What to look for at quarter end.
First Question, are we in deflation? That is a huge issue because if we truly are then you have a depression and all bets are off. Stocks cannot sustain any meaningful move higher if that is true. The evidence may be in falling lumber and copper. Let's not go there just yet.
In the ES futures 977.00 is the 20% decline level from 1221.25, which if that happens puts us in official bear market territory. The bond market again made new highs and at 127 11/32. S&P futures at 1035.00 have a massive bullish divergence versus the bond market or does it need to play catch up? The last time the bonds were at this level was 4/15/09 when the S&P futures were trading at 816.00. So who has it right are we slipping into double dip recession or even depression? Or is the economy just going to muddle thru and high yielding big cap stocks about to have their day in the sun?
The market I know looks bad and is still pointing lower. The fear is in the street and since we have the month end right in front of us, maybe not being so bearish here is a good idea. Gold is saying inflation and 10 year is saying deflation, who is right? The bottom line a lower low could set up a tradable bottom. Stocks down 7 days in a row are values. XOM is trading 8.29 times 2011 earnings with a dividend of 3% that, I believe is going to stay intact. 7 days in a row in any market is worth taking a look at the other side of the trade. Copper certainly has the lead and broken down yesterday from the 309.00 volume cross over level. Can’t the market make a low without going lower? I highly doubt it. The next Globex number is 1119.50 and a good target. Once a lower low is made we will be extremely over sold. That sets up the new monthly low and provides the ability to bounce.
We monitor support and resistance levels, and a set of technical indicators, in multiple time frames, in multiple markets – primarily stocks, bonds, the oil complex, and metals. We don’t waste time speculating about things we can’t know and over which we have no control. This is another corridor of information entirely – we are immersed in the markets, and our insights are about market sense, market flow, sentiment, macroeconomics, and the psychology of effective decision making.
