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Wednesday Technical Review: Ramping and Rumors.

  • Written by Syndicated Publisher 462 Comments462 Comments Comments
    December 8, 2011

    A late day rumor that the G-20 was considering a $600 billion loan to the IMF to facilitate the purchase of EU debt via the ECB sent markets rocketing higher as emotions continue to run very high into tomorrow’s two-day meeting.

    Earlier in the day though the IMF, not a rumor said they had a capital shortfall in excess of $120 billion. And surprise at 1:59 the IMF denied the rumor of this bailout.

    Perhaps the following comment from a German official should be a cause of concern “I must say I am more pessimistic than a week ago about reaching a comprehensive deal. Several partners do not realize how serious the situation is.”

    This market though is so headline driven people cover and or initiate new longs without even considering the news source and if it has any relevance to the actual problems facing Europe. Beyond the noise (which is the purpose of this site right?) there are some interesting developments within equities and sentiment.

    Sentiment is shifting

    Below is a five day intraday comparison chart between the vix and the SPX. Notice how the first three days the two would move inversely as they should. Notice the change over the past two days with the vix rising along with equities. So even though equities are rising concern among investors is growing.

    Divergences within equities

    Notice how the Russell 2000 (small caps) and the Mid Cap 400 (mid caps) put in significantly lower lowers today and failed to put in higher highs unlike the SPX. Also notice the SPX and how it continues to remain within the July downtrend. The mid caps and small caps are showing greater weakness than the SPX as a sign of a possible shift in direction.

    Russell

     

    Mid Cap

    SPX

    Images: Flickr (licence attribution)

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