Beware the rally Friday - June 29 - Traders covering their short positions

Word has it the rally was from traders covering their short positions at last day of the month/quarter. Don't get suckered in with the muppets, do some research first. Traders also said they were selling into the rally.

The rally is not because anything has been fixed in Europe. Europe is patting itself on the back for being able to continue bailing water from their sinking boat.

As Greenspan said,

June 30, 2012 - "It's like a leaking boat in which we keep bailing it out, and we're very pleased with ourselves that we continue to keep bailing it out," Greenspan told CNBC on Friday...."The problem is, we haven't fixed the holes yet, and unless and until we can do that, this situation is not going to get resolved," he added. ... "My concern is that if Europe does not come out of this without some really serious problems, the rest of the world is going to be very troubled," he said.

IBT link

The US has it's own troubles, the impending fiscal cliff that neither party has the political will to tackle, plus the new Obamacare taxes loom ahead as an additional burden on the economy.

reply to post by Dbriefed


As an economic newb,(meaning me) you're saying then that the increase in the DJIA was a result of short-selling and we will see a sudden dive in American and European markets?

I thought Merkel caved on Spain and Italy demands for help.

Forgive me if I have this wrong.

reply to post by beezzer


Merkel probably capitulated and gave nothing more than in-principle support. There's absolutely no details or road map to rescue the Eurozone from these latest discussions. The market rally will soon fall again. I reckon easily before the end of this week.

Originally posted by surrealist
reply to post by beezzer

 

Merkel probably capitulated and gave nothing more than in-principle support. There's absolutely no details or road map to rescue the Eurozone from these latest discussions. The market rally will soon fall again. I reckon easily before the end of this week.

Thanks.

The reason why I'm so curious is because I watched the market fall on thursday after the SCOTUS ruling, yet saw it rebound on friday due to Merkels decision.

Or am I just over-simplifying?

reply to post by beezzer


Maybe a little but the truth is, markets did rally after the EU summit. The OP suggests there were other reasons for the rally, and certainly there were, but look at the Spanish and Italian markets, they surged over 5 per cent on Friday. This was obviously in reaction to the discussions at the summit. But once it becomes clear there is no detail or solution, the markets will fall again, and then pollies will convene yet another emergency meeting and come up with some more empty promises, markets will rally, and repeat.

I'm not sure what the American and European markets will do at the opening bell on Monday morning or if the Obamacare bill will make US markets momentarily rise on the news that the government is raking in more tax profits. Then fall again once businesses realise they are the ones paying more. In Australia I do expect the stocks to rise a fair bit on Monday morning because with our just instated Carbon Tax most companies can now hike their prices and make more profit. But it will all eventually come crashing down when people just can't afford to pay for items any more because they are taxed to the hilt already. I can't say I understand Obamacare as much as I do the Carbon Tax. So I'm not as sure which direction your markets will head, but I'm pretty certain the Aussie stocks will rise all be it temporarily.

The truth of the matter is as far as Obamacare, it's another revenue stream for the US government to tap for budget purposes, just like Social Security. Citizens pay into these funds and the Federal government uses these as bank accounts for unrelated other programs they don't have money for.

As far as a medical care system, the total sum of medical care for everyone is far greater than what everyone can afford to pay. It's another pyramid scheme.

This "Rally" in the currency markets last Friday. spiked on all cross pairs against the USD, EUR, GBP, CHF, etc. The tell on this was that GOLD also bounced. In otherwords someone, or peoples dumped a tonne of USD to make a short term kill on this. and they did. If you try and follow this, you will get wiped out.

Beware of the word rally and trying to jump on the tail of this Those early gains on Friday Morning, (Thursday night in the US) have already retraced to around -32% of the gain. which is the theoretical Fibonacci support point. Meaning wherever the FX goes from here is a coin toss. come Monday we have to look at the fundamentals again. but my feeling is you will see the USD start to strengthen a little as the hangover from Fridays celebration has worn off in Europe, and we'll see further sustained risk aversion and moves to protection in commodities, and going long on the USD. FOR NOW. in the medium term we have to see where this LIBOR scandal is going to take us, Recently it was said by Kissenger or Buffet, one of those old guys, that Europe needed a Lehmann Borthers moment, and low and behold, within the Month, we have Barclays scandal. This time the crap is going to hit the US from our side instead of the other way. and my position is whatever happens can;t be good.

Just to add, this is my own opinion, and I am only do this as a hobby. and it has cost me A LOT of money in losses.(only becuase I didnt have enough in to cover the risk spread. Usually my feelings are on the money in the end.)

reply to post by JakiusFogg


Agreed, there was a currency dump on Friday, that's why we saw oil up almost 10% on Friday! Along with Iran imbargo taking affect July 1st. Gold and silver also had very large gains. When you have a dump on currency the advers affect is a rally in stocks. Dollar drops and stocks rise because it now takes more dollars to purchase the same shares of stocks.

Let me make this simple for anyone wondering about bailout news. It is always bad news, because there is no excess capital available anywhere to bail anyone out. All it ever means is money will be created out of thin air or moved from one broke entity to another to temporarily try to make everyone feel like the problem is solved.

The problem cannot and will not EVER be solved until the excess debt is gone from the system. No amount of new debt can erase the old debt. This is why economic disaster is CERTAIN, the debt eventually has to be defaulted because it is impossible to be paid. Every new bailout simply means the eventual economic collapse has just gotten bigger, so that a little more pretend time that everything will be ok can continue. This will not work for much longer.

The only thing that can and ever will lead to healthy economies again, is if countries only spend as much as they bring in with taxes and not a penny more. Call that austerity if you want - I call it reality and so does the market.

One great solution would be to raise the salary worldwide, that would mean a tremendous inflation which will bring down state debts worldwide.
Prices would rise accordingly, but that won't be a problem if they do not rise more that salaries.
Think about it, a higher gdp equals lower state debt, more income for the governments, more money in the bank accounts.
The downside is, those who are rich, probably don't want this, rather they will want to keep their wealth and let the poor suffer.
Imagine the boost, suddenly people would be able to afford houses again, so they will likely go up in price again, bad loans turn good as people can repay them.
I would say a 100 percent rise in saleries, and most important, repair the mistakes that have led to this crisis.

Well i can dream

What you are asking for is hyperinflation.

And how could wages go up more than prices?

That would mean that real buying power increased out of thin air.

It could be done, yes, but it would mean that the elite lose a large share of their current buying power momentarily, so that fact alone makes it quite unlikely.

reply to post by earthling42


Yes raising the salary would be great! However I have never seen that
happen, only minimum wage increases and those increases keep getting
closer & closer to being the same wage as people who spent alot of money
for an education & some working more than one job trying to pay back student loans. I have no experience
in finances so (just throwing it out there) is this part of why the middle class is disappearing?
People who have to pay student loans forever plus all the normal bills never seem to
move up....maybe due to over the years of increases on minimum wage & no one else
& seems that now a you need more than a Masters or PhD often to just get by...
I always thought that for it to be fair that when minimum wage goes up that everyone
should have at least the same amount of increase....like I said I don't know anything
regarding finances & I do need to learn as the above has never made sense to me...
Thanks for the thread & the info from everyone.
I do have to say when I first saw the thread title with the date, I immediately in my own
mind thought about the Extreme High Winds that same evening...Fri 29 June. I was
literally in it camping with many others at a sheepdog trial. I don't know the extensive damage
as I just got home...was in Bath County VA near Goshen VA. Bloody Hell was Scary as it just hit! The winds didn't build up ALL hit at once....won't go into detail but just hearing about the extensive damage
kicked my brain into wondering...
Cheers
Ektar
Thankful I had power tonight!

Hyperinflation comes when printing is done in order to meet obligations of interest on debt that has risen beyond the capability of an economy.
When investors stay away, only printing is left as an option which will destroy the currency.
But if over a period of say 10 years people get a raise of 10 percent it should not lead to hyperinflation.
But it must be done worldwide, controlable inflation to lower debt burdens.

Debt has risen far more than the salary of the working class, this has been the case worldwide for more than a decade.
It is unsustainable if prices keep rising while people do not get a raise, everything simply becomes unpayable, leading to bad loans and less demand.

reply to post by Ektar


In order for a economy to produce and export goods, the salaries are kept low to keep labor cost down.
This is done so a economy is able to compete with other economies throughout the world.
But as we have seen, if people can't afford to buy goods or repay their mortgage because they do not earn enough, it puts the economy into a downward spiral.

Mostly the middle class is destroyed because many are in debt and can not afford to start a business nor find a job.
This affects the state income because on one side people need benefits to support their family and on the other side, a high rate of jobless people will mean less income out of taxation for uncle Sam to pay his bills.

Thats where the printing starts.

On the EU bailouts topic, remember in the US we started with a $700Billion bailout which was supposed to fix all the known issues. $2.7 Trillion was the second number we remember before we became numb to the dollars government was throwing away and we couldn't keep track of shadow bailouts and off-sheet debt.

Spain just said (ZH link) that Q2 GDP will be worse than Q1, the Spanish economy continues to contract. Their debt problem is not going to go away by adding more debt from the ECB. It's a bad sign when you run up your credit cards (ECB debt) to pay your mortgage bill (bonds).