Living Inside a Broken Clock: Monday, Feb. 1, 2010

The USA is getting more stimulus than a fifteen year old boy with a V.S. catalog.  Bankers are rushing to cash in bonuses – even equity ones – and taking a sizeable haircut to do so. Actions speak louder than words – remember that, Political Class. Bernanke is re-confirmed, and incumbents began looking for lobbying jobs. Foreign Central Bank holdings of T-bills, as measured by the FED, are declining. Looks like all the rats are leaving the sinking ship. Since Paulson, Geithner, Bernanke, and others called before the AIG inquiry, seem to have had nothing to do with anything or any decision, it shouldn’t matter since a mysterious cabal is making all the decisions. (Before you pull out the Reynolds Wrap, this is a joke). If that’s not disturbing enough, then try this. ( It is a cartoon – anime – and it can be disturbing).

http://www.youtube.com/watch?v=Urfsy2f9jGQ

EQUITY

Swim with the current. The trend is your friend. On my daily SPX chart, the trend is clearly down. This means that short trades will likely have a higher percentage of good resolution, or a better risk /reward ratio.  The 5 DMA is keeping SPX’s head down. It is at 1088.97 (1089 between friends). Watch this number today.  SPX = 1086 was an important support line, and it has been broken. There is a 50/50 chance of there being a re-test at some point – but I’m not taking any positions based on that.

Asia was mixed, and so is Europe. The important DAX is pretty much flat  as the bottoming, or consolidation process continues.

ES has been trending up since the open on Sunday. It is running into resistance at the neutral pivot – and tried to get through already at around 4:30AM. This reinforces my opinion that the best plays today will be short ones – in keeping with my “swim with the trend” trading theme. Pivots:

• R2: 1103.50 =  At the peak from Thursday.  Looks like it was resistance on the way up throughout November 2009.
• R1: 1087 = puts SPX below 1086. This suggests that any SPX re-test will have a strong headwind.
• Neutral: 1076.75 = The roof, for the time being of ES overnight.
• S1: 1060.25  = A long way down from here. TD has support in the way at 1068.25. Any weakness could lead to more downside.  SPX daily has a trend line support at SPX =  1056.77 and a TD support line at 1046.50 – for those who like to dream of the apocalypse.
• S2: 1050 = Right in between the SPX numbers in S1 paragraph.

Right now, on my ES 5 min chart, I see overhead TD resistance at 1078.75 with price exhaustion at 1079.25. This looks like a good place to get short. TD Wave has a retrace at 1082.75 – if this run up does get away from things. Downside, I see TD support at 1074.50 and again at 1072.75. TD Pressure has just signalled a low risk SELL with a plausible stop at 1078.50 – I usually find these too tight. MACD (21,13,8) is postive but looks to be peaking.

FX

DXY’s next big test wil be at the 38% FIB at 80.07 (high=89.62; low = 74.17).  There is pivot support at 79.27 for the consolidation to take place. Below that, S1 is at 79.04 – so it is not a big risk fall from where we are now. EUR looks like it is putting in another bearish upward sloping wedge.

CAD, EUR are stronger, JPY is flat, GBP is weaker. JPYEUR is up – meaning it takes more JPY to buy 1 euro. This means the SPX should be up if the correlation is still holding.

EUR mfg was revised up. BoJ says consumption may not resume until into 2011 / 2012 (after 20 years of printing money?)

NEWS

Close your eyes here if you think it doesn’t matter.

Citi plans to sell or dispose of their $10 bb private equity unit.  CBs are shifting assets – but not embracing the EUR – putting its potential as a reserve currency in serious doubt. BoE is thinking of termporarily halting its QE program to guage impact.  The BRL falls a lot, and some see this as a warning for the AUD.

US Corp spending rises the most since 2006.  This seems to be lead by tech, and companies like GE.

DATA

8:30

Personal income, spending, PCE deflator

10:00

ISM mfg; prices paid, construction spending MoM.

Cheers.