Should Europe come out with solid advances on its path towards fiscal union this week, markets would likely rally. Expectations are pretty low for this summit to produce substantial progress.
Today was an ugly day for the bulls. As of now, I take this signal as a vote of no confidence on the Spain bailout resolution.
While I thought the event would be bullish, the problem was in the details of the resolution. It now sounds like Sovereign bondholders will be pushed down the seniority scale in exchange for the bailout money. Spanish and Italian bonds fell today as a result.
Technically speaking, the S&P 500 may be in a reverse head and shoulders and would be bullish if minor support at 1,295-1,300 held. A break of major support at 1,266-1,270 would likely result in a further leg down.
I’ve been MIA for a while now. I’ve been busy attending to other professional endeavors. I hope to gradually get back into the swing of things in the weeks to come.
I feel very displaced from the hustle and bustle of markets and the incessant flux in the macro landscape.
For starters, some pictures (S&P 500 has hit a new bull market high recently and is bullish; Copper, nor the Dow Theory has confirmed though and is bearish).
We Got Ourselves a Face Ripper
I began expecting a strong rally early Sunday (yesterday) given recent good news on further progress in the Eurozone. Here are my thoughts on what they’re trying to do.
While the rally in risk assets certainly seemed impressive there were some “unanswered” questions. 1) Oil pulled a large bearish reversal (why?); 2) the bond market did not indulge in the new-found bullishness. Both 10 and 30-yr U.S.Treasury yields actually fell for the day.; 3) Copper, while it rose, also showed some weakness into the close.; 4) Italian yields didn’t budge (they still remain above 7%) and one of the rumors causing the rally was refuted (IMF).
I’m going to hold back another day or two on placing hedges. This rally will have to grow on me. Let’s see if tomorrow provides follow-through.
Markets can be anywhere! Here’s a veggie market.
Looks like the week will start "Risk off"
The Egypt situation is still a thorn in the bull market rally at this point. Oil however is rising to 90+ dollars. If oil continues rising, it will endanger the already fragile recovery in the US and the globe.
On the bright side, Japan came out with a strong Industrial Production number and signals that demand continues to increase from Japan’s trading partners. The global recovery continues according to this metric.
Perfect Example of a "Moral Hazard Bubble"
(Click on the article above)
Congratulations officials…you’ve succeeded in setting up the most dangerous investment climate ever….BRAVO!!!
This confirms my worse fears that this whole recovery in the markets is based on hope and moral hazard (ie the government will always come to the rescue). Sure the economy has been recovering, but the recovery has been extremely lackluster and is VERY vulnerable to ANY negative shock.
At this point, any time you have some government pondering the idea of withdrawing support, you’ll get this. It’s happening in the Eurozone and it’s happening here.
But guess what…it may continue…because every day the market goes up, more air is being blown into the bubble and the more painful the crash will be. Officials will do everything in their power to keep it going until there’s some sort of political event that pops the whole damn thing.
Who knows when the whole house of cards comes crashing down, but be assured that it will be riduckoulus. It may be worse than 2008.
It’s madness I tell you!! Buy everything!
(Sarcasm oozing)
Summer of 2008 anyone?
