Home > Uncategorized > 2013/01/29: Calendar, Finance Meets Professional Wrestling

2013/01/29: Calendar, Finance Meets Professional Wrestling

© 2013 ROHR International, Inc. All International rights reserved.

The Weekly Report & Event Calendar is available through the link in the right hand column. This week’s Summary Perspective will be added after the US Close today to allow for the influence of all of the (admittedly light) early week economic data prior to the late month data commencing tomorrow along with the FOMC announcement. Obviously that is followed by all of the first of the month data, which includes US Employment on Friday.

Yet, in addition to the calendar there are two key areas of interest we want to cover today: the final degeneration of the public image of finance (aided and abetted by the financial fourth estate), and the degree to which the equities’ technical psychology remains positive in spite of the March S&P 500 future setback from the 1,500 area.

First of all, there are the shenanigans surrounding Pershing Square Capital Management CEO Bill Ackman’s very public expressions of his bearish view of (and significant short position in) nutritional supplements company HerbalLife. And as most of you are likely already aware, that has led to a very public spat with previously aggressive activist investor turned corporate shepherd Carl Icahn. The highlight clip of that several day running confrontation is an interesting, if somewhat depressing, bit of viewing.

Ackman/Icahn Spat Highlights

Click for Ackman/Icahn Audio-Visual Highlights

Much more of the story beyond the clip highlights (including the back story on the sour relationship) is available online via Business Insider.   And just to show it is not just CNBC self-promotion when they say it, the BI article title also refers to it as The Greatest Moment in Financial TV History. More like one of the most depressing displays of excessive ego and opinion. (That said, the BI article is a bit of a good giggle.)

And it leaves an already suffering financial services and investment industry (especially the ‘active funds management’ sector after the past couple of years) with another hit to its public image. Strong expressions of opinions on individual investments and entire sectors are to be expected from high-profile fund managers. But what transpired last week seems beyond the pale.

It sounded a lot more like the kind of confrontation we recall from our misspent youth watching professional wrestling interviews on television…

…especially right before a key match or championship bout. It was The Crusher about to step in the ring against ‘Golden Boy’ Buddy Rogers. The Crusher’s stocky baldness was meant to evoke nothing less than the troll under a bridge, in stark contrast to the Golden Boy’s flowing blonde locks and Adonis-like physique. Yet the promoters felt this contrast wasn’t enough evoke sufficient emotion from the fans…

…so there needed to be a pre-match interview where Rogers expresses confidence it would be a fair and honest (yeah, right) match, while The Crusher expresses his sentiments by saying, “This guy Rogers is a bum. I’m going to go in there and destroy him with my baby finger.”

And of course, professional wrestling not only continued that fine tradition, but extended it to far greater theatrics and antagonistic rhetoric. Which is fine for their fan base, yet possibly quite a bit less so for the public and professional investment communities. Was there really that much difference between what The Crusher had to say and Icahn’s characterization of Ackman being like “…the crybaby in the schoolyard…” and “…the most sanctimonious guy I met in my life…”?

Ackman also had some choice barbs for Icahn, like noting he either had a faulty memory or issues with the truth. That said, Ackman might have summed up the real bottom line when he noted that this confrontation is “…not a great use of CNBC air time.” We agree.

This all had little effect on the broader markets, which maintained the same tendencies yesterday that we had anticipated out of the end of last week. Which is to say equities remaining strong overall, and that weighing on govvies to a fairly significant degree while foreign exchange is seeing some very diverse trends at present.

General Market Observations

That said, the technical momentum leads us to expect the March S&P 500 future will at least reach the 1,510 interim resistance, and very possibly test the more meaningful 1,526 level before it is overbought enough to set up a near-term downside correction; or possible top if the economic fundamentals deteriorate. Of course, there is also the issue of the last several sessions stall out into the 1,500 area. However, that would seem to only be psychological resistance, and as long as it holds no worse than the 1,490-85 violated interim resistance it should still push above 1,500 at some point.

EXTENDED TREND IMPLICATIONS

The most telling influence into the other asset classes has been the weakness of the primary government bond markets. While each had been able to hold some key lower supports, they had also clearly failed on repeated test of the obvious higher resistances. In fact, if the equities continue to push higher in the near-term, it is likely that the recently held supports will be violated on the way to more important lower levels.

That is especially so for March Bund future that failed at violated 143.75-.50 key support on recent rallies after holding multiple tests of 142.62-.30 support. Having closed at the low end of that range on Friday, the additional equities strength yesterday morning led to a failure that points toward the more major lower support. Initially that means the 141.30-.00 area, yet with the ultimate major support down in the 140.00-139.60 range.

The March Gilt future failure below important 117.50-.00 support turned that into resistance, and puts it back into an entire lower range with next major supports not until mid-114.00 and mid-113.00 areas. However, at least so far it has been able to hold interim 116.30-.00 support; which is interesting because the Gilt was the weaker sister initially at the top of the year. If that should fail, lower supports are in the mid-114.00 and especially mid-113.00 areas.

The most important might be the March T-note future, which had been strong sister insofar as it only just barely sagged below its critical 131-16/-12 support after the US Employment report; and had not significantly challenged it since then until the end of last week. That it is below it now is a very important sign for the overall primary government bond market psychology. Much as was the case with the 117.00 support in the Gilt, that area is the meat of the congestion at the high-end of the significant late 2011 through April 2012 trading range.

And any weekly Close failure back into that range would leave the T-note as damaged as the Gilt below some significant Fibonacci levels and congestion. While there is some interim support is nearby as 130-20 (the December 2008 spike high), more major support does not occur once again until the upper 129-00 and 129-00/128-14 areas. With the equities still looking to head higher in the near-term, the trend psychology is back to favoring the bears in a manner not seen since the first week of the year.

It is also of note that the US Dollar Index fared so poorly in the wake of the upbeat communication out of the ECB press conference three weeks ago. As noted previous, the public seems to have bought into the headline “The (euro) House Is Not Burning” for now. That drove the US Dollar Index back below .8000 toward its low-.7900 to .7860 support.

However, that seems to have a bit of a delimiter as well in the form of just how far above its test of 1.3000 support EUR/USD is ready to rally right now. While that surge also Negated a near term 1.3200 DOWN Break (now near term support along with the previous 1.3250-80 range), it has now rallied up into the low-end of the heavier resistance (congestion, DOWN Break and ultra-long term MA) in the 1.3450-1.3550 range. Fundamental factors come into play as well: just how strong a euro is desirable or sustainable for a Europe in an extended recession? The rumblings from the European powers-that-be did not take long to materialize after we had mentioned that two weeks ago.

And it is obvious this is secular strength in the euro rather than US dollar weakness. Note the GBP/USD very temporary extension above 1.6300 serial highs quickly failed back below it, and has now failed key support in the 1.6000-1.5950 range as well. That put it back under pressure below next real support at 1.5750 yesterday, even though it is squeezing back above it a bit today. The more major lower support not until the 1.5500-1.5050 area.  The lack of assistance for weaker global economies would seem to be a bit of a non-confirmation factor for the overall upbeat economic and equity psychology, even if equities rally further for now.

The lack of more euro strength versus the US dollar weakness goes for the ostensibly Asia-assisted Australian dollar as well; another seeming non-confirmation factor, only this time more relevant to Asia. It is of note that the past several weeks’ AUD/USD rally above 1.0450-1.0500 stalled at recently generated resistance as nearby as the 1.0600-25 area prior to dropping back below 1.0450 at the end of last week. The next meaningful lower support is in the 1.0350-00 area (including weekly MA-41), intensifying into 1.0250-20 once again. It all felt a bit stretched at the high end. And unless there is more general US dollar weakness, all of that reinforces our hypothesis on the early year economic improvement possibly being no more than a positive holdover from late last year.

And the really aggressive trend in foreign exchange remains with the sharp weakening of the Japanese yen. That was so in spite of the near term bounce from the surprisingly deferred BoJ and Japanese government “Open-Ended Asset Purchasing Method” included in the new anti-deflation plan announced at the BoJ meeting last Tuesday. After the USD/JPY February rally above key resistances at 78.35 and 79.50 were UP Breaks, 84.00-.50 was key resistance. Back above it after the prolonged retest of those UP Breaks was a major confirmation of the overall UPturn (i.e. yen weakness.)

Pushing above 85.54-.94 resistance as well also saw it violate far more critical 87.50-.00 resistance at the top of the year; and that was also near term UP Acceleration. As such, holding retests of that area (with a Tolerance to last year’s 86.75 Close of the year) maintained that UP Acceleration.  As far gone as that trend may have felt into the 90.00 ‘big penny’ resistance, the actual next significant resistance was not until the 91.00 area now being tested. While there may be some sort of set back from that important threshold, our intermediate term Objectives remain 94.00-95.00 and the 105.00 area (both more major Oscillator and Fibonacci thresholds than 91.00.)

Thanks for your interest.

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