Let’s Make a Deal

The market continues to play Let’s Make a Deal with the Fed: keep pumping $85 billion into the banking system every month and we’ll keep pumping prices higher.  Ben Bernanke realized long ago that the game is rigged.  He should know.  He rigged it.

The contestants (the banks) can’t help but win, while the studio audience (the rest of us) squirms in their seats, waiting for their shot.  Enough of them remain hopeful that no one noticed the air conditioning had pooped out, the snack bar ran out of food and the punch bowl was getting dangerously low — until now.

Now, the word is getting out.  And, the audience is very, very focused on that punch bowl.  When it runs dry, we know the contestants will pack up their winnings and sneak out the back door — leaving an untenable situation out front.  What will Monty do then?  Can he risk letting that happen?  What would happen if the entire audience rushed the door?

Stay tuned.

*  *  *  *  *  *  *  *

The futures are pointing south, so we’ll play along on the opening.  But, this morning’s subpar economic news reassures us that the punch bowl isn’t yet dry.  Services PMI comes out at 10:00AM.

The picture was much gloomier overnight, when the USDJPY once again flirted with losing its channel.

The RSI tells the same precarious story:

DX came very close to breaking out…but hasn’t.  It very likely will complete a Bat Pattern first, even if it means another dip below the channel support later tonight.

Even the EURUSD is doing its part…hinting at a Bat Pattern completion at 1.3148 very deep into its rising wedge (also likely after hours.)

UPDATE:  9:35 AM

SPX just reached an .886 retracement of its rise from yesterday’s low, so we’ll cover our short and revert to full long here at 1625.  Stops at 1622.75.

UPDATE:  10:02 AM

Services PMI came in at the expected 53.5 versus last month’s 53.1.  Factory orders grew at 1.0% versus an expected 1.5% and last month’s dismal -4.9%.  The punch bowl just got topped up.  The game can go on — at least for now.

Note the all-important employment index — down to a barely positive 50.1, just like its manufacturing counterpart.

UPDATE:  10:15 AM

Just got stopped out at 1622.72, so back to the short side. Trailing stops.

There’s a Crab Pattern to be completed at 1608 — also the H&S target. But, there’s an argument for a leading diagonal/falling wedge that would indicate support at 1615-1617.  So, we’ll see.

Harmonics traders all just got stopped out when their potential Point C dropped below Point A — the last low at 1622.72.  But, wavers should be fine it this is wave B in a flat wave 4, which I understand is allowed to and frequently does dip below wave A.

Great way to shake out the bulls before a run to the upper bound of the wedge — if that’s what this is.  I’ll likely resume a long position on any strength back through 1622.72, but would much prefer a tag of 1616.24 first.

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