Head and Shoulders
As I’ve outlined in earlier articles, Spain will be the straw that breaks the EU’s back. The country’s private Debt to GDP is above 300%. Spanish banks are loaded with toxic debts courtesy of a housing bubble that makes the US’s look like a small bump in comparison. And the Spanish government is bankrupt as well.
The technical guys are feeling bearish.
While gold is now negative year to date in dollar terms, it remains 0.7% higher in euro terms. Gold prices dropped 3.7% last week and silver fell 5.1% to $28.89/oz. The smart money, especially in Asia, is again accumulating on the dip. Demand for jewellery and bullion in India has dipped in recent weeks but should resume on this dip – especially with inflation in India still very high at 7.23%. Also of interest in India is the fact that investment demand has remained robust and gold ETF holdings in India are soon to reach the $2 billion mark. This shows that recent gold weakness is primarily due to the recent bout of dollar strength. Morgan Stanley has said in a report that gold’s bull market isn’t over despite the recent price falls. Morgan Stanley remains bullish on gold as it says that the ECB will take steps to shore up bank balance sheets, U.S. real interest rates are still negative, investors have held on to most of their exchange traded gold and central banks are still buying gold.
All you need to read and some more.
We all have had our fair share recently of Gartman the "market timer" (here and here). However, little have we experienced of Gartman "the historian". Here he is, by way of Art Cashin, being off by 300 years notwithstanding, describing something that he has intoned on recently in his ever-so-frequent appearances on CNBC: the "they" who are in control, or in this case the central planners whose decisions ultimately lead to nothing but ruin.
But anyway, the big thing is liquidity right now, not whether or not you have a job.
The following chart from Bank of America captures the past three years of American "recovery" quite starkly: the US economy, as measured by the ISM has so far not double but triple dipped, and the result would have been far more pronounced had the Fed not stepped in after each of the prior two local maxima and injected trillions into the economy. Following peaks in mid 2010 and early 2011, we are "there" again - how long until the Fed has to jump in? And would it have already done so if it wasn't an election year? Which brings us to our question: third time is the charm? Or head and shoulders?
Listen up you Muppets!!!!! I'm rehearsing from my Goldman Interview, applying for retail stock broker, pushing Apple inventory :-)
I believe the EUR/USD is going to approach parity within the next year. All the nonsense we've seen in Europe over the past couple of years is going to start giving way to reality, and even with Helicopter Ben's efforts to devalue the US dollar, the Euro is going to do a better job pushing its way down.
The bullishness is rather interesting considering the notable headwinds that exist in the European sovereign debt markets, the geopolitical risk seen in light sweet crude oil futures, and the potential for a recession to play out in Europe.
Against this highly deflationary backdrop, the one primary prop for the markets is hope of more juice/credit from the world Central Banks. However, even that prop is losing its strength: the gains of the last coordinated Central Bank intervention lasted just a few weeks.
"What we have on our hands is a good old fashioned quagmire" is how Morgan Stanley's Mike Wilson sets up his surprisingly non-sheep-like perspective on the troubles that US equity investors may be about to face. Expanding on MS's bearish strategic (fundamental) forecast, that we discussed earlier in the week, Wilson combines the 'liquidity vs negative-real-rate' thesis (that the Fed's liquidity is perhaps no longer 'good' for stocks) with his own views on ECRI's weakness (very 2008-like in relation to ECO surprises), household debt deleveraging (more and longer), how much QE3 is already priced in and what will its effect be when it comes (less and less positive in nominal and real terms), investor sentiment (very bullish), long-term technicals (weak breadth), and short-term earnings expectations (deteriorating and weighted to 'weak' financials to end with the pragmatic realist perspective that perhaps 'the gig is up'.
Is a Massive Head and Shoulders Pattern Completing ... Just Like On the Eve of the Second Wave Down in the Great Depression?Submitted by George Washington on 07/05/2010 14:21 -0400
Should we be tightening our seat belts?
Our European central bank friends went and borrowed a trillion dollar bailout from us, and all we got was this lousy 6 hour bounce and rolling head and shoulder formation? Goldman Sachs is now red as the bears smell fear again, and as goes Goldman so does the market (even if it means a Warren Buffett MBO/LBO of every public stock). Look for a fun close or the announcement of another trillion dollar bailout from JCT who is now and forever the butt of every joke of bureaucratic incompetence.
After today's action, thousands of technicians will be pulling out their slide rules in order to mull over the "double top" or "head and shoulders" pattern on the NY Composite. With millions of traders worldwide all looking at the same moving averages, the same patterns, the same 5-min. charts, all in real time, the fate of the stock market and the fate of mankind will now be determined by a few squiggly lines. Which way will it go?