Saturday, October 9, 2010

The Viscous Nature of Oil in Winter...

...Economic "winter" that is!

The more expensive the oil, the more everything costs. Every step of production is influenced by oil’s price. As price rises, it acts as a tax on the consumer. Given a constant income level, spending more on energy means spending less on other goods and services which themselves also cost more.

The one part of Mike Ruppert’s movie “Collapse” that I always remember is the scene where he explains that never ending growth is impossible on limited energy. Of course many have explained this, but his explanation of how he foresaw the economic “collapse” unfolding involved oil prices shooting higher until a certain price was reached that strangled the economy. Oil price would then fall back down for awhile, and as the economy recovered oil would rise again to the point that it slowed the economy yet again, and thus we would have a rolling collapse as oil repeatedly reached an unsustainable price. Kunstler’s “The Long Emergency” also echoes this theme.

Collin Campbell predicted this “bumpy plateau” effect to be a sign of peak oil. Below is his chart illustrating this point…

Take the following chart with a grain of salt, however it does depict the "bumpy plateau" on the peak of the oil based economy.

I’ve been warning recently that the level of maximum sustainable oil price appears to be the $80 level. Below is a chart over the past three years with the horizontal blue line at the $80 mark. The candlesticks represent the price of oil, while the solid black line is the SPX:

Note that at this time of year in 2007 (very left side of the chart) oil crossed over the $80 mark on its way to $145.66. What was the trajectory of the stock market while this was occurring? DOWN.

Fast forward to the past year and you will see that there have been five minor excursions above the $80 mark… and what has happened each time? Both equity prices and oil prices fall back down. Coincidence, or cause and effect? The correlation seems a little too good for coincidence.

This is exactly why Bernanke and all those who do not understand the dynamics of their actions always run into problems when confronted with the real world. They see the “need” to stimulate but realize the bond vigilantes will get them so they rig the bond markets by printing money to buy our own debts. The dollar plummets, oil zooms, and then…

Question: When is Expensive Oil Bad for Your Engine?

Answer: When your economic engine is dependant upon inexpensive oil!

Friday, October 8, 2010

Graham Summers - Three Horrifying Facts About the US Debt “Situation”

By Graham Summers

Since too often financial articles consist of some stooge blathering on and on with opinions instead of facts, I thought today we’d simply focus on some FACTS about our current financial system which few if any want to acknowledge.

#1: The US Fed is now the second largest owner of US Treasuries.

That’s right, this week we overtook Japan, leaving China as the only country with greater ownership of US Debt. And we’re printing money to buy it. Setting aside the fact that this is abject lunacy, this policy is trashing our currency which has fallen 13% since June… as in four months ago. Want an explanation for why stocks, commodities, and Gold are exploding higher? Here it is.

#2: “There are only about $550 billion of Treasuries outstanding with a remaining maturity of greater than 10 years.”

This horrifying fact comes courtesy of Morgan Stanley analyst David Greenlaw. And it confirms what I’ve been saying since the end of 2009, that the US has entered a debt spiral: a time in which fewer and fewer investors are willing to lend to us for any long period of time… at the exact same time that we must roll over trillions in old debt and issue an additional $100-150 billion in NEW debt per month in order to finance our massive deficit.

And only $550 billion of the debt we’ve got to roll over has a maturity greater than 10 years!?!?

So we’re talking about TRILLIONS of old debt coming due in the next decade. The below chart depicting the debt coming due between 2009 and 2039 comes courtesy of the US Treasury itself. In plain terms, we’ve got some much debt that needs to be rolled over that you can’t even fit it on one page and still read it.

#3: The US will Default on its Debt

… either that or experience hyperinflation. There is simply no other option. We can NEVER pay off our debts. To do so would require every US family to pay $31,000 a year for 75 years.

Bear in mind, I’m completely ignoring the debt we took on with the nationalization of Fannie and Freddie, AIG, and the slew of other garbage we nationalized or shifted onto the Fed’s balance sheet. And yet we’re STILL talking about every US family making $31,000 in debt payments per year for 75 years to pay off our national debt.

Obviously that ain’t going to happen.

So default is in the cards. Either that or hyperinflation (which occurs when investors flee a currency). Either of these will be massively US Dollar negative and horrible for the quality of life in the US. But they’re our only options, so get ready.

Good Investing!

Graham Summers

Morning Update/ Market Thread 10/8

Good Morning,

Equity futures went lower, then higher on the Employment situation release. The dollar is lower, bonds are up a little so far, oil is flat, and gold is slightly higher.

As I expected, the headline number was worse than consensus, coming in at -95,000 jobs. There were supposedly 64,000 private jobs created, this is worse than August’s 67,000 and far worse than the consensus of 85,000. The Unemployment Rate remained level at 9.6%.

Here’s the entire report from the BLS:

Employment September

Right off the bat we can see the wave C mentality as the government lost 159,000 jobs. Why? Because the same levels of stimulus are no longer palatable because it is finally being recognized that we have far too much debt.

Just look at all the numbers that increased… Sadly, “The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) rose by 612,000 over the month to 9.5 million. Over the past 2 months, the number of such workers has increased by 943,000. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.”

Also, “About 2.5 million persons were marginally attached to the labor force in September, up from 2.2 million a year earlier.” Gee, that’s only an increase of another 300,000 in one month!

And, “Among the marginally attached, there were 1.2 million discouraged workers in September, an increase of 503,000 from a year earlier.”

Those are some dramatic increases, much larger than we’ve seen recently. I do not see a large change to the Employment Population Ratio, it is obvious that the rate was able to stay low due to the large increases in the number sets just above.

Here’s a portion of Econoday’s update:
The private sector is doing its best to offset weakness in the government sector. But Census layoffs and state and local government cut backs have been more than offsetting. Payroll employment in September declined 95,000, following a revised 57,000 dip in August and a 66,000 decrease in July. The September fall was significantly more negative than the median forecast for an 8,000 decrease. The July and August revisions were net down a slight 15,000.

The Census Bureau layoffs of temporary workers continued to damp overall jobs. Government payrolls declined 159,000 after decreasing 150,000 in August. A decline in federal government employment was due to the loss of 77,000 temporary Census 2010 jobs. As of September, about 6,000 temporary decennial census workers remained on the federal government payroll, down from a peak of 564,000 in May. Employment in local government decreased by 76,000 in September with job losses in both education and non-education.

But on the positive side, private nonfarm employment continued to rise, advancing 64,000 in September, following a revised increase of 93,000 the prior month. The median market forecast was for an 85,000 boost for private payrolls.

Private service-providing jobs gained 86,000 after an 83,000 increase in August. The rise was led by a 38,000 boost in leisure & hospitality jobs. Other increases were scattered by category. Temp help services advanced another 17,000 after gaining 18,000 in August. This category typically is a leading indicator for permanent job hires or layoffs but companies are still more skittish than usual about adding permanent positions.

Goods-producing jobs fell 22,000 after a 10,000 increase in August. Manufacturing slipped 6,000 while construction jobs dropped 21,000. Mining rose 6,000.

Average hourly earnings were unchanged in September after rising 0.3 percent in August. The September figure fell short of the market estimate for a 0.1 percent gain. The average workweek for all workers was steady at 34.2 hours in September, matching expectations.

On a year-ago basis, overall payroll jobs improved up to 0.3 percent in September from up 0.2 percent the month before.

Turning to the household survey, the unemployment rate was unchanged at 9.6 percent, coming in a little lower than the market forecast was for a 9.7 percent.

Overall, business demand for labor is sluggish. Discounting the loss of temporary Census workers, the recovery continues but at a soft pace.

On the news, Treasury yields and equity futures were little changed. The dollar declined.

Looking at the Alternate Table, we can see that seasonally adjusted U-6, the number most closely resembling how it has been tracked in the past, rose to 17.1% from 16.7%. Note that this is worse than last year’s 17.0%. How many jobs were “created” in the past year?

I have been mentioning that this report would be worse than expected due to the Birth/ Death model. That’s exactly what happened as the adjustment was only 11,000 for September this year which is still more than the zero correction this month last year. Note that next month is a mild correction and then there’s a negative correction coming in November – yes, these do tend to follow this same pattern:

The Birth/ Death model is simply a ridiculous notion and a way for the BLS to manipulate the data. It is not accurate when the economy is contracting or expanding, which would be all the time. That means this model is never accurate! To say that small businesses are adding jobs while small businesses in general are going out of business is simply a lie and an economic distortion.

Below is John Williams Employment chart from, you can see that it has now exceeded 22%!

These are depression era readings people, this is no “recession.”

And recently Bernanke so much as admitted that adding QE money will do little to help! Can you say, Wave C mentality?” I thought you could!

Fed’s $2 Trillion May Buy Little Improvement in Jobs

Oct. 7 (Bloomberg) -- For $2 trillion, Federal Reserve Chairman Ben S. Bernanke may buy little improvement in growth, employment or inflation over the next two years.

Firms with large-scale models of the U.S. economy such as IHS Global Insight, Moody’s Analytics Inc. and Macroeconomic Advisers LLC project only a moderate impact from additional Fed asset purchases. The firms estimate that the unemployment rate will remain around 9 percent or higher next year whether the Fed buys $500 billion or $2 trillion of U.S. Treasuries in a second round of unconventional stimulus.

“This is not a game changer for the economic outlook,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts, whose models show that $500 billion of purchases would boost growth 0.1 percentage point in 2011 and leave the unemployment rate at 9 percent or above for the next two years. “There is clearly a risk that people start to perceive monetary policy as impotent.”

The meager impact shows the conundrum U.S. central bankers face. Interest rates near zero have failed to produce the intended cycle of borrowing and spending among consumers and businesses. Unemployment hovering near a 26-year high, partly a symptom of weak demand, keeps downward pressure on prices, and further declines in inflation would raise borrowing costs in real terms, making credit more expensive.

Uh, huh. They can QE all they want, but if they don’t help those who are saturated with debt, this economy is going exactly nowhere. In fact, it is quite the opposite. If they simply do nothing then the debts will clear and the economy will move forward. It’s their attempts to help it that are destroying it. Each infusion simply lowers the value of our money making it harder and harder for folks to live. The more they do it, the WORSE the economy gets.

Wholesale Trade numbers are released at 10 Eastern this morning.

There are signs from yesterday that the market may finally be rolling. The dollar may have hit at least a temporary bottom, and the Euro a top. I’m basing that simply on the candlesticks that were created and on the Key Reversal that occurred in both oil and gold yesterday. Below is a chart with the dollar on the left and Euro on the right:

The fly in that ointment is the Yen. Yesterday it broke down (down is higher on this chart) below a very power trendline than comprised the bottom of a large descending wedge. I warned yesterday that prices can waterfall out of descending wedges, and today it is continuing to strengthen – that will pressure the dollar and other currencies. This type of move in the Yen is very unwelcome and it has the potential to get disorderly:

The point & figure diagram for the Yen is targeting 151. That target is 25% higher than current levels!

The Japanese yesterday did announce yet another stimulus program although they swear they are going to keep them smaller in the future, LOL. They are hosed, there is no other way to put it, but it was their own actions that put them in their current predicament.

Yesterday the McClelland Oscillator finished barely above zero. Turning negative is a warning sign, one that puts the Hindenburg Omens in play. This is a very dangerous time for equities. Alcoa and Micron both reported earnings yesterday. While Alcoa met their revised expectations, get this… “which declined 21% from the year-earlier period and 55% from the previous quarter. " And Micron (MU), while earning more than last year, flat out missed on both earnings and revenues.

No, QE 666 won’t bring our economy back, our money will be destroyed long before we get there. This employment report is all bad. There is no POMO scheduled for today, the key level is the 1150 mark.

Thursday, October 7, 2010

Morning Update/ Market Thread 10/7

Good Morning,

Equity futures are higher once again, lofted higher by a crashing dollar, a skyrocketing Yen, and yet another $2.1 billion POMO hot money injection yesterday. The dollar is down yet again, reaching just above the 77 mark. The Euro is zooming as the Germans and the British are only slightly less anxious to destroy their currencies. Bonds are flat, oil is zooming now above $84 a barrel, while gold reached yet another all-time high of $1,366 an ounce.

The Monster Employment Index rose from 136 to 138. “Gains in the month were evenly distributed with public administration and utilities showing special strength.”

Weekly Jobless claims fell from 453,000 to 445,000. Naturally, the prior week was revised higher to 456K. The market is using this data point to break out higher in the futures with the dollar breaking down further. This is yet another report in the same horrific range that we’ve been in forever. Month after month, the job losses mount as any number above 350k is nothing short of a disaster that shows continued job contraction. Here’s Econospin:
ADP or not, the jobs market appears to be improving based on incremental decreases in the number of jobless receiving unemployment benefits. Those receiving initial benefits fell 11,000 in the Oct. 2 week to a lower-than-expected 445,000 (prior week revised slightly higher to 456,000). The four-week average is at 455,750 for a sixth straight decrease and is down a convincing 25,000 or so from a month ago.

Those receiving continuing benefits fell for a fourth straight week, down 48,000 to 4.462 million. The four-week average of 4.511 million is slightly lower than a month ago. The unemployment rate for insured workers dipped one tenth to 3.5 percent.

There are no special factors in the data making for a clear view, a view that shows tangible improvement in the jobs market. These results will calm nerves following yesterday's disappointing ADP estimate.

Nice spin, whoever wrote that should be writing copy for Florida condo brochures. Again, check out the chart, you can see that it’s simply wiggling in the same old range. Meanwhile, the number of people claiming Emergency Unemployment Compensation jumped 157,735 from the prior week, with the total still above 4.1 million compared to “only” 3.3 million a year ago! Now there’s job growth only the mainstream can ignore.

Yesterday it was learned that the Fed has been conducting POMO operations since 2003! They POMO’ed on 203 of the last 1,334 trading days! Had you invested on those POMO days, you would have gained 51%, versus a loss had you only invested on non-pomo days! That sample is certainly statistically relevant, showing that the markets are only higher due to Fed intervention. Here’s a chart that ZH published showing this:

Meanwhile QE operations are also working to destroy our currency. The sole purpose of these operations is to BUY DOWN INTEREST RATES. It’s costing us trillions to keep rates low, MORE than we take in through taxes. Of course everyone expected our lack of fiscal discipline to eventually translate into higher rates… well IT HAS! This is exactly why the Fed has had to resort to buying up their own bonds – if they could sell them to someone else, THEY WOULD! And they can sell then to others, but NOT at these artificially low rates. I say again, we are spending MORE than we collect in taxes on INTEREST on our debt due to the forced buying down of interest rates. This cannot and will not last. It is causing disturbances the world over.

Below is a chart of the 10 year Treasuries, the TNX. You can see that we definitively broke below support of the H&S neckline. The target is now just above 2%:

The Yen is now breaking down below its descending wedge. This is ominous! Should it continue on this trajectory, Japan will not be able to export as their goods will become prohibitively expensive compared to weaker currencies. They will be forced to respond, and when people are cornered is when desperate actions get taken. Desperate actions can lead to those “other” events.

Below is a monthly chart of the Yen, lower equals a stronger Yen on this chart. You can see the descending wedge clearly – these are usually ending patterns where you expect price to rise up from it. However, sometimes prices come spilling out of descending wedges in a water-fall – that is exactly what happened to our markets as wave 3 down struck in 2008. Should the Yen cascade down and out of that descending wedge, it could be very ugly indeed:

Here’s a closer look at the daily chart. That lower trendline has perfectly stopped price every time until now. All the trillions spent to keep the Yen weak have FAILED, just as all currency intervention eventually does:

The DOW Industrials are now pushing on 11,000 with 11,258 the April high. Yesterday saw several of the second tier momo tech stocks break down hard on earnings warnings. This is eerily similar to what happened in early 2000 just prior to the tech bubble bursting. Then, like now, techs were clearly leading and were rising in near parabolic fashion. Then a set back, and then another week of nearly straight up parabolic into THE top. Collapse followed, and here we are 11 years later with the NASDAQ still down 58% from that peak:

And yet as I look around I see many of the same euphoric types of moves and bubble prices. I also see the same rotational moves that were occurring near the ’07 top. This time, the divergences are even larger. And like 1987, this time we have a dollar fading rapidly in the background.

Could we shoot higher into another ending parabolic move? We sure could, there are signs of that already occurring in places like oil, gold, silver, and some of the ridiculous momo tech stocks. If it does occur broader based from here it will likely mark the end, but you obviously don’t want to step in front of it if it does. Parabolic moves end suddenly, and picking their ending points is nearly impossible – again, this is exactly why front-running turns can prove costly.

The McClelland Oscillator is still positive, but just barely. I think one of the first signs we’ll see of a decline is that the McClelland turns negative and stays negative. People are already forgetting about the Hindenburg Omens on the clock that are valid until the end of the year. This entire move higher is not real, it is a falling dollar POMO fueled rally that left gaps every step of the way. All those gaps will be filled, and all that hot money fed into the machine will simply be shredded in the end, a complete and total waste. More money in the form of QE2 or TARP 13, or whatever, will also have no effect in the end if it’s simply squandered in the same exact manner. Money needs to get into the hands of the people, and it needs to be used to pay down debt. That’s the only way meaningful jobs are going to be created. I think I see the writing on the wall… Did you want non-fat, or whole milk with your latte, sir?

Wednesday, October 6, 2010

Morning Update/ Market Thread 10/6

Good Morning,

Equity futures are down this morning following more ramping overnight. The dollar fell to a low of 77.57 and then bounced, bonds are sharply higher, oil is reaching higher, and gold touched $1,351 an ounce.

The Yen fell down to and perfectly touched its lower trendline of its large descending wedge. This touch produced a new lower low that follows trillions worth of yen intervention. The IMF came out and warned about the dangers of currency wars stating that it can do long term damage and hinder any recovery – no kidding?

And yet we continue to make money from nothing and hand it over to the banks buying up their worthless debt “assets.” They then take that money and run up equities, commodities, and bonds, taking short term profits for themselves and leaving the debts behind for everybody else. Not only are they leaving the debts behind, but they are destroying the value of the dollar, thus robbing the people every time they make a purchase with dollars they are forced to earn, unlike the banksters who have created their own laws.

The still worthless MBA Purchase Index rose an unbelievable (as in I don’t believe it) 9.3% in the week prior. The Refinance index fell 2.5%, and because refinancing far outweighs purchases, the total index sank another .2%. Here’s Econoday:
In the latest sign that housing is moving up from its post-stimulus hole, mortgage applications for home purchases rose 9.3 percent in the October 1 week. The jump was fed by a 17.2 percent increase in Federal Housing Administration (FHA) applications. The report notes the jump precedes an October 4 deadline after which the FHA now requires higher credit scores and higher down payments. Yet in a sign of overall strength, conventional purchase applications rose 3.6 percent in the week.

Refinancing applications slipped 2.5 percent in the week to make for a 0.2 percent dip in MBA's composite index. The average 30-year mortgage decreased 13 basis points to 4.25 percent for a record low in the survey.

Record low rates, and purchases are up due to FHA tightening. Making it more difficult to get loans doesn’t sound like never ending growth to me, it sounds like ending growth. Note how the bankers get POMO infusion after bailout, after bailout, but the people are losing their access. Those buying into the mantra that the economy doesn’t matter to the stock market are about to get a big surprise. The consumer who now is forced to pay more for their gasoline, their food, and who is losing access to credit comprise 70% of the economy. The disconnects between economic reality and the stock market are HUGE. By many measurements they are larger than they were at the ’07 top. At that time people were saying the same exact thing, “Don’t fight the Fed.” Just look at how that worked. Interest rates went to zero and despite that the markets crashed. Just look at the state of housing now compared to then. Look at the stock market now compared to then. Don’t fight the Fed my rear. They are the problem, they have failed and are going to continue to fail, and the stock market is a massively overvalued disaster just awaiting a triggering event.

Let’s talk about employment starting with the Challenger Job-Cut Report… Mass announced layoff jumped 6.8% in September from 34,768 to 37,151. Here’s Econoday:
Layoff intentions totaled 37,151 in September, down from 34,768 in August. Government layoffs were up while layoffs in the retail and industrial-goods sectors were down. Hiring intentions for the retail sector soared to 114,000 in September in a staggering jump from a year ago when retail hiring didn't even total 2,000. Challenger's numbers can be bumpy and are a difficult gauge for Friday's employment report. The report itself notes that a low number of job cuts doesn't necessarily translate into increased hiring.
Again, the government is laying off people because they can’t find the money for that, but it’s amazing how they came up with $5.2 Billion just yesterday to pump up the stock market! Insanity comes to mind, but so does the term greed. I don’t know when the people are going to wake up, but if they ever do it’s going to be rightfully ugly. Hiring intentions sound nice, but then again so does buying inventory that winds up sitting on the shelf.

The ADP Employment Report, which I give very little credence, says that Private Payrolls in September fell from Augusts’ -10,000 to -39,000. Oh my, that’s not at all what the “consensus” was expecting. I think this Friday’s Employment Report is going to disappoint, again we have a minimum month for the Birth/Death model and we have temporary government jobs going away. No, that won’t be a good thing because it spurs QE2, just look at the dollar and at the price of oil if you need a reality check.

According to McHugh, nearly half of yesterday’s rise was short covering. Yet another huge gap was produced. It’s not real, it’s not going to last. That POMO money is going to disintegrate and we’re all simply left holding the empty bag in the end.

Watch the currencies and bonds today. Today is the last scheduled POMO day too, we'll have to see how large today's infusion is. The TNX is close to confirming that new H&S pattern, and the dollar is not that far away from its potential support in the 76ish area. Should the Yen break that lower trendline, that could produce a real firestorm.

Tuesday, October 5, 2010

After Market/ Post POMO Thoughts 10/5

Today’s 193 point Dow rise has certainly given rise to panic from the bears and screams of hyper-inflation from those who believe that’s imminent. From my perspective nothing has changed, not even a clear breakout from our trading range.

It was yet another 90% panic buying day with 93.3% of the NYSE volume on the buy side. There were 283 new 52 week highs, an amount lower than we had when the market was at lower levels. That’s a bearish divergence, yet it is also near the 300 level that is usually reserved for significant market tops.

Today’s action for a change at least was not boring. I find the fact that big up days are coming on big POMO days fascinating... Yet, on a $5.2 billion POMO day, AND a 5 trillion Yen intervention day, we have unbelievable levels of insider selling at 2,341 to 1! What this says to me is that our central banks are paying off the insiders, plain and simple.

Of course everyone else gets the meat grinder of darkpool, HFT, POMO fueled gold soaring to new all-time highs ($1,343 an ounce), oil soaring to $83 a barrel, food commodities soaring, and a dollar in free-fall debt-slave treatment.

Despite all that, the XLF still couldn't get over the 200dma, BANK is resting on the upper Bollinger way below its 200dma, GS is still well inside of its triangle, the Transports are still well inside their range and against the upper Bollinger, volumes are still in the gutter not confirming any breakout whatsoever, and Harley Davidson rose a completely insane 9% to LEAD the market up because it was put on a buy by RBC Capital Markets after experiencing 1 month of sales gains following 4 months of sales losses (not to mention a broken model, too much capacity, and demand that has fallen 30%+ on horrifying demographics).

You can call it whatever you like, I call it completely unsustainable. The consumer is still saturated with debt, their homes are still underwater, and with oil and food costing more, they will have even less to spend towards contributing to making corporate earnings rise. In other words, it’s simply a matter of time, the market is busy sucking in all that it can to be destroyed later, which it will be.

From a technical basis I still don't have the markets broken out. As of now, wave c simply equals wave a as a part of wave 2. I will not consider the market broken out of anything until it exceeds the April high. Even if it does, the tremendous number of gaps we are leaving behind WILL get filled, we will be back here again. The risk to me is clearly being long.

The most bullish thing I see out there today is the VIX which broke beneath its recent uptrend line, but note how close it is to the lower Bollinger again, that could set up yet another market sell signal should we close beneath it:

I know… many are thinking that the signals just aren’t working. They will. The dollar can only be sacrificed so low and then what? Oil can only go so high before it breaks the economy, and then what?

I made the mistake of turning on CNBS for a few seconds… And as insane as it seems, especially with Japan as a disastrous example, I had the displeasure to see a Spanish DEVIL from the IMF, name is Jose Vinals, talking about the $4 trillion world-wide debt roll-over that needs to occur shortly – please listen to what this global pusher of debt has to say:

LOL, they need to “provide more capital” into the banks! As he repeats this, I keep thinking "from where?" Well, we all know where, thin air is where. Note that he also plays the other side by condoning austerity (less spending, less debt).

Then the very next segment on the show is Karen Finerman, president of Metropolitan Capital, pumping equities as the only place to be. Of course the CNBS “girls” fall all over themselves after this mindless and one sided interview:

Damn, that was enough to make me want to go put some lipstick on my pig. That’s the most television I can stand for one month, I relearn this lesson every single time I make the mistake of turning it on.

So, what about bonds, are they done? Well, the TNX was moving towards lower rates today against the rising equity market! It descended right to a new Head & Shoulder’s neckline. If that neckline breaks, the ten year will be targeting approximately 2.075%:

Can rates climb from here? Yes they can, but they can also go lower first. Longer term, they need to indeed rise, but doing so before the debt saturated condition is cleared will prove to be lethal for the economy.

