Morning Update/ Market Thread 9/7

Good Morning,

I hope everyone had a great holiday weekend… I think it’ll be the last one for a long while with the market above the heavily fortified and well defended 10,000 level on the DOW!

Equity futures are down despite massive lip flapping from our President. I swear that every time his lips move at least one billion dollars spills out. I remember listening to his campaign speeches well, a lot of rhetoric and I kept asking myself, “where is the money coming from?” And I’m still asking that, too bad he’s not. In the mean time, bonds are higher, the dollar is stronger, oil is down sharply, and gold is spiking higher.

Pay attention to the connection I drew… Obama flapping lips, no money to pay for it, oil down, gold higher. That’s it in a nutshell, a very dangerous combination.

Earlier this weekend Obama (and when I say Obama, I mean the mouthpiece for the central banks) announced a $50 billion stimulus program to rebuild our infrastructure according to the AP,

The goals of the infrastructure plan include: rebuilding 150,000 miles of roads; constructing and maintaining 4,000 miles of railways, enough to go coast-to-coast; shorter, high speed rail projects; and rehabilitating or reconstructing 150 miles of airport runways, while also installing a next generation air navigation system designed to reduce travel times and delays.

What a joke! $50 billion was the size of the New Deal, but in today’s dollars, it won’t even light a firecracker. America is in the hole at least $1.6 trillion just in infrastructure repair – that’s just to bring back up to standards what we’ve already built! $50 billion only gives Obama something to flap about – and it’s very limited size shouts volumes about the corner in which the Administration is backed into. Damned if they do, damned if they don’t – it’s a lesson in history that they have ignored but one that will haunt them. If any insider is reading this, the corner you’re in is created as a function of WHO controls the production of money.

Oh, and simply repairing our current infrastructure does NOTHING for the future as Obama says it does. None of that money will build the infrastructure of TOMORROW that will create jobs and make America a leader once again. Totally off the mark, not nearly enough. And in the meantime American citizens sink further underwater in their homes. They are trapped, prisoners in their own homes. They can’t sell them which means that they can’t move, and they can’t change jobs. America is stuck in central banker hell – a debt money prison. I can’t tell you how many people, many old friends and relatives, I have talked to in the past couple of weeks who are in this predicament. Very sad, they did not listen when I told them earlier and now they are trapped.

I took a drive through my old golf course community this weekend. I learned of several more foreclosures and bankruptcies. I saw several “$1.5 million +” homes that were built and now are standing derelicts… zombie homes with boarded up doors and windows and five foot tall grass and weeds for landscaping. Sad, but driving through I felt like I had “escaped from New York.” I own no real estate and while everyone I talk to is a prisoner, I am completely free and enjoying it while keeping one eye out for deals. "Beware the danger, but look for the opportunity."

The other part of O’s lip flapping (sound of loose money falling into a hole in the background) comes to the aid of businesses:

Obama to introduce another business tax cut

(CNN) -- In another move aimed at stabilizing the still-shaky economy, President Barack Obama on Wednesday will introduce a new $200 billion tax cut giving businesses across the country an incentive to buy new equipment in the short term, according to a senior administration official.

The tax cut would allow businesses to write off 100 percent of new investments in plants and equipment made between now and the end of 2011, according to the senior administration official.

The new tax cut will be in addition to a $100 billion permanent extension of the business tax credit for research and development, as well as $50 billion in new infrastructure spending included in a package that the president will officially unveil Wednesday during an economic speech in Cleveland, Ohio.

Again, woefully inadequate to quell the powerful forces of debt deflation. The ability to instantly write off investments is just another attempt to pull future demand into the here and now. Similar attempts have failed miserably and so will this. Businesses already write off so much that they effectively pay little tax, so the net effect of this may help some, but it will not bring our economy roaring back, I can guarantee you that. Again, what did it do to help debt saturated Americans? Is it really going to create jobs? Nothing meaningful.

