Robert Prechter with Jim Puplava…

A very thorough interview by Bob Prechter where he lays out a very strong case for deflation. There is a ton of good information on market psychology, probably the best interview I’ve heard from him -well worth the time to listen.





Robert Prechter - Windows player

Robert Prechter - mp3

Damon Vrabel - Renaissance 2.0 - Brightening the Future

Another terrific installment by Damon. Once again he clearly delineates the false left/right paradigm and leads us to why non debt-backed sovereign money is so important.

To view the complete Renaissance 2.0 series, please visit the following link: Renaissance 2.0

Renaissance 2.0: Lesson 6 (part 2 of 3) - Brightening the Future

Morning Update/ Market Thread 6/18

Good Morning,

Today is quadruple witching. Index options expire at the open, most other June options expire at the close, and today is the last day to trade June futures.

Equity futures are down slightly to flat this morning following yesterday afternoon’s completely unnatural bounce. And I don’t say that lightly, it was not a generic move. I have watched the markets for many years, tic by tic, and can tell you that they are not the same markets that existed just a few years ago. So, is this some “new normal” that we are just going to have to get used to – wild HFT driven swings with constant game playing? No, the forces creating this action will be driven out, that is my belief, but it’s going to take major change, and I think that change is coming.

What I see today in the overnight action is a small broadening formation that looks like a megaphone. The action over the past couple of days looks like a larger broadening formation. You can see the larger one on the 15 minute chart of DOW futures below left, and the smaller one on the 5 minute S&P futures chart below right:



What I had been tracking as a rising wedge was broken yesterday – yet the end of day bounce brought us back up to it. A channel doesn’t fit this movement unless you give it a lot of room. The candles that were created yesterday look bearish pretty much across the board. We sit just below key overhead resistance at the SPX 1120ish area. Get over about 1125 and we’re probably headed to 1140 or 1150. Fail to get over it and wave 3 of 3 is looming.



Keep in mind that today is Friday and thus Monday and its 90% odds on ramp job come next. Again, not a “market,” more like a banker manipulated toy.

Speaking of banker manipulated toys; gold zoomed to a new all-time record last night now at $1,260. The P&F diagram and a triangle formation both have the same target of $1,310 an ounce.

The dollar is flat this morning, just above support at about 85.50. The Euro is down slightly.

There’s a very important development occurring with the Emerging Markets ETF (EEM). It’s just about to put in a “death cross” which is when the 50dma falls below the 200dma. You can see in the chart below that prices moved right up into those moving averages and got stopped – a cross is occurring now. This is an ominous sign for those believing that emerging markets are going to pull the globe up and out. If you go back and look at these crosses, they are quite bearish and odds are high that significant further declines occur once this cross has occurred. Below is a one month chart of EEM showing this cross:



Some of the major financials also have already produced death crosses, like JPM and GS. Others are about to as well – bearish.

With no economic data today, I’ll keep this short and wish you a great weekend. Emerging Market death cross? Where are those millions of Chinese consumers when you need them?

Dobbie Brothers – China Grove:

Monetary Trends – July

After trying to convince you that “quantitative easing” is okay because it had been done before, we can get on with the latest St. Louis Fed’s monetary compilation current through June 15th, 2010.

Of note is a now year over year negative MZM. This has caused MZM velocity to turn slightly upward (still at historic low levels), but we’ll see if that’s maintained as growth slows. Another point is the S&P 500 trailing P/E that has come down substantially. Again, I point out that the only reason its anywhere near historic range is due to fraudulent accounting. The spike to record P/E’s was caused by the requirement to mark to market, once removed it dove. Were the financials and quasi-financials to truly mark “assets” to market there would literally be NO S&P 500 earnings and thus the P/E would be mathematically infinite. And it’s not just fraud in the financials, it’s rampant, including our own government statistics. With that feel good nugget, here’s Johnny…

July Monetary Trends

Morning Update/ Market Thread 6/17

Good Morning,

Equities fell to the lower rising trendline last night, bounced to a new high that is right in the 1120ish resistance area I’ve been looking at, and then collapsed back to about even on the weekly jobless numbers.

Oil is down this morning, gold is up and closing in on new highs, the dollar is down and testing the 86 area, while the Euro is up. Bonds are roughly flat, but they are getting close to an inflection point, so let’s take a look at the charts. Below is a daily chart of the long bond futures, /ZB… there is a clear triangle forming that appears to be consolidation prior to what should be a move higher:



Since that triangle was entered from the bottom, it should move upwards, and because the move into it was so significant, the move outbound should also be significant. The next chart is a daily of TLT, the 20 year bond fund. Yesterday’s action produced a black hammer right on the uptrend line. In the past, this type of candle on the uptrend led to strong moves upwards in the following few days. In other words, this trendline is powerful and needs to be watched. If TLT bounces higher that would be bad for equities, but if that trendline breaks or we break downwards on the /ZB triangle, then equities probably have more legs:



Weekly jobless claims rose from 456,000 to 472,000 in the past week. Once again the prior week’s number was revised higher. Consensus was looking for a drop to 450k, and again they are disappointed with jobs:

Highlights
Layoffs continue at a rate not consistent with a recovering jobs market. Initial claims rose 12,000 in the June 12 week to 472,000 with the prior week revised 4,000 higher to 460,000. The four-week average slipped slightly to 463,500 but is still about 10,000 higher than this time last month which points to another disappointing monthly employment report.

Continuing claims rose 88,000 in the June 5 week to 4.571 million, retracing about a third of the prior week's big dip. Here the four-week average is slightly below this time last month though the unemployment rate for insured workers ticked higher to 3.6 percent.

The outlook for the U.S. economy has been improving despite troubles in Europe and despite still high jobless claims. But employment growth is a necessity for a healthy domestic economy. Stocks are falling and demand for Treasuries is rising following the report.

Next month’s Employment Report is going to be ugly as the Census is in the process of laying people off instead of hiring, and the ridiculous birth/death model peaked seasonally last month.

Don’t forget the 4.8 million people drawing Emergency Unemployment, this is still 2.5 million higher than last year. And here’s some wave ‘C’ psychology for you:

NEW YORK (CNNMoney.com) -- Seeking to appease deficit hawks, Senate Democrats scaled back unemployment benefits and Medicare physician reimbursement measures on Wednesday.

The revised jobs bill eliminates a $25 weekly supplement for the jobless that had been part of the last year's stimulus act. Those currently receiving the supplement in their unemployment benefits check will continue to do so until they exhaust their extended benefits, or until the week of Dec. 7, whichever comes first. That cut will reduce the bill's cost by $5.8 billion over the next decade.

Every move to reel in spending is another step towards another wave of deflation. In wave ‘A,’ it was easy to toss out some bucks to placate the masses – note how it gets progressively harder.

And now the CPI has turned negative again, falling .2% month to month, but still positive 2% year over year. Here’s Econoday:

Highlights
Over the last two months, consumer spending power has increased and not just because of income gains. A buck actually goes farther as prices have dropped on average, tugged down largely by lower gasoline prices. In May, overall CPI inflation declined 0.2 percent, following a 0.1 percent dip in April. The latest number matched the market forecast. Excluding food and energy, CPI inflation rose 0.1 percent, following no change in both March and April. Analysts had projected a 0.2 percent boost in the core rate.

Checking out the components, energy component fell 2.9 percent, following a 1.4 percent dip in April. Gasoline decreased 5.2 percent after a 2.4 percent fall the prior month. Food price inflation came in at flat after posting a 0.2 percent rise in April.

Helping to keep the core rate soft was no change in the owners' equivalent rent subcomponent. This series has either been flat or negative for several months. Also, recreation was flat and medical care edged up only 0.1 percent for the latest month.

Year-on-year, overall CPI inflation slowed to 2.0 percent (seasonally adjusted) from 2.2 percent in April. The core rate in May was steady at 1.0 percent. On an unadjusted year-ago basis, the headline number was up 2.0 percent in May while the core was up 0.9 percent.

Bond yields edged down marginally on the news with an unexpected but small rise in initial jobless claims also contributing. Equity futures eased but were still positive. Today's report validates the Fed's recently ongoing decision to keep short-term interest rates low for an extended period of time. This outcome from the CPI report should partially offset disappointment over the modest rise in initial jobless claims.

Leading Indicators and the Philly Fed are released at 10 Eastern. The leading indicators may not be as strong as some hope with the money supply figures trending downwards.

As we close in on options expiration tomorrow, most watchers are seeing a ton of activity in the SPX 1100 area. That would be an interesting place to go out if we descend as it would place prices below the 200dma. The fact we’re still above it has many bullish and they saw the breakout above 1,100 as very bullish. I don’t think that level is as significant as others do as the wave count I’m following (c of 2 of 3) would place wave c’s top higher than wave ‘a.’ If you look at the 3 month SPX chart below, you will see a confluence of overhead just above 1120 – the upper Bollinger band, the uppermost downtrend line from the top (dashed green), and it’s a perfect 61.8% retrace of the prior wave, what I am counting as wave 1 of 3 until proven otherwise. A rise above 1125ish would throw this count into question, but it would not be invalidated until exceeding the top of wave 1.



I will note that wave 2’s job is to fool as many people as possible. This current wave is not rising in a channel as most people have it drawn, it is a rising wedge in both the futures and on the SPX, but it is subtle. The movements are getting narrower towards the top, that’s a rising wedge – all rising wedges eventually break, when they do prices usually return to the base, and this base is all the way back down at 1040.



And everyone seems to forget that the bigger picture is that we broke a rising wedge off the March ’09 bottom and that target is still in play – a very large wedge takes longer to play out. Another bit of information to consider is that summer doesn’t have to be a relatively strong time in the market. Wave C of the decline in 1930 picked up steam in June. That decline was a series of disappointing drops followed by bounces that convinced people it was over – disappointment after disappointment went on for two years, while the bad economic data went on for many more.

I think people are underestimating the BP spill’s effect on the economy. I think its impact will ultimately be MUCH LARGER than 911. In fact, a year from now it may be the event that winds up taking the blame for kicking off wave C. The “little people” will be mad as hell at the oil industry, a very nice distraction from the central bank.

The Doobie Brothers – Black Water:

Morning Update/ Market Thread 6/16

Good Morning,

Equity futures are down this morning following yesterday’s completely lopsided computer driven jump. Yet another extreme, 95.6% of the volume was on the upside – the 90%+ score card since mid-April now stands at 8 down and 6 up, 14 total. Unprecedented, and again is a warning about the character of the markets – not good.

Immediately upon the close the RUT proceeded to lose nearly 1%. Best Buy (BBY) reported a flat out miss, blaming poor television sales, and is down 10% this morning. Then Fedex (FDX) lowered earnings estimates and is down this morning as well.

So far prices remain inside of the rising wedges I showed yesterday. Obviously a break below those rising trendlines is the indication that this movement is over:



The Euro is down on debt driven concerns again with the dollar up slightly. Bonds have taken back all of yesterday’s losses, and both oil and gold are down slightly after rising strongly yesterday. Oil broke back into its prior channel, a bullish development.

The Gulf oil well crisis is a mess with far more going on than the public is being told. Please follow this link to read the most lucid explanation of events and what is likely occurring in that well - theoildrum.com.

In yet another example of how stocks go down in the long run but indices go up due to substitution bias, the NYSE announced that both Fannie and Freddie are going to be delisted from the exchange.

With yet more proof of how whack the MBA Purchas Index is, here’s Econoday:

Highlights
The purchase index rose 7.3 percent in the June 11 week for its first increase in six weeks, its first increase since the end of second-round stimulus. The report said it is unclear whether the gain is a one-time gain or whether a rebound is underway. The refinance index, up 21.1 percent, has been on the rise, the result of low mortgage rates. Mortgage rates were mixed in the week with 30-year loans little changed at 4.82 percent.

Riiiiggght… the refinance index rose 21% in one week’s time with no change in interest rates. This type of nonsense can only leave one to shake their head and know that you cannot trust hardly anyone to do the right thing at this point in time. The right thing to do, by the way, is to prohibit special interests from reporting their own statistics, if you can even call these that.

Meanwhile housing starts in May collapsed by 10% in one month, falling to 593,000 from April’s 672,000. Consensus was looking for 650k, making this another very large miss:

Highlights
Homebuilders are playing it cautiously after the close of the special tax credits program. Housing starts in May fell back 10.0 percent, following a 3.9 percent boost in April. May's annualized pace of 0.593 million units came in well below the market projection for 0.650 million units and was up 7.8 percent on a year-ago basis. The decline in the latest month was led by a 17.2 percent decrease in single-family starts, following a 5.6 percent gain in April. The multifamily component actually rebounded 33.0 percent after a 5.1 percent drop the prior month.

By region, the drop in May starts was led by a 21.3 percent plunge in the South Census region with the Northeast declining 6.3 percent. The West and Midwest posted gains of 10.8 percent and 4.9 percent, respectively.

Permits declined 5.9 percent, following a 10.9 percent fall in April. The May rate of 0.574 million units annualized was up 4.4 percent on a year-ago basis.

Today's numbers are disappointing-showing more weakness than expected. We could get some bottoming in starts soon if more homes close from the special tax incentives program and eat into new home inventory. The deadline for signing a contract was April 30 but the deadline for closing is now the end of June. Equity futures and Treasury yields declined on the news.

Did you note that home starts in the south region collapsed 21.3% in May? The BP oil well blowout had been occurring all month… could the drop be oil spill related? Of course it is.

In contrast to housing, the Industrial Production numbers came in stronger, rising 1.2%, while the consensus was expecting 1.0%:

Highlights
Although this morning's earlier housing starts report disappointed, industrial production certainly did not-coming in hotter than expected. Overall industrial production in May surged 1.2 percent, following a 0.7 percent boost the month before. The latest number was stronger than the consensus forecast for 1.0 percent.

Manufacturing has been robust over the last three months with this component gaining 0.9 percent in the two latest months and jumping 1.2 percent in March. For other sectors in May, utilities output was up 4.8 percent and mining slipped 0.2 percent.

A jump in motor vehicle production added significantly to May's overall production boost. Motor vehicle production jumped 5.5 percent, following a 1.4 percent dip in April. Nonetheless, gains were widespread in other industries.

On a year-on-year basis, industrial production improved to 7.6 percent from 5.2 percent in April.

Capacity utilization continues its upward trend, reaching the 74.7 percent mark in May from 73.7 percent the prior month. May's figure topped analysts' forecasts for 74.5 percent.

Clearly, manufacturing continues to lead the economy despite concern that exports could slow to Europe. Apparently, demand for U.S. goods remains strong domestically and in many overseas markets. On the news, equities futures and interest rates firmed. The earlier news on weak housing starts had weighed on both.

No, manufacturing will not lead this economy to recovery – it is far too small a percentage to have a short term effect. We allowed our manufacturing to be done overseas and that’s the price we pay for being complacent. Best Buy’s report shows that the consumer is not strong. Auto and home sales are way, way down from peak and are barely off the bottom. Ramping production at this time will prove to be a mistake in the near future. And don’t let Apple igadget sales fool you… an iphone sale does not equal a car or a house – and yet the service plans for those gadgets commit the holders effectively to not so little “loan” payments. $148 a month to maintain your phone? That’s how much my first new car payment was and it was paid for at the end of 3 years!

The PPI decreased .3% in May, this is an acceleration downward from the .1% drop in April. It’s less, however, than consensus that was looking for a .5% drop. Here’s Econoday:

Highlights
Gasoline prices pulled down the PPI but not as much as expected due to sharp gains in some narrow components of the core. Overall PPI inflation weakened even further to a 0.3 percent drop in May after dipping 0.1 percent in April. May's decline was less negative than analysts' projection for a 0.5 percent decrease. At the core level, the PPI gained 0.2 percent, matching the rate in April. The consensus had called for a 0.1 percent uptick. The core was boosted largely by jumps in prices for tobacco products and for light trucks.

The decline in the headline PPI was led by a 1.5 percent drop in energy costs, following a 0.8 percent dip in April. Gasoline fell 7.0 percent in May after slipping 2.7 percent the prior month. Also adding to weakness in the headline number was a 0.6 percent decrease in food prices after a 0.2 percent decline in April.

At the core level, the mild acceleration in May was led by a 2.2 percent spike in tobacco prices and a 0.8 percent boost in light truck prices.

For the overall PPI, the year-on-year rate eased to 5.1 percent from 5.4 percent in April (seasonally adjusted). The core rate rose to 1.3 percent from 1.0 percent the month before. On a not seasonally adjusted basis for May, the year-ago increase for the headline PPI was up 5.3 percent while the core was up 1.3 percent.

Despite some firming in the core, inflation at the producer level remains subdued.

Obviously oil is playing the largest role with prices on the producer level. I do think this is a positive report for the markets because it does not show as much deflationary pressure as was expected. CPI will be released tomorrow.

The Baltic Dry Shipping index recently broke support and should be watched for signs of further deterioration. Below is a longer term chart followed by a shorter term perspective:





Below is a 3 month chart of the SPX to give some perspective. All the indices closed above the 200dma, if they hold that is obviously a bullish indication. You can see the outer downtrend line and upper Bollinger band are coincident at the 1120ish area. The short term and daily stochastic are now overbought:



The charts look overall bullish and the internals looked strong on the surface. However, the working count is still the same. A rise above about 1120 would open up the possibility of 1140 or 1150 for the right shoulder of the larger H&S pattern that too many people see. A rise above that area means that the working count is wrong and that new highs are possible. For now we’re still inside the rising wedge and its still wave 2 of 3 until proven otherwise by breaking through those resistance levels.

Yesterday’s 90%+ up day came on the third trading day following the last one. This is the outer limits time wise, but it is confirmation and follow through of the first. Of course it came on lower volume and is on the heels of confirmed multiple 90%+ down days and so it is a very suspect bottom indicator but must be respected. We are in-between levels for now, a place to be cautious. The last time we had two positive 90% plus up days it was in March of ’09, and did cement a long term bottom. However, those moves were not a part of a historic cluster of them as is occurring now, and they were based on a change in fundamentals, namely the resumption of mark-to-fantasy accounting and TARP. Here you have a deteriorating situation in Europe, a disaster in the Gulf, a housing market that is still in a state of collapse, and a financial system that despite mark-to-fantasy is as insolvent as the day is long. The market will NOT go racing off without the financials and without housing.

Did you see that lightning struck and shut down the ship collecting oil from the BP well head? Did you see that the "King of King's" statue of Jesus Christ standing outside of Solid Rock Church in Monroe, Ohio, was struck by lighting the same day and burned to the frame? Hey, I may never get another intro like that to a good tune again…

Doobie Brothers – Jesus is just Alright:

Damon Vrabel - Renaissance 2.0 - Brightening the Future, part 1

Another installment from Damon that introduces the basis of what he (and I) see as a necessary part of the solution - sovereign money.

Renaissance 2.0: Lesson 6 (part 1 of 3) - Brightening the Future

Martin Armstrong – The Paradox of Regulation

This is a thought provoking piece by Martin. I tend to agree with him and think that less is more in terms of regulation. The key to getting it right, in my opinion, is separating special interest money from government – this would seem to be something that should be a natural order law.

One aspect I would like to point out that’s also reversed right now is TRANSPARENCY. The government is seeking more and more transparency into citizen’s lives while still playing “I’ve got a secret,” especially when it comes to central banking. I think this is opposite of a good and natural government, transparency into government is critical for the people to maintain a check on it.

Again, a thought provoking piece, a little different and more succinct than what Martin usually writes.

Morning Update/ Market Thread 6/15

Good Morning,

Equity futures are up this morning, the dollar is down, the euro is up, oil is up, and gold is up just slightly. After reviewing the count and potential waves, I moved the lower boundary of what appears to be a rising wedge to contain yesterday’s action. Below is an hourly chart of the DOW and S&P futures:



Yesterday Moody’s downgraded Greece’s debt further, this time 3 notches lower all the way to Ba1 – JUNK. Nope, sorry to all the debt watchers, we are NOT in better shape than Greece when adding in all the debt we are carrying off balance sheet. And when you add in future liabilities and an insolvent still overleveraged financial sector, we’re worse.

Crank of the day goes to the CFTC who approved, with a 3-2 vote, the creation of futures contracts based upon movie box-office receipts! Hollywood is furious, as they now see speculators shorting their films, LOL. It’s so funny I’d cry if it weren’t so disgusting. What it shows so clearly is how our current version of a “marketplace” is nothing but a gambling parlor – a joke. Oh wait, now movie studios can “hedge” their productions! Or better, an actor can take a lucrative contract, short the movie, and then produce a stinker, “throwing” the film for profit! LOL, what fun there is in a casino.

Hey, I’m thinking of creating a new family of ETFs… first I’ll create one for “Red,” and another for “Black.” Each morning I’ll spin the wheel to determine which one rises or falls, and in about three month’s time I plan on rolling out my 3X versions of my new ETF’s. Anyone want to “invest” in my new enterprise? It’s going to be big, I’ll follow the red and black ETFs with “heads” and “tails.”

The Empire State Manufacturing Report came in below expectations at 19.57. This was above the prior reading of 19.1, while the consensus was 21. Here’s Econospin making their case that the positives in this report outweigh the negatives:

Highlights
Solid describes June's Empire State report that shows steady and firm month-to-month acceleration in orders and shipments. New orders rose more than three points to 17.53 to indicate significant month-to-month growth in this most important of all readings. Shipments, which follow orders, rose nearly 8-1/2 points to 19.67 with the workweek rising to 8.64 vs. no change in May. Delivery times slowed significantly in the month, to 9.88 vs. May's minus 6.58 to indicate stress on the supply chain. Manufacturers in the region are adding employees but at an index of 12.35 they are adding fewer employees than in May or April when the index came in just over 20. The headline business conditions index, steady at 19.57, reflects the overall strength underway.

Price acceleration eased reflecting lower energy prices as prices paid fell back more than 17 points to 27.16. Pass-through of costs is minimal with the prices received index steady at 4.94. Inventories remain a key negative in the report, at minus 1.23 to indicate a marginal draw this month as businesses continue to keep a tight grip on costs. Like inventories, unfilled orders are also a negative at the same minus 1.23 reading to indicate a slight month-to-month draw. Employment and inventories really won't get going until backlogs begin to build.

Despite the negatives, today's report is a plus for the manufacturing outlook pointing to strength for Thursday's report from the Philadelphia Fed and for the monthly ISM purchasing report to be posted at the beginning of next month.

Import prices for May fell from 1.9% to negative .6% reflecting both a large drop in oil prices as well as a large general decline. Export prices fell from 1.2% in April to a rise of .7% in May:

Highlights
Import prices fell 0.6 percent in May reflecting a steep 5.0 percent monthly decline in import petroleum prices. Excluding petroleum, import prices rose 0.5 percent following the same 0.5 percent rise in April. While prices for inputs fell, the result of the fall in energy prices, prices for finished goods remain little changed, at plus 0.2 percent for capital goods and at plus 0.1 percent for consumer goods. The rising value of the dollar points to easing pressure for import prices in the months ahead.

For exports, the rising dollar points to greater gains as foreigners have to pay more for less. Export prices rose 0.7 percent to extend solid gains for a third month. Here the wildcard is agricultural prices which rose 1.4 percent. Excluding agriculture, export prices rose 0.6 percent for a third solid month of gains. Prices of finished capital and consumer goods edged fractionally lower in the month.

The inflation outlook right now is benign and shouldn't stand in the way of policy makers. The rising dollar is a big plus that will keep import prices down and help keep inflation in check.

Got to keep that “inflation in check” so that the Fed can keep rates low for longer, LOL. We’ll get PPI and CPI this week to see how much steam deflation is picking up.

April monthly TIC flows (Treasury International Capital) came in barely positive once again overall. In March they were an anemic $26 billion and for April they were reported at only $15 billion. A balanced situation would see this amount covering our monthly trade deficit which is running above $40 billion. Here’s the report:

tic_april

I’m seeing that because we are tapping up against the SPX 1,106 area more people are turning bullish – many see a run up into the 1,140 to 1,150 area in order to form that right shoulder that everyone and their brother sees. That alone makes me suspect.

McHugh, however, is pointing out what he sees as a positive divergence with the advance/decline line rising against falling prices. His favored count shows only one last leg higher in this sequence and that would fit into the rising wedge shown above. I’m doubtful that we would make it very far on the upside, and think a good overthrow to draw people in before turning would be likely. The options IV skew is still bearish, and the IRX is an enigma, dropping severely over the past couple of weeks (although already at extreme low levels).



This says to me that money is sneaking to safety – not mom and pop money either.

Boston - Cool the Engines:

Sovereign Money for a Sovereign Republic

What follows is a short video made by Ivan on behalf of his country, sovereign money, and SwarmUSA.com. Great job, Ivan, thank you!

Morning Update/ Market Thread 6/14

Good Morning,

Equity futures are higher this morning; no excuse needed other than its Monday, of course, and the algos are all now well programmed to ramp Friday afternoon in advance. Too bad my Word processor can’t get ahead of my typing like that!

The Dollar is down with the Euro up. As you can see, the Euro has reentered its channel, that’s a bullish development. Robert Prechture believes we have completed this wave up in the dollar, seeing 5 waves up from the bottom:



Bonds are down sharply this morning, but remember that the short end showed money pouring into it on Friday. That relationship smacks of distribution in equities to me. Oil is higher, and gold is down slightly.

Friday's advance was on significantly lower volume, again advances come only on low volume relative to the selling. We are, however, now advancing through the downtrend line, and that could mean that a meaningful retrace is in the works. Overhead resistance is at SPX 1,100, and the 200dma is at 1,109.

There are no noteworthy economic reports today, but the rest of the week will be busy with CPI, PPI, “leading indicators,” etc. Friday is quadruple witching which means that we can probably expect a volatile week. One indicator to watch is the Thursday prior to opex… I know this sounds weird, but about 70% of the time the week of options expiration will be in the opposite direction of the previous Thursday close. Thursday was up, that would mean down overall for the week – and it’s typical for that direction change to come early in the week. Another interesting point is that last month the Intrinsic Value skew on options went way expensive on options as market makers were betting there would be a down move into options expiration, and they were right again, big time. Well, this past week the IV skew was even further off, with puts being far more expensive than calls. Will the market makers be right again?

The geopolitical world environment is just turning plain weird. The U.S.’s hands are in most of it, of course, stirring the pot in one way or the other. Here, the N.Y. Times explains the “vast riches” that the U.S. has discovered in Afghanistan…

U.S. Identifies Vast Riches of Minerals in Afghanistan

WASHINGTON — The United States has discovered nearly $1 trillion in untapped mineral deposits in Afghanistan, far beyond any previously known reserves and enough to fundamentally alter the Afghan economy and perhaps the Afghan war itself, according to senior American government officials.

The previously unknown deposits — including huge veins of iron, copper, cobalt, gold and critical industrial metals like lithium — are so big and include so many minerals that are essential to modern industry that Afghanistan could eventually be transformed into one of the most important mining centers in the world, the United States officials believe.

An internal Pentagon memo, for example, states that Afghanistan could become the “Saudi Arabia of lithium,” a key raw material in the manufacture of batteries for laptops and BlackBerrys.

The vast scale of Afghanistan’s mineral wealth was discovered by a small team of Pentagon officials and American geologists. The Afghan government and President Hamid Karzai were recently briefed, American officials said.

While it could take many years to develop a mining industry, the potential is so great that officials and executives in the industry believe it could attract heavy investment even before mines are profitable, providing the possibility of jobs that could distract from generations of war.

“There is stunning potential here,” Gen. David H. Petraeus, commander of the United States Central Command, said in an interview on Saturday. “There are a lot of ifs, of course, but I think potentially it is hugely significant.”

The value of the newly discovered mineral deposits dwarfs the size of Afghanistan’s existing war-bedraggled economy, which is based largely on opium production and narcotics trafficking as well as aid from the United States and other industrialized countries. Afghanistan’s gross domestic product is only about $12 billion.

“This will become the backbone of the Afghan economy,” said Jalil Jumriany, an adviser to the Afghan minister of mines.

There are just so many angles that could be played from this, I don’t even know where to begin... Do they think they are going to have Halliburton put the Afghanis to work digging mines? That’s the future for Afghanistan? We have U.S. Generals now who are experts on economies? Well, you have to give them an ‘A’ for creativity and stick-to-itiveness. Now our nation’s longest running war in history, we are still clueless as to what “victory” looks like or why the hell we are still there (besides the obvious feeding of the military industrial complex and bankrupting of our nation, of course).

Remember the recent DEBT tensions in Kyrgyzstan? Well now we have violent riots and no one is connecting the central banker’s debt to the tragedy occurring there over the weekend – sad pictures at the following link, just be warned that by looking at those pictures your eye (and brain) will shift your focus from the central banker debt:

Armed ethnic clashes rage in Kyrgyzstan; thousands flee

(CNN) -- Tens of thousands of Uzbeks are fleeing ethnic violence in southern Kyrgyzstan amid what one aid official described Sunday as a "humanitarian catastrophe," according to the International Committee of the Red Cross.

At least 114 people have been killed in the clashes and another 1,458 have been wounded, Kyrgyzstan's national news agency AKI press reported. Earlier Sunday, the government put the figures at nearly 100 people dead and more than 700 hospitalized since fighting broke out Thursday night.

According to one report, the death toll is much higher. Officials in Osh, the city most affected by the violence, said at least 500 ethnic Uzbeks have been killed, according to Ferghana.Ru, an independent news agency.

An estimated 80,000 refugees have fled across the Kyrgyz border into neighboring Uzbekistan, according to ICRC spokeswoman Anna Nelson.

It’s amazing how debt tensions always turn into “ethnic violence.” Don’t look now, but there go another four missiles from a drone in Pakistan, “ethnic violence” to follow… in other news, shares of defense contractor Halliburton (HAL) gap higher despite their involvement in the Gulf oil spill disaster – Cramer recommends ‘Buy, Buy!’

Meanwhile back in the United Bankrupt States:

Obama Presses for Aid to Cities and States

From Jackie Calmes and Sheryl Gay Stolberg at the NY Times:

President Obama on Saturday implored Congress to provide more aid to states and cities to blunt “the devastating economic impact of budget cuts” by local governments that imperil the jobs of teachers, the police, firefighters and other public employees.

In a letter to Democratic and Republican Congressional leaders, Mr. Obama said the “mounting employment crisis” in the states “could set back the pace of our economic recovery.” ... education secretary, Arne Duncan, has said that without federal aid, up to 300,000 fewer teachers would be in classrooms this fall ...

The WaPo quotes Obama as writing there will be "massive layoffs of teachers, police and firefighters" without the additional funds.

