Europe is between a rock and a hard place. If they bail out Greece, then there are the other players in the GIPSI and STUPID entourage just waiting to dive into the trough. If they don’t, Europe will have to hope that the Greek politicians do what is right and not what is expedient. The European Investment Bank says that it cannot participate in bailouts for members to deal with deficit or balance of payment problems. At the same time, it seems that GS is following the same algorithm that they did with AIG. TIck. Tock. Tick. Tock. They are doing God’s work, after all.
EQUITY
It seems that the carry trade is painfully and slowly unwinding and driving a lot of what is happening in the risk markets. I’ll just note that DXY is down this morning, and ES is up. SPX closed yesterday below the “Since Oct 2nd” trend line. On Friday, it put a pin through the TD support level at 1046.50. That was just a gentle kiss. At some point, this relationship will be consumated.
When I look at the daily ES, I have a channel that runs from the peak on Jan 11th, to the bottom on Jan 22 and October 2nd. Puttin’ on the FIBs against that channel, shows that the 162% FIB is suport and the 150% FIB is resistance - these are upward sloping, and ES is just above the 150% FIB as I type. If this turns into support, then the 138.6% FIB is at 1168.63. It also looks like the ES got stopped by the 5 DMA, which is at 1067.60
Overnight, Asia was mixed (Japan and Australia were Red - rut roh), and Europe is also mixed. The DAX is barely green. The CAC is red. Eyeballing the DAX shows a bottom put in around 5450 and an attempt to move up with higher highs and higher lows happening over the last 3 trading days. DAX = 5515 appears to be a lwel of resistance, but it is soft.
ES pushed it’s way up off of the lockup yesterday evening to run into both a pivot and a TD resistance level around 1065.50ish. There is TD support below near the other pivot at 1059ish.
R2: 1074.75 = Kind of where the waterfall from Feb 4 began to level off.
R1: 1065.50 = Currently the roof, supported by TD resistance just above it. TD Pressure is showing a low risk sell (right now - doesn’t last long).
Neutral: 1059 = The floor right now. ES went through it easy on the way up overnight.
S1: 1050 = Looks like a support leel from Friday - but hasn’t been really tested hard.
S2: 1043.67 = An imaginary point leading to the gates of hell.
FX
USD is tanking, and EUR is running up. All of this revolves around speculation as to what will happen with Greece. CAD is stronger, JPY is weaker. EUR and GBP are stronger.
Not much else to add. The DXY / SPX inverse correlation appears to be alive and well at this point in time. I think that volatility will grow as the carry trade looks to get out of their positions, private parts intact.
NEWS
German CPI is still down MoM, but the Trade balance was above expectdations. Credit markets are pricing in very very low rates of default - especially for junk. Bankers are trotting out more securitizations of toxic waste - probably will wind up on the FED’s B/S. Portugal is going to try to issue 10 year bonds in Euros. This looks like a good coffin nail to me.
Meanwhile, all the hot air about global warming leads to even more snow coming to D.C. Is Al Gore speaking there?
Data
Nothing of note, IMO. Go see at Briefing.com
That’s about it. I played some FX profitably yesterday. I don’t know what I’m going to do today, since I’m still feeling a bit out of sorts. The DXY trend is up. SPX trend is down - so I don’t feel comfortable going short DXY or long SPX - but my delirium and fever may lead me there anyway. heh.
I wonder if the boyz are saving their ammunition for the last 5 minutes again. As I pointed out yesterday afternoon - the JPM sponsored short squeeze late Friday was not confirmed by market breadth, the Euro, or any of the momentum indicators I’m looking at. It might actually have been counter productive to the bulls (i.e. VIX ended inside the 2.0 BB) and today’s regularly scheduled ‘Monday Melt Up’ seems to be a non-starter thus far. Yes, the final hour looms ahead and it’s possible that this is only a b-wave of a Minuette degree a-b-c correction.
The bulls need to get their asses out of this downside channel. They tried this morning but didn’t get very far - there is simply not enough participation on the long side. The Dollar is hanging on stubbornly as the Dollar bears may be using this little reprieve to settle/unwind some of their positions.
As the old saying goes: You can fool some of the people sometimes, but you can’t fool everyone all the time.
Again, I would not be surprised to see a late day surprise move by either JPM or GS - but even if it comes - ladies and leeches - before you panic over a few handles to the upside:
THINK LONG TERM!
All the wave counts are still in play - no changes.
It’s Superbowl Sunday - one of my most favorite and the same time least favorite day of the year. Why? Because on one hand I get to watch this year’s top NFL teams duke it out for the coveted Vince Lombardi Trophy. On the other hand - it’s the final official NFL game of the season and I’ll have to put up with seven months of mind numbing basketball and baseball coverage (the horror… the horror). Fortunately for us Euro trash - and hot blooded latinos/latinas - 2010 is the year of the FIFA World Cup - so I’ve got at least something to look forward to this summer. If you don’t know anything about ’soccer’ (or football in the rest of the civilized world) then I suggest you get yourself a latino friend - he’ll be more than happy to get you up to speed on some of the top teams in the running. If you’re a female reading this - get yourself a hot latin lover and kill two birds with one stone.
Talking about Euro-trash - Greece pretty much is in the crapper and a default is pretty much guaranteed as the big rats are leaving the sinking ship in droves. ECB chairman Jean Claude Trichet is sitting between a rock and a hard place: Bail out Greece and set a terrible precedent for how to deal with the rest of the PIGS (Portugal, Italy/Ireland, Greece, Spain) - or do nothing and perhaps be responsible for triggering a worldwide financial meltdown. Not a decision I would want to have to make. Or would I?
Mwuuuhaaahaaaaahaaaa!!! (insert echo of your choice)
Anyway, I have a football game to watch - so let’s get to the meat and potatoes:
Three scenarios here:
Orange: We are in the midst of Minute {iii} of Minor 1 of Intermediate (1) of Primary wave {3}. Friday’s late spike up is nothing but small degree second wave - which means {iii} is sub-dividing and will get us to below the 1000 mark on the SPX (probably 970ish).
Blue: The count shifts around a little and we either finished Minute {iii} on Friday afternoon or will do so on Monday around 1035ish. This should be followed by a strong push back toward SPX 1100 which will be counted Minor 2 of Intermediate (1) of Primary wave {3}. The confirmation point for Blue is 1104.73 - admittedly way too late - so if you’re skittish prepare to sweat bullets.
Green: The Bears Get It Up The Ass Again Scenario: Instead of painting a motive wave we corrected in the form of a zigzag (A-B-C). Which means we are pushing higher aggressively, don’t look back and make new highs for the year.
Note that I highlighted a horizontal line which delineates exactly where we bounce don Friday. You might assume that I drew this line this weekend but actually it’s been there for months (check my prior posts if you doubt me). In order to see where it traces back to we have to zoom out - way out:
There you have it - it goes back to October 2008 and marks the top of Minor 4 of Intermediate (3) of Primary {1}. The Zero Lite had been painting a monster divergence all day (are you a sub - if not get on it!) and it was clear that a bounce was in the making. But although it was orchestrated and executed perfectly the Euro didn’t play ball:
Yes, that’s my handrolled TOS correlation chart - I hope you’re green with envy Anyway - you can see that we bounced at the 78.6% fib extension relative to Minute {i} as per the orange count. The Euro however kept dropping and by quite a bit I might add. Forgive me if I can’t take such blatant intimidation tactics courtesy of the bulls seriously. And neither should you if you had the foresight to bulk up on long term puts like me. Remember - they will try and they will scare the shit out of you on several occasions as they won’t give up without a fight. But they will fail - in the end - and I’m going to stick to my guns until the fat lady sings.
OR - we get Soylent green and I’ll have to re-apply some of that left-over vaseline I’ve kept on my desk. It’s a little memento I kept around to remind me of the horrors of 2009.
I you look at the VIX chart you realize that the bears might just have received an unitended favor by our friendly prop desk junkies over at JPM. Had those wankers not banged the tape higher we would have probably closed outside the 2.0 BB (i.e. one step towards a buy signal). Instead we pushed the bubble out further and then closed inside. Nice
I also looked at the NYSE A/D ratio and the reading at the close was 0.734 - pretty weak. So, I believe that we might be able to stay inside that downside channel you see on the first SPX chart. If we breach above it and don’t snap back then Soylent Blue is probably in the works. I don’t put much stock in Green right now - would have to see more consistently bullish A/D ratio readings in combination with convincing ‘vol-ume’. But it’s not impossible of course and I talked to a bunch of bullish trading buddies who went long in a big way at the close. So, the dip buyers are convinced this will be the known as the bear’s Waterloo (i.e. the final defeat and short squeeze from hell) - so, Monday should be interesting to say the least.
And that’s pretty much all I have for you rats tonight. Time to pop open some Hefeweizen and watch the battle of the titans.
Equities remain bid challenged - all $NYMO divergences notwithstanding. A good lesson of not succumbing to recency bias? Maybe - meanwhile sit back and watch the market do its equivalent of Goofy’s Holler:
It’s not all just fun and games at the evil lair however - after all we busy working to separate pig faced bulltards from their ill gotten gains:
I love those Fib extensions in TOS charts (hint hint - T.K.) - if this is not an a-b-c (if it is we’re screwed) then we should be breaching the 1000 mark in a jiffy. Also shown on the chart is the monster divergence between the Euro and equities which developed in late 2009 and finally resolved in late January. I kept harping on that fact for weeks, pointing out that the bulltards could only ignore the Dollar bear squeeze for so long. Hey, I’m trying - not my fault if nobody listens.
This fine chart was posted by brother Jeff Kohler over at OptionAddict.com. Jeff rightly points out that we again are looking at a bullish divergence on the NYSE McClellan (a medium term trend indicator). He’s right - only question here is if the resolution will be the same as during the uptrend. However, I’m willing to consider the possibility, which is why I posted the chart on top. We need to get out of an a-b-c scenario and for that to happen we need to push past the 165% mark (which is how far a C wave ‘usually’ extends) which would occur at (drumrolls) 971.80. If we get past the 990 mark I believe we actually have a chance of getting past that point.
So, we have quite a bit to go until we can pop the Cristal - but thus far I’m liking the ride
BTW, the Dollar is on a tear - so far the retracement levels on the DXY are working like a charm. We are now near a 14% short RL which is 80.7 - either cash out here or wait for 81.7.
I see some dip buyers jumping in - it’s long overdue - if this mark doesn’t hold right now we are looking at some EOD nastiness.
Now might be a good time for you dirty rotten bastards to order your ‘evil speculator riding the black swan shirt’ - or in short, your personal evil-tease (click on image):
Remember, I don’t make a dime on those to keep the cost down.
SPX is red across all sectors - it’s a bloodbath out there - starts looking like Hades down in the pits. NYSE A/D ratio currently at 0.1113 - this is not a typo. For the noobs - that is BAD.
I think we can expect a bounce around the 1060 mark - not a big one - just enough to let this third wave sub divide and lead us towards 1035. After that the abyss awaits - get your fucking evil-tease - you will need them for the occasion.
I wish there was a subtitled version - you rats have no idea how applicable the lyrics are.
Obama is going to fix the world by arm-wrestling China into re-valuing the Yuan. Meanwhile, the USA is going bankrupt from the grass roots up, as people, municipalities, and states run out of money. How does this happen when the biggest stimulus imaginable has been going on for a year? Tomorrow we see how big a lie about jobs the .gov is willing to admit to. Be assured that there are more cockroaches still scurrying around. There is growing pressure for Treasury to disclose the new mysterious direct bidder(s) that have been showing up at auction to save the day.
The PIIGS and STUPIDs (see Zero Hedge for explanation) are being slapped around in the credit markets. All is not well in that federation. The USD catches a small bid - but oddly enough, gold has not been responding to the USD strength like it used to. Fear is growing. Overnight, the down bars had more volume (by eyeball) than the up bars.
Does anyone know what time it is?
EQUITY
Asia was red. Europe is red. Ony LATAM and Middle east is green on my pie chart. The DAX gapped down at the open and has caught a bid above the support levels from Feb 1st, at the supportlevel from the open on Feb 2nd. Just eye-balling, suggests that 5600 is still an important point for support - and the tale if the trap door opens. Oddly enough, Financials, Info Tech and Telecom are green. The index appears to be range bound between 5625 and 5640 - with the odd foray down to 5620 and up to 5650. Not that German mfg orders were weaker than expected. Cue China.
SPX daily (and ES daily) are still in the clouds, Ichimoku style. The signal is buy or sell, the trend is bearish or bullish or neutral.
Conversion line is below base line = SELL; The Price is in the cloud which is Neutral. The downward movement of these lines is Bearish
The lagging span is below the closing price of the lagged day = SELL; The price ”lacks support of the mountain” .
The Cloud composition is rising and getting thicker indicating support for Bullish; The cloud is projected ahead and looks to be weaker from Feb 26th on, and Bearish from March 5th.
The candlestick pattern for yesterday was red and totally inside the previous days. Experts chime in on whether this means up, down, or no clear direction.
Overall, Ichimoku says that the outlook is conflicted with two SELL indicators, 1 bullish and 1 neutral trend. How to proceed?
SPX daily re-tested the “SInce Aug 17″ trend line from below. To me, this is a sign that the fall can begin. The trend line is at SPX = 1108.70, which is about the top of the cloud. Looks like a good point to decide is a SELL trade is wrong, or to put on a BUY trade if breached decisively. The 50 DMA is just above at 1113.34 - which is about the 1114 resistance line of the 1086 / 1114 box SPX has been in, on and off.
SPX got a push off of the Ichimoku conversion line yesterday, which was at the LOD = (SPX) 1093.97. The pre-market looks like it will be headed down. The 5 DMA is below at 1089.64, and then there is the box bottom at 1086 for support. The cloud bottom is around 1080.
My Interpretation: Beyond intra-day, SPX will trade sideways for a while (Ichimoku suggests a lack of clear direction with SELL signals trading off against that rising and thickening cloud; Traditional TA suggests historical short term support nearby, but also tight overhead resistance.
Intra-day, the waters are clearer. ES trended down overnight, but the 9 and 34 pMA have put in a recent bullish cross. MACD is trending up, and the price has entered the cloud. Note that the cloud is trending down and thickening - which suggests a bearish tone. That trend starts to change around 9:30 - 10AM based on the Ichimoku projection (I’m as curious as you are as to IF this has a good hit rate - think of the possibilities on the daily chart). TD has an overhead resistance point at ES = 1094.25 - which is between two pivots.
R2: 1105.50 = Well above the highs since the most rec ent waterfall in January. This was resistance from Nov into December until it was breached in the second half of the month on lower and declining volumes. My interpretation is that this is strong resistance.
R1: 1101 = around the recent highs from Jan 28th and Feb 2ns (midnight). Looks like it will be tested a third time.
Neutral: 1095.75 = Right through the heart of the last few days’ activity. Above the TD resistance level - so any waves that get here will be weak, IMO.
S1: 1091.25 = Was around the resistance level on Tuesday before the ramp up. Resistance turns into support once breached.
S2: 1086 = Also a watershed number for ES based on volume and activity (see old ZH posts) Looks like it was a support level for the thrust up on tuesday.
So we’re clear. I’m not playing ES right now, I’m actually short the CAD. When I post a trade suggestion, it is one that I would take if I weren’t trying to maintain discipline about lining up longer and shorter time frame trends. I provide enough info in the trade so that anyone can see what assumptions I am using, as well as my risk points. I DO NOT post possible trades as a lark - but only ones that might have a higher probability of paying off. Many of them may fail, but overall I believe that the ones I post that do pay off will provide a greater gain than all the losses. If it is a “scalp” - which for me is a quick in and out only, I will indicate this. Remember - there is NO sure thing. There is only a view, a trade, a disciplined method, and risk management.
FX
Ho ho! DXY has clawed its way back up into the rising channel that began Jan 25th. The pivot at 79.659 is providing resistance at the moment, and the next pivot is a long ways down at 79.17. However, the channel does appear to be putting a floor underneath the USD. There is nothing like fear (see PIIGS, STUPIDs etc) to turn toilet paper to a real currency once again.
Short term, I’m seeing EUR putting in a floor at the pivot at 1.3844 (S1) and looking like it is consolidating for another attempt up. Derivatives Week of Jan 25 says that Hedge funds and Corporates have been taking short term bets for the USD against the EUR using one-week and one-moth USD calls. “Greece is becoming a serious issue for the euro….” NOtional traded in one day was about USD 500 mm.
NEWS
Productivity in the USA is probably keeping down inflation (i.e. firing people keeps costs down and reduces demand). The PIIGS markets are supposedly leading the weakness in worldwide equities. TALF is ending soon. Credit spreads could widen. BOE will pause in its QE but could restart as deemed necessary. The BOE and ECB have eft rates unchanged. Greek strikes may hinder the deficit-reduction plan
DATA
8:30 AM EST
non-farm productivity; unit labor costs; initial jobless claims; continuing claims.
As you can see we either completed Minute {1} of Minor 1 of Intermediate (1) of Primary {3} yesterday or will be doing so by Friday/Monday. Cycle wise it’s also possible we build something more complicated that takes us into the middle of February - we shall see. Today’s closing A/D ratio of 0.623 wasn’t so hot and it would take some renewed buying interest tomorrow to push us towards 1,112 or higher.
I really like the developing wave patterns on the currency side of things. The DXY is right on track of tracing out an almost textbook third motive. Admittedly that’s a very early assessment but the first and second waves, as well as the currently evolving third wave look very nice in terms of form, sub-divisions, angle, and velocity. I know this doesn’t look like much to most equity traders, but let me assure you that a bunch of dollar bears are sweating bullets right now.
Where do we go from here? I think it’s up - at least until the 80/81 cluster. But let’s consult our DXY retracement calculator - courtesy of 2sweeties from retracementlevels.com:
As you know I always start with the odds and considering that this may be a third wave I am extra conservative and have placed my 100% mark at 83.44. Based on that the odds for a meaningful reversal are 75.73% at 80.7 and 87.45% one handle further up at 81.75. Now under regular circumstances I’d say that 75.73 would be a decent spot to get positioned for some short side. But again - we might be dealing with a third wave here and if I was planning to go short (which I don’t - only playing the long side) I would wait until at least 81.75. Please bear in mind that this bias is predicated on me having faith in EWT and its wave counts in the first place - if you don’t, then just fade my comment and focus on the odds.
The frequency tab tells a bit of a different story. There seems to be a a cluster of reversals around 80.7 and even a stronger one at 80.06. The next two above (81.75 and 83.44) also have respectable frequency readings above 10%. What to do - what to do?
I think at the current stage of the wave count trading the short side might not be the most profitable endeavor. The main trend seems to have switched to the long side and thus it is here where you should expect to see some nasty surprises - the bucky bear squeeze is on! If you are long since 77, then either take profits at 80 or hold to see 81.7 or 83. The wave count appears to be progressing nicely and we should not fall into the trap of over trading.
If you simply look at the chart it’s quite clear where the resistance clusters will slow the Dollar’s run. Bundle in the odds I proposed and the long side is promising right now. Also, once we get a reversal in the form of another sub-division we might push up hard in a third-of-a-third type scenario. This is the money trade we should be looking to get positioned for. I will keep you guys posted when we are getting close.
BTW, if you’re interested in trading currencies like the pros by facilitating statistical odds head over to retracementlevels.com and pick among various daily calculators:
EUR/USD
GBP/USD
USD/CHF
USD/JPY
AUD/USD
UUP
UDN
If currencies aren’t your thing then 2sweeties’ got your back:
Gold COMEX (GC)
Hang Seng Index (HSI)
Nasdaq 100 Index (NDX)
Oil (CL)
PowerShares QQQ Trust (QQQQ)
Russell 2000 Index (RUT)
S&P 500 Index (SPX)
SPDRs (SPY)
S&P/TSX Composite Index (TSX)
And those are just the daily indicators. I personally use 2sweetie’s hourly E-Mini S&P 500 (ES) and I wouldn’t even thinking about touching a contract without checking the odds first.
UPDATE 4:00pm EDT: PRSGuitars is back with a vengeance - I’m posting his very interesting chart without commentary as I’m not following this particular pattern.
I would however love to see it play out But again - this is one of those ‘exotic ones’ (at least in my book) I leave to others to follow. But I must point out that the resolution does coincide with my own wave count - so we shall see.
Blackrock filed over 1,800 13-Gs indicating more than 5% ownership in the relevant companies. Apparently, this was a result of a purchase of an asset manager.
“It has been noted that they closed the acquisition of Barclay’s Global Investors and this dump is a consequence of the update of that transaction. Ok, well and good, but the point remains - they’ve got a book that is now trading against free cash of less than 1% of these disclosures alone. Indeed, it’s even worse - their total trading book, according to some sources, is approaching $4 trillion dollars, yet the firm has a market cap of $40 billion and less than $4 billion in actual cash”
There are so many spinning plates and wobbing dominoes that the mind boggles in contemplation of the mess when it crashes. I’m in a funny mood today. I must have forgotten to take the proverbial lithium. Tick, etc….
EDIT: 10:00AM EST
Props to BobtheHorse. His explanation makes a lot of sense and shows how you can see death and despair in every corner if you want to. Blackrock acquired an asset manager. The 13-Gs reflect the ownership of the fund. OWNERSHIP OF THE FUND - ie. those positions belong indirectly to the fund investors, not to Blackrock.
Thanks Bob!
End of Edit.
Today, I think I will write a little more on equity and ignore the rest. I’ll just say that DXY has bounced off of the S2 pivot (78.69) and regained a foothold at S1 (78.85). It looks ready to start carving another upward channel - but those two numbers will help confirm or deny this.
EQUITY
I’ve got my head in the clouds. Ichimoku that is. Yesterday in the comments section, I wrote about how SPX was in the clouds - which are below the mountain. “In the clouds” means that the direction is not certain. The “clouds” are a band derived from prior price movements in the security and projected forward. It is helpful as a trend indicator. Yesterday, SPX put a pin up through the top of the cloud but closed below. Today is not necessarily an up day - in fact the volume and behaviour (in a TA sense) both indicate that the rally does not have legs (meaning it does not seem likely that it will go on and on from here).
There are a few components to Ichimoku and their actions give meaning relative to one another. I want to list some of the signals that have appeared in the last day or so.
Conversion line crossed below Base line = Sell signal; However, the lines crossed while above the Cloud, which is bullish (the above part, not the crossing) - so this mitigates the sell signal somewhat.
The closing price was within the cloud = Neutral
The Lagging span (which trails and is measured relative to the bar at that trailing time) is below the closing price from Dec 24th (the lag). This is a Sell signal.
The cloud composition indicates that overall the market is still a rising one
Here is how some of these indicators are computed:
Conversion Line = ((Highest High + Lowest Low) / 2) of the last 9 days Base Line = ((Highest High + Lowest Low) / 2) of the last 26 days
Lagging Span = Today’s closing price plotted 26 days earlier
Leading Span 1 = ((Base Line + Conversion Line) / 2) plotted 26 days forward
Leading Span 2 = ((Highest High + Lowest Low) / 2) plotted 26 days forward
As I write this, ES for today is still within the cloud. Summary:
The market is still generally rising, but short term direction is neutral or uncertain. There are two sell signals which suggest that trouble is brewing for the upward trend - all of this from a daily chart.
Looking at some more traditional TA indicators, SPX did use 1086 to move up strongly yesterday. Resistance going back to mid-November sits at around 1114 - so we are back to that boxy range of 1086 - 1114, in a broad sense. At the same time, the SPX trend line “Since AUg 17″ is still just above, and for today has the value 1107.58 - coincidentally around the upper boundary of the Ichimoku Cloud. I would suggest that this is where today’s resistance will come from, IF there is a stonger bullish move.
The lower edge of the cloud is below the 1086 support, at 1079.88; Below that, the trend line “Since Oct 2nd” is at 1057ish (all SPX). If for some reason, there is a rout, these are likely support levels on the daily chart.
Asia was green. Europe is mainly GREEN - except for Switzerand and Spain. DAX has moved above 5700 and re-tested it from above. Still, it looks like a Head and Shoulders forming from yesterday close and today’s open - with the right shoulder having put in its peak already. This is not the pattern of a strong bull. The breadth is tepid with green in only 3 sectors: Consumer Discretionary, Staples, and Materials. Financials are essentially flat and keep moving from red to green and back. This is hardly the sign of a market ready to bull its way higher.
ES was essentially flat all night, moving within a range between 1095 and 1100 - and it was quite well-behaved with regular oscillations. Earlier, MOrtgage appilcations were up 21% vs down 11% prior, job cuts YoY were down 70% vs 73% prior. Doesn’t look like the market even noticed.
R2: 1113 = Puts SPX up above the 1114 box limit, outside of the cloud, ready to run.
R1: 1105 = Around the peak from early AM on Jan 28th - Fight now Jan 28th - Feb 3rd sure looks like a cup and handle forming - which is bullish. However, the bowl is sloppy, and I’m not sure that the requirements for depth and width of bowl have been met to make this a valid pattern. Any knowledgeable traders please feel free to chime in.
Neutral: 1093.50 = Was resistance for the pop on Jan 29th - looks like it could be a decent floor and support to any move down today.
S1: 1085.75 = Was support on any retrace yesterday. Has also been resistance in the cup’s bowl - so there is a lot of activity at this level - with volume
S2: 1074 = Down around the lows
Right now, ES is clinging to the 1098 level - I don’t have a reason for this. It does get SPX above 1100, which is some form of psychological barrier, I would imagine.
For trades right now, I’ve got nothing. The short term TD indicators are lining up to be more bullish than bearish = but the 99 and 34 pMA are right on top of each other. The longer term indicators are tipping bearish - but not enough that I would risk any skin on what will happen inter-day. I’m going to sit back and watch how this unfolds.
A broken clock cuts both ways, if I may mix metaphors.
Zero Hedge sees major resistance for ES at 1085. This is short and sweet. Remember to close your eyes to avoid seeing the Bloomberg chart. The point is that volume is drying up as ES moves higher. ES has already gotten through this barrier, and anticipated pumps from stop running didn’t materialize. Guess the shorts are still absent. - which does not bode well for either distribution, nor any type of safety net for the market as the liquidity programs from the FED wind down. Tock. Tick. Tock. Tick.
This is the long and short of it. SPX has retraced to close above the 1086 level, and above the 5 DMA. As with all binary decisions, the market can go up or down from here. Up suggests a retest of the “Since Aug 17″ trend line at SPX -= 1106ish. Down suggests a test of the “Since Oct 2nd” trend line at SPX = 1057ish, followed by a significant TD support leel at 1046.50.
Asia is handsomely green. Europe is up about 1% or so. The DAX is back to re-test the 5700 mark, that was exceeded brefly on Jan 28th before being beaten down, and acted as a roof on Jan 25th. Third times the charm? This level is one to keep an eye on for its implications for the risk trade. Closing above this suggests higher targets on the retrace on SPX. Failure means the recent lows are likely to be re-tested. Only Consumper staples and discretionary are in the red, so the move is broad-based. I don’t have volume numbers.
