Tuesday, June 21, 2011

Morning Update/ Market Thread 6/21 - Clunk, clink, clunk goes the can Edition…

Good Morning,

Equity futures are continuing higher this morning following Friday’s VIX market buy signal – a short term signal. The dollar is down, bonds are flat, oil is higher, gold & silver are higher, and food commodities are also higher.

Note how the market has a somewhat self-regulating feature in that commodities zoom with the hot money stimulus and eventually work to cap profits. This definitely robs the people of their discretionary money. We keep waiting for the bond market to discipline the equity market, but with the “Fed” buying up bonds that discipline is being enforced in other ways… eventually. We hit a high, pulled back, and now may be starting another run… will it continue? Tough to tell, but for it to continue over a longer duration it will need more fuel or it will peter out.

You can see how the dollar impacted this move if you look at how it came right to the top of the upper downtrend line and then turned back down off it. Again, when it breaks this range we’ll have a better idea of what the next wave is going to look like:

Take a look at how the VIX responded following the return to inside of the Bollinger band range:

The Russell 2000 still looks like a Head & Shoulder’s top to me, we may be bouncing off the neckline now to form a right shoulder:

The NDX may also be building a similar pattern.

Underpinning the fundamentals, of course, is macroeconomic debt saturation. It’s everywhere and it’s exactly what’s plaguing Greece and really all of Europe as well (and most of the world as well). This is producing symptoms of stress that you can see everywhere. The stress pops up here, then pops up there, and the “Fed” and their IMF and other central bank cronies go around trying to put out the brush fires while simultaneously keeping their failing scheme in motion. The latest stress is really in the credit markets again where interbank lending occurs. This can be seen in the SHIBOR rates. Below is a weekly chart of SHIBOR, you can see the stress building, and it’s building quickly:

Existing Home Sales are released at 10 Eastern today, we’ll cover it inside the Daily Thread. Tomorrow is FOMC manipulate you day.

Speaking of existing homes and brush fires… the HUD is implementing a $1 billion program today to help distressed homeowners who have taken a hit to their income in certain states – Washington state is one. They are offering no interest loans up to $50k… get yours today! Seriously, if you are in distress, you should look into it, here’s a link to an article describing it: $1 Billion in Homeowner Aid Offered

Of course that program is just another sad Band-Aid that in reality is just another back door bailout of the banks designed to keep liquidity flowing through them for a little while longer, all the while preventing what needs to happen from really happening. Clunk, clink, clunk goes the can…