Posts by "stationdealer"

http://www.morganstanley.com/views/gef/archive/2010/20100119-Tue.html

Morgan Stanley: Get Ready To Bottom Pick European Stocks


In their latest Strategy Forum, Morgan Stanley shows how European stock valuations are now lower then their 2003 trough. At the same time, the VIX, an (imperfect) inverse-indicator of sentiment is near past peak-levels.
Morgan Stanley's Graham Secker:
The 12-month forward P/E in Europe is now below 10X, much lower than the 16-17X reached in 1998 and compared with the long-run average of 14X. The trailing dividend yield is now 3.5%, compared with the 3.3% yield on a euro-weighted government bond. In terms of sentiment, the recent spike in the VIX was exactly what we saw in 1998. The AAII reading was recently at -21, versus the -22 trough n 1998. The put/call ratio recently peaked at 1.5, higher than the 1.3 reached in 1998.
...
The issue for us right now is that many key leading indicators are still at very high levels, meaning that the equity correction has happened sooner than in past cycles. Thus, markets may struggle in coming months as these indicators do begin to roll over. Then, once we start to get more clarity that the global economic recovery is actually sustainable, we would expect markets to rally quite hard.

The DOW has traded below 10,000 in the last few moments.
DOW down 2.35%
NASDAQ down 2.13%
S&P 500 down 2.25%
The acceleration is partially product of the euro, now trading below $1.20 and today's disappointing job numbers. More to follow...


David Rosenberg Explains Why The Jobs Report Was Even Worse Than It First Looked

With no need for introduction, here's Gluskin-Sheff's David Rosenberg on why the jobs report was even worse than the headlines suggest:

This is probably the first time on record when a 431,000 surge in U.S. nonfarm
payrolls was viewed as a terrible employment report. Perhaps this is because
411,000 of those jobs, or 95% of the tally, were in Census hirings, which
everyone knows are temporary.

Private payrolls were the real key for the market and the consensus was completely giddy believing that we were going to see a +180,000 print today. Instead, we got a putrid 41,000 increase, which is hardly significant in any statistical sense for once, the ADP survey looked optimistic. And of course, state and local governments are moving aggressively to get their fiscal position back into black ink and that means massive cost cutting. In May, this belt- tightening translated into a 22,000 retrenchment in employment in this part of the economy, which is 50% larger than the federal government.

Not only that, but a big red flag was clearly waved by the Household Survey,
where total employment actually fell 35,000 the first decline of the year and a
splash of cold water on the widespread view that this recovery was gaining
steam. Note too that the 41,000 increase in private payrolls marked a huge
slowing from +218,000 in April and +158,000 in March, and the diffusion index
sank like a stone, to 54.1% last month from 66.7%, so we have a situation
where nearly half of the universe of employers were either cutting their payrolls
or leaving them stagnant last month. This is not the hallmark of a robust V-
shaped expansion deserving of an 80% rally off the lows, which is what we had
on our hands little more than a month ago. Look for consensus GDP growth and
earnings revisions to start heading down in coming weeks.

The unemployment rate did manage to come down to 9.7% from 9.9% but this
was a pure statistical anomaly owing to the 322,000 plunge in the labour force.
Absent that decline, the headline jobless rate would have actually climbed back
to 10%. The broad U-6 unemployment rate also managed to drop, to 16.6%
from 17.1%, again owing to a sharp decline in the total pool of available labour
last month. (We have no idea where these 504,000 souls wandered off to
maybe all the students went to camp instead of looking for a job at the gas
station). We also had some new record highs being set:

i) The average duration of unemployment (34.4 weeks from 33.0 weeks in April);
and,
ii) The share of the unemployed ranks who have been out of work now for at
least a half-year (46.0% from 45.9%).

Anytime we have both the employment rate (58.7% from 58.8%) and the
participation rate (65.0% from 65.2%) declining the same month, you know you
have a very soft labour market on your hands.

I do not believe there is any mechanism in place in the Eurozone to actually leave the Euro. To join yes... but to leave no! Therefore if a country wanted to leave then it could be the financial equivalent of the cessation of the Confederate states from the Union and with all the implications that would involve. To be honest that may not be a true analogy because those states wanted to be out whereas the current pressure is to chuck the PIGS/PIIGS out. If Germany wanted to leave then that would be a more accurate situation.

The EU is a political union. It is also the largest trading bloc in the world. Its very easy to sit in a trading room and make judgements on the rest of the world. "Germany should leave or Greece should leave", without thinking of the consquences. It simply is not going to happen, not because of the economics but because there are other issues involved such as the security of the people, the past history and the sense of belonging to a union, Greece is a NATo country responsible for the defense of the southern cost of Europe, and much more..........

What we see right now acting on the markets is common sense and bad practices. Considering an Analyst, Economist, some professor of Econ, or a Politician gets a policy wrong, they can get away with it. But if a market participant gets it wrong that would mean the end of his/her firm or career. So for that reason market participant have room to manoeuvre till political-systematic risk diminishes or shows sign of recovery, some form of adjustments, or guarantees. Till political or systematic member do not come up with short and long term policies, market participants will continue to hold a negative outlook and continue to make pointless & wild assumptions regardless if it makes sense or not. They will even go as far as satisfying their reason with some historical data or formations, which we clearly know is not always correct in these current times. We saw that in 2007-08 US crisis and right now you might see it in play as-well. Main street media does not help during these crisis as their system is just to create panic and manipulate anything and everything.

However, I would point out one thing. It became clear to me on my last trip to Eastern Europe. The closest similar situation that we can use as an example of what can happen (and what to avoid) in case the Euro does break up would be the break up of the former Soviet Union into the CIS & the subsequent explosion in different currencies, systems & political instabiliies. Again, this is no ideal example but there are things (the dual currency regimes, etc... that could be used to show how systes operate.........just in case.

montmorency i was critical of that last night, here was I thinking panic stricken people are going to start selling at this rumour again but made very sure last night not to until it was confirmed. Just goes to show you most traders, and analyst's are confused as f*%$.........

This is what happens when something as little as man's ego get best of his wits. People are so damn sure that this Euro is going down that they forget to see signs of a bottoming trend forming and not considering it as a buying opportunity. May's over! we've gotten range bound like in feb into march. 12160 12640 will play for now as a range till we see some up side around end of June.

Thank God someone plugged that mother oil gusher. Most people do not realise but this is a big big big BIG environmental loss and for country like US that used, delayed the issue as long as it has prolonged. Shame on them! for using accident/disaster/or whatever as excuse to let this continue, I certainly hope their motive was not that it would create some more contractual jobs so no need to call an emergency, cuz that's what I think the local governors and Obama should have called in. That would be very sad. And shame on BP for let this go by play by play.

Long positions above 0.821 with targets @ 0.837 & 0.85 in extension.

Alternative scenario: Below 0.821 look for further downside with 0.807 & 0.7905 as targets.

Comment: the RSI is mixed and calls for caution.

Key levels
0.859
0.85
0.837
0.8226 last
0.821
0.807
0.7905