Living Inside a Broken Clock: Friday, Jan. 30, 2010

Obama finds that the tides don’t listen to his beautiful speaking voice.  Foreclosures are being forecast to reach 3 mm in 2010 vs 282 mm in 2009 – remembering that banks are doing whatever they can NOT to foreclose and have to mark to market.  .Gov assistance programs are ending.  Debt loads remain high, and unemployment continues to take a toll. Delinquencies are rising sharply. Meanwhile, Moody’s says that the economy will die if .gov measures are withdrawn too quickly (read “at all” into that). I’m getting awfully tired of all these apocryptic warnings. Can’t “they” see the economic wasteland that is already all around us?

Meanwhile, the AIG hearings are showing that apparently no one was in charge even though Financial Armageddon was the expected outcome. Further, the mysterious NY FED was the source of an email lamenting that they would be unable to keep things secret from Congress due to the sheer number of fingers in the pie. TIck. Tock. Tick. Tock.

EQUITY

Asia was red. Europe is GREEN *(except for Switzerland – how’s that CHF doing? Looks stronger. We have a correlation!) .  The DAX is putting in a floor with apparent overhead resistance at 5600.  All sectors are green except Telecom. This suggests an up day initially for the SPX. The green is between 1% and 2%, so not too shabby.

This is the last trading day of the month, but portfolio window-dressing is already done. Today could be a low volume tug-of-war, it seems. Volumes on the ES have been accelerating since the start of the year and are up around 3.0 mm per day (24 hour less lock up).  SPX volumes remain subdued.

Yesterday, the SPX put a pin down through the 1086 floor – and closed blow it.  TD Pressure says that today should be an up day as it crosses back above the oversold signal line. I’m more interested in the 5 DMA and how it has pushed SPX down. IMO, for an up day to hold and mean something, SPX would need to close above the 5 DMA – which right now is at 1092.55. The “Since AUg 17” trend line is overhead at 1104ish, and the 50 DMA is still tracking flat at around 1114 – 1114.50 (our upper resistance level from eye-balling the chart).

ES gentle wound its way down until around 1 AM and has since, gently, retraced its way back up to the highs of the session. It looks like a “normal” overnight market with sellers dominating earlier, and buyers coming back in later – but no reindeer games. In this type of market, cyclic TA seems to work well, and we have a bullish cross on the 9 and 34 pMA on the 5 min ES chart. TD pressure has indicated a low risk buy at these levels, with pre-cautionary stop around 1079. I notice that this is just below the 34 pMA and a TD support level at 1080ish. If 1079 is penetrated decisively, then price exhaustion would become active down to 1074.50.  Given the bullish cross, and TD pressure – that is a big IF. Pivots:

• R2: 1115 = would put SPX above the 1114 ceiling. Not impossible, but not likely, IMO.
• R1: 1097 = Certainly would put SPX above the 5 DMA. Looks like it’s in the area of a lot of “peaking” activity over the last 5 trading days.
• Neutral: 1085.75 = Put a stop to the rally into the close yesterday. Looks like ES wants to make it a base camp for an assault on R1. Not there yet though – and there is good resistance at this level. This is also above a lower trend line on the 4hr ES chart, beginning Aug 18 (With a touch Nov 2nd and 3rd, a near touch Oct 2nd, Sep 2nd).  So far that trend line is holding, unlike the one on the daily chart.
• S1: 1068 = Site of the turnaround of the dip from late Nomember. Was also resistance back in the second half of September.
• S2: 1056.50 = The gates to the abyss?

FX

Not much to say here. DXY is moving up, CAD is neutral, JPY, EUR, GBP are mildly weaker. Financial leaders in Europe are still telling us that a strong USD is in the best interests of everyone (who wants toilet paper in their wallet), and that Greece is not an issue. That’s twice they’ve denied it. Third time, and……. I’d worry more about California’s debt.

NEWS

1. Bernanke hearing gets past cloture. Does the icy pain of betrayal by one’s elected officials ever grow numb?
2. The PBOC is worried about inflation – now that they have let it out of the cage, it refuse to behave and they are finding it difficult to “manage the economy”. Who knew?
3. Bankers are bitter at the absence of their annual wine-tasting in Davos and plot long sober hours on how to bring .gov back to heel.
4. US GDP is expected to be driven by factory output, even as commodities are expected to fall.
5. Greek bond yields come back in showing an improvement in confidence that there will be no bailout.
6. The Gates-es do some more good and pledge $10 bb for vaccines for the poorest nations. Future consumers have to come from somewhere, he said cynically.

DATA

Here is the European data from this AM:

http://www.forexfactory.com/

Today is GDP and all the attendant sub-data at 8:30AM EST. 4.7% is expected vs 2.2% prior. Do you know why the saying is ” Buy the rumour, Sell the news”? It’s because traders /gamblers take a position based on their expectations of what the data point will show. When the data comes out, they close their position for a gain or loss. There is a built-in bias to the upside on the saying as well.

Note that Personal consumption is expected to be down to 1.8% from 2.8% prior (and yet GDP is supposed to double? – sure looks like a lot of inventory building is expected).

We also have these two little sleeper items:

• 08:15 FRB Vice Chair Kohn on bank interest rate exposure
• 10:30 Fed agency purchase (Oct 18, 2016 to Jul 15, 2032)

I got an email from the FED saying that they bought $12 bb of MBS in the last week, $12.5 bb gross – which suggests pre-payments of about $0.5 bb in the week. Not yet at the levels expected by the zero hedge article – but something nonetheless. I have seen about $2 bb difference between net and gross in previous months.

On the trading side, I see ES is leveling off its move upward. The 9 pMA is turning down – and is close enough to the 34 pMA to cross over in a bearish cross. However, it looks like flat slow waves into the data. Nothing left now but the white knuckles and grinding teeth of those betting on the numbers. The TA shows more downside support than overhead resistance, all in all, on the 5 min ES chart. It sure looks like a consolidation before a move up. Swim with the current if you’re gambling.  Watch out for the volatility in this news. I’m sitting on my hands until afterwards.

HERE IS A LINK TO MOLE’s POST FROM LAST NIGHT:

https://evilspeculator.com/?p=14397