Via UBS Financial Services
Gold, Oil And Stocks Stay As Coordinated As the Rockettes – Things did not improve in Greece yesterday but they seemed to calm down a little bit. That kept the U.S. dollar below Monday and Friday’s highs. That, in turn, allowed the Troika (gold, oil and stocks) to move higher in lockstep.
The techs continue to stand out. Many are long cash and had no real exposure to the financial meltdown. The upbeat Intel report suggested that a round of technology upgrading may be evolving.
The buying tended to be broad. Advances beat declines better than 4 to 1. Advancing volume outpaced declining volume by a similar ratio. New highs swamped new lows 295 to 4. Net/Net it was a walk in the park for the bulls.
As just stated, the lockstep coordination of stocks, gold and oil strongly hinted the influence of a calming in currency markets.
The dip in volume was the only miss by the bulls.
Cocktail Napkin Charting – As noted in the market recap, the technical underpinnings of the stock market remain quite good. The new highs vs. the new lows and market breadth remain impressively strong.
The bulls may have picked up strength from another technical signal. Mark Hulbert discussed it in his MarketWatch column this morning. Here’s a bit:
What I have in mind is a rare buy signal that was generated a couple of weeks ago by a trend-following indicator with a good long-term record. Prior to the recent buy signal, there had been only 12 of them since 1967.
And two of those 12 prior buy signals occurred in the last 12 months alone. In other words, between 1967 and March 2009, this indicator gave just 10 buy signals -- an average of just one every 4.3 years. Since March 2009, in contrast, they have averaged once every four months or so.
That's a very friendly trend indeed.
The indicator in question comes from Ned Davis Research, the quantitative research firm. It generates a buy signal whenever the percentage of common stocks trading above their 50-day moving averages rises above 90%. Davis refers to such events as a 'breadth thrust.'
The recent buy signal, according to this indicator, occurred on April 5. The other buy signals over the last year occurred on May 4 and Sep. 16 of last year.
Hulbert then goes on to examine how the market performed after each of the prior signals. His mileposts were: the next month, the next quarter, the next six months and the next year. Even in the worst performance of this indicator, the mileposts were all plus. That’s quite impressive.
Tuesday’s rally punched through the first napkin resistance in the S&P (1202/1205). For today, napkins see resistance at 1212/1215. Support looks like 1192/1195.
Marinating With Mauldin – As I wrote last Thursday, I had two opportunities last week to marinate a few ice cubes with John Mauldin. First, was on Monday when John joined a non-plenary session of the Friends of Fermentation. John was very much the celebrity center of attention, so he and I didn’t get a lot of direct exchange. The second occasion was Wednesday evening when I dined with John, his lovely daughter Tiffani and her husband Ryan. At dinner lots of topics came up.
First, was the Greek crisis. We discussed the likely backlash in the streets of Athens to any austerity program. That could bring the government down and/or prevent the imposition of the kind of corrections needed.
On the other hand, a handout to Greece might topple the German government which does not have majority control. Greece needs to be able to revalue its currency – to devalue its way out of the crisis. They can’t devalue the Euro so one solution is for them to exit.
John even pondered whether Germany, itself, might wish to restructure the European Union or even exit itself. That thesis popped up in the marketplace several days later. As usual, John was ahead of the pack.
We’ll touch on other points discussed in coming days.
Consensus – Currency calmness is helping oil, gold and stock futures this morning. The IMF and ECB are expected to meet with Greek officials today. The bill to ban derivatives in FDIC banks may move in committee today. Be watchful and stay very nimble.
Trivia Corner
Answer - The answer to Little Simple Shoo's first question naturally had to be 'yes' whether from a liar or a truth teller. Since the second alien said the word meant yes he (or she) had to be a truth teller.
Today’s Question - Ends alike, still won't rhyme. Can you get these words that end with the same letters but won't help a poet? Example: Clown/Grown
Poet; Largest Amount
Milk Person (?); Not Plain
Garden Tool; New
Things You Wear; Needs
AN ENCORE PRESENTATION
On this day in 753 B.C., the Ancient and Eternal City of Rome was founded. For the first quarter millennium of its existence it was ruled by kings - starting with Romulus (part of a notable brother act with a doggy home life) and ending with Tarquinius Superbus. (If your king sounded like an oversize van, wouldn't you give up the monarchy?)
Next came the Republic: lots of success, gladiators, scholars, arch-ways, public baths, Spartacus and Caesar (but no salads). During this period, Rome dominated, educated and even enumerated virtually all of the known world. (Doubters may look up 'Census - Tiberius et. al.)
So - okay - you're sitting there saying 'I learned all that in sixth grade.' And you're also saying 'does that dope expect me to believe he knows the ancient date when Ancient Rome was founded.' Well...the answer is - Yes! You see it's the 'A.U.C.' thing.
If you were living in Ancient Rome and wanted to count time, it was tough. You couldn't do 'B.C.' since you couldn't anticipate the date of the birth you were counting before. (Huh?) So, without the birth of Christ as a date of demarcation, the Romans had a problem. If you were opening a toga shop, would you put on the letterhead....er....parchment head....e.g. 'Founded - ???'
At first they tried the obvious: 'In the third year of Romulus...' But that got to be a problem as new kings were envious of the names of old kings still having their names around on walls, letterhead, etc. Even worse, it could get confusing, 'Was he born in the second year of Pliny the III or the third year of Pliny the II'
So, the Romans opted for something a bit more permanent like the city itself. So, they began dating everything from the time the city was founded which you will recall from Latin class would be Ab (from) Urbe (the city) Condite (founding). Thus, they made cornerstones and time clocks possible. 'Annus 2768 A.U.C.'
Traders may have been watching the time clock yesterday as bulls continued to recoup more of Friday’s losses, albeit in light volume.
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