Best of the Week
Most Popular
1.Gold Price Target of USD 2,300 - GoldCore
2.Greece Banking System Collapse Monday as ECB Pulls the Plug, Capital Controls Ahead of GrExit - Nadeem_Walayat
3.Why British Muslims Are Leaving Elysium Paradise for Syrian Hell - Nadeem_Walayat
4.Greece BANKRUPT! Financial and Economic Collapse to Follow IMF Debt Default - Nadeem_Walayat
5.Extreme Gold/Silver Shorting - Zeal_LLC
6.European Empire Strikes Back Against Greek Debt Fantasy, Counting Down to GREXIT - Nadeem_Walayat
7.Gold And Silver – Three Choices: Sell, Hold, Hold and Add. A Trading Treatise - Michael_Noonan
8.Gold and Silver Price Headed for Breakdown - Jordan_Roy_Byrne
9.Greece Crisis OXI - Raul_I_Meijer
10.Flatline Investing and Dead End Debt Schemes - Doug_Wakefield
Last 5 days
The Great Greek Economic Depression - 4th July 15
Happy 4th of July Stock Market Analysis - 4th July 15
The Most Pressing Reason Yet You Want to Avoid Investing in Retail Stocks - 4th July 15
Fed’s Full Normalization and the Stock Market - 3rd July 15
The U.S. Dollar's 2014-2015 Rally: Wave 3 in Action - 3rd July 15
Stock Market Where are we? And where are we Going? - 3rd July 15
Xi’s Anti-Corruption Campaign Is Key to China’s Prospects - 3rd July 15
How the New Iranian Nuclear Deal Will Impact Crude Oil - 3rd July 15
China's Stock Market Rollercoaster Ride Continues - 3rd July 15
Gold Stocks Cheap to Buy but Not for Long - 3rd July 15
Capital Controls and a Bank Holiday in Greece… Here’s How You Can Profit - 3rd July 15
Greece's Varoufakis: I will Resign if there's a 'Yes' Vote - 2nd July 15
The Student Loan Bubble: Gambling with America’s Future - 2nd July 15
Inflation Is Lurking, but This Asset Can Protect You - 2nd July 15
Three Total Wealth Stock Investor Tactics You’ll Need Because Greece Isn’t Over - 2nd July 15
Why This $5.6 Trillion Investor Profit Boom Is Set To Take Off - 2nd July 15
Greek Debt Crisis: "Too late to prepare now" - Video - 2nd July 15
Guaranteed US Dollar Death Dynamics - 2nd July 15
The Greek Stress Test & The Reality Of Incremental Changes - 2nd July 15
Forget Drachmas Greece Syriza Government Could Instruct Central Bank to Print Euros! - 2nd July 15
Greece Debt Crisis Trigger for Stock Market Crash or Bull Rally? Video - 1st July 15
Gold Stocks Break Below 2008 Low - 1st July 15
SPX Stock Market Retracement May be Over - 1st July 15
Silver Tunnel Vision 'Experts' - 1st July 15
Gold And Silver - Monthly, Quarterly Ending Analysis - 1st July 15
Europe’s Controlled Demolition - 1st July 15
The End of Dow 18,000; Bailouts No Longer Extended  - 1st July 15
Athens Mayor: Greek Government Should Resign - 1st July 15
China Stocks - This Is What a Bubble Looks Like - 30th June 15
Stocks Plunge on Greece Euro-Zone Financial Armageddon Blackmail - 30th June 15
Greece Crisis Shows Importance of Gold as Europeans Buy Coins and Bars - 30th June 15
Stock Investors Express Route to Profits in the Healthcare Sector - 30th June 15
Beyond the Greek Impasse - 30th June 15
Gold GDXJ : Impulse Move Pending - 30th June 15
Fed Interest Rate Increase Could Be Best Thing to Happen to Gold - 30th June 15
Marc Faber - Greece is Basically Bankrupt - 30th June 15
Greece - Shoot the Dog and Sell the Farm - 29th June 15
Grexit?, BIS Warning, Chinese Market Crash & Systemic Risk Shake the Global Economy - 29th June 15
The New "Sharing Economy" May Not Be the Profit Bonanza Everyone's Expecting - 29th June 15
Gold and Silver Greece and Short Positions - 29th June 15
Volatility and Sleep-Walking Markets - 29th June 15
Greece BANKRUPT! Financial and Economic Collapse to Follow IMF Debt Default - 29th June 15
Stock Market More Decline Ahead? - 29th June 15
China Stock Market Crackup - The Final Trap Looms... - 29th June 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

China Stocks - Where are they going?

