Monday, January 25, 2010

Morning Update/ Market Thread 1/25

Good Morning,

As it turns out, it was a good idea to take profits on Friday if you were short, as the equity markets are up over the weekend after the SPX landed right on a support level in the 1,090 area.

Below are the DOW and S&P futures, I left the DOW chart on a longer timeframe so that you can see the descent that was made last week. I can count that descent as a 5 wave move, so that may mean that wave 1 of wave 1 is complete just in time for the usual Monday ramp job which is now 19 of 21, or of the past 21 weeks there’s a 90% chance of Monday being an up day. When that pattern breaks, look out. There’s still a chance this rise is just a wave 4, and also note that it’s moving quickly. If a wave 4, we should see some selling later. If this is a wave 2 bounce, it should also move quickly and should draw back in a lot of bulls, probably in an a-b-c fashion:

Existing home sales will be released at 10 Eastern, that is likely to move the markets. Tomorrow begins the FOMC meeting that will be announced Wednesday, Consumer Confidence on Tuesday, and then we get to see how much fun with numbers they are having with the 4th Quarter GDP on Friday. A busy week for data.

We also must endure watching the Bernanke spectacle play out as he must be reconfirmed this week.

Here’s a chart of the SPX, you can see pretty clearly where support and resistance levels are here:

Obama is trying to placate the middle class uprising with words and more handouts (ht AZRainman). Child tax credits? Oh yeah, that will solve the problems. When you hear talk like the following, always ask yourself, “Where is the money for that coming from?”

Obama to announce aid for middle class

WASHINGTON (AP) -- Previewing key elements of his State of the Union address, President Barack Obama is announcing on Monday a series of initiatives aimed at calming some of the economic fears of struggling middle class families.

The proposals to be unveiled by Obama and Vice President Joe Biden at the White House, and which the president will push in his Wednesday night speech, include a doubling of the child care tax credit for families earning under $85,000; an increase in federal funding for child care programs of $1.6 billion; capping student loan payments to 10 percent of income above "a basic living allowance;" expanding tax credits to match retirement savings; and increasing aid for families taking care of elderly relatives. The plan would also require all employers to provide the option of a workplace-based retirement savings plan.

The proposals are the result of the work of a middle class task force that Biden had headed. A White House official says they are aimed at the "sandwich generation" -- Americans that are struggling to care for both their children and their parents. The official spoke on the condition of anonymity because the speech has not been finalized.

The official said that creating jobs, addressing the deficit, changing Washington and helping middle class families are the main themes of Obama's first State of the Union address. He'll also discuss his bid to take on the financial industry, energy, education and immigration -- all issues the president has said fit into his plan to rebuild the economy.

White House advisers see the speech as a key opportunity for Obama to recalibrate his message to better connect with the public and reset his presidency after stinging setbacks.

Obama has promised a sharper focus on jobs and the economy as the dust settles from the punishing loss of the late Edward M. Kennedy's Senate seat in Massachusetts. Republican Scott Brown's victory put the seat in the hands of Republicans for the first time in decades and took away Democrats' 60-vote majority in the Senate.

Obama and fellow Democrats are trying to regroup to head off more populist anger and stem more losses of congressional, gubernatorial and legislative seats in the 2010 midterm elections. Obama's poll numbers are also off -- primarily because of the slow economic recovery and double-digit unemployment. A majority of Americans also have turned against health care reform, the president's signature legislative effort now in jeopardy.

The initiatives being announced Monday were first reported by The New York Times.

Under the president's proposals, families making under $85,000 a year would see their child care tax credit nearly doubled. Families making under $115,000 would also see at least some increase in their credit. Obama will also call for the allocation of $100 million to assist families caring for aging relatives by providing help with transportation, adult day care and in-home aids.

Since he is going to have to add more debt on top of debt, or print to do this, expect the net effect to be negative to the economy overall. Remember that the velocity of debt is now negative 15 cents. The Japanese have been doing that for 20 years and it is only making their problems worse, they will be printing trillion yen bills in Japan in the not to distant future at this rate. We’re not that far behind and starting from a much weaker debt situation.

Sam’s Club announced they are laying off 10,000 employees. They claim they are going to be indirectly hiring them back via outsourcing, so those firms will have to hire about that many to compensate. What they are really saying is that they are outsourcing already low paying jobs to a company that can do it for even less. Riiight. Can’t you just see the jobs of the future? More tax credits and food stamps for everyone.

For more technical analysis, please refer back to the weekend update. Remember, today’s Monday, these are the best of times!

Styx – The Best of Times: