Monday, October 22, 2012

Morning Charts 10/20/12 SPX /ES

What are you supposed to do on debate days? What have the last two delivered for potus? Just saying.

Another European summit down and again nothing to show for the efforts. Are these guys just hanging out and pulling a DSK or a US Secret Service working with the help more than doing business? Heck, I know which would be more productive. When the ship is sinking and you can't possibly plug all the holes would you blame them?

Frustrated? On one hand you get Q3 Earnings Season To Date Summary: Ugly... And Getting Worse with, "Roughly one third of the S&P has reported earnings so far, with another third reporting in the next five days and almighty AAPL on deck Thursday evening, and if there is one word to describe what has happened so far, that word would be "ugly." The same word would be used to describe how Q4 is shaping up to be." STB has been waiting patiently on AAPL for a few weeks now. Thursday will be D Day.

Add this morning's development of Caterpillar Forecasts Slowest Sales Growth in Four Years (not even making the Bloomberg headlines) and one begins to wonder (not really) how are the markets holding on?

On the other hand you get (along with more talk of Japan easing again) Bernanke Sedates Bond Traders Seeing Treasuries Added to QE3. How could treasuries not be added? The global Ponzi must be well oiled and without UST purchases everything comes to a screeching halt. With the rest of the world abandoning the treasury market, net outflows becoming a reality and the fiscal cliff staring us in the face, the Fed will again double dip supporting the debt and manipulating the yield curve even more. This is the only net positive for the markets (which should in reality be a double negative, but this is the new era).

So, wait for AAPL and follow the Fed remain the only plays in town. Things are rapidly deteriorating no matter what crap the MSM spews. Their games are coming to an end. I bet they are hoping the DHS's 1.6 billion bullets for domestic use are enough at this time to quell the uprising that is coming.

The charts are all over this coming disaster as well. Going all the way back to the double top at 1375 in August when the markets should have topped, the overbought blow off triple top set up has been increasingly strengthening for the bears. The last daily top with sensational divergences may be about to get its due.

I spoke about this set up and that under normal circumstances a 5 to 10% correction would be in the works here. So far so good I guess, but then came the test of the first major support last week which Potter and friends defended well. That was until Friday and here price is back at the 50dma having busted major support for this move up.

Daily SPX - Debate day and the Bernank talking about buying more UST? CAT Schmat, who cares, BTFD should be in order with that combination. I don;t like that call, but it must be headed at least for today. Then the AAPL rumors will start to swirl. Everyone sees where the SPX is. A bust here and 1422 is in the cards and below that a gaping hole to rising wedge support near 1400.

Minis 30m - Here you can see where STB cautioned about the double support STB point at 1413 and where 1416 held just above that and price reversed back in the 14th. They took price up to backtest yellow s/r diagonal and back down she came. The daily divergences worked their magic so far. Can they fend off the Fed and get what they rightfully deserve?

Pink support diag is the third of the rising wedge off the June lows. Green was the HnS support off the March top. This is major support combined with the dma's.

So here we sit with another major market inflection point upon us and the Bernank comes out with a well timed "we'll buy more of whatever it takes" moment. The Fed's problem is they have eased now. The cat is out of the bag. Why did they ease when they did? I have no clue other than potus needed the lift. They were doing just fine or even better with rumors of easing (see Draghi).

Let's be patient and see if the bears can finally take a bite instead of a nibble. Things are dire, no question, but until support cracks I would not get too carried away just yet.

Be patient. Let the trade come to you. Follow the Fed. They may let things drift to 1400 here (they may not have a choice). I expect them to fight back in that area. If they don't, the worst may actually be finally upon us.

GL and GB!

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