Thursday, May 20, 2010

Morning Update/ Market Thread 5/20

Good Morning,

Equities are down sharply this morning with the S&P 500 now below important support at the 1,100 level and beneath the 200 day moving average. Below is a 5 minute chart showing the overnight action of the DOW on the left and S&P futures on the right:

Bonds are sharply higher this morning as money is obviously flowing towards “safety,” if you can call buying the debts of a bankrupt country safe. That term is certainly relative, that’s for sure. The Dollar is higher, the Euro lower, oil is higher but still below $70, and gold pulled all the way back to $1,174 before bouncing a little.

Weekly jobless claims “surprised” to the upside once again, this time jumping to 471,000 from last week’s 444,000. The consensus was looking for 440k, here’s Econoday:
In a setback for the May payroll outlook, initial jobless claims jumped 25,000 in the May 15 week to 471,000. The disappointment includes a 2,000 upward revision to the prior week. There are no special factors to explain the latest week's jump. The 471,000 level is the highest in five weeks, the second highest since February, and 12,000 higher vs. mid-April. But in an important offset, the four-week average of 453,500 does show improvement from mid-April's 461,000.

Continuing claims also show improvement, down 40,000 in the May 8 week to 4.625 million. The four-week average of 4.643 million is little changed compared to April. The unemployment rate for insured workers is unchanged at 3.6 percent.

Initial claims have been stubbornly high with expectations hoping for a big move lower -- not a big move higher. If next week's report doesn't show a reversal, estimates for May payrolls will be very conservative. Stocks and commodities are moving lower in reaction to the data with money moving into the safety of Treasuries.

What, no excuses? I’m sure the weather was bad somewhere. The mask of debt based stimulus is slowly being peeled back to reveal the hideous creature underneath.

According to the DOL, “States reported 5,101,246 persons claiming EUC (Emergency Unemployment Compensation) benefits for the week ending May 1, a decrease of 94,788 from the prior week. There were 2,268,367 claimants in the comparable week in 2009.”

These EUC citizens are seldom reported but are up still nearly 3 million from a year prior.

The so called “Leading Indicators” and the Philly Fed are released at 10 Eastern. Regarding the “leading indicators,” people who worship this indicator are drunk with bad thinking. It cannot see the debt, the sovereign risk, the psychology of fear, the oil gushing into the gulf, volcanoes erupting in Iceland, nor the world tensions created by needless wars and massive differences betweens the haves and have nots. What were the leading indicators saying in 1999 or in 2007? That’s really all you need to know about “leading indicators.”

The same myopic vision is shared with most economists who fail to pull their heads out of academia. They fail to study history as it really is, they create fanciful formulas with no relationship to debt backed money, they ignore WHO controls the markets and what their agenda is, and their livings are financed by the very people who strive to keep their common sense suppressed.

Want to see a leading indicator for the United States? Take a look at the Chinese markets, which are crashing, and look at the separation between their markets and ours (updated chart below). Take a look at Japan, listen to the anger pouring from the South Koreans who finally admit that it was North Korea that lashed out and killed 47 of their sailors. The North has nothing to lose, they have nothing – the gap between the Korean halves and have nots is huge.

Did you see the city of Bangkok, Thailand, on fire yesterday? The exchange building was one of those lit on fire and burned. Can you imagine the same type of thing occurring on Wall Street? It’s occurring on the streets in Greece again this morning – yes, it can happen here. And you’re right CNN, we’re not Greece, we hide FAR MORE toxic debt than Greece did, in fact we’re the shameful debt pushers of the entire globe – debt central.

Do the leading indicators show that the people are angry and are removing incumbents left and right? Harry Reid had better look out, I can see that he’s feeling the heat – finally. The financial “reform” bill went down in flames yesterday… gutted, it would have been meaningless other than as another propaganda tool to placate the masses.

The drop below 1,100 on the S&P is serious. It means that lower is in our futures sooner, rather than later. I think we’re headed to the 990/1,000 area now before we encounter a significant bounce. When we do, it will be just another sucker move. But first we have to get beneath 1,066, the pin lows of the “flash crash.” Once both the Dow Industrials and the Transports exceed those pin lows, you will have a new DOW Theory sell signal and an official resumption of the bear market based upon that indicator. That’s only 20 S&P points away, the Transports are even closer. The next milestone is in the 1,150 area, the lows of the pullback that bottomed in February. Just keep in mind that nothing travels in a straight line.

The VIX has jumped above 40 this morning, again reaching levels of fear reserved exclusively for bear markets:

Remember all that bull market talk? Deficits don’t matter. Remember the green shoots talk? Remember that subprime is contained? Remember too, we’re not Greece… uh, huh.

The Kinks – You Really Got Me: