Friday, July 2, 2010

Morning Update/ Market Thread 7/2

Good Morning,

Headline employment data for June – Rate fell to 9.5%, with the headline number on consensus of minus 125,000. Private Payrolls missed the 105k consensus at 83k. Birth/Death adjustment fell from 215k to 147k.

Futures ramped initially, immediately fell back to flat, then proceeded to climb into the green. The dollar continues to fall sharply, euro higher. Bonds are lower and yesterday they put in a candle that looks rather toppy. Oil is flat, gold is up slightly – both convincingly broke support yesterday.

Regarding the employment numbers, keep in mind that the rate is calculated from the household survey and thus it can be disconnected from the headline calculation. When we dive into the report, we find that the reason the rate fell is because there was a sharp drop in the labor force! The Participation rate fell .3%, and the employment-population ratio fell as well. Here’s Econoday:
The jobs picture in June was quite mixed as temporary Census workers were laid off and private hiring was positive but moderate. Also, the unemployment rate continued to dip even as the workweek slipped. Overall payroll jobs in June fell back 125,000 after spiking a revised 433,000 in May and after a 313,000 jump in April. The June decrease was matched the market forecast for a 125,000 decline.

Looking beyond the temporary effects of Census hiring and firing, private nonfarm employment increased 83,000, following a 33,000 rise in May. The latest figure fell short of analysts' projection for a 105,000 advance in private payrolls.

The private sector gain was led by a 91,000 boost in private service-providing jobs. This included professional & business services, up 46,000, and leisure & hospitality, up 37,000. The goods-producing sector lost a net 8,000 payrolls with construction down 22,000. Manufacturing posted a 9,000 gain while mining & logging advanced 5,000. Manufacturing has risen three months in a row.

The big weakness, of course, was a 208,000 drop in government jobs after a 400,000 jump in May. The decline included the loss of 225,000 temporary employees working on Census 2010. Employment in both
state and local governments was little changed over the month.

On a year-ago basis, overall payroll jobs improved to down 0.1 percent in June from down 0.4 percent the prior month.

There other signs of a slowing in the labor market. Growth in average hourly earnings eased to a 0.1 percent decline, following a 0.2 percent boost in May. The average workweek for all workers edged down to 34.1 hours compared to 34.2 hours in May. The market forecast was for 34.2 hours.

The good news at face value in the June report was that the unemployment rate to 9.5 percent in June from 9.7 percent in May. However, the decrease was due to a sharp drop in the labor force.

Overall, the June jobs reports points to a softening in the labor market. Private employment continues to grow, but at a more moderate pace. On the news, markets were uncertain of how to react as equity futures moved back and forth.

“Marginally attached” and “discouraged” workers rose a combined 829,000 from a year earlier – that is one way the size of the labor force falls while the population rises. Below is a chart of the Employment Population Ratio, the plunge resumes despite population that continues to rise:

The net 240k loss of government workers did not materialize, it came in with a net loss of 208,000.

Below is a full copy of the BLS Employment Situation Report:


Looking at the Alternative Measures table, we find that not seasonally adjusted U-6 jumped from 16.1 to 16.7%. Seasonally adjusted fell from 16.6 to 16.5%. Note the one year ago rate figures for both U-3 and U-6 - there has been basically no change in the unemployment rate in the past year, I guess we have Obama to thank for that, LOL, and we won't mention the fact that we are bankrupt as a nation:

These are the numbers that more closely resemble the way the statistics were reported in the past but are not a perfect comparison by any means. For a more consistent report over time, we cannot rely on government data, so we turn to John Williams at

Chart of U.S. Unemployment

Below is the completely whack “Birth/ Death Model” adjustments. They fell, as I predicted, from 215k to 147k. This number is very likely to be negative for July, it typically is for that month:

Overall this report was fairly close to consensus, but shows that the labor force is still shrinking. This is because there are fewer jobs and it’s been forevvveeerrr, and thus the number of people just giving up is very high, and also there are people who are flat out running off the rolls as their benefits have run out. For them, depression is absolutely the correct term. Is this like other “recessions?” Heck no, and here’s proof – the Mean Duration of Unemployment has never been higher:

Factory Orders were reported sharply lower this morning, falling from a positive 1.2% to a negative 1.4%! Consensus was expecting a fall to -.5%, but this is another big miss and yet another sign that the economy is falling sharply without the trillions in stimulus.

Yesterday, the Motor Vehicle Sales report continues to look very weak. Total sales came in at 11.1 million, down from 11.6 million. Pre-depression numbers were in the 16 million + range, here’s Econoday:
Vehicle sales were weak in June in an early indication that retail sales may prove disappointing for a second month in a row. Unit sales of domestic-made cars and light trucks came in at an 8.4 million annual rate vs. May's 8.9. Adding in imports and the comparison shows an 11.1 million rate vs. 11.6 in May for a 4.5 percent decline.

Looking at the markets, there are signs that we may have reached a temporary bottom, but the primary count we were using is slightly off if a bottom materializes today. The working count says that we should just be starting wave 3 of 3 of 3 (of 1). The alternative is that I was correct the other day when the wave count didn’t look fully formed and that we just bottomed on wave 1 of 3 of 3 yesterday and are now beginning wave 2 for a couple of days. Either way, a steep plunge should follow relatively soon.

Below is a ten day chart of the SPX. You can see that prices are challenging the channel top that’s been holding prices:

Updating the look at the Chinese Shanghai Index versus the SPX, you can see that our recent declines have not closed the gap with China's markets continuing to lead to the downside. I keep reading analysts who continue to shout that they are going to lead us up, but that's simply not happening:

The CBOE Put/Call ratio rose to 1.25 yesterday, that is nearing levels where one would expect a bounce to occur.

Also a bullish divergence yesterday was the VIX that fell by about 5%. Besides those two indications, however, I did not see anything that looks amazingly bullish, divergent, or contrarian otherwise. So, the people who do not count the waves might be looking for a bounce, the surprise therefore would be that the bounce does not materialize for them – and that may lead to a little panic on their part, we’ll see.

Don’t forget that we are sitting on a three day weekend… holding positions over it will be risky, if you are a bull, don’t look up, it’s a long way to the top!

AC/DC – It’s a Long Way to the Top if you want to Rock-n-Roll:

Thursday, July 1, 2010

More Awful Economic Data…

Just released were the Pending Home Sales for May, the Manufacturing ISM for June, and Construction Spending for May. All were bad.

Pending Home Sales collapsed 30% in one month, the index falling from 110.9 all the way down to 77.6! Here’s Econoday:
After the plunge in new home sales in May following the expiration of the sale deadline for special homebuyer tax credit, it was no surprise that pending existing home also plummeted. But the size was. Pending home sales dropped 30.0 percent in May, following a 6.0 percent jump in April. Pending sales decreased to a year-on-year fall of 15.9 percent in May, compared to up 22.4 percent in April. By region, pending sales fell 31.6 percent in the Northeast; 32.1 percent in the Midwest; 33.3 percent in the South; and 20.9 percent in the West.

Obviously the plunge was due to the end of the home buyer tax credit – a fine piece of artificial home price manipulation by our government that once again simply pulled demand forward, leaving the cliff that we are falling from now. No, the new legislation to extend the tax credit won’t produce another spike because it only offers the credit to those who already completed their purchase by the end of April. This legislation is heading to Obama’s desk for signature now, here’s CNN:
NEW YORK ( -- First-time homebuyers will have until Sept. 30 to close on their purchases and land an $8,000 tax credit under a bill passed by the Senate late Wednesday.

President Obama is expected to sign the bill, which was overwhelmingly approved by the House on Tuesday. The deadline had been June 30.

The bill doesn't help anyone currently shopping for a home. Buyers must have signed a contract by April 30 to qualify for the tax break. At issue is when the deal must be finalized.

Qualified existing homeowners also have until Sept. 30 to close on new homes and receive a tax credit of up to $6,500.

Congress has been trying to pass the extension for the last month, but it got caught up in Washington politics. Only when it was separated from a larger jobs bill did deficit-wary lawmakers sign off on it. The extension will only raise the deficit by $9 million.

An estimated 200,000 people have missed out on the tax credit because they wouldn't have been able to close by the end of business Wednesday. Many are trying to take advantage of short sales, which are complicated deals to complete.

Don’t look for another bounce, and stimulus like this will not be so easy to do again. Proof that they are a waste of money can be seen in the free fall that follows. Look for big changes as the Keynesian monkey pumpers are being discredited by reality. Debt saturation is MECHANICAL, that is what leads to the psychological and the markets then follow.

Construction Spending for May fell from April’s positive 2.7% gain to a negative .2% loss. This was actually a smaller fall than consensus that was looking for -.5%. Construction fell off the cliff already and has simply not recovered. It’s not going to recover, either, until the problem of debt saturation is resolved.

The Manufacturing ISM plunged from 59.7 in April to 56.2 in June. The consensus called for 59. This is yet more confirmation that the economy is slowing very rapidly. Here’s Econoday:
The acceleration in manufacturing cooled but only slightly in June, according to the Institute For Supply Management's composite index which slowed to 56.2 from May's very strong 59.7. The slowdown was led by a more than 7 point decline in new orders to a 58.5 reading that nevertheless indicates a strong month-to-month gain, only a smaller gain than in May. Orders continue to move into backlogs but also at a slower rate. Production slowed but remains very strong at 61.4 while hiring also slowed but also remains strong at 57.8. Delays for deliveries eased with the index down nearly 4 points to 57.3, also consistent with slowing activity.

Manufacturers may be having trouble building inventories as the index is little changed at 45.8. But improvement in the customer inventory index suggests that inventories are not as bare as they were in May. A big 20.5 point drop in prices paid indicates easing month-to-month pressure for inputs, the result of flat energy prices.

A month-to-month base effect is at work in this sample, that is comparisons become more difficult as levels across components rise. Similar readings can be expected in the months ahead as the manufacturing recovery matures.

Again, manufacturing has been decimated and cannot recover to be anything significant as long as the economy is saturated with debt. This is the central banker’s folly. The markets are plummeting and they are going to attempt to use this crisis (of their doing) to further entrench their debt based power throughout the globe. We CANNOT let that happen. We must use this crisis for the people to remove them from power!!! We must produce sovereign money and we must do it in a way that reduces existing debts and derivatives while keeping the overall quantity of money under control. To do this, I don’t see any other way besides accomplishing political reform at the same time. That means separating special interests from government! Financial Reform is not even close to being enough to solve the problem or to keep them from happening again.

Interestingly, the dollar is still plunging today and has broken support at 85 - remember, a loss of confidence occurs swiftly as in a phase transition. Is that occuring now on data like this? Stimulus obviously = FAIL as I've been saying all along that it would.

Oil (left) and gold (right) are correcting hard as well. Gold just convincingly broke its uptrend line - interesting that it is falling as the dollar also falls...

Meanwhile, the bond market races higher as money flees to perceived “safety.” The SPX plunges deeper into wave 3:

This is negating the hammers I showed this morning on the daily charts and it definitely appears that wave 3 of 3 of 3 (of 1) is well under way. As I look at the length of the prior waves, wave 3 must be at least as long as wave 1 and that means that we are quickly headed down to 1,000 on the S&P at a MINIMUM. The death cross and 860 await, it may not be long.

Morning Update/ Market Thread 7/1

Good Morning,

Equity markets are roughly flat this morning, but the dollar is down severely in the background, falling all the way back to prior support at the 85 mark. Should the dollar break below 85, it is probably going to correct to the bottom of its uptrend channel. The Euro is rallying… why, I’m not so sure, but Spain did “successfully” complete their bond auction that everyone was worried about as they had just been downgraded by Moody’s and the debt rollover was large. While they did sell the bonds they planned, the bid-to-cover was low and the rate was higher than past auctions. Also, Merkel’s choice for Presidents, Christian Wulff, was voted in, this is seen as her maintaining power for now. She has become the European driving force for austerity, this was forced upon her after being kicked in the teeth for tossing a trillion of stimulus into the kitty.

Bonds in the U.S. are flat this morning after the TNX and TLT produced what may be ending hammers yesterday. These hammers coincide with a hammer that was made by the VIX, charts below:




These may be meaningless, but they may also indicate that a pause in the equity downtrend is about to occur. That makes today’s action important. If the count is correct, we are now in 3 of 3 of 3 down… unless wave 1 of 3 wasn’t really over. I still have a difficult time counting 5 waves there and it could be that we’re going to have a more meaningful wave 2 correction from here? Note the question mark… this is not McHugh’s count, he’s convinced wave 1 and 2 are complete – we’ll see, sometimes it’s not so clear until you see the action. If the selling resumes today, then he’s right. Regardless, wave 3 is underway and the waves are moving swiftly.

I want to make something clear about this wave 3… I view this as most likely wave 3 of wave 1 down. If you go back and look at the top in late ’07, the waves so far look very much like that. If we are rhyming, then the very serious crash type of collapse won’t happen until wave 3 of 3 on the higher scale. So again, this wave 3 of 3 of 3 is most likely of wave 1 right now, the beginning of the collapse. Once this wave 3 completes, we will go through a small scale wave 4, then 5, and then we should have a significant wave 2 bounce. By the time all that completes, we may very well find ourselves in the fall, a typical time for more ferocious selling – that would be the larger scale wave 3. I throw this out there only as a possibility for what I am thinking and seeing in the markets right now.

Yesterday’s late day dive crossed some key technical levels. First of all, the Head & Shoulders pattern neckline was decisively broken and the pattern is now confirmed. It is well formed and a classic pattern. Even if we rise back above the neckline, this pattern now has very high odds of playing out and achieving the target. The target is 860ish – once that target is achieved, the market will have lost roughly 30% from its April peak – about 15% lower than here. That will qualify as both a bear market and a market crash.

