Macro Gloom

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MARKET WRAP UP 08/19/10

With the Philly Fed seeing its worst reading in over year, combined with weekly unemployment claims moving back up to 500,000, the market had every excuse it needed to sell-off this morning. And sell-off it did. Just as the New York lunch hour approached, the S&P 500 hit its lowest level of the day, at 1070. For the remainder of the session, the market attempted to put in some type of bottom, as the S&P finished down 1.69% to close at 1075. As we have seen for many months now, volume ticked up on the heavy selling, and breadth was unflattering. All in all, today marked a sound thrashing by the bears.

Nonetheless, from a technical perspective all that has really happened is that we have retraced the move we made from this past Monday. The S&P, along with many other key indices and sectors, did not break below those Monday lows. As you may recall, earlier this week I talked about the idea of how the bulls needed to present themselves to defend the key multi-month support levels. Well, we are right back to that scenario. The bulls absolutely must defend these current levels, in order to avoid a major breakdown.

You might notice on my updated and annotated daily chart of the S&P 500, seen below, that I tightened the channel lines for the multi-month broad channel. I think the new channel reflects just how tight of a range we truly have been navigating these past three months. Note that any attempted break from the channel, in either direction, has been aggressively faded.

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Updating the daily charts of some other key indices and sectors, the predominant theme is that, despite today’s vicious selling, we are either slightly above or directly pinned to Monday’s key multi-month support levels.

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With options expirations tomorrow, we can expect to see more whipsaws from this market. With that said, the multi-month support levels that I outlined above are of the utmost importance. A major breach of them tomorrow will likely beget even more selling. Similarly, if the bulls can hold these levels, yet again, then the stage will be set for a run to the very top of the trading range. While I know that sounds like “we can go up, or we can go down,” that is simply the nature of a multi-month, indecisive stock market that has been trading in a tight range.

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[youtube:http://www.youtube.com/watch?v=P4TbrgIdm0E 450 300]

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Heading into the closing bell, the bulls are trying to salvage some type of positive that they can take away from the day. If we close above 1076-1077 on the S&P 500, then it will be somewhat of a reason for bulls to keep their chins up. Nonetheless, the bears owned this morning, and we will close soundly in the red. Today shows us that, once again, the market rarely offers up easy scenarios to both bulls and bears.

The 5 minute chart of the S&P, seen below, should illustrate how most of this afternoon was spent trying to scallop out a double bottom. Until we can move above 1080, the double bottom remains on shaky ground.

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What do I know, right?

Most of you guys on the twitter stream have the universe figured out, simultaneously pwning a Rubik’s Cube while banging Kelly Brook. To label me a permabull illuminates your lack of historical knowledge of my work, not to mention your overall lack of class and civility, good sir.

If entrance to “The Wine’s” tab were like a nightclub, I would have my bouncers tossing your scrawny asses so hard into the ground, that your bullshit Cavaricci jeans would split at the seams.

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As for the market, the selloff this morning was nasty. Congratulations to all of the ursine-minded traders out there who positioned for this dump out. On a very short term basis, it was an above the rim trade to go short at the close yesterday. However, for those of you with a bit longer term view (longer than a few hours, that is), I remain skeptical that today marks the start of a fresh leg down. In essence, we have retraced the entire move from last Monday, which on the S&P 500 is 1070.

As evidence, I will proffer my reliable “tell,” old $FCX. If the market were supposedly dumping out and commencing a move to new lows, one would think that Freeport would be down at least 4% on heavy volume, leading us lower. However, as you can see in the updated daily chart below, the stock is holding up very well today. Moreover, the wisdom of The PPT dictates that today should be much more of a buying opportunity than a selling one.

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Perverts of zee world, unite! All you have to lose are your $1 bills!

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I must say, the prospects for seeing some upside follow through to the reversal in $RICK become more enticing by the hour. To reiterate my strategy with a chart like this, I am starting with a 1/2 position, and will immediately add on further strength. If price breaks down below the hammer from yesterday, then I am gone. The idea is to avoid trapping yourself to the downside by defining your risk with the lower wick of the hammer. At the same time, you are allowing yourself to benefit from the potential explosive move off of a bottom.

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NOTE: A good trashy song to go with your $TNA purchase:

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[youtube:http://www.youtube.com/watch?v=Lh9AdU3Dw4Q&feature=related 450 300]r

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MARKET WRAP UP 08/18/10

In front of some key economic data tomorrow, the market nudged slightly higher today. Both the morning gap down and the early afternoon bull run were faded, as traders sought to avoid making bold bets in front of tomorrow’s headlines. With the S&P 500 closing up 0.15% to finish at 1094, the 1100 level remains a key battleground area since the bears gapped us down and held below it last week. Volume was lethargic, while breadth was unimpressive, with energy the clear laggard.

As you can see in the updated and annotated daily chart of the S&P 500 below, the area just above our current price is proving to be a real test of mettle for both bulls and bears.

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The Nasdaq Composite Index held support on Monday, but is already up against some tough resistance in the form of the 50 day moving average (see chart below).

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Let’s take a look at black gold for a moment. The monthly chart may very well be a good illustration for how 2010 is starting to shape up. After the euphoric bull run and subsequent crash in 2008 and the first half of 2009, the past fourteen months have more or less rendered crude oil to be dead money. The pink line in the chart below is drawn from highs of June 2009.

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Finally, I urge you to hone in on the financials. While their ETF has held on to the key $14 level, we have yet to see any inspired buying. Should the bulls manage a breakthrough and rip this higher, I expect the broad market to surge through that key 1100 level, dragging many bears with it.

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UPDATE: Much props to our resident King of the Peanut Gallery (KoPG), Turd, for telling everyone to take the day off earlier today. Agree or disagree with his views, no one can deny that Turd has confidence in his bold calls. Well done!

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[youtube:http://www.youtube.com/watch?v=CIRazQMIS-Q&feature=fvst 450 300]

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Price still has memory.

When it gets amnesia, it will be an interesting sight to behold, indeed. However, for now, we need to pay attention to the 1100 level on the S&P 500. Ever since last Wednesday’s bloodbath, the bulls found support just below 1070. They have also found resistance right smack at 1100, which happened to be the level precisely where the bears gapped up down and held below last week.

Above 1100, you can be sure many buy-cover stops will be triggered for unhappy shorts, and some fresh buyers will emerge as well. Right now, The PPT is implying….well, wouldn’t you love to know that?

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