Markets, Economies, Central Banks - All Out of Power!

Stock-Markets / Financial Markets 2012 Jul 07, 2012 - 12:38 AM GMT

By: Sy_Harding

Stock-Markets

Best Financial Markets Analysis ArticleHaving topped out into corrections in March and April, most global markets rallied back some in June, fueled by hopes that June’s unusual schedule of promising events would provide rescues for the eurozone and the U.S. economy. As those events arrived, if one or two failed to produce results, the rally only paused momentarily as there were still remaining events that might produce results.


But now we’re out of promising events for a while.

June’s first hope was that Spain would receive its requested bailout loans for its banks and Spain would go away as a worry. Next was the scheduled election in Greece that might prevent it from exiting the euro-zone. Then the G-20 summit on June 19 was hoped to produce a big coordinated global stimulus effort, and the Fed’s FOMC meeting was anticipated to result in new QE3 stimulus efforts for the U.S. economy. That was closely followed by the EU summit meeting and hope that it would result in a promising plan to control the eurozone debt crisis. This week it was that the European Central Bank and the Bank of England would cut interest rates at their meetings.

Markets won some, lost some.

Spain did receive the bailout loans for its banks. But the market’s euphoria lasted less than a day before it was realized that Spain’s government debt crisis was worse than its banking crisis.

The G-20 summit produced nothing except an agreement to continue to monitor conditions. The Fed’s FOMC meeting produced only an extension of the current ‘operation twist’ (which was already failing to halt the economic slowdown).

However, it seemed to get a big win last week from the EU summit, a major agreement to allow European banks to borrow directly from the established rescue programs, for the bailout funds to be used to buy the bonds of individual countries having difficulty selling their bonds to investors, and giving the European Central Bank more control over the rescue funds.

Unfortunately, the excitement over the agreement was short-lived when it was realized that much of the promised action would be delayed until the details are worked out later in the year.

But both the Bank of England and the European Central Bank came through with the hoped for interest rate cuts on Thursday. The Bank of England even included a degree of QE3 stimulus by adding to its bond-buying program. And China’s central bank chimed in with an unexpected rate cut of its own.    

Unfortunately, markets had apparently already factored those central bank actions into prices since they declined on the news, apparently also concerned about the next event, Friday’s U.S. monthly employment report.

And that jobs report was a disappointment. Only 80,000 new jobs were created in June. New jobs therefore averaged only 75,000 a month in the 2nd quarter, down  a big 66% from the average of 226,000 in the first quarter. That’s on top of all the other economic reports showing the 2nd quarter to have been much worse than the 1st quarter.

So the economy continues to run out of steam at a worsening pace.

The lack of positive response to the further monetary easing by central banks, and the biggest effort yet from the EU summit to contain the euro-zone debt crisis, indicates that central banks have also run out of firepower.

Can markets be far behind?

Consider also that ultimately stock prices are driven by corporate earnings, and Thomson/Reuters reported this week that warnings from corporations that their 2nd quarter earnings will not meet estimates are at the highest level in ten years.  

Bullish analysts are confident the dismal jobs report will force the Federal Reserve to rush in with the additional QE3 type of stimulus program they failed to produce at their FOMC meeting two weeks ago.

But the Fed was already reluctant to try to come to the rescue. In testimony before Congress Fed Chairman Bernanke denied that it was because the Fed has run out of ammunition, even though the positive effect of QE2 in 2010, and ‘operation twist’ last year, each lasted only six months before the economy ran into trouble again.

Now it faces the fact that the additional monetary easing by central banks in Europe on Thursday seems to have had no effect in reassuring markets, at least so far, with markets down two days in a row after the actions. That may have the Fed even more reluctant to follow with similar action. After all, if the Fed fires off what ammunition it may have left and it fizzles, what if more is needed down the road? It may be better to wait and keep markets hoping they still have something left for down the road “if needed”.

My forecast at the beginning of the year was for the market to top out in April into a tradable summer correction, and then launch into a substantial rally in the market’s favorable season beginning in the October/November time-frame.

I could be wrong. But so far, short-term rally attempts notwithstanding, it seems to be working out that way. June’s rally is beginning to look like a rally to be sold into, another opportunity for short-selling and profits from downside positioning in inverse etf’s.

Stay tuned!

Sy Harding is president of Asset Management Research Corp., and editor of the free market blog Street Smart Post.

© 2012 Copyright Sy Harding- All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2015 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Biggest Debt Bomb in History