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If It's A Fake, It's A Good One!
Submitted by Nic Lenoir of ICAP
We have seen a couple headfakes that were brutal to say the least since March. The question is, is this another one or is this the big one. 1,036 was my medium term target for the S&P future and we got there surprisingly quick. Very short-term indicators were indicating quite a bit of divergence and we still managed to push lower for another sizeable leg down today.
Fundamentally, I have discussed several times that the business cycle and the upswing in ISM was scheduled to top out around November or December. Economic news has started to disappoint. There are now worries that GDP, which was even said to peak reach +5% annualized growth in Q4, might disappoint a bit tomorrow, and has already for the UK and China, along with lower revisions to bad Q2 numbers. The risk is that given that consumer confidence is still very low, any slowdown in the progress will also impact cap-ex plans for 2010, and you are down to relying to governments only to hope a breakeven in growth. Also housing is a problem we are far from done dealing with. I agree with Bil Gross that it was 50% overvalued from 2007 highs. Well there is still quite a way to go.
Technically, very interesting chart of the Dax. We broke today so we have another 6% until the next big support. Any rebound up to 5,600/5,712 should be sold here. USDBRL has triggered a double bottom today... So much for the most expensive big mac in the world! You want signs of a market topping and ready to implode? It does not get any better than this kind of analogy. Last year Petrochina surpassed Exxon in market cap, just before a complete collapse. In theory USDBRL should go a lot higher from here.
The flip side of this is that S&P is close to support which after refining my target is around 1,032. We have reached the lowest RSI level on the 3-hour interval chart that we have seen since March. We could be exposed to a bounce. 1,070.5 should not be violated, otherwise it's a trap. Gold interestingly pushed lower straight to 1,026 as well. We have a three way support here with the 1,618% extension, the overlap, and the bottom of the channel, all clustered between 1,023 and 1,028. So if we bounce we will observe 1,044 as resistance, and 1,052 should not be violated. Silver as pointed out before is still leading the way and is still not taking any prisoners with him. Decent support is below us around 16. A close below 16 would probably indicate we will see 14.20 in short order. But the intermediary support is right here 15 cents below us. Finally EURUSD is running extensions on the downside. That is very bearish and it is the first time since last fall. However we have key support between 1.4620 and 1.4670. The first leg down could be coming to and end there.
Overall much more bearish price action today than the past few days really in equities, and we have not had any support from emerging markets especially in Asia overnight during the past few sessions. This has the making of being a proper turn. It's all the more interesting that bearish blogs are being cautious, and traditionally more bullish analysts are now starting to warn about downside. Observe 1,070.5 in S&P future and 5,720 in Dax future as key resistances, and without violation any rebound should be sold for now. If this is the needed retracement to start a new bull market we should see 875, if it is as I think a potential Elliott Wave III, the 550 and 380 will be visited on the downside. Watch cautiously 119-10/119-23 for the 10Y future. A break there also would indicate we are running higher and yields are going to drop aggressively despite all the fresh supply. These are signs that dont' lie.
Good luck trading,
Nic
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Excellent. No buyers before 900 on SPX. It was definitely a virtual insanity since 13rd of july.......
While we can and do make money in either direction, reestablishing the cosmic convergence of world wide Karma requires the buy-the-dip crowd to become the buy-the-dope crowd for at least a little while longer, don't you think?
CD, my view is the buy the dip crowd is still around, looking for a quick buck. You don't become "un-greedy" all of a sudden. The market is thin enough that the large funds can move a sector easily with a little buying and a little noise.
I agree but afford an old man his Karma for crying out loud. Lie to me if you have to.
regularly scheduled lies can be found on cnbc
24 x 365
Batten down the hatches.
NIC / Another very good report. When you focus on reports like this (and not sidetracked by the Ken Lewis' of the world) you sincerely produce very good and comprehensive market analysis. Again, thanks for sharing your thoughts on these markets.
Ditto; keep 'em comin' Nic!
Thanks Nic, thanks Tyler. Great lesson to close an awful day for bulls.
Never catch a falling knife.
W3
"If this is the needed retracement to start a new bull market we should see 875, if it is as I think a potential Elliott Wave III, the 550 and 380 will be visited on the downside."
550 and 380...? What is that based off of?
I see a triple lindy head between the legs shoulder in your TA.
I agree...great analysis! I think we will be riding a choppy slope of hope on the way down.
