Forget about the news for a second. I know it’s difficult considering we are “melting the fuck down” fundamentally both here and abroad. In fact, this has been the worst year of newsflow that I have seen since Jimmy Carter was President when folks were waiting on line for gasoline.

The equity market, as flawed as it may be, is simply stuck in a trading range but clearly undergoing distribution after a 30 month Free Money rally that added $4 Trillion of liabilities to the FED and our country’s balance sheet. Jeez, there I go talking about fundamentals again! Gotta stop that.

Back to technicals. Like last year, we are stuck in a trading range. But unlike last year we are near the high-end rather than than the low-end. That is because EVERYONE JUST KNOWS that QEIII is just around the corner. How can it not be after all that has already been invested?

But today, like Friday, the SPX 200 day moving average is being tested and we have been above it since September 13, 2010 just a few days after QE2 was leaked. The 200 day is the “Demarcation line” between being “officially” bullish or bearish. Considering that there has already been an internal breadth thrust lower for the major market indices, it should be of little surprise that most stocks are way off their highs–other than the dozen or so momentum favorites that everyone must own.

I’ve thought that there was a chance that that markets could make a marginal new high before doing what the market must. Considering that equity indices swing so wildly and stock traders have more “hope” than other investors, it is still a possibility. But my long-standing target is for the $SPX is to give half of QE2 back–and that puts us to the 1225 area.

Fragmented, wild, frustrating, insane. Just a few words to describe the hour to hour market action. Remember, the stock market did not crash until AFTER the government promised $700 billion for Wall Street and it was all “Sell the News”.

Are you fucking kidding me? A balanced budget amendment is the holy grain of “Shrink The Beast” and that is what it takes to get this shit settled?

The Republicnuts will do anything to blame Obama so as to win the next election. It is so obvious to me and I’m not even an Obama fan. And the Democraps need to protect transfer payments, and their base, at all costs.

Today was the first morning that any fear was apparent but it lasted all of about a half hour. GDP, Europe? fuggetaboutit. JBTMFD

I’m not even going to analyse this clusterfuck today. With so many really smart people just dying to buy the dip, I’m going to suggest that the outcome could prove to be very market-unfriendly, regardless of the outcome. SPX 1220 is not that far away.

After a lovely day of fun and sun, I’ve undertaken a  review of some technical basics primarily reviewing  Bollinger Bands as they are an excellent intermediate-term cycle indicator that can tell you–in no uncertain terms–whether we are in a bullish or bearish mode. Here are some broad observations:

Market breadth “thrusted” lower today with net breadth indicators making lower highs before turning over and trending lower even before today’s thrust down. It will take a breadth miracle to turn in around successfully.

Both the SPX daily and weekly charts show a break of the middle Bollinger Band. That means a test of the lower band is coming and that level is 1260 for the weekly chart. The monthly chart has been above the middle band since breaking above it in early August, 2009. That middle band resides at the key SPX 1200 area that my work suggests we test by late summer.

The Nasdaq COMP is now sitting right on the weekly middle band. The lower band resides just above 2600. After an up 60 point day last week and today’s down 75, you had better pack your vomit bag if you want to play here.

Interestingly, the weekly middle band for both the SPX and COMP were broken from above in the May-June sell-off and the lower bands were tested. Then cam the “Magical Mystery Rally” (MMR) whose move appears to have achieved double tops for many of the major indices.

The MMR was undertaken on the lightest average daily volume yet seen in this “manufactured” rally that began in early 2009. It was narrowly focused until last week when the broad market seemed to quickly catch up to the momentum favorites. But it was a flawed signal created in conjunction with a plethora of negative divergences.

 In 2008 the market collapsed and the government came to the rescue.  Many have found it amazing that the markets have been able to stay so resilient in the face of a collapsing government. Now the government is collapsing but the markets won’t be so kind.

It looks like regardless of any “deal” to keep the business of government afloat will be met with a turbulent sell the news reaction that most everyone is waiting to buy. So expect the unexpected, like a failed rally followed by a trip to the bottom of the trading range with a failed bounce and then a breakdown. My work still shows that we will give back at least half of the gains from QEII, or a test of the low SPX 1200 area.

Broken Market? Broken Government? Phhhhttt!

I guess laying in your TPX bed, buying stuff on AMZN with your AAPL and watching old crap on NFLX is what this country has come to…

I just read a popular blogger/money managers latest market missives. Many truly enjoy blogger/guru commentary which are both entertaining and enlightening. I am not here to take issue with various prognosticators, but rather to offer an alternative to some of the latest markets forecasts that suggests the market will break out, big-time.

I’m not going to talk about the bullshit “forecast then beat” earnings announcements. That stocks might move based on this is the height of trader-based idiocy. I won’t discuss how the market has defied the odds by remaining a spit away from post-crash highs in the midst of the worst news flow since the Credit Crash itself. I won’t mention about how market sentiment swings with each near-term market movement, bending like a reed in the wind against near-term consensus. I won’t talk abough how QE is over or that worldwide governments are fiscally failing. I don’t care about almost anything or everything that we think we know about markets and the economy. 

Remember last year when QEI ended? The markets levitated for about a month before pulling back about 200 SPX points or about 15%. Most of the summer witnessed a market that continued to test the low end of its trading range. Between the end of the free government money (QEI), a weakening economy and the weak technical picture in the markets, EVERYONE TRULY BELIEVED that markets just had to crash as the “A-Team” came back from their Hampton’s Holiday. After all, there was little justification, fundamentally or technically, for higher prices. Yet Uncle Ben came to the rescue and markets did exactly the opposite of the overwhelming consensus.

Our economy and markets are in a very similar situation, both fundamentally and techinically to last year. The only difference is that the fundamentals are actuallly worse and the markets are 25% higher. Hows that for irony?

The reason that markets are levitated at the top of the range is because NOBODY will make the same mistake that they made last year. NOBODY will allow the fundamentals to get them bearish when they KNOW that there will be unlimited stimulus, liquidity and cash thrown at the markets at the smallest hint of disaster. Everyone just KNOWS that fundamentals don’t matter and that the market CANNOT go lower. After all, they’ve been given every opportunity to crack wide open, yet they have not done so in the midst of one of the worst years for external-driven news perhaps in our lifetimes.

So here we are hovering at the highs of our trading range, exactly inverse to what we were doing this time last year when we hovered near the low-end of our trading range. Last year most expected the economic and market weakness to lead to a major pullback. Now, most have witnessed the resilience of our current market and will simply “do what the market tells them to do” and that is to buy every dip.

Last year the expectations were for a big technical breakdown once everyone realized how weak things really were. This year’s market situation has brought many forecasts of a hearty breakout to come once some of these negatives “clear up”. And watching weekly 50 point SPX ramps in the midst of the news, I can understand the forecast. But as we witnessed a marginal breakdown last year (30 SPX points) that got everyone really bearish before a monster reversal, I expect that this year we will get an exciting marginal breakout that will get everyone excited and wanting to ‘play’. It will come in spite of news or fundamentals. It will bring a call for some really optimistic end-of-year forecasts and/or more stimulus from the Central Bankers. We may get to the SPX 1400 area and that is when the optimism will really flow. But that is where the market will trap all those who have been programmed to ignore all semblance of reality and instead focus on “what the market is telling them”, especially since the markets can change shape in just a few trading days.

The Wall Street Complex is designed to foment ever higher stock prices and with the help of almost unlimited free money, the Complex has done its job. We have made back all that was lost since the greatest market freeze in history. After all, the stock market’s near term activity has become the barometer of corporate and individual confidence in today’s economy.  Invest or trade in a style that works for you but stay skeptical and be ready for a big negative market surprise that could come at any time. After all, this is NOT a garden variety recession. It is something that happens rarely but whose consequences are bigger and longer lasting than any market cycle.

This chart of the Nasdaq Composite is technically picture perfect. The only real problem is that the gains are getting more narrow as this rally progresses. That’s not to say it won’t test the recent highs near 2880. It may just, but getting through shouldn’t be easy.

As you know, I’ve been comparing this year to last year and the similarities are remarkable. The only major difference is that last year everyone just knew that we had to crash when the summer ended. After all, we were clinging to support and the economy was toast without QE. This year we levitate 25% higher but everyone just knows that there must be more QE to keep the markets stimulated. Therefore we continue to hover near post crash highs.

Considering how short-term and one-way markets function nowadays, the action is not too terribly surprising. But we all know how the overwhelming consensus gets it wrong…