Saturday, July 31, 2010

07/30/2010 - The Vomit Comet

The 'vomit comet' is the nickname for the airplane that produces near zero gravity simulations by climbing in altitude and then steeply diving only to resume the climb. The nickname is derived from the tendency of the occupants to become nauseous and vomit. The casino that the Fed now runs is doing the same to investors. Friday, July 30, is a classic example. The previous two days left the Dow wiggling slightly down after taking out the last previous lower high in the post-April downtrend. Job well done, Ben! That's the first step in the nausea. As soon as the Fed gets a hint that a downtrend is developing, they step in with one of those patented ferocious one-hour rallies that jack the Dow index up by a triple digit move. Out of the blue, with no reason whatsoever, we get a rally. This has led to the Fed Chairman finally admitting to Congress last week that the economy has now become "unusually unclear". Gee, I wonder why? Let me give it a shot. The casino now moves violently when the Fed intervenes and there is no longer any reason at all that we see changes in trend. So let's get back to Friday.

Second quarter preliminary GDP numbers were released for the US economy and the government set the number at 2.4%. That was slightly below the expected 2.5% and and a decline from first quarter numbers that were 'revised' upward to 3.7%. Immediately when the casino opened, the Dow dropped 120 points in the first ten minutes. In the next five minutes, the DIA Dow-correlated ETF was greeted with over a million shares of trading (10% of the days volume) that pushed the index higher. Within thirty minutes, the index recovered all 120 points. Before long the Dow was actually up 40 points. Then it lost all of that and went down 40. There was a lot of gyrating throughout the day but in the end, the Dow finished the day nearly flat. The entire investment community must have cheered the closing bell as they were running short on Dramamine. Maybe we should call the NYSE the 'vomit casino'!

Since no one on Earth has a clue what the next day may bring, investors have to watch the manipulation and intervention. Given that someone with hundreds of billions stood ready ten minutes into trading on Friday to jack the indices higher, we must assume that the manipulators want a rally. Goody, goody. July was a good month for the indices as the Dow and the boys rallied some 7% for the month. Now we move into August. Will the rally continue? Why are you reading this? Shouldn't you just ask Bernanke?

The disarray now injected into the indices has produced the chart below. The 10-year US Treasury bond price has appreciated nicely so far this year (the blue line) while the S&P 500 (gold line) is still struggling to turn positive. Almost all the 'experts' have been predicting a bond sell-off. Idiots. Treasuries will not be allowed to sell-off because the world's most indebted nation cannot tolerate rising interest rates. Period. What does this tell us? It tells us that no one trusts the casino. No one trusts the 'recovery' story. No one trusts the government numbers. Rising bond prices almost always tell us that something is wrong. Of course, the market can be manipulated higher if the manipulator just pours enough money into the effort. Go Ben, go! Welcome to the new bull market! Just eat lightly and keep a trash can nearby in case you need to hurl!

YTD SPX in gold, 10-yr Treasury bond price in blue
Chart courtesy

Saturday, July 24, 2010

7/23/2010 - The World is 'Asinine'

'Asinine' means 'utterly stupid'. Investing money these days requires a mental reconciliation that the entire world is simply asinine. This past week is a case in point.

A week ago Friday, the Dow sold off some 265 points leaving the index precariously close to 10,000. Investors were worried about economic slowdown, poor earnings, and the upcoming results of the Euro-bank 'stress test'. As we know, the PPT is always present to defend Dow 10,000 and so they did. Monday of this week, the indexes rallied a bit. On Tuesday, they opened way down and the Dow touched 10,007. At that point, it was like air raid sirens went off and the PPT sprang to action as the Dow proceeded to rally 250 points. All the same worries were present. But more importantly, there were several outbursts of heavy volume buying letting in investors know that the PPT was present, accounted for, and hard at work. The rally stayed alive until on Wednesday afternoon, Ben Bernanke testified before Congress that the economy was 'unusually uncertain'. That comment dropped the Dow 150 points in an hour leaving investors feeling a bit queasy. If the man with the golden printing press was 'uncertain', how could any of the rest of us discern reality? Of course, this is the same person who has spent the last 4 years injecting, stimulating, intervening, taking over, manipulating, printing, swapping, repurchasing, bailing out, and generally treating the economy like it was a wad of Play-doh in the hands of a chimp. Gee, how did things get so screwed up that now no one can figure out where we're going?

But, his minions were ready the next morning as the indices shrugged off the asinine thoughts of yesterday and the rally continued. 15% or so of the entire trading volume of Thursday hit the indices in the first 15 minutes of trading on Thursday blasting the Dow upward. It was 200 points higher before the bubblicious CNBC crowd could get their pom-poms in the air. What were we worried about, again? Oh yeah - economic slow down, housing in the gutter, earnings, and that darn European bank stress test. Well, it is asinine to think that the PPT would abandon the indices now! The rally held as Bernanke pledged in his second day of testimony that the Fed would stand ready to stimulate further should the economy falter. After all, their sole function is to drive markets higher so no one notices their real motives of enslaving the world in debt. Did I mention that the world was asinine, anyway?

So Friday, we got the results of the 'stress test'. Only 7 of 91 banks failed the test. Boom! Big rally ensued. What was the worry all about? A few weeks ago, an ECB member said publicly that an EU bank default was "asinine". Since the ECB injected a trillion euros into the EU banking system a month ago, I take the man at his word. What was the purpose of a 'stress test'? What 'stress' could there be to any bank in danger of default? The ECB has a printing press just like us and they are willing to ink it up. There is no stress. There are only bailouts and injections. The whole process was asinine. There won't be any failures. There won't be any defaults. The asinine public simply has no idea that they are slowly being captured by the central banks who seek to dictate every aspect of their lives. The bank's weapon is greed fueled by the ignorance of debt's enslaving powers. Austerity will be imposed on the asinine. But for the banks - there is nothing like free money.

Forget the news. Forget earnings. Forget the economy. All that matters is the central bank and the illusion of the stock casino. And right now, they have set all the slot machines to pay off. Take a look at the chart of the week's DIA action. You'd have to be asinine not to like that chart! This rally might not even have any speed bumps!

DIA - Past 5 days intraday with 10-minute bars
Chart courtesy

Saturday, July 17, 2010

07/17/2010 - The Beginning and the End

Is the Fed-induced rally from March 9, 2009 finally dead? Is the bear back? Time will tell. I have included a chart of the DIA from the last five days with 30 minute bars. The chart clearly shows that all the volume action comes in the first thirty minutes of the day and the final thirty minutes of the day. That would imply serious manipulation attempts. Thursday shows a gallant PPT rally of 100 points in the final hour of trading. However, Friday was another story. The Dow fell some 265 points on the day and the PPT was nowhere to be found. Sure there was a lot of volume in the final ten minutes but what is really happening?

Gold is falling and so is the dollar. The general media reported that gold was falling due to the strengthening Euro. Funny, gold is denominated in US dollars. You would think the price of gold would move with the value of the dollar. Maybe it's just me. For the past year, the Dow has been inversely moving with dollar. Now the dollar is falling and so is the Dow. What's changed?

Frankly, Mr. Obama is probably scaring the bejeepers out of the rest of the world with his assault on the American public. His team is busy raising taxes, bludgeoning business, and expanding regulation while spending like a drunken sailor. Europe's leaders have been preaching 'austerity'. So, it would make sense that the Euro would increase in value relative to the dollar. It would also make sense to sell the US assets as Obama's policies are those of destruction.

Consumer confidence plunged in the survey released on Friday. The previous confidence survey was up the most in a year. Why is consumer confidence gyrating so wildly? Supposedly unemployment has been declining. Supposedly real estate has stabilized. BP capped their leaking well in the Gulf. Corporate earnings were decent in the past week. So why the selloff on Friday?

The Senate passed the financial reform package authored by Frank and Dodd. Great. More regulation. Now we have a tax code thicker than the Bible, a health care tax code thicker than War and Peace, and now we have financial regulations to match. At some point, the heavy hand of the government will weigh down investors. The stock casino may be the leading barometer that we have reached the end. Lower highs and lower lows are a downtrend. Since we did not make a higher high, the Dow looks poised to make a lower low. That would be somewhere below Dow 9,700. Of course, Bernanke and the PPT could intervene. Maybe they will offer another trillion in 'stimulus'. Maybe they will buy a trillion in stocks. The ten-year bond yield is again below 3% and will soon be at 2%. That tells us that no one trusts the US government. If Ben doesn't save us on Monday, go short. But don't forget to cover just before someone tells the dopey Fed that a downtrend in the market casino might be signaling more weakness. Of course, the Fed's numbers won't confirm it. Their numbers are bogus anyway. Oh yeah, maybe that's why the indexes are falling.

DIA intraday past 5 days, 30 minute bars
Chart courtesy

Friday, July 9, 2010

Stock Market Review - 07/9/2010

Fed Fears

Let me show you what is wrong with America. The first image below is a photo of the information necessary to comply with IRS regulations requiring me to pay taxes for 2009. I am a small business. Preparing the return cost me $2,000. If you think the answer to solving our problems is to allow the government to impose more regulation, then you are a blithering idiot! Go read something else. Go read something that Hillary Clinton says or read a line from the dopey Dodd or feckless Frank. The reason we pay taxes is the government imposes its will. The reason we collect so much documentation is so we have some means of defense against ruinous regulators who operate in dictatorial fashion. Look at the box. Is it any wonder that business in America has seized up? You would think that of all the people that want a hand out from people like me that go to work everyday, at least one of them would be kind enough to offer to carry my box of documentation in and out of the accountant's office for me. But nnnnooooooooo!

2009 tax documentation.

Alright, let me get back to the stock casino. Yes, I said 'casino' because that's what it is. We just completed the best week in the casino since July of 2009. Remember, the 'best' of everything always comes in the midst of bear markets. This rally is a bear rally but it is a rally nevertheless. I included a chart of the Dow so you can see that even after the fantastic week, the Dow now stands at 10,198. Yippee!! The point of the chart below is to show the real reason for the rally. A downtrend is defined as having lower highs and lower lows. Since April, we have an undisputed downtrend. Worse, the downtrend broke below Dow 9,900 and that is the neckline on a head and shoulders pattern that should be expected to bottom at around Dow 8,200. So, since the Federal Reserve and their shill banks like to play Santa Claus now, they can't let negative patterns play out. The pension plans of the world will have their con games revealed. The banks will be found out to not only be without pants, they don't even have on underwear! Governments are broke and they surely can't lose their oafs. What if we lose all of our money? What about all the morons that 'play the stock market' and still have no idea that the dealer is crooked and can throw down a face card whenever they like? The idiots are glued to CNBC and they think the cartoon they are watching is real life! No, the con game has to be perpetuated.

And so, as the 'correction' that started in April threatened to descend into a 'bear market', the Fed had to do something. They sent Obama to run some oil-soaked sand through his fingers while he pined for someone's 'ass to kick'. They sent Frank and Dodd to the House of Village Idiots to compose more financial regulation to further strangle commerce. This is like hiring the Skipper and Gilligan to take the helm of a three-hour cruise! The Fed sent the ECB out to buy up Euro debt and manipulate the Euro higher with a trillion dollar stimulus package. They sent Hillary to South America to extol the virtues of marxism while she showed off her complete lack of knowledge concerning anything. Downtrend? What downtrend?

Since the Dow rolled over, the ECB announced a trillion in stimulus (May 10), a Euro debt buy back program (June 7) with no garbage too smelly for their liking, and declared the financial crisis dead. Each announcement turned the casino higher. China said they would float the yuan and now as we pondered the bear market of last week, the Fed goosed the casino higher on July 6 after a 150 point rally faded to zero. The jumped the index 60 points in the final 10 minutes of trading. That was the first sign that the PPT was in action and determined to push the Dow. Two days later, the rally began to muddle and the PPT jacked it up 80 points in the final hour of the day storming the markets with 25% of the day's volume in that final hour. Okay fellow, we got your message. Go long and close our eyes. Reality doesn't matter. Bank earnings are great. Although, the 87th bank of the year failed on Friday. Unemployment is falling (according to the government). Although, Merck said they were laying of another 15% of the work force and Well Fargo announced cuts of nearly 4k employees. Retail sales were up. Although, some of that was due to the number of stores no longer in business so those that still are caught some extra business. And, sales tax receipts are still down from last year. I guess the stuff that is selling is the 'tax free' stuff.

Hey, what am I saying here? We now have a fledgling rally in the casino, right? Who is to argue? If anybody sees Captain Ben leave the NYSE, call me. Until then, let's rally! Oh, one more thing. In order to officially blow up the downtrend, the Dow has to surmount 10450. Heck, Bernanke can punch that through in a 10-minute buying flurry at 3:50 PM. And, you want to be there for that 10 minutes! Go Ben!

Dow YTD 07/09/10
Chart courtesy

Friday, July 2, 2010

Stock Market Review - 07/02/2010

'The' Ten Minutes

The chart below is the DIA chart for the past five days. The Dow continues to descend further into 'correction' mode and the 'hope' camp continues to lose confidence. Governments have been manipulating economic stats for so long that nobody believes them - good or bad. Today (Friday, July 2, 2010), the government announced that the US economy lost 125,000 jobs in the most recent lying period. Obama held a conference to chirp about it and reassure to oafs that if they just keep trudging, economic recovery would soon be upon them. Of course, there really isn't a need to keep trudging when the government promises to take care of health care, retirement, financial reform, food stamps, and oil spills. Unfortunately, the government has traded whatever sense it ever had for the power of the printing press. They pump out money to banks and boasts of triumphs for elected leaders. Unfortunately, our elected leaders do nothing but continue to surrender power to unelected leaders, czars, and regulators that are supposed to take care of us. Frank and Dodd authored a financial reform package that didn't even mention the two biggest kingpins of financial catastrophe - Freddie and Fannie. Letting Frank and Dodd do anything in the realm of financial reform is like hiring the Skipper and Gilligan for a three hour tour.

'Financial reform' is of course, a euphemism for more taxes. So now in addition to the health care tax, and soon to be cap and trade tax, we have a financial tax. Investors know taxes are kryptonite for economic growth so it makes sense that the indices are falling. But the fall is not easy.

Most investors are the 'buy and hold' variety and very few have the skills or savvy to short the indices. Plus, all the government intervention of the past decade has rattled the conviction of the short sellers. So, we now have a herky-jerky market. The real difficulty is that buying and selling comes in bursts. You can be right in positions for 36 hours and 50 minutes of the 37-hour trading week. But ten minutes of buying or selling can completely destroy and impact your portfolio. Those bursts of trading are no question institutional traders as the volume can testify. As such, the 'market' is no more. We now have a stock 'casino' and momentum is your friend or foe. As an example, look at the final ten minutes of trading in the chart below. The Dow was down 100 points in the morning, climbed all the way back to positive territory, and then surrendered 50 points in the final ten minutes of trading. And this trading, came on heavy volume on a Friday afternoon before the July 4 weekend. The selling was well timed and very purposeful.

The coming week looks interesting. The world governments have been trying to save the Euro as it looks poised to complete its double top and lose another 30%. The manipulators, including our Federal Reserve, have been 'swapping' dollars for Euros with the ECB so the ECB can sell dollars and buy Euros. The ECB also extended $130 billion in Euro loans to European banks. That has now ended. What will the currency do next week? In the meantime, US 10-year Treasury yields have fallen to less than 3% on their way to, I believe, 2.2%. What does that say for the stock casino? Most importantly, there does not seem to be anything that could rally the casino in any meaningful way on the horizon. This could lead to a long, hot summer of melting stocks. The trick is to be ready to pounce in one direction or another when the important ten minutes of trading hits the market. Good luck and protect yourselves at all times.

Intraday DIA - 5 days ending 7/2/10, 10-minute bars
Chart Courtesy