Tuesday, December 8, 2009

Morning Update/ Market Thread 12/8

Good Morning,

Equity futures are down significantly this morning with the S&P reaching the 1,090 pivot area…

The Dollar is up, having regained the 76 level. Bonds are also up. The Yen is strengthening, looking like it’s retesting its breakout from a couple days ago, but the Euro is weakening rapidly and has now also broken its trendline. So, here you have rotating currencies that are weak against the dollar. The dollar is NOT strengthening because of fundamental strength, it is simply a left over, but dying, remnant of the deleveraging trade. Below is a daily chart showing the Dollar/Yen cross on the left and the EUR/Dollar cross on the right:

Oil is down hard again after breaking below and closing below its downsloping channel. Gold has broken its uptrend line and looks to be in correction mode. The next area of support appears to me to be in the 1,070 area. Below is a daily chart showing oil futures on the left and gold futures on the right:

Debt related “events” continue to pile up with no admission that there’s any problem along those lines. Bernanke’s latest statement?

“Fed will make a profit on the bailouts.”

Riiiighhht… and I’m Santa Clause. Of course this is just more out and out deception and lying. We have spent trillions on one form of bailout or the other including all sorts of insanity up to and including “cash for Clunkers.” The Treasury’s balance sheet has expanded nearly $2 trillion and yet he can say with a straight face that he’s making a profit on the bailouts!? Yeah, he’s making money alright, plenty of it, and it’s almost all backed by debt. These people simply do not understand the concept of debt saturation when your money is backed by debt. The more money they produce, the more debt they produce.

Their understanding of economics is rooted in a world that doesn’t understand the debt and how it affects their INCORRECT economic formulas. Take the velocity of money, for example. Their formula does not take into account DEBT… Yet common sense will tell you that if all levels of government, the population, and businesses are saturated with debt that when they get their hands on new money they MUST use it to make payments on their debts! This sends the money right back to the banks instead of circulating it through the economy. BASIC, BASIC principle, what Nobel Prize winner have you heard spell that concept out to you?

Heck, I can draw you a curve to show that this effect gets stronger the more saturated society is, and I can undoubtedly make a formula to express this effect mathematically. These are the types of real world modeling that need to be done but are not.

And their failure to follow the written rules of law as they pertain to capital along with their misunderstanding of how money and debt are controlled by the laws of nature inevitably leads to other “events.” Thus we struggle and fight, bombs explode in Iraq and in Pakistan, Iran is hollering like madmen, not so little debt bombs explode in Dubai, in Greece, and a huge one goes off in Japan. Yes, other, bigger, events are coming.

So far the People of the United States have stood by like scared sheep. They know that something just isn’t right, but they either can’t put their finger on it or are just afraid to act. But they have been brainwashed by expert marketing and leaders of no substance, simply mouthpieces for those who control the real power, the power of money creation! For it is those who possess this power that control the events of the world! You do not feel in control, because YOU, the People, are not! You should be. And you can be, but it is up to YOU to take the power back that rightfully belongs to you.

Want to hear more lies from the establishment? Okay, I thought you would. Here is an article in Bloomberg:
Moody’s Says U.K., U.S. Aaa Ratings Relatively Weaker

Dec. 8 (Bloomberg) -- Moody’s Investors Service said its top debt ratings on the U.S. and the U.K. may “test the Aaa boundaries” because their public finances are worsening in the wake of the global financial crisis.

The U.S. and U.K. have “resilient” Aaa ratings, as opposed to the “resistant” top ratings of Canada, Germany and France, analysts led by Pierre Cailleteau in London said in a report. None of the top-rated countries is “vulnerable,” or have public finances that are “stretched beyond the point of ‘no return’ to the Aaa category,” New York-based Moody’s said.

You have to laugh at the unmitigated gall of the ratings agencies! Now there are “resilient” and “resistant” levels of supposed triple A. Riiiighhht. And to even imply that the numbers are not “stretched beyond the point of ‘no return,’” is to simply look at 2 + 2 and to DENY that the result is 4. There will be a special place reserved for all these players as the ‘events’ that are coming unfold.

Okay, yesterday we had a very small movement on the McClellan Oscillator which means a large move is coming today or tomorrow. So far that move appears to be occurring today and it appears to be down so far, but the 1,090 pivot must fall for the decline to pick up legs. If it does, then 1,061 is the next pivot followed by 1,040. Overhead is now just above 1,100 and then 1,107.

There are still two patterns in play in this range… either an expanding megaphone top or a bullish flag. How low we go on this run will help us determine which one is most likely in play. In the meantime we are still in the same range and can assume nothing from this price action. Therefore, to have a clue, one needs to look at the currency and debt markets for direction. Here we find that the dollar has broken its most recent downtrend and is establishing a new uptrend.

The XLF has been looking very sick relative to the rest of the market. I placed a small short on it yesterday morning as a short term speculative play only. For those who may have missed my comments yesterday in the market thread, I also want to point out yet another very large divergence that is on top of all the other ones I’ve been pointing out. The divergence is occurring between the number of stocks above their 50 day moving average and the price of the market.

Below is a 3 year chart showing a similar, but smaller divergence prior to the ’07 top:

And this is a chart showing the past year. You can see that back in May and June of this year, there was a smaller divergence that again produced a pull back. These are the types of divergences that eventually correct, and they are the type of thing that most retail “investors” miss and why they are prone to being distributed to:

The Eagles – The Last Resort: