Did the ECB just move to QE? That is the question of the morning as Italian bond yields nose dive. In recent days we have seen Central Bankers around the world warning that they stand ready to help with liquidity problems out of Europe. The action in the Italian bond auction this morning, without going into arcane details, tells us that maybe the ECB has caved in and bought bonds directly from the Italian government without sterilization. If so, Mario Draghi is stepping into overdrive and following Bernanke’s lead in monetizing debt. There seems to be no other choice as one of the world’s largest debtor nations stands at the brink. We are staring into the abyss. Are investors not paying attention or do they see more monetization on the horizon? This is THE question of the year. Watch gold and the Euro. They should give us our clues.
Yesterday’s global margin call brought forced selling as we expected. This morning the futures are rallying quite nicely. Are the underinvested at it again or do they see more QE, inflation and asset prices? We always look for a 1/3 retracement of the prior day’s fall when looking for strength. We have that this morning. Let’s see if they can hold. The bond vigilantes have taken over. There aren’t many statements left which can move the market higher. It is now time for action and more QE would move the market higher. The rules are about to change again.
Support for the Dow Jones is in the 11,400 area. Are the underinvested going to front run that area of support? They will try. It’s not how they open. It’s how they close. If Italy is imploding then why does Greece need to be saved? That is one to ponder as we move through this crisis. Greece may be the odd man out. Recession is back on the table in the US due to lousy wholesale inventory numbers. France is quickly moving to the front burner and Italy may soon find itself out in the cold. This crisis is picking up a head of steam and moving too quickly for the politicians to get out in front of. Is a bank holiday in Europe coming? Sounds positively prehistoric. Build scenarios and trade accordingly. Historic volatility. Hang on tight. Maybe even close your eyes a little. The seas are getting a little choppy. The crisis is on. Is there more QE on the way?
Answer: Teddy Roosevelt was the first sitting US President to make a trip outside the United States?
Today’s Question: The Mona Lisa is the most visited piece of artwork in the world. What is the second most visited?
A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty. – Winston Churchill
Disclosure: This blog is informational and is not a recommendation to buy or sell anything. If you are thinking about investing consider the risk. Everyone’s financial situation is different. Consult your financial advisor.