More ES, More Likely Our Move Did Start Yesterday

If the above is true, then our timing was just about right on as my thoughts before the new week were early this week, Tuesday, possibly even Monday afternoon. It looks more like Tuesday, but the point is the 30 min positive on all of the Index futures was a very strong signal and still is, the fact it grew to reach 60 min is just a bonus confirmation.

Remember my email from Saturday that I posted regarding a member's question as to the catalyst and I agreed that the normal or usual suspects were likely, but I wouldn't be surprised to hear some F_E_D rumors, yesterday as you know we got even better with the two biggest F_E_D hawks coming out and speaking in little, sweet "Dovish" tones.

Add to that today's ECB promise by Draghi, that's he's "Ready to act" and you have the makings of a nice catalyst.


As I already showed the 1 and 5 min (and most Index futures look pretty similar, there are some variations, but not enough to change the basic premise of the move)..

*The opening parabolic move is nice and all, but it's really not where the meat and potatoes of the ES strength is, it's just a flashy open and that doesn't impress me much, what's below does (plus you know I don't trust parabolic moves)

 15 min ES looks a lot like that Inverse H&S pattern, although far from textbook, the point is ES is moving at the right places, the divergence strengthened at the right time. This doesn't mean we should expect a straight line up, far from it, but as far as the next tradable trend, and probably the last to the upside, I think we are well on our way.

 The 30 min chart is what has been the "High probability" aspect, with a divergence or accumulation like that sitting there, it's just a matter of a few days before it fires.

And the 60 min joining the party just adds more weight. Interestingly, all gained and built stronger overnight, that's not too much of a feat for a 15 min chart, but for a 30 or 60 min, it's impressive.

As far as gold's move last night, I suspect that the liquidity problem that Chinese banks have been facing, that has been getting worse every day until today in which Chinese banks are actually no longer lending because of the freeze (it's been confirmed that branches of two bigger banks, Bank of China (BOC) and Industrial and Commercial Bank of China (ICBC)) have halted all lending to commercial and personal lines, right now this is being attributed to debt to loan ratios that they must maintain, there are also lending quotas set for banks and being near the end of the month some may be running in to those and with liquidity drying up, halting loans may not seem like such a bad idea.

Remember this started only 3 weeks ago and China is not considered by many to be transparent, as many lies as we saw about the health of US banks in 2007-2009, you can just imagine what the real situation on the ground is like in China.

It's possible gold was a victim of the liquidity freeze, that's what nearly took down the US banking sector and claimed victims like Lehman Bros. so its very possible gold was sold to try to create some liquidity.

In addition China or more accurately, the PBoC (China's Central bank) has said it will rescue certain banks, this is vague and leaves huge counter party risk wide open just like the US in 2008 and exacerbates the liquidity freeze as no one knows who that "other bank" that needs to be saved is, thus they shut down all overnight lending and the liquidity situation freezes, you'd think they'd have learned from the US circa 2008, but perhaps political interests don't want to name the banks, perhaps they are just trying to avoid a panic/bank run. Either way, they are in between a rock and a hard place.

The other obvious culprit may be the crash of the Indian Rupee which hit all time lows against the USD last night, and we know how much gold India takes up.

*****I would like to say this for all those that believe in the simpleton CNBC cause and effect of market movements, Do you really think ES would look the way it does now considering the Chinese situation if cause and effect  (as in news) where what moved this market?

Along those same lines, look at US Q1 GDP on the second and final revision this morning at 8:30, first revised lower from the initial print of 2.5 to 2.4, today was expected to be unchanged, however to many people's surprise it came in MUCH worse at 1.77% which is odd (well perhaps not that odd) considering yesterday's beat in Durable Goods,  Housing and Consumer Confidence. Expectations/Consensus was for an unchanged 2.4 print, they got a big surprise at 1.77%! Capex/Fixed Investment (especially non-residential) and Consumer Spending were responsible for much of the downward revision, in other words the F_E_D wants out, they have their reasons and I think we know what they are (Balance sheet and bubbles), but as far as the "Economic" face saving excuse, I think the GDP revision put a nail in that excuse.

Finally for now as I need to take a look at some opening indications, the $USD which flipped back the the historical correlation last week right in sync with the F_O_M_C, looks like this...

 $USDX 1 min not looking good intraday, that has been good for the market since the new (old/historical) correlation came roaring back last week.

The $USDX 15 min chart I mentioned yesterday as it was deteriorating more...

And finally the 30 min that went from a large positive that fired off (while the correlation flipped) and now the negative, which is so far (correlation wise) supportive of the market and the 30-60 min Index futures making an impressive upside move.

If we go to 60 min, things don't look the same and that is a reflection of "What comes next", that's why I say any strong upside is a means to an end, it's not the main focus.

I'm going to check out some other assets, not the least of which would include the PM complex.