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Harry Boxer's Charts of the Day

Europe Does It Again.....

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We woke up to futures down over one hundred points this morning. There were two main culprits, bad news out of Greece on their financial situation, which keeps taking turns for the worst, and the political headache for Chancellor Angela Merkel out of Germany, the opposition party winning a key election not necessarily friendly with her views. Merkel is desperately trying to hold Germany out of the financial crisis inflicting the rest of the Euro-zone. She'll have one less friend to work with now. Certainly, she doesn't need opposition right now, but it's what she'll be getting.

The market was not happy with either situation, thus, Greece and Germany got pounded overnight. We never escape that type of carnage here in the United States, when the news is that poor for our neighbors in the stock market. We gapped down, and stayed down nearly all day, and about the best that can be said for the day was that we didn't crash out below 1325. We tested back down below 1340 again, but still, the bears haven't taken that level out cleanly. We'd have to close at 1325, or so, to make that more official. With today's bad news, it's yet another day of having to deal with European headaches. It seems to be hitting us almost daily lately. There’s just never anything good that comes out of the Euro-zone.

The market here is showing amazing resiliency compared to that of Europe. You have to wonder just how long that can continue. You'd think there's a straw out there that will break the markets back. It exists, but what that is, is clearly unknown at this time as the market hangs tough into the teeth of some very nasty situations globally. When today was all said and done, the damage could have been much worse. The bulls are trying desperately to defend S&P 500 1325 down to 1314, the same as the bears defended that lost critical exponential moving averages on the rally back off the most recent lows. For now, it's still a stalemate, but the bears are slightly in charge, as they look to grab hold of this market. So far, they have not gotten the job done, but the story is far from over.

Poor Mr. Bernanke. You can feel him exhale as he faces a lose-lose type of situation. He's so desperate to hold up the stock market, and thus, the economy, to a strong degree, while not pricing the average struggling person out of inflationary existence. He pumps and pumps to keep things from a deflationary spiral, while knowing that this is dangerous to the average person out there financially. If he doesn't pump, however, there is the reality of a recession, if not worse. Can you say lose-lose? You bet! Bernanke doesn't know what to do next, but my guess is QE3 will be introduced to the world in the not-too-distant future, simply because he's more concerned with politics than probably doing the right thing. He won't likely worry about inflating once the election is over, thus, he'll likely introduce QE3 before too long.

Once the President is elected, whoever it is, he'll probably start to pull the money plug away. He needs to pump for now, but you won't be seeing a QE4 ever. For now, the market should hold up biggest picture, until it knows for certain that the cash infusion days are officially over. When that time comes, the market goes into bear mode. No money printing machine equals a bear market, folks. The pullback off the top has been everywhere. Few areas, if any, other than super defensive areas, have been given the downside action off. It's been pretty nasty for all, except there are two areas hit the hardest in all of this selling.

The financials have been hit hard for sure, but none worse than the world of the commodity stocks. No mercy there as deflation is the name of the carnage game. The charts all over the commodity world are in terrible shape. Gaps, and lost moving averages. Some of those gaps are huge, and some of the lost moving averages were back tested and failed to get back through. More bearish behavior, which is what you'd expect as the market unwinds, and what you'd expect when a market isn't going to do much for most of the year. The unwinding process needs a lot of time. More than we'd like. With most of the market losing key support, it's going to be a long time before we can celebrate something very positive with this market.

Just look at stocks like (PCLN) and Apple Inc. (AAPL), which are down big time from their highs. Priceline is down over 100 dollars, with many lost key-support levels on good volume. It won't be blasting back to its highs any time soon. Leaders won't be leading folks for quite some time. Expecting this market to blast back up will leave you terribly disappointed. This is more of a longer-term unwinding. You should be getting used to it by now. If not, start doing so. The best of this bull is likely over.

The S&P 500 has massive support from 1340 down to 1314 where the 200-day exponential moving averages live. The bears have been pounding on the 1340 support level quite a bit. It's getting heavy. Below 1340, we see support at 1325, and then massive support again at 1314 and 1292. You don't want to see 1314 go away. If we bounce at 1292, then 1314 becomes new resistance, that's just not bullish behavior. If we do crater out more than I thought, it would take about 1250/1275, or so, to get sentiment where you'd form at least a near-term bottom, but the technical damage will have been done. Bottom line is the bulls need to defend 1314, or it's very likely lights out for them. The bears would be in complete control of things.

Right now, we are at least starting to see some real bearish sentiment creep in as there were readings over 1.40 today on the put-call indicator. Bears are really rocking in now, and that's not a bad thing for the bulls. We're in a very complicated time here. Things are deteriorating rapidly from a global economic perspective, but the market is holding out hope that the Fed will ride into the inappropriate rescue. I think that is likely to be the outcome, but you never know. We watch carefully, and for now, hold tremendous amounts of cash. Nothing will be easy from now on.