china white
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Morning Comment - 06.07.2010.
Good morning! 2 things here – one technical, one regarding sentiment.
1. A “death cross” is on the way. A “death cross” is when the 50-day moving average crosses below the 200-day moving average. This juicy buzzword which sounds like it was concocted in the times of Edward I and Eleanor of Castile is viewed to be a deadly technical signal by many. It may, and probably will occur soon on the S&P 500’s chart. Let us re-visit the history though. The “death cross” formation historically has resulted in a 0.4% drop in the S&P the month after, but the market traditionally gains nearly 5% in the ensuing six months! A 5% gain in six months is hardly “deadly”. Brightest example – 2004 when the “death cross” on S&P was followed by a 3-year long bull market!
2. More importantly – funny thing is that at this juncture it is nearly impossible to find a bull among the growing sloth of bears. Which is a good indicator markets will reverse northbound. It will be easy for them to do so given massive “intrinsic” liquidity in the market (seasonal “summer” value removed).
Important milestone in this summer-dead market will be next week when European banks will reveal how well they passed (or otherwise) the stress-test. They are NOT obliged to do so, however chances are noone will be hiding – just for the sake of not BEING SEEN hiding!
RUSSIA: Yesterday we had extremely low volumes due to closed US market, most liquid shares traded flat. No surprise that activity in small cap names was almost zero - we had only sellers in DIXY, buyers in BANP prefs, some buyers in TGKs, sellers in discos.
Good morning! 2 things here – one technical, one regarding sentiment.
1. A “death cross” is on the way. A “death cross” is when the 50-day moving average crosses below the 200-day moving average. This juicy buzzword which sounds like it was concocted in the times of Edward I and Eleanor of Castile is viewed to be a deadly technical signal by many. It may, and probably will occur soon on the S&P 500’s chart. Let us re-visit the history though. The “death cross” formation historically has resulted in a 0.4% drop in the S&P the month after, but the market traditionally gains nearly 5% in the ensuing six months! A 5% gain in six months is hardly “deadly”. Brightest example – 2004 when the “death cross” on S&P was followed by a 3-year long bull market!
2. More importantly – funny thing is that at this juncture it is nearly impossible to find a bull among the growing sloth of bears. Which is a good indicator markets will reverse northbound. It will be easy for them to do so given massive “intrinsic” liquidity in the market (seasonal “summer” value removed).
Important milestone in this summer-dead market will be next week when European banks will reveal how well they passed (or otherwise) the stress-test. They are NOT obliged to do so, however chances are noone will be hiding – just for the sake of not BEING SEEN hiding!
RUSSIA: Yesterday we had extremely low volumes due to closed US market, most liquid shares traded flat. No surprise that activity in small cap names was almost zero - we had only sellers in DIXY, buyers in BANP prefs, some buyers in TGKs, sellers in discos.