Taking stock: A global financial inflection point

By Todd Harrison

NEW YORK (MarketWatch) — In what’s shaping up to be the most important Wednesday in the history of days that end in “Y,” we’re set to digest guidance from the Federal Reserve and G-20 regarding how they plan to combat the sovereign sequel to the first phase of the financial crisis.

The fact that our once free-markets are dependent on a steady fix of drugs from global policymakers, while sad, isn’t the point. We must trade the tape we have not the tape we want and odds are that without the tens of trillions of dollars in synthetic stimuli, we probably wouldn’t want that tape either. See Minyanville’s “A Five-Step Guide to Contagion.”

 

There are several sides to the current ride and we would be wise to see them all.

The good

• S&P 1335 — the level of lore in a reverse head and shoulders formation that works (through a pure technical lens) to S&P SPX -0.33%   1400 — remains underfoot.

• BKX BKX +0.40%  44 — the ‘stealth tell’ we’ve monitored in Minyanville that has worked like a charm — resides below current levels as well.

• The momentum monkeys — Apple Inc. AAPL -0.61% , Google Inc. GOOG -0.88% , LinkedIn Corp. LNKD -0.19% , Amazon.com Inc. AMZN -0.87%  , Baidu Inc. BIDU -3.20% and Priceline.com Inc. PCLN -1.61%  — trade firm, which implies an underlying “risk-on” mentality.

• Quarter-end is on tap next week, which may be why the “bang-for-the-buck” proxies mentioned above have traded with a better bid.

• Given the uncertainty surrounding the Greek election — and European concerns as a whole — many market participants moved to the sidelines last month and are sitting in cash; as a result, they may be vulnerable to a “long squeeze” as the buyers are higher (and the sellers lower).

The bad

• Europe isn’t fixed, as evidenced by Spanish yields trading near crisis highs.

• Greece, while moving toward a coalition government, has yet to reach an agreement for further funds needed to stave off default. German Chancellor Angela Merkel continues to insist “the new government must stick to their commitments” and “there can be no loosening on these reform steps.”

 

 

 

 

 

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