Living Inside a Broken Clock

by gmak

I’m watching the beginning of a nasty winter storm and thinking that somwhere Al Gore must be stridently speaking about Global Warming. He acts as if the ants can determine what gets served for lunch in the school cafeteria  The Earth has a 50,000 year wobble in its spin and the magnetic poles move 90 degrees or more every 500,000 years.  Regulate that you schmuck.

Quick! Tell me what the weather will be in 2 weeks! Thought so. That’s why I don’t believe it when you tell me the weather in 20 years. You’re the government weather control and you’re here to help.  If weather patterns are changing systemically, shouldn’t we, the human population, be working on plans to deal with the longer term effects instead of bickering over the cause?

Tiny Tim is said to be looking for an extension to the $700 bb TARP until October 2010. How dare Congress try to reduce the deficit with that money. There are still bankstas without mansions in the Hamptons.  china is starting to show price inflation in powr and food. No surprise on food when the Gobi Desert eats 4,000 sq km of arable land every year (the number may be off – anyone have a source, I lost mine from 2003). We are starting to see PIK notes – payment in kind – where interest paid by borrowing more. Truly the ultimate paper gain. Greece says for the second time that there is ABSOLUTELY NO RISK of default. Welcome to the broken clock.

EQUITY

The worm is turning, but slowly. The last bar in the daily chart came so close to touching the green dashed line. Admittedly, it’s drawn with crayons and eyeballs so is not precise. Then again, I’d rather be more or less correct than precisely wrong. If you want to play long on a bounce, gt in and set the stop below that line, elow the lowst low in that string. That would be below SPX = 1083.74  for a stop.  That’s 8 points from where we are right now. Quite a distance before finding out you might be wrong. The red dashed line is where TD thinks buyers would come in. SPX, in their eyes, needs to get below that level decisively (1046.50) for the trend down to continue. You can see that TD Pressure at the bottom chart is going into OVERSOLD territory. I like the greater volume on a down day, but I know that a short term pop could be coming.

Asia was red, but Europe turned green. It was no doubt inspired by the data that came out including German Trade balance and CPI MoM which were better than expected. Never mind the nasty French and UK Trade Balances – this is a selective picking market.

The coin has flipped again today and fianncials and industrials are laggards to the other sectors in the DAX. You can see in the price chart that DAX failed to get below the lows of Nov 30 at this time and is putting in an intra-day higher high. It’s hard to take the markets seriously when sectoral rotation occurs on a daily basis. This is a trading market – nothing more, nothing less.

ES has been stuck in a moderately wide range with a move up this AM that has failed to clear the high from yesterday (Noon EST).

Pivots of note:

• R2: 1115 – Need quite a bid to get back here in the next day or so
• R1: 1102.50 = Where the market is eyeing right now – just looking for an excsue after 2 red days in a row.
• Neutral: 1095 = Current battle line, acting as resistance but ES is getting a leg up over it.
• S1: 1082.75 =  This would take the markets solidly below the SPX green dashed line and set them up for a re-test of that line in the sand.
• S2: 1075.50 =  Interesting, but still not below the low from Nov 9 – which is a psychological level IMHO.

FX

What can I say? The USD is weaker today. The CAD, JPY, EUR, and GBP are all stronger – so it may be some form of consolidation. GOLD is up and so is Oil. This suggests to me that FX markets might be nerous about US Treasury plans for spending – and how the FED will monetize that debt.

DXY has found support at the last high – the white line it just bounced off of. I’ve drawn the next level above that needs to be scaled – probably jives well with Mole’s DXY gap chart and the probability distributions from that chart in his post.

NEWS

DATA

Not much today/ More interesting tomorrow – watch out for the setup today into the close.

The storm is intensifying, and the metaphor as well.  I don’t know if SPX will go down to the green line in the sand or not – but the odds favour a bounce of some kind before the end of the week. Stay nimble, keep those stops tight. Remember that there is about $230 bb in Treasury offerrings coming between today and the 23rd of December, and a lot of it at the tail end is in the belly (3 – 7 year).

What’s missing above is $118 bb in 2, 5, and 7 year nots on December 23rd. I couldn’t control how the screen copied. Watch the 10 year over the next 2 weeks to see how the market is feeling about this.

Cheers.