The Lights Have Officially Gone Out In the US
Here’s a news story that summates the US economy’s problems rather well:
The last major GE factory making ordinary incandescent light bulbs in the United States is closing this month, marking a small, sad exit for a product and company that can trace their roots to Thomas Alva Edison's innovations in the 1870s. ,
Here we have a product, invented by one of America’s Greatest inventors (if not THE greatest), of which the US was the premiere manufacturer, now being manufactured ENTIRELY overseas:
How could this have happened?What made the plant here vulnerable is, in part, a 2007 energy conservation measure passed by Congress that set standards essentially banning ordinary incandescents by 2014. The law will force millions of American households to switch to more efficient bulbs.
The resulting savings in energy and greenhouse-gas emissions are expected to be immense. But the move also had unintended consequences.
Rather than setting off a boom in the U.S. manufacture of replacement lights, the leading replacement lights are compact fluorescents, or CFLs, which are made almost entirely overseas, mostly in China.
This story, more than anything else I’ve seen in recent weeks, summates beautifully the current political/ economic situation for the US today.
Congress which is comprised of individuals who know nothing about engineering, chemistry, manufacturing, or any other technical know-how, pass a law based on political agenda without even bother to consider the impact on the US economy.
As if that weren’t ignorant enough, Congress then proclaims that the new clean energy policies will CREATE jobs, once again proving they don’t have a clue what they’re talking about when it comes to real economic conditions in the US.
The end result?
An industry that has flourished in the US for over a century, founded by an American genius, has now been entirely outsourced overseas. That’s just one more nail in the coffin for the American manufacturing base. And one more wave of American workers finding themselves at the unemployment line (the last existing plant in Winchester, VA is laying off 200 people this month).
Please understand, I am not against Clean Energy at all. What I AM against is stupid policies losing Americans jobs just to fatten profit margins at the large multi-nationals.
The real winner of this whole set-up is of course the multi-national company, in this case GE, which, by the way, owes its very existence to tax payer bailout money from 2008. GE will very likely see a slight bump in profits by cutting down on the operational costs of its light-bulb manufacturing wing (labor is cheaper in China).
This hammers home one of the founding theses of my socio-political newsletter The Phoenix World Views Digest, that the US is comprised of two groups of people: individual citizens and the large multi-nationals. These two operate under a completely different set of rules. And the system is entirely rigged to benefit the latter (the multi-nationals) at the expense of the former (individuals).
Until this changes, the US will remain as it has been for the last 30 years: an oligarchy masquerading as a democracy.
Friday, September 10, 2010
Stocks are slightly higher this morning, continuing to rise within a bearish rising wedge pattern. The dollar is slightly higher, bonds are lower, oil is higher, but gold is breaking down and appears to be entering another correction as the latest uptrend appears to be broken.
The Wholesale Trade report finishes a very light week for economic data at 10 Eastern this morning.
Yesterday’s up/ down action produced a small movement on the McClelland Oscillator, meaning that we can expect a large price movement sometime over the next couple of trading days.
Below is a 10 minute chart of the SPX, I have outlined the rising wedge in red. Internally it would appear to need one more rise in price to complete the pattern. That rise can end anywhere, it can run to the top, go only half way, overthrow the top, or even just collapse from here. The initial target on the break of a rising wedge is the base of the wedge – in this case only 1090. We would look for other patterns from there. Note the bearish RSI divergence with lower RSI readings against rising prices. That divergence is across all time frames through the 60 minute charts:
Bonds are having great difficulty despite heavy buying from the Fed. Below is a chart of the long bond futures in which you can see that we are challenging the uptrend line from April. Should that line break, you are likely to see an exodus from bonds with rising rates:
Would the Fed appreciate that? No, they would not, they are spending TRILLIONS to artificially buy interest rates down. How could they keep rates down? Well, they can increase the amount of bonds they buy, but that has consequences for the dollar. How can they avoid crushing the dollar and keep rates low? By letting capital flee from equities, that’s how.
The Feds’ very worst nightmare is capital flight, where money is fleeing bonds and stocks together. Are we there yet? I think we are IF they wish to continue to defend 10,000 on the DOW. Should they give up on that, then I think they can avoid capital flight for awhile as mechanical deleveraging will keep the dollar temporarily lofted and money flowing into bonds. Any way you slice it, it’s not an enviable position, and it’s one that the central debt pushers have put is in.
Volume has been falling and is flat out pathetic on the rise. Again, very few players still in the market, the ones who are own HFT machines or they have dumb money managed by people who are paid to run mutual funds that milk a portion of your earnings each month and donate them to the owners of said HFTs. It's called distribution, and it's happening big time. Whatever you do mom & pop, don't look at the options skew, that would be the professionals making it expensive for others to profit on events they know are coming.
McHugh has pointed out a couple of new Head & Shoulder patterns within the dollar chart. Those patterns are not perfect and are not yet complete, but I do see them. If they fully form and confirm, they would target first 80 and then 72 on the dollar. Would a falling dollar save stocks? NO. In fact, a falling dollar may drive certain commodities higher, the latest being the price of lumber and coffee. Is demand rising for lumber that justifies higher prices? Of course not. It’s simply Fed created hot money chasing the latest bubble. These mini commodity bubbles are terrible for the economy! Each increase in price acts as a tax drawing money from the consumer. What activity is making the consumer, who is ridiculously 70% of the economy, more wealthy? Are their wages rising? Are their retirement plans increasing in value? Is their debt burden falling? Is the value of their homes rising? Indeed, there is no help for the largest segment of the economy, and that is just the latest failure. By the way, should help magically arrive, it would take months for it to take effect, way too late to stop what’s going to occur from happening.
Remember the magician’s trick of getting your eye to follow one hand while they perform their “magic” with the other? This seems to be the only thing in which our government and their puppet masters are proficient.
Are you following the events surrounding the potential burning of the Koran? This seems to have all the media attention, the attention of the FBI, the CIA, our President, the Pentagon, and our top military officials. Does that have a calming effect or does it draw attention to it? Palm, simulation, steal, ditch, misdirect… magic! Looks simple, doesn’t it? Will more “events” follow? Can we see what the other hand is up to?
Penn and Teller explain spreading the wealth around, enjoy your pie…
Thursday, September 9, 2010
Equity futures ran higher overnight and then spiked upwards on the release of the weekly Jobless Claims number which improved slightly for the third week in a row. The dollar is slightly lower, bonds are lower, oil is higher, and gold is stuck just below the level of its prior high.
The weekly Jobless Claims number came in at 451,000, down from the prior week’s 472,000 and less than the expected 470k. Of course the prior month was revised upwards to 478k. Today’s number, while trending down, is still awful and may be influenced by the Labor Day holiday. Next week’s data will be based on a 4 day week and will definitely be influenced by it. Looking at the unadjusted data, claims fell only 6,474, much less than the DOL’s claim of a 27,000 drop where they compare the revised higher data against today’s as of yet unrevised data – apples and oranges, and why is it that revisions are only in one direction? NEVER is there a revision that lowers this number, what does that tell you? Here’s Econospin:
In a sign of improvement for the labor market, initial jobless claims fell substantially in the September 4 week. Claims came in at 451,000 vs. 478,000 in the prior week (revised from 472,000). The 451,000 level is the lowest since July and the second lowest since May. The Labor Department told Market News International that nine states had to be estimated due to delays tied to the holiday shortened week, but the government stressed that data since received confirm the improvement. The four-week average fell nearly 10,000 to 477,750 and is only slightly higher than a month-ago.
Continuing claims show only fractional change for a second week, at 4.478 million in data for the August 28 week with the four-week average at 4.488 million, the latter down mildly from the month-ago reading. The unemployment rate for insured workers is unchanged at 3.5 percent.
The impact of today's report on the market will be limited by uncertainty over the impact of the holiday shortened week, yet the improvement, if confirmed or even extended in next week's report, would begin to raise expectations for payroll expansion. Stock futures are moving slightly higher.
Get this, according to the DOL, Continuing Claims only fell by 2,000, and the 4 week average fell by only 3,250, a paltry sum considering there are 4.488 million people filing continuing claims. However, their Continuing Claims were revised higher by 28,000 which means that compared to last week's report Continuing Claims actually ROSE by 22,000! There’s another 4.5 million people drawing Emergency Unemployment, that number is 1.4 million higher than this time last year – no mention of that in the media. Next week’s numbers will be contrived as well due to the shortened week this week.
