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Weekly Bull/Bear Recap: Turkey Week Edition, 2012

Tyler Durden's picture





 

Via Rational Capitalist Speculator,

This objective report concisely summarizes important macro events over the past week.  It is not geared to push an agenda.  Impartiality is necessary to avoid costly psychological traps, which all investors are prone to, such as confirmation, conservatism, and endowment biases.  

Bull

 + Uncertainty is decreasing.  In last week’s recap, the bull’s strongest case was the “the contours of a resolution” taking shape regarding the fiscal debate in Washington.  This week, more investors bought into this bullish point, leading to the S&P 500’s best weekly performance since June.   In geopolitical news, a cease fire has been declared in Gaza.  Decreasing conflict in the region means cooler heads are prevailing.    

+ Risk markets are ripe for a tradable bullish move given that the S&P 500 is extremely cheap when looking at current P/E ratios.  In fact, it would need to rally 26% just to reach the average P/E of bull markets dating back since the 60s.  Meanwhile, trends in insider trading are hinting at a sustained rally to come.  Mainstream investors are entirely too pessimistic on longer-term earnings growth, yet sources of future growth are around us….

+ …global growth will be the recipient of a welcomed surprise in China, where a rebound is gaining strength as per HSBC’s latest PMI reading, increasing to 50.4 from 49.5 and marking the metric’s first expansionary reading in more than a year. Meanwhile, “The German economy is holding up well in face of the euro crisis” and ECB officials signal that the central bank is willing to forgo $9 billion in future profits on its Greek holdings, a sign of understanding that some relief will need to be given to periphery countries.  

+ …meanwhile, U.S. economic growth will be increasingly supported by a rebounding housing market.  The National Assocation of Homebuilder’s Housing Index rises to a 6 and a half year high.  Existing home sales for October surprise to the upside and upward pressure in home prices may be the reason for improving consumer confidence (Source: Econoday).  Rising Housing Starts indicate that the housing industry is becoming more confident in the recovery.  Meanwhile in manufacturing, Markit’s U.S. PMI report certainly doesn’t agree with the bearish claim that the sector’s is about to enter contraction.  Finally, U.S. officials understand that today’s globalized economy is about competition and are considering establishing laws to encourage the brightest minds in the world to consider the U.S. as their home.       

 

Bear

-Investors are like frogs in an increasingly hot investment environment.  Europe continues to show signs of disunity and infighting as EU finance ministers are unable to agree on a revised version of Greece’s fiscal consolidation plan or approve to extend the country’s public debt target.  Meanwhile France’s AAA rating is history as per Moody’s.  Increasing investor skepticism doesn’t bode well for lawmakers as eventually financial markets will force the issue.  Finally, economic and financial data is just awful.

- Confidence in the global recovery is evaporating.  U.S. Tech companies are feeling the effects of a slowing global economy.  Meanwhile, China reports that foreign investment in the country has fallen for 11 of the last 12 months.  If bulls are certain that China is poised to rebound, why has the Shanghai Index dropped to a new low?  Meanwhile, Japan reports a 6.5% plunge in October exports (exports to the EU cratered 20% YoY)

- As if critical damage due to a slowing global economy wasn’t enough, the U.S. economy is also contending with a crisis of confidence due to Fiscal cliff concerns.  Investment is falling off a cliff as companies pull back on business spending.  The consumer better step through this holiday season (early signs   aren’t promising).  Despite a higher trend in Michigan’s Consumer Sentiment index, weakening momentum is causing alarm.    

- Cooler heads may seem to be prevailing in the Middle East, but the longer trend is of more hostility.  Meanwhile tensions in Asia remain elevated and territorial claims dealing with the South China Sea are likely to exacerbate fissures in the region.

 


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Sat, 11/24/2012 - 02:31 | Link to Comment Yen Cross
Yen Cross's picture

sans the bs  old navy pop ups tyler

Sat, 11/24/2012 - 03:13 | Link to Comment takeaction
takeaction's picture

We are so screwed....you have to see this guy let the ZOMBIES have it... "Go Buy some new Ipads"  LOL!!

http://www.youtube.com/watch?v=HAeMeLhjswQ

Sat, 11/24/2012 - 06:31 | Link to Comment Michaelwiseguy
Michaelwiseguy's picture

There's another name for the Ruling Elite New World Order Owner Class, they're called the "Ferengi".  Spelled backwood it's short for "Ignorant Fucks".

Ferengi Discusses Earth Economics (Star Trek)

http://www.youtube.com/watch?v=hG0ipvIoFZs

The End Of Ferengi Civilization

http://www.youtube.com/watch?v=7zFTO8mOLTk&feature=related

 

Sat, 11/24/2012 - 03:10 | Link to Comment CPL
CPL's picture

Summary of the past week.

 

- Bond sales were done

- No volume

- Market recaptured footing on all bad news.

 

Time to run this faster and help it over the cliff.

Sat, 11/24/2012 - 06:54 | Link to Comment MillionDollarBoner_
MillionDollarBoner_'s picture

You had me up until

"given that the S&P 500 is extremely cheap when looking at current P/E ratios."

Fuck off!

Sat, 11/24/2012 - 09:22 | Link to Comment Muddy1
Muddy1's picture

nt

Sat, 11/24/2012 - 09:49 | Link to Comment q99x2
q99x2's picture

I'm following the trail of a lost leader where the intensity of perception has rendered reality no more than whimsical speculation. If I wouldn't have to learn I'm sure I could remember the future..

Sat, 11/24/2012 - 10:55 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

The algorithm headline readers are still weighing Greece heavier than anything else because Greek default can trigger swaps, which have global system destruction potential.

Simply that.  Most other data is fluff.

The homebuilding stuff is all apartment complexes.  Single family residences aren't participating.

Sat, 11/24/2012 - 11:05 | Link to Comment max2205
max2205's picture

Index Trend followers got a big whipsaw with the spy dropping below the 4 and 10 month Ema. This week saw a cool reversal above both MA.

This is all that matters till the market reverses and holds.

This would be only the 4th MA buy sig since 2009

Sat, 11/24/2012 - 15:08 | Link to Comment max2205
max2205's picture

http://advisorperspectives.com/dshort/updates/Market-Valuation-Overview.php

Doug short would disagree with this: + Risk markets are ripe for a tradable bullish move given that the S&P 500 is extremely cheap when looking at current P/E ratios. In fact, it would need to rally 26% just to reach the average P/E of bull markets dating back since the 60s.

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