Living Inside a Broken Clock: Wednesday, Feb. 24, 2010

Pay attention to the $200 billion just handed over to the FED by congress and the treasury. It’s not what it seems.  I saw a piece on ZH, that has since disappeared, that seemed to imply that the $200 billion was a vehicle for removing liquidity from the market. This warrants further investigation, and could be how the FED “persuades” congress to ease off on the audit and provide more QE – with an equity market push-down no less. Tick. Tock. Tick. Tock.

 EQUITY

I expect today to be green. This means that SPX will close above yesterday’s close at 1094.60. I have no overarching reason for this other than the fact that 3 red days in a row is a rare occurence – usually reserved for waterfalls in this market. I expect SPX to bounce off of the short-term trend line that was resistance from Feb 8th – and should now be support, IMO. However, the GARTLEY pattern is still valid.  I’m still looking for a general down trend to the 1058.50 – 1069.50 range.

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.

In summary, the short term trend is down, but today could be an up day if recent market behaviour continues. In this environment, I would still feel more comfortable with the risks in a short trade, than with a long trade – because MY dominant trend is down. That being said, I believe that there will be a few swing trade opportunities today.

Developed Asia was red.  Emerging Asia was mixed with China, Malaysia, Vietnam, and Sri Lanka being green. Europe is mixed withi France, Germany and Austria, The PIGS, and the nethrlands in red. Italy is green oddly enough. However, the breadth is tepid and countries keep flipping back and forth. Short term scalping seems to be the order of the day.

The DAX fell at the open. The gap from Feb 17th has been closed. The close from the 16th ( around 5590) appears to be the interim support level and we have a mild bounce. Sector performance is split, with Utilities, Consumer staples, Consumer Discretionary, and Materials all in the red.  The green sectors have good breadth with most stocks in the green.  The index is essentially flat.

ES moved up after the bell yesterday and held that level all night until Europe opened. It got a bid at the support line at 1094ish at 5AM and moved up off of that.  It appears that traders were motivated in their actions by the stronger-than-expected Euro Industrial orders data. (does this count as news?).

• R2: 1122.50 = Not today.
• R1: 1110 =  Level of the start of the waterfall yeseterday. This market looks too tired to re-test that level
• Neutral: 1100 = Looks like the roof for today, IMO
• S1: 1087.50 = In low volume, its possible that nervous sellers could push ES down to here. I would expect a bounce, though. My opinion is that there is enough technical support above this pivot to slow the fal.
• S2: 1077.75 = Not today, IMO. But this will need to be breached over the next week IF the Gartley pattern continues to be valid.

FX‘

Eurozone industrial orders were better than expected and this put a bid under the EUR.  The data was released at 5AM EST.  Forexlive.com thinks that there are Asian CBs that put a bid in around 1.3540 /50 overnight. This still seems to be a support level.

EUR is still running in a broad downward channel that began Feb 9th. There have been big pops out of it – but overall the slope remains constant and down.  The action overnight was in a tight range until the Euo-news at 5AM. This gave a pop to the HOD. Support, as mentioned, seems to continue at 1.3540 /50.  The trend is up since yesterday – but zooming in makes EUR look like it is in a sloppy bear flag. I don’t like sloppy – too much room for interpretation and wishful thinking. The EUR will NOT do what I want it to based on TA. Remember that.

NEWS

EURO Industrial orders. Bernanke to testify. How do you know when he is lying (even by omission)? Because his lips are moving.

DATA

MBA Mortgage applications were -8.5% (week ending Feb 19) vs -2.1% prior;

10AM = New Home sales.