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Something occurred to me last night: remember how I used to point out how the Fed's prostituting itself kept having a shorter and shorter bullish effect on the market?
At first, the bullish effect last a few months…….then a month…….then a couple of weeks…then the effect could be measured in days……
How long did yesterday's investment-bank-giveaway last? Half an hour. Thirty minutes. Which was the thirty minutes I needed to short about 90 new positions.
As the Fed continues setting explosive charges underneath our once-great Republic, the effect of these – pfft – "stimulus' efforts will continue to diminish to the vanishing point. In a few years, Ben Bernanke will be held up as an even more destructive force than Greenspan ever was.
I started the day with 284 positions, and I trimmed (probably unnecessarily) to 250. One of the best performers – which I'm still holding – is Synchronous Technologies (SNCR), shown below. It had a couple of characteristics I love to short: (1) a failed bullish breakout; (2) a trendline break. I suspect this has a couple of points left to fall.
As for my my one long – FXE – I imagine it'll do as well as the other "insurance" I got yesterday, which is to say, not at all. But better safe than sorry. Given what I'm seeing with the NQ and ES right now, Thursday is going to be another winning day for the bears.
Knowing when to cover is way, way harder than knowing when to enter. Here’s an example of a position I covered today at a 15% profit. The risk simply outweighs the potential reward at this level. On the whole, I am keeping most of my positions. I have 264 shorts remaining, although I am only through 4 letters of the alphabet at this point!
SPX spiked up strongly after the FOMC announcement stated that the
economy is so weak that the Fed is going to be printing more money, but
even this good news wasn't enough to sustain the market long, and
overnight ES broke both yesterday's low and last Friday's low. In the
short term ES formed a small head and shoulders pattern yesterday with a
target of 1096 ES. That is also the level for the gap fill from last Monday's gap up and a strong candidate for a likely area to see a bounce today:
On the bear side it is excellent news that the strong support level at
1104.5 ES broke on an hourly basis overnight, and even with a recovery
above it the path further down looks wide open now. While we haven't yet
seen a daily close below the ES / SPX rising wedge, it no longer seems
credible to think that the wedge has not broken downwards:
I won't repost any of the updated forex or oil charts from yesterday.
They're all playing out as I suggested then, and Oil and AUDUSD are both
now testing the first weak level of support that I indicated. EURUSD
and GBPUSD are both halfway to the stronger targets that I indicated.
We therefore now have a confirmed wave up in USD at the same time as a
confirmed wave down in equities, and that, as I've mentioned before, is
when we see big moves down in equities. On that basis I'm somewhat
doubtful about either of my first ES support levels at 1084.5 or 1070
holding, and Pug's alternate
count target near the very important support level in the 1040 SPX area
looks the most likely to be reached. I'm expecting that we will see a
fast move downwards over the next week, with a bottom being made between
Monday and Wednesday next week in time for a bounce into opex on
I have a couple of other charts to share today that look interesting.
The first is the CADUSD chart, where I posted a symmetrical triangle
that was breaking up last week and mentioned then that I hate trading
these triangles because they often break out one way before resolving in
the other. That appears to be happening on CADUSD now and it will be
interesting to see whether it will make the downside triangle target at
Denizen mentioned yesterday that there is a huge head and shoulders
pattern on copper, so I had another look at the chart on a longer term
basis, and he's absolutely right. I've redone the copper chart showing
the bigger picture:
The copper chart is one to watch carefully. For the bull case, the first
rising channel target near 310 should hold, but if it doesn't the next
obvious strong (declining) support level is near 260, which would be a
new low for 2010. If that breaks and then confirms by breaking 252 (3%),
then the H&S target is 180, which would have far-reaching
Copper is one of the more important indicators to watch for the medium
term bull case and I'll be watching the rising support trendline at 310
very carefully. If it breaks then the bull case may be in trouble, and
if copper should reach declining support at 260 then it will be in very
Another indicator that I'll be watching is EURUSD. My view is that
EURUSD is just retracing during a bull move towards a wedge target in
the 1.46 to 1.50 area. If I'm right, then I'm expecting rising support
for EURUSD in the 1.275 area to hold. If it doesn't then the bear
scenario over the next few months will look a great deal stronger.