If the Administration really wanted to help the economy, without exiting the debt backed money box in which we live, they must find a way to clear out the debt of the PEOPLE. This is because we are a consumer economy in which 70% of economic activity is driven by the consumer. That is a ratio that is probably not sustainable, and that may also be a part of the cleansing that needs to take place.

For those comparing now to the “recovery” of 2004, I ask you, “Where is the next bubble that makes the consumer more wealthy?”

You see, in 2004, we had shifted from a tech market bubble to a housing bubble. The “consumer” was getting more wealthy on paper as their home values shot up and they were able to leverage that into spending. Now we have a bubble in DEBT INSTRUMENTS, and we’re trying like mad to create a bubble in food and other commodities, but those bubbles are different in that they act as a TAX to the consumer, the opposite of the housing bubble. Let that sink in, it’s very important.

Just this morning, Japan and Australia issued warnings about the condition of the U.S. economy. But make no mistake, the condition of debt saturation that inflicts the U.S. also inflicts most of the globe:

U.S. Outlook Prompts Warnings by Japan, Australia

Sept. 7 (Bloomberg) -- Japan’s and Australia’s central banks signaled that the outlook for U.S. growth is deteriorating, making it tougher for them to set monetary policy.

The Reserve Bank of Australia extended a pause in raising interest rates “for the time being” today, even after the nation’s gross domestic product rose the most since 2007. The Bank of Japan said it’s prepared to add more monetary stimulus after last week’s emergency decision to expand a credit program that followed a tumble in the dollar against the yen.

Both banks singled out the U.S., with the RBA saying growth there looked “weaker” in the second half, and the BOJ citing “uncertainty about the future, especially for the U.S.” The statements highlight the threat of any return to recession for the world’s biggest economy, even for nations benefiting from surging demand in Asian emerging markets, led by China.

The entire globe is quickly headed deeper into the exponential math of debt backed money. This is systemic, the problem does not go away or get truly fixed until we change out the money changers of the world.

Oh, poor money changers:

Sept. 7 (Bloomberg) -- After two months bankers would like to forget, Wall Street may need a September to remember to avoid closing the books on the worst quarter for investment banking and trading revenue since the peak of the financial crisis.

For the number of shares traded on U.S. exchanges to match last year’s third quarter, average daily volume for the rest of the month would have to top that of any trading day in the last three years. Debt trading also needs to pick up, as corporate bond trading in July and August was down 8 percent from the same period in 2009, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Did you catch that? Share volume is so low that it would take an entire month of max volume days just to be even with last year’s third quarter! What does that say to you? It says to me that there are no more real players left, that the HFT machines are playing with themselves. Without the POMO operations by the FED, the fuel to hold the market up is gone. This market is SHOUTING its future direction, and Obama’s speeches are not going to change that future direction, not taking the path he is currently on.

There is no economic data released today and it’s very light all week.

Friday produced several signs of at least a temporary top. Let’s start with the VIX which closed below the lower daily Bollinger band… when it closes back inside the Bollinger’s, which is likely to happen today, that will trigger a very reliable and infrequent market sell indication. The last one of these occurred about a week and a half prior to the April top and we have been lower ever since. There can be a lag following one of these VIX sell signals, but I sincerely doubt the market progresses too much higher beyond Friday’s high:



The other sign of a top occurring Friday came when the SPY and DIA ETFs created topping hammer candlesticks. These look different than the SPX because of they way the candle is drawn on a gap up open, should prices close lower today, these hammers will be confirmed:



There were also hammers on BANK and somewhat on the XLF. In addition, IYR created a hung man above the upper Bollinger and is opening lower today.

The best guess for the Elliott Wave count is that we have probably just finished wave a of 2 of 3. That means that we should descend a little for wave b, and then rise again in wave c. Will wave c exceed Friday’s top? Possibly, but probably not by much if it does.