Another classic DOW Theory sell signal arrived as we closed below the June 7th closing low in both the Industrials and the Transports. This is a very powerful confirmation, one that cannot be ignored – it means that the trend is down and is likely to stay that way, the odds remain that the next bounce will fail to make a new high.

Another VERY BEARISH signal is occurring right now. This is a bearish cross of the Weekly 13 and 34 exponential moving average. This is a long term signal that many professionals watch. It is the “autopilot” signal, the one that if you use it mechanically, you will simply buy the market on a bull cross, and sell it on a bear cross – and forget about everything else, it will make you money in the long run, no doubt about it. It has very few false crossovers and you can see that this one is steep:

And then we have the 50 and 200 day moving average cross (death cross) also about to happen. I believe it’s likely to cross tomorrow or Monday at the latest. This is yet another long term reliable signal – it can produce short term throwovers, but that is rare and again this signal is steep with the 50dma falling rapidly:

There are many, many sick individual stocks and many broken patterns. They are signaling further declines are likely and I believe they are coming – the evidence is overwhelming.

Weekly Jobless claims rose from last week’s 457,000 back up to a very stubborn 472,000. The consensus called for a drop to 450k – obviously that once again did not happen. Listening to Obama talk about how he saved the economy yesterday was sickening. Empty suit is an understatement – a math challenged puppet of the oligarchs is the unfortunate reality. Here’s Econoday:
High levels of initial jobless claims remain the biggest disappointment on the U.S. economic calendar. Claims rose 13,000 in the June 26 week to 472,000, lifting the four-week average by 3,250 to 466,500 for the highest level since March. Compared with May, June levels are slightly higher and point to trouble for tomorrow's big employment report. Census workers may be a factor as some may qualify for unemployment benefits, but the Labor Department is not citing this.

Continuing claims have been edging lower in what is probably a good sign though it may reflect to a degree discouraged workers leaving the workforce. Continuing claims for the June 19 week did rise 43,000 but the four-week average of 4.568 million is about 100,000 lower than mid-May. The unemployment rate for insured workers is unchanged at 3.6 percent.

Money is moving to safety following the results as the dollar is gaining and stocks are losing.

The “Monster” Employment Index actually rose from 134 to 141, supposedly reflecting stronger online employment demand. This index has not correlated well with unemployment statistics.

The Challenger Jobs report, which tracks mass layoff announcements, rose slightly from 38,810 to 39,358. These numbers are small compared to the mass layoffs during the ’08 decline, it would seem to me that the low hanging “fruit” is gone and finding massive employees to trim further will be impossible. The more likely outcome as wave C deepens is that companies will fail to hang on altogether.

Construction Spending, Pending Home Sales, and the Manufacturing ISM are released at 10 Eastern this morning.

There was a small movement in the McClelland Oscillator yesterday, which means that a large move is likely either today or tomorrow.

And just to prove what a JOKER (destructive idiot) Alan Greenspan is, here’s your quote of the day:
July 1 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan said the U.S. economic recovery is undergoing a “typical pause” that will be shaped by the performance of stock markets.

“While ordinarily we’re seeing the stock market driven by economic events, I think it’s more the reverse,” Greenspan said in an interview today on CNBC. “What we do know is stock prices are a leading indicator.”

Too bad he never considered debt saturation a leading indicator, but that would be far too much to expect for this Joker, one of the world’s most prolific DEBT PUSHERS.

Steve Miller – The Joker:

Wednesday, June 30, 2010

Graham Summers – Political Lessons from the Walang Kulit

Graham gets it. This is why I’m willing to share his work, and this is one of the best pieces he’s written showing exactly how he gets it. Puppet masters, distracting issues, oligarchs taking your money, controlling our politics, and controlling our minds… All true, but the corporate oligarchs to which Graham refers in turn are controlled by an even narrower group of elites who are the ones who control corporations with their debt money – the central bankers, the DEBT PUSHISHING KINGPINS.

I read both of these documents in about 15 minutes; they are focused on the root issues of corporate power and control and presented in a way that is easy to understand. The issues Graham explores are ones that I have devoted much time to writing about and developing potential solutions. The key solution here from my perspective is to separate special interest money from politics – an important part of Freedom’s Vision. Limiting special interest money influence would go a very long way to limiting the power and control of corporations that has grown so wildly out of control. The very purpose of allowing corporations to form has been forgotten and subverted; sharing information like this will hopefully lead to people opening their minds to see the programming behind the curtain…



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):

Tuesday, June 29, 2010

Graham Summers - Treasuries Have Entered “Autumn 2008” Mode

Another keen observation from Graham that he sent to me yesterday BEFORE today's action - as always, it pays to keep your eye on the money as it moves from one asset class to another. Equities are usually the last to react...