ES, since the Europe open, is continuing its retrace that began yesterday. Pivots:
R2: 1098.75 = ES would need to re-test the highs from Jan 28th (mirrors the DAX) to get here. THis would suggest a “double top” of sorts, on the way down - and would provide a lower risk entry for a short
R1: 1092.50 = The roof right now. Also stopped the advance on Jan 29th, and was pretty staunch resistance Jan 26 / 27. Moving above this would definitely be a bullish signal in the short term.
Neutral: 1080.25 = Was resistance, now is support. Didn’t get below here overnight.
S1: 1074 = Was support on Jan 29th, but ES has gone below this to consolidate for the current up-thrust.
S2: 1061.75 = ES hasn’t been here since….. the end of October 2009. That was when ES (and SPX) dipped down enough as to have everyone believing it was the second coming of P3. I think a lot of bears got nailed on the subsequent rally up of the bottom around 1022 (remember that number - it was as important as SPX = 1086 is right now).
I don’t see any outstanding short-term trades at the present time. The TA suggests more downside for ES (or sideways) - but it’s hard to say how much. A short up around ES = 1092.50 seems reasonable, with stop above that pivot, and target around the TD support at 1083. The 9 and 34 pMA are just forming a bearish cross - so a short here, although lower percentage - seems decent, given that TD pressure is indicating a low risk SELL with stop around ES = 1090.50 (which I find a little tight given where the pivot above is).
A swing trade at the TD support at ES = 1083 looks to be a decent risk /reward as well, with stop below the pivot at 1080.25, and a target up around 1092.50.
As you may have noticed - I see trades in both directions most of the time. I try to overcome my bias for the short side. Right now the short -term trend is up, but the medium term trend is down, within the longer term trend being up. I’m still trying to come to terms with how to play “swim with the current” when all the ducks are NOT lining up.
FX
If you’re still playing correlations, or just playing FX, DXY is running into the same resistance as it did at the end of July, 2009. At that time, the FIB a 77.817 acted as support, ultiimately, and I would expect the same here during consolidation on the way up. The 5 DMA is at another support line that goes back to September 2009 at around 70.94ish. So, if there is a typical consolidation, I would expect sideways action centered around 70.94. IF the DXY takes a beating, I would expect it to regroup and move up off of the FIB at 77.817.
This AM, USD is weaker with CAD and EUR stronger, JPY flat, and GBP down slightly. Trading rumours have the BIS buying EUR around 1.3930 - but EUR is running into a headwind at the R1 pivot at 1.3962. There is support at the pivot at 1.3907 - although when Asia opened, the EUR did fall below this for about an hour or so.
On the 30 min chart, DXY is finding support at the S1 pivot at 79.09ish. Resistance is at the pivot at 79312. I see ultimate support at 78.937 which is the S2 - it also mirrors support from the “left shoulder” of the latest move up. DXY has broken down, out of it’s upward channel that began Jan 21 - 25, but it looks like an underthrow to me - or the search for the next channel up.
NEWS
Commodities rally, dragging stocks - and the AUD gets thrumped after a rate surprise (everyone was expecting an increase). Obama wants to spend the TARP money recovered on small banks. It just keeps burning a hole in those spendthrifts’ pockets. Swiss banks workers keep selling stolen data - maybe they should pay them more. Volcker is making positive noise about regulation and Bernanke’s policies, thereof.
Anyway - you can see that we bounced at the 78.6% fib extension relative to Minute {i} as per the orange count. The Euro however kept dropping and by quite a bit I might add. Forgive me if I can’t take such blatant intimidation tactics courtesy of the bulls seriously. And neither should you if you had the foresight to bulk up on long term puts like me. Remember - they will try and they will scare the shit out of you on several occasions as they won’t give up without a fight. But they will fail - in the end - and I’m going to stick to my guns until the fat lady sings.
