GETTING CLOSE TO YOU KNOW WHAT TIME
September 06, 2011
The large gap opening lower was fully expected given the situation globally and especially in Europe. The German stock market has fallen over 8% in the past week and is in bear market territory. (You might just change the names of the characters in the lead image to “Hanz & Franz”.) Clearly there’s a lot going across the pond. Greek 2 year notes hit 89% Tuesday making a default certain. The Bernank chimed-in stating a Greek default was “manageable” meaning between he and Jean Claude they have plenty of paper and ink to take care of things with (cough) the exception of contagion. Oh, but that reminds me Italy made for negative headlines most of the day.
The big news early was the Swiss National Bank (SNB) threw in the towel on more conventional currency debasement strategies and decided to peg the franc to the euro at 120. This means they’ll be printing a lot of francs to buy euros to make it all work. This initially threw gold for a loop which had been making fresh highs. After falling on the SNB news, gold rallied back to nearly unchanged only to fall again in the U.S. on profit-taking and a rising dollar. We closed our gold positions at the opening based on more DeMark readings. (Yeah, it’s funny how these work sometimes, if only temporarily.)
Economic data from the ISM Services Sector was better than expected at 53.3 versus 51 expected. However, inside the numbers orders were weak and comments negative which didn’t help stocks much.
Stocks were weak overall but came well off their lows around mid-day as HFTs entered and launched buy programs. Bulls in the financial media will ignore this and only complain when they’re active on the downside.
Bonds were well bid once again, the dollar was higher overall and commodities were mixed at best.
Volume remains high while breadth per the WSJ remains negative as perhaps we’re getting short-term oversold.
Conditions continue to deteriorate even with some late day buying. You’re seeing some strange behavior now with indicators—a sharply rising VIX while others remain in neutral or even ascend. The news flow remains highly negative and fund managers have reinvestment money to put to work; hence some buying off the lows on Tuesday.
There is little more to make of things. The president’s jobs speech on Thursday will be political but a non-market event. Many are waiting what Bernanke & Co will do on the 21st which may provide a lift or not. It’s hard to go to the well too often since QE2 was a failed moon shot in the final analysis.
Wednesday will feature the Beige Book released at 2 PM. Remember back in February Bernanke stated with certainty the economy was building steam for a “durable” recovery. They count on us to have short-memories.
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