Market Observations 01/12/07
In our top story tonight, Yvonne DeCarlo aka Mrs. Lilith Munster is dead and no one can take her place.
Today, Advanced Micro Devices plunged 10% after warning Q4 revenue will miss expectations, not the 1st nor last to issue such warnings this reporting season.
The New Year had brought range bound trading between SP500 1405 - 1415. The last 3 days a separation to the 1430 level.
1440 is within reach, as is 1860 NDX (NDX closing at 1845 today), DJIA already above 12,500, 830 RUT is another discussion as this index is lagging and trying to get over 800.
A seeming rush to safety from MID & RUT to SP500, DJIA, NDX & NAZ is apparent as they made all time & 6 year closing highs this week.
Having bounced off 82 around Dec 4th, the dollar index poked 85 and seems headed for 86. Gold of late has suffered falling from $650 to $605 in rapid order, but rebounding to equilibrium $630 today.
Crude oil over the same period falling from $64 to under our target of $52, has the aroma of a forced liquidation (unwinding of positions due to hedge fund failure) and panic.
Observing a daily chart, the dollars rise since early Dec coincides with stagnation and downtrend in both stock and bond markets. Note the bond markets decline during this period, as rising rates drain liquidity.
It seems the Fed through its temporary and permanent market operations has "shrunk" the markets liquidity. By letting some "repo" agreements expire without replacement, they have pulled approx. $20 Billion off the table since Jan 1.
This has boosted the dollar by reducing the amount of dollars floating around to the tune of $200 Billion (10X multiplier).
This week, the ECB stayed pat while the BOE raised. The key is whether the BOJ raises on the 18th.
This would affect the carry trade (borrowing in yen to buy higher yield debentures in dollars.) A BOJ 25 bps raise to 0.50% would put another tent in the global liquidity mania.
One can now consider the dollar index a barometer of market liquidity or money supply. As the supply of dollars contracts, the dollar index rises.
Should the dollar move to 86 and head for 87, this could precipitate a pullback and deeper correction in equities markets, as liquidity dries up and what is left heads for safer havens.
Next week, a short week, markets closed MLK day, options expiration Friday. Watch the BOJ's action and the markets reaction, as well as any sudden movement off the current level 1430-1440 SP500 for a "tell" of things to come.
Keep it tween da ditches, we take it day by day and keep our eyes peeled to the sky, because it could be a name brand that pancakes us. Just my opinion, I could be wrong, this is The Nattering Naybob and your NOT!
Today, Advanced Micro Devices plunged 10% after warning Q4 revenue will miss expectations, not the 1st nor last to issue such warnings this reporting season.
The New Year had brought range bound trading between SP500 1405 - 1415. The last 3 days a separation to the 1430 level.
1440 is within reach, as is 1860 NDX (NDX closing at 1845 today), DJIA already above 12,500, 830 RUT is another discussion as this index is lagging and trying to get over 800.
A seeming rush to safety from MID & RUT to SP500, DJIA, NDX & NAZ is apparent as they made all time & 6 year closing highs this week.
Having bounced off 82 around Dec 4th, the dollar index poked 85 and seems headed for 86. Gold of late has suffered falling from $650 to $605 in rapid order, but rebounding to equilibrium $630 today.
Crude oil over the same period falling from $64 to under our target of $52, has the aroma of a forced liquidation (unwinding of positions due to hedge fund failure) and panic.
Observing a daily chart, the dollars rise since early Dec coincides with stagnation and downtrend in both stock and bond markets. Note the bond markets decline during this period, as rising rates drain liquidity.
It seems the Fed through its temporary and permanent market operations has "shrunk" the markets liquidity. By letting some "repo" agreements expire without replacement, they have pulled approx. $20 Billion off the table since Jan 1.
This has boosted the dollar by reducing the amount of dollars floating around to the tune of $200 Billion (10X multiplier).
This week, the ECB stayed pat while the BOE raised. The key is whether the BOJ raises on the 18th.
This would affect the carry trade (borrowing in yen to buy higher yield debentures in dollars.) A BOJ 25 bps raise to 0.50% would put another tent in the global liquidity mania.
One can now consider the dollar index a barometer of market liquidity or money supply. As the supply of dollars contracts, the dollar index rises.
Should the dollar move to 86 and head for 87, this could precipitate a pullback and deeper correction in equities markets, as liquidity dries up and what is left heads for safer havens.
Next week, a short week, markets closed MLK day, options expiration Friday. Watch the BOJ's action and the markets reaction, as well as any sudden movement off the current level 1430-1440 SP500 for a "tell" of things to come.
Keep it tween da ditches, we take it day by day and keep our eyes peeled to the sky, because it could be a name brand that pancakes us. Just my opinion, I could be wrong, this is The Nattering Naybob and your NOT!
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