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Did The Market Just Protest?
From Nic Lenoir of ICAP
Hard to tell if it's a coincidence, or if the market just rejected the news as Ben Bernanke pretty much said he would print whatever amount necessary even in the face of improving conditions to make assets go up. The initial reaction was positive in equities, welcoming the guaranty of continued ability to carry any deranged semi-defaulted asset for a meager spread without having to worry. But then the equity markets turned on a dime, to finish a fair bit lower, and down on the day.
Maybe it has to do with the voodoo 88 week moving average (anybody doubting that one look at the chart), or the rejection for now of the resistance in AUDUSD, a crowd favorite carry trade. Maybe it was the break of the bullish trend in oil, a market which surprisingly reacted on fundamentals today, or even the rejection og the 50 dma in GBPUSD. There were a lot of hurtles out there technically given how over-extended the risk assets are on the upside, but if that ends up being a major turn for the medium turn, it did happen just as expected... when no one expected it: after the announce by the print-master that the carry-trade fiesta is not about to end anytime soon.
It is interesting to remember that the last big sell-off in bonds happened despite the announcement of quantitative easing... On the announcement the market had rallied like never before, only to drop for almost 3 months straight from the next day on. Maybe the market simply doesn't like being told too forcefully what to do... In any case it's probably not the effect Mr. Bernanke would have forecasted himself in response to the FOMC meeting's statement.
History will tell us if today was a significant turn around or not, but in any case I will repeat myself regarding the 88 week movng average: do not mess with it, until you remain under you are in a bear market, and everytime we test it you should sell it until the day it crosses on a weekly close.
Good luck trading,
Nic
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Sell the news, buy tomorrow's dip. Seen this play too many times.
Leo
Maybe Vampire Squid has opened new playbook.
Not yet time to harvest zombie legions.
Must wait for Red October surprise.
Unfortunately I agree. Was hardly bearish volume and far from a bearish A/D line. If anything I think all that happened was that s&p got pushed down enough out of overbought ranges to become bargain bait for the dip buyers.
I think this market needs to see some real trouble to turn south. They can spin the fed curtailing support as proof of the recovery taking hold despite all data suggesting otherwise.
More better than expected data and less worse than expected earnings are almost here.
Yes the 1080 level had to be sold, but I really doubt it will materialize into much worse than a garden variety pullback without a sinister catalyst. Looks like was mostly fishing for and sopping up of stops. Just as likely to blow through 1100 on some fake data and the fact that shorts are sitting on top of the market now.
This reminds me of the expanding diagonal pattern (or megaphone if you like) we saw on the weeks preceeding aug options expiration.
Dunno about the S&P but the DJIA volume stepped up into the close. That was deliberate selling into the close today esp when the support failed to kick in the second time it hit 0 on the day. All in the last 15 minutes.
Is there some technical resistance point at 1080 on the S&P? Never heard of using a 88wk MA.
88wk = 440 day. 440 hz = Middle A (what a coincidence)
MAs are like opinions, everybody's got their favorites. However, nobody seems to care about anybody else's.
You should only trust prime numbers.
(not quite serious post ;-)
Middle A. We were looking for Middle A.
Edit: You fixed it.
LOL, or Concert A. I'm an Engineer, not a musician. Long time since Physics 101.
433 is a much better number ;-)
All the indeces are actually in the middle of a big cluster of major support and resistances. In the SnP's case, the dates where the 1080 area turned the tide of supply and demand for stocks were: 3/22 2001; February 2002 ; actually the whole year of 1998, especially the middle was centered around this area; same for 2004; and in 2008 the 1080 area served as the paper floor in October.
As far as the SnP/Gold ratio goes, we are still in heavy S/R cluster area that goes back to Oct 08 but there is no major multi month/year resistance or support closeby for the ratio, except for that uptick Tyler pointed out a while back from the 70's.
In short we are back in familiar territory for many averages, including DJT and NASDAQ and S/R's are abound.
More on testing the 88wk MA
http://www.kitco.com/ind/Summers/printerfriendly/sep232009.html
"Ben Bernanke pretty much said he would print whatever amount necessary even in the face of improving conditions to make assets go up."
I'm not sure where that assessment came from. We all know the headlines, MBS extended to 1Q10, etc. But unlike the BOE no new programs, no new fiatcos for MBS, nothing of the sort.
So I see today's move as the exact opposite. I see this as a protest that Bubbles WON'T be throwing out more doh. Either way I'm not so sure this is the same old one day dip and back to the party. Dollar shorts got hosed today something serious, especially the ones waiting for the Fed to put their trade on. With technical levels rejected for now it would take some bold Dollar shorts to push lower, at least for the next few days.
I agree. A status quo move for the FED after blowing all that sunshine about the recession being over between meetings was not a good thing for the market.
Why was the "status quo move" not benign? It WAS benign, because it is widely perceived that the Fed believes that despite economic improvement, they need to safeguard it by continuing their most important special programs.
I think the late-day selloff had other reasons, but I'm not sure of them.
89 is a fib #, never heard of 88 being sig
Bernanke should be rotting in prison.
He's nothing but a fucking thief.
I think it was a combination of oil down and the fomc making reference to the end of bond purchases.
Love that Quato pic :o)
I'd say it was just a move to take out all the stops placed above the recent highs in the markets (especially 1074.xx SPX proving to be constant resistance). Max pain reversal follows. Most common in a relatively illiquid market. Look at yesterday's volume in the SPY+QQQQ+DIA. Same thing happened to the USD last night when Asia was on holiday.
Love the comment the oil market reacted to fundamentals - how about the fed desperately wants to keep printing and have oil go down to stay constant. For the laymen that is called stealing. Goldman had a call out monday for 3% on the ten year - love to be a fly on the wall as the equity strategist and bonds strategist duel it out over the "fundamentals" Seems all the fed wants is a slow burn - and while the max pain trade is a dollar reversal, there arejust trillioins of feet waiting for their opportunity to stomp on its throat
This was all about that smell coming from a corner. PM corner.
There tha guys just sold EVERything they claim they own.. Without anyone noticing.
See their pants? Those - kind of - baggy looking smelly papered ... ?
Lots of itchy fingers perched on the sell button these days. When it finally decides to blow again it will blow violently.
I take it you were not watching the tape. The devil is in the details.
The Fed is bordering on reckless. Sure, leave rates where they are, broadly leave the programs unchanged...but they should be acknowledging that right now they are fighting the data and that the economy is significantly improved. Bond market to be the next shoe in this mess to drop. Who is buying bonds in the face of this??
This patient has had enough morphine, pethadine, propofol and every other drug you've been administering Dr. Ben ... and you know what happened to the last guy that was given too much of that!
Bordering? Seriously?
I would say over the last 10 years the Fed has been overtly reckless. Without shame, and without regret!
Ok, I am trying to be polite! They'll carry Bernanke out of the Fed....
the 88 week MA works only with SPY, maybe because it bottomed at 666 points.
Uncle Clem's left big toe is itchin'. And something has the bluejays mighty spooked.
My moms sister's dad was named Clem. He was from Alabama. BTW. Bluejays are mighty nasty little birds.
SPY 108 resistance. Top of the gap - "Sell Mortimer Sell!!"
http://stockcharts.com/h-sc/ui?s=SPY&p=D&st=2008-09-15&en=2008-10-15&id=...
As a convenience for posting a link, I went to stockcharts.
There seems to be some discrepancy about the ranges for those days, Oct 3 and Oct 6. Stockcharts has one set of values, and Yahoo's historical prices have another set. So what is the Truth? Is there Truth?
http://finance.yahoo.com/q/hp?s=SPY&a=09&b=3&c=2008&d=09&e=6&f=2008&g=d
Date Open High Low Close Adj Close
6-Oct-08 107.15 107.62 100.64 104.72 102.07
3-Oct-08 112.86 115.45 109.68 110.34 107.55
The values in my trading platform agree with those of Yahoo. However Yahoo also shows an adjusted close for 3-Oct-08 of 107.55 reflecting dividends paid on SPY, effectively negating the gap...
Poor Ben, he's so beyond fucked. The only genius policy initiative that seems to work is "free money". Anything other moves our new "Maestro" attempts are met with an immediate dump in the indexes.
The "Recession is Over" call is going to be the "Mission Accomplished" embarrassment of the next decade...
I'm with you, but just not yet. We'll push it up over DOW 10K and hold for a bit then the sell-off.
on the other hand if the s&p thrashes for a bit in the 1060 / 1070 range while shorts get bolder the geese at goldman on a light volume day might just goose the market up over 1100.
anything is possible in this market.
no way i'll short it until it breaks much lower. been burned too often since march.
"Hard to tell if it's a coincidence, or if the market just rejected the news as Ben Bernanke pretty much said he would print whatever amount necessary even in the face of improving conditions to make assets go up"
I didn't find anything in the FOMC statement to corroborate this statement. Am I just not reading between the lines enough?
Ben is following Eggertsson's plan.
He must continue to be irrational to inflate assets at this point.
The more irrational the better. We know he fits this mold.
