2012/04/09: Courtesy ‘Market Alert’ from Friday… Back in tomorrow

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Short & Sweet on the specific market comments in this post, because we are out today with the UK and Europe. That said, Friday’s TrendView Market Alert was also a view on some very interesting influences coming up early this week. Might this possibly be the beginning of a more substantial significant trend reversal in equities? That’s quite a bit more problematic into the beginning of a new quarter and the June S&P 500 future only dropping to initial support at 1,375-67 so far. 

And without a new trading high of any substance last week (i.e. only marginally above the previous week’s 1,415.50), there is not even a bona fide pattern top in place. While across time the equities might still be topping out, the seasonal phase and significant support below the market indicate any major trend reversal will most likely occur on a ‘trading’ basis. There will more likely be some further filling out in a more convincing top between the mid-1,300 and low-1,400 area than any further sharp capitulation.

That said, there are a couple of wild cards out there.

2012/04/03: Just Do It vs. Triple-E

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Whatever the other asset classes may be doing, it is a very interesting equity markets right now. And spite of some still formidable tail risks on Europe and the like, the market does have reasons to be encouraged. As we noted in our formal research, this week sees the information equivalent of carpet bombing by the liquidity infusion-oriented major central banks.

For those who’ve been reticent about diving into the equities since the first of the year, there seems a compelling (Nike-inspired) “Just Do It” imperative to not miss the further appreciation. And various factors this week would seem to support the idea the equities will find encouragement from quite a few quarters. After FOMC minutes this afternoon, it’s the ECB meeting and press conference tomorrow, all followed by the Bank of England meeting and somewhat limited statement on Thursday.

What we know for certain is moderate (Goldilocks “not too hot, not too cold”) US growth was highlighted again in the FOMC minutes. That will be seen as constructive, while allowing (‘50s pop group) Benny & the Doves to maintain further QE (quantitative easing) potential. Even if that was played down in the minutes, the rate hike horizon being pulled forward to late 2013 somehow does not seem much of a threat. The perception remains QE will be implemented if the economy weakens. There is still a ‘Bernanke Put’ out there.

There will also likely be another upbeat ADP Employment Change report tomorrow, driving bullish anticipation for Friday’s US Employment report. So after relatively constructive global Manufacturing PMI’s and other economic data, the only question becomes why aren’t the equities stronger?

It seems that on both the data and the central bank influences a June S&P 500 future that Closed yesterday above the 1,400-07 resistance for the second time in the current rally should have been doing better. Might it be that there are some broadly acknowledged tail risks out there, even if they are not dominant at present? Maybe it’s the Triple-E threat!

2012/04/02: Quick Post: Weekly Calendar and Perspective Now Available

© 2012 ROHR International, Inc. All International rights reserved.

The full calendar is available through the link in the right hand column. The focused comments below it will be available in the calendar section shortly after the weekly calendar is posted each week as Summary Perspective on Key Influences. We hope you find that useful as well.

For those of you who have not already seen it, there was also a fresh post on Friday regarding an insight into how the current US administration views economic theory and practice: Quick Post: Obamanomics encourages OSD (Occupy Supply-Demand) Movement. It cites an interesting section of Mr. Obama’s mini-speech from last Thursday on repealing oil company subsidies that revealed either a lack of understanding or desire to ignore the basic laws of economics.

It’s a critical mid-week decision horizon this week. Not to say that there are no important influences at the end of the week as well. Especially the truncated US trading session on Friday (fools!!) to allow for a reaction the US Employment report will be telling.  However, most of what is potentially radical in the market influences rolls out of heavy central bank releases or activity between Tuesday and Wednesday. 

2012/01/27: It’s a wrap: Risk Fizzle, Euro-hope, WEF ‘Global Risks 2012′, Smartest Guy in the Room

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Looks like Helicopter Ben morphing into Gusher Ben didn’t help much… except to exacerbate what we all knew was going to be a disjointed week from the time we walked in. And the markets certainly did not disappoint in that regard. Pops and flops (equities and to a lesser degree risk assets like commodities), solid extensions of up trends (those strange bedfellows govvies and Gold), and significant reversals (back to the ‘risk-on’ US dollar “carry trade” in foreign exchange) were all apparent. And substantially due to the FOMC opting-in to a consensus the Federal Funds rate should remain effectively at zero for much longer than the middle of next year projected at their last meeting.

That summary view is all the reasonable response we anticipated in yesterday’s post on Gusher Ben attempting to push psychology upward from underneath hoping that the enthusiasm will pop like an oil ‘gusher’. This is nothing less than a mind game version of quantitative easing (i.e. de facto Q3.) All of the specific asset class analysis and the intermarket implications that came home to roost by yesterday’s Close spilled over into today were noted in yesterday’s analysis.

That said, the resilient equities have found a new/old cause for hope: fresh upbeat assessment of the potential for a Greek debt deal. EU Finance Minister Olli Rehn said this morning at Davos, “A Private Sector Involvement deal is imminent; if not today then likely over the weekend.” We shall see. Certainly everyone hopes he is right.  Yet there are several grounds for skepticism which even go beyond whether a deal can be crafted. There is now some concern whether the Greeks will sign on to something as modest as “reform” (forget “austerity”), and other issues remain.

2012/01/25: Quick Post: Merkel’s Jerry Maguire Moment, Obama, Apple, and Hungary & the Fed

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Well, it seems to have finally happened… Germany’s Jerry Maguire Moment. At long last this week it is finally agreeing to “show (me) the money” to the rest of Europe hungering for greater funding for its sovereign debt bailout funds. However, that comes with significant strings attached, along the lines demanded previous on major moves toward closer integration of the European Union…

…and that is along much more stringent Teutonic fiscal lines. Those are at the very least distasteful to much of Europe, and completely unacceptable to the UK. That much was clear from Mr. Cameron’s rejection of the push for such an agreement at the previous EU Summit. As such, if Frau Merkel made her assertion during her meeting last week with French president Sarkozy that everyone should relax on the sovereign debt dilemma because the entire EU treaty was going to be ready for next week’s follow-on EU Summit, it appears as specious as we suggested when they announced it.

In fact, it only reinforces our view that might’ve seemed a bit extreme when we noted it one week ago: the bombastic, bi-polar nature of the leadership in Europe right now. As noted then, the vacillations are almost as troubling as the lack of real progress. If the rest of Europe is not going to go along (and there are others who disagree as well) with the extreme strictures in the German proposals for closer integration, then the only inference that can be taken is that Germany is not going to agree to greater funding of the rescue operations.

So maybe it is not a huge surprise she has also at least partially thrown Greece under the bus this morning by noting the bailout may not be working. What is interesting about that is she allows that the combination of the requisite billions of euros along with austerity does not seem to be getting the job done. And that last bit is the most interesting part.

2012/01/24: (Yet) To Be, or Not To Be (Discounted)? That is the Question

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The good ship Greek Debt Negotiation has seemed to suffer the same fate as the Costa Concordia (with due respect for the latter being a human as well as a financial tragedy.) Both ran close to the shoals of disaster. The Concordia in the form of an actual shoal, and the debt negotiations in the even murkier shallows of financial canard. The difference is that the Concordia should reasonably have had a chance to avoid its fate through either high-tech instrumentation warnings or more conservative navigation by its captain. The Greek debt negotiation was already effectively aground before it started, after very early technical indications the country was drowning in more debt than it could possibly service were widely ignored.

More on that intractable situation below. The real question is how the equity markets are gliding along so well near the top of their recent rally in the wake of the indication at the top of this week those negotiations were truly failing. Is it possible that a Greek debt default on (or into) its major March 20th €14.4 billion bond maturation is already discounted? Is it possible this is something the equity markets can simply ignore? Or is it more so that this is yet to be discounted at some point in the future? Drawing the full implications of all that is nothing less than disturbing and fascinating.

2011/11/09: Quick Post: Opera Berlusconi Continues… With Equities in Thrall, Yet Not Necessarily Bad

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Opera Berlusconi has finally seen the fall of the ebullient Prime Minister. If not for his policies and management of the state, he will at least be remembered for the excitement he provided. Of course, that includes the degree to which his shenanigans pointed out the ineffectiveness of leadership in the profligate southern European sisters, and even Europe as a whole.

It was the sort of demonstration of narrow partisan domestic focus that ultimately belied the myth of there being a cohesive Euro-zone even more so than the riots in the streets in Greece. Italy is just that much larger, ostensibly competitive on an industrial basis, and potentially capable of the right sort of fiscal balance if only the political will were effectively exerted. And yet, the other aspect which is clear even from Italian domestic politics is that it also suffers from its own North/South divide. In that sense, it is the fractal miniature example of why Europe cannot really be a monetary union without becoming a fiscal and political one as well; and that’s not happening.

As just a brief early word on two primary asset classes’ price activity, on current form it seems the government bond markets had it right by rallying on the weak economic news and disturbing developments in Europe. That was in spite of the strength of equities, which can be an anticipatory bid during earnings season and then weaken once things revert to normal. However, in this case they seem to have also been defying the crushing logic of the fact that Europeans who had been so adept at kicking the can down the road, well, finally seem to be running out of road.

Italian 10-year government bond yields shooting up above 7.00% in spite of Mr. Berlusconi’s resignation (at least seemingly so for now) came as somewhat of a surprise to casual observers. We are not sure why they would be so shocked by that, as an spite of his obvious weaknesses and problems Mr. Berlusconi was at least a strong leader up until the recent extreme loss of confidence in him. What we do know is that the market is exhibiting a rational reaction to the fact that no one else in Italy is considered much better, or much more likely to generate support for the necessary budget adjustments.

This would seem to be a classic example of “be careful what you wish for.”

2011/11/04: Quick Post: Draghi Not Soggy. But Does G20 End Up Just a Cannes-Game?

There was quite a bit of concern about whether Signore Draghi taking the reins at the European Central Bank (ECB) would lead to a much looser regime that would ignore inflation. In the first instance he is an Italian central banker, who historically have been known to have no qualms about allowing significant amounts of inflation. While he has been personally committed to far more fiscal rectitude than any of his Italian predecessors, that still left a question in the air.

Especially so at a time when Italy is going to need seemingly massive help with its sovereign debt problem. There was some passing concern (nothing really too serious) that he might be overly accommodative in supporting the Italian government bond market through ECB purchases. And all of that was seemingly compounded by the first interest rate decision under his regime yesterday, as the ECB put through a surprise 25 basis point rate cut to 1.25%.

Horror of horrors? Well, not really. Along with the rest of the world, European inflation does remain very high at present. As such, an easing ECB seemed to be joining Fed Liquidity Lubrication Club. However, in the context of the recalcitrant rate rises into an obviously weakening European economy by hawkish predecessor Jean-Claude Trichet, the reversal of one of those hikes hardly makes Signore Draghi an inflation Dove.

In fact, the economic data all seems to have vindicated his decision to make a bold move at his first interest-rate meeting as ECB President. As events have evolved today at the G20 meeting in Cannes, he has also rejected the idea that the ECB should continue purchasing the sovereign bonds of Europe’s weakest fiscal sisters. In that regard his indication that the Euro-zone needs to get its European Financial Stability Facility (EFSF) act together (funding, mandate, leveraging mechanism) is wholly consistent with that of his predecessor. On the whole, a very solid showing.

However, whether the ECB has turned just a bit more dovish is the least of the equity market’s concerns. The now bizarre machinations in Greece, and more importantly the continued lack of agreement on the critical funding and operational aspects for EFSF are plaguing the markets today. The biggest problem seems to be recurring failure of lofty pronouncements followed by no credible details on all of these various rescue at fiscal reform plans. And once again at the G20 in France, it is all starting to feel like not much more than a Cannes-game!!

2011/10/11: Global Slowdown and US Housing Trump Positive Indications

The classically better equities market attitude into the top of corporate earnings announcement season was on full display yesterday. It had been a long time since the DJIA had gained more than 300 points from anything more than a previous sharp drop. That occurred yesterday after holding up well around the middle of the previous broad trading range, as was the case for a December S&P 500 future which also pushed up above the 1,155-45 range; which it had singularly failed to do in the wake of last Friday’s strong US Employment report.

However, there is a question as to whether this all confirms the return to a bull market, or is just another swing in a consolidation range that might still leave the general equities trend bearish? While only time will tell, there are quite a few indications which leave the current rally suspect. Not the least of those is the significant lack of volume on such a massive rally yesterday. That’s just not typical of truly bullish technical trend tendencies.

Beyond that, there are more than a few fundamental reasons to take the early earnings season euphoria with more than a grain of salt. Which is not to say the positive news should be completely dismissed, but more so that the balance of some very significant influences would still seem to favor a bearish outcome in the intermediate term.

2011/10/04: QuickPost: Might Monday Have Been About Obama and Congress?

So much of what is ostensibly bothering the economies and equity markets right now is being blamed on Europe. Yet, we still feel that much of the concern should rightfully be directed at the weak outlook for the US economy. The most prominent center of consumption (conspicuous or otherwise) for the other global economies seeming damaged contributes significantly to the sense of weakness elsewhere. The rest of the world may no longer get pneumonia when the US catches cold, but they can surely catch cold if the US has pneumonia.

And that includes the degree to which China is no longer simply cooling, but seems headed for a much harder economic landing than was previously predicted. Of course, there had been some signs of that; most prominently in the last couple of month’s OECD Composite Leading Indicators, which we highlighted when they were released. That had already shown China moving toward a potential real slowdown. Contrary to hopes in some quarters, it was never reasonable that the emerging markets were going to rescue the developed economies. In fact, for all of the fixation on China’s aggressive growth, it is still a relatively small economy compared to the major, mature developed economies. As such, it still relies heavily on its exports to those economies; especially the US.

And what have we seen over the past couple of days? Nothing less than the failure of the US administration and Congress to come to grips with steps necessary to reinvigorate the US economy, and an imperious tone from the President on demanding action on his Jobs America bill during the press conference at the top of his Cabinet meeting yesterday.

After hearing from Dallas Fed President Fischer yesterday about the degree to which the Fed should not be attempting any further major actions, we wonder what we will hear from Chairman Bernanke today? To further convolute matters, anti-Fed Congressman Ron Paul will be exploring the potential to audit the Fed. Talk about basic bad timing all the way around!

As noted previous, there is even a pernicious new phase of protectionism entering the picture. Do we really need a trade war? Someone should illuminate the Congress on a little thing called “Smoot Hawley” (same protectionist instincts circa 1930.)