Living Inside a Broken Clock: Tuesday, Feb. 23, 2010

It seems the FDIC wants Americans to do their patriotic duty and open savings accounts at banks.  The administration, no hypocrite, continues to borrow record amounts to keep pace with their desire to see all consumers become even bigger slaves to interest rates.

Greece isn’t alone. GS reveals that other countries like swapping as well. Guess they all sit around and the MinFins throw their keys in a big bowl for the IBs to select. Meanwhile, the IMF shows up in Greece. The fourth horseman of the financial apocalypse stands revealed. There is enough worry that the World Gold Council says:

“The volume of total identifiable gold demand during 2009 was down 11% on 2008 levels at 3,385.8 tonnes. In $US value terms, the two years were broadly on par. Tonnage demand in Q4 was down 24% on Q4 2008, equivalent to a 5% rise in $US value terms. If we add the less visible side of investment, total tonnage demand in 2009 enjoyed an 11% rise over 2008 levels.”

Looks like the fear trade is still on. Demand has increased in the face of rising prices. 

Meanwhile, although Canada is said to have NO housing bubble, recent sales in my neck of the woods are at ABOVE asking price.

Welcome to the broken clock.

EQUITY

In my opinion, the Gartley pattern is still valid. SPX daily put in a red candle yesterday by closing lower than Friday.  It looks like SPX = 1114 is still the line in the sand for any attempt at a run up. I was hoping for higher volumes yesterday to point to distribution – but it is what it is. The Gartley numbers are:

Here are the numbers I get for SPX:

X = 1150.45 (Jan 19)
A = 1044.50 (Feb 5)
B = 1109.98 (Feb 19, 22)
C = 1058.50 – 1069.50 (projected range)
D = 1124 – 1135 (projected range) Go short here if the pattern holds.

A pattern is just that – it is NOT a prediction. It is just a structure overlaid on the Market. It is a simple elegant mathematical construct based on historic occurrences that is trying to make sense of MESSY, SLOPPY, UNPREDICTABLE reality.

In my opinion, the SPX = 1086 line (dashed green line) is now support again. SPX = 1114 is the overhead resistance. Looks like a solid risk /reward to go short here. Maximum overhead run would likely be to the trend line “Since Aug 17” which is up around SPX = 1121.

TD Pressure has curved down and desperately wants to cross below the Overbought signal line – which would indicate a LOW RISK SELL.

Meanwhile, I just want to point out that Monday was NOT an up day – even though the blogosphere has been full of the expectation that it would be – just because it has been. My opinion is that these “common knowledge” statements, once they are prolific on the internet, are an indication that they wil NOT happen.

Asia was mixed with Developing all red, except for Malaysia, Indonesia, and Thailand – sort of a reverse 1997 crisis. Developed Asia was green except for Japan, where the BoJ is apparently worried about sovereign risk in its holdings.  The DAX gapped up (AGAIN!) and then sold off to find support just below 5650. I guess 5640 is THE number to watch again. There is still that GAP to fill from Feb 17th which began at 5590ish. As goes the DAX, so goes the SPX, usually.  Every sector is red except consumer staples (back to this old chestnut).

ES was pretty much flat overnight, wxcept for a bump up into the Europe open, with a selloff to the Low overnight along with the DAX. Pivots:

• R2: 1117.25 = Not a chance, IMO.  This was last resistance back in October / November. If 1114 is closed above, then the Gartley pattern is off, IMO.
• R1: 1112.25 =  Altready twice hit at the open yesterday and at the Europe open today. Looks like it will hold to me.
• Neutral: 1108 = Was overnight resistance. Give the bearish cross about to happen on the 9 and 34 pMA, it could be again.
• S1: 1103 = THis is where ES has bounced from overnight, including recently. I note though that each time is a lower low.
• S2: 1098.75 = When the levee breaks. TD has a retace level for the mini wave 3 it ses on the 5 min chart, at around 1097.75. 1099 looks like a good target and where a bounce would likely take place.

I’m just curious how all the monkeys with their hands in buried jars are going to get out without letting go of the peanuts. Distribution is a bitch if no one shows up at the party.

FX

The EUR was sold and ridden hard all night.  Looks like someone has had enough and it bounced at the bottom of the downward channel on th 3 min chart – around the S1 pivot – to break above that declining channel and clear some TD resistance. I’m playing that it will reverse back down, through a DXY long.  I see the upper Bollinger, and TD price exhaustion, a TD pressure that has gone into overbought (note that it was there once earlier, fell down, but came back up to overbought righ away).  Apparently there was some weak data earlier but someone is trying to put in a floor.

JPY is stronger since midnight, CAD is weaker, and so is GBP.

NEWS

Nothing. But doesn’t matter anyway, unless you’re betting on it.

Well, German business confidence was down. Hence the DAX plunge and USD strength. The FED wants to keep bank oversight as one of its powers – even though its useless as…. [pick the  analogy of your choice]. Apparently an AIG doument shows that the NY FED kept secret, shows that GS created most toxic CDs (NO!).

DATA

9 AM EST = Case Shiller home index. 10AM = Richmond FED mfg index; consumer confidence. 17:00 = ABC consumer confidence. Ho Hum.

I remain opportunistic. Since I am playing the Gartley pattern, I remain more receptive to short trades today (ES) than long trades. Again, I look for a number of TA indicators and trends to line up – with a clear stop level that is less of a loss than the potential gain. In the meantime, I scalp DXY as a less leveraged way to play the EUR.

Cheers.