Better Retail Sales and Consumer Sentiment data helped bulls push equity prices higher today. The dollar continued its climb while commodities (energy and gold) and bonds fell. The ongoing “dollar carry trade” seems at risk but that didn’t seem to bother bulls in the short-term.
Volume is hitting holiday-like lows which help bulls manage a positive day easily. Breadth was mostly positive.
If you have been short the stock market for the last month or so you have gone nowhere with your investments. If you have been long the stock market for this same period your results have been the same. If you have been in cash, you have done as well or better than most of those invested in either long or short positions.
However, if you have been long gold you are really starting to hurt. As the dollar has hammered out a bottom and broke above both trend line support and trend line resistance, creating a minor dollar breakout, gold bugs have been hammered.
The recent high for the dollar was set today, at 76.74, up from the recent low of 74.21, set on November 26th. The dollar has retraced clear back to the lows set on September 11th. During the last seven days gold has dropped from a high of 1226, set on December 3rd to a recent low of 1111, set today … a painful 9.4% drop in only seven trading days. The only bright spot today was that gold closed above today’s low, though not much.
We continue to see defensive sector rotations. Those sectors which traditionally are strong during a bullish trend have performed poorly over the last two months and those sectors which are traditionally weak during bullish trends have reversed course and are now doing much better during the same two months – a clear indication of defensive rotation in equities.
John Murphy of StockCharts.com illustrates this rotation well. Check out his chart:
Although the stock market remains stuck in a short-term trading range, a more cautious tone has been revealed by sector rotations beneath the surface. Over the last month, for example, the two top market sectors have been utitilities and healthcare which are traditionally defensive groups. The two weakest sectors have been financials and energy. Chart 1 shows relative strength ratios of those four groups since the start of July plotted around the S&P 500 (flat black line).
Two of the things I always look for in sector work are absolute and relative strength. Absolute strength refers to a strong chart pattern. Relative strength refers to the group's performance versus the S&P 500. Charts 2 and 3 show strong absolute performance in the Utilities (XLU) and Health Care (XLV) SPDRS. Both charts show strong chart patterns. The XLV (Chart 3) has been hitting new-52-week highs. The XLU (Chart 2) has just broken out of a big basing pattern. What's especially noteworthy, however, is the recent upturn in their relative strength ratio (solid lines). Both ratios have recently broken down trendlines in place since March when the stock market bottomed. The last time the ratios turned up was the autumn of 2008 as the market was selling off. Investors usually turn to defensive stocks when they think the market is in danger of dropping or has rallied too far and is looking over-extended.
John Murphy, StockCharts.com
To give you an idea of the malaise recently seen in the stock market take a look at the S&P 500:
Notice the shaded area, where the S&P 500 has traded in a very narrow range for more than a month. While the bullish among you might say that this is clearly a bullish flag, suggesting that a breakout rally is short around the corner, there are just too many warning signs right now (like the defensive rotation discussed above and technical bearish divergences.)
What I think is happening is that the large intervention players (read Goldman Sachs, JP Morgan … the too-big-to-fail banks doing massive insider account trading this year) are milking the public for what it’s worth.
These large institutions have controlled 50% or more of the total NYSE volume this year. It is not much of a stretch to imagine them taking advantage of the individual investors and small money managers by pushing the futures market either up or down during the night and then trading equities in the opposite direction during the following day.
We have seen this kind of manipulation a lot during the last month, where the market moves strongly to the upside at the open and then sells off the rest of the day – or the market moves strongly to the downside at the open and then rallies for the rest of the day.
As this scenario is repeated again and again, these volume traders are effectively transferring more and more shares out of their hands into the hands of some other unsuspecting soul.
There may yet be a final push near the end of the year to mark as high a YTD figure as they can (to offset the terrible YTD results of 2008). But know that if it happens it is likely going to be a final manipulated rally that will likely collapse in the first month of the New Year.
There are just too many bearish divergences and evidence of defensive rotation to be comfortable fully embracing the bulls right now.
Be patient and cautious here. At what appears to be a topping pattern we will either see better entry on a pull back or the bulls will be forced to prove that this rally can indeed break out of the topping pattern and be sustained to the point that all these divergences begin to disappear.
That’s it for today’s little light volume exercise. Next week is another Fed meeting with an announcement Wednesday. Let’s see if they stick to their guns or give markets a holiday present. Then on Friday we get quadruple witching again as the Street shuts down for the holidays at least in terms of volume.
In between those events we’ll have other data to digest but those two events should take center stage.
We are stopped out of our UCO/USO trade and so should you if you took that trade. Oil and gold are selling off against a strengthening dollar. We expect this to continue for an extended period of time. Read my update for details.
The market headed down out of the gate this morning following Asia and Europe and mixed-in with Dubai worries; country credit rating downgrades; and, a strengthening dollar which weakens the “dollar carry trade”. But then the president made a curious speech stating among other things, “We must spend our way out of” this recession. Since this White House, like so many others before, read poll data and with the public very much against more spending and higher deficits, it made no political sense and perhaps exacerbated further selling today. And yes, that’s just a guess; but, the 2:15 Buy Program Express didn’t make it out of the station today.
