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Cliff Wachtel
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Cliff Wachtel, CPA, is currently the Director of Market Research, New Media and Training for Caesartrade.com, a fast growing forex and CFD broker. He covers a variety of topics including global market drivers, forex, currency hedged and diversified income investing, and is currently working on a... More
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  • PRIOR WEEK MARKET MOVERS: IS THE FEAR PRICED IN? 0 comments
    Oct 1, 2011 8:57 PM | about stocks: UUP, UDN, FXE, ERO, URR, ULE, EUO, DRR, FXA, FXB, FXC, FXD, FXF, FXEN, FXY, JYF, AUNZ, CYB, GLD, CNY, USO, DUG, USL, NBO, DBV, ICI, CEW, SLV, OIL, SPY, SDS, RSW, BXDC, SPXU, SH, DIA, EWC, EWA, TLT, XHB, ITM, IGOV, VGK, TBT, GSG, DBC, CORN, ICN, SZR, BZF, GRU, DAX-OLD, FRC, DB, SAN, BNO, ENI

    Part 1: Prior Week Market Movers & Their Lessons For the Coming Week

    The following is a weekly strategy guide for traders and investors, covering prior week’s market movers and their lessons for the coming week for traders of all major asset classes via both traditional instruments and binary options. Perfect for those seeking a summary of prior week market movers & their lessons for the coming week and beyond, & a look at likely coming week market movers.

     

     

    G-d only knows, G-d makes His Plan

    The information’s unavailable to the mortal man,

    We’re working our jobs, collect our pay,

    Believe we’re gliding down the highway, when in fact we’re slip sliding away

     

    - Paul Simon

    The short answer to the question posed in the title:  for the past 8 weeks, yes, though few believe we’ve seen the worst of the current move lower, and there’s new evidence of much worse to come.

    Two weeks ago markets rallied on faith and hope, last week they dropped on fear and dread, this week they did both and ended largely unchanged. Markets rallied early in the week on belief in a coming big plan to save the EU, gave up the gains later in the week as those hopes were dashed, and closed little changed.

     

    The same fundamental market drivers of the past weeks remain in place, and the technical decline becomes more firmly established

     

     

    The Technical Picture

     

    As exemplified by the S&P 500, risk asset markets finished their 8th out of 12 weeks down, but remain locked in the 1200 – 1100 range of the past 8 weeks that began at the end of July. The technical significance of this otherwise harmless sideways movement is that the big wound inflicted that week is not healing, and the downtrend is thus becoming more entrenched as the 10-50 week moving averages continue diving towards the 200 week MA, and the index remains firmly within the Double Bollinger Band sell zone, indicating further downside ahead.

     

     

    The Fundamental Picture

     

    Here’s what was behind the technical deterioration this week:

     

     

    EU CRISIS DOMINATES: IT’S ALL POLITICAL

     

    Rumors and hopes they fed regarding a big EU rescue plan overrode any data. In other words, markets are moving with sentiment about likely political rather than economic events.

     

    No one expects a “bazooka” style big bailout plan needed to calm markets until markets hit a crisis dire enough to scare Germans into approving the ~2 trln EUR believed needed to convince markets that even Spain and Italy are not at risk of default.

     

    Until then, EU leaders, especially those of Germany & France, are likely to continue to opt for the politically easiest route of minimal measures that cost the least up front but only provide temporary solutions and just defer the hard choices between

     

    Taking The Pain Of Greater Costs To Preserve the EU and Euro In Its Current State

     

    Funding countries accept a huge additional burden of subsidizing the debtors via some kind of The big bailout fund of ~ 2 trln EUR. So far there are no credible plans that we know of, as they involve assorted forms of shared liability for EZ members’ debts that carry obscene risks. Seehere, and here.

     

    Debtor nations accept further austerity and reforms needed to live within their means and/or become more competitive.

     

    As the above implies, everybody accepts reduced living standards.

     

    Everyone accepts reduced national sovereignty in favor of more centralized, enforceable EU budgeting to ensure against a repeat crisis.

     

    Dissolution Of The EU As We Know It

     

    The above may well be asking too much. The costs of dissolution are said to be even higher than going the distance, however:
     

    Part 1: Prior Week Market Movers & Their Lessons For the Coming Week

    The following is a weekly strategy guide for traders and investors, covering prior week’s market movers and their lessons for the coming week for traders of all major asset classes via both traditional instruments and binary options. Perfect for those seeking a summary of prior week market movers & their lessons for the coming week and beyond, & a look at likely coming week market movers.

     

     

    G-d only knows, G-d makes His Plan

    The information’s unavailable to the mortal man,

    We’re working our jobs, collect our pay,

    Believe we’re gliding down the highway, when in fact we’re slip sliding away

     

    - Paul Simon

    The short answer to the question posed in the title:  for the past 8 weeks, yes, though few believe we’ve seen the worst of the current move lower, and there’s new evidence of much worse to come.

    Two weeks ago markets rallied on faith and hope, last week they dropped on fear and dread, this week they did both and ended largely unchanged. Markets rallied early in the week on belief in a coming big plan to save the EU, gave up the gains later in the week as those hopes were dashed, and closed little changed.

     

    The same fundamental market drivers of the past weeks remain in place, and the technical decline becomes more firmly established

     

     

    The Technical Picture

     

    As exemplified by the S&P 500, risk asset markets finished their 8th out of 12 weeks down, but remain locked in the 1200 – 1100 range of the past 8 weeks that began at the end of July. The technical significance of this otherwise harmless sideways movement is that the big wound inflicted that week is not healing, and the downtrend is thus becoming more entrenched as the 10-50 week moving averages continue diving towards the 200 week MA, and the index remains firmly within the Double Bollinger Band sell zone, indicating further downside ahead.

     

     

    The Fundamental Picture

     

    Here’s what was behind the technical deterioration this week:

     

     

    EU CRISIS DOMINATES: IT’S ALL POLITICAL

     

    Rumors and hopes they fed regarding a big EU rescue plan overrode any data. In other words, markets are moving with sentiment about likely political rather than economic events.

     

    No one expects a “bazooka” style big bailout plan needed to calm markets until markets hit a crisis dire enough to scare Germans into approving the ~2 trln EUR believed needed to convince markets that even Spain and Italy are not at risk of default.

     

    Until then, EU leaders, especially those of Germany & France, are likely to continue to opt for the politically easiest route of minimal measures that cost the least up front but only provide temporary solutions and just defer the hard choices between

     

    Taking The Pain Of Greater Costs To Preserve the EU and Euro In Its Current State

     

    Funding countries accept a huge additional burden of subsidizing the debtors via some kind of The big bailout fund of ~ 2 trln EUR. So far there are no credible plans that we know of, as they involve assorted forms of shared liability for EZ members’ debts that carry obscene risks. Seehere, and here.

     

    Debtor nations accept further austerity and reforms needed to live within their means and/or become more competitive.

     

    As the above implies, everybody accepts reduced living standards.

     

    Everyone accepts reduced national sovereignty in favor of more centralized, enforceable EU budgeting to ensure against a repeat crisis.

     

    Dissolution Of The EU As We Know It

     

    The above may well be asking too much. The costs of dissolution are said to be even higher than going the distance, however:

    DISCLOSURE /DISCLAIMER: THE ABOVE IS FOR INFORMATIONAL PURPOSES ONLY, RESPONSIBILITY FOR ALL TRADING DECISIONS LIES SOLELY WITH THE READER. IF WE REALLY KNEW WHAT WOULD HAPPEN, WE WOULDN’T BE TELLING YOU FOR FREE, NOW WOULD WE? 


     





     

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