Recap 9-23-11

Main Items:

  • Korea intervened in the FX market overnight. Japan reiterated that they could take action at anytime. Brazil is considering lowering the IOF tax.
  • WSJ reports that US corporate pension plans may now be 450bn underfunded, requiring increased corporate contributions.

Overseas:

  • French Consumer Confidence declined to 80 in Sept vs 83 exp and 82 prev. It is the lowest print since Feb 2009.

Commentary:

Further deleveraging today – precious metals, the CTA community’s favorite assets, got slaughtered. Silver is now down for the year.

Risk assets are likely to bounce next week. Supportive clues:
1) Sentiment is at bearish extremes, as are short term technical oscillators.
2) The fact that we the sharp deleveraging in EM and precious metals did not spill over to equities suggest that equity positioning is now clean.
3) The fact that EM assets have stopped falling suggests that the deleveraging process is nearly over
4) Month end is coming up
5) Earnings season is approaching, and expectations have fallen sharply.
6) Finally, the S&P has held support for now:

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