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Post Greek Vote - The Bond Vigilantes Rule... Spanish Bond Yields At New Highs...

Monday - 6-18-2012

Dr. John L. Faessel


Commentary and Insights

Quote of the Day

"We have reached a contingency where political choices have become predominant over monetary instruments that we can use in the near future."

Mario Draghi

ECB President


Fugetaboutit, More Baloney!

Spanish 10-year (generic) bond yield at new cycle highs of - 7.09%

The Bond Vigilantes Rule...

The Euro has given up ALL of last night's gains following the Fandango of yesterday's Greek vote where a plurality of voters wished 'this time' to stay in the Euro and have the ECB / Germans continue to pay their bills / pensions and for their Ouzo rations. The can just went down the road again...

After gapping higher to $1.275, the Euro is now below Fridays close at 1.261. S&P 500 futures have also retreated off last night's and are currently off 6 points.

EuroLand Bond Yields moving higher again

Greek 10-year yields 24.85%

Italy 10-year (gross) bond yield - 6.07% - off from highs of 7.29% on 11-24.

Spanish 10-year (generic) bond yield at new cycle highs of - 7.09%

The McClellan Oscillator (my favorite measure of overboughtness or oversoldness) is somewhat overbought at plus 164. Stochastics and the Bollinger bands are also showing that the market is overbought. Bullish sentiment is just off the lows of the cycle. (See below)

Prepare for another 'down stroke' me think to burn off some of the 'Overboughtness'//

If you can stand the reality ― check John Mauldin / Weldon's Money Monitor - the graphs of the key economic metrics in EuroLand say it all.

Macro-EU: The Solution Illusion - link:


The S&P 500 (SPX) closed Friday at 1342.84 One-week ago it was 1325.66. three weeks ago it was 1278.04

Short term price support is at 1334

Longer out term price support is at 1310 / 1307

The 200-day moving average support is at (SPX) 1291

Stronger 'Price' support (the lows last Monday) in the (SPX) is at 1266 and will be the battleground zone as the market tests its lows.

50-day moving average resistance is at 1348

Stiff resistance is at the lows of the pattern of former support that got blown out on May 8th at about 1357.


Friday's key indicators and metrics:

Cycle highs or lows are in red

· McClellan Oscillator is in slightly overbought at plus 164

· Euro - 1.2637

· Copper - 3.3835

· The Treasury 10-year yield 1.59%

· The 30-year Treasury is at 2.69%

· US Dollar Index - 81.605

· VIX - 21.11

· CBOE Put / Call Volume Ratio - 1.02

· 3-month $ LIBOR at 0.468

· Crude oil (NYMEX) $84.03

· Brent Crude $97.61

· Natural Gas (Globex) 2.467

· Silver (COMEX) 28.471

· Gold (COMEX) $1628.1

· Aussie Dollar - 1.0085

· Japanese Yen 12708

· Swiss Franc - 1.0524

· Canadian Dollar - 0.9772

* This week's Bullish Investor Sentiment.

Certainly, sentiment is remains terrible but just off the recent new cycle lows.

(High BULLISH readings in the Investor Sentiment Readings usually are signs of Market tops; low ones, market bottoms.)

· The American Association of Individual Investors [AAII] Investor Sentiment Survey of BULLISHNESS rose a few ticks to 34%from 27.5% the prior week. The lows of the cycle were ticked 5-weeks ago at 23.6%. It had posted previous lows of the cycle at 25.3% in September 2011. It was 42.4% just ten-weeks ago. For perspective January 2011 it ticked its highs in Bullishness at 63.3

· The Market Vane (Market Letter Survey) jumped to 53% from 50% the prior week. It ticked Bullish cycle highs of 69% 3-months ago. In 2007 it ticked high of the cycle at 75% BULLISH.

· Consensus Index BULLISH investor moved well higher to 56% from 47% the prior week. Cycle highs of 78% were reached 3-months ago. In September 2011 the Index registered cycle lows of 28%.

· The AAII Investor Survey of BEARISHNESS fell to 35.8% 45.8% from the prior week. 5-weeks ago it was 46%. On August 4th 2011 it posted cycle highs of 49.9% in Bearishness. Late December 2010 it was only 16% Bearish.

· The Citigroup "Panic / Euphoria" Model rose to a minus 0.28 from its cycle lows of minus 0.31 the prior week. Just over four-months ago it registered cycle highs of plus 0.31.

The BARRON's Confidence Index posted a 68 from 68.4 the previous week. Just over 3-months ago the index posted cycle lows of 66.9. One-year ago it was 77.1.

The Confidence Index is the premier measure of how the bond markets trillions (total global is around $91 trillion and USA is 39% of that) are allocated: (The bond market is twice the size of the stock market.)

The Index is the High-grade bond index divided by intermediate-grade index. A decline in latter vs. former - generally indicates rising confidence, pointing to higher stocks.

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