Investorstoday

Friday, October 14, 2011

Weekly Wrapup, October 14, 2011


Earnings season started and the market continued to churn higher ignoring bad earnings reports from Alcoa and JP Morgan instead focusing on Google and the more than successful launch of the iPhone 4S.

The iOS 5 upgrade was a bit of a disappointment but Siri is more than making up for it.  It seems as though Steve gave her a sense of humor and if you search tumblr there might be a slightly NSFW site up with the stuff that siri says. 

Back to the markets, the S&P 500 moved up through the initial downtrend line and now sits at an important resistance level that has defined the fall rally.  A move through this point next week would put 1250 as the next resistance level. 



I would turn bullish but there remain a number of significant problems on the ledger and these problems are not the climb the wall of worry type. 

The first has to do with Greece and the continuing problems.  It appears as though they will get their money but in a foreboding sign the EU is pressuring banks to raise capital immediately, which of course makes that job even more difficult. 

Rumors are floating that the Greek write off will be raised to 50% but as Slovakia there is discontent brewing under the surface.  In addition, there are rumblings coming from Italy and Spain was downgraded on Friday.

Next weekend is a meeting where the market is hoping Europe finally makes some decisions regarding Greece.  The problem with giving the Greeks their bailout is that they have yet to make any structural reforms and continue to struggle doing so.  This creates a moral hazard risk.

Once Europe get resolved next weekend (hopefully) eyes will turn back to the US where Congress faces a deadline over budget cuts.  Expect the political rhetoric to heat up as the deadline approaches and I would not be surprised to see the markets begin to run into some selling pressure and pull back shortly.

In fact, if the markets kept rising to new highs I would be worried. 

The problems in Europe and the US are triggering some interesting technical patters in both gold and silver as seen below.





If banking earnings next week are weak and ignored my concern would continue to grow.

In short, risk has not gone away but it may be taking a short vacation.

Look for articles next week on Seeking Alpha regarding the third quarter production reports from selected gold and silver stocks, the USD, and others.

Have a great weekend.






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