Tuesday, October 5, 2010

After Market/ Post POMO Thoughts 10/5

Today’s 193 point Dow rise has certainly given rise to panic from the bears and screams of hyper-inflation from those who believe that’s imminent. From my perspective nothing has changed, not even a clear breakout from our trading range.

It was yet another 90% panic buying day with 93.3% of the NYSE volume on the buy side. There were 283 new 52 week highs, an amount lower than we had when the market was at lower levels. That’s a bearish divergence, yet it is also near the 300 level that is usually reserved for significant market tops.

Today’s action for a change at least was not boring. I find the fact that big up days are coming on big POMO days fascinating... Yet, on a $5.2 billion POMO day, AND a 5 trillion Yen intervention day, we have unbelievable levels of insider selling at 2,341 to 1! What this says to me is that our central banks are paying off the insiders, plain and simple.

Of course everyone else gets the meat grinder of darkpool, HFT, POMO fueled gold soaring to new all-time highs ($1,343 an ounce), oil soaring to $83 a barrel, food commodities soaring, and a dollar in free-fall debt-slave treatment.

Despite all that, the XLF still couldn't get over the 200dma, BANK is resting on the upper Bollinger way below its 200dma, GS is still well inside of its triangle, the Transports are still well inside their range and against the upper Bollinger, volumes are still in the gutter not confirming any breakout whatsoever, and Harley Davidson rose a completely insane 9% to LEAD the market up because it was put on a buy by RBC Capital Markets after experiencing 1 month of sales gains following 4 months of sales losses (not to mention a broken model, too much capacity, and demand that has fallen 30%+ on horrifying demographics).

You can call it whatever you like, I call it completely unsustainable. The consumer is still saturated with debt, their homes are still underwater, and with oil and food costing more, they will have even less to spend towards contributing to making corporate earnings rise. In other words, it’s simply a matter of time, the market is busy sucking in all that it can to be destroyed later, which it will be.

From a technical basis I still don't have the markets broken out. As of now, wave c simply equals wave a as a part of wave 2. I will not consider the market broken out of anything until it exceeds the April high. Even if it does, the tremendous number of gaps we are leaving behind WILL get filled, we will be back here again. The risk to me is clearly being long.

The most bullish thing I see out there today is the VIX which broke beneath its recent uptrend line, but note how close it is to the lower Bollinger again, that could set up yet another market sell signal should we close beneath it:

I know… many are thinking that the signals just aren’t working. They will. The dollar can only be sacrificed so low and then what? Oil can only go so high before it breaks the economy, and then what?

I made the mistake of turning on CNBS for a few seconds… And as insane as it seems, especially with Japan as a disastrous example, I had the displeasure to see a Spanish DEVIL from the IMF, name is Jose Vinals, talking about the $4 trillion world-wide debt roll-over that needs to occur shortly – please listen to what this global pusher of debt has to say:

LOL, they need to “provide more capital” into the banks! As he repeats this, I keep thinking "from where?" Well, we all know where, thin air is where. Note that he also plays the other side by condoning austerity (less spending, less debt).

Then the very next segment on the show is Karen Finerman, president of Metropolitan Capital, pumping equities as the only place to be. Of course the CNBS “girls” fall all over themselves after this mindless and one sided interview:

Damn, that was enough to make me want to go put some lipstick on my pig. That’s the most television I can stand for one month, I relearn this lesson every single time I make the mistake of turning it on.

So, what about bonds, are they done? Well, the TNX was moving towards lower rates today against the rising equity market! It descended right to a new Head & Shoulder’s neckline. If that neckline breaks, the ten year will be targeting approximately 2.075%:

Can rates climb from here? Yes they can, but they can also go lower first. Longer term, they need to indeed rise, but doing so before the debt saturated condition is cleared will prove to be lethal for the economy.

Speaking of lethal for the economy, Doug Short made up the chart I suggested the other day placing the Consumer Metric’s Growth Index against the SPX. Their index is making new lows below the lows of ’08, and as I mentioned is producing quite the divergence between it and equity price.

Overall I remain unimpressed by anything other than abject stupidity. I remind those who wish to gamble everyday in the market that attempting to front-run turns is simply not a good idea. This market is going to suck in as much as it possibly can and it is going to make people look as foolish as possible in the end. The central debt pushers have little room left to maneuver. They have forced interest rates almost as low as they can go, and now they are pushing down on the dollar while the cost of real things act as a tax on consumers. Paper fluff is not real, and it can and will vanish just as easily as it was engineered into being.

If the debt pushers choose to push confidence over the edge, we’ll know it, but a POMO induced 1160 on the SPX just isn’t it. What would tip me over the edge? A breakout above the April highs and a breakdown of the dollar convincingly below 71 – that would do it. Until then I’m keeping my cool. I have that luxury as I have no stake currently in the market. If you do, you may be experiencing one or more of the following stages of grief: