Yesterday started the holiday-shortened week with a short-covering rally. Overnight, China says that extensive stimulus measures are not planned. This tanked futures and the worsening Spain situation continues to keep futures lower. News hit a short time ago with the European Union is calling for direct bank recapitalizations. This brings the European markets up towards the unchanged levels far off the lows today. U.S. futures moderate on the news but remain bearish.
The RTH moved above 41.15 yesterday providing the bull fuel so watch this closely at the bell to see if the RTH moves back below. If so, the bears got game today, if not, the bears got nothing. Also important is the NYA 40-week MA at 7646 (price is below and bearish for markets) and the SPX 12-month MA at 1295 (price is above and bullish for markets). The SPX begins today at 1322. The bulls need to touch the 1335 handle and the markets will accelerate higher. The bears need to push the SPX under 1319 to accelerate the downside. A move thru 1320-1334 is sideways action.
If the SPX is down today 8 or 10 points or more then typically Thursday morning would be expected to be weaker since markets tend not to bottom on a Wednesday after a strong sell-off. There are only two days remaining for trading in the month of May; the SPX monthly chart is providing drama in reference to the 12-month MA just like the end of April. The 12-month MA is critical, now at 1295, representing the cliff for markets. This level represents where markets fall back into a tactical bear market and will signal an official end to the ECB's LTRO1 and 2 money-pumping rallies.
RIMM laid an egg last evening warning of a large loss coming. The surprise was the announcement about retaining JPM to review strategic options for the company. What?! Were not they doing this already? Apparently not. One of the reasons Keystone was playing RIMM was due to the potential for great news occurring overnight on any night concerning a sale of the company, partial sale, or further agreements concerning patents. It turns out that RIMM management has been sitting back picking their noses all this time. It is best to allow the smoke to clear with this one. Keystone exited RIMM after yesterday's open dodging the late day bullet; in trading it is always better to be lucky than good.
FB continues its faceplant stumbling along like a drunken sailor. New lows occur each day for FB. The news about a Facebook cell phone was not well received. Not only the idea but also the new fear that this idea is even being considered. The sharks are circling the FB water but it is near levels where a bounce should be expected soon. The bounce, however, may simply provide an entry for shorts ganging up on the stock moving forward. AAPL was up yesterday on Apple tv hype but this remains a broken soldier.
Yesterday the CRB dropped under 280 signaling deflation firmly in place and opening the door to QE3 which will likley be a coordinated global intervention with QE3, LTRO3 and China stimulus all rolled into one package. The wine will be flowing like water once Chairman Bernanke steps up to the mic and exclaims "QE3!" but the booze will run out and the punch bowl will likely run dry again by Labor Day into the elections. The summer rally on tap due to stimulus is analogous to the Last Supper. The 10-year yield fell under 1.70% to a 1.67% historic low yield this morning showing that traders continue to look for safe havens to park money.
Keeping it technical and keeping it simple, RTH 41.15, NYA 7646, SPX 1295, and the SPX 1319 and 1335 levels dictate broad market direction today.
when do you suspect bernanke will announce the QE? TIA
ReplyDeleteHello Anon, all you can do is hang on now. Watch the CRB, now that it dropped under 280, QE3 can occur at anytime, 6/20/12 is the FOMC meeting announcement day so that would be a logical target. Probably 6/20 unless CRB falls under 270 then QE may be imminent and occurring before 6/20. This analysis will change continuously so stay tuned.
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