Home > Uncategorized > 2012/05/22: Quick Post: Weekly Calendar and Perspective still available

2012/05/22: Quick Post: Weekly Calendar and Perspective still available

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

The Weekly Report & Event Calendar is still available through the link in the right hand column. The focused comments below it are now also available as well in the calendar section as the now regular weekly Summary Perspective on Key Influences. We hope you find that useful as well. It also has the Concise Market View at the end.

For those of you who have not already seen it, there is a lot of emphasis again this week on Wednesday and especially into Thursday… with a much lighter reporting/influence day on Friday. However, as opposed to last week’s clear focus on the negativity generated by the potential Greek expulsion/departure from the Euro-zone, it’s a somewhat more balanced perspective as we head into the informal European summit tomorrow.

Can they really craft the sort of hybrid approach outlined at the G8 meeting that blends the further growth encouragement into the necessary fiscal rebalancing? It’s going to be quite a balancing act, and there are no small numbers of fiscal purists who might act as bomb throwers. While the Left-leaning governments on Europe’s periphery are all for it, the idea of greater funding for supranational organizations splashing out spending across the weaker portions of peripheral Europe is not necessarily a new idea.

In fact, that has already been articulated today…

 

 …by Austrian Finance Minister Maria Fekter. According to a report on Bloomberg news service, she opposes joint euro-area bonds as they would cost the Alpine republic more interest. While open to a test of EU guarantees for project bonds “project bonds” issued by private infrastructure construction companies, she is opposed to any pan-European bond issues unless there is direct influence over individual states finances and fiscal measures. That’s a pretty high hurdle to accomplishing any immediate growth plans.

And spite of the “friendly” talks between new French President Hollande and German Chancellor Merkel, there are also some bright line restraints on that front. While also open to some creative experiments at the fringes, Frau Merkel also remains strongly against issuance of joint euro-area bonds for a seemingly good reason: eliminating the gaps in bond yields would remove the incentive for weaker countries to overhaul their economies.

That’s a reasonable position, and after all, she’s got history on her side. That’s a major aspect of how the whole mess became so overblown in the first place. Much like the inferred US mortgage guarantees from quasi-governmental institutions like Fannie Mae and Freddie Mac, the assumption that Euro Area membership implied Teutonic credit worthiness turned out to be a big mistake.

However, even beyond the informal European summit tomorrow, there is important influence flowing from the Bank of Japan Rate Decision and Statement (especially the latter’s discussion of their ingrained deflation problem), the minutes of the last Bank of England rate decision meeting, and further US housing data. And that’s only the warm-up for Thursday.

So even if some sort of constructive compromise comes out of tomorrow’s European summit, the markets will still need to deal with a huge amount of economic data all the way from China right through Europe into the US on Thursday. Thankfully the government bond auction calendar is a lot cleaner this week, with nothing critical into mid-to-late week. However all that data on Thursday is accompanied by the most significant wave of financial luminary communication for the week, including Signore Draghi among others.

General Market Observations

It was impressive to see June S&P 500 future seem to repair a good bit of the short term technical damage that was done into the end of last week. Based on yesterday’s activity the trend might actually be stabilized once again. However, there is now a serious question over whether it was just a “pop and drop” after the renewed European concerns heading into the meeting tomorrow.

As June S&P 500 future was back above both the (Head & Shoulders Top 1,367 DOWN Break) 1,297 DOWNside Objective and the 1,310 February UP Break on yesterday’s recovery, those remain key levels to consider. If it holds no worse than the lower of them, the current selloff might just be a scary downdraft as part of the stabilization. If it actually holds no worse than 1,310 through the European summit tomorrow, it would certainly look better than not in the short term.

The dilemma is that the reinstated resistances up at 1,338 and (more prominently) the 1,350 area are still likely to restrain the market on any near-term recovery. As noted previous (when the market was still holding above it), any slippage back below the top of last year’s 1,350-1,250 major trading range would likely indicate a tendency to retest the lower end of that range… even if only as part of a broader bull trend correction.

 

EXTENDED TREND IMPLICATIONS

And of course the decision by the equities will also have quite a few implications for the other asset classes. No surprise that the primary government bond markets drop back down a bit after their strong bids on the recent equities problems. Strong sister June Bund future has backed off from its 144.00 area oscillator resistance to slightly below its 143.70 long-term weekly chart topping line. June Gilt future fell from the low end of its similar 119.00-.40 topping line and oscillator resistance. June T-note future is a bit of a weak sister right now, never even quite making it to its equivalent 134-00 resistance. That said, as long as any rally in the equities stalls into resistance (as we suspect), the primary government bond markets are still likely bullish after a correction.

▪ Foreign Exchange markets have been subject to some bipolar influences of late. First there was the sharp rally last week in the Japanese yen, followed by today’s sharp drop on the back of the Japanese government bond ratings downgrade. While that may look a bit confusing, on current form it is still been no worse than the major support down at USD/JPY 78.50, and at least so far no better than equally important resistance in the 80.25-80.60 range.

More meaningful in our view is the combined recent weakness of the euro and the Australian dollar, with the latter testing critical AUD/USD .9800-.9700 support. Given the importance of the Australian dollar’s role as a commodity currency, that decision is also likely going to be a bellwether of general global economic tendencies. And in light of the activity in both the troubled euro and the recently weaker Australian dollar, the US Dollar Index is also very interesting insofar as it has stalled after its recent strong run right up near the .8178 high from back in January. Yet, it should also have very good support on any selloff near .8000. With the euro sagging once again near its January EUR/USD 1.2621 trading low, an awful lot seems contingent upon whether the equities remain stabilized or weaken once again into the end of this week.

▪ July Crude Oil future not only failed hefty 95.50-94.50 range congestion, it also Closed last week below important lower support (December pullback lows) in the 93.00-92.50 range. Unless it can stabilize and claw its way back above that area soon, next significant support is not until 90.50-89.50 area.

▪ June Gold future finally capitulated after its previous ability to hold its major 1,615-1,600 support. And that should also be fairly scary for the equities bulls, as the only time the Gold heads down this heavily with the equities is during a potential for a significant deflation scare. However, as the European crisis continued last week Gold did get a bid back, even if low-1,600 area remains resistance. Support is last December’s 1,526 low.

It is of note that industrial metal July Copper future remains weak below both 3.65 and is now significantly challenged in even getting back above critical lower support at 3.50.

Thanks for your interest.

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