Friday, January 16, 2009

Morning Update 1/16

Good Morning,

The hits just keep on coming, one of these days the rule of law will prevail, but the lawlessness for now just seems to be getting worse.

And the market doesn’t care at this point and is higher, continuing its technical bounce. Right now the DOW is up nearly a hundred points and the S&P is up 10.

Data out this morning shows the CPI fell .7%, again energy being cited, but the deflationary forces are taking hold.

Check out this report on Treasury International Capital Flows:
Investors and institutions across the world repatriated funds in November, leading to a net outflow of $21.7 billion in long-term U.S. securities. Foreign accounts sold a net $56.0 billion of U.S. assets in the month while U.S. accounts sold a net $34.3 billion of foreign assets. Of the $56.0 billion in foreign outflow, official institutions sold a net $37.1 billion of U.S. assets with private investors selling $18.9 billion. Foreigners were once again heavy sellers of U.S. agency debt and were also heavy sellers in November of corporate bonds.
That is showing investors do not like what they see happening in the treasury complex, and guess what? Treasuries are way off this morning, TLT and /ZB have returned to their respective channels. I may re-enter my bond trade with a small position just to see what happens (haven’t yet). I think Mish and others who think bonds will stay high in price for a long time may be incorrect. If there’s no rule of law in the U.S. foreign investors will exit and we already know some of the big players are doing the same.

Okay,the markets just opened and here’s a 20 day, 30 minute chart of the SPX. Notice that I’ve drawn some Fibonacci lines on there. Last night we ran up to the 23.6, and today it looks like we may run up to 38.2% line. Notice that we broke the neckline of the small inverted H&S pattern. The target for that will be closer to the 50% retrace line. I’m thinking, however, that I’ll exit my long positions this morning as I am not trusting this move completely yet, and as you can see, we are overbought now on the 30 minute stochastic:

The XLF is barely positive and is still weighing on the market, another reason that I am skittish about holding long here. For the market to rally, financials must go along for the ride.

In any event, I don’t like what’s happening with the bailouts, etc. and I think the bond market doesn’t like it either. It’s unorganized, it’s lawless, and until the looting of the taxpayer stops, the markets have no chance.

Otherwise, have a great day and best of luck to your trades,


Okay, here's an EconoTune that reflects how I'm feeling about trading today...

Eagles – Wasted Time:

PS – I trust this move so little that I just exited my long positions… sorry it took so long to get this out.