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“Never do today what you can put off till tomorrow. Delay may give clearer light as to what is best to be done.”
                                          Aaron Burr

Commentary & Analysis
It’s confidence week – is confidence weak?

I wasn’t sure how I wanted to spin the word ‘confidence’ around today – there are so many ways. So let’s just spin them all …

Is the market confident Wednesday’s Eurozone summit will not be another bust?

I can’t imagine how. Summit after summit has been a total failure, when measured by actual progress and not simply temporary market price action and kick-the-can worthiness. We should get somewhat of an idea how Europeans are reacting to the latest non-developments when we see German and Italian consumer confidence reported tomorrow. Expectations aren’t expecting much change. But some preliminary PMI data out today showed manufacturing and services sectors PMI growth shrinking at its fastest pace since 2009. That’s not fun.

Are Chinese officials confident they can arrest a credit bubble and avoid a hard landing?

This probably poses one of their biggest fears. Growth likely isn’t going to fall to zero. But when the slide begins officials will need to do the best they can to stay somewhere near the promised 8% range. An imploding credit bubble threatens that support zone; and consequent social discontent could exacerbate the situation. HSBC released a new read on PMI. The prior month showed contraction (49.9); this month is showed slight expansion (51.1).

Do the Eurozone leaders have any confidence they can agree on a solution?

Lately these meetings have produced no more than disagreements between the top two: Germany and France. In the meantime, everyone must watch Greece’s relentless battle with debt and austerity. Based on the continued rioting in the streets of Athens, the Greeks are confident that austerity is not the answer they want (regardless of whether it is the answer they need.) Yesterday’s summit was a non-event. My bet is Wednesday will be equally dull – if not supremely disappointing should these officials really fess up to how tough their job has become. There is an Italian bond auction on Friday. Can’t you just feel the suspense building?

Can US policymakers be confident that another round of quantitative easing would benefit – directly or indirectly – the real economy at all this time?

It probably depends a lot on their definition of benefit, which appears to diverge from the generally accepted definition of creating a positive, tangible outcome in its intended target. This has been talked about a lot in the last few days, but it may strictly be because a few District Federal Reserve Presidents were running their mouths about it and the media jumped on it. There are currently more signs pointing away from more QE3 (even besides the fact that it doesn’t work). That all could change of course, after we see consumer confidence on Tuesday, durable goods orders on Wednesday, Q3 GDP on Thursday, and personal income and consumer sentiment on Friday. If these numbers improve from last time around, or even beat expectations, it will be interesting to see how the US dollar and euro trade … assuming Wednesday’s summit is a bust.
The euro is fighting to break through the 50-day moving average. The 50% Fibonacci retracement level is in play; the 61.8% level just overhead. It looks like very good selling opportunity:

The CRB commodities index is in a similar position, with overhead resistance in play:

Whether markets can move to new highs may depend very much on how confident people are in the real economies.

We should get a decent gauge of that this week.