OK, my bearish opinion is clear, but am I missing something? Following up on last week’s post (What The Hell Does This Mean ?!?!?!?), I would have expected this to get a bit more attention. Not like Iran or some despot crackpot regime praising Allah that we will be wiped off the map again this week … this is Russia threatening Europe?!? WTF.
Russia threatens military response to US missiles…
“MOSCOW (AP) - Russian President Dmitry Medvedev is warning his country may respond to a U.S. missile shield in Europe through military means. Medvedev says that the deployment of an anti-missile system close to Russian borders “will of course create additional tensions.”
“We will have to react somehow, to react, of course, in a military way,” Medvedev was quoted as saying Tuesday by the RIA-Novosti news agency.
S&P: Home Prices Drop by Record Amount in 2Q- AP A widely watched housing index shows home prices dropping by the sharpest rate ever in the second quarter.
FDIC: Bank Profits Fell by 86 Percent in 2Q- AP U.S. banking industry profits plunged by 86 percent in the second quarter and the number of troubled banks jumped to the highest level in about five years, as slumps in the housing and credit markets continued.
The Aug 22 rally was short lived, with Monday’s price action reversing all gains (Morning DOW - Stay Short). As the attached daily chart highlights, this bounce and failure should be viewed as a re-test of the low end of the wedge pattern, and the result is not good. This suggests to me that the entire rally since the Jul 15 low, 10812, is a continuation pattern, and should see prices return to the Jul low at a minimum. Stay short, or sell strength for 10800, and potentially 10300. Good luck & good trading !
Some technical setups for your consideration this fine Monday morning. Starting with EUR/GBP, it appears as if the cross is finally making a breakout to the upside of the range that has been in place since Apr. Need to hold .7914 to maintain a bullish bias, min targets are at the 2008 high, .8097. The measured target out of the range seeks .8025 (Forex Outlook - EUR/GBP Poised For Upside Breakout).
And USD/CAD has corrected off of the 1.0726 high following the early Aug breakout, falling back on top of the old range. This should be a re-test of the breakout, look for 1.0378 to hold for new buying. Plenty of room to go to the upside yet.
Stocks Point Higher on Prospect of Lehman Buyout- AP Wall Street appeared headed for a higher open Friday, as a pullback in oil and the growing chance that Lehman Brothers Holdings Inc. could be acquired drove investors back into the stock market.
“…And on Friday, after the previous day’s media reports that discussions between Lehman and a group of Korean banks had fallen through, another media report emerged that Korea Development Bank is considering buying Lehman. Lehman shares jumped more than 14 percent in premarket trading.”
The attached daily chart clearly highlights the recent breakdown, as the contract has traced out a bear flag between 11509 - 11286 for the past 4 sessions. Stay short or sell into the upper end of the range, all trend and momentum measures continue to point to lower levels from here. A break below 11286 should trigger a new round of selling, offering a measured target of 11063, just above the 20-day low, 11101. Happy Friday !
UPDATED: As you read this consider and share a general view of what would happen to the USD? No idea. Equities and gold would clearly have a one way direction. Bonds too. Oil and Nat Gas? Like the USD, who knows, but share some thoughts as to a potential outcome of a confrontation scenario.
UPDATE 8/21: U.S. Destroyers Head To Black Sea On Humanitarian Mission. Stars and Stripes Pacific edition, Friday, August 22, 2008. “The Turkish government has given permission to three U.S. ships to enter the Black Sea as part of relief efforts in Georgia, a U.S. official confirmed on Wednesday. However, Defense officials would not confirm that the ships are headed to Georgia. ”
As mentioned last week (Disconnect ??), there suddenly appears to be signicifant unknowns in the geo-political arena that are hiding just beneath the surface. Aside from this week’s renewed concerns about financials and inflation (Inflation, credit worries slam Wall St.), I tell you this can blow sky high. Time to get very defensive.
SHOWDOWN: RUSSIA VOWS SHIELD RESPONSE BEYOND DIPLOMACY“MOSCOW (AP) - Russia says its response to the further development of a U.S. missile shield in Poland will go beyond diplomacy. Russia’s Foreign Ministry issued a statement saying the U.S. missile shield plans are clearly aimed at weakening Russia. The U.S. says the missile defense system is aimed at protecting the U.S. and Europe from future attacks from states like Iran. The United States and Poland signed a deal Wednesday to place a U.S. missile defense base just 115 miles from Russia’s westernmost fringe”. UPDATED: I have this feeling we will all be shocked shortly … Crisis: Russia digs in within Georgia, threatens response to Poland “beyond diplomacy”; Update: Russia freezes ties with NATO? Aug 20, 2008 3:45 PM by Allahpundit
The DOW appears to have finally broken the low end of the rising wedge pattern I have been highlighting over the past 2 weeks (DOW & USD, DOW - Get Ready For Sharp Break Lower), setting the stage for a larger decline into the end of the summer. As the attached 240-minute chart indicates, sell any rallies back into 11530-575. We should see an initial move into 11101, then a re-test of the range low, 10812.
More good news to start the day …. Ex-IMF chief says big US bank to go under…
SINGAPORE (Reuters) - The worst of the global financial crisis is yet to come and a large U.S. bank will fail in the next few months as the world’s biggest economy hits further troubles, former IMF chief economist Kenneth Rogoff said on Tuesday. The U.S. is not out of the woods. I think the financial crisis is at the halfway point, perhaps. I would even go further to say ‘the worst is to come’,” he told a financial conference. “We’re not just going to see mid-sized banks go under in the next few months, we’re going to see a whopper, we’re going to see a big one, one of the big investment banks or big banks,” said Rogoff, who is an economics professor at Harvard University and was the International Monetary Fund’s chief economist from 2001 to 2004.
Now, my guess is that this is likely correct, but the target is not. He suggests Freddie or Fannie, but I am thinkning Citi or something completely earth shattering to bring the crisis to an end. Meaning a total flush out, and death of the sector for a very long time. Just a guess ………..
I mentioned this weekly chart back on Jul 30 (Morining DOW - Rally Buys More Time, Outlook Remains Bearish), said I was early then, so here we are …. shares of PAAS are trading just above 2003 trendline suppoer, 20.20. I am staying with the long term trend, buying here for a min move back to the 40-week SMA, 34.40.
