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

by gmak

Just time for a quick post today.

EQUITY

Gartley is still a valid pattern – although SPX daily is insisting on running along the upper trend line ‘for the nonce’. A close above SPX = 1114 would definitely suggest a nascent bullish trend.  Just as a refresher:

Here are the numbers I get for SPX:

X = 1150.45 (Jan 19)
A = 1044.50 (Feb 5)
B = 1109.98 (Feb 19, 22)
C = 1058.50 – 1069.50 (projected range)
D = 1124 – 1135 (projected range) Go short here if the pattern holds

Asia was green with the Hang Seng up over 2%. Only Karachi was red in all the markets of the region. Europe is gren with only Spain in the red.  Breadth across individual markets is weak.  The DAX gapped open and now looks weak – like it will try to close that gap. The gap goes from about 5600 up to 5650. This is interesting in that the EUR is being beaten badly in spite of supposed agency buying at 1.36 and again at 1.3580 /90. I guess that it’s the hedge funds against the CBs.

DAX leadership is across the board and most stocks are green. This was a fundamental lift – looking for distribution here if there are any commentors with volume insight. Once again we are faced with the potential of SPX opening up (driven by ES) with a strong USD. When correlations shift, they really do a 180.

ES moved up from the Asia open for most of the night, and then sold off post the Europe open to put in a new LOD reently – paralleling the EUR drop, which is what one would expect from the standard correlation. Pivots:

• R2: 1114 = This would put SPX into a different topping pattern (if not a bullish one, yet). Fujisan at SoH has some ideas about other patterns. My own opinion is that trying to fit a topping pattern over and over is symptomatic of trading with bias. I’m going to try to empty my mind of this (not as hard as it sounds given the relatively uncluttered and empty space up there).
• R1: 1108.75 = ES was comfortably above this most of the night. Some support was noticed before the drop through – so this could be resistance on any rally back up.
• Neutral: 1102.50 = This was a support level at the close on Friday. It was local resistance before that, so the level has some meaning.
• S1: 1097.25 =  ES touched this level briefly on Friday. This also looks like it was support and resistance for the second half of last week.
• S2: 1091 = This was support last week, at times.

I really don’t know what to say about what we are saying, except I remain vigilant for signs of distribution.  Volumes were higher on Friday and the closing price was near the opening price for SPX – usually a sign. More confirmation is needed but that’s a start.

FX

DXY is back within its local channel. There must have been some news from Europe this AM because it went from sideways action and bottoming to a nice 2 hour rocket move. It looks like each move up in EUR is being met by selling. Give a man a fish and he eats for a day. Give a hedge fund zero-cost money and it eats everyone’s lunch.

Every currncy is weak against the USD suggesting that this is the currency of last resort under the present emotional context of th market. This is quite a switch from Friday, no?

EUR is testing the 62% FIB within the channel that began at the start of December.  IF the TA on the chart is correct, I would expect upward pressure to come in around here – with the long run FIB of 62% just below at 13483.  There are some TD indicators on the daily chart that suggest that a material move up could happen – TD methodology suggests that if this doesn’t happen within the next 2 days (up to and including Wednesday) that the BUY set up and countdown are just whistle stops on the way further down.

If FIBs have any meaning and aren’t just random lines that work much the same as horoscopes (we see the times that FIBs are support or resistance and ignore those where it isn’t), then this general locale is as good a spot as any for support to come in. Part of it depends on how badly China needs a strong EUR- but not at the expense of the JPY.

NEWS

I got nothing. SOme tidbits: The financial world is abuzz about the AIG Asian unit purchase by Prudential. The GBP is falling. Corporate bonds are rallying on the “Greece plan” – wish I knew what that was. APparently there is an expectation that the 10 mm people in Greece will not stifle economic growth in the world. 

DATA

See briefing.com for more.

8:30 = Personal income, spending, and PCE . How bad off is the consumer?

10AM = ISM manufacturing and Construction spending MoM.

Cheers.