China Attempting To Reign In Speculative Buying Across Its Economy
Richard Rhodes | Jul 08, 2013 02:03AM ET
The S&P 500 remains above the 160-wma long-term support level at 1333. The standard 200-dma support level is at 1511. Perhaps more importantly, the distance above the 160-wma has has now faltered below the +23% “bubble-like rally” threshold. This is definitely a warning sign, given that 1600 was violated to the downside.
Asian bourses closed sharply lower on Monday, whereas European bourses are trading sharply higher at the time of writing. The reason for this dichotomy is that China is in the process of “no priming the pump” in her economy, attempting to reign in speculative buying across the Chinese economy. In Europe, however, the ECB last week followed the Fed’s rhetoric of telling the markets they intend on “keeping interest rates low for an extended period of time.”
This is a change in tenor for the ECB, and it is giving rise to “risk-taking” across the investment landscape. We believe this comment was in reaction to the fact European bond yields were rising sharply across the European landscape, especially in southern peripheral countries such as Spain, Italy and Portugal. Previously, Draghi’s comments that European policy-makers were willing to do anything to preserve the Euro allowed the ECB to jawbone bond yields lower. This is exactly what is planned for now, and so far the markets are following his Pavloavian lead.
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