I don’t want to pop any champagne bottles prematurely but it’s increasingly starting look like the bulls have run into a wall here. This was the second time an attempt to breach that 78.6% fib mark I drew yesterday. Doesn’t mean not yet another attempt will be made on Monday but it’s looking decent right now and Soylent Green has been revived – for now.
Charts below for holders of the secret decoder ring:
What we now need to see is a relentless drop below 1180 and that in a hurry. If we hang around here then I am afraid we will remain stuck in this annoying sideways action for quite a bit longer. Strike your enemy while he’s down – if the bears permit the bulls to take a breather the weekend will take care of (i.e. reverse) any retracement, as usual.
From a wave count perspective we are at an inflection point – if this is only a 2nd Minuette wave down then Soylent Blue is running out of space and time – we would need to see a reversal pretty much now. Until we either bust higher above today’s highs or below Wednesday’s 1181.62 low we are a bit in limbo land here. Let’s hope for a quick resolution as I have had enough of this spasmodic action.
A little shout out to everyone: I keep seeing extremely bearish comments and the first submitted to this thread claimed that the bulls are completely fucked now. Well, I’m not saying that we won’t see a decent reversal, BUT let’s please keep things in context please:
The COMPQ is down a whopping 1.39% this week – after having ramped it up the bears’ asses for 13 months. Let’s cool the emotions and trade the tape – I know you all are yearning for those 2008 drops but we are a long long way from that. Stay frosty and don’t let wishful thinking influence your trading decisions. Finally, do NOT chase any downside – especially on a Friday.
UPDATE 1:50pm EDT: About half an hour ago I issues a quick warning to my subs on the Zero Lite chart. This is what I was thinking:
At this stage of the trend it is expected for dip shit buyers to swarm in fairly quickly. Just think about it – it’s been nothing but 13 months of up up up trend – people are conditioned to see quick drops as long opportunities. Now, as soon as I saw the Zero Lite pull straight up from about -1.5 to -0.7 I expected the zero mark to be touched. Maybe the warning was a bit risky but I prefer to err on the cautious side.
Now I was lucky making that call and we reversed about 40% of that drop. To all the subs I recommend this now – keep looking at the Lite signal and wait for a slice through the mark to a least -0.5. Above that I only expect gyrations and a ramp up from here. If we do drop below -0.5 there’s a good chance we’ll see a sell off into the close. The bulls know they have to put a floor underneath this now lets this will get out of hand quickly.
UPDATE 2:20pm EDT: I don’t know who is stepping in to buy the dip here – I don’t see anything on the side of the institutions. Really strange tape today – crack open a cold one and call it a week, folks – this is getting a bit too sideways too late on a Friday for me.
More long term I have two juicy bonus charts for my subs. Again, secret decoder ring required – if you are not a member please go here to sign up. About the cost of five Starbucks lattes, you caffeine addicts!! And the barrista here whips up great charts instead of the empty foamy dish water you get on the financial MSM
The equities/copper divergence is alive and well thus far. So, if you are holding long term puts – do nothing. I think there is a decent chance we will see a January repeat in equities unless we see a reversal on the copper side of this chart. Make sure you have enough theta though – very much possible we may see new highs before the final drop. These patterns don’t mean there won’t be a quick snap back to shake out the hobby bears. But thus far – odds are starting to look decent for an actual reversal.
This is actually some very good news for the bears. As of this writing we are not getting a close below the first candle inside the 2.0 BB. That is actually extremely good news for the bears as it would cancel out the third and final step leading to an equities buy signal. Heck – the same happened to us bears a little while back – tit for tat.
Now, I’m not becoming an überbear here right away – don’t get me wrong – but I’m cautiously optimistic here. At least Soylent Green has a chance. But we MUST NOT close below yesterday’s close on the VIX – hope that is understood.
I had a late start today as I had a lousy night. First thing I usually do when I wake up is to grab my iPhone to look at Mr. Zero. I can’t say that I was happy to see the spike up this morning but I frankly wasn’t surprised either.
The signals we’ve seen on the Zero Lite for the past two days were almost textbook and strongly pointed towards a snap back. Remember when I told you to take profits on your short term puts on Tuesday? Well, I hope you did
Alright, we are now finding ourselves at an inflection point for the bears. I had warned about letting this opportunity slide and it seems we are but a few handles from Bear Armageddon.
More below for magic ring owners:
We are yet again at the 78.6% fib line counting from the first drop down. Since Tuesday’s dip is near that I’d call that line good enough for government work. A breach above technically does not disqualify the green scenario – only new highs would do that.
The Zero Lite is flat as a flounder right now – usually a precursor to a big move. Which way it’ll swing I don’t know yet. Let me dig around for more clues and I’ll chime in shortly.
2:25pm EDT: While we are waiting for this market to make up its mind I’m parsing for symbols.
Here’s a first one – CREE – part of the Nasdaq – semiconductor stuff. I see it near the end of a retracement. Chances are that support line will hold up. Easy to go long around 73 set a stop around 70. Careful with options – if you use them go more long term as ATR on this thing ranges between 2% – 4%. It makes a good delta hedge though I think.
I’d set an alert for 44 on DRI – yes, it broke that trend line but I have an inkling it’ll bounce at that 2.0 BB, maybe half a handle before. Stop slightly below, maybe 43. This thing is slow – so no options on this one. If you are crazy (and have margin) you can sell puts – I personally do not and would not recommend doing that unless you’re a pro.
I wish this HCBK was a bit further along as my momo indicators point towards a snap back. But I’ll have to be purist on this one – best to wait for a trendline touch. 13 sounds like a good place to take out a small long position.
INCY (drug pushers) looks like a nice long here. We are slightly below a more longer term support line but it’s worth the risk with a stop around 12.5. But earnings are coming up – be out before 5/5.
I hate to tell you this but JPM looks like a good long here. IF it breaches then try again at 40. However, wait for a retest – I personally hate to chase.
And now for something completely different – because I’m in a Metallica mood today:
That’s one sick video.
P.S.: Damn it – Bearmageddon would have been so much funnier.
LEAP is an economic think-tank out of Europe. About a year ago they predicted that the Chinese would scale back their exposure to long term U.S. treasuries and shift into the short end of the yield curve. They were proven correct. A few months later LEAP also predicted that the second stage of this secular bear market cycle would not be triggered here in the U.S. but on their own turf, specifically naming Greece, Portugal, Spain, and Ireland. That was way before the MSM ever became aware of the PIGS – we are talking fall of 2009.
I am not a subscriber but am considering it as their monthly bulletins continue to cut through the noise and offer surprisingly accurate predictions six to twelve months into advance. What I appreciate the most is that the reports are generated outside the U.S. which offers me an alternate perspective on where Bernanke’s bubblenomics might be leading us.
Now LEAP is back with a new report – the teaser part of which you will find copied below. If you are interested in signing up for their annual service go here – please bear in mind that Evil Speculator is not affiliated with LEAP in any way. We don’t get a cent if you decide to sign up – I want to be clear on that. However, I feel it is important to give you an opportunity to get to know their work as their analysis may affect your long term investment and plans for the future. Enjoy…
Just as LEAP/E2020 anticipated many months ago, and in contrast to the reports coming out of the media and the « experts » during these past few weeks, Greece really has the Eurozone behind it to give support and credibility (especially concerning good management in the future, the only guarantee of an escape from a damnable cycle of growing public deficits (1)). There will not be, then, any Greek default of payment even if the commotion over the Greek situation really is an indication of a growing awareness that money to finance the huge Western public debt is becoming increasingly difficult to find: a situation now « untenable » as a recent report of the Bank of International Settlements underlined.
The fuss made over Greece by the English and US media in particular tried to hide from the majority of the economic, financial and political players the fact that the Greek problem wasn’t a sign of an upcoming Eurozone crisis (2) but, in fact, an early warning of the next big shock of the global systemic crisis, that is to say a collision between, on the one hand, the virtual British and US economies founded on untenable levels of public and private debt and, on the other hand, the double wall of borrowing, maturing from 2011 onwards, combined with a global shortage of available funds for refinancing at low rates.As we have explained since February 2006, at the time of our anticipation of its imminent arrival, one mustn’t forget that the current crisis has its origin in the collapse of the world order created after 1945, of which the United States was the support, assisted by the United Kingdom. Also, in order to understand the real effect of events caused by the crisis (the Greek case, for example), it is useful to relate their significance to the structural weaknesses which characterise the heart of the world in full meltdown: so, for our team, the « Greek finger » doesn’t cite the Eurozone as much as the explosive dangers of the exponential financing needs of the United Kingdom and the United States (3).
2010 projected sovereign debt issuance (Total: 4.5 trillion USD) – Sources: IMF / Hayman Advisors / Comcast, 03/2010
Subscribers should be aware that during a period when financing requirements exceed available funds, as is the case today, the sheer amount as regards sovereign debt issuance is more important than the ratios (amounts in relative value). This is shown by a very simple example: if you have 100 Euros and you have two friends, one « poor », A, who needs 30 Euros and the other « rich », B, 200 Euros. Even if B can pledge his expensive watch, worth 1,000 Euros, to you, whilst A only has a 20 Euro watch, you can’t help B since you haven’t sufficient funds available to fulfill his financing requirements; however, in discussing a pledge and interest, you can decide to help A. Putting it in this perspective thus invalidates all the arguments based on the debt ratio: in fact, according to their logic, you would obviously help B, because his debt ratio is clearly more favourable (20%) than A’s (150%). But in the world of the crisis, where money is not available in unlimited quantities (4), the theory hits the wall of reality: wanting to do something is one thing, being able to do it is another.
So then, LEAP/E2020 asks two simple questions:
. who will be able/want to help the United Kingdom after the 6th May when its political chaos will inevitably expose the advanced meltdown of all its budget, economic and financial parameters?
The financial situation is so serious that the technocrats running the country have devised a plan, submitted to the parties contesting the next General Election, in order to avoid risking a power vacuum which could lead to a collapse in Sterling (which is already very weak) and British treasuries (Gilts) (the Bank of England having bought 70% of those issued over the last few months): Gordon Brown would remain Prime Minister even if he loses the election, unless the Conservatives were able to garner sufficient votes for outright victory (5). In effect, with an economic and political crisis as a backdrop, the polls lead one to think that the country is turning to a « Hung Parliament », without a clear majority. The last time that happened, in 1974, was a kind of political preliminary to IMF intervention eighteen months later (6).
For the rest the Government puts a positive spin on the statistics to try and create the conditions for a victory (or a managed defeat). However the reality is depressing. British real estate is trapped in a depression which will prevent prices reaching their 2007 levels for many generations (in other words, never) according to Lombard Street Research (7). The three parties are preparing to face up to a catastrophic post-electoral situation (8). According to LEAP/E2020 the United Kingdom could well suffer a « Greek (9) » event with British leaders announcing that the country’s situation is substantially worse than that disclosed before the election. The numerous meetings, at the end of 2009, between the Chancellor of the Exchequer, Alistair Darling, and Goldman Sachs is a very reliable indicator of sovereign debt manipulation. As we wrote in the last GEAB issue, all one needs to do is follow Goldman Sachs to know where the next risk of sovereign debt payment default lies.
US Federal Government financing requirements (2010-2014) (10) (in trillions USD) – Dark: the federal deficit / Light: maturing debt (future short term borrowing not included) – Sources: Moodys / S&Ps / Treasury Dpt / New York Times, 03/15/2010
. who will be able/want to back the United States once the British fuse (11) has started burning, causing panic in the sovereign debt market in which the United States is, by far, the largest issuer?
Especially since the size of sovereign debt needed corresponds with the start of the expiry, beginning this year, of a mountain of US private debt (commercial real estate and LBO due for refinancing, amounting to 4.2 trillion USD of private debt expiring in the United States between now and 2014 (averaging one trillion USD a year (12)). Purely by chance, it is the same amount as new global sovereign debt issuance for 2010 alone, of which almost half is by the US Federal Government. Adding to that the financing needs of the other economic players (households, businesses, local authorities), the United States must find nearly 5 trillion USD in 2010 to avoid « running dry ».
Our team anticipates two replies just as stark:
. as regards the United Kingdom, the IMF and the EU, perhaps (13); and we’ll be watching, from this summer, the « Bank of England battle (14) » to try and avoid a simultaneous collapse in Sterling and UK public finances. In all cases Sterling will not come out undamaged and the crisis in public finances will engender an austerity plan of unprecedented size.
. as regards the United States, no one; because the size of its financing requirements exceeds the capacity of other players (including the IMF (15)) and, in winter 2010/2011, this event will lead to the explosion in the US Treasury Bond bubble founded on a huge increase in interest rates to finance sovereign debt and private debt refinancing needs, causing a new wave of financial institution bankruptcies. But it isn’t only countries that can default on payment. A Central Bank can also go bankrupt when its balance sheet consists of « ghost assets (16) » and the Fed will have to face up to a real risk of bankruptcy, as analysed in this GEAB issue.
Winter 2010 will, equally, be the stage for another destabilised event in the United States: the first major elections since the beginning of the crisis (17) when millions of Americans will probably express their feelings that they have had a « belly-full » of a continuing crisis (18), which doesn’t affect Washington and Wall Street (19), and which creates US public debt which is now counter-productive: a borrowed Dollar now causes a loss of 40 cents (see chart below).
Diminishing marginal productivity of debt in the US economy (in USD) (GDP/Debt ratio 1966-2010) – Sources: EconomicEdge, 03/2010
One may not be in agreement with the answers given by our team to the two questions asked above. However, we are convinced that these questions cannot be ignored: no analysis, no theory on world developments over the next three quarters is credible if it doesn’t provide clear replies to these two questions: « who will be able/want to? ». From our side, we think the same as Zhu Min, the Deputy Governor of the Chinese Central Bank, that « the world hasn’t enough money to buy any more US Treasury bonds (20) ».
In this issue our team has, therefore, decided to make a progress report on the major risks weighing on the United Kingdom and the United States, and anticipate developments over the next few months in the growing context of a “velvet war” between Western powers (financial, monetary and trade war). We will also disclose a series of recommendations for facing the double shock of British and US financing needs.
Mole here again: That last chart is especially scary. As Karl ‘No Slave To Fashion’ Denninger suggested a few months back: We are reaching the point where additional debt issued may reach a point of zero or below zero productivity – based on the chart above that moment has come and gone. That, my dear ladies and leeches, is the moment when the jig is finally up. Because no printing of the Federal Reserve will then be able to postpone the inevitable, which is a deep decade long worldwide depression.
Final comment: None of the above should be considered when it comes to daily trading decisions, at least short and medium term. I am sorry for sounding like a broken record on this, but I don’t want you guys to start shorting the market in a big way tomorrow. As we all have learned by now – these things will take its merry time to unfold and I merely want to offer you a glimpse into the future. Anyone visiting Evil Speculator will be well prepared to trade this market down, once we start seeing meaningful (and painful) support zones being taken out.
An increase in volatility begets market reversals – which either turn into meaningful corrections or are simply used as buying opportunities. Time to throw out the riff-raff so to say…
Charts only available for evil lair members – freely available to everyone after the session:
As you can see Mr. VIX is stuck in a nice clean channel from which there seems no escape. But escape it must – lest the bears remain trapped in this ‘buy-the-dip purgatory’ they have found themselves boiling on slow flame for the past year.
Bottom line: If this thing snaps back the punishment for the bears will be of biblical proportions as we have now stretched out that 2.0 Bollinger as if Max DeLong had his dirty way with it. A short term bounce is expected here but should be followed by a selling frenzy.
Friend of the blog Chris Carolan (a master of charting in his own domain and one of the folks I have utter respect for) suggested the Bollinger on the weekly VIX as a possible target – assuming we keep pushing higher here (i.e. lower in equities). Sorry for stealing your chart, Chris – just trying to do God’s work
I’ll be back once I dug up a few more juicies for you guys.
Club Zero Update: I drew this channel on the Zero Lite this morning and low and behold we are still in it. I think this is a textbook example of how Mr. Zero can keep you out of trouble when early morning price gyrations are trying to fake you out. Sorry, Zero subs only – again, it’ll be available for free to everyone after the session. Make sure you come back for it – this is not one to be missed:
Zero subs know that I drew this channel about ninety minutes ago – and thus far we’ve remained stuck inside. That is bad news for the bears on a short term basis. We need to clear this thing or the dip buyers will employ their kung fu grip in about one to two hours from now.
Stay frosty until we breach today’s highs and cross that upper boundary of the channel.
UPDATE 1:11pm EDT: A little birdy sent me this last night:
Recent reports of a strengthening recovery are not fully supported by the behavior of consumers on the web. At the Consumer Metrics Institute we measure the depth and quality of web based consumer “demand” on a daily basis, and during this recovery the year-over-year changes in “demand” that we measure actually peaked in August 2009 and have been declining ever since.
In fact, our “trailing quarter” of web based consumer demand slipped into year-over-year contraction on January 15th, and since then we have been plotting the progress of this 2010 contraction event against the profiles of similar events in 2006 and 2008.
As you can see from the above chart the current consumer “demand” contraction event is unique: if there is a “second dip” it may very well be unlike anything we have seen recently. Instead of a “call-911″ type of event in 2008 or the “hiccup” witnessed in 2006, we may be seeing a “walking pneumonia” type of contraction that has legs.
Over the most recent 7 quarters our economically “upstream” Daily Growth Index has led the “downstream” factory GDP numbers by about 17 weeks. If that pattern continues to hold, we are currently about halfway through the consumer transactions that will drive the third quarter’s production and GDP. If the blue line shown in the above chart continues drifting laterally over the next 40 days, the 3rd quarter 2010 GDP will look a lot like what we have previously projected for the 2nd quarter 2010 GDP, contracting at a mild but persistent rate.
In summary, our data is telling us that U. S. consumers are very reluctant to take on the kind of debt that they have traditionally assumed when pulling the economy out of previous recessions. Even a recent upturn in our retail index faded once the seasonal impact of the forward shifted Easter holiday had passed. Furthermore, even during the Easter retail up-tick the quality of the transactions was not very high. Big ticket items requiring longer term financial commitments were relatively scarce, and for that
reason our Weighted Composite and Daily Growth Indexes did not materially respond.
Our mission at the Consumer Metrics Institute is to measure (on a daily basis) exactly how consumers are leading the U. S. economy. We “mine” nation-wide internet consumer tracking databases on a daily basis for early warnings about the demand side of the economy. Our data is significant upstream economically from the factories and the products measured by the GDP, putting us far ahead of the traditional economic reports. Perhaps our data is too timely; we are so far ahead of conventional economic measures that our story generally differs (either positively or negatively) from the stories being simultaneously reported by more traditional sources.
The indexes themselves can be found at http://www.consumerindexes.com. An overview can be found at http://www.consumerindexes.com/Overview.pdf.
I realize that your readers are probably tired of hearing about the recession, and frankly our data is certainly less uplifting than the picture currently being painted by most economists. But our data has substance and (as you can see) the chart is telling us that something actually is “different this time.”
Well, isn’t that a how a howdy-doody – some additional evidence that the recently hyped consumer confidence numbers were as usual smoke and mirrors. Buy buy buy!!
For the record however – although I allow myself the occasional Denninger moment this should not affect our TRADING. If certain trend lines and measures are broken we will trade this market up without compunction. Always remember folks – fundamental news and economics mean very little when it comes to trading. Case in point? The past 13 months.
Zero UPDATE: We are running out of time today:
Well, we have 15 more minutes in the futures for a breach here – not sure it’ll happen…
Now this was a fun day – although bananaben would probably disagree. Sorry buddy!! You’ll snap back from this!
Well, to the bears I now give the same advice I would give to that 40 year old virgin. Dude, you better close the deal this time!
This is why – we closed far outside the 2.0 BB on Mr. VIX. But the worse news is that the LOWER border of that BB is now extending a lot further down. Good luck seeing a push below 14 anytime soon – sheeesh. The bears better make this one work, ladies and leeches…
More short term – check out the divergence we saw on the Zero Lite:
Yes, we prefer to see those intra-day and a lot can happen overnight. However, it’s reasonable to assume that Ben and cronies may hold some kind of emergency session overnight and that we might see some push back tomorrow morning. Now that said – more longer term it’s interesting that we reversed right here and now:
Plenty of charts below for subscribers – Evil Speculator Gold will set you back a whopping 29 bucks – less than you handed your Starbucks barista this week
Oooh – she looks like she’s going to hurt you if you don’t know the difference between a Venti and a Grande – I like her….
That’s right – we bounced right off the 61.8% fib line.
We also bounced off the 78.6% fib line on the COMPQ – coincidence I think not!
I’m sure you are all familiar with the concept of ATR – Average True Range. Look how we seem to push up just before we paint a meaningful retracement. And that divergence is getting stronger each time around. It’s another expression of increasing volatility and that is something we want to see ahead of a retracement.
BUT – will it happen tomorrow? Not sure – the Zero Lite is telling me that there is a good chance for a snap back, which hopefully will be manhandled by the bears and that within a day or two. If not – well, then all we’ll see is yet another buying opportunity. I for one am sick of seeing green/white candles.
UPDATE 8:40pm EDT: Bonus chart!
Copper futures are painting a little divergence. It’s not a massive one, granted but considering the big picture it’s yet another clue.
The yield on Greek 2 year bonds is higher than that of Venezuela. In fact, it is the highest rate IN THE WORLD. Soon the debt will be toxic enough for GS to do God’s work and stick it in a CDO-squared to push off on unsuspecting foreign investors. Then they can pump each other up with profanity in internal emails and self-congratulations on duping the suckers yet again, and eternally with the .gov’s blessing.
In the meantime, Lloyd is going to swallow his pride and thank the taxpayer for their support – all the while pretending that GS has paid back every cent with interest. Pay no attention to the fact that Lloyd’s boyz are still responsible for about $21 billion in TLGP loans which are FDIC insured – meaning you are still on the hook for them. By happy coincidence, this is just over the amount that the boyz paid themselves in bonuses. From your wallet to God’s hands. Meanwhile, their favourite uncle-shareholder is showing that he is not beyond twisting legislative arms to keep his face in the trough. Oink me!
Thank goodness for the NFL draft to distract the masses while they’re fleeced. Welcome to the broken clock.
First, here is a link to a section on investor sentiment. It’s well worth a read. It says that the dumb money (that’s us) is overwhelmingly bullish while the smart money remains ambivalent.
Finally, Noma of Copenhagen has been named the #1 restaurant in the world. El Bulli of barcelona has won second (and was first for the last 4 years). third is the Fat Duck from the UK. Gordon Ramsay didn’t even make the top 100.
The Data today includes the CaseShiller home price index, the Richmond FED mfg Index, and Consumer confidence.
Asia was red, except for Japan. The fear trade is back on. Europe is red except for Iceland (I don’t know – check the CDS spreads). The DAX has been selling off since the first hour and has almost closed the gap up from yesterday. Only Utilities are green at this time and Financancials and Consumer Discretionary are leading the market lower. Breadth to the downside is strong. This sets the tone for the ES and the SPX for today. I repeat: It looks like the risk trade is off. ES wandered sideways for most of the night, and then sold off with the DAX to find support at the S2 pivot.
R2: 1220 = Not likely with the fear trade back on.
R1: 1214 = Around the high from yesterday. It’s possible today – but, IMO, not very likely given the sentiment. I see this as outside the range for today.
Neutral: 1210.75 = Looks like this area will be the top of any range that gets going.
S1: 1205 = Not a factor yet. Might act as resistance as ES tries to crawl off of S2.
S2: 1201.50 = Looks like this is the bottom of any range.
Note that ES put in a local wave 5 down to get to the S2 pivot. ES is being remarkably well-behaved TA-wise this morning. We’re looking for the ABC wavelets up – where I see ES = 1207.50 as the top of this move (a TD resistance level). I don’t see any data points that could change sentiment this morning, so if that point is reached then it is likely that the S2 pivot will be tested again on the way down.
Greece has a week to produce budget plans to reach their fiscal deficit targets or they are not eligible for aid. The economist estimates that foreign banks’ exposure to Greece and Portugal is about E$1.2 trillion. Wednesday, we will be graced by yet another statement from the FED. Given the dissent we have seen from some members, I would love to be a fly on the wall for those meetings. Saturday Night Life has started to poke fun at the unions. Even they can see the farce and ridicule in “pork for life” – so why can’t the unions themselves. So long as they exist in any profession and are able to limit supply, then this will be the norm in this time of sub-employment:
A congressional groundswell is building to ban proprietary trading at the banks. Non-Commercial Emini (ES) contracts have reached their greatest net short level since November 2008. These are NOT a contrarian indicator – but usually presage a market correction or move up (short and long respectively) through the change from net long to net short, or vice versa.
Tick. Tock. Tick. Tock.
Developed Asia was green. Australia was closed. Emerging Asia was mixed with China in the red. The DAX is gren, being led by industrials and Financials – so the risk trade is on. It gapped up considerably at open and is maintaining that level with support at 6300. Looks like another Monday Fun day for the bulls is shaping up. I don’t know why the rocket, except it looks like the market is responding well to the news that the Treasury will sell up to 1.5 billion shares of Citi stock.
ES followed the DAX but not wth the same degree of violence. Around the Asia open, ES rose to around 1214 where it meandered until the Europe open, then hit 1216ish before following the DAX down and up a bit to currently sit around 1215ish. The interesting part is that on the 5 minute chart for ESM0, TD has 3 risk levels stacked up like planes over Chicago. They are saying that the risk is down if the recent high isn’t cleared. In other words, we’re starting to see a lower low and,now, what may be a lower high – in to the opn. Pivots:
R2: 1224 = This would be around the 62% FIB for SPX, and is a distinct possiblity today – barring unexpected data or news.
R1: 1218 = This is where I believe that ES is headed, and it has to make this level to clear all 3 TD risk levels (These arise out of ES reaching SELL countdowns lucky number ’13′ almost simultaneously, from all the consecutvie moves up that have happened over the last week. This is the battle zone for now, and a short at 1218 with stop above would not be a bad move – depndending on the velocity with which ES gets there.
Neutral: 1208 = May have been a bit of resistance April 21 and 22. It doesn’t look like this is much of anything in the present environment.
S1: 1202 = This has been a suport and resistance level over the last week. If there is a move down, this would probably be the place to polay the swing trade.
S2: 1191..50 = Hasn’t really been tested from above as support. It did hold for ES on April 12 and 13.
I believe today will be an up day, simply because it is Monday Funday. Don’t foreget that this is a FED week as well.
I spent some time this weekend checking out what bar shapes occurred the most in tangent just before a local high or top. The results are interesting, and I talk about them a bit below.
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