Treasuries Have Entered “Autumn 2008” Mode

I’ve written extensively about how US Treasuries are treated as a safe haven when things are not well in the world. I do think that at some point this will end (and there will be a flight from the Dollar), but right now Treasuries remain the “go to” place for investors when they want safety.

Because of this, Treasuries rally whenever investors get spooked. On that note, I want to point out that Treasuries (black line) have remained elevated throughout the last month, despite stocks (blue line) rallying.

Remember, the bond market is a much more sophisticated market than the stock market (it’s also twice the latter’s size). So the fact that bonds didn’t roll over when stocks rallied tells us that the “smart money” is spooked and doesn’t trust the stock rally at all.

Indeed, when you look at a long-term chart of US Treasuries, something VERY significant just happened:

For the last three years, US 30-Yr Treasuries have been trading in a clear-cut range (the exception being the spike that occurred during the Financial System Crash in late 2008/ early 2009).

So it is extremely and I mean EXTREMELY significant that Treasuries have recently broken out of this range. Even more significantly, the former overhead resistance line of the last three years is now acting as support.

This is a BIG deal. The last time Treasuries were at this level was November 2008. I think we all remember what happened then.

Does this mean we’re going straight into a full-scale Crash now? Not necessarily. But it does mean that the “smart” money is extremely worried and getting defensive now for what’s to come.

Good Investing!

Graham Summers

Morning Update/ Market Thread 6/29

Good Morning,

Equity futures are down hard this morning following yesterday’s sideways triangle that appeared to be a part of a very weak wave 2 of 3 of 3 bounce. That means that this morning’s action is very likely the initial part of wave 3 of 3 of 3 down.

The dollar is up, the euro is down, oil is down big, gold is threatening to break up trending support, and bonds are up large again. The move in bonds yesterday was very important - it told us in no uncertain terms that big money was moving into the “safety” of DEBT, LOL, and that equities were therefore levitating on borrowed time (pun intended). Below is a chart of TLT, the 20 year bond fund and you can see that yesterday’s action put prices above the prior high while pushing the upper Bollinger band up and out of the way:

The TNX (10 year Treasuries) fell in yield to new lows as well. My pennant target for the ten year is 2.3%:

With the SPX now well below what was 1070 support, I believe we are now quickly going to go visit the 1040 neckline and I doubt that it holds. My best guess is that it breaks and verifies the large H&S pattern, but then comes back up to test the break from below. Of course it doesn’t have to play like that, so it’ll be interesting to watch as many people will use 1040ish as their line of demarcation. Note on the chart below that the 78.6% retrace is at 1061 – I doubt that level holds for long:

Yesterday the knucklehead Paul Krugman finally got around to using the Depression word – gasp, oh my. But someone I actually respect, Paul Hussman, issued another “recession” warning yesterday. He uses more conventional indicators such as the ECRI “Leading” Index and notes that the odds of falling into negative growth are now very high. Hussman has been correct in the past and he wrote his recession warning here: Recession Warning

China’s economic indicators are slowing rapidly now as well. Yesterday, Japan’s Industrial Production and Household Spending both showed further declines. Their unemployment rate also increased. Greece had more riots with its 5th national strike of the year.

One thing is certain – change is on the way, and the current version of “financial reform” is not it. Whatever comes, we all are going to have to roll with the changes…

REO & Styx – Roll with the Changes:

Monday, June 28, 2010

RSA Animate - Crises of Capitalism

Here’s an interesting take on what’s happened from various perspectives. This animate comes from a talk by David Harvey who talks a lot about Marxist theory in comparison to other theories of capitalism.

Interesting, he brings up some good points but admits he can’t see a solution. This is because he doesn’t really see how the financiers are using the structure of our money system to distract and steal at the same time. True change must come by changing this structure – to escape from the debt backed money box in which we’ve all been placed. (ht Kevin)

RSA Animate - Crises of Capitalism

Here’s the original talk in its entirety:

David Harvey at RSA…

Bill Still – Iceland

Bill recently returned from a trip to Iceland and Europe. There is a lot happening in Iceland, they are hanging tough in telling the central bankers to pound sand. Here’s Bill’s report:

Did you catch that the bankers tied the PRINCIPAL portion of the loan to inflation? That’s right, as they drove a massive credit bubble the amount owed on the principal portion of the loan increased! Can you imagine? Talk about usury, that’s it.

CORRUPT. The politicians who allowed this and other abusive practices were bought off. Even after the collapse politicians made great sounding promises but then were blatently bought off by the bankers once they got elected to office - sound familiar?

Well the people of Iceland are rightly pissed and are not taking it anymore. They recently passed legislation banning the practice of denominating mortgages in currencies other than the Krona, another abusive practice that made it impossible to service loans as the Krona sunk on world markets. Imagine having a job that pays in Kronas, but having to service your loan in Euros! This created an impossible situation, but not to worry as the IMF was there to “bail them out” with more loans!

Are we any smarter? Hardly - the abusive practices of our own “Fed” have been robbing Americans of their productive efforts for decades. So far the backlash here has been relatively contained… so far.

Here is an interesting story of the “Best” Party and how it started off as a joke but has turned into a political force. They are now considering starting up the “Best Bank” in Reykjavik which would be similar to the Bank of North Dakota. The following article was published in the New York Times on June 26, 2010:
Icelander’s Campaign Is a Joke, Until He’s Elected

REYKJAVIK, Iceland — A polar bear display for the zoo. Free towels at public swimming pools. A “drug-free Parliament by 2020.” Iceland’s Best Party, founded in December by a comedian, Jon Gnarr, to satirize his country’s political system, ran a campaign that was one big joke. Or was it?

Last month, in the depressed aftermath of the country’s financial collapse, the Best Party emerged as the biggest winner in Reykjavik’s elections, with 34.7 percent of the vote, and Mr. Gnarr — who also promised a classroom of kindergartners he would build a Disneyland at the airport — is now the fourth mayor in four years of a city that is home to more than a third of the island’s 320,000 people.

In his acceptance speech he tried to calm the fears of the other 65.3 percent. “No one has to be afraid of the Best Party,” he said, “because it is the best party. If it wasn’t, it would be called the Worst Party or the Bad Party. We would never work with a party like that.”

With his party having won 6 of the City Council’s 15 seats, Mr. Gnarr needed a coalition partner, but ruled out any party whose members had not seen all five seasons of “The Wire.”

A sandy-haired 43-year-old, Mr. Gnarr is best known here for playing a television and film character named Georg Bjarnfredarson, a nasty, bald, middle-aged, Swedish-educated Marxist whose childhood was ruined by a militant feminist mother.

While his career may have given him visibility, few here doubt what actually propelled him into office. “It’s a protest vote,” said Gunnar Helgi Kristinsson, a political science professor at the University of Iceland.

In one of the first signs of Europe’s financial troubles, Iceland’s banks crashed in 2008, plunging the country into crisis. In April, voters were further upset by a report that detailed extreme negligence, cronyism and incompetence at the highest levels of government. They were ready for someone, anyone, other than the usual suspects, Professor Kristinsson said.

“People know Jon Gnarr is a good comedian, but they don’t know anything about his politics,” he said. “And even as a comedian, you never know if he’s serious or if he’s joking.”

But as Mr. Gnarr settles into the mayor’s office, he does not seem to be kidding at all.

The Best Party, whose members include a who’s who of Iceland’s punk rock scene, formed a coalition with the center-left Social Democrats (despite Mr. Gnarr’s suspicion that party leaders had assigned an underling to watch “The Wire” and take notes). With that, Mr. Gnarr took office last week, hoping to serve out a full, four-year term, and the new government granted free admission to swimming pools for everyone under 18. Its plans include turning Reykjavik, with its plentiful supply of geothermal energy, into a hub for electric cars.

“Just because something is funny doesn’t mean it isn’t serious,” said Mr. Gnarr, whose foreign relations experience includes a radio show in which he regularly crank-called the White House, the C.I.A., the F.B.I. and police stations in the Bronx to see if they had found his lost wallet.

THE polar bear idea, for example, was not totally facetious. As a result of global warming, a handful of polar bears have swum to Iceland in recent years and been shot. Better, Mr. Gnarr said, to capture them and put them in the zoo.

The free towels? That evolved from an idea to attract more tourists by attaining spa status for the city’s public pools, which have seawater and sulfur baths. For accreditation under certain European Union rules, however, a spa has to offer free towels, so that became a campaign slogan.

Mr. Gnarr, born in Reykjavik as Jon Gunnar Kristinsson to a policeman and a kitchen worker, was not a model child. At 11, he decided school was useless to his future as a circus clown or pirate and refused to learn any more. At 13, he stopped going to class and joined Reykjavik’s punk scene. At 14, he was sent to a boarding school for troubled teenagers and stayed until he was 16, when he left school for good.

Back in Reykjavik, he worked odd jobs, rented rooms, joined activist groups like Greenpeace and considered himself an anarchist (he still does). He also wrote poetry and traveled with the Sugarcubes, Bjork’s first band. He said he hated music but was a good singer, and began his career with humorous songs punctuated by monologues.

“I didn’t have many job options,” he said. “It was a way of making a living and still having fun.” His wife, Johanna Johannsdottir, a massage therapist, is Bjork’s best friend.

