(The Weekly Digest reproduces the morning capsules made available every morning before the market open in the Real Time Feeds to the paying subscribers.)
IS GREECE EXITING EUROZONE PRICED IN?
May 25, 2012
Is Greece leaving eurozone priced in? As the probability of Greece leaving eurozone increases, debate is raging about its effects. It will all depend on the results of Greek elections scheduled for June. About half of the experts believe that a Greek exit is already priced in the markets. Other half disagree.
Our analysis shows there is no one answer. The impact will depend on when Greece exits and how it exits. If Greece were to exit today, S&P 500 may fall to 1225. But this is hypothetical because Greece is not exiting today.
Gold futures are at $1560, silver futures are at $28.14, and oil futures are $90.54.
S&P 500 resistance levels are 1324, 1330, and 1339; support levels are 1312, 1300, and 1290.
DJIA futures are down 39 points.
OUR CALL ON CHINA PROVES SPOT ON
May 24, 2012
Months ago we started writing that growth in China had peaked. Until today there had been two opposing camps of analysts, one supportive of our models and the other contradicting it. Today we say the data show seventh straight month of manufacturing contraction in China. After today there is no argument against our call months ago on China. The data has proven our models to be spot on.
As a full disclosure, we are short on China in ZYX Emerging Markets ETF Alert.
No decisions were made in European summit yesterday, but hope abounds.
From our sources, there is a serious discussion going on about separating bank support from sovereign debt and deficit issues. If such a scenario materializes, expect an explosive rally in stock market and a big sell off in bond market.
Gold futures are at $1574, silver futures are at $28.43, and oil futures are $90.95.
S&P 500 resistance levels are 1324, 1330, and 1339; support levels are 1312, 1300, and 1290.
DJIA futures are up 40 points.
MARKETS GO MAD OVER GREECE, MOMO CROWD SELLS GOLD AND SILVER
May 23, 2012
Yesterday stock market was in an upswing. Even gold and silver were up. Then came the word that former Greek prime minister has stated Greece made some preparations for exiting eurozone.
With the situation that Greece is in, would any sane person have thought that Greece made no preparations to exit eurozone? Such a conjecture is already priced in the markets. But markets are not about sanity as there are plenty of trigger happy impulsive investors in the markets.
On the report from Greece stock market fell out of bed and lost all of its gains from yesterday morning. Heavy selling continues this morning. Stock markets from all over the world are lower.
Gold and silver remain in the hands of the momo crowd. The momo crowd promptly sold gold and silver on bad news from Greece. This morning there are several reports that central banks throughout the world may tolerate higher inflation. What does the gold and silver momo crowd do on the potential of higher inflation? They promptly sell more. Not much of a surprise here. Momo gold crowd continues its pattern of selling gold and silver on bad news or news of higher inflation.
Gold futures are at $1558, silver futures are at $27.65, and oil futures are $91.11.
S&P 500 resistance levels are 1312, 1324, and 1330; support levels are 1300, 1290, and 1285.
DJIA futures are down 110 points.
THE OFFSPRING OF WORLD WAR II RUBBLE ADVOCATES EURO BONDS
May 22, 2012
Organization of Economic Cooperation and Development (OECD) advocates issuance of eurozone bonds. OECD was set up by European leaders to avoid the mistakes that lead to World War II when they realized that the best way to ensure lasting peace was to encourage cooperation and reconstruction.
There is enough wealth in Europe to take care of the debt crisis.
If Europe decides to issue euro bonds, European crisis will be over and today’s depressed prices of European stocks will prove to be once in a generation buy.
Gold and silver are pulling back.
FB continues to fall in the pre-market and now is at $32.76. The reason we are mentioning this is because this development has negative implications for the entire market. Disgruntlement over FB may dampen the nascent rally that started yesterday.
Gold futures are at $1577, silver futures are at $28.10, and oil futures are $92.25.
S&P 500 resistance levels are 1324, 1330, and 1339; support levels are 1312, 1300, and 1290.
DJIA futures are up 1 point.
IMPACT ON MARKETS OF FB BREAKING THE IPO PRICE
May 21, 2012
Today there is an event that does not lend itself to our rigorous analytical methodology. The event is FB breaking its IPO price of $38. As of this writing FB is trading at $36.75.
FB IPO is one of a kind. There is simply not enough other instances of such a widely anticipated IPO breaking the IPO price in similar overall market conditions. Our models need lots of data sets. There is simply not enough data to analyse this situation.
It is one of those rare occasions that we will resort to opinions. At the recent market swing top we started suggesting a 65% correction probability to a zone which market has now hit. In the absence of FB situation, there would be a 90% probability of a significant bounce from here. However, FB is creating a very negative sentiment and all bets are off.
Gold futures are at $1587, silver futures are at $28.20, and oil futures are $91.67.
S&P 500 resistance levels are 1290, 1285, and 1270; support levels are 1300, 1312, and 1324.
DJIA futures are up 45 points.