The International Trade numbers also were released this morning with the Trade Deficit narrowing from -$49.9 Billion to “only” -$42.8 Billion. This is indeed good for our country, but it is not good for the debt pushers who seek never ending debt growth, and never ending consumption (from America). A contracting deficit with our current system means that overall demand is down and you can see that in this report, especially in petroleum which accounted for over $6 billion of the $7 billion shrinkage! All the rest came due to shrinking demand for Consumer Goods. Simply put, the contraction was mostly due to lower demand, that does not spell economic growth, but it is a plus towards fiscal balance.
The trade gap shrank sharply in July on both a rebound in exports and dip in imports. The overall U.S. trade deficit narrowed to $42.8 billion from $49.8 billion in June. The latest shortfall was much smaller the consensus forecast for a $46.8 billion deficit. Exports rebounded 1.8 percent, following a 1.3 percent decline in June. Overall imports declined 2.1 percent after increasing 3.1 percent the prior month. Nonoil imports fell 3.0 percent, following a 4.6 percent jump in June.
The improvement in the trade gap was largely seen in the nonpetroleum deficit which shrank to $33.2 billion in July from $39.7 billion the prior month. The petroleum goods gap also improved, narrowing to $20.9 billion from $21.3 billion in June.
By end-use categories, the boost in goods exports was led by a $2.3 billion jump in capital goods excluding autos. A large part of this--$1.4 billion-was civilian aircraft. This still left a moderate $0.9 billion outside of aircraft. Also gaining were industrial supplies, up $0.5 billion. Automotive exports were down $0.4 billion. The feeds & beverages and consumer goods ex autos components were essentially unchanged though down negligibly.
The drop in imports was broad based though following a large overall increase in June. Consumer goods fell $1.9 billion; autos were down $0.7 billion; capital goods ex autos declined $0.6 billion; and industrial supplies-which include oil-slipped $0.4 billion. Foods, feeds & beverages edged down $0.1 billion.
Today's report is good news for adding a little lift to third quarter GDP growth. And manufacturers certainly will be happy about the resumption of export growth. But it appears that businesses may be tapping down their expectations for consumer spending with imports of consumer goods down. But that dip did follow a strong gain in consumer goods imports in June.
On the news, equity futures rose. Also, initial jobless claims fell sharply and more than expected, further adding to lift in equities.
It may help temporarily in the GDP calculation, but lower demand forecasts a lower real GDP moving forward. This report was not a plus for equities, the jump in equities is solely due to the Jobless Claims.
It would appear that Tuesday’s down stroke was wave b of 2. That means that we are now in wave c of 2, and by my count the move higher this morning is the 3rd movement of c. That means that wave c could top by the end of this week, just in time for the confluence of turn dates this weekend.
With equities breaking out above the 1105 level, this will break the primary downtrend channels’ upper boundary and will draw in more money on the long side, that is wave 2’s job. The 200 day moving average is up at approximately 1115 on the SPX, but the upper Bollinger, which is pointing sharply lower and will act as resistance, is at only 1111. This tells me that we are unlikely to push too much beyond that point in the short term.
We are also now working under both a confirmed Hindenburg Omen, and a VIX market sell signal. Additionally, we have confirmed H&S targets that are still active targeting the 860 range. I personally do not believe that we will be range bound for the entire fall as some are suggesting. I think we are on the precipice at this time and that a triggering event will occur soon. It does not have to be some catastrophic event, it will just be some type of data or news that gets pinned for the decline that’s going to happen regardless.
Note that my tone does not change with the daily direction of the market! There are certain trigger points that would make me less bearish, but we are not even close to any of those points yet. We are overbought and running into strong resistance. The prevailing thoughts I hear from most people regarding all of the Administration’s announcements are similar to mine – too little, too late. Even if the Administration were to do something significant in scope, it would take many months for anything to take effect, and they can’t do it because they risk shooting themselves in the foot, which is exactly what they would be doing. They are backed into a corner by their own fruition. Instead of helping the PEOPLE clean up their balance sheets, they helped the criminals run off with the loot. The market knows this, at this point it, and the criminals, are simply trying to draw in more. But most people aren’t buying it, they are taking their money and they are wisely refusing to play as the outflows out of the market confirm big time (Stock Outflows Surge By Over $7.5 Billion In 18th Consecutive Week):
This is very typical of TOPS, not bottoms. At major tops stocks consolidate into a few hands. At the same time that money is flowing OUT of the market, mutual fund managers have a larger percentage of their available cash invested than at any time in recent history! That is a contrarian indicator, again it is a sign of a top, not a bottom:
The signs are all in place. The election cycle is NOT positive, years ending in zero are not positive, the September through November time frame are not positive, and no, overall sentiment is not bearish enough. It is time.
By the way, for those keeping track of the residential real estate market or are wondering if now is a good time to be a buyer, here’s a link to a good and fair article published on ZH yesterday: Guest Post: Should You Buy a House Now?
Wednesday, September 8, 2010
His synopsis is excellent, centering around the notion of systems complexity. He brings in many valid points, it would be an even stronger argument, in my opinion, if he were to describe WHO created the complex system and why – then we would be talking about the root causes of the complexity and how to unwind them moving forward. It is completely possible to unwind them in a controlled manner without having to go back “to the simple life” entirely. Freedom’s Vision spells out how – yes, there are many issues that can crop up in the process, but getting the foundation right is a must to creating a sustainable yet prosperous future that is in balance.
While “Simple” may sound like the way to go to compensate for too much complexity, I firmly believe that we must instead strive for balance, recognizing that overreacting to one problem is the basis for creating unnecessary cycles and large swings in the economy. Thought provoking, Ashvin gives us much material to consider:
By Ashvin Pandurangi
The Limits to Complexity
The Muni Bond Crisis is Officially Here: Harrisburg, PA Drops $3.3 Million in Muni Bond Payments
Back in January, I outlined a general 2010 forecast for the financial markets to subscribers of my paid newsletter Private Wealth Advisory. All in all, I outlined ten specific items I thought would come true.
1) MASSIVE increases in volatility in the markets
2) The Fed to continue its bailout efforts but in a more subtle “behind the scenes” manner (less public bailouts, more non-public lending windows/ purchases of Mortgage Backed Securities/ etc.)
3) The market potentially struggle to a new high (potentially 1,200 on the S&P 500) sometime before March 2010 (this is negated by any major negative catalyst e.g. a sovereign debt default, major bank going under, etc.)
(CHECK though I was off by a month+ on the top, which occurred in April).
4) Once the market peaks, a serious, VIOLENT reversal followed by a volatile roller coaster ride downward for the first half of 2010 culminating in a Crash
(CHECK on the first part and we’re getting there on the Second: the Crash).
5) Several sovereign defaults and credit rating downgrades
(Sort of CHECK on the first part, DEFINITE CHECK on the second)
6) Multiple states to beg for bailouts or default on their debt.
(Getting there but not yet)
7) A municipal bond Crisis
(Check: Harrisburg last week)
8) Interest rates to rise or inflation to break loose
(Half CHECK: Negative on interest rates, but food inflation and cost of living is breaking loose)
9) China’s credit bubble to pop
(Getting there but not yet)
10) Civil unrest in the US
(Getting there but not yet: see Atlanta riots at section 8 housing)
All in all, every single one of these predictions has either come true or is in the process of coming true as I write this. I take great pride in my work, so I’m pleased to have provided such an accurate forecast to my subscribers. However, I get no pleasure from the fact the financial world is heading to “you know where” in a hand-basket.
Indeed, just last week my prediction #7, a municipal bond Crisis began in earnest when the capital of Pennsylvania, Harrisburg, dropped $3.3 million worth of municipal bond payments for the month of September.
This is just the beginning. Collectively US states continue to face massive budget short-falls in spite of massive Federal Aid. According to the Center on Budget and Policy Priorities, US states are expected to run deficits of $144 billion and $119 billion in FYs 2011 and 2012 respectively, unless they can cut spending further or raise taxes dramatically to close these gaps.
States can cut spending and raise taxes all they like, but the stark reality is that most of them have debt problems. And a growing number will be forced to choose between social programs and debt payments to make ends meet. Social programs buy votes, debt payments buy credit ratings.
Which do you think politicians are going to sacrifice?
I believe we that Harrisburg, Pennsylvania’s actions represent the very tip of the iceberg municipal bond missed payments and/or defaults.
Remember, the muni bond market is $2-3 trillion in size, so we’re not talking about a minor issue here.
