Monday, September 12, 2011

Index futures were getting pounded in the wee hours Monday, unable to resist the onslaught of selling that has sent Asian markets reeling.  Structural support for the E-Mini S&Ps lay just beneath the so-far low at 1135.75 in the form of a prior low at 1130.50 recorded a week ago, but if it gives way a robustly bearish impulse leg would form on the daily chart.

The December contract was on track for a pullback to 39.850 with the breach Sunday night of a minor midpoint support at 41.315. That will remain our target unless buyers can push this vehicle to a close today above the 41.215 midpoint resistance shown.

The corrective pattern show has smashed its 1830.30 midpoint support, hinting of more downside in the days ahead to as low as 1771.50, its 'd' sibling.  This would be confirmed if the smaller down-pattern at the right-hand edge of the chart were to exceed its 1839.90 midpoint support.  You can bottom-fish that last number with a stop-loss as tight as four ticks, but if the stop is tagged, look for more downside to its 'd sibling 1808.10.  Alternatively, an uptrending ABC at the right-hand edge of the chart would become 'actualized' on a print exceeding the p midpoint shown at 1873.20. ______ UPDATE (1:59 p.m. EDT):  A $50 plunge so far today has brought the December contract within two ticks of the 1808.10 target flagged above. We should infer that the Smart Money and its good friends in high places wanted it that way so that they can score some bargains.

Open up some space in the lower half of the daily chart and you can see how a fall to at least 1088.75, the midpoint support of the pattern show, has become visually unavoidable.  It's tied to a 'D' target at 954.00, so, presumably, there will be a long way to fall if and when the midpoint has been exceeded to the downside on a closing basis for two consecutive days.  As of around 1:30 a.m. EDT, camouflage opportunities to get short were hard to find, since the downtrend was so well developed. A minor cycle on the 15-minute chart had surpassed an 1139.25 midpoint support, presumably bound for its 'D' sibling at 1133.75.

Jitters over Greece’s increasingly dire financial plight are waxing yet again, taking Wall Street traders by surprise if no one else. The Dow Industrial Average dove 303 points Friday on speculation that Greece would fall into default when the new week began. As of late Sunday night, however, there was barely a word about Greece on Google’s news page – only a story about rioting in the streets following enactment of a new, $2.7 billion property tax in the name of austerity.  That’s the relatively good news. The bad news is that France, of all countries, was generating scary headlines of its own: Woes at French Banks Signal a Broader Crisis, declared the Wall Street Journal.  “France’s largest private-sector banks will likely suffer further credit-rating downgrades this week, the latest sign that the debt crisis on the euro zone’s periphery is slowly infecting the core of the region’s financial system,” noted the article.  Just when we thought the panic was about to engulf Spain and Italy, the spinmeisters insert France into the picture as a buffer, a default risk calculated to be at least somewhat less thinkable than the one threatening to inundate France’s two large neighbors to the south. We doubt the diversion, if that’s what it is, will last for long, however, since, as everyone but the Powers That Be seems to understand by now, we’re all in this together -- Europe, the U.S., China, Japan, South America, Russia et al.  That fact hasn’t stopped U.S. banks from choking off lending to their European counterparts in recent weeks in a delusional attempt to distance themselves from the coming euro-implosion. Do Citibank, J.P. Morgan, Chase, Bank of America and their ilk actually believe their timid, eleventh-hour avoidance maneuvers will keep the blood-dimmed tide at bay when market forces ultimately