Tuesday, May 18, 2010

SPX 1,174 Is The Key

I am of course making the assumption that SPX will get back to 1,174.

The 20-day, 50-day and the high of last week are all at 1,174 (Black Arrow). That makes it critical resistance. It is also the top of this little 8-day trading range.

Notice how the 150-day (Blue Arrows) served as support for both the February panic and this most recent panic (so far).

Barring something nasty, I am going to operate as if the low is in. If there is a high-volume Follow Through Day in the next week or so, I will stop focusing solely on the Index proxies (QQQQ, SPY) and start to focus on high-growth leaders on pullbacks or breakouts.

Sunday, May 16, 2010

We Got Our Pullback...

I wrote the following on Wednesday –

“Prices are now back to the 20-day and 50-day averages. These may offer some short term resistance. Also, 1,160 has been a key price level for SPX. The cycle date is May 15, so there could be a pull back or pause into Friday or early next week.”

The Euro tanked as it became clear that the EU does not want to undertake QE. Instead, they simply want to buy debt from banks, but not increase the overall supply of liquidity. They are truly stupid. The markets don’t like it. This all appears to simply be a power grab designed to make the EU superior to the individual democracies of Europe.

From Ambrose – Evans Pritchard


“Fonctionnaires and EU finance ministers will pass judgement on the British (or Dutch, or Danish, or French) budgets before the elected bodies of these ancient and sovereign nations have seen the proposals. Did we not we not fight the English Civil War and kill a king over such a prerogative?

Yet again we are discovering the trick played on our democracies by Europe’s insiders when they charged ahead with EMU, brushing aside warnings by their own staff economists that monetary union was unworkable without fiscal union. Jacques Delors knew perfectly well that this would lead inevitably to a crisis, but it would be the “beneficial crisis” that would force sovereign parliaments to submit to demands that they would never otherwise accept.”

“This is the Gold Bloc fallacy of Continental Europe from 1931 to 1936, the policy that led to Bruning’s destruction of Weimar, Laval’s near destruction of the Third Republic in France with his deflation decrees. It was a precursor to Laval’s fateful role as the Nazi enforcer of Vichy. He was later executed by firing squad, vomitting from a botched suicide with cynanide.

The reactionary character of the EU system is astonishing to behold. Mr Barroso … is becoming a serious danger to civil society and the survival of European democracy. SeƱor Barroso, a decent man, needs to step back and ask himself what on earth is going to be achieved by imposing a deflation death spiral on a large swathe of Europe.”

The Euro
The Euro has fallen from 133 to 123 in just 11 trading days! This is a big-time currency. That is a huge hit. There is a lot of talk that there will be intervention if price falls to the 122 range. 121 is a 50% retracement of the 2000 – 2008 Euro bull market.

The Euro is crashing in a panic, on par with its 2008 crash. The EU has now attained more power than the sovereign nations it represents. If the ECB does not act quickly to calm the panic, then all the power they have attained will be for naught. They will need to step in immediately to calm things down, or all hell will break loose.

You can see here that daily targets have been reached in price.

Gold has been the panic safe haven. It is running into lots of technical time cycles and has significant resistance less than 3% above here. Funny how all the panic news always seems to happen around key time cycles and price levels, isn’t it…

The S&P 500 is right above critical support levels. The two main levels are 1,125 and 1,100. I expect those to be heavily defended the next few days. My goal is to always be buying at these key prices, within a few days of these key time cycles. The setup is there. They do not always work. We could go into a full blown crash next week, but I am not so sure how likely that is with the Euro down so much the last few weeks. This is option expiration and should be one crazy week.