Looks Great But Ain't

The falling wedge noted in the futures yesterday has morphed into something less worrisome, for the moment.  I'm not surprised, either, for it is relatively easy for large operators to muscle around the futures here and there, especially at crucial times.  And now is one of those crucial times.

On the cash index it's quite different, which is why it's used for charting.  It doesn't trade.  It can't be pushed around.  It's not a derivative of price.  It IS price.  Nor is it a vehicle to speculate on the price, as are futures and especially ETFs -- I never chart those things, I just trade them.

The daily chart of the S&P cash shows you why it's a crucial time.  And wouldn't you know it, Bernanke is speaking this morning.  With 1340 looming, it's no wonder to me that futures are up.  Either they're being propped up before he drops the bomb that there will be no additional stimulus before the election as to appear impartial (how about just out of bullets).  Or he is being frontrunned on the expectation he's about to jam the shorts.

I'll stick to the daily chart.  Two buying tails in a row.  Looks bullish.  I don't think so.  Both days gave every opportunity to the bulls to steamroll the bears and they blew it each day.  Yesterday they couldn't even reclaim and hold the previous closing price.  The 38% retracement at 1370.71 was never touched.  And as price struggled, volume built to the downside.  Basically it's sitting just above the 1340 swing point while volume is growing.  That is a very bearish sign.  It suggests that 1340 may fail, and that the market is focusing on lower targets as previously mentioned in yesterday's post.

Bernanke is due to speak about bank capital this morning, conveniently at 9:30am EST.  He loves to jam the shorts, so perhaps today is the day that 1370 gets hit.  But seeing how there isn't any bank capital, seeing how there are virtually no banking reserves because the Fed said "go ahead, you really don't need any, we've got everything under control," he could easily spook the markets too merely by suggesting prudence.

I lightened up on my calls yesterday and retained my SH hedge just for this sort of thing.