Wednesday, January 13, 2010

Morning Update/ Market Thread 1/13

Good Morning,

Equity futures are up a little this morning following yesterday’s fairly sizeable decline that was somewhat stealth as the Industrials held up far better than the overall market. The chart I’m presenting up top is a little different today, it doesn’t just show the overnight action, it is a 15 minute chart that clearly shows the divergence between the DOW on the left and the S&P on the right. The NDX and RUT were weaker than both, losing about 1.3% each:

The dollar is down substantially this morning, bonds are also down, oil and gold are both up slightly after being routed yesterday. Commodities were hit very hard across the board, with all agricultural commodities big losers. Wheat was a huge loser and corn futures actually went lock-limit down, losing more than 7% on the day yesterday and are down ANOTHER 4.3% this morning.

About 84% of the volume was on the downside yesterday, a pretty negative day that saw a ton of money flow into bonds and saw the defensive large caps fare better. It was a very important day technically because of the market sell signal given by the VIX. This is a rare event, there have only been three in the past four years and all have resulted in some type of sell-off that began within a few days of receiving it. Below is a 3 month chart of the VIX, you can see that we closed a daily bar entirely outside of the lower Bollinger Band which is a 2 standard deviation indicator. The act of returning back inside is the market sell signal, that happened yesterday:

Again, this does not necessarily mean that descent will happen right away, and there are instances further back in time that did not lead to a significant decline, but the odds are pretty good and certainly should not be ignored.

Here’s a snapshot of the RUT in a 15 minute view. Does that look like a Head & Shoulders pattern? Why yes it does, and it is fairly sizeable:

The S&P and NDX also sport the same type of pattern, although not as clean as the Russell. It’s worth keeping an eye on for sure.

Today the very worthless MBA Purchase Applications Index came out with their usual nonsensical report. Get this, even Econoday is left scratching their heads:
The Mortgage Bankers Association's purchase index rose 0.8 percent in the Jan. 8 week while the refinance index jumped 21.8 percent. MBA's data have been choppy in recent weeks and have not offered a clear take on mortgage demand. Interest rates have backed up slightly in recent weeks but remain very low with 30-year loans averaging 5.13 percent.

So, the overall “index” is up .8%, but the refi index jumped a stunning 21.8% in one week. Realllly? Okay, whatever. Econoday doesn’t bother to produce a chart for this anymore, because they CAN’T. An index reported only in percentage change on a weekly basis with no raw numbers to base anything upon? WORTHLESS, and the NAR should be ashamed of themselves for their attempts to manipulate and spin the public. This type of data “reporting” and manipulation should be illegal if it’s not already.

The petroleum report is released at 10:30 Eastern, and there’s a 10 year bond auction today that could have interesting, if not also entirely manipulated, results. Manipulated how? Oh, nothing special, just Primary Dealers and their shell companies placing false bids in order to show false demand and fool people into believing that everyone in the world wants to buy more of our debt, thus not scaring away those who really do. Gee, Nate, is all the data manipulated in your mind? YES. The above statements are fact, not supposition. There are very few data sets anymore that are reflective of reality, tax data is probably the best.

Own California bonds? Were you counting on Schwarzenegger to secure Federal money to help the state out of its ever-growing black hole of a budget? If you were, you just got burned as California is being rebuffed:
Jan. 13 (Bloomberg) -- California’s hopes are fading for federal help in closing a projected $19.9 billion deficit that has caused the lowest-rated state’s borrowing costs to rise 26 percent in three months.

“We recognize they have enormous problems,” David Axelrod, senior adviser to President Barack Obama, said in an interview. “But we can’t solve all of those problems from Washington.”

Investors are growing more concerned that California, the world’s eighth-largest economy, will repeat last year’s fiscal crisis that forced it to use IOUs to pay bills. With Governor Arnold Schwarzenegger seeking $6.9 billion in federal assistance to narrow the deficit, the extra interest paid on the state’s 10-year bonds over AAA-rated municipal securities has risen to 1.34 percentage points from 1.06 points in three months.

Think holding municipal debt will be as rewarding in the future as it has been in the past? Think again.

But what amazes me here, and is becoming ever more apparent to the states and to the public, is how much money can and is readily produced to bail out banks and financial businesses, but how NO MONEY can be found to help out the states or the citizens who comprise this nation. It is almost as if they are trying to incite revolt, isn’t it?

Not that I favor bailing out the States by just handing them money! I don’t. Governments are simply far too big, their budgets are out of control. That said, there is really no way out for states whose economy and citizens are all saturated with debt. There is simply no escape until we get serious about cleansing out the debt along with those who push it. That time is coming, I’m doing my best to give it a push.

But boy, does Obama ever have tough love for some unknown 20 banks:
Jan. 13 (Bloomberg) -- President Barack Obama will announce his intention to impose a fee on more than 20 of the country’s largest banks and financial institutions to help recoup taxpayer bailout money and trim the federal budget deficit, an administration official said.

The fees, expected to be spread over as many as 10 years, will be based on the leverage or amount of liability each firm has, the official said, who spoke on the condition of anonymity.

The administration is still working out the final details of the levy, which will be part of the fiscal 2011 budget submitted to Congress in early February. The bank levy has been part of discussions since August among Obama and his advisers about ways to recoup taxpayer bailout money and reduce the deficit, advisers said.

The financial industry has been a frequent administration target. Obama has leaned on banks to boost lending to small businesses and homeowners facing foreclosure, support his plans for revamping financial regulations and discourage bonuses that encourage excess risk taking.

“They’ve had a year to figure out how they wanted to participate in the nation’s recovery and they don’t somehow seem to have gotten that message,” said Anita Dunn, former White House communications director.

Who is it that hasn't gotten the message? Are your words fooling the people into believing that your ACTIONS have any real meaning?

How about people who don't understand that you can't force more debt onto people and entities whose incomes cannot support the debt they currently have?

Of course the banks would never dream of passing any of those fees onto the American people, or just creating more credit dollars to pay for it, would they? No, didn’t think so. But hey, Obama got to stand at the podium once again and badmouth the very industry that supports him and all the politicians, his Administration having more former central bankers in it than any Administration in history. Can’t you just hear him singing, “Bad, bad company…”

Bad Company – Bad Company: