Living Inside a Broken Clock – Thursday, Dec. 10, 2009

by gmak

With rampant unemployment, it seems that the last stimulus has funded, among other things, on dinner cruises, golf courses, puppet theaters, and stimulus road signs.. Meanwhile over 3 milion Americans have lost their jobs, not counting the illegal landscapers, carpenters, brick layers and so forth who now weigh down the economic safety net.  The bond vigilantes have turned their dead pool eyes on Spain and other European nations. The silver lining is that this may leave more funds available for Tiny Time to scoop up in the massive Treasury Auctions that are in the cards over the next two weeks. Yesterday’s 10yr auction was less than stellar but with the smell of gunpowder still lingering from that shot across the bow, the good ship USS Tiny Tim ploughs on. Tick tock. Tick tock.

EQUITY

The most interesting thing, apart from Mole’s zero fractal, is that SPX bounced (once more) on the 1086 trampoline. Sooner or later it will stretch and rip (like my gazebo under the weight of sodden snow – although that even bent the metal frame) and SPX will “all fall down”.  RIght now, I’m more interested in seeing how high this bounce goes before it fades. ES is up this AM, but so is DXY. By the pricking of my thumbs……

If you played the low risk bounce on SPX with a stop below 1086 – then you scalped 5 – 10 points. IMHO, this is one of the few ways to play the market right now. Pick a spot and trend, pick your stop. Walk away if you’re proven wrong.

It’s beginning to look a lot like… Yesterday. Asia was red, but Europe is green.  Notice how the DAX also bounced off of it’s intermediate support line – but there is not a higher high yet. That is the key on SPX. Watch for where the turn comes, as gravity’s rainbow shows the way down.  I would pay attention tot he horizontal white line on the daily SPX chart that begins Nov 15 (bar number eight) It is the bull’s analog for the dashed green line of support. For pre-market, DAX = 5700ish is, IMHO, a clear indicator of momentum. Moving above it on a 30 min chart would suggest, to me, that momentum is now up for a few days (at least until the next auction results, surprise country downgrade, or *shudder* debt default).

ES ramped up into the close yesterday – ah, memories! But, it only got a bid when Europe opened at 3AM EST.  Well, I would suspect a growing feeling that Greece will not be allowed to default as helping. Because the eco-data out of Europe this AM was not stellar. German WPI was up 0.7% vs exp = 0.3% and -0.4% prior (all MoM) – which might lead some to conclude that there are pricing pressures which relates to economic growth (the other choice is that low inventories push prices up short term whenever there is a small bulge in demand or inventory replacement). ES pivots:

• R2: 1105.25 =  previous support for Mon and Tue.
• R1: 1100.50 = Current psychological barrier that pre-market bulls want to get above and use as a consolidation point
• Neutral: 1092.75 = Bounced off of here a few times overnight.
• S1: 1088 = Acted as support Tue and Wed.
• S2: 1080 = Probably would confirm that SPX is decisively below 1086, no?

FX

DXY is still playing ‘bouncy-ball’ with that white line local high. It is consolidating here, IMO, and should eventually continue up – but a catalyst or two is needed given the sheer volume of USD bears. Where is that last feather to tip the balance?

EUR is forming its own bearish flag, having ripped through its purple dashed support line. That line is now resistance above. Look closely at the pivots for today – the action is quite wide across them but it looks like the neutral pivot can be used for scalping either direction.

NEWS

Notice that China is firing another salvo in the trade wars skirmishes that seem to be happening with more frequency.  Brazil is now pushing the “stimulus” game as more and more exporters are forced into a “beggar thy neighbour” push.

DATA

Trade and Jobs. Two very important numbers. News may not be important to some (hah!) but the markets’ reactions sure will affect your P/L.

What a fine kettle of fish we have (goodbye and thanks for all the fish?). USD is stronger and so is ES. It looks like the US strength may not be. CAD, EUR, and GBP are all up. Only JPY is weaker (sorry CHF and other DXY currency that I don’t know – I don’t look at you). GOLD is down a bit more but I think the “johnny-come-lately” types have all been squeezed out on the fall. It could find a bid now. OIL is up a touch, trying to stay above $70. I wonder what price torpedoes all those tankers and storage ships at anchor all over the world?

I’ll re-iterate for those who aren’t clear on my mind. The only way to play this market is to pick selected entry and exit points with very well defined stops. Of course, if you like spending Theta like FRNs, its your money.

Cheers.