Friday, September 17, 2010

Morning Update/ Market Thread 9/17

Good Morning,

Trillions of HFT micromanipulations later, and nearly an equal number of POMOs to fuel them, prices are finally challenging SPX 1130 overhead. Of course this is occurring on no volume overnight, as if there is any volume to speak of during the day… there’s not. That's because there are no REAL buyers, real people know that NOTHING has been solved. The banks are still insolvent, the sovereign default risk has not gone away, accounting FRAUD is rampant world wide, data manipulations are rampant world wide, and despite Elizabeth Warren heading out into the Wild West to “protect consumers,” they are already laying there with the life blood sucked out of them – zombies at best, just like the banks that made them that way.

Futures ramped overnight, using games with RIMM and Oracle’s earnings to shoot tech stocks even higher, as if 11 days of straight up isn’t enough. That push ran well over 1130, but has fallen back since, leaving bonds higher, the dollar higher, oil lower, and gold higher. By the way, the Yen has gone exactly nowhere since the massive intervention Tuesday evening. When reading about earnings that “beat,” just keep reading and consider things like all the “one time” write offs that are always there yet in today’s world are not included in “operating earnings” which are the numbers touted. Also look long and hard at margins and what direction they’re headed, if you do, you may not be so impressed.

Of course today is quadruple witching day, and as such I do not take the price action today seriously. I guess I need to add the Friday evening pump for the Monday morning ramp to the list of things that I don’t take seriously. Oh wait, I guess the truth is that I don’t take our markets seriously at all, they are nothing but an illusion designed to suck your productive capacity into the hands of the few who play with their HFT machines, have access to dark pools, and “make” markets. Still, what I know is that unreal markets don’t last, this one won’t either. I certainly make no apology for their actions, people gambling in THEIR markets need to practice extreme patience or they will be stripped bare.

The Philly Fed report yesterday was just plain awful when you look at the details. The headline was -.7%, but if that negative report weren’t enough, inside the report were these not so little points:
“New orders, at minus 8.1, contracted for a third month and contracted at a deepening rate. Unfilled orders, at minus 8.5, extended their long run of contraction. Shipments, at minus 7.1, contracted for a second month as did the workweek. Delivery times, at minus 4.1, continue to shorten. Inventories, at minus 16.7, show a second month of significant destocking in a telling reading that suggests businesses are growing more defensive.”

Not to worry, the people on TV, and the people who have lots of things to sell you, say there is almost no chance of a “double dip.” People like Warren Buffet, who owns banks like Wells Fargo that was proven guilty of laundering drug money, who owns Gillette which produces razor blades that you MUST HAVE because they have 5 blades, as if two weren’t enough. They won’t even keep making only two, because they’re almost finally affordable at a buck each - no, no, we must spend $4 each for 5 blades or otherwise their bottom line will suffer, and I’m sure I just look so much better with a 5 bladed shave. Poor, but man do I look better. Thanks Warren. Sure, I’ll buy some of your stock from you, never been a better time. What’s that, you want me to take out a loan and work the rest of my life to pay you back? Sure Warren, no problem, I’d gladly trade my soul that’s making my one trip on this planet to you for a shiny new overpriced oil sucking car made by a company I bailed out with the tax portion of my productive efforts. It’s a dream come true! Sure am glad to see Elizabeth come to my rescue, I’m feeling richer already, think I better go buy a house because there’s never been a better time to buy.

The CPI came in on expectations, which is up .3% month to month overall, but FLAT when removing the food and energy that the hot money POMO rotation created. Year over year consumer inflation is supposedly up only 1.2% - sure, and Santa will come down your “shelter’s” depreciating chimney in only a few months. Here’s Econospin:
Consumer price inflation remained somewhat on the warm side, thanks to higher energy costs. However, core inflation eased further to nonexistent. The overall CPI in August posted a 0.3 percent rise, equaling the boost in July. Excluding food and energy, CPI inflation slowed to no change, coming in below analysts' expectations for a 0.1 percent rise. Playing a key role in softening the core rate was an unchanged shelter index.

By components, energy jumped 2.3 percent, following a 2.6 percent boost in July. Gasoline rose another 3.9 percent after a 4.6 percent gain the previous month. Food prices rebounded 0.2 percent after dipping 0.1 percent.

In the core, shelter costs continued to stand out-as weak. Just when you thought they could not get softer, they do. Shelter costs were flat in August after rising only 0.1 percent in each of the prior fourth months. Again, this reflects the weak housing market and also a sluggish travel market for lodging while away from home. Overall housing was flat after a 0.1 percent gain in July. Declines were actually seen in apparel and in recreation, down 0.1 percent and 0.2 percent, respectively for August. Medical care rebounded 0.2 percent after slipping 0.1 percent in July.

Year-on-year, overall CPI inflation slipped to 1.2 percent (seasonally adjusted) from 1.3 percent in July. The core rate in August was steady at 1.0 percent. On an unadjusted year-ago basis, the headline number was up 1.1 percent in August while the core was up 0.9 percent.

Overall, price pressures are nearly nonexistent outside of energy. If you believe the recent gains in energy costs are temporary, then the inflation picture currently is quite good. On the news Treasury yields nudged down while equity futures were little changed.

Hey, it’s all good. Just ask the “consumers” who will tell us how warm, well shaven, and fuzzy they are this morning at 9:55 Eastern when their sentiment is released.

Yesterday’s action did produce hammer candlesticks just underneath support. It’s time to either do or die:

Again, if it does break out above 1131 today, it is suspect due to options expiration. If, however, it continues above that level next week then everyone and their brother will be talking about the inverted H&S pattern and how the market is going to 1220. Personally, I won’t be betting on it, but I won’t be betting against it either until the uptrend lines are convincingly broken. I still think the odds are high that this ramp fails anywhere in here, as we are overbought and the divergences are growing. For example, we have negative RSI divergence, we have contracting new highs, we have a VIX that is flat to higher following the VIX market sell signal, and I could go on. The count is important here, if this is wave c of 2, as I suspect, then there is very little chance that the market makes it anywhere near 1220. We are at the top of the range now, it’s a time to be a seller unless it breaks out convincingly on volume. I’m not at all convinced or impressed, and at times like these it’s best to sit back and play some old Guns & Roses:

Thursday, September 16, 2010

Damon Vrabel - Harvard Lobotomies and the Disgrace of the Economics Profession

Once again Damon takes pot shots at ivy league economists. Unfortunately for our nation, it’s kind of like shooting fish in a barrel (and Damon’s a good shot)!

Harvard Lobotomies and the Disgrace of the Economics Profession

By Damon Vrabel

It’s worth stepping back on occasion to consider the progress that has been witnessed in particular academic fields. Astronomy took a giant step forward centuries ago when it finally realized the sun was at the center of the solar system. Geology adapted to the fact of a round earth. The continuous evolution of Physics boggles the mind.

Engineering perpetually pushes into new frontiers.

And how does Economics compare?

Well let me take a moment to congratulate the few Harvard, LSE, Princeton, Chicago, MIT grads serving Wall Street, the Fed primary dealer cartel, the IMF, and the World Bank (and Larry Summers deserves extra credit). These economists drive the field, and they’ve brought it to a point that has taken us back to the days of medieval feudalism. The field is now more primitive than flat-earth Geology and Ptolemaic Astronomy. Congratulations economists!

Of course it’s not entirely the economists’ fault. They were taught from day one in Economics 101 that they will undergo a moral lobotomy. Neoclassical Economics goes to great lengths to indoctrinate new recruits that it’s a positive vs. normative “science.” Other sciences don’t bother to do that because the fact is there should be no conflict between the positive and the normative. Why is Economics the only field that does this? Because it wants to avoid the questions that good students interested in true progress would otherwise ask. It knows it’s hiding something in its content that conflicts with the normative and it doesn’t want students to search for and find the truth. Just remember this helpful indicator in your next life–anything that goes to such lengths to admit upfront that it’s morally bankrupt might be something around which you should NOT build your life!

The truth is that modern Economics has been designed to completely hide the monetary system that hovers above the economy. It assumes money is just a medium of exchange floating through the economy to facilitate a free market and generate wealth. At times that has been true, but today it’s probably the biggest lie of modern history. The current system does not generate wealth and freedom for most people. It generates debt and servitude. And it is not a free market. Today’s money flows from a top-down imperial power system expanding globally. It creates a master-servant relationship because all money comes from privately held debt.

Let me say that again. ALL MONEY COMES FROM DEBT (for those of us who suffered the most indoctrination by attending schools like Harvard, let’s pause here for a moment so we can catch up to the rest of the class). This means in order for governments, businesses, and people to have the liquidity necessary to live, they must agree to sign over a claim on their assets to banks. As the banking system inflates over time passing out credit, which makes everyone feel good with more digits in their accounts, it gathers claims on all the assets in the system for its private capital holders. Admittedly, this is one way of facilitating development (good students would’ve figured out a better way had they not been stifled). But it’s also the method for transferring everyone else’s assets to the balance sheets of the capital holders behind the banks once deflation sets in.

This is what we’re facing today. The global banking system has a claim on most assets in the world (except those in places like Iran, so it’s no surprise the military is gearing up to conquer the region for Wall Street and its Harvard employees…like JP Morgan Chase moving in on the mineral assets seized in Afghanistan because it’s a primary bank that pays the military-industrial complex to conquer territory for it).

Once the system has gathered all the claims it wants, senior capital will be removed, kicking off the next phase of deflation and a transfer of assets from the people to the banks. At that point we’ll probably see JPM Chase CEO Jamie Dimon, another Harvard lobotomy victim (there’s a high correlation between Ivy League lobotomies and billionaires), on CNBC threatening Americans to pay up as his firm jacks up their rates and takes their homes like he did in early 2009.

In this transfer process, the people’s equity will be eliminated. And this means, they will be returned to the life of a feudal servant to the capital holders behind the banks. This is not rhetoric, but the unarguable math and accounting of the banking system. It’s very simply a mechanism to transfer assets/equity from the balance sheets of the many to the balance sheets of the few.

So a final word for all the top economists out there:

Congrats again! It didn’t take much to buy you off. Today’s financial elite who control the global debt machine have rewarded you with paychecks and the status of the high priests of old. Sad. Do you have any pride, or is it really that easy to co-opt you with retreats in Jackson Hole, hobnobbing in Davos, and membership in the CFR?
Come on. Rise above it. You are obligated to fix this immediately:

1) Develop an interim solution in concert with the old time-tested bondage/jubilee, growth/rest cycles which gave the people, communities, land a breath of fresh air in the midst of empire growth. (if you’re writing that off as religious romanticism, ask yourself what top athlete doesn’t live by training/rest cycles…over-training results in deterioration, not progress)

2) Then develop and advocate a humane money system that facilitates the rebuilding of real community as opposed to one based on debt servitude that parasitically sucks the life OUT of communities.

We know the debt holders have a lock on Harvard and LSE (my days at Harvard were marked by professors preaching the greatness of Enron finance and Wall Street derivatives, so most Harvard grads are probably beyond recovery). But what about the rest of you? It’s time to step up and work toward progress like your colleagues in other fields. It’s time to move beyond the dark ages.

Morning Update/ Market Thread 9/16

Good Morning,

Equity futures are lower this morning, with bonds flat, the dollar down slightly, oil down, and gold higher with another new all time high this morning.

The Weekly Jobless Claims for last week came in at 450,000, that is down from last week’s report of 451,000 which was revised higher, of course, to 453,000. The consensus was looking for 455K, which I’m sure they’ll get with revisions. This is about what I was expecting for last week as it was a 4 day week. I believe the last two reports were influenced by the holidays, but they should normalize going forward. Here’s Econoday:
Delays tied to the Labor Day week cloud what is otherwise a favorable jobless claims report. Initial claims came in at 450,000 for the September 11 week for the lowest total since July (prior week revised to 453,000). The four-week average posted its sharpest decrease of the year, down 13,500 to a 464,750 level that is about 20,000 lower than mid-month August. This comparison points to strength for monthly payrolls. Yet delays surrounding Labor Day, both administrative delays on the government side and delays for those filing claims, may be holding down the total.

Continuing claims are also positive, down 84,000 in data for the September 4 week to 4.485 million. The four-week average of 4.503 million is slightly lower than the month-ago comparison. The unemployment rate for insured workers fell one tenth to 3.5 percent.

Today's report joins this week's run of favorable economic reports though expectations of improvement for the labor market will depend on confirmation of improvement in next week's report.

What favorable reports? Nice try. There are still 4 million+ people drawing Emergency Unemployment, that number dropped by 400K, but that number is unadjusted and I’m assuming is due to the shortened week.

Speaking of spin and unemployment, FedEx spun the economy as “improving” but they simultaneously announced they are laying off 1,700 employees. Seems that’s the new American way – let’s call it spin and slash.

The next monthly Employment Report will come on October the 8th. I expect this number to disappoint as September is one of the near zero seasonal adjustments for the Birth/ Death model, and because of reports like this from Washington State (Puget Sound Business Journal):
Washington’s unemployment rate remained frozen at 8.9 percent in August, with private sector employers adding 900 jobs.

But that hiring was offset by the lost of about 2,900 government jobs, according to figures released Wednesday by the Washington State Employment Security Department.

Private sector job growth in August was down significantly from the 3,100 jobs added in July, when the state’s unemployment rate was also 8.9 percent.

Washington State has done relatively better than most, but this trend of government job losses overriding any positive job gains is a wave C phenomena as the government is still running HUGE deficits but would have to run tremendously larger ones to keep up with the hole they have dug for themselves.

