The 40-year old virgin is running out of time. Tomorrow will be the last chance to ‘close the deal’ so to say, otherwise we’ll be most likely talking about a 50-year old virgin a month from now.
Let’s run through some medium and long term charts to make sure everyone is on point for this coming trading week:
Really long term outlook here. I have shown this chart in the past and what is now an established trend is that of diminishing volume during rallies and increasing volume during drops. Is that a new bull market? One could make the ‘wall of worry’ argument here but if that was the case we wouldn’t have almost doubled in one year, right?
As many of you are Zero subscribers (memberships have tripled in the past month) I am happy to revive a welcome addition to the team – the daily Zero. We were watching the daily until late December, but starting January TOS somehow reset their servers and the daily somehow went blank overnight. Although new data has now accumulated since that big reset I finally had enough and recoded the Zero for my NinjaTrader platform which runs on DTN – a more professional data service. And I’m glad that I did as the bullish divergences precisely at the bottom of lows (marked with green arrows on the chart) alone are worth your monthly subscription. I’m pretty excited about this – although the bearish divergences seem to be a lot less reliable this indicator will be invaluable for any bear intending to play the big swings.
Anyway, the daily Zero has now pushed into positive territory in the past week but then dropped slightly below the mark on Friday. Tomorrow will either be the day where we snap back and confirm a new bullish pattern or we yet again push negative and most likely make new lows for year. For the bears is deal closing time – no more time to waste – 1125 is where the rubber meets the road, for the bulls that is.
I’m sure you want to know what the HotFusion panel is. No, it’s not a stochastic
This is my JNK:TLT spread chart. Basically, how tasty is junk in relation to treasuries. Now compare this one with my copper chart:
Which seems to tell the same story: Both charts appear to precede equities when it comes to rolling over after a new high. Eventual snap back rallies appear to be supported. We will keep an eye on both.
Mr. VIX was stomped on after some pretty intense readings which pushed outside an already overstretched Bollinger. Can’t keep going straight up folks – we need a little rest. Right now we reverted back to base camp at the center line. Again, a breach of this line will spell higher prices in equities – if we hold and bounce it’s possible that the 40-year old virgin gets to first base (i.e. SPX 980).
On the NYSE Adv/Dec Volume chart we did get lower close accompanies by a higher reading. The ensuing snap back was pretty intense, just like the one before – which for the record made acting on it a bit difficult. Now we have plenty of momentum to the downside, which favors upside for equities.
Then there’s my CPCE chart. Nothing really has changed on the 10-day moving average – there’s plenty of air below now, which again will be a head wind for the bears. Yes, markets do fall off the plate in oversold conditions, but it would have to happen quite rapidly – we are talking Tuesday/Wednesday.
Same story on my TRIN chart. We have come a long way and to go higher we need a non-statistical event.
Which brings me to the wave count. We are running out of time and the wave formation now puts the pressure on the bears to make a move. If we breach last week’s high at 1103.52 it will be one strike against the bears – if we push beyond the 1120 mark it will be a second strike leading most likely to Soylent Green. And that one could actually stretch out for quite some time – as we could indeed push higher than 1175. Which brings me to my final chart for today:
Before I explain this one please make sure you read up on my little intro on the Chris Carolan’s spiral calendar work, which I greatly admire. So much actually that there is also an entire category dedicated to Chris’ work.
Anyway, a while back I realized that U.S. equities were lagging the Dow Jones Shanghai Index – China goes first and the U.S. follows, it seems – eventually. I tried to nail down the approximate amount of delay for obvious reasons and the numbers I got started to sound familiar. So at a hunch I began to correlate the delays via spiral calendar time cycles. What I got was quite fascinating. Back in 2008 we were right on the Chinese’ heels, but now there seems to be a longer delay minus 6-10 days. The chart explains it pretty well – and maybe the 10 day delay is a bit hefty to be taken seriously – not if it continues to line up however. So, it’s quite possible that the current retracement up (which may turn into Soylent Green) could take us close to 6/21. I don’t think 8/18 is a possibility for Soylent Green – perhaps that is where Intermediate (2) would take us – either that or a completely different scenario that puts us into new annual highs.
