"Under Pressure"

The daily SPY’s stochastics are oversold. Here’s the chart(Courtesy TDAmeritrade StrategyDesk):




The weekly stochastics are headed down. Remember, when they are both oversold, that’s the one time in the year you need to buy. They only hit oversold maybe once or twice in a year.

I still see some downward psychological pressure on the market. The media is full of the European contagion, but no one has mentioned what happened to the value of the sovereign debt that was purchased 6 months ago. I’m sure the smarter banks have tried to unload that, but I doubt there were many takers. We’ll see what happens when the MSM starts raising this issue. Banks’ values and capitalization are sure to suffer.

Our Super Committee failed, and should be named “Stupor Committee”. I think since they can't be fired for failing, they should be forced to return their salaries and campaign contributions received for the period they were "serving".

More downward psychological pressure: S&P says that we may see another downgrade of US debt. Corporations have figured out how to be profitable even though GDP growth is poor at best and Europe is in a recession. The way these corps may be profitable is through accounting tricks. But job growth in the US is on a rise—tiny, but on a rise. So there are some mixed psychological signals along with somewhat unbelievable fundamental signals.

On the technical side, we see some reasons to pressure the market upwards. Europe hasn’t capitulated even with Italian bonds trading at 7%, and a terrible German bond sale. Germany is under pressure as one of the main support columns for the Euro. If it backs out (Merkle says she wants a fast modification to the treaty, but it’s not likely to happen) the Euro is toast. That’s not gonna happen, don’t look for a UUP boost because of that anytime soon. Also, the daily stochastics for the S&P are oversold (see the above chart). Also, the $SPXA50 from Stockcharts.com shows that the number of stocks trading above their 50 day MA is at a low, and may be ready for a turnaround. (Chart courtesy of Stockcharts.com).



The biggest aspect of the market pressure is from the headlines. What will the headlines give us over the next week or two? If we do see a dip down toward the 1080 floor, I expect a quiet FED will turn a little more lionish and start buying MBS’s and other mortgage derivatives, in hopes that will spur common people to buy homes. It won’t. Common people are still afraid. But that headline will pop us upward for sure. You won’t see the politicians and PM’s do anything, so there won’t be any major headlines on those fronts.

Financials are supposed to lead the market. What happens to the financials, happens to the market. I think the financials are toast. Unknown regulation, and costs associated with it. It seems their bets may be coming home to roost: no more prop trading. Pretty much the only way they have to make money is loans, and nobody is borrowing. Inflation is upon us, feed prices are rising, farmers are making money, and we are all paying them for it. So nobody will want to borrow. You may see some headlines on these issues and more that affect the financials. Look at GS: it’s at 90. That’s the point I’ve seen targeted to take it private.

I will be playing the market on the short side, selling the blips. Because of the costs of borrowing shares, I play the short ETFs like SKF, REW, SRS, SDS, SMN, DUG DUST QID. If it looks like a significant upswing in progress, and I get stopped out of my short plays, I might buy some DIG QLD ROM USD. Saves on the borrowing costs.

Also I will be going home long SKF. Putting my money where my mouth is.