Many readers have asked for the 08/11 updated comparison chart. Here it is. Note how we flirted with the 200 day moving average. The market turned perfectly, within the negative trend channel.
MF Global instead if Lehman, and voilá, we have the perfect storm set up. We doubt the Greek people will support the austerity in the referendum vote coming up. Eurozone crisis 2.0 has just started, and will end in tears, unless we get another really BIG bail out….
Markets taking another aggressive leg down. Greece is implying of pulling the plug. With Interactive Brokers walking away from MF deal, due to balance sheet issues beyond…..let’s see what China says about balance sheet issues before they accept the generous offer of investing in the EFSF.
SPX Channel still intact, but this is definitely trading weakish.
Mega Bullish at 1290 accompanied with “extra” bullish positions, dreaming of ultra short at 1080 (but actually 20% long), now Mega Bullish at 1290 again, and we trade at 1265. Time to name an Indicator after the Guru. Bloomberg video below explaining just how bullish Biggs is again, and MF Global is just a minor thing…..
Markets trading lower. MF Global is imploding, NY Fed suspending MF from conducting business, and there we go, one primary dealer less in the World. The EFSF short squeeze effect is soon gone. The below circles mark the EFSF (non) event we got last week. Many shorts have been totally killed during that massive move we saw. With focus shifting back to Italy where rates now trade well above the 6 % mark (6.1%). Don’t forget Spain, unemployment hit 21.5% last week, but hasn’t received the attention, as the EFSF Euphoria was the Top News.
The SPX Trend Channel is still intact. Sentiment is clearly on the weak side, but the market is trading in a no volume regime so far. We believe the market has reached levels, where a correction is very probable. Let’s see where markets head later while we enjoy this World of Intervention, unless somebody pegs SPX at 1500?
Yesterday we saw a real short capitulation move. It took the market almost 50 days to fall from 1290 to 1090, and only 18 days to go from 1090 to 1290. That is a cruel squeeze, with many “smart” shorts getting absolutely killed yesterday. The vol collapse according to us is wrong. The moves up have been way too strong, for people to be selling vol in panic. Many short gamma players got hurt more during the past session, than on the way down. Market is driven by greed and fear, and all moves are magnified by HFT Algos, making it impossible for big players to trade risk efficiently. Below are our chart expectations and levels to look out for.
08/11 comparison. Yes the market was pushed above the 200 day moving average yesterday, but we want to see more stability before giving this signal the appropriate attention. Note how we actually never closed above the 200 day in 08, but the similarities are still there. The situation is not identical, but there are similarities, and the coming days will be crucial in deciding if this was the shake out of shorts marking the short term top.
The outlined Trend Channel we have been posting over the last couple of weeks is still intact. The circle marks the shake out before we got the final short capitulation today. There are many big “smart” guys getting run over today, especially in Europe. In this complex world, it’s best to keep it simple. Stay tuned for our full chart review later.
European leaders reached a deal with Greek debtholders on Thursday morning that would see private investors take a 50 per cent cut in the face value of their bonds, a deep haircut that officials believe will reduce Greek debt levels to 120 per cent of gross domestic product by the end of the decade, http://ftalphaville.ft.com/thecut/2011/10/27/713356/eurozone-agreement-reached/
Europe’s banks will be forced to find about €106bn of extra capital by the end of June, under a mandatory scheme agreed by European Union leaders to temporarily bolster the defences of the banking system. A recapitalisation plan overseen by the European Banking Authority will require around 70 banks to meet a higher 9 per cent threshold of the “highest quality capital”, after revaluing sovereign debt at market rate. http://www.ft.com/intl/cms/s/0/ede0bc94-ffee-11e0-ba79-00144feabdc0.html#axzz1bxFOLwak
South Korea has doubled its currency swap arrangement with China to Rmb360bn ($57bn), further increasing the firepower available to protect its financial system from any turmoil in the eurozone. This latest swap agreement with Beijing, announced during a visit to Seoul by China’s vice premier Li Keqiang, comes only a week after Seoul increased its swap facility with Japan to $70bn from $13bn.http://www.ft.com/intl/cms/s/0/35911e14-ffd4-11e0-89ce-00144feabdc0.html#axzz1bxFOLwak
Low volume, no trend action in early European trading. The US markets reversed big time yesterday. At one point we saw a “mini panic” sell off. Broken markets, mainly driven by manipulation, intervention and HFT, are dangerous markets. We believe the sharp rally seen over the past days, with yesterday’s reversal, is the first sign in several weeks, of bulls getting less confident. Possible scenario presented below. SPX short and long term charts presented.