As of yesterday, Cyprus was on its way to becoming a distant concern, pushed off the front page by news about New Jersey’s $338 million Powerball winner and the Supreme Court’s likely endorsement of same-sex marriages. And yet, with euroland’s latest banking crisis out of the way for now, investors acted surprisingly subdued yesterday, pushing the Dow to a modest gain of 113 points. Our guess is that Wall Street is quietly gearing up for a rip-roaring short squeeze to finish out the week. The broad averages have been hovering near record highs to begin with, but by the time Friday rolls around, we’re betting that stocks will be trading well above these levels, demonstrating yet again that investors haven’t a care in the world. The flip side, unfortunately, is that gold prices are about to head lower, having failed to register much of a pulse even during the most worrisome phase of negotiations to “rescue” the Bank of Cyprus.
Not to rain on speculators’ parade, but here’s a number to watch if you’re crazy enough, after all these years, to still be looking for a top: 1617.48, basis the S&P 500 Index. Thats a proprietary Hidden Pivot target of ours (see chart above), and although we must concede that no such target that we’ve proffered over the last four years has shown fatal stopping power, this one seems likely to produce at least a short-able high. The purpose of these Hidden Pivot numbers is not only to provide precise swing points to get short or long, but to gauge the strength of the underlying trend. In this case, and generally speaking, if a clear “hidden” resistance such as this one gives way easily, it is a sign that considerable buying power remains to be spent. Thus, we would regard an easy move through 1617.48 as strongly implying that no end is in sight for the bullish rampage. One more thing: the target is also our minimum upside projection for the near term. Under the circumstances, any trades we recommend to subscribers will be from the long side. Click here to join the fun with a week’s free subscription to Rick’s Picks.
Posted by Mike Shedlock: Mish's Global Economic Trend Analysis
on
Wednesday, 27 March 2013 13:39
It has been amusing listening to the hypocrisy from Brussels regarding the leverage in Cyprus.
Jeroen Dijsselbloem, president of the eurogroup led the charge that Cyprus had an unsustainable problem with deposits over 700% of GDP.
Here is a little perspective courtesy of the Financial Times.
Somehow we are supposed to believe that 7-1 ratio of deposits to GDP is a problem but the 22-1 ratio in Luxembourg is not. And what about the 4-1 ratios in France and the Netherlands?
What sunk Cyprus now rather than later was Cyprus was dumb enough to be in Greek bonds.
So why did Cyprus stay in Greek bonds so long? The answer is Cypiot banks were foolish enough to believe ECB president Jean Claude Trichet when he insisted there would be no haircuts on Greek bonds.
Markets in Asia were higher in overnight trading, with both the Japanese Nikkei and Shanghai Composite both up 0.2 percent. European markets are in the red, with Spain leading the way lower, currently down 1.5 percent. Italy is also quite weak due to political chaos and the difficulty the country has in forming a government. In the United States, futures point to a negative open.
Will a financial collapse come about in 2013? Marc Faber gives his advice for gold and silver stackers and some economic forecasts.
Marc Faber is the publisher of the Gloom Boom and Doom report and often shares his recommendations in interviews regarding the financial markets. He believes equities will fall 20% in the short term in most countries, except Japan, Vietnam, China due to their underperformance over the past few years. He was also asked about bonds? He says they could rally from here because they’re oversold, we could have seen the lows but he would not buy US treasuries. Other questions asked include what do you see the price of oil going to in 2013 and is Apple stock (AAPL) overvalued? Will the price crash or correction continue?
The Government Debt since 2007 has increased by more than 6 Trillion Dollars
David McAlvany : As you say, things are not evenly distributed. The misery index has, over the 5-year period from here going back to about 2007, gone from 7½ to 9½ . We have had, as you said, median household income decline from just shy of $55,000 to $50,000. People’s primary asset, the median existing home, has declined. When we look at consumer confidence, this is where we see something of a divergence. Where do you see this divergence between the S&P and consumer confidence taking us?
Marc Faber : In principle, it is possible that as a result of rising stock prices and recovering real estate prices, confidence will increase somewhat, but I have to go back to what life is for the typical household, and what life is for the holders of capital, in other words, the 1%, or ½% of the population. For the typical middle class, the standard of living is not going up because the insurance costs are going up, healthcare costs are going up, taxes are going up. Everything is going up in price, but employment has improved.
But then, if we decompose the improvement in employment, and we analyze what kind of jobs people get, then the jobs that are being created are mostly low-paying jobs, and the jobs that were lost were high-paying jobs, so I don’t think we should just look at the number of jobs.
In the meantime, I also need to mention that the government debt since 2007 has increased by more than 6 trillion dollars, and we have deficits of around 1 trillion dollars. Having these deficits will become, one day, a problem. They may not seem a problem now because the Fed basically finances the deficit through the purchases of assets, but will they be able to do it forever? That is the big question mark.
So if you want to boost equity prices, or asset prices, print that much money. But as I just tried to explain, you don’t create wealth in a nation by boosting asset prices. You create wealth through employment and capital investment in factories, in infrastructure, in education, and in research and development. – in a recent interview with McAlvany – Click here to watch the full interview >>>>>>
“Those who control the money make the rules, and their main aim is to remain in power. Currently, the various central banks control the creation and the issuance of money. To ensure that they remain in power, the central banks are spewing forth a veritable avalanche of fiat currency, money created out of a computer — money that has been created out of “thin air.” In turn, we are supposed to bow down and thank the money creators, those who are saving us from a new world depression.”
“So to sum up my search for a THEME, the theme of today is the “haves” remaining in power, and in doing so, also keeping the “have-nots” content and happy. Everything we are dealing with now, including stocks, bonds, real estate and possible sources of income revolves around the central theme that I have presented.”
“have drawn attention to the problem of the S&P in previous sites. Below we see the rising channel in the S&P. The technical problem is easily seen in that the S&P is well below the upper border of the channel. If we were seeing strong action in the S&P, the Composite would be making contact with the upper trendline of this channel.”
Good morning. Here’s what you need to know.
