Less is More
Less is More
by gmak
William Black read a statement before the Financial Services committee. Black is an Associate Professor of Economics and Law, at the University of Missouri. He has credibility in this realm, with a specialty in financial fraud by elites – and having been a regulator through the S&L crisis. His contention is that there were major lapses in governance of Lehman. He also contends that Geithner and the FED WILLFULLY ignored fraud in the pursuit of their own agenda. You can read the text here:
http://tinyurl.com/y3zrnda
Tick. Tock. Tick. Tock.
OverNight
Asia was green, except for Hong Kong and Vietnam. Europe is red except for Ireland and Denmark. The DAX opened up a bit, then proceeded to sell off on the realization that Greece will be worse than East Germany reunification for sucking the financial life out of German citizens. Currently the DAX is seeing somwe support at yesterday’s level of around 6240 – but 6250 is becoming resistance. Guess there will be a good ole bearish flag forming. Info Tech and Materials are the only green sectors – and Materials breadth is not good. Financials are leading the way down – so it looks like the risk trade is OFF, once again.
Data today is the MBA mortgage appications up 13.6% vs prior of -9.6%, for the week ended April 16. Tomorrow brings the dreaded PP! and Jobless claims, Existing home sales, and House Price Index MoM.
ESM0 headed up off of the afterglow of Apple news but could not bread through the 1209.50 pivot (R1), and sold off into the Europe open to find a floor down around 1201.75. Pivots:
- R2: 1213.50 = Possible, but not with the current sentiment (today anyway).
- R1: 1209.50 = This was staunch resistance overnight, and tested twice before the sell off. I would argue that this is the top end of any range for today.
- Neutral: 1201.75 = Looks like the support level from yesterday is making a repeat appearance today. At the same time, this looks like the end point for a TD wave 3 down (remember, TD Waves are sequential and not nested like EW). Overhead short-term resistance is at 1204.38, the 34 pMA (5 min chart) at 1204.85 – and a tchnical resistance level at 1208.25 that seems to show up a lot recently. In the interim, ES is having a hard time getting above the 9 pMA on the 5 minute chart.
- S1: 1197.75 = This was reisstance around April 9 – but doesn’t seem to have been much of a factor otherwise. To me it looks like this level would be sliced like warm bread.
- S2: 1190 = There was a battle around this area, and resistance over a lot of April, so far. This is likely to be stronger support.
There’s more for subscribers:
[amprotect=9,1,5]The TD low risk SELL is still in effect – even though the stop level is up at the 62% FIB at 1228.74. The “Since Oct 21” trend line has been re-tested from above and held. I don’t know about you, but to me that is a bulish TA sign. However, reality has a way of catching up to the markets sooner or later.
Right now we are seeing a war between the Algos and sentiment. I think that the true point of resistance will come from the SPX recent high at 1213.92. The probabilities are neutral as to whether or not CLOSE > OPEN for the day after a ’15’ bar. But when the two days are considered together (35, 15), then (based on a sample of 20 occurences since 1982) there is a 60% chance that CLOSE <= OPEN, but with no standouts as to the possible shape of the bar. Looking at the CLOSE = OPEN shows a probability of 15% – which is quite high for this occurence. When this has happened in the past, the CLOSE and OPEN have a tendency to be close to each other. Again, this is a work in progress and should NOT be used on its own to make trades. At some point, we will be able to conclude that it is useful information, or relegate it to the scrap heap of interesting but useless ideas. 🙂
The volatility of the VIX has increased, judging by the relative size of the most recent bars. The Bollinger bands are beginning to widen. For this to continue, it looks like we will see a lot of back and forth on the vix – which means good intra-day movement on the SPX.
This is to present yet another perspective on the USD, and perhaps suggest where it might go in the short term. I like the probabilities that that Mole posted yesterday. I agree that a short is probably a better play than a long on the DXY, from a TA perspective – but I am thinking of the short term here and the various factors that might come to bear.
Ignoring potential macro-economic events that may or may not happen (i.e. flight to quality from Greece bankruptcy – which would trump TA every time for those who are leaning to the “news doesn’t matter” camp), what does the DXY Daly Chart say? It says that there is a lot of overhead resistance at the 50% FIB at 81.897, including that green picket fence (DXY = 82.049) that is a TD momentum indicator (it is resistance that can turn into a slingshot under certain conditions, to send DXY up to the blue picket fence – oh boy!). DXY would have to get past the FIB, past the green picket fence and have enough momentum to push above the purple dashed line (A TD resistance level that suggests a barrier to any move higher). The channel, IMO, is no longer valid – but once breached there could be a re-test, right?
Just to remind you, the numbers from yesterday’s post on the USD were 82.125 to go short (just above the green picket fence in the chart), and 81.386 to take profits off of a long DXY (just above the last high on Friday).
The purple dashed line (82.876) coming off of the ‘5’ wavelet (or ‘C’ if you prefer the down sequence) is generated by the end of a SELL countdown. This countdown indicates a go / no go level for a reversal. The fact that DXY put in successive lower highs and lower lows after the completion of this countdown, suggests to me that the trend is down for the next little while.
However, it would be wise to take note fo the decent support at the 38% FIB at 80.073. This has been tested considerably since the start of the year. It could turn out to be the launchpad for the next move up – or be so full of holes that DXY falls through the next time there.
Looking at TD Pressure at the bottom of the chart, shows that it has gone above the red line into “overbought” territory. A move down from here would put in a low risk SELL – which is a higher probability chance of DXY falling in price. This is a short term indicator – as you can see from the previous weeks – and, IMO, it is saying that there is more downside coming from DXY. Look at the divergence. DXY is just in overbought mode, but the bars are at lower levels. Not a good sign if you’re long DXY.
Bottom Line (DXY): The TA says that it is weak and likely to move down. Reality says that the impact of Greece is not complete.
The EUR is over 50% of DXY. I think that it is worth a look at the TA for the daily chart and read the tea leaves there, so to speak. Does this support or contradict my thesis of a lower DXY in the short term?
EUR is running in a downward channel. This would seem to indicate that the trend would be up for the DXY, over time. But, TD Pressure is saying that “soon” the oversold pressure needs to be released. This can be done with a move up – or a move sideways. What has caught my eye is the resistance that seems to be coming from the horizontal 62% FIB (NOT the one running parallel with the channel). There is such a confluence of support and resistance at the current location for EUR, that I think there might be a sideways movement for a while.
This is a tough call – but DXY canNOT move up without the EUR moving down. Given the support at around the same level for 3 days in a row, it seems that sideways is more likely – or up if there is some positive news concerning the Greece situation. (Down, if there is another volcanic eruption).
On that note, I understand that when the EUR was around 1.327 (last week of March), the Greek / Bund spread was around 310 basis points. The spread has since moved to over 470 basis points but the EUR is higher. If there is a relationship, either the EUR needs to fall quite a bit (moving the DXY up) – or if this doesn’t happen and the spread begins to narrow, the EUR will rally hard – pushing the DXY down.
Morning Update to EUR: The German FinMin told parliament to prepare for the Greek aid request. The fabulous 1.34 barrier has been broken, and technical support lies below at 1.3368. CAD, JPY, and GBP are stronger – so it’s all EUR, all day, baby. The DXY fell to the 80.80 level where it found support at the S1 pivot (for yesterday) and has since managed to move back up to 81.20 – which is the R1 pivot for today Support now seems to be at 80.979, which is the neutral pivot.
[/amprotect]My Best Regards.
