Closing Wrap.

News wise, Interactive Brokers are getting traders ready for commodity margin rate hikes that look like they'll be above the exchange imposed hikes. The unwinding of leverage seems to be a theme that is starting to make brokers nervous if the downside or a panic unwind comes to pass, their essentially covering their butts, unless they are being "asked" to cooperate by a government entity.

Last night I watched "Too Big to Fail" on HBO, a docu-drama about the Bear Stearns/Lehman Brothers period and it was very interesting. Catch it if you can, it may be out on a rental basis. One of the things that I didn't find surprising, but didn't exactly know about was when Hank Paulson called all the heads of the major Wall Street investment firms together and said that Barclays would be taking most of Lehman, but they didn't want the real estate portfolio. Paulson told these CEOs, all competitors of Lehman, to sit down in a room together and figure out a private sector solution, the government wasn't getting involved and "We will remember who was helpful and who was not". Jamie Dimon (in the movie) basically led the group and  said we'll all kick in  billion dollars and take the toxic assets. In another scene, Paulson more or less ordered the head of the SEC to call Dick Fuld of Lehman and tell them to file bankruptcy, a power the SEC didn't have, nonetheless, the call was made in a roundabout way. Eventually the Lehman deal fell apart when Paulson forgot to run the Barclays deal by British oversight and they didn't take kindly to being left out and killed the deal, saying "We aren't going to import your cancer". Interestingly, like a total amateur (literally) Fuld could have had a deal in which Warren Buffet bought Lehman at $40 a share, instead Fuld insisted that the stock was worth $66 a few months ago and he wasn't giving away the company. I can't remember how much Fuld held in stock, it was over a 100 million, at the end of all of this, he was left with $56,000.

Any way, good movie, the point being the government can exert pressure in round about ways. What I find interesting was the last line of the movie after the Fed and Treasury forced banks that didn't need TARP money to take it, Bernanke said, "I just hope they'll use the funds as they were meant to be used". It makes me kind of wonder if this stock market/commodity bubble may have been a scenario in which POMO and other funds given to the banks were used in a manner which was unintended. After all, the economy is no better,  the jobless rate is more or less unchanged, the housing market may be worse off, but the market is certainly higher.

As for today:

The S&P 500:  178 stocks close unchanged or better-much better then yesterday.
The NASDAQ 100: 19 unchanged or better (yesterday it was 7 I believe)
The Dow: 9 stocks unchanged or better (yesterday there was 1)
The Russell 2000: 584 unchanged or better

The price/volume relationship didn't have 1 dominant, the only real change was yesterday the highest relationship was close down/volume down, today was largely the same except for the Russell 2000 which had a few more stocks close down on rising volume.

3C is all over the place in the short term, it looks like a very disorganized market. The only charts that can possibly be interpreted to make any sense would be the mid-term charts (10-15 minute).

 DIA 10 min -this could make some sense within a range. The longer the range and divergence persist, the larger then anticipated move up.

 The Q's look horrible and we can't even get to a 10 min chart, 5 min is as far as we can go with this idea.

 The SPY 15 min.

And another that is looking bad, the IWM on a 10 min chart.

I mentioned this as a possibility last night, basically a range would have to persist with improving 3C readings without the market dropping like a rock and the Q's and IWM are both very close to falling off that ledge. Both were the worst percentage losers, the SPY was nearly flat and the DIA off by about .20%.

Internal breadth readings improved slightly today, but that is to be expected as today's percentage losses were no where near yesterdays so we can chalk that up to useless.

USO looks like it has done the work and wants to rally

60 min chart, TSV and 3C have both called the top and are showing positive activity inside this bearish descending triangle.

The problem with USO is we've had several peeks above resistance and there is no volume to push a breakout through. Maybe this is being controlled for some sort of market synchronisity (the energy complex will have to rally if the market stands a chance in doing the same), but there will have to be some increase in volume to get the fish biting

Silver looks very similar to USO

 This 60 min chart looks nearly identical to USO in both 3C and TSV, whether it be the top or the positive action inside the more benign triangle.

Silver did breakout today, volume was up, not hugely inspiring though. I mentioned earlier that I felt this may be a bumpy ride. Looking at the EUR/USD pair right now, the trend is at best consolidating. If it turns out to be more then a consolidation, Silver will likely fill some of today's gap. I'll check on the pair when the Asian markets open later tonight.

Financials did stabilize a bit today (so there's no confusion, I'm talking about in the very short term)

 Although XLF was off by .06%, lower prices were tested and rejected.

XLF 15 min, 3C has worked well here calling the top, so I suppose we should give this positive divergence the benefit of the doubt and say financials are looking a little better. Financials will be critical for the market to move as well as energy. Again to avoid confusion, I'm not looking for a bull trend, at most a head fake. As I showed you last night, we are really looking at the trees or more tactical perspectives. The strategic outlook is very bleak for the market right now. If I'm  long term investor, I pick a handful of shorts, leave some cash on the sideline and enjoy my summer.

Tomorrow we hav the DOE inventories, which could be a catalyst for energy, Durable Goods and the House Price Index, I believe the Fed's Kocherlakota is also speaking tomorrow (he's been floating the 50 basis point hike in the Fed Funds rate) so that could be interesting.

I'm going to take an hour or two off with my wife and start looking through the Chinese stocks as well as  Natural Gas companies to see if any jewels pop up. I'll update later if the Euro takes a nose dive or if anything interesting pops up out of Asia. Enjoy your evening.