20dmf rt

[Pascal]

Below is the RT 20DMF.
Nothing strange: no divergence between price and MF.
You might somehow forget my "comment of the day" that stated well before the worldwide liquidity agreement that today would be a buying opportunity to start new positions. I do not consider a large up-gap of the proportion we had today as a "buying opportunity."


Pascal

11647

[lulzasaur]

Pascal,

What are your thoughts on the magnitude of the price jump compared to the change of the MF? Is this something worth noting or irrelevant?

Thanks

[ilonaross]

Sorry, I'm not that sophisticated about this stuff.

So this emergency funding extended till Feb 2013 is going to be inflationary, right?
It's going to prop up the market short term, right?
Doesn't it really mean that at least some big banks and and central banks worldwide are in deep doodledy doo and that the Fed has to ride to the rescue with more printing, which means more inflation?

Please, someone, an explanation...

[lulzasaur]

this article explains what's going on pretty clearly:

http://finance.yahoo.com/news/central-banks-rescue-todays-action-162004495.html

[ilonaross]

As always, ZH clarified things.

http://www.zerohedge.com/news/did-fed-leak-european-bailout-decision-monday-morning-visual-exhibit

[ilonaross]

@lulzasaur

tnx

[Billy]

As always, ZH clarified things.

http://www.zerohedge.com/news/did-fed-leak-european-bailout-decision-monday-morning-visual-exhibit

Once again, the only common denominator to the boards of directors and advisors of all concerned is Goldmafia Sachs.
Billy

[Pascal]

Pascal,

What are your thoughts on the magnitude of the price jump compared to the change of the MF? Is this something worth noting or irrelevant?

Thanks

In a strong gap, what is important to watch is the direction of the MF and not the strength.
The MF is only the MF after the price gap. Therefore, if it is positive, it shows that the market has bought the gap (probably a combination of shorts covering and new long players.) If it is negative, then it shows that the much higher prices have attracted profit taking. As of now, the MF is positive.

In this kind of market, since the new swaps are supposed to be inflationary, it is interesting to look at the money entering the materials/energy/gold sectors in the futures market. Once selling starts showing up in these sectors, then we will know that the fear of inflation will be gone.

You might have noted the the Euro Futures and the swiss Franc are being sold. TBT and LQD also show a negative LEV pattern. Fertilizers have a negative MF (due to CF), Copper miners do not attract much money. On the other hand, all the energy complex is soaking up money, except pipe-lines (money printing usually does not increase the flow of liquids in the tubes.)



Pascal

[Timothy Clontz]

The global danger is Euro deflation. If the US prints, that creates a sugar rush that will result in a Euro deflationary spiral.

EUROPE MUST PRINT OR WE'RE DONE.

[Billy]

It will be interesting to see what the final minutes will bring today.
If you remember, on Monday it all happened within the last ticks.
Billy

11649

11648

[ilonaross]

@Timothy:

Please elaborate... for the dismal science-challenged folk like me.

tnx

[bh_trade]

Thank you Pascal for these intraday updates. Very helpful to see the charts in close to real time. About the only thing I noticed was the increase in money flow as the market fell off slightly over the mid-day doldrums and I think the strong close was a result of that

[Timothy Clontz]

@Timothy:

Please elaborate... for the dismal science-challenged folk like me.

tnx

Because we exist in a world of fiat currency, inflation of one currency correspondingly deflates another. This is most true in the case of the dollar and the euro. When the US Fed inflated the dollar (i.e. devalued it) during QE2, that caused the euro to deflate (i.e. increase in value).

Since Greece's primary economy is focused on maritime activity, the increase in the value of the euro REDUCED demand in the US for European goods, which caught Greece like a vice by drying up its primary economic drivers. Even worse, the debt Greece owed also increased in value even as their ability to pay it was derailed.

You'll also note that the Fed's QE2 exported inflation into emerging economies that were tied to the dollar, which was most keenly felt in the Arab world, where fully 35% of per capita income was needed just for food. The surge of inflation caused people there to no longer afford food, and so they rose up against their governments in order to meet their most basic needs.

Ben Bernanke caused the so-called Arab spring by dollar inflation in economies pegged to the dollar.

Ben Bernanke ALSO pushed the PIIGS to the point of no return (faster then they would have anyway), by euro deflation (as a side effect of dollar inflation).

MORE monetary loosening by the Fed might be a temporary fix to the European banking crisis, but only by making the soveriegn debt crisis even worse.

Generally exchange rate effects show up in the following quarterly earnings reports, so the pop UP in this quarter MUST have an equivalent pop DOWN in the following quarter unless Europe takes action IMMEDIATELY to devalue their own currency through monetary easing.

Tim

[ilonaross]

@Tim:

Tnx