Tuesday, July 12, 2011

20 and 50 Day Moving Averages Held this Morning

After a wild and wooly (sp?) overnight session in which futures were crushed, markets rallied through the 7-8 AM hours and opened to mild losses.  At this point the 20 and 50 day exponential moving averages have held firm as good support levels.  That said, with the market in a bipolar state - sometimes focuses on the macro, and sometimes ignoring it - news flow can overwhelm any form of technicals.  Italy did not suddenly become an issue overnight, but not until middle of last week, did the market seem to 'care'.

Until/unless these levels break I expect dip buyers to keep trying - especially those who missed the move of the previous 2 weeks and now have performance anxiety.  If not for the ever present European issues, the move into earnings season would be dominating, and generally over the past 2 years (excluding a few periods such as last July) this has been a gleeful time for stocks.

Not much on the economic radar this week other than inflation figures, which the market has ceased to care about long ago since easy money Ben will not relent on the helicopter dumping of dollars.

As for Europe I think the end game is simple - the ECB will lose any last shard of credibility and turn into the Fed - buying all sorts and manners of Italian, Spanish, Greek (done), Portuguese (done), and Irish (done) debt.  It's just a matter of when they give in - most likely when the market forces their hand.  They will become the great European garbage dump.  I still am amazed France is getting off with no damage, they have an ugly debt profile themselves.  This chart is from 18 months ago but you can see France is right there with.... Portugal.

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