Note on the SPX that the 200 day moving average (red line) stopped the advance once again, as it has done seven of the last 9 up waves. The dashed green line is the down channel’s upper boundary from the April top, prices so far remain contained, and the daily fast stochastic is now overbought with the shorter time frames just beginning to diverge against rising prices:



Have you followed the Afghanistan bank run situation? The criminals are running on the banks… and that is prompting everyone to run on the banks as well. The U.S. first says they will help, then denies direct money help. What will happen is that the U.S. will flood the government with cash so that they can stem the run themselves, effectively YOU will be the bag holder once again as our elected officials can’t let a central banker or a true criminal face their just rewards. It won’t be too long before the bank in the background of this picture says CHASE. I’m looking forward to that actually, because at that time it will be close to real and meaningful change – once the cartel falls, then I will have real hope.



There is a Bradley model turn date at the end of this week that also corresponds to a McHugh Fibonacci turn date. It’s likely that we move down in wave b, and then back up again in wave c of 2. It is also possible that all of wave 2 has topped and that it is over. It is wave 3 of 3 that we are stalking, it will incite fear again when it comes as the hopes and dreams for a 2004 repeat wane. Oh, the gnashing of central banker teeth – poor, poor pitiful debt pushers…

Labor Day Weekend Funnies...

Morning Update/ Market Thread 9/3

Good Morning,

Equity prices are jumping on the Employment Report where the headline number was an increase from 9.5% to 9.6%, with a minus 54,000 jobs print. The rate was inline with expectations, but the number of Private Payroll jobs “created” was better than expected at 67,000. The SPX is spiking over 1100 on the release, bonds are sinking, the dollar is sinking, oil is higher and gold is lower.

Below is the entire Employment report from the BLS, they claim that the employment situation is little changed from July to August with the labor participation rate largely unchanged:

Employment August

Let’s see the Econospin, and then we’ll dig deeper:

Highlights
Overall payroll employment fell for the third straight month but there was a moderate gain in the private sector. Also on the positive side, wages were up. Overall payroll jobs in August slipped 54,000 after falling a revised 54,000 in July (yes, they are the same) and contracting 175,000 in June. The August overall number was less negative than the consensus forecast for a 90,000 decrease. The June and July revisions were net up 123,000.

A big part of the latest month's weakness was seen in the government sector, which still includes layoffs of temporary Census workers. Government jobs dropped 121,000 after falling 161,000 in July. In contrast, private nonfarm employment continued to rise, gaining 67,000 in August, following a revised boost of 107,000 the month before. Analysts had called for a 40,000 advance for private payrolls in August. July had previously been estimated to be a 71,000 increase.

Average hourly earnings improved to 0.3 percent from up 0.2 percent in July. The August number topped the market estimate for a 0.1 percent gain. The average workweek for all workers was unchanged at 34.2 hours in July. The market forecast was for 34.2 hours.

Turning to the household survey, the unemployment rate came in at 9.6 percent, compared to 9.5 percent in July. The consensus projected a 9.6 percent figure for August.

Overall, today's report shows that the economy is not going back to recession. Still, growth is less than robust. For now, it appears to be a growth recession (less than long-term trend), but not an outright recession. The bottom line is that the private sector is holding up better than expected.

On the news, equity futures jumped sharply and interest rates firmed.

Not going back into recession? LOL, that’s a good one with a negative overall job print and a 16.7% U6!!

Here’s the deal, this report is not as bad as many were expecting, but it IS NOT great either. It certainly does not justify the action I’m seeing now in the market, that tells me that it could very well be an exhaustion move – an opportunity. Let’s dig deeper…

Below is the Alternate table showing U6, the number that is most like how it used to be reported. The seasonally adjusted U6 rose from 16.5% to 16.7%. Note how the percentages increase when the employment population ration stays unchanged:



When I went to find the Birth/ Death model adjustments, the data surprised me at how large it was – this is blatant game playing from my perspective, as there was a 115,000 add for small business jobs that were supposedly created, versus July’s 6,000! That is a rise of 109,000 from one month to the next! Bet you didn’t know so many small businesses created jobs just as school is about to start back up. When looking at the data from last year (top table), you can see that the same games were played in the same months last year. But then look at September of last year, it was a zero. If they play fair (lol), it should be roughly zero next month, and that means we are setting up for the next report to disappoint:



As a reminder, here is John Williams data, still pushing nearly 22%:



The supposed “growth” in private sector jobs is nothing but pure fudging of the numbers, the Birth/ Death model alone erases all of those supposed jobs. The government is laying off more than just Census workers, 121,000 last month in all – that is what happens when you hit the wall in deficits and the psychology shifts from stimulus to austerity.

The fact is that jobs are not being created and it takes very large numbers of them just to break even with population growth. This report is not good, buy the news at your own risk. Look for next month’s report to disappoint.

Lately there has been the RIDICULOUS notion in the markets that BAD data is good because it will prompt government intervention. If that’s the case, then a report that is taken as good should lessen the chance for more stimulus. Yet the HFTs are all running on one side with this, it’s a very dangerous prospect, again an opportunity is rapidly approaching.

There is more economic data coming this morning (non-manufacturing ISM), the day is young.

Below is a 30 minute chart of the SPX with the channel I was tracking. Yesterday finished with a small rising wedge, we have overthrown that now, but it could still be valid and this throwover may be finishing off this wave. We have filled the 1094 gap, and the only gaps left are above at 1120ish and now big gaps below us (look at the NDX). The market is WAY overextended on the up side, we should see a significant pullback soon. If the price remains over 1100, then there certainly could be more upside, but I think that once this report is fully digested some sort of correction will occur.



On the /ES (S%P futures), you can see that the spike took us to the top of the channel:



Hey, with reality reporting like that, it’s a good thing I ain’t no Senator’s son… as far as I'm concerned, this report and the media's reaction to it only further erode confidence in our government - they have bankrupted our nation in an attempt to spark the economy, and they have failed except in their attempts to massage and manipulate data.

Morning Update/ Market Thread 9/2

Good Morning,

Equity futures are flat to slightly higher this morning. Bonds are lower, the dollar is flat, oil is down, while gold is up and looking to take out the prior highs.

Weekly Jobless Claims were roughly the same as last week, coming in at 472,000 versus last week’s 473,000. Of course last week’s figure was revised upwards to 478K, so the headline monkeys type that it fell 6,000 during the week! No, it fell 1,000, one cannot compare apples to oranges, yet the media does that all the time if it makes any report sound better than it is – which is exactly the theme as everyone is ultimately trying to take your money and your life’s productivity. Yes, professionals of all kinds are CONSPIRING to take your money, that’s become the American way, and if you have ever sat down at a company’s marketing meeting you are witnessing that conspiracy out in the open. Unfortunately, it has become the norm for absolutely everything. Here’s Econoday’s spin:

Highlights
Initial jobless claims may be edging down, at least they have the past couple of weeks. Initial claims for the August 28 week came in at 472,000 compared with a revised 478,000 in the prior week and the 2010 peak of 504,000 the week before that. The four-week average fell 2,500 to 485,500 yet is still about 25,000 higher than a month ago, which is not a positive indication for tomorrow's employment report.

Continuing claims fell 23,000 to 4.456 million in data for the August 21 week. Here the four-week average, at 4.485 and down more than 100,000 from a month ago, probably offers a positive indication for tomorrow's report. Note that a decline in continuing claims reflects both hiring but unfortunately also reflects the expiration of benefits. The unemployment rate for insured employees is unchanged at 3.5 percent.

There are no special factors in today's report, a report that probably won't affect expectations for tomorrow's data. The job sector is flat at best, a description that likewise fits consumer spirits and consumer spending.

Although numbers are down from a year ago, the current trend is stubborn. It has been a long, long time with numbers this high and without the economy producing jobs. We need to produce many jobs just to stay even with population growth, so every week that we fail to create jobs, more people go without – a disaster that is dramatically underreported by the government and by the media.

By the way, the DOL releases these numbers to the public (yours truly) 15 minutes after companies like Bloomberg are granted access. I want to know who else is granted early access and why - it is absolutely ridiculous to create "insiders" who have the data prior to the public, especially when that data comes from a government agency who is paid for by the public! Disgusting.

The Monster Employment Index fell roughly 1.5% in August, their Index falling from 138 in July to 136.

Highlights
The Monster Employment index fell two points in August to 136. The report said the decline reflects caution among employers. Manufacturing and warehousing, the latter group often focused on as a leading indication for job demand, both showed weakness in August.

Productivity and Costs for Quarter 2 were released this morning with nonfarm productivity falling 1.8%. This is down from Q1’s drop of .9%, but slightly better than the forecast drop of 1.9%. The trend is clearly negative in this regard. This data is also very skewed from my perspective as it is based on “productivity” calculated in the same manner as GDP (including financial engineering, if you call that productive). That said, to have productivity falling means that businesses have hit the wall in terms of simply throwing people out the door and maintaining prior levels of “production.” Labor costs were expected to rise 1.2%, but rose 1.1% which is up significantly from Q1’s .2% annualized rise. Here’s Econoday:

Highlights
Due to the slowdown in output and businesses already having cut labor costs to the bone, productivity fell notably in the second quarter. Nonfarm business productivity declined an annualized 1.8 percent in the second quarter after a 3.9 percent advance in the prior quarter. The market had forecast a 1.9 percent dip in productivity. Unit labor costs rebounded an annualized 1.1 percent in the second quarter, following a drop of 4.6 percent in the first quarter. The median forecast was for a 1.2 percent boost in labor costs.

The drop in productivity reflected in part a slower 1.6 gain in nonfarm business output after a 5.0 percent jump in the first quarter. Also, hours worked jumped to a 3.5 percent pace from 1.1 percent in the first quarter.

Year-on-year, productivity was up 3.7 percent in the second quarter-down from 6.3 percent in the previous quarter. Year-ago unit labor slipped to an annualized minus 2.8 percent from minus 2.9 percent in the first quarter.

While the latest productivity report is not as favorable for profits as the recent string of gains, the good news is that companies may have pressure to start hiring. Any notable and apparently sustainable boost in company demand should result in additions to payrolls. Economic uncertainty, of course, will dampen hiring enthusiasm.

Today's numbers are close to expectations. At the same time, initial jobless claims barely missed analysts' median forecast. Markets are little changed on the release.

The market is taking these as "disaster avoided for now." If I hear the term “new normal” one more time, I’m very likely to become violently ill, I must have read or heard that term more than a dozen times in the past week alone. No, it’s not a “new normal,” it’s called DEBT SATURATION, the point at which more credit cannot be forced onto “consumers,” as incomes cannot support more.

Yesterday, Sales of domestic cars and light trucks were also reported down. Take a look at the grey bars on the accompanying chart, unit sales are down roughly 33% from August of ’07, three years ago. That is a huge percentage:

Highlights
Unit sales of new domestic-made cars and light trucks slipped about four percent in August compared with July, offering a mildly negative indication for the August retail sales report. Domestic cars and light trucks sold at an 8.4 million annual rate vs. July's 8.7 rate. Yet less aggressive incentives in August are likely to narrow the gap in dollar terms. Note that fleet sales to non-consumers, which vehicle manufacturers do not break out, adds noise to the comparison. Sales of domestics make up about three quarters of new car and light truck sales. New car and light truck sales make up two thirds of the motor vehicle category which in turn makes up about one sixth of total retail sales.

