Monday, September 13, 2010

Blog For Sept 13

¹²Blog For Sept 13, 2010

By Bill Cara | 13 September 2010

Morning Call [7:42am ET] One only needs to see a few charts to see how the equity market is likely to be played out today. Basel III means that (i) Euro's will come home— just as Dollars would be repatriated to America if the Fed did the 'responsible thing' re the regulation of Wall Street banks, and (ii) Europe's bankers will put on a marvelous show, sniffing to the 'Great Unwashed' that tougher regulations will only mean stronger banks.

Europe's bank prices this morning showed lift-off and then zero follow-through. Chart of Australia's All Ord's showed lift-off and then zero follow through.

The stronger Euro has shot equity futures higher, but in time the independent traders of the world will realize just what's at stake here. This is about regulators trying to prevent the next financial system melt-down as banks try to clean up their balance sheets. Avoiding catastrophe is a great thing. The problem is, at what cost today? Too few people dwell on what's important. The cost is the reality; the future is our hope.

Nothing has been done by banks this weekend to (i) warrant higher share prices, and (ii) to make more capital available to the private sector— the wealth-building part of the global economy. Nothing has been done by governments to stop their spending and relieve the pressure on capital markets to come up with the funds needed to pay for their excesses. Give it some thought. Buy stocks on higher volume and a series of lifting prices based on the fundamental metrics in the companies getting better.

Yes, the futures are soaring, but for how long? If you trade based on momentum indicators here, you will get burned fast. There is still a lot of selling that intends to come out here unless the S&P manages to be lifted by frightened banks (using OPM) to a higher than 1130 level.

Have a good day.



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