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ON THE MARKET > Euro / US Debt Bomb & Fiscal Cliff Rules

Monday pre-market > 7-16-2012

Dr. John L. Faessel

ON THE MARKET

Commentary and Insights

Quotes of the Day
"Not only banks and insur­ance com­pa­nies but sov­er­eign nations as well can­not all be counted on to guar­an­tee a return of prin­ci­pal, let alone a return on investment. An authen­tic debt cri­sis - which the world is now expe­ri­enc­ing - can only be ulti­mately cured in two ways:

1) Default on it, or 2) Print more money in order to inflate it away."

~ William Gross ~

PIMCO

"All of these attempts [to slow moves toward greater central control] will have no chance with me or with Germany. Whoever receives assistance and where liabilities are taken over, there has to be control"

~ Merkel ~

German Chancellor

Notable Last Week on the Global Slowdown

· Euro at 2 year lows

· EuroLand stocks relative to US shares at 40 year lows

· Euroland rates fall to all time lows

· 10-year Treasuries ticked forever yield lows

· US 30-year mortgage ticked at forever lows

After a six day retreat Stock Markets in the USA mover higher 1.6% on below average and declining volume. The McClellan is now in NEUTRAL at plus 68. We have just [7/3/2012] come off the McClellan high post of year in OVERBOUGHT'ness at Plus 307 coincident with the high of the recent recovery cycle when the (SPX) ticked 1374. On Thursday the (SPX) broke below BUT closed above its important 50-day moving average demonstrating, in Japanese Candlestick parlance, a hammer candle indicating end of (short term?) trend. That said, I'm still bearish...

EuroLand Bond Yields are running 'only' slightly lower than last week after the ECU Bailout Plan was fired up a week ago.

Greek 10-year yields 24.15%

Italy 10-year (gross) bond yield - 6.05% - off from highs of 7.29% on 11-24.

Spanish 10-year (generic) bond yield - 6.66% was 7.05% last week.

Indicators of Bullish sentiment fell again last week, but they were taken and compiled on Thursday prior to Friday's 1.6% advance. (See Sentiment Indicators below)

The McClellan Oscillator (my favorite measure of overboughtness or oversoldness) was NEUTRAL at plus 144, Thursday's was well OVERBOUGHT at plus 238 and Tuesday's post was at yearly highs in OVERBOUGHT'ness at 307.

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The S&P 500 (SPX) closed Friday at 1356.78

Price resistance at the 'top' of the recent rally is at 1374.

Short term price support is at Thursday's low of 1325

50-day moving average support is at 1333

Key trendline support is at 1328

Longer out term price support is at 1320/1313/ 1309

The 200-day moving average support is at (SPX) 1307

Stronger 'Price' support in the (SPX) is at the June 4th lows of 1266 and will be the battleground zone if the market tests its lows.

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Friday's key indicators and metrics:

Cycle highs or lows are in red

· McClellan Oscillator is NEUTRAL at plus 68

· Euro - 1.2215

· Swiss Franc - 1.0226

· Copper - 3.5040

· Crude oil (NYMEX) $87.10

· Brent Crude $102.89

· Silver (COMEX) 27.369

· US Dollar Index - 83.474

· The Treasury 10-year yield 1.50%

· The 30-year Treasury is at 2.58%

· VIX - 16.74

· CBOE Put / Call Volume Ratio - 1.00

· 3-month $ LIBOR at 0.468

· Natural Gas (Globex) 2.874

· Gold (COMEX) $1592.0

· Aussie Dollar - 1.0163

· Japanese Yen 12566

· Canadian Dollar - 0.9845

* 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 fell a few ticks 30.2% from 32.6% the prior week. Six-weeks ago it was 27.5%. The lows of the cycle were ticked just over two months ago at 23.6%.

· The Market Vane (Market Letter Survey) fell to 55% from 59% the prior week.

· Consensus Index BULLISH sentiment fell to 55% from 58% the prior week.

· The AAII Investor Survey of BEARISHNESS fell to 34.7 to from 33.3% the prior week. Two-months ago it was 46%. On August 4th 2011 it posted cycle highs of 49.9% in Bearishness.

· The Citigroup "Panic / Euphoria" Model rose perceptively to 2.20 from 0.29 the prior week. Four-weeks ago it ticked cycle lows of minus 0.31. The model remains 'slightly' in the Panic mode.

The BARRON's Confidence Index posted cycle lows 65.1 off from 67.16 the prior week. One-year ago it was 77.3.

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.