Monday, February 8, 2010

Morning Update/ Market Thread 2/8

Good Morning,

Equity futures are roughly flat this morning, very unusual for what has become Manic Monday. Below is a 60 minute chart of the DOW futures on the left and 5 minute S&P on the right:

The dollar and bonds are pretty close to level also, oil is down just a little and gold is about flat.

There are no economic reports out today and it will be a light week in that regard with International Trade, Retail Sales, Weekly Jobless claims, and Consumer Sentiment being as big as it gets and all later in the week.

Friday’s bounce off the bottom channel boundary looked to me like an attempt to front-run Manic Monday. The down-up action did produce a small movement on the McClelland Oscillator meaning that we should see a large move either today or tomorrow, direction unknown by that indicator.

Below is a 30 minute trading hours only chart of the SPX. You can see that the top of the channel today is just under 1,090. Prices will first have to get through 1,080 again to get that far. I think the count is pretty clear at this point, you can see wave 1 down, which was very large, a wave 2 bounce, the start of wave 3 down, and now we are bouncing in wave 2 of 3 of 1. This down channel is very large, and wave 1 of 3 was also very large. Wave 3 of 3 of 1 should follow this wave 2 movement and at a minimum, it should be as long as wave 1 and likely up to 1.61 times as long. Most of the short term oscillators are in the middle range except that the very short time frames are overbought:

SPX 1,061 is a pivot point, we fell below it on Friday, but closed back above it producing a hammer with a long wick. Something funny looking about Friday’s candle and reversal, that is normally something you see at a pretty major bottom, but this one came at the wrong place and time. It will be interesting to see what follows, again, my best guess is that we run higher a little more and then wave 3 strikes.

Below is a daily chart of the DOW. Here you can see a long stemmed candle and how it bounced off the bottom Bollinger. The daily stochastics are oversold, but the weekly has plenty of room to go and the monthly is rolling over from overbought. Volume was pretty high on Friday, most of it was down internally until the manic Monday ramp at the end of the day:

I think the 30 minute chart of the VIX is very telling, it is where counting the waves is easiest. Just look at 1 up, 2 down, 3 up, with the beginning of 2 of 3. Keep in mind that the volatility gauge moves opposite direction of the stock indices:

Here's the parabolic chart of the week, Federal Outlays. Take a look at the timeframe of this chart and look at how classic that structure is:

This chart is in a parabolic blow-off phase, moving literally straight up. Math and nature simply do not allow such moves to continue for long. When they end, they tend to end suddenly, but predicting where the move will end is indeed difficult. Notice what happened to the NASA budget? Only 4 shuttle flights left, manned exploration of space not progressing.

This is what backing your money with debt does to you. Eventually you saturate yourself and can only use new money to make payments on prior debt. Who is it that benefits? Oh yeah, Jamie Dimon just took a $16 million payment home for marking his worthless trash to a fantasy model and for collecting massively off the American taxpayers through interest and fees trading the "debts" of what is supposed to be the American people's money system. That chart is going to roll over, mark my words. When it does, our economy and monetary system are going to be standing naked, a very indecorous sight indeed.

The math is just ugly, and no, the Administration’s budget forecasts will not pan out. We will run more than a $2 Trillion dollar deficit this year and we will take in only slightly more than that in total. This is like someone who earns $100,000 a year spending ALL their income, PLUS charging $100,000 a year on credit cards. Can you imagine? How long do you think that will last? We don’t have long, we have got to build the Swarms. Please register (or re-register) and please get your friends, family, and anyone you can to register too, you can go to by clicking the banner at the top of the site – thank you!

These waves are traveling quickly and they are large. Do not be surprised when Manic Monday, which has been a Pavlovian set up for months now, turns into something entirely different for the bulls. Yes, I have the Bangles tune, “Manic Monday” going through my head, but I just wouldn’t do that to you, lol, so here’s something better:

Bon Jovi & Bob Geldof - I don't like Mondays