Thursday, December 11, 2008

Morning Update 12/11

Good Morning,

DOW futures are down 160 points this morning.

The fundamentals of our economy continue to deteriorate. The only exception in the news this morning is that foreclosures in November actually dropped slightly. I believe that will prove to be temporary.

People filing for first time unemployment for last week rose much greater than expected, by 58,000, jumping to 573,000, a 26 year high.

The trade deficit for October was expected to narrow, instead it widened to $57.2 billion. Yes, our imports are falling dramatically, but so are our exports. That means that despite the world-wide slowdown we still need $2 billion a day in foreign money to finance this deficit. Cheney and others say that these deficits don’t matter. They are WRONG. They are sacrificing BOTH security and freedom with their incorrect ideology.

The House passed the $15 billion bridge loan for Chrysler and GM. The terms were too onerous for Ford, so they passed. Now it goes to the Senate where there is opposition. Many are hailing this as positive because of the restrictions being placed on them. Not me, the very fact it is even being discussed is against all the principles this country was founded upon. And those who think that Ford is looking great by taking a pass had better take a look at the airline industry. Having your competitors in bankruptcy or getting any kind of special treatment gives them an advantage. Those zombie businesses use their bankruptcies to unload debts off their creditors while slashing wages and benefits thus allowing them to compete with lower prices. Those who choose to avoid bankruptcy are left with legacy wages, etc. The entire thing is a mess, we never should even be discussing interfering in the way we are. The only thing that needs tampering with in this regard is the broken bankruptcy laws that have been written and put in place by corporate America for corporate America.

The Russians are talking further about devaluing the Ruble. Rumor has it the Chinese are talking along the same lines. These types of currency manipulations will impact global markets, so we need to be aware and consider their impact. I’ll have more on this as I know more.

The bond market continues to say deflationary credit collapse. Short term yields are still basically zero. The charts of the 10 year and of the long bond are looking suspiciously like they are ready to move even deeper into lower yields. The chart of the TNX, for example, looks to be making a wave 4 sideways consolidation at about 2.5%, and if there is a wave 5 coming it looks to be targeting 2%. That is unbelievably low for a 10 year note. The TNX just broke down out of a small triangle this morning.

The VIX remains in its ominous triangle for now, not good if you are long equities.

Same technical picture as discussed in yesterday’s end of day report. I do note that I am starting to see some small bearish divergences and a volume pattern that is not looking too bullish either.

The 885 level on the /ES or SPX seems to be providing support for now, I don’t plan on any sizable plays in here unless we can break out of this range in one direction or the other. Again, I point to what looks like fresh sell signals on the DAILY charts, the DOW and Transports showing them first. Still on the WEEKLY buys signals, which means that there may be more rally after a period of decline. Cross currents, and they are difficult to play. The patient person will wait for alignment as I spelled out in my article on the subject.

I have a couple more articles in the pipeline, look for one either later today or tomorrow. I’m making so many update posts that it seems the articles are getting lost in the noise, so I’m working on ways to get them to stand out. One thought I have is that I may produce a second blog, one that is dedicated to my articles and one that is dedicated to technical work and market updates. Let me know your thoughts for improvement.

Also, I am discovering that the automatic email summary is not working that well. It’s not sending them at the time I have in their system and they are hard to read. I increased the font size and played with the timing feature so we’ll see how that goes. For my friends I am going to start a twice daily “executive summary” via email. No guarantee on how long I can keep that going. My list is growing and it takes a lot of time to manage.

The DOW futures are down 150 points just prior to the bell.

Have a good day,