Living Inside a Broken Clock: Tuesday, Feb. 2, 2010

PLEASE BE SURE TO READ MOLE’S STELLAR POST HERE.

IT IS VERY IMPORTANT FOR UNDERSTANDING WHAT WILL HAPPEN GOING FORWARD. Just click on it!

https://evilspeculator.com/?p=14429#disqus_thread

https://evilspeculator.com/?p=14429#disqus_thread

A broken clock cuts both ways, if I may mix metaphors.

Zero Hedge sees major resistance for ES at 1085. This is short and sweet. Remember to close your eyes to avoid seeing the Bloomberg chart. The point is that volume is drying up as ES moves higher. ES has already gotten through this barrier, and anticipated pumps from stop running didn’t materialize. Guess the shorts are still absent. – which does not bode well for either distribution, nor any type of safety net for the market as the liquidity programs from the FED wind down.  Tock. Tick. Tock. Tick.

http://www.zerohedge.com/article/futures-resistance-1085-proving-material-volume-moves-fumes-empty

EQUITY

This is the long and short of it. SPX has retraced to close above the 1086 level, and above the 5 DMA. As with all binary decisions, the market can go up or down from here.  Up suggests a retest of the “Since Aug 17” trend line at SPX -= 1106ish. Down suggests a test of the “Since Oct 2nd” trend line at SPX = 1057ish, followed by a significant TD support leel at 1046.50.

Asia is handsomely green. Europe is up about 1% or so.  The DAX is back to re-test the 5700 mark, that was exceeded brefly on Jan 28th before being beaten down, and acted as a roof on Jan 25th. Third times the charm? This level is one to keep an eye on for its implications for the risk trade. Closing above this suggests higher targets on the retrace on SPX. Failure means the recent lows are likely to be re-tested. Only Consumper staples and discretionary are in the red, so the move is broad-based. I don’t have volume numbers.

ES, since the Europe open, is continuing its retrace that began yesterday. Pivots:

• R2: 1098.75 =  ES would need to re-test the highs from Jan 28th (mirrors the DAX) to get here. THis would suggest a “double top” of sorts, on the way down – and would provide a lower risk entry for a short
• R1: 1092.50 = The roof right now. Also stopped the advance on Jan 29th, and was pretty staunch resistance Jan 26 / 27.  Moving above this would definitely be a bullish signal in the short term.
• Neutral: 1080.25 = Was resistance, now is support. Didn’t get below here overnight.
• S1: 1074 =  Was support on Jan 29th, but ES has gone below this to consolidate for the current up-thrust.
• S2: 1061.75 = ES hasn’t been here since…..  the end of October 2009. That was when ES (and SPX) dipped down enough as to have everyone believing it was the second coming of P3. I think a lot of bears got nailed on the subsequent rally up of the bottom around 1022 (remember that number – it was as important as SPX = 1086 is right now).

I don’t see any outstanding short-term trades at the present time. The TA suggests more downside for ES (or sideways) – but it’s hard to say how much. A short up around ES = 1092.50 seems reasonable, with stop above that pivot, and target around the TD support at 1083.  The 9 and 34 pMA are just forming a bearish cross – so a short here, although lower percentage – seems decent, given that TD pressure is indicating a low risk SELL with stop around ES = 1090.50 (which I find a little tight given where the pivot above is).

A swing trade at the TD support at ES = 1083 looks to be a  decent risk /reward as well, with stop below the pivot at 1080.25, and a target up around 1092.50.

As you may have noticed – I see trades in both directions most of the time. I try to overcome my bias for the short side. Right now the short -term trend is up, but the medium term trend is down, within the longer term trend being up.  I’m still trying to come to terms with how to play “swim with the current” when all the ducks are NOT lining up.

FX

If you’re still playing correlations, or just playing FX, DXY is running into the same resistance as it did at the end of July, 2009. At that time, the FIB a 77.817 acted as support, ultiimately, and I would expect the same here during consolidation on the way up. The 5 DMA is at another support line that goes back to September 2009 at around 70.94ish.  So, if there is a typical consolidation, I would expect sideways action centered around   70.94.  IF the DXY takes a beating, I would expect it to regroup and move up off of the FIB at 77.817.

This AM, USD is weaker with CAD and EUR stronger, JPY flat, and GBP down slightly.  Trading rumours have the BIS buying EUR around  1.3930 – but EUR is running into a headwind at the R1 pivot at 1.3962.  There is support at the pivot at 1.3907 – although when Asia opened, the EUR did fall below this for about an hour or so.

On the 30 min chart, DXY is finding support at the S1 pivot at 79.09ish. Resistance is at the pivot at 79312.  I see ultimate support at 78.937 which is the S2 – it also mirrors support from the “left shoulder” of the latest move up.  DXY has broken down, out of it’s upward channel that began Jan 21 – 25, but it looks like an underthrow to me – or the search for the next channel up.

NEWS

Commodities rally, dragging stocks – and the AUD gets thrumped after a rate surprise (everyone was expecting an increase).  Obama wants to spend the TARP money recovered on small banks. It just keeps burning a hole in those spendthrifts’ pockets. Swiss banks workers keep selling stolen data – maybe they should pay them more.  Volcker is making positive noise about regulation and Bernanke’s policies, thereof.

DATA

10AM = Pendin home sales.

17:00 = ABC Consumer confidence, domestic vehicle sales, total vehicle sales. (Ho Hum).