Wednesday, January 14, 2009

Morning Update 1/14

Good Morning,

Sorry for the delay in posting this, the Google Blogger site went down right as I was in the process of posting…

Futures are way down following the retail sales report for December, Nortel filing for Chapter 11, Deutsche Bank losing $6.3 billion in the fourth quarter, Greece’s credit rating cut by Standard & Poor’s, and Obama running into resistance from Congress… you know, the usual news as of late!

Due to all that, the DOW futures are down nearly 200 points, and S&P futures are off by 20.

So, the fundamentals are what I’ve been saying they are, and not what the “experts” were HOPING. It’s a bummer when expectations get dashed, that’s called disappointment.

And speaking of expectations gone awry, let’s quickly review the bond situation, it looks like I may have been early on my bond market call, so I’m exiting that trade here FOR NOW, but will re-enter if we regain those channels later in the day. Here’s a snapshot of the premarket activity, that’s TLT on the left and the long bond futures on the right and they are both outside of their respective channels, therefore I’m out of the trade for now:

Here’s a snapshot of the TNX, 10 year Treasury Notes. It, too, has broken down from its channel (TNX is showing rates [2.2%] on the right, whereas TLT and /ZB are showing price on the vertical axis):

Okay, so that answers that question for now about bonds. The move, however, is still parabolic and will end nastily at some point, I’m still thinking it won’t be too much longer, but then again, parabolic moves can surprise even people who understand them. Here’s what it feels like when a trade like this goes wrong… it’s also what the “experts” who are miscalculating the economic situation must feel like… it’s what it feels like if you went long last night (I had a small long)… and it’s what it’s going to feel like as the entire Baby Boom generation realizes they don’t have the money they thought they did for retirement – sad, but true:

The Five Stages of Stock Market Realization (or death) – as explained by a giraffe!

So, from a technical perspective, the markets are breaking down further, and they are making a lower low at this stage, having exceeded the previous low. Here’s a chart of the DOW daily. Note that the lower Bollinger band is moving down out of the way, but also notice that we’re oversold on the fast stochastic – that can get oversold and stay there:

Since I missed the short entry at SPX 856, I am now resigned to waiting for either a retest of that level, or a break of the next major support level at 840ish. At that level, there is a pivot point in play and that’s also where the bottom of the daily Bollinger currently is.

Overall, this is a dangerous place for traders. It could be a bear trap, but that’s NOT what the fundamentals are saying to me. So, we’re close to breaking down out of the range we’ve been in, but close does not count. Breaking 840 will probably set up a retest of the November lows, now that I will be a part of.

DOW is currently down 190 points...

Have a good day, I hope you’re not feeling like that giraffe!