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rpt-MTA-2012-07-cu-Peek

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Published by lcmgroupe
Monthly Market Analytics & Technical Analysis
July 2012 Edition

Gordon T Long 7/12/2012

1 July 2012 Edition
Copyright 2012 © Gordon T. Long All Rights Reserved

Restricted & Confidential
general@GordonTLong.com

Monthly Market Analytics & Technical Analysis
JULY 2012
SUBSCRIPTION SERVICE: PLAN IV
BIG PICTURE - KEEPING YOUR PERSPECTIVES ..................................................................................................................................... 7 HIGHLIGHTS - WHAT YOU N
Monthly Market Analytics & Technical Analysis
July 2012 Edition

Gordon T Long 7/12/2012

1 July 2012 Edition
Copyright 2012 © Gordon T. Long All Rights Reserved

Restricted & Confidential
general@GordonTLong.com

Monthly Market Analytics & Technical Analysis
JULY 2012
SUBSCRIPTION SERVICE: PLAN IV
BIG PICTURE - KEEPING YOUR PERSPECTIVES ..................................................................................................................................... 7 HIGHLIGHTS - WHAT YOU N

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Published by: lcmgroupe on Jul 12, 2012
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1
 July 2012 EditionRestricted & Confidential
Copyright 2012 © Gordon T. Long All Rights Reserved general@GordonTLong.com
 
Monthly Market Analytics & Technical Analysis
 
July 2012 Edition
Gordon T Long7/12/2012
 
 
2
 July 2012 EditionRestricted & Confidential
Copyright 2012 © Gordon T. Long All Rights Reserved general@GordonTLong.com
 
Monthly Market Analytics & Technical Analysis
 
JULY 2012
SUBSCRIPTION SERVICE: PLAN IV
BIG
 
PICTURE
 
-
 
EEPING 
OUR 
ERSPECTIVES 
..................................................................................................................................... 7
 
HIGHLIGHTS
 
-
 
HAT 
OU 
EED TO 
NOW 
..........................................................................................................................................10
 
SUMMARY ANALYSIS ......................................................................................................................................................... 10 
 
"BERNANKE'S BOX": Political Pressures greater than Escalating Economic Pressures ............................................. 14 
 
Defining Chart #1 - Long Term ......................................................................................................................................... 14
 
Defining Chart #2 - Long Term ......................................................................................................................................... 15
 
Defining Chart #3 - Intermediate Term ............................................................................................................................. 16
 
Defining Chart #4 - Short Term ........................................................................................................................................ 17
 
OUR
 
APPROACH
 
-
 
ACRO 
A
NALYTICS 
...............................................................................................................................................19
 
............................................................................................................................................................... 20 
 
JULY 2012: Global Macro Drivers ...................................................................................................................................... 21
 
DRIVER: Real Wealth, Commodities & Dr Cooper ........................................................................................................... 22
 
DRIVER: Carry Trade & the € : ¥ Cross
.......................................................................................................................... 24
 
DRIVER: Currency & Forex Markets ................................................................................................................................ 26
 
DRIVER: Yield, Spread & Credit ...................................................................................................................................... 30
 
RECIPIENT: Global Equities ............................................................................................................................................ 33
 
RISK: Risk-On versus Risk-Off........................................................................................................................................... 34 
 
RISK: QE III: August FOMC ............................................................................................................................................. 34
 
RISK: Option Pricing Sentiment ....................................................................................................................................... 35
 
RISK: Transitioning Risk-Free Returns to Return-Free Risk ............................................................................................. 36
 
TECHNO-FUNDAMENTALS ................................................................................................................................................ 38 
 
PATTERN: Federal Reserve Has "Effectively "Doubled the S&P 500............................................................................... 38
 
PATTERN: Trader Sentiment - Intermediate Term Buying Climax Forming ...................................................................... 43
 
PATTERN: Has M2 Money Supply Peaked & Will It Take the Market With it? .................................................................. 44
 
PATTERN: Slowing Global Growth Points to Continued Deceleration in S&P 500 Earnings............................................. 46
 
PATTERN: Political Pressures Will Force Bernanke's Hand with a third "QuEen" ............................................................ 49
 
PATTERN: 2008 Comparisons to All Time Worst Bear Markets ....................................................................................... 50
 
PATTERN: If Japan was About De-Leveraging, then US & the EU are De-Leveraging .................................................... 51
 
PATTERN: Nikkei & Disinflation ....................................................................................................................................... 52
 
PATTERN: Central Banks & Liquidity Injections ............................................................................................................... 53
 
OUTLOOK
 
-
 
A
NALYTICAL
A
NALYSIS 
.....................................................................................................................................................55
 
STUDY: Q2 Earnings Season - Warnings & Pre-Announcements ................................................................................... 55 
 
EARNINGS: Pre-Announcements A Major Concern ......................................................................................................... 55
 
EARNINGS: Warning Season Worst Since Q4 2008 Financial Crisis ............................................................................... 56
 
EARNINGS: At +9.7%, Q2 Earnings are Still Too High ................................................................................................... 58
 
STUDY: Foreign Earnings Concerns - Both A Revenue & Currency Translation Problem ............................................ 60 
 
EARNINGS: European Revenue Dependence ................................................................................................................. 60
 
EARNINGS: Asian Concerns ........................................................................................................................................... 61
 
BUSINESS CYCLE: Q2 Sector Performance & Rotation .................................................................................................. 62
 
STUDY: Second Half Earnings - The Real "Fiscal" Cliff ................................................................................................... 64 
 
EARNINGS: Q4 Optimism Unfounded & Due for a Fall .................................................................................................... 64
 
EARNINGS: H2 Earnings Slump ...................................................................................................................................... 65
 
