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Yesterday was a Great day but Today Euro Bond Yields Advance again

Wednesday pre-market - 12-21-2011


Dr. John L. Faessel


Commentary and Insights


Quote of the day

"It is incumbent on every generation to pay its own debts as it goes.”

~ Thomas Jefferson ~


Santa......Ah haa... Right on!    Err?


Price Fires thru ‘first’ Declining Tops Line Resistance... But Still Remains in Well Defined Coil


The McClellan Oscillator is in NEUTRAL @ plus 2

But oops - Key EuroLand Bond Yields Advance

Italy 10-year (gross) bond yield – 6.72% up 0.20 from yesterday

(Off from 7.26% on 11-24)

Spanish 10-year (generic) bond yield – 5.19% up 0.19 from yesterday

 (Off from 6.7% on 11/24)


Yesterday was one of those wonderful up 3% market days. Volume was up, but was "just" right at average. There was a lot of short covering to further sustain the trade.


There was a lot of good news on the European front as the European Central Bank dumped $645 billion on the teetering European banks. This was on top of a big chunk from the International Monetary Fund the day before. There was also good news from housing starts.


But, today is another day and while we've had some wonderful technical improvement with "price" advancing through the first line of declining tops resistance let's remember that the market drivers remain Italian and Spanish bond yields and they are the focus of this cycles iteration of the bond vigilantes. It should be noted that the $645 billion went to the banks and not the "sovereign" i.e. countries themselves, that like here in the USA spend way more than they take in. So the bond vigilantes aren't going away anytime soon. And is the "big mess" really any better?


Obviously, yesterday's big move is a huge technical plus and the McClellan Oscillator is in neutral at plus 2. CBOE Put / Call Volume Ratio was the lowest since July @ 0.81 and the VIX was 23.22 the lowest since July.


Given any pause in the key Euro bond yields and with the McClellan in dead neutral let's hope for at least a narrow range day to absorb the huge advance of yesterday. Better yet, why not hope that Santa continues with his sleigh full of presents to a world that is in need. Another day like yesterday would have "price" breaking out of the multi- month consolidation...


Today's early S&P futures have retreated from the plus side to slightly negative at this writing. European stock markets opened higher but now down about 0.3 percent as they watched the key bond yields advance.


Again: “From a technical perspective the key declining Tops line resistance at (SPX) 1315ish that comes off last July's top tick will be the major overriding wall of resistance.” Correspondingly the lower trend line off “the” lows of 10/4 and 11/28 is at (SPX) 1183.


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