Speaking of conspiracies, what do you suppose is Mr. Harris’s motivation for speaking the following line of drivel? “The U.S. economy is so bad that the chance of avoiding a double dip back into recession may actually be pretty good.”

You have got to be kidding me. This is so inane, so totally lame, that you absolutely have no choice but to see the conspiracy that I mention, it is blatant. And yet Bloomberg, a supposedly respected business news service, chooses to print this crap:

U.S. Avoids Recession as Data Can’t Get Much Worse

Sept. 2 (Bloomberg) -- The U.S. economy is so bad that the chance of avoiding a double dip back into recession may actually be pretty good.

The sectors of the economy that traditionally drive it into recession are already so depressed it’s difficult to see them getting a lot worse, said Ethan Harris, head of developed markets economics research at BofA Merrill Lynch Global Research in New York. Inventories are near record lows in proportion to sales, residential construction is less than half the level of the housing boom and vehicle sales are more than 30 percent below five years ago.

“It doesn’t rule out a recession,” Harris said. “It just makes it less likely than otherwise.”

The possibility of the economy lapsing into another contraction during the next year is 25 percent, he said in a Sept. 1 report. Harris cut his forecast for growth this year by 0.1 percentage point to 2.6 percent and lowered his 2011 estimate by a half point to 1.8 percent, according to the report.

There are simply no sources left, besides select bloggers on the internet, to get any semblance of reality. And here’s the reality – there is no recession, it’s called a depression. There is no growth, the GDP numbers are false, our “productivity” is false, and our employment numbers are nothing but an outright lie. I am ashamed of what I see. Embarrassed for my country and for the portions of the world that play along.

It’s tough to even call our stock market a “market.” It’s nothing but a playground for those wealthy enough to use High Frequency Trading machines to rob the citizens who are fooled into thinking that they are “investing” for their futures. This theft is allowed, backed, and sponsored by our own government. Talk about a dysfunctional relationship.

The proof of dysfunction was on clear display yesterday. Data that is piss poor, even in its trumped up form, gives the thieves a reason to ramp their HFT machines that all get on the same page within nanoseconds, even before orders are executed. Of course they are using YOUR MONEY to steal your money from you. The money is given to them by the FED, who works for them, yet leads you to believe they are a part of the government. They are not. The FED, through POMOs, is feeding the very companies who run the HFTs BILLIONS. That money is not used to do anything productive in the economy, it is used to ramp up the markets, enlarging the disconnect between reality and price.

Yesterday was a 96% up day – PANIC buying. Panic buying for what? For the sake of making a short term trade and for drawing in stupid money. If you don’t own an HFT, you are stupid money, and that includes me – I am blind in the market relatively speaking. My only advantage is in knowing reality and that eventually the games will work against them. Make no mistake, its coming. Not maybe, it’s a done deal – get ready.

This is my strongest warning ever that the markets are shouting crash potential. One in three days is a 90%+ day, Hindenburg Omens, Head & Shoulders patterns, wave 3 of 3 next in the rotation, it’s going to come undone, and yes, it can do it in a flash. The similarities between now and ’08 are stunning. There are also similarities between now and 1987. Volatility is a precursor, it is another clue, just as the Hindenburg Omen is a clue. Hello… Friday is a 90%+ up day, Monday is a 90%+ down day, Wednesday is a 90% up day. These types of large moves in both directions are exactly what presage a market meltdown. Another similarity is the action of the Yen – the trend is clearly with a stronger Yen (down on the following chart), just as it was in 1987:



Yesterday’s move stopped just under the 50dma. It is possible that wave 2 of 3 is nearly complete, but my best guess at this point is that it’s probably just wave a of 2 that is nearing completion. Either way, we are not far from what I believe is going to be a serious correction of the imbalances that exist. To echo Richard Russell, it won’t be over until the cleansing is complete.

Morning Update/ Market Thread 9/1

Good Morning,

First I would like to point out to Think or Swim (TOS), who has done a terrific job in the past, that should they not get their act together in the near future that there are other charting services available. Price freezes are not acceptable, nor is having to rebuild all your charts each and every morning.

