Thursday, March 11, 2010

Morning Update/ Market Thread 3/11

Good Morning,

Equity futures are down hard this morning, the selling began immediately after the close yesterday. This looked very much like the market makers were holding sell orders to me, a game that I haven’t seen played in some time. But then again it could also be the mysterious and laughably ridiculous ability of the big manipulators to buy and sell in “dark pools.” In any event, the casino’s computers were finally switched to sell as the people who needed to get out of their C, AIG, FRE, and FNM positions are finally gone. Now all that’s left are the poor saps still holding onto their rotational tech shares that were purchased in the casino’s favorite new game of musical chairs. Oh yes, that rotational trade game is an oldie but a goodie, played only near major tops and designed to leave only the slowest standing when the music stops.

Below is a 60 minute chart of the DOW on the left and a 5 minute chart of the S&P on the right showing the late night casino hours:



Note the broken up channel on the DOW – do not ignore that! The dollar is up, bonds are roughly flat, oil is down and gold is down fairly hard after falling hard yesterday in what looked like margin call activity from somewhere.

Want to talk about the results of exponential growth? Here’s the ticker off the wire yesterday:

BN 13:00 *U.S. POSTS RECORD $220.9 BILLION BUDGET DEFICIT IN FEBRUARY

A record $221 Billion in one month! In the month of February our nation took in only $107 Billion, the first increase in 21 months, but spent a staggering $328 Billion! Niiiice. This chasm is so wide that we only covered ONE THIRD of our expenditures!

Please, let that sink in.

That’s right, we spent three times the amount of money we took in! Now, how long do you suppose our monetary system has left at that rate? I say that math is so far gone, that Freedom’s Vision is the ONLY possibility of moving forward as a nation. We need to get on it, time is running short. There is simply no way this nation carries on this way for much longer. The above truth is shocking. We need to get the word out on this, even if it means placing that statistic on Facebook and directly to your friends. Let them know there’s a solution and that we need their help.

The morning the latest International Trade numbers came out showing a narrowing of the trade deficit, which is good, only in this upside down world, it is bad because it means the Ponzi scheme is dying a tortured and agonizing death. Here’s Econoday, they won’t look at it quite the same way:
Highlights
Based on the latest trade numbers, either worldwide final demand is not growing as much as hoped or the January numbers are simply coming off sharp gains the month before. The overall U.S. trade deficit unexpectedly shrank in January despite higher oil prices, falling to $37.3 billion from a revised $39.9 billion in December. The January shortfall was much narrower than the consensus forecast for a $41.0 billion gap. Exports slipped 0.3 percent but imports fell a sharper 1.7 percent.

The improvement in the trade deficit was about evenly split between the petroleum and nonpetroleum balances. The petroleum deficit came in at $22.7 billion, down from $23.6 billion in December as barrels imported fell significantly. The nonpetroleum gap narrowed to $25.4 billion from $26.9 billion in December.

The decreases in exports and imports were broad based by components but with those for imports more notable. However, both followed strong gains in December as exports jumped 3.4 percent that month and imports surged 4.9 percent in December. At second look, it is not clear whether the drop in imports likely reflects a downgrade in the recovery by U.S. businesses believing that demand growth will be more sluggish.

The shrinkage in the petroleum deficit was due to a sharp 11.5 percent fall in barrels imports, following a12.5 percent boost in December. The price of imported oil increased to $73.89 per barrel from $73.20 per barrel in December.

Year-on-year, growth in overall exports of goods and services in January increased to 15.1 percent from 7.7 percent in December. The numbers are still coming off a low base during the worst of the recession. Meanwhile import growth rose to 11.9 percent from 4.7 percent the prior month.

It would have been nice for the eight month consecutive gains in exports to continue but there are always oscillations in any series. Taking into account recent strong gains, the January dip may or may not mean much in terms of overseas demand. The same may hold true for imports and domestic demand-but we will have to watch for other numbers to see.

On the news, markets were little changed this morning.
The year over year numbers are now up substantially off the bottom, I believe those will begin to fall back again rapidly as the comparisons will quickly get away from the standstill period of the beginning of last year. New month on month decreases are not saying the same tune that is being sung by the debt pushing crowd. And let’s face it, the vast majority of international trade is on the back of our massive debt. What happens when the exponential growth in government debt begins to collapse? Debt is money, international trade will collapse right along with it, as it already has due to the collapse of private sector debt. The life support cannot remain forever.

Jobs? Jobless claims came in at a still horrid level of 462,000 for the past week:
Highlights
Jobless claims remain stubbornly high, pointing to continued slow bleeding for payrolls. Initial jobless claims totaled 462,000 in the March 6 week, about what was expected and driving up the four-week average by 5,000 to 475,500 for the highest level since November when claims first broke below 500,000. There won't be much hope for payroll gains until claims move convincingly below 450,000.

An emerging negative may be continuing claims where declines have fizzled out. Continuing claims in the Feb. 27 week rose 37,000, marking the fifth increase out of the last eight weeks. The four-week average has stabilized the last two weeks at 4.581 million. The unemployment rate for insured workers is unchanged at 3.5 percent.

This report was unusually choppy week-to-week during February and unfortunately, in the first week of March at least, has stabilized at uncomfortably high levels. Equities and commodities fell as did the dollar in reaction to today's report.



How long have we been at this type of level, it seems like forever. Our economy needs to be creating massive jobs just to break even and the opposite is happening. Why? Look no further than debt saturation. Jobs in northern Florida hard to find? NASA laying of hundreds, no money to spend on that, only on debt. Kansas City closing HALF its schools??? No money for schools, only to service DEBT.

Oh yeah, sure, it was the unions that killed our economy, just like it was the unions that killed GM and Chrysler. What nonsense! Unions were created in this country for good reason, they were a part of a natural balancing act that arose during the industrial revolution and unions brought huge strides in worker safety. Trust me, flying on an airliner would not be the completely routine task that it is today were it not for labor’s ability to organize to affect change.

No, try this reality on and see if it fits… Unions now seem like they are very over paid because they were able to actually increase their wages at something almost as fast as the central bankers and debt pushers inflated our economy. The cost of housing through the roof on the back of fraudulent credit derivatives?? How does a fire fighter in San Franscisco buy a house to live in? So the spiral was circling higher, and higher, but what ignited the spiral, was it the union and their demands for higher wages? Or did the spiral start with the debt pushers? The answer is obvious. Look at GM. GM could have not paid one cent to all their workers and not a penny in benefits, yet they still would have lost billions and billions per month. This is because they did the same thing with automobile debt as subprime and other exotic mortgages did to housing debt. Oh, and GMAC also stupidly got on board the housing debt mania. That is a complete and total failure of management, not just of GM management but of the management of our banking system and of our government.

Do wages now have to adjust to a new post credit bubble reality? That's the way it's supposed to work, but that will not end the cycle of crisis.

And America is now stifling our chance to start over by keeping those crippled companies who failed alive. That’s not the way nature is supposed to work. If union demands are so high that they cannot be supported, then the business becomes non-competitive and it goes away. Thus the check and balance has been short circuited. This is what happens when economic and government distortion is piled high, one upon the other. The root cause of our problems lie squarely on the pushers of debt, it’s WHO controls the money that’s important, THAT is the root of the problem.

Moving back to our casino, there was a small change in the McClelland Oscillator meaning that there should be a large move in price today. Can the market move downward more than 1 or 2%? You bet it can, the warning signs are there. Just that scary new high figure alone should have you running for the hills. Non-confirmations all over the place, the market was not moving up together. Yesterday the Transports made a new high and yet the Industrials never got close and are now falling away. The up channel is now broken, Buckle up.

Tom Petty – Breakdown: