Thursday, November 18, 2010

Morning Update/ Market Thread 11/18

Good Morning,

Equity futures are higher this morning going along for a media circus GM IPO/ POMO frenzy. Bonds are lower, the dollar is lower, while oil and gold are both higher.

The GM IPO, as if you can refer to it as “initial,” is nothing but more criminal behavior. The offering wasn’t even made available to the public, the same public who spent billions inappropriately bailing out the wrecked FINANCIAL institution that GM became. Automobiles? Forget it! And even the poor workers didn’t understand that it was GMAC that sunk GM while their bosses and the media attacked the unions. And nothing has changed – they are back into the same risk filled financial gambling that they were in before. It’s not about the cars people, it’s only about the money. And GM through GMAC was PRINTING MONEY! They PRINTED far more money (from nothing) than they made cars! Still do!

That’s right, GMAC was making all kinds of loans from subprime homes to automobiles and they were making money from thin air every time they originated a loan. Of course they buried GMAC, but then THIS JULY GM bought subprime lender AmeriCredit in order to crank up their printing presses yet again. Oh, and that was financed on YOUR nickel. LOL, and people are talking about cars and unions as if they are important to this company – not even.

And where did the money for the IPO come from? Gee, the “Fed” is pouring $8 billion a day into the market… thus the “largest offering in history” only absorbed 2.5 days of POMO!

And cars are most certainly a bubble themselves. Run up to completely unbelievable prices on the back of longer financing terms and artificially low interest rates. This too shall pass as wage arbitraged Americans who earn $10 an hour are not going to be able to afford $30,000 autos forever.

Weekly Jobless Claims were reported for the prior week at 439,000, that is up from the prior week’s 435k which was revised up to 437k. Here’s Econoday, and then we can discuss reality:
Highlights
Jobless claims held onto the big improvement of the prior week, rising only 2,000 to a lower-than-expected level of 439,000 in the November 13 week (prior week revised 2,000 higher to 437,000). The four-week average, at 443,000 and down more than 15,000 from a month ago, is signaling solid improvement for November payrolls.

Continuing claims have also been coming down, falling 48,000 in the November 6 week to 4.295 million. The four-week average of 4.353 million is down 133,000 from its month-ago comparison. The unemployment rate for insured workers fell one tenth to 3.4 percent.

Special factors aren't a factor in the improvement underway though the November 13 week does include Veterans Day. Jobless claims remain one of the brightest spots on the economic calendar.



Reality. Last week had Veteran’s Day in it and government offices were closed. Despite that, the unadjusted actual number of claims increased by 28,808 people during the week. There were 3.8 million people who made Emergency Unemployment Claims during that week. Thousands are falling off those rolls every week as they have simply been out of work for too long. And all 3.8 million are going to lose their benefits by the end of the month unless those benefits are extended yet again.

Any number greater than 350k reflects a loss of jobs – period. And as Mish’s article I linked yesterday shows, the number of people truly unemployed is far greater than what’s being reported – 6 million in the past year.

So called “Leading” Indicators and the Philly Fed Index are released at 10 Eastern this morning.

Yesterday the VIX closed back inside the range of its Bollinger Bands thus producing a market buy signal:



Note that the Bollingers were narrow, and thus it didn’t take much movement to send the VIX outside of the range. This set up for me is indicative of a bounce in the market, but not necessarily a change of trend. It was noted in our daily thread yesterday that a VIX buy signal preceded the Flash Crash last May by about one week:



Indeed, stock prices are about the same exact place as they were then – similar setup with prices sliding, then a bounce, then the real selling wiped off 1,000 DOW points in 15 minutes. No two moves are ever identical and I don’t expect that now, but I do think that the entire rally since QE was announced is false and will be undone.

There are still bearish divergences in the longer time frame and the stochastic is divergent from price still on this decline even though it is approaching oversold.

The dollar and euro are finding respective resistance and support on their channel boundaries. It’s still in question as to whether or not those boundaries break – if they do then the down move in the dollar was an a,b,c – but if not then it may be a 5 wave move:



I think the action of the week belongs to the municipal bond market where rates are skyrocketing and prices got pummeled. They did recover some, but so far just a fraction. And yesterday the city of Philadelphia’s debt got downgraded as did San Francisco’s. Of course this occurs AFTER the market has pummeled their bonds – the rating agencies are again WORSE THAN WORTHLESS as their conflicted and corrupt business models cause great distortion and harm to our economy.