Monday, September 27, 2010

Morning Update/ Market Thread 9/27

Good Morning,

Yet another Monday morning which means that the debt pushers are hard at work building a false façade in the markets for maximum psychological effect… they must really like the democrats to be pushing so hard against what’s normally a negative election and seasonal cycle. Just wait until the debt pushers are not getting their way, then we will be right back to blackmail the economy via the markets again, a lesson we just haven’t seemed to learn despite being beat about the Head & Shoulders repeatedly throughout our history.

The dollar continues its plunge this morning, bonds are higher however, oil is also higher, and gold is setting yet another all-time high (although looking somewhat tired).

This latest run in stocks has been nothing but a government sponsored run on the back of billions and billions of YOUR money/ indebtedness. Just last week alone the Fed provided more than $20 billion in POMO activity. This and the expectation of some QE2 program are sinking the dollar, and sinking America’s future right along with it. In other words, the rise in stocks you see is false, what is really occurring is the torpedoing of the dollar, a move which is confirmed by gold.

Taking another look at the dollar chart, you can see that we have broken convincingly through the important 80 level, and we have confirmed the H&S target of 71/72ish by breaking below the neckline. This structure is inside of a larger triangle or pennant, the bottom boundary of which is currently just above 76. Should that 76 level be broken, that pennant says that America is in for some interesting and very difficult times:

Japan, of course, has been experiencing interesting and difficult times for the past three decades! Remember their recent attempt to stop the rise in the value of the Yen? It more than half melted away already, so this weekend they announced the following:
Japan Said to Consider Stimulus of as Much as 4.6 Trillion Yen

Sept. 27 (Bloomberg) -- Japan’s government is considering compiling an economic stimulus package totaling as much as 4.6 trillion yen that will be funded with existing revenue, a government official said.

That’s only $54.6 Billion in U.S. Dollars… sure, sure, it will “be funded with existing revenue.” Riiiigggght. Just like the last 10 trillion injection and the 10 trillion injection before that. Note this press release is nothing more than lip service, an attempt to scare traders into covering their positions. In other words, it’s blatant market manipulation… but we all know that by now, don’t we? Does it work? The chart says NO, not even a wiggle. This is the SAME exact thing that happened in Zimbabwe… the amounts got bigger and bigger, but they had less and less effect. This is also occurring in the United States, we’re just a little bit behind Japan. We are now deep into competitive devaluing of our currency. If it continues, it is going to completely destroy our economy.

That said, those are some pretty bearish dollar comments, and I know that we are flirting with record levels of dollar bearishness, that makes a reversal likely in the not too distant future, at least temporarily. However, from a technical perspective I just don’t see any meaningful support until we reach that 76 level.

There are no economic releases today, but this week is fairly busy with Case-Schiller home prices and Consumer Confidence tomorrow, the final revision of Q2 GDP on Thursday (consensus expecting no change at 1.6% - I think this is high), Chicago PMI, and several other reports come throughout the week.

The count in the market still looks like we are close to ending wave c of wave 2. SPX 1150 is an important level, and actually the market closed just above the 1146 pivot point on Friday. The next higher pivot is at 1168, however, 1160 is approximately where wave c equals wave a. The next lower pivot is located at 1136.

Friday’s run up was absolutely insane – again very artificial looking. There are massive gaps all the way up the charts. There are divergences all over the place, the number of 52 week highs is an important new one, there is also a developing divergence in the Advance/Decline line to go along with all the previous divergences and severe overbought market condition. Additionally, several of the sentiment indicators are at record levels of bullishness.

Again, the climb upwards has been an artificial illusion. It is not based upon climbing some mythical “wall of worry,” it is based upon $20 billion POMOs that fuel Fed sponsored HFT activity designed to knock down the value of the dollar while the American people are robbed. People who are robbed of all their productive efforts will eventually stop being productive. They will have less and less money that they can use to be “consumers.” As the consumer well runs dry, corporate profits will continue to collapse as they already have. Sometimes it’s real, sometimes it’s not – it’s our job to know the difference. Right now we’re 8 miles high…