Wednesday, April 11, 2012

Afternoon Delight 04/11/12 - The Topping Process

Not if but when is most appropriate. Has the market run it's course for this QE cycle? Is the rain in Spain about to become a market wrecking EU destabilizing cat 5 hurricane? Are high gas prices destroying consumer sentiment and sacking retail? Is it time for the Fed to cool the presses? The negative issues go on and on. On the other side we have all the questions surrounding the persistent rumors or promise of further easing, the next FOMC meeting on the 24th and the first three important weeks of earnings season.

What's coming with earnings? (partial from a quick scan)

GOOG after the bell tomorrow
JPM and WFC before the bell Friday
C Monday before the open
YHOO and IBM sometime, GS, JNJ KO before the open and INTC after the close Tuesday
HAL before and YUM after Wednesday
BAC before and MSFT after Thursday
MCD before Friday
AAPL sometime Tuesday the 24th in conjunction with the FOMC meeting. 

STB hates earnings season (documented here every quarter). It is the most unpredictable time of the year. The fraudulent accounting, FASB rules apparently no longer exist, Repo 105, CVA's and a total lack of regulation all joined with the analysts on Wall St. low balling everything make for a time that it's best to sit back and watch. I'll scalp and maybe do a short swing or two if momo is moving in a particular direction, but for the most part I'm a spectator. It used to not be this way and was one of my favorite times to invest or speculate.

My attention will be focused on AAPL and the FOMC meeting on the 24th and 25th. AAPL earnings can hold up the oceans (and so can the promise of more QE), so those dates will be the next marker for STB. I'm not saying anything can't happen between now and then. Up appears to be seriously in question and the bears seem to be wanting to run with the ball.

As noted on the minis the pink diag near 1357 I have been showing held for now, and I've been looking at 1341 level as a potential neckline point. If that number goes anything could happen. I have also discussed the need for a catalyst. If Spain/employment miss/US downgrade only got us 70 points on the minis, what's it gonna take to get a real move started? Right now I'm hoping price hits 1341 and stops to finish the head and launch a right shoulder that targets as low as 1260. If this move is for real I'm liking the 1170 (updated from 1140) area and the QE3 call (and a massive short squeeze) to save the markets till the US runs out of money just before the election in September. Of course the wild card in that scenario is a Greek relapse and a Spain default or near default.

That's a lot of stuff, but that's the world we live in. Many variables in play. Wild cards everywhere that can be sprung anytime. It appears that the failure of LTRO2, the Fed's apparent inability to ease at this time (based on gas prices not to mention other things) and Spain rearing its ugly head have the markets scared to death and barely hanging on at this point.

As for the topping process, the data suggests (as I have been charting all week and as seen in recent price action) there are few support points to stop slides and that big chunks will be taken in short periods of time if things fail here. Overbought is an understatement.

Weekly SPX - Just nasty and you can see the HnS scenario and the three neckline possibilities.

Monthly SPX - Updated last night but little changed. Yes, I think that is what the markets are going to do eventually and that this top will be the last and lower lows (lower than '08) are coming. I may tinker and add another fall scenario that at least gets us out to the election. Note the incredible weakness of this run in the divergences on the indicators.

That's enough for now. Patience, form and follow the Fed still rule. I probably should have called a top by now, but I'm waiting on that 1341 to crack and holding out till the FOMC/AAPL event if I can.

GL and GB!

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