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

by gmak

Tick. Tock. Tick. Tock. Now, on to something more relevant.

EQUITY

SPX daily shows clearly that the Gartley pattern is not the valid one for a topping action. TD Waves says that SPX is still in a B wave of an ABC correction (on a bullish trend), or in wave 2 of the start of 5 waves down. SPX did close above the 1114 number and TD Pressure is not above the red oversold line, yet. This suggests continued upward momentum – even if it is on declining volume.  The next possible resistance leel is the trend line “Since Aug 17” which is around 1128 for today, and 1129 for tomorrow. 

If for some reason, this market continues up for a 76% retrace of the X – A segment, then that value would be around SPX = 1125.45. If the trend line is in play, then this number is nonsense, and vice versa. If the FIB is in play, then the trend line will not be reached.

The High was at 1150.45, and there is a TD resistance point there. TD support comes in at SPX = 1046.50. These are both levels that need to be breached and re-tested from above /below for the the trend to continue in that particular direction.

Asia was green except for small isolated pockets. IN fact, most of the world is green over the last 24 hours.  Only Portugal and Austria are in the rd – and just barely.  The big news is that the DAX didn’t gap up, but continued a 45 degree steady trend line up and has put a pin above 4750 – looking for support and consolidation. There is that big juicy gap fro 5600 to 5650 – but the DAX has put in a higher low and a higher high (this is the game that the Gartley pattern is based on, and it brings in the last of the momentum players at a top  – and leads to distribution, followed by the road down).

ES was as flat as Olive Oyl, until 6 AM and then it pushed through one resistance pivot to test R2 – failing for now. PIvots:

• R2: 1122.75 = The high point for ES overnight. TD has put in a local 5 wave up, or C wave in an ABC correction on a down trend. There is a TD resistance level above at 1125.50 suggesting that is where any aggressive upward action might be turned back.  This level was also the TD resistance point through the first half of December, and the high level of consolidation at that point before the next ramp up.
• R1: 1118.75 =  ES cut through this over the last hour without hesitation. It looks like this level could come back as support for today.
• Neutral: 1111.50 = Was below support on the overnight. Note that ES got lifted by a push from the 9 pMA on the 4 hour chart and on the 5 min chart. Volume began to grow just before the AM ramp, eased off – and then came the pop.
• S1: 1107.50 = Quite far down given the sentiment.
• S2: 1100 = Don’t even think about it. There isn’t any news that would be tradeable today – so the bets are likely one-directional.

FX

I can’t say it any better than forexlive.com, from yesterday:

The market should get a short-term lift from the Greek news but it may soon go hunting for another target like Portugal or Spain, putting the EU to the test. A move above 1.3700 will take the immediate downside pressure off of EUR/USD and open the way for a rebound to the 1.3850 area. 1.3585 is the next hurdle EUR/USD needs to overcome in the near-term.

ON the 3 min chart, there is a pivot and resistance at 1.3562 for the short term. Howver, it looks like EUR is being bid up steadily. CAD is a lot stronger – by about 70 bps since midnight.

Looking at the EUR daily chart, the currency put another pin through the 62% FIB since midnight. You know the drill – if it has enough holes in it, the support will tear and the security will fall through. TD support resides below at 1.3369. Overhead reisistance in the channel at FIB (50%) – not to be confused with the High – Low FIB, is at around 1.3575. The channel FIB below is at 1.35. IF there is range trading, this is where it will happen. Look for breaches of either for a mood shift, as it seems the market is awaiting a positive resolution to the Greece situation.

As I type, EUR is making an assault on bot the neutral pivot and the TD resistance at 1.3565. A shift in sentiment on the EUR would be indicated by the pivot becoming support and consolidation beginning. Pay attention because it seems the EUR might be a leading indicator today for the SPX. (but like CO2 and warming, the causality direction is confusing).

NEWS

More tungsten in gold. See ZH for the German video.  EM stocks have reached a 5 week high – who says there are no risk-takers left. Australia raised their bank rate. Canada is really toying with the housing bubble fate as they are rumoured to keep the lending rate at the lowly 0.25% but jawbone the market that an increase will be coming later on. That can sure gets kicked a lot, lately.

DATA

Nothing until 17:00 EST = ABC consumer confidence. Domestic vehicle sales, total vehicle sales.

I’m short the DXY and not for a day trade. I keep looking at the record oversold condition on the EUR. I know the market can remain…. blah blah blah. I’m looking at using ES as an indirect hedge on the postiion. If DXY shows signs of consistent strength – ie not gaming – then I might put on an ES short to offset the losses. The plan would be to ride ES down, and either close out the DXY, or the ES if it looks like there would be another wave up for it – and ride the remaining security in the trade.

Cheers.