Here’s the pretext for our QOTD,
The German parliament is set to approve a new multibillion euro bailout package for Greece on Monday, but instead of thanks, southern Europeans are expressing their dislike of us.
Germans will have to get used to their new role: We have become the Americans of Europe.
– Jan Fleischhauer,
Commentary, Der Spiegel
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Is this fulfillment of the prophecy that California will fall off into the ocean? Just askin’.
Stunning that 29 + percent of all mortgages in the state are underwater.
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Wow! We didn’t realize Tim Geithner and the G20 could move like that. If you look hard and long enough, Tom Cruise does kind of resemble Angela Merkel, no?
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Waiting for a correction in the S&P500 has proven costly for those looking to get longer equities. Our view is that a move to 1340 is in the cards in the next week or two, which coincides with short-term support and the 20-day moving average.
The strong upward momentum has turned into just a slight drip higher over the past few trading sessions. The positive to this is that equities are working off a severe overbought condition. The S&P500’s 14-day RSI, for example, was over 82 on February 3rd and has fallen to 65.60 as of Friday’s close.
The bulls will see this as consolidating recent gains and basing before the next leg up. The bears? In their eyes the market has been freebasing for for quite some time. As traders we’re agnostic and trying to surf whatever waves the markets generate. As economists it’s really hard to see how this all ends without tears.
What really stands out to us in the chart, however, is the small number of red candlesticks since December 2oth. That is, 32 of the past 45 trading days, the S&P500 has closed higher than its open, which is reflected in the ubiquitous green candlesticks.
This has initially happened only three times since the turn of the new millennium — January and April 2010 and October 2006 — and prior to that was March 1995. Not exactly market tops. We don’t know what is causing this trading phenomenon. It could be just the lack of liquidity as trigger happy short sellers are forced to cover before the close as they continue to fight global central bank balance sheet expansion.
Whatever the case, higher oil prices do seem to be putting the kibosh on the market’s momentum and we expect, at the very least, a modest pullback in the next few weeks. Also note the relative weakness in the Russell last week. We’re using put spreads on the S&P50o ETF to express this view, mainly to hedge some long positions. If the index breaks 1340, it may be time to get shorty.
The big event this week is the ECB’s second LTRO. It’s going to be interesting to see the final take up and, more importantly, how the markets react to it.
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Nice data from the EIA showing petroleum consumption by region. This, in part, explains why the stock rallies are starting to sputter in Korea and India, both heavily exposed to oil prices.
Bloomberg reports that “in 2011, Japan, South Korea, India and China accounted for 60 percent of Iran’s oil sales.” The Iranian crisis and oil spike has the potential to create some very big challenges to the world’s geopolitical structure.
The Shanghai and Nikkei are dancing to the beat of a different drummer at the moment — monetary relief rallies and, in the case of Japan, a weaker yen.
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Here is Fareed’s interview with George Soros from a couple weeks ago that we’ve been meaning to post and thought you’d find interesting. We suspect the 15 minutes you spend watching it will return a nice dividend. Enjoy.
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