Another push-pull at the resistance levels – the retail sales number and the weekly claims looked good on the surface, but didn’t show signs of a recover – but that the recession is slowing. A bottom has yet to be found. While the bond auctions had not done very well, the smaller 30 year auction actually did better than the 10 year that preceded it. While 11 billion is a lot – it was paltry compared to the other auctions. So while it did well – skeptics remain cautious.
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Dollar Cheerleading!!!
The big story right now is the dollar and U.S. debt.
1. We saw Geithner travel to China on a road show to ease concerns and get the Chinese to buy more.
2. We had the BRIC (Brazil, Russia, India, and China) – with Russia taking the lead – purchase IMF bonds and mention they will reducing dollar holdings.
3. Nouriel Roubini said the dollar will eventually diminish as a world reserve currency.
4. The Fed is buying (printing money) billions of Treasuries to make up for the short-fall and to keep interest rates low – but failing.
5. Bonds are getting hit and yields are rallying.
6. Dollar is slipping in value against foreign currencies
7. Commodities are rallying
I had never in the past seen equity and option traders pay so much attention to the bond auctions and watching the dollar. This is going to be the big story. As I mentioned the dollar bubble is inflating and it will either POP or deflate. A pop is not a good thing.
Keep an eye on the currency exchange rates, bond yields, auctions, and foreign central bank action.
We are seeing China and others moving into shorter-term maturity rather than buying 5, 10 or 30 year. This allows them to get out earlier and not fully committed.
Yesterday I forwarded an interesting story (which I have yet seen covered in the U.S media) – so far I don’t know if they are counterfeit or real. But even if they are counterfeit at $500 million denomination who are they going to sell them to and if they are real – they are only issued to foreign central banks.
http://www.asianews.it/index.php?l=en&art=15456&size=A
It is interesting that the Finance Minister of Japan came out the next day and said, “We have complete trust in the fact that the U.S. views its strong-dollar policy as fundamental.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=apWVhFYArRhg
It would be interesting to find out something more about this story.
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Futures Pre-market
The futures are down and the spread is in. Expect some negative pressure on the market at the opening if the spreads remain.
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Support / Resistance
Each time we try to break out we come right back down. It has been a weak of push and pull at this level. Can’t go higher, but can’t go lower. Who wins?
There is nothing more to say – other than watch the close and these are the numbers.
INDU 8750
NDX 1500
SPX 950
RUT 540
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Conclusion
A follow-up to the dollar story is the Healthcare plan which according to an NPR report could cost over 1.5 TRILLION, the question is how are we going to pay? Whether you are for it or against it – the reality is that it is MORE national debt (a lot more). If foreign nations are already concerned, calling for a reserve currency, and we rely on them to extend us credit – what do you think there view is of this nation spending another trillion? Time to get out?
While the Healthcare program might sound good, it could be the international straw that breaks the dollar back.
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