Wednesday, February 22, 2012

Things giving me pause

I am seeing a giant caution flag being waved high above the market, its giving me pause regarding my long positions, reassuring me of my shorts, and just downright worrying me about where we're headed.
But then again, the Dow just reached 13,000, so what could go wrong? Well here are just a couple things that are on my mind:
1. From a technical perspective the market is smack against resistance.
2. The ECB plans to end the LTRO program. This program gave European banks much needed access to capital, and added liquidity to the markets. Now it seems the ECB is intent on closing this spigot.
3. The ECB just announced their Greek bonds' have "super seniority" (thats the technical term). This seems an all too clear sign the ECB is preparing for a greek default, the bond market seems to be pricing this in, but the stock market is NOT.
4. Margin compression in US companies. Margins are at all time highs, and you can only cut so much fat before you start cutting into muscle and bone. It looks like margins will begin to compress.
5. The Obama administration wants to raise taxes, and the republicans want to implement austerity. Both of which will depress US consumer spending.
6. ~50 % of the growth in GDP during the current "recovery" has come from exports. Now Europe is in full fledged crisis and China is slowing, US exports will not be sustainable (especially with a stronger US dollar).
7. Tensions between Iran and Israel are escalating, and oil is already above $100 a barrel. Even if there is no immediate war, if oil stays at this level it will be a serious drag on the global economy.

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