Tuesday, February 17, 2009

End of Day 2/17

Don’t worry if you’re a bull… that wasn’t the grim reaper. There’s still HOPE. And Stimulus. No, Mr. Reaper is still waiting for the right moment.

Of course there’s still more fraud to navigate, who can you trust after all? Hedge funds, it seems, aren’t exactly telling the truth about past performance. Not to worry, because the hedge fund with all the insiders who own Chrysler are right back at the government trough asking for more billions. Will they get it? Well, now that we’ve given them billions already, the excuse will be that we have to “protect our investment.” In other words, we throw fiat money after bad so that the criminals in society can continue their great escape.

Oh, and it seems Mr. Buffett either needs to raise money or is so convinced the bottom is at hand that he has sold 54% of Johnson & Johnson as well as 9% of Proctor & Gamble – two “defensive” stocks. I’m sure P&G losing 18% in the past 3 weeks has nothing to do with it?

And how about that close on the DOW? Everyone all day long talking about the November closing low of 7,552.29… and the official close today? 7,552.60! Are you kidding me? Of course, right afterwards selling continued and took it beneath that level showing that sell orders were stacked up and “held.” This is a game that has been played repeatedly at key levels over the past year. The market makers are absolutely playing games. The SEC should be throwing people in jail, but if it helps prop the market up, they look the other way. How critical was that level? Oh, that half point difference is the technical difference between DOW Theory confirming a market sell signal or not. Now the technocrats can say not. I say “whatever,” the market will ultimately go where it’s going and that’s a lot lower than here.

For today, the DOW finished down 297 points, the S&P gave up 4.6%, the NDX lost 4%, while the RUT lost 4.3%. The XLF was punished for 10% with all the big players taking large hits, including the very deserving GS. IYR was another notable, losing 6.3% today and causing SRS to close up 13% at 77.77. GM lost more than 12%.

Internals were very negative with the number of new lows rising strongly; over 90% of the issues declined; and declining volume swamped advancing volume by a 95% margin. This follows a 97% down day by only three trading sessions.

That’s saying wave 3 down to me. It might also mean that we’ll need a little time to consolidate, but keep in mind that I cannot count 5 clean waves yet inside of wave 3 down. This could have been 3 of 3 of 5 and we’re about to make 4 then 5 of 3? Hard to say, but the stochastic indicators are oversold on the 30 and 60 minute time frames. Might be a little room for a wave 5 down and remember that oversold is where waterfalls are born.

Inside the 20 day, 30 minute SPX chart you will see the red line that was the bottom of the pennant. I think we have to call that officially broken, don’t you? There’s also a fresh buy on the stochastic on this timeframe but you can see that it just curled down at the close:

Now let’s zoom out to a 3 month daily chart so that you can see where the November lows are. Today’s SPX close at 789 was exactly on a long term pivot point, the next lower one is down at 768. Note the daily stochastic is entering oversold, but the slow is not there yet with my settings. Today’s close was beneath the lower Bollinger. It has turned it down hard, but it’s not uncommon to bounce back above it or to move sideways allowing it time to catch up (quick note – the SPY looks like it created a big inverted hammer… that is false, there is a bad print in there producing the stem):

The DOW daily shows that we are way beneath the rising red trendline that was the pennant bottom (target horrific). I also had a red line down channel and we closed beneath the bottom of that as well. See the rising green line? That’s a 20 year uptrend line, and today was the first close beneath that support. Next long term support? The 100+ year uptrend line that currently resides in the DOW 4,000 area, the same area that the pennant is targeting. Note that today was on higher volume, but certainly not capitulation type of volume:

Next is the NDX. The red lines here did not form a pennant, they formed a rising wedge. Here, too, the bottom of that wedge is broken. Large gap in the chart is being left behind, so until we get a good distance from it, caution is advised in that regard. Note that the NDX has tons of room on all the indicators before reaching oversold:

Here’s the RUT. Its pennant line is the up sloping black line and it, too, is clearly broken (target again horrific). You can see that the RUT, like the NDX, has a ways to go prior to the November lows:

The Transports clearly closed at a new low for the bear market again. This time giving up 5.2% of its value today and closing beneath the lower Bollinger. That’s a broken chart as they all are. Not to worry, Obama sounded good while taking hundreds of billions and handing back only tens of billions to the people ultimately responsible for the whole fiasco:

The XLF left a big gap too, closing down nearly 10%. Another broken chart with no sign of capitulation. If you’re tempted to buy the financials at this level thinking that they can’t go lower, keep in mind that the P&F chart is STILL showing a target of $3. What’s going to save C and BAC this time? Are GS and JPM as clean as they say they are, or as dirty filthy leveraged to the moral & mathematical abyss as Nate says? The proof will be in the ultimate destination, won’t it?

Note that bonds are moving up in price as equities move down. I show TLT sitting right on the upper boundary of its down channel. A move higher out of that channel and I think you have to respect that if you are short TLT or long TBT.

The most positive chart I can find tonight for equities is actually the dollar chart. Why is it potentially positive? Because it produced an outside hammer near resistance – that’s a potential reversal indicator. It would have to be confirmed by tomorrow’s action, which if the dollar is down, you would expect equities to be up:

Here is a series of P&F charts showing that nearly every index and nearly every stock broke down and produced new bearish targets:








So, there you have it. Major technical breakdowns all the way around, but hey, the DOW managed to close above the November closing low by a quarter point! LOL… not that it matters to me, but I see their little market maker game. Personally, I would need to see a close below the pin lows for DOW Theory confirmation and that’s a little bit lower still… 7,499.38 to be precise.

If you were foolish enough to have your money on the bullish side last Friday, well today some of your fiat returned to their birthplace. Yes, your other money will soon meet the reaper too if you don’t act to protect them soon…

Blue Oyster Cult – Don’t Fear the Reaper: