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Thursday, June 14, 2012

Do you believe the rumor of Central Bankers Intervention ?

It was a roller coaster ride for the stock market. US jobless claim came higher then expected at 386k. It was a bad news but the stock market kept rising on the hope of QE 3. When it seemed that rally was fading, there came a rumor that Central banker are getting ready for their dinner and lunch date on Monday and Tuesday along with G7 finance minister over the phone. This immediately caused short squeeze in the market and Dow was up by 200 point in no time. At the close, Dow was at 12,651 (+155, 1.24%), S&P500 1329 (14.22, 1.08%) and Nasdaq 2836(+17.26, 0.63%)

One thing I don't understand why does the rumor comes in last hour of trading ? Its always from secret source. Anyways automatic computer trading or so called Super computer doesn't differentiate whether its real or rumor. And even if you decide to take action, market is already up or down by 50 - 100 point in no time. I still don't believe central bankers can take action till market falls below 11k or US dollar Index rises above 85. Today's rumor was to prevent panic ahead of Greece election and divert the mind from bad US economic data and Egan Jones downgrading France rating. 

Today's rumor also made sure that S&P500 stayed away from 1309 level which is 200 MA ahead of Greece election.  Below is the chart which shows what happened in May when S&P500 broke 200 MA. 
Let consider different scenario. 
1. Greece is not going to exit Euro on Monday, so if your in a camp that market will crash then its not going to happen. If anti bailout camp wins on Sunday, austerity will be renegotiated. Shorts in Euro is at all time high, so any good news will take above 1.30 No news should keep it below 1.24

2. Central banker can only intervene if there is liquidity issue. Global economy is slowing and by pumping money into system, its not going to create job or growth, when the demand is reducing. A stock market can go up but eventually it will come down on reality. Central bank provided liquidity support on Nov 30th US dollar currency Index was at 79 and on the news it came at 77. After 8 month, US dollar index is at 81.86 

So far Central banker have printed over 6 trillion There is no doubt market will go higher if central banker provide liquidity support. But don't buy bullish stocks on the hope and wait till its really done. This doesn't mean you have to play defensive. Look at the chart and trade on fundamental basis. 

Technical Strategies For June 15th:
Based on the chart tomorrow, market should open flat and close low. Expect volatility to rise. So watchout UVXY, VXX and TVIX. 

For Bullish sentiment to continue: Dow needs to break 12670 while S&P500 needs to break 1333. 
For Bearish sentiment to continue:  Dow needs to break 12625 while S&P500 needs to break 1328

In the chart below Red circle represent Bearish sentiment, Blue Circle represent Bullish sentiment.
In Forex Currency trading, Eur/Usd closed at 1.262, Usd/Cad closed at 1.023 and Aud/Usd closed at 1.01 US dollar Currency Index closed at 81.86

CBOE Volatility Index VIX down 10.67% at 21.68

GOLD closed at 1625 (+5.80)

SILVER closed at 28.165 (+1.16)

After hours big gainer:GNOM, ACTG, DECK, SNMX, YPF, ORI, THC, JKS

After hours big loser: SDT, AIR, WMS, KWK, SPF, WETF, MVIX, NDSN, SCHN


Stocks for Option Trading: CAT, XOM, SPY, QQQ, IBM, PCLN, AAPl, WLT, PCX, GOOG, MT.

8:30 amEmpire state indexJune12.817.1
9:15 amIndustrial productionMay0.0%1.1%
9:55 amUMich consumer sentiment indexJune77.879.3

If possible avoid this market till Greece election and FOMC meeting are over. 

Goodluck !

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