Posted: 2/26/2013 9:52:20 AM
The reason why I did not jump in here as frequently as before among other reasons is because I didn't see the need to discuss "more of the same" and I wanted to observe the market reaction to yet "more of the same". When I made a statement at that time it was reliant on whether or not there were two straight weekly closes below 1360 on ES with increasing volume. I was clear on that. There were not two consecutive such closes.
Given that, and yet more monetary easing announced and/or jawboned we obviously saw another rally which is not surprising. This is what I mean by "more of the same". The Fed announced more QE though it had already announced it would do this and basically came out one month after stating it was possible to in fact affirm it would increase money printing to $85 Billion/month into perpetuity. Sure enough this occured just as the charts were "on the edge" thus confirming my belief that Bernanke and his troops are very aware of the technicals and make announcements at certain times for very specific reasons. They know this is a house of cards and they are doing their best to try and kick the can down the road as far as they can for as long as they can. This is the reaction I wanted to observe.
Given that, nothing has changed in terms of the central banks around the world doing anything and everything to intervene to artifically prop up ES, EURUSD, and the Dax in that order of priority. At this point it appears to me that this latest attempt to do just that is running out of steam.
I'll touch on the charts as there is now a more distinct possibility that both an intermediate term top and long term top is forming. Regarding the fundamentals they are more deplorable than they were in the late fall and I highlight a couple of observations:
- there is an enormous, mind boggling disparity between US equity strength and many, many key macro indicators most notably the performance of high yield debt, credit markets overall, and indicatiors such as the price of copper. In other words, stocks have been floating in la la land on their own beyond levels on a relative basis not seen since 2007/2008. High yield debt and credit overall has a very strong track record of anticipating reality.
- despite every central bank in the world propping up EURUSD and trying to hurt the USD that son of a gun USD just won't break down and in fact has rallied sharply in recent weeks. The "strength" of EURUSD is/was intended to fool the speep into believing "all is well" with the Eurozone financial system but that same "strength" substantially hurts the alredy decimated Eurozone economies so in the end as usual there is no free lunch. A stronger and rising USD does not help risk assets.
- markets not artificially supported by Bernanke such as gold, silver, and the Shanghai composite continue to reflect what the charts can and do predict accurately. In other words, if Bernanke is not literally buying a certain market through the primary dealers then the charts are very accurate at telling you what is really going on. I note that the metals (as I consistently stated in various threads here) continue to grind out their decline within their downtrends. the Shanghai Composite has also stayed within its long term downtrend channel. These tell you something about risk assets when uncle benny is not there to scratch your back each and every day. Obviously, the last thing Bernanke would support is rising gold for example as it could/would suggest a potential panic and loss of faith in the very house of cards he worked so hard to support!