We posted our base case scenario a few days ago, Essential Charts Update. Markets have since reversed and are trading lower. With fresh memories after the central planners “killed” the shorts, many are hesitant to shorting the market. With the sell off we saw today, many are caught totally wrong, and frustration is increasing as we approach the supposedly calm holioday season.
Short term charts below. Note how the central planners coordinated effect soon is gone.
After the initial rally (we still can’t figure out why), all futures have traded down, and are now at intra day support levels. News of how the Eurozone will be saved is getting more pathetic by the day. Politicians can’t agree on anything, this should be clear to everybody. Everything is still moving on light volume, although the sell offs show increasing vomlumes. Let’s see if we will start flirting with the levels post the central banks intervention some days ago. We would love to see how the market breaths “down there”. Chart below;
Another dull pre Christmas trading session. The market is trading higher on thin volume. This is an extremely easy market to push around. We saw how quickly SPX moved late yesterday. Vvol, volatility of volatility, is rather extreme, as markets moves easily on no volumes. Dax continuing the underperformance. Chart levels below;
Schroders, one of the UK’s biggest fund managers, is is the latest in a number of international companies to outline its plans to evade the possible worst effects of the eurozone crisis, the FT says.http://ftalphaville.ft.com/thecut/2011/12/07/784281/schroders-braces-for-eurozone-break-up/
A growing belief among investors that the Swiss National Bank will intervene again to weaken its currency sent the franc tumbling against the euro and the dollar on Tuesday, says the FT. Many analysts and traders now think action by the central bank this month is inevitable, http://ftalphaville.ft.com/thecut/2011/12/07/784131/swiss-franc-dives-as-investors-look-for-intervention/
US state attorneys-general stepped up their attacks on large US banks for allegedly illegal home seizures, says the FT, creating further doubt for an industry longing for resolution of mortgage-related litigation. The state of Massachusetts on Tuesday asked the federal government to investigate US taxpayer-owned Ally Financial for allegedly illegal foreclosures,http://ftalphaville.ft.com/thecut/2011/12/07/784141/us-states-ramp-up-illegal-foreclosure-fight/
Goldman Sachs, JPMorgan Chase and other leading international banks may be forced to reveal the pay of their top London-based executives for the first time, as the UK government seeks to tackle what it calls “unacceptable” levels of bonuses in the City, http://ftalphaville.ft.com/thecut/2011/12/07/783961/city-bankers-to-face-pay-pressure/
As we started writing this European morning, “another non event day”, we were unfortunately proven right. Trading is very dull, despite the rumors coming out of Europe. The latest being Europe will run joint rescue funds. News flow is now getting pathetic. Market is rallying some, but with the lack of volume we see, it is hardly statistically significant moves we see.
Some charts below, and note how the Dax is underperforming the Stoxx 50.
Banks face paying more to raise finance in traditional bond markets – and some will continue to be locked out completely – as a growing demand for collateral from other lenders is undermining the strength of their balance sheets, http://ftalphaville.ft.com/thecut/2011/12/05/778711/uk-banks-face-higher-financing-costs/
Businesses breaching EU privacy rules will face fines of up to 5 per cent of their global turnover under sweeping proposals to be unveiled next month, says the FT. In the first significant update of data protection legislation since 1995, http://ftalphaville.ft.com/thecut/2011/12/05/778671/eu-eyes-big-fines-for-privacy-breaches/
French president Nicolas Sarkozy and German chancellor Angela Merkel meet in Paris on Monday under pressure to align their positions on eurozone budget co-ordination, reports Reuters, ahead of an EU leaders’ summit in Brussels on Thursday and Friday. http://ftalphaville.ft.com/thecut/2011/12/05/778691/little-expected-from-merkozys-monday-meeting/
Australian coal miners Whitehaven Coal and Aston Resources have confirmed they are in discussions over a potential $A4.65bn (US$4.76bn) merger, the WSJ reports. Such a deal would make the combined company one of the country’s biggest coal producers with a combined output comparable to Peabody Energy’s Australian operations. http://ftalphaville.ft.com/thecut/2011/12/05/778441/australian-coal-miners-in-talks-over-4-7bn-merger/
China’s manufacturing sector contracted in November, marking the first decline since February 2009, the FT reports. The official purchasing managers’ index (PMI) fell to 49.0 in November from 50.4 in October, http://ftalphaville.ft.com/thecut/2011/12/01/774641/china-pmis-go-negative/
Asian markets retained their gains on Thursday on the back of the previous day’s central bank liquidity moves, despite poor manufacturing data from China. The wave of central bank action around the world to avert a liquidity crisis cheered financial markets on Wednesday but highlighted the depth of international concern about possible economic turmoil in Europe,http://ftalphaville.ft.com/thecut/2011/12/01/774701/markets-remain-bouyant-on-liquidity-move/
Zynga, the fast-growing online game maker, plans to value itself at as much as $10 billion in its forthcoming IPO, says NYT Dealbook, citing two people briefed on the matter. The company plans to file an amended prospectus on Friday with an estimated price range of about $8 to $10 a share, http://ftalphaville.ft.com/thecut/2011/12/01/775001/zynga-said-to-seek-10bn-ipo-valuation/
Japan’s two biggest carmakers warned that the record strength of the yen could drive more car manufacturing overseas and called for more aggressive official intervention to push the currency lower, reports the FT. http://ftalphaville.ft.com/thecut/2011/11/30/774551/toyota-and-nissan-call-for-more-action-on-yen/
Markets have traded rather boring so far today. After the sharp sell off in US trading last night, Europe tried rallying, but the move is fading. Spanish auctions just came out, with rather high yields…Contagion is spreading, and it is only a matter of time before the Spanish 10 year breaks above the 7% level. Italy is trading at 7.1%… Equities markets have been trading in an increasingly tioghter range over the last month. Let’s see if we break that big dynamics? Charts below.
Quick market update, while we learn that Buffet has been loading up on IBM, Wells Fargo and other “long term” positions. Markets reversed sharply after this mornings initial gap open. Europe is under pressure yet again, although volumes are rather muted. The Italian situation is not fixed. As we have been warning over the weeks, next up should be Spain. With the 10 year yield just crossing the magic 6% level, expect renewed Euro Debt Jitters. Below short term levels of Stoxx 50 and the ES futures.
….and the reaction to Italy’s solved problems is a slight risk off. After the initial short covering, futures have traded down and filled this morning’s gap. As we have pushed higher over the past days, the SPX has once again reached the 200 day moving average. The market is “confusing” many at these levels, as it is not breaking up, nor does it want to break below the lows. With Christmas coming up soon, trading volumes will slowly dry up and make people even more frustrated. Some chart levels below.