Darshan's Blog

Darshan's Daily Market Ponderings

When Will Groundhog Day End?

Thursday 12th November, 2009

Afternoon all!

Today will be a short note - as there is not much to talk about on the markets. It's the same script each month - we get a few days, where overnight pumps create a week of strong moves and then we just flatline for most other days. It's getting dull...the real action remains on the forex market. (My favourite!)

The good news is that the analysis worked yesterday...we hit that gap October 2008 crash gap at 10333 yesterday and profit taking swiftly kicked in from there. It was a high prob trade, with that area also being the 50% retracement of the fall from October 2007. The other thing that worked out well, is the idea that the USDX would rise from above the 74.75 area and that's exactly what it has done, with risk unwinding overnight. I'm sticking to the script that we will get a retracement here, that should give back a portion of this rise from last week, before we kick off again to tackle the higher levels mentioned in yesterday's blog. The Asian markets certainly support this view, with their lack of enthusiasm last night. The divergences with the SPX still stand btw - as it has still failed to make a new high now, while the Dow has motored ahead...so another case to help us gauge whether this rally is serious or not; at the moment it is not supported by a broad basket of stocks at all. The 30 stocks in the Dow do nothing to comfort me about economic recovery - there is a reason the index is called the "Mickey Mouse Index".

As you know the long-term risk is constantly to the downside but now the short-term risk is also to the downside. In the meantime we have the usual financial media ridiculousness. Let me introduce you to a snippet from today's reaction to the US Initial Jobless Claims figures. They fell by 12,000 to 502,000. This is the great news, as it is the lowest level since January. However, rather than analysing the reasons for this, both Bloomberg and CNBC are declaring the end of the employment slump. Also nevermind, the 502,000 people who had to claim for unemployment benefits in the last week alone. We'll just ignore those shall we.Everything is just dandy, and that's why the Treasury is auctioning another $16b in 30 year bonds today.

So just keep all this mind and let's try to get this week out of the way. I envisage major action next week, as we get those final spikes and then we can start heading lower. Until then - just turn off your screens and go out and enjoy yourself.

Happy non-trading for today,

Darshan

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