Home > Uncategorized > 2011/11/21: Quick Post: Observations and Weekly Reports & Events Calendar Now Available

2011/11/21: Quick Post: Observations and Weekly Reports & Events Calendar Now Available

© 2011 ROHR International, Inc. All International rights reserved.

The full calendar is available through the link in the right hand column. This is such a robust week once again, it is impossible to include anything but a fraction of the major influences in an overview. Yet, key aspects will be those that relate to the continuing debt and fiscal reform problems in both Europe and the US.

In addition to continued sharp influences from the seemingly still failed attempts to address the European Sovereign Debt Crisis, there is also going to be quite an impact from whatever the fallout might be from the now almost assured failure of the US Congressional Fiscal Reform Super Committee. Our perspective on that is there are far too many folks who are very sanguine about the actual failure for two reasons.

The first is that it was always expected that this little experiment might fail. We don’t necessarily agree with that, however as failure loomed ever larger many folks adjusted their view to the idea they had always felt it was going to be the case. Secondly, and far more important, is the fact that the failure is based on seemingly more rigid partisan positions. It is also does not yet seem to incorporate one key factor: the heightened chance of a further credit rating agency (CRA) downgrade of the US government debt rating based upon a ‘broken’ process. And once again this likely will perversely be far worse for equities than the government bond market.

Of course, after Wednesday’s University of Michigan Confidence, things go quiet in the US for the Thanksgiving holiday. It is also the case that those Michigan Confidence numbers this month and next month are far less important than other times during the year. Both the students and staff who work on those leave for their holiday well prior to the end of the month. So the numbers do not reflect full months’ activity; and especially not the key holiday shopping periods at the end of each month.

And it all ends into lunchtime Friday in the US with a most interesting speech from the ECB’s Gonzalez-Paramo on, of all topics, “Outlook for the Euro-area Economy” in London. That will be right into the European Close, and with not much time left in the holiday-shortened US trading day on Friday; even for the NYSE.

General Market Observations

The combined European and US conundrums are already being reflected in the current markets. Very similar to the US conundrum, yet far further down the road toward a real failure, is the fact that the profligates still want the ECB or EFSF to continue major purchases of their debt while the Germans (and their successful northern tier cohorts) are committed to preventing any monetization of that debt. A fine mess that the equities really do not like.

EXTENDED TREND IMPLICATIONS

Whatever the actual reason, it is therefore no surprise that the December S&P 500 future sliding back below the critical 1,240 and 1,230 serial supports last week appears to be on its way to a retest of the somewhat major mid-1,100 area supports. And the degree to which Europe is beginning to lead the way down once again speaks of that particular negative influence indeed being quite prominent.

That includes weak sister DAX finally slipping back below the important 5,750 area support it had held since mid-October, and even the more resilient FTSE 100 slipping below its 5,350 congestion it had held across that same timeframe. All of which works hand in glove with the renewed bid in the govvies and US dollar. Weak sister December Bund future is squeezing back above the 137.00 area, even if the more important interim resistance is now 138.00, while the December Gilt future recovers from its test of 130.00, and December T-note future keeps its bid without ever sliding fully back down to the upper 129-00 area.

Similarly in the foreign exchange markets, after some weakness on Friday the US Dollar Index is right back up to the low end of its .7850-90 area resistance while EUR/USD is back testing the low end of 1.3500-1.3460 near-term support (even if critical support is down into 1.3400-1.3360 area.) Not surprisingly, commodities and commodity currencies are under pressure as well.

Thanks for you interest.

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