I … Today’s rally in the financial sector went unsupported by currencies.
The chart of the Euro, FXE, the Brazilian Real, BZF, the Mexico Peso, FXM, the Swedish Krona, FXS, the British Pound Sterling, FXB, and the emerging market currencies, CEW, together with the European Financial Institutions, EUFN, the US Banks, KBE, the Emerging Market Financials, EMFN, and the Russell 2000, IWM …. FXE, BZF, FXM, FXB, FXS, CEW, EUFN, EMFN, KBE, IWM … shows that the rally in the financial shares lacked support from the Euro and other currencies.
II … The Chart of the Euro, FXE, shows today’s weakness in the European currency.
Tali Arbel in Bloomberg article Dollar Climbs After Fitch Cuts Ireland's Ratings reports that the dollar climbed against the euro after the credit ratings agency Fitch slashed Ireland's debt rating, saying its big bailout showed its debt crisis was worse than had been known.
Today’s rally stocks included Bank of America, BAC, European Financial Institutions, EUFN, Banks, KBE, Banco Santander Madrid, STD, Small Cap Revenue, RWJ, Deutsche Bank, DB, Fortress Investment Group, FIG, Global Financial Firms, IXG, Investment Bankers, KCE, Insurance, KIE, Lazard, LAZ, Mortgage Finance, KME, Nasdaq Community Banks, KBE, NewStar Financial, NEW, Wall Street Financial Service, IYG, Nelnet, NNI, American Express, AXP.
Chart of Banks, KBE shows a full retracement to the May 20, 2010 and August 19, 2010 values
Chart of Bank of America, BAC
Chart of European Financials, EUFN,
Chart of American Express, AXP,
III … Germany based industrial automation company Siemens AG turned lower.
This rally is totally surrealistic; and is the type of rally one can sell short, as in a bull market one buys on dips, but in a bear market one sells into strength.
Another short selling opportunity is Munich Germany based Siemens AG, SI, the world’s largest supplier of products, systems, solutions and services for industrial automation and building technology as it fell lower today, having manifested a dark cloud covering candlestick on December 7, 2010. Barchart.com’s recent report relates: ”Siemens on Friday rallied by 0.82% to post a 2-3/4 year high. In recent news on the stock, Barron’s on Nov 28 ran a favorable article on Siemens noting its successful 12-year restructuring program and saying that the stock could rise to $140 as the global economy improves.
When one looks at the chart of Siemens AG, SI, and also Lear Corp, LEAR, one sees strength in global business and the lingering strength of the current rally that came with the rise in Euro with the announcement of the EFSF Monetary Authority in July, and then the anticipation of QE 2 in September, as well as a most recent assumed flight to safety from sovereign debt crisis.
The weekly chart of Siemens AG, SI Weekly, is a good example of the rise of German manufacturing in a highly competitive world environment. And the weekly chart shows what is likely the fall lower into an Elliott Wave 3 Down.
The weekly chart of Siemens AG is testimony to the rise of what many call Euro German, the rise of Germany to world power, in a type of revived Roman Empire: just as Charlemagne was ruler in Rome, so is his modern-day successor Angela Merkel in Frankfurt.
And even, another better short selling option, is in the small cap industrial shares, XLIS, as these have risen quickly, and are likely to fall more quickly than the Dow, DIA, or other industrials.
IV. The Morgan Stanley Cyclical Index shows peak risk and peak growth has been achieved.
The ratio of the Morgan Stanley Cyclical Index, $CYC, to the DOW Industrials, $INDU, $CYC:$INDU, is at an all time high 0.089 suggesting that peak value has been achieved in the stocks which reflect investment in growth opportunities. Said another way, peak wealth and peak expansion of growth stocks, specifically risk stocks like Freeport McMoRan Copper and Gold, FCX, has been achieved. The world is at the point of peak risk and full investment expansion. Might there come a prick in the global investment bubble even tomorrow?
I gave up short selling and trading long ago, as I perceived that a sovereign debt crisis would emerge; and concluded that an investment demand for gold would arise; and bought bullion gold. It has proven to be a wise decision.
V …. The currency yield curve steepened enabling small cap shares to rise higher.
The small cap pure value shares relative to the small cap pure growth shares, RZV:RZG, might be called the currency yield curve, it steepened on risk appetite to 0.799, as the small cap pure value shares, RZV, zoomed up to 38.93; this rise is a contrary indicator, in as much as the ratio has encountered strong resistance.
The 1.0% Gain and hammer seen in the chart of Taiwan Semiconductor, TSM, suggests that a top is in the Taiwan Shares, EWY, and the Taiwan Small Cap shares, TWON, and the entire market as well.
VI … A number of country and sectors traded lower.
Today’s market activity shows the following notable fallers: Turkey, TUR, India Earnings, EPI, Indian, INP, India Small Caps, SCIF, Sweden, EWD, Brazil, EWZ, Brazil Small Caps, BRF, Brazil Financials, BRAF, Mexico, EWW, New Zealand, ENZL, Emerging Markets, EEM, China Materials, CHIM, Global Industrial Metal Equities, CRBI, Stanwood Property Trust, STWD, Base Metals, DBB, Office REIT, Caplease, LSE, Labor supply company, TrueBlue, TBI, Nanotechnology, PXN.
The sell off in emerging market telecom company AMX, today, reflects the ongoing debt deflation coming from falling emerging market currencies, CEW.
VII …. Deleveraging and disinvestment is imminent
I find the Mid July Bespoke Investment Group Blog chart-article S&P Last Six Months helpful as it shows quite well the fall in the S&P commencing April 26, 2010, as concern grew over the emergence of the European Sovereign Debt Crisis, and the sell off of the world currencies by the currency traders against the Yen, commenced a strong disinvestment from the S&P on unwinding yen based carry trades.
I believe that we are on the verge of another strong sell off of the world’s major currencies, DBV, and emerging market currencies, CEW, driving financial and small cap shares quickly lower as concerns arise once again over the ongoing sovereign debt banking symbiosis crisis.
I totally discount the Pacific Investment Management Co projection as simply an interview to encourage even more quantitative easing and to justify that which has taken place. In stead of economic expansion, I see massive contraction, delveraging and disinvestment as interest rates soar and currencies fall lower in price. Rich Miller of Bloomberg reports Pimco Raises 2011 U.S. Growth Forecast Becasue of `Massive' Stimulus: Pacific Investment Management Co., which manages the world’s biggest bond fund, is raising its forecast for U.S. growth next year as policy makers pump a “massive amount” of stimulus into the economy, Chief Executive Officer Mohamed El-Erian said. Pimco sees the economy growing 3 percent to 3.5 percent in the fourth quarter of next year from the same period of this year. That compares with its previous estimate for 2 percent to 2.5 percent