A Lot Of Bearish Noise That Still Needs Price Confirmation

In addition to the woes from yesterday, when the market's focus on credits of Dubai and Greece were joined with industrial production alerts from Germany, today Japan discloses its miss. But wait for that a second.

Still yesterday, BNP Paribas commented on European manufacturing:

Overall, despite the recent upward trend, output is still well below its levels prior to the crisis (Chart 3, see below). This is one of the reasons why we remain cautious on the recovery and believe the policy rates in most advanced economies will stay low for a longer time than what the market is currently pricing in.

Click on chart to enlarge, courtesy of BNP Paribas.

Today analysts at Societe Generale go further as they write the title of daily economics publication:

European growth may stall as fiscal stimulus wanes

and expand on it as follows:

One of the key themes of our recent ‘Global Outlook’ was the likelihood of a growing divergence in the growth in the US and the euro area. That was supposed to be a theme for 2010, but this week’s manufacturing data out of Germany suggest the divergence may be more immediate. Increasingly, it looks as if much of the earlier than expected recovery in the euro area was almost entirely down to the impact of fiscal stimulus. Car incentives, in particular, have been very effective at restarting manufacturing demand.

Click on chart to enlarge, courtesy of Societe Generale.

Well, I noted the trick of global manufacturing in September, but it was more than obvious in October. However, the US consumer is probably rolling over, as I already noted last Friday. Jamie Dimon, the CEO of JPMorgan Chase, was neither optimistic about the bank reserves, nor consumer credit too. I was curious also looking at the chart of JPMorgan's stock price. Technical deterioration continues, but rally is not over just yet ... however, it may get really nasty, also due to fundamental reasons, and not only due to loss of momentum.

Now, we are back to the Japanese story, as they revised the initial estimate of real GDP growth in 3rd quarter only more than 3 times lower. More than 3 times miss ... on investments and inventory. BNP Paribas has more details for you.

Well, but the reversal of fortune is not yet confirmed in my eyes. What I am waiting for? First of all, I am still ready for an exhaustive bull's leg higher in risk markets, but positioned with defensive tilt. On the defensive side, I wait for new reaction lows below November levels in:

EUR/USD currency exchange rate should move below 1.46
WTI Light Crude Oil below 72 USD
S&P500 moves below 1084
US 10 year Treasury Note yield below 3.20%

On the European side of the pond the conditions appear somewhat more fragile at the moment ... and some positives (Dow Jones Transports, Korea ... ) are visible elsewhere.