Mr. Gnarr said his idea for the Best Party was born of the profound distress and moral confusion after the banking collapse, when Icelanders fiercely debated their obligation to repay ruined British and Dutch depositors.

Practically speaking, Mr. Gnarr said he had no qualms. “Why should I repay money I never spent?” he asked, a common sentiment here. But on a deeper level, he had misgivings.

“I consider myself a very moral person,” he said. “Suddenly, I felt like a character in a Beckett play, where you have moral obligations towards something you have no possibility of understanding. It was like ‘Waiting for Godot’ — I was in limbo.”

LAST winter, he opened a Best Party Web site and started writing surreal “political” articles. “I got such good reactions to it,” Mr. Gnarr said, “and I started sensing the need for this — a breath of fresh air, a new interaction.”

The campaign released a popular video set to Tina Turner’s “The Best,” in which Mr. Gnarr posed with a stuffed polar bear and petted a rock, while joining his supporters in singing about the Best Party.

“A lot of us are singers,” said Ottarr Proppe, the third-ranking member of the Best Party, who was with the cult rock band HAM and the punk band Rass. Mr. Proppe now sits on the city’s executive board, where he will be deciding matters like how much money to allocate for roads. “Making a video was very easy,” he said.

At a recent budget meeting, Mr. Proppe, who has a wild red beard, ran his hand through his bleached-blond hair as he studied the fiscal report from behind tinted, gold-rimmed glasses. His old band mate S. Bjorn Blondal quizzed the city’s comptroller. Heida Helgadottir, who ran the campaign and is now assistant to the mayor, wore a diaphanous minidress and typed notes.

Mr. Gnarr, who comes across as thoughtful and reserved, did not speak often. When he did he had the whole room, including the strait-laced Social Democrat, in stitches. Still, he is not just playing a cutup; friends describe his move to politics as a spiritual awakening. He agreed.

“Of all the projects I’ve been involved with, this one has given me the most satisfaction, the greatest sense of contentment.”

Paul Mylchreest's Thunder Road Report

In this issue Paul takes a detour off the beaten path for sure. War, precious metals, rare earth minerals, China, Bilderbergs, Crawford’s astrological alignment warnings, and movie reviews… it’s definitely an eclectic collection. These are not subjects I normally would post, but I know that Paul has fans, so I post for continuity and awareness which is always important.


Morning Update/ Market Thread 6/28

Good Morning,

It’s a flat Monday morning, do you know what your algos are up to?

The dollar is up slightly with the euro down. Bonds are higher (not conducive to stocks), oil and gold are both slightly lower. I think most people are looking at Europe and they are now hearing “austerity,” while they look at the U.S. and they still see our stimulus idiots shooting off at the mouth. This gives the dollar an excuse to correct, but the mechanical forces of deleveraging debt are very powerful. And just look at the psychology changing, our officials are now having a very tough time, just look at the pinch the states are in and now we have a million on extended unemployment who are going to be completely without soon. That’s no way to keep a revolution down!

The oil in the Gulf is getting stirred up by tropical storm Alex. Even though it’s looking like it’s going to land in northern Mexico, the low pressure spins counter-clockwise pushing the oil into shore along the Gulf region. The outer bands already have heavy rains and thunderstorms in the spill area. This helped to push oil higher on Friday and could be a factor moving forward.

A large part of the reason Friday did not turn into a rout was because the Russell Index was “rebalanced.” That is to say that they pulled out nonconforming stocks and replaced them with new companies. This is the cause of substitution bias and is why the stock indices rise, yet stocks themselves may not be. This creates a false appearance that stocks always rise – they most certainly do not, they have life cycles. It created heavy volume on Friday, but that volume bar should be ignored in my opinion.

Personal Income and Outlays for May was reported this morning. Personal Income rose .4% month over month, the same as the month prior, and less than consensus which was looking for .5%. This is pretty strong income growth and the core price index rose .2% when .1% was expected. Consumer spending rose .2% which was consensus, it is now up 4.9% year over year, but keep in mind that comparisons are still against a very weak time last May but will be getting tougher as we go from this point. Here’s Econoday:
The consumer sector got another boost with a jump in spending power in May. Consumer spending was sluggish but mainly related to a drop in gasoline prices. Personal income in May rose a solid 0.4 percent, following a 0.5 percent advance in April. Analysts had called for a 0.5 percent increase in personal income for the latest month. The key wages & salaries component gained 0.5 percent, matching April's improvement.

