Monday, December 13, 2010

Morning Post, SPX, S&P 500, e-mini

Running a little late this morning, sorry.

Most important post this morning is the most recent from Zero Hedge With Bond Yields Continuing Their Push Higher, What To Expect For Stocks Next?  "So no major surprises: with one exception, the market tends to run into a bond hike, only to realize that such moves end up being driven by permissive monetary policy and rarely by actual economic moves (assuming fundamentals news is even remotely relevant to market formation... the alternative of course would finally put an end the seemingly endless fallacies spewed forth by every Chicago school of thought). And unlike now, at least in the past the US was not saddled with an amount of debt that on a gross basis is substantially greater than GDP. Sooner or later the market will finally need to come to grips with the realization that it is the jump in yields that is the black swan, nothing more and nothing less." And there you have it. Time is running out for the bulls and facilitators of the re-inflation trade. Just sit back, be patient and wait for the fireworks that should happen sometime by mid 2011. 

Economic Calendar -   Nothing today, but the rest of this week is pretty busy. Please ALWAYS check the calendar. 

POMO Schedule -  We got a new schedule Friday and the biggest surprise was there will be two POMOs on the 22nd totaling a possible $17 billion. Yet another POMO day today. (We'll most likely have POMO from now to infinity or till the systemic failure that is destined to come.) 

Shanky's Dark Side - Where I call all the intraday action and throw out tons of charts.

Pivot Points -  For what they are worth in this busted market.

Markets reacting to the Far East this AM. Markets are overbought setting divergences. The ISEE Friday was at 230. This is severe nosebleed levels. As mentioned towards the end of last week the TRIN, CPC and several other indicators were extremely toppish as well. Some of these indicators are new to the game that we did not experience in the Sept, Oct run up (that we're still in I guess since the markets are not allowed to correct). Combine that with the screaming 10yr treasury and you are getting a nasty brew for the markets. Alas, there is this one thing called POMO. The cure for all that ills the markets. Don't forget the HFT algos and lack of regulation.

The FAS catchup trade we had been discussing over the past couple of weeks cam home. I like it when this chart bunches up. Usually indicates a turn is near.

 SPX Daily - The screaming TNX is seen plainly on this chart. So it the screaming SPX. This is not normal and should indicate a turn in one or the other. Since the bond market rules the roost, it is suggesting the risk off trade is not far away if not on. What is setting up here is a nice head for a HnS formation. Top for 5 (THE top) down for 1 to the black neckline, up for two for the right shoulder and then kaboom the markets bust. Looking at a similar move off the top here that we saw in April. The question is will QEIII have the same effect as the promise of QEII off the August lows? I doubt it, especially since the treasury ceiling will not be raised again in April (or so they say). That will be end game, meet you maker, time to take the medicine. 

So the Shanky call of QEII pop, drop, and ramp into Xmas then all bets are off is spot on right now (it has been spot on since The Bernank announced QEII. Don't fight the fed. Follow the POMO trade is still on thru the holiday season then all bets are off. YE statement prints are part of the game now. Tax law issues are apparently behind us for now.

I am expecting some sort of pullback or consolidation soon. Maybe the data this week will dampen some holiday market spirits.

GL, have a great week and enjoy the season.