Living Inside a Broken Clock: Wednesday, Dec. 23, 2009.

by gmak

A British priest advises his flock to steal from large businesses. The yield curve continues to steepen with dire consequences for mortgages, especially the wave of re-fis coming up. Tiny Tim says that good times are coming back. So borrow more. Spend more. Live large. He’s got our collective back… Really. Treasury has successfully borrowed our way back to prosperity. Tick. Tock. Tick. Tock.

EQUITY

On very low volume, SPX opened and closed above my little white horizontal line of resistance with a new high since March: 1120.27. Just 3 little points until my Pareto level is reached.  I don’t think it’s safe to draw any conclusions until the New Year is past. In the meantime, keep an eye on the dotted trend line “Since Oct 21” and the purple horizontal dashed line just above it. The latter is where TD TA has a watershed turning point (around 1133.90). Getting past this level would suggest much more upside to come. Usually, it acts as resistance – and a major retrace level.  If you’re nimble, you can probably run in between the rain drops and make some money. I don’t believe that this is a good time to take a major short or long position to hold. The SELL count has just started (at 2) and TD Pressure s moving up – but it hasn’t set a new local high along with SPX. The lines for establishing a trend are in purple and red = SPX : 1046.30 – 1133.90. That’s quite a distance before you know if you’re wrong or right on a longer term position.

The world is green. No surprise into year end with the MSM pushing the recovery story hard. DAX is clinging to its peak. The grey is Japan (=0%), which is closed today.

ES was folding until Europe opened at 3 AM EST.  Now, it is finding support at the pivot at 1117.

• R2: 1120.75 = Within spitting distance. ES almost got there around 5:15 AM EST.
• R1: 1117 = Current support level. Didn’t get any respect overnight. If for some reason ES gets below this, there is a TD risk level at 1114.75 – this is the real barrier for a trend change. We won’t get here until in the New Year, IMHO.
• Neutral: 1112 = Was the TD risk area late yesterday and overnight. Out of the picture for the time being.
• S1: 1108.75 = base for most of yesterday. Touching here led to another 30 minute pop.
• S2: 1103.75 = old support area that saw the launch of the latest ramp that began on Monday AM.

If you want to put on a short trade in ES, right now. IMHO: buy here with a stop around 1115 (below the yellow retrace level for the so-called wave 3 down in yellow). Look for that 1120.75 target.  Pretty pithy pickings. RIsking 2 to make 4. It’s ok, but the TA isn’t great, just average, supporting this trade.

On the daily chart, ES is pulling above the TD risk level (dashed violet line) at a low point in the SELL setup count. This is a bullish indicator, in spite of the declining volume. SInce the overall trend is bullish, bullish scalps make more sense from a probability perspective. Not that TD wave is blue 5 (up sequence – so after this it is a down wave of some kind or another. But no one can know where the turn can come.

FX

DXY is weak today.  CAD is pulling all the weight as JPY is essentially flat, EUR is up just a touch, and GBP is weaker.  Treasury is auctioning 2, 5, and 7 year bills for a total of $118 bb. This is potentially market-roiling action.  You’ve seen the charts from yesterday.  DXY is putting in a bullish flag at the pivot at 78.18. EUR continues to consolidate with a declining wedge. 1.4266 is acting as overhead resistance. The economic data from Europe this AM didn’t flip any switches one way or another.

NEWS

Americans will be happy to see that their tax burden has been reduced to $8.2 trillion in terms of FED and Agency debt, guarantees, and expenditures. Spending by Congress is taking over.

DATA

I’m off until January 4th. I won’t be posting until Monday coming up – and the posts may be short and sweet, we’ll see. Have a Merry Christmas, and a Happy Holiday.

Cheers.