Living Inside a Broken Clock – Wednesday, Dec. 2, 2009

by gmak

North Korea just cut it’s people’s purchasing power by 100 (1,000 Won is now 10) but limiting the amount of currency that could be exchanged. If you were a saver you have been crucified on the altar. I would bet that the elites were safely in gold. Gallup suggests that consumer spending is trailing last year’s by 25% (Gulp!). Chrysler sales were down but total vehicle sales were up  MBA mortgage applications are up MoM but Challenger job cuts are down 72.3% YoY vs -50.7% prior (I don’t know if this is a double negative or what). Obama is sending more troops to the war zones. Japan is going to spend over $100 bb (while it’s still real money) to combat deflation. Th US debt is above the limit but using loopholes to look like it isn’t. How Dare You Save!!! Welcome to the Broken Clock.

EQUITY

SPX re-tested ULTRAVIOLET yesterday and closed below. Volume was decent and above most recent days in the last 2 weeks. Uncertainty reigns as North Korea reminds all the little people of the world that they too can be screwed in the blink of an eye. Gold is the recipient of all the excess liquidity. Is it time for a “Hunt Brothers” scenario by the elites? Nah! They are permitting gold to settle in paper now. End of problem. Nothing left to see except apoplectic gold bugs (Us equity bears feel your pain). Everything is binary, so SPX will either claw its way up to test the dotted white trend line just above, or drop to retest the green dashed line. If you wanted to go short for a quick trade, you could do it here with a stop above yesterday’s high (SPX = 1112.28.  I’m not sure about going long here.

Just look at the indecisiveness in the ES overnight, and how volatility increased once Europe opened (at 3AM EST). This says (as did Mole yesterday) scalp, short-term trades, clearly defined and tight stops. ES is showing lower highs and lower lows – so I would be more inclined to do a short (as mentioned above the SPX chart).  If a 5 minute ES bar closes above 1113.25, then the short is done. There is a pivot below at 1104ish – so the risk /reward is about 1 (4 points of loss risked against 5 points of gain for ES at present levels). This is NOT exciting, bu it is a trade. You could also put the stop above the highers o/n high which was 1111 to make the trade have a better risk /reward.

Asia was green, but Europe is slightly red. This is just part of the back and forth that is going on. Can you spell DISTRIBUTION? I knew you could!

The DAX is mixed (again, it is a good proxy for what is /will happen inside of SPX and explains ES movement in the pre-market, IMHO).

Still, it did open around yesterday’s close and, is essentially flat at the present time. I am seeing lower highs and lower lows, though.

FX

Gold is getting the fear trade thanks to North Korea. The cat is out of the bag now. The USD is down a bit but holding stubbornly above 74.17 which is my personal “point of no return” for DXY.  The trading range is tight for DXY.  CAD< EUR, and GBP are stronger. JPY is weaker. Japan is saying that they’re ok with the YEN strength. Bernanke must have pictures of them with little boys, or it’s simply an admission that Japan is helpless in the face of USD printing and China intervention in FX markets.

GBP is stronger due to reports of a large EUR/GBP sell interest for the fixing later this AM. China was selling GBP earlier. EUR has  Sell orders at 1.5110, buy stops on move through 1.5120, but then more sell orders up at 1.5125 through 1.5150 where barrier option interest is well noted.  Here is what the EUR 30 min looks like. The yellow Bollinger shows how trading has tightened. 1.5057 is a clear TD and pivot point support level. Short below this for a better risk /reward (it’s always easier to swim with the current).

NEWS

North Korea. blah blah blah. (OMG We’re doomed). Gold blah blah blah.  ANd here is the other stuff:

DATA

There is almost nowhere left to hide. When you think that buying GOLD will save you, you should probably be buying lead. TIck tock. Tick tock.