Saturday, January 30, 2010

Stock Market Review - 1/29/10

The Dollar Drops the Market

A new week - same old story. The stock market remains a slave to the US dollar. Yes, the US government continues to borrow and print. The Treasury issued another $118 billion in debt this week. That should sink the dollar but this is a different era. The banking cartel that has taken the world captive has to continue the illusion of debt acceptance so they buy dollars to buy the debt issuance. That serves to boost the dollar's value. Secondly, the banking cartel has to continuously deal in derivatives because that's the only instrument that earns them money. Derivatives require credit default swaps which in turn require an underlying asset which is usually US Treasuries. Therefore, Treasuries are in demand and so too is the dollar. All of this is necessary to continue the illusion of wealth and economic 'recovery'. Stupid people are easily fooled and can't spell 'debt' much less understand its destructive effects. So, the game goes on.

In addition, the dollar continues to strengthen due to the weakened state of various government states throughout the world. Greece is the latest country drowning in debt and extending a hand for a bailout. So, the dollar strengthened this week.

When the dollar strengthens, the stock markets fall. Why? Because the market is a function of dollar inflation. It is also a function of manipulation. When the manipulators are busy manipulating bonds, they don't have time to simultaneously manipulate stocks as well. Sadly, the Plunge Protection Team (PPT) launched a brief attempt to spike the markets on Wednesday. The Fed announced a commitment to zero percent Fed Funds forever given the supposed strength of the economy. You know the gag. The Commerce Dept. claims a 5.7% GDP growth rate for the fourth quarter. Turns out that nobody on the planet actually believes this number including the Fed. Thus, they left rates at zero on Wednesday. The market swooned. Given that they coordinated and anticipated this reaction, the markets went from fifty points down to fifty points up in a jiffy. Another brief selloff was met with another burst of buying. When I say 'markets', I mean markets. At 2:30 PM eastern time, ALL MARKETS began and ascent. The Dow. The Nasdaq. Germany. Brazil. China Australia. Antarctica. Jupiter. Pluto. Everything leaped higher all at precisely the same moment at precisely the same ascent. Pathetic. Check out the chart below.

Thursday morning was met with harsh selling that was again arrested by weak buying. Friday brought the trap door and the markets fell in the afternoon with heavy volume. There were many theories as for why all economic and corporate earnings news was good and the market action was bad. Perhaps some of the markets weakness was spurred from the Congressional investigation into the methodology of saving of insurance giant AIG. Congressman Twiddle Dee and Congressman Tweedle Dum question current and past Treasury Secretaries. I thought I already made this clear. AIG was saved so former Treas. Sec. Paulson could save his $500 million dollar golden parachute with former employer, Goldman Sachs. As you remember, Goldman would likely have been pushing up daisies had AIG expired. The same fate would have befelled poor Mr. Paulson's pension. Ditto for his buddies at Goldman. So, the greatest heist in human history was carried out right under the nose of Nancy Pelosi and George Bush. It was all for our benefit, of course. So too is the resulting $12.3 trillion in debt no doubt. The bailout was never about economic recovery. TRUTH.

Bottom line is this. The dollar looks poised to rise and the markets look poised to fall.

DIA - 15 minute bars - 1/25/10 thru 1/29/10
Chart courtesy

Friday, January 22, 2010

Stock Market Review - 1/22/2010

Reality Packs a Strong Punch

The chart below is 5 trading days (1/15/2010 - 1/22/2010) with 5-minute bars. The candlestick line is the UUP and the green line is the IYF. Here's the story.

The UUP is of course the rising dollar etf. Federal Reserve shills are still having to buy massive quantities of US dollars so they can in turn buy the massive quantity of US debt issued every week. The massive debt should drive the dollar down and the massive buying should prop the dollar up. It is a battle that the buyers have been losing. The chart shows strong spikes with strong volume. Why? The US Treasury bond yields flirted with 4% and an economy weaker than Nancy Pelosi at a capitalism convention can't survive unless the money is nearly free. More on that in a moment. But as we know, in a market absent any reason to be trading above zero as is ours, the market falls when the dollar rises. This is becoming a 'dead horse' so I'll move on.

I included the IYF which is the Dow Financial index. The Dow lost 600 points this week from its high and the financials were front, center, and in the lead down. Turns out that the bozo that sleeps in the White House made a statement about limiting the 'trading' abilities of the big banks. Of course, he was talking about everything from derivatives to high frequency trading to hedge fund trading but the point was not lost on Wall Street. Everyone knows that if the banks can't steal it, extort it, pilfer the Treasury, then they have no earning power. High frequency trading is front-running and it is supposed to be illegal. Well, it is unless you are a big bank. Derivative trading is already capped and limited. Well it is unless you are a big bank. What is this suggestion? Are we no longer willing to let Jesse James guard the safe? Talk about a man without a single clue!!

So, the banks took a dive and so too did the stock market. Also rattling the investing world was the suggestion from the Chinese that they were tiring of living in their bubble and they were going to reign in lending. Again, no one has any real money. All we have is credit. Take away the credit and we have nothing. We will see how long all these politicians stand by their guns. When the banks and their point man of swindle, Jesse James Paulson, last presented the politicians with financial ruin, the politicians caved in like Senator Nelson from Nebraska when presented with a bribe. It may be time to turn the investment guns to the short side as reality continues to punch us in the mouth. You want the truth? There is no recovery. Housing will be at depressed levels for decades. Inflation is already eating the linings from American's wallets. Workers are making far less than they used to. Unemployment is 20% or so. Stocks were over-priced at the low on March 9, 2009 when Ben and the magic printing press inflated them higher. There is no way out but to face the truth. No one even raised an eyebrow this week when our government raised the debt ceiling to $14 trillion. How do you know this is a large number? It was rounded by the ten billions' place.

This is another reason our interest rates have to stay close to zero. When you are trillions and trillions in debt, ever tenth of a percent in interest rates makes a huge difference. Mark down the people that were talking about raising interest rates a few weeks ago. That's a clown show. Should rates go up? Yes, absolutely. This is how balance is achieved. Will they? Of course not. Our government is about keeping the con game going and they are not going to relent now. They have taken lying to a new level. They are still talking about recovery and how the current administration 'saved' the world from financial ruin. This is sad and profoundly delusional.

Don't forget - shorting takes skill. Don't do it unless you have the skills. Otherwise, if the idiots at the Fed will kindly step aside, the rest of us have some money to make!

1/15/2010 - 01/22/2010 5-minute bars UUP in candlestick and IYF in green
Stock charts courtesy

Monday, January 18, 2010

Stock Market Review - 1/17/2009

Same Old Story

The chart below is a microcosm of the new era of investing. Since the Federal Reserve coup of 2007, the 'market' behavior has radically changed. No longer do we need to concern ourselves with a 'market'. It no longer exists in the sense or definition of a 'market'. The indices go where the Fed pushes them. We no longer need to concern ourselves with corporate earnings. The Fed doesn't care so neither should we. Besides, the Fed allows companies to report earnings as 'needed' by allowing silly puddy accounting. We no longer need to concern ourselves with economic data. That stuff is supplied and compiled by our government and is now less believable than a politician's promise not to raise taxes in a campaign speech. Our government is nothing more than a propaganda machine dedicated to their own aggrandisement. What we need to concern ourselves with is the chart below.

It shows the last five trading days and the story has not changed. The stock market is manipulated completely to the point that sellers don't want to sell. Short sellers have to be salivating at a market grossly overvalued and an economy grossly over-exaggerated. Yet, selling has been met with forceful Fed buying thus eliminating profits of prudence, intelligence, and skill. The 'market' now resembles a carny game at a state fair. The chart we are looking at shows the dilemma of the manipulators. The US continues to sink into the deep sea of debt necessitating the constant issuance of more debt in the form of government bonds. The Treasury had to issue a tad over $80 billion last week and it is becoming harder and harder for the world to soak up that much stupidity. The Chinese and the Japanese already hold close to a trillion of the junk. Do they keep buying? If they don't, then our government will lose their already preposterous claim of 'strong foreign interest' in the auctions. Anyway, the chart shows the obvious. Debt is issued on Tuesday thru Thursday. The world has to scramble to accumulate US dollars to buy the massive issuance of US debt. This distracts the stock market manipulators away from stocks over to the task of manipulating the bond market. Why? If they didn't manipulate the bond market, interest coupons on the newly issued debt would soar. What ever is left of real estate would surely collapse and the real economy would accelerate its contraction. Sure, the government would still claim 3% GDP and no inflation and all the other utter nonsense that it already disperses. But look at the chart. When interest rates jump, bonds have to be bought to bring said interest rates down. That strengthens the dollar and weakens the stock market. The Fed will have to create even more money going forward to get the Dow back to pre-Lehman 11,400. And so they will. It's a hard hill to climb but they do have a printing press and they do run insider trading scams with Goldman Sachs.

In reference to bogus government numbers, they claim that November employment actually grew by 4,000. That must have prompted enormous laughter throughout the world and we thank our government for supplying a bit of chuckles. Meanwhile, the research firm, TrimTabs, estimates that the economy lost over 220,000 jobs for the same November. I guess the numbers all depend on methodology. The government prefers the lie while others stick with reality. Rock on Ben! You have a rally to stoke!

Last 5 days - TNX in red, Dow in blue, IEF in green
Chart courtesy

Friday, January 8, 2010

Stock Market Review - 01/08/2010

The Edge of the Abyss

The chart below tells the story of what is to come in 2010. The red line is the 7 - 10 year US Treasury ETF, IEF, the blue line is the 10-year US Treasury yield, and the green line is the rising US dollar ETF, UUP. The term is 3 years and they tell us the real story. Our government capped the first week of the year with a sterling rally festered by lies about low inflation and 'revised' job creation numbers for November. They claim December saw losses of 85,000 which came as a surprise. We all know all government numbers are total poppycock blunderbuss babbling nonsense. Unwilling to give in to negativity, the PPT no doubt ushered a nice rally to the indexes in the final hour of trading. Now for the real story.

The only reason the US is still breathing is the Asians have loaned us the money for a respirator. We could only accept the loan as long as interest rates stayed on the floor. That necessitated our Asian friends to buy more than their share of our debt. This is shown by the red line of Treasury buying. The rally of '09 required low rates and the Asians needed our spending. But, everyone knows this story has an ugly ending if allowed to continue. Most of the ugly will fall upon the lenders.

So we look to the blue line. This is the rising US Treasury yield. If your boat is leaking a gallon of water every minute, you have to bailout at least that much else the boat eventually sinks. The US debt addiction has required a few trillion a year in debt issuance to keep the illusionary effects of 'recovery' in place. Somebody has to bail all that debt out of our house else we drown. However, the Asians only have a bucket so big and are losing the ability to bail out all of our rising debt. Thus, bond yields are rising and bonds are falling. Uh-oh. It looks like the Asians are going to have to swim for safety because it is becoming more and more apparent that our debt boat is sinking. The 10-year US treasury yield now looks poised to me, to be headed towards a 5% yield in this coming year. We can't afford our debt at 3.5% so how can we afford it at 5%?

Enter the green line - the rising dollar ETF, UUP. It is still sinking. This is quite remarkable considering that the rest of the world is swirling around the debt toilet bowl with us and currency is weak everywhere as affirmed by gold trading at over $1,100 per ounce. The Chinese are now staring at the abyss. They have stocked up to the tune of a trillion of our debt and they are now watching it dissolve in their vaults. Worse, their currency is still loosely pegged to ours so they are seeing the same double digit inflation as the US currently experiences. I calculate my own personal inflation rate at about 25% as our government has become useless to the core in telling the truth about anything. So what will the Chinese do this year? Will they keep buying our debt to hold down our interest rates so we can continue to borrow so we can buy the stuff they make that we used to make? If they do, they no doubt know that this will continue to erode the currency's value. So, they lose. If they don't buy our debt, interest rates in the US rise to the moon and we will have to cut back our spending. So, they lose. They are staring into the abyss. There is no way out of the 'greenspanning' that started in the late '90's. The Fed continues to reign idiocy upon the idiot-wannabes in Congress and no one has the guts to stop the insane borrow until we explode mentality that prevails.

I will repeat this every week. Some people think we are better off now and the TARP programs saved us from bankruptcy. If so, the US debt was $4 trillion in 2004 and now it is $12 trillion 6 years later. If this is true, then let the economics books be rewritten. The way to solve unrepayable indebtedness is to borrow more money. You have to be even stupider than our Congress to believe that. We now spend 3 times more on debt interest payments than we do on education at the federal level. We are, as a nation, clueless idiots as we allow the current set of incompetent nitwits to rule us. We had better enjoy our cluelessness because pretty soon, we won't even be able to spell it.

The bottom line is this. The only way to control our interest rates is to buy more of our bonds. Bonds are bought with US dollars and the dollar has to rise. If the dollar rises, it kills the inflationary effect on the Dow and stocks fall. 2010 is the year that we will find out if Bernanke is willing to drive the bus into the abyss with the Chinese riding in the front seat.

3 yrs - UUP in green, IEF in red, TNX in blue
Chart courtesy

Monday, January 4, 2010

Stock Market Review - 1/2/10

The Swindle

Remember that we had to bailout Goldman Sachs and Bank of America least we risked bankruptcy? Isn't that what our lying government claimed. Of course, that's what they were told by the lying Federal Reserve. What is bankruptcy? It is having more debts than assets leading to an inability to satisfy creditors. Now, ask yourself one question. After the swindle, uh, I mean 'bailout' of '08 and '09, are we further from bankruptcy than we were? Well, our national debt is $12 trillion plus as we move into 2010. Before the bailout, it was something like $2 trillion. Case closed. This will be the year of short selling. Happy New Year!