Living Inside a Broken Clock – Fri Dec 4, 2009

by gmak

BofA raises $19 bb in the largest US equity offering since 2000 – lots of USD available for paper pushing financial parasites which add no value to the productive capacity of the nation. Meanwhile, a German industrial company struggles to get even 2/3 of the EUR they need through a stock offering. Japan scares world with a rumour that they might start selling Treasurys and the FED doesn’t even blink. It’s not a bluff if there is no chance of it ever happening – BoJ should play more Poker online. Meanwhile, Bernanke wishes he had pictures of more senators with shaved gerbils in hand, so to speak. Canada somehow creates 79K jobs (multiply by 10 for the US equivalent) while Global trade collapses slowly on itself and exports dry up – all of this in the domestic services of EDUCATION. How’s that for a long term contributor to GDP? Welcome to the broken clock.

Yesterday’s close was startling. After the Ramp and Camp that was the day, we found ourselves in an alternative universe where there was no ramp into the close. Looking at the 30 min chart sure shows a tired market with selling into any rally and rip.

Notice how the fall was supported by the pivot at 1099.50 – and how the BUY setup count is only at 6. SHort term TD Pressure suggests it needs to be released with some sideways or upward movement. Now, I’m writing all of this without having looked at ES yet this AM. I wanted to put up fresh impressions, and quickly. BIG NEWS is coming at 8:30 and it looks like I may not post on time.

Looks like ES gave a rising flag overnight – so there was no recovery in spite of the great BofA issue and the possibility that Bernanke could be reconfirmed. Watch ES = 1097.50. IF crosses downward with definite purpose, then TD says 1093.75 is where price exhaustion might occur. Of course all of this changes once the open happens and volume comes in.

SPX daily shows a red bar on higher volume. TD Pressure is headed back down – but hasn’t gone below its last low, yet. As well, the dashed green line still lingers as better support than Tiger Woods alimony. SPX still has failed to get back above the long term ULTRAVIOLET trend line even if each day puts in a new high – the center cannot hold.

After the news from Canada, there should be no suprise that only 11K jobs were lost in the US. It’s a miracle! Praise Saint Bernanke and the Apostle Tim! Meanwhile, the USD is holding its own while the JPY starts to spiral down the toilet. EUR is close to flat but the CAD and GBP are soaring. Long live paper profits and paper shuffling!

TNX is going through the roof! To me this says that next weeks debt issue may be under some pressure. JPY continues to fall, and GBP is seeing some profit taking.

Looking at the DAX, I see green in Utilities, Materials, Consumer Staples, and Telecom. Looks like the day-by-day sector rotation continues. I would expect the same in SPX, and that spells DISTRIBUTION. But who is the giant evil squid distributing to?  I’m limited in my screen capture right now, so the pretty pictures will have to wait.

FED’s Balance Sheet

Reserves from banks in the FED system shrunk in the week ended Wed Dec 2, 2009, from 1,165.5 Billion to  1,119 Billion.  Not a big change, but it says that banks deployed $46 billion or so elsewhere. Meanwhile, MBS is indicated as unchanged WoW at $852 BB.  You can see here yourself:

This week: http://www.federalreserve.gov/releases/h41/Current/

Last week: http://www.federalreserve.gov/releases/h41/20091127/

Factors supplying reserve funds only increased a total of $2 billion. The factors reducing reserve funds rose – with currency in circulation falling – primarily due to something called “Supplementary Financing Account” which sounds ominous. This account is part of the “Deposits with Fed. Reserve Banks OTHER THAN RESERVES” account. I’ll leave it to those with more time than me, at the present moment, to figure out what this is, as there is no footnote of explanation.

This B/S is where all the squid ink comes from – so it behooves us to understand what is going on.

FX

EUR has fallen off a cliff and is testing its S2 pivot at 1.4980.  GBP has fallen a least a cent as well. But the CAD hold strong at up almost a penny. Given how the TNX ramped up, I can’t believe that this is flight from risk. It looks more like a lot of money pouring out of foreign assets into US assets. If that is the case, look out for margin pressure on the USD carry trade. I’m sure that many here will be writing excellent explanations for what we are seeing right now.

Do you think that the US poplulace will take to the barricades next time the Jobs number comes out, if it has a huge revision downward?