...oh...and I would bet large that more "truth" will be uncovered as this gets dismantled...people will (should) get more and more angry and will likely do more than just write witty comments to blog posts.
Can't wait to hear the "We did what we thought was best for the country!" and "It was in their best interest not to know" that will certainly flow from their mouths. Suck on it liars! It's not your job to lie, cheat, manipulate, and steal our cash.
Can I be a General in our rebellion?
General Pooplagrande? Doesn't exactly roll off the tongue, does it?
Priceless
It ain't called trading anymore. It is called chumming. First you cut into tiny little pieces, fish parts- parts is parts. Once you have about 4 or 5- five gallon buckets, you load up into the boat. You travel three beers into the gulf, about 20 feet of water with lots and lots of rocks, about 100-150 yards long. Start down the rock line dispensing parts. By the time you finish dispensing the parts, hundreds and hundreds of little fish rush up from the safety of the rocks and start inhaling parts. Shortly, the cobia begin arriving. Put fish parts on your line and hook cobia for a while.
Transfering ownership to stock now-a-days is the same. Chum the waters with posts telling little people how to act like big people. Wait for a dip in temperatures following a cold front, then start casting stock deals into the water at the first signs of a warm-up.
Almost immediately, some fool buys stock even though his wife said she would kill him if he again starts trying to make money in the stock market. In his mind he knows he can make up that lose last month on SKF.
The only difference in suckering in aggressive fish and suckering in dreams is there is a daily limit on suckering in aggressive fish.
Do you know my wife?
Bennie and his pet Squid are already planning Santa's entry into the market. The sell off will make his holiday cheer seem that much better.
Hmmm, but only after a Squidly reversal! Watch 1030, as that could be the start the "catastrophic 'C' wave down"
Whee this investing stuff is easy! (Thanks Mogambo)
S&P 550 or 380 would be something. Hard to scream inflation from those levels
If the Daily Double occurs Thursday, which means a rise in jobless claims and a below-Goldman-revision GDP, I WILL watch CNBC just to see the faces of the soon-to-be dearly departed. Cleavage will surely reign supreme.
You can smell the fear. Smells like week old fish lying in the sun on a humid and windless day. Like mayonaise left on the counter during the August vacation. It's palbale fear. A child's fear. Voiceless fear. You know a lot of folks are just now waking up to the fact that they bought the dream, drank the Kool-Aid---choose your favorite metaphor---and that their self-proclaimed contrarian view of an ever rising market and better-than-most-people-think V-shaped recovery is actually the overwhelming majority view, already reflected in the market.
Some---the most foolish---think they might be able to unload their position the same way they expected to use Portfolio Insurance on the morning of 19 October 1987. God bless'em. Others will hold tight, covering their eyes and ears, waiting for the buy-on-dips crowd or another freshly printed dose of indulgence from Uncle Ben. These folks will see their year evaporate in the blink of an eye, if only they opened their eyes to see. How many weeks of jobless claims does a former portfolio manager receive? Can I sell my Upper West Side apartment?
There's nobody to buy. Nobody on the sidelines if this thing turns ugly. There's more Baptists at an al Qaeda convention than real buyers waiting to pounce. Goldman's MOTS, made up mostly of retail and hedge funds, might buy higher but they won't be buying lower, at least not during the cascade. Retail will just sit and watch and hope some Goldman partners are getting skewered. They might even watch CNBC. The hedgies will take their pound of flesh and press to the point of naked shorting, taking out at least one of the major banks (BAC?).
By sundown Friday we see at least an "8" handle on the S&P, and the weekend Talk Shows will be filled with the Four Horsemen. Monday we may, or may not, open.
Or...........
the jobs and GDP number beat expectations and the market takes back twenty-five handles and Tiny Tim sleeps the good sleep and Pisani smiles knowingly.
Somewhat surprised, but still skeptical. Technically, I see us still in an up-trend, until we take out Oct 2 lows on SPX. Also we are in still in a upward channel – Aug 7 thru Today (low trend line) and Sept 17 thru Oct 19 (high trend line).
Above all, as witnessed time and time again, fundamentals nor technicals really matter NOT. If these GS’ers and BS’ers want to squeeze this thing higher, it will go higher. The blueprint; gather up a peak in short interest, like with bearish technicals, bearish GDP, bearish CNBC tone, etc., and then burn them like babes to moleck.