Speaking of lethal for the economy, Doug Short made up the chart I suggested the other day placing the Consumer Metric’s Growth Index against the SPX. Their index is making new lows below the lows of ’08, and as I mentioned is producing quite the divergence between it and equity price.

Overall I remain unimpressed by anything other than abject stupidity. I remind those who wish to gamble everyday in the market that attempting to front-run turns is simply not a good idea. This market is going to suck in as much as it possibly can and it is going to make people look as foolish as possible in the end. The central debt pushers have little room left to maneuver. They have forced interest rates almost as low as they can go, and now they are pushing down on the dollar while the cost of real things act as a tax on consumers. Paper fluff is not real, and it can and will vanish just as easily as it was engineered into being.

If the debt pushers choose to push confidence over the edge, we’ll know it, but a POMO induced 1160 on the SPX just isn’t it. What would tip me over the edge? A breakout above the April highs and a breakdown of the dollar convincingly below 71 – that would do it. Until then I’m keeping my cool. I have that luxury as I have no stake currently in the market. If you do, you may be experiencing one or more of the following stages of grief:

Size Does Matter...

Chart says it all... click for a larger view.

Morning Update/ Market Thread 10/5

Good Morning,

Equity futures are playing ping-pong in between support and resistance… the dollar is tumbling, bonds are lower, oil is flying high above $82 a barrel, and gold is zooming now well above $1,330 an ounce.

One trend is clear, rises in our equities occur at night in the futures when most real people are asleep, these leave gaps in the charts. Sell-offs occur during the day and most of those gaps are filled. This trend is yet another marker of intervention, of a completely trumped up market. This morning’s run is completely artificial looking, moving basically straight up on no news or economic releases. It appears to be triggered by currency manipulation which bleeds over into other markets.

This is a major problem for the economy. In the race/ “war” to competitively devalue currencies the world over, not just one country but almost all are pumping in hot “money” (debt based) like crazy into a world already saturated with debt. How has that worked out for Japan? Despite this strategy being an obvious abject failure, Japan yet again intervenes into the market overnight, this time literally lowering rates to ZERO (already was close) while pumping further hot money into the market in an attempt to force the value of the Yen lower. This IS the definition of insanity according to Einstein. Take a look at the last two evening’s attempts… spike higher on the chart is lower Yen:

Each attempt literally costs the Japanese people trillions now. Each attempt now has an attention span the equal of an ADHD adolescent whose Ritalin was replaced with corn syrup. What they don’t understand is that they never should have went down that road in the first place because once you create artificially low interest rates, they also created a massive carry trade (distortion) and now they are paying the price as that carry trade they created is unwinding. They cannot stop it, and attempts to do so only rob the people of Japan (and the world) of their purchasing power. The Yen is therefore TOAST, as in it will be the first currency of the “modern” world to fail. The U.S., and the rest of the world, is now on a similarly psychotic path.

None of this hot money, currency destroying, pumping makes it into the hands of the people. Instead, those who touch it first (the speculating banks) use the money to pump up whatever they can. Right now it’s oil. Oil over $80 a barrel will crush our economy. Should food prices soar, then the placated masses may not stay placated.

And the beat goes on.

Meanwhile “rogue” French trader Jerome Kerviel gets sentenced to 3 years in jail and is fined $6.75 BILLION (U.S.) by a French Judge who found him guilty on all counts! This is typical of a corrupt and unjust judicial system. There is simply NO WAY he operated all alone with no one else’s knowledge or approval. He is simply just another scapegoat, a Patsy taking the fall for the banksters. His real crime, of course, is not having the sense to run away from a bunch of morally bankrupt narcissists who push debt upon the world and ruin what used to be at least somewhat free markets.

And in the real economy things just continue to deteriorate. “Foreclosuregate” is going to be a HUGE blow to the economy moving forward. I expect this to play out in a manner similar to how the subprime mortgage disaster did. It was simply the tip of the iceberg, once known the iceberg itself began to be exposed. The paperwork fraud that has been found related to foreclosures will be found in ALL mortgage paperwork going forward since it is the product not of the foreclosure process, but of the securitization of debt process. It will thus require a massive restructuring of the mortgage system, and will have to likely involve bailing out the banks via some sort of total refinance scheme. It’s coming, but the markets may have to tank some more in order to create enough pressure to blackmail our politicians once again. Again, it is the bankster’s problem and we will be coerced under pressure from our own monetary system to bail out the criminals who have been perpetrating fraud on a massive scale. Enron times a billion is an understatement.

The Service ISM is released at 10 Eastern this morning.

Volumes continue to be nonexistent as real people no longer participate in the fraud we call a stock market. Yesterday's selling, with only 77% down volume, started out strong, but in the end did not appear to be an impulsive start to wave 3 down. So far it appears to be yet another trip down within the same old trading range.

As I look across the charts this morning I see that everything is going up simultaneously… that is except for the dollar. I also see that the Euro is zooming higher, clearly they are losing the war to devalue. How high will they let the Euro run before they are forced to take action? These economic wars should not be taken lightly – they affect real people and real lives. They are the precursor to those “other events” some of which we’re already seeing, like tariffs. Use your imagination and combine it with your knowledge of history to see where this is leading.

Monday, October 4, 2010

Morning Update/ Market Thread 10/4

Good Morning,

Equity futures are lower this morning, but since it is a Monday, you have to ask yourself when staring straight down the barrel of a POMO loaded HFT if you feel lucky… well do ya? Punk! The dollar is up, bonds were up but have turned down, oil is down, and gold is down after hitting $1322 an ounce which can be considered fulfilling the bullish target from quite some time ago.

Yesterday evening the Yen had a great big move that looks like intervention in another attempt to weaken it… it lasted, oh, about a couple of hours and is now completely gone. Wonder how much that cost them?

Could gold be nearing a short term top? There’s a headline on CNN that says, “Catch Gold Fever – Buy an ETF.” You decide. There’s an accompanying article singing the praises of buying gold ETFs, a planted article by the industry I’m sure. For those who don’t have marketing experience, you should be aware that it is very common practice for companies to hire marketing firms that get stories implanted in publications. Thus nearly everything you read in the mainstream is actually marketing of some type – otherwise known as spin.

Speaking of spin, why do you suppose there was all of this terror travel news this weekend? “If only you knew what we knew, you’d be scarred, very scarred!” LOL, what a bunch of malarkey! This is how they justify their existence and the continued feeding of the military industrial complex. It’s the same thing that occurred when they were trying to force me and everyone else in the military to shoot up with anthrax. Lies, and more lies, with money buying officials in the background.

Not to worry, they’ll keep never ending growth from ending… Ahhh, oops! Take a close look at Consumer Metric’s latest chart of growth the way they track it compared to reported GDP! That blue line is now more negative than it was at the height of the crisis in ’08! Note how the GDP reports trail. Note the huge divergence in the direction of “growth” of this blue line compared to the stock market:

Many of the divergences now, like bonds, are larger than they were prior to the collapse in ’08. No, a trillion dollars now is not going to do anything besides make matters worse and more complicated. Note how the media is failing to pick up and report on the debacle in foreclosure paperwork. This is obviously industry wide and it is a huge deal. What’s more is that you have ask yourself was it limited to only foreclosure paperwork? I highly doubt it!

Looking forward, I would expect that this will trigger some sort of blanket mortgage refi program that will really be just another bank bailout in disguise. Is the populace being set up for that now? Look at how it’s presented in the mainstream once it starts, that’ll be the tell. The truth, of course, is that the fraud is rampant and the banks are insolvent regardless. Enron times a million is an understatement.

Factory Orders and Pending Home Sales will be released at 10 Eastern this morning. The important data this week will be Employment centered with the Employment Situation report for September coming on Friday. Expectations are for a rise from 9.6% to 9.7%, and I’ve seen 77,000 private payrolls tossed about. I think this report disappoints due to it being a seasonally small death/birth adjustment month.

Soft commodities have turned lower, below is a daily chart of the price of corn, you can see that the uptrend is clearly broken, that is true for most of the soft commodities as it’s completely obvious that the momo POMO hot money has simply rotated over to ramp oil which is now pressing $82 a barrel – nice job of destroying an economy there Fed – btw, if I hear the phrase “don’t fight the Fed” one more time I’m going to barf up some corn based products:

We never did get a resolution to last week’s small change in the McClelland Oscillator, thus we can still expect a large directional move.

Friday’s VIX candle was another inverted hammer – these have been pretty consistent at indicating a turn up the wick, let’s see what follows this one:

Meanwhile we’re still in the range between 1130 and 1150… the spring is coiled, you can feel it, it’s been too long, the spin too great. Speaking of spin, something about to snap, and things that are corny…