Wealthbuilder Market Brief September 10th

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Wealthbuilder Market Brief 10th

. September 2013

The Dow Industrials, Transports and the S&P are range bound with the NASDAQ in a

bullish breakout.

The Syrian Conflict pullback is over and the market is back in bullish mode, particularly theNASDAQ which has just given a bullish breakout signal.

For the third time the 1480ish level on the Dow Transports has held. With this support holding,

the bull trend is back in business on the Industrials the Transports and the S&P. However, theyare range bound.

Within this apparent overall strength however there is much technical weakness about when you

start to drill down a bit into specific stocks, particularly consumer staples. This development iscausing me to worry somewhat and indicates that all is not completely rosy in the economic

fundamental garden.

For example of the 10 top holding in the bell-weather consumer staples ETF: XPL, 5 are trading

at or below their 100 DMA (PG, PEP, CVS, CL and MO) and another 3 are trading at or below

their 200 DMA (KO, PM and WMT). Apparently this technical weakness is due to bad guidancemoving forward which is not a good omen for the health of the overall world economy. This may

also explain why so many companies, in the broader market, are trading below recent highs.

Thus caution is warranted.


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A German calm before a European storm.Even with the slight prospect of a war breaking out between Syria and America there is an eerie

calm around Europe. There is one reason for this and one reason alone: the German Federal

elections to be held on 23rd

. September. As Ulrich Beck of the Guardian reported:

It may look as if the chancellor is dozing on the volcano of the European crisis: but that will all

change if she wins a third term

With Germany's federal elections taking place in late September, a visitor to Berlin these days

might expect the city to be raging with debate on Europe. Surely the streets are alive withEurosceptics wailing for the return of the mark and impassioned Europeans demanding "ever

closer union". In fact, Germany is oddly detached. So far the campaign has focused on US

intelligence surveillance, the rising cost of energy and childcare facilities. Military intervention

in Syria may become an issue but that's it.

In Sunday night's TV debate, Angela Merkel, the Christian Democrat chancellor and her main

opponent, Peer Steinbrck of the Social Democrats, came out more or less equal (though polls

show that Steinbrck performed better at convincing previously undecided voters which arestill as many as one in three). Europe was one of the first items on the agenda, yet both

candidates seemed eager to move on to more comfortable terrain. Germany, the key to solvingthe euro crisis, seems immune to a truly polarising dispute over alternatives, especially since

none are available for free.

Since the start of the crisis, many governments across Europe have been swept from power.

Germany's, on the other hand, has never looked more secure. Germans love Merkel. Why?


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Because she asks little of them. And because Merkel is practicing a new style of power politics in

Europe, which I have calledMerkiavellism: a combination of Machiavelli and Merkel. "Is it

better to be loved or feared?" Machiavelli inquired in The Prince. His answerwas that "one

ought to be both feared and loved, but as it is difficult for the two to go together, it is much saferto be feared than loved, if one of the two has to be wanting".

Merkiavelli is applying this principle in a new way. She is to be feared abroad, and loved at

home perhaps because she has taught other countries to fear. Brutal neoliberalism to the

outside world, consensus with a social democratic tinge at home that's the successful formulathat has enabled Merkiavelli constantly to expand her own position of power and that of

Germany as well.

There's a striking discrepancy concerning the positions of executive elites and political partiestoo. In most European countries there are strong Eurosceptic movements and parties giving the

increasingly restless citizenry a voice. To them the austerity politics imposed by their

governments are monstrous acts of injustice. They are losing their last spark of hope and trust in

politics.

This, again, is not the case in Germany. Here we find a rare state of consensus. The SocialDemocrats and the Greens may be challenging the detail of Merkel's austerity programmes, but

have so far always voted with her in parliament. Meanwhile, two of the parties that form

Merkel's government the Bavarian CSU and the liberal FDPare remarkably distant from theposition of Merkel's party. As a result the German debate on the eurozone crisis takes place

without an opposition in parliament.

In the real world, meanwhile, the European crisis is coming to a head, and Germany finds itself

faced with a historic decision. It must attempt either to revive the dream and poetry of a political

Europe in the imagination of the people, or to stick with a policy of muddling through and ofusing hesitation as a means of coercion until the euro do us part. Germany has become toopowerful to be able to afford the luxury of indecision and inactivity. But Germany is sleep-

walking down its own special path. As Jrgen Habermas puts it: "Germany isn't dancing. It's

dozing on a volcano".

And there is a final paradox: even if Germany is dozing on a volcano, even if there is no

discussion on the moment of decision, the most likely outcome of the elections is going to be infavour of the next step towards a political EU. This is because most likely Merkel will return to

the chancellery for a third term. Under her, I expect that there will be a silent turn to a politics of

more Europe: switching positions is the key element of Merkiavelli's power politics. In the

unlikely event that Merkel won't be re-elected, a red-green government would take the initiative,together with France, Italy, Spain, Poland etc, to correct the design flaw of European monetary

union and take the next step in completing the political union: producing a situation in which

Merkel, in opposition, constitutes the informal part of a "grand coalition".

Thus look out for events in Europe and indeed the rest of the free world to speed upconsiderably post September 23

rd. If you think the last 5 years were a roller-coaster for

European austerity you aint seen nothing yet, the real pain has yet to start.
http://www.opendemocracy.net/ulrich-beck/power-of-merkiavelli-angela-merkel%E2%80%99s-hesitation-in-euro-crisishttp://philosophy.about.com/od/Philosophical-Quotes-and-Lines/a/Machiavelli-S-Best-Quotes.htmhttp://www.spiegel.de/international/germany/juergen-habermas-merkel-needs-to-confront-real-european-reform-a-915244.htmlhttp://www.spiegel.de/international/germany/juergen-habermas-merkel-needs-to-confront-real-european-reform-a-915244.htmlhttp://philosophy.about.com/od/Philosophical-Quotes-and-Lines/a/Machiavelli-S-Best-Quotes.htmhttp://www.opendemocracy.net/ulrich-beck/power-of-merkiavelli-angela-merkel%E2%80%99s-hesitation-in-euro-crisis


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Trading wise, I reckon the direction the market takes following the October earnings season will

be significant for the medium to long term. For this reason I advise clients to keep their powder

dry and not follow the bull herd heedlessly but rather trade specific technical signals. At themoment those signals are mixed.

Charts courtesy of StockCharts.Com

Christopher M. Quigley 10 September 2013

Wealthbuilder Market Brief September 10th

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