Obama to America: Let them eat cake; rally still possible Tuesday

Credit where credit is due dept.

It seems hard to believe that it was just a week ago when we stood at Dow 12,657 that I wrote:

"I think we're much more likely to see 11K this month before we see 13K."

That sure didn't take long, did it?  Today's close: 10,810.

 O-bomber, Ax Murderer of the Dow

This afternoon, when the VIX had reached the incredible level of 39, I posted that it could possibly be telegraphing a peak and therefore an end to the slaughter on the Street  Then Emperor Nerobama went on TV.

The Empty Suit delivered an Empty Speech.  The Dow responded by nearly doubling its losses on the day and the VIX rose another 9 points to close at a beyond incredible 48.  If you missed this rhetorical masterpiece, let me quickly summarize what he said: "Blah blah blah blah blah."  I think that's pretty much the gist of it.  I may have one of the blah's in the wrong order, but yes, that's it in a nutshell.

Marie Antoinette, playing fantasy games

Let's see.  Um, he blamed pretty much everybody except himself for the mess we're in.  He somehow managed to call for both lower taxes and higher taxes.  Then, in a truly astounding display of arrogance and contempt, he assessed the current disaster in the stock market by saying "Markets go up and markets go down".  I was waiting for him to follow this up with, "Let them eat cake" ("Qu'ils mangent du gâteau").

Marie Antoinette would be proud.  About all that's left is for him to go prancing about the White House lawn in a hoop skirt with a crook tending a flock of sheep.  That would be about as effective as anything else he's done since taking office.

Let me be perfectly clear: Mr. Obama, you have demonstrated time and time again that you are simply not up to this job.  If you really want to help the country and be remembered as a hero instead of just another self-serving hypocritical politician, then kindly resign.  Now.  Go away.  Thank you.

The VIX revisited

OK, so back to the VIX.  It's 1 AM Tuesday now and incredibly, ES is continuing its relentless march to the lower reaches of Hades, down another 1.3% in the overnight as I write.  NQ and YM are both down again too.  But, ES stands at 1096.75 right now.  At 10 PM, just three hours ago, it was at 1077.   There's still plenty of time between now and Tuesday's open to make a move higher.

Now looking at that huge green candle the VIX put in today and the palpable level of fear on the Street, I'm almost scared to say that the VIX will go lower Tuesday.  And it's entirely possible that it will in fact go higher.  After all, we were at this level on October 6th, 2008 and in just two more weeks back then, the VIX skyrocketed to 89.53.  And after the last two weeks, clearly the market is never going to go up again, right?  It's headed for zero, right?

Maybe not.  Since that time in '08, the current level of 48 has become a resistance line.  The VIX spent most of early 2009 trying to rise above it without success, and last May's peak during the European PIGS crisis v. 1.0, it topped off at exactly 48.  So I'm going way out on a limb tonight and claim that the VIX is going lower tomorrow.  That should provide the juice to run the market higher.  This despite the fact that the S&P ominously broke under its 200 week MA today, also as I predicted yesterday.  Note however that the Dow did not.

And don't forget that tomorrow is a Fed day.  I'm sure Uncle Ben was watching Obama's idiotic speech and has no desire to follow (empty) suit.  While much has been made about the Fed running low on ammo, don't discount the potential psychological impact of encouraging words, kind of like telling a dying man he's going to be alright.  (OK, maybe that's not the best analogy, but you get the idea).

Bottom line

Tomorrow's absolutely critical number: Dow 10,740, the 200 week MA (just 70 points from here).  Going below this virtually ensures more pain.  Shying away or bouncing off it and we're going higher.