Weekly Bull/Bear Recap: June 27-July 1, 2011

Tyler Durden's picture

Submitted by Rational Capitalist Speculator

Weekly Bull/Bear Recap: June 27-July 1, 2011


+ Greece’s parliament approves the austerity plan and
removes the largest threat to the global recovery.  Now countries can
revert their focus back to economic growth, while in the US, businesses
can begin to hire and consumers can move forward with confidence.

+ We’re beginning to see evidence that the current slowdown is transitory.  The ISM Manufacturing Index came in better than expected at 55.3%, increasing from 53.5% in May.  Chicago’s Manufacturing Index showed improvement, while the Richmond region showed stabilization in May.  Auto-related production rose 0.8% after falling 3.8% the previous month.  Japan is finally recovering and will lead to higher manufacturing readings in the months ahead in the US as supply issues are in the rear view mirror.   

+ The stock market is sniffing a recovery headed into the 2H of the year with a very bullish performance for the week.  Get on board as the recovery gains steam in the months ahead!  

+ China remains committed to investing in Europe
signaling increased confidence that the recovery there remains on
track.  Such a big player in the world economy announcing their
confidence in the Eurozone will help soothe sovereign debt jitters.

+ China finally has the inflation tiger under control as per Premier Wen.  This means that tightening measures may be coming to an end as inflationary pressures subside and a goldilocks environment of falling inflation with easier monetary conditions keeps the economy growing at a brisk rate.     

+ Confidence is slowly making its way back as gas prices keep falling.  Bloomberg’s consumer confidence index just notched its highest level in 10 weeks.  Consumers have more disposable income and company’s  margins are improving.


- The ATA Truck Tonnage Index has declined for 3 months in a row and confirms that the economy is under serious turbulence.   The same can be said
for the Railroad Traffic report from the Association of American
Railroads.  It’s only a smidgin away from signaling contraction.  Both
these indicators show that the recovery has stalled.    

- Consumer spending took a hit in May
due to higher uncertainty and a still anemic job market.  Businesses
don’t have customers and therefore will not invest in future growth. 
Consumer spending is the engine of the US economy.  It is dangerously
close to stalling.

- The housing market remains a zombie as mortgage applications have declined for 2 weeks in a row
and paints a worsening picture for the housing market in the months
ahead.  Still high levels of inventory and meager demand will ensure
that prices revert back to their second leg down.   

- So the bulls point out how lower gas prices are going to lead to improved consumer confidence and more spending.  Well, gas prices declined throughout June, but the Conference Board’s Consumer Confidence reading fell for the month (the U of M sentiment index didn’t fare well either).  It’s not all about gas prices.  Crappy Job Market = No Confidence.     

- One of the most important discretionary indicators is signaling a red flag
The National Restaurant Association’s Restaurant Index just indicated
that the sector as a whole is now in contraction.  The last time this
happened was mid last year, when the economy was about to enter another
recession only to have Bernanke save the day at Jackson Hole.  He may
not be able to do the same this time around. 

- It’s funny how bulls are quickly dismissing the obvious slowdown
in China.  While we had persistent bearishness in the past couple of
weeks, this recent rally has made “downright giddy” heading into the 4th
of July weekend.  

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kito's picture

You ever wonder why there isnt one, just one, major player who is completely positioned for a collapse of the system?

kito's picture

Thanks for your effort but A) he is not major, and B) he is 75 pct in govt bonds--which doesnt put him in the camp preparing for complete monetary collapse.

kito's picture

Thanks for your effort but A) he is not major, and B) he is 75 pct in govt bonds--which doesnt put him in the camp preparing for complete monetary collapse.

Caviar Emptor's picture

Mr Market says: Who can be bearish when we have such generous overlords? Party on, friends, if we fail we get bailed, and if we get bailed we'll fail. 

Michelle's picture

Can you say Major Short Squeeze? Idiots on the wrong side of the trade, again! Still waiting for Obama to pull the jobs bill out of his hat, it's coming as we get closer to election time.

Tuffmug's picture

+ World Ponzi saved from collapse by Greek politicians extorting money from EU and IMF in exchange for not defaulting and promising austerity and repayment of loans that will never happen. World Ponzi markets rally!

Caviar Emptor's picture

Yup. And they're already counting on Spain, Portugal, Belgium and Italy. Each time there'll be another back door bailout to the banks. That way they can keep wearing Hermes. And they can use some of the proceeds to run HFT algos to nickle and dime retail investors. 

RobotTrader's picture

After considerable reflection on this absolutely stunning rally, my only conclusion is that either Jamie Dimon is going to be the next Treasury Sec., or Obama is about to unleash a "McJobs Bill" that will shock the financial world.

sitenine's picture

Geithner quits scenario - bearish or bullish?

Johnny Yuma's picture

Get on board the great space coaster! 

lolmao500's picture

We’re beginning to see evidence that the current slowdown is transitory.

Mwahahaa... did Bernanke wrote that? Inventories are going nowhere. They can increase the production all they want, it ain't getting sold.

teotwawki's picture

Rates are headed up it appears. This is bullish? Nice short squeeze this week. On to new highs? Doubtful. If we make new highs in this putrid environment just start wiping your ass with dollars because that is all it will mean.

teotwawki's picture

Absolutely stunning rally...what a shithead

Grand Supercycle's picture

Since DOW/SP500 is now EXTREMELY overbought, the reaction next week should result in a significant retracement.

S&P500 daily charts show updated rising wedge and possible head and shoulders pattern with target of 1,150 when confirmed.


RobotTrader's picture

I have to keep an open mind.

With IBM, KFT, MCD making new record highs, I must consider the possibilty of a runaway bull market.

If the 13 year bear market is ending, how would be we able to spot it before we break out to new highs?

I'd say a huge breadth surge, and lots of stocks coming off lows after big corrective bases.  That is exactly what is happening now.

mendigo's picture

what about the possibility that money simply spilled into stocks on flight from treasuries

what are the fundamentals to support an extended rally - other than perhaps the absense of another melt-down

mendigo's picture

so these are the msm grade interpretations of what's happen. are there no more realistic assesments - something other than bull or bear, maybe a sheep (but a really pissed sheep)

economical signals are weak or mixed

us continues to become more stratified in terms of haves and have-nots

many corporations are reporting strong profits or reasonable prospects for return to profitability

europe has patched over the greece thing - can money printing and fancy talk really pull this off. tyler says they cannot but he lives in a world of reason - check your assumptions

oil is down then back up - WTF maybe internet went down and bernankes transfer did not go through

us congress continues to provide comic releif in effort to help us forget about our problems (sometimes it almost seems they are capable of accidentally doing the right thing) 

falak pema's picture

melt down of assets in USA means money becomes available in EM. Its swings and balances.  A key to world bull demand would be restructuring US debt and increasing budget revenues through taxes plus drastic cuts in defense and more allocation to infrastructure renewal. The big US corporates have to contribute in tax increases and also by financial regulation on derivatives and financial book cleaning in shadow banking. Major overhaul. Squeeze the financial squid, invest in infrastructure and let the EM market rip. The recipe for new growth world wide.  America will start creating jobs by outsourcing less.

Burgess Shale's picture

The first item in the Bull list was written by a truly talented comedian.  It has all the right memes and it's certainly pure "bull." I almost spat my coffee.

oldmanagain's picture

Some of the "good" figures was by inventory accumulation, ie over production. This could be temporary but another month of the same would raise large concerns.

The rally seems built on low volume, no really bad news, summer holiday, and combo of low volume and  short term shorts.

 A relief rally because the world survived a Greek vote?  California votes get no press but many times more important?  Hard to tell. Anything that can cause a great derivative unwind is a threat.  Who, what will be the ultimate dominoe.  

There is such a wide variety of dominoes, it is hard to tell in commodity markets what the initial wave will bring.  Will the traded, regulated, fail by inference, or be a safe harbor?