Earnings Day in Brussels

• Posted by Derek
• on December 9th, 2011

What’s great about this EU Summit is it’s like an earnings event but on a macro scale.  Earnings come only once a quarter, and the market response often tells us both how folks are positioned and where they seek to position.  Other than the inevitable emergency meetings(rumored or real), this was it for awhile and the bureaucrats have had their chance to act…now markets take their turn to respond.  If we can get through the day with little drama, chalk this week up as a noisy but higher high and higher low for most indices.

We’ve seen 3 tags/failures at 200 day MA…the fact that we’re lingering just below it is encouraging.  Viewed another way, it could be said that we’ve spent the entire month of December consolidating above the 200 day if we use exponential vs. simple.  There should be no magic in a number measuring the average price from February til now, but the market’s volatility kicked in the day(August 2) we closed below it so clearly there is a reluctance by institutions to commit investment capital below it.  Funny that for all the noise, we’re trading this morning exactly where we closed on that day.

Until we have a clear resolution to this trading range, I just don’t see how the “All In” bet makes sense for longs or shorts.  The fact that 1/2 the stocks I track left November 25 behind as an area of maximum regret leans me to the bull side, but other than $XLP I lack confidence in a group that acts healthy enough to lead.  Investment money does have to find a home somewhere, and it doesn’t take much imagination to see megacap U.S. growth as a quasi-reserve currency…isn’t the hoarding of cash the reason the Occupy movement found support?  Perhaps it’s just money being parked, but with names like $PG, $PM, $WMT, & $KO it would take either a crushing bear or runaway bull to knock it from its perch…it’s the only one of the big sectors that has been able to get and stay above its recent highs:

A healthy market would bounce here, as Thursday’s close put $SPY into the 124 area that served as the launch point for the November 30 moonshot.  We’re pinned between the highly watched 50 and 200 day averages, with no real slope for either.  That won’t come until after we move away from them so given the stakes why place a bet right in the middle?  What’s most important is to do my daily work but be mentally prepared to act aggressively when this range ends.  The fact that we’re staring at headlines from Brussels shows the high level of underlying anxiety, but anxiety comes between the big move not during.  What will get me excited(and positioned) will be evidence of widespread regret for failing to get in gear with the major move; I’m hoping it comes soon and don’t much care which direction as long as it’s A direction.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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