Monday, November 23, 2009

Morning Update/ Market Thread 11/23

Good Morning,

Equities are up sharply overnight in reaction to a sharp decline in the dollar. Below is the overnight action in the DOW and on the right side is the S&P futures that I left in a 30 minute chart:

On the 30 minute chart, you can see that the S&P ran right back up to the 1,101 resistance area which if it isn’t exceeded will form a perfect right shoulder of a H&S topping pattern. If the top of the head is exceeded then the pattern is invalidated.

The dollar took a tremendous .75% plunge overnight and over the weekend. Moves of that size are a sign of severe stress and instability, bordering on getting out of hand. Bonds are down, oil is up, and gold rocketed to another new high, this time peaking at $1,167 an ounce, a stone’s throw from the $1,200 mark. Remember how high it sounded when gold was at $600 an ounce? Well, this move looks like it’s a little bit parabolic now, it’s very overbought and likely to take a rest soon, but it has been crawling along the upper boundary of an expanding wedge and still is.

Three busy days for data prior to the holiday, of course markets will be closed on Thursday and Friday. Today is the slowest of the three, with existing home sales coming out at 10 Eastern. Tomorrow is revised GDP for the 3rd quarter, consumer confidence and a myriad of others. Wednesday is durable goods, jobless claims, consumer sentiment and new home sales.

On Friday we had a very small movement on the McClelland Oscillator which meant that there’s a large move coming, and it looks like we got that in the form of this run up. SPX 1,101 is an area of resistance, then there’s a pivot at 1,107, the prior high at 1,113, and then another pivot at 1,133. The support pivot is at 1,090, the H&S neckline at 1,086.

Also on Friday, there was a spike downward in the VIX. I don’t ignore these spikes as the odds of it following down the tail of the spike seem to be very high, and it looks like this time may be no exception with prices rising again here, chart below:

I really don’t have a lot to add technically otherwise as not a lot has changed… we’re still either in the final wave up, or we’ve topped and this is the start of wave 1 down, those are the two scenarios in play right now and we won’t really know which until we either make a new high or exceed the prior low. Of course the technicals are still screaming TOP is either in or at hand.

Going out into the realm of Fibonacci spirals, a world that will seem “moonbattish” to most, some may remember a post from a person who is running spiral time series and came up with some turn dates for the remainder of the year. He said that his time series showed the following: “The 25th (“F25”) Fibonacci Spiral Calendar sequence gives you the four dates explained in the above Excel chart in 2009; July 11, 2009 (significant low), October 16, 2009 (final highest high in the crash year), November 23, 2009 (secondary high before a crash) and December 10, 2009 (crash).”

His first date was direct hit, his second date is what I am calling an “internal high” and is the still within a day of the actual high in the RUT and XLF, and here we are today to what he calls a “secondary high before a crash” which would imply that we begin a descent and then accelerate downward the second week of December, counter to the usual positive bias in December (btw, the week of Thanksgiving has a strong historical bullish bias). No, I don’t know much about his background or his track record, I’m just bringing it up because I do believe there’s basis in Fibonacci time sequences, I brought it up before, and it seems to be tracking pretty accurately so far.

I found a very interesting chart over the weekend in which it shows the diminishing effects of each new dollar of debt. This is really another way of showing how velocity comes to a stand still as you force more and more debt into the system (dollars in our system are debt). This study concluded that at trend by the year 2015, only five years away, that each new dollar of debt will have ZERO effect on raising GDP and that it already is so bad that $1 of debt only adds about 18 cents onto the output of goods and services in this country!

That’s a pretty amazing thing, and it shows graphically exactly what I’ve been talking about. Debt saturation leads to a stand still in velocity as new money can only service prior debts, thus infusing more debt onto debt eventually has NO positive effect whatsoever on the economy. You see that in the parabolic charts of debt. Well, all parabolic curves collapse, the curve of debt will be no exception. Keep in mind what that means! Our money is debt! When that curve rolls over, it will signal a crash in our money as well… and in fact, the debt and money supply charts are already beginning to roll. This is a system that was flawed via its design, the feature of our money that is causing it is NOT the “fiat” feature (fiat means by decree, thus all money used by governments would be fiat, or by decree), it is the interest bearing debt backed feature that guarantees its eventual demise and the math is saying that for this dollar, it is in the end phase.

In fact, AZRainman did a great picture this weekend showing what’s coming to Wall Street in the second wave:

LOL, AZ does great artwork, and he knows what’s coming (link to his site in blog favorites)!

And my favorite chart from the weekend is someone’s diagram showing the inner workings of the 64% B wave rally:

Now that looks about right to me, might be a little too high a cut for “reality” though, lol. Hey, all this debt, it’s got the dollar under pressure!

Billy Joel – Pressure: