This page has been archived and commenting is disabled.
U.S. Stocks and Euro Hinting at Bottoms; Bullion Vulnerable.
The mirage of economic recovery conjured up by our political leaders and a credulous news media dimmed and flickered in the harsh light of reality on Friday, when grim employment figures for May sent stocks into one of their steepest dives of the year. Although 431,000 jobs were added last month, most of the workers were census-takers hired temporarily by the government. Even that figure evidently was ginned-up, since it appears that many of the workers had been laid off during intervals when there was little to do, only to be rehired later and recounted. But the bottom line for private-sector employment was a paltry 41,000 new hires, the smallest increase since January.
Wall Street did not exactly take the news in stride, and the broad averages fell as though the data had caught most traders by surprise. Index futures had head-faked overnight to trap bulls, but by day’s end the blue chip Dow Average was down 323 points. We would caution bears against becoming overly confident, however, since there are several technical factors coming into alignment that augur a potentially sharp reversal in the broad averages and some important trading vehicles that we track. For one, at Friday’s low of 1059, the E-Mini S&Ps was within 37 points of a longstanding “Hidden Pivot” target of ours at 1022. That’s equivalent to about 300 more points in the Dow, and it could easily be reached this week if sellers continue to hit stocks on Monday morning as they did on Friday.
Bullion ‘Vulnerable’
The euro may also be close to an important turn after having been savaged since mid-April, when the currency hovered just above $1.37. On Friday, heavy selling drove it below 1.20 for the first time since 2005. The precise intraday low on the June Comex contract was 1.1955 -- 0.0015 points from our downside target of 1.1940 – so the bottom could already be in. However, this week’s action is still needed to confirm a bottom, since even a small overshoot of the 1.1940 target or a close below it would imply additional risk all the way down to exactly 1.1717. A rally in the euro would imply at least a respite for the U.S. dollar, which has pushed steadily higher since December and recently accelerated to the upside. We also see potentially corresponding weakness in bullion prices – silver relatively more so than gold.
»
- advertisements -
Is it my imagination or do national currencies do something like commodities, blow off to great highs even while we know these highs are the certain death knell of said commodity/currency as the effect of these high values are lethal to macro situation.
Oil goes high, so then oil sucks money that would be spent on other things and US unemployment will quickly spike and oil will go lower. Icelands currency spikes, this assures their exports halt, bam, they are dead.
Honest question, I am very ignorant in these matters.
The problem I have with technical analysis, pivot points, and such is that, if it really worked, people like Rick Ackermann would be as rich as Croesus. Because they aren't rich as Croesus, I have to conclude that technical analysis isn't all its advocates crack it up to be.
these guys from goldseek are now flooding into the forums here. Interesting that Tyler D has a post suggesting the diametric view of this rather inane commentary. We're all too familiar with Ackermann and his "pivot points" and portentous prognostications thereof. The old saw about buying the Euro because everybody is rushing over to the sell side of the boat sounds ridiculous. As if the financial, social, and political implosion of the Western World can be handily contravened by some transient "investor sentiment" and technical chart hocus pocus. Ackermann is also jumping on the sell silver bandwagon along with dear befuddled "Mish" and the gooney Prechter. The deflationary bogeymen are coming out of the woodwork once again.
who iz you!
*waves knife in face*
Europeans do not have control over their currency in the world markets. If they did, they are not free markets. Europe can rejoice at the Euro in the 1:10 area but how about at 90? or 80? or a collapse? The Euro may now only be at the 120th floor dropping downwards... so far so good. What if the idea of the Euro was flawed one backed by the same bogus ideas as the dollar? What if this is a collapse of the "fiat currency" idea?
Europe is competing with India and China for exports so should they devalue to the Indian Rupee? The American consumer is tapped out already and credit is shrinking.
The rise of the dollar only makes the dollar demoninated debt burden heavier in a global marketplace. Hence the Deleveraging and Defaults are bound to continue.
What is this "free market" that you speak of?
Sweet, i want to buy more $350/ounce gold. Bring it on, i dare you!
http://theautomaticearth.blogspot.com/2010/06/june-6-2010-go-long-euro-at-this-point.html
June 6 2010: Go long the Euro at this point in time? Not me!
Ilargi: The cat is out of the bag (or Schrödinger’s box, if you prefer, to add some spice). And if not the whole cat, surely its tail is. Maybe French Prime Minister François Fillon spoke out of line, or maybe it was orchestrated, we’ll probably never know for sure, but the good soul brought the Euro down on Friday while at the same time confirming what The Automatic Earth readers have been able to read from me for a long time now.
Which is: Europe has been building a concerted effort to bring down the value of the Euro since at the very least the beginning of 2010. And the effort has been remarkably successful. While Americans often tout the power of the Federal Reserve, or the US Treasury Secretary, the comparative value of the US dollar has risen hugely in the past half year, which turns President Obama's goal of doubling US exports in the next five years into a red-nosed type comic relief exercise.
Mr. Fillion's "admission" leads some pundits to suggest that France and Germany are on different sides of an imaginary divide, but they haven't been paying attention. Germany’s economy is doing -relative to others- quite well, thank you very much, and many thanks to the falling Euro, and Angela Merkel has no reason to internally contradict Fillon's intentions, even though she may not have liked these to be out in the open. At this point it’s hard to guess when certain parties would like specific details known, even if Merkel looks like a musical director no orchestra member would or should like to clash with.
Mr. Fillon goes as far as saying that the European Central Bank (re: Berlin, Paris, Amsterdam) wants the Euro to achieve or sink below parity with the US dollar. Personally, I doubt that. It may be just a statement designed to speed up the fall of the currency. I’m thinking Merkel et al are aiming for $1.10-1.15 for the Euro. But they may have decided to go for the jugular, it's possible. A strong currency is great in times of strong economies, whereas a weak one fits weak times. It all depends on how Berlin and Paris view the future, which is something they'll never ever let the public in on. Politics, after all, is about looking ahead in silence.
Not that these people have some sort of absolute control, mind you. What's happening is that they have no choice. A very similar thing as applies to currencies in weak vs strong economic times also holds true for the relative value of exports to national economies. And I’ve talked about this before: very few people seem to understand that in bad economic times, where a lot of debt is involved, the relative values of exports rises exponentially.
What you can’t sell, you have to borrow, to put it into an albeit simplified way. We now see even Nouriel Roubini, who's been hiding in a dark humid doom corner over the past year, come out and say that a weaker Euro might save the Eurozone. Which, to wit, is what I’ve been saying all along: in order for Germany to save the union, and to bail out Greece and others, it will have to sell products, it’s really as simple as that, no big major mysteries there.
US Treasury Secretary Timothy Geithner calls for the opposite of all this: more domestic demand in the main Euro countries. Still, is he really that witless, or have the banks he works for in real life made trillion dollar bets on the very outcome we’re seeing develop before our eyes today, the US dollar doing precisely what no US manufacturer wants? That one I can’t answer. Geithner may not be the brightest light of day, but to presume he’s that thick is quite a different matter altogether. Still, yes, that would mean that he is actively trying to strangle US industrial capacity. Not a trivial trifle matter either.
A Euro at $1.40 or even $1.50 as always a threat to many parties, if only because many US products are assembled in 2 cents an hour economies. Parity? Perhaps, if Merkel et al are clear enough on the depth of the -inevitable- coming downfall (we don’t know what and how much they know). There would be a huge psychological advantage to a $1.10 exchange rate, but if Merkel knows what I do, and acts on it despite potential election losses (which I have no worries about), the decision may already have been made to aim for below parity, and the US interests have no choice but to rake in the profits from the resulting short trade.
And as we saw on Friday, Europe has a seemingly endless series of aces up its sleeves to achieve what it desires. Out of the blue, Hungary, which is not even a member of the Eurozone, became a major news item because of its awful economic prospects. That's where you get to think: look, the entire world, all of it bar none, has awful economic prospects. Why Hungary? And then the Euro went to below $1.20 for the first time in over 4 years. And you go: Ahhhh, Hungary, right!!, and next week Bulgaria, Romania, Latvia. By now I’m sure you get the idea.
