This Is Not Likely the Cycle Low


Author Larry Berman

Posted: 12 June 2012 re-posted from etfcm

The TSX is developing a degree of an oversold bottoming pattern, but the fundamentals looking out for several quarters suggest that this is not likely the cycle low for this market decline that started in 2011. The giant band-aid that the ECB is going to place on Spanish banks could pacify the markets for a while, especially if Greece votes to stay in the EMU next week.

We saw S&P reaffirm the negative watch in the US, but suggested that any further downgrades would not come until closer to 2014 after the new administration gets a chance to tackle the longer-term debt issues. In the mean time, the reserve currency status and their ability to print money and monetize debt should tide them over.

The market could bounce a bit more than some expect, and for the TSX, it depends on the “risk on” trade and how commodities play out. The initial reaction on Sunday evening was a 2% plus jump in copper and crude, with a 1.5% jump in S&P 500 futures, faded once European banks opened for trading today.

 

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