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US Equities Outperformed On Sad Day For Integrity
From Nic Lenoir of ICAP
The S&P looks like it has validated an inverted H&S pattern. While H&S pattern bearish patterns triggered on poor economic news and high volume are usually head fakes and a deadly bear trap, inverted bullish H&S with no participation on no news tend to see quite a bit of follow through.
More broadly we have pointed out that we would need a bit of confirmation from the Bovespa to fully confirm that the markets are breaking out, currently as seen on the daily chart we are right on the resistance still. Similarly AUDUSD closed right on the 200-dma.
We once again point out the global liquidity index which isgetting close to making new highs, and given the huge correlation between liquidity and equity markets over the last year, stocks are in fact under-priced in that respect, no matter all the reasons I see out there for a bear move. Governments and central banks have done their job well at propping up a piece of crap.
The European stress test today was a very very sad buffoonery to witness. Firstly the worst case scenario is a 3% GDP contraction and a 20% equity market sell-off. Let's be frank if GDP contracted in Europe by 3% stocks would fall a bit more than 20%. More importantly, as 20% correction would leave the market clear by 33% above the lows of 2009. You would think the worst case scenario would be at least to revisit these lows. So basically the worst case scenario is not really credible as a "worst" case. Secondly the test focused strictly on the mark-to-market holdings of sovereign bonds. That is like sizing up an iceberg using only the tip. Spanish banks for example are ridden with housing inventories that are most likely marked at the 2006/2007 highs, and all that is happily excluded from the test, as well as accrual accounting books. The fact that they had to resort to truncating the scope so much given a relatively mild worst case assumption tells you how much head scratching must have gone on to make this look half way decent. It even felt like they invented some random unknown banks that failed just to make it legit. Solid work I must say, and on a summer Friday with no volume and syndicated desks using algos to push up the tape, the reception by the market looks quite grand on paper. The fact sadly is that no one cared today and there is not one reasonably informed investor out there who doesn't see this for what it is: a sad joke. Unfortunately when everybody gives up on the market and it melts up for no reason, I think we are really worst off than if we took the pain we deserve now and deal with the real state of affairs. This expensive extension of a broken system will only make it worse in the end.
For now it looks though that markets are intent on more celebration and more rallying ni the near future.
Good luck trading,
Nic
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I just got a letter from Senator Burr stating that the budget deficit for this year will reach $1.6 Trillion, after the $1.4 Trillion blown last year. In Mr. Burr's letter he states, and I quote: "The massive spending has not only been ineffective, but it has added a crippling legacy of debt that we are leaving to our children and grandchildren. This is not only fiscally insane, it is morally bankrupt."
The question is - how much did he participate in the moral bankruptcy that got us here.
Your letter came from a politicial so it must be true right? I mean politicians wouldnt lie and deceive would they??
One way or another, liquidity in the system must be restored. If you want to see a depression where people starve, just stop that government spending. That giant sucking sound will be all of the money going away.
The only way out of a depression is to wipe the debts clean. In time, the government will seize all of the banks, and finally destroy all of the debt and finally resetting the world of finance. All we are waiting for now is realization that there is no other way to do it.
This might sound familiar, but its from the Treasury of Secretary (Henry Morganthau jr.) during the Great Depression.
"We have tried spending money. We are spending more than we have ever spent before and it does not work."
"I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises."
"I say after eight years of this Administration we have just as much unemployment as when we started. ... And an enormous debt to boot!"
+1939
just put a fork in it
Sounds like there is some money to be made for the poor souls whose only means is dabbling in a suicidal market. I see it as an opportunity for the precious metals to remain in a bit of a funk -- gonna buy some more.
I am far from a financial expert, but is it possible that equities could be getting a lift from inflationary concerns? For example, all other things being equal, would the value of AAPL decline in the face of hyperinflation, or would it just be worth 10x or 100x more because the dollar was worth 1/10th or 1/100th of its former value? I know this is counterintuitive, but would investors really treat equities as a hedge?
I'm asking because I really don't know the answer. I apologize in advance if it is a stupid question.
There is a good article on this by Dr. Frank Bulthaupt, Inflation and Equity Prices, at
https://www.allianz.com/static-resources/de/images/saobj_1120568_juli_aug04_e_inflation.pdf
"One of the most important questions that arises in the assessment
of equity markets is the correlation between stock prices and
inflation. It is commonly believed that rising prices also push up
corporate profits and hence share prices. But is this fact or fiction?"
It begins:
To evaluate the impact of inflation on stock market performance, investors frequently
draw on experiences in the immediate aftermath of the two World Wars. In Europe,
these periods were marked by drastic currency depreciation. However, stockholders
at the time were far less affected by inflation and currency reforms than were (for
example) holders of fixed-income securities or cash, some of whom lost all of the
money they had put up.
Are stockholders, then, protected against inflationary risks? At first sight, economic logic
suggests that they might be. …
This one takes the cake.
Straight up boner run right off the open.
Well, all those folks out of work have plenty of spare time to shop on-line and buy, buy, buy. Obvious.
Hopeless ;-)
LOL, and I thought GS was the trade of the week....only to be outdone by AMZN!!!
Is that the SEC interview process?
School, anyone???
A sad day for integrity indeed! The Vigilant Grandpa is a bit frustrated given the focus of raising kids and influencing grandkids to be honest productive members of society. Maybe we should bring Pluto back as I maintain it would prove a viable alternative given Rome is burning yet again.
On a left brain note: Based on trading volumes the Bulls' parties offer tasteless hors d'oeuvres
The euphoric bull party of the U.S. equity party is poorly attended attended. The trend of high volume, well attended trading days during a declining market and poorly attended low volume days during the manipulated launch days continunes.
During the month of June, the Standard and Poor's 500 closed down 58.7 points on total monthly trading volume of 110.107 billion shares. 13 of the 22 June trading days were negative and generated 60% of the total trading volume during the month. The two largest down days occurred on June 4th (down 37.95) and June 29th (down 33.33). The average volume during these two largest down days was 6.159 billion shares. The two greatest up days occurred on June 10th (up 31.15) and June 2nd (up 27.67) on average volume of 5.086 billion shares.
The two largest down days generated 1.073 billion more guests per day than the two greatest up days. It appears the realistic and fundamentally focused bears truly know how to entertain. The "fundamentals don't matter", "I am entitled to a rally" and "CNBC affords me hope" bulls continue serving tasteless hors d'oeuvres.
For the week ending July 23rd, the Standard and Poor's 500 clocked in a net gain of 37.78 points with 33 of those points generated during the final 13 hours of trading. The market launched after Ben Bernanke's "unusually uncertain" phrase regarding his outlook on the U.S. economy. Month-to-date, the Standard and Poor's 500 index has launched 71.95 points during 16 trading days. The daily average trading volume month-to-date is 416 million shares less than June.
During the month of June, $8.076 billion was withdrawn from domestic equity funds (reporting period ending 6/2/10 through 6/30/10) or an average of $1.615 billion per reporting period.
The first two reporting periods in July note $7.272 billion has been withdrawn from domestic equity funds or an average of $3.636 billion per reporting period. Billions yanked from the U.S. equity market while the Standard and Poor's 500 Index romps 71.95 points.
Given the monster move in July, surely the bond market sold off causing interests rates to rise substantially...well not exactly...The 10 year treasury closed out the month of June at 2.95% and closed out July 23rd at 2.99%. The Standard and Poor's 500 launches 72 points (7%) in 16 trading days while the 10 year treasury moved a paultry 5 basis points (1%)!?
The 10 year treasury dropped 35 basis points (10.6%) during the month of June as the Standard and Poor's 500 index dropped 5.4% and a heavy trading volume month.
The market has clearly disconnected from any and all rational fundamentals while the bond market offers absolutely no endorsement of the bullish equity run. Time will tell who throws the ultimate party however during the interim, grandpa ordered tickets for the next bear bash!
++++1000
If the market is not following principal, fundamentals, technical analysis on the way up....
Why would anyone believe that on the way down?
The markets are signaling nothing but euphoria, hopium and delusion.
There are a bunch of people that are literally going to be "put against the wall" when this DOES FALL. That will start with the liars like CNBS and the dry pumper team. It makes no difference, but I would stand very very far away from those people, like a building away.
People have lost big, and are losing more beacuse of HFT, and manipulation. Look at the gold market and everyhwere else. SOMEBODY is CHEATING and CHEATING BIG. That person or entity will pay a very terrible price, from the pits of human rage.
"That person or entity will pay a very terrible price, from the pits of human rage."
Yup...the hopium is wearing off.
Everywhere in the world it is being rediscovered what everyone already knew. Elites are idiots enabling politicians to lie and pillage the public at large.
It's incestuous really.
"The plan would also shrink the bureaucratic apparatus, in keeping with the government’s goal to effect $30 billion in “efficiency savings” in the health budget by 2014 and to reduce administrative costs by 45 percent..."
"In a document, or white paper, outlining the plan, the government admitted that the changes would “cause significant disruption and loss of jobs.” But it said: “The current architecture of the health system has developed piecemeal, involves duplication and is unwieldy. Liberating the N.H.S., and putting power in the hands of patients and clinicians, means we will be able to effect a radical simplification, and remove layers of management.”
"The health secretary, Andrew Lansley, also promised to put more power in the hands of patients. Currently, how and where patients are treated, and by whom, is largely determined by decisions made by 150 entities known as primary care trusts — all of which would be abolished under the plan, with some of those choices going to patients. It would also abolish many current government-set targets, like limits on how long patients have to wait for treatment."
http://www.nytimes.com/2010/07/25/world/europe/25britain.html?_r=2&hp=&p...
Summed up in last paragraph...
http://www.dimandlistless.com/2010/03/oh-wednesday.html
Incredible ain't it, an endless list of control freak idiocy.
A particular political ideaology has morphed from "keep your hands off my body" into we will tell you what to put into your body. From "stay out of my bedroom" into we will tell you what temperature to keep your entire house.
No, we don't mind you having a handgun for protection at home, but it can't be cheap (so the poor can't avail themselves of it) and it must be kept unloaded in a lock box...so you will have to request all home invaders make an appointment...LOL.
They have become so absurd, such caricatures of reason and logic, they now have classified the very breath we exhale a danger to the entire planet...ROTFLMAO.
Unfortunately for us, these psychotic control freaks and their sycophants in DC will leave no stone unturned and no sphere of human freedom untouched. We are but cattle in their eyes, no?
Thanks for laying all that out. Good info.
Friday was a very sad day IMO. The stress tests weren't even close to viable. But watching the FinMins yap away was a complete credibility suck. Things might be even worse than we imagine. Add the MSM lapping it up demonstrated their agenda and complicity. The final stroke was GE announcing a dividend hike 15 minutes after the stress test announcements - not mind you before the open or during their earnings conference call a couple of days earlier - demonstrates the widespread effort to prop the market up. Then the MSM once again runs with the 20% dividend hike (still 60% below pre-crisis), how it shows "corporate confidence" and a "reduction in the projected budget deficit" shows the desperation but also effectiveness in keeping the charade going.
The game is now clear - prop the stock market up with ANY means possible. Do NOT address any of the underlying problems. Keep pretending.
What's the end game? Dunno. When? Dunno. But I have a sneaking sense that it won't be good when it happens. I do know that there is no credibility, no honesty in any of this, and that bodes very poorly for our future.
RT, either you are a guy, or the hottest lesbian I know & have not yet met.
I prefer my bonanza's to be real...they just taste better.
Nothing in that picture is real, from the synthetic fibers in the carpet to the color of her hair -- and everything in between.
LOL
such a market ramp appears counter-intuitive if there is a desire to pitch more QE
This is the QE - they don't need permission from anyone anymore...
Sad but true. They got what they wanted between the "Patriot" Act (thanks to 9/11) and the FinReg/Obamacare (thanks to the "Great Act" of 2008). What more do they want?
Futures options expiry Tuesday. GLD has its third July options expiry Thursday (but there's not much left in it since its last expiry on 7/22).
Does it really matter what assumptions "the worst case" was based on if the EU members and EU-based banks will be bailed out by the ECB regardless of the cost?
Yes, EU was a quick student of Timmy Geithner's "how to lie, cheat, and bail out fat cats" weekend seminar, but it only makes ECB's implicit guarantees more explicit: no bank will be allowed to fail, no matter what the actual cost is.
So, the only unknown in al lthis is how much money printing the ECB will have to do, i.e. how high Gold/Euro is goign to get.
The worst case assumes a 3% decline in GDP over a 2 year period, 0.9% followed by 2.1%. It's even less severe that you imagine.
If this means that the ECB is determined that no banks will be allowed to fail, then they clearly don't realize just what nasties lies hidden away in the dark corners of the balance sheets.
"The benchmark macro-economic scenario assumes a mild recovery from the severe downturn of 2008-2009, whereas the adverse scenario assumes a “double-dip” recession. For the euro area, the GDP growth under the benchmark scenario is assumed at a level of +0.7 (2010) and +1.5% (2011), whereas under the adverse scenario the euro area would see a decrease of GDP by -0.2% in 2010 and -0.6% in 2011. For the whole European Union (EU27) the benchmark scenario assumes a +1.0% growth of GDP in 2010 and +1.7% in 2011, whereas under the adverse scenario the GDP would not grow in 2010 and would decline by -0.4% in 2011."
"The European stress test today was a very very sad buffoonery to witness."
As opposed to what? The buffoonery of the American stress test? Operation AIG? Get it through your heads, they will do whatever it takes to reflate risk assets and inflate their way out of the debt jam. And that includes outright purchases of stocks.
Finally, proof of efficient market theory...ROTFL.
I agree with you Leo, that they will do anything and everything to try to reflate. Unfortunately they will fail in one way or another. Either deflation will crush them, or they will destroy the currency for which the people toil.
Either way, "they" will be their own undoing, as they have put the world in a precarious position. We will, and I emphasize WILL, crash in one way or another, it is simply the nature of the crash (hyperinflation or outright deflation) that is yet to be determined.
Place your bets.
Spanish banks for example are ridden with housing inventories that are "most likely" marked at the 2006/2007 highs...
You certainly have a "source" for this kind of info, or does the usage of "most likely" implement some sort of "uncertainty"...?
And by the way : who until now has not understood that equity markets act as the re-inflationary tool for central banks to bring "wealth" back to people - hasn´t understand anything at all !
Good luck trading
So i guess its time to go long
I'm watching HBC to see if it can bust out of this consolidation:
The "Clap Stock" of Spain (STD) has already broken out over the 150-day:
Don't toy with me, RT. When I see the phrase " . . . to see if it can bust out of this consolidation," in one of YOUR posts, I fully expect to see big, bra-busting boobs soon thereafter. But that didn't happen this time, did it? DID IT?!?!?
Programmer: Sir everytime we enter 2+2 we get the answer "5"
Oligarch: Just add another line of code that prints "4" whenever the answer is "5" - that will fix it.
Programmer: Sir it will fix it for now - but as time passes that program line will become a major problem - it will create structural instability.
Oligarch: I don't give a fuck - add the line in now. We will be long gone by the time the stupid sheep figure it out.
