BTFD bitchez! What a day. A little Spanish bond success and some earnings beats and BAM! Must have been the makings of a secret sauce that launches the /ES from a 1359 overnight low to a high of 1388 (a 29 point surge - in one day remember). Wow is all I can muster at this point. Just when you think the bears have them cornered and the markets are sitting on support overlooking the cliff of doom, in come the bots to do their bidding. I guess we have come to expect these moves and they are really not all that surprising anymore. Heck, I don't even get angry and throw things like I used to.
Don't get used to this and get caught in the bull trap. Things are not well at all. They may be able to maintain or extend and pretend a bit longer, but they are not solving anything. As this post remarks, "It did not take long for the honeymoon following LTRO2 to end and despite today's exuberance, Italian and Spanish equity markets (as well as financial credits) have collapsed as Spain's sovereign risk has skyrocketed. While Spanish bank holdings of Spanish govvies, ECB lending to Spanish banks, and Spanish credit risk are surging so is one other much more worrisome fundamental trend - that of corporate non-performing loans." LTROver | ZeroHedge
You see Spain needs some geedus in a bad way, and we know that since they can't pay back what they already know how this will work out, "and now we get the Bank of Spain, also taking advantage of today's market rally to dump its own set of bad news, namely that Spanish banks will need to provision another €29.1 billion, and will have higher core capital requirements of €15.6 billion (this is fresh capital)." Bank Of Spain Releases Details Of Additional Capital Needs For Spanish Banks | ZeroHedge For those that remember Greece, are you having deja vu?
So, where does the money come from? Well in the EU as mentioned this morning, some bankrupt insolvent government will lend to the same and all will be well till it isn't anymore. As for in the US, QE3 will come at some point. That is the big dilemma STB has. When Twist ends in June, what happens? Will it be a replay of the 2010 and 2011 tops in 2012? Will they stop the liquid flow of hopium and allow another 20% corrective in a presidential election year? Will they roll directly into QE3? This is a big, big question. I have been on the 15 to 20% corrective setting up a massive short squeeze plan that has been their MO twice in the past. Maybe that is too obvious. Maybe they can't afford to let the market slide back past 1300?
The question/speculation seems to be a growing topic of discussion. "With "Operation Twist" now rapidly coming to an end and the Fed apparently in a trap of rising inflation I am not sure what the next "support" for the economy will be. My expectation continues to be that the economy will continue to run at a sub-par growth rate though the end of 2012 and that we could see a recession by the end of 2012 or by mid-2013. Of course, that is assuming we are boosted by further rounds of artificial intervention by the Fed or Mother Nature." Guest Post: Mother Nature's Bail Out Coming To An End | ZeroHedge
Most regular readers know that when the Fed reaches a point it can not print anymore where I think the funds to support everything will come from. That is the point they confiscate every retirement plan in the country and use those funds to buy treasuries. That will lead to the ultimate epic fail as they will still not fundamentally address or fix any problems. the paper over technique will continue till the screw that up and then everything breaks. Yes, I honestly think this is going to happen. They have no where else to go for funds. The retirement system is totally busted and needs the "balance" and additional funding from those that have been prudent in their planning where the entitled and the government have not. I wrote a big post on this subject last month.
Minis - After giving you the STB point this morning at 1359 yesterday morning, in my second comment of the day today I threw another one out at 1386 this evening. Hey, they jumped the gun a bit (10:00 was the target time tonight). The bad news, no more obvious intersections at this point for price to travel to.
29 point ramp hugh? Out of left field fo shizzle. So what's next? Well, I have been looking for 1341 and the HnS to materialize. We'd be in the RS now if that's working. Most know I have targets as low as 1170, but that may have to wait till Twist ends this summer before we can get there. Near term there are technical scenarios galore. With opex week, earnings in full bloom, EU summits, AAPL earnings and the FOMC meeting next week now is not the time to speculate on anything (if you did not learn your lesson today).
Pink diagonal support (the cliff) off the November lows barely held. Price ran to backtest 1386 and the busted green wedge support today. With opex max pain and the incredible surge today I would be tempted to lean on things calming down at this point. I'm not ready (nor do I want ) to start talking about the red, blue, green and pink diagonals above, but you better know they are there.
I shared this chart this morning in the comments section. This is my BTFD Chart. Its track record is pretty solid. I suggest you take a look at it. I personally can not commit to this, but wish I had at support at the close yesterday.
That's enough for now. Let's see what the futures hold for us tonight. Remember patience, form and follow the Fed (at least till June).
GL and GB!