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Thanksgiving Friday Market Update

Tyler Durden's picture




 

Submitted by Nic Lenoir of ICAP

First of I apologize for the radio silence the past week as I was travelling. For those of you in the US I hope you and your families had a very happy Thanksgiving.

Now straight to the markets, the obvious question is whether black Friday this year will take a different meaning than just a shopping holiday. Obviously if you stuffed your Turkey with Dubai bonds this year you are risking a serious indigestion. A lot more on the follies of that market later. For now here are a few indicators I would look at in order to confirm this move has more legs than what we have seen so far, or whether it is to be faded.

The Dax bounced this morning on its 100-dma. Remember that was the support we had identified late October / early November. While I think in the medium term a deeper sell-off is inevitable, breaking the 100-dma on a daily close is an important confirmation.

EURUSD bounced on its 50-dma. This support has been religiously respected during the rally and we need to break and close below on a daily close to confirm a serious retracement is in the works. Same obsevation can be made on the USD index. Note that it is surprising that people have been selling EURJPY aggressively in this risk aversion environment but EURUSD is still holding support. The outperformance of the JPY on this move is quite overdone in my opinion: given that both USD and JPY are now carry-funding currencies and both trade weak everytime risk is bought in the market, I would expect more USD strength. It is worth keeping an eye on USDJPY which shows divergence on these new lows and appears to be in the process of forming a morning star candle which would be a clear buy signal.

Finally Gold came back to retest the former resistance of the short-term bullish channel we broke out of now, and is now resistance. While the key support remains the support at 1,070 which is still ways away (depending on volatility it's closer than one thinks) reintegrating the former bullish channel would be bearish. By the way, if you think you are fighting bubble creation being long gold against fiat currencies in a deflationary environment as I have pointed out many times you are wrong. You may make a lot of money, but the rational is flawed and you are in fact taking part in one of the bubbles. The price action on this move shows exactly that, as Gold has not realy been trading like a safe refuge in the past 48 hours. It is worth thinking about as part of a broader reflexion on the gold trade. Certainly as we have suggested on many occasions one should at least be long gold against another currency than the USD to mitigate the leverage.

The only trend that seems relatively certain going into year-end is higher US treasury prices. Ever since we have broken above the 200-dma we have had confirmation the direction is higher. Seasonals going into year-end obviously favor long positions as well, and given we managed to rally in Fixed Income in the past few weeks despite strong equity and credit markets, we should expect that any sort of risk aversion will only add fueld to the fire. The curve should flatten along with this move.

Good luck trading,

Nic  

 

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Fri, 11/27/2009 - 13:43 | 144149 Anonymous
Anonymous's picture

good to have you back, this column is my favorite part of zero hedge, I was worried you had stopped, thanks for everything

Fri, 11/27/2009 - 13:47 | 144155 Daedal
Daedal's picture

Is it me or is the 2 year Treasury yield lower now than it was when market was lower a few hours ago? Who is buying equities, the tooth fairy??

Fri, 11/27/2009 - 13:54 | 144160 Anonymous
Anonymous's picture

A short guy: Lord Blankfein

Fri, 11/27/2009 - 14:02 | 144174 mdtrader
mdtrader's picture

The usual suspects. We cannot have a stockmarket crash in the run up to Christmas after all.

Fri, 11/27/2009 - 14:19 | 144190 ghostfaceinvestah
ghostfaceinvestah's picture

Exactly, anyone thinking that after printing trillions to support the markets, the Fed is going to give up now, is terribly naive.

Fri, 11/27/2009 - 14:15 | 144185 taraxias
taraxias's picture

Bingo!

Fri, 11/27/2009 - 14:00 | 144171 Anonymous
Anonymous's picture

Here's a thought i've had concerning Dubai.

Step 1, private default: ZH recently ran a piece about the hidden stimulus of home owner squatters, or people living in foreclosure in-process homes.

http://www.zerohedge.com/article/guest-post-americas-stealth-stimulus-pl...

Step 2, commercial default: Mish commenter, LaGirl, told a banker story yesterday and CRE owners intentionally defaulting on loans.

"I just had Thanksgiving dinner with my brother in law, a commercial loan officer / vice president (all the loan officers are vice presidents) working for a small to mid size bank in Glendale, Ca. He says he and the other employees are just waiting for the FDIC to come in and shut them down, they all know it's just a matter of time. He is over fifty and realizes that his career is over, he will never get another job doing what he does again."

"He is personally trying to collect on many of the loans he originated. Many are apartment buildings in AZ or UT or various retail or hotel properties, some in the NW or the south, but even though a lot of those properties are generating cash flow, the borrowers won't pay a dime toward their mortgages, they figure they'll wait and deal with the FDIC directly once they take over."

"His only comfort at this point is there are lots of other banks that are similarly situated, so maybe it will take some time before the FDIC gets to them."

Step 3, Sovereign default; Dubai threatens default. Do you see where i'm going with this? A conspiracy of defaults of sovereign debt holds the world, and particularly the US, hostage. Moral hazard becomes unhinged as every debtor greedily awaits Ben's choppers. It's not a pretty thought. Just think, amongst sovereign debtors, Dubai has gotten in line first for the international 'Black Friday' coming to a country near you. No wonder Canada's housing boom has still not busted.

Fri, 11/27/2009 - 14:18 | 144187 NRGTDR
NRGTDR's picture

I prefer the lastest commentary from Jim Sinclair--He truly gets it unlike even some of the "smartest guys in the room":

The Essence Of Dubai’s Request For Debt Payment Delay

Posted: Nov 27 2009     By: Jim Sinclair      Post Edited: November 27, 2009 at 2:10 pm

Filed under: General Editorial

Dear CIGAs,

What is the essence of the Dubai request for debt payment delay (a technical default)?

1. Will an implied Dubai Federal Guarantee of the debt of state owned corporations be honored in Dubai and elsewhere?

2. How many more financial problems are there out there hidden in plain view in the West as well as the Middle East?

3. Will the Middle East see to the bailouts of its own problems or is there a stampede of camel trains into the desert, devoid of cell phones and Mercedes?

4. Will this event cause other developing market country debt to default in a domino effect?

In terms of gold this event is further proof that paper and promises are NOT the stuff money is made of anymore.

Those that will come out of the woodwork to call a top in the gold price have little experience in what a top looks like in gold. Let me assure you the action of today contained zero evidence of a top.

The USA has become a giant FDIC and will have to finance in strange ways (QE) to meet its obligation prior to June of 2011.

Other than transitory technical factors there is nothing whatsoever positive in a collapse anywhere for the US dollar. When the snow falls here on the east coast of the USA the dollar will come under more pressure and fall much further.

The major immediate financial problem, hidden in plain view, is that 2009 financial entity earnings are CASHLESS. They are more than 75% due to the permission of FASB (Financial Audit Standard Board) who sold their souls to the financial sector to again mark up toxic paper to values self determine by the financial institution. The profits of their trading is toxic paper mark up accounting.

The inviting conclusion is the over the top greed in plain view by financial institutions is their own knowledge of the cashless nature of their earning and the fact that the junk is marked up now as much as one can do without either starting a riot or doing time. Therefore the earning prosperity is behind them, nothing is fixed and that makes this year the last opportunity for a long time to cash in for themselves.

Dubai has reminded us that there has been NO cure to the systemic financial problems of the West and those like Dubai that not only tried to mimic the West, but overdo them in a garish manner.

You can be sure that the US Fed and the ECB are chasing the sheiks into the desert today like Lawrence of Arabia in an attempt to get them to pay up and support their own problem. That means more international QE, as the Fed is not in the mood to tank a $12 trillion dollar bailout operation over an $80 to $110 billion dollar failure of a stupid and garish real estate project in Dubai. This concept would contain the domino effect, putting it off until later in 2011.

Conclusion:

The dollar will not reverse out of the bear market it is in, nor will gold top here and now. In fact the bear market in the US dollar and the bull market in gold is not only alive and well but in terms of price, young.

Enjoy your weekend and stop looking at the markets!

Fri, 11/27/2009 - 14:26 | 144203 Hephasteus
Hephasteus's picture

See. We are moving towards a cashless society. Cashless profits, Cashless balance sheets, Cashless transactions of cash.

Fri, 11/27/2009 - 15:49 | 144283 Anonymous
Anonymous's picture

That's the plan. When the USD is scuttled it will be replaced by a credit card, not by another paper currency.

See: http://www.zerohedge.com/article/pull-swift-one

The re-positioning of the clearing house.

It's one way for the taxing authorities to totally eliminate black money. Meaning uber profitability for them. How else can we pay for this debt?

"Morpheus informs Neo that the year is not 1999, but estimated to be closer to 2199, and that humanity is fighting a war against intelligent machines created in the early 21st century."

Fri, 11/27/2009 - 21:19 | 144542 Hephasteus
Fri, 11/27/2009 - 14:18 | 144188 Anonymous
Anonymous's picture

Nov. 27 (Bloomberg) -- Dubai’s debt woes may worsen to become a “major sovereign default” that roils developing nations and cuts off capital flows to emerging markets, Bank of America Corp. said.

“One cannot rule out -- as a tail risk -- a case where this would escalate into a major sovereign default problem, which would then resonate across global emerging markets in the same way that Argentina did in the early 2000s or Russia in the late 1990s,” Bank of America strategists Benoit Anne and Daniel Tenengauzer wrote in a report.

A default would lead to a “sudden stop of capital flows into emerging markets” and be a “major step back” in the recovery from the global financial crisis, they wrote.

Fri, 11/27/2009 - 17:57 | 144407 deadhead
deadhead's picture

thanks for the chart Andy...definitely food for thought.  thought the Japanese Finance Minister's words on currencies was rather telling yesterday (if you didn't see Bruce's column, it's clearly worth the read).

You are enormously overdue for an article and I demand one or two over the weekend!

In addition to the usual suspects, perhaps some discussion on Japan, yen, the tanking Nikkei, etc.

naturally, more.meat.

Thank you!

Fri, 11/27/2009 - 15:23 | 144259 NRGTDR
Sat, 11/28/2009 - 00:30 | 144620 Lou629
Lou629's picture

NRG,

That was so funny i had tears in my eyes from laughing so hard.  You might want to check this one out too:

Hitler misses the bull market:

http://www.youtube.com/watch?v=yqkn1tviGMM&feature=related

 

Sat, 11/28/2009 - 18:33 | 144993 NRGTDR
NRGTDR's picture

awesome! I liked that one even better!

Sat, 11/28/2009 - 03:32 | 144681 Fibozachi
Fibozachi's picture

Thanks for the update Nic and thanks for the good laugh NRGTDR ... just don't get caught holding the bag on your preferreds.

Fri, 11/27/2009 - 23:21 | 144584 SloSquez
SloSquez's picture

Here's to Nic and Tyler - Thanks!!!!!

http://www.youtube.com/watch?v=fj-M-Q5E610

Also to the US: Holders of the AAA Super Senior Tranche.  Phuck Dubai!

Sat, 11/28/2009 - 10:15 | 144727 gatopeich
gatopeich's picture

Thanks for the update! One needs some intelligent input after watching those crazy pumps in action for the day...

I find this interesting or at least funny: (if graph doesn't show just click link)

The S&P Square Wave which has been going on for the last 15 days. Keeps gaping up n down between 1090 and 1110 every 2~3 days, and floating in the meanwhiles. Very consistent, swear!

I'm no chart magician, still I have an (naive) hypothesis: the pumpers can't/won't pump it higher, so HTFs have orders to keep the 1100 level for a while, and the square wave is their machine-natural way (or the result of heavy pre-opening future fixing).

Sat, 11/28/2009 - 23:05 | 145165 Anonymous
Anonymous's picture

The markets are in very confused state.. I see that square wave you are talking about. The % of stocks below there 40 day moving average continues to get weaker.

We are seeing the underpinnings of the market being pulled out one at a time like Jenga.

There are some charts here at http://redliontrader.com worth looking at.

Sun, 11/29/2009 - 09:36 | 145313 Anonymous
Anonymous's picture

Any thoughts on TBT at this point?

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