Will Housing Data Save the Week?

Data released this morning showed a rise in the Housing Market Index, as shown on the graph below (courtesy of www.forexfactory.com). The graph shows a very soft housing market since numbers fell below 50 in 2006. There are more housing and home sales reports coming out each day this week...will see what the trend shows in those and subsequent market reaction.

In this regard, I've shown a Daily chart of the Realty ETF, ICF below. It has shown relative strength to the Major Indices the past few days...however, price dropped and closed below a near-term support level as it could  not rally above confluence resistance of the 200 sma (pink) and Year-to-date Volume Profile POC (red horizontal line)...a chart that I'll keep my eye on during the course of the week...any turnaround and rally on this ETF could have a positive effect on the Major Indices...otherwise, continued weakness will likely produce a drag on the equity markets.

Below is a Daily chart of the Financials ETF, XLF. Price broke and closed below near-term major support...a break and hold below its next confluence support level of 12.00 could send it down to 11.00.

BAC closed below its confluence support level of 5.00 today, as shown on the Daily chart below. As I noted in my post on October 3rd, major support is sitting around 2.00 on its Quarterly timeframe:
http://strawberryblondesmarketsummary.blogspot.com/2011/10/200-in-store-for-bac.html We'll see where it goes from here.

I'd be looking for a substantial drop in the YM/Dow 30 if major weakness persists in BAC and in XLF. Today, the Dow outperformed the XLF and the Russell 2000, as shown on the 1-Day 1-Minute percentage comparison chart below. The Commodities ETF, DBA, held up the best today, with ICF dropping in line with the Dow, S&P 500, and the Nasdaq 100.

Below is a 4-Hour chartgrid of the YM, ES, NQ & TF. There are now 2 out these 4 whose 50 sma (red) has crossed below the 200 sma (pink) once more to re-form a bearish Death Cross...namely, the ES & NQ...the 50 sma is presently 0.20 above the 200 sma on the TF. A break and hold below their respective lower Bollinger Bands should be sufficient to send price further down to resume their bear market movement and fill the gaps below, as shown on the 30-minute (market hours only) chartgrid below. Since the VIX closed just below 25.00 today, it will be important for the bear case for it to return and hold above that level.

Another Decline in European Current Account

Data released pre-market today shows another decline in the European Current Account, as shown on the graph below (courtesy of www.forexfactory.com). Rarely has it been above zero since 2005.

The important support level of 1.3 was breached overnight on the EUR/USD as shown on the Daily and 4-Hour charts below...another break and hold below this level could send price down to the next (confluence) support level around 1.277.

Watching Japan's Nikkei Stock Futures Index

My last post of December 1st on Japan's Nikkei Stock Futures Index, NKD, refers: http://strawberryblondesmarketsummary.blogspot.com/2011/12/capital-spending-shrinking-in-japan.html For a summary of why I've written a number of posts about this index in the past, I'd urge you to take a quick look at that post.

At the moment, the NKD is trading lower in overnight trading as shown on the Daily chart below. A break and hold below the last swing low set on November 25th could send it plunging...this could set the tone for U.S. Major Indices to follow. (Other Asian markets are down as I'm writing this, as well.)

Below is a 4-hour (market hours only) chart...price has filled 4 out of 5 gaps since its recent decline on increasing volumes...at the moment, it's sitting on the 5th gap, which is very large (235 points)...we'll see if some or all of it gets filled soon.

"Teamwork" in action...

How YM, ES, NQ & TF closed out final OPEX for 2011

Today saw the YM, ES, NQ & TF close out their 4th quarter options contract for 2011. Each candle on the chartgrid below represents a one-Month Options Expiry period. Most of the price action after the large red July-August OPEX candle has taken place inside that candle's range. The last three candles reflect indecision in these markets on consecutively lower volumes (large upper and lower wicks).

Unless renewed optimism enters equity markets on a global level in the new year, we could see these e-mini indices mirror a drop similar to the one that occurred in 2008 after the arrows that I've added. Granted, they may not fall to the same extent, but a fall (and, potentially, a substantial one) is possible, nonetheless...at least to the bottom of their Bollinger Bands.

Below is a Daily chartgrid of the YM, ES, NQ & TF. The YM, ES & TF are hovering around their 50 sma (red), while the NQ has been weaker of late. Next week, I'd be looking to see whether they move above or below this moving average, and on what kind of volumes. No doubt, volumes will be lighter, so we could see some volatile moves intraday.

Below is a 4-Hour chartgrid of the YM, ES, NQ & TF. They were unable to hold at today's highs and are currently below their 200 sma (pink). Of note is the fact that the NQ is under the influence, once again, of a bearish Death Cross formation (50 sma below 200 sma). The moving averages on the others are merging. I've found that once these moving averages merge, we tend to get a rather large move one way or the other afterward. At the moment, the NQ is signalling a bearish move...if we get a Death Cross on the others, that will also signal a move down. While the YM led today's move down, it will be important to see whether the NQ, as well as the YM experience much weakness next week. I'll be watch these two e-minis to set the tone for the other two.

Today, the VIX closed below the 25.00 level as shown on the Daily chart below. I'd be looking for a move back (and hold) above 25.00 to confirm any bearish movement next week, as well as any sustained move down in the S&P 500 Index.

We'll see what Santa has in store for the markets next week...have a great weekend!

Europe's Trade Balance down more than forecast

Data released pre-market today showed that Europe's Trade Balance declined quite a bit more than was forecast, as shown on the graph below...this continues to confirm the contraction that Europe's economy is undergoing...as depicted, 2011 is dramatically weaker than 2010.

At the moment, the EUR/USD is being squeezed between 1.31 and 1.30, as shown on the Daily and 4-hour charts below...it's currently in a bear flag formation...will see on which side the break ultimately occurs...so far, trading has been weak since today's market open.

Where are the "Fat Cats" hiding and what are they up to?

Where and what, indeed! Methinks their hiding place is within the "Thin Ice Zone" that I mentioned in my post yesterday: http://strawberryblondesmarketsummary.blogspot.com/2011/12/some-bears-are-still-awake.html

I say this because what has been "hatched" from within this zone since August of this year has been one clever-sounding rumour after another, and cleverly-timed press releases, the results of which have made little or no impact on resolving global economic challenges as countries' politicians struggle with fiscal/unity problems. In the meantime, we're left with this volatile and unpredictable market of 2011.

For example, as I mentioned in my post of December 3rd: http://strawberryblondesmarketsummary.blogspot.com/2011/12/fat-finger-look-likes.html, immediately after Standard & Poor's downgraded the U.S. credit rating, price plunged down towards the upper end of the former "Fat-Finger" candle on the Weekly timeframe of the YM, ES & NQ, and mid-way into it on the TF...a violent re-test of this extremely volatile action...pre-planned or coincidence?

Manufacturing may have been up on this latest monthly data release, as shown on the graph below, but business inventories also rose this past Tuesday, as shown on the second graph (both graphs courtesy of www.forexfactory.com). We'll see whether the smoke continues to billow from those chimneys or whether it will reduce to a wisp as growth slows in global economies...something to add to the "Watch" compartment in my  "little grey cells" as a potential negative influence/drag on the equity and commodity markets.

By the way, the TF has re-visited the "Fat-Finger" zone since my post of December 3rd and is currently trading within...the ES dipped its toe into that level just after mid-night last night and has closed today just above...the updated Weekly chartgrid of the YM, ES, NQ & TF is below...the important "Fat-Finger" levels are 11000 for the YM, 1200 for the ES, 2050 for the NQ, and 730 for the TF...a hold below those levels could set the stage for more violent plunges ahead.

The ES, NQ & TF are still trading within their respective "Thin Ice Zones," while the YM trades above.

The VIX closed above 25.00 again today, as shown on the Daily chart below...as I mentioned in recent posts, it's my opinion that anything above this level holds the potential for large volatile swings in the S&P 500...an important level to be held by the bears.

Finally, be sure you know who's waiting under the mistletoe before venturing underneath...it could be a Santa-imposter!

