Thursday, February 12, 2009

End of Day 2/12

Supertramp – School (Crime of the Century):

So many song choices to describe this day… let’s see, there was Gasbagarino on CNBS breaking the story of how Goldman Sachs held secret meetings over what to “do about” Geithner. Now that inspires a little Rush music, “Fly By Night” comes to mind! Ha, it seems that Geithner wasn’t born and raised in the Goldman fold, that’s too bad. They’re going to have to do something to see if they can’t get another one of their boys in the Secretary Treasurer spot – hey, even though Geithner is a near clone, he’s not acting fast enough to protect their interests.

No, Goldman is still pulling all the strings. Just look at that market action. Ran right into the WALL that is the 805 support area while looking bearish as can be… and within just 5 minutes of hitting that critical support level, BAM, out comes word that more billions are going to be spent to prevent foreclosures! Ha, ha – those who were caught shorting into the abyss without a hedge were once again sent to SCHOOL courtesy of the boys pulling the strings. The currency markets were giving clues, and again the retail investor gets to donate his fiat to the Crime of the Century.

So there you are, in the shoes of a retail investor when this news breaks… one hour prior to the close, never after hours for news like this: Is it for real? How big of a program? Will it be effective?

Of course the big money string pullers are the ones who have written the documents and pushed for their passage. Thus, at just the right moment (805 support on the SPX and 1 hour to the close), they are cocked, loaded, and KNOW just what to do. Am I making that seem too much like a conspiracy game? Well, it’s the truth, ignore it or go watch Cramer if you so choose, but that’s the game. And if you don’t know the house rules, then you shouldn’t be playing in this Wicked Game (another appropriate song title).

But if you were following our market thread then you know that a breakdown of the last flag of the day was calling for us to reach 807. And if you could have been listening (you can) to Doc and I call the shots on instant messenger, then you would know that we began taking profits and covering our positions right then and there. We’ve played this wicked game before.

And on this day where strings were pulled, the DOW was down 240 points but recovered all of it to close the day down 6 points. The S&P was up .2%, the NDX was up, down, up and finished up 1.3%, while the RUT finished up .55%. Despite the ramp, the XLF finished down 1.3%.

It was another strange day internally. Declining issues narrowly outnumbered advancing issues on the NYSE, but it was the other way around on the Nasdaq. Share volume was slightly negative on the NYSE but nearly 2 to 1 on the Nasdaq. The number of new lows expanded while the SPX and NDX finished green. No, they are NOT anywhere near capitulation low numbers, keep that in mind when I show you what look like potential capitulation bottom candlesticks. No, I don’t think the world was saved with this latest announcement, but I don’t have all the details yet. The government trying to catch homeowners before they’re in trouble sure sounds terrific, but how about not letting home prices get so out of control to begin with? Oh, and how about letting them correct back to levels that are affordable with current incomes, and forcing those who pushed the bad debt out there to eat it?

Okay, on to the charts…

Let’s start with the VIX. Here’s a 3 month chart, the red lines are the wedge boundaries, with the upper red line the trendline from the highs. You can see that we jumped the 50dma and pinned that downtrend line but rejected hard off it on that perfectly timed announcement. Got to laugh over that one… it sent the VIX plummeting down more than 7% in minutes, and once again it failed to stay above the 46 level:

Next, let’s look inside the SPX at a 10 minute, 10 day chart. Overall, it looks like there’s a Head & Shoulder pattern with a broken neckline and a retest. That neckline just happens to be the pennant bottom, and yes, we were sticking our toe into the abyss. Now they come out with a “detail” and the market quickly pulled its toe back in at the last minute as you can see. That created a W formation which may or may not be bullish. Note that the 10 minute stochastic is overbought. The 30 minute is nearly overbought and the 60 is mid-range:

Now let’s look at the SPX daily. Nice, perfect touch of the lower Bollinger band and rocket shot back up to create a hammer. Note that the head of the hammer is occluded and is just above the pennant bottom. Still showing a sell signal on the daily stochastic with room:

Now let’s look at the DOW daily. We spent most of the day beneath the bottom Bollinger and then jumped back up to where we opened and created that Dragon Fly candlestick.

What do you call that candlestick? It’s a doji that is referred to as a “dragon fly.” Here’s what says about Dragon Flys:
Dragon Fly doji:

Dragon fly doji form when the open, high and close are equal and the low creates a long lower shadow. The resulting candlestick looks like a "T" with a long lower shadow and no upper shadow. Dragon fly doji indicate that sellers dominated trading and drove prices lower during the session. By the end of the session, buyers resurfaced and pushed prices back to the opening level and the session high.

The reversal implications of a dragon fly doji depend on previous price action and future confirmation. The long lower shadow provides evidence of buying pressure, but the low indicates that plenty of sellers still loom. After a long downtrend, long black candlestick, or at support, a dragon fly doji could signal a potential bullish reversal or bottom. After a long uptrend, long white candlestick or at resistance, the long lower shadow could foreshadow a potential bearish reversal or top. Bearish or bullish confirmation is required for both situations.

So, because it is at the end of a decline, it could be a bottom reversal, but we need to have follow through tomorrow to confirm the reversal.

And when I look at the DIA, I don’t see the same Dragon Fly, I see a large headed hammer on top of the lower Bollinger. It too, however, can be a reversal indicator, but needs confirmation:

And here’s IYR. I showed this chart last night and pointed out the shadowed hammer that is highlighted. Today we got a big red hammer, again, right on the lower Bollinger. Another potential reversal indicator that needs confirmation:

Yet another hammer belongs to the Transports – same deal:

And, to follow up on the put/call ratio, you can see that it’s in neutral ground, NOT in the territory of major bottoms, or tops:

Finally, here is a series of Point & Figure charts that tripped bearish targets today because of the earlier technical breakdown. Once triggered, these targets remain valid unless an upside breakout triggers a reversal. Note that we have received numerous reversals since being in this sideways pattern – that’s what they do:







If you could write a script on how to frustrate the largest number of investors in a market place, I’m sure it would follow the sequence that’s been created by the market puppeteers and government incompetents. If you’re being whipsawed by their actions, keep in mind that’s the market’s goal – to separate you from your money. It’s all a truly wicked game…

Chris Isaak – Wicked Game:

And for you younger guys, here’s the HIM version…

HIM – Wicked Game:

Vote for your favorite Wicked Game version below:

HIM = “Interesting”

Chris Isaak = “Cool”

Bet you can’t guess my bias (lol)! I’ll take “funny” to mean that Nate’s just full of it! It’s okay, take out your frustrations on Somebody Like Me…