The Whale And The Rat

Futures are feeling the brunt of reality as the world is reminded once again that bankers are simply careless fools that should not be trusted anyone's money but their own.  1340 will likely be on tap today on the cash S&P, pass or fail.

There is no way to know if 1340 will hold.  For some reason, I suspect it will, purely based on the wave pattern and the positive divergence being displayed across several indicators.  The main caution I have is that whenever price stalls just before a swing point such as 1340 and builds volume there, it can sometimes blow through it on an event driven trade.  This J.P. Morgan news could be such an event.

The other side of this trade is the sudden spike in bearishness on this news.  Such spikes often occur at the culmination of a move.  In this case, the one from May 1st.  There is even room for a relief rally just because the world did not end overnight.  Note that the 38% retracement at 1370.71 is still untouched.

I smell a rat inside this J.P. Morgan mess.  It's a CDS (credit default swap) trade gone wrong in their London office (operation London Whale), and it's got me wondering if they're upside down on some European sovereign debt.  And, if they are, who else is?  There is never just one cockroach.  The first thing I thought of when this news broke was "Bear Sterns, Part 2."  We'll see.