28 FEB 2010, Sunday

1. Above chart from John Hussman (http://www.hussmanfunds.com/rsi/yieldsinflation.htm).  It plots the historical monthly Volatility of Inflation (consumer price index) against the Price / Earnings ratio of the stock market.
2. Basically, higher inflation volatility tends to create investor uncertainty which leads them to reduce (sell) stock exposure resulting in lower stock prices (P/E ratio).  Makes sense right?  Heck, if you blur your vision a little you'll see that the relattionship tends to behave in a well contained "L" type curve.
3. But six data points stand out as unusual (even if they weren't colored red).  And those points just happen to be the most recent 6 months of data.  
4. I only post this as another demonstration of how we are not in normal times at all.  Those "errant data points" indicate a sort of "No Man's Land".  Perhaps indicative of the past 2 years of FED pumping???  Interesting!
5. This weekend I mulled over a lot and I think it largely comes down to the answer to this question, "Which will be the influence on our economy going forward for the foreseeable future: deflation or inflation?"  The answer (and timing) holds the key to investment success over the next 5-7 years.
6. Many think inflation because:  1) the Fed has printed a ton of money and 2) we always have inflation when that happens...no?  Yes, it has worked that way for most of our memories but that is definitely not the way it always works.  Sometimes, unforeseen shocks can overwhelm situations that would ordinarily have very predictable outcomes.  For example: what if the Greece implodes and the Euro is perceived as in jeopardy...enough so that people seeking safety rush into the US Dollar.  Pssst....stronger dollar is not inflationary.  Who knows...just an example.
7. At the risk of saying "this time's different"...I still lean toward deflation.  Reasons:  1) credit expansion / loans were not backed by true value only "hoped for" value, 2) loans on banks books are currently underwater and will get worse (FED/Congress bought time but things have gotten worse), 3) deteriorating banks will seek to maintain loss reserves which will prevent them from lending to anyone except the US Treasury (now you know who's buying all the bonds...you are or at least your bank is with your money), 4) individual consumers and businesses don't want to borrow even if they could right now due to economic uncertainty and current debt servicing burdens, 5) taxpayers will not support additional federal stimulus and 6) states / municipalities can't print money, will no longer pray for federal stimulus and instead will actually have to cut spending or raise taxes but both take money out of the system. 
8. As "in system" credit shrinks there is less money and fewer buyers willing to bid for assets.  Prices have nothing left to do but fall...eventually seeking a level at which buyers are sufficiently interested to bid aggressively enough to finally put a price floor in.
9. Just a thought for a Sunday.
10. As to current action...choppy, sloppy go nowhere week (click the SP500 1Yr Daily on sidebar).
11. But at least we have some tighter pivots to watch at 1112 and 1086.  Let's see what happens this week.  

27 FEB 2010, Saturday

1. Well...they're up to it again.  The Securities and Exchange Comission (SEC) is out to "Get Shorty" again.  
2. Heck, you know they've got to paint the shorts as evil vice the failed companies that are on the road to oblivion (those poor hapless victims like Enron, Worldcom, Bear Sterns, Merrill Lynch, Countrywide, GM, Chrysler, etc, etc, etc). 
3. Anyway, a little history first.  Back in JUL 2007, the SEC removed the uptick rule that had been in existence since the 1930's.  This rule required a stock to have an uptick before anyone could sell it which did tend to slow the selling pressures.  Well, when that happened I took notice and asked the obvious, "Why are they doing that?  And, especially, why are they doing that now after 5 years of an up market and we're at all time high's?"  Well, the answer to me was "Da Boyz" had just changed the rules and were getting ready to play a new game.  Now , they could just pile on and submerge a stock with continuous selling.  And play they did!  Da Boyz didn't care about shorts then but....
4. So then after the market is getting the crap beat out of it in summer 2008, the SEC institutes the "no short sales on financials" ruling.  They were trying to force the shorts to cover and provide upward buying pressure..which didn't really amount to much.  And when the final downward drive in October happened, there were no shorts to cover and provide buying pressure so the market just kept falling until people with titanium steel balls (and pockets as deep as the TARP legislation) said enough and stepped up to buy. 
5. Well, they just passed a new uptick rule this past week.  In my opinion it's just for show because of the way it's constructed but....It's still a change so I take notice.  Anyway, the rule says no short selling after a stock has gone down 10% in a day.  Kind of stupid because who the heck would short it then?  Most traders would be hesitant and expecting some sort of reaction / bounce to short instead.
6. The only advantage that this might be to Da Boyz is with regard to the leveraged ETF's which could potentially get all jacked up with tracking errors in a short sale limited straight line fall?  But the inverse leveraged ETF's would be going upward in value so how would that play out?  Don't know...just thinking outta da box. 
7. The heck with this...it's early Saturday...time to enjoy some weekend!

25 FEB 2010, Thursday

1. The after hours nonsense seems to be back...here's an article from late DEC 09 that described its effects last year.  Traps people who held overnight on wrong side and makes it very difficult to get onboard during regular trading hours for fear of getting slapped very hard without warning in a vicious snapback. 
2. And what do you know about today, big gap down in morning...chopped around very tightly for hours and then late afternoon produced the vicious snapback rally.
3. Yeah...the market is rigged.  It's unfortunate but the innocent people who are treating the stock market as a "one direction high yield bank account" with their IRA/401K's will be completely disabused of that notion eventually. 

24 FEB 2010, Wednesday

1. Above is today's action...for now, price seems to be trapped at the NOV-DEC highs, struggling with the 90 (green) & 50 (red) moving averages and the RSI (purple indicator at bottom) can't get much above 60.
2. What's interesting is if you look back at the 2007 peak and subsequent action...compare current indicator and moving average configurations to the DEC 2007 time frame.  Do you see what I'm seeing?  Does that time frame look similar to current?  Does to me.  Brief push up past recent highs then rollover in early MAR?  Dunno.
3. Again, market is playing monkey in the middle and I'm the monkey...could go either way.  Currently, intraday trading.
4. Blast from the past...In 2005, Democrat Senators rail about how the majority (Republicans) might unjustly use the reconciliation method to bypass the minority.  Wait a minute...wait just one second!!!  So what's different now?  Why have the Democrats flipped on this obviously strongly held principal and are now ready to ramrod healthcare through using reconciliation???   
5. Sooo...vote for Obama-care....FREE LUNCH FOR EVERYONE!!!  We'll just pass the bill to our kids and grandkids...Freaking priceless and unbelievable.

23 FEB 2010, Tuesday

1. Just a reminder...the SP500 1 Yr Daily Chart (in the sidebar at the right) has the same information as above if you don't see a post.  And if there is nothing very different from my last post, I probably won't post.
2. As described last time, I'm in trader mode because it is pretty unclear right now...meaning, I can see it going either way (despite my preference).  
3. But for now, closed below the 90DMA which puts me back to selling rallies intraday.  Note: will flip again as necessary.
4. For longer term traders...something to consider is the potential for a head and shoulders pattern (right shoulder) forming.  If that's the case and it breaks below recent swing lows...projected price would be 920's.
5. Oh...and this can't be good for or indicative of a healthy economy...  Or this either... The FDIC report comes just two weeks after the bi-partisan Congressional Oversight Panel released a 183 page report that says 2,988 small U.S. banks are about to “get hit by a tidal wave of commercial-real estate loan failures”. That’s approximately 38% of the 8,000 banks in the U.S.
6. One day at a time.

21 FEB 2010, Sunday

1. Uncertain what to expect since; 1) we recently broke swing low pivots, 2) daily closes were below the 90DMA (green) ....both indicating down but then 3) price closed back above the 90DMA and 4) broke upward of the early FEB swing high pivot...one indicates up while the other merely shows side.  The confusion is a big clue which indicates sideways, too.
2. Sooo...we went from up, to down and now to sideways.  Speaking strictly with regard to market structure...To turn back up, market needs to make higher swing highs and higher swing lows.  To turn back down we need to punch some new swing lows.
3. Problem is we are right in the middle of a 10% price range between those highs and lows.
4. When it gets like this, I either sit aside and wait for more information or just day trade.  So, I'll day trade as necessary.
5. Point is...I'm going to do everything I can to avoid getting dragged to the wrong side of the trade which is exactly what "Da Boyz" want to do so they can spring their trap...but which side?  I'm still leaning toward down but have to be open minded too!
6. One day at a time.  

19 FEB 2010, Friday

1. Very short term overbought with momentum still tending upward.  Been playing intraday because I'm worried about getting my hand slapped and...
2. After hours yesterday (before Options Expiration), the Federal Reserve raises the discount rate.  Within seconds the market was down 1%.
3. Yup!  Dat's how dey roll!  Da Boyz are back in town....Da Boyz are back. 
4. Below...Sustainable??? 

17 FEB 2010, Wednesday (Part 2)

1. Zoomed in a little on the chart.  Had to so that you could see today...tiny, tiny, tiny!  Not much movement.
2. For long term traders...ask yourself one question..."How queasy did that 9% drop make you feel?" If more than you liked, you've recovered half of that drop...perhaps consider lightening up on rallies and sit out for a little while.
3. Nothing changes from yesterday...we're at somewhat of a "fork in the road" in my mind. I will be alert to whichever way it wants to go and be prepared to flip as quickly as necessary.

17 FEB 2010, Wednesday

1. Above pic demonstrates my point from last night's post on how nothing has been fixed and it will take a long time.  In fact, alot longer than the average person can even imagine.
2. The graph above is from an economics study of massive credit contractions throughout history and across all countries worldwide (if you want to read the report I can probably dig it up).  The writers of the study found a common pattern across all instances and arrived at the above "road map" to recovery. 
3. It's just one of the reasons I'm not buying into the "we're back on track" bullshirt.
4. For example...sure seems to me that we just had the rally.  No?
5. Below is just a reminder of long term history.  The bad news is that we may have a ways to go still in the flat to down "red" window.  The good news is that folks my age may get one of those multi year booms to aid retirement funding...when we need it.

16 FEB 2010, Tuesday

1. Good size upmove...right up into the NOV-DEC range lows, the early FEB pivot high and challenging the 90DMA (green) from underneath and 50DMA (red) still above price. 
2. Things can change fast...both ways.  For example; bearish sentiment rose quickly during the recent swoon.  Was it a shakeout?  Dunno...only future price tells the tale.  You only know what has happened and make your best guess of what might happen.
3. The move down from JAN, broke pivots and made lower lows.  Will this rally result in a lower high?  Technically, the rally could retrace a large part of the downmove and then rollover to place a lower high.  It could also stop in the current vicinity.
4. Sooo, with uncertainty what it is...I intend to be very nimble and trade, as necessary.  MAR 09 and on was filled with non-stop upside surprises with a large portion of the up moves happening in the overnight trading (ie, massive screw job by Da Boyz...please don't do it in reverse).  I remember that and as the Who sang, "I won't get fooled again."  Instead, I will stay with the flow as best I can even if that means flipping sides quickly while Ms Market tries to sort this out.
5. My biggest problem is that I don't believe that any of the problems that caused the OCT 07 - MAR 09 down move have been fixed.  If anything, it's been made worse despite markets "broadcasting" that all is well.  I, personally, think it's an illusion.  BUT, there's always a but, it does make the major point that the market does not necessarily reflect economic fundamentals.  They can disconnect and you have to trade the market you have or be willing to stand aside...period.
6. Below, for giggles, is a chart of the early 1970's move compared to current action. 

 

15 FEB 2010, Monday

1. Markets closed on Monday for holiday.
2. Tough call.  Daily has worked off its oversold while the weekly still points down.
3. Times like these...I'm happy to be able to trade the intra-day moves.  That way I can follow price whichever way it wants to go.
4. OK...so when forced I still lean toward more downside (below the 90DMA) but still leary of bounces...1085-1095???  Or rollover here?  Tough...Da Boyz do their work well, indeed.
5. One day at a time.

14 FEB 2010, Sunday

1. Happy Valentines Day...tell those you love most what they mean to you!
2. It's all that matters in the end.

9 FEB 2010, Tuesday

1. Daily closes below 90DMA (green) lean me toward selling rallies intraday while looking for 2-7 day rallies to potentially position short for a swing trade.  (For example; dips in bull markets, the RSI (purple indicator line) tends to find support between 40-50...while rallies in bear markets, the RSI tends to find resistance in the 50-60 area.  Just guidelines but additional clues as to environment.)
2. As mentioned in previous posts, weak action...bounces are next to nothing right now.  But, intraday, even those tiny bounces relieve oversold  temporarily and allow for further downside.  Currently, behaving like the MAR rally...only in reverse.  Sure hope that crap ends.  Still thinking some bounce more likely but ya never know...thus I'll stick to intraday for now.  Recent 60 minute chart below for grins.
3. While waiting....trying to remind myself...One day at a time.

7 FEB 2010, Super Bowl Sunday

1. First and foremost...Congratulations to the New Orleans Saints for their tremendous upset victory.  I think about 85% of the country thought they'd lose but wanted them to win...I was among that crowd.
2. Soooo...Who Dat?!!
3. Cool...perhaps we're finally going to see some orange suited perp walks amongst the "Banksters" as they start to cut deals and roll on one another to save their own sleazy hides.
4. Chart below...tough to call near term direction after that late Friday recovery.  Could just as easily bounce a quick 2-3% as fall the same.  Small bounce is probably more likely in my opinion.
5. But, overall, I'm trying to look for opportunities in sync with the intermediate term which seems to be down.  This was my failing during the upmove...didn't trust the pump job, resisted the intermediate trend (IT) and, in doing so, just made it way more work (ie, daily trading) than it needed to be.  So, right now, I'll be watching for reasonable 2-7 day rallies to short.
6. However...always a but...current scenario slightly resembles the JUL-AUG 07 drop which briefly turned the IT down and then price rallied (turning IT back up) for 2 months to a slightly higher high...the ultimate high...in OCT 07.  Just trying to stay alert to all possibilities and why I follow with...
7. One day at a time!  Trying to stay in tune with the flow.

4 FEB 2010, Thursday

1. So, last evening my computer goes down.  Well, the monitor anyway. 
2. Oh well...got a new monitor once my son returned from school today but talk about a bad day to be out of business when in short mode.  The way it goes.
3. Anyway, was surprised to see today down as hard as it was...thought we'd see a little more short squeeze then we got.  News on European sovereign debt was overnight news and then increased unemployment claims this morning.
4. Wednesday, seemed like there was a lot of HFT action going on...still wondering if Da Boyz take this down like they took it up.  Who knows...One day at a time. 
5. Just an updated chart below.

2 FEB 2010, Tuesday

1. Comments on chart...click it.

1 FEB 2010, Monday

1. My fear...the consequence of complacency will be catastrophe.  Cheney said, "Reagan proved that budget deficits don't matter."  What an idiot!  I'm afraid that all politicians are clinging desperately to that concept with all the hope of their political futures.  However, the thing they miss is that the overall debt loads way back then were so much smaller than they are now.  These are different times requiring a different approach.
2. Here's an alternative...A Roadmap for America's Future.  Submitted for your consideration!

31 JAN 2010, Sunday

1. Appears that Intermediate trend has changed to down.  Short term oversold.
2. Looking to short rallies.

26 JAN 2010, Tuesday

1. Two quiet days...waiting for Obama's speech?  Wednesday's Fed announcement?  Bernanke's confirmation?
2. It is where it needs to stop if it is to resume the uptrend or where it needs to break to indicate a downtrend...or is it just going to become a broad swinging sloppy sideways on the longer time frame?
3. How's that for definitely non-committal?  But that's where it is.  It is what it is.
4. With sentiment where it is (bulls conditioned to buy every dip) and the NYSI turned down I favor the downside.  But very short term oversold makes it difficult to press...unless watching it like a hawk.
5. If it breaks, it's likely that the trend has changed.  Next level seems to be 1030.
6. If it bounces upward from it's current area...I'd like to see what it does in the 1115-1125 area for possible intermediate short.
7. I sure hope that "Da Boyz" don't throw this thing into reverse down in a similar manner that they did to the upside since MAR 09.  That would screw both the bulls looking to get out at better prices...and bears looking to get in at better prices. 
8. One day at a time!

23 JAN 2010, Saturday

1. Weekend reading list for those so inclined...
2. Get your geek on people and read this lengthy but crucially critical treatise on what we are truly up against...despite the pleasant respite recently enjoyed with the upward stock market rise.  John Mauldin sums it up pretty well.  Basically, too much debt with excess industrial capacity tends to lead to deflation not inflation.  This conclusion is drawn from a historical analysis of previous overleveraged economies around the world throughout time...despite people wanting to claim "this time is different"...the single most dangerous phrase in finance. 
3. The California Gold Rush has officially ended...CA is Broke!  How did they get here?  Due to under-taxing or overspending???  I know where my vote falls.  They really need to face facts and buckle down or...just shut up, quit looking to the taxpayers of other states to bail them out (who have their own budgetary problems) and enjoy their misery.  Oh, one more thought...the US is fast headed in the same direction.  Will we require our leadership to move toward corrective action soon enough to avoid the outlandish consequences?  History says "No" and that they will merely seek a way to kick the can down the road.  At some point, they will find that the can has been filled with cement and they will stub their toes...painfully so!  I hope "This time is different"...the single most overused phrase in the history of mankind.
4. John Stossel does a wonderful recap on President Obama's campaign promises versus the reality of his first year in office.
5. Dayum!  Three down days and the Fed's are already starting their hunt to kill the shorts...again???  When they did it in SEP 08, it just accelerated the downside because the built-in buying to cover shorts had been eliminated.  Will they never learn?  This is really getting old...but perhaps it gives a little insight to what may lay ahead once all the "propping up" is exhausted.
6. One more just to complete the nonsense...Global Warming news flash...scientist who provided claim, to UN Nobel prize winning global warming report, of Himalayan glaciers to be completely melted by 2035 admitted last night that the supporting data was unverified yet the statement was still put in the report to...wait for it..."put political pressure on world leaders."  And the hits keep coming...email-gate, fraudulent computer modeling, tortured data, complete omissions of "inconvenient" data and now this!!?  Enough already!  Time to open full and complete investigations to get to the bottom of this hoax...identify the people involved, prosecute and punish top to bottom...and don't forget the soon to say "we're horrified" political cronies that have been involved in this fraud!
7. Here's a Global Warming Sanity Check: 2008 & 2009 were coolest years since 1998.  Wait a minute, we evil humans have still been doing our carbon thing non-stop so shouldn't the temperature be "hockey sticking" upward unrelentingly?  Al?  Anyone?  Oh yeah another item tucked in there..."Since 1998, according to NCDC’s own figures, temperatures in the US have been dropping at a rate of more than 10 degrees F per century."  Crap!  Prepare to here about the coming ice age next.  Hmmm...perhaps that is why we're hearing the phrase "climate change" now instead of "global warming."
8. Here's a good one...weren't we supposed to be getting more frequent hurricanes???  And how come we had more hurricanes annually long before the "hottest decade in history"???
9. Psst...remember...the debate is over, the science is settled and there is a consensus...about, er, something or other.

22 JAN 2010, Friday

1. Yeah, baby, yeah!
2. Good news for bears seems to be playing out the past few days...intraday trading has become much easier...path of least resistance was definitely down.
3. Currently in an area where it should begin to slow/stabilize and attempt to recover some of it's recent losses.  If it doesn't, and instead keeps going lower to break the NOV-DEC bottoms, some solid technical damage will have been done and could finally be building an Intermediate Term change.
4. So, what may happen...hold those pivot lows discussed above, then rally back toward SP500 1120 area then down toward 1050?  Dunno...no one knows with certainty.
5. First chart below is daily with some comments...second is the daily scrunched up so you can compare price to moving averages and indicator swings over time for comparison's sake.
6. One day at a time!

21 JAN 2010, Thursday

1. Wow...some follow through!  But it dropped right into the old highs for support and the 50DMA and some very short term indicators are already oversold but they can get more oversold if this is more than just a correction.  One day at a time!  Let's see how this plays out.
2. See that...Upmove has been relentless and has made even diehard bears cautious...maybe that's a positive for the downside...LOL.
3. Intermediate term still up...we'll see how support holds.

20 JAN 2010, Wednesday

1. Choppy railroad track days...waiting for a decision.  Would love to see it break out to the upside and then fail.
2. So, how to make the markets more interesting?

19 JAN 2010, Tuesday

1. Still tending upward.  Additional comments on chart.
2. Short term...Starting to chop sideways similar to the JUN and OCT timeframes...perhaps I'm looking too hard.  Both those occassions looked good but were bear traps.  Although, with sentiment and overbought not really getting relieved...makes me think.  Watching NYSI: daily showed a downturn on Friday but upturn today, weekly still up.

16 JAN 2010, Saturday

1. Happy Birthday to me!
2. Interesting video about people having had enough fo the current Washington DC games.  NOTE:  It has been taken down from YouTube several times already...and put back up by other posters.  Interesting...why and who keeps taking it down???  Freedom of speech infringement?  Who knows...if it's there...enjoy!
3. Well...Con-gress is back in town and will commence hurtling toward the edge of the cliff once again.
4. Gosh, I hope Scott Brown wins the Massachusetts Senator seat (Kennedy's old one) and brings some much needed gridlock to allow our illustrious leadership to slow the heck down and actually think about what they are doing both short and long term.
5. Consider, just for a moment please....

What if the current level of reduced tax revenue to government, at all levels, is closer to the norm of what we may expect over the next 5-7 years??? What true plans, not just "papered over and passed on" plans, are being developed to prepare for that possibility?  This is the nightmare scenario that we will face if the Bond Market finally says to Uncle Sam "Oh no...no mas!" regarding the ongoing ridiculous deficit financing.  At that point the Federal government will force all IRA's, 401K's and all pension plans to purchase 100% US Treasury Bonds.  Can't happen?  Already has...two that come to mind from the 1990's, South Korea (seized all citizen's gold also) and Argentina (hell, the government just took all the money).  We are not immune from financial reality merely because we are America!  Please do not delude yourself or go ostrich when, instead, you need to be as active as you can be.  Anyway, read on...

Below excerpt picked up from Heritage's blog but completely sums up my thoughts....

Harvard’s Stephen Goldsmith has discussed why it’s time for all levels of government, from local to federal, to come to grips with the fact that today’s budget deficits are not a short-term byproduct of the recession. Rather, deficits are due to the long-term dilemma of big government which makes massive promises of public services that it simply can’t pay for. Judging from the agenda of the current Congress, this is a problem which is on the verge of exacerbation, rather than extermination.

To truly address the growing federal deficit, lawmakers must abandon past strategies for addressing economic downturn. Says Goldsmith, “We need to break out of our old patterns of thinking and break some old habits.”

First of all, federal aid for the states will not cure, but simply delay the effects of, state budgetary trouble. The stimulus bill exemplifies this point. Federal dollars provided short term relief, but will force state budgets into the red when federal aid ends. This does nothing but prolong needed change.

Secondly, deficit spending must come to an end. Peterson and Pew Foundations show in a recent report that under current conditions, the public debt could rise to 100% of GDP by just 2022. This would inevitably lead to an unprecedented fiscal crisis. Tax increases won’t solve the problem, either, but would instead stifle economic growth and place heavy burdens on Americans already struggling to make ends meet. Lawmakers must resist the urge to delay the effects of the growing deficit until sometime down the road when someone else will be in office to deal with it. The devastating effects of out-of-control government spending can be averted if elected officials take responsibility and address the problem now.

Finally, state and federal legislators and the public alike need to get serious about the financial crunch the country is facing. Short-term fixes, like hiring freezes and employee furloughs, are not enough to address the issue at hand.

Rather than continue to throw small solutions at a big problem, it is time for the United States to rethink the public sector. The reality is that government’s promises to the electorate are unsustainable in the long-run and will drive the country to ruin if left unaddressed. As Goldsmith puts it, “Like it or not, fiscal crisis is the new normal.”

Oh...and to you military pensioners out there, consider this...FDR passed The Economy Act of 1933 that cut the salaries of federal workers and reduced benefit payments to veterans (by 40%) while intending to reduce the federal deficit in the United States.  The Economy Act had little effect on either the federal deficit or the economy since spending in other areas rose so substantially that it dwarfed the cuts imposed by the Economy Act.  Of note, within a few months Congress and the President slowly and incrementally added benefits back over a period of two years.  It has happened here!

13 JAN 2010, Wednesday

1. Holy Crop! 
2. Someone with really, really, really big pockets wants the SP500 futures market up.  Ordinarily, about 5-8,000 contracts trade each minute.  At 12:03 EST today, 230,000 contracts traded in 1 minute!!???
3. Hmmm...bad data?  Who the hell has that kind of firepower?
4. Was that Goldman Sachs flipping the bird to futures traders and saying "We've brought our HFT death machines to you, too."?

12 JAN 2010, Tuesday

1. What??!  A down day?  I had to call my data vendor and make sure the feed was accurate.  OK...kidding, but multi day slow grinding moves can be very frustrating.
2. My goodness...there's still hope that our young folks are paying attention and ready to act!
3. Below, now that we're in earnings season it's worthwhile to see what's occurred recently.

1. Below, commentary on chart.  It's still up.  (scratched prior short term trading commentary so as not to confuse investors).
2. I, personally, am starting to get a bearish itch again that hasn't happened since October and this is very countertrend...but I am watching for clues.  Will see how it plays out.  Solidly break below SP 1120 and stay below and I'll feel way more comfortable. 
   
