Holding Pattern

The best way for me to describe the tape of the last two days would be a ‘holding pattern’. Seems that there is much hope and anticipation regarding tomorrow’s GDP numbers. As you all know - I don’t trade the news - besides the big boys actually attribute much time and resources to collecting sufficient intel before the actual report is handed down to the rest of us mortals, thus they are always positioned beforehand. If you see traders running around screaming with their hair on fire you know they were the suckers left to hold the bag.

Gmak posted this about the treasury auctions which I believe deserves more eyeballs:

If you look at the TNX (index representing 10 times the 10yr bond yield), one notices that from open to close, it followed a straight line down, with the only objection coming around 1PM. This was squelched.
Given how the SPX behaved yesterday, I would suggest that liquidity was being applied to get the yield down in order to provide a decent auction for the 2year. In other words, at the margin the liquidity is the financial system is so over-extended that it is becoming difficult for dramatic moves in multiple asset classes.
From Reuters, here is today’s schedule:

• 10:30 Fed agency coupon purchase (Nov 15, 2011 to Oct 18, 2013)
• 11:30 Treasury auctions $25 bln 300-day Cash Management Bills
• 13:00 Treasury auctions $41 bln 5-year notes

Last of the POMO at 10:30 perhaps [Mole: POMO is happening tomorrow] – restoring some liquidity from yesterday’s auction. The amounts being issued today are hefty. It would surprise me if the POMO leads to a big pop. Also remember that there is a TAF maturity coming up next week – Thursday if I remember correctly. Watch the auctions and more specifically, what it does to yields. This is the first time that I’ve noticed that the games of pushing yield up before a major auction to get a cheaper price, has NOT been working for the “hedge funds”.

I totally screwed up the blue wave count yesterday - my apologies. Obviously we would be putting in an X and not a b-wave as the pro-regressive waves need to count out a five.

• Soylent Orange - still remains what we bears all want to be seeing right now and the bulltards appear to sell into based on the recent distribution patterns (although that has slowed down). We are inside a Minuette (iii) of Minute {i} of Minor 1 of Intermediate 1 of Primary {3} of Cycle wave c. Which means we should have NOT meandered around here for long and proceeded straight towards the 1045 mark for a little bounce, more drop. So far it’s been down but way too slow - not liking the pattern. Anyway, if it happens today/tomorrow expect a pull back into Minute {ii}, a.k.a. as the last good chance for us bears to back up the truck.
• Soylent Blue - the bulltards’ favorite. We faked out the bears once more by approaching an important trend line via Minor X [not Minute {b}], which is still playing out and might take us all the way to 1045. If this turns out to be ugly reality then expect whatever news tomorrow to be the excuse for a run up to complete hopefully the last zigzag of Intermediate (Y) of Primary {2} of Cycle wave c.

Fact of the day: This sell off has been stopped in its tracks and the little wiggles to the downside since Monday can quickly be reversed by a POMO cash infusion (admittedly there is not much left) in a matter of minutes. Take a look at the my favorite CPCE chart - we are now pushing into code yellow territory. The bears better make use of the time - if they sit on their asses until tomorrow they might find themselves in a good old fashioned squeeze again.

Alright that should keep you guys busy for a while

10:51am EDT: I just put this chart together before we dropped off the plate:

Still applies though - however I would probably start taking partial profits here.

This entry was posted on Wednesday, October 28th, 2009 at 10:17 am and is filed under Elliott Wave Theory, Futures, Intraday Update. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.