Wednesday, January 28, 2009

End of Day 1/28

Well, according to Jim Cramer, that was the most bullish FOMC statement he had ever heard and thinks that they were telling everyone to go out and buy stocks! That’s sooo funny, because what I heard was that the Emperor wears no clothes but likes to give lip service to buying up the bond market and every piece of debt instrument in existence. The bond market caught that immediately and raced lower, while those on CNBS keep talking about credit markets “freeing up” and money flowing out of bonds and into stocks. Again, what I see is tht people tried to front-run the Fed buying bonds, and now that they know they aren’t are exiting. Gee, that’s just like the insiders who said that they have been exiting for awhile now and they even told ya so. Don’t worry, the short bus riders in equities will figure it all out… eventually – just not today or probably tomorrow!

For the day, the DOW finished up 200 points even (2.5%), the S&P was up 3.4%, the NDX jumped 3.5%, and the RUT blasted off to a 3.8% gain. Notable was the XLF that gained 12.8%, C plus 19%, BAC plus 14%, STT + 31%, WFC + 31%... basically all the banks that can possibly be bailed out for their bad behavior skyrocketed. A lot of VERY big gaps in the charts, they better hope nothing blows up overnight to cause a gap down or that would be very bad from a technical prospective. Being earnings season, you never know, plus we have durable goods orders, jobless claims, and new home sales announcements in the morning. Don’t forget that 4th quarter GDP estimate will come out on Friday.

Starbucks just announced that they are going to lay off 6,700 workers and close 300 stores. Barista workers will comprise 6,000, while executives will make up the other 700. Boy, when it rains on Seattle, it comes in streaks; that makes Boeing with 10,000 – Microsoft with 5,000 – and now Starbucks. Anybody see some future home defaults there?

But not to let reality stand in the way, the bulls came on strong at the close to fill in what could have been some ugly candles and turned them into pretty bullish ones. A lot of technical breakouts on the P&F charts, I’ll post those separately.

The internals were very bullish with 87% of the volume on the advance side and advancing issues outnumbered decliners by a 6 to 1 margin on the NYSE. New lows fell substantially, but new highs are obviously still anemic.

Let’s start on the charts with a look at the 10 minute SPX. I was estimating 875 for a high today, we touched 877 and closed right below 875. That blue line there is our old friend the bottom of the old triangle from November – that line acts like a magnet drawing prices to it. Note that we overthrew that wedge… it’s a very steep incline and will have to give that type of near parabolic growth up pretty soon. The 10 minute stochastic is midrange, but the 30 and 60 are on fresh sell signals with a long way to go on the down side – that could mean lower prices tomorrow, but they can remain overbought:

The daily SPX chart has a big green candle on it that closed over the 50dma… that’s pretty bullish. Here’s a one month SPY showing a gap up and a close above the 50dma on slightly higher volume:

Next is a chart of DIA, here we see a large gap up and close well below the 50dma on lower volume.

The same chart on the index itself has a solid candle and higher volume. Note the rise and strength of the fast stochastic now:

Now, here’s the XLF… giant gap up on much higher volume. There’s still an open gap just above its current level that would be filled by a run to $11 and the 50dma is just above there.

TLT just got nailed after the FOMC announcement. That’s a bearish engulfing candlestick and it looks like it could be the beginning of wave 5 down. If so, I’m targeting about the 100 area. Note the higher volume here as well. NOT GOOD.

TNX (10 year bonds) shows the same deal, but remember we are talking yields here not price. Note that it broke above the 50dma on pretty good authority:

Lastly I want to show you a chart of the dollar index from Note the hammer right on the 50 day average (blue line). Interesting to have stocks up and the dollar up today… If the dollar were to mount a rally here, that would not be good for stocks so is something to keep an eye on.

All in all, a pretty bullish day from a technical perspective. Nothing but a disaster from a fundamental perspective – our government coming out and saying that come hell or high water they will monetize debt is beyond words as it’s beyond scary. I guess they just feel that they’ve got nothing left to lose!

The Alan Parsons Project - Nothing Left To Lose:

Okay, that was a really lame song with someone's travel photos, so let's revise that last sentence above, okay? Let's just say that I see through your latest trick!

Dire Straits – Your Latest Trick: