Living Inside a Broken Clock: Tuesday, Jan. 26, 2010
Living Inside a Broken Clock: Tuesday, Jan. 26, 2010
Obama decides to shut the barn door now that our grandhildren will be chasing that deficit horse. Geithner makes apocalyptic noises about doom following Bernanke’s possible dismissal. Bernanke is still shoveling the money out the back door, down to the bitter dregs. Congress, bereft of ideas, morality, and spine, decides to push for another stimulus. The AIG fiasco lurks in the background with obvious stench. Wall Street rewards itself, anyway, for fantasy accounting profits.
http://jessescrossroadscafe.blogspot.com/2010/01/financial-services-from-servant-to-lord.html
The UK gets a pinky finger out of recession. China starts to tighten up, again, on loans. The FED considers adopting interest on Reserves as the new benchmark (can’t have interest rates in the hands of the market, now, can we?). Portugal tries to avoid looking like Greece (let’s put some lipstick on that PIIGS). Wall Steet hooks the electric current up to synthetic instruments.
Welcome to the broken clock.
EQUITY
The magic numbers on SPX daily still remain 1086 berlow, and 1114 above. 1086 is the horizontal support line that runs all the way back to mid-October. 1114 is a resistance line for all the mini-waves since November, as well as the 50 DMA and soon-to-be the 5 DMA. That’s a lot of ju-ju.
Yesterday, SPX put a pin up through the trend line “Since Aug 17” but closed below. Good enough for me, and the overnight market seemed to agree. Asia was red by over 2% in some cases. Europe is red, but less so – around 1% Only Denmark is green.
The DAX gapped down at the open and is trending sideways. I’m not sure that the gap will get filled today. Industrials and Telecom are the only green. The Financials opened green yesterday – but are not holding up their end. There was some Data out of Europe showing German import prices up MoM, French consumer spending up MoM, the European current account improved, Italy…. well you can see it all lhere:
ES, overnight, sold off with the Japan open, and spent the next hours moving back and forth betwen the S2 and S1 pivots. Europe had no real impact at their open. The market seems to be waiting. Pivots:
- R2: 1108.25 = Resistance before the waterfall on Friday.
- R1: 1100.50 = Around the highs from Monday.
- Neutral: 1095 = How about that ’10’ handle? Funny how a few days changes perceptions from Maginot line surrender by the bears, to quasi-jubilation and greeting of the abyss. This was around the highs overnight before Asia opened.
- S1: 1087 = roof overnight, still providing resistance this AM. Matched by a TD resistance line as well.
- S2: 1082 = Floor overnight. ES has put in the bottom of wave 5 down on the 60 minute chart. Look for the upwardly corrective ABC wave before the next down – if wave theory means anything.
On the daily chart, ES has started its TD wave 1 of 5 down. I see no real technical support (except Bollinger bands, Pivots, and FIB lines – which have all the value of CDOs and CDSs once the liquidity fails).
FX
DXY daily is still hoding its head above the 23.6% FIB (hig = 89.624, low = 74.17). I get the sense that the market is waiting to see what happens to the players who have been printing USD. The 30 min chart has an R2 pivot at 78.50 – and DXY is making an attempt to hold just above this. If not, there is support at R1 at 78.345.
The EUR is falling below S2 at 1.4093 and we may be seeing the 3 handle again, soon. The low from last week was around EUR = 1.4029 – talk about cutting it close. I get the sense that someone is defending short Fx options around 1.40 (barrier maybe?).
NEWS
Just waiting……. If you don’t know what for – maybe you shouldn’t be trading.
DATA
Lots of home data at 9 AM (case Shiller). Consumer confidence, house prices, and the Richmond Fed at 10AM. ABC consumer confidence at 17:00. See here for more:
http://www.briefing.com/Investor/Public/Calendars/EconomicCalendar.htm
SUMMARY
There is a lot of uncertainty around, which breeds fear – but not capitulation. The trade into the open? My opinion is that you can go short around ES = 1087ish [the pivot and TD resistance level] with stop around 1089 [stop level from TD Pressure] (or higher if you’re able to handle more risk), and target around 1082 [there is a TD support level at 1082.75].
If ES gets down to 1082, one could go long with a stop below 1079 [a TD price exhaustion level = red picket fence for those playing along at home] and target back up at 1087. Rinse, repeat. Rinse. Repeat. Tick. Tock. Tick. Tock.
Cheers.