Worst of all, individual investors are the ones most likely to end up getting creamed.
Indeed, ever since the 2008 Crash, investors have been generally pulling money from stocks and putting them into bond funds. All in all they’ve put $480 billion into bond funds since June 2008. Of this, some $88 billion or 18% has gone into municipal bond funds according to the Investment Company Institute.
These folks are in for a very rude surprise when they find out that munis, which historically have maintained extremely low default rates, are not nearly as risky as once thought.
I strongly urge you to review any muni bond holdings you might have in your portfolio. Below is a list of the states with the largest projected fiscal deficits for FY 12.
Projected FY12 Shortfall
Shortfall as % of FY 11 Budget
However, as the case of Harrisburg, Pennsylvania proves, the muni bond crisis is going to be a state, city, and town affair, so examine EVERY muni bond you own, regardless of where it is located.
Equity futures are slightly higher this morning after being lower overnight. The dollar is flat while the Yen touched a new high but has since fallen back. Also significant in the currency world, the Euro made a significant new low yesterday against the Swiss Franc as spreads once again widen in Europe over debt concerns. Oil and gold are mostly flat with gold still not able to get over the top of its prior high.
The worthless as ever MBA Purchase Applications Index supposedly rose 6.3% in the past week – riiight. Well, at least they admit that it’s still at an extreme low level that’s 40% below year ago levels, whatever that number is, they won’t say. What they did say is that the refinancing portion of the index fell 3.1%, and since right now refinancing is 82% of the transactions, the total index actually fell 1.5%. If they would report the actual numbers, it would be much more useful, but even with those, I do not trust the MBA (Mortgage Banker’s Association) or their data methods.
The Beige Book is released at 2 Eastern this afternoon for conditions through August, that may move the markets some, so be aware. International Trade and weekly Jobless Claims tomorrow is about as heavy as the data gets for this week.
In the 6 month daily chart of the SPX below you can see that prices failed to get over the 200 day moving average (red line), and also turned right on the upper boundary of the overall down channel (dashed green). The DOW perfectly touched the 200dma and immediately fell once again:
While yesterday’s action did produce bearish engulfing candles, especially bearish on the Russell 2000, it came on lower volume and was not a 90% down day. This tells me that this is likely not the beginning of wave 3 of 3 unless selling were to pick up heavily from here. It may not due to low volumes associated with this holiday shortened week. Volumes should pick up next week... however, overall volumes are down as I believe there are fewer players left in the market – a condition that is usually present at major tops as stocks consolidate into a few hands (computers). If the government (Fed via their surrogates) keeps defending DOW 10,000, eventually they would own ALL the shares (and that's not going to happen)!
We did receive the VIX market sell signal yesterday. This is one more indication to go along with all the other negative indicators, such as the valid Hindenburg Omen that will remain in effect until close to the end of the year even without receiving any more individual Omens. The VIX sell signal is reliable and should not be ignored.
Another indicator that should not be ignored is the CBOE put/call ratio that reached 1.33 at yesterday’s close. That is the highest reading since May of ’08, just prior to the waterfall that cascaded for the remainder of that year. In the three year chart below, note that usually extreme low readings mark the actual top, but that high readings usually correspond to bottoms however sometimes are seen in the area just after a major top forms. In other words, somebody is making large bearish bets, and sometimes they are right. Right now I don’t see other indications of extreme bearish sentiment that would otherwise mark a bottom:
What I do see is that our markets are lagging the Asian markets down. Below are charts of the Nikkei and the Shanghai indices verses the SPX (thin black line). Note the divergence, it is quite large:
Contrast those markets with Europe and Canada…
Based on yesterday’s low volume action, I suspect that we will remain range bound this week. I’m thinking it was most likely the start of wave b of 2 of 3. It could be over, but normally I would not consider it deep enough to finish a wave b movement. Thus I would normally think that this morning’s bounce is a subwave of wave b and will be met with more weak selling once very short term oversold conditions are worked off. It is possible, however, that yesterday was all of b and that wave c of 2 is underway. There is the turn window at the end of this week, so if we’re headed to a high by the end of this week, it’s going to have to move quickly.
The Rolling Stones - Tumblin' Dice:
Tuesday, September 7, 2010
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:
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…