Tuesday, October 13, 2009

Morning Update/ Market Thread 10/13

Equity futures are down this morning, with the DOW and S&P futures down more than the NDX and RUT:

Note in the /ES chart on the right that I drew a line at what appears to be a small neckline of H&S pattern that’s worth about 8 points or so. If prices drop below that neckline I would target about 1,060. The 1,070 area is acting like support… 1,061 is the current support pivot and 1,090 is overhead.

The dollar dipped below 76 this morning but bounced back above once again and is currently at 76.16. It keeps knocking on that 76 door, if it stays down here long enough eventually it will break through. Gold ran up to 1,069 overnight before pulling back a little. Oil is also higher, reaching $74 a barrel. Bonds are also higher.

Meredith Whitney downgraded Goldman giving it about a $4 per share hit and the XLF a bit of a bruising as well.

Johnson & Johnson missed on Revenues, be nimble as there are a lot more earnings coming out this week.

The Redbook reported a yoy increase in chain store sales of .6% for the previous week. Sorry, but I just don’t believe this report even though the year over year comparison is now much easier than before. Sales tax revenues are way down, I call B.S., and again will point to substitution bias.

Once again there are many Treasury auctions this afternoon, we’ll keep an eye on those. Tomorrow we’ll see Retail Sales, Purchase Applications, Import and Export Prices, Inventories, and we’ll get to peak at the FOMC minutes, something that the investment community gives far too much credence in my opinion.

There was yet another small movement in the McClelland Oscillator yesterday, meaning that the spring is being wound to produce a large directional move. McHugh’s count is still saying that the final wave up is not over, so any correction in here, unless it’s quite large, is likely just a subwave on the way up.

We did make a new high in the Industrials yesterday without making a new high in the Transports. That sets up the possibility of a DOW Theory non-confirmation should the turn occur prior to the Transports making a new high. I would expect something like that as wave C begins, to go along with all the other divergences that are occurring right now.

Below is a daily chart of the DOW. Note the declining volume, and even lower yesterday. This volume for September and October so far are RECORD low volumes for modern history. That’s a pretty big clue, its a screaming divergence from price.

You can also see that the daily Stochastic is overbought once again, and that yesterday’s candle could be a top indication. If prices decline below the level of yesterday’s low, then it may indeed be at least a short term top, and McHugh is open to wave B being complete, but we would both expect that wave C would likely begin with a pretty good down movement and we just haven’t seen that yet, obviously. The 60 minute stochs are sitting on a fresh sell while the 30 and 10 are sitting on a buy…

Warren Zevon - Excitable Boy: