Constructed by years of fiscal white lies and monetary insanity, the body bags have yet to be filled. Municipal governments in China still depend on increasing real estate values, while European banks holding large debts of failing Southeastern states still stand. The United States Economy has “recovered faster than anyone could have imagined” and the S&P 500 at one time had nearly doubled from it’s lows. But still the whispers; 10 year U.S. Treasuries nearing 3% yields, LIBOR trending higher, market technicals showing a shift towards negative confidence, and this weeks economic data hanging in the balance…
As founder and editor of Diamond Slice I’m proud to announce that The Weekly Spectrum is going to be more “focused”. It’s obvious that you can get a weekly outlook anywhere on the net, so the one you’ll find here is about to become a bit, well, edgy. There’s enough “fair and balanced” out there to kill us all of boredom, I believe that we at DS can give you something much better, something much smarter, and something you can actually profit from. So without any further ado, I give you “The Weekly Spectrum” 2.0…
In the week ahead the U.S. equity market, broadly represented by the S&P 500 index, will be looking for direction as the level reaches its 200 day moving average (MA), which had served as firm support before dropping below that level on May 22, 2010 for the first time since mid July 2009. By our analysis, markets are now undergoing a sentiment shift, in turn morphing the 200 day MA into a resistance; twice tested but not yet broken since crossing below on May 22.
This week will likely begin with some relief for the Euro, on G20 plans to cut costs in Euro states, while the hangover from Friday’s U.S. Jobs data could continue into a “no news” Monday trading session. Look for pops to add to shorts early in the week, but keep stops tight leading into Jobless claims and Friday’s data.
The “sell-off” is now two weeks young as red flags are hoisted daily above a mob of jaw dropped spectators, formerly known as the efficient market. There is no absence of questions on the minds of international market forecasters. Instead, we’re hearing vague rhetoric from analysts and financiers that sounds more like confusion than any sort of prediction. The confident ones are still playing the “buy because markets are down” card, but we are taking an alternative, perhaps disagreeable, path.
Many of you may be asking yourself, “what’s changed since last week with the EU bailout?” One would think there would surely be some sort of news or development concerning the exact structure of this plan, rumored to be a sovereign debt backstop of $1 trillion USD. Is there surely some plan moving forward?
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While history may paint our stance with the heavy brush of criticism, we’re going on the record to call increased volatillity and a lower close on the S&P 500 by week’s end. We feel it is our duty to yell from the rooftops just how treacherous the current developments in world markets have become. While we won’t stamp corny metaphors to the ailing sovereign debt markets, wasting your time with visions of ships and storms, we do pray that readers appreciate the urgency of this week’s Weekly Spectrum.
Last week was a ROUT. There’s no other way to put it. While we suspect this week will start off with some trading traction, it may not end looking much better. What is certain, is that geopolitical uncertainties in Europe look to be trumping economic data in a slow week for U.S. macro indicators. This week’s Weekly Spectrum is then more focused on the geopolitical risks surrounding the EU TARP style debt purchase program nearly $1 Trillion large, power transitions in the UK and Germany, and a few economic reports due out later in the week in the U.S.
Greece, Greece, Greece… Is that Papa guy ever going to get his act together and accept a check from the EU? is it 45 billion or 100 billion Euros now? What’s the deal with these riots in Athens?
Chances are you have answers to these questions, and a few extra cents to contribute to the issue. Frankly, that’s what the comment box is for, and we won’t waste time on the issue beyond these next few words.
U.S. stocks looked unusually strong on Friday as two major factors concerning short term risk in global markets changed dramatically. The stagnant housing market and uncertainty over a viable path to solvency in Greece, which have been weighing heavily on global markets, seem to be less threatening if Friday’s data were judge. Technicals remain extremely overbought in commodities and equities as markets now face Bernanke and Q1 GDP this week.