I am just saying (as I believe you are too) that the U.S. Federal Reserve will not allow falling prices, tight liquidity and high interest rates in the commercial market. Unfortunately.

But we’re still many months (hopefully years) away from Bernanke’s helicopter going into real action. If we’re lucky this recession lasts another 12 months without panic inflation from the FED.

Yes, maybe a word like “dis-inflation” would be better.

Matt

India tightened credit again yesterday. Reserve Bank hiked repo rate 50 basis points to 9.0%. Cash Reserve Ratio was increased again to 9%.

I am not sure we should call it deflation, as that term will be misunderstood by people who want to misunderstand it.

A worldwide credit crunch is maybe better? It is getting tight out there.

My contribution for the day: SPX 1262-63 to 1269-70 is ST resistance, which sets up a test of weekly-close support at 1168-79 with a stop in the ~1200s-20s along the way, IF 1245-47 is broken to the downside.

Alternatively, a breakout above 1270 (28 DEMA) implies a possible C-wave (???) rally to the 1370s-80s, stopping at the 1300s en route.

SPX 1257-60 is weekly-close resistance, whereas 1280 is monthly-close resistance for Thursday’s close.

BKX 66-68 is ST resistance, which, if held, projects the upper 40s; a breakout above 67-68 projects 95-100, which is certainly possible with the gov’t and Fed bailing with both hands, but not yet probable. Today’s close at the 50 DMAs might have been the extent of the rally.

I would expect the long stocks-short oil (and vice versa) trade to fade increasingly hereafter, as the global recession worsens into late summer and year end, and as the down phase of the 9- to 11-yr. commodities cycle bears down into ‘09-’10 or ‘11.

The gov’t employment data at this pt. in the business cycle are notoriously worthless and more so today due to the Millennial cohort being dramatically smaller as a share of the total labor force than were their Boomer predecessors, contributing to a much slower growth of the labor force than in the early to late ’70s. With Boomers leaving the full-time, regular labor force en masse (voluntarily and otherwise) over the next 2 decades, the structural “official” U rate will “appear” to be much lower than the “effective” rate.

The labor market in the yrs. ahead will be particularly unforgiving for workers 30 and under and those 50-55 and over (see the experience of 1930s in the US and Japan in the ’90s-’00s).

More later in the week, FWIW . . .

SPY has the same patterns as XLF. The intra-day chart has the head-and-shoulders pattern and is overbought, which is why I went short SPY.

The daily charts for SPY and XLF now have an uptrend line, which I have drawn from the July 15th low to yesterday’s low. I would say that the daily pattern is now a symmetrical triangle, or a weak-looking ascending triangle.

A few days ago, I mentioned that the Q’s have an ascending triangle on the daily chart. SPY and XLF now have the same pattern. The reason why I describe it as weak is because I have the upper trendline for the Q’s drawn at $46, and they haven’t been able to get up there for four days now. If the Q’s can’t push higher tomorrow, I might “downgrade” the pattern to a symmetrical triangle.

So yes, the daily charts are trying to shape up, but it is still touch-and-go.

I think the daily charts will breakdown. I don’t think the market is at the point yet where it can ignore job losses. In addition to the BLS report, we now know that the weekly unemployment-claims report has the power to knock the market down. So, that will be instilling fear on a weekly basis for some time to come.

Matt

I see the GOOG bear-pennant now. Nice. Apple is also solidly below its recent downtrend line. The Q’s picked up a bit of volume today, but it was still below average. This was no barn-burner.

Matt

The hourly looks like a H&S.

Here’s something to keep an eye on: GOOG traded like a dead dog today. +1.3% for this high beta beast? Still below $500?! On low volume??!! Bear pennant forming!!!! Can’t be good news for the Qs… AAPL also lagged the Qs