The Precise Take – Gapping up into 2012

Big Picture Analysis: A few technical hurdles this morning prevents a more thorough analysis.  ISM at 10:00 am and FOMC Minutes at 2:00 pm could be market movers.

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The Precise Take – Closing the year

Big Picture Analysis: Chicago PMI at 9:42 am and Pending Home Sales at 10:00 am could be market movers, but things should quiet down afterwards unless headline risk surfaces.  Yesterday was likely a shakeout of weak longs, but we are paying attention to the fact that this was another selloff from the 200 day MA.  We will return January 3, 2012.

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The Precise Take – Just the charts

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The Precise Take – Nothing new

Big Picture Analysis: Barring a big surprise, things should continue to be slow.  Consumer Confidence today at 10:00 am EST might be a market mover, and there is also the Dallas Fed Manufacturing report at 10:30 am.

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The Precise Take – Up, up and away

Big Picture Analysis: Volume and volatility are low, but risk markets are quietly creeping upwards.  The ES (and its counterparts in the cash and SPY) are once again testing the 200 day moving averages.  A convincing thrust above would likely draw attention, while another stall and rejection would attract short sellers.  Having said that, we might simply see non-committal chop until the holidays are over.

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The Precise Take – Markets stable after GDP

Big Picture Analysis: After the bell yesterday, selling continued in US equities, but things turned around midday, with a strong rally into the close.  After a rally in European trading overnight where the ES came within three points of its 1249.00 high of yesterday, a slightly disappointing GDP has facilitated a modest pullback.  Absent a stunning development, volume and volatility should contract going into year end.

Consumer Sentiment today at 9:55 am could be a market mover, then Leading Indicators follows at 10:00 am.  Tomorrow, Durable Goods at 8:30 am and New Home Sales at 10:00 am will be in focus, but only by those few traders who remain ahead of the three day Christmas holiday weekend.

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The Precise Take – Buy the rumor, sell the news

Big Picture Analysis: Yesterday, expectations for today’s ECB liquidity providing LTRO along with a Housing Starts beat facilitated a trend up day that closed at the highs in the US indexes.  Overnight, risk markets sold off on the three year ECB auction this morning, which came in with demand well above expectations.   The net liquidity addition was 210 [billion] euros, or $273 billion, which is nearly 2.5 times the monthly Fed injections during the QE2 era.  Inasmuch as the next LTRO is two months away (Feb 29), the ECB is on track to slightly beat the Fed if demand keeps up.  In the meantime, it will be critical to see how the issue of capitalization will be addressed, which so far only the Germans have.  We still don’t place too much stock in these short term fluctuations, especially in a low liquid holiday environment.

Existing Home Sales at 10:00 am EST is the major economic release of the day, while EIA Petroleum Stats at 10:30 am and the 7 Year Note Auction at 1:00 pm will also be watched.

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The Precise Take – Just the Charts

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The Precise Take – Winding down 2011

Big Picture Analysis: With nine trading days left in 2011, we expect volume to taper off as traders take off for the holidays.  And, with the Santa rally not having materialized, end of year window dressing will probably make for more choppiness.  Having said that, illiquid markets will remain vulnerable to surprises in both directions.  Another trend we have noted is that the US markets tend to become more erratic after the European close at 11:30 am EST.  No major news today, though there is a 3 Year Note auction at 1:00 pm and the Treasury Budget at 2:00 pm.

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The Precise Take – Spanish bonds tell an interesting story

Big Picture Analysis: Yesterday was another risk-off day, with the ~1200 battle ground area in the ES tested and slightly broken overnight.  Indeed, the low of the day of 1202.50 was a tick below the 50% retracement of the latest up leg from the November 25 low (day session only), so the bulls have not yet given up.  The four 8:30 am EST reports this morning had a net bullish effect, as Jobless Claims came in better than expected and PPI slightly above consensus.  The Philly Fed Survey this morning at 10:00 am will likely be a market mover.  Tomorrow features CPI at 8:30 am and is also options expiration.

The Spanish government this morning was able to sell 6 billion euros of bonds ahead of an expected 3.5 billion, which has significant implications for the markets and the EU going forward.  The reason is that this strong demand is ahead of next week’s first ECB’s new three year long term refinancing operation (LTRO), in which banks will be able to pledge these and other bonds as collateral and receive cash from the ECB (after a haircut), which need not be repaid for three years.  Thus, it is a back door “solution” to not providing direct ECB monetization.  Many correctly pointed out that this will increase bank leverage ratios.  Given capital ratios are already being required to be raised, they also speculated banks would not engage in this carry trade en masse.  With the Germans reopening a 2008 vintage bank capital facility yesterday and the demand from this morning’s Spanish auction, it appears the leverage/capital ratio problem will be worked out.  This probably does not have short term implications, but it is likely bullish for the intermediate and long term, as the decision to “print” has been made, and is simply not obvious yet.

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