Tuesday, February 9, 2010

Morning Update/ Market Thread 2/9

Good Morning,

Equity Futures are higher this morning, below is a 60 minute chart of the DOW on the left and 5 minute chart of S&P on the right:

Both the dollar and bonds are lower, oil and gold are higher. While I’m mentioning gold, the CRB commodity index is sitting right on long term support, the HUI is as well. This is a pretty critical place for commodities, do or die some more. If you’re thinking long commodities, it’s a good place to enter as long as you stop out on a breakdown. Personally, I think a breakdown is pretty high odds as I think we have a wave 3 of 1 on deck and that can easily drag commodities below support.

Not much in the way of data today. The Redbook and Goldman ICSC show their usual nonsense, wholesale trade will be reported at 10 Eastern.

CNN is reporting “A Massive Tax Hike is about to Hit.” They are talking about jumps in unemployment insurance taxes on businesses. It is a large increase, here’s the short version:
NEW YORK (CNNMoney.com) -- Employers are getting hit with a massive tax hike at a time when they can least afford it.

Companies in at least 35 states will have to fork over more in unemployment insurance taxes this year, according to the National Association of State Workforce Agencies.

The median increase will be 27.5%. And employers in places such as Hawaii and Florida could see levies skyrocket more than ten-fold.

Of course many states are way beyond the models for collecting enough taxes to cover costs and thus they have had to borrow from the Treasury. The Treasury Trust Fund is broke, as far as I can tell, yet miraculously the money keeps flowing. I just read last night that they are sliding into the latest bill another 3 month extension of emergency benefits. Of course higher taxes on businesses will only work to drag down employment, a nasty and not virtuous cycle.

Yesterday’s large point move satisfied Friday’s small move in the McClelland Oscillator. It came on lower volume and appeared to be wave b of wave 2 of 3 of 1 for those who follow. That means today’s action is most likely wave c of 2 and may complete wave 2 sometime soon. Next should come a powerful down move if this count is correct.

Below is a 30 minute chart of the SPX. You can see that the top of the channel is now about 1,085 and the 61.8% retrace of this wave is at 1,081. I would not expect wave 2 to rise above that and it is already proving to have a hard time getting back above 1,070. There is also overhead at 1,080. For me, this is the next entry point on the short side. I would like to see prices get close to that upper channel boundary and then use that as a stop:

Below is a 3 month daily of the SPX, you can see how it negated the hammer as being a bottom reversal indicator. I was suspicious of those, they did not come at the right place or time. Again, volume was lighter on the move yesterday and that suggested that indeed it was a middle wave b movement and not a continuation of the main wave down:

Yesterday I noticed that the Oil Point & Figure chart tripped a new bearish target on a breakdown. It closed above, but this is a clue that commodities may not hold support. The target generated is $61 a barrel, that would be about 15% lower than here:

The DEBT problems continue to ripple across Europe. Ireland is the one to watch now. The fallout from problems in Ireland would be much more significant that Greece or Portugal. Spain is another larger country that is definitely having debt issues. The dominos continue to travel and will continue to travel until the debt is cleared and countries stop nationalizing the debts of their financial industries. I am not hearing enough talk about how debt is holding back human progress. I think it’s very significant that the NASA budget is being sacrificed. This is the exact opposite of JFK’s vision, and is a good example of how being saturated with debt slows the progress of mankind. There is a better way, just think of all the money that was spent in the past couple of years bailing out the financial industry, buying down interest rates, and also spent directly on interest to just to use our own money system! Trillions upon Trillions. More money than all the wars combined, more money than all the stimulus ever given. Not exactly an inspiring situation. This is a historic parabolic move in our monetary system that is NOT sustainable and is coming to an end soon. Please go to www.SwarmUSA.com and register for the Swarm today!

Allman Brothers – Jessica: