More Echoes From 2011 As European Stocks Signal Trouble Ahead

Tyler Durden's picture


As the mainstream media gets over-run with 'buy-the-dippers' and 'healthy retracement' protagonists with the S&P down a monstrous 1.5% from its highs, it is perhaps worth noting (h/t Doug Kass) that Europe's broad equity market index is now down over 5% from it's peak two weeks ago (as is the UK's FTSE index). In yet another echo of last year's liquidity-fueled spurt-and-slump, European equity markets (along with US and European credit markets as we have already noted) are sending a warning signal that trouble may lay immediately ahead for US equities. The Euro-Stoxx index has just crossed below its 100DMA for the first time in over 4 months having dropped over 4% on the last two days. Add to this size of margin debt (as we noted earlier) and the ultra-low levels of cash at equity mutual funds and what is now the largest drop since the rally began (an incredible fact that we have hardly dropped more than 2% peak to trough in five months in Cembalest's sweet serenity) may well mean more pain is to come.


2011's US vs Europe Equity performance...

and the current 2012 rally's performance...


Charts: Bloomberg

(h/t Doug Kass)

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Wed, 04/04/2012 - 13:32 | 2316991 fonzannoon
fonzannoon's picture

It's good to see that on massive down days the gold miners are in fact heavily leveraged to the price of gold. Not so much on the up days though....

Wed, 04/04/2012 - 14:17 | 2317168 swissaustrian
swissaustrian's picture

Valuations of some miners are just totally laughable.

Wed, 04/04/2012 - 14:59 | 2317283 malikai
malikai's picture

Relax, everyone. It's just decoupling. The USA is entering the new Glorious Future. Everyone has forgotten about Europe.

Wed, 04/04/2012 - 18:31 | 2317812 Zero Govt
Zero Govt's picture

don't worry, Jim Sinclair's on his 17th call in 2 years the Miners are a "coiled spring ready to explode"

wake me up when they do wud ya

Wed, 04/04/2012 - 13:34 | 2316997 Sutton
Sutton's picture

Let me guess what Hilsenrath is going to write about tomorrow.

Wed, 04/04/2012 - 13:50 | 2317058 nope-1004
nope-1004's picture



Wed, 04/04/2012 - 13:34 | 2316998 spartan117
spartan117's picture

It's 1:30.  Crimex is closed.  Time to ramp stocks back up to give the illusion that the USA economy decoupled from the world. 

Wed, 04/04/2012 - 14:48 | 2317256 dwdollar
dwdollar's picture

Good call. Probably close even now.

Wed, 04/04/2012 - 13:34 | 2317000 TradingJoe
TradingJoe's picture

"there will be a bounce tomorrow":()))

Wed, 04/04/2012 - 13:50 | 2317051 Village Smithy
Village Smithy's picture

Yes, bounce tomorrow because Friday is NFP payback day.

Wed, 04/04/2012 - 13:51 | 2317067 TradingJoe
TradingJoe's picture

:()))) yepyyyy!

Wed, 04/04/2012 - 13:37 | 2317009 AladdinSaneGirl
AladdinSaneGirl's picture

It's all been said before ... what's the point of QE when all the £££$$$ taken out of the market when government announces QE ending? They should be forced to invest for a minimum time period of 2 years ... OR SOMETHING.

Wed, 04/04/2012 - 14:18 | 2317172 mayhem_korner
mayhem_korner's picture



"Invest"....?  I'm not quite sure where to go with that one...

Wed, 04/04/2012 - 18:33 | 2317819 Zero Govt
Zero Govt's picture

try shorting Greece can't fail with that one

Wed, 04/04/2012 - 13:39 | 2317016 Ratscam
Ratscam's picture

so this must be bullish news then: Enterprise has joined the 5th fleet

Wed, 04/04/2012 - 14:05 | 2317130 I Am Not a Copp...
I Am Not a Copper Top's picture

Almost time for the Gulf of Persia Incident...

Wed, 04/04/2012 - 13:44 | 2317033 Snakeeyes
Snakeeyes's picture

Spain is toast. LTRO isn't working. The PIGS are dying. And France can't sustain their bloated economy.

Wed, 04/04/2012 - 14:23 | 2317183 disabledvet
disabledvet's picture

Yes. "And equity has caused it." How this impacts US equities in a. Egative way I simply don't understand. And just as obviously Doug got his ass handed to him as we went all in on a sell off to start the year. Of there are equities worth shorting here...for professionals like Mr. Kass of course..."but this ain't Lehman and the glory days." will the bulk of Europe's banking system be taken out by a total collapse of Spain? Possibly. But how will the RISK be transferred sheeple? If you answer "to Iran"...well...sure. "If you're the United States." this thing stinks to high heaven, it feels like a controlled collapse "over there" and that means interest rates stay at or near zero just like the Fed has said they will and "bulls and bears make money." simply put "the numbers don't lie." the market has rallied into March on the "news" that the EU is about to implode.

Wed, 04/04/2012 - 13:46 | 2317042 junkyardjack
junkyardjack's picture

Yawn, Bullish. Investors just haven't read the memo yet, "This time is different"...

Wed, 04/04/2012 - 13:46 | 2317044 Free Markets
Free Markets's picture

How many days before we get a suggestion of QE3 again?  I say Friday.

Wed, 04/04/2012 - 14:03 | 2317115 vote_libertaria...
vote_libertarian_party's picture

The SF Fed prez already said today more QE is possible.


They can't let one down day occur before freaking out.

Wed, 04/04/2012 - 13:52 | 2317066 gatorengineer
gatorengineer's picture

Bennies only goal at this point in time is get Barry re-elected.  He doesnt have much ammo left but luckily the average Americans memory is only about 30 days........ The presses start in August after an interim 20% market swoon.  Picks for the S&P on Election day and the price at the pump?

Mine S&P 1350 Gas $3.25


Wed, 04/04/2012 - 14:22 | 2317181 mayhem_korner
mayhem_korner's picture

the average Americans memory is only about 30 days


By "days" do you really mean:

a) minutes

b) lattes

c) episodes

Thu, 04/05/2012 - 03:33 | 2318706 Havana White
Havana White's picture

My thinking to a tee, gator.  Too early to gun it, will have petered out when Obama/Chairsatan could best capitalize on it.  My guess for QE fanfare would be shortly after Labor Day, when tv viewing surges and the debates are underway.

Wed, 04/04/2012 - 13:52 | 2317069 Pretorian
Pretorian's picture

90% of investment fools are in Gold I wait 4 the day to see them enjoying this secure asset.

Wed, 04/04/2012 - 13:53 | 2317079 distopiandreamboy
distopiandreamboy's picture

Interesting head and shoulders pattern on the 3 month EUR/USD playing out...

Wed, 04/04/2012 - 13:59 | 2317099 TradingJoe
TradingJoe's picture

2:15ish  "buy express(o), anyone?!?! :())

Wed, 04/04/2012 - 14:05 | 2317126 HD
HD's picture

I get the feeling Ben is more concerned with who is going to buy all those T-bills. A good 20% correction will bring in the buyers and hold the line on inflation. Looks like the S&P is going to have to take one for the team...

Wed, 04/04/2012 - 14:27 | 2317199 Village Smithy
Village Smithy's picture

I think that T-bills will be fine as long as the EU is tip-toeing along the edge. My question is when their bonds go will they take down the entire bond complex with them including UST's?

Wed, 04/04/2012 - 14:06 | 2317131 orangegeek
orangegeek's picture

Any Elliott Wave people out there?  FTSE wave 3 down looks to be under way.

Wed, 04/04/2012 - 14:22 | 2317185 Zymurguy
Zymurguy's picture

Wasn't the avg. DOW volume around 200mil' shares just six months ago... today the avg. shows 140mil' and currently the volume is only 70mil' for the day!

Wed, 04/04/2012 - 14:36 | 2317219 Village Smithy
Village Smithy's picture

Well you can't short without fear of being "rampled"  (yes I intentionally left off the "t"). And if you go long you can almost hear them snickering at squid HQ.

Wed, 04/04/2012 - 14:32 | 2317207 jomama
jomama's picture

just picked up 100oz. Ag at a steal of a paper swap today :D

Wed, 04/04/2012 - 15:22 | 2317339 junkyardjack
Wed, 04/04/2012 - 14:44 | 2317243 diwolf
diwolf's picture

As a fund manager it is quite simple. What do you prefer: European stocks in EUR area or US stocks in USD.

Wed, 04/04/2012 - 14:46 | 2317247 monopoly
monopoly's picture

And here we go. Spoos soon to cross 1,400. What a broken piece of shit market this is.

Wed, 04/04/2012 - 14:59 | 2317280 Carl Spackler
Carl Spackler's picture

The first question is at which moment in time is the inflection point building toward, the NFP number on Friday of the beginning of earnings season in 10 or so days ?

The second is whether the downward action today is the institutionals' flipping point from long bias to short bias?

Wed, 04/04/2012 - 15:33 | 2317370 Haddock
Haddock's picture

I guess the whole globalism thing isn't going quite to plan

If any of the politicians actually gave a shit about their people, they would be talking about protectionism for jobs. They ain't, so I guess they don't.

Thu, 04/05/2012 - 08:02 | 2318889 domain2host
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