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Living Inside a Broken Clock: Wednesday, Feb. 3, 2010
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Living Inside a Broken Clock: Wednesday, Feb. 3, 2010

by The MoleFebruary 3, 2010

Blackrock filed over 1,800 13-Gs indicating more than 5% ownership in the relevant companies. Apparently, this was a result of a purchase of an asset manager.

http://www.footnoted.org/buried-treasure/blackrocks-massive-friday-afternoon-dump/

Market Ticker explains what is going on, but it seems like there is one more domino in the line that is wobbling.

http://market-ticker.org/archives/1927-Where-Did-They-Get-The-Money-BlackRock.html

“It has been noted that they closed the acquisition of Barclay’s Global Investors and this dump is a consequence of the update of that transaction.  Ok, well and good, but the point remains – they’ve got a book that is now trading against free cash of less than 1% of these disclosures alone.  Indeed, it’s even worse – their total trading book, according to some sources, is approaching $4 trillion dollars, yet the firm has a market cap of $40 billion and less than $4 billion in actual cash”

There are so many spinning plates and wobbing dominoes that the mind boggles in contemplation of the mess when it crashes. I’m in a funny mood today. I must have forgotten to take the proverbial lithium. Tick, etc….

EDIT: 10:00AM EST

Props to BobtheHorse. His explanation makes a lot of sense and shows how you can see death and despair in every corner if you want to. Blackrock acquired an asset manager. The 13-Gs reflect the ownership of the fund. OWNERSHIP OF THE FUND – ie. those positions belong indirectly to the fund investors, not to Blackrock.

Thanks Bob!

End of Edit.

Today, I think I will write a little more on equity and ignore the rest. I’ll just say that DXY has bounced off of the S2 pivot (78.69) and regained a foothold at S1 (78.85).  It looks ready to start carving another upward channel – but those two numbers will help confirm or deny this.

EQUITY

I’ve got my head in the clouds. Ichimoku that is.  Yesterday in the comments section, I wrote about how SPX was in the clouds – which are below the mountain. “In the clouds” means that the direction is not certain. The “clouds” are a band derived from prior price movements in the security and projected forward. It is helpful as a trend indicator. Yesterday, SPX put a pin up through the top of the cloud but closed below. Today is not necessarily an up day – in fact the volume and behaviour (in a TA sense) both indicate that the rally does not have legs (meaning it does not seem likely that it will go on and on from here).

There are a few components to Ichimoku and their actions give meaning relative to one another.  I want to list some of the signals that have appeared in the last day or so.

  1. Conversion line crossed below Base line = Sell signal; However, the lines crossed while above the Cloud, which is bullish (the above part, not the crossing) – so this mitigates the sell signal somewhat.
  2. The closing price was within the cloud = Neutral
  3. The Lagging span (which trails and is measured relative to the bar at that trailing time) is below the closing price from Dec 24th (the lag). This is a Sell signal.
  4. The cloud composition indicates that overall the market is still a rising one

Here is how some of these indicators are computed:

  • Conversion Line = ((Highest High + Lowest Low) / 2) of the last 9 days Base Line = ((Highest High + Lowest Low) / 2) of the last 26 days
  • Lagging Span = Today’s closing price plotted 26 days earlier
  • Leading Span 1 = ((Base Line + Conversion Line) / 2) plotted 26 days forward
  • Leading Span 2 = ((Highest High + Lowest Low) / 2) plotted 26 days forward
  • As I write this, ES for today is still within the cloud. Summary:

    The market is still generally rising, but short term direction is neutral or uncertain. There are two sell signals which suggest that trouble is brewing for the upward trend – all of this from a daily chart.

    Looking at some more traditional TA indicators, SPX did use 1086 to move up strongly yesterday.  Resistance going back to mid-November sits at around 1114 – so we are back to that boxy range of 1086 – 1114, in a broad sense. At the same time, the SPX trend line “Since AUg 17” is still just above, and for today has the value 1107.58 – coincidentally around the upper boundary of the Ichimoku Cloud.  I would suggest that this is where today’s resistance will come from, IF there is a stonger bullish move.

    The lower edge of the cloud is below the 1086 support, at 1079.88; Below that, the trend line “Since Oct 2nd” is at 1057ish (all SPX). If for some reason, there is a rout, these are likely support levels on the daily chart.

    Asia was green. Europe is mainly GREEN – except for Switzerand and Spain. DAX has moved above 5700 and re-tested it from above. Still, it looks like a Head and Shoulders forming from yesterday close and today’s open – with the right shoulder having put in its peak already. This is not the pattern of a strong bull. The  breadth is tepid with green in only 3 sectors: Consumer Discretionary, Staples,  and Materials. Financials are essentially flat and keep moving from red to green and back. This is hardly the sign of a market ready to bull its way higher.

    ES was essentially flat all night, moving within a range between 1095 and 1100 – and it was quite well-behaved with regular oscillations.  Earlier, MOrtgage appilcations were up 21% vs down 11% prior, job cuts YoY were down 70% vs 73% prior. Doesn’t look like the market even noticed.

    • R2: 1113 = Puts SPX up above the 1114 box limit, outside of the cloud, ready to run.
    • R1: 1105 = Around the peak from early AM on Jan 28th – Fight now Jan 28th – Feb 3rd sure looks like a cup and handle forming – which is bullish. However, the bowl is sloppy, and I’m not sure that the requirements for depth and width of bowl have been met to make this a valid pattern. Any knowledgeable traders please feel free to chime in.
    • Neutral: 1093.50 = Was resistance for the pop on Jan 29th – looks like it could be a decent floor and support to any move down today.
    • S1: 1085.75 = Was support on any retrace yesterday. Has also been resistance in the cup’s bowl – so there is a lot of activity at this level – with volume
    • S2: 1074 = Down around the lows

    Right now, ES is clinging to the 1098 level – I don’t have a reason for this. It does get SPX above 1100, which is some form of psychological barrier, I would imagine.

    For trades right now, I’ve got nothing. The short term TD indicators are lining up to be more bullish than bearish = but the 99 and 34 pMA are right on top of each other. The longer term indicators are tipping bearish – but not enough that I would risk any skin on what will happen inter-day. I’m going to sit back and watch how this unfolds.

    Cheers.


    About The Author
    The Mole
    Mole created Evil Speculator amidst the chaos of the financial crisis in early August of 2008. His vision for Evil Speculator is a refuge of reason, hands-on trading knowledge, and inspiration for traders of all ages and stripes. You can follow him and his nefarious schemes at the usual social media waterholes.
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