Chinese, European Data Continues to Weaken as Market Potentially Forming New Bear Flag
by Market Montage - May 24th, 2012 8:50 am
Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
First we’ll go to the technicals. Back in mid April I had opined a ‘bear flag’ formation was being created. [Apr 17, 2012: Potential Bear Flag Forming] But the market being the difficult beast it is, head faked everyone and rather than a break down from said flag it first went UP and nearly touched yearly highs. This caused everyone to think the bear flag had failed…. only to lead to a horrid May in the market. Generally a bear flag will resolve relatively quickly but the longer that one lasted the more doubt it created and potentially transitioned into a market that was creating a new range before a new move up. Hence, why it was so tricky.
I speak of this only because we potentially are forming a new bear flag. After extreme oversold conditions the markets finally held a previous low Monday and rallied. This had been expected for a few days but anyone trying to catch the knife last week had their fingers chopped off… repeatedly. We had mentioned a potential bounce level to 1338 minimum [May 22, 2012: Market Bounce Arrives - How Durable?] but as of Tuesday mid day the rally only hit 1328 as it was rejected by the quickly falling 10 day moving average. Then yesterday started horribly as news surfaced that discussions / preparations for a Greek exit from the EU are formally starting behind the scenes, and it really looked like the bears would take charge. Instead it was a trap, as rumors out of Europe that (a) Merkel supports backstopping all EU bank deposits (b) Italy and France support Eurobonds [May 22, 2012: Are Eurobonds Coming?] and/or (c) pick your rumor, hit.
The larger picture is this environment is akin to summer 2010 and latter 2011 where headline rumors, European comments, intervention hopes dominate the landscape and the market is herked and jerked around while in a downward path. The action is violent in sharp contrast to January and February of this year. Stocks are moving en masse as correlations return, and individual stock picking is nearly useless again. Meanwhile the safe havens – the U.S. dollar and Treasury bonds, surge. Therefore, unless you know the rumor/intervention hope of the day ahead of time it’s really not…
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DiggMarket Reverses on (wait for it) Greek Headline
by Market Montage - May 22nd, 2012 3:47 pm
Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
The market remains a mess right now as we are back to the environment of latter 2011 and middle 2010 where random comments from officials across the Atlantic move everything en masse. Today the market was hit by word that preparations for Greece’s exit from the EU are being considered.
Of course a denial by another official would send the market up 1% immediately. Rinse, wash, repeat – year #3.
The bigger picture right now is all stocks are moving as one asset class as our massive correlations return. Until that changes it is very difficult to bother to be a stock picker.
Disclosure Notice
Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
Are Eurobonds Coming?
by Market Montage - May 22nd, 2012 11:08 am
Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
It is still very early in the conversation but the fact some European leaders are seriously considering a region wide bond is definitely a sea change. This news came out yesterday and while Germany will resist, it will be interesting to see if over the next 6-12 months the idea of a “eurobond” gains momentum. The bond would obviously help protect the weaker countries in the region (letting them borrow at rates they otherwise would not) and be a penalty for the stronger countries (namely Germany). So Germany has to consider if its worth the cost and/or if this is a cheaper way to maintain a flawed system in a current form – which gives it a currency far weaker than it would have outside of the EU.
Via NYT:
- When European leaders meet on Wednesday to discuss the troubles of the euro zone, France’s president will press the issue of euro bonds, his finance minister said in Berlin on Monday. Yet, while the German government has been receptive to many proposals to revive growth on the Continent, officials here said euro bonds might well be a step too far.
- Pierre Moscovici, France’s newly appointed finance minister, traveled to Berlin for talks with his counterpart, Wolfgang Schäuble. In a news conference after the closed-door meeting, both characterized the exchange as friendly and productive, but Mr. Moscovici acknowledged that the two men, and their governments, had real differences of opinion over pooling obligations to use the credit of the strongest European countries to prop up the weaker ones, an approach achieved through euro bonds.
- Mr. Hollande’s victory in the French election has pushed the question of how to kindle economic growth in the euro zone to the top of the agenda, challenging the focus of Chancellor Angela Merkel of Germany on trimming back budget deficits to reduce indebtedness. Ms. Merkel has signaled flexibility on some of Mr. Hollande’s ideas, including more financing for the European Investment Bank and redirecting unspent European Union funds to try to fight unemployment.
- But the German government is staunchly opposed to euro bonds until deeper integration and harmonization of budgetary and public spending policies have been achieved. Most Germans
…
Market Bounce Arrives – How Durable?
by Market Montage - May 22nd, 2012 8:51 am
Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
After panic selling late last week, Monday morning provided an interesting host of outcomes. The action Friday was particularly dispiriting as a market that looked extremely oversold looked ready to finally – at minimum – have a dead cat bounce, but it never happened and the market closed out at its lows. So walking into this week we had an even more oversold condition which most likely would lead to one of two outcomes – a bounce or a crash. Why the latter probability? Crashes generally happen from an oversold condition – not in a market happily moving along at new highs or in a middle of a range. While a low probability event one must allow for it. Obviously the higher probability event happened. So what now?
Just as we use Fibonacci levels to predict pullbacks, we can use it to predict snapback bounce areas. First let’s quickly discuss what has happened in May. The S&P 500 has pulled back almost perfectly to its first major Fibonacci level – a 38.2% retracement of the October to early April move, we discussed this last week. Within the context of the big picture if Friday’s lows were “the low” a 38.2% retracement would be a very healthy intermediate term sign. Obviously we won’t know to be true until we have the benefit of hindsight down the road. If Friday’s lows are eventually broken, then the 50% and/or 61.8% retracement levels discussed last week come into play, but that’s a discussion for another day.
In terms of this bounce we see a 38.2% retracement of the May drop would take the S&P 500 to just under 1340 and a 61.8% retracement to just under 1370. Both of these are key levels that have come up repeatedly in the past. The market spent all of February bouncing off 1340 and 1370 was the 2011 high. Ironic how these levels keep repeating.
Obviously we are just speaking price levels in a vacuum, and dismissing the ever present news flow which continues. Yesterday’s bounce was attributed by the media to comments out China’s premier that they will focus more on growth, and some push pull in Europe between growth and austerity. The truth of the matter is any reason would have been fine as an excuse…
Back to Mid January Levels
by Market Montage - May 18th, 2012 5:34 pm
Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
Some stats on this selloff – it has taken the S&P 500 all the way back to levels last seen on 1/18. NASDAQ 1/19, and the Russell 2000 is back to 1/9 levels – almost as if the year never happened. Keep in mind we were not at, but a shade below the 4/2 highs on 5/1. So this all has happened in about three weeks. -8.5% on the S&P 500 since May 1. A powerful move.
Disclosure Notice
Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
Another Afternoon Selloff
by Market Montage - May 18th, 2012 3:05 pm
Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
Morning “strength”, afternoon selling – the pattern continues. One of these afternoons there will be a late day reversal to the upside and should be the ‘sign’ people are looking for that short term bounce. Could be today … but if not, we are really pulling the rubber band far. When this snaps, it should be quite an interesting move.
The dollar is taking a big hit here in the past 15 minutes… not sure what it means yet, but it’s been on a rampage for 2+ weeks, as people flee to safety. Speaking of rubber band – the dollar and US bonds are off the charts.
Keep in mind some G8 and other such meetings so those in the “know” will trade on whatever is to come out (if anything) while everyone else will speculate.
Disclosure Notice
Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
What’s Weak is Bouncing, What *Was* Strong is Fading
by Market Montage - May 18th, 2012 1:07 pm
Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
The market is volatile today but in a relatively small range. Everyone is looking for the trademark reversal into the close that one of these days will mark a short term bottom. I will say the index is hiding a lot of damage. What is bouncing today is the stuff that has been demolished for weeks – take Wynn Resorts (WYNN) as an example. If you held it the whole way down you are “winning” today but my gosh, it is the case example of why taking moderate losses is far better than sticking through – even if that strategy looked extremely foolish in January and February.
Meanwhile they are coming around to attack the names that had been holding up – see this homebuilder ETF.
So the averages look benign while the rotational correction continues under the surface… nothing is being left unscathed. Bigger picture, after this oversold bounce (whenever it may come) we have a host of broken charts that will needs weeks of recovery to build any real base.
Disclosure Notice
Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
U2′s Bono to Become World’s Richest Musician Today Due to Facebook (FB)
by Market Montage - May 18th, 2012 10:56 am
Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
I am obliged by the laws of financial blogging to do a post somehow relating to Facebook (FB), and since almost every angle on Earth has been examined on this company, I thought I’ll do a fun one. According to this story, Bono’s PE firm – Elevation Partners owns 2.3% of the firm. I’m not sure what stake Bono has in Elevation Partners but the story assumes its 100%. If so, and the Facebook IPO does well today (cough), Bono apparently will pass Paul McCartney as the world’s richest musician. So there you go, something maybe you have not read on another site re: “the IPO of the century!”
- The U2 singer owns 2.3 per cent of the shares in Facebook through his private equity firm, Elevation Partners, which they bought for $90 million (£57 million) in 2009 and now stands to make a handsome return.
- Given the social media company is currently valued at over $100billion (£63 billion), this makes Bono’s share worth over $1.5 billion (£940 million) and puts him well above Paul McCartney, who is currently the world’s richest rock star with a fortune of £665 million.
Disclosure Notice
Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
Reaching Extremes
by Market Montage - May 18th, 2012 8:09 am
Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
Yesterday morning I wrote the market needed a “flush” and we definitely saw one. The last of the holdout sectors such as housing, REITs, and even some of the most defensive names were raided. That said, a close on the low on large volume should lead to a bad open and it looked like that was setting up to happen 4-5 hours ago but overnight futures have rallied some 15 points (from 1293 to 1308). It’s been a very “curious” week in the overnight session as “someone” has been buying each and every night to support this market. But I’ll leave black helicopter thoughts to myself. Europe is bouncing a bit and some traders are saying it’s due to hopes for “the global intervention” (that most assuredly will come if things continue to degrade) as there are some G8 meetings this weekend. I don’t remember the G8 doing one darn thing during 2008-2009 but I assume the hope is central bankers unite etc. That can come at any time and those caught short will get blasted as they always do when all the King’s Horses (and Men) arrive to save the day. We’ve seen this pattern repeatedly now for 4+ years.
As for the market yesterday’s losses have taken the indexes to the second major pullback area in the 1280-1320 range. (The first obvious pullback range was 1340). If you are a Fibonacci fan you can see below the S&P 500 has not even yet pulled back to the 38.2% retracement which would be near 1290. That shows you how massive the run was from October til the end of March.
[click to enlarge]
I can’t show it on stockcharts.com charts but the 23.6% retracement level was 1340. The rising 200 day moving average is also 1280ish so the most bullish outcome here would be a convergence of that 200 day and the 38.2% retracement to form an ultimate bottom. Less positive would be a 50% pullback to the 1240s, and then if we have to deal with lower levels than that, we can circle back at that time.
In the very near term this indicator of % of S&P 500 stocks below the 50 day moving average is reaching extremes. Any reading below 20% is usually…
Whew
by Market Montage - May 17th, 2012 4:01 pm
Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
Awful close.
Disclosure Notice
Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
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