Summer of Discontent or The Lyin’ in Winter
Summer of Discontent or The Lyin’ in Winter
by gmak
Dick Fuld demonstrated beyond doubt that he had to have been the most over-paid individual on the planet, through his testimony. At 30 to 1 leverage, Lehman was “too risk averse” and so failed. Where do they find these people? But, he’s not in jail and still relatively wealthy. Too stupid to fail?
In the real world, Greece spreads continue to widen to Bunds (German bonds). Portugal is getting pulled along in the wake. The IMF says (finally) that this is a wake up call on sovereign risk. Ya think? Germany had a failed bond auction itself. Where is the flight to safety now for the PIMCOs of the world?
But taking a cue from their fellow pigs at the trough, unions everywhere don’t want to give anything up (and really! Why should they unless the elites do so as well? Might as well distribute the pain to all of the piggy triumvirate = financial parasites, political, and union) – and are both verbally and physically threatening the political class that they (the unions) believe they own.
One of the good things in all this is: To save their skins, the politicians trying to curb the unions, will throw the financial parasites to the wolves in order to appeal to a broader constituency than those groups with private lobbyists.
I thought freedom of speech, lawful assembly, and the right to bear arms were enshrined in the constitution. I feel sorry for the USA, as the administration has decided to get ready to head off civil unrest heading into the fall elections with the readiness of a special military unit for that purpose. Something bad must be coming down the pipe for this to be in the works. Now, I am curious about what it could be.
Welcome to the broken clock.
OverNight
Asia is red, except for Singapore, India, Philippines, Malaysia, and Indonesia. Breadth is strongly negative. Europe is entirely red again, but less than 1% in individual markets. The DAX tested resistance around 6280ish, but failed and fell down to the support line at 6180ish. Health care and Info Tech are green. Financials and Industrials have led the market lower. Seems like a repeat of yesterday. Some manufacturing stats were released for Europe, and I guess that they were not as good as expected. More likely is that the Greece news just gets worse with the revised budget deficit now around 15% of GDP. Jawboning by EU officials with a positive spin is just making matters worse as credibility suffers.
ES tried to run up into the bell, but sold off into the lockup and basically moved sideways in a tight range for most of the night. It mirrored the DAX from the Europe open onwards and has settled around the pivot at 1194ish. Th peak of the range was around ES = 1204 – and that is likely to be it for today, especially given that this was strong resistance near the HOD for yesterday.
- R2: 1216 = Not too likely in the current sentiment environment. Wouldn’t you agree?
- R1: 1208.25 = A possibility if data points exceed expectations
- Neutral: 1201.75 = Around the area for the likely point of resistance on any move up. Has been tested several times in the last 24 hours.
- S1: 1194 = This is the floor as ES looks to be putting in a bearish pennant. This might be the consolidation area for another attempt up on the data coming.
- S2: 1187 = This was a support area from Monday. And was resistance / support from April 5 – APril 14. Likely to play a role in any move down, and should not give in easily.
Today is the dread PPI (no, not the Pirate Roberts but the Producer Price Index). This will indicate how business is getting squeezed – given that they are unable to pass price increases on (CPI is staying low, no?). As well, the Jobless data comes out, along with existing home sales and price index. All of this is at 8:30, 9:00, and 10:00 respectively (NY Time).
And here comes the stuff for those with the secret decoder rings….
[amprotect=1,9,5,2]The chart shows the same possible scenarios. The low risk SELL from TD Pressure is still on. Yesterday’s bar behaved as indicated by the probabilities. CLOSE < OPEN, and CLOSE close to OPEN in value.
Just considering the ’43’ bar from yesterday, and the fact that SPX still has a positive slope, the probability indicates CLOSE > OPEN (56%); CLOSE = OPEN (9%); CLOSE < OPEN (35%). This seems to support the CLOSE > OPEN of the two bar probability, as follows. On 17 data points, a ’15’ + ’43’ combo indicates that CLOSE > OPEN (53%); CLOSE = OPEN (17%); CLOSE < OPEN (30%). Given the relatively high prob for CLOSE = OPEN, it looks like the probabilities are saying that CLOSE > OPEN, but that the two will be relatively close in value.
The VIX is getting support from the TD technical level indicated by the dashed purple line. It seems to be limited to the upside by the average Bollinger (which is 21 days on this chart). Looking back on the VIX, it does not regularly move up / down / up / down as rapidly as the recent days, except when there is a change in the Bollinger width. Given how narrow the Bollinger bands had become, I would suggest that they are going to widen. The VIX volatility will increase, meaning that the SPX should be showing a lot of up and down itself. I would argue that the momentum is still down for the VIX, and that it needs to test the bottom bollinger yet again before any major SPX correctoin. Just an opinion here.
The trend is still down – but volatility seems higher with dramatic (relatively) moves in one direction or the other. Right now the channel 62% FIB is holding, and the channel seems to be taking precedence over the Bollinger Bands. MACD is indicating ‘down’ but loking back, this doesn’t always last. In the meantime, within the down trend, EUR is putting in higher highs and higher lows, since the last week of March. It looks like a wedge is forming from the local high of 1.3814 set on March 17. Usually, the exit is in the same direction as the entrance to this type of formation = DOWN. However, news is having a tremendous impact on intra-day movement to the point of distorting the inter-day movement. I hesitate to call a longer term direction, still.
DXY is trying to move up but is having trouble getting past the average Bollinger (effectively the 21-day SMA). It looks rangebound between 80.229 and 82ish. I would use this range for trading. Right now, it is in the middle and not an attractive risk / reward – although 2sweeties probabilities do provide additional insight and a bit more of an edge.
[/amprotect]My Best Regards.
