Home > Uncategorized > 2011/12/19: Quick Post: Observations and Weekly Reports & Events Calendar Now Available

2011/12/19: 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 Europe and less so US influences that are as goofy in their way, yet not as influential at present.

In addition to the continued sharp influences from the attempts to address the European Sovereign Debt Crisis, there is also going to be quite an impact from important scheduled reports, communication from central banks and bankers as well as political events and news releases, yet with much lighter government debt auctions.

All of which points up the degree to which the European situation has left both foreign exchange and to an even greater degree the govvies willing to dismiss the recent equities bid as a “triumph of hope over reason.” We shall see if that is vindicated further this week.

Yet it is consistent with the skepticism we have shown for the proposed solution in Europe not being a fiscal union as such, yet rather more so a benightedly pro-cyclical German Austerity Club. And as it relates to this week’s reports and events, the first impacts were already hitting yesterday evening in the form of the release of the weekend Financial Times interview of ECB President Draghi.

While there are quite a few interesting aspects, he is very clear that effective address of the European Sovereign Debt Crisis will at the least take a fully funded and functional European Financial Stability Facility (EFSF.) The ECB can not (and should not) be counted upon to provide endless support for distressed peripheral sovereign bonds. While they have kept it very cordial, this is a major confrontation between the ECB and the German government; and may have an impact on how the Bund trades against the US and UK long-dated govvies.

The fact the ECB head is finding it necessary to request EFSF be put in good order once again at this late date (i.e. after latest round of European Banking Authority stress tests) speaks volumes about the situation still being less than effectively addressed. And EFSF must indeed be funded (Hello Berlin, is anybody home?) to see any sustained improvement. While he also once again hopes for major IMF involvement, the Americans have signaled they are not interested in funding it in light of their situation.

And it is also a very robust week for various other central bank and political influences during what is normally a bit of a reporting hiatus after important early month data. That includes no small number of central bank reports and political meetings and votes on various aspects of the European Sovereign Debt Crisis. And all that’s into the early Close of US debt and foreign exchange markets (but not the NYSE) on Friday for the Christmas holiday weekend.

And the situation in the US also remains fraught as well on the back of political uncertainty. Once again Congress has kicked its can (not to be confused with the European one) down the road with the Senate’s two-month agreement on important issues like the Payroll Tax Cut; and now that’s been rejected by the House. No clarity as yet for individuals or businesses on the extended financial, tax and regulatory landscape for next year. Taxulationism rules. Anybody still wondering why it’s a jobless recovery over here?!

General Market Observations and EXTENDED TREND IMPLICATIONS

It is important to note the March S&P 500 future (lead contract as of Friday) Closed the week below 1,230. Even though it held the old 1,210-06 support for the daily Close at the bottom of the drop into Wednesday, the general tendency in equities recent game of vertical ping-pong has been to extend each significant swing to the next major technical area. That has meant mid-1,200s, mid-1,100s, and the 1,100 area.

If there was any real indication that that problem was not going to weigh on the global economy and markets, why in the world did the euro have such a lackluster response? Barely trading back above violated EUR/USD 1.3400 support, it subsequently violated the early October 1.3146 trading low on its way below 1.3000.

The same sort of activity was apparent in the government bond markets. The Gilt future did not even back off below its previous major October-November highs, and more range bound T-note future barely backed before pushing up once again, even though each of them is at a ridiculously low yield level. There is even a renewed ‘haven’ bid in recently more challenged March Bund future back above 137.00.

Unless it should drop back below both that level and the 136.40 area, it still looks like a retest of mid-139.00 area is possible on equities weakness. All of which point up the degree to which both foreign exchange and to an even greater degree the govvies have been willing to dismiss the recent equities bid as a “triumph of hope over reason.”

Thanks for your interest.

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