Saturday, July 2, 2011

Weekend Open Thread...

Happy 4th of July Everyone!

...Now, if we just could remember the principles upon which freedom is based.

Friday, July 1, 2011

Morning Update/ Market Thread 7/1

Good Morning,

Equity futures are creeping higher again this morning as we launch into a new quarter and new month. The dollar is higher, bonds are higher, oil is lower, gold & silver are making sizable corrections lower, and most food commodities are sharply lower as well.

Confused over the possibility of a significant decline in Quantitative Easing, all whilst massive money printing is still ongoing, the dollar has etched out a triangle as has the schizoid Euro. Below are daily charts of the dollar on the left and euro on the right. The euro ran into resistance at the same time the dollar hit support within that triangle, and thus for the equity trend to continue we need the currencies to bust out of, and run, from those triangles:

Of course “injecting” another $124 Billion into Greece will work out peachy, just like the last iteration of print money from nothing, take real assets and productive people’s efforts, robbery. I’d say that it will work out the same as last time, but that’s not the way debt works, it will work out worse than last time because the effects are cumulative, just like the nuclear hot particles we are all consuming.

Speaking of hot particles, if you haven’t heard Arnie Gunderson’s latest interview yet, you should. It’s an hour long, but worth it: Arnie Gunderson Interview

Motor Vehicle Sales are reported throughout the day today, “Consumer” Sentiment, Construction Spending, and the Manufacturing ISM will all be released at 10 Eastern this morning. Of course we’ll report on these inside of today’s daily thread.

M2 money supply was reported yesterday as gaining $30 Billion in the week, this is up tremendously from the previous week’s $11.7 billion (which is still a ton).

Looking at the money supply charts, the St. Louis “Fed” is actually doing a better job of breaking out the component money supply parts. They are also finally including explanations about how they calculate each chart. I noticed that they broke out Small Time Deposits and that when they do, it produces an M2 Minus chart that clearly shows the parabola nature of the “Fed’s” Ponzi debt backed money:

All parabolas eventually collapse, this one will be no different.

According to the “Fed,” “The small-denomination time deposits component of M2 includes time deposits at banks and thrifts with balances less than $100,000.” That would be pretty much everyone in the middle-class and lower, right? So, let’s take a look at just the Small Time Deposits component of M2:

Straight up, then straight down. Note that the straight down part is still ongoing. I think that says a ton about the winners and the losers of “Quantitative Easing,” and about corporate capture of government in general. Ehhh, be quite, swallow a few more hot particles, and get back to “producing,” whatever that means in America these days (I think it’s going to mean taking care of a lot of cancer patients about a decade from now).

Just as a refresher, here’s the current Base Money chart:

And here’s the hot money effect on the M1 Multiplier which is setting new lows:

This latest rally is one to be careful of in my opinion. The market is already very overbought with the major indices all now above their 50dma’s, but also well above their upper Bollinger Bands. Of course the difference between now and just a week ago is nothing but more debt for Greece, and I can thus guarantee that we’ll be revisiting the debt issues again shortly, as in very shortly. Note that the time intervals between debt driven events are growing shorter and shorter, the result of exponential impossible math.

Below is a daily chart of the NDX on the left and Russell 2000 on the right. Both have formed pretty clear Head & Shoulder’s patterns, the right shoulder is now formed and thus I would not be surprised by a turn back down to the neckline soon. Of course exceeding the top of the Head would nullify this pattern, but there it is:

Thursday, June 30, 2011

Morning Update/ Market Thread 6/30

Good Morning,

Equity futures are slightly higher again this morning, the dollar is lower but bouncing, bonds are lower, oil is flat around $95, gold is slightly higher, silver is flat, and food commodities are mixed.

Of course the notion that Greece was “bailed out” is just a twisted euphemism for being stuck with even more impossible debt. That tragedy is far from over, in fact it was only made worse.

The bounce in our markets is already running into resistance. The VIX went down and touched the lower Bollinger band yesterday while the major averages all slammed into their upper Bollingers, none have broken the downtrend as of yet. Below is a daily chart of the DOW showing it up against the upper Bollinger, up against down slopping resistance, and just below the now down slopping 50dma:

The XLF gapped higher yesterday and closed above the upper Bollinger. Phony money galore, I hope they enjoy the little pop while they can, today is supposed to be the last of the $600 Billion QE2, however, when looking at the POMO schedule we find that today’s POMO operation is NOT the last, that they have operations scheduled on July the 6th and 11th, and a statement that a new POMO schedule will be posted on July 13th. So, there you have the end of QE2, and the unnamed beginning of QE3 with no end of the market manipulation whatsoever. Sold to them.

