Friday, March 19, 2010

Thursday's powerful impulse wave down in the Yen futures and the breach of the pattern's midpoint suggest that the D target of 1.1003 will be reached.  Although this is near the very round number of 1.1000, it might produce a tradeable bounce as it is otherwise "in the middle of nowhere" on the chart.  If the pivot gives way, the area around the prior low of 1.0984 will tell the tale.  That low was a bounce from just above two convergent hidden pivots, including the one pictured here on March 17.  A print below 1.0960 will leave no doubt that both of those pivots are broken and that we should expect the Yen to continue falling.  (Posted by Doug McLagan)

We held a mirror under the April contract's snout tonight and determined that it had ceased breathing.  Its revival presumably is nigh, however, because Bollinger Bands can only get so close before  they reverse polarity. We'll move to the sidelines in any event, since  Friday Follies might be more raucous than usual.

Enactment of the healthcare bill should prove no worse for the economy than a collision between Earth and an asteroid, so it's hard to fathom why stocks have not yet begun to discount this apparent likelihood with a pyrotechnic rally.  Clearly, Wall Street's most fervent belief is that too much of a bad thing is never enough.  So why were index futures flatlining shortly after midnight, setting some kind of record for time spent in a two-tick "range"?  Charles Krauthammer says the bill is going to pass, and that means it's going to pass -- even, presumably, if a torch mob five-million strong descends on the Washington D.C. Mall this weekend to raise some tea-party hell.

I've stipulated that before the futures are deemed likely to bolt for a Hidden Pivot rally target at 1154.30 they must first close for two consecutive days above an important midpoint resistance at 1126.00.  Yesterday's finish fulfilled half the requirement, but the futures will need to finish the week firm-to-higher to set the bullish scenario irreversibly in motion. There wasn't much happening at 6:30 p.m. EST to provide a low-risk handhold for trend surfers, although the pattern shown in the chart is probably worth a three-tick stop-loss for speculative bids placed at 1123.70. _______ UPDATE (11:35 p.m.):  The futures took a $1.80 bounce from a tick above our bid, turning the recommendation to dross.  Somewhat lower prices ensued, suggesting there was little urgency tonight on the buy side.

Years ago, when talk of an epic housing bust was considered looney-bin stuff, we predicted that deflation would cause home prices in the U.S. to fall by at least 70 percent.  With prices roughly halfway there, there is no change in our outlook. But the question remains as to how the real estate market will eventually find a bottom. The following scenario seems entirely plausible to us. It was written by one of the smartest guys we know, a Colorado-based financial advisor who has done very well for his clients over the last several, extremely challenging, years.  With the wealthy shouldering most of the burden, here is how our friend thinks home prices eventually will be made to “clear” in the marketplace: “Short sale” has always been tough to explain to investors. First you borrow the stock, then you sell it. But now we have a much more easily understood concept, as it applies to housing transactions. The proceeds of the sale come up short of the amount owed, so you get to stiff the lender. And the Treasury Department endorses it. Seems simple enough. But wait; weren’t they just trying to prevent foreclosure? Well, fear not. This isn’t foreclosure. This is deed in lieu, lease in lieu, or emergency program in lieu of foreclosure. One must assume that the original “mortgage modification” program carried with it the expectation that the economy could catch up to the problems of insufficient income, job loss and home price decline quickly enough that families could stay in their homes with some help from Uncle Sam. Clearly, the economy hasn’t cooperated. The new program is designed to make the process of getting delinquent and “underwater” homeowners out of their homes smoother and less costly, at least for the lenders. According to the NYT, the