So, today China was the savior. Our thesis has been the market is about to make a false break out to the upside. Today might just be that day. With the total lack of volumes, this market is truly “sucking” people into “forced” longs. With everything grinding higher on extremely poor volumes, this action risks attracting rather weak longs. Many markets are reaching some rather big resistance levels.
Below some random charts from our screens.
So far, so right. With the SPX hitting 1300 today let’s review Mr Bulls view. Goldman’s O`Neill talks about the growth outlook for China and the impact on the global economy, the European sovereign debt turmoil and currency markets. Bloomberg video below.
The European mess risks taking focus from other important event. The Geopolitical space is still alive. From Stratfor on US, Iran and the Strait of Hormuz.
The United States reportedly sent a letter to Iran via multiple intermediaries last week warning Tehran that any attempt to close the Strait of Hormuz constituted a red line for Washington. The same week, a chemist associated with Iran’s nuclear program was killed in Tehran. In Ankara, Iranian parliamentary speaker Ali Larijani met with Turkish officials and has been floating hints of flexibility in negotiations over Iran’s nuclear program.
This week, a routine rotation of U.S. aircraft carriers is taking place in the Middle East, with the potential for three carrier strike groups to be on station in the U.S. Fifth Fleet’s area of operations and a fourth carrier strike group based in Japan about a week’s transit from the region. Next week, Gen. Michael Dempsey, chairman of the Joint Chiefs of Staff, will travel to Israel to meet with senior Israeli officials. And Iran is scheduling another set of war games in the Persian Gulf for February that will focus on the Islamic Revolutionary Guard Corps’ irregular tactics for closing the Strait of Hormuz.
The market is trading higher (mainly due to China), and looks to be breaking to the upside, although we lack volumes for these top attacks. Central planners are still in charge, and by several successful operations, they eventually make the market go where they want it to be.
Note how the LTRO has “fixed” the curve. Meanwhile the ECB deposits break the 500 billion barrier.
The ECB is being very innovative when it comes to how to “fix” the mess. From WSJ;
The European Central Bank is looking for a possible alternative to its current bond-buying program, the Securities Markets Program, or SMP, ECB Governing Council Member Ewald Nowotny told The Wall Street Journal on Monday.
“We are discussing other possible alternatives. This discussion is however not so far along that we could do without the SMP program,” said Mr. Nowotny. “That is a discussion that includes all monetary-policy instruments.” There is a certain amount of doubt concerning the SMP in the ECB’s council, Mr. Nowotny said.
“There is indeed a skepticism about the Securities Markets Program because there is the fear that the market imperfections that we want to correct could possibly appear in other places,” he said.
Full article here.
Copper for delivery in three months at the LME on Monday rose to $8,082 a tonne, up 6.9 per cent in January so far after suffering a 22 per cent plunge over the course of 2011, reports the FT. Inventories of copper at LME-registered warehouses stood at 354,575 tonnes on Monday http://ftalphaville.ft.com/thecut/2012/01/17/836021/copper-price-jumps-as-lme-stocks-set-to-fall/
China’s economy expanded 8.9 per cent in the fourth quarter of last year, extending a slowdown that began at the start of 2011 and is expected to continue into 2012, reports the FT. “In terms of the domestic and international situation, http://ftalphaville.ft.com/thecut/2012/01/17/835721/markets-welcome-chinas-8-9-gdp-growth/
A quarterly report released by the Bank of Japan on Monday revealed that the outlook for the economic conditions in seven of the country’s nine regions has dimmed, the WSJ reports. While the central bank doesn’t think the regions risk a downward trend, http://ftalphaville.ft.com/thecut/2012/01/16/835521/bank-of-japan-sees-recovery-slowing/
Saudi Arabia is aiming to keep oil prices at about $100 a barrel, a third above its previous public target, the FT reports. Ali Naimi, the Saudi oil minister, on Monday for the first time said the world’s largest oil producer aimed to keep oil prices at the triple-digit level, http://ftalphaville.ft.com/thecut/2012/01/17/835771/saudi-arabia-raises-oil-target-price-to-100/
Morgan Stanley plans plans to cap cash payouts at $125,000, the WSJ says, citing people familiar with the matter. Some top executives will receive nothing now, deferring their 2011 payouts until the end of this year. http://ftalphaville.ft.com/thecut/2012/01/17/835821/morgan-stanley-bonuses-capped/