Part 2 : Coming Week Market Movers & How To Profit
A month ago we warned that September would be scary. It was, yet for all the drama, markets have moved sideways for the past 8 weeks, with the S&P 500 bouncing within the 1100 to 1200 range. Don’t be fooled. The past month may have been range bound, but it has left further fundamental and technical deterioration. A gloomy September (down about 7%) closed out an even worst quarter (down about 14%), the worst since the over 22% plunge in Q4 of 2008. Could the coming quarter prove as bloody?
Given the widely expected coming endgame in the EU and the general slowdown in most major economies, the only question is how much of the prevailing pessimism has really been priced in? Until we’ve a credible plan to prevent a Greek default from becoming a global banking crisis, we suspect more, potentially much more, downside risk remains.
We have a typically packed first week of the month, with the added drama of yet another month with Greece on the edge of default.
1. Finance Ministers’ Meeting: If the past is any guide, no breakthroughs on reversing the EU’s slide to the abyss. There are no signs of agreement, with the only plans on the table involving some variation on collective sharing of GIIPS debt liability and increasing the EFSF (aka bailout fund) size. Germany and other funding nations understandably oppose these measures as a risk to their own credit ratings. No near term resolution expected until the current crisis becomes more severe, at which point Germany and the other funding nations are expected to pay up until they have a plan to protect their banks. When that happens, the GIIPS may well be left to default.
2. Troika Auditors Release Results: Technically, this determines whether Greece gets its last tranche of cash from the First Annual Greek Bailout. However because no one is ready for the collapse a default is expected to spark, the consensus is that one way or another Greece gets the money. The bigger question is, do we get a rally we can sell into, or will this be the news portion of a “buy the rumor sell the news” situation? Given the consensus that Greece will default, how much longer can EU leaders keep burning the taxpayers’ money? Until they figure out how to insulate the banking system from risk of collapse.
3. ECB Meeting: Will Trichet’s last meeting as ECB President bring an anticipated rate cut? Most expect him to leave that to his successor, though comments could be market moving.
1. Federal Reserve Governor Ben Bernanke testifies before the Joint Economic Committee on the Economic Outlook.
2. ISM Manufacturing and Non-Manufacturing PMI Reports: In addition to providing the latest snapshot of the US economy, of particular interest for their employment sections, which, along with the…
3. ADP Monthly Jobs Report: Is leading indicators of the…
4. Monthly Jobs Reports: Typically one of the biggest events of the month. After recent disastrous reports, expectations are low. Anything less than a big surprise is unlikely to have much influence.
Central Bank Rate Statements
& Outlook Comments
In addition to the ECB, the:
All issue monthly rate statements and comments on their economies.
Again, the range bound nature of the past two months suggests markets have priced in the current gloomy outlook. We suspect they haven’t, and that we could see another red October.
Disclosure/disclaimer: No positions. The above is for informational purposes only. All trade decisions are solely the responsibility of the reader.