US TECHS: S&P Outlook; Climbing Wall of Worries
Tuesday, February 19, 2008 9:19:00 AM
Boston, February 19. The fear mongers are at again attempting to jaw bone the risk markets down and it is not working. Indeed the FT reported today that US banks have been quietly borrowing massive amounts of money from the Federal Reserve's Term Auction in recent weeks, a sign of growing weakness for the overall banking system. We are not sure what they are looking at but the amounts have been the same $30 bln at the past two TAFs and the rates have been tame suggesting the opposite of the stress that the FT cites. And look at the reaction of the indices to the continuing Street write down rumors, the last time we had a Monday holiday it was Jerome's day and SPH was down 50 to 70 handles.
Not only are the indices climbing a wall of worry, but a necessary condition for a continuation of the risk rally is a climb in yields which too is happening suggesting that the reflation trade is underway. SPH did indeed close above its mid Bollinger band for a third consecutive day, a condition we noted Friday ("Last Chance to Dance") necessary for a continuation of the recovery rally. The close above this reference along with Monday and Tuesday's Globex action suggests that the target is now the 50% Fibo retracement at 1383.15. The mid Bollinger has become support and must not see a close below (1353). Below here a trend line at 1344 must hold on any intra-day pull back, with the last line in the sand support at 1331-1337.
