U.S. Equity Sector ETF Performance

Posted on November 16, 2012 by macromon

(click here if charts are not observable)

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Cliff Diving – Day 5

Posted on November 16, 2012 by macromon

Nice stock bounce almost instantly after the four Congressional leaders emerged from their meeting with President at the White House.   “Constructive” is the word.

The S&P500 put in a bullish outside day – lower low and higher high than prior day — and closed strong.   The VIX collapsed and the Russell outperformed.    Apple, which has led the market down,  had a huge $25  reversal on big volume, which sure looks like a short-term tradeable bottom to us.

The upshot?  We remain a little more, can,  we say,  constructive on the market.  Not balls to the walls bullish quite yet, but a little more constructive in the near term.  Strong seasonals are fighting the fiscal cliff/tax increase headwinds.

We are still working on that expected value S&P500 level based on the Erskine Bowles probabilities that we promised you yesterday.

 

What would a real fiscal cliff panic look like?

Stocks down hard;  Russell 2000 down harder;  consumer discretionary down hard;  gold up;  dollar down;  VIX spiking;  and defense stocks in the tank.

Bonds?   Tough to extract a clear signal with the Fed’s financial repression, but,  initially,  the cowboys would most likely be in buying on recession fears and increased worries about going over the cliff.

(click here if video and table are not observable)

Posted in Fiscal Cliff Monitor | Tagged , , , , | 2 Comments

Weekly Eurozone Watch

Posted on November 16, 2012 by macromon

Key Data Points
German 10-year Bund 2 bps lower;
France 10-year 4 bps tighter to the Bund;
Ireland 14 bps tighter;
Italy  9 bps tighter;
Spain 7 bps wider;
Portugal  4 bps wider;
Greece 50 bps tighter;
Large Eurozone banks down 0-6 percent;
Euro$ flat to up 0.15 percent.

Comments

It feels like the Greek debt crisis is as old as the Acropolis. Stocks are sinking as we shut up shop for the weekend, as traders take their money off the table ahead of yet another Eurogroup meeting next week.

We all know how it going to play out; the talks will go down to the wire, stocks will fall because of the ‘what if’ factor, but in the end Greece will be given the money and we might see a small bounce. Even when Greece is given the kiss of life next week, another indebted nation will be in the cross hairs, and it may well be Spain.  – David Madden,  IG market analyst

Europe experienced widespread austerity protests  this week;
CEPR stated Eurozone has been in recession since Q3 2011;
Portugal’s opposition calls for rethink of austerity;
China’s sovereign wealth fund warns EU that its citizens are being “pushed to the limit”;
Opinion polls show that two-thirds of Italians do not want Mario Monti to continue as PM;
The Economist magazine’s cover regarding France:  The time-bomb at the heart of Europe;
Greece makes €5bn bond payment;
Investors bet on Greek bond buyback.

Source:  The Guardian

(click here if charts are not observable)

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Weekend At The Movies: The Other Son

Posted on November 15, 2012 by macromon

Here’s a flick we’re off to see after the market close.

It looks pretty good and timely given the escalation of the conflict in the Mideast.  Looks almost like a biblical parable.  Wish they would take a timeout over there and go see it!

God keep the children on both sides safe.  Shalom and العيش مع السلام

“The Other Son” is the moving and provocative tale of two young men — one Israeli, the other Palestinian — who discover they were accidentally switched at birth, and the complex repercussions facing them and their respective families.

(click here if the video is not observable)

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Where’s the Bottom?

Posted on November 15, 2012 by macromon

Wish we knew.

We respect the downtrend and are trying to remain flexible.

We do know fiscal cliff worries are dominating the market, the S&P500’s medium-term uptrend is broken, and the 200-day moving day has been violated.   We now  look to the Fibonacci retracement levels as the next key levels.

The .618 retracement level of the June-September 208 point rally is 1346.1, which held today.

The .382 retracement of the October 2011-September 2012 400 point rally is at 1321.8 and the .50 retracement at 1274.5.

If the June 1266.64 low is violated,  we really have a problem.

Still don’t see the panic that is usually associated with a bottom.

Cliff diving is no fun, at least, for most.

(click here if chart is not observable)

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The Script

Posted on November 15, 2012 by macromon

We had to post this before we pack it in.

Another Irish fave with some American spice from Will.i.am.   Great lyrics.

Yeah, You could be the greatest
You can be the best
You can be the king kong banging on your chest
You could beat the world You could beat the war
You could talk to God, go banging on his door

You can throw your hands up
You can be the clock
You can move a mountain
You can break rocks
You can be a master
Don’t wait for luck
Dedicate yourself and you can find yourself

Standing in the hall of fame
And the world’s gonna know your name
Cause you burn with the brightest flame
And the world’s gonna know your name
And you’ll be on the walls of the hall of fame

(click here if video is not observable)

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Cue la France

Posted on November 15, 2012 by macromon

In our post earlier this month, How the mighty have fallen, we wrote,

Why do we have this gut feeling Japan and France will be the countries of focus next year?

Sorry, we’re dismal scientists.

The Economist seems to share our worries, however.    Their cover story this week begins,

Why France could become the biggest danger to Europe’s single currency

THE threat of the euro’s collapse has abated for the moment, but putting the single currency right will involve years of pain. The pressure for reform and budget cuts is fiercest in Greece, Portugal, Spain and Italy, which all saw mass strikes and clashes with police this week (see article). But ahead looms a bigger problem that could dwarf any of these: France.

