Guest post by Macro Story;

As a reminder from the 2007 comparison the move from Point F to the low in the highlighted red box was 15.3%. So far the 2011 move has been 14.5%. Something to consider as history does often repeat itself in emotional markets.

This market still appears very weak with internals about as weak as I have ever seen. At the same time markets tend to turn around when everyone is screaming sell. As a friendly reminder, don’t be greedy and don’t be a hero. Remember the FOMC meeting is tomorrow.

Manic Markets. After the ES futures traded at 1075, we are now at 1145. Europe has turned around in a huge reversal. Markets surging on no liquidity. The famous August trend still intact, but could be breached. This time around, Europe is showing the way. Greed and fear of missing out on all manic moves. What if, just a what if Ben takes the market to 1200+ later today? Stoxx intraday below.

Ft.com
The Royal Institution of Chartered Surveyors said its monthly gauge of prices edged up, the WSJ reports. The index reached a balance of minus -22 from minus -26 in June. The negative reading means prices are still falling http://ftalphaville.ft.com/thecut/2011/08/09/647461/uk-housing-sector-falters/

Bullion gained more than 2 per cent on Tuesday, Reuters reports, roaring to all-time highs for a second consecutive session to stand above $1,750 as equity markets dived on growing fears of a globalhttp://ftalphaville.ft.com/thecut/2011/08/09/647441/gold-hits-another-record/

A top US congressional committee is scrutinising Standard & Poor’s decision to lower the country’s credit score, in a sign of escalating political heat on the rating agency. A Democratic aide in Congress told the FT that the Senate banking committee was “looking into the issue and gathering more information http://ftalphaville.ft.com/thecut/2011/08/09/647431/senate-to-probe-sp-downgrade/

The US Federal Reserve’s FOMC meeting on Tuesday will be the most difficult and divisive in a year, the FT says. Sharply weaker economic data in recent weeks, a new peak in the eurozone debt crisis,http://ftalphaville.ft.com/thecut/2011/08/09/647416/fed-faced-with-stimulus-question/

Chinese inflation data for July failed to calm markets, showing a higher than expected increase of 6.5 per cent, up from 6.4 per cent in June. This compared to a 6.3 per cent average forecast from economists polled by Reuters and by Dow Jones. http://ftalphaville.ft.com/thecut/2011/08/09/647406/chinese-inflation-comes-in-higher/

The new leader of Tibet’s government-in-exile has condemned Chinese rule over his homeland, striking a defiant tone as he assumed the political role recently ceded by the Dalai Lama, reports the FT. In a strongly worded inaugural address http://ftalphaville.ft.com/thecut/2011/08/08/647251/tibetan-leader-vows-to-fight-chinese-%e2%80%98colonialism%e2%80%99/

Standard & Poor’s on Monday cut the triple A credit rating of government-backed mortgage financiers Fannie Mae and Freddie Mac following a similar downgrade of the US government on Friday, reports the FT http://ftalphaville.ft.com/thecut/2011/08/08/647241/fannie-mae-and-freddie-mac-downgraded/

Continue reading →

What we have witnessed during the last two weeks  in the stock markets is rather extreme. With 99% of all fund managers totally lost in space, all fully invested, blaming S&P, there have been some people around, willing to think outside the box, and stick to their research, irrespective of Ben printing ES futures, and the crowd following for no reason.

Welcome to the father of Black Swans and their fund, Universa, who correctly predicted what was to happen.  From Universa.

Full must read report, click here.

One of our favorite charts is back, explaining the world of Finance so everybody understands. Great insight as we still follow this chart. Next up, breakdown of the currency world?Courtesey Long.

Many Indices have now oficially entered the Bear Market. Once again, we got that Heinz Ketchup bottle effect. You shake and shake, it never comes out, and all of a sudden everything is out….Below, Dax, Stoxx, Shanghai and OMX, all entering the 20%  or more correction.

Let us see if they can create another QE ver 3.0 bull tomorrow….

As the World is imploding, let’s quickly remember what happened last year. Stoxx had a similar sell off and bounced then off the support level. Are we about to witness a similar move again, or is this time different? One thing is for sure, the market is totally driven by Algo Trading only.

With the SPX at Jackson Hole levels from last year (adjusted for the USD) let’s get prepared for the QE3. Remember POMO? Quick recap of what that means, courtesey Omid Malekan.

Like we argued, the dip turned into a squeeze. Currency moves turned out to be a major non event. The Stoxx rallied right back up to resistance levels, with the Banks trading strongly. It looks we will be up for at least one serious squeeze while trying to brake the 10 day resistance levels. Some of our risk markets are now trading in positive territory. Beware the upside….Stock intraday charts below,

…and the IBEX and MIB surge some 4%. Welcome to short gamma….