And Washington will come back with: but we have New Jersey, and California, and Illinois, and they’re worse off than Eastern Europe by a mile, and we want exports too. Yeah, but the US has so far kept up the apperance that its central and centralized government will make good on all debt all over the 50-odd states. And as long as it keeps up that charade, Merkel wins. Whereas once that charade can no longer be maintained, there’ll be as many valid concerns about the survival of the USA as there now are about the European Union.
We're entering the reality phase of the economic downturn. The first party to recognize that has a head start. At the same time, as I indicated earlier, the major banks that own US and -most of- Europe politics and politicians may well have realized that a long time ago, and divvied up the loot well in advance. Still, go long the Euro at this point in time? Not me.
And then again, who's thinking about money when you see an entire and fast expanding (Louisiana, Alabama, Misissippi, Florida, Georgia, Carolina's and more) local ecosystem and economy go up into less than nothingness? What are our prorities, exactly?
thanks, nice...if say oil was lapping up on the Greek beaches we'd have parity already, but it happens in US, ho hum.
Great post. All too often I have read that "the first to devalue wins...". But that's only true unless you have the most to lose. Ben and Tim have done their job. The US congress will ensure a seemingly unrecoverable debt load. The dollar will no longer be the reserve currency and that alone will tank the dollar and ensure debts are monitized. Be prepared.
@ Ackerman
The Euro is in a freefall and nothing short of RAISING interest rates sharply can stop this decline till it plays out. Too many "investors" who used the carry trade are trapped including the Muslim countries who rebeled against the Dollar as a reserve currency. Iran, Venuzuela, etc are trapped with hundreds of billions in Euros and now quietly looking for the exits. They may in fact be forced to exit screaming for Allah's help (divine assistance?) given that smart traders trade in the direction of the most pain, in this case, going lower will cause the most pain. Raising rates will kill equities and the fragile economy. The're between a rock (Iraq?) and a hard place.
The SnP broke through the 1105 (200 dma) down to 1040 than rallied by up to the 200ma and now has turned down again. Any bull worth his salt has protective stops under the 1040 low to preserve profits and given that in the last 13 months there were no reaction lows violated, I think that breaking 1040 low will be the start of a panic. The Fed cannot do much more because irates are too low already. So will they simply monetize all debt? I don't think so because Hyperinflation causes pain for everyone and Deflation hurts mostly those who are in debt. Our govt leads the way on that score so the jury is out on what course of action they will take. Eventually the market that dictates the terms because nobody is bigger than the markets and this debt deleveraging will continue in the months and years ahead.
tic - like your analysis...but are you sure monetization cause hyperinflation, be hard to keep up with collapse credit if your scenario is right?
So what youre saying is "if the market doesnt sell off next week , it will go up"
Perhaps youd like to add more to back up your pointless 20 seconds of blathering as this place is frequented by those with more investment IQ savvy than those found in an old folks home whom you probably naturally prey on.
well put
what a worthless article.
"The mirage of economic recovery conjured up by our political
leaders and a credulous news media..."
Hey. Don't forget Leo.
>But the bottom line for private-sector employment was a paltry 41,000 new hires, the smallest increase since January.
Wait till you see what happens later on this year when cities, counties, and states start laying off people in droves. Check this out.
>
10 States Where An Absurd Percentage Of The Population Works For The Government
http://www.businessinsider.com/10-states-where-an-insane-percentage-of-people-work-for-uncle-sam-2010-6Wow, that's shocking... NY with 16%+...sigh
Many of these people work in DC....errr and Wall St....errrr is there much difference?
TRIN readings:
I think the highest closing TRIN ever recorded, something like 12.4
That sent the 5-day ARMs to a blowout 19.4 or something like that.
TICK readings:
We have had -1000 intraday TICK readings 20 out
of the last 25 days.
We have had -1250 intraday TICK readings 8
out of the last 16 days.
At the March 2009 lows we set a record of
16 of 19 days of -1000 or greater.
how can you have a -1000 TICK reading on an index with 500 stocks?