Living Inside a Broken Clock: Thursday, Feb. 11, 2010

The EU will stand behind Greece, but only if Greece takes its medicine. This is as expected. The EMU cannot let the tapestry start to fray in from the edges. Yet, if the bailout is too easy, then the STUPIDs and the PIIGs will be lined up like GS, JPM and others were at the FED trough.  Meanwhile, the EUR doesn’t know what to think. Presently down around the session lows, it doesn’t look good for the USD or EUJY carry trades.

Meanwhile, you’d think that the states in the eponymous USA would be cause for greater alarm. California, Florida, others…. But the USD is whore with crabs in a room full of aids – for a little while longer anyway. Sorry for that imagery – but it does make a forceful point. Tick. Tock. Tick. Tock. More here on the damage to many gears in the clock.

http://www.ritholtz.com/blog/2010/02/insolvent-european-vs-american-states/

EQUITY

For the <CTRL><C>-challenged, here are the GARTLEY numbers again:

Here are the numbers I get for SPX:

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

If this is in fact the reversal pattern (Gartley wrote that over 30 years, this pattern paid off 70% of the time), then SPX is headed for 1110ish on this wave up. The fact that SPX closed above the 5 DMA yesterday, and that Greece is now on the back-burner, suggests that up is the direction for now, in any case.

My own opinion is that 1110 is way too high for this wave up. There is too much fear. However, an announcement of a FED QE III might just do the trick. On that note, $15.4 billion of the $38.5 billion in TAF money maturing today has been rolled over before 7:30 AM EST. The only liquidity drain that I see is the amortization on the MBS (over $1 trillion) that the FED holds. But it is persistent and unrelenting.

 The world is green. but not more than a percent. Spain is red.  Japan and Taiwan are flat.  The DAX was selling off and then saw a big pop this AM, probably on the Greece news. It is since selling off from the highs. Distribution, maybe?  5580 seems to be the roof for now, with support at 5500.  Heath care, materials, utilities, and consumer staples are green – with the latter just barely. All the rest are red – with consumer discretionary way down.

ES kept below the highs of yesterday but sold off along with the DAX between 5 and 6 AM, followed by the pop and then the resumption of a sell off. I note that ES is trying to put in an upward sloping channel now but it is too early to call direction.

FX

The USD is down. CAD is stronger, JPY is stronger, EUR is stonger. GBP is weaker. However, the EUR has been selling off all night – so the gains are just the remains. Buy on rumour, sell on news. It looks like we’re seeing the slow crawl off the bottom now. The middle bollinger is at 1.3735 for those who want to know where EUR might run out of steam. 1.3727 is TD price exhaustion – and the first hurdle on the way to the mid-Boll.

DXY (30 min) poked its head out of a downward sloping channel that began last Friday. But I’ve drawn the channel narrow – and over and underthrows are occuring . It looks like DXY needs to put in a base before resuming the march up. 80 seems to be a pivot with some rsistance. 80.341 is the next pivot up, and 79.685 is the one below.

NEWS

Greece will be given some tough love and get its salad tossed. Obama insists that he is a fierce advocate of business. Bonds are in trouble. China is in inflation. US Corporate cash reaches $1.19 trillion.  In a touching bit of irony, the Portuguese PM says that the EU will do its best to help Greece.

Nothing from IRAN that could shake the world, yet. They did murder execute two protest leaders for “religious reasons”.

Data

Jobless claims at 8:30 AM. Only important to those betting on direction.