The PPI rose by .4% month to month in August. That’s hotter than the consensus of .3%, and is double the prior month’s .2%. Excluding food and energy it rose by .1%, which is down from .2%. Once again this is reflecting hot money that rotated into the energy markets. I believe that will be temporary as the hot money will be forced to move eventually or will be overwhelmed by the forces of deflation which are still roaring despite near daily POMO activity. Yes, gold is saying “knock it off” to the Fed. So are elevated PPI numbers, and that does not bode well for more outright stimulus. Note that year over year PPI fell from 4.1% to 3.0%:
Headline producer price inflation spiked in August but the core rate slowed. Energy was the difference. But the scare over salmonella helped to partially offset the jump in energy. The overall PPI accelerated to a 0.4 percent gain in August from 0.2 percent in July. The median forecast had called for a 0.3 percent increase. At the core level, the PPI eased to a 0.1 percent gain, following a 0.3 percent boost in July. The August core matched expectations.

Looking at key broad components, energy surged 2.2 percent after a 0.9 percent decrease the month before. Meanwhile, food prices eased, declining 0.3 percent, following a 0.7 percent jump in July.

Within energy, home heating oil increased 7.0 percent while gasoline jumped 7.5 percent. Residential gas and electricity rose 1.4 percent and 0.6 percent, respectively. The decline in food prices was led by a 4.7 percent drop in the price for fresh eggs as consumers kept away from this product tainted by salmonella in some shipments from two producers.

Softening the core rate was a 0.4 percent decline in passenger car prices along with scattered slippage in prices of various other components. Providing upward pressure were a 0.6 percent boost in pharmaceuticals and a 0.2 percent rise in prices for light trucks.

For the overall PPI, the year-on-year rate decreased to 3.0 percent from 4.1 percent in July (seasonally adjusted). The core rate eased to 1.3 percent from 1.5 percent the prior month. On a not seasonally adjusted basis for August, the year-ago the headline PPI was up 3.1 percent while the core was up 1.3 percent.

Headline inflation jumped largely on higher energy costs and a key question is whether the rise in energy costs is a trend or a blip. With modest economic growth, odds are that it is closer to a blip than a trend. Nonetheless, the headline number spooked traders as Treasury yields firmed and equity futures dipped despite improvement in today's initial jobless claims number.

Most food futures were spiking into the month of August, I find it hard to believe that eggs kept the price down, but then again I find most of what the government reports to be unbelievable – as in completely.

Speaking of unbelievable, TIC data (Treasury International Capital) was reported for the month of July as being positive by a net $63.7 Billion. Riiiight. I’ll have to look into the Treasury’s site deeper, but this makes no sense whatsoever unless they are counting their own Fed buying as private inflows, lol, which they are. Creative accounting somewhere, here’s the report, again I’ll dig deeper and will report findings in the daily thread:

TIC july

The Philly Fed data is released at 10 Eastern and is likely to move the markets. Tomorrow comes CPI and Consumer Sentiment.

No change to the market report, we’re still rattling around just underneath SPX 1130 overhead. This is the same thing that happened the last two times we were here, we trapped under it for several days and then it failed. Perhaps there’s enough POMO money to get it to break through, but if it does, it will be just another sucker move.

Below is a 30 minute chart of the SPX showing the rising wedge. We fell just below it and then began to follow the lower trendline higher:

Bonds are right back on their uptrend line following yesterday’s action and are threatening to break beneath that line again. Keep an eye on that, if it breaks on volume we could be in for some changes. I find it hard to believe, however, that the Fed will just let the bond market send rates higher without a fight. Higher rates would completely destroy what’s left of the housing market, and it would dramatically increase our government’s funding costs. Oh yeah, the Fed doesn’t really care about either of those things because they are private banks who profit from the people either way. Momentary laps, sorry.

I know this sounds like a broken record, but the data is not what is being reported or spun. Every time I hear the word “Fed” I have this strange and twisted vision of Ben Bernanke immitating Annie Lennox in black spandex (sorry for the mental image)…

Eurythmics - Would I Lie To You:

Wednesday, September 15, 2010

Morning Update/ Market Thread 9/15

Good Morning,

Equity futures are lower this morning, bonds are also lower, the dollar is higher, oil is dramatically lower, gold is slightly lower after setting a new all-time record high yesterday, and intervention in the Yen overnight caused it to dramatically lose value against the dollar.

Yesterday I showed you charts indicating that the action in the Yen was important to watch, and I showed you the trend line where support was likely. EXACTLY on that trendline, Japan rolled out an announcement that they were taking action to devalue the Yen – currency manipulation:

YEN Hourly:

YEN Weekly:

Later it was learned that the Bank of Japan was working in concert with officials overseas – in other words, the currency manipulators are Ben Bernanke and little Timothy Geithner, the same people who deride China for manipulating their currency.

Here’s the deal that you can take to the central bank – currency manipulation NEVER works! In fact, it will have the opposite effect over time. Once the shorts are destroyed (this will cause deleveraging elsewhere) the currency will begin to sink again (Yen rising due to carry trade unwind) and any intervention will have to be larger and larger until the shorts win, and win they will. Currency manipulation is pathetic, it is the result of a society that has saturated itself with DEBT and has allowed massive distortions to form by supporting gambling in international markets. Those distortions will seek to balance themselves.

This morning the Empire State Manufacturing Index (not a very sharp tool) fell from its prior reading of 7.1 to 4.14. This was worse than the 5.0 expected. It is showing sharp deceleration, and while it did not yet turn negative, the Philly Fed has already and we’ll get another update on it tomorrow. Here’s Econospin, no double-dip in sight, LOL:
Business activity in the New York manufacturing region has firmed slightly so far in September, the latest report to point away from a double dip. The Empire State Index came in at 4.14, a reading over zero to indicate month-to-month growth but at a slightly slower pace of growth than August's 7.10 reading. A rise in new orders is clearly good news, at 4.33 vs. the minus 2.71 that indicated month-to-month contraction in August. Employment is also a positive, at 14.93 to indicate strong month-to-month labor growth and at a slightly higher rate than August's 14.29.

Other readings are less positive. Unfilled orders are extending their run of contraction, at minus 5.97 in September. Draws in unfilled orders do not point to extending gains for employment. The six-month outlook for unfilled orders moved into the negative column while employment plans and new order expectations slowed.

Today's report is positive but only marginally positive. Tomorrow's September report from the Philly Fed will be very closely watched given its surprise contraction in August.

No, actually a rise in orders is not a good thing, not when inventories are growing rapidly as was reported yesterday. Those inventory builds are most likely forced which means that demand is too low for the amount of goods ordered. In other words, businesses are once again being suckered in by morons in our government and in the economic voodoo profession. Just remember that’s its hard to get a garden to grow in the middle of winter, it’s not a time to be planting seeds. That’s not being negative, that’s just reality.

The worthless MBA Purchase Applications Index fell .4% in the prior week, but the refinance index plummeted 10.8%, leading to an overall index loss of 8.9%. Gee, Econopray doesn’t seem to have much to say on that one today:
Mortgage applications to purchase homes edged 0.4 percent lower in the September 10 week while applications to refinance existing mortgages fell 10.8 percent. The results are adjusted for the Labor Day shortened week. Rates are very low which point to increasing mortgage activity ahead. The average 30-year mortgage fell three basis points to 4.47 percent. Next data on the housing sector will be the Housing Market Index on Monday.

“Rates are very low which point to increasing mortgage activity ahead?” What planet are they living on? The Fed has lowered rates as low as they can go, they have bought up nearly every mortgage in the U.S., and they have spent literally TRILLIONS to artificially buy rates down (talk about manipulation)! Each step of the way the people who could refinance did. Now we are at the end of the line. Sorry, but it doesn’t get lower than zero, the only way to get mortgages lower now is to start cutting out the middle men (bankers) and lend directly to the people at next to nothing. That would be a disaster of monumental proportions, as if it’s not bad enough already. Yet after living through the past couple of years, I don’t put it past them.

Import and Export prices came in a little hotter than the month prior for August, here’s Econoday:
Import prices rose a sizable 0.6 percent in August reflecting higher costs for food products and petroleum products. Foods, feeds & beverages jumped a very steep 2.2 percent in the month, though the gain here is not part of a trend. Petroleum prices jumped 2.1 percent, and here too the gain is isolated given steep contractions back in June and May. The bottom line is finished goods where prices have been stable: consumer goods up 0.2 percent following two prior months of 0.2 percent decreases; capital goods up 0.2 percent following two months of 0.1 percent declines.

The export side shows a 0.8 percent gain, again not part of a trend given a 0.2 percent decline in July and a 0.7 percent decline in June. Foods, feeds & beverages also show pressure on the export side, up 4.3 percent in the month following small declines in July and June. Finished goods show no change for capital goods and a 0.3 percent decline for consumer goods.

Country data show a 0.2 percent price rise for goods imported from Japan, not significant but newsworthy given Japanese intervention overnight to stem the rise in the yen. Though deflation bugs are making noise, prices are basically stable right now. Small healthy gains are expected for both tomorrow's producer price report and Friday's consumer price report.

The hot money rotation produced higher prices in food and energy. As noted, this is not a trend, it’s so far just a short term pop. The forces of deflation are still fighting what has now become three POMO’s a week and before we know it, we’ll likely see three POMO’s a day. Did I mention the morons and their intervention? Respect them? No. Not an adult to be seen, only $212 Billion+ increases in governmental debt per month as far as the eye can see.

Industrial Production fell from the prior month’s 1.0% rise to a .2% rise, this was inline with expectations, but again shows slowing momentum in what are not leading indicators. Remember, the ECRI is leading and pointed to negative growth quite some time ago, still residing below -10%. The Capacity Utilization Rate fell to only 74.7%, this is down from 74.8, and in the wrong direction from expectations looking for an increase to 74.9.

Turning back to the markets, prices have now fallen below the redrawn rising wedge lower boundary that can be seen on the following 10 minute chart:

Yesterday prices failed to get over the 1030 resistance level once again. McHugh, looking at the proportionality of the waves as I pointed out earlier (2.5 months for wave 1, 2.5 months for wave 2), changed his primary count to this wave being wave c of wave 2 of wave C (wave 1 bottoming on July the 1st and a,b,c for wave 2 since). That means that he now believes we still have not begun wave 3, that was the alternate count I’ve been following. In truth, it can still be either way as we have yet to rise above 1131. Regardless, the next wave will be down and it will likely be wave 3 – it may have already started, not that I’m ringing a bell or anything…

Tuesday, September 14, 2010

Derivatives to be Manufactured in China…

The latest to be stamped, “Made in China,” will be CDS. Not to worry because, “It is neither evil nor good.”

Hey, I didn’t just make that up! Here’s the story with a link:

China to Introduce Credit-Default Swaps by Year-End

By Christine Richard

Sept. 13 (Bloomberg) -- China will introduce credit-default swaps by the end of this year, according to Shi Wenchao, secretary general of the state-backed National Association of Financial Market Institutional Investors.

Investors in the derivatives will be required to own the underlying risk, Shi said today in an interview with reporters in New York. China plans to limit the amount of leverage used in the contracts to avoid the kind of financial crisis faced in the U.S. two years ago, he said.

“We believe CDS is a neutral risk-management tool,” Shi said. “It is neither evil nor good.”

Private swaps complicated efforts to solve the credit crisis in the U.S. when regulators and market users couldn’t easily determine how interconnected banks had become through trading contracts.

China also expects to open its debt markets further to foreign companies, saying the prospects for their selling debt will gradually improve during the next 3 to 10 years to “extraordinarily great” from “promising,” Shi said.

NAFMII was formed by the People’s Bank of China, the country’s central bank, in 2007 to help develop over-the-counter financial markets, including bonds, loans, commercial paper, foreign-exchange and gold.

Wow. Another 12 year old does interviews?

Nothing like the smell of some bubblicious Red CDS in the new year! I’d say that prospects of credit bubbles look “extraordinarily greeeaaat!” Obviously an effort to keep their new found never ending growth never ending, the communists are learning quickly from their oligarchic “free market” Ponzi central banking counterparts. I hear that the fireworks will be amazing this New Year!

Morning Update/ Market Thread 9/14

Good Morning,

Equity futures are slightly lower this morning with bonds rising in price. The dollar is flat overall, up slightly against the Euro, but down against the Yen. Oil is down slightly and gold is roaring higher.

The development in the Yen is the most important thing I see across the board this morning. I have been monitoring a small triangle on the daily chart and this morning it has decisively broken that triangle to the down side (strengthening Yen). This is due largely to the unwinding of the Yen carry trade, it represents deleveraging:

Looking at the monthly chart, the Yen is strengthening (falling on the chart) in a descending wedge and it has landed squarely on the bottom of that descending wedge. That means that it could bounce from here, or it could break it. Descending wedges are often reversals, but they can also lead to waterfall events as price cascade lower out of them. This is important as much rests on this relationship:

Another important development is occurring in the long bond. Yesterday I showed that it was testing support, well it bounced dramatically yesterday and is now looking like it may have entered a new wave higher. Yesterday’s action did not support the mild rise in equity prices, nor does this morning’s rise:

TLT, the 20 year bond fund, also descended to the bottom of its rising channel and bounced, producing a bullish reversal for TLT and the long bond:

Overall Retail Sales came in flat month to month for August at .4%, this is slightly better than the .3% expected. Less auto sales, the figure supposedly grew .6%, which was also better than the .4% expected. Initial reaction was positive, but then the news was quickly sold with bond prices rising. Here’s Econopray:
Retail sales topped expectations for August with components more positive than not. Overall retail sales in August continued to improve, gaining 0.4 percent, following a 0.3 percent rebound in July. The latest number topped the median forecast for a 0.3 percent advance. Excluding autos, sales increased 0.6 percent, following a 0.1 percent rise in July. Analysts had projected a 0.4 percent rise for the ex-auto number. Sales excluding autos and gasoline jumped 0.5 percent, following a 0.1 percent dip in July. Today's report shows that consumers are still spending. The August numbers are a little better than expected but still a moderate pace. For those wondering if the boost was related to back to school spending, the numbers are seasonally adjusted and largely take that factor into account.

The rebound in July was led by a 1.9 percent gain in gasoline station sales with food & beverages up 1.3 percent and clothing up 1.2 percent. Also showing increases were health & personal care, sporting goods & hobby stores, general merchandise, nonstore retailers, and food services & drinking places.

