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Markets Tripped Up By "Diesel-Bomb"

David Fry's picture





 

 

The Cyprus debacle was temporarily remedied by a bank restructuring vs a bailout. The bottom line is depositors with over €100K would see deposit confiscation. Theoretically, this would mostly affect Russian oligarchs with money laundered deposits. You had to accept this as the case even though there would be Cypriots with deposits in that size. But they were deemed just so much collateral damage by both the Cyprus government and EU. This was all seen as a positive in the eurozone and the U.S. in early trading Monday. Then along came a statement from EU Head, Jeroen Rene Victor Anton Dijsselbloem (a mouthful to be sure) or better known as “Diesel Bomb” to the street, which undid the early rally. The statement: The Cyprus solution will serve as a template for future EU bailouts. That was like a bomb to equity markets since it threatened deposits in other troubled banks in Italy, Spain and others.

After seeing the damage his comments did to markets, Diesel Bomb quickly retracted them denying he made them, even though they were made before FT and Reuters.

 “Cyprus is a specific case with exceptional challenges which required the bail-in measures we have agreed upon yesterday. Macro-economic adjustment programmes are tailor-made to the situation of the country concerned and no models or templates are used.”


 Bernanke got tapped on the shoulder regarding Cyprus and the eurozone situation while speaking in Europe and merely said: “The situation in the eurozone is mixed.” Those words meant little frankly.

After walking back Diesel Bomb’s earlier statement markets recovered some. But as some were quick to point out, the first statement was probably a slip of the tongue truth.

 “Risk Off” was back once again as the dollar (UUP) and bonds (TLT) especially rallied. Gold (GLD) ended only slightly lower after being pummeled early. Commodity (DBC) markets were mixed as higher oil (USO) were offset by virtually everything else.

 Active stock sectors lower were financials (XLF) on contagion fears from the eurozone (IEV) and (FXE) and homebuilders (ITB). Stocks closed only modestly lower as another late day “stick save” followed the now epic Diesel Bomb retraction. For the ETF Digest as the week began we were 40% in cash.

 Volume was higher on selling which is typical as trailing stops get hit. Breadth per the WSJ was negative.

  3-25-2013 5-30-03 PM diary

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$NYMO

The NYMO is a market breadth indicator that is based on the difference between the number of advancing and declining issues on the NYSE. When readings are +60/-60 markets are extended short-term.

 

 $NYSI

The McClellan Summation Index is a long-term version of the McClellan Oscillator. It is a market breadth indicator, and interpretation is similar to that of the McClellan Oscillator, except that it is more suited to major trends. I believe readings of +1000/-1000 reveal markets as much extended.

 

$VIX

The VIX is a widely used measure of market risk and is often referred to as the "investor fear gauge". Our own interpretation is highlighted in the chart above. The VIX measures the level of put option activity over a 30-day period. Greater buying of put options (protection) causes the index to rise.

 

Well, that was a fun day, eh? Spills and thrills the whole day long.

Importantly, it’s the end of the quarter and performance bonuses are on the line. So any excuse to rally is built in to conditions.Tuesday features Durable Goods, Case-Shiller Home Price Index, New Home Sales and Consumer Confidence. These are market moving indicators.

Let’s see what happens.

 

 

 


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Tue, 03/26/2013 - 02:29 | Link to Comment ebear
ebear's picture

Geezus, even Ferdinand Magellan didn't need that many charts

Tue, 03/26/2013 - 02:19 | Link to Comment petrossa
petrossa's picture

For years Cyprus ignored EU  demands to at least conform their banking sector to the transparancy rules, if not restructure them since this result was inevitable. I can see how tax havens for laundering money are very attractive to certain people, but let's not forget that ever dime laundered in Cyprus is a dime the regular Europeans have to pay more. Personally i'd have let go bankrupt and damn the consequences.

Unfortunately the EU doesn't have the balls and let hang their ears to doomsayers. So now i as EU taxpayer can fork out AGAIN for some corrupt 3rd world nation style country. This is the least they could do, and i'm glad they did. Let's hope it is a sound warning for Luxembourg et al : Hodi Mihi Cras Tibi

Tue, 03/26/2013 - 04:11 | Link to Comment ebworthen
ebworthen's picture

Any bank anywhere is happy to launder money from everyone while things are good.

When things go bad they selectively screw over small nations and banks, and of course the taxpayer.

Everyone with uninsured deposits is not a drug or other crook, and all depositors of Laika may lose their money.

The real problem is corrupt central banking schemes and their lackey politicians.  Those crooks will ALWAYS screw the taxpayer.

Tue, 03/26/2013 - 01:25 | Link to Comment Lucius Corneliu...
Lucius Cornelius Sulla's picture

Cyprus was handled right.  Stockholders lost, junior and senior debt lost and then uninsured depositors lost.  That is the correct order for asset haircuts in the case of insolvency.  If that had happened to Citi, GS and all the other insolvent US banks then we would be closer to a sustainable recovery.

 

Tue, 03/26/2013 - 01:42 | Link to Comment Assetman
Assetman's picture

If that had happened to Citi, GS and all the other insolvent US banks-- the earth would be tilted on its axis at 80 degrees... cats would marry dogs... and there would be no more money for anybody left in the world.  

Except for Lloyd Blankfein.

This is true because Tim Geithner, Larry Summers, Henry Paulson, and Robert Rubin told us all so. 

And they were all ex-Treasury Secretaries and crap like that.

/sarc

Tue, 03/26/2013 - 01:17 | Link to Comment ebworthen
ebworthen's picture

Chartalicious!

Thank you, good stuff.

Look at that complacency in the Vix, wow.

Of course they aren't going to take anyone else's desposits, because the recovery is here!

Things are so fixed in Cyprus they are going to keep the banks closed for another day (indefinitely?)!

Mon, 03/25/2013 - 23:30 | Link to Comment Tinky
Tinky's picture

#graphoverload

Tue, 03/26/2013 - 00:28 | Link to Comment BC6
BC6's picture

#greenshits

Do NOT follow this link or you will be banned from the site!