Good summation NIC. Again, traders should be very cognizant of a potential "trend change" brewing in this dollar "carry trade" which has greatly influenced fund managers into blindly selling the dollar while buying every other asset class (especially in the last 6-8 weeks).
what about 20 month simple moving average? Serve the same purpose...
The only question left is that IF this is the turn, where will be the target? I think that's a more important question...
I reckon they were defending the dollar index above 76 for the G20 meeting
I suspect the PPT needs more short interest to gun this sucker to 10,000. So, you give the trigger fingers an outside reversal day, the shorts pile in and then using minor intervention money you do a full reverse at around 11:30 am-12 noon EST. When the traders get back from lunch(do they eat?) their cover triggers were fired off and the market gets turbocharged up-creaming even more shorts on the way up. The PPT sells the stock to cover, and makes the money back in spades.
Meanwhile Goldman and JP frontrun the market and start buying heavy at 11:25 EST before hammering the USG order home. Everybody in the club wins!
Just bear(lolz) in mind when looking at that AUD/USD chart that that 52 week moving average is brutally affected by the giant downward correction corresponding to last year's Wall Street collapse. EVERY CHART does something like that during those weeks. Better to either use an exponential moving average, or just start your calculations from the lowest down point post-Lehman. The Aussies have taken steps to firewall themselves from Wall Street's great junk bond selloff, so they're not likely to be as affected next time this happens. Plus, that's what a guaranteed stop order is for... just be nice and conservative about that and don't set your floor too low. We can all make bank off of helicopter boy and the collapse of the Anglo-American empire with this move, and I too was VERY happy that helicopter boy decided to accelerate both my earnings AND the collapse of the Empire today.
I was really hoping for .1% but alas, the Fed only moves in quarter percent increments. Really, it is misguided to try and save the Empire in its present form. Helping to burn down this system is a good thing, because total financial collapse is the only thing that will remove these clowns from power and give better people the chance to clean things up and rebuild America better than before. As an American, I can say that I have a vested interest in this process. The end of Empire means we can be a solvent nation that does not have to spend almlost half of its money, or whatever obscene percentage that is, maintaining a giant military, that can actually take care of its people as well as protect its markets from currency manipulation and subsidized dumping ala China.
As to that, subsidized dumping is NOT a free trade maneuver when China does it to us with cheap trinkets any more than when we do it to Mexico with subsidized corn, and the result is always the same: massive unemployment, massive trade deficits, and eventual collapse. I believe it was Ayn Rand who said that one can only have free trade with free countries, and on that score I wholeheartedly agree.
If you want a clean sweep, KEEP SHORTING THE DOLLAR!!!
It's a curse to have money. Who am I to say? Why, I'm just someone who browsed these comments. So worried about my dollars! Nevermind that there's a Tesla dealership down the street where balding rich fecks routinely spend gray afternoons splurging my 401k on a two-seater with a 250 mile operating radius. No, no, nevermind them...I feel quietly compelled to visit this site, day after day, and agonize, and lose sleep over the fate of the Dollar and the fate of my dollars. As if ANY of it freaking mattered.
Let me ask you one question
Is your money that good
Will it buy you forgiveness
Do you think that it could
I think you will find
When your death takes its toll
All the money you made
Will never buy back your soul
All this chatter is about how traders trade.( This is not a disrespectful comment)
But, you should recognize that your're all human algos w/SFT (slow frequency trading) skills.
Don't get me wrong, This is a useful excercise, trying to use technicals to predict what the algos and other technical traders will do next. Its especially useful when the majority of the trading (on very little volume) is transacted by these players. In "normal: times, traders and longer term investors are headed in the same direction, so the technical traders seem to reflect overall market sentiment, and as a result its wise to keep an eye on them.
But As a naif trader, I thought the technical traders were dolts. Till I lost lots of money betting against them during "stable" market conditions.
Then I came to realize that there really are investors and traders. The traders are the drama queens and we can't help but get wrapped up in their drama, and drop them before its too late. The investors (hint: serious volume) bore us (traders) to tears and usually sit on the sidelines, till they don't.
Then all hell breaks loose and the technical analysis needs to be reset.
I think we're at a reset point now and the technical analyis is the last place we should be looking for forward directional clues, although that 88 DMA is visually intriguing.
The market is over bought, but it could stay that way for much longer than people think. There might be a sell-off coming or sideways movement but the indicators point to higher prices after that. When they want them down, they take them down FAST, and overnight. It just doesn't feel that way right now. The McClellan Summation Index is at new highs, which usually means at least sideways movement or higher prices. Also, there are not many meaningful divergences.