Living Inside a Broken Clock: Friday, Feb. 26, 2010

by gmak.

I’m off today a feeling a touch maudlin. It must be the weather and cabin fever. It has come to this. The MSM and the FED are blaming the weather for the poor economic data points in the USA. To top it all off, I expect the word “unexpectedly” to be the most frequently used by all these figuratively deaf, dumb, and blind shills for a grasping financial system.

California has passed a bill to delay payments to programs, including schools, to avoid running out of cash. Must be the weather. US jobless claims rise, “unexpectedly”. Curse the weather with tiny impotent raised fists and squeaky voices. Equipment demand slows. Darn rain clouds. Home sales hit record lows. Who shops in the rain or snow? Economic indicators rise less than expected. Begone vile storms! At least Obama has decided to outlaw foreclosures without approval by the .gov. Then he will persuade the consumer to spend. Finally, he intends to bend the tides to his will. After that, perhaps the weather.

Japan sees consumer prices fall 1.3%. Is there anyone left in the world who still thinks that a CB can automatically reflate an economy in the face of a credit contraction? Thirty years. Thirty years. Thirty years. That’s some weather. Protests grow in Greece, Portugal, and Spain. If only the weather had been better, their leaders would NEVER have overspent and encouraged wanton and wasteful consumption. But, goods news in that sharks disguised as squids are willing to help Greece sell off assets to meet its debt obligations. Live by the leverage, die by the leverage. And there will always be the scavengers to feed on the corpse. Yet, the UK plows ahead undaunted in its own race to the bottom and insists that its QE will be the best ever. What do those Japanese know anyway?

Thank goodness that I have this broken clock to live in or surely all this weather would do me in.

EQUITY

Quite a day that caught me a bit off guard and showed me that pre-conceived notions are the same as bias.  There is nothing more dangerous than a trader with a straight edge. heh.  I just watched a Swedish men’s curling team that pretty much owned Canada in the game  but let it all slip away. I understand their dismay and want to avoid that fate. I remain on the sidelines until I get my wits and detachment back – even if the damage was not that severe to me. WHen you slip into telling the market what to do instead of following the TA trail…..

The EUR just put in a 30 pips rocket in 3 minutes (at 7 PM EST).  I guess that stop running remains an all-season sport. Those cwazy weindeewr.

SPX daily put in a red candle – but bounced off the the 1086 support line that has been around for months now. The Gartley pattern remains intact. I have no clue what will happen tomorrow. Most expectations seem to be for a green candle (close higher than today’s close). Most expectations tend to be disappointed. Just ask all the economists. Whatever we think, the SPX = 1086 level remains decent support – if only as a parameter in a skynet program. Ignore it at your peril.

On Thursday, the ES climbed the 9 pMA on the 5 minute chart, an amazing exercise in control – Jack and the beanstalk. This continues post-lockup. Volumes are low as those mystery traders that are responsible for most of the SPX gains in the last while continue to have their way with the futures market. Overbought conditions are relieved by gentle sideways action. This is a thing of mathematical beauty that in no way ressembles loose and sloppy reality. The lesson in all this is play the market you are given, not the one you want to be. The market is headed up on the 9 pMA magic carpet ride. Hop on!  The downside risk is very well defined by a near-parallel tracking 34 pMA.

FX

The Washington Post has an article about how many many hedge funds are trying to use the EUR short as a generational wealth trade. Oink me. The EUR strength is no surpise as there are likely to be many forced short coverings before all this is done. It’s a race between Greece and Greed.

Looking at the daily DXY, I see it running into wave 3 up resistance and a sideways consolidation beginning. Wave 4 is underway and wave 5 a plausible future – according to the TD wave count. There is a 38% FIB at 80.07 which appears to be interim support. Below, there is a long time “eyeball” line of support at 79.63. This defines the risk for being long. Overhead, the 50% FIB is at 81.90 – this defines the short term reward. TD pressure suggests that there may be some more downside, but that DXY should rise from the ashes like the phoenix, when the TD pressure goes below and crosses back above the oversold signal line and indicates a Low risk buy again.

NEWS

 Obama may ban all foreclosures without review by loan-modification program; Japan Production climbs most since May. Retail sales rebound. Deflation continues. Bernanke says GS deals with Greece will be examined. I know I will sleep better. Clinton calls US record deficit and debt a growing national security concern. She knows that it’s a war.

 DATA

8:30 AM = GDP; Personal Consumption.

9:45AM = Chicago Purchasing Manager; U of Michigan Confidence

10AM = Existing home sales; NAPM Milwaukee.

This is why I believe that inflation is unlikely. You can’t spend what isn’t there. Of course, everyone is entitled to their own opinion.

MORNING UPDATE

Asia pretty much stayed the same all night. Green except for China. Europe is green except for a few minor markets (Franfurt? How did that happen?).  The DAX gapped up (yawn) and is putting in a slightly upsloping sideways wave. The gap is from around 5532 to 5560. Given that this is the weekend, one would expect that to close – but read the comments below because there are a lot of DAX voyeurs in the mix. The green in the DAX is across all sectors except health care, and pretty much beteween 85% and100% of the stocks in the index (mainly 100%). Even so – the DAX is not running away with itself. Keep an eye on the gap, it might be a good play today with clearly defined stops to the upside.

As it did up to midnight, The ES pretty much rode the 9 pMA all night. Volume was low except around the Europe open – which put a bid under the ES as it bounced off of the TD support level I mentioned last night. Pivots:

• R2: 1115.75 = Plausible if stop running is in vogue.
• R1: 1109 = Possible. I don’t think that this would violate the Gartley pattern – but then again, it’s just a pattern.  I note that ES did not get near this pivot overnight (relatively speaking).
• Neutral: 1095.75 = Possible support level if GDP scares the longs
• S1: 1090 = This was suport on Feb 23rd off the bottom of the waterfall.
• S2: 1077.75 = Not today (I know I said that yesterday for the S2 as well, but I’m just playing the odds). This will be reached if Gartley is valid, in the next 2 weeks.

EUR was goosed up all the way to 1.363ish with ECBs rumoured to be the goosers. RIght now, it is testing support at 1.3579 which is one of the levels for the ramp off the bottom at the Europe open. I expect that there was some short covering here, and that nervous stops were run most of the night – with no sellers available to challenge. That should change with the NY open, assuming that hedge funds have any powder left.

I’ll be in and out all day but not doing much action. I am sitting on a DXY long (with money that I can afford to lose, and a good cushion for the reindeer games). Let’s see how this plays out.