In Between Days: Technicals

by CC October 23, 2011 10:26 pm • Commentary

Bespoke

The S&P 500’s 22.86 point gain today put the index above the 1,230 key resistance level that it had been struggling to break above for the past few weeks.  As shown below, the index now has quite a bit of room to run before it bumps into any significant upside resistance, which no doubt allows market bulls to breathe a sigh of relief.

Dshort

The S&P 500 broke 1 more resistance but on 2% below-average volume and on near-resistance momentum. It is now knocking on its upcycle resistance, 80 points or 6% away from its downtrend resistance. It took the index 9 weeks to move from its lowest close of the upcycle (1123) to the current close or 12.77 points/week on average.

Dshort

Year-to-date the index is in the red at -1.54% and 9.19% below the interim high of April 29.

From an intermediate perspective, the index is 83% above the March 2009 closing low and 20.9% below the nominal all-time high of October 2007.

Hussman

The most depressing display of math-illiteracy by investors last week was the excitement over a report suggesting that France and Germany had agreed to a 2 trillion euro bailout package for Europe, which triggered a “risk-on” tone for the rest of the week, even after the report was retracted as inaccurate. It was almost beyond belief that investors took that report seriously, but people have become so tolerant of unbelievably large figures that virtually any bailout number can now be tossed out without triggering the least bit of scrutiny. Notably, 2 trillion euros is more than the GDP of France, and is half the GDP of Germany and France combined. Moreover, Europe has just gone through a tooth-pulling process just to approve 440 billion euros for the European Financial Stability Fund (EFSF) from all EU members combined.

So barring new dedicated funds from Germany and France, which had zero chance of being forthcoming, the only way you could morph 440 billion euros into 2 trillion euros was for each of those 2 trillion euros to really be only 22 euro cents of protection. In other words, you could only say that the EFSF would “protect” 2 trillion euros in European debt by limiting the protection to about 20% of face value, without using any of the funds to recapitalize banks or deal with much deeper probable losses on Greek debt (50-60%). Those losses alone will gulp down a large chunk of the EFSF (not to mention post-default needs to stabilize Greece over the longer-term, which the Troika estimates at another 450 billion euros).

Last week, the yield on one-year Greek debt closed at 183%, a new record, and up from 169% the prior week. Yet on Friday, the market rallied on hopes of a comprehensive “solution” to the European debt crisis, and took heart that part of an 8 billion euro hold-over loan to Greece was approved. The 1-year Greek yield pushed 3 percentage points higher. As I’ve noted before, this limited amount of immediate relief is needed to buy time preparatory to a default. A clean solution to the European debt problem does not exist. The road ahead will likely be tortuous.

The Week Ahead (WSJ)

Economics and FedSpeak:

Monday

Chicago Fed National Activity Index

New York Fed President Bill Dudley speaks

Dallas Fed President Richard Fisher speaks

Tuesday

Weekly chain-store sales

August Case-Shiller Home-Price Index

August FHFA House Price Index

October Consumer Confidence Index

Wednesday

Weekly MBA Mortgage Applications Survey

September durable goods orders

September new-home sales

Eurozone debt crisis plan — the unveiling! Maybe!

Thursday

Weekly jobless claims

Chicago Fed Midwest Manufacturing Index

September pending home sales

Friday

September personal income and spending

University of Michigan consumer sentiment index

Earnings:

Monday

Amgen

Kimberly-Clark

Lorillard

VF

Eaton

Roper Industries

Masco

Plum Creek Timber

Zions Bancorp

Caterpillar

Invesco

Netflix

Texas Instruments

Tuesday

Peabody Energy

Cummins

DeVry

Lexmark

3M

PACCAR

Reynolds American

Regions Financial

Sigma-Aldrich

Waters

U.S. Steel

UPS

Simon Property

Ryder System

National-Oilwell Varco

Ecolab

Quest Diagnostics

AK Steel

Range Resources

QEP Resources

Nabors Industries

Life Technologies

FMC Technologies

Express Scripts

Boston Properties

Broadcom

CR Bard

Amazon

DuPont

Tellabs

Xerox

Molex

Illinois Tool Works

Sherwin-Williams

F5 Networks

McKesson

Total System Services

Western Union

C.H. Robinson

Wednesday

Wyndham Worldwide

Stericycle

Sealed Air

Prologis

Novellus Systems

Northrop Grumman

Lockheed Martin

Hess

General Dynamics

Exelon

BMC Software

Allegheny Technologies

Akamai Technologies

Allergan

AFLAC

Thermo Fisher

SCANA

Praxair

Mylan

MeadWestvaco

Medco Health

Hospira

Corning

Dr. Pepper Snapple

Bemis

ADP

Visa

Torchmark

Symantec

Owens-Illinois

Norfolk Southern

LSI

Equity Residential

Equifax

Cabot Oil & Gas

Ameriprise Financial

Assurant

WellPoint

NASDAQ OMX

Sprint Nextel

Boeing

Southern

ConocoPhillips

Avery Dennison

Harris

CA

Teradyne

O’Reilly Automotive

Thursday

Wisconsin Energy

Republic Services

Procter & Gamble

Precision Castparts

Occidental Petroleum

Johnson Controls

Hershey

Gilead Sciences

Expedia

CMS Energy

Celgene

Bristol-Myers Squibb

Avon

Exxon Mobil

Xcel Energy

Waste Management

Time Warner

PulteGroup

Mead Johnson

Moody’s

Iron Mountain

International Paper

Starwood Hotels

Goodrich

EQT

Colgate-Palmolive

Coca-Cola Enterprises

Cardinal Health

Ball

Airgas

Varian Medical Systems

Southwestern Energy

MetLife

Leggett & Platt

Flowserve

Federated Investors

Electronic Arts

Dun & Bradstreet

Cliffs Natural Resources

Cincinnati Financial

Cerner

Advanced Micro Devices

Aetna

DENTSPLY International

Dow Chemical

Zimmer Holdings

Motorola Solutions

Altria Group

CONSOL Energy

Citrix Systems

Franklin Resources

Raytheon

Cameron International

Principal Financial

Motorola Mobility Holdings

VeriSign

KLA-Tencor

Eastman Chemical

Friday

Constellation Energy

Cablevision Systems

Coventry Health Care

Dominion Resources

Interpublic Group

Merck

Weyerhauser

Newell Rubbermaid

Newmont Mining

Goodyear Tire

Chevron

Biogen Idec

Aon

Apartment Investment & Management

Rockwell Collins