The bears got to get their groove on starting Tuesday morning. There is simply too much bullish evidence on the table, and the bulls will not hesitate to give the bears a run for the money, and at this point they have the odds on their side. As I said all week – I am keeping my long term puts as this is the only way to not miss out on a sudden drop, which I am still confident will happen – most likely in mid to late June. Unless of course the bears can close the deal tomorrow. Also watch the EUR/JPY (not shown here) – it was a bit overbought on my 30 minute chart on Friday, so there is a chance it could lead equities lower.
Stick with the levels shown on my wave count to scale out of short positions if you are playing things short term. Otherwise, my own approach will be to give this the time second waves usually need to shake out the weak hands.
From the Financial Times: ECB warns of ‘hazardous contagion’
The eurozone’s financial sector and economy are facing “hazardous contagion” effects from the region’s debt crisis, according to the European Central Bank ... Taking into account writedowns already reported and loan loss provisions, some €90bn of writedowns have yet to feed through, it said. For 2011, it expected banks would have to make additional loan-loss provisions of about €105.There is also a video discussion with Martin Wolf and Richard Haass, president of the Council on Foreign Relations.
except with permission
From the NY Times: Europe’s Banks at Risk From Slower Growth, Report Says
... the E.C.B. expressed particular concern about banks’ need to refinance some €800 billion, or $980 billion, in long-term debt by the end of 2012. Borrowing costs could rise as the banks compete with governments in the bond market “making it challenging to roll over a sizeable amount of maturing bonds by the end of 2012,” the report said.
I cannot figure out why some people cannot post without moderation.
The editors (and interns) were directed to blacklist spammers and to put trolls, asshats and birthers into moderation. There is obviously a degree of subjectivity in these terms — “does this comment make me an asshat?” — so there might be more than a few false positives involved.
Regardless, if your user name or IP address is on the list — and it should not be — please contact the editors for correction — use thebigpicture at optonline dot net, subject line “moderated comments”.
Some folks believe that the market reacts to news within milliseconds. Let's take a look at the daily price chart of British Petroleum (BP) to test this theory. I've put an arrow marking the day the fatal explosion occurred:
Over the course of over a month, yes, BP has lost about a third of its value. But instead of taking milliseconds to react, almost an entire trading week transpired before there was any meaningful reaction. The same can be said of TransOcean (RIG) which has suffered even more greatly.
Incredible, isn't it?
The other day I posted a commentary exploring some quick thoughts that I had about what was going on in this world of ours. Some of my thoughts focussed on geopolitical tensions. In my piece which can be read in its entirety HERE I explored the possibility of the tensions involving Israel were going to rear their ugly head again. Well, it wasn’t a direct shot at Iran that made the Israeli war machine go ape-shit. Instead it was their “commando” takeover of Turkish aid ships heading out to provide relief supplies to Gaza.
If you missed it, all the controversy revolves around the Israeli attack on 6 Turkish ships carrying aid to Gaza, which according to the latest estimates has left 19 dead and 36 wounded
This attack has drawn immense global condemnation and outrage. Israel didn’t gain any friends today……but instead it may have helped strengthen relationships between countries that, in the past, never saw eye to eye on a lot (Greece/Turkey for example).
As expected the Muslim world is infuriated with this event and Europe is calling on Israel to explain their country’s actions.
Do we need anything else to raise the temperature of the Geopolitical climate?
Greece siding with Turkey - the end is nigh. Reuters reports: "Greek police fired teargas on Monday at demonstrators protesting outside the Israeli embassy in Athens over Israel's storming of a Gaza-bound aid flotilla and the killing of pro-Palestinian activists. "Dozens of protesters tried to break a police cordon, and police responded with teargas," said a Reuters witness. About 2,500 protesters rallied outside the embassy, police said, chanting "Hands off Gaza".
Süß find ich ja die Aussage, “dass die Banken nicht berücksichtigen, dass es bisher kaum Insolvenzen von Wohnungsbaugesellschaften gab”. Das hat der Herr Schneider durchaus richtig formuliert… ;-) Gefunden bei mittelstand-nachrichten.de:
Ostdeutsche Wohnungsbaugesellschaften mit Kreditproblemen
Halle. Immer mehr ostdeutsche Wohnungsbaugesellschaften haben Probleme, Kredite von internationalen Banken zu bekommen. Das berichtet der Verband der Wohnungswirtschaft in Sachsen.
Direktor Siegfried Schneider sagte dem Rundfunksender MDR INFO am Montag, das Kreditgeschäft sei viel komplizierter geworden. «Infolge der Finanzkrise übertragen viele internationale Banken die Erfahrungen aus dem US-Geschäft auf den deutschen Immobilienmarkt.» Sie bezweifelten die Kreditwürdigkeit vieler ostdeutscher Wohnungsunternehmen, weil diese häufig verschuldet seien und einen hohen Leerstand aufwiesen. Deswegen hätten alle 130 Verbandsmitglieder die Erfahrung gemacht, dass manche Finanzinstitute ihnen keine Kredite gewährten.
«Die Banken berücksichtigen aber nicht, dass es bisher kaum Insolvenzen von Wohnungsbaugesellschaften gegeben hat», gab Schneider zu bedenken. Auch seien die Mieter zuverlässiger geworden und hätten kaum noch Mietschulden. «Die Wohnungsunternehmen sind nach deutschem Verhältnis stabil aufgestellt. Die internationalen Banken verstehen möglicherweise viel von Aktien, aber nichts vom deutschen Immobiliengeschäft.»
France Worries About AAA Rating; UK Economists Urge Greece to Abandon Euro; Spanish Prime Minister Losing Support; Japan’s Industrial Output Weakens
French Finance Minister Says "Keeping AAA Rating a Stretch"
As Eurozone trade unions prepare to battle over various austerity programs, the French budget minister warns on credit rating.
France admitted on Sunday that keeping its top-notch credit rating would be "a stretch" without some tough budget decisions, following German hints that Berlin may resort to raising taxes to help bring down its deficit.UK Economists Advise Greece to Abandon the Euro
Euro zone trade unions are preparing for possible confrontations in the coming week if governments impose austerity measures or labor reforms unilaterally. But ministers made clear they were ready to take unpopular steps to prevent the Greek debt crisis spreading to their economies, although doubts are growing about whether the Spanish government in particular has enough support to get its way.
Budget Minister Francois Baroin indicated on Sunday that France should not take for granted its AAA rating, which allows Paris to borrow relatively cheaply on international markets and finance its big budget deficit.
"The objective of keeping the AAA rating is an objective that is a stretch, and it is an objective that, in fact, partly informs the economic policies we want to have," Baroin said. "We must maintain our AAA rating, reduce our debt to avoid being too dependent on the markets, and we must do this for the long term," he told Canal+ TV in an interview.
France has forecast its deficit will hit 8 percent of gross domestic product this year, but aims to bring it down to within the European Union's 3 percent limit by 2013.
The Times Online reports Greece urged to give up euro
THE Greek government has been advised by British economists to leave the euro and default on its €300 billion (£255 billion) debt to save its economy.I believe it is impossible for Greece and Spain to pay back those debts. Here is a hilarious video on that subject.
The Centre for Economics and Business Research (CEBR), a London-based consultancy, has warned Greek ministers they will be unable to escape their debt trap without devaluing their own currency to boost exports. The only way this can happen is if Greece returns to its own currency.
Greece’s departure from the euro would prove disastrous for German and French banks, to which it owes billions of euros.
Doug McWilliams, chief executive of the CEBR called the move “virtually inevitable” and said other members may follow. “The only question is the timing,” he said. “The other issue is the extent of contagion. Spain would probably be forced to follow suit, and probably Portugal and Italy, though the Italian debt position is less serious.
Clarke and Dawe: Lending merry-go-round
Spanish Prime Minister Loses Support
If you think Spain will head full force into austerity measures to shore up its credit rating and reduce its deficit, you need to think again. Please consider Zapatero Losing Credit as Fitch Strips Spain of AAA.
Spanish Prime Minister Jose Luis Rodriguez Zapatero, isolated in parliament and his popularity slumping amid the biggest budget cuts in 30 years, is finding his efforts aren’t paying off internationally either.Japan’s Industrial Output Advances Less Than Forecast
Fitch Ratings late last week stripped Spain of its top AAA credit grade and questioned the nation’s ability to grow its economy as the government reduces spending. U.S. stocks and the euro declined after the downgrade to AA+, on concern the European debt crisis will deepen.
“It’s bad news for the government,” said Fernando Fernandez, a former International Monetary Fund economist at IE business school in Madrid. “It shows a lack of confidence in the government internationally. It looks like the budget cuts haven’t helped.”
Zapatero, a Socialist running a minority government, faces strike threats from his traditional allies in the unions and risks being unable to pass next year’s budget because of opposition to his plans. His attempt to rein in the euro area’s third-largest budget deficit has also failed to reverse a surge in Spain’s risk premium amid concern that the European Union’s 750 billion-euro ($920 billion) bailout plan won’t solve the problems of its indebted nations.
The measures are aimed at reducing the budget gap from 11.2 percent of gross domestic product last year to 6 percent in 2011. While they were initially welcomed by markets, pushing up bond prices and Spanish stocks, concerns have resurfaced.
Spain’s Ibex-35 share index fell 0.6 percent at 9:40 a.m. in Madrid to 9,360 points. The Ibex has declined 22 percent this year amid concerns over the economic outlook. Even as bad loans are stabilizing after a two-year surge, shares in Banco Bilbao Vizcaya Argentaria SA have fallen by almost a third.
The yield on Spain’s benchmark 10-year bond rose 4 basis points to 4.27 percent, while the 2-year bond yielded a three- week high of 2.60 percent, up 18 basis point.
The extra yield that investors demand to hold Spanish debt rather than German equivalents rose 5 basis points to 158 basis points, 15 basis points less than the post-euro high of 173 basis points reached on May 7. The average spread over the last decade is 23 basis points.
Bloomberg reports Japan’s Industrial Output Advances Less Than Forecast.
Japan’s industrial production increased less than economists forecast in April, the latest sign that the economic recovery may be losing momentum.It will be interesting to see the reaction of Trichet when Spanish government yields take out the May 7th high. This crisis in sovereign debt is far from over. In fact the crisis has barely begun.
Factoryoutput rose 1.3 percent from March, when it gained 1.2 percent, the Trade Ministry said in Tokyo today. The median estimate of 26 economists surveyed by Bloomberg News was for a 2.5 percent increase.
“The report reinforces the view that the pace of recovery is going to get slower this quarter,” said Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute in Tokyo. “Even so, we’re likely to see production stay on a rising trend because of the recovery in exports, particularly from Asia.”
The expansion may lose steam as the effects of stimulus spending taken worldwide last year wear off, according to Naoki Tsuchiyama, market economist at Mizuho Securities Co. in Tokyo. Government expenditure cuts in Europe may damp sales of Japanese cars and electronic goods over time, he added.
“Production will remain in a recovery trend but its pace of growth may slow in the months ahead,” Tsuchiyama said. “The effects of the governments’ stimulus will wane, and we can’t ignore the European sovereign problem as a downside risk to the global economy.”
These problems cannot help but slow the world economy, much more than the cheerleaders think.
Mike "Mish" Shedlock
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