Thursday, March 25, 2010

Morning Update/ Market Thread 3/25

Good Morning,

Futures are moving upwards once more in more parabolic fashion, with the ramp beginning around midnight. The movement is particularly strong in the NDX, but weakest in the RUT. Below is a 30 minute chart of the DOW on the left and a 5 minute chart of the S&P futures on the right:

This move appears to be a fifth wave higher off the last touch of the uptrend line and comes off a bullish flag that appears to have been wave 4 of this move.

The dollar had an enormous move upwards yesterday on high volume and was a breakout. It is slightly lower this morning. Bonds had a massive move downwards yesterday (higher rates), moving back down to support. The TNX broke upwards out of a bullish triangle, signaling that higher rates are likely. This is a big deal for our debt saturated economy should it continue. Both oil and gold are higher this morning, the downward movement in gold yesterday produced a bearish target of $1,040 an ounce on the Point and Figure chart:

Yesterday new home sales fell another 2.2% to the lowest sales level in history! That’s right, at no point in my lifetime have the number of new home sales been lower than last month. Now that’s an economic recovery. It shows just how damaging the creation of bubbles can be and how long the aftermath can be.

The weekly jobless claims did, however, come in slightly less than expected, but still at very depressed levels. Here’s Econoday:
Initial jobless claims fell to a lower-than-expected 442,000 in the March 20 week, which outside of a single week in the up-and-down month of February, is the lowest total of the recovery. Expectations were centered at 450,000. The four-week average, at 453,750, is at a cycle low.

Continuing claims are also at a cycle low, at 4.648 million with the four-week average at 4.689 million. The unemployment rate for insured workers is unchanged at a cycle low of 3.6 percent. Claims for emergency unemployment compensation and extended benefits also fell. Today's data include annual revisions.

According to the D.O.L.’s raw data, “States reported 5,558,430 persons claiming EUC (Emergency Unemployment Compensation) benefits for the week ending March 6, a decrease of 329,618 from the prior week. There were 2,094,811 claimants in the comparable week in 2009.” That decrease is about the same size as the increase the month prior. There are nearly 3.5 million more people on the Emergency rolls this year than last.

Ben Bernanke testifies at 10 Eastern. Tomorrow we get Citizen Sentiment and the final revision to 4th quarter GDP.

The Republicans were evidently able to force another vote on the healthcare bill over a technicality. Not sure that will change anything, but the more I learn about it, the sicker and more perverse it seems, the more damaging to the economy it appears. I’ll just call it an “accelerating event.”

The market is reaching historic extremes in the upwards direction while our housing market is hitting historic extremes in the downward direction. And 100% of DOW stocks are above their 30 day moving average, even after yesterday’s move lower. It’s quite a roller coaster ride, “you would sure hate to miss out on a rise like that,” says the man about to fall victim to Minsky’s 6th bubble stage. But, hey, hot money running away from the debt bubble has to go somewhere, no? Just remember as you see the cost of healthcare zoom, taxes zoom, food and energy zoom, that Zimbabwe had the best performing stock market in the world for about a year. All the while the real economy was collapsing. The foundations of our economy are being chiseled away, we are looking more like Zimbabwe everyday.

Will America go through what was experienced in Zimbabwe, Weimer Germany, Argentina? It’s hard to say where events will lead. This time most of the entire world is going through these Debt driven events together. When the economic inequalities are at their highest, it seems to me, that the risk of “other events” climb higher. Things are heating up around the globe at the same time that sovereign debt is growing exponentially. There is one thing of which I have no doubt. The rules of the game of money are about to change.

Styx – Crystal Ball: