Tuesday, October 25, 2011

Morning Post 10/25/11, SPX

OK, so here is the deal (or no deal) - EU was supposed to have a deal done by the 23rd but did not. Markets ramps on the "fact" they will have a resolution. Since there is no solution to the insolvable problem, they delay meetings and push the resolution date out. Markets still believing there is "hope" continue to rally. Does anyone here get the feeling that they A) know there is no solution or they would have fixed it months ago as STB has speculated or B) they really like the markets direction and know the "hope" or "rumor" trade is better for the markets avoiding the sell the news event as long as possible?

It has been clear as day for months (if not a year) now, Germany is not willing to go all Wiemar again and is not willing to destroy their economy to bail out those less fiscally responsible. Their house was in better order than the rest, so the rest of the EU came begging. Germany is the only sane country on the planet. They are the only ones not willing to run with the rest of the lemmings over the cliff of debt. For some odd reason they see the end game and want no part of it.

Not long ago the Fed told the EU to get its shit together and solve the problem. That is not working out so well (thanks Germany), so where do they fall back? They defer to the IMF of course. Who backs the IMF? The Fed of course. It appears the ball is back in the hands of the most committed lemming of them all, the Fed (or indirectly the US taxpayer). "From the WSJ: "Europe may ask the International Monetary Fund to create and run a special new fund to help solve its debt crisis" As Hope For EFSF Solution Vanishes, Europe Comes Crawling To Uncle Sam | ZeroHedge. Yup, as expected, we've gone full circle.

Oil is exploding this morning. The Saudis are pretty stoked I guess. We're wiping out local dictators and causing the price of oil to ramp at the same time. Oh happy days! Not so fast my friend, anyone see a stable or legitimate regime installed in one of these countries? Anyone realize that Libya is going to be controlled by the Taliban? I think the UN's meddling in MENA will create a far more unstable region than the US military can police. As McCain and Obummer have noted to other leaders over there - they are not thru cleaning house yet.

If the open cooperates, which it may, there should be sell signal triggered all over the place. What type of momo can be created? You still have the insurmountable debt issue that no one wants to can deal with. The one that they have to can't deal with or the financial markets will crash and the world will come to a screeching halt. Of course this is the best reason for the markets to rally to higher highs on the hopium that kicking the can brings with it. Add to that the Fed drops a QE3 rumor every now and then which is just enough to keep the bulls in the game.

Daily SPX - If you would like to see my 13/34 charts they are all updated. The 5 and 10m will cross after the open (Inc's are here - don't forget to vote). Looking at this daily chart the NYMO, from this point it has generated at least a 100 point corrective (1,000 DOW points). Price hit the 61% retracement off the fall from 1370 and backtested the resistance/neckline of the busted head and shoulders that started all this mess.

On the bullish side the 20 just crossed the 50dma and the weekly chart's indicators look like they are just getting warmed up. The bulls will be looking for a corrective to the 1220 support and then a move higher. That would be nice IMHB(earish)O to set the daily divergence and let the weeklys work off some steam setting up a really major move south in November (which is what I've been calling).

So, let's look at getting thru 1220 before putting the cart ahead of the horse. The markets are way overdue for some selling here and should get more than that. 100 points as indicated by NYMO history gets us near 1156 which is a prior support area. STB has not given up on 1040, speculating as many readers know I'm thinking we have a crash in November with some issue from EU or MENA sparking it and the debt ceiling issues adding to the problem, then the Fed comes in with the last big QE stick save.

/es minis 1m - Thru the (pink) VWAP this morning and backtested it. 1245 is first resistance the 1254 then 1258. First support is 1237 then 1231, 1218.

GL and GB.

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