Wednesday, September 9, 2009

Morning Update/ Market Thread 9/9/09

That’s a lot of nines. Did you know that 9/9/1929 represented the top in the market that was not exceeded until 1955? Of course there’s nothing to worry about here because this is 2009 and there’s one less nine, lol! Oh, don’t worry that consumer credit is contracting at the fastest pace in history, just remember that they said subprime melting down wouldn’t affect the consumer either.

And on queue, overnight the markets ramped in a near vertical ascent, leaping off the 1,018 pivot that held yesterday and ran right up to 1,028, an area of resistance that has held so far (1,041 next higher pivot):

The dollar is roughly flat, having held just above the bottom of that descending wedge I showed yesterday. Bonds are lower, oil is racing back higher (up to $72 again), and gold made several attempts to stay over the $1,000 mark but is hanging out just below (check out the performance of silver).

Again, the action in the markets is not based on anything fundamental, it is based on hot money, on computer trading, and on government/Goldman (one in the same) intervention.

Two worthless and misleading pieces of economic information are out this morning, the Goldman ICSC which I will not even report and the MBA purchase index which supposedly gained 9.5% for the week. Remember that they just stopped reporting any of the underlying numbers, so I consider this report to be nothing but propaganda, not that week to week numbers have much meaning to begin with, they don’t, especially when manipulative government programs are beginning and ending… Here’s Econoday’s spin:
Mortgage applications jumped sharply in the Sept. 4 week in the latest indication of strength in the housing market. MBA's purchase application index, boosted by the approaching end of the government's first-time buyer credit, rose 9.5 percent for the biggest gain since April. The refinance index rose 22.5 percent for the biggest gain since March. Lower mortgage rates boosted demand for both purchase and refinance applications as the average 30-year loan dropped 13 basis points to 5.02 percent.

Meanwhile, back in reality land, we find that my anecdotal story yesterday about the wealthy people from my old neighborhood is pretty widespread. How’s a 73% year over year jump in wealthy people’s bankruptcy filings grab you? Keep in mind that these are people who hire and put to work other people, and their homes were worth far more than several subprime homes:
Wealthy Families Succumb to Bankruptcy as Real Estate Crashes

Sept. 9 (Bloomberg) -- Wealthy individuals’ Chapter 11 bankruptcy filings jumped 73 percent in the second quarter from a year earlier, according to the National Bankruptcy Research Center, a research firm in Burlingame, California.

More individuals or families with at least $1,010,650 in secured debt and $336,900 unsecured are using Chapter 11 of the U.S. bankruptcy code typically associated with business reorganizations. Falling U.S. home prices leaves them unable to refinance or sell their property when they drop below the value of their mortgage, said Chicago bankruptcy attorney Joseph Baldi.

Chapter 11 is more expensive and time-consuming for debtors and creditors than a Chapter 7 liquidation of assets. Wealthier people filing for bankruptcy typically have large homes, two car payments and children in private schools, said Leslie Linfield, executive director of the Institute for Financial Literacy in Portland, Maine, a credit-counseling and research group.

“You’re living on the edge, you’re juggling those financial balls,” Linfield said. “When one ball goes, they all fall down.”

Listings of homes for sale worth $1 million or more increased 27.3 percent in July from October, according to, a Web site that tracks real-estate transactions. The number of homes sold with a value between $1 million and $2 million fell 23 percent in July from a year earlier, according to the Chicago-based National Association of Realtors. There was a 21-month supply, up from 16 months last year.

I love that quote, “You’re living on the edge, you’re juggling those financial balls,” Linfield said. “When one ball goes, they all fall down.”

That is exactly right, and that is exactly what the United States of America is doing right now. The balls are already falling down and the chain reaction is in progress, you must look through the trumped up stock market to see it, but it will continue to manifest itself until all the balls have landed.

Back to the markets.

McHugh is talking up the potential rising wedge in the markets as being a potential ending pattern for wave c up of B up. If this pattern is what’s in play, and it looks like it is, then we may get a good view of the end of the move prior to the next large wave down. Here’s a chart of the SPY that shows the wedge well, the top of the wedge is currently about the 1,055 area, just beneath the 1,061 pivot point. Keep in mind that these patterns can overthrow:

Again, note the volume pattern on that chart, it is BEARISH.

The dollar is now testing the 77 level again, that’s a key level! The long bond futures are on the right, down hard this morning…

The NDX made a new high yesterday. That should not be ignored as it throws the EW count towards McHugh’s wave 3 of c of B. The rest of the indices could follow, and if that rising wedge is in play, then we should test the top of it fairly soon. As he points out, this is a good time to be raising cash.

In the meantime ball juggling continues because the circus must go on…

Three Dog Night – The Show Must Go On: