Home > Uncategorized > 2012/02/06: Quick Post: Observations and Weekly Reports & Events Calendar Now Available

2012/02/06: Quick Post: Observations and Weekly Reports & Events Calendar Now Available

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

The full calendar is available through the link in the right hand column. There is also a bit more extensive than usual fundamental factor review this week. That is due to the highly bifurcated (fancy legal metaphor for sharply split into two sections) politico-economic influences at this time. And you don’t likely need us to tell you that this is due to better sentiment toward the US in the face of still seemingly intractable issues around the European Debt Crisis…

Especially Greece. More on that below.

There are three central bank meetings this week, beginning with tomorrow’s Reserve Bank of Australia decision, followed the Bank of England and the ECB on Thursday. Of course the latter’s press conference will be the obvious highlight of central bank influence this week. Whatever Signore Draghi has to say about the Long Term Refinancing Operation (LTRO) massive liquidity support for the banks and the continued direct ECB intervention in stressed sovereign debt as part of staving off the worst potentials of the European Sovereign Debt Crisis will be most interesting; and potentially market moving.

And while the economic data has been much improved of late  (especially the US), there is a question over whether any immediate problem in Europe might defuse the current upbeat economic and equity market atmosphere. This is of course all against the backdrop of the still contentious, seemingly endless, negotiation over Greek sovereign debt. In addition to all of the previous horizons and deadlines, the talks being pushed out beyond last weekend into this week once again represent a blatant failure.

The most vexing part of that situation may be that it is running up against Greek electoral sensitivities, with the next election to be held within the next several months. For all the sensible reasons further austerity and major reforms may be necessary to turn around the Greek fiscal situation, the political class now feels it has limited latitude to commit to further pain.

Further insights on that serious split in the fundamental influences between the US and a good deal of the rest of the world will be further illuminated by projections released next Monday (February 13th.) The Organization for Economic Cooperation and Development’s (OECD) Composite Leading Indicators (CLI) have been a fairly reliable projection for the six-month forward view on both the developed and emerging global economies. That has made them a useful indicator for current potentials in the equities, which also tend to operate on six-month forward anticipation. Last month’s release showed all else weak but the US possibly basing. So this month’s release should be very interesting on how that all looks now.

Along with the somewhat less intense economic data this week there are a limited number of expositions by the usual financial luminaries. However, the bond auctions might once again be more interesting bit, especially after last week’s pressure on primary government bond markets in the face of sustained equities strength. Tomorrow brings a Greek 6-month treasury bill offering along with a 5-year UK Gilt, as well as the 3-year T-note opening salvo of the heavier US refunding, which is followed by a 10-year T-note on Wednesday and a 30-year T-bond on Thursday. Along the way we also see a 40-year JGB auction on Thursday, along with a 30-year Italian bond auction; and yes, that last bit is among the most critical.

General Market Observations

As for the markets, much of the overall trend activity remains consistent with our assessment that de facto QE3 is being implemented by ‘Gusher Ben’ flooding the markets with liquidity. While we are not sure that will create any sustainable economic and equity market strength, it seems at least in the US it has lifted spirits enough to bring about the improved employment picture. Regardless of the mixed news, every time the equities violated resistance they were unable to get back below it. This was a classic “walk up the ladder” trend progression, even if volume is still light enough that it leaves some suspicion it might still reverse.

March S&P 500 future back above the very important 1,310-15 area violated technical resistance was already favoring the bulls. Once it was clear that the data was going to encourage further strength, it had no problem and pushing up to the bigger resistance that begins at 1,340 and intensifies into the 1,350-55 and 1,360-67 areas.

EXTENDED TREND IMPLICATIONS

That said, it is still very interesting that the govvies have only broken back toward incremental interim supports, with strong sister March T-note future holding up above 130-20, weaker March Gilt future dropping back around critical support at its 115.00-114.85 recent lows, and the March Bund future holding up well above its recent lows into the 137.50-.30 area critical support by hanging on at no worse than interim 138.30-.00 support.

In foreign exchange, the significant US Dollar Index failure back below (i.e. Negation of) its .7950 UP Break on the Fed’s endless liquidity provision indications two weeks ago reversed what had been a reasonably firm trend early this year. Failure to get back above that area over last few days is a weak sign, even if there is extended resistance back into .8070-50. Next lower support of any substance is into .7800 area, with more major supports into .7650.

However, that the US Dollar Index is holding up as well as it is below that failed .7950 support is interesting to say the least in light of the improved economic outlook indicated by the equities. It would seem the risks from Europe are highlighted in the degree to which the euro remains fairly weak overall and spite of the equities strength. That is still consistent with the reversal of the euro on a fresh EUR/USD 1.2925 UP Break out of its downward channel (from the major 1.4248 October high.) There is a somewhat higher interim support in the mid-1.3000 area previous resistance which it has had problems pushing up significantly above; especially as initial resistance above the market should not come in until 1.3400-1.3360. We shall see.

Thanks for your interest.

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