Monday, February 22, 2010

Morning Update/ Market Thread 2/22

Good Morning,

The Monday morning mark to fantasy crack-up boom continues once again so far with equity futures higher, below is a 60 minute chart of the DOW on the left and a 5 minute chart of S&P futures on the right:

Both the dollar and bonds are down slightly, oil and gold are roughly flat.

No economic data today although Bernanke flaps his monetary and rule of law destroying lips at 11 Eastern as well as twice more later in the week. Tomorrow is Citizen Confidence, then comes New Home Sales, Durable Goods, GDP revision and a host of the regular cast of distorted and twisted statistics.

Greece is still smoldering, nothing accomplished but lip service. Debt still rotting all across Europe and around the world – nothing solved, debt will continue to cause problems around the world, do not be fooled.

Schlumberger is evidently buying Smith International for $11 Billion in an all stock deal – note the lack of cash. This will create a giant drilling and oil field servicing company, and is of course, a great topic for pump on CNBS with no real meaning or implications to the broader market from a realistic perspective. Again, no cash, not even any movement in the debt pushers’ world.

Friday produced a small movement in the McClelland Oscillator which means we can expect a large movement either today or tomorrow. It seems to be a part of this Monday morning ramp phenomena that stocks produce a low volume ramp on Friday in order to get in front of it. Of course last Friday was Options Expiration and that played a part too, the volume was low for what you would expect.

Here is a chart of the XLF, again, nothing but a low volume melt up to the 50% retrace and to the 50dma which it could not penetrate so far:

The SPX is sitting just above the 1,107 pivot which is now support. The next higher pivot is at 1,133, and next lower support is at 1,090 with 1,100 also a support level. Most of the indices did manage to barely close above the 50dma, but others like the Transports did not.

This retrace has now performed a textbook 61.8% retrace for what I have been tracking as a wave 2. Wave 2s can retrace up to 100% of wave 1 and still be valid. There is another turn date on the 26th of February and McHugh believes that since it is close to the one last week that we’ll likely see one turn in the middle, that would be this week. Hey, timing is the hardest part to pin down, especially in these hot money manipulated markets. If there’s no turn downward this week, or if we go on to make a new high, then we start to look at what else is going on. For now, we are tracking what I and McHugh are calling a wave 2.

I note that Tony Caldero is starting to waffle on his wave count and is talking up the new bull market alternative. Basically in that scenario, the last down move instead of a wave 1 is a wave 4 and this is wave 5 up. I do not buy that wave count and note that wave 2 here is doing its job of sucking people and their money in. Volume confirms price, no bull market, in fact, historic volume divergence.

I want to make it clear, however, that while I don’t see the possibility of a genuine bull market, I am always open to a money printing crack-up boom, but again, I just don’t see it unless we go on to make a new high here and produce an obvious 5th wave higher. A 5 wave movement higher would be an indication that wave B was not really a 3 wave movement a,b,c – that is was wave 1 up. Again, that is not the primary count in any way, shape, or form, instead I believe that we are still very close to producing a top here as the most likely scenario. Nothing fundamentally from a debt perspective has been solved. Incomes are further away from servicing the debt, not closer. That is the ball to keep your eye upon - until that is resolved there will be no genuine bull market in equities.

I note a downdraft occuring on the open, I can just visualize all of Bernanke’s debt backed money fluttering in the wind while being stirred up by his helicopters! Funny, but I can also see that the breeze flows unimpeded in one ear and out the other…

George Benson – Breezin’: