Friday, June 18, 2010

stock Market Review - 06/18/2010

Santa Tries to Save Europe

There is only one thing you have to know about the current stock 'market'. Well, two things. Actually three things. First, it is no longer a 'market'. Stock indexes have become the manipulated playground of the central banks intent on keeping investors' spirits high by keeping portfolios buoyed via the public investment mechanism we used to call the 'stock market'. Two, the central banks have captured the printing presses of sovereign nations. And three, stocks now move in reaction to the prices of manipulated currencies.

At the forefront of today's investment battlefield is the Euro. Excessive debt has served to run the price of the Euro down in relation to the US dollar. While the US probably leads the world in debt, the Euro has come under attack. Let's remember that the US is a bit unique in that it reports debt at a federal level. Of course, there are 50 states in the Republic that also have crushing debt loads that does not get counted in the federal debt. Therefore, we can assume that like everything that comes out of the federal government's propaganda mouth, the debt is under-reported and thus a lie.

To get to the heart of the matter, I included a chart of the Euro ETF, the FXE, below. The chart pattern is easy to identify and it is the bearish head and shoulders. The neckline crosses under the peak of the head at about 125 and that allows us to set our downside target for the FXE at 90 or .90 to the US dollar. That's about a 30 percent drop. If allowed to play out, that would imply a reactive 30% increase in the US dollar and in turn, that would drive the beloved and worshipped Dow down some 30%. Remember, there is no value in the indexes any more. They are only a function of how much money the Fed pumps in (along with their shill banks of course). The Dow is now simply a function and reaction to inflation as defined by currency value. Currency goes up - Dow goes down. Currency goes down - Dow goes up. Ditto for oil prices and all other commodities and measures of inflation.

Now you know why the battleground of the moment is at FXE 1.22. Central banks are determined to 'save' the Euro and at least keep it above 1.22 or else risk the imposition of reality forcing the FXE to .90 or below. Notice the volume at the bottom of the chart. The trillions unleashed by the ECB (and the IMF) seem to be finding their way into the Euro manipulation. After all, this is all central banks in the west do. They manipulate stock indices and currencies all day long every minute of every day. I think they at least owe the Chinese an apology as Treasury Sec. Geithner keeps babbling about Chinese currency manipulation. The bottom line is if you want to know where the indices are going, keep your eye on the currencies. Earnings and sales and all that crap are now meaningless. Besides, a good accountant can make that stuff up at the drop of a derivative anyway. The only question is will the ECB be willing to spend enough money to prop up the Euro over time? Keep an eye on the volume of the manipulators!

FXE 7 years
Chart courtesy

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