Meanwhile debt saturated Americans continue to wallow in low employment. Weekly Jobless Claims came in at 428,000 which is much higher than the consensus looking for 420k. Here’s Econohope:
No worse but only little better is the indication for the June employment report based on initial jobless claims which edged only 1,000 lower in the June 25 week to 428,000. A look at the four-week average, up 500 in the week to 426,750, shows no change from the May 28 week. But this month-to-month comparison of the four-week average does show improvement through the month, including an important 14,000 improvement in the household-survey sample week of June 18 vs May 14 (426,250 vs 440,250).

Continuing claims have also been improving slightly from a month ago, down 12,000 in data for the June 18 week to 3.702 million to bring the unemployment rate for insured workers down one tenth to 2.9 percent.

The Labor Department cites no special factors skewing the data. There's no significant initial market reaction to today's report.

While Americans may not have figured it out yet, the Greeks have – and the violence continues. Public workers in Britain are now also taking to the streets as the criminal “upper” class is robbing their retirement plans. There are clearly two sets of laws in the world at this juncture in history, those that apply to the money changers, and those that apply to everyone else. Look for more rioting here in America as the impossible math expresses itself more fully in the near future.

The Chicago PMI will be out shortly, that should be interesting and we’ll report it (almost) live right here, inside of our Daily Market Thread.

Wednesday, June 29, 2011

Morning Update/ Market Thread 6/29

Good Morning,

Equity futures are higher again this morning, the reason du jour being the Greek Parliament’s passing of yet another phony “bailout.” As if dumping oceans of debt on someone bails them out. As if “restructuring” bonds into permanent fixtures that never ever retire is some sort of cure. As if forcing the populace to pay higher taxes to the wealthy class actually moves an economy forward. Of course the people are rioting, they recognize a stick-up when they see one, and they know who the victims are. In the U.S. we remain oblivious to reality as we are placated with endless tripe from those who stole the ability to produce our money. So the dollar goes down some more, bonds sink a little lower, oil rises a little higher, gold & silver continue to climb, and food commodities rise on the hope the dopes can keep their robbery in motion a little longer. We’ll be revisiting this Greek tragedy soon enough.

News flash for ya – there is only one real way to bail Greece out, and that’s through the process of default. Default eliminates their debt saturated condition and nothing else will except debt forgiveness which is exactly the same thing, with exactly the same results. The U.S., of course, is in a FAR deeper hole than all the PIIGS but again we don’t acknowledge reality because we are baffled with phony debt to GDP boloney that doesn’t consider the “Fed’s” balance sheet, our off balance sheet debt, nor any of our future financial obligations. If you or I used that type of accounting we’d be in prison. Do the math, and our true debt compared to our income – the only measurement that really matters – and you will find that there is no place on earth like America. It’s nice to be temporarily unaware, what a luxury to be the world’s purveyor of fraud.

Speaking of fraudsters, the hypocritical Mortgage Banker’s Association says that their Purchase Index fell another 3.0% last week – nice of them to invent a number that doesn’t move 20% or 30% in one week, maybe they are reading here that we don’t really believe that kind of action? Here’s Econospin speechless over the fact that interest rates fell and yet refinancing activity also fell:
Mortgage applications for home purchases extended their June decline, falling 3.0 percent in the June 24 week in results that point to weakness for the month's home sales. Applications for refinancing fell 2.6 percent, but unlike purchase applications, have been trending higher most of the month. Mortgage rates fell significantly in the week, down 11 basis points for 30-year loans to an average 4.46 percent.

Pending Home Sales are released at 10 Eastern this morning and will be reported inside of our Daily Thread.

Yesterday, “Consumer” Confidence was reported lower again, and for once the State Street Investor Confidence report was also lower. Yet the markets continued to bounce on the supposed Greek bailout as if the world was all going to pretend for awhile longer that such a farce was actually possible.

The Gulf oil disaster long forgotten, the fact that we have Fukushima followed by four nuclear plants threatened in the United States and it is garnering no change of policy in the United States is going to be a far greater tragedy than anything produced in Greece. We have pushed the energy envelope far beyond our understanding of nature, but it is our lack of acknowledging that fact when confronted head on that is truly stunning.

As of now the downtrend is still intact, however the markets did manage to get above key overhead resistance yesterday. Below is a daily chart of the DOW, a break above that trendline, now about 12,300, would mean that an uptrend has replaced the downtrend since May:

Remember, that the end of month, beginning of month window dressing is occurring and there are a lot of changes coming in July, such as the end of open POMO. The fireworks around that time should be interesting to watch.

Tuesday, June 28, 2011

Morning Update/ Market Thread 6/28

Good Morning,

Equity futures are continuing to rise during this last week of the month, and last week of scheduled POMOs to the tune, as Carl Sagan would say, “billions and billions.” Unfortunately, with these billions it’s the inverse chance of finding intelligent life. The dollar is down, bonds are down, oil is up, gold & silver are up, and food commodities are mixed.

Yesterday the dollar tried to push through overhead resistance, but that down slopping upper trend line of the descending wedge turned it around once again:

My suspicion is that this wedge will break to the upside once we’re past the end of the month. However, do not rule out the possibility that the “Fed” is still going to be stealthily buying with both hands to keep the façade from falling over. The current façade is built upon nothing but printing and fraudulent accounting. The one supposed bright spot is earnings, but earnings are trumped mark-to-fantasy earnings, just one of many “modern” accounting shenanigans.

This morning April Case-Shiller data was released with the 10 city index coming in positive for the first time in 8 months, up .8% unadjusted. Remember, this data is old, it is for April which is the beginning of spring and thus you expect strength. When seasonally adjusted, this data was flat, 0.0%. Of course any number that is even slightly positive, even if completely weak on a historical basis, gives the shills something to base their latest bottom calls upon. Of course anyone with an ounce of patience and common sense will be far more patient than that – not Econoshill:
Indications are building that home prices are beginning to recover, the latest is Case-Shiller data for April that show no change in its adjusted composite index of 10 major metropolitan areas. Case-Shiller data are three-month moving averages which indicate actual gains for April given contraction in prior months. There's still a lot of cities showing negatives but many areas out West, where some of the heaviest of the price contraction hit, are now moving into positive ground including LA and San Francisco. Year-on-year, however, the contraction is deepening, to minus 3.1 percent though this reading is compared against stimulus-boosted sales a year ago.

Unadjusted readings are very positive though seasonality plays a big part in the housing market which benefits from warm weather. The unadjusted composite 10 index is up 0.8 percent in the month though the year-on-year rate remains negative at minus 3.1 percent (the same reading as the adjusted rate).

Today's report falls in line with recent price indications in both the existing and new home sales reports. Housing data tomorrow will be highlighted by pending home sales which the National Association of Realtors has already promised will be very strong.

Below is the entire Case-Shiller report, it’s a much more balanced read than Econoday, however even they inject their hopeful bias, despite pesky facts like having 6 of the 20 cities they track hit new index lows:

Case Shiller April

No, the home price adjustment is not over. However, a big chunk of it is, and as I’ve pointed out we are nearing the peak of Option-Arm resets and that will continue to pressure prices for at least another year – once that anchor is removed from the market it will at least stand a chance.

Yesterday the Dallas “Fed” Survey plunged to a negative 17.5 reading from the prior negative 7.4. Of course this was unexpected and was hardly mentioned in the business press. When you combine the negative manufacturing data of the past couple of months, you wind up with the most negative situation since 2008, which was formerly the most negative of modern records… well, we just beat that according to this chart compiled by Zero Hedge which shows the combined two month change:

“Consumer” Confidence is released at 10 Eastern – the sun is out, the irradiated birds are singing, nothing but blue skies…

Monday, June 27, 2011

Morning Update/ Market Thread 6/27

Good Morning,

Equity futures are slightly higher this morning with the dollar poking through, but then retreating from the top of the descending wedge it’s been testing. Bonds are flat, oil is lower ($90 range), gold & silver are lower with gold sitting on the $1,500 mark (up slopping support $1,410ish), and most food commodities are lower with corn gapping significantly lower.

Commodities continue to correct with, I think, the perception that QE is about to go away. That perception is not exactly correct, as I pointed out that in the last FOMC minutes they reiterated that they would continue to “reinvest bond principle,” which is just another way of stating that they would continue to print, but not quite as much as before. “Reinvesting bond principle” is a deceptive trick designed to lead you to believe that it’s just a roll-over operation… but that is certainly not true. Normally debt that matures simply goes away, it is retired. Not retiring debt that has matured is exactly the same thing as just creating money from nothing – again, it is just money printing, to use what is now quaint terminology.

Bloomberg actually picked up on this, but of course is not calling it printing as they are nothing but front men for the private “Fed.” Still, there are grains of truth here that should be understood:
Fed May Buy $300 Billion in Treasuries After QE2

The Federal Reserve will remain the biggest buyer of Treasuries, even after the second round of quantitative easing ends this week, as the central bank uses its $2.86 trillion balance sheet to keep interest rates low.

While the $600 billion purchase program, known as QE2, winds down, the Fed said June 22 that it will continue to buy Treasuries with proceeds from the maturing debt it currently owns. That could mean purchases of as much as $300 billion of government debt over the next 12 months without adding money to the financial system.

The central bank, which injected $2.3 trillion into the financial system after the collapse of Lehman Brothers Holdings Inc. in September 2008, will continue buying Treasuries to keep market rates down as the economy slows. The purchases are supporting demand at bond auctions while President Barack Obama and Republicans in Congress struggle to close the gap between federal spending and income by between $2 trillion and $4 trillion.

“I don’t think the Fed wants to remove accommodation in any way, shape or form,” said Matt Toms, the head of U.S. public fixed-income investments at Atlanta-based ING Investment Management, which oversees more than $500 billion. “It’s quite natural for them to reinvest cash,” he said. “That effectively maintains the accommodative stance.”

Still, this is significantly less accommodation than the continual growth in balance sheet debt that has been occurring. I don’t think they can just let the status quo be, they must continue to grow the numbers or the forces of deflation will quickly take over – you can already see that in commodities and especially in the financials where the rotting insolvency continues to fester.

That rot is clearly seen in the charts. Below is the XLF which on Friday produced a “Death Cross” with the 50dma crossing below the 200dma. Not only that, but the upper Bollinger band is in the same location as the cross – that will provide serious overhead on the next rally attempt:

The $BKX Index is even worse, it produced a Death Cross about a week ago. Both of these crosses have largely gone unnoticed, but have significant implications for the broad market:

The disconnect between warning signs like those and the pumping in the mainstream has never been bigger. CNN published an article with a chart (I won’t show) projecting future stock price possibilities that were higher, way higher, and only slightly lower – of course completely ignoring where stocks would be if even a small portion of the graft were removed. And on Bloomberg it’s all about “analysts” moving their revenue projections up next year, as if never ending growth will never end. Of course the weight of exponential math ensures that it will end.

The Economic Calendar is fairly light this week with Consumer Confidence tomorrow, the Manufacturing ISM and Construction Spending on Friday. I’m sure that falling oil prices may boost Confidence which is exactly the ploy in releasing oil from the strategic reserves – purely political, but there are many potential consequences to irrational actions like this. Zero Hedge did a piece on those potential consequences, it’s worth a read: As The IEA-OPEC Nash Equilibrium Collapses, Is A 1973-Style OPEC Embargo Next?

Personal Income and Outlays were reported this morning and it was softer than expected pretty much all the way around. Incomes supposedly grew .3% in May, but that was below consensus and April’s number was also revised lower. Of course prices were higher against Consumer Spending that was 0.0, flat, month to month despite all the money debasing, which shows you how quickly deflationary forces can move back in – still, it’s only one month’s number and year over year is still up, but is decelerating from the prior month. Again, these numbers are in no way “real,” as measuring in a devalued currency produces apparent growth, not real growth. And when you monkey with the statistics, you have little real information to go on – thus $1,500 for gold doesn’t seem like such a stretch, does it? Here’s Econospin on the numbers:
In May, income growth was moderate but spending was flat largely on a dip in auto sales with gasoline appearing to also weigh down. Inflation news is mixed. Personal income in May rose 0.3 percent, matching the gain the month before. The latest figure came in lower than analysts' expectation for a 0.4 percent advance. Wages & salaries increased a modest percent, following a rise of 0.4 percent in April. This component was softened by no change in the government subcomponent.

Personal spending weakened in May, posting at no change, following a 0.3 percent boost the prior month. The median market forecast called for no change. By components, durables dropped 1.5 percent after no change in April. Nondurables dipped 0.3 percent, following a 0.2 percent rise the month before. Services gained 0.2 percent, following a 0.1 percent slip in April. Within PCEs, the drop in durables likely was related to shortages of autos dependent upon Japanese parts. The nondurables dip probably was due in large part to a decline in gasoline prices.

On the inflation front, the headline PCE price index eased to a 0.2 percent rise from 0.3 percent in April. However, the core rate edged up to 0.3 percent from 0.2 percent in April. The consensus projected a 0.2 percent rise for the core for the latest month.

On a year-ago basis, headline PCE inflation rose to 2.5 percent from 2.2 percent in April. Core PCE price inflation firmed to 1.2 percent on a year-ago basis from 1.1 percent in April.

Year on year, personal income growth for May printed at 4.2 percent, compared to 4.4 percent the month before. PCEs growth rose a year-ago 4.7 percent, down from 4.8 percent the prior month.

Today's personal income report adds to the "soft patch" scenario. Income is still growing but not at a strong enough pace for the latest month. And spending is flat. However, there are arguments that the softness is transitory. Improvement in employment would boost income. An easing of supply disruptions in the auto sector will likely lead a rise in durables spending. However, nondurables will likely weighed down by additional near-term declines in gasoline prices.

Waves of inflation and deflation as the deflationary forces of debt saturation fight against a determined private group of narcissist bankers hell bent on creating inflation to keep their Ferraris out of the repossessor’s hands.