Thoughts on markets today – I don’t trust the rally

October 13, 2011

Global Macro

What a difference a week and the plan for a plan can make to the performance of markets. After last week’s pessimistic crescendo there was always going to be a snap back as we discussed at the time and with the continuing fresh news coming out of Europe of more plans for plans and saving the banks and increasing the haircut Greece gets seem to be filling investors with confidence I am a skeptic.

Indeed the price action last night suggests that maybe markets might have reached their initial targets and that this feels like a dead cat bounce.

In the past hour Martin Andersson the Director General of Sweden’s Financial Supervisory Authority is on Bloomberg saying that he,

We don’t see any positive signs…things are getting worse and, of course, then you are concerned about liquidity and solvency…. 

We might end up in a situation similar to what happened in 2008…and then of course there will be problems with liquidity 

Even when he tried to be positive it left me a little cold,

The banks now have better liquidity management. They are much prepared for this uncertainity that’s in the market right now and potentially worse turbulence.

It is his reference to 2008 that worries me because as someone who sat at the coal face of banking in 2007/08 and 2009 when everything happened it feels very reminiscent again now. Also as someone who uses technicals and charts as an input into my models and considers himself a behavioural finance/economics guy i reckon the increased volatility (read emotion) and the chart patterns also feel reminiscent of 2008.

What ever the fix we get from Europe for Greece they want to make sure they bring the Howitzer not the pop gun because once Greece is done Ireland can quite rightly put their hand out and ask for help. And then it begins again.

 

And don’t forget the ECRI and their indicator of US growth. They called a recession as inevitable in the world’s biggest economy last week. I think they are right and i think that Europe has a Japan like low growth future ahead of it, i believe that the BRIC countries are catching hiccups and so I believe that global growth is going to be on the lower side of expectations.

So fo me I trade the market in front of me but I’m a seller of rallies – it’s just a matter of from what level. 

Please remember these are not recommendations for you to trade these are my views and I have my risk management tools and risk parameters that you do not have access to. Thus, this blog is for information only and does not constitute advice. Neither Greg McKenna nor Lighthouse Securities has taken your personal circumstances, objectives or financial situation into account. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs.

If you do need economic, investment or financial advice we are happy to help.

Please Email the team at Lighthouse at info@lighthousesecurities.com.au or Greg directly on greg@lighthousesecurities.com.au

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