Friday, May 10, 2013

Morning Charts 05/10/13 SPX /ES

I feel comforted this morning. It is good to know that Jack Lew says,""The debt limit will be reached in just a few days when it expires on May 18 but because of the cash flows we can predict that we will be okay until Labor Day,"" That must be code for he's gonna pull another Turbo Timmy and raid the government workers pensions for loans to keep the government open again (and again and again).

Phew! The once unachievable $12.5 trillion debt ceiling now stands at $16.8 trillion and is rising. That's good right? No bubble here. We can continue to print more to stabilize a rotting economy and increase the entitlement base (those that rely on the government and will vote for the socialist democratic party in the future) all the while the Fed controls interest rates so this can remain affordable. They have everything under control, so there is no need to worry.

But as typical Americans (referring to the banks and citizens here) they rack up debt regardless of their means to pay for it cause the banks want us to. The more we borrow the more we spend and that is how this great country is "richer" that anywhere else on the planet (margin debt at all time highs). Good credit, bad credit - does not matter. Collateral? If you got it we'll take it but that is not necessary. Got a job?No, well that's OK too. (China - delinquent loans surge by 29% - not here - but a good example of how things are globally)

So what about the bad loans. They fixed that problem in 2009 with all that new regulation and tighter lending restrictions. Those worked for a while till "they" figured out that rules were just messing things up and getting in the way of profits. Dodd Frank? Uh, yeah, that went well. SarbOX - shuh riiight. They have the solution for everything and that begins and ends with the Fed and it's CTRL+P powers.

You see the banks lend, we default, the Fed provides more liquidity and all is well. This liquidity now even serves multiple purposes as loan loss reserves, since default rates are plummeting (cough, cough - see China above), can now be reallocated to support earnings (even in the quarters where the banks have 100% winning trading day records).

It all works so well till it doesn't. Maybe we need to start looking at Japan as a "for instance" as to what currency and interest rate manipulation can bring. Maybe not, the CB's say. We're different. It can't happen here. No one saw it coming (oops, I got ahead of myself there).Their debt/GDP is like 215 and ours is only like 105. What's the big deal? The Yen just eclipsed 100 yesterday and all was well in the East till this morning when JGB's were haled limit down. Whoa! Wait a minute. I thought everyone said Abenomics was the ticket. $75 billion a month in easing and they were buying up the globe. What happened? Well the like 5th bond market closure in the past couple of weeks happened. All is well? The other day it was Fitch, today it is Moody's (now that S&P is out of the way) reassuring you that the Bond Market Bubble is Overstated.

I could go on and on, but I won't. You know most of the story. It is the same as it has been since 2009 and nothing has changed other than the numbers get bigger and the methods of manipulation continue to deepen. We're nearing the end game. It could literally come at any moment now. They are one slip from total destruction. The good news is that we have full faith and trust in the good folks that got us in this mess to get us out of it.

On to the markets -

The good news for the bulls is it looks like they are setting up a massive HnS formation. I'm not sure if they have changed the definition of this pattern from bear to bull yet, but they will need to sooner than later as right shoulders have proven to be the best buying points over the last few years. More on this next week.

Minis 60m - Busier chart than I have been showing over the past few days and now you see why I want to blow up this ToS chart but can't.

Daily SPX - OK, I'm giving my blessing to those that want to short now. Only for a brief stint, but I have to go out on a limb and say that this setup with the news flow to come that this could be a good point to enter shorts with protection. I would not go balls deep out of the gates, but scale in and make sure the play is the right one. It has been a VERY long time since I have been willing to say that. Personally I would not prefer to short going into a weekend. I hate leaving that much faith in hands of others when I can't get to a open trading platform. I'll start projecting targets and such next week IF this matriculates. No bother in putting the cart ahead of the horse especially when talking about shorting this bullfest.

As usual more to come below.

Enjoy the weekend.

GL and GB!

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