Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Further Gold Price Pressure as the USDX Is About to Rally - 23rd Oct 20
Nasdaq Retests 11,735 Support - 23rd Oct 20
America’s Political and Financial Institutions Are Broken - 23rd Oct 20
Sayonara U.S.A. - 23rd Oct 20
Economic Contractions Overshadow ASEAN-6 Recovery - 23rd Oct 20
Doji Clusters Show Clear Support Ranges for Stock Market S&P500 Index - 23rd Oct 20
Silver Market - 22nd Oct 20
Goldman Sachs Likes Silver; Trump Wants Even More Stimulus - 22nd Oct 20
Hacking Wall Street to Close the Wealth Gap - 22nd Oct 20
Natural Gas/UNG Stepping GAP Patterns Suggest Pending Upside Breakout - 22nd Oct 20 -
NVIDIA CANCELS RTX 3070 16b RTX 3080 20gb GPU's Due to GDDR6X Memory Supply Issues - 22nd Oct 20
Zafira B Leaking Water Under Car - 22nd Oct 20
The Copper/Gold Ratio Would Change the Macro - 21st Oct 20
Are We Entering Stagflation That Will Boost Gold Price - 21st Oct 20
Crude Oil Price Stalls In Resistance Zone - 21st Oct 20
High-Profile Billionaire Gives Urgent Message to Stock Investors - 21st Oct 20
What's it Like to be a Budgie - Unique in a Cage 4K VR 360 - 21st Oct 20
Auto Trading: A Beginner Guide to Automation in Forex - 21st Oct 20
Gold Price Trend Forecast into 2021, Is Intel Dying?, Can Trump Win 2020? - 20th Oct 20
Gold Asks Where Is The Inflation - 20th Oct 20
Last Chance for this FREE Online Trading Course Worth $129 value - 20th Oct 20
More Short-term Stock Market Weakness Ahead - 20th Oct 20
Dell S3220DGF 32 Inch Curved Gaming Monitor Unboxing and Stand Assembly and Range of Movement - 20th Oct 20
Best Retail POS Software In Australia - 20th Oct 20
From Recession to an Ever-Deeper One - 19th Oct 20
Wales Closes Border With England, Stranded Motorists on Severn Bridge? Covid-19 Police Road Blocks - 19th Oct 20
Commodity Bull Market Cycle Starts with Euro and Dollar Trend Changes - 19th Oct 20
Stock Market Melt-Up Triggered a Short Squeeze In The NASDAQ and a Utilities Breakout - 19th Oct 20
Silver is Like Gold on Steroids - 19th Oct 20
Countdown to Election Mediocrity: Why Gold and Silver Can Protect Your Wealth - 19th Oct 20
“Hypergrowth” Is Spilling Into the Stock Market Like Never Before - 19th Oct 20
Is Oculus Quest 2 Good Upgrade for Samsung Gear VR Users? - 19th Oct 20
Low US Dollar Risky for Gold - 17th Oct 20
US 2020 Election: Are American's ready for Trump 2nd Term Twilight Zone Presidency? - 17th Oct 20
Custom Ryzen 5950x, 5900x, 5800x , RTX 3080, 3070 64gb DDR4 Gaming PC System Build Specs - 17th Oct 20
Gold Jumps above $1,900 Again - 16th Oct 20
US Economic Recovery Is in Need of Some Rescue - 16th Oct 20
Why You Should Focus on Growth Stocks Today - 16th Oct 20
Why Now is BEST Time to Upgrade Your PC System for Years - Ryzen 5000 CPUs, Nvidia RTX 3000 GPU's - 16th Oct 20
Beware of Trump’s October (November?) Election Surprise - 15th Oct 20
Stock Market SPY Retesting Critical Resistance From Fibonacci Price Amplitude Arc - 15th Oct 20
Fed Chairman Begs Congress to Stimulate Beleaguered US Economy - 15th Oct 20
Is Gold Market Going Back Into the 1970s? - 15th Oct 20
Things you Should know before Trade Cryptos - 15th Oct 20
Gold and Silver Price Ready For Another Rally Attempt - 14th Oct 20
Do Low Interest Rates Mean Higher Stocks? Not so Fast… - 14th Oct 20
US Debt Is Going Up but Leaving GDP Behind - 14th Oct 20
Dell S3220DGF 31.5 Inch VA Gaming Monitor Amazon Prime Day Bargain Price! But WIll it Get Delivered? - 14th Oct 20
Karcher K7 Pressure Washer Amazon Prime Day Bargain 51% Discount! - 14th Oct 20
Top Strategies Day Traders Adopt - 14th Oct 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Euro Crisis - What Crisis?

Stock-Markets / Financial Markets 2012 Aug 03, 2012 - 12:00 PM GMT

By: Christopher_Quigley

Stock-Markets Best Financial Markets Analysis Article"The European Central Bank indicated on Thursday (2nd. August) it may again start buying government bonds to reduce crippling Spanish and Italian borrowing costs but the conditions it set and the dissenting voice of its key German member disappointed markets.

In the latest move to contain the eurozone crisis, ECB President Mario Draghi indicated that any intervention would not come before September - and only if governments activated the euro zone's bail-out funds to join the ECB in buying bonds.


"The Governing Council ... may undertake outright open market operations of a size adequate to reach its objective," Draghi told a news conference after the central bank's monthly meeting, using the central bank's code for bond-buying.

The ECB kept euro zone interest rates at a record low 0.75 percent but Draghi said the council did consider a further rate cut on Thursday amid signs that an economic recession in peripheral European countries is spreading across the continent.

A Reuters poll of nearly 50 economists after Draghi spoke found t hat most expect the ECB to start buying Italian and Spanish bonds in September and to cut rates t o 0.50 percent.

Draghi was under intense pressure from investors, European leaders and the United States to deliver on a pledge he made last week to do whatever it takes to preserve the euro by bringing high borrowing costs down.

But shares and the euro fell after the ECB chief's remarks, and Spanish and Italian bond yields jumped, with Spain's 10-year paper vaulting over the 7 percent danger level.

"It is quite disappointing ... There is a lack of any action so he has basically passed the buck back on to politicians," said Ian Smith, strategist at Knight Capital."

So reported Reuters in Frankfurt yesterday. Since last Monday the ECB had hinted that on Thursday Mario Draghi would announce a "game changing" initiative. However his presentation to the press turned out to be a "non-press" conference. No new initiatives were propounded. On the contrary Draghi intimated that Italy would probably need to avail of a bailout in addition to Spain. Thus the European Stability Fund (ESF) which is supposed to be the great savior of Euro sovereign debt will be 40% "secured" by countries availing of bailouts. Four Euros out of every ten are the ESF contributions to be made by Greece, Portugal, Ireland Cyprus, Spain and Italy. Thus the "Bailout Fund" is in large part being bailed into by those countries actually bankrupt. Talk about the blind leading the blind. When will this farce end my American colleagues ask? Things have got so bad that two weeks ago the IMF reported that they would no longer contribute to any more ECB bailouts unless radical measures are taken to address the structural problems in the Eurozone. Draghi's presentation on Thursday was in part as a result of this American pressure however, his response was far less than what was expected and accordingly the Euro "crisis" is back on centre stage once again.

Today, Friday, Ireland's most influential newspaper; the Irish Times, had its main economics editor Dan O'Brien reporting that he has raised his probability of a breakup of the Euro from 15% to over 50%. This is mainstream media not some off-world blog. Such articles would not be appearing in premier publications unless the Irish establishment was actually preparing for the possible demise of the Euro. Across the Irish airwaves other economists were picking up on Mr. O'Brien's comments. They too reckoned the Euro would fall and soon. Jim Power, one of the top economists with an Irish bank, pointed out that the European "model" had failed. He believed like the Irish Times journalist that Germany was walking away from Europe and was deciding to tie in its lot with Poland, Russia and the East rather than the West. Strange times indeed.

Dow Theory Schizophrenia

I have been teaching stock market investment now for over two decades. One of the first modules I present in my course is  called "understanding the markets". The main conceptual paradigm I use in this exercise is Dow Theory coupled with Advance/Decline Line (ADL) analysis. In all my time monitoring and teaching Dow Theory I have never experienced such "schizophrenic" technical signals as those charted over the last 4 months.

I am not alone. At the end of April most Dow Theory commentators read a classic Dow bear market sell signal in the technical picture. The Dow 20 Transports had failed to break new highs set by the Dow Industrial 30 and then both indices broke below previous lows. This Dow bear trend had been forewarned by the ADL on the 16th April when the Dow Transports daily moving average (DMA) broke below the 50 DMA. However despite this "sell" signal, markets rallied and the 20 DMA on the ADL broke above the 50 DMA on July 5th. Thus in summary the bulls were killed in April and the bears were slaughtered June/July Thus Dow Theory is not giving the reliable technical signals it is historically renowned for.

In my view the main catalyst behind these confusing gyrations is the Euro crisis. In April the markets were reacting to the confusion surrounding the dire situation in Spain. By June as soon as the crisis appeared to have been solved the markets reacted accordingly. Thus I think it is fair to say that until the Euro crisis is finally resolved, either way, the markets can be expected to give very mixed signals. Markets do not like uncertainty and it is probably only once every 50 years or so that a "doomsday" event like the potential breakup of the Euro Zone appears on mister market's radar. Major crises spawn major confusion.

The political classes on both sides of the Atlantic should take this fact on board. The last thing the markets want is the current status quo to persist. We do not want 20 years of a stagnating Europe, al la Japan. Germany must decide if it wants to remain benefiting from a 100 billion a year trading surplus with its Euro partners and cough up to Euro bonds accordingly or it should revert back to the Deutschmark. Yes there will be fallout but as with Mexico in the 1989, Argentina in 1990 and Russia post 1991 there is life after default and devaluation. Such devaluation is exactly what Greece, Ireland, Portugal, Spain and Italy require to recalibrate its sovereign debt balance sheet and make their exports more competitive. History shows that the pain will be hard but it will short and sweet.

America on the cusp of a boom; if only?

The metrics of the American indicate to me that she is on the cusp of a boom once the Euro Zone issue is finally resolved. American companies are the most profitable, competitive and resourceful in the world. In valuation terms they and the stock market had gone nowhere since 2000, particularly when you allow for inflation. In a field of instability the American dollar is by far the most favored currency on the globe and its democratic/political system the envy of the world. So what's holding America back? What is the catalyst that will trigger this long awaited boom? In my humble opinion the fuse will be lit when, following a Euro Zone resolution (either way), the over 30 year bond bull market finally gasps its last breath. Then and only then will the stage be set for a boom in equities. We are nearly there but not quite. Yes this scenario will involve the raising of interest rates but rates cannot remain at zero forever. When FED policy changes it will be timed perfectly be under no mistake about it. All its ducks will be in a row and when it moves the effect of the American stock market will be substantial. This demise in the bond bull market will have the potential to create a wealth effect to match the Millenium tech boom. This in turn will influence the American real estate market, making a new secondary wealth strata. This real estate recovery will in turn recalibrate the value of American banks. This recalibration will place these financial corporations in pole position to take advantage of their less favorably placed European and Asian cousins. In other words I can see American banking institutions "buying up" bankrupt European banks, corporations and state assets. How long will this scenario take to play out? I am not sure but I do perceive the American establishment putting the pieces in place. I believe the City of London has been forced into a political cul-de-sac as a result of the horrendous LIBOR scandal. This will leave Wall Street the pre-eminent financial power house in the world and the dollar the undisputed reserve currency. All this augers well for Uncle Sam. I reckon for America the best has yet to come. Keep your powder dry and await the technical buy signals which will be breakout high on Industrials, Transports, Real Estate and American Financials. I repeat we are not there yet. I reckon following the September 2012 earnings season the imminent balloting in the American presidential elections will be an interesting time followed by what I reckon will be a watershed year - 2013.

Dow Transports: Daily

Dow Industrials: Daily

NASDAQ: New Highs- New Lows

Charts: Courtesy of Stockcharts.com

By Christopher M. Quigley

B.Sc., M.M.I.I. Grad., M.A.
http://www.wealthbuilder.ie

Mr. Quigley was born in 1958 in Dublin, Ireland. He holds a Bachelor Degree in Accounting and Management from Trinity College Dublin and is a graduate of the Marketing Institute of Ireland. He commenced investing in the stock market in 1989 in Belmont, California where he lived for 6 years. He has developed the Wealthbuilder investment and trading course over the last two decades as a result of research, study and experience. This system marries fundamental analysis with technical analysis and focuses on momentum, value and pension strategies.

Since 2007 Mr. Quigley has written over 80 articles which have been published on popular web   sites based in California, New York, London and Dublin.

Mr. Quigley is now lives in Dublin, Ireland and Tampa Bay, Florida.

© 2012 Copyright Christopher M. Quigley - 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 trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Christopher M. Quigley Archive

© 2005-2019 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

6 Critical Money Making Rules