Friday, October 16, 2009

Morning Update/ Market Thread 10/16

Good Morning,

Mark-to-fantasy wasn’t enough to save Citi from losing $3 billion, and this morning we learn that it wasn’t enough to keep Bank of America from losing $2.2 billion! The power behind our politics is becoming more and more clear and there are two companies that are seemingly a little too protected, those being JPM and GS. And now we know why Ken Lewis is on his way out and why he would concede to leaving with no pay for 2009. They all deserve prison as far as I’m concerned.

And those earnings, combined with a 45% decrease in profits at GE to go along with sales that missed forecasts, show that the financial crisis, again despite the reintroduction of mark-to-fantasy, is not over – as I’ve been pointing out time and again.

Equity futures are down sharply:

TIC data comes out this morning but too late to make it into this report, I’ll do a write up on it once it comes out. Industrial Production and Consumer Sentiment come out right before the bell and shortly after, so we’ll have to report on those in the daily thread.

The bearish divergences are growing. Yesterday we developed a new one in that the number of stocks over their 5 day average diverged downwards against prices. More signs of a top approaching everyday, you can see the momentum falling out of the market as the swings become larger.

The 1,107 pivot has not been breached, and prices have now fallen back beneath the 1,090 pivot and that makes 1,061 support.

McHugh’s wave count is progressing, but we are NOT complete yet. The rise this week was likely wave 1 up of the final 5 waves. This morning’s action, therefore, is likely part of wave 2. That means that we still have 3, 4, and 5 of 5 up to go… or it truncates on further bad news which is always a possibility.

The daily candles from yesterday did not look pretty. Large, heavy hammers on the Industrials and the S&P. The NDX did not make a new high and made a second daily hammer showing the strength of the 61.8% Fib that it's up against:

The Transports, very interestingly, failed to get over the prior candle and failed to make a new intraday high – leaving the picture for DOW Theory cloudy:

The XLF also issued a warning with a red hammer, like the NDX, though, it too is “inside” but needs to be watched to see subsequent action. The XLF is down hard in the futures:

Hey, besides Mark-to-Fantasy, there’s never been any real reason for any of this six month rally…

Head East - Never Been Any Reason: