Friday, June 18, 2010

Morning Update/ Market Thread 6/18

Good Morning,

Today is quadruple witching. Index options expire at the open, most other June options expire at the close, and today is the last day to trade June futures.

Equity futures are down slightly to flat this morning following yesterday afternoon’s completely unnatural bounce. And I don’t say that lightly, it was not a generic move. I have watched the markets for many years, tic by tic, and can tell you that they are not the same markets that existed just a few years ago. So, is this some “new normal” that we are just going to have to get used to – wild HFT driven swings with constant game playing? No, the forces creating this action will be driven out, that is my belief, but it’s going to take major change, and I think that change is coming.

What I see today in the overnight action is a small broadening formation that looks like a megaphone. The action over the past couple of days looks like a larger broadening formation. You can see the larger one on the 15 minute chart of DOW futures below left, and the smaller one on the 5 minute S&P futures chart below right:

What I had been tracking as a rising wedge was broken yesterday – yet the end of day bounce brought us back up to it. A channel doesn’t fit this movement unless you give it a lot of room. The candles that were created yesterday look bearish pretty much across the board. We sit just below key overhead resistance at the SPX 1120ish area. Get over about 1125 and we’re probably headed to 1140 or 1150. Fail to get over it and wave 3 of 3 is looming.

Keep in mind that today is Friday and thus Monday and its 90% odds on ramp job come next. Again, not a “market,” more like a banker manipulated toy.

Speaking of banker manipulated toys; gold zoomed to a new all-time record last night now at $1,260. The P&F diagram and a triangle formation both have the same target of $1,310 an ounce.

The dollar is flat this morning, just above support at about 85.50. The Euro is down slightly.

There’s a very important development occurring with the Emerging Markets ETF (EEM). It’s just about to put in a “death cross” which is when the 50dma falls below the 200dma. You can see in the chart below that prices moved right up into those moving averages and got stopped – a cross is occurring now. This is an ominous sign for those believing that emerging markets are going to pull the globe up and out. If you go back and look at these crosses, they are quite bearish and odds are high that significant further declines occur once this cross has occurred. Below is a one month chart of EEM showing this cross:

Some of the major financials also have already produced death crosses, like JPM and GS. Others are about to as well – bearish.

With no economic data today, I’ll keep this short and wish you a great weekend. Emerging Market death cross? Where are those millions of Chinese consumers when you need them?

Dobbie Brothers – China Grove: