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ie Market Brief
13th. November 2012 Technical Weakness Continues: The technical picture in the market continues to deteriorate. The divergence between the Dow Transports and the Dow Industrials has been resolved with both indices now adopting a bearish stance. The Dow 30, the Dow 20 and the NASDAQ are all trading below their 200 day moving averages. The S & P 500 is only 3 points above this important technical level. In addition, with regard to market breadth, the 20 day moving average has crossed the 50 day moving average on the McClennan Summation and the NYSE Advance/Decline Line. I am a great believer in market breadth indicators so I reckon we are on the cusp of a bear trend turning into a bear market. It is all in play as we speak but for me the deciding indicator will be the Dow Transports. As mentioned in the October brief, should this index break below the 4850 level decisively, in all probability the bear trend will have gained "legs to last". Many reckon that the "fiscal cliff" will be quickly sorted and that the positive trend in the American economy will resume. I am not so sure. This was no "ordinary" election. The Republican Party, following the "tea party revolution", is not the "normal" Republican Party. The issue is no longer simply economic. It has become one of identity and meaning, thus the party has become "evangelical". Previously a democratic president could always rely on doing a deal with some breakaway republicans to swing a mandate. Not so today. Any republican that breaks ranks will be seen as a total traitor to a higher cause and banished. This was why there was no fiscal breakthrough last year. The same dynamic will make it even more difficult to negotiate a resolution this second time around. The closer the economy gets to the cut-off date the more volatile the situation is going to become and I read in the technicals that the market sees a difficult time ahead. I hope I am wrong and that the Transport Index holds. Dow Industrials: Daily

Dow Transports: Daily

NASDAQ: Daily

S & P 500; Daily

European Trauma: The European saga with regard to austerity continues apace making one wonder what American and Chinese politicians think of the sham that is Eurozone "financial management". Spiegel Online: 11th. Nov. "The disbursement of the next loan tranche to Greece will be significantly delayed, German Finance Minister Wolfgang Scheuble confirmed. "At the moment I do not see how we can come to a decision on Greece and with Greece at the end of next week, it would be too early," Scaeuble told an economics forum in Hamburg. We are not out of the woods with Greece yet, he said, according to news agency Reuters. Last week, the German minister had said that the troika still has plenty of unanswered questions on Greece and that its work is far from over. According to Reuters, Schauble added that for a large majority of eurozone countries a debt restructuring for Greece is not legally possible. EU Economic and Monetary Affairs Commissioner Olli Rehn also stressed on Thursday last that there remained a few more steps to take before the Eurogroup makes its final decision on Greece. There is no denying that it [Greece's debt] is increasingly unsustainable without further measures, Rehn told reporters in Brussels. Earlier in the week, in an interview with Reuters, Rehn had said that the IMF, EC and ECB troika were working with the Greek government to find a way to cut the debt to a more

sustainable level. "It is important to look at ways and means to reduce the debt burden of Greece. We are currently doing this together with the IMF and the Greek government and it may be a combination of factors related to the length of maturities and level of interest rates of official loans," Rehn said. "However, no haircuts of official loans are on the agenda and they are not necessary," Rehn added." Greece needs a reprieve in the next few days else its public employee and bond interest cheques will start to bounce. The European Commission will do anything to keep Greece in the Euro and is thus in favor of granting her longer repayment terms and debt write-off. Yet Germany refuses to publicly consider a new bailout. The IMF is also on the side of maintaining original terms. Somebody will have to square all this by the end of the week. It's my guess that Germany and the IMF will be brought to heel, as the formal bankruptcy of Greece would lead to its immediate departure from the Euro and this cannot be contemplated. There is nothing like the abyss to open folk's minds and wallets. Meanwhile in Spain the austerity measures continue to tear the social fabric apart. 400,000 homes are in foreclosure with no end in sight. Prime Minister Mariano Rajoy held emergency meeting with banks yesterday to try to implore them to become more lenient with borrowers. This initiative was forced on him following widespread outrage when Amaia Egana, a 53 year old woman from the Barcalda district, committed public suicide when banks tried to force her from her property. In the Catalonia region of North Eastern Spain things have become so bad that there is now a growing movement to secede from the Spanish state. Regional president Arthur Mas, who favors secession and wants to hold a referendum, is expected to be re-elected November 25th. King Carlos had stated that secession could lead to the total breakup of Spain and a collapse of the Catalonian economy. He has vowed to prevent it. The Catalonian populace, in the majority, wants to withdraw from the Spanish state but remain in the Euro. The European Commission has gone on the record saying that this would not be possible. In France, Great Britain and Italy authorities are getting tough with large American public corporations that use strident tax avoidance measures to mitigate taxes. The representatives of entities such as Google, Amazon, Ebay and Starbucks have retorted that what they do is totally legal and within the remit of current international tax treaties between the US and the Eurozone. One British parliamentarian who was interviewing these corporate executives in London yesterday went on the record saying; "yes your actions may be legal but they are not moral". I reckon that as austerity measures continue to bite across Euroland we will see more and more attacks on favorable tax avoidance measures. This trend can only adversely affect the profitability of international corporations operating throughout Europe, bringing with it more uncertainty, instability and risk to corporate financial planning and assessment. Charts: Courtesy Of StockCharts.com (C) Christopher M. Quigley 13th. November 2012