Living Inside a Broken Clock – Tuesday, Dec. 15, 2009.

by gmak

The financial system is practically forcing homeowners to re-neg on their mortgages and walk away from debt servitude. Austria insists that “there is nothing more to see here”. Greece spins a fairy tale and the financial world, with no other choice, chooses to believe that it is possible (c’mon, clap for tinker bell, boys and girls). Banks say thanks for the TARP memories, but we’re paying ourselves first. By the way – good luck with the toxic waste we gave the FED. Tick tock. Tick tock.

EQUITY

Asia was red. Europe is red. ES seemed to fall off a cliff (a little one) at about 3AM. Dax opened up then began a slow fall down.  EUR really fell off a cliff around 3 AM EST. Scuttlebutt says a large NY bank was selling – hedging or speculation? Apparently a lot of stops got tripped and this had some impact on ES. I can’t find any news other than maybe some nervousness about the Austrian bank baill out. Fear is making a come back, it seems.

Yesterday, SPX managed to get a claw above the resistance line. The behaviour of markets overnight siggests that this will not be an easy level to hold. SPX = 1119 is still the high since march (HSM), and the dashed green line at 1086 is still support for the nonce (always wanted to use that in a sentence. heh.).  Going short here is a decent risk on an inter-day trade – if you are prepared to wait 13 points to find out you’re wrong. Going long makes sense, only if there is a decent intra-day support level (a pivot perhaps?) to hide a stop behind.  But if fear is on top of greed, then long is definitely swimming against the current.

ES didn’t crater to the same extreme as the EUR. In fact the overnight looks kind of like a diminished Fall and Crawl.  Pivots:

• R2: 1120.33 = above the high, and probably out of sight for today.
• R1: 1114.50 = above the highs from yesterday. SPX would need a change in sentiment by open (data maybe?) for this to be reached by ES
• Neutral: 1107 = This is the current roof and was sliced through easily in the 3 AM EST fall. If the data warrants and ES gets up above this level, there is a strong TD resistance level at 1109.25 – and you can see how ES danced around it in the early morning EST.
• S1: 1101.25 = a lot of action around here on Friday, and looks like support for the rocket launch yesterday.
• S2: 1094 = Looks like resistance from Dc 10th that has turned into support.

If ES gets above 1107, and heads up to 1109, that is a decent place to short – TD “TDST” levels (and the dashed green line is one) are pretty reliable as resistance or support points and, even with an overthrow, they tend to indicate where the trend could change in the short term. Going long here, with the pivot around ES=1101 is a lot of risk to make a couple of points if it were to be turned back by the pivot at 1107.

FX

USD is stronger and has gotten back up over the next “high” it needs to scale.  It sures looks like DXY is climbing steps to the stars.  R2 has been breached to the upside.  CAD, JPY, EUR, and GBP are all weaker. Why? My guess would be the risk trade is off again – easy guess given the overnight equity markets. There is fear, but not crisis fear (GOLD is down).

Overnight, EUR has done a Fall and Crawl. I think the whole world is waiting for the 8:30 EST data. Watch 1.4531 as a decision point for reversal or dump again. Wasn’t it just a few days ago we were hearing 1.60?. EUR is below S2,

Some say it looks like the USD is responding to the “positive economic data”, and EUR is being hit by bank worries – there is never just one cockroach. I think that it is more likely that the FX market does not see liquidity coming in from the US side – and there is that TAF maturity of $50 bb or so on Thursday. I agree on the bank worries. As I said, Fear is back in style.

NEWS

Banks, banks, and more banks.

DATA

The markets are saying that the data at 8:30 AM EST is going to be bearish.

As I finish typing, the EUR is testing the decision point level that I mentioned – and it looks like there might be a little bounce. It’s still too early for reindeer games involving the data at 8:30 and too late for position squaring.  I’mjust keeping one eye on the CAD – which is really an economic growth, resource utilization story in front of a speculative boom story, in front of a “more liquidity” walking corpse.

Today may be the day the tarnish first shows on all that shiny armour of economic growth and “heroes that saved the financial system”, that can be seen by the regular person.

Cheers.