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Wednesday Technical Review: A Headline Driven Market.

  • Written by Syndicated Publisher 44 Comments44 Comments Comments
    November 10, 2011

    Now that was a headline driven market. Prior market action was labeled as such but it was really a rumor driven market. Today reality was priced in and priced in hard. I still sense a lot of complacency out there. The belief that central banks will bail out Italy any moment is keeping hope alive (I thought hope was not a trading strategy though)?

    Lots of charts today so I’ll keep the banter to a minimum. One note though today’s selloff had excellent breadth (net declining issues) behind it which was missing during the October selloffs.

    SPX

    Two times is not a charm. The 200MA has failed once again. The 100MA held on by 73 cents. Notice the similar move over the past few days versus that of the days preceding the July selloff (details on the chart).

    10 Year Treasury

    Multi-month downtrend continues. Notice how yield closed below the prior lows. Lots of calls out there for 1.50% on the 10 year. The charts would support that.

    Currency

    This is a currency driven market and the currencies are showing a lot of weakness. Notice the failed bear flags on both the EUR/USD and AUD/USD (two channels failed today). Prior lows have also been taken out.

    EUR/USD

    AUD/USD

    Bank Of America (BAC)

    This one is moving closer and closer to $5. I believe BAC will be the token victim that politicians will use to sell TARP 2 and say that “DC took on Wall St.” BAC moved their derivative book to a subsidiary where deposits are held. The result the FDIC does not have the capital to cover deposits and derivative counterparties get paid first.

    So TARP 2 will be a bailout of the taxpayer a much easier sell. It’s also class warfare as 1 in 4 deposits (if memory serves) are held at BAC. The end result is the same JPM and all other NY banks will be paid in full on derivatives like the AIG bailout. Anyway, watch BAC. The biggest bank in the US is becoming a counterparty risk in a risk off repo market.

    One More Scary Chart

    Remember this from Sunday night? It gets updated Thursday night.

    Images: Flickr (licence attribution)

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