Whipsaw Wednesday – No 1,565 For You!

That was my comment to Members in early morning chat today as the markets began turning sour in Europe as Cyprus continues to be a worry but, more importantly, Spanish and Italian 10-year notes are pushing back to 5% as the fantasy of EU support runs into the harsh reality of abandonment in Cyprus.  This was no surprise to us as we had already labeled the run-up as fake, Fake, FAKE and have been tilting more bearish since last week.  

We had some quick fun in the Futures this morning, riding the Nikkei and Oil down for quick profits but I already (7:29), warned people not to be greedy as we're just looking for that Egg McMuffin money in the morning and oil already hit $350 per contract and the Nikkei was good for $250 per contract – which is never bad for an hour's work, is it?  

Why not stay bearish?  Because we figure we're still good for a big prop job into tomorrow's close and we have 4 Fed doves putting up a wall of Fed-speak between 11 am and 1pm (Evans, Rsengren, Pianalto and Kocherlakota) ahead of the 5-year note auction so it's not very likely they'll say any words other than encouraging ones for the bulls.  If the S&P Futures (/ES) fail to hold 1,550, however – it will be "game on" again with our Futures shorts.    

As noted by Dave Fry on these S&P Charts, reality and the indexes are not currently on speaking terms when even the collapse of an EU nation and it's banking system resulting in massive losses for bondholders and uninsured depositors can't get the markets to take a pause that lasts through lunch – give us a break!

Obviously, I'm no perma-bear – just last week I said we could ignore Cyprus because it wasn't big enough to interrupt the planned prop job for the end of quarter and I pointed out that the average Global Citizen does not give a crap if a bunch of rich people lose 40% on their deposits over $130,000.  Now we've seen that that's true but what next? 

Now we have a bit of a trough until earnings season kicks in around April 8th (AA) but we're already starting to see from some early reporters that expectations may have been set…

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