Home > Uncategorized > 2012/02/27: OGB Alive & Well and Perspective along with Weekly Calendar

2012/02/27: OGB Alive & Well and Perspective along with Weekly Calendar

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

Our 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 now being approved by the German Parliament 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 and stalling into resistance in the strong sister US once again?

And the OGB (Occupy Greek Budget) movement in Germany is on the move again. According to an excellent Financial Times article on that today, “German tax collection experts have volunteered to go to Greece…” Oh, Goody!! The discussion of has played down all of the acrimony since an earlier article reported on initial responses to similar suggestions in late January from Davos; especially note the comments elicited by the latter. Here’s the bottom line: Rigid implementation of agreed Greek reforms that include strict enforcement of tax regulations are the good intentions which are paving the path to Hell.

The ‘hawks’ seem oblivious to the degree to which Greece has already been the learning lab, and the lesson is that pro-cyclical austerity will not result in the narrowly calculated fiscal improvement. Even allowing it may be a necessary evil, as we’ve noted previous you’d think the folks who suffered the occupation of the Ruhr after WWI would be a bit more sensitive about how they went about proposing tax collection ‘assistance’. We all know how well that episode worked out.

Why doesn’t Greece just declare war on Germany? They could throw the contest after the first shot, and put in for ‘reconstruction’ support rather than try to cure such a hopelessly over-burdened balance sheet. (Please reference “The Mouse That Roared.”)

And now (just now this afternoon in the US) we have Standard & Poors downgrading Greece to “Selective Default” and that seems to mean some of the actual debt has dropped to “D” …for ‘Default’ due to the insertion of ‘collective action clauses’ on some outstanding Greek bonds.

Well, we can’t blame them for citing the failure to maintain some portion of previous agreements. But aren’t these the same folks who put through recent downgrades of a whole lot of the rest of Europe because of the concerns about poor economic prospects? Hey, it’s beyond us to see how that circle gets squared. Yet, if there’s one thing we do know right now it’s that it is certainly time watch for what happens with the private bond holders (PSI); especially if the ISDA (International Swaps & Derivatives Association) agrees this has been a “credit event” (i.e. triggering payouts on the Greek debt Credit Default Swaps.)

The Germans and their northern tier European cohorts missing another window to strengthen the Euro-zone Debt Crisis firewall surely doesn’t help. That’s especially so with the IMF playing hardball on more help from Europe in preventing the crisis from spreading prior to putting in any more funding from elsewhere… and all of that right into the EU Summit Thursday and Friday where (once again) all 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’s quite a bit else of interest this week, even if it pales by comparison with the Days of Our Euro-zone soap opera.  That includes tomorrow’s German & Euro-Zone Consumer Confidence and US Durable Good Orders, Wednesday’s Australian Retail Sales, ECB LTRO, Bernanke’s first day of semi-annual testimony and the Fed’s Beige Book, Thursday’s global Manufacturing PMI’s and German Retail Sales, and Friday’s (quieter?) EU Summit conclusion. Wednesday into Thursday are also key Euro-zone government bond auction days.

General Market Observations

All trend indications remain very much consistent last Friday’s post. That was much the same as the previous Friday’s indication, “…the final arbiter of successful follow-through for the March S&P 500 future would be to push above last May’s 1,367 lead contract high…” As it has failed to accomplish that so far, it remains somewhat vulnerable. Yet it remains important that it has also so far sustained the overall up trend without slipping back below the 1,350-55 area key support.

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 once again held interim support at 130-20. Even if that leaves it well above a late January test of its more important 129-24 support that would’ve been consistent with Europe dropping back to equivalent levels, it still looks firm from that area once again. That said, the low-mid 132-00 area remains important resistance as well. Getting through it will likely take some sort of failure from the equities.

In foreign exchange, the significant US Dollar Index failure back below (i.e. Negation of) its .7950 UP Break on the Fed’s recent endless liquidity indication 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. 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 at the bottom of the selloff two weeks ago. While above initial resistance at 1.3400-1.3360, the major resistance remains 1.3500-40; which fits well with that US Dollar Index .7800 support.

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 April 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, and 105.35 area it headed up to fill the major higher gap up to 109.80. Much above 110.00 it might see the 113.00 area right away.

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 the rally after the reaction to the top of key supports in the low 1,700-upper 1,600 areas has pushed back above 1,752-1,767. Resistances on a contract and continuation basis are both in the 1,804-08 area with not much above that until the mid-upper 1,800 area if it gets through.

Thanks for your interest.

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