Thursday, January 21, 2010

Morning Update/ Market Thread 1/21

Good Morning,

Equity futures are lower again to flat this morning but the 1,133 pivot is still supporting prices so far, here’s the overnight on the DOW and S&P:

The dollar is higher at new recent rally highs. It appears as if the dollar has begun either wave 3 or c up, and thus we can expect something that’s probably at least equal in size and duration from the first leg up. Bonds are up slightly, but are already up against the upper Bollinger band. Oil is up slightly, gold continues to correct, and the Euro continues to fall.

Ebay reported good earnings and is higher following their report. The NDX is managing to fare better overnight than the rest of the indices, and is about level.

The big report was, of course, Goldman Sucks, err Sachs, who swung from a $2.12 billion loss the year prior to a $4.95 billion, or $8.20 per share profit! Sweet! Thank you Uncle Sugar! Looove that Ferrari. And da fools on the Street were looking for only $5.18, what were they thinkin’? Don’t they know that we own D.C. and also control the world’s markets? Really…

But someone is yanking on my chain and I don’t really like it because I know when there are games being played and there is definately a game being played this morning as President Obama, just coincidently, oh yeah, a total and complete coincident that it’s on the morning of Goldman’s blowout $1.65 BILLION PER MONTH report (wonder where your money went?), comes out with the following:
NEW YORK ( -- Later this morning, President Obama is expected to publicly give a thumb's up to a message that former Federal Reserve chief Paul Volcker has been saying for a year: Let's limits the big banks.

Volcker, an economic adviser to Obama, is set to join the president Thursday in announcing measures to narrow the "size and scope" of banks and their investment activities, according to a senior administration official.

Details were scarce, but Obama is expected to propose higher capital requirements for some financial products like derivatives, preventing commercial banks from trading for their accounts and limiting or preventing bank investments and ownership in hedge funds, sources said.

The proposals are mostly aimed at the nation's largest banks including J.P. Morgan Chase (JPM, Fortune 500), Citigroup (C, Fortune 500), Bank of America (BAC, Fortune 500), Wells Fargo (WFC, Fortune 500), Goldman Sachs (GS, Fortune 500) and Morgan Stanley (MS, Fortune 500).

Hmmm… what game is being played here? Time to take the markets down, reel in the boys a little now that they've stolen all those trillions? Let Volcker come in and play the part of the adult again? While this sounds like an obvious thing that should have happened long ago, the timing leaves me knowing that we are simply witnessing a political ploy. Sorry, I am not buying it. And I’m not buying that anything meaningful will truly come from it, for if it did, the banks would be broken up at a minimum. Again, I’ll be watching what they do, not what they say to placate the public on the day of an outrageous release – a crime against Americans who don’t even know that they are being robbed every time the market moves against them taking their hard earned dollars in what is now a casino but was meant to be a functioning capital market.

And exactly how are jobs being helped? Still, after all this time, they are not. The weekly jobless report grew by 36,000 to 482,000. Digging into the report, “The advance unadjusted number for persons claiming UI benefits in state programs totaled 5,716,608, a decrease of 299,837 from the preceding week. A year earlier, the rate was 4.2 percent and the volume was 5,651,117.” In other words, there are 60,000 more people in state programs now than at the height of the crisis last year, yet the reported numbers are shrinking way down from peak as they are not reporting those filing emergency claims.

Here’s Econoday’s spin, see if you can pick out the outrageous factor in this report:
Distortions cloud what on the surface is a negative jobless claims report. Initial claims jumped 36,000 in the Jan. 16 week to 482,000, marking a third straight increase and the fifth increase in five weeks -- not a streak that points to improvement in the labor market (Jan. 9 week revised 2,000 higher to 446,000). The four-week average, at 448,250, rose 7,000 in the week to snap a long streak of uninterrupted improvement going back to August.

Now the special factors. The Labor Department said claims piled up due to short holiday staffing at state processing centers. Market News International is quoting a Labor Department analyst as saying the week's gain is "not economic, but administrative." Starting with the next report, the government analyst expects the effect to reverse making for a steady decline in coming weeks. An implication here is that short-staffing this year was greater than prior years and is not offset by seasonal adjustments. Note also that data from an unusually large number of seven states had to be estimated for the current report.

Continuing claims, data available for the Jan. 2 week, did show improvement or at least did decline for a fifth straight week, down 18,000 to 4.599 million. But the decline in continuing benefits reflects, at least in part, the expiration of benefits as the unemployed fall out of the insured workforce.

Other data show a nearly 40,000 drop in those receiving extended benefits while more than 650,000 received emergency compensation. The markets showed no significant reaction to this report, a report that will be very closely watched for improvement next week.

Oh, “a Labor Department analyst as saying the week's gain is "not economic, but administrative." That’s nice. So, what they are saying is that they withheld data pre-holiday to make the reports look better? Hate to ruin everyone’s holiday… and the manipulations continue to stack up, one upon the other. But no one will be prosecuted for manipulating the markets, because it’s in the “good direction,” everyone likes a positive Prozac person.

Leading Indicators and Philly Fed are out at 10 Eastern.

Below is a 30 minute chart of the SPX, a clear megaphone, it is nearly a complete pattern and the odds favor a downward break. It could break down from somewhere in the middle, or may run all the way to the top again. McHugh's count shows that it should be the last run inside. You can see that the 30 minute RSI is approaching overbought, but the 60 has a way to go still:

Here's a 30 minute NDX chart. Perfect megaphone formation. They are a directional change formation, that means lower. If that formation breaks up, you will know that the markets are not acting "naturally" once again:

That’s about all I can stand to talk about this morning, excuse me, time to go take a happy pill… LOL.

Bad Company – Can’t get enough: