Wednesday, June 30, 2010

Morning Update/ Market Thread 6/30

Good Morning,

Long term “investors,” welcome back to the beginning of 1998:

Equity futures are flat to down slightly following yesterday’s 98.2% NYSE volume rout (sixteen 90%+ days now since mid-April, 10 on the down side). Again, this shows a lack of liquidity in the market, very few real players and mostly HFT players are left. Bonds are slightly higher continuing what appears to be a now parabolic move up in price, down in yield. Oil is flat, and gold is now trying again to break up trending support. The dollar fell substantially overnight, but is recovering, nearly back to level despite the U.N. calling to scrap the dollar as the world’s reserve currency and have the IMF replace it with other international “liquidity transfers.” LOL, this is the central bankers standing there exposed for you to see… it shows you where their lairs are (IMF, U.N., BIS):

Scrap dollar as sole reserve currency: U.N. report

(Reuters) - A new United Nations report released on Tuesday calls for abandoning the U.S. dollar as the main global reserve currency, saying it has been unable to safeguard value.

But several European officials attending a high-level meeting of the U.N. Economic and Social Council countered by saying that the market, not politicians, would determine what currencies countries would keep on hand for reserves.

"The dollar has proved not to be a stable store of value, which is a requisite for a stable reserve currency," the U.N. World Economic and Social Survey 2010 said.

The report says that developing countries have been hit by the U.S. dollar's loss of value in recent years.

"Motivated in part by needs for self-insurance against volatility in commodity markets and capital flows, many developing countries accumulated vast amounts of such (U.S. dollar) reserves during the 2000s," it said.

The report supports replacing the dollar with the International Monetary Fund's special drawing rights (SDRs), an international reserve asset that is used as a unit of payment on IMF loans and is made up of a basket of currencies.

"A new global reserve system could be created, one that no longer relies on the United States dollar as the single major reserve currency," the U.N. report said.

The report said a new reserve system "must not be based on a single currency or even multiple national currencies but instead, should permit the emission of international liquidity -- such as SDRs -- to create a more stable global financial system."

"Such emissions of international liquidity could also underpin the financing of investment in long-term sustainable development," it said.


Jomo Kwame Sundaram, a Malaysian economist and the U.N. assistant secretary general for economic development, told a news conference that "there's going to be resistance" to the idea.

"In the whole post-war period, we've essentially had a dollar-based system," he said, adding that the gradual emission of SDRs could help countries phase out the dollar.

Nobel Prize-winning economist Joseph Stiglitz, who previously chaired a U.N. expert commission that considered ways of overhauling the global financial system, has advocated the creation of a new reserve currency system, possibly based on SDRs.

Russia and China have also supported the idea.

Uh huh. Stiglitz is officially an idiot who would turn over the world to the debt pushers, as if their influence isn’t powerful enough already. This is absolutely the very last thing that the world needs and that WE should allow to happen – there is absolutely no need to have a global “liquidity exchange,” currencies can be exchanged in nanoseconds without it. It’s not about exchange, it’s about DEBT and CONTROL. Again, the WHO is in control is extremely important and it’s going to get down to THEM (central bankers) or US (the people who rightfully own the money system in each country). This absolutely solidifies my stance that the IMF and BIS need to be abolished alongside of the FED. Should the people fail to take them out, servitude is the future for our children.

Yesterday’s Consumer Confidence number was a disaster, falling nearly 17% in one month from 63.3 to 52.9! Here’s Econoday:
The Conference Board's consumer confidence report is a major disappointment, falling dramatically and showing regional weakness tied no doubt to the Gulf spill. The consumer confidence index fell to 52.9, in a nearly 10 point decline the size of which usually corresponds with an economic shock. The decline was led by severe weakness in the East South Central (37.7 June vs. 56.0 May) and the South Atlantic (49.1 vs. 62.8). But other regions are weak too including significant drops in the Mid-Atlantic and Pacific regions.

Consumers are now showing much more concern over the jobs market and over their income prospects, with the latter reading arguably the closest to the consumer psyche. Those saying jobs are currently hard to get rose nine tenths to 44.8 percent. The size of this rise isn't overwhelming but the direction is definitely troubling, only the second negative monthly comparison since November. For the jobs outlook, more see fewer jobs (20.8 percent vs. 17.8 percent) and fewer see more jobs (16.0 vs. 20.2). On the future income question, the unprecedented negative spread deepened between the optimists, now at 10.6 percent vs. May's 11.4 percent, and the pessimists, now at 17.2 percent vs. 16.4 percent. Consumers aren't going to be spending if they don't have confidence in their income.

