Correlation breakdown at end of day: SLV (silver) and SPY (S&P 500)

I have been a believer in some form of correlation breakdown between metals and the stock market during a rapid decline.  However, it appears SLV and GLD have traded down with the market recently.   However, something happened at the end of the day Monday October 17th, 2011.  Just after 3:30pm, SLV had a nice rally into close as the SPY sold off to close near the lows of the day. 

You can see that silver has continued to trade slightly up as the Hong Kong exchange opened.
As it still seems that metals and the SPY are functions of the USD, until central banks (in the east most likely) start to buy gold / silver on equity sell offs, SLV and SPY will probably continue to trade up and down roughly together.

EUR/USD review - Options Expiration Week watch for Volatility

Watch for breaks of the above indicated levels of support.  EuroZone has 1 week to deliver a collective solution to tame fears of a global recession.

From Bloomberg: G-20 Tells Europe to Deal Decisively with Debt Crisis at Oct-23 Summit

European officials “will have left Paris under no misunderstanding that there is a huge amount of pressure on them to deliver a solution,” U.K. Chancellor of the Exchequer George Osborne told reporters. Next weekend “is the moment people are expecting something quite impressive.”

Options Expiration Week

Keep a close watch on the VIX

Economic Events Calendar from Bloomberg 

S&P Downgrades Spain from AA to AA-. EUR/USD Topping?

With Spain just downgraded from AA to AA-, is it time for this run up in EUR/USD to give way in the short term at least.

Wall Street Journal provides an overview of this event:

-- S&P drops Spain to AA-, three notches below top AAA rating, with a negative outlook
-- Cites banking sector risks, says labor market reforms needed
-- Move follows Fitch's downgrade of Spain last week; Moody's could be next

Overview of past week for the S&P500 - bearish outlook

Needless to say articles calling the tipping point here and here were dead-on.  Over the past couple of months since August decline it was all to clear that this was a period of consolidation before another push to the downside, and this push is gaining steam.  From the time I have spent looking at charts, I have never seen what many of the perm-bulls were expecting.  A Massive drop in august and then magically a regaining on confidence in the system resulting in a buying back to yearly highs.  There is on caveat...  QE3... This appears to be off the table right now, but you can easily foresee S&P500 at below 1000 as a signal to the FED that the market needs more money pumping. Again, this market is strictly controlled by central banks at this stage, if they ease it will go up, if they signal a halting to easing (not even tightening) the market will meet the reality of price discovery.

October I don't think will disappoint the crowd that fears this time of year based on historic data (ie crash of 1929, and many others).  The first day of October is listed here on a 5-min intraday chart.

Using the SPY as a proxy for volume, we can see that this market ended at the lows of the day on substantial volume. This market also closed below a key level that has been a battle ground throughout Aug-Sept 2011 as well as key resistance in the early part of 2010.  The level was 1120, some commentary about this battle can be found at: Once Again The Battle For SPX 1120 Is Raging

Lets take a step back and look at the daily chart from March until now.

From any technicians perspective this chart is broken.  We are heading into an area of consolidation which occurred in early 2010 which may provide some support but this market getting to 1040 in relative short order is becoming every more likely.

One technical indicator that I think is important to note is the MACD.  There has been a failure to reach the 0 (neutral) level, and the momentum has rolled back down to the bear side, setting the stage for a rough week ahead. 

The S&P500 has decisively broke out of the consolidation range over the course of September.  And a similar move to August could be in the works.  Eurozone failing to react, weak US financials, poor world  economic data all point to a deep recession in the short - mid term.  But remember the caveat ... QE3 (probably valued at $1 trillion +) will of course cause this picture to be voided but all we can do now is wait and see how governments, investors, corporations will respond to this new phase.

I guess it was time to short :) - S&P500 drops nearly 3% - on Fed annoucement - September 21 2011

Two days ago I warned that "We are coming to a definitive point in the markets" in the post :
Time to short S&P 500 ? Depends on Fed Meeting Wednesday 

Evidently it was time to short as the Fed announcement disappointed the markets as the "Operations Twist" was already priced into the markets and then some.  It appears Big Ben realized that further asset outright purchases would elevate commodities (ie gold) to levels that are unthinkable and with that inflation creep which has already started to occur.

It has been commented on many websites that until the S&P 500 gets to the 950-1000 range QE3 will be unlikely. 

We will see if the range will be broken sharply tomorrow, the selling continues expect that 1000 much sooner that most people think.  October might be a "typical" October where markets get reacquainted with economic reality.

SourceFire - Stock Charts - September 20, 2011

Thought it would be interesting to have a look at SourceFire.

From Wikipedia:

Sourcefire was founded in 2001 by Martin Roesch, the creator of Snort. The company created a commercial version of the popular Snort software: the Sourcefire 3D System, an intrusion prevention solution. Sourcefire states that it is committed to advancing open source technology and continues to maintain close ties with the Snort user community.

Company mission from their website:

Focused on its mission to be the leader in intelligent cybersecurity solutions, Sourcefire® is transforming the way Global 2000 organizations and government agencies manage and minimize network security risks. With solutions from the network to the endpoint, Sourcefire provides customers with Agile Security™ that is as dynamic as the real world it protects and the attackers against which it defends

 Weekly chart

The company has shown relative strength company to the broad S&P500 / Nasdaq Indices.
As seen below, FIRE has appreciated faster than the general indices.

Another notable divergence is more recently.  August was a terrible month for NASDAQ and S&P500, however SourceFire emerged unscathed which shows relative strength. 

Time to short S&P 500 ? Depends on Fed Meeting Wednesday

We are coming to a definitive point in the markets.  The Fed will be announcing its meeting Wednesday, which will really set the pace of the next 3-6 months.  The chart below shows also a short signal.... Slow stochastic is getting into overbought territory and the 50 day MA resistance is right above the current price.  A touch of this level at 1226 could be an optimial short entry with a tight stop above this level.  If the Fed disappoints the market, look out below, however there has been talks the FED announcing some form of stimulus which is not priced into the market (ie surprise).