Happy Friday the 13th!
We reached our target range (1380-1400) for the H&S pattern to set up [see: Analog Details], hitting 1388.13 yesterday. The shoulders are still a bit lopsided, but that's not especially problematic.
I would prefer to tack on another 10 points or so before the trip down, but this morning's dip feels pretty convincing. We'll want to keep an eye on the little channel that guided the past two days. And, of course, a break of the neckline at 1361 would complete the H&S pattern, signaling a nominal target of 1305.
I've added the alternative path to 1462 that we discussed yesterday (purple, dashed). A strong bounce at or above the neckline would bust the H&S pattern and signal a rapid rise to the 1462-1472 level
Along with the worse than expected University of Michigan Consumer Confidence report, worse than expected Chinese GDP growth and worse than expected results from JPM and WFC [see: What Do Bankers Dream Of?], the situation in Spain is getting ugly.
Today, we learn that Spanish banks increased their borrowings from the ECB by 50% over the past month alone -- from 152 billion euros to 227 billion euros (the same 75 billion euro increase as Italy reported last week.)
As we pointed out yesterday, the Spanish 5 yr CDS hit a near-record 491 bps. This morning, the 10-year surprised no one by topping 6%.
We all remember the drama over the Greek default, when CDS amounted to $3 billion net. Spanish net notional is reported to be nearly $15 billion, on $173 billion of gross. For every buyer of insurance, there is a seller. And, although the chains of title may be hundreds or even of thousands of transactions long, somewhere there are bankers sweating bullets over how this is going to end. Hint: not pretty.
More later.
We reached our target range (1380-1400) for the H&S pattern to set up [see: Analog Details], hitting 1388.13 yesterday. The shoulders are still a bit lopsided, but that's not especially problematic.
I would prefer to tack on another 10 points or so before the trip down, but this morning's dip feels pretty convincing. We'll want to keep an eye on the little channel that guided the past two days. And, of course, a break of the neckline at 1361 would complete the H&S pattern, signaling a nominal target of 1305.
I've added the alternative path to 1462 that we discussed yesterday (purple, dashed). A strong bounce at or above the neckline would bust the H&S pattern and signal a rapid rise to the 1462-1472 level
Along with the worse than expected University of Michigan Consumer Confidence report, worse than expected Chinese GDP growth and worse than expected results from JPM and WFC [see: What Do Bankers Dream Of?], the situation in Spain is getting ugly.
Today, we learn that Spanish banks increased their borrowings from the ECB by 50% over the past month alone -- from 152 billion euros to 227 billion euros (the same 75 billion euro increase as Italy reported last week.)
As we pointed out yesterday, the Spanish 5 yr CDS hit a near-record 491 bps. This morning, the 10-year surprised no one by topping 6%.
We all remember the drama over the Greek default, when CDS amounted to $3 billion net. Spanish net notional is reported to be nearly $15 billion, on $173 billion of gross. For every buyer of insurance, there is a seller. And, although the chains of title may be hundreds or even of thousands of transactions long, somewhere there are bankers sweating bullets over how this is going to end. Hint: not pretty.
More later.
