Home > Uncategorized > 2012/10/16: Quick Post: Weekly Calendar and CRITICAL Equities turn!!

2012/10/16: Quick Post: Weekly Calendar and CRITICAL Equities turn!!

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

The weekly Report & Event Calendar is available through the link in the right hand column. The Technical Projections and Select Comments from early last week are also available and still relevant… with the notable exception of the critical equities decision explored in the General Market Observations below. Those will also be reviewed at greater length that includes the other asset classes in this week’s Summary Perspective on Key Influences that will be posted later this evening. We hope you find that useful as well.

This is one of those weeks that actually began before it began, including some important Chinese economic data over the weekend that was noted in the calendar. However, also noted in the calendar was the far more important IMF and World Bank Group meetings over the weekend. That provided the real sense of comfort on the European situation that is so prominent in the sharp improvement of the equities market from the very top of this week. And in spite of all the interesting news yet to come that includes more Chinese data on Thursday, it looks like a significant decision to reflect a renewed ‘risk on’ mentality has already been taken by the equities.

Now it is just a matter of how far they proceed in the near-term before they react back down to the key lower levels…

…such as December S&P 500 future 1,430-1,424.50. Why that is so important will be explained below. But for right now suffice to say that when Madame Lagarde, Chancellor Merkel and Signore Draghi are all on the same page providing slack to Greece and potential outright bond purchases for Spain, it makes it much tougher for the bears to postulate any near-term trigger for a renewed European crisis. Whether that stands up to the response from the burghers of Bavaria when Frau Merkel gets back home is another matter. But for now even any near-term negative economic data is likely trumped by the ‘risk on’ psychology of ‘Buzz Lightyear’ Bernanke’s QE-Infinity program along with what is looking like a fairly effective ‘liquidity’ Band-Aid on the broader and deeper European ‘solvency’ problem.

And what we also know right now is that folks who are chasing returns in a zero interest rate policy (ZIRP) environment are not going to worry about piddling things like the US Fiscal Cliff or the fact that Europe’s overall insolvency will remain a problem for the next several years across the cycle.

General Market Observations

There has been more than a bit of improvement in equities since yesterday morning. That is based on decent economic data and positive NGO (Non-Governmental Organization) influenes after December S&P 500 future violation of the 1,424.50 late-September previous reaction low on Friday’s Close. It was back above that level early Monday morning, also pushing above Friday’s 1,430 DOWN Break below the intermediate-term daily up channel (from the significant 1,253 June selloff low.)

What is now critical for the equities is today’s Close back above the Tolerance of that DOWN Break at last Thursday’s 1,439 high. Short of that it might have still been ready to extend the current weakness for a test of the more major 1,400 area supports. But above it, the bears have let a window of opportunity Close, and that has typically led to the next upside extension.

While it may still run into trouble temporarily in the area of the previously Negated 1,451 UP Break, that was a relatively minor failure. The point is that the inability to maintain last Friday’s DOWN Break for even one day means the bears missed a chance to keep the down trend going, and that area will now likely act as excellent support on any pullback from the mid-1,400 area.

That decision in equities obviously has implications for the other asset classes, even if there are leads, lags and outright divergence at times. The current situation is reinforced by the previous stubborn residual softness in primary government bonds in spite of equities weakness, with that now turning into overt extensions of the govvies’ breaks. The same goes for the strength in the euro on EUR/USD back above 1.2950-1.3000, and the US Dollar Index failure from .8000. 

Thanks for your interest.

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