Below are some random charts comparing the CRB Commodity Index VS the SPX and then a few key commodities VS the CRB. One of the key takeaways is that since the October 4 bottom in equities the CRB has severely lagged the market and is currently flashing a large divergence.
SPX VS CRB – Notice the move off the October 4 bottom and the relative weakness in the CRB. As the USD moves higher this will further weaken the CRB. Additionally notice the down trending parallel channel that has contained the CRB for the majority of 2011.
Markets have been grinding higher on low volume since mid December. The Santa Rally is showing signs of fatigue. Market lacks the conviction of taking out new highs. If anything, we might get a false break.
Below are 30 day charts of SPX and DAX. Low volume, low volatlity is giving investors a false sense of security. Watch those levels accordingly.
Confidence that there will be no stock market crash in the succeeding six months generally declined (though with a lot of ups and downs) over the years since 1989 until the stock market bottomed out in late 2002. Just after the terrorist attacks of September 11, 2001, Crash Confidence actually rose a little. But Crash Confidence reached its lowest point at 20.79% for institutional investors and 28.95% for individual investors as of November 2002. Crash confidence reached its all-time low, both for individual and institutional investors, in early 2009, just months after the Lehman crisis, reflecting the turmoil in the credit markets and the strong depression fears generated by that event, and is plausibly related to the very low stock market valutions then. The recovery of crash confidence starting in 2009 mirrors the strong recovery in the stock market.
Trading has been focused on the Italian situation lately. Let’s not forget, Greece is not fixed, and needs to refinance many billions this year. Money Greece does not have. Great WSJ article on the Greek mess getting attention today.
Negotiators for banks and governments are working to complete a promised debt restructuring for Greece that will slice in half what the nation owes its private bondholders.
But the deal sets up other governments in the euro zone to bear any additional burden if—many analysts say when—Greece needs more help to get out of its deep fiscal rut.
The concerns about additional costs have made some European capitals wary of consummating the deal, said people familiar with the talks, and are among the reasons they have dragged on for months.
The no volume market continues. The year has definitely started rather slow and boring. The Santa rally has brought us up to some important resistance levels. With volatility having come off hard over the past weeks, many are slowly experiencing this market “won’t move“. Usually, this is when majority are wrong, as they have paid out too much theta, and are now happy not to have options.
Key European charts below.
Investors are all talking nervously about the debt problems of Europe, but this is not the biggest problem Europe faces. With ageing population, the pension liabilities bomb risks bringing down many economies. With changing demographics, especially in the Med countries, more burden will be paid by less people working. Despite all these problems, no politicians will try dealing with the issue, as it is simple too big. Europe needs more people working, and needs the growth to come back. This once beautiful lady, has turned very old, amnd despite putting on all the make up, nobody is asking for the last dance. On the pension bomb, from Bloomberg.
State-funded pension obligations in 19 of the European Union nations were about five times higher than their combined gross debt, according to a study commissioned by the European Central Bank. The countries in the report compiled by the Research Center for Generational Contracts at Freiburg University in 2009 had almost 30 trillion euros ($39.3 trillion) of projected obligations to their existing populations.
Germany accounted for 7.6 trillion euros and France 6.7 trillion euros of the liabilities, authors Christoph Mueller, Bernd Raffelhueschen and Olaf Weddige said in the report.
“This is a totally unsustainable situation that quite clearly has to be reversed,” Jacob Funk Kirkegaard, a research fellow at thePeterson Institute for International Economics in Washington, said in a telephone interview.
Japan wants to keep importing crude oil from Iran despite rising pressure from the US to cooperate in strengthening sanctions against the Islamic Republic, reports the WSJ, citing an unnamed official at Japan’s Ministry of Foreign Affairs. http://ftalphaville.ft.com/thecut/2012/01/11/827131/japan-wants-to-keep-importing-crude-oil-from-iran/
Global regulators may expand the definition of a too-big-to-fail financial firm, signing up domestic lenders, clearing houses and insurers to capital rules designed for the world’s biggest banks, reports Bloomberg. The “framework should be in place for domestically systemically important banks by the end of the year,” Mark Carney, http://ftalphaville.ft.com/thecut/2012/01/11/827021/carney-says-too-big-to-fail-definition-will-be-widened/
A key email between Philipp Hildebrand, the former chairman of the Swiss National Bank, and his financial adviser was seen by neither the central bank’s governing council nor auditors investigating his financial dealings, http://ftalphaville.ft.com/thecut/2012/01/11/826951/key-hildebrand-email-not-seen-by-investigation/
Citigroup chief executive Vikram Pandit has called for banks to be more transparent about how they measure their risk in an FT oped, the newspaper reports. He writes that each bank should be required to explain how it would measure risk in a standard portfolio, http://ftalphaville.ft.com/thecut/2012/01/11/826761/pandit-urges-risk-disclosure-shake-up/