Tuesday, January 27, 2009

End of Day 1/27

This Elton John XLF/ Bad-bank program, after-hours rocket shot song, is hereby dedicated to outgoing Secretary Treasurer/ Chief Criminal and Co-Conspirator Hank Paulson:


Tim Geithner – Tax Evader/Rocket Man:

Hey, another day, a little step higher despite more poor economic data and record low consumer confidence, but still in the trading range which showed that the SPX 850 area is pretty strong resistance (it’s being challenged again after hours on low volume – a popular game nowadays).

The after hours rocket shot is occurring mainly in the financials as CNBS is reporting that the there will likely be a bad bank solution shortly. Yes, that will help you if you are a Robber Barron, but if you are anyone else, not so much as I spelled out in my recent article Aggregator Bank Concept… Who Are We Helping?

For the day the DOW finished up 58 points, the S&P up 1.1%, the NDX up .8%, and the RUT gained 1.2%. The XLF gained 3.5%, the transports were up 1.8%, gold gave back a little, while USO got pounded for 8.2%. The VIX broke down hard, losing 7.5% and closing at 42 (bullish sign).

Internals were about 5 to 2 on advancing volume and 2 to 1 advancing issues over decliners.

Another 11,500 job cuts were announced today, no wonder consumer confidence is so low… That’s 85,000 jobs in the past two days, and that’s just large company announcements. And analysts are actually saying that the market is “forecasting” an end to the recession 6 months out and the bottom is in!? Ha… that’s a good one, just like “subprime’s all contained.” Unemployment when it really gets ramping creates a viscous circle. Wages go down and all businesses make less money, which results in even fewer jobs and smaller profits, and so on.

Tim Geithner was unfortunately sworn in as our new Secretary Treasurer – look for more of the same Paulson like games (bad bank concept?). You won’t see Geithner focusing on unemployment, you’ll see him focused on propping up dead banks while transferring their bad debt on the now unemployed taxpayer. Hey, interest rate and money supply manipulations are the stuff where depressions are born.

And speaking of interest rate manipulations, don’t forget that at 2:15 Eastern tomorrow the FOMC meeting results are announced. People will parse every syllable the morons mutter, and will head fake then settle into the real direction later. Of course their meddling with interest rates is a large portion of why we are in this mess to begin with. I would love to see the Fed disappear and have interest rates set by markets only – of course I’m even more “radical” and would like to see a money system that is a productivity based system not a debt based system, but I’m convinced this cannot happen until the central bankers have been exposed for what they really are. When we are at rock bottom, then the PEOPLE will want real solutions, not central banker solutions.

Today was generally a lower volume rising day which has been typical of this bear market – volume confirms price and what we’ve been seeing in this bear market is that rallies turn into routs when the volume tapers off – look and you will see that theme repeatedly on the charts tonight. For a great example, look at the charts of C or BAC and you will see the volume falling rapidly as they have advanced off their recent lows.

We’ve been in an uptrend now for the past 3 days that took us from the bottom of our trading range around 804 to the top at about 850. We closed today at 845 and we are now at do or die time for the bulls as that uptrend must either penetrate or retreat. You can see that if you look at a 10 minute chart of the SPX. Looking more and more like a rising wedge, but you can see how 850 has been strong overhead resistance so far – imagine a line across 850, you can see a triangle that looks like it wants to break up, but if resistance holds then the wedge will give way. Note that the 10 minute stochastic is just turning down, the 30 and 60 minute stochastic are near the upper end of their ranges.

Here’s a one month chart of SPY showing the decreasing volume very well.

Same picture on the DIA… decreasing volume but a buy signal on the daily stochastic with a long way to go to the top – all the indices are the same in that regard. Note, again, how the ETFs produced dojis whereas the indices produced candles with fuller bodies.

The NDX managed to get above the 50dma and close there. You can’t see the volume on this chart, but it was down significantly – making that break of the 50 a low volume event.

In the bond world we got a reversal from the downtrend in TLT or uptrend in the $TNX (yields). There were a lot of auctions today and when they went better (gee, I wonder who was buying?) bonds shot up and rates went down. Here’s a chart of the TNX showing how it ran into the 50dma and has fallen back. Note the stochastic rolling over and fresh sell on the RSI.

As you can see, TLT ran higher and broke its current downtrend channel. That move still looks like a possible wave 4. I exited short term positions but held onto some LEAPS. The 111 level should provide resistance and note that on this 30 minute chart the stochastic just rolled over issuing a very short term sell signal.

Bottom line is that I think this rally runs out of steam fairly soon as the volume is decreasing on advances. That doesn’t mean we can’t rally some more first, we certainly can and probably will as you can see from the after hour announcements, game playing, and attempts to hide bad debt. If you’re looking for a short entry, it’s time to be patient and wait for the sign that we’ve topped.

Five Man Electrical Band – Signs: