Home > Uncategorized > 2012/02/21: Quick Post: Observations and Weekly Reports & Events Calendar Now Available

2012/02/21: 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 ostensible finalization of a Greek debt deal not seeming to affect trends to any great degree. If this is such a major success, why were the equities only marginally higher from Friday in the US, and the European stock markets lower?

Watch for what happens with the private bond holders (PSI), and especially next week’s EU Summit where the actual funding commitments are supposed to be finalized. Wonder if they’ll pull another one of those stunts where the other ‘damaged’ countries (Portugal, Italy, Spain, Ireland) are putting up money for Greece?

There are also questions regarding quite a few aspects of this Greek debt ‘done deal’… such as whether it accomplishes its goals in light of the much worse economic situation in Greece since the time the negotiations first began in earnest last fall? What about acquiescence of the Private Sector Involvement (PSI) to a ‘voluntary’ dilution of their holdings, versus a Greek government threat to impose “collective action” clauses on the current outstanding debt; which would be a clear “credit event” triggering the designation of a “default”?

And what is going to be the overall impact on the European economy (as well as knock-on effects for the global economy) of the straight austerity approach demanded (and achieved) by the northern European political class? On current form, it doesn’t look like that is at all as constructive as powers-that-the in Europe deluded themselves into believing. Yet, for now the OGB (Occupy Greek Budget) movement for oversight of austerity/reform implementation we cautioned was not going to achieve constructive ends seems to have won out.

The “received wisdom” was that any Greek Debt Deal which provided the €130 billion second tranche of rescue funding would be a panacea unleashing all of the pent-up higher valuations which the equity markets had refused to actualize previous; and also finally crush the primary government bond markets along the way. If this ostensible deal was supposed to do all that, at least initially it looks quite a bit more like one of those classic (equity market) cases of “buy the rumor; sell the fact.”

And there is quite a bit else to consider this week in addition to the Greek situation. Like Wednesday economic data and Bank of England meeting minutes into Thursday’s additional important economic data and EU Economic Forecasts. That all culminates with further important economic data on Friday as well as the start of the G20 Finance Ministers Meeting into the weekend in Mexico City. The latter may be a critical forum for the debate over specific contributions to the Greek debt deal and overall rescue package.

General Market Observations

Especially the degree to which March S&P 500 future failed to open for (post-holiday) ‘regular trading hours’ above last May’s 1,367 lead contract high or even last Friday’s 1,361 trading high, there has been no additional UPside Runaway Gap on the weekly charts this morning. So in spite of how good the market looked above its 1,350-55 resistance (now key short-term support) on last Friday’s Close, at least so far the follow-through is unimpressive. That is especially so with equities’ daily MACD’s generally refusing to turn UP (from mildly DOWN last week) in spite of trading to new highs.

EXTENDED TREND IMPLICATIONS

Even if the March T-note future perversely (due to it being long-dated bond of the country which ostensibly is leading the economic recovery right now) has held up much better than Europe, it is finally slipping below interim support at 130-20. Yet, it’s more important support is the 129-24 area that it last tested in late January.

Europe is where the govvies seemed to have a problem, as the downside leader March Gilt future has once again slipped below its 115.00-114.85 support to the extended 114.65-.50 area port generated on the slippage two weeks ago. That is also the case for the more resilient March Bund future that recently Closed marginally below its 137.50-.30 support only to gap back above it a week ago Friday. Even though it is not back into that lower support just yet, it is back below important interim support at 138.30-.00.

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 three weeks ago reversed what had been a reasonably firm trend early this year. Failure to remain back above that area in recent trading is a weak sign, especially as it couldn’t even quite fully get back up to extended resistance at .8070-50. Next lower support of any substance remains into .7800 area, with more major supports into .7650.

That is also 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), which it could not even get down to test at the bottom of last week’s selloff. There was a somewhat higher interim support in the mid-1.3000 area previous resistance as well that it never actually Closed below last week. While international just fine currently are you there is initial resistance above the market at 1.3400-1.3360, the more major resistance remains 1.3500-40.

Working against the equities rally representing a return to sustainable economic strength and a high degree of normalcy, the energy market has surged back up from below near-term support at March Crude Oil future 97.00 area; and it never even tested the more major support in the 95.50-94.50 range. Back above significant 102.00-103.39 range resistance, it looked headed for the 105.35 area or even higher; all consistent with the unsettled geopolitical situation revolving around the Middle East.

Similarly for the April Gold future, the strength of energy and commodities seems to be driving an inflation and crisis psychology once again. As such, it is not much of a surprise in the near-term that a Gold market which reached important resistance in the 1,752-1,767 range three weeks ago is now rebounding from barely testing the top of key supports in the low 1,700-upper 1,600 areas.

Thanks for your interest.

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