You can tell it's summer, can't you?
The market rallies yesterday after headlines blare that Papa Bear Nouriel Roubini now sees an end to the US recession at the end of the year. After the close, futures evidently fell off after Roubini issued a clarification that essentially said "at the end of '07 I forecast a recession lasting two years. You do the math." Oh dear. You really couldn't make this crap up.
Anyhow, it seems as if many bears are picking up the pieces of shattered P/Ls are thye head and shoulders break proved to be false. With option expiry upon us today, Macro Man is losing all of his equity positions, and given the frenetic nature of this market, he's not necessarily in any rush to replace them just yet.
Meanwhile, his inbox is rapidly filling with mails trumpteting other key technical breaks. Chief among them is from the DGDF crowd, crowing about the triangle break in the DXY, which portends a sharp downtrend from here. Y'know, kinda like a head and shoulders usually does.
Naturally, the dollar has rallied today, with good old Voldemort (who yet again failed to complete a bill auction) fingered as the major seller.
Meanwhile, fixed income markets have quit falling after the oh-so-obvious break of trendline support, seen most clearly in Bunds, below. Indeed, bunds motored yesterday afternoon even as the equity rally was picking up steam. Hmmmmmm.
A similar chart is that of silver, which had a clear break of the downtrend line but has yet to really accelerate higher and extend the break. Not exactly the sort of impulsive price action you expect at reversal points, is it?
Maybe all these clear breaks will hold, unlike the equity head and shoulders pattern. But maybe, summer being summer and with bears everywhere having run for the hills, these breaks will also prove to be false.
After all, we're being treated to a litany of earnings reports that are, quite frankly, conjured out of thin air. As noted in yesterday's diary, Google somehow managed to conjure 70c/share of "extraordinary" items, taking their EPS from a below-consensus $4.66 to an above-consensus $5.36. Quelle surprise. Perhaps an equity specialist could enlighten Macro Man and his readers exactly what extraordinary items cost Google 70c/share? Writing down the value of stale beers in the company fridge? Enquiring minds want to know....
In any event, given the now-common perception that the authorities are trying to manipulate both perception and markets from behind the scenes, Macro Man's left questioning the identity of the person in charge. Pam Anderson? Jordan?
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