François Hollande is France’s  first Socialist president since François Mitterrand.  His fall from grace has been hard and fast and is now the most unpopular French president after six months in office.

The Economist piece speaks to the country’s lack of competitiveness, overly rigid labour- and product-market regulation, exceptionally high taxes,  high public spending and debt.  It finishes with this  stark warning,

Unless Mr Hollande shows that he is genuinely committed to changing the path his country has been on for the past 30 years, France will lose the faith of investors—and of Germany. As several euro-zone countries have found, sentiment in the markets can shift quickly. The crisis could hit as early as next year. Previous European currency upheavals have often started elsewhere only to finish by engulfing France—and this time, too, France rather than Italy or Spain could be where the euro’s fate is decided. Mr Hollande does not have long to defuse the time-bomb at the heart of Europe.

Of course, we’re not saying France is definitely going to crash.  In fact, the government’s 10-year bond yield closed today at 74 basis points over the the 10-year German bund. This is about half of where it started the year.

Nevertheless,  in order to “skate where the puck is going to [or may] be, and not where it has been“, we highly recommend you read the full piece.   Keep it on your radar.

Bonne chance, Monsieur Hollande.

(click here if cover and video are not observable)

Posted in France | Tagged , , | 4 Comments

Speaking of the Irish….

Posted on November 15, 2012 by macromon

Not only do we love Irish bands, we  owe much our heritage to the country.

We’re also proud our distant relatives (less so with Twitter, however)  are working hard to take one of the eyes out the European PIIGS.   The Irish were not only crucified with the bursting of their housing bubble,  but the population was also stuffed with the sins of their bankers.

We posted back in November 2010,

The European Central Bank exposure in Ireland is above €130 BN, a quarter of its book, and now wants its money back.  In the article,  The ECB May Not Be The Friend It Seems, in Monday’s  Irish Times, John McMananus writes,

Suggestions that [the] bailout may in fact be to protect European interests may not be too wide of mark

WHEN THE history of Ireland’s banking and fiscal collapse comes to be written, the role of the European Central Bank may well turn out to be the most controversial…

It is worth noting in this regard that Jean Claude Trichet rang Brian Lenihan over that fateful weekend in September 2008 to impress on him the importance of not letting any Irish bank fail. The obvious inference was that the ECB would play its part.

Now you understand the EU/IMF attempt to bailout the Spanish banking system without sinking the Spanish sovereign with the massive debt load similar to what the Irish had to assume.   Ireland was just too early in the game and a very unfortunate guinea pig in the EU’s learning-by-doing bailout policymaking.

Nevertheless, the country is doing something right as Ireland’s sovereign bond has been the best performer in the world over the past year.   The 10/9-year yield has fallen a stunning 1,072 basis points since July 2011.  They now yield lower than Italy and Spain.

Though we suspect technicals has had something to do with the move, we’re not really studied enough on the Irish economy to comment on the fundamental reasons for this incredible performance.   We do suspect, however, at least, in part, it has do with their tough stance they took against the Germans and French to keep their corporate tax rate low relative to the rest of Europe     We posted in March 2011,

Ireland, after assuming its bank liabilities, owes the European Central Bank so much it essentially owns the European Central Bank.   Their leaders should resist the political and economic lobotomy being forced upon it by the European bureaucracy and do what is right for the country.   They are fighting hard to do so

Way to go, Irish!

By the way,  thanks for giving us the beautiful gift of Andrea Corr — and the rest of the band, of course.  Breathless!

(click here if video is not observable)

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Bono Gets Vertigo Over Fiscal Cliff

Posted on November 15, 2012 by macromon

We love this guy.

The reports,

U2 singer Bono says spending cuts that hit in January would devastate programs to help the world’s poor, leading to more than 60,000 deaths. “There’s real jeopardy,” Bono said Wednesday at the World Bank with bank President Jim Yong Kim. 

U2 – 0ne of the best ever!   Unos, dos, tres, catorce!

(click here if video is not observable)

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Cliff Diving – Day 4

Posted on November 15, 2012 by macromon

Stocks continued their slow sell-off today.  The S&P500 did, however,  hold the key level of 1346.1,  the .618 Fibbonaci retracement level of the June 4 to Sept 14 rally.  The index closed 5 points off the 1348.05 low at 1353.33.   Looks like 1325 is the next strong level of support.

Interestingly gold is getting whacked with everything else.   The VIX continues to creep up and the Russell underperforms.

We continue to remain bearish on stocks until proven otherwise.

Maria did a great interview with Erkine Bowles and Alan Simpson on the fiscal cliff today.  We highly recommend you check it out.  These guys know their stuff.

Click here for interview.

Erskine Bowles:  I think there’s a one-third probability we’ll get a deal in done and  about one-third we’ll go over the cliff and be able to reach a deal right afterwards. That’ll be okay.

But there is that one-third chance we won’t and end up in chaos.

Interesting, 1/3rd,  1/3rd, 1/3rd probabilities for the three scenarios.   We’ll try and whip up an expected value for the S&P500 based on these probabilities in tomorrow’s post.   Click here for past Fiscal Monitor posts.

What would a real fiscal cliff panic look like?

Stocks down hard;  Russell 2000 down harder;  consumer discretionary down hard;  gold up;  dollar down;  VIX spiking;  and defense stocks in the tank.

Bonds?   Tough to extract a clear signal with the Fed’s financial repression, but,  initially,  the cowboys would most likely be in buying on recession fears and increased worries about going over the cliff.

(click here if the table is not observable)

Posted in Fiscal Cliff Monitor | Tagged , , | 1 Comment