STUDY: Presidential Year Cycles - Without the Fed, Bernanke is Toast! ........................................................................ 68 
 
PRESIDENTIAL YEARS: The Unemployment Rate is Everything .................................................................................... 68
 
LABOR REPORT: Employment Continuing to Fall Further Behind Labor Force Growth Requirement Trend ................... 72
 
JOB GROWTH: Presidential Year Politics ........................................................................................................................ 74
 
REFERENCE: PREVIOUS STUDIES STUDY: Any QE III Rally Will be Short Lived ..................................................................................................................... 75 
 
 
 
3
 July 2012 EditionRestricted & Confidential
Copyright 2012 © Gordon T. Long All Rights Reserved general@GordonTLong.com
 
Macro news is falling short of expectations almost everywhere ........................................................................................ 75
 
Fed balance sheet expansion and US equities were, for a while, correlated .................................................................... 77
 
Growth concerns, not systemic risk, are now unsettling markets. ..................................................................................... 79
 
STUDY: Market Being Distorted - Unprecedented Historical Debasement Occurring .................................................... 80 
 
Nominal versus Real - (Don't Fight the Fed)
x
................................................................................................................... 80
 
STUDY: Marginal Propensity of Liquidity Injections ......................................................................................................... 86 
 
If $2Trillion a Quarter is Still Insufficient to Move Markets, How Much is Enough? .......................................................... 86
 
STUDY: The Potential "DELUSIONAL DISTORTION" ........................................................................................................ 88 
 
 A Near Term "Scare" ....................................................................................................................................................... 88
 
Then More Pumping, More Distortion ............................................................................................................................... 89
 
SHORT
 
TERM
 
 –
 
ECHNICAL
A
NALYSIS 
................................................................................................................................................90
 
SUPPORT & RESISTANCE ................................................................................................................................................. 90 
 
Gann Analysis.................................................................................................................................................................. 90
 
Boundary Conditions ........................................................................................................................................................ 92
 
Channels & Regressions.................................................................................................................................................. 94
 
Fibonacci - Controlling Time Extensions .......................................................................................................................... 96
 
Elliott Wave ...................................................................................................................................................................... 99
 
SENTIMENT - Consumer, Investor & Trader .................................................................................................................... 103 
 
Consumer Confidence - Conference Board .................................................................................................................... 103
 
Consumer Sentiment - Michigan .................................................................................................................................... 106
 
Consumer Comfort......................................................................................................................................................... 107
 
Investors Intelligence ..................................................................................................................................................... 109
 
 American Association of Independent Investors ............................................................................................................. 109
 
National Association of Active Investment Managers (NAAIM) ....................................................................................... 110
 
Small Business Optimism .............................................................................................................................................. 111
 
Smart Money / Dumb Money Confidence ....................................................................................................................... 112
 
Percentage Stocks Above 50 & 200 DMA ...................................................................................................................... 113
 
Margin Levels ................................................................................................................................................................ 114
 
Mutual Fund Cash Levels v S&P 500 ............................................................................................................................. 118
 
OSCILLATORS & BREADTH: Indicators of Importance ................................................................................................. 120 
 
NYSE Overbought / Oversold ........................................................................................................................................ 120
 
OEX Open Interest (Puts/Calls) ..................................................................................................................................... 121
 
TRIN .............................................................................................................................................................................. 122
 
McClellan Oscillator ....................................................................................................................................................... 123
 
INTERMEDIATE
 
TERM
 
 –
 
ISK 
A
NALYSIS 
.......................................................................................................................................... 124
 
RISK SUMMARY- Aggregated Global Financial Risk Index ............................................................................................ 124 
 
Banking Risk - LIBOR-OIS Spread (Updated) ................................................................................................................ 125
 
Banking Risk - TED Spread (Updated) ........................................................................................................................... 125
 
Credit Risk - Global Credit Default Swaps (Updated) ..................................................................................................... 125
 
Credit Risk- EU Credit Default Swaps (Updated) ........................................................................................................... 126
 
Consumer Risk - Housing- Rate of Change (Reference) ................................................................................................ 127
 
Economic Risk- ECRI Leading Index (Updated) ............................................................................................................. 129
 
Inflation Risk- Money Supply Growth - M3 (Updated) ..................................................................................................... 130
 
Inflation Risk - Money Velocity (Updated) ....................................................................................................................... 130
 
Monetary Risk - Bank Liabilities (Updated) ..................................................................................................................... 131
 
Cost of Money Risk - Interest Rates (Updated) ............................................................................................................. 132
 
 AGGREGATED RISK LEVEL ........................................................................................................................................ 133
 
EARLY MAY - Everyone Is Suddenly Nervous ................................................................................................................ 134 
 
Nervousness: GREECE: Investors Flock to Safety as Euro-Exit Fears Rise .................................................................. 134
 
Nervousness: FRANCE: Showdown in Europe: Hollande Takes on Merkel and Draghi, Insists on Renegotiation of Merkozy Treaty .............................................................................................................................................................. 135
 
APRIL- Complacency the Biggest Risk ........................................................................................................................... 136 
 
Complacency: US Equities Ignoring US Sovereign Risk Warning .................................................................................. 136
 
Complacency: US Equities and Treasuries Decouple - Déjà Vu .................................................................................... 138
 
Complacency: Five Reasons For Caution in US Equities ............................................................................................... 139
 
Complacency: Five Reasons For Caution in US Equities ............................................................................................... 142
 
Complacency: It's Time to Dial Back on Risk ................................................................................................................. 145
 
Complacency: Complacency Measures are High ........................................................................................................... 147
 
Complacency: Exhibit A, January Volume ...................................................................................................................... 149
 
Complacency: Volume Crashes ..................................................................................................................................... 150
 

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