Labour Day is done, the holidays are over, schools and colleges are back: game on. Expect one wild ride in the markets between now and the November US presidential election results.
Internally the technicals are weakening. There is a significant divergence between the Dow 20 Transports and the Dow 30 Industrials. The Dow 20 is moving towards lower lows and a break below 4850 will be an indication that the overall market is going to move much lower, fast.
UK Crash Expected:
With the London Olympics now more or less over the absence of sporting construction and service dollars is beginning to be felt throughout the British economy. The UK is already in recession, as is most of Euroland, but the figures going forward for UK GDP data are going to be far worse than expected. This will not augur well for City institutions which are already reeling from numerous financial scandals.
Spanish Bank Runs and Struggling Deutsche Bank:
There is a fully fledge bank run ongoing in Spain that is not being adequately reported in the mainstream news media. In June $70 billion dollars left their system. In July it was $92 billion which is 4.7% of total banking deposits. This means that from January to July of this year $368 billion or 17.7% of total banking deposits has fled Spanish institutions. Previously this money was heading for Switzerland and Germany but with the truth filtering out concerning the weakness of German and Swiss banks alternative destinations are now being chosen. The emerging weakness of Deutsche Bank is a particular worry for the ECB and the situation is being exacerbated by a sharply contracting German economy. As reported in Spiegel today:
“Euro Crisis Starts to Bite. German Export Orders Fell Sharply in August.
Exports are a major pillar of the German economy, but now the sector is starting to feel the impact of the euro crisis and the global economic slowdown. German export orders fell in August by the highest rate in more than three years, the Markit financial information company announced Monday after conducting a survey of 500 industrial firms.
“Survey respondents commented on a general slowdown in global demand and particular weakness in new business inflows from Southern Europe,” the institute said. The firms hardest hit by declines are manufacturers of machinery and other investment goods as well as producers of intermediate goods such as chemicals.
In the first half of 2012, German exports had still grown thanks to demand from Japan, the United States and Russia. But it was already evident then that exports to crisis-hit countries were falling sharply, and that trend is now continuing.
Markit economist Tim Moore said the German industrial sector is going through its worst quarter — the three months to the end of September — in more than three years.
“The new orders figures are especially disappointing, with export work dropping at the fastest pace since April 2009 amid an ongoing deterioration in global demand,” he said in a statement.”
Mini Flash Crashes:
I have noted over the past few months that the “flash crash” syndrome, which nearly collapsed the market on May 6th. 2010, has not been sorted out by the powers that be. This ongoing problem has major implications and the fact that regulators have not fully solved this manipulation is very very serious. I list below two charts for your consideration. I fervently request my American colleagues to write to their elected representatives to implore them to use their influence to finally end this travesty. Its ongoing presence is undermining the integrity and future of the US stock market.
Example 1. Monster Beverage Company (MNST) 30th. April 2012.
Note: price moved from $65 to $83.96 and quickly back again, a total change of 18.9%.
Example 2. Dollar Tree Stores Inc. (DLTR). 16th. August 2012
Note: price moved from $38.40 to $49.11 and quickly back again, a total change of 27
(C) Christopher M. Quigley 4th. September 2012
- Euro Crisis Starts To Bite – German Export Orders Fell Sharply In August (freeinternetpress.com)
- German businesses now fear for their future exports (worldbulletin.net)
- [Analysis] The battle for banking union (euobserver.com)
- Deutsche Bank Blames Euro Crisis For Earnings Plunge (dealbook.nytimes.com)
- European banks under substantial pressure: Deutsche Bank report (news.xinhuanet.com)
- Mark Gongloff: Deutsche Bank’s Internal Libor Investigation Finds Deutsche Bank Mostly Innocent (huffingtonpost.com)