Friday, March 12, 2010

Morning Update/ Market Thread 3/12

Good Morning,

After closing just a fraction below January’s high, prices appear set to open higher, thus pushing the SPX over the top. Below is a 60 minute chart of the DOW futures on the left and 5 minute version of S&P futures on the right:

The dollar is lower and exactly touched its rising uptrend line from December. Bonds turned sharply lower, they are sitting right back down on the very large H&S pattern’s neckline. A break for bonds below that neckline will signal much higher interest rates in the months ahead. Oil is higher, gold is about flat.

Note that prices rose to new highs overnight before any economic news this morning. Then came retail sales which look, well pathetic, but are being much trumpeted by the media. For February, “the bad weather month,” retail sales rose .3% which was higher than expected by the supposed experts. Note that the year over year comparison weakened compared to January and that comparisons are now relative to the height of the financial freeze. These Retail Sales numbers are for surviving stores only! They do not look at overall sales dollars and compare them to last year, yet another very flawed statistic, one that does not match sales tax receipts. Yet we are going to party like it’s 1999! Here’s Econoday:
Apparently, consumers more than caught up on spending when the snow melted as February sales were much stronger than expected for that snow bound month. Overall retail sales in February rose 0.3 percent after rebounding 0.1 percent in January. The gain was higher than the consensus forecast for a 0.2 percent slip. But the gain was far better after discounting a drop in auto sales. Excluding autos, sales in February jumped a sharp 0.8 percent, following a 0.5 percent boost the month before. Excluding both autos and gasoline, February sales spiked 0.9 percent, following a 0.5 percent rise in January.

The consumer is spending more than most economists and analysts have been expecting. Most likely, those with jobs are more confident about the economy staying strong enough for them to keep their jobs and are more willing to spend.

The February jump in sales was broad based but leading the increase were electronics & appliance stores, up 3.7 percent; miscellaneous store retailers, up 2.5 percent; food & beverages, up 1.3 percent; and sporting goods, hobby, book & music stores, up 1.2 percent.

Overall retail sales on a year-ago basis in February decreased to up 3.9 percent, from up 4.1 percent in the prior month. Excluding motor vehicles, the year-on-year rate slipped to 4.2 percent from 4.3 percent in January.

Oh yeah, the consumer is going to lead us out of this recession. Try the $2 Trillion increase in government spending has created a temporary debt pushing drug high.

Consumer Sentiment is released just before 10 Eastern.

Has everyone caught the news about the off balance sheet transactions that were occurring at Lehman before they failed and is most likely occurring at the current large banks? Quite the accounting scandal, it’s ongoing, and the scale of it is going to make Enron look like Kindergarten by the time it’s all exposed. And no surprise, little Timmy Geithner, Dick Fuld and the SEC all KNEW about the fraud. Totally corrupt, the debt pushers are addicts who now are so far gone that they cannot survive without breaking the law.

There was yet another small change on McClelland Oscillator yesterday, meaning that we’ll likely see a large move in price within the next two days.

We have a potential DOW Theory non-confirmation in play should the Industrials fail to close above their January high. The daily charts are about as overbought as they have ever been. This move over the past two weeks was parabolic, sending daily Stochastic readings well above the 99% level. This is manic buying, a party that is eerily similar to both 1999 and to 2007.

Dr. McHugh, our Swarm target yesterday and Elliott Wave expert, has identified two possible scenarios should the DOW confirm the new high along with the rest of the indices. One is that this has been wave 5 up and that it will lead to a flat with a more shallow next wave down, but the other possibility is the following in his words:
“…should prices rise above the January 19th 2010 highs. Stocks could be completing a double Zig Zag for Supercylce degree wave (B) up, correcting the decline from October 2007 through March 2009. If so, we would look for a top around 11,100ish, the 200 week moving average in the Industrials. That top could possibly arrive around our April 7th phi mate turn date, and probably be this year's version of the spring equinox cycle turn.

The same count is possible in the S&P 500 should it rise above its January 19th, 2010 top. A double Zig Zag.

If this alternate labeling is occurring, unfortunately for markets and our economy, it means the Grand Supercycle Degree wave {IV} Zig Zag scenario is very likely, and catastrophic wave (C ) down is next, with a possible downside target toward zero.

Just a possibility though, so no worries – keep the party and that beautiful accounting fraud rolling. If you didn’t realize that criminals are running our financial system and our country, you do now. Karl Denninger wrote a short piece on it, time to start getting educated on the latest Lehman - Where Are The Cops?

Oh yeah, it’s time to Party like its 1999!