The collision of global markets and social mood

Thursday, August 14, 2014

Failed Overnight Ramp, Negative German GDP, Negative German Rates, Upper Targets & Lower Stops

Another weak close coupled with another overnight futures ramp that seems to have failed.

Futures hit a new rally high early this morning and gave it all back. Perhaps Europe had something to do with it. Germany's negative GDP figures probably spooked traders, and France's flat GDP didn't help.

German bunds (their 10yr) dipped below 1% for the first time. German 2yrs turned negative. Deflation is getting louder.

Deflation is echoing here too. The Import Price Index just fell -0.2% led by the largest one month drop in automobile prices since 1992.

The drum beat for further stimulus should continue for the ECB and the Fed to add more fuel, only the fuel they're adding is the cause of the problem. The fuel is essentially artificial demand for broken debt markets.

Broken debt markets can only be healed by a return of risk to the price of debt. Stock markets around the world will hate that.

The 1965-1967 area remains a valid target area along with the 1970.07 gap. 1928.29 is the hard stop for this scenario.

The rally is starting to show signs of marked weakness, with yesterday's NYSE volume (a proxy for S&P volume) 63% lighter than the July 31st downdraft.

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