Overnight Trade

 ES Futures shows the closing EOD positive divergence on the 1 min chart. That lifted futures a bit above the New York 4 p.m. close, a negative divergence set in  and the futures have dropped off since.

 ES 1 min closer look at overnight. The negative divergence on the overnight rally and the subsequent fall into negative territory, currently trading in line.

 ES 5 min shows pretty much the same, except a positive divergence currently, we'll see if it holds overnight.

 ES 15 min shows a number of positive and negative divergences, currently there's a small relative positive divergence overnight, again we'll see if it holds throughout the night.

 Here's a look at international futures with the US in the red box as of about 1 a.m., there's a lot of red there.

 Here's FX trade-EUR/USD since the close, a slight rally followed by a move down. This hart depicts a downtrend with lower lows/lower highs.

Here's the long term pair on a 60 min chart for the entire rally. You can clearly see the top I mentioned as forming yesterday, it looks like a H&S top and at the purple arrows it is making lower lows/lower highs and approaching the neckline support.

 This is the Euro/FXE long term 3C chart-30 mins in a leading negative divergence.

Here's the big picture since the August fall, currently the 60 min is leading negative and this looks like a downtrend with Sept/Oct. acting as a consolidation within that downtrend.


As for Wednesday's news...


Business Week
"European banks, assuring investors they can weather the sovereign debt crisis by selling assets and reducing lending, may not be able to raise money fast enough to prevent government-forced recapitalizations."


I think this weekend's post about the Euro in a closed loop system was right on and the last thing the EU wants to hear are the two words, "reduced lending". This isn't good news for the EU economy considering how much businesses in the EU lean on banks for operating capital-80%.


From Reuters:


" Germany saw poor demand for its 10-year bonds at an auction on Wednesday "


This is the second failed bond auction for Germany in a week. Being the strongest of the EU, the fact Germany has now seen two auctions fail to cover the issuance is proof that contagion has spread from the PIIGS countries right to the heart of the Core. We talked a lot this weekend about what has been happening in France where the bond vigilantes are now targeting France the same as they did with Greece, Ireland, Portugal, Italy and Spain. This was what the German/French led bailouts were trying to avoid, contagion spreading to the core-it's there right now. 


MS reported earnings and they have resorted to the same accounting gimmicks as the other banks. When compared, apples to apples, $1.12 of their $1.14 EPS is chalked up to accounting gimmicks.


As for the G20 ultimatum...
"France's Sarkozy says Euro zone deal talks stuck over relations between EFSF and ECB according to centre right legislators"


No new news there.


As for AH earnings, both American Express and Ebay miss, down -1.33% and -3.86% respectively.


From FAZ


Any decisions regarding leveraging the EFSF made by Chancellor Merkel, will have to be authorized by the Bundestag as was already decided by the German constitutional court, so already deep divisions between Merkel and Sarkozy will be that much deeper when Merkel's hands are possibly tied by the Bundestag. Needless to say, dreams by the G20 of a quick resolution to the EU crisis are fading rapidly.
  
From the FT
Apparently whatever the final size of the EFSF, whether the current $440 bb Euro or the dreams of leveraging it up to 1 trillion, the banks are going to face a major shortfall. Apparently there's about $100 bb available for EU bank re-caps and a probable shortfall of up to $1 trillion dollars which means to save countries, banks will be the last one standing without a chair when the music stops. If it were that simple! By now and after going through this in the US, we should all know that the Toe bone is connected to the Foot bone, the Foot bone is connected to the Ankle bone, the Ankle Bone is connected to the Leg bone and so on. If one fails, the other won't be far behind.


There's a lot more, not much of it is good. This is starting to feel like 2008 on steroids. The market won't be able to bury its head in the sand on this one, the pendulum always swings back-overshooting the middle ground by an amount that we rarely can imagine.


See you in a few hours...