Morning Update: Market Thread 6-22-2009

Futures are down significantly this morning with the /ES falling to the significant 903 level and so far finding support there.

Friday’s action did not satisfy the very small movement in the McClelland Oscillator on Thursday, so I expect a large move today. If we open here, that large movement may already be close to satisfied.

Below is a 10 day chart of the SPX. Note that Friday’s action remained within the confines of the small corrective up channel. That channel has lasted 3 days now, the same length of time as the larger down channel. Note that the 10 minute stochastic is overbought, the 30 and 60 minute are in neutral range.

I like the Elliot Wave count for the first time in months. The down move is clearly 5 waves and the corrective move up looks to me like a complete abc that started wave 3 down intraday on Friday.

Now that we have broken beneath that channel, I would expect wave 3 to at least equal wave 1 which was worth about 50 points. That would place wave 3 in the very strong support area around 880. 903 is the first area of support. Once 903 falls then prices are very likely to head to the next major support area which again is around 880. That area is the key… if it is broken then a larger correction than most people are expecting will be taking place.

Commodities are down sharply. That is not a good sign for the bulls as commodities and technology led this rally after the manipulation in the financials (who are also manipulating oil and other commodities). Without the leadership of commodities, further rally becomes way less likely. And beyond speculation, why would they continue to rally? Demand is certainly not strong, in fact it has fallen off the proverbial cliff.

This weekend we learned that the Fed is going to be a buyer at today’s bond auctions, but they don’t say how much and once again we return to the fantasy of QE (printing/buying our own debt) but now without any transparency whatsoever, not that there was ever any real transparency anyway. It is my belief that the $300 billion announced by Bernanke (and supposedly only $150 billion spent so far) is just the tip of the iceberg for the amount of QE that has happened in reality. Of course they don’t want their books to be audited by an independent agency, it likely won’t happen, and we’ve all seen the video of how effective and competent the internal auditor is (not).

So, the biggest weekly auction amount in history is scheduled for this week and that is the real news. More debt than there are buyers for and the Fed admits it must continue to buy its own debt. That is DEFAULT. When you can no longer finance your debts, you have failed – as in BANKRUPT!

And speaking of bankrupt, California is a disaster that is not waiting to happen, it is imploding NOW. Martin Weiss wrote a good article on California and I suggest everyone read it. With an economy larger than Russia or Canada, its collapse is not insignificant, quite the contrary, it will have a very profound effect indeed. Please take the time to read Weiss’s article: California Collapsing.

Despite some intermittent very nasty weather, I had a fun weekend riding my motorcycle all over eastern Washington and Oregon. One thing that is becoming clear to me though, is that the pace of economic and “other” events throughout the world is quickening as catching up on events and economic news was very difficult. I could not possibly cover all the important issues that I would like to cover. While that’s always been true, I do not believe that there has ever been so many events and things to consider as there are now. No, there are far to many balls and manipulations in the air. Some of those balls are going to start falling soon. I’ll plug Zero Hedge for having some very good articles this weekend, one that I think is very intersting is about the new rating agencies and how the government is using them to prop up the ratings on TARP collateral. While these new agencies claim to have no conflict of interests, the facts say otherwise as JPM is a large stake holder in one of them – Zero Hedge: Conflicts of Interest.

There is no economic data out today, but there is a bunch later in the week including the results of the FOMC meeting on Wednesday so it should be another exciting one.

In regards to the stockmarket, well, I think it’s ultimately in trouble.

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