Weakness was led by a 1.1 percent fall in electronics & appliances and a 0.9 percent decline in miscellaneous stores. Motor vehicle & parts dealers decreased 0.7 percent while furniture & home furnishings slipped 0.5 percent. Building materials and garden equipment sales were flat.

Overall retail sales on a year-ago basis in August slowed to 3.6 percent from 5.4 percent the month before. Excluding motor vehicles, the year-on-year rate slipped to 4.8 percent from 5.0 percent in July.

Today's report adds ammunition to the argument that there will be no double dip. A consumer sector that is posting moderate gains in spending will likely support continued modest growth in the recovery. It's certainly not gangbusters, but the news is welcome relief for those worried about the economy becoming too sluggish or turning negative again.

There it is again, “there will be no double dip.” What wishful thinking. Gee, where have we heard that before? Oh yeah, it was yesterday… "We will not have a double-dip recession at all," this, according to Warren Buffett whose economic prowess is only exceeded by that of Ben Bernanke. Disrespect intended, as both are nothing but shills in support of their own interests. Buffett has something to sell you, I guarantee you that. I can also say that there will be no double dip, but that is because there was never a real “recovery” to begin with.

Why is it that very few public figures have been able to see (or at least acknowledge) the problems for what they are, yet many average people now do? Very few, like me, have been pointing to reality for years, yet few listen. The bias, manipulation, spin, profiteering, and outright FRAUD are plain as day to me.

Returning to the Retail Sales report, once again this is a report that is riddled with bias, such as survivor bias. It is based upon same store sales and NOT adjusted for stores that have closed, of which there are many. When a store closes, what sales it had wind up in another store, one that hasn’t folded. That alone makes this report next to worthless during times of contraction or during times of expansion. And thus we turn to tax receipts where just last evening I listened to Washington State’s Governor, Christine Gregoire, describe our state’s $3.3 billion deficit and how it is EXPANDING, not contracting due to continued and accelerating short falls in tax receipts! Washington State has no income tax, just SALES tax. So no, the consumer is most definitely not spending and this “retail sales” report is bunk as it always has been.

But that’s just deceptive, let’s get back to the FRAUD. This time I’ll simply highlight what I’ve written about over and over, but it’s been awhile, and that is our own government, the U.S. Treasury, who is defrauding the public for who it is supposed to work. Yesterday the Treasury Department released the budget deficit for August as being $91 Billion. As Karl Denninger was first to point out, the nation’s DEBT grew not by the already horrific $91 Billion figure, but by 2.3 TIMES that amount, a zombie terrifying $212 Billion! Just for one month! Is it okay to annualize that figure like they do for GDP? It is? Okay, that equals $2.544 TRILLION in new debt for just one year. Can you say, “exponential?” I thought you could.

So, how does the U.S. Treasury get away with saying that the budget deficit is only 43% of that which is reality? It’s simple, it’s because we let them. Unfortunately, the U.S. Treasury, headed by little Timothy Geithner is acting as a subsidiary of the “FED” which is actually an organization that is owned, and controlled, by the private banks. It is completely fair to call this accounting FRAUD, and it is completely fair to say that the Treasury Department is no longer working on behalf of the people of the United States.

What’s most important is WHO controls the power of money creation. It either works for all the people or for a few elites. Right now there is no question that it is working for a few elites, that’s by design.

Business Inventory data is released at 10 Eastern.

The rise yesterday took prices slightly above the 200 day moving averages. That is a bullish development, but we’ve been here several times before only to watch it fail. The NDX has left gaps all over the charts as it rises in some LSD laced Apple twisted flashback of 1999. It also broke the downtrend line from the April peak. The DOW, however, rose right to that downtrend line and was stopped:

Volume on yesterday’s rise was only slightly higher than the record low volumes encountered last week (lowest weekly volume of the year). SPX 1031 is still resistance to get over, until that happens, the count is still the same. McHugh has picked up on the sloppy inverse H&S pattern with the SPX 1010 low as the “head,” and the neckline at 1130ish. A break higher to fulfill this pattern would produce a 1212 target. It is sloppy and it is not verified. He and I both give it lower odds of fulfillment than the already verified, larger, and well formed H&S pattern that produced the 860ish target. It gives the bulls something to hang their hats on… I believe they will be disappointed once again. Keep and eye on the Yen and on bonds, while definitely ignoring the pontifications of those who wish to distribute to you.

Monday, September 13, 2010

New Interview on Two Beers with Steve…

This September 11th, Steve Patterson and I spent our evening and two beers just discussing current topics and then some market technicals. It’s a lengthy interview and the technical discussion begins about half way through.