Buying plans fell back sharply led by autos and including appliances. Buying plans for homes, already badly depressed, fell back some more. A slip in inflation expectations, the result of soft gasoline prices, is the report's only positive, at least a positive for the interest-rate outlook. Stocks are falling on this report, one that offers the first hint of significant economic trouble related to the spill and one pointing specifically to trouble for Friday's employment report.

Keep in mind that this confidence Index is based on the confidence in the year 1985 as the base year being 100! These numbers are horrific, and yes, they do correspond to the above article that mentions the dollar not being a store of value. Confidence – it is the basis of all money, regardless of WHAT backs it. This is what the majority of our politicians and debt pushers have failed to take into account. The Europeans just got a dose of it, don’t be surprised when confidence goes through a phase transition in regards to the dollar – I think it’s coming, but in the mean time the mechanics of deleveraging debt that is denominated in dollars continues to keep it elevated, relatively speaking, for now.

Speaking of a lack of confidence, the worthless MBA Purchase Application Index fell another 3.3% last week, but refinancing activity reportedly rose a ridiculous 12.6% - whatever, I really wish we could get an unbiased source of information! Here’s Econoday’s report of their biased report:
Purchase applications for home mortgages weakened again in the June 25 week, down 3.3 percent and remain near 13-year lows. The weakness points to major trouble for June home sales which don't appear to be getting any lift at all from record low mortgage rates. But low rates are giving a boost to refinancing applications which rose 12.6 percent. The average for 15-year mortgages is at a record low 4.06 percent while the 30-year, at 4.67 percent, is at its lowest since April last year.

No credibility, “economic reporting” like this is nothing but another bruise to confidence in our system.

The ADP employment report came in weaker than the 55,000 job addition that consensus was looking for, falling all the way down to only 13,000. I don’t put much credence in this report either, the jobs data will come, of course, on Friday. This will likely lower expectations for it.

The Chicago PMI was just released and came in at 59.1, this was weaker than consensus and the prior month which were both at 59.7. Yet another indication that economic activity is slowing. The number is still above the “growth” demarcation of 50, for now.

The Baltic Dry Index continues lower after breaking support. Here’s a close in view that may not look as dramatic as the longer term plunge, but its recent down movement has wiped off an amazing 41% of this index. This is a leading indicator of economic activity:

Below is a messy 9 month chart of the SPX. The Head & Shoulder top formation is now well formed and is complete. The close yesterday was beneath the neckline in almost anyway you can draw it. It’s not what I would call decisive yet, but others believe so. Regardless, I think it’s playing out and the target is 860ish. Note on the chart that there are several down slopping support areas above 970:

The SPX and most indices closed right on the bottom Bollinger band. Although yesterday’s waves are not clear to me on the fine scale, McHugh claims that he can count it as a 5 wave structure which means that wave 1 of 3 of 3 of 3 is complete and we need to pause for wave 2. This will give the Bollingers a little time to get out of the way, but I don’t think it’ll be long as wave 3s move swiftly. The next wave will be yet another wave 3, now 4 levels of 3 which means that it’s likely to be a very powerful downwards thrust when it comes.

The S&P 100 index produced a "death cross" yesterday when the 50dma moved beneath the 200dma:

This is a very bearish sign. The S&P 500 will cross either Friday or early next week. Again, ominous, and a confirmation that a powerfull bear move is in progress - history says these crosses are not trifle. Also, yesterday the S&P 500 200dma turned negative. I did a study showing that once it falls by 1% then the odds of a powerful decline following is very high.

What you see from the U.N. recommending that the world depend on debt from the IMF is exactly what I’ve been warning about all along! That the central banking DEBT PUSHERS would use this crisis to swoop in and create a system that is even larger, more controlling, and creates nothing but more debt servitude for the entire world. This would be the opposite of freedom and must be fought at all costs! Your very freedom depends upon it, and the future of your children depend upon it. They should be in control of their own destinies, not the future generation of privileged world bankers!

Velvet Revolver - The Last Fight (Libertad):