Monday, August 10, 2009

Morning update/ Market Thread 8/10

Good Morning,

Equity futures are down this morning after Asia mindlessly went up further this weekend:

The dollar and bonds are both up.

No economic releases today, this week will bring the FOMC meeting results on Wednesday, International Trade number, the Treasury budget, Retail Sales, CPI, Industrial Production, and Consumer Sentiment. While everyone will be listening to the moronic words of the FOMC the real important data is the CPI and then the PPI which I believe will come out next week – It’s important because I believe we are still very close to a deflationary spiral, the exact opposite of what the majority of market participants are looking for (speaking of MORONS, Krugman is saying Bernanke deserves a second term. Sorry, Krugman doesn’t even know 4th grade math, and is not qualified to manage my checkbook much less win Nobel prizes).

The market still appears to be in the process of putting in a top. McHugh’s Elliott Wave count has room for one more push higher that could even run us up to the much touted 1,050 level, but there may be too many people looking for that – we’ll see. This week, TODAY, begins a Fibonacci turn window. The trend coming into the turn window is obviously up and thus it would be expected that prices would turn down beginning some time during the week as the end of the window is Friday. Just remember that frontrunning turns can be hazardous to your wealth.

The daily stochastics have issued a sell signal despite the rise in prices on Friday. The weekly is insanely overbought, but I pointed out the monthly is still rising and is only about 2/3rds of the way up.

So, right now prices are up against very strong resistance at the 38.2% Fibonacci of the entire move and yet we are above the psychologically important 1,000 level which is now acting as support.

This may be a transition week, it will be interesting to see if that Fibonacci turn window hits. Prices are obviously out of control from a valuation perspective, the psychology is reaching a point where there are many, many participants who believe we’ve entered a new bull market, but I’m sorry, the fundamentals do not support anything more than a money induced fluff. And to make matters worse, we are getting close to a couple of long term buy signals, not yet, but getting close and they are likely to be triggered (like the 20/50 wma cross). I think it’s very likely that some of these long term buy signals get triggered, but I think they will wind up being thrown over in the end. That’s why we generally wait for them to cross by at least 1% before taking action.

But this movement, at this time is extremely dangerous to go long. The angle of ascent is too steep. So steep, in fact, that buying on the moving average cross may be too risk filled as you must evaluate where you stop out – when prices cross below the averages? Well right now prices are getting so far away from the averages that the risk assumed is more than I like, that’s for sure. Not for me. The disconnect between price and earnings and reality are far too great for me to be suckered into a money move. I think I would rather own harder assets not backed by U.S. paper, thanks.

Debt and money fluff – castles in the air!

Don McLean – Castles in the Air:

By the way, for those who don't know Don McLean, he's the one who did "American Pie" and "Vincent," another very beautiful song. Here's Don playing the same song when he was younger, it's very interesting to see the same musician play at different stages in life...