Monday, December 19, 2011

Morning Post 12/19/11, SPX

'Twas the week before Christmas and all thru the house Shanky had a  lot going on (as I am sure you do as well). You'll always have a post but not always have me this week as I gots some things to do. Those that play the Shanky vacation market crash trade you are in luck! The week after Christmas I'll be doing the annual trip to ski with the family in Crested Butte. I'll still be working from CB as usual. I wish everyone a safre and happy holiday season.

On to the markets. As you know we have almost fully entered the "all bets are off" zone STB has been forecasting. After this week I may go full blown duck and cover, but now that we're past opex I suggest you be at the ready. There is a massive hole for news generating events till the next FOMC meeting in late January. Unless Evans of some other Fed president starts really hyping easing (in a big way), I see nothing that can lift the markets or even sustain them at current levels till the rumor ramp should start mid January. What the bulls will have is the next two weeks will be super low volume and some EOY adjustments. Bears may have to remain patient.

You all know I'm looking for a major move south to allow for some sort of massive easing. DB has been looking for this as well. "So what does this tell us? The extremely low risk premium fully captures QE expectations. Empirically, they find USD19bn of new QE tends to reduce real rates by 1bps and based on this and a model of fundamentals and risk aversion parameters, they find that Twist was fully priced in last September and since then the current dislocation suggests another full QE2-style package of about $800bn is already priced into the market (ex MBS reinvestment)." We just hope the market is not disappointed. Deutsche On QE3, It's $800bn Or Bust! | ZeroHedge. STB is looking for multiple trillions. A major move with language there will be more to come.

Minis 4hr - See the pink channel? Bulls better make a move here with price recovering off a potential double bottom at 1200, they need to push price thru 1218 resistance and the upper channel resistance. If not it could get fugly.

Daily SPX - Right now I'm still looking for 1040 SPX and 10k DOW before the Fed makes their move. Let's keep an eye on support levels.

Remember the Reason for the season!

GL and GB.


Minis chart from the work computer - For those that doubt the yellow channel support diag I have been showing for months - here is the interaction with it this morning. For those doubting the 1218 backtest and how I have harped on that number (for months now as well) - there it is. Green channel resistance is just above and the red diagonal s/r (off the 1292 and 1272 tops) is there as well. Note the volume (or lack there of).

Update #2: My yellow support diagonal and the 1218 support/resistance in the green channel down - any questions?

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