Art Cashin On Technical Indicators Turning Red
Readers know that among the things the we find most meaningless in the New Normal are those anachronisms known as 'charts' - after all when it comes to central planners exclusively running the market, this has never occurred before in history at this level. Yet the impact of technical analysis should not to be discounted, as it does create a self-fulfilling prophecy (far weaker than the impact of marginal liquidity but it is there nonetheless), in which case today's note from Art Cashin may have an impact on risk appetite. Or not - all it takes for any bout of selling to end is a sideways glance from the Chairsatan and we see a 20% surge in risk in the next few months on nothing but a whisper of a new multi-trillion liquidity injection.
Cocktail Napkin Charting - As previously noted, the recent lethargic inaction has begun to impact the technical/picture. Jim Miekka (of Hindenburg Omen fame) has shifted to a “red” condition (time to sell) in his Sudbury Bull and Bear Report. He had been on a “green” (buy/hold) signal for many months.
Jason Goepfert of SentimenTrader expresses concern about the divergence between the weakening Russell 2000 and the other averages, particularly the S&P. He is also troubled by the back to back inside days in the S&P. That has been followed by a negative pattern several times since 1982. Further, he notes that net longs in the oil market are at a 20 year high. For today, the napkins see S&P resistance at 1374/1377 and 1381/1384. Support looks like 1362/1365 then 1354/1357 and 1347/1351.
And in other tangential geopolitical news, Cashin also explains how the west, by pushing Iran into hyperinflation, has just made any potential future negotiation even more impossible.
In Iran the turnout was huge and Khamenei and the clerics saw their side gobble up nearly 75% of the Parliament seats. That makes Ahmadinejad even more of a lame duck and makes any compromise with the West very, very remote.
In the “be careful what you wish for” department, the West may have outsmarted itself. They imposed sanctions hoping to force Iran to the table. The sanctions are crushing the Iranian economy. The people blamed the weak economy on Ahmadinejad and therefore voted for the hard-line clerics, making negotiations even less likely.