Before the open this morning, came a bullish prediction from GS: “The S&P 500 may rally a further 13 percent to 1,250 by the end of next year as interest rates remain low, revenue grows and investors pour money into U.S. stocks. Continued profit margin resiliency from prior aggressive cost reductions should drive strong returns in early 2010 and push the S&P 500 towards 1,300. Equity investors will begin to rush for the proverbial exit ahead of what consensus believes will be the start of an interest rate tightening cycle.”
So, the rally we’ve seen is based on financial engineering but not job growth or real production gains. At least that’s what one can infer from the prophets on high at GS as they continue “God’s work”.
Volume was heavier than yesterday which isn’t saying much while breadth was highly negative.
DOLLAR VS COMMODITIES
The US dollar has begun to firm over the last few days and for the first time in quite a while is now trading “above” its 50-day moving average.
Notice that the dollar is beginning to break out above some key resistance levels (light colored blue lines). I am not comfortable at all in declaring the beginning of a new uptrend in the dollar, but even this small rising dollar event is having a noticeable effect on the commodity laden S&P 500 index, which looks to be forming a topping pattern.
Any strength in the dollar means weakness in the commodities. Crude oil prices peaked at $82.50 with oil now trading at $72.76 on the nearest futures contract. Gold has corrected $53 since the dollar has strengthened over the last week.
As you can see from this monthly chart of crude oil prices, oil has been unable to penetrate above its monthly middle Bollinger Band line and is now forming what also looks like a topping pattern.
I am glad to see this, though, as crude oil prices above $80 a barrel is ruinous to our economy and will offset any stimulus efforts and will only cause more troubles for the banking industry, more mortgage defaults and stress on corporations.
So far Gold has suffered a minor correction, but does this correction have more downside?
As you can see from this chart, the 14-day RSI values had reached into 80%, an extreme overbought condition. At a minimum, a test of the weekly middle Bollinger Band lines at 1041 is likely, which is about $100 an ounce lower. The weekly stochastics are just starting on the downside, so gold buying on dips is not recommended until the intermediate cycle has fully discounted current gold prices.
As I have repeatedly stated, there is a huge short position on the dollar from all parts of the world and among all levels of investors. These short dollar positions have done well for them in 2009 and if these short dollar gains are threatened, then expect to see big short covering spikes in the dollar – and consequent selling in commodities and equities.
Time for continued caution here – don’t buy the dips on this sell off yet.
A weak day as Dubai’s problems resurface and the dollar rallied accordingly. This challenges the previous cozy “dollar carry trade” where commodities and higher beta EMs prospered. Perhaps it’s just a temporary correction in that trend especially coming at this year-end period where traders hope to close their books and go on holiday.
Again, there’s not much economic data until Thursday and Friday. Until then we’ll get more jawboning from the Fed, Treasury and, I guess, the WH.
The news you had to know was coming just came. The central bank of the United Arab Emirates just announced that it was going to bail out Dubia World.
If you were paying any attention to the stock market last week then you know that the announcment by Dubia World, a state owned holding company with $59 billion in debt that it was looking for creditors to give it a six month free window on paying interest sent shock waves through the world markets and brought bears out everywhere.
Many people saw it as the start of a huge correction. Some CNBC talking heads were calling for a collapse.
But I actually think there is nothing to fear and we should use the Friday morning weakness to increase long positions.
What the bears are missing is that tops don't happen in an instant or on one news event. They are a process that takes time to unfold. And many of the things needed to be able to say we are at a stock market top simply aren't there yet.
Until they come you have to go with the trend of the market - which is up. And will probably accelerate to the upside from now until the end of the year.
Ignore the doubters! Don't get shaken out because of some worry wart on CNBC.
Dave Skarica of Addicted To Profits wrote a great report showing you the things to look for in order to spot a market top. In his report he even goes over the past major tops in the stock market so you can use them as a road map for right now. I recommend you read it by clicking here.
Throughout Thanksgiving weekend, I kept on thinking about what other implication will the Dubai default have on the financial market around the world. Dubai is out of money because they spent their way to prosperity. You know, just like Americans, what a shame too. Dubai is out of cash, and only 29 days left until Christmas. Maybe Goldman Sachs will float them a big fat Christmas loan.
US market was down over 200 pts just on the fear of Dubai going bankrupt over $60 billion. Now that may sound like a lot to most of you, but that number is only 1/3 of what we gave to AIG. If you look at Dubai on a map, they are a dot somewhere on the tip of Saudi Arabia. If a small nation can cause this type of fear in the market, think what will happen when some eastern European nations start defaulting on their debt(Greece...). Instead of seeing the DOW down 200, it will be down 2000 pts. This is the danger we traders are facing during this period of financial uncertainty.
Dubai doesn't want to pay back billions in debt. At least not for a while. Uh oh. Thing is, do they care? Who actually cares about banks? Anyone? Does anyone think, "Oh that nice bank. They need that money. I should pay them since they are so hospitable and so great." No. No one cares about banks. Especially central banks. So, possibly other countries will now follow suit and tell US creditors, "You know what? I don't really want to give you that money, so ummmmm stop calling me, ok?"
It was a very thin trading volume day ahead of Thanksgiving Day Holiday but the real news are the currency wars and the geopolitical battles that are occurring around the globe that most of us only get a glimpse of understanding after things are filtered out through the media.
We have a global war over the US dollar and its relationship with crude oil and it is causing tremendous problems. Trade wars are brewing as a result of what appears to be the US and many of the UN trading partners of the US who have been conspiring to drive the dollar lower.
Apparently unable to get concessions from China regarding its currency relationship with the US dollar, the dollar looks as though it is being used as a trade weapon, causing a huge asset bubble to develop specifically in China, as it happened before in Japan.
I don’t know if out of frustration whether Russia is furious at the US/UN currency wars and what this will do economically in the future, but Russian computer hackers broke into a British/UN global warning center and stole thousands of emails and documents and then made this information public.
What it shows is the global warming data appears to be a massive UN-funded fraud.
This is a huge event and its implications are criminal and far reaching.
“ Russian computer hackers have published emails and source code from the UN-affiliated Climate Research Unit showing profound corruption, fraud, and criminal activity. What's really behind the Copenhagen treaty?
Check out the video interview:
Recently, Russian hackers published over 160mb of scientific emails and source code taken from the primary 'climate research unit' -- the University of East Anglia, which is the center of UN/IPCC-promoted global warming alarmism. What the emails and data prove is shocking, and may represent the greatest scandal in the history of science.
In the emails, these UN-funded scientists talk about deleting data under FOIA request, faking data for journals such as Nature, conspiring to keep opposing science out of peer-reviewed journals (which they controlled the editorial boards), using "tricks" to "hide the [cooling period]" etc.
A picture emerges of big science funded to the tune of billions of dollars for the purposes of an underlying international political agenda. The degree of collusion between big media, the UN, and corrupted scientists involved in frank criminal activity is deeply disturbing. As I have detailed before, the purpose here is a political one. Global warming, or now abstractly identified as 'climate change', has been chosen by international banks and think tanks as the method of induction of vast political and social engineering never before seen in the history of the world.
We see based on the activities of criminals representing themselves as 'climate scientists' that the politics came first, and the science came second. They were more than happy to represent the political interests of the UN and international banks -- as long as their lab was well-funded. But there are politics behind this indeed. Here is a small sample of the underlying political agenda: Billions in new taxes, International regulatory control under the UN, Goldman Sachs/CCX carbon trading, obliteration of national sovereignty, extreme forced austerity and reduction of the standard of living, deindustrialization of the First World countries, and implementation of Orwellian state policies for the purposes of "carbon tracking". The science does not matter -- the politics does.
Let us consider for a moment the cynical political objectives behind 'global warming' before we delve into the mountain of evidence thanks to the leaked emails and source code.
Global Warming and Orwellian State Policy
The Dutch government attempts to introduce GPS tracking units in everyone's cars under the pretext of 'climate change'.
THE HAGUE — The Dutch government said Friday it wants to introduce a "green" road tax by the kilometre from 2012 aimed at cutting carbon dioxide emissions by 10 percent and halving congestion.
"Each vehicle will be equipped with a GPS device that tracks how many kilometres are driven and when and where. This data will be then be sent to a collection agency that will send out the bill," the transport ministry said in a statement.
Global Warming and New Taxes
One of the primary political aspects of the global warming fraud is the imposition of a massive and bewildering array of new taxes. Obviously it is plain to see how this is in the interest of governments and banks, particularly if such taxes are imposed on an individual level.
Carbon Insurance For Your Car May Be Down The Road [Green Gas Taxes at Pumps] by Terry Tamminen (cnbc.com) - Nov. 13, 2009.
" A carbon insurance premium could easily be included in such a gas pump surcharge so drivers pay the true cost of operating their vehicles in terms of all relevant risks, including their fair share of creating both fender benders and climate change collisions."
Queensland’s flailing government has now made it a crime to sell your house without first doing a big green audit:
QUEENSLANDERS selling their homes will soon have to complete a 56-point questionnaire detailing the property’s environmental credentials
Global Warming and Forced Austerity
The UN has advocated funding global birth control initiatives [read: 'population security'] in order to 'reduce CO2 emissions'. Of course now we know the connection between CO2 and temperatures is based on fabricated data . . . So where does that leave such UN population initiatives?
UN says Birth control the most effective way of reducing greenhouse gas emissions [UN Wants More Abortions and Sterilizations to cut Co2] by Ben Webster (timesonline.co.uk) - Nov. 19, 2009.
The population control objectives of the global warming fraud do not end there. Andrew Revkin, an NYT correspondent identified in the leaked CRU emails exhibiting a very cozy relationship with the corrupt scientists, advocates restrictions on the number of children couples are permitted to have via the issuance of 'carbon credits'. This is similar to what was advocated by Obama's chief science advisor John Holdren in his book Ecoscience. There is a political agenda behind global warming.
" Should–probably the single-most concrete and substantive thing an American, young American, could do to lower our carbon footprint is not turning off the lights or driving a Prius, it’s having fewer kids, having fewer children,” said Revkin. “So should there be, eventually you get, should you get credit–If we’re going to become carbon-centric–for having a one-child family when you could have had two or three,” said Revkin.
The above is significant because Revkin is identified in the leaked emails corresponding with the corrupt Climate Research Unit (CRU) and has written many pro-global warming articles for the New York Times.
Global Warming and Systemic Financial Fraud
Where would we be in a Zerohedge article without mention of the fraudsters at Goldman Sachs. No doubt they are present in almost every evil or fraudulent enterprise known to man and global warming is no exception. Certainly these charlatans plan on making billions trading hallucinated carbon credits on Maurice Strong's Chicago Climate Exchange (CCX).
Al Gore's "Carbon Trading" Scam Reeks of Who Else? Goldman
These examples illustrate how the global warming fraud is used to push a far-reaching political agenda -- an agenda born out of the unholy fusion of governments , banks, and corrupt scientists. But let us consider now the content of the leaked emails.
Scientific corruption at the highest levels:
From: Phil Jones To: ray bradley ,mann@xxxxx.xxx, mhughes@xxxx.xxx Subject: Diagram for WMO Statement Date: Tue, 16 Nov 1999 13:31:15 +0000 Cc: k.briffa@xxx.xx.xx,t.osborn@xxxx.xxx
Dear Ray, Mike and Malcolm, Once Tim’s got a diagram here we’ll send that either later today or first thing tomorrow. I’ve just completed Mike’s Nature trick of adding in the real temps to each series for the last 20 years (ie from 1981 onwards) amd from 1961 for Keith’s to hide the decline. Mike’s series got the annual land and marine values while the other two got April-Sept for NH nd N of 20N. The latter two are real for 1999, while the estimate for 1999 for NH combined is +0.44C wrt 61-90. The Global estimate for 1999 with data through Oct is +0.35C cf. 0.57 for 1998.
Thanks for the comments, Ray.
Cheers Phil
Prof. Phil Jones Climatic Research Unit Telephone +44 (0) xxxxx School of Environmental Sciences Fax +44 (0) xxxx University of East Anglia Norwich Email p.jones@xxxx.xxx NR4 7TJ UK
Obviously the above email speaks for itself. Despite the glaringly obvious fraud, Phil Jones and his collaborators across the world would have you believe that "trick" and "hiding the decline" are simply normal procedures in any scientific laboratory. The FORTRAN source code tells a different story.
Climate Research Unit FORTRAN code backs up claims of fraud and corruption
Neal from Climate Audit writes:
"People are talking about the emails being smoking guns but I find the remarks in the code and the code more of a smoking gun. The code is so hacked around to give predetermined results that it shows the bias of the coder. In other words make the code ignore inconvenient data to show what I want it to show. The code after a quick scan is quite a mess. Anyone with any pride would be to ashamed of to let it out public viewing. As examples [of] bias take a look at the following remarks from the MANN code files:"
function mkp2correlation,indts,depts,remts,t,filter=filter,refperiod=refperiod,$ datathresh=datathresh ; ; THIS WORKS WITH REMTS BEING A 2D ARRAY (nseries,ntime) OF MULTIPLE TIMESERIES ; WHOSE INFLUENCE IS TO BE REMOVED. UNFORTUNATELY THE IDL5.4 p_correlate ; FAILS WITH >1 SERIES TO HOLD CONSTANT, SO I HAVE TO REMOVE THEIR INFLUENCE ; FROM BOTH INDTS AND DEPTS USING MULTIPLE LINEAR REGRESSION AND THEN USE THE ; USUAL correlate FUNCTION ON THE RESIDUALS. ; pro maps12,yrstart,doinfill=doinfill ; ; Plots 24 yearly maps of calibrated (PCR-infilled or not) MXD reconstructions ; of growing season temperatures. Uses “corrected” MXD – but shouldn’t usually ; plot past 1960 because these will be artificially adjusted to look closer to ; the real temperatures. ; "Spin that, spin it to the moon if you want. I’ll believe programmer notes over the word of somebody who stands to gain from suggesting there’s nothing “untowards” about it.
Either the data tells the story of nature or it does not. Data that has been “artificially adjusted to look closer to the real temperatures” is false data, yielding a false result." -Anthony Watts, Meteorologist - Source
Discussion
The source code above shows that the scientists involved manipulated their data in order to achieve a predetermined outcome. This is fraud, plain and simple. What is worse is these scientists also deliberately deleted the paper trail showing their research was fraudulent when the FOA requests arrived. This is criminal activity at the highest levels, and these people should be investigated and prosecuted. The massive amounts of funding they were provided with was used to lie to the public , in order to achieve the objectives of the UN and its affiliated think tanks, whether these scientists were aware of the implication of their corruption or not. The point is these entire 'climate change' claims need to be thrown in the trash heap and evaluated by competent scientists without financial or political interests in the outcome of their research.
And above all, the UN's Copenhagen treaty for dramatic forced austerity and international political control should be exposed for the vicious and cynical hoax it actually is. Copenhagen is the culmination of these fraudulent policies. National sovereignty will once again be reduced under a treaty conceived and funded by think tanks and international banks. Massive taxes will be imposed. Goldman Sachs and JP Morgan will make billions trading hallucinated carbon credits. Orwellian state policies for tracking individuals and interfering in personal autonomy will become acceptable under the pretext of 'stopping climate change', despite the entire rationale being fraudulent. Monopolistic international finance capital and the billionaire elitists behind it believe they are about to achieve another victory over the unwashed masses with the Copenhagen treaty.
The true political objective behind global warming was proven beyond a doubt in the Club of Rome publication The First Global Revolution. Keep in mind Al Gore is a member of this elitist group of policymakers, and even chaired a full Club of Rome meeting in Washington DC in 1997.
“ The common enemy of humanity is man. In searching for a new enemy to unite us, we came up with the idea that pollution, the threat of global warming, water shortages, famine and the like would fit the bill. All these dangers are caused by human intervention, and it is only through changed attitudes and behavior that they can be overcome. The real enemy then, is humanity itself."
We should understand that the international political agenda underlying the falsified global warming scandal is, at its core, an ideology of corrupt banks and politicians intent on framing humanity as the enemy, in order to achieve purposes of social control. Thus, it is no surprise that the 'science' behind global warming has been exposed as fraudulent.
For in-depth coverage of this growing scandal, see:
Last week the market pretty much ended the week where it started as the S&P 500 closed on Friday down two points for the week. Gold though continued its torrid rise despite more premature calls by various talking heads and Wall Street experts for a major bottom in the dollar.
Once again the opinions of the majority have been proven wrong.
In fact on this weekend once again I cannot find a single person on the Internet who is saying now is the time to buy stocks. Sure - there are people on message boards that are, but I'm talking about writers and commentators. This has been a trend for about a month now. And the more people that are down on the market the harder it is for most people to buy - even to just hold on to what they already have that is working for them.
The fear from last year still remains. The average American lost about half of their retirement account and that's a painful memory for most to overcome. Yes, I do think eventually next year we'll see the market make an important peak, but there is no sign of that happening now. Yes the number of stocks leading the rally is narrowing, but there are enough going up to make some nice money.
In fact this week tends to historically be one of the best weeks of the year, because the stock market almost always goes up the holiday shortened day before Thanksgiving and continue higher the day after Thanksgiving too.
Going back to 1983 the S&P 500 has tended to rally in the days leading into Thanksgiving and continue higher until eight trading days later. After which it would dip a little in the first part of December and then continue higher until the end of the year.
Even last year during the stock market meltdown the market managed to rally into the Thanksgiving holiday and maintain an upward bias through December.
Now I wouldn't base any decisions solely upon these facts. I always look at the charts as my primary indicator.
Right now the S&P 500 has support in the 1070-1075 area while it is overbought on daily stochastics. Below that level it has support in the 1070 area. I am fairly convinced that we'll see the market go higher on Wednesday and Friday - the days between Thanksgiving.
So if the market is going to go much lower it needs to do it today and tomorrow. It really needs to do it today. It needs to sell this gap up and drop.
Even on a chart you can see this, because if the market is going to fall much more it needs to carry over the downside momentum we saw last Thursday and Friday. If it just holds up then it will be in a position to simply drift sideways. That would cause its daily bollinger bands(they are green in the chart above) to come together and lead to a volatility breakout - one that would most likely be to the upside.
Here is the thing though - if the markets has an upside breakout from here it will most likely spark a huge climatic blow-off top rally - a rally that will last for weeks and send the market up another 10-20% by the middle of January.
I know this might sound crazy to you. So many people are calling for big declines right now and talking about how the valuation of stocks or lack of growth in the economy doesn't justify current stock prices.
However, if the market manages to just hold up here and then break to new highs it will completely devastate the bears who think a major top is happening right now.
They'll be forced to cover.
More importantly though all of the nervous nellies - the mutual fund managers, hedge funds, and individual traders - who have been sitting on the sidelines in fear of market tops will start to rush into to buy. The last thing an institutional manager can do is not be invested in a rising market at the end of the year. They rather LOSE money than miss out on something like that. So they'll be forced to buy despite the lack of growth in the economy..
Upside momentum will grow and lead to what would probably be a climatic rally that would end around the start of January earnings season.
Most people don't think about the stock market this way. When the TV is bullish they get bullish and when the talking heads get scared they get scared. Most investors simply follow the herd.
I have read a lot of information recently about gold being "overbought" and those sorts of things. How people are too bullish on the metal. And, I appreciate some of the articles sent to me.
However, gold is at another record high on Monday before the market opens.
The reason is, a lot of the people who think gold is overbought aren't actually holding gold themselves!
Last week I wrote about how gold mining stocks were underperforming the physical metal and advised traders to sell gold mining stock and instead buy the gold ETFs like GLD or DGP. And that seemed to be the right move as gold stocks continues to trade lower to side ways while the physical gold and its ETFs are trading at new highs.
As the saying goes "There's always a bull market somewhere"
That's not always the case, but it is 90% of the time. And now, it's gold. No stopping it as far as we can see here. There isn't anywhere near the pandemonium of buying. The thing is, if you haven't bought now, then when? If gold drops to $1000? $900? Or if it rallies to $2000 and you don't want to "miss out". All you have to do is determine your risk, and then make the trade!
Today, the dollar rallied and the stock market finished mixed with weakness in the NYSE and the Russell 2000, with a small uptick in the OTC indexes and a fair showing in the DOW. The S&P 500 was up one point.
There is very little volume today so investors aren’t excited about this market and the “huge carry trade” policies of the Fed.
President Obama is getting an ear full from the Chinese who are upset the US Federal Reserve is fueling “speculative investments” by cheapening the dollar, known as the carry trade or inflating its speculative assets through its loose monetary policies, which is forcing countries like China to adjust its monetary policies to hedge against a plunging dollar environment by accumulating commodities such as crude oil futures.
This, the Chinese believe is posing “real and insurmountable risks” to the global economic recovery.
As investors we have to watch closely as to what comes out of these meetings with China and especially whether China is willing to let their currency trade freely and apart from pegging it below the US dollar.
The Fed is playing with fire, perhaps to force the Chinese to trade more fairly with its currency peg relative to the dollar, but with oil prices at $80 a barrel, signs of stress are clearly being manifest.
Today it was announced that mortgage delinquencies hit another record in 3Q and that 6.25 percent of U.S. mortgage loans were 60 or more days past due, according to credit reporting agency TransUnion.
Yet, no one is talking about $80 oil as a contributing factor as to why mortgage delinquencies are hitting new records. But the strain of $3+ gasoline in many parts of the country, especially in California where people have to drive rather long distances to get to work is a killer.
This administration knows perfectly why oil prices are this high and it is because of the dollar carry trade and their policies of continually undercutting the dollar. To campaign on change and then proceed to undercut the dollar and drive up oil prices again may make the Saudis happy but it is going to make renters out of most Americans.
Already 47% of Americans pay no income tax. Imagine that, half of all Americans are essentially in poverty and on welfare.
Yet, at the same time we seem to have found support technically at the middle Bollinger Band line on an intermediate-term basis and appear to be setting up for an intermediate-term end of the year advance. But any intermediate term advance will depend on a big plunge in the dollar to sustain an intermediate term advance in stock into the end of the year. I am not sure the Fed really wants to drive oil prices into the end of the year but it is hard to understand the mind of Bernanke and Geithner.
In any case, a minor pullback is due to allow the short cycles to correct but don’t expect much of a pullback as intermediate term cycles are attempting to advance for a few weeks. Then that should be it for this cyclical bull cycle.
Meanwhile, the long-term cycles are now once again very overbought, with the monthly stochastics back over 92% on %K on the stochastics suggesting we are coming to the end soon for this Fed induced cyclical bull market unsupported by true fundamentals.
wow, it looks like moon is really affecting our emotions at least lately, lol, nice correlation lately. anyway it's not something I follow, thought I would post it for fun.
Market indexes were up 1.33% today while these four stocks are lagging. What caused the rally? Commodities like precious metal and energy were the leaders today. Gold rallied $20s, but gold stocks lagged again. This is hinting inflation is going to pickup, and the market rally is due to cheap money coming in to the market. Market could rally another 10% from 1100 but if the dollar falls 8-9%, you've really only broken even. Therefore, instead of owning stocks, you might want to own ETFs to preserve your gains.
What to buy? GLD(long gold ETF) or DGP (double long gold ETN)
"A nation can survive its fools, and even the ambitious. But it cannot survive treason from within. An enemy at the gates is less formidable, for he is known and carries his banner openly. But the traitor moves amongst those within the gate freely, his sly whispers rustling through all the alleys, heard in the very halls of government itself. For the traitor appears not a traitor; he speaks in accents familiar to his victims, and he wears their face and their arguments, he appeals to the baseness that lies deep in the hearts of all men. He rots the soul of a nation, he works secretly and unknown in the night to undermine the pillars of the city, he infects the body politic so that it can no longer resist. The traitor is the plague." - Cicero, Rome's Greatest Politician
Gold Reaches Another Record High Gold is money. Currencies of countries are promissory notes. You have have heard that California is issuing IOU's since it's basically bankrupt. Well, that's what money already is, anyway. So, in a way, California is issuing its own money, debt free. When that's that case, overprinting always occurs. But that only speeds up the complete devaluation of a currency rather than a slow process over 100 years like the US dollar down 96%.
In some ways, it should be celebrated. It's the only way an honest money can return to the land. Wall Street will never ever give up its grip on the US dollar. The only way to the return of a gold and silver standard is for the dollar to completely implode. It might not take long. At 3% a year, there is a total of 34% inflation over a 10 year period. At 5% a year, that's 62%. Your $3.50 latte could cost $5.67. Hmmm. That's not gonna be enough. I am going to guess it's gonna be when a latte costs around $19.00 that people will freak out. So, that would mean 12% inflation for 15 years.
It could take a while. That's also a lot of money printing. And, don't dismiss that possibility of "new money" being created. Such that you trade in your "old" money for "new" money and all prices are divided by 10. Then, it's only gonna be $1.90 for a latte! Totally reasonable. Then the banks will say, "Ha! I can't believe the people continue to buy this old scam!"
If you held old US dollars for "savings", then you're sort of out of luck. But if you buy gold today, you're gonna be better off than US dollars. That's my opinion. TONS of countries have had mass inflation and printed new currencies. Except the US. Look at the Brasilian Real, that's only about been around since 1994! http://en.wikipedia.org/wiki/Brazilian_real
How to Win the Game A $300,000 house at 5.5% on a 20 year mortgage is about $2000/month.
In 20 years you own the house.
If you invested $500 per month, at 10% annually, you'd have about $378,000 in 20 years. (If you invested $500 per month, at 3% annually, you'd have about $165,000 in 20 years.)
Now, this is assuming 10% a year.
So, since the goal is to own the house, since it has real value, if you can rent it for $1500, and pay the extra $500 yourself, you win the game. And, in 10 years, inflation could drive up the rent, anyway.
Nowhere I know of in the world can you lock in a mortgage rate for more than 10 years, except in the US.
How Real Estate Millions Were Made
Before the internet, people would go up in small planes, with cameras, and fly around towns. See where they are expanding, take pictures, and look at maps. You see where the town is expanding, and you buy cheap real estate in the outside. People laught at you, and in 10 years you sell it to them for a hefty profit. I would imagine this could really work in Northern California, Idaho, Montana, and other places with "wide open spaces" near mountains and rivers. How many people do you know who do this? None? Ok, so it continues to work then. Good Trading,
As the unemployment rate crossed the double digit barrier for the first time since Michael Jackson learned to moonwalk, President Obama announced that he will convene a “jobs summit” to finally bring the problem under control. Using all the analytic skill that his administration can muster, the President is determined to figure out why so many people are losing their jobs and then formulate a solution. That's a relief; for a while there, I thought we were in real trouble! In fact, the absolute last thing our economy needs is more federal government interference. If Obama really wants to know what's behind entrenched joblessness, he should start by looking at the man in the mirror.
Obama is pursuing, with unprecedented vigor, the same policies that have for decades undermined our industrial base and yoked us to an unsustainable consumer/credit driven economy. This doubling down on Washington's past failures is destroying jobs at an alarming rate. Today we learned that the September trade deficit surged by 18.2%, the largest gain in ten years. Much of the deficit resulted from Americans spending Cash-for-Clunkers stimulus money on imported cars – or “American” cars loaded to the sunroof with imported parts. In exchange for more domestic debt, we have succeeded only in creating foreign jobs.
An article in this week's New York Times by veteran writer Louis Uchitelle confirmed a fact that I have been alleging for years. Uchitelle pointed out that foreign outsourcing of component manufacturing has led to consistent overstatement of U.S. GDP and productivity. The connection goes a long way to explain why we keep losing jobs even as GDP is apparently expanding.
As our economy becomes less competitive due to higher taxes, burdensome and uncertain regulations, and capital flight, more manufacturing and services will be outsourced to foreign firms. However, the flaw in GDP calculation allows the output of those foreign workers to be included in our domestic tally. Since we count the output but not the worker responsible for it, government statisticians attribute the gains to rising labor productivity. To them, it looks like companies are producing more goods with fewer workers.
The reality is that we are producing less with fewer workers. The added “productivity” comes from higher unemployment and larger trade deficits. This is a toxic formula that will have lethal economic consequences.
Don't expect the brain trust at the President's job summit to fret much about these details. That public relations stunt will likely ignore the root cause of the economic imbalances and instead stress the need for government spending on training and education, i.e. more public debt. The unemployed do not need government theatrics, they need actual jobs. But as long as the government props up failed companies, soaks up all available investment capital, discourages savings, punishes employers, and chases capital out of the country, jobs will continue to be lost.
To really fix the unemployment problem, the President must look past his peers in government and academia to understand how jobs are actually created. In the private sector, all individuals have a choice to either work for themselves or someone else. Since labor is far more productive when combined with capital (office equipment, machinery, business models, and intellectual capital), those who lack these assets themselves often choose to work for others who have sacrificed to accumulate them. This increased productivity is shared between the worker and the owner of capital, and both are better off.
However, for one person or company to choose to offer a job to another, there must be an incentive to do so, and they must have the necessary capital. In the first place, employers must commit to paying wages and benefits, comply with government mandates and regulations, and subject themselves to potential lawsuits from disgruntled employees. All of these costs must be measured against the extra profits an employer hopes to earn by hiring an additional worker.
If profit opportunities exist, jobs will be created. Otherwise, they will not. Of course, anything the government does to raise the cost of employment, such as a higher minimum wage, mandated heath care, or greater regulatory burdens, not only prevents new jobs from being created but also causes many that already exist to be destroyed. Anything that diminishes the profit potential of extra hiring will diminish the number of job opportunities that are created. Also, since it is after-tax profits against which employers measure risk, the higher the marginal rate of income tax, the less likely employers will be able to hire.
Finally, in order to hire workers, employers must have access to capital to expand operations. Anything the government does to discourage capital formation automatically diminishes job creation. By running the largest federal deficits in history, Barack Obama is diverting all available capital to the Treasury, and is in effect waging a war against private capital formation.
If the President's summit truly intends to find the root cause of unemployment, his advisers don't need Bureau of Labor statistics or complex modeling software, just the courage to drop their dogmatic belief in central planning and embrace the laws of economics.
The stock market managed to recoup some of what was lost yesterday, as a dip in the dollar helped to ramp up the market again as the direction in the dollar is largely the single largest determinant of what the stock market will do from one day to the next.
I think this is largely a technical slugfest being waged on all financial fronts, but the dollar is still the main show and what it does next week will determine how the market plays out and that’s what makes this a rather tough call.
The largest of all markets is the currency market, so it is here that traders are focused to make decisions for nearly all the markets.
Notice from this chart the US dollar is short term oversold, attempting to construct a double bottom. Notice, too the rising RSI values. This would suggest the dollar should try and advance next week.
Conversely, when we look at the stock market which is trading inversely to the US dollar it appears to be in various stages of topping patterns. The S&P 500 and the Nasdaq Composite Indexes are forming a double top. The Wilshire 5000 looks to be forming a “head and shoulders” formation, suggesting a broad market topping pattern is developing.
As you can see from the above chart, even though the markets put in a positive advance from a weekly perspective the pattern that has developed over the last three days still keeps a head and shoulders correction pattern in play.
The Russell 2000 index, which tracks the small cap stocks, is even in a more advance stage of deterioration, as seen below:
As you can see the small cap index (Russell 2000) has already put in a double top at the last short cycle high and has now produced a lower low and a lower high on the daily cycles, with this latest short cycle advance clearly nowhere near its former high. Even more significant, the Russell 2000 is now struggling below its 50-day moving averages and curling downward.
Right now there aren’t a lot of choices that are attractive. Gold, energy and the commodity driven stock market all look top heavy here.
Ford is coming out with a new car program for 2010 that has everyone excited about. You should know about this.
For those of you holding on to gold related stocks, now would be a good time to sell and take profits. As you can see, the GDX to GLD ratio broke down Wednesday. I would of made this post earlier but I was out sick on that day. So for right now, take profit on gold and gold stocks. Once the ratio crosses back up we can enter long. And also, the US dollar is attempting to make a bottom at the $75 level. If it can successfully hold that level, we'll see another sell off in the market.
The small rebound in the Us dollar sure didn't last. Gold is now at another record high. Spot gold rallied to $1,115.85 an ounce.
A lot of people think you're "investing" in gold. But over the long run, gold maintains its value, and paper money goes to zero. After all the Us dollar has lost 95% of its value since 1913. This isn't a linear process, which is why it looks like you can make gains in gold. You can, but, let's say over the next 20 years or so, your gold will buy you the same amount of coffee or oil.
I think that gold could go to $1500 easily. That's why I think it's prudent to get into gold. Or should I say, what would you rather hold over the next few years? Gold or paper dollars?
If you want the stocks too, you can buy a basket with GDX.
Wednesday's economic calendar: Veterans Day - stock/futures markets open, bond markets closed.
Dumb money has been pouring into international corps that may benefit from lower USD but we knew what came out of IBM , don't we. Why? 'cause cancer is not contained in US anymore. Europe, is now in as bad shape as US, to say the least.
Somethings never change in Wall Street, Suckers are now buying the top as usual, forgetting the fact when the Pandora's box opens, USD may take off like a VIX index during a selling climax, forcing the sheeplie to the exit all together at the same time... sounds like a 4-sigma cause.
S&P
Trend
Support
Resistance
Weekly
Up
876
1200
Daily
Up
1012
1110
Vix
Bullish
20
31
R3
1115
R2
1103
R1
1098
Pivot
1093
S1
1086
S2
1079
S3
1067
NOTE: Nov 11: price on daily is now overbought
Oil
Trend
Support
Resistance
Weekly
Up
65.00
90.00
Daily
down
65.00
90.00
Note:
Euro
Trend
Support
Resistance
Weekly
UP
1.4304
1.5066
Daily
UP
1.4440
1.5006
R3
1.5074
R2
1.4946
R1
1.4835
Pivot
1.4707
S1
1.4596
S2
1.4468
S3
1.4357
S&P500
-Long term trend remains up, and intermediate trend is Up
-Yesterday was a non eventful day with most major indexes closing near unchanged. except for the small cap which closed down 1%. These indexes are now overbought on their daily charts, and yesterday's indecisive price action could be the sign for an intermediate top. But as I look at the dollar chart, it is not showing any signs it wants to bounce higher. Indicating it wants to slide lower. Since dollar moves inversely to the general market, this will allow the market to advance further. - You can take a look at the S&P "fan" chart below(this is a bearish pattern), we are once again forming another top. Markets need to reverse this week in order for this topping pattern to play out. Or else the S&P is likely to probe up to the 1120-1150 level. Traders should hold on to their remaining long positions to see how far this uptrend can go, but do not initiate any new long positions. One could also take a small short position to hedge against their longs at this level. - Another sign of weakness is the financial chart I posted below. It has clearly broken down and lagging in this market advance.
Crude Oil
-Long term trend remain up , intermediate trend turned down.
-Oil continues to fight the $80 level. The Fed wants inflation, which will cause oil price to go up. The Fed also wants economic recovery, which needs oil price to remain relatively low. Ultimately, oil price among with other commodity prices will go up. But as traders, this is not a good environment to be trading oil. Manage your risk.
Gold
-Long trend remains up while intermediate trend is Up
-Gold consolidated yesterday and price was able to hold around 1100. At this point, it all depends on what the dollar can do, but in the mean time, go with the trend, which is up.
US Dollar
- Long term trend remains down, intermediate trend is down - Dollar is oversold on the daily chart and price is trading side ways along the $75 level. Without any noticeable positive divergences, the most likely scenario for price action is down. Which implies the stock market will continue to move higher. We'll see how the market plays itself out today.
Conclusion As the G20 decided to continue to inflate away, are we seeing a repeat of what happened in 1983? Is the gold market telling us of an eminent dollar collapse? We will have to wait and find out. But for now, trade the trend and manage your risk.
-- Michael Chang Technical Analyst Washington Asset Advisors
