No Crest in Job Losses Yet
Volume was light on Friday, so the selling was not serious. Some bulls will look at that action as signaling a buyable dip. On the other hand, those same bulls have been thinking that the recession is almost over, and they may take pause after learning of yet another monster job-loss coming in Friday’s jobs report. The forecast from Bloomberg’s survey is for another 660,000 jobs lost, and a jump in the unemployment rate from 8.1% to 8.5%.
Soros Sees 30% Dive in Commercial Real Estate
That will be bad for banks. From Bloomberg:
“Commercial real estate has not yet fallen in value. It is inevitable, it is written, everybody knows it, there are already some transactions which reflect and anticipate it, so we know, they will drop at least 30 percent.”
Gap of Doom Lives
From page 104 of The Candlestick Course by Steve Nison:
“If the price rallies to the top of the window [gap], but does not close above it, that resistance stays intact.”
We had a daily close above the G.O.D, but the market was not able to hold above on the weekly chart (click to enlarge):
So, the Gap of Doom has not been officially conquered. And on Friday morning we saw an example of the “Gaps Beget Gaps” phenomena as SPY created a new gap spanning the top boundary of its G.O.D. The fact that the market was not able to close Friday morning’s gap may be significant. It is possible that the big funds have switched into distribution mode.
Also, the top of the Gap of Doom at 826.84 is almost exactly the 78.6% retracement of the dive from the February peaks which makes it an important confluence level:
If the market cannot rally back above 830 and hold there, this “rally” may turn out to be a mere correction of the February plunge.
When everybody is speculating on how high the market might go, it is usually a good idea to start looking at downside targets. So, if what we have is just a correction of the February plunge, then a potential target is 624.64, which would be a 100% extension:
The low 620’s also turns out to be a confluence level as it would also be a 127% retrace if the rally fails:
A Soros Signal?
It is very likely that Soros has put on his short CRE play, and gave his -30% target publicly in order to recruit more traders to his cause. Was that a primary reason for the drop on Friday? Maybe, seeing as how the XLF was down 2.55% and SRS was up 7.98%.
Quarter-End Markup
While everybody is expecting the market to be held up through quarter-end, and I do see signs of “propping” in the trading action (megaphone patterns with bullish resolutions), it is important to keep in mind that historically, the last two days of March are down days.
Cold War Two
It looks like a new cold war may be brewing, but with a twist. This time the USA will be leading the forces of socialism while China leads the forces of capitalism. Funny how the tables have turned…
Americans have elected their two most left-wing senators to lead them into socialism, and the Chinese are now worried about their dollar and US bond holdings. If I were China, I would be stockpiling minerals like crazy too.
Support levels:
804.00 – This level has been weakened and can’t be counted upon.
797.00 – Still in play, but weakened also.
791.37 – Intra-day low from March 25th.
780.00 – Was resistance before the plunge to 666.
768.54 – The Geithner Gap from March 23rd.
752.44 – November 20th low close.
Resistance levels above are:
826.84 – The top of the Gap of Doom; now weakened.
832.98 – Rally peak so far.
839.43 – The final resistance level before the Gap of Doom on Feb 13.
852.00 – Was resistance on Jan 26th and Feb 4th.
875.01 – The February 9th peak.
Other Important Levels
800.58 – Weekly low close from 2002 (October).
815.26 – Monthly low close from 2002 (September).
823.09 – A close above makes a monthly bullish engulfing candle.
826.84 – Gap of Doom. Still critical on weekly chart.
828.51 – 78.6% retracement from Feb 9th peak using closing prices.
830.45 – Ditto, but using the extreme high and low.
836.00 – Obama Downtrend Line (OBL).
Holding above the 78.6% retracement level will convince many traders that a run to 875 is likely.
I have the Obama Downtrend Line at 836 today. I have drawn the line from the close on Election Day through the close of the January 6th peak.
If you have any other important levels we should keep an eye on, please post them in the comments.
it is funny how you quoted Steve Nison while I am watching one of his seminars on candlestick charting.
my resistance point agrees with yours and I am looking at 875 for adding shorts if it goes there.
852 another resistance just like you mentioned.
looks like we are on the same page. are you short much Matt or cash? am heavily short financials and some SDS
Breaking news: !!!The world is screwed!!
just kidding but here is the breaking news
A person with knowledge of General Motors’ plans says Rick Wagoner will step down immediately as chairman and chief executive of the struggling Detroit automaker.
remember when we suspected something was wrong with Citi reporting good earnings?
Exclusive: AIG Was Responsible For The Banks’ January & February Profitability
http://zerohedge.blogspot.com/2009/03/exclusive-aig-was-responsible-for-banks.html
Unless the futures recover a bit, SPY is going to open with a gap down below it’s rising wedge from the past few days. Volume didn’t exactly drop while the wedge was being formed so it may not be valid. Either way, there is a lot of negative divergences right now.
Watch out for announcements from the G20 meeting and GM & Chrysler…
What we are seeing here in my opinion here is a battle for power between big business corporate world and the US government. It is one of the scariest things I’ve ever seen. Just think about it.. over the years, with their power lobby’s, big business and the wallstreet elite have slowly gained influence within the government to drive home deregulation so that they can run rampant. They royally screwed up and what they have is the treasury doing everything they can to pump money into these dead companies while big bonuses continue to be paid. The Fed is acting like a shadow government where it doles out taxpayer money to whomever they wish with no regulation. The Fed is in the process to grab even more power based on Timmy’s testimony last week. Based on some of the actions taken so far, it seems that many of these actions are unconstitutional at best and criminal at worst. Who gave the wallstreet the right to spend taxpayer money? Who determines that a company is too big to fail?
Well.. what does the government do? They begin exacting rules on whomever takes money to regain control. They force the likes of CEOs (GM) to step down and tax bonuses. In an effort to regain the control that they lost, Congress is trying to play a bit of hardball here. Well.. who wins in the end. taking government money seems to be getting unpopular and so some companies are trying to give some back.
I guess the point is that both sides seem to be at war with each other. At times like these, they should be working together to improve the situation.. not attempting a power grab. It’s just so sad to watch and it spells the doom of the United States. So much inner fighting going on that they won’t hear it when the fat woman sings. Sad Sad Sad…
Asia is getting hammered; Nikkei is down over 4.5% and looking like a slippery ski slope. The futures continue to fall.
Did anyone else notice a new wave gaining momentum this weekend? No, not another EW count, rather a wave of reason. The videos and blogs out over the weekend seemed to me to show a change in tide: the voices against bailoutmania and calling instead for decreased debt are becoming louder and louder. Furthermore, they appear to be resonating with taxpayers.