Please use the following link:
Propaganda, Koran Burning, and Hindenburg Omens with Nathan Martin

Morning Update/ Market Thread 9/13

Good Morning,

Equity futures have jumped the shark once again with the usual HFT driven and central banker fueled Monday morning ramp job. I love the smell of jet fuel in the morning! The SPX futures are high enough to overthrow the top of the rising wedge I’ve been tracking, and we are still rising within the current uptrend channel:

The dollar is down, Euro is up, oil is higher and gold is lower. Of particular interest to me is the long bond futures which have broken beneath their rising uptrend line. While it could just be an underthrow, it could signal that the “risk trade” is coming back at least temporarily, so it needs to be watched for further signs of money flows:

There is a small gap up at SPX 1120, a gap fill there may need to occur, and the key level of resistance to watch is SPX 1131. A break over 1131 would indicate that the working count (wave 2 of 3) is not correct and that we would then be likely in a larger wave 2, or the bullish alterative is a flat formation for the larger wave B. We’ll cross that bridge if it happens, but I still think we’re going to have a ton of difficulty getting over the hump here. A throwover of the 200dma is not unexpected, in fact it is just the market’s way of drawing in more money and creating more bullishness. Most people aren’t buying it, that’s why the volumes have been pathetically low, the lowest volume of the year occurred last week, that should not be occurring this time of year.

There are no economic reports this morning, data this week is not all that heavy which gives the market makers more latitude to play with the markets for this quarterly options expiration this Friday. Note that last Thursday was an up day, that makes roughly a 70% chance that this options expiration week is a down week. We’ll see Retail Sales, PPI, CPI, Consumer Sentiment, Industrial Production, and the usual twisted weekly Jobless Claims. I expect the Jobless Claims numbers to be fudged once again due to the 4 day week last week. Of course the rest of the data will be skewed too, with pressure from politicians to keep their jobs and pressure from the debt pushers and marketers of the world to create never ending “growth.”

The Basel III Accord brought together 27 country’s central bankers (where’s a UAV when you need one?), Ben Bernanke and Sheila Bair represented our interests, doesn’t that make you feel great? Neither one of them are elected officials, yet they are the ones controlling the greatest power on earth – Congress gave them that power without the permission of the people. The markets love it when the central debt pushers all agree, and this time they agreed that 20 to 1 bank leverage is just fine, thank you very much. In fact, they gave the banks 8 years to get back to a 4.5% common equity cap ratio, a highly leveraged ratio by historic standards, yet obviously “conservative” compared to the infinite leverage being conducted today.

And yet despite this non-serious mandate by Basel, still it is too much for some banks in Europe, Deutsche Bank announcing that it is raising $12.5 billion via equity sales to comply with capital ratios. That announcement hammered its stock last week, but the truth is that there are games being played out of the spotlight - one of those games is called the shell game.

The shell game is played by creating a separate entity (another corporation), then “selling” your stinking pile of debt to that entity, thus cleaning your books of the rot while you eventually bankrupt the new entity. That’s the corporate shell game and it is ILLEGAL, it is nothing but accounting FRAUD. It has always been illegal, but now our own government not only doesn’t prosecute the shell game, they support it. Citi Bank is playing the shell game, and I’m certain that most of the larger banks are as well. Here’s a recent article that discusses BankAtlantic’s shell game (ht Mick):
The Loneliest Analyst

"He (Levan) has also shifted troubled assets from BankAtlantic to its holding company. Because regulators don’t require the holding company to be as financially sound as BankAtlantic, the maneuver appeased regulators while shifting the burden to the holding company.

In 2008, Mr. Levan sold $101.5 million of distressed commercial loans from the bank to the holding company for 93.5 cents on the dollar. Since then, the loans have lost half their value, but the transfer prevented that downturn from more seriously undermining BankAtlantic. "

Got it? That’s called FRAUD, and it is widespread and it is the only reason some institutions are hanging on (Bove is nothing but a tool of the debt pushers by the way). Do our Basel representatives know or care? Of course they do, that’s why they are trying their hardest to cover it up and to give years and years to continue to cover it up. The truth, of course, is that should the accounting fraud be removed, the FDIC would be overrun in an instant and the games would be exposed for what they are. The banks who create and push the rot are let off the hook while the PEOPLE still struggle to service the debts with no escape. And that is why our country, along with most of the developed world, is Enron times a million and will go nowhere, just like Japan who has done the same types of things over the past three decades only to mire in and out of a never ending recession.

Today’s ramp is fulfilling the large move expected from last Thursday’s small movement of the McClelland Oscillator. I will not be surprised, in fact I expect, to see a reversal this week. The VIX sell signal should become effective sometime within two weeks, so I would expect that to start playing out soon. That should also coincide with the Bradley Model turn date, today is the 9th day since this current up wave began, it is definitely long in the tooth, living on borrowed volume. Dang how I don’t like HFT Mondays!