Good Morning. As we head into a three day weekend (US bond and equity markets are closed on Monday) were the fate of Greece as a member of the EU may possibly be decided I wanted to offer a less technical, more macro Morning Brief today.
But first a few technical points and securities to watch on option expiration day. This is a long post by the way but there is a lot going on this weekend in Europe.
That feisty AUD/USD currency pair is back at it again turning what looked like a bearish reversal into possibly another head
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Since everyone is focused on the default (again) and the massive derivatives market affected with a default, I’m wondering if Greece is going to have a non-default default. I know it wasn’t a question but wanted to see if you had any thoughts on that.
I’ve been thinking that a Japan credit downgrade is the real black swan coming that’ll really kick things off
Is Greek law, ‘all Greek’ to you, Tony? Yes, very lame.
I have commented before that I think Bernanke extending ZIRP, in light of all the “positive news”, means that the Fed expects some bad events in the near term.
I also find it interesting that the Republicans, in an election year, are now offering support to Obama’s wish for extension to payroll tax cut. They fought hard against this a few short months ago to only extend it 2 months.
Again, do the Republicans know something dire is in the works (and they would be privy to this info as well) and are simply trying to be supportive to job market so Obama cannot point finger back to them indicating this is why we are in the mess…
Just something to think about…
You may be onto something, CL. Another theory of mine, as far out there as it may be, is that hedge funds and wall street are not supporting Obama like they did in 2008; they are giving heavily to Romney. Wouldn’t be surprised to see a market crisis all of a sudden to make the President the one to blame for a crash-like event.
This market seems as though it is just starting it’s powerful move. It seems as though too many people are waiting/wanting a pullback, which we are obviously not getting.
What am I doing? Well I am still short oil and sitting on losses. Oil looks like it is going to $120 (that is WTI). 20% up in oil means 20% in market and that means Dow eclipses old highs. It doesn’t look like it will even pullback to let people in either.
Who knows? At the end of the day the US has a Fed chairman that will print more $ than a Yakuza counterfeiter at Kinko’s. He is insulating people against downside risk. It makes me think that being short is stupid.
Now to add further confusion to this post (which to be honest is what most people are….confused), negative divergence is beginning on the Dow charts. Could a top really be here? (this is the only reason I am staying short).
Good Morning everyone…
[...] It will be a long weekend. …Guest Post by Macro Story. [...]
0% interest rate plus, all liquidity the market will need plus, payroll tax cut…
And last year gdp for usa is only 1.6%…. and markets continous rising waiting for more liquidity…
I mean this is a market very overvalued, very overbought and thirsty of more liquidity…
This is the end of capitalism, i don’t know where to put my money, gold?
Mike you lost me at default. A non default default meaning ISDA says no default? That is what leaders would prefer but that would likely have negative consequences as outlined above.
Oscar if you have a lot of money get a big mattress a little money a small mattress should suffice.
Big discrepancy between AUD and futures. Opening strength could be faded if AUD does not reverse.
EUR/AUD is a beast today
http://screencast.com/t/hQGV4bmWj0Vt
Based purely on OI SPY would like to close today below 136.
Look where EMD reversed today
http://dl.dropbox.com/u/49250221/Charts/Feb%2013%202012/Screen%20shot%202012-02-17%20at%209.07.37%20AM.png
copper down at lod…looking ugly – nice .10 reversal again
checkout the intraday ES vs AUD – massive divergence here.
http://chart.ly/n5593dw
copper not looking healthy
http://screencast.com/t/PPTwOI6J6d
Seems like Greece deal is done and they are now heading to bring into law CAC measures.
From what I have read this should trigger CDS…
However, that is up to ISDA committee to decide…
What are your thoughts on whether ISDA will indeed trigger CDS, or are they as corrupt as rest of the players in this story?
If they don’t trigger a event of default then you will see sovereign debt sold off and yields rise. There is no win here.
Is there any way you see this situation playing out so that the markets keep moving up?
Seems to me the market has been grinding higher for last couple of months to get all those retail investors long in the market again…
Then, the rug gets pulled out…
i know i’m getting ahead of myself here, but if sovereigns sell off – that’s in line with your thesis of the flood into treasuries, Tony?
If sovereigns sold off we would see risk off in a big way and treasury I believe would catch the “safety” bid.
Europe is in a catch-22 there is absolutely no way Europe will be contained. No one knows how much CDS is outstanding and who owes what to whom. If they don’t trigger it, then they’ll cause a run on the sovereign bond markets there as Tony said. If they do trigger it, they will at least keep some resemblance of faith in the financial system.
Meanwhile the tech sector has gone absolutely parabolic here and MSFT has completed a perfect triple top:
http://www.etf-corner.com/.a/6a010535da87f8970c0168e786a899970c-pi
As a pure hedge from some crazy ramp on Tuesday I bought spy calls expiring next Friday. Short money but done purely for defensive purposes.
Is that the ‘throw your hands up and shout’ formation on MSFT, Rob?
Ha! That’s what it looks like to me Eric. These moves are occurring on no news whatsoever – pure euphoria (this does not mean that it cannot continue for even longer). That last time MSFT hit 31.50, did not end so well either…
its amazing just how many risks there are out there – this chart of FXY says something happens to Japan soon
http://screencast.com/t/dbS3b5RkA7sj