1. The Euro has reached now our target zone around 1.28 and is showing technical evidence for a short term bottom as we count the second daily 12 ( final 13 tomorrow) within a weekly 9 count. This makes it a strong case for a short term rebound from my 1.27/8 level starting next week. Help will rather come from the USA as the Full Moon in 4 days implies some USA specific financial trouble. Also will the USA not like the appreciation of the US Dollar since it kills a substantial part of the profits the SPX companies generate on the one hand and makes a very attractive case for foreign bondholders to sell.
Stockmarkets in USA are still due to test the SPX 1300 level the next days before a more severe pullback can be expected. Early next week around the Full Moon should be a good time for a top and a pullback in the 5-7% magnitude thereafter. Once the real top is set which can extend to end Jan not necessarily with new highs but overall the target area is 1310-30 a substantial drop should follow to the 1000 level. First indication for such a move will be a weekly close below 1200 which is the level I expect to be tested after we reach 1300-10.
UPDATE: EFSF said to get EUR4bn of orders for 3Y issue is providing some cover (at what rate? We offer to buy 1tn at 300% yield…)
With plenty of time left until France unleashes its supply (and a dismal consumer confidence print earlier), there is a plethora of notable market moves: Unicredit is halted down 7.9% (seems to be the culprit for the initial risk-off turn in Europe), but DeutscheBank is down over 5% on liquidity problem rumors, EURUSD traded under 1.2850 at its lowest level since September 2010, 10Y Italian bonds have pushed well above 7% yields and 510bps spread to Bunds as Unemployment rises to 8.6%, Belgian 10Y yields are over 4.5% – highest in 3 weeks, and the rest ofEuropean Sovereigns are all leaking wider (near wides of the year). Risk assets (CONTEXT) broadly are under pressure but ES (the S&P 500 e-mini futures contract) is holding off yesterday’s early morning lows for now. Commodities are all dropping fast with Gold (actually outperforming in this slide) back at $1615, Oil at $102.50, and Copper approaching $340. Treasuries are bid but trading in line with Bunds’ movements so far in general. Some chatter of ECB buying in the last few minutes is stabilizing things a little here.