Living Inside a Broken Clock: Wednesday, Feb. 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:

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.