The Close

We didn't even get to talk about what I believe has turned the initial positive ECB knee jerk reaction to a negative in the market's eyes; this was already taking shape over the weekend and as has been the case for the last several years, everything the EU and now the ECB do to stem the bleeding, makes matters worse. In the context of EU policy action, it seems more like pure incompetence, a rush to do something, very little communication with key players, a hastily thrown together plan and no one considering the obvious holes in the plan that are clear as soon as they announce it. For example, when the G-20 demanded the EU do something and do it before the G-20 meeting (a week or two out), the EU came up with their grand plan to leverage up the EFSF (European Financial Stability Fund) to a trillion Euros over a weekend meeting, assuming the Chinese would be the financial white knight, perhaps they should have had more or some discussions with China as the first auction to raise a mere $3 bn Euros for the fund was a technical failure that couldn't raise $3 bn, how would they get to a trillion?

One of my favorites was the Spanish Banking crisis (still ongoing) with the weekend conference call in which the EU thought they'd hit the market over the head with a proverbial bazooka and come up with $100 bn Euros for Spain which at the time was thought to need about $60 bn, surely this 1-day plan would impress the market, except it didn't; as I remarked the very next day, the EU went from having a Spanish banking sector bailout to a probable full-scale Spanish sovereign bailout as the ESM (European Stability Mechanism-successor to the EFSF) would retain seniority over all other debt, which immediately made Spanish bond buyers and holders thing, "Greek Haircut" as their holdings went from senior debt to subordinated debt over 1 phone call. Bond traders started selling the Spanish 10-year sending it from 6+% to over 7.5% in weeks and putting the entire country at risk of default.

The ECB issue, which is just as full of holes (I can't decide whether through incompetence, by design or as an order from Goldman Sachs themselves) needs to be discussed and it will be as the initial Central Banking policy knee-jerk reaction is fading in Europe and has failed in the US today.

Here's what some key markets looked like at the close.

 This is one reason I say, "Don't get lost in the lines", we want the best entry possible, but often in retrospect it's not that big of a deal as AAPL took out 12 trading days of profits today alone.

 The NASDAQ Composite put in a Doji reversal as it broke above closing and intraday resistance.


 The Dow-30 with a Doji/Bearish Engulfing reversal formation.

 The NASDAQ 100 with  confirmed Harami reversal

 The SPX with a bearish engulfing reversal formation.

 The VIX surging today after having been at 5 year lows in complacency just less than a month ago. These are the charts you look back in retrospect and hardly notice the 3 weeks since the 5+ year low, I'm not saying you should, but when all is said and done, getting too lost in the lines can make you miss a great opportunity.

The Dominant Price/Volume Relationship for all the major averages today was Price Down / Volume Down, this is also the most common relationship during a bear market and while bearish for the internals of advancers/decliners, a close with higher volume would have made a short term reversal to the upside more likely, this is a less oversold situation

It still appears a bounce is coming, I'll have to look at the averages/3C and other things to see if it is likely to be overnight or through tomorrow, the 1 min AAPL divergence was run over.

 Both S&P and NASDAQ mini Futures have decent 1 min positive divergences, as mentioned, this could lead to an overnight bounce relieving any oversold conditions or it could (if it builds) lead to a bounce that runs in to the open tomorrow. I'll try to narrow that down.

Right now I have a skype call I have to make, as many of you know, my wife has been struggling with some health issues, we booked a ticket to send her to Hungary where she is a citizen (US resident) as she has free healthcare there and the ticket was less expensive (even last minute) than the deductibles, medication, etc. here in the US so she left Saturday night and had a long 10 hour layover in Berlin so this is the first time we will talk since I put her on a plane Saturday night.

I will be back as I have nothing but time right now :)