March 18th, 2013
in Gary's blogging
Midday Market Commentary For 03-18-2013
By noon the averages were making steady progress recovering from this mornings lows but still -0.17% below Friday's closing numbers. Potentially, this decline could be a shot across the bow for further area of weakness to exhibit themselves in more negative declines.
The 12 o'clock numbers have been rising on falling volume which is never good and smacks of manipulation and the theatrics of the HFT computer crowd. The gaps created this morning are headed to be closed shortly as expected and then watch out below.
None of this crap coming from Cyprus is any good.
Prior to yesterday, if you were trying to handicap how the unelected leaders of the Eurozone were going to react to a tough situation, you only had to refer to the quote "When it becomes serious, you have to lie" from Mr. Junker to understand their mindset.
But so long as someone at the ECB was willing to flood the world with free EURs (with significant backup provided the US Federal Reserve) the market closed its eyes, held its breath and took the leap of faith that all was well.
However, post the Cyprus decision, the curtain has been pulled back and wizard revealed with all his faults and warts. It would be hard to over-emphasize how significant the Cyprus situation is.
The damage done here is not related to the size of the haircut - currently discussed between 3 and 13% - but rather that the legal language which each and every investor on the planet must rely on in order to maintain confidence in the system has been subordinated to the needs of the powerful elite.
The DOW at 12:15 is at 14507 down 7 or -0.05%.
The SP500 is at 1557 down 3 or -0.23%.
SPY is at 155.47 down 0.37 or -0.24%.
The $RUT is at 950.01 down 2.49 or -0.26%.
NASDAQ is at 3245 down 3 or -0.09%.
The longer trend is up, the past months trend is bullish, the past 5 sessions have been bullish to neutral and the current bias is up.
WTI oil is trading between 93.69 and 91.78 today. The session bias was bearish and now is bullish and is currently trading up at 93.60.
Brent crude is trading between 109.020 and 107.32 today. The session bias is now bullish and is currently trading up at 109.00.
Gold rose from 1591.00 earlier to 1610.80 and is currently trading up at 1606.40.
Dr. Copper is at 3.44 down from 3.51 earlier.
The US dollar is trading between 82.33 and 83.10 and is currently trading down at 82.77, the bias is currently bullish. There is a gap from this morning at 82.35 which will probably be closed when the indices rise and recover. BUT, watch out after that technically is finished.
I am sure the 'noise' from this morning Cyprus fallout will subside over the next few trading sessions, but be assured this may be only the first act of a tragic end to the Euro as we know it today.
Never the less, a lot of Innocent folk are going to be hurt regardless which way this bastardization of government regulations goes goes.
The Cyprus bailout package tax on bank deposits is a deeply dangerous policy that creates a new situation, more perilous than ever.
It is a radical change that potentially undermines a perfectly reasonable deposit guarantee and the euro itself.
Historians will one day explore the dark political motives behind this move. Meanwhile, we can only hope that the bad equilibrium that has just been created will not be chosen by anguished depositors in Spain and Italy. The really worrisome scenario is that the Cypriot bailout becomes euro-systemic – in which case the collapse of the Cypriot economy will be a sideshow.
This will happen when and if depositors in troubled countries, say Italy or Spain, take notice of how fellow depositors were treated in Cyprus.
All the ingredients of a self-fulfilling crisis are now in place: It will be individually rational to withdraw deposits from local banks to avoid the remote probability of a confiscatory tax.
As depositors learn what others do and proceed to withdraw funds, a bank run will occur. The banking system will collapse, requiring a Cyprus-style programme that will tax whatever is left in deposits, thus justifying the withdrawals. This would probably be the end of the euro.
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Written by Gary