End of the Quarter

Yesterday I warned that if we had a sharp down day we would get a news bogey today. Barney Frank is the clever news bogey designed to prevent a plunge du jour. See if you can spot the template: #1 Barney gets himself on CNBC. #2 Barney talks about how there should be some flexibility in mark-to-market accounting for the banks (changing from present valuing of assets to some future value of assets, like deciding what an asset might be worth in.....say five years versus its present value. The idea is sound, but the irony is that mark-to-market all started with the Enron scandel, so this is an about face for all the haters of big business that picked up votes from the "downtrodden little guy" because they stuck it to the big corporations).

Pre-market futures are up a bit on the news.....I think everyone should get their turn on CNBC. I want to be on CNBC, how about you? Would you like to be on CNBC? CNBC is good, CNBC is our source for all things new and important in the business world. By the way, the first volley shot by Congress over easing mark-to-market accounting came on March 12, so Barney's using an old template, which means it may lose a little of it's effectiveness. If the market sells off a little more after the Googley-Eyes finish getting high off the manufactured news, then expect another news bogey tomorrow because Barney wasn't able to "do the job." The silly thing in all this is that the selling has more to do with the profit-taking competition at the end of the quarter amongst fund managers (after such a sharp run-up in March) than it does anything else right now. It's getting kind of nuts, watching these folks toss out bogeys every time the market has a blip.

Alright, so news bogeys are really not that hard to predict once you get to know the playing field.....Onward with the day.

Refer to yesterday's Market Wrap at the end of the posting for the chart and the numbers. If the Googley-Eyes get keep the momentum going this morning all the way into the open, then look for a gap test on the SPY around the $80 area. By the way, aren't you glad you're doing a lot of short swings. Yesterday was a dead-ringer for a breakaway gap and continued selling today. And yesterday's earliest entry was at the gap, right around $80. So for anyone holding full positions overnight, this morning will probably return them all the way back to the starting place yesterday, and leave them with nothing for all that effort and time. All because of a news bogey. Isn't it fun?......For those of you who took profits as you went, you have a chance to watch the chart construction early in the day and decide if you want to lather, rinse, and repeat with a fresh set of puts.

Another day, another news bogey, we'll see if this rolls over after a gap test or not. It's the last day of the quarter, so there will be some fundies who hope the market stays up, there will be some fundies who don't want to take the risk and they'll lock down end-of-quarter results, and there will be some fundies who get all googley-eyed over the news and buy it. Another day, another news bogey.....

10:38 am MT: If the market is going to roll over after the gap test, it will probably be right here. The SPY (market) just threw an Evening Doji Star on the 30m charts right at the $80 that I speculated on pre-market.

Here is a 30m chart of the SPX:
(click on image to enlarge)

If the market pushes back through resistance, then look for the 80.25 - 80.50 area. If it rolls over then it's probably headed down to the 78.75 area. The Bear Gap from yesterday will probably hold, and the market will probably continue to consolidate, but as always, you have to watch those news bogeys. The put setup off the gap test is not an extremely high probability scenario given the battles at the end of the quarter, the Googley-Eyes with their news bogey, and the potential (that fund managers are well aware of) for more news bogeys. So don't look for a big trade right here, keep anything you do small for now. It may clear up a bit later in the day, but I won't be surprised if we have to get through the ISM tomorrow to get the next general consensus.

10:45 am MT: The market is hanging between an Evening Star and a Bull Flag on the 30m charts. The desperate fundies want this pretty bad so they can close out their quarter with the best possible numbers. The realistic fundies are holding their breath and watching to see if any of their other realistic fundy buddies decide to cash in. It's an interesting balancing act going on right now. The news bogey worked. Again, don't try to get too aggressive with puts just yet, although I think the gap test will eventually run out of gas. I would be a nibbler at most right now and then add if the market starts to roll down. Also, don't try to make too much out of this day. As soon as Barney bogarted the market it was mostly over, that's why I spent all my focus on that event pre-market. Puts went from easy to more challenging, and trading went from higher volume to nibbling as soon as he got on CNBC (which, after all, was their whole purpose in the first place).

10:53 am MT: Bull Flag wins. Look for the 80.25 - 80.50 area next. If we get a one-candle failed signal, then you may have a put opportunity. If it pushes all the way to 80.50, then once again, don't get too aggressive.

11:12 am MT: I'm switching back over to the SPX since the gap push has gone far enough I don't need the SPY anymore to see it better. The current move up means that I'm going to use the 60m or 2hr chart for my base read for the next little while, and only use the smaller time frames to look inside the price action.

Here is a current 2hr chart of the SPX:
(click on image to enlarge)

You can see the SPX bounced right in the middle of no-mans land. I call it turning in space. When a stock or the market turns in space it's usually because time ran out before price was finished, or because of news bogeys. I've seen a lot of space turns in the past year because of news bogeys, when the unexpected hit the market (although we've all gotten to where we expect the unexpected). The SPX is headed back towards 810, which it probably would not have even come close to accomplishing today without Barney's bogart. Technically the SPX was headed for 767 - 770, and that was a fairly high probability, to the point it was almost fait accompli.

I know I keep hammering on this, but those of you who have been keeping the trades to the very short term, and realizing the news bogey and market manipulation risks continue to be high, have seen a lot more consistency over the past year than those traders who held longer and then were frustrated with a whipsaw just like today. There have been periods of short trends in the past year, but short swing trades take advantage of those anyway. It's all the other days and periods in between that have cut up a lot of traders who tried to hold a position for several weeks (or even days) at a time.

If the SPX rolls over in the 805 - 810 area, and a roll-over pattern forms on the 2hr charts, then there may be a put opportunity, but I'm not really that enthusiastic about it today. Technically the SPX made a lower low on the 2hr charts, so the next move should be a lower high. However, enough news manipulation and we could see a Broadening Pattern, which is the single hardest pattern to deal with in technical analysis. I have seen more Broadening Patterns in the past six months on both the daily and intra-day charts than I've seen in several years prior. The Broadening Pattern is very difficult to accomplish without news. It usually takes some sort of news to push a stock or the market from a lower low back to a higher high. And of course, we've had a lot of "news" (real or manufactured) the past six months.

1:00 pm MT: The SPX pushed to 810 (810.48) as speculated. There were no put opportunities, as speculated. And the market has been quiet, as speculated. As we move in to the last hour, expect volatility to increase with some mini-whipsaws as fund managers try to throw a little lipstick on the pig on the last day of the quarter. Give your eyes a rest and don't bother watching it all too closely. I thought the day was over as soon as the news bogey hit pre-market, and it pretty much was. I held out hope for one good signal intra-day, but it lasted all of 10 minutes and that was it. There were little trades here and there, but the momentum disruption hit pre-market and that was that.

1:45 pm MT: There goes the end of quarter profit-locking. Some big funds decided to lock right about when this usually happens - the last 15 minutes. The SPX is rolling over on the 2hr charts.