Tuesday, September 6, 2011

Another Rough Morning

European markets had some form of a dead cat bounce earlier today, generally up in the 1% range but have given much of it back.  U.S. futures have been all over the place but generally wavering between a 1 and 2% loss the past 12 hours.  As of this writing it appears the S&P 500 will be opening somewhere in the 1140s, so obviously that line in the sand at 1175 which has been a big pivot point the past month will be broken.  Technical analysis takes a back seat when headlines dominate which is the current case.

The ultimate lows to test are S&P 1120ish (give or take a few points) which held many times the past month - I count 6 episodes.  Than below that the intraday low on Fed decision day of 1100.

Ten year yields on U.S. Treasuries are at sixty year lows in the 1.90s - a form of safe haven buying along with forecasting recession ahead.

Lost in the shuffle is ISM non manufacturing this morning at 10 AM.  Consensus is for a decrease to 50.5 vs 52.7 in July.  (low bar)  Remember, the U.S. economy is dominated by services so this report actually is more important than the much more widely lauded manufacturing report we saw last week.  (I'll be out of pocket until after 11 AM, so won't report ISM until an hour after)

Other than that not much in the way of market moving economic data - I see Bernanke speaks 1:30 PM Thursday and then Obama rides on his white horse and gives us an "infrastructure 2.0 - and this time I mean it!" stimulus speech Thursday evening.  One thing I am proud of in terms of calls, is I said when the payroll tax was announced late 2010, than the economy would be in such a weak position 12 months down the road, there is no way this would be a 1 year thing.  Indeed, we are going to get another year - and I will say now we will get another extension late in 2012 as the economy will still be weak.  The only question is if employers get a matching 2% cut.

So essentially we sit here waiting for more intervention of both a Fed and federal government kind, not to mention actions in Europe.  Greece remains a mess, and it appears Italy - now that the ECB rode in to the rescue and pledged to buy their debt - has lost urgency to do any real reforms.  Which of course is peeving off the ECB.

As an interesting side note - the Swiss National Bank has pledged to buy foreign currencies in unlimited quantities to set a minimum exchange rate of 1.20 francs per euro.  Essentially what has happened to the Swiss franc, is its being treated as one of the few safe havens, since they have their house in (relative) fiscal order, and have not been punishing their fiat currency as the U.S., Japanese, and lesser extent British and Euro zone have.  By not being part of the global race to the bottom in fiat currencies, investors have flooded into the franc.  Now it's rallied so much it is hurting their export sector - hence the move today.

That leaves gold - already back to highs from a few weeks ago, despite the big margin requirement hikes, as a place to not be devalued.

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