Thursday, March 19, 2009

End of Day 3/19

I know that it wasn’t that long ago that I played this Morrison tune (a different version), but I think yesterday’s actions mark a turning point in the life of what we knew as the Dollar. Do you see the accident happening? It’s happening right now – this marks the beginning of the final phase of the current dollar experiment.

Doors – This is the End:

But the dollar has lived through various renditions and perhaps the term “dollar” will stick around, but it won’t be the same dollar you grew up with – it’s already not, exponential growth has ensured that – the dollar has lost 5% since Bernanke’s announcement yesterday:

That means that when you travel overseas or buy anything from another country, your puchasing power went down by 5% in just the past two days. Can you imagine if that continues?


Today the DOW finished down 85 points, the S&P lost 1.3%, the NDX only lost .2%, the broader Nasdaq lost .5%, and the RUT gave up 1%. The XLF gave back 8%, IYR lost 5.7%, GLD gained another 1.4%, and the transports managed to close up a fraction creating a gravestone doji on its 8th consecutive up day:

Internally, the NYSE was split evenly on advancing and declining issues, but 60% of the volume was on the downside. The number of new lows contracted to just 8 on the NYSE… that could be called a bullish divergence, but one that I don’t think has much meaning for where we are in the rally – it shows that a lot of the pressure has been removed on prices, for sure.

But the pressure hasn’t been removed from the fundamentals and after the close today we learned that Simon Property Group (SPG) announced a public stock offering for 15 million shares that sent their share price tumbling 10% after hours. That has pulled IYR down placing pressure on all the REITS and even the broader market to some extent.

Here’s a 10 day 10 minute SPX chart showing the relentless climb over the past two weeks. You can see that we closed today outside of the green channel – barely. The red lines are the wave 5 channel… this leaves the door open that we just created wave 4 and still could make wave 5 of 5 down. Regardless, there will likely be a ‘B’ wave retrace and further rally even if wave 5 down is coming. The minimum I would expect for a B wave would be down to the 38.2% fib line which is now at 751. Note here that the 10 and 30 minute stochastic are oversold which could point to some rally tomorrow, but the 60 minute will likely keep it under pressure and the daily as well:

The daily SPX chart shows that we made another attempt to get over 800 and failed. We also pinned the 50dma and failed to get above that. You can see that the daily stochastic is overbought and the RSI touched the overbought line and backed off slightly. We closed beneath the 789 pivot which makes 768 and then 734 the next pivot support areas. Note that the 734 pivot is now exactly a 50% retrace of the up move, while the 748 pivot is very close to the 38.2%. This candlestick pattern does not look like a topping pattern by itself, but being beneath the channel means that the trend could be changing:

The DOW’s close makes me a little nervous just because it failed to touch the upper Bollinger band which I would expect once it’s gone this far. Again, there are limitations elsewhere, like the transports which did make a topping candle with that gravestone. The close right on 7,400 is peculiar, it is support, so the open and action tomorrow will be important. In fact, tomorrow’s action will be critical to know whether we have begun wave ‘B’ or not:

This is a 20 day chart of the NDX. This rising wedge pattern is fascinating. You can see that it came to a point at the end of the day today with prices closing just under it after overthrowing the top yesterday. On the daily chart, the NDX is running into the upper Bollinger, and that has definitely slowed its progress down some, although today is its second day above the 50dma:

The XLF tried to climb higher this morning but the news of legislation to cap bonuses was enough of a catalyst to get prices headed out from above the upper Bollinger. That close above the Bollinger yesterday combined with the close beneath it today is a solid sell signal. Note that it closed beneath the 50dma and thus only remained above it for a day:

Here’s the Put/Call ratio, it turned the corner with a low reading and is now at .77:

Tomorrow’s an important day for determining the intermediate road. The short term stochastic look like a bounce is possible, but the pressure is on and tomorrow’s options expiration making anything possible. It’s possible we are beginning wave B down, but one thing’s for certain… Yesterday, Bernanke’s actions mean that we are burning down the house in regards to our currency. The underlying problem is too much debt and too little real income. And what underlies that is a government that is bloated beyond belief, they cater and are controlled by the central bankers who have convinced them that never ending growth is workable in terms of a currency.

Talking heads – Burning Down the House: