Too Big To Flail
October 1, 2010
It’s the same old song, But with a different meaning, Since you’ve been gone (Four Tops – 1965)
Price action on all the major exchanges was exactly just that yesterday, more of the same old same old. The DAX swung up and down, briefly touching the 6.310-6.350 resistance area before selling off into the close and the S&P briefly went above the all important 1.150 mark before settling down just a little at the end of Q3.
There was plenty of macro news to digest, not the least of which the widely anticipated downgrade of Spain by Moodys from Aaa to Aa1 and a worse than expected result at Allied Irish which means the Irish Government will have to sink billions of euros more in that bottomless pit. But as usual this won’t lead to Ireland going bankrupt or making use of the European Stability Fund, there’s absolutely nothing wrong !
Price action on all the major exchanges was exactly just that yesterday, more of the same old same old. The DAX swung up and down, briefly touching the 6.310-6.350 resistance area before selling off into the close and the S&P briefly went above the all important 1.150 mark before settling down just a little at the end of Q3.
There was plenty of macro news to digest, not the least of which the widely anticipated downgrade of Spain by Moodys from Aaa to Aa1 and a worse than expected result at Allied Irish which means the Irish Government will have to sink billions of euros more in that bottomless pit. But as usual this won’t lead to Ireland going bankrupt or making use of the European Stability Fund, there’s absolutely nothing wrong !
Just as there is absolutely nothing wrong with Spain, or is there… A pdf alleging Spain has been lying about the severity of it’s economic downturn was doing the rounds on the internet and got even picked up by FTs Alphaville. Goldman was quick to rebuttle but true or not, it’s very clear there is a lot of mistrust in the markets as this report was important enough to have the market ignore good economic news out of Germany.
The news coming out the US was also good. Jobless claims came in at the ‘right’ side of the 450K and the Chicago PMI bounced back to a healthy 60.4 Not only the headline index was better than expected, the more important underlying ‘new orders’ and ‘production’ indexes were higher as well. The Milwaukee (we get way too much statistical data these days which diminishes their impact a little) PMI was softer.
In the end the Dow dropped 0.44% closing the month +5.05% S&P -0.31% (+5.64% m/m) Nasdaq -0.33% (+8.81% m/m) WTI $ 80 and Gold $ 1.308
Apart from technology ending down -0.6% there were no real moving sectors as money managers had to cope with the end of Q3. So we are entering the very last quarter of a very difficult year. The markets have shown a mixed return so far but are trading really close to their starting levels of the year which is remarkable seeing as we had quite some turmoil in the world. The major US indices are up between 3% & 5%, Europe ranges from -5% - +5% (if we leave the PIIGS out of it) and in the Far East the Nikkei is the loser of the year so far -11% as the yen keeps rising versus all major currencies.
What to make of the coming quarter is too hard to predict. Volumes in the equity markets have been drying up, making me think most market participants have already closed their trading books for the year or have gone on to trade on greener pastures like Gold or the Bond market. Perhaps a push through the resistance levels of the year will entice or force them to come back, more quantitative easing from the FED might make that happen but we won’t know anything more about that decision until we hear it at the November meeting or see it in the market.
Apart from technology ending down -0.6% there were no real moving sectors as money managers had to cope with the end of Q3. So we are entering the very last quarter of a very difficult year. The markets have shown a mixed return so far but are trading really close to their starting levels of the year which is remarkable seeing as we had quite some turmoil in the world. The major US indices are up between 3% & 5%, Europe ranges from -5% - +5% (if we leave the PIIGS out of it) and in the Far East the Nikkei is the loser of the year so far -11% as the yen keeps rising versus all major currencies.
What to make of the coming quarter is too hard to predict. Volumes in the equity markets have been drying up, making me think most market participants have already closed their trading books for the year or have gone on to trade on greener pastures like Gold or the Bond market. Perhaps a push through the resistance levels of the year will entice or force them to come back, more quantitative easing from the FED might make that happen but we won’t know anything more about that decision until we hear it at the November meeting or see it in the market.
In the mean time we seem to be stuck in the same trading range, it’s the same old song.
Happy Hunting & Let’s be careful out there !!!
Happy Hunting & Let’s be careful out there !!!
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