Oligarch: mumbles to himself quietly (but out loud) - we've be fucking the masses for sol long that they think getting fucked is normal.....hahaha
The celebration is over for Bell…a city whose people are experiencing poverty while its officials are living beyond its means. Shades of a “healthy” Bernanke Dow Jones amidst unhealthy market news?… Bell officials thought they could get by with it, too.
Poor L.A. City Irate Over Officials’ High Salaries | San Franciso Chronicle | July 24, 2010
Council members who make almost $100,000 a year for governing this small, poverty-plagued suburb of Los Angeles must resign immediately or face a recall campaign, a community group warned Friday.
The threat came hours after it was announced that the city manager, assistant city manager and police chief were stepping down after a public outcry over their salaries, which total more than $1.6 million a year.
In the wake of that scandal, residents have lost trust in Mayor Oscar Hernandez and three other council members - the people who approved the contracts - said Ali Saleh, co-founder of the Bell Association to Stop the Abuse.
"We are happy that all three resigned, but the fight doesn't end here," Saleh said.
The group, whose acronym - BASTA - is Spanish for "enough," said that if the council members don't step down by Monday's council meeting, it will begin working for their recall.
In the meantime, organizers planned to paper Bell with 12,000 flyers over the weekend, urging people to attend the meeting. City officials have declined to respond to the recall threat.
Council members emerged from an hours' long closed session at midnight and said they had accepted the resignations of Chief Administrative Officer Robert Rizzo, Assistant City Manager Angela Spaccia and Police Chief Randy Adams.
Rizzo was the highest paid at $787,637 a year - almost twice the pay of President Obama - for overseeing one of the poorest towns (90.9% Hispanic). in Los Angeles County. Census figures for 2008 showed about 17 percent of the city's less than 40,000 residents live in poverty. (Median household income in 2008 was $39,394, compared with a California median household income of $61,021.)
Spaccia makes $376,288 a year, and Adams earns $457,000, or 50 percent more than Los Angeles Police Chief Charlie Beck.
City Council members who earn about $100,000 a year receive most of that as compensation for serving on city agencies.
California law limits the salaries of city council members in most cities of Bell's size to about $400 a month, unless voters approve a higher wage. It also sets a $150 pay limit for each commission, committee or board on which a council member serves.
That law was signed in September 2005. Two months later, Bell held an election - in which fewer than 400 people voted - that declared it a charter city and allowed it to bypass the state law applying to "general law" cities.
The Los Angeles County district attorney's office and the state attorney general are looking into the salaries.
http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2010/07/24/MNE41EJ2RT.DTL
Unbefuckinlievable isn't it? Just like those residents got them booted out of office, we need to boot out the fucking Millionaires Club in Congress!!!
"Rizzo was the highest paid at $787,637 a year - almost twice the pay of President Obama - for overseeing one of the poorest towns (90.9% Hispanic). in Los Angeles County. Census figures for 2008 showed about 17 percent of the city's less than 40,000 residents live in poverty. (Median household income in 2008 was $39,394, compared with a California median household income of $61,021.)"
Kind of reminds you of an African dictatorship, where the ethnic leader impoverishes his/her own race for personal gain. Fucker should be executed.
Except this time its Italian.
Great. Three more weeks of market melt-up on fumes.
Damn dandruff formations!
Good. I've taken my gains on my 7s10 treasury play (very nice for a few months work), and missed the bottom in the commodities plunged but escaped with a small profit. Crank this fucker up and we'll just poise ourselves for the next plunge.
http://www.tradersnarrative.com/dennis-gartman-turns-bullish-4485.html
The ECB stress tests were such blatant bullshit, it boggles the mind that they made money move in any way that could be vaguely construed as "positive." But, I suppose that rationality really is abandoned when desperation sets in. Good bye, fundamentals, hello, voodoo! Somebody ought to ask George H.W. what he thinks about this...
thanks to bogus analysis like these supposed 'stress' tests, the next leg of the crisis will involve a more sustained and profound loss of confidence in all areas of the financial world. we are witnessing the complete dislocation between reality and what is being presented as such by an army of useless, bureaucratic institutions. the people may be dumb, but PTB are pushing a fine line these days. holla!
