Today's Market Episode Brought to You...

by the letter... "M". (Example, see /ESH0 2/08/2010 @ 6:30am; 7:00am; 7:35am; 8:25am; 8:50am)

A strong impulse, followed by 25-50% pullback, followed by a retouching or eclipsing the left high of the M, and falling back to the base of the M.

This pattern was quite noticeable and frequent during the first and middle stages of Oct 2008 descent. It later morphed into what might be called "the bat signal", where the impulse started slower then quickened to an exponential height at the peaks, ending in a exponential fade.

Beware, if it carves out a larger bat signal, where wings are evident on the left and right side, this is a sure sign of further weakness.

Watch for it to morph into a W or weaker lowercase w or m formation, signaling a potential trend change.

TED Spread

Lots of noise in the equity trenches, but it's crickets over in the TED spread trench.

( http://www.bloomberg.com/apps/cbuilder?ticker1=.TEDSP%3AIND )

If European debt is a true problem, why are the banks willing to risk dollars versus Euros at almost the same risk? At this point, Eurodollar versus US dollar lending is in longer term, 'normal' territory.

If European credit-worthiness were at risk, the spread should widen, unless both parties (US & EU) are being weighted as equal risk of default. Last read, Greece was given 20% odds of default.

Breakout, Fakeout, Continuance?

Afterhours perspective as of 5:44pm EST. Commodities in the commode. Equities flat. USD strengthening. Treasury yields rising (money flowing toward USD?)

UUP did breakout, and fell back late in the trading day. But afterhours, the breakout, then fallback (aka. fakeout), and an upside breakout continuance may be forming.

Futures Last Change Change %
Crude Oil 76.98 -0.25 -0.32%
Natural Gas 5.42 -0.04 -0.73%
Gold 1112.00 -6.00 -0.54%
Dow 10248.00 +7.00 +0.07%
S&P 500 1097.60 +1.20 +0.11%
Nasdaq 100 1790.00 +4.50 +0.25%

Forex & Bonds Last Change Change %
EUR/USD 1.3890 -0.0077 -0.55%
USD/JPY 91.03 +0.65 +0.72%
GBP/USD 1.5886 -0.0090 -0.56%
5-Year Treasury 2.402 +0.045 +1.91%
10-Year Treasury 3.703 +0.068 +1.87%
30-Year Treasury 4.632 +0.082 +1.80%

Predatory Credit Squeeze

I just read Mish's article on Business Loan Margin Calls.

In short, bank "Margin Calls" on business lines of credit or loans can lead to a bank issuing 'perfect' interest letters to your accounts receivable. Some blame the credit cards for lowering credit lines, making many businesses cash strapped. Who owns the line of credit? It is the same banks that are calling in the margin!

This should be called predatory credit squeezing---where a bank squeezes credit card lines of businesses, so they can call in business loans and liquidate a business.

Very underhanded, but it may help thin the herd of companies in higher leveraged, lower margin business practices.