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!
Stock charts courtesy StockCharts.com
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