Monday, April 26, 2010

Greece debt problems.... and USA?

Today I read an interesting article, in which Nouriel Roubini was giving his opinion on the Greece crisis. He compare this crisis with the crisis of Argentina 2001, explaining that given the Greece numbers (worse than the Argentina figures previous to the default),  we need a miracle in Greece. The figures in the chart are the ones described by Roubini for Greece and Argentina. I calculated the figures for U.S.A and compare them with Greece and Argentina.

The output is staggering:

Sunday, April 25, 2010

Preparing for this week

I will post periodically some doubts and apparent incoherences in the market.

The S & P 500 has reached the maximum levels since September 2008, before Lehman's collapse. The Nasdaq is at the May 2008 levels.
Like always happen, we have opposite signals. Regarding the bond market, the situation has not change since it is anticipating no inflation, as we can see in the spread between the TIPS and treasury. I have read something interesting in bloomberg:

Demand for U.S. government bonds is increasing. On average, the Treasury received $3.21 in bids for each dollar sold at 10- year auctions this year, compared with $2.63 in 2009 and $2.41 from 2004 through 2008, according to data compiled by Bloomberg.

But, when I look at the gold market (considered like a hedge against inflation), we see that the cost of this hedge goes up.

Why investors are buying treasurys and why they are buying Gold at the same time? Why this apparent contradiction?. I think we are talking about different investors. I have read that Soros is buying GLD. Is he buying treasurys too?  I do not know, but I do not think so. The Greece debt crisis could be the reason, as investor are hedging against money emission in the Greece bail-out and also making a little fly to quality? I have to make more research on this matter.

The TNX is moving within a channel and the trend is moderately UP, although the astronomic numbers of the debt in relationship to GDP (looking at the debt clock, you can see the debt growing 1.000.000 while in the same term the GDP grows only 85.000). Despite this situation (how long can the government keep this level of debt growth?),  I would go long at the current levels.

Regarding economic information of this week, these are the most important announcements:

- Tuesday:  Consumer confidence
- Wednesday: FOMC interest rate announcement
- Friday: GDP / University of Michigan concumer sentiment

One sector to keep an eye on is the energy sector (XLE), which have made new maxs. Sector rotation could choose this sector to keep the bull rally in the market, since this one of the sector lagging the market (the other is healthcare) and the balance sheets of the most important companies (XOM, CVX) are better than most of the other sectors.

Finally, most important earnings announcements:

Tuesday: MMM, F
Wednesday: DOW, V
Thursday: BMY, XOM

NASDAQ Composite: long term resistance break out!

Amazing bull market. The Nasdaq has broken the long term resistance from the maximum level of March 2000.

Monthly chart:

Weekly Chart:

Friday, April 23, 2010

More on the euro: following the Greece market?

The Greece market has broken critical supports. The euro is following the same pattern. Technically, we should see new lows in the euro. The up-trending channel is at risk. I am thinking in 1.25 the first target if it breaks 1.3222. In addition, take a look at the relationship between the Euro, the 10 year treasury bond yield, the Greece market and the S & P 500.  The treasury bonds keep their soft down trend while the Greece debt is going down. The fly to quality is absent, the question is: how long?. The S & P is almost reaching  its target at 1,228 points. I am wondering which could be the effect in the markets if a debt crisis begin in Europe.  

ATG daily chart: notice the positive divergence in the MACD. May be we could see a double bottom. 1.790 points is the critical pivot point. 

ATG weekly chart:

Relationships between the different markets: notice how during the second semester of 2009 the negative correlation between the TNX (10-year treasury note index) and the ATG. In addition, the euro has become irrelevant with respect the SPX. It seems that there is no correlation between them.

Euro/Usd monthly: important support.

Euro/Usd weekly:

TNX daily chart:

Tuesday, April 13, 2010

Market Update

Something in which I am thinking constantly is on the 10-year treasury notes yield. The ascent in the yield, is anticipating inflation, or economic rebound? I think that it is anticipating economic rebound. If you look at the gap between yields on the index-linked and conventional bonds, you will see that this narrow gap is not anticipating inflation.
In addition, sector rotation is holding the indexes. The past week it was energy stocks...before, financials. Let's see what happen with the earnings comings this week.
I think a correction is possible (or necessary) from this levels, but the rule have not changed: "buy the deeps" will be alive until the bears stops shorting all the corrections.
The VIX is something to worry for the bulls. It is making new lows, and looks like it is ready for a rebound. We know what happen when the VIX wakes-up in bad mood.

But, on the other hand, the Dow Jones Transports has confirmed the new highs in the rest of the indexes:

The euro looks like it is ready for a rebound. Look at the EURO/USD monthly chart:

FXE daily chart:

Saturday, April 3, 2010

PFE: 16.8

Notice the cross between the 200 EMA, the 200 SMA and the 38.2% fibonacci retracement.

Global Markets Heat