A jump in auto sales helped offset softness in gasoline and other subcomponents in nondurables. Overall, personal consumption rose a modest 0.2 percent, following no change in April. The May figure came in equaled the market forecast for a 0.2 percent increase. By components, PCEs were led by a 0.8 percent boost in durables-reflecting motor vehicle sales. But services also were robust with a 0.5 percent jump. Nondurables declined 0.9 percent with prices effects explaining most of the weakness. Still, nondurables slipped 0.2 percent in real terms.

Inflation was mixed in May. The headline PCE price index was flat in May as was also the case the prior month. The core rate, however, firmed to 0.2 percent from 0.1 percent in April.

Overall, the consumer sector is slowly gaining strength in terms of spending power. Purchases have been a little erratic due to off and on auto incentives and consumer caution in general. Overall, the consumer sector took one step forward in May, helping the recovery continue.

Blather. Nondurables down .9%, that’s what the real consumer is doing right there. Note how this was blamed on PRICE weakness – correct to point that out, but note how they usually fail to blame increases on money fluffiness – imports, for example, are expressed in dollars so one has to be careful to assume that imports are up just because the amount of money spent on them is up. Unfortunately we track most things in dollar terms, this is a misleading mistake especially when currencies are moving around a lot.

We’ll get Citizen Confidence tomorrow, but the large piece of economic data comes Friday with the June Employment report. Last was positive 430,000, the consensus is looking for negative 100,000 with the census workers going away. I’m not sure what’s priced into the market, that seems like a pretty negative expectation for the mainstream crowd. But instead of adding massive part time workers we will be subtracting approximately 240k, and with birth/death adjustments likely smaller, it could get that far negative or even more.

A lot of mainstream callers are looking for some bounce in equities here. July/August are typically more bullish months, but I don’t think this Head & Shoulders pattern has a couple months left in it and the wave count I’m using says declines are coming soon as wave 3 begins to more fully express itself. Last week was a very bearish week, fully engulfing on all the primary indices. Below is a weekly chart of the SPX showing this bearish engulfing candle, that’s not what you want to see if you’re bullish:

In the chart below I show the dollar (left) which is still hanging on above 85. If it drops below that level it could be in for further slide. The long bond (right) is continuing to break higher out of a triangular pennant and is about to set a new high. This is signaling that money is still flowing into perceived “safety,” and will eventually pressure stocks.

Of course we’re now end of month and end of quarter fun and games times, the levels to watch are still the same – overhead resistance in the 1090 area, then 1100ish. Support is 1070, and if we get below that we are likely headed to 1040. Monday mornings have that positive bias, let’s see what we get this afternoon. And for those with cycle awareness, we did have a full moon this weekend...

Warren Zevon - Werewolves of London:

Sunday, June 27, 2010

Damon Vrabel – Renaissance 2.0, Will You Answer JFK’s Call?

This is the part where Damon spells out solutions and asks us to join together in an opposing force to the CFR. His solutions will sound very familiar to those who follow the Edge and the Swarm as his specified solutions are roughly an outline of Freedom’s Vision. While Damon doesn’t credit the work done on Freedom’s Vision, it’s great to see the ideology spread – that was the intent. These ideas are called “memes” (rhymes with ‘cream’), they spread and become a part of the psyche for those who understand them. Like seeds, plant them and watch them grow.

I urge caution as this meme spreads – seemingly small deviations from the concepts of Freedom’s Vision can have large implications and each action must be fully understood how it relates to the entire system. I urge cooperation – that the best UNBIASED minds work together to draft legislation that fulfills the principles of Freedom’s Vision. Please contact me if working on the legislative nuts and bolts interests you (

Damon adds an important personal dimension to the discussion. I hope that you visit his new site and please sign up to follow his work, you can get email updates simply by subscribing in the block on the right hand column at the following link:

Will you answer JFK’s call?

By Damon Vrabel

“Ask not what your country can do for you. Ask what you can do for your country.”

That wasn’t just another cheap talking point from a politician’s speechwriter. It was the last real president’s attempt to remind the American people of the need to self-govern, to play our part in keeping the republic, rather than being passive, submitting to the rising banking/corporate/military empire, and becoming debt servants. Will we finally heed his call?

This video explains some of the things JFK might ask us to do today–the “to do” list some of you have been asking for. It also points out the nexus between economics and our psychology and spirituality. Our current economic system, driven by the predatory financial system, has profoundly impacted both in negative ways. It imposes destructive, controlling energy from the top-down. We need to respond from the bottom-up with positive energy rather than the incessant negativity we typically see. I think it’s the only real hope of changing things, given the level of control in the system at this point.

Some of you may already be shouting “impossible!” Well, it would require nothing less than the next Enlightenment…certainly no small task. But hardly impossible.

Renaissance 2.0, Lesson 6, part 3 of 3

To view the entire Renaissance 2.0 series, please visit: Renaissance 2.0