Turnaround Tuesday is upon us but someone evidently forgot to send Europe the memo.
Consistent with our (16-month-old) Five-Step Guide to Contagion
, the bag, previously possessed by Greece, Ireland, Portugal and Italy has found its way into the hands of Spain and France. Indeed, the cost of insuring French bonds is a record high while yields on Spanish debt rose. All the while, the honeymoon in Italy is apparently over, much the way Fil Zucchi predicted last week
I suppose you can't blame the markets for their concern. Angela Merkel recently said, "Irish problems are Slovak problems, Greek problems are Dutch problems and Spanish problems are our problem...our responsibility does not end at our borders." True dat Angie; welcome to the other side of globalization, population YOU.
It probably doesn't help that the German Chancellor's ruling party voted to allow euro states to quit the currency area, effectively endorsing a move that currently isn’t permitted. That's akin to your spouse walking into the kitchen one morning and saying, "I love you honey, I really do...but feel free to date whomever you want."
Remember, because this is at the heart of the issue: credit of a different breed -- that of credibility
-- is the issue at hand for markets at large. The crisis in confidence has been percolating
for years now and yes, it too is cumulative.
Europe doesn't have a monopoly on psychological stress. I woke up this morning to news that police in riot gear stormed Zuccotti Park (the "sweep" was by most accounts peaceful), the NBA season is all but done (it's hard to be empathetic when multi-millionaires pinch pennies), political brinkmanship is good and think (into the election) and the Oracle of Omaha -- the world's most famous value investor who by his own words "doesn't understand tech" -- bought a ton of IBM
(IBM) at all-time highs.
The whole thing is nutty, I'll tell ya; and I won't even talk about MF Global
(MFGLQ.PK) -- I’m still hearing horror stories -- or the general malaise that continues to, for lack of a better word, creep
into our collective consciousness. Social mood and risk appetites shape financial markets, not the other way around.
is the level of lore while BKX 40
continues to lend a hand on the shoulder of bears looking for short-side assurances. On the upside, the S&P 200-day -- along with the trendline connecting the three lower highs -- will come into play in and around 1270, if and when.
Click to enlarge
My sense is that they'll try to take them higher this morning and the reaction to that Snapper should tell the tale for the rest of the session. We will, as always, be covering the nuances in real-time on our Buzz & Banter (two week free trial!).
N's over S's (NDX out-performance of S&P) was a dominant theme yesterday, although I must note that the belle of that four-letter ball—Apple (AAPL)—is quietly down $28 (7%) over the last four sessions.
While wearing my black-on-black Raiders lid over the weekend—first place and all—someone called me a "bandwagon." Imagine that! A bandwagon Raider fan! It’s been a long time.
Take the high road; it’s less crowded and has a better view. And no, it’s not always easy these days.
While earnings were by-and-large better than expected (74% of the S&P beat expectations), the single most bullish catalyst for the year-end market is hope. Hope that Europe buys time, hope that we get the green light on QE3, hope that social mood doesn't erupt (more than it already has). While any (or all) of those could happen, we would be wise to remember that hope should never be actionable catalyst.
As some of you may know, LOUIS XIII has graciously offered to donate a three-liter Jeroboam to The Ruby Peck Foundation for Children's Education. We'll be running the auction through Festivus and some lucky duck will be walking away with the only such item available in America. Take that, Karl Marx!
It's already the holidays and both the NASDAQ and S&P—and the dollar, for that matter—are more-or-less hugging the flat line for 2011. That’s a lot of energy expended running to stand still.
An optimistic Hoofy would offer that they've thrown the kitchen sink at this market (Europe, stateside brinkmanship) and we’re still treading water. See both sides; this year will be made or lost in the final innings.
I'm long the journey and short the destination, so to speak, but I do believe we must deleverage on a global scale to effectively reset the system. That doesn't mean I won’t be bullish or bearish or neutral on any given day—naturally; there are shekels on that path—but the backdrop is worth repeating. Once you see the entire probability spectrum, you can map your risk profile and time horizon accordingly.
Fare ye well into the bell and may peace be with you.
No positions in stocks mentioned.