Tuesday, June 12, 2012

Morning Charts 06/12/12 $SPX $ES

So the ECB is bailing out the banks so they can bail out the government, does that sound familiar? What will $125bn buy these days? We're about to find out. It appears that possibly the most expensive commodity on the planet right now is TIME and its price is exponentially growing.

Here at home you have Evans willing to write blank checks till pigs fly and Lockhart says that low yield should keep us from printing. The FOMC meeting is on the 20th. There should be some interesting rhetoric in the coming days surrounding the Fed's dilemma.

There is so much uncertainty out there right now between bailouts and how and why and when and who and who is next and who wants their deals reworked and who will need more and when that you can hardly grasp it all. All you need to know is whatever they do, adding more debt is only throwing fuel on an already out of control inferno.

Something we discuss often as a part of the Fed's strategy here at STB is the set up of the short squeeze to assist the Fed in its efforts at lifting the markets with as little effort as possible. At The End Of May NYSE Short Interest Soared To November 2011 Levels, Leading To Epic Short Squeeze discusses this set up and the chart below defines the sentiment.

BPSPX Comp Chart shows that bullish percent hit a level where markets have rallied in the past, but it is still well short of dire conditions (black line and arrows) where more severe bottoms have been set. If this fall is to 'get real', we're about two thirds of the way home in sentiment and lacking the tell tale divergence in sentiment (see pink lines) that usually telegraphs a major bottom or top.

Checking out the CPC chart, it could be at a 'buy it' point but then again there is still some room to run if bear market levels are in vogue here.

As stated, STB is pretty much in consolidation mode. I think we remain range bound till the Fed shows its hand on or just before the 20th. Uncertainty in the EU will hang over the markets and keep a lid on things. Up 7 on the minis does not look like much here as major s/r comes back into play. Red, pink and green are all major s/r lines that are dominating price action here. There is a potential HnS set up forming (missing the RS here with head at 1342) that is it plays out will take you to 1255 which is in the open gap above 1264 support that stopped the slide last time.

SPX Daily - There is a chance that the falling wedge did not break out, but is just resetting to a higher D point which would allow for a slightly deeper fall for E. Not sure about that as the reversal candle (in green box) has been a solid sign in the past. The problem there is that markets (IMO) were not sold off enough (as shown above) and the Fed may have jumped the gun on pushing the squeeze button. I'm looking for a lot of violent chopping over the next week as price gets stuck in a broad range. I'm still stubbornly looking down with 1170 still being in the picture.

As usual, I'll give you charts all day in the commentary and on twitter with key levels and points to look for (along with my usual savory tidbits from the web). The core commenters have been exceptional in their analysis lately and the news they share is always excellent.

GL and GB!

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