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The Biggest Market Headfake Ever: Is A Wholesale French Bank Liquidity Run The Sole Reason For The Euro, And S&P, Surge?
Over the past two weeks, there is one simple thing that has been bugging skeptical macro observers: namely the paradox of i) just how ugly the European funding and liquidity situations have gotten, on the one hand, confirmed by the blow out in French bond yields (the French-Bund 10 year spread just hit an all time record yesterday) as well as continuing deterioration in credit spreads across core European nations, yet, on the other, ii) the euro, especially in that critical pair the EURUSD, has seen one of its most explosive rises in recent history, which as Zero Hedge pointed out yesterday, has totally decorrelated with the French-Bund spread, to which it had been firmly 'pegged' previously. As a result of ii), equity markets have surged due to legacy correlation arbs, which see Euro strength, and hence dollar weakness, as an empirical signal of equity "cheapness", which in turn leads all algos to treat a rise in the EURUSD as a buying signal. So how is it that even with the interbank liquidity situation in Europe frozen and getting worse, further keeping in mind that European banks are now expected to (or have already commenced - see yesterday's move in PrimeX) engage in widespread asset liquidations, that broad market risk is perceived as cheap? Simple. As the following note by Deutsche Bank's Alan Ruskin explains, the sole reason for the EUR (and hence S&P and global 100% correlated equity risk) surge in the past 9 days is not driven by any latent "optimism" that Europe will fix itself, but simply due to the previously discussed wholesale asset liquidations (as none other than the FT already noted), which on the margin are explicitly EUR positive due to FX repatriation, courtesy of the post-sale conversion of USDs to EURs. Which means that the ever so gullible equity market has just experienced one of the biggest headfakes in history, and has misinterpreted a pervasive European, though mostly French, scramble to procure liquidity at any cost by dumping various USD-denominated assets, as a risk on signal!
In other words, an internal bank run has somehow been interpreted to be stock positive... And there is your explanation for not only the paradoxical surge in the EURUSD and S&P, but why the correlation between the EURUSD and the Bund-France spread has completely broken down. Expect all of this to promptly, and very violently, correct once the market understands what an idiot it has been in the past two weeks.
From Deutsche Bank:
In the last few days there has been talk that European bank repatriation of capital may be behind EUR strength. Setting aside the timing of asset sales, and the reduced universe of potential bidders for these assets, it is worth considering what happens when a European bank sells USD assets. European banks in aggregate are regarded as having a still sizable shortfall of USD liabilities. The BIS has done some of the most comprehensive work on the USD shortage (see in particularly working paper: www.bis.org/publ/work291.pdf ). The most recent data for the end of 2010 (see the latest BIS annual report page 104), suggested the funding shortage had declined by at least half compared to before the 2008 crisis. More recently. the dependence on cross currency funding has gone up again, with the decline in US money funding. (DB’s Bill Prophet showed EUR region CDs of 7 of the 10 largest US money funds fell by over $70bn from May through September). Given this collapse, it is likely that European banks that do successfully sell USD assets, will try maintain the corresponding USD liability to mitigate against USD term funding that may not be rolled in the future. If a European bank sells a USD asset, it probably reduces the European Bank shortage of USDs by the sales amount. A smaller ‘USD shortage’, at the margin reduces the risk of a short USD squeeze of the sort seen in 2008, and to that extent is a minor USD negative, and EUR positive. It also fits with the EUR cross currency basis swaps coming in slightly of late, although this almost certainly has more to do with global risk appetite. This marginal USD negative, EUR positive impact, should not however be confused with a foreign exchange transaction whereby USD’s are converted into EUR.
Even Deutsche Bank is scratching its head to explain the dichotomy between the funding market and general risk. They do, however, provide the only real explanation, as opposed to the widely trumpeted by market cheerleaders ridiculous explanation that this is merely the latest "hope" rally. Ridiculous, because if that was the case, one would see a thawing of interbank liquidity and defaults spreads. As Zero Hedge readers know, 100% the opposite has happened.
Note also that the EUR is going in the opposite direction to much purer gauges of EUR tensions in the bond market. The collapse in OATS today is a major story. This is not least because France is experiencing the negative side of its (still) AAA status and being a member of the core - the fiscal transfers are going toward the periphery and away from the core in terms of ability to tap the EFSF for bank recaps, and possibly bond insurance/guarantees. In the past, we have noted that the periphery flows fleeing toward the core has tended to leave the EUR trading like a closed system to the outside world, which is one explanation for surprising EUR resilience to periphery travails. The latest French balance of payments data (http://www.banque-france.fr/gb/statistiques/economie/economie-balance/ec... ) again shows large French portfolio inflows that are very surprising, although the large errors and omissions do suggest the data is incomplete. (In the future, Target 2 balances will be another vehicle to use to check the degree to which inflows are being concentrated in Germany solely). In any event, instability in the French bond market has the capacity to significantly reduce points of refuge for risk averse funds at the EUR’s (shrinking) core, and adds to DB FX team’s doubt about the sustainability of the EUR’s rally...
And so on.
Naturally, the Eurocrats will be delighted to associate the run up in risk assets and the European currency as a confirmation that the market is interpreting further lies, innuendo, and confusion as a risk on indicator, and is encouraging their behavior, when nothing is further from the truth. However, the biggest beneficiary of the recent move is none other than the insolvent French banking system, whose very own liquidity run has caused asset values to soar, on an epic misinterpretation of underlying market signals, and thus sell even more into market strength, when in fact the market should be selling alongside France...
As for unwind catalysts for this most insidious market move, we are confident that the inability of the G20 to come up with any resolution over the weekend in Paris, nor the Eurozone Summit in one week to actually present any relevant details vis-a-vis the continent's bailout, or the EFSF's expansion into some multi-trillion Bailoutstein monster, will not be met too happily by a market which has just realized it has been thoroughly fooled by the cash-crunched French banking system.
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Good link.
giving that fuckwit a nobel prize is right up there with Obummers bauble.
scandanavians have been on a big slide during my lifetime , sad. too many swedish backpackers getting too much clap and bringing it home
The gift that keeps on giving...
corporate shill selling candy to a baby...the same type that then takes both candy and baby for free as his fee!
During any de-leverage process the value of currency where it's taking place rises. That makes perfect sense, just as the run up here in stocks via dollar devaluation makes likewise perfect sense, especially to the bots. If the value of the US buck drops, the value of the stock assets multiples via INflation and vice versa. And as we just saw sometimes in dramatic fashions BOTH WAYS.
Quite simple really, until the reality of decreased biz from cash strapped Europe weighs in on SnP earnings...oops. These things take longer time to develop. But the effects are starting to trickle in already if yer watching.
IF and when Europe ever decides to QE via bank recap. (somewhat doubtful unless tanks in the streets threats to the masses are rolled out and the populace is hoodwinked into INFLATION) the dollar will spike like cahrazy in response. And in turn we will again be forced to do MORE QE to keep the buck DOWN and the illusion of wealth alive.
Buck worth more, stocks worth less. Buck worth less, stocks worth more. In either scenario has anything changed? Nope. People just think it's better when stocks are worth more and their dollars less. Idiots top to bottom.
It's all quite logical and mathematically quantifiable and THAT'S why it happens. If the US dollar was actually worth a real dollar the stock market would be considerably lower and your dollar would buy considerably more.
NOTHING CHANGED.
The only reason to even engage in such antics is to preserve the value of your money against inflation by going long stocks (look at Zimbabwe charts sometime,) and vice versa to capitalize on any UPward valuations in the dollar by SHORTING the market.
Tis a viscious game that can explode in yer face either way if caught wrong. One thing is for sure. FED antics are destabilizing the game entirely and that is starting to weigh in as well.
Dollar long is not conducive to credit expansions and dollar short is not conducive to bonds.
We are caught in the middle of the road currently. One false move in either direction is going to spell disaster on one front or the other.
Expect a FLAT correction in the US buck for now...and everyone hold their breath to see what surprises Uncle Ben has in store for your money.
Smart money expects the value of the US buck to rise, which is why some of them bailed on stocks before the last dollar upswing, if that gives you any hints.
P.S. They are still bailing and many long traders made them very very happy since Oct. 4th. That money will be used to go long the US buck because YOU American citizens ARE de leveraging via force of a slow economy.
Cash will remain king. Nothing changed. People in debt are screwed however. They will be paying their debts back with harder to come by cash in a much slower economy.
Well said!
It is my opinion that things looked so bleak 9 days ago that the Fed was so salivating to do a QE3 (super-sized beyond market expectations) that they tipped their hand too much and didn't let the washout occur to enable them to implement their plan.
The Fed is already doing QE3, they just haven't said it. How else could they do Operation Twist and still keep the short end at 0%? But I guess the market needs them to actually say it. Regardless if they say it or not, at some point soon the market will realize it because the pace of QE3 will need to quicken quickickly quickiquickidy.
Holy cow Batman! This explanation makes a lot of sense, and makes me want to smash some of those full-retard-momo-chasing-algo-churning blackboxes!
Going with this theory, the stocks will trail the rise in EUR/USD, and will follow...Anyone have a SP/EUR/USD chart?
Yep, in the last 7 days, if the EUR/USD went up prior US open, sure enough, SP/DJIA followed right with it.
Is there now a rehab center for algo/robots?; I'm starting to feel sorry for them
Feel sorry? Please. They are serial rapists & need closing down.
Good insight. Thanks.
I believe it when IWM goes back below the 4 wk ema. Until then BTFD
10 month is within striking distance again which will trigger more traders and a bear reversal for what maybe the shortest bear market in history. Manipulated or not trade the trend
hahahahahaha wtf?? what is this "trend" that you speak of?? lmfao if you are going long here without waiting for test of support..
Now you tell me.
I WOULDN'T PUT MY MONEY INTO ANY CURRENCY THAT IS REFERRED TO AS A "PROJECT"
No. It is the 3.5 trillion Euro bailout they are building which is going to be massively inflationary.
No wonder retail left this schitzo market. Never to be seen agan.
Inspite of bad news the Euro surges, the dollar rises, and gold falls. Anyone want to bet the central banks are buying paper with physical gold?
Correctly, They are selling paper gold for paper currency.
The whole point of the EFSF is to show that "Ya, we have a bazooka too!". So what? Paulson's bazooka was 700 billion, and the S&P went down to 666. Nobody actually believes that they can get the money, much less actually use it. If enough banks need the cash, they're gonna come up dry, because there is no powder in that barrel marked EFSF. And if they print it, it's gold to the moon bitchez. Get physical, physical !
ZH never ceases to amaze. How anyone can be in the financial industry and not read ZH is beyond me! Daily, ZH’s front page (and blogger comment such as yours) is a rare example of comprehensive economic, political and market transparency, some not available anywhere else, by the country’s best and most provocatively professional analysts bucking a massive sea of deliberate government and central planner market disinformation. It's this truth that gives birth to the “hope springs eternal in the human breast…” and makes change possible.
That said, in the central planners’ globally-controlled world picture, I have news: they can’t make it work simply with paper; they’ve got to have assets. The case in point is Germany and Greece, vocalized by ECB voice Josef Ackermann, and his daily cry: “We must do everything to rescue Greece…”
Deutsche Bank (DBK GY) CEO says we must do everything to rescue Greece
Bernanke and the Fed (Goldman et al.) have only one trick going and that is to try to keep the stock markets up to cover their tracks. Everything they do, everything they say, every lie they tell, every back track they make, every plan, is for the stock market because it’s the only remaining viable economic factor they can control. All the other economic indicators are too fabricated to be believed.
Exactly. Assets means capital. Debt is not capital. "Recapitalizing the banks" actually means handing them more debt. Debt isn't an asset. Is this whole financial system outta their minds or is it just me? Long term prosperity cannot be had with accumulation of debt, but they are doing their damdest to disprove that fact.
And when the French banks run out of USD denominated assets to sell, and when all the other European banks do the same, what then? Epic reversal. I have been short the markets for a while and have had to be very patient and calm my stomach down daily. I remain patient, though my tummy is definitely feeling better after reading this. This article is pure genius - thank you Tyler.
As I understand, the European central banks are loaded with Iraqi Dinars. When the Dinar revalues and becomes a globally tradeable currency that's how they plan to keep up the ponzi. Will it work? ???
Did they check that paper with a gieger counter for radioactive uranium before they bought it??
So what happenes if other European banks start to do the same thing before the robots adjust? EUR/USD to the moon?
The yen move lasted about a week, the euro move is just a little over that.
USD asset sales drive risk assets north, makes sense when you really think about it. In turn the short side was taken to the woodshed.....all on a headfake. Timing is everything....
The vultures are circling. This will be the biggest corporate raid of the 21st century, so far. The fallout from this will catch everyone in the commercial system, in the blast.
http://georgesblogforum.wordpress.com/2011/10/13/the-real-weapon-of-mass...
This might help a bit...comments related to China would also apply to any foreign holder of US Treasuries.
http://www.montrealanalyst.com/node/88 "Last week, the Federal Reserve announced “Operation Twist” which is yet another measure designed to stimulate a moribund economy. However, given that the theoretical foundation for this policy is doubtful, could “the Twist” really be a preemptive response to the ongoing menace of US Treasury bond sales by the Chinese? If so, it might be a smarter idea than it seems.Operation Twist is simply a Federal Reserve plan to replace $400 billion of short-term US Treasury securities in its portfolio with longer-term securities. Essentially, the Fed will be selling T-bills to buy T-bonds. In doing so, it will bid up the price of T-bonds and drive down their yields thereby reducing long term interest rates. The hope is that this will reduce borrowing costs throughout the economy and help economic recovery.
The problems with this policy strategy are numerous and explain why it fell out of favour fifty years ago. First, in ultra low interest rate environments, a relatively high proportion of any total borrowing cost is the interest rate spread added on top of the government yield to reflect the lesser credit quality of the borrower. So, lowering a government yield of 3% by, say, 25 basis points to 2.75% has limited impact on “high yield” corporate securities currently priced near 8.75%.
A second reason is that government interference in both the short and long term end of the yield curve means that there is no longer a free market in capital, and the “signal effect” of market behavior is lost. While a more comprehensive level of state control may produce valuable results over a brief period of time, the new and completely artificial price of money means that unrealistic excesses in supply or demand will quickly accumulate and, when it is time to remove the controls, the return to normal will be anything but. This tactic guarantees future problems and volatility.
Finally, if engineered lower long-term interest rates do manage to help the economy, it means that future rates will be higher (making bond prices lower) and, thus, smart money will make a graceful exit to avoid capital losses by selling their bonds to the Federal Reserve, leaving the government “long and wrong”. Wall Street wins yet again.
So, why use a flawed policy tool? In recent months, China has seen that the US is very mindful of its vulnerability. In fact, just this week, the US Senate has been threatening to impose trade sanctions on China for having an undervalued currency. Clearly, being a massive borrower is no reason to stop dictating to lenders. This might partly explain why China has expressed an interest in helping out Europe. Perhaps it will be able to garner more influence there if it shifts some assets.
Operation Twist would allow the Chinese to dispose of a good percentage of their US Treasury holdings at current low yield/high price levels. In effect, it guarantees the Chinese a realized capital gain on their holdings and they should take advantage of the opportunity. Even if the Chinese use the Twist to temporarily convert their long term T-bonds to short term Treasury securities, the Fed will have transformed the inevitable Chinese exit from a potentially confidence rattling outright sale to a position that disappears by quietly coming to maturity and rolling off the books in the months ahead.
The Fed’s Twist is deserving of its name. Most people assume that twisting means changing a form by rotating one end and not the other or the two ends in opposite directions. That fits the Fed’s intended yield curve impact. However, the notion that a policy may be valid for reasons other than its declared purpose suggests the OED’s fourth definition that is to distort or misrepresent the meaning of words. Perhaps this is about avoiding future arm twisting. Or the quintessentially American dance, the twist, might simply be how the Fed intends to waltz China out the door.
I sure hope so cause I just shorted the shit out of the market before Friday's close. Levered Bitches!
What correlation?:
http://www.bloomberg.com/apps/quote?ticker=ECBLDEPO:IND
Resets every month with each new 1 month MRO. Check this chart again in 4 weeks.
G20 tells euro zone to fix debt crisis in eight days ... Let's get this party started
choreography 101
G20 presents deadline to EU to fix debt crisis - RTÉ News
must.surrender.to.central.planners.&.nannies.
Wouldn't it be ironic that investors who piled into sovereign debt suddenly decide that AAPL, INTC, IBM, etc. have much better balance sheets and safer dividend yields?
So there is a huge asset rotation out of sovereign fixed income and back into blue chips?
Hey, it could have already started.
I'm betting my $$$ that this money will flow to commodities and not corporations facing tighter margins and a consumer base with no $ to spend on new products. You bet your $$$ on the wonderful stock market.
As of this writing, you haven't yet accumulated your usual plethora of downticks. I have to give your point some thought. Clearly AAPL runs a tighter ship than the USG or France, as does IBM. Perhaps globalization's endpoint is that corporations not only run the world, but are the real risk free assets. Sovereign debt will be the new high yield junk. Maybe instead of PMs, the new "money" will be pieces of ownership in the mega-corporations. This isn't so far fetched. Hong Kong money is issued under license to Bank of China, HSBC and Standard Chartered.
ibm is the so[u]le property of the oligarch and the stepchild of our mcm which happens to be the mistress of gs,...
that what ibm is about
I'm sure if the world community were a giant corporation, Aapl's CEO would do a beter job of running it than our current political leaders. The problem is the world is not a corporate construct. Its a political-socio-cultural constuct over three thousand years or more. Built on war and spilt blood of countless heroes and villains. If the CEO of Aapl ran it like a corporation we would move fast to world war. As corporations cannot solve other issues than what their corporate culture teaches them, which is NOT about running countries and P-S-C constructs.
The shoe wouldn't fit and the people-PRINCE would go looking elsewhere than in Aapl for its Cinderella-Princess of P-S-C happiness. Simple minds and complex systems.
The current crisis of American capitalistic construct, expressing certain very ephemeral value systems based on power wielded by a young nation, having inherited an empty, resource rich continent, will be a watershed in moving the world to a new P-S-C construct.
robo - your thesis doesn't explain why garbage stocks are going up even more than the "good" ones like IBM and INTC
"Garbage stocks" pop back harder because they got hammered worse in the previous manipulations. It's simple mean-reversion.
Energy and PMs are not risk IMHO with all the debased paper being pushed around, but what the fuck do I know?!?
I was full long-tard for 2009, 2010, 2011 YTD. Worked great until 2011. Almost lost all my gains. Now I'm harvesting cash on rallies and shopping for puts.
Never go full long-tard!
Have you seen this data?
http://streetlightblog.blogspot.com/2011/09/europes-banking-system-transatlantic.html
"MFIs in Europe have drained their bank accounts at European banks by about €700 billion over the past year and half, which at current exchange rates is approximately $1 trillion. It seems that much of that money has recently found its way into the bank accounts that European MFIs keep in US banks. And conversely, it seems likely that the large inflow of cash deposits held at US banks this year is largely from European banks.
Putting it all together yields a compelling story: European banks are shifting their cash assets out of European banks and putting much of them into US banks.
This has happened at a significant rate, with a net transatlantic flow from European to US banks that probably totals close to half a trillion dollars in just six months. "
That explains why U.S. equities have vastly outperformed everything else.
Here's a chart book of the major U.S. indexes vs. foreign index ETF's.
http://clearstation.etrade.com/cgi-bin/bbs?post_id=9868030
It suggests the smart money knows that the usa can keep its lackeys slaving away for a less and less slice of the labour / capital pie.
europe on the other hand.... is europe....
damn those red cards! Now lets see if NZ will teach France what total rugby is all about! I haven't ever seen the French play a worse semi final in WC and scrape through with a win!
Miracles and 'french flair'...is all that can save France in the finals!
But having said that, France has a greater chance to win the WC final than to save its banks from melt-down. Eight days is all they have and Frau Merkel breathing down their necks...Mamma mia, she is as tough at kicking french butt as the NZ coach ...Graham Henry!
Robo, how does a EMA (150) charted comparsion of the various world indicies explain why US equites vastly outperformed everything else?
It is interesting to see that all the charts show a longterm downward trend. Thanks for the link.
Now who is confusing correlation with causation.
Silly stock bots.
I thought EuroYen was the tightest pair to SPX, especially over trend trading timelines.
It is no headfake - this is the beginning of a massive Zimbabwe-esque re-pricing for assets as measured against ALL fiat. Money flow is swaying back and forth in an enormous scramble for assets that will survive the reflationary maelstrom. To be short the assets offered indirectly and directly through common stocks is folly. The dangerous trade is cash - fiat paper backed by the promises of useless politicians bought and paid for by the money-printers. No amount of anti-stocks blogging will make cash/short stocks more valuable than short cash/long stocks.
Oil +$3.05
SP500 +22
Its a calamity!!!
MiningJunkie calling " bullshit !"
I have Australian Dollars stuck in a high-yield cash-deposit account in Australia and there's no other place I can find right now to get a better (6%) and safer AAA return for my cash.
the price of everything else, stocks and especially commodities is just too inflated for me right now -
junk me if you must, but that's the way things are out here in Australia.
remember, only 307 million Americans live in the US.
It might come as a surprise to you,
but the majority of People don't live in Hollywood
wr;)
I can only get 5.7. Where's the 6%?
Fuck this.
So now, in addition to having to study human, institutional and regulatory behaviors and reactive patterns, one has to also be expert in Robot psychology and Algorithmic herd behaviors to have any chance of understanding what's going on?
@unprepared-Its like trying to figure out what makes a woman happy; its impossible. The real PTB(market makers, inner circle hedge funds) in the equity market, have info to real time short/long interest. Its like playing poker with marked cards.
Make a woman happy? Just listen, really.
Adapt or die, human.
Correlation -> http://img834.imageshack.us/img834/5194/unledemg.png
great analysis Tyler, thanks
EFSF is seen like a TARP or QE Fund and the IMF, ECB,Tim Geitner's love of "leverage", the Fed TWIST, ZIRP record low 10y Bond yields pushing down already low USD does the rest.
ah yes, and the European bailout will of course be funded in US Dollars because there are not enough Euro's
a real head - fuck
those who got on the wrong side of this game,
have been hit hard by the pump and dump - crash and burn
mofo units. ( too late to press the red button)
wr;)
Hate to be the bearer of bad news, but the sharp decline in EURAUD throws a glitch into this theory. Some observations to share with regards to late-week market action in FX space last week:
That said, i thought it was far enough into the risk-on rotation and worth a sho(r)t so that's what i did; disclaimer being, my stop-loss is based on duration instead of absolute price levels so whatever figures i've given are merely indicative! (ie, noone can say with any certainty how much more money will pile onto this prevalent trend, or their intended target levels, if any.)
Cat On A Ledge about EUR/AUD
the AUD is a Commodity based Currency and as the USD falls
Commodities usually rise because it makes Commodities cheaper
to buy for traders outside the US.
Commodities are paid for in USD and a falling USD makes it cheaper
for Australians to buy commodities, and so demand goes up -
which in turn hikes up the price of commodities and the AUD.
I should know,
I live in Sydney.
wr;)
is there any reason this isn't some of the cause
Starting in October, the Federal Reserve and other major central banks will begin auctioning allotments of dollars to the European Central Bank, which will then use the new money to shore up shaky European megabanks. The allotments, which will have three-month maturities and will be structured like typical repurchase operations (“repos”), will be issued against euro-denominated collateral and repaid, with interest, in dollars. That at least is the theory
Do appreciate the analysis regarding the credit, FX and equity markets in light of the current liquidity situation.
Because in my infinite naivety I thought that the equity markets have been reduced into an automated gambling den between MSM headline driven algorithms.
I knew I wasn't crazy.
As golden calf worshippers, the Zh uber-trading community manifestly does not believe in the ten commandments of regulation. But in their golden god of free markets and day to day speculation.
So now as the fiat symbol of that golden calf, the greenback, and its surrogate sister, the Euro, start to burn, which way will the world go? Towards the golden calf of PMs or towards more regulation, expression of the new ten commandments in the financial world?
The OWS crowd and their world wide ground swell say it loud and clear : regulate, prosecute, give us back our work, our lives. Fukk the bankstas and their debt slavery, through international labour arbitrage and financialisation of perpetual bubble.
Is there a new Jerusalem in PM worship to replace the green back, while the people of the world die in financial attrition?
"Oligarchs of the world unite behind the golden PM calf" is the rallying cry amongst the fast and furious Zh types. "Your fiat god is now hollowed to virtual ghost status. All blood n guts now hanging out like a dying warrior." Cry these saviours of new capitalism, without debt but without growth, just a symbol of hoarded wealth, sterile image of hyper-consumption age gone dead, into grid-locked, corruption-fed, stultifying immoblity.
People vs Oligarchs the fight now starts in the first world as in MENA, as the Oligarchs divided between their fiat god and the PM golden calf BRIC crowd, run from pillar to post, like headless chickens in that elitist venue called the G20 summit.
Gold standard and fiat standard, two faces of the same broken coin of mad world; where instant satisfaction is first commandment and sustainable growth a dirty word of devil's disciples...
"Those Keynesian-crypto communist, statist shills, who think that low IQ sheeple constitute the essence of humanity in their teeming, smelly numbers...
They don't, the truth stays with the 1 percenters, hard working entrepreneurs. Period. No regulation or just the papered amount to 'extend and pretend'. And THEN, If things get ugly, bring out the State troopers; lets have our Kent state '70, Tiananmen Square 89, Prague 68 moments again. Shit, we are the Oligarchs."
This won't end well...
BTW, and more to the point, I appreciate the 'headfake scam' that TD analyses for us so brilliantly above, as preliminary episode in upcoming Oligarchical mad hatters G20 party. False flags, mirrors and masks are welcome at this Venetian ball!
OT:
http://www.infowars.com/china-to-import-iran-gas-via-pakistan/
big regional alliance in the making... GAme changer for US's future role in Pakafgh/India.
Fr(ance)ench fries anyone?
Tomorrow is Black Monday II
-1
Surely you mean "Freedom" fries...
Jus kiddin, +1 for constancy.
The market operators ie banksters are driving the USD index down and pumping up everything else. This process will continue till there are no long positions left in the USD index and no short positions in any of the commodities, stock or currencies other than the USD.
The operators are then likely to take the long position on the dollar and short position on everything else. They would then use their money power to move the markets in the direction which would get them the maximum profit while screwing all other traders / hedge funds / investors.
http://www.marketoracle.co.uk/Article24581.html
The stock, commodity and currency exchanges have been reduced to gambling dens whereby the more powerful traders with deep pockets move the markets to maximize their own profits at the expense of the remaining not so powerful players. The big boys have enormous money power to move the markets in the direction which results in maximum profits for themselves. They effectively use the media to lure the other players in the market to a position where they would incur maximum loss.
and if you think your stops will safe you, think again
before futures and options expire, all stops will be taken out both ways
until there is total Capitulation, Panic, and Consequence.
Then the liabilities of losers will be exposed,
only then can the mess can be cleaned up.
No Worry.
The Central Bankers and the paid for politicians will stick the bill to the taxpayers with more and more bailouts till all the wealth has been transferred to the top 2% of the population while the rest suffer unemployment, hunger and total loss of life savings.
Long Live Capitalism
Technically, most EUR pairs do still remain bullish and major fundamental news aside (not even that may change it's path) EUR is likely to go higher as are Indices.
USD:CHF hourly candle closed below support Friday night.
http://www.indexswingtrading.com/wp-content/uploads/2011/10/USD-CHF-daily-17th-Oct-2011.jpg
http://www.indexswingtrading.com/wp-content/uploads/2011/10/USD-CHF-hourly-support-break-17th-Oct-2011.jpg
EUR:USD wants higher (where I await my short entry).
http://www.indexswingtrading.com/wp-content/uploads/2011/10/EUR-USD-Daily-17th-Oct-2011.jpg
EUR:GBP could be a bullish wedge on the weekly 'frame
http://www.indexswingtrading.com/wp-content/uploads/2011/10/EUR-GBP-weekly-17th-Oct-2011.jpg
Most other Euro pairs have a bullish edge
DOW/INDU looks good for 11,750 and then maybe onto 11,910 - 12,000
http://www.indexswingtrading.com/wp-content/uploads/2011/10/DOW-daily-18th-Oct-2011.jpg
It's so mentally challenging to dive into such trades when you know they are based on non-confirming fundamentals, but what else can we do?
I've sat on my hands much of last week scratching my head whilst watching things go up, and up, and up.
For as long as Indices leave gaps behind which they are doing so, we can be sure that eventually, bears will again get their turn, and lets be honest, bears do things in style!
RS2000, it seems that you see the major indices challenging the neck-line of the H&S. Unfortunately, there is a bearish divergence on the MACD and MACD-Hist still on Friday. We really need to push into that neckline at high volume for people to get long-term bullish. Recent volume does not indicate that will happen, but maybe tech and disc retail earnings will be enough to generate fund buying.
"I've sat on my hands much of last week scratching my head whilst watching things go up, and up, and up."
I have spent several wasted minutes trying to imagine a contortion that would achieve this and I have failed. Please ease my frustration. Tell me how you did this.
Correct me if I'm wrong, but haven't I read that European banks have mostly been hurting for US dollar liquidity? If that's the case, why would they be buying Euros? Shouldn't we see a rising dollar as non-dollar assets are sold and converted?
As DB explains, they are preserving the pro rata exposure on their liability exposure pre and post sales. Which in retrospect is stupid and they should be adding to USD net. Ironically this only makes the dollar surge that much more powerful when it comes.
Seems to me the true Troika (U.S., Britain, China) are selling short/near term US Treasuries and buying short/near term Euro Bonds. Provides low cost liquidity to eurobonds, pressures the USD, allows excess liquidity to flow into stocks. Only a major international conflict can interrupt this system, otherwise business as usual, follow the trend. Banks may fail, but the system will remain in place.
Here's a couple of currency traders who as of Friday are shorting EUR/USD. And it is clear that they don't even know about the ZH headfake theory:
http://www.cnbc.com/id/44906694
Dont think that a few billions os USD assets can trigger a rally like that.
The real reason is here:
http://capital3x.com/think-tank/the-quote-of-the-week-by-jean-claude-tri...
tyler how much $ are we talking about? you didn't say. how much USD-denominated assets have to be sold by French banks to have made the Euro go up as much as it did the past two weeks?? Is it even possible?? Or was it just the idea of this going on that ramped the Euro more than was actually merited?
Fantastic read! Thanks for the link.
Please allow me to paraphrase the most interesting passages...
1. Enter Chancellor Palpatine:
2. Oust the rebels:
3. Empire über republic:
[emphasis mine - sorry couldn't help it]
So when they open tender for a clone army, we know it's time. The good news is, eurobonds will be the hottest thing since sliced bread!
I think this is a plausible and astute theory but in order for it to be true it presumes that just a few lines of of code were left out of a simple If/Then loop in an unknown number of robot programming schemes-something like this:
If EUR/USD increases...
Is it because European banks are liquidating assets and converting proceeds from USDs to EURs?
No
Then buy stocks.
Yes
Then sell stocks
"...it presumes that just a few lines of of code were left out..."
Not a bad presumption since such algos are based on historical tendencies, and only recently have the European banks been forced to liquidate assets.
MACD and MACD-Hist is what led the TA traders into this recent rally. There was a major bullish divergence on the last trip to S&P 500 at 1070. However, the volume last week does not confirm a breakout, so the TA bulls really will need to set stops at 1200 if they follow their own risk-managemen protocols. Matter of time...
I would also argue that the Euro, with its liquidity issues and imploding supply issues, is more deflationary than the dollar at the moment. The FED can print like mad, and pimp long bonds and dump short notes to provide an exit strategy for the overlevered here. The Europeans have nothing to run to except euros- unless they borrowed dollars- but if they borrowed dollars those are easy to cover compared to the euro.
The euro is a currency, and everyone needs a currency to function. Hence why gold and silver are doing well- they are returning back to currency status as the wolrd CBs fuck up everything 15 ways past Arkansas.
just look at a weekly uup chart since 2008. the pattern of the dollar is replicating itself from september/october 08 to now: squeeze out of a falling wedge; that squeeze retraced about 50% in two weeks (which is where we are now in 2011). the question is what happens next. in october 2008 the dollar ripped after the 50% retracement of the initial short squeeze. patterns tend to replicate themselves and theres a good probably in my opinion it does it again
"Feckless Fench" Oktober Lemming Fest ! Monedas 2011 Schweinfurt Ball Bearing (Any resemblance to Schwein Fart party novelty aerosol pig farts is purely coincidental !)
What a chance to expose MSM FRAUDULENT REPORTING!!
I agree with the big market headfake perspective. An analysis of the SPX, CL, DX, EURUSD, and AUDJPY shows a potential reversal to a risk off tone in the short term. http://bit.ly/ooBpTu
anyone has link to that note pls?