Monday, March 1, 2010

Morning Update/ Market Thread 3/1

Good Morning,

Equity futures are mostly flat to slightly higher for your central planned Monday ramp job. The roller coaster will be departing momentarily, please ensure that your life’s savings are securely fastened, and please note that an air sickness bag has been provided for your convenience and for the comfort of those seated next to you. Have a good trip.

Below you will see a 60 minute chart of the DOW on the left and a 5 minute overnight view of the S&P futures on the right:

The dollar, meantime, has gone for a vertical rocket-shot, and bonds are rising. I would like to point out that last week was quite unusual as both bonds and stocks were up. When this condition occurs, it is usually the bond market that is correct – watch this relationship, I’ll bet there is some catch up coming shortly. The Euro is down hard this morning. Oil is up slightly and gold is down slightly.

Personal Incomes & Outlays, were reported as follows according to Econoday:

Wages & salaries were strong in January, up 0.4 percent but were not strong enough to offset a reversal in last month's jump in farm income to make for a lower-than-expected 0.1 percent increase in personal income.

The spending side is also mixed. A 0.5 percent rise for personal consumption is stronger than expected but, given a 1.8 percent surge in non-durable goods, looks to have been boosted by gasoline. Spending on durable goods rose only 0.1 percent with spending on services up a moderate 0.2 percent.

Price readings are flat with core PCE up only 1.4 percent year-on-year, while the savings rate, drawn down by spending, fell 9 tenths to 3.3 percent. Equities got a slight lift on today's report, one highlighted by strong wages.
The Manufacturing ISM and Construction Spending come out at 10 Eastern. The largest economic report of the week is the February Employment situation that is released on Friday.

Speaking of unemployment, did everyone see that the emergency unemployment benefits failed to get extended and that as of today there are now 1.2 million people who instantly fell off the unemployment rolls? They can still vote to reinstate them, but as of now those people are losing the only income they have.

Today is a Bradley Model turn date and it is at the backside of the window of McHugh’s turn dates as well. Friday’s action produced yet another small change in the McClelland Oscillator, this is another phenomena that is occurring at a high rate and I believe it’s related to the Monday ramp job. Prices try to move lower on Friday, but the market is supported and late day buyers come in trying to get in front of Monday’s ramp. That back and forth movement produces the small readings. Now we can expect today or tomorrow to be a large directional move.

I want to go over a few charts today as I didn’t get a chance to go over them for the weekend – I see some things of interest mainly in the weekly charts. In general, the markets are back to being overbought on the daily time frame – we left Friday with the short term oscillators in the middle of their ranges.

Since it has been almost 1 year since the March bottom of ’09, below is a chart of the DOW showing the very large rising wedge that is broken (prices generally fall at least to the base of rising wedges). You can also see generally decreasing volume, this is a pattern that is divergent against rising prices and is the largest divergence in modern history, by far:

Next is a WEEKLY chart of the DOW. Note the red hammer on rising volume. That hammer is a potential reversal indicator, but because it is inside of the previous candle, the odds of it being valid are less. Almost all of the indices produced a similar candle:

NDX weekly hammer, partially outside:

SPX weekly hammer:

Now here’s the one that is most interesting to me. It is the VIX, which produced an inverted outside weekly hammer:

Here is a two year view. There are two similar candles to this one, one in August of last year that was not meaningful, and one in August of ’08 and just look at what followed that reversal indication – I’m just observing. If you go back in time further, you will find that nearly all inverted hammers on the VIX produce upward reversals that result in downward moves in equities. The one last August is a rare exception:

McHugh has some short term patterns that say we have one more wave higher, likely at the beginning of the week, then we move lower. This looks reasonable, but we need to see lower on the week to validate the hammers. There is something brewing in Europe with our dollar rocketing higher and the Euro falling. There is also something brewing with bonds disconnected from equities – the bond market players are smarter than the equity players. Bonds bounced perfectly off long term support. Money cannot continue to flow both into bonds and equities for very long – one or the other will give.

Below is a link to a CNN article on DEBT. This is a perfect example of where Swarm members and supporters of Freedom’s Vision can make a difference by going and placing information about the fact that there is a solution that can work as I did this morning. Please take the time to make a remark and place a link to in the remarks, thank you!

America's hidden debt bombs

Just remember that the pushers of debt are actually WORSE than the pushers of drugs. They cause more damage and reap more havoc across more people’s lives than drugs ever could. Beware the Pusher Man:

Steppenwolf - The Pusher: