Highway to Hell: Your Tax Dollars Paving the Good Intentions
Highway to Hell: Your Tax Dollars Paving the Good Intentions
by gmak: April 7, 2010
- Foreclosures are imminent. Freddie is going to auction off homes, with the timing to permit buyers to get the $8,000 credit just before expiry.
- At least one sane member of the FOMC is aghast at how long the ZIRP might continue.Why aren’t the others? Have they no shame?
- Detroit is staring bankruptcy in the face. LA is apparently going to run out of cash by the first week of May. Food stamp distribution and usage has never been higher (39.4 million people with the 14th straight monthly increase).
- The FED thinks that it could sell $15 – $25 billion of mortgages A MONTH and have the B/S back in shape in about 10 years. I guess the Treasury will be buying them with money borrowed through T-bill auction where the “direct buyer” is the only one bidding (hint, it’s the FED). That’s why the members of the FOMC are smirking in their photos, hands in each others’ pockets.
- Equity volume keeps getting lower, and the market dances to the tune of fewer and fewer individual names. The NYSE is might offer special pricing on certain “premium” names in options: AAPL, BAC, C, DIA, EEM, FAZ, GDX, GE, GLD, IWM, QQQQ, SPY, UNG, USO & XLF – and now we know what will drive the next leg of the market. Meanwhile, on LIFFE, they are announcing new futures – what better way to provide a lever to jerk markets around in interest rates.
Welcome to the broken clock.
This is a very confusing market to some. They look at the nasty, nasty condition of the economic world and insist that equities should fall. They don’t. They won’t. There are buckets and buckets of liquidity being dropped into the tub of the financial system and it is spilling and sloshing into every other tub and asset class that one could imagine.
Skip to 1:30 to see how this began and how it will end. This would sound much better with the “Highway to Hell” from AC/DC – but I’m a trader not a movie editor.
The TA is getting very interesting and suggesting a correction of some form or another within 12 trading days.
Overnight, Asia was mainly green, except for China which had its first down day in 5. Europe is mainly red. I guess the fact that the Greek banks said they needed to tap into a EURO$17 billion of existing guarantees, is making everyone nervous. The DAX is having trouble getting above that 6250 level and sticking, but it isn’t in free fall by any means. Only 3 sectors are green: Utilities, health Care, and Materials – so it looks like rotation taking place from the last week. Breadth is mixed with some red sectors actually having 50% or more in the green by members.
The EUR took a slap a short while ago from the Greek Bank news. Greek banks are having a hard time rolling over debt, it would appear. The interesting part in all this is the emotional context that leads to a weak EUR. If Greece defaults on EUR loans, there are less EUR in existence and, ipso facto, the EUR should paradoxically strengthen. But before then, there is a fear of holding EUR assets and I would suggest that the strength in JPY is partially coming from the unwinding of EURJPY positions.
Overnight, ES traded sideways in a slightly descending range. There seems to be a technical floor around 1182ish, and a technical ceiling at 1185ish if you want to trade those 3 points every hour or so. Mortgage applications were -11% versus +1.3% prior. The market didn’t even notice. NO other data comes out today except consumer credit at 15:00 – which is expected to decline by less than a billion (Feb.) versus an increase of %5 billion in January. Pivots:
- R2: 1194.25 = Given the fear trade being back on, I don’t think this is likely today unless some Algo gets stuck in a loop.
- R1: 1190 = Ditto.
- Neutral: 1183.75 = Currently acting as resistance to ES – with that TD resistance point up above at 1185.50; If that gets cleared decisively then R1 would be on the table.
- S1: 1179.50 = Possble support if techical support at 1182 is broken. This has been a general support and resistance level oer the last two trading days. But, it is uncharted territory this year as far as support / resistance goes
- S2: 1173 = ditto.
If you’re a subscriber, you can look behind the curtain.
[amprotect=9,1,5]I can only repeat what I wrote yesterday. TD TA is saying that conditions are ripe for a correction. Bar 13 (inside the white circle on the chart linked below) has formed. It will take 12 more bars to INvalidate this condition – and a reversal (down) of SPX can take place at any time during that interval.
The last two days, the SPX bar has been a ’15’ and a ’24’ There is a distinctly higher probability that the CLOSE < OPEN, today. The most likely scenario has the CLOSE being within 20% of the LOD. SPX has now spent 25 days above the 55-day SMA. If this is somehow to avoid becoming a runaway train, the move down towards the moving average has to start soon. SO far the SPX slope appears to be steeper than the 55-day SMA, which suggests > 50 days above – a higher probability event. Watch for the re-test of the “Since Oct 21” trend line. If it holds, then there is a lot more room to run (Duh!).
There are a few TA indicators that suggest that something is imminent – even if it’s not the Bears’ Holy Grail.
- TD Pressure is in overbought territory – and this does NOT usually go on “until”. If a pink box forms – then yes the trend will continue. If not, there are usually only 3 – 5 days before the price moves down.
- the 138% FIB is now acting as overhead resistance. This is a more ‘natural’ resistance point than the 124% FIB.
- TD has put a little yellow triangle and a little red triangle below the SPX most recent bar. These are the start of the ‘picket’ fences that indicate areas of support that can turn into downward momentum. Notice the green and blue picket fences earlier on the chart. The fact that the green one doubled up on its ‘pickets’ indicated that momentum was being established to take SPX up to the blue picket. The yellow picket fence will start out with normal density. If it gets reached by SPX, and then goes double density, then the red picket fence becomes the target. Long story short, TD is sensing conditions for the NEED for support down at that 21-day SMA.
- SPX reached the price exhaustion level of the blue picket fence, and that means that buyers are disappearing. That is no secret to anyone who is watching volume but this indicator is not volume based, but rather based on the relationship between open /close and high / low of the SPX bars.
- SPX has overthrown the “Since Oct 21” trend line (the dotted white line just below the most recent bar). In most normal universes, a breaking of trend usually leads to a retest from the other side.
FX
The last time CAD was near parity with the USD, it moved back and forth over that line in a 2 – 3 cent range for almost 8 months before weakening back to the 1.30 level. That back and forth can give a sweet return if played in the direction of the movement – i.e. with the range. Sell CAD at 0.98, buy back at 1.02 (in futures, each cent is worth about $1,000 per contract).
The daily chart is showing CAD as putting in a LOW RISK BUY – which means TD expects the price of CAD to go up (which is a weakening of CAD – because it is how many CAD a USD can buy). The way to play is to short the future – which I have.
At the same time, there is that yellow ‘5’ that says that a 5th wave down is in. ABC-up comes next in the simplistic world of TD waves. There is also a little purple ’13’ which suggests that a reversal is imminent (it takes 12 bars before the condition is considered a false alarm).
A few days of upward or sideways movement might just get the 10-day SMA (orange line) to turn up. Notice that there is the beginning of a single density green picket fence and the blue picket fence. These are bullish indicators for price (which is bearish for the value of the CAD). TD sees that momentum is building for a move up to to the 1.0160 level – where the SMA’s currently reside.
The EUR is everyone’s favourite whipping girl right now. But, as the daily chart shows, there is support coming from the TD risk level (which is the purple dashed line that the current bar is sitting on. Looking at TD Pressure, if EUR doesn’t go down to test the diagonal FIB line from the channel that is just below, then it looks like a higher low will be in, and a new move up might begin.
I’m writing this at night, so we’ll see if the EUR manages to break the 1.3370 level and fall – or if the big guns come in with a rescue once again. Note that the EUR / DXY / SPX correlation is not active at the present time. Here is the daily EUR chart:
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