The Pain in Spain

Walking through downtown Madrid one sees little signs of an impending market meltdown. The weather is a bit chilly (for a skinny Californian) but very sunny and everyone seems to go about their business as usual. By no means does the current economic crisis seem to have affected local cigarette consumption. Everyone smokes – everywhere. The real pain in Spain for this ole’ Mole is trying to catch a whiff of fresh air in between people all around me blowing smoke out of every orifice and all those damn diesel mini mobiles which seem to be equipped with smoke machines instead of catalytic converters.

Meanwhile Kirchner (the nut who’s running Argentina right now) just took over oil and gas producer YPF. Now there’s a great recipe for disaster sending anyone holding stocks or bonds running over the next few months. Mark my words – this is going to end in tears. Yes, I admit – not exactly a very precarious prediction.

But I digress – let’s talk about the tape – which is why you guys pay me the big bucks (or not). The daily spoos should be your line in the sand – whether you are long or short. The NLSL at 1357.5 has been holding thus far and if it gives then we are going to 1315 – it’s that easy.

However, if you think the daily is interesting then you definitely want to see my weekly SPX chart. Please step into my little improvised lair:

I think this chart is fairly clear and does not require much of an explanation. We are sitting on a weekly NLSL at 1360 and change. If we drop through it we may slow at 1340 but I think the weekly agrees with the daily that a more realistic target would be the 1310 – 1315 cluster. If that gives there’s 1240 where the 100-week SMA currently resides.

However, it’s the 30-year bond futures which really grabbed my attention today – and again it’s the weekly which seems to have reached an inflection point. Again, quite a simple setup. If we push above then the we have a good chance of making new highs here, so watch 143 like a hawk – I definitely will.

Now – isn’t it beautiful how the daily is at its own inflection point at the very same time? This may be the most significant setup we’ll see this quarter. You can be short here or you can be long – with little risk. I actually hope we break out higher as we could see quite a bit of acceleration. If this affects equities this could also make a big dent into vega – so you may consider options if you can hack it.

Cocoa is creeping up and I like it. Very simple 2262 is where things get very interesting. But don’t forget – it’s a comparably small contract so don’t get in too deep as there’s always a chance of a shake out before a big move.

AUD/JPY is in a box right now, stuck between 82.5 and roughly 84.4. Until we break out of it – do nothing. Once we either drop below or above I expect quite a bit of acceleration.

EUR/USD back at the bottom of its trading range – 1.3 is where we continue to go long until the tape tells us otherwise. My stop is below that lower 25-day BB – I suggest you use that as your line in the sand.

Alright – that’s all I see for today, especially I’m still working on a 17” lappy screen.

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Cheers,