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Saturday, April 20, 2024

Monday Market Movement

Asia exploded out of the gate today! 

The Hang Seng is up 2% at 21,196, gaining 408 points on the day along with a 2% gain on the Nikkei (216 points), taking them over the 10,500 mark to 10,585 as they play catch-up to the Dow, which topped out at 10,566 last week.  The BSE keeps going higher, adding 0.6% for the day, back over 17,000 at 17,108 and the Shanghia added 0.7%, finishing the day at 3,053

The Hang Seng's incredible morning gap up and 100-point follow-through, though impressive, is only a "good start" to getting that index back on the road to recovery as they had topped out at 23,000 in November and flirted with 22,500 in early January so we'll need some sustained conviction before we get all bullish on China but, for today, we can just say "WOW" – it's amazing how much a market can move when it's closed!  

We're closed as well but our pre-markets are looking strong although Europe is kind of flat-lining.  They are all upset because the 300,000 people who live in Iceland took a vote and decided they didn't have $5.3Bn to bail out failed Icebank, which kind of leaves the EU investors, who deposited money into an internet savings account that promised 8% returns, in a bit of a lurch becuase (surprisingly, I'm sure) it turns out the bank took a lot of risks to get those returns and (even more surprisingly) THEY BLEW IT!   Even more surprisingly to European investors, 93% of the voters said: "No thank you, we will not agree to pay $17,666 per person (about $58,000 per family) to make foreign investors whole."

What I find most funny about this is that the UK and the Netherlands had the nerve to ask Icelanders to repay this money.  $5.3Bn is 1/2 of Iceland's GDP – that would be like countries who lost money in the Lehman collapse asking US taxpayers to kick in $6.5Tn to make them whole.  What do you think our vote would be?  Sure we are numb to our own debt level but are we that numb?  Possibly so as we seem to be happily buying oil at $80 a barrel again – sending $321Bn American dollars out of the country in exchange for a product we burn up and need again the next day.  I wrote about this disaster over the weekend so no need to re-hash it here. 

Also a disaster was our too bearish stance last weekend as we missed (are missing?) a big move up.  I went over that in our Weekend Wrap-Up and, as to the current chart – Market Tamer has an excellent video on the "cup and handle" formation in the Dow and I am not, in any way, shape or form, saying we don't have bullish techincals – we do.  What I am saying is that we are ignoring A LOT of fundamental issues that cannot be papered over by a low-volume stock rally – no matter how good it makes us feel in the short-term

 

Everyone is flying off of Friday's big move and look at those rising 20 dmas – if they cross over the red lines (50 dmas) they make for very bullish indicators so let's keep a close eye on oil ($81.50) and the Russell (666) – which both need only very small moves up to give us "Golden Crosses" that should get the TA guys salivating.  Of course failures to advance here, especially after this morning's huge boost from Asia, would be a cause for concern. 

As long as we hold our red lines this week, all shall be well and we'll have entered into, in the very least, a bullish consolidation pattern that will indicate we were betting on the wrong end of that 5% line and our range will be more like 10,165 to 10,700 than the 10,400 top we were predicting.  As I reminded members this weekend though, all this bullishness is based on a 150-point gain for the week that took 5 quick moves totaling 400 points last week, just to get those 150 points to stick. 

Still if "THEY" are "faking it" then they are very good at it and we may as well go with the flow, right?  Sarkozy says the EU is ready to help Greece and he seems to be in charge over that.  That sent Greek (and Dubai's) CDS's to a 6-week low.  Our own Paul Volcker criticized Greek derivative abuse but the IMF seems ready to step in and act as a bank to lend Greece whatever they need to see them through the year

I am trying very hard NOT to have an opinion on the markets as we're already above where I though we should be and I also thought that China moving to nullify all guarantees local governments have provided for loans taken by their financing vehicles would have spooked investors this morning but the Hang Seng and the Shanghai are up strongly despite the potential for a $1.7Tn default.  “China’s sending a very strong signal that this kind of financing is over,” said Patrick Chovanec, an associate professor in the School of Economics and Management at Tsinghua University. “It raises the specter that China’s banking system has a lot more risk in it than people previously thought.”  Blah, blah, blah Patrick – all we hear is BUYBUYBUY!!! 

See – I'm getting the hang of this market now!  The NY Times reports this weekend that our own municipalities, school districts, sewer systems and other tax-exempt debt issuers are ensnared in the derivatives mess as well with New York State on the hook for $3.74Bn worth of swaps outstanding.  Hmm, must be time to invest in NY savings bonds! 

So everything must be great because the markets are going up – that's our story and we're sticking to it at the moment.  We're already way too bearish if things continue higher so we'll be watching that Russell line closely, as well at 1,140 on the S&P but 1,150 should be the real resistance along with 2,250 on the Nasdaq but, even testing those levels is going to be a pretty bullish indicator so we'll watch and wait and see what sticks

 

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