Saturday, January 14, 2012

Friday The 13th - Bad OMEN for the ES Market

The broad market declined on Friday. The strongest decline was noted on the Russell 2000 (0.77% loss) while NASDAQ 100 lost only 0.42%. The NASDAQ 100 index closed down 0.42%; the S&P 500 dropped 0.49% while the Dow lossed 0.39%. For the week, the NASDAQ 100 is currently showing a gain of 0.67%; the S&P 500 has gained 0.88% while the Dow is presently up 0.5%.

Volume for the S&P 500 was 2,630 million shares today, 7% less that the average daily volume of the past 3 months.

In previous short-term outlook, I had suggested: " Negative money flow would suggest the possibility of negative trading tomorrow after the market open. ... Overall I would consider the outlook for tomorrow slightly in favor of the Bulls.

 However, sentiment could be easily turned into bearish and if my indicator starts to decline on the 30-day chart I will consider it as a signal for bearish trading session" - Then the indexes moved down at the market open, and then a short covering vertical move in the last hour but more down is expected as the 30-day chart started to decline.

Equities have been shrugging bad news coming out of Europe and slowly and steadily creeping up. In the past few days markets have generally fallen at the open, but then slowly regained its footing by the end of the day.

All this indicates that the equity market is complacent and confident that prices will rise. But in a different corner of the market, where the big boys play, traders and investors are getting risk averse. The US treasury market and the US Dollar are giving signals that the risky play of equities may be off the table.

 On Friday the 10-year US treasury bond prices made a new high  and the Dollar index broke a key resistance level. The US Dollar and treasuries are considered safe places to invest when the equity market is falling.

But the US treasury and dollar market have been steadily moving up for the past few days even as the equity markets continued to rally. A rallying of safe havens and equities simultaneously is pretty unusual.

Notice that both the Dollar and treasuries rallied high on Friday but sold off. The dollar index is back in it's resistance zone and the 10-year treasuries did come back below its previous all time high.

If both these markets close above Friday's highs next week and continue higher we could see a sell off in equities. There are however a few factors that are not in favor of the equity bears. Gold the other safe haven is not rallying with any kind of strength. The other factor is that both the US dollar, treasuries and equities have been going up in tandem over the past few days. This does not ussually happens and completely skews the risk-safe haven inter-play, leaving technical analysts scratching their heads.

Consumer sentiment hit an eight-month high in early January as Americans grew more optimistic about job prospects, a survey released on Friday showed.

The economy could improve one to two years earlier than it otherwise would if the Federal Reserve behaves "very aggressively," including possibly making additional asset purchases, a top Fed official said on Friday.Giving President Obama another victory in the upcoming elections.

In politics , Newt Gingrich visited a Cuban Restaurant in South Florida,looking for money donations to safe his dwindling useless political campaing. Apparently some rich wealthy Cuban Americans think that this old, hippocrite and fat conservative candidate is going to help them re-establish the failed Cuban Embargo even when the majority of exiles no longer support that idea.They don't realize that Newt Gingrich is ignoring the Black African American's voters in South Florida and he will eventually loose against Obama.We all know that 99% of blacks will re-elect Obama again.

The Federal Reserve should not ease monetary policy further because that would lead to higher inflation without additional economic growth, Richmond Fed President Jeffrey Lacker said on Friday.

The U.S. Federal Reserve is considering ways to ease or tailor regulations impacting community banks, such as commercial real estate standards, as a way to boost their lending, a top Fed official said on Friday.

Import prices edged down in December as oil prices fell after a November surge, according to a government report on Friday that showed inflation pressures still muted.

Observations : It is amazing how a few mediocre trading GURUS are selling support and resistance levels to the unaware and unimformed inexperienced new traders when these information can be obtained easily from many free sources and by looking at the charts , especially when these so called experts never show a live trade using their levels.A Twitter posted trade is NOT a live trade !- Mediocre traders ( Riskcap, FT71 and others ) selling information that is NOT unique without showing live trading proof.And the fools keep paying them !

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