Enis’s Macro Wrap – Quiet, Weak Markets

by Enis July 25, 2012 7:50 am • Commentary

Quiet, weak markets are good markets to sell.  They ordinarily develop into declining markets.  But when a market has gone through the stages of quiet and weak to active and declining, and then on to semi-panic or panic, it should be bought freely.”

Dickson G. Watts, in Speculation as a Fine Art and Thoughts on Life, 1880


Though Mr. Watts’s comments are from 1880, in markets with vastly different circumstances, the psychology of market participants remains the same, and will remain the same.  Human psychology dominates markets, just like it did in 1980, or 1880, or 1780.

In my mind, we are transitioning from a quiet, weak market, to an active and declining market, and we are still a ways away from a market in semi-panic or panic.  From Thursday’s close to yesterday’s close, the SPX is down almost 3%, but the 3 day average volume ranks in the lower half of the last year.  It is still a relatively quiet market, and a dangerous one at that.


Markets reversed their post-AAPL earnings losses overnight, after comments by ECB board member Nowotny suggested a potential change in stance by the ECB regarding expansion of the ESM rescue fund.  (I also think the market is just naturally relieving a bit of its oversold condition).

  • The Euro led the risk-on rally, starting around 3 am EST, moving from 1.2050 to 1.2150 vs. the Dollar
  • After Asia closed broadly in the red, European indices rallied, and are trading up about 1%, led by Spain and Italy up around 2%
  • Commodities are broadly higher, Treasury bonds lower, and SPX futures indicating a slightly higher open
  • Busy earnings day (Pepsi, Ford, Caterpillar, Visa, etc) and New Home Sales the only economic data point, out at 10am