Non-Confirmations Still Persist
The S&P 500 has recently made a new high, in short the rebound from the mid October low has not failed at a lower high. Therefore, the clock has so to speak been reset. However, as our updated comparison chart between SPX and the major euro-land indexes shows, there is now a third divergence in place between them, and this one is even more glaring than the first two. Keep in mind that there such divergences have not always been meaningful in the past. However, when global markets are drifting apart, it is a sign that the global economy is no longer well-synchronized. Given that the Fed’s “QE inf.†is in relative pause mode (we hesitate to say it has ended), the situation is certainly worth keeping an eye on.
A third divergence between the SPX and the major continental European stock markets is now in place – click to enlarge.
ECB Meeting and Central Bank Coordination
There will be an ECB meeting this week, and possibly the central bank plans another surprise announcement, although we actually doubt that at this point. While the rate of change of euro-land CPI has continued to decline, the BuBa is implacably opposed to “QE†involving government bonds, and with three different liquidity pumping measures already in place, there is surely a case to be made for the ECB to wait for their “success†before embarking on even crazier schemes.
We only mention this because it seems highly likely that the recent Fed, ECB and BoJ actions were subject to coordination. Let us not forget, these people regularly meet (in secret) at the BIS. It is not a secret that these meetings are taking place on a regular basis – secret are only the details and what is discussed there. Let us just say that everything that has recently happened in terms of central bank decisions smacks of a coordinated effort. Even the jawboning seemed to be coordinated at times.
As noted in this recent report at Der Spiegel, “deep divisions have emerged at the ECB†over putative plans to expand QE into the sovereign bond arena. The usual pablum about the alleged “dangers of deflation†is mentioned of course, but as the article also points out, the “success†of QE is actually impossible to gauge, since no-one can possibly know what would have happened without it.
