Many are abandoning the bear positions during this prolonged Santa rally. Volumes have been rather poor, despite yesterday’s volume increase. Market has been losing volume for a long time. Today we have been getting those contra indicator calls. “This market won’t go down, vix implies there is no risk in this market“. Now is probably a great time loading up on downside puts, just in case…..Guest post by Macro Story.
I don’t believe this market is going to come to a specific level and reverse giving an all clear signal to go short and or exit longs. The basis for that statement is in late July 2011 the market experienced a minor pullback off no major technical level that quickly turned into a major decline of 220 SPX points in less than two weeks.
The one signal that was given in July as is being given now is that of price action in the US Treasuries (UST). The equity market began slowly selling off while at the same time UST began slowly breaking out of a bull flag pattern. The two were needed in tandem I believe for UST needed the added capital flow that an equity selloff offered to break out.
Right now UST is at a very similar period as that which preceded the July 2011 selloff. The two year is right at all time highs while the five year is at a five month high and less than 0.3% from an all time high. The rest of the curve, the ten and thirty year are not far behind. All of these moves were supported by very heavy volume on Wednesday.
Market ripping further today, while the shorts are struggling. “Nothing” has really changed according to many bears, but the market doesn’t care. The charts have been breaking up, on somewhat sceptical volume. Looking back, the market is within the 30 day trend channel.
Short term charts below.
Soros-”The best-case scenario is a deflationary environment. The worst-case scenario is a collapse of the financial system.”
The master of Reflexivity theory is getting increasingly bearish on the US society. Soros is predicting widespread riots, police state and class war for the mighty US. When Soros speaks, you should listen. From RT;
Billionaire investor George Soros has a new prediction for America. While it might be as dire as it gets for the financial wiz, this bet concerns more than just the value of the buck. According to Soros, there’s about to be an all-out class war.
Soros, 81, previously bet against the British pound in the early 90s and made $1 billion off its collapse. In the years since, he’s remained active in investing, but also in advocacy. He’s helped keep Wikipedia afloat thanks to impressive contributions and through donations to the Tides Center, has indirectly funded Adbusters, the Canadian anti-capitalist magazine that put Occupy Wall Street on the map. Speaking to Newsweek recently, Soros neglected to acknowledge his past successes, but instead offered a word of warning: a period of “evil” is coming to the western world.
“I am not here to cheer you up. The situation is about as serious and difficult as I’ve experienced in my career,” Soros tells Newsweek. “We are facing an extremely difficult time, comparable in many ways to the 1930s, the Great Depression. We are facing now a general retrenchment in the developed world, which threatens to put us in a decade of more stagnation, or worse. The best-case scenario is a deflationary environment. The worst-case scenario is a collapse of the financial system.” (Full reading here).
Video with Soros below.
The US Federal Reserve has set the stage for three more years of ultra-loose monetary policy in the world’s largest economy, prompting an immediate fall in bond yields, the FT reports. The rate-setting Federal Open Market Committee predicted low interest rates until late 2014 and set a formal inflation objective of 2 per cent,http://ftalphaville.ft.com/thecut/2012/01/26/852121/fed-sets-path-for-three-years-of-low-rates/
In a forthright opening speech to the World Economic Forum in Davos, Angela Merkel said that Europe could only recover the confidence of global markets if the weaker European economies boosted their growth and competitiveness with structural reforms, http://ftalphaville.ft.com/thecut/2012/01/26/851971/merkel-questions-calls-for-bigger-bail-out/
Iran has threatened to pre-empt a European embargo on its oil by halting its exports to the region immediately, a move that could hit economically weak southern European countries, the FT reports. The European Union this week approved a ban on crude oil imports from Iran from July 1, http://ftalphaville.ft.com/thecut/2012/01/25/851931/iran-threatens-to-act-first-on-eu-embargo/
Friday the 13th may be an unlucky omen for Portugal. On that day, almost two weeks ago, Standard & Poor’s became the last rating agency to downgrade Lisbon to junk, marking the moment for many investors when default looked inevitable for Portugal as well as Greece, http://ftalphaville.ft.com/thecut/2012/01/25/851911/portuguese-bonds-hit-as-traders-fear-default/