And Hell and Brimfire damnation will befell you all, least you fail to support more bailouts, more debt, and higher taxes across the land.

Sound familiar? That, my friends, is a classic central banker blackmail gambit. Who do you think is pulling those strings? Note that it’s always education and teachers that are used as hostages in order to tug at your heart strings (BOOM! Oh, don’t worry about that, it was just another dozen or so million dollar rockets going off in Pakistan. CRASH! And don’t worry about the billion dollars of arms we are “stockpiling” in Israel for their new JIT (Just-In-Time) weapons on demand program – BOOM! BANG! Damn, how about that ethnic violence and those damn TERRORISTS, yeah, good thing we’re fighting them over there!).

Of course the FINANCIAL TERRORISTS are over here, they are the breeders of and feeders of the violence around the globe.

And in something usually reserved for both the Sunday Funnies and Enron, the governor of New York decided to borrow money to fund the state’s underfunded retirement plan… and guess where they are borrowing the money from?

State Plan Makes Fund Both Borrower and Lender

Gov. David A. Paterson and legislative leaders have tentatively agreed to allow the state and municipalities to borrow nearly $6 billion to help them make their required annual payments to the state pension fund.

And, in classic budgetary sleight-of-hand, they will borrow the money to make the payments to the pension fund — from the same pension fund.

As word of the plan spread, some denounced it as a shell game and a blatant effort by state leaders to avoid making difficult decisions, like cutting government spending or reducing pension benefits.

“It’s a classic Albany example of kicking the can down the road,” said Harry Wilson, the Republican candidate for comptroller, who holds an M.B.A. from Harvard.

Under the plan, the state and municipalities would borrow the money to reduce their pension contributions for the next three years, in exchange for higher payments over the following decade. They would begin repaying what they borrowed, with interest, in 2013.

But Mr. Paterson and other state officials hope the stock market will have rebounded to such a degree by that time that the state’s overall pension contribution burden will have been reduced.

Another oddity of the plan is that the pension fund, which assumes its assets will earn 8 percent a year, would accept interest payments from the state that would probably be 4.5 percent to 5.5 percent.

This week, Mr. Paterson called borrowing “a last resort,” but added, “I have never said I wouldn’t borrow.”

Sick and twisted – but hey, at least he’s not holding teachers and children hostage… yet.

Oh, yes, we’re all saved! It’s a good thing we gave into Hank Paulson’s blackmail and tossed TRILLIONS at Fannie and Freddie, that sure saved us…

U.S. Home Foreclosures Climb 44% to Record in May

June 10 (Bloomberg) -- U.S. home foreclosures reached a record for the second consecutive month in May, with increases in every state, as lenders stepped up property seizures, according to RealtyTrac Inc.

Bank repossessions climbed 44 percent from May 2009 to 93,777, the Irvine, California-based data company said today in a statement. Foreclosure filings, including default and auction notices, rose about 1 percent to 322,920. One out of every 400 U.S. households received a filing.

“We’re nowhere near out of the woods,” Rick Sharga, RealtyTrac’s senior vice president for marketing, said in a telephone interview. “We’re likely to set a quarterly record for home seizures if June is anything like May.”

Lenders are completing the “inevitable progression” of taking properties from homeowners who stopped paying, Sharga said. He predicted last month that another 5 million delinquent mortgages will end in foreclosure in addition to properties that had already been repossessed.

Almost 3.1 million properties have been seized by banks since April 2005, Daren Blomquist, RealtyTrac’s marketing communications manager, said in an interview today.

“The second quarter won’t be the peak,” Sharga said. “I’m not even sure 2010 will be.”

The previous record for seizures was 92,432 in April. Last month was the first in which every state had an increase in repossessions from a year earlier, according to RealtyTrac.

Oh yeah, we exited recession all right, gee, I wonder if we’ll see a “double-dip?” BANG, BOOM! Did I mention that we must work hard to fight them over there?

Oh, wait, somebody is fighting them over there…

Iraq Central Bank attacks leave 15 dead

Explosive attacks and exchanges of fire at the compound of the Iraq Central Bank in Baghdad have killed at least 15 people and injured more than 40 others.

Those behind the attacks on Sunday triggered eight explosions and took hostages, prompting a siege at the bank's whereabouts, AFP reported.

Bank workers comprised most of the casualties, said one defense official.

It is yet to unclear whether the assailants had meant to empty the vault, destroy the building or target the employees.

Doh! It would seem the Iraqis have figured out where the real power is. BADA BOOM!

Boston – Feelin’ Satisfied: