Home > Uncategorized > 2012/06/28: Quick Post: Ready for today’s potential ‘Rip-n-Dip’?

2012/06/28: Quick Post: Ready for today’s potential ‘Rip-n-Dip’?

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

Our only question is whether we actually get the ‘Rip’ (i.e. sharp short term rally), if it was built in on an anticipatory rally on Wednesday? Of course, there might still be a constructive knee-jerk reaction to the US Supreme Court (SCOTUS) likely move to strike down the ‘individual mandate’ (forced purchase) portion of the Affordable Healthcare Act. However, there is a question of whether it is so broadly anticipated as to become a non-event?

That is all reinforced by the degree to which the European Summit does not seem to be yielding any constructive results. In fact, while the acrimony might be very cordial at this point, it seems to be escalating nonetheless. And that would be based upon actions by some of the participants that appear nothing less than counterproductive…

…like the new socialist government in France. As just a glimpse of the problems there, forget Greece and even Spain… France does not seem at all interested in additional reforms. Rather, it is restoring aspects of the social compact weakened under the Sarkozy regime. Those include the less than ‘competitive’ steps of lowering the retirement age, and most recently raising the minimum wage.

And they expect Germany to step up and provide more time and funds? Not likely. So even if there is any is bullish equities reaction to the SCOTUS decision, we suspect it will be very short-lived without something more constructive coming out of the EU Summit. However, at this point the latter looks like nothing less than pulling a rabbit out of a hat… or single currency out of an abyss. Take your pick.

And along with the somewhat weaker than expected economic releases this morning, it seems time (in fact well past time) for the “equities are cheap based on such conservative earnings multiples” crowd to wake up. The global reality is that instead of the ‘P’ in P/E going up, the ‘E’ might be coming down.

General Market Observations

The September S&P 500 future has already seen a nice rally from supports at 1,310 and most importantly 1,297, which was not likely to be violated on a straight down drop from mid-1,300s. And yet, it stalled yesterday only slightly better than last Friday’s 1,326.80 weekly Close. That was important due to the gap remaining up to that level from Monday’s gap lower opening on the week.

The secondary resistance to watch is the 1,338 violated Tolerance level (of the major 1,350-55 resistance) the market failed from after the disappointing indications from the FOMC last week. A stallout into and weakness from either of those levels after SCOTUS decision would likely indicate the market remains bearish in the near-term. Supports remain the same as the levels noted above. And if 1,297 is violated on even a daily Close, the September S&P 500 future will most likely be headed back to more major 1,260 area or even 1,245 support, with commensurate activity in other markets… especially bond markets and commodities.

 

EXTENDED TREND IMPLICATIONS

Foreign exchange shift back to aggressive trend activity on the equities weakness has been most interesting as well. Especially the degree to which problems which seemed to emanate from Europe suddenly stopped weighing on the euro into the top of the month, yet are now back. However, after a good run on anticipation of greater US dollar liquidity from the Fed, EUR/USD topped out last week at no better than the low-end of the heavier resistance in the 1.2750-1.2800 area. All pretty much as expected if anticipated further largess from the Federal Reserve was not forthcoming. Now it is back down just below its critical 1.2500-1.2450; made much more telling by Monday’s 1.2515 DOWN Break from its near-term upward channel from the 1.2289 June 1st low. All the more reason any failure below 1.2450 might indicate potential to swing down to the heavier 1.2150 or 1.2000 area supports.

Similarly (if conversely of course) for the US Dollar Index, as its May strength stalled right into its .8350 area resistance. Yet even as it sagged back below initial support around the .8178 trading high from January, it seemed very orderly and limited. It certainly never even had to sink into extended support back into the upper-mid .8000 area. It is of note that a good deal of that resilience was on commodity currencies not recovering well on the recent equities rally. That is a potentially significant indication of the continued weakness in the global economy.

And while very negative initially on Friday three weeks ago, the Australian dollar held below AUD/USD .9700 Tolerance of (its major Fibonacci and channel support in the) .9800 area and cleaned up for a weekly Close right back at .9700: a clear rescue. That left it strengthening back above 1.0000 two weeks ago, which was an UP Break out of its downward channel since the 1.0850 February high. However, much as with many other currencies against the US dollar, weekly MACD remained DOWN and any Close back below that 1.0000 UP Break from two weeks ago is a negative sign for a likely retest of .9800-.9700; or failure to lower levels.

All the rest remains consistent with Current Rohr Technical Projections Key Levels & Select Commentsdistributed last Thursday (based upon Wednesday’s US close) and the top of the weekWeekly Report & Event Summary Perspective sent on Monday morning. Both are now available via the link near the top of the right-hand column along with the color-coded Weekly Report & Event Calendar.

Thanks for your interest.

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