that a whole lot of money is going to rush into the dollar next week.....only to find a fools paradise and a balloon full of holes, unpluggable.
Can see it like a bad b-movie, panicked screams and all.
Tch!
ORI
http://aadivaahan.wordpress.com
I don't think a selloff in the US will be allowed into black Friday. On the flip side, the rubberband has been stretched so far in one direction that it may even overwhelm the Fed's leveraged free money henchmen.
All your base are belong to us!
"may seek a substantial British contribution to the program..."
Ah, good, I suspect they'll just pull that from the Iceland I.O.U.'s then...
Lows of the day? Somewhere between 9:45AM and 11:15AM. I expect a big up day in the S&P today - recapture 1220 at a minimum. We've seen this set-up too many times before.
http://www.reuters.com/news/video/story?videoId=164066321&videoChannel=6&refresh=true
This JUST IN!
billions being pumped in today, heavy chance for green.
Billions of what though?
.
.
Good question
I think I've seen this movie before. Same story, different characters.
Reports of the Euro's death have been greatly exaggerated,and when not if Ireland gets its bailout why would that cause the US market to tank?
The ECB is going to bail out every bust bank and country in Europe,and there is nothing anyone can do to stop them,just as noone has stopped the Bank of England and the Fed.
I still think out of Sterling the dollar and the Euro,the Euro will be the strongest long term bet.They are doing just enough money printing to keep countries nostrils above the brown stuff,Bank of England is printing enough to keep house prices from falling(its not working so there will be more) and Bernanke is just mad - so just imagine the worst case scenario for the dollar,multiply it by ten -- and you ain't even close.
Anyone still reading down here?
Anyway, I can't get my head around why the AUD/JPY trade would be driving futures. I hope a fellow ZH friend could help explain. Here's what I think happens:
Traders buy AUD and sell JPY then invest the AUD at high interest rates and pay cheap to borrow the JPY. But how does that affect US futures? Where's the missing piece?
Thanks in advance.
There are a couple of things at work here. The main idea to ingraine in your head is about risk: which currency in which pair is "risk-on" vs. which is "risk-off."
The AUDJPY mimics the SPX (and ES by default...) because the Ozzie Dollar, otherwise known as the price of gold, is seen "at risk" to the venerable Japanese yen. As long as there is perceived money on the sidelines- from the Fed or whoever- then the risk trade is on, meaning that the AUD would rise against the JPY, provided the SPX is rising also.*
The other thing at work here that makes the AUDJPY pair favored over the now-usurped EURJPY for a risk trade is the fact that the AUD is just about the only currency on earth paying any kind of interest whatsoever. The Japanese buy AUD for the carry, the price goes up, they buy more AUD; mo' money, mo' money, mo' money...
And so the circle jerk goes...until it doesn't.
Making assumptions, though, as our friends at derailedcapitalism found out two days running, is that these things can change on a dime. You can't wait for "signs" and "signals" in this 4X market. By the time they come due, it is already past the move.
*Most would say that it is the AUDJPY (for the time being...) driving prices in the equity markets higher, while I contend that it is the exact opposite: rising equity prices are spurring 4X traders to get long risk. Being the paranoid critters that we are, it only appears that 4X is running the stock market, when the truth is that paranoia can sometimes save your ass. We (over-)anticipate that, take a little out of the middle, then get out.
So the basic answer to your query is that all is hinged on risk appetite. With the SPX in a chop-topping formation, watch the AUDJPY for signs the 4X traders are getting seriously paranoid, then trade the ES in that way. My bet is down.
______________
There is something else you should know, though. Remember how I said that these things can turn on a dime?
Well, back in the day, oh, say 2007 or so, it was the USDJPY pair that acted as the AUDJPY pair (only upside down, in that the JPY was seen as the "risk" currency...) has been acting over the past several months. What changed was the perceived idea that the Fed was printing money out of control and that the USD was being debased all over the globe...
Such rubbish couldn't be further from the truth. The USD hasn't been debased at all but strengthened from back-room and back-door machinations fit for spy novels of the future. Now, you can witness the transition of the USDJPY pair live in your chart by watching the pair take its rightful place as the harbinger of all things risk. Last week, it was like a rebirth going on in that currency pair and the weeks ahead will demonstrate more growing pains. Stay nimble as hell but that is the trade to be in going forward.
In the future, trade risk appetite from the USDJPY and never look back. Take good care of your family.
:D
Orly - I am grateful to you for the explanation and cannot thank you enough. I now understand.
I will of course take good care of my family for it is them who matter most.
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