Overnight and into the open...

If you believe the financial media accounts, one of the reasons ES held up overnight is a lot of chatter of further stimulus or easing (in some cases $2 tn Yuna being cited), however  a release in Chinese daily Xinhua which said that China has no intention of introducing large scale stimulus.

For members, I think we know what this is all about as the timing was covered in last Friday's post, the main factor being "keeping up emotional sentiment" during a short squeeze, which a 3-day weekend was not conducive to.

ES even held up well over night after Spain posted a record drop in retail sales. Spanish Retail sales dropped 9.8 percent in April in year-on-year on a seasonally-adjusted basis, a 22nd consecutive decline.

There were several PIIGS debt auctions that came in with worse yields as well, ES shrugged it off.

In the US, the 9 a.m. Case Shiller missed.

Released On 5/29/2012 9:00:00 AM For Mar, 2012

Prior Consensus Consensus Range Actual 20-city, SA - M/M 0.2 % 0.3 % -0.2 % to 0.7 % 0.1 % 20-city, NSA - M/M -0.8 % 0.0 % 20-city, NSA - Yr/Yr -3.4 % -2.7 % -3.0 % to -2.0 % -2.6 %

CS came in below the prior and consensus on the top 20 composite.


Consumer Confidence comes out momentarily.

ES overnight

 To the left in yellow is the triangle consolidation/continuation pattern that was head faked to the downside as traders would have expected and then moved to put those shorts at a loss at the green area. Europe opened at the white arrow.

In orange is Friday's EUR/USD continuation/consolidation triangle we were watching for a head fake shakeout to the upside which came on the open of FX trade this week. As mentioned last night, note the flat, base-like area in the Euro over the last several days and the Euro remains above that long term resistance trend line.

Speaking of bearish consolidation/continuation patterns, the most important one we have been watching in the market was broken to the upside as expected on the open today.

 Here's the bear pennant, which is a consolidation/continuation pattern, traders using technical analysis would be expecting this pennant to break to the downside , starting the next leg down, we have believed Wall Street would do what Wall St. does 80% of the time and break price out to the upside instead, creating the start of a short squeeze, that's exactly what happened this morning.

Here's a closer look at the pennant, a clean upside gap through resistance. I had mentioned last week the pennant is only about 2/3rds developed and a breakout before it is fully developed will be extra bullish, we have that breakout. Now it's just a matter of keeping up the emotional pressure on the shorts to force a series of short squeezes as we have been expecting.

A market update on the opening action will be out soon.