Mid week observation

I have been on the hill all week. Skiing is good, but the market are consolidating SPY 80-87. I am positioned well.


Here is the range that matters in the SPY today. Above SPY 88 suggests a breakout to the upside of the tertiary trendline. A break below SPY 82 suggests down. A short term Head and Shoulders pattern is forming. So I would say close above SPY 88 would be a technical reason to get to the long side. The SPY also closed on the 20 day MA yesterday. That has been a major point of downward resistance. I expect it to happen again. The trend is undeniably down.
SPY 12.4.gif
Any bottom callers are just guessing, and there are no confirmed technical or fundamental reasons to do so… Unless hope and contrary sentiment is the indicator being used.
As far as the SSO, it is above 25.20 for a quick gap fill to 26.50, then higher.
The SDS above 103.80 would suggest a breakout.
I am still playing mostly sideways to down. But I am aware of a sneak attack to the upside. The Govt is showing that they are willing to do just about everything possible, short of adding a zero to the end of every stock price, to move the economy up. They are doing everything they can to “INFLATE” the economy. This can be seen by looking at the dollar via the UUP, and a breakdown below 25.80. And a rise in commodities and commodity stocks. Neither is happening this morning. This suggest to me that my sideways to down in the market.
So, what else could cause a turnaround? Anticipation of a Christmas rally, and the “hope” of an Obama turnaround. The second is a viable catalyst as the government has acknowledged a recession. Was there any doubt that it would be announced after the election? Duh. Now it can be viewed as, “We are now in recession, and now Obama and his team can get us out”. The term recession has been altered and held off so that it could be announced after the new President could be elected and his new team could be announced. This is NOT conspiracy theory, it is the way our government works. It would have happened regardless of party elected.
Paramore – “Decode” – “How did we get here.” – Indeed

There are a few fundamentals that keep sticking in my mind. Big firms/hedge funds are
deleveraging from 40:1 to 10:1. That seems like a 75% reduction. However, there are
more redemptions which draws that down further. And there are short biased firms which
are putting more pressure on the sell side. Many companys have not giving 2009 guidance, and the majority of the ones which have are down. And jobless claims are 529K, AT&T announced 12K layoffs. State governments, and municipalities are in an enormous budget squeeze. Hmmm, buy? On a market short squeeze, not as an investment, not me.
On every rapid rally the bottom callers are ready to take profits, and as we start to top out, there are people ready to sell more of their holdings. We are in a vicious cascading cycle. SPY 80 needs to be held. If it doesn’t we retest 74.3. If that doesn’t hold, a lower low will be created.

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