Cyprus drama continues. The Cyprus finance minister returns from Moscow empty-handed. Russia wants to wait for the Troika (European Commission, IMF and ECB) decision. Merkel (Germany) is unhappy since Cyprus has delayed talks with the Troika. Cyprus parliament is in session trying to agree on a plan forward. Word that Cyprus's Popular Bank would close and restructure has sent hundreds of citizens into the streets protesting and clashing with police, albeit peacefully still yet. France and German business confidence drops. European contagion is subdued for now. Italy and Spain yields are not exploding higher as yet. Portugal remains steady as well. Greece, however, is now above 12%.
10-Year Yields:
Greece 12.06%
Portugal 6.02%
Spain 4.86%
Italy 4.57%
France 1.99%
U.S. 1.90%
U.K. 1.84%
Netherlands 1.80%
Austria 1.64%
Finland 1.55%
Germany 1.35%
Japan 0.57%
The U.S.-Germany spread is 55 basis points (1.90-1.35). A spread of 25 signals concern so the spread is not particularly alarming, however, the 55 is the outer side of the spread range. Thus, either the U.S. Treasury needs to drop through 1.90% and head lower (which would be in concert with U.S. equity markets selling off), or, the Cyprus situation is quickly resolved and the flight to German safety ends and sends the Germany yield higher above 1.40% again, or, a combination of the two. Which do you think will happen and in what proportion?
The Cyprus solution may protect the smaller depositors but the larger depositors (Russians) will receive a haircut of perhaps half their money or more. Russia will likely retaliate. Cyprus needs 5.8 billion to avoid mayhem so they had better shake the couch cushions. Cyprus has three days. Tick, tock. Watch Greece.
...like I've previously said ... soon the only bears will be exposed in FED's cages and at the Zoo ...and this will be the sign of the real peak ... still not yet at that point!
ReplyDelete2 more steps : 1576 and/or 1614 ...
Be patient let this up move totally exhaust in it's fifth wave and the fruit will be sweet :)!
http://pragcap.com/where-did-all-the-bears-go
V.
V, you are likely correct as long as VIX stays under 14.95, if VIX moves above 14.95, markets will be heading lower.
ReplyDeleteToday (Friday) and next Thursday (when the final US GDP is published) are some big POMO funds allocated ... guess today we might see some shorts squezeed.
DeleteAnyway, this up-movement it's not finished according to the EW 5 waves theory... the final (and ending) 5th wave will end in the 1570-1578 SPX (futures) area ... after that an ABC movement just might slightly "sniff" the 1600-1614 area (although not necessary to do that!) without stabilizing there, only to get absolutely all technical indicator negatively diverged and in overbought state ....
after that, next stop will be at somewhat ( :D ) lower level :
- the most positive scenario(and most likely to happen): 1425-1440
- the most negative scenario: 1345 - 1360
- the doom & gloom, death-like scenario (nearly impossible): 1240-1266.
After reaching 1425-1440 (mid-May) prepare for The Top that will be reached sometime in August/September/October 2013 and in the area 1646-1685 (cannot determine a more accurate area according to actual data).
those are my thoughts....
V.
So KS, what happened to Copper an=s a barometer? Can't sue that one anymore?? Now it's VIX?
ReplyDeleteSarcasm is sensed. Copper and commodities are the only two sectors that are in the bear camp right now, they act as a drag on the markets. On the bull side the two sectors nearest the bull-bear line are VIX 14.95 and SOX 421. So copper is definitely a barometer and remains bearish. VIX has been in direct play and the most important influence on market direction for about three weeks now so you must not be following along.
Delete