Fundamentals Update

Last night I talked about the obvious things-with an analogy “keep your eye on the prize/the ball” and suggested looking where the focus is not. This may not be the best example, but as tensions in the Korean Peninsula dominate press coverage, one of the most risky things that could happen in Europe, Spain needing a bailout, just got worse. Overnight Spain's spreads widened to record highs. Last night I said I thought the EU had Ireland under control and could probably absorb a bailout from Portugal as well, the real trouble would be Spain. It seems I may have been wrong, very wrong. The German Finance Minister said this today in a budget speech to Parliament:

"In this context, I want to say very clearly that our common currency is at risk,"

"We have to assume responsibility," he urged. "If we can't defend our currency effectively as a stable currency, the economic and social consequences for our country and the people in our country would be incalculable," he warned.

We haven't even reached the details of Ireland, much less a Portuguese bailout.

HERE'S ANOTHER ONE OF THOSE WEDGE PATTERNS WITH A NEGATIVE DIVERGENCE I LOVE LATELY IN THE FXE EURO TRUST ETF-If we get a close around this area, I think we are reasonably out of the breakdown range of volatility and a decent entry zone.

In addition, the Swiss are sounding early alarm bells regarding the strength of their Franc which is killing their exports. The Eurozone is looking worse everyday. There was a website that took all kinds of bets regarding everything from sports to elections and it was pretty accurate, I wonder what their current bet looks like on the EU totally collapsing?

Last night at Trade Guild I published this article,

“The SEC Grows Some Misplaced Teeth” 

In addition to this article, the NY posts that the next target are the HFTs (High Frequency Trading Firms) and prop trading, which is an ongoing battle that has been in the works for years. Basically day traders can get a series 7 license and wok-and I use that term very loosely, for the firm. They trade their own money and have access to absurd levels of margin. Now don't get me wrong, I'm all for a more transparent and level field in the market, it's just this manipulation ad inside information has been going on for over a century with almost no action from the SEC, and now the Justice Department and FBI. The question is why now? Could it have something to do with the HFT firms effectively replacing the institutional bank's market makers and specialist system? I really don't know, but this is not a new issue in the markets, the SEC actions are new and it makes one wonder, “Why now?” when they've spent decades doing nothing other then picking on some high profile societal figures like Martha Stewart? UPDATE-Hedge Funds are now being targeted as well!

Last night I tangentially mentioned bank runs, well guess where they are now commencing...? Ireland and the money s going into Switzerland, which is exacerbating the problem noted above in the Swiss currency. Again how long before the E.U. Just totally collapses? With contagion running on it's own despite what the EU does, it seems the Union's destiny is already written on the wall. One word... “FXE”

Another hint the Tech sector is falling apart. BRCD beat by a penny but gave weaker guidance then Wall Street expected. BRCD is currently down over 9%. While BRCD is probably not the best fit within SMH, I've recently showed charts of SMH showing weakness in the tech ETF. Here's a more current update.

 SMH 10 min chart breaking at the highs on a negative divergence

SMH hourly showing the larger problem in the tech space, especially semis. If we do see a bounce, we may very well see sector rotation, to what? I'm not sure, financials, PMs, etc.

Asian shares traded down due to continued fears of China tightening and raising interest rates

 Here's that wedge pattern I love with a positive daily divergence and a breakout that looks pretty safe from the initial breakout volatility area.

A close here or higher looks like a pretty decent area to enter the trade as it has moved out of the volatility area. The last 2 night's I've ben discussing how successful these patterns have been and how they are showing up as shorts in the sectors that have been pumped lately.

South Korean President Lee Myung-bak escalated tensions on the Korean peninsula by ordering his military Tuesday to strike North Korea's missile base around its coastline artillery positions if it shows signs of additional provocation.

As for today's POMO, it came in weak, it should be a non event.

Updates coming ....