After spending more than half an hour just getting my charts back, we can now see that equities have risen to the top of the current downchannel, the dollar is down strongly, bonds are down strongly, and both oil and gold are up.

For those who missed the economic reports and discussion in yesterday’s thread, the data was all BAD, but came in slightly better than expected and that got spun into something that it wasn’t. Consumer Confidence is still in the gutter, the Chicago PMI was down a very large amount, and the Case-Schiller Home data showed slow price growth, but that is based on sales that occurred PRIOR to the government stimulus ending and does not include sales that have fallen off a cliff since. The cheerleading only leads to larger disconnects from reality. That’s right, take two Prozacs and consult with your private marketing expert in the morning, you’ll feel better about it.

The worthless MBA Purchase Applications Index supposedly rose 1.8% in the past week – gee, what happened to those wild 30% weekly swings? This index is not based in anything, it is simply a marketing tool to spoon disinformation to the public, I repeat their nonsense only so that you know what others are being shoveled:

Highlights
The Mortgage Bankers Association's purchase index rose 1.8 percent in the August 27 week, only a slight increase from a very low level which the report says points to no improvement for new home sales in August nor existing home sales for September. On the refinancing side, the index is up 2.8 percent to a 15-month high as borrowers take advantage of even lower mortgage rates. The rate on the average 30-year loan dropped 12 basis points in the week to 4.55 percent.

The Challenger Job-Cut Report showed that the amount of announced mass layoffs fell from July’s 41,676 to 34,768 in August. This report is echoing that the bulk of the layoffs are now coming from government. That is fitting with what is expected for wave C as the desire to provide stimulus grows weaker.

The ADP Report for Private Payrolls fell from July’s +42,000, to August at -10,000. You would think that a 52,000 drop in private payrolls would be a negative for the market, but no, stocks are higher. I give this report little credence as it is notoriously different than the government’s numbers which will be out this Friday. I look at the ADP report as a set up… it sets the expectations so that the real trade gets reversed out from those who act on this one. The consensus for Friday's number is that it improves from -131,000 to "only" -80,000... we'll see.

ISM Manufacturing and Construction Spending are released at 10 Eastern this morning.

Yesterday did produce a 6th Hindenburg Omen. Once again the number of new lows expanded against higher stock prices. Interestingly, the number of new lows on each touch of the SPX 1040 support area has been lower. This could be interpreted as a positive divergence, and I know that some people see it that way, I do not. I see it as basing for the next move lower. Each run up from the 1040 area has been weaker than the prior and that action has produced a descending triangle with a flat base. Those normally pressure the flat base until it breaks. However, this morning it looks like we are going to open above that triangle, so we’ll have to watch today’s action which may indicate that a higher level wave is occurring especially if we exit the current down channel as seen in the 30 minute SPX chart below:



We are also now clearly making a small rising wedge in the futures. You can see those clearly in the DOW and S&P futures below in what I could recreate in my charts this morning:



I’ll leave you with some words from an old sage who I respect immensely, Richard Russell. My only critique is his thinking on gold as money, otherwise his big picture view is spot on:

Richard Russell:

Bear markets exist for the purpose of exposing and eliminating the greed, the corruption and the fraud that thrived in the preceding primary bull market.

To my mind, the biggest fraud of the last fifty years has been the rise and acceptance of fiat "money." For that reason, I expect fiat money to meet its end before this bear market breathes its last. Judging by the size of the top, this could be the biggest bear market since the '30s. I believe this bear market means to take us back to basics and truth. That alone implies the end of central bank-created money and the rise of gold and probably silver. It may also end that immoral inflation machine, the Federal Reserve. Wall Street and its bankers now run the nation. That too will end.

The history of money in the US is a legend of lies, manipulation, immorality and greed. I think this bear market will end those lies, one way or another.