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Observations Of French Markets From A Trader's Perspective: Contagion
As excerpted from European Bank Run Trading Supplement Available for Download, here is the first of several observations of European markets from a trader's perspective...
The Monthly chart, with only one more trading day left tomorrow [Friday] shows we are breaking the monthly trendline at 3910 THIS month (July), even though on a weekly basis, there were a few weeks this month where it was below already.
That’s a quite NEGATIVE new development, with the 1st natural target being around 3600 (high above the trendline was 4200, break point 3900 - so a 300 point range) that 3600 level is the Nov10 low. A more serious target behind is the 2010s low in the 3300-3375 range. Beyond that, we need more negative news (which of course is likely to happen) but also we need the technicals to deteriorate more.
After all we’ve seen markets in levitation with bad news, so after 900 points from the highs and so much money printing it could well hold, right?
Then a 3300-3900 range would be in play and remove 100 points each side for most of the action for say 6 months if this scenario holds.
The intra-month attempt to stay above 3900 failed in a week time (1st week of July), and the rebound in the 3rd week was capped by the 10wk MA at 3870, just 1% below the monthly trendline. This is a very bad setting.
Of note some big chip names have seen big drops very recently, like automaker PEUGEOT, which revised down its earnings. The worst performers this year in the index have NOT been financials.
CDS in the French markets are also on the rise. Its safe to assume that some of the bigger credit players are drawing conclusions similar to those espoused in the BoomBustBlog subscription documents regarding Italy and the path of contagion.
Posts of relevance:
- The Mechanics Behind Setting Up A Potential European Bank Run Trade
- What Happens When That Juggler Gets Clumsy?
- Let's Walk The Path Of A Potential Pan-European Bank Run, Then Construct Trades To Profit From Such
- Greece Is Fulfilling Our Predictions Of Default Precisely As Predicted This Time Last Year
- The Anatomy Of A European Bank Run: Look At The Banking Situation BEFORE The Run Occurs!
- The Fuel Behind Institutional “Runs on the Bank” Burns Through Europe, Lehman-Style!
- Multiple Botched and Mismanaged Stress Test Have Created The Makings Of A Pan-European Bank Run
- Eighteen Percent of the EU is Literally Junk, Carried As Risk Free Assets at Par Using 30x+ Leverage: Bank Collapse is Inevitable!!!
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There is now no capital remaining for productive investments as much of it & more is servicing a bloated shadow banking rentier sector.
Although the banks are so dysfunctional that even if they were clean they would pump more air into further bubbles.
The west is dead - we just have to accept this new reality.
In fact I think its been dead for 40 years - its just that the stink is overpowering now.
So that's it. And all this time I was sure there was a dead mouse under the fridge. Guess I can cross that off my 'to do' list.
BNP is so short its in britches; the state is holding its purse strings in the back office. Understand France...its all controlled from the Elysees...at people's expense. So the markets must take on this statist class that runs France... no big deal...except they are seamless...resilient upto the end.
Pot n kettle, while the whistle blows and the white smoke rises to the roof. We have a new pope!
When I see charts like these and talk of contagion, I have to remind myself of 2008. The debt and leverage will never be wound down completely (unless there is a total collapse). I might get lucky shorting the ponzi banks for a little while but then the FED and ECB are going rip my face off when they print fiat to infininty. I have to remind myself that hyperinflation is the only way out for these scoundrels. Or a slight chance they can kick the can long enough (few years to a decade) for the few inventors and entrepreneurs left in the world to create clean cheap energy and massive efficiency gains.
Contagion will then spread westerly across the Atlantic.
Like I said Reggie,
Time.
Confidence.
Contagion.
End Game.
"It's the Europeans, stupid!"
Reggie
Came on.. Even on a day like today, you continue to speak about Europe. The holophotes are 6000 km away, east direction ….
Should I already start shorting BNP ?