Obama is a budget buster, but Bush left him with over a trillion dollars in the hole for 2009. Congressional Republicans have a shorter memory than the half life of astatine-217 at 0.0323 seconds http://www.iem-inc.com/toolhalf.html.
What struck me the most was the absolutely sad note of the last paragraph.
Despair. But of course this is the place that more and more intelligent people will arrive at as the blinders are pulled on tighter. All these shams of stress tests are for sheeple consumption, cover for their volume-less melt-ups and flashy crashes.
It's almost like reality and fiction are coming together at a quickening pace...
Matter+Anti-matter = Doesn't matter
ORI
http://aadivaahan.wordpress.com
Perception is funny. Remember when you were out in the valley. So much buzz in the air about so many different fully funded projects. Remember those days. No one, and I mean no one in that scene thought about 'the end'. Everyone was giving birth. It was the beginning of greatness.
Nic:
"This expensive extension of a broken system will only make it worse in the end."
Here on the hedge 'the end' is the center of gravity for most. The end. No birth. A fascination with the contrary. And all the brilliant contributors, so smart, so metrosexual, so wrong.
Hi Metarzetc,
Not sure how you knew I was in the Valley but I remember 1999 well. We were the kings and queens of the world.
But that was a false fecundity. It was not productive like a womb. It was more like a Birthing Production Station.
And for all the hedgies, though they span a broad spectrum, I think they are focused on what seems to be an inevitable end, to the financial world as we know it for sure. By extension most of the western world and way too then.
As for everything else, the GOM disaster is the canary in the coalmine for this paradigm.
ORI
False fecundity? I guess... Some very seriously productive (in a quantitative way) technology came out of that period and I'm not talking about Drupal. Some projects were a little sticker than others for sure. Sorry about your luck.
VC money was the only way to go back in mid to early 90. Then wall street came in and fucked it all up. As they do for everything.
The GOM spill is done. BP survived, all else will have to litigate. It's a good opportunity for lawyers. The only thing I will be upset about is when the loop current gets hold of the underwater lakes. The dry tortugas are going to get destroyed. If you ever spend time neutrally buoyant then you know about the DT's. The most amazing reef in the world right in the center of the loop current.
The bigger question is what is he willing to do about it? Nothing I would suspect.
The real test is whether of not the EU bond market buys the results on Monday morning.
it's like farming - sew, fertilize, reap, repeat.
you know the harvest is coming - the object is to NOT to be the fertilizer!
I have a feeling that the 'farm subsidies' will keep rolling out if market goes higher by election time.
Worst case scenario would be closer to the 09 lows, with collapsing banks causing a domino effect in interconnected bad bets across an eu region which is tapped out. This was never a stress test- just took a leaf from Geithners book with pr stunts used to fool investors that all is good.
I would disagree GFORCE, I think the PR stunt was not to fool investors, but to placate a docile media, and to prime the pump for the HFTers. Investers that I know are all out of this casino, all that is left are the HFT and MM.
is there any patttern left to this market now that the H&S was invalidated...
what about a Time Symmetry Head and Shoulders,...???
has this article got it right .....???
http://www.safehaven.com/article/17446/head-and-shoulders-pattern-a-time...
Has anyone noticed that gold prices have just been bullshit all weekend. Not adding up. Not making sense. Someone's doing a financial black ops.
The "single dip" ice cream that is far too big for the cone, and it has melted. Melts in thier hands because no one wants to put it in thier mouth. I think we are not likely to slip back into recession but get deeper into the red. Stocks should zoom upward while 80% of the US population lowers thier standard of living. Hail Caesar !!!