US $ vs British Pound Sterling

With Britain's Prime Minister Cameron walking out of the EU Summit talks last week and withdrawing Britain's support for their latest agreement, it could be interesting to see whether money flows (potentially out of commodities and equities) into the British pound sterling, or the US $, or both, if the Euro continues to weaken.

Below is a Daily chart of GBP/USD. The British Pound was weaker today than the US $, but has paused at trendline support.

Below is a Daily chart of EUR/GBP. The Euro was weaker today than the British Pound, but has also paused at trendline support.

Below is a Daily chart of EUR/USD. The Euro was weaker today than the US $, but has also paused at a confluence of price and trendline support.

All in all, the Euro has been weaker than the US $ and the British Pound recently...on the currency side of things, it appears that money has been flowing into the US $ and the Pound, with more flowing into the US $. The 5-day 5-minute percentage comparison chart below confirms this relationship...something to watch for in terms of either a continuation or a reversal of money flow back into the Euro.

Some bears are still awake...

Below is a Daily chartgrid of the YM, ES, NQ & TF. Relatively-speaking, the Dow is holding up better than the other 3 as it closed on its 50 sma (red) and mid-Bollinger Band today, while the others closed below. In keeping with my "mean" theme from yesterday's post, the YM returned to its "mean" (50 sma), while the other 3 moved away and below.

Below is a 4-hour chartgrid of the YM, ES, NQ & TF. Price continued its downward trek on this timeframe and put in a lower swing high and low...moved away and below its "mean"...and closed at its lower Bollinger Band. My short-term RSI readings are a bit oversold, so price may bounce somewhat from here, or pause.

Below are 4-hour charts of the YM, ES, NQ & TF. My post of November 30th referred to a "Golden Fibonacci Sweet Spot":  http://strawberryblondesmarketsummary.blogspot.com/2011/11/golden-fibonacci-sweet-spot.html
It's a confluence of numerous Fibonacci retracement and fanline levels...it was my opinion that these markets would need to hold above this level on any pullback if I was to be convinced that the rally that week was sustainable in order that we could see them reverse the bearish moving average Death Cross formation that was present then on this timeframe, and on the Daily timeframe.

Since then, the moving averages have moved into a bullish Golden Cross formation on the 4-hour timeframe for all 4 e-minis, and on the Daily timeframe for the NQ. While price has, so far, held above the "Sweet Spot" for the YM, it has been substantially penetrated on the other 3 e-minis. Additionally, price has fallen back into the "Thin Ice Zone" on the ES, NQ & TF, which is the high and low of the daily candle from August 5th...the day that Standard & Poor's downgraded the U.S. credit rating...since that date, the markets have gapped up and down a lot within this zone and there is much weakness and volatility within.

Inasmuch as the YM is holding up the most on this downdraft, and since the Financials sector, XLF, held up and actually closed in the green today, as shown on the Daily chart below, I'd be looking for either a demonstration of increased weakening on these 2 to continue shorting the TF, or a slowing (and reversal) of downward momentum on the ES, NQ & TF to possibly consider going short-term long.

The 1-day 1-minute comparison chart below shows how XLF was propped up today, relative to the Major Indices, and Commodities.

The VIX closed above the 25.00 level again today, as shown on the Daily chart below. As long as it stays above that level, I'm wary of going long on the TF on an intraday basis.

As long as the "flight to safety" money flows into the U.S. $, it appears that the equity markets will continue to fall...it may reach a level of 82.325ish (+2 deviation level of uptrending regression channel), as shown on the Daily chart below, before pausing.

In conclusion, if the markets were to turn continue falling, I'd be looking for a bearish cross, once again, of the 50 sma below the 200 sma on the NQ on the Daily timeframe, as well as the re-formation of a bearish moving average Death Cross on all 4 e-minis on the 4-hour timeframe, as a confirmation of the resumption of the bear market...if that were to happen, I think these markets could weaken quite quickly and fall quite rapidly (without any QE intervention from the Fed...and the ECB in the European markets). And, it's quite possible that the lows of 2011 will be broken. As long as the Commodity markets continue to fall, I think it would be difficult for equity markets to rally.

More bad news from "Down Under"...

Further to my post on December 11th (http://strawberryblondesmarketsummary.blogspot.com/2011/12/home-loans-and-trade-balance-lower-down.html), data released tonight shows a big drop in Consumer Sentiment in Australia, as shown on the graph below (provided courtesy of www.forexfactory.com). This latest release shows it tied with the low registered in July this year...both months are the lowest reading since the October 2008 low...not a good reading for consumer spending, which accounts for a majority of overall economic activity.

At the moment, the AUD/USD forex pair is trading lower and has fallen below the 1.00 parity level, as shown on the 4-hour chart below. The next support level is 0.99, followed by 0.97.

Uncle Scrooge says, "Get those ducks in order!"

With today's Fed announcement came this press release:
http://www.federalreserve.gov/newsevents/press/monetary/20111213a.htm

As we now know, the Fed stated that:
"Information received since the Federal Open Market Committee met in November suggests that the economy has been expanding moderately, notwithstanding some apparent slowing in global growth."

The upshot of their December meeting was that there was no change to their policy from the last meeting.

What I'm hearing again from both the Fed and the ECB are (unspoken but implied) messages to their respective political leaders to find ways to deal with the slowdown in global growth...in other words, to "Get those ducks in order." The problematic economic ball has been thrown back to the politicians, both in the U.S. and in Europe. And we know how divided those houses are.

With that being said, it's my humble opinion that, for the next while, the equity markets will continue to trade within their respective ranges that are in play on the Daily charts below of the YM, ES, NQ & TF from their August lows to their October highs. I don't believe that the Fed is going to step in with any kind of QE stimulus as long as these markets trade above their August lows...and possibly even lower...with the caveat that as long as world economic and financial conditions remain at their current levels, i.e. without new financial crises erupting. With today's higher volume, we'll see if a market sell-off comes in tomorrow or in the next several days, or whether there is an appetite to add further risk before Christmas which could send these markets above their October highs.

On a shorter-term basis, I'd say that if these markets break and hold below their recent narrow range from December 1st, we could see a retest of their November lows, as shown on the 4-hour charts below. All 4 of these e-minis have made a lower swing high and lower swing low on this timeframe...however, the 50 sma (red) is still above the 200 sma (pink), and, as such, the moving averages are still in a bullish Golden Cross formation, which may keep price trading in this range.

Additionally, and in the short term, the YM, ES, NQ & TF are still trading under a bearish Death Cross moving average formation, as shown on the 15-minute charts below...as such, they are still subject to further bearish downside movement.

If Gold continues to sell off and the Euro continues to fall, I see little likelihood of any kind of major Santa Clause rally in equities...particularly if Gold falls below its next Fibonacci confluence level of 1590, as shown on the Daily chart below, and if the EUR/USD falls below a trendline confluence level of 1.277 as shown on the Daily chart below.

The VIX closed above the important 25.00 level as shown on the Daily chart below...a hold above that could send the equity markets further down...however, volatility has fallen dramatically recently...we'll see whether additional short-sellers step in here to take the markets down with conviction, or whether the markets just drift until next year. I don't imagine the big players, who are currently long this market, will want to give up their gains from the August/September lows too easily, but they may not be prepared to take on additional risk until next year.

In conclusion, as an intraday e-mini futures trader in this current market environment, I think the easiest and safest way for me to play the current market is to look for an acceleration in trading momentum either away from a "mean" on whatever timeframe I'm basing my trades, or towards a "mean." So, for example, if I were looking at the above 3 timeframes on the TF, and if I used the 50 sma as the "mean" on each respective timeframe, I'd see that it has reverted to the "mean" on the Daily, away from (below) the "mean" on the 4-hour, and away from (below) the "mean on the 15-minute. If the selling continues tomorrow on accelerating volumes (and higher volatility on the VIX), price could eventually drop to the lower Bollinger Band at around 666 on the Daily chart before, potentially, reverting to the "mean" on this timeframe...time will tell what happens.