Living Inside a Broken Clock – Thursday, Dec. 3, 2009

by gmak

States are borrowing money to make Unemployment payments. The ECB is making exit plans – Trichet speaks today. Bernanke will somehow get reappointed today in spite of single-handedly putting the entire middle class and descendants unto 4 generations into indebted servitude – all this in the name of shifting wealth to financial paper-pushers.  GS employees are joining the NRA en masse. Today will reveal more labour and jobless stats and rub all our noses in how disconnected the financial markets are from reality. Welcome to the broken clock.

Today, $32 bb in TAF money matures. You can see that here:

http://www.gmtfo.com/reporeader/OMOps.aspx

As well, tonight the FED issues it’s B/S from the week ending yesterday. Given gold, and given the bid under equities, I think we will see shrinking bank reserves (meaning more “money” going out into the system), or less of a growth there than the whole B/S. It’s all about Liquidity.

EQUITY

SPX daily is starting to move just under the ULTRAVIOLET trend line – putting pins up through but closing below (see chart below).  Yesterday, the magic number high of SPX = 1113. 69 was exceeded for a NEW HIGH = 1115.58; notice that the volume is declining again after Monday’s hordes.  I stil don’t think the risk/reward is very good here. Going long – and you face a tired struggling market that looks like Distribution is going on. Going short – and you face at least 6 points (to yesterday’s high)before finding out you were wrong. However, the support level is 24 points below (I must confess, that’s not too shabby). All this in the face of a possible $32 bb being taken out of the financial system. Is that even an amount that matters anymore?

The world is pretty much green with Japan doing the best of all (that’s the greenest block in the chart below).  The YEN is falling – so maybe we are seeing the first steps of a new carry trade – maybe.

As TradeJane so aptly pointed out, the DAX is gapping all over the place (see chart below) but it looks tired today. There was good news on services out of France and Germany – so there are nascent signs of some economic growth. Don’t underestimate the odds of a scenario where the market moves sideways and the economy slowly catches up. (Economic growth with falling employment is an oxymoron, IMHO – but it’s beliefs and not reality that drives the market).

Yesterday, Telecomm was doing quite well at this time (DAX), but today it is the turn of financials and materials. Jekyll and Hyde. Risk and safety.  I think that it is really distribution and that pushing the market up to sell to the chumps is creating this split-personality market.

ES has been on a steady climb since around noon yesterday. PIvots of note include

• R1: 1114.25 = acting as the current roof
• Neutral: 1109.25 = was the floor from 18:00  EST to 22:00 ; Right now there is TD support at 1110.75 with buyers coming in .
• S1: 1103 =  Should be lots of support from Dec 1 (Tuesday) – but if it ever got breached it looks ike 1092ish is the next ES main support.

Here is the chart:

FX

This is getting old. USD is weak. JPY, GBP are down (the latter only just). CAD, EUR are up – the EUR quite strong. I guess that if you tell the world how you’re going to reduce iiquidity, it puts a bid under the currency. Much better than sending out a pencil-kneck like Timmay to squeak “The US wants a strong dollar”, to much laughter. Current resistance on the EUR is 1.5139. The magic number for DXY is 74.243. My personal “fall into hell” level is 74.17 (Abandon hope all ye who enter here). I don’t htink any charts are necessary here.

NEWS

DATA

Today is another day. News may not drive the market according to some – but Data certainly drives trades.  Check this out.  At 8:30 EST, productivity is still expected to be the nemesis of inflation as labour takes it up the <orifice of your choice> to keep costs down.

You’ll all be happy to know that Barclay’s is going to temper bonuses but raise salaries instead. Good job! Watch the 10 year yield today.