THE DOT - if this turns orange or red be alert

Tuesday, May 4, 2010

part 2

3. The market speaks for itself with todays price action - the short trades are fully confirmed and we can expect more follow through the next weeks. NDX has tested already the 200 daily ma level support today which is no obstacle at all to overcome the next days as the minimum short term target is 1900-20 for the first wave down. the complacement of the bulls is still too big to stop any time soon. Although we have quite aggressive put buyers today which could bring a little short covering before Friday and retest the neckline of the head and shoulder pattern around 1990 NDX and 1180 SPX.

4. The Euro has reached the minimum target 1.30 level but is poised to keep going even lower towards the 1.27 before a bounce can be expected. Actually it might be more than just a bounce as the same crowd which was calling the Dollar to be doomed are saying now similar things for the EURO.
As much as the PIIGS are in trouble plenty American states are as well. The overall debt of America is even worse compared to Europe even on the momentum side. Furthermore the weak Euro gives Europe a competitive advantage which America tolerates for now as it helps to sell the incredible amount of new debt they are issuing plus Europe has a higher saving rate compared to America. In a structural comparison the EU is better financed America has the more profound political structure of a real union. what I am trying to say that the doom song in the markets will be changed soon and focus will come back on a weak Dollar.


Treasury Refunding Upside "Surprise", Q2 Borrowing Higher Than Previous Estimate By $71 Billion, Sees September Debt Of $13.6 Trillion

Today the Treasury issued its quarterly Treasury Refunding statement in which it announced that previous estimate for Q2 borrowing were woefully below expectations. We are confident none of our readers are "surprised" by this development, although seeing how it is an "upside" surprise it will be further evidence of the benevolent decoupling of the US economy from the world. In a nutshell here is what Tim Geithner's payday lending operation announced: "During the April – June 2010 quarter, Treasury expects to issue $340 billion in net marketable debt, assuming an end-of-June cash balance of $280 billion, which includes $200 billion for the Supplementary Financing Program (SFP). The borrowing estimate is $71 billion higher than announced in February 2010. The increase in borrowing is primarily related to cash balance adjustments associated with the recent restoration of the SFP to $200 billion. During the July – September 2010 quarter, Treasury expects to issue $376 billion in net marketable debt, assuming an end-of-September cash balance of $270 billion, which includes $200 billion for the SFP." In other words, the Treasury itself, which chronically underestimates its funding needs by about 20%, sees $716 billion in net funding needs in 6 months. Zero Hedge is prepared to make a market (and no we won't disclose to you that you are idiots if you sell protection on this bet either) on this number actually being north of $850 billion. In April, the Treasury issued a net of $176 billion in total debt (includes Trust Funds and marketable debt), to end the month at $12,892,729,000,000. The final Bill redemption balance in April was a paltry $596 billion, or $675 including Bonds. Let us repeat: in April the US Treasury had to roll over two thirds of a trillion in debt. Assuming the treasury is correct, the Treasury balance will be $13.23 trillion on June 30, and $13.6 trillion on September 30.

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