Monday, August 9, 2010

Morning Update/ Market Thread 8/9

Good Morning,

Welcome to your oh so difficult to predict, absolutely ridiculous, Monday morning HFT driven ramp. Like Bill Murray in Groundhog Day, I think all of us non-HFT using, non-dark pool “investors,” have already smashed our alarm clocks and are ready to find a way out of this most frustrating computer loop. It was ridiculous when it first became noticeable, then it became an outright slap in the face to any semblance of a market and freedom, but now it’s just plain old BORING.

With no economic data today in front of tomorrow’s rumor wild FOMC meeting announcement, there is little opportunity to throw any more reality onto the “markets.” In the mean time, the bond market remains in record yield territory, refusing to confirm the up action in equities. Oil remains above the dangerous $80 mark, while gold is basically flat.

There is, I think, a concerted effort to put a positive psychological spin on the markets via the politicians through the media (duh) that is getting to the point of being so blatant that these people are losing credibility. In just the past few days, we have had Obama, Geithner, Robert Rubin, and Paul O’Neill, all central banking lackeys who say they see continued [never ending and mathematically impossible] growth in our futures. Right… because saying so over and over will make me want to go out and buy a home that’s still 40% over priced, or an automobile that is 50% overpriced.

But attempting to talk people into believing that black is white reduces their ability to sell more stimulus. And that is why I think the rumors of FOMC action regarding “QE 2” are nothing but an attempt to prop the markets just a little longer as the big players continue to distribute to anyone who will buy their BS. In the old days we called such rumors “manipulation” and while there are laws about that, they only are applicable if such rumors cause the price of anything to go down. Any action to manipulate the price higher makes you a good hearted, red blooded, all-American. Do that well enough and you might even stand a shot at entering the inner circle. Do it well enough to make prices go down, you will wind up in prison – unless you are already in the inner circle, in which case you make money every single day in the first quarter, and only lose money on 10 trading days in the second quarter (how in the heck do you lose money on any day when you are the market and the government is complicit using trillions to build you in a permanent interest rate arbitrage scam)?

So we simply await the last sucker to buy into their bullshit, for there is always some idiot who is so asleep that they actually believe the spin... Evidently they must only watch CNBS and have therefore not seen the rising wedge that every single market caller in the world has now published at least a dozen times…

Yesterday’s plunge to the lower trendline and bounce made this pattern look complete to me with 5 waves inside of the wedge. The fact that it bounced and ran higher on Friday afternoon does not look natural, although McHugh labels Friday’s downmove as wave ‘b’ and believes that the ramp we are currently experiencing is the final wave higher of the formation with the potential to reach, or even overthrow, the top of the rising wedge. I personally think that this move higher produces too many waves and touches on that rising wedge, it does not look natural at this point. Regardless, I think that once we get beyond the latest market rumors and the FOMC announcement that we will run out of suckers for distribution.

Below is a 60 minute chart showing the rising wedge:

Tomorrow is a Bradley model turn date and we are squarely in the turn window for those who study cycles, like Martin Armstrong and Arch Crawford.

The VIX has formed a large pennant that is just about out of time. This formation is expected to break upwards. Note we are sitting right on the lower Bollinger – any significant push higher today may send the VIX to a close below that Bollinger, and that would set up a potential market sell signal when it returns back inside of the bands:

With the dollar finding support and with money continuing to race into bonds, I think the pressure is mounting on equities and I think the façade begins to melt soon…

Dang, 10 trading days that didn’t pan out in the second quarter… if only every day was an HFT Monday!