Friday, January 20, 2012

Brick wall…and a market leveraging and deleveraging

When you give a monkey a gun…you can never be sure what is going to happen…other than its probably not going to be fun. When you give a bunch of Central bankers and bureaucrats authority it is quite a similar situation. The markets are being driven by the totally random nature of where and how force fed liquidity decides to go. In our case, more liquidity force fed to institutions that do not know what to do with it is causing more insecurity and more market aberrations and ironically deleveraging - the exact opposite of the intention.

The chart above shows that our markets have come back to major resistance areas. It is highly unlikely that they will be broken. A significant reaction and more likely rejection should be expected here. There is, similar to the dollar last week, a setup that would require one more upside test for equities - which should simply be a test of the resistances in the charts above. This is one of the reasons that I felt the symmertical target for the S&P500 was likely the zenith for this market move in previous posts. That target was 1310 on the S&P500 cash and 1,318 on the S&P Futures. I guess that puts us squarely in the middle of it.
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