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ES and the Great POMO Rally
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ES and the Great POMO Rally

  #331 (permalink)
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Fat Tails View Post
Some links allowing a fundamental view on the Dollar Index.

http://www.cbo.gov/ftpdocs/117xx/doc11705/Budget_Chartbook_Show_SlideShare.pps

http://www.cbo.gov/ftpdocs/117xx/doc11705/Economics_Chartbook_Show_SlideShare.pps

The Only Two Charts That Matter For The US, And A Q&A On The Fiscal "Debate" From Goldman Sachs | zero hedge

For 2010:

-> Net Business Investment below 1% for the first time during the last 60 years
-> Highest Long Term Unemployment since 60 years
-> Highest Vacancy in Housing Units since 45 years
-> Worst Budget Deficit since 40 years exceeding 10% of GDP
-> Stocks and Commodities are rallying

Can you imagine a US Dollar Index at 40?

Great data points! From a technical perspective looking at the USD, it appears to have broke below it's supporting trend line . There was a nice bullish divergence on the big picture chart at the lows of 2008 and price bounced but ended up getting caught in a wedge pattern for most of 2009 and 2010 and has since broken down. 2009 lows, here we come!

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  #332 (permalink)
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After rallying through the first part of 2010 due to the sovereign debt problems in Europe, The $ began to decline despite the fact that those sovereign debt troubles have continued. A declining dollar tends to increase inflation, and decrease demand for dollar-denominated debt. At least for the time being, a declining dollar is good for stocks because it increases the value of exports and makes our products more competitive on world markets. However, the U.S.is a net importer overall, so the balance is clearly negative. Consumers are just beginning to feel the effects of lower income and higher costs, and inflation is only just beginning to work it's way through the pipeline. At some point in time, if not already, businesses will also begin to feel the effects. While rising food costs may not be a concern for businesses, the rising cost of energy and raw materials will certainly have an effect on the bottom line.

Eventually, higher inflation and higher interest rates will surely not be good for stocks.


Last edited by tigertrader; April 11th, 2011 at 10:17 AM.
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  #333 (permalink)
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There's the gap-fill. Needs to hold and rally from here, to keep the bull's hopes alive.

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  #334 (permalink)
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tigertrader View Post
There's the gap-fill. Needs to hold and rally from here, to keep the bull's hopes alive.

RUSSELL too closed its GAP. Was watching both.

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  #335 (permalink)
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The bulls must certainly feel that their attempt at new material highs is an exercise in futility as the ES ventured above 1330 for the seventh day in a row only to fail from that level again. The market then sold off and looked like it might hold Friday’s settlement @1324.00 only to sell off further and test major support near the weekly S1, daily 20EMA. 50% Fib extension, and upside gap. A lack of strong buying interest at these levels must have the bulls concerned that short term follow through to the downside may be forthcoming. However, they must have found some solace in the fact that the market didn’t close below the weekly S1. Alcoa, the largest U.S. aluminum producer, reported first-quarter profits that beat analysts’ estimates after prices rose for the lightweight metal, with little to no attendant market reaction to the news in extended hours trading. The fact the bulls are unable to mark up the market after the good news is not constructive for the market short term. Barring a gap up and run opening tomorrow, follow through selling will most likely become a reality.

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  #336 (permalink)
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Some more fundamentals

A simple calculation per today

US public debt per today: $ 9,652,196,858,759.48
Source: Debt to the Penny (Daily History Search Application)

US interest payments in March: $ 24,460,282,823.69
Source: Debt to the Penny (Daily History Search Application)

US population per today: 311,152,205
Source: U.S. & World Population Clock


Are you the head of a family of 4?

Then your share of the debt is $ 125,000.
Your personal share of interest is $ 10,50 per day or $ 315 per month.

In case that the Fed will raise interest rates, your share will increase. So may the will wait a little bit longer, and if you are lucky the bill will be paid by foreign and domestic bondholders.


What about Europe?

European Union (27) public debt per 3rd quarter 2010: € 9,429,378,600,000
Source: Eurostat - Data Explorer

Population of European Union (27 countries: 501,103,425)
Source: http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&language=en&pcode=tps00001&plugin=1

However the figures cannot be directly compared:

-> the figure for Europe is the gross debt, which makes it better
-> it is quoted in € not in $, which makes it worse
-> Europe's population is considerably higher, which makes it better
-> The income per capita is lower compared to the US, which makes it worse.

Europe is no better than the US. Humans are generally irresponsible, governments have further developed and cultivated irresponsibility, which is mirrored by the current state of the environment and public finances. There is only one thing worse than a human being, a group of them. Have bought the book "Crowds and Power" by Elias Canetti for my son. He is reading it now. The second key to understanding what is going on is game theory. Collective benefits are different from individual benefits. Moral hazard cannot only be used to describe the behavior of financial institutions, but is even more widespread amongst politicians.


Conclusion:

Sell the $, or buy something which is quoted in $. I am astonished, for once I made it back to the topic, the Great POMO Rally.

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  #337 (permalink)
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Do you guys see yesterday fall as a dip or the start of a bigger correction?

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  #338 (permalink)
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jonc View Post
Do you guys see yesterday fall as a dip or the start of a bigger correction?

I see this as a game being played during the option expiration week. We often see these moves up/down during this time.

You might want to check this precision report (clickme) when it's available. It offers an interesting perspective.

Also, as a quick recap of the night action, you might want to read what James Dalton has to say just before the day begins:

James Dalton Trading | Market Recap and Updates | Free for Traders

Hope this help

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  #339 (permalink)
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jonc View Post
Do you guys see yesterday fall as a dip or the start of a bigger correction?

The weak hands threw in the towel yesterday after repeated attempts by the bulls to punch through and make new highs. The bears took the lead and the market sold off for the majority of the day, but was met by strong bull leadership near major support @ the weekly S3, daily RTH-only S3, Fib retracement and extension levels, daily 50EMA, and the monthly PP. The bounce continued into the ETH session and took out the previous sessions high @1315.50. 1320-22 is now critical resistance for the bears to defend. The bulls still enjoy the home field advantage as we are in the midst of earnings season, in what is still a cyclical bull market - the odds are the market is most likely to run on positive news rather than negative news. However, a rejection of 1320-22 points to at least a retest of yesterday’s lows and a possible break.

Support areas include: 13311.75 (VAh), the daily gap/pivot area, weekly S2 and closing VWAP, from 1309.75 to 1310.25 and 1308.25 to 1309.00, but likely not below.

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ES and the Great POMO Rally-es-06-11-daily-4_14_2010-4_14_2011.jpg   ES and the Great POMO Rally-es-06-11-135-min-4_13_2011.jpg  

Last edited by tigertrader; April 13th, 2011 at 12:01 PM.
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  #340 (permalink)
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Long @1312.00 against the VAh - covered 1/3 of my position at the low of the opening range@1314.75. Looking for the market to take out the high of the opg, range @1317.50 and test the R2 @ 1320.00 level. Planning to cover another 1/3 at that level, and hold the balance. Market internals are not strong enough to warrant pressing-and-adding to my position.

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