3. Day by day...it's the only way!
   

8 JAN 2010, Friday

1. Living in a truly free society...good read.
2. Thoughts from John Mauldin:

The Great Experiment

So this is the backdrop as we look into the future. Unemployment is rising and is likely to remain stubbornly high (over 10%) for some time, except for the few months this coming summer when the Labor Department will hire hundreds of thousands of temporary census workers. The savings rate is rising, and consumer spending is at the very least challenged. The stimulus starts to drop sharply in the latter half of the year. States, counties, and cities are short about $260 billion and will either have to cut services (and thus jobs) or increase taxes. Housing is likely to get weaker, as there are large numbers of defaults coming because of mortgage-rate resets this year and next (more on that in a few weeks). Valuations on stocks are in the high range, and do not portend well for long-term returns.


Further - and this is the most important item to me - Congress is likely to allow the Bush tax cuts to expire and to add insult to injury with some form of large tax increase for heath care. Between the local, state, and federal tax increases, we could see a massive increase in taxes of perhaps $500 billion in a $13-trillion economy, or about 4% of GDP.


Think about that for a moment. It is likely we will begin 2011 with close to 10% unemployment, if not higher. Christina Romer's work shows that tax cuts have a three-times benefit to GDP. Tax increases presumably have a similar negative effect. (Ms. Romer, by the way, is President Obama's Chairwoman of the Council of Economic Advisors. This is not a partisan idea.)


This is the great experiment to which we are going to be subjected. There are those who agree with Art Laffer and company that tax cuts are a positive for the economy (that would include your humble analyst). And there are those who contend that the economy did just fine in the Clinton years before the Bush tax cuts and that we will do just as well if we take them away. And further, taxing the rich a little more is not really going to change their behavior.


My contention is that if such a tax increase is enacted all at once, the economy will at a minimum dip back into a nasty recession. If I am wrong, then I will have to abandon one of my long-cherished beliefs. I will have to stop arguing that tax cuts are as important as I think. Right now, when I read the data and studies, they confirm my tax-cutting bias. But I have to be willing to change my mind if The Great Experiment proves me wrong.


But if you think unemployment is high now, you will really not like what happens if we dip back into recession. It could go a lot higher. They are truly risking a great deal if they decide to pursue this experiment.


Thus, I am faced with a great deal of uncertainty as I look into the future with my forecasts - and we will get into the bulk of the actual forecasts next week. I almost titled this letter "The Year of Waiting," because there are so many important developments we are waiting on. Will they actually raise taxes in such a soft economy, or will cooler heads prevail and the increases be postponed, or at least phased in over 4-5 years? What will the health-care bill look like? There are so many things that could significantly change any predictions.


As I have written for years, the stock market drops an average of over 40% during a recession. If we go into a recession in 2011, it is highly unlikely that there will be an exception to the bear market rule. But this market seemingly wants to go higher. Smart people like my partner Steve Blumenthal argue with me that the technicals say we could go a lot higher in the short term. And he may very well be (and probably is) right.


This is a trader's market. It is not time to buy and hold large indexes or high-beta stocks and expect to be made whole over the next ten years. Hope is not a strategy. But waiting for the "shoe to drop" is frustrating, I know. However, that is the situation we find ourselves in.


The current environment is quite different than 1982, when the last bull market started. Rates were falling; they are now likely to rise over time. Taxes were going down. Valuations were at historical lows, not high and rising. Inflation was coming down. And on and on. The current environment is not one in which bull markets are born.

7 JAN 2010, Thursday

1. Slowly drifting upward.  Click chart for comments.  Tomorrow is employment report which typically makes for big days in one direction or another.  Perhaps that is what everyone is waiting for.
2. Interesting...Didn't you get the memo warning you of potential increased risk in a rising interest rate environment?
3. FDIC recommended the following stress testing ... "When conducting scenario analyses, institutions should assess a range of alternative future interest rate scenarios in evaluating IRR exposure. ... In many cases, static interest rate shocks consisting of parallel shifts in the yield curve of plus and minus 200 basis points may not be sufficient to adequately assess an institution’s IRR exposure. As a result, institutions should regularly assess IRR exposures beyond typical industry conventions, including changes in rates of greater magnitude (e.g., up and down 300 and 400 basis points) across different tenors to reflect changing slopes and twists of the yield curve."
4. A 4% interest rate spike coming?  That'd put a crimp in the economy and housing.  Would put alot of headwinds to stocks too.
   

3 JAN 2010, Sunday

1. Sentiment...things that make me nervous.  That and the market is very extended.  Doesn't mean it has to come down...just a reflection of risk environment.
2. You be the judge.  Saw this video...first 10 minutes covers general equity markets from Breakpointtrades.com.
3. Here's another slightly longer term view of retail investor bullishness.

31 DEC 2009, Thursday

1. HAPPY NEW YEAR!!!  Best wishes of health and happiness to all.
2. 2009...good riddance! 
3. And...another decade rolls into the dustbin of history, too!  Guess we were due for a weak decade after two back to back barn burners.

30 DEC 2009, Wednesday

1. Folks...please do not blow off the XMas Eve news announcement by the US Treasury to completely back Fannie Mae and Freddie Mac.  Originally, the taxpayer was to back $400 billion and now it is unlimited.  The portfolio of those two housing behemoths is close to $5 trillion dollars.  No small sum!
2. Effectively, this is a "backdoor TARP" program!
3. This tells me that the Treasury Department is convinced that the worst of the burst real estate bubble is yet to come. Why else would they be providing unlimited financial support for the two largest Zombie banks the world (outside Japan) has ever seen?
4. As we move into a new year, the stock market’s technically weak rally and the repercussions of the burst real estate will follow along. So stay flexible with your investment strategy because we could be in for another hard fall.
5. Global warming...Fantastic news!  French high court rules carbon tax unconstitutionial.
6. Also, who says the science is settled and there is no disagreement among doctorates and scientists???

28 DEC 2009, Monday

1. Interesting...breaking out?  Continue or fail?  I just can't buy this...too extended....could still run higher.
2. Things that give me the willies...
3. Good fundamental summation.
4. This shows how the after hours have been gamed...
5. To Al Gore...wanna see a hockey stick...here ya go!  Speak out against this and I'll be impressed!  This is the looting of the taxpayer...especially after the XMas Eve announcement by Treasury to cover unlimited losses by Fannia mae and Freddie Mac for the next 3 years.
6. And for those that believe the economy is improving because commodities are rising....Boom!  What happens when this deflates.  Of course it would be good for us peons wh o actually have to put gas in our tanks to get to and from work.

26 DEC 2009, Saturday

1. Well...whaddya know...Con-gress continues to do things in the dark of night to pass items (remember, Monday @ 1 AM to vote to bring the bill to the floor).  But, now they slip to new lows...Christmas Eve, after dinner news cycle, to pass the healthcare reform bill and avoid drawing anymore attention?
2. And coming in right behind them as a close second in the "we can be sleazy too" contest...US Treasury announces the Obama administration's decision to cover an unlimited amount of losses at the mortgage-finance giants Fannie Mae and Freddie Mac over the next three years which removed the previous $200 billion loss caps on each.  Prepare yourself because it's coming...the next huge bailout has now been made inevitable...the question is simply when.  I suspect it will be a slow, steadily increasing bleed just so the unwashed masses don't become outraged at a single huge announcement.
3. Which brings me to my next point....

Above picture, I just read a fantastic book that, historically, connects all the dots regarding the mess we're in and how it will continue to result in rolling crises / taxpayer bailouts until government once again frees the free market instead of attempting to coerce the markets into unsustainable and market deforming political mandates. Below is a review of the book....HIGHLY RECOMMENDED (Warning: you will be absolutely sickened by the long slow motion trainwreck that we are still on)!!!  I truly hope you read it...if it's not at your library, ask your librarian how to get it through the Inter-Library Loan system.

Architects of Ruin, bestselling author Peter Schweizer describes in riveting detail how a coalition of left-wing activists, liberal politicians, and "do-good capitalists" on Wall Street leveraged government power to achieve their goal of broadening homeownership among minorities and the poor. The results were not only devastating to the economy, but hurt the very people they were supposedly trying to help.

Built slowly, over decades, and agressively expanded in the mid 1990's....The story begins in the 1960s with Saul Alinsky, the legendary Chicago rabble-rouser who trained his acolytes in highly aggressive techniques of community activism. Alinsky's disciples—along with race-baiting activists like Jesse Jackson—seized on the "redlining" controversy of those years to argue that banks were guilty of racial discrimination. In the 1970s, with the help of liberal senators like Ted Kennedy and William Proxmire, legislation was passed that put bankers under the thumb of local activists.

In the Clinton years, a new generation of liberal technocrats came to power in Washington and on Wall Street. Schweizer describes how a powerful phalanx of elite liberals, including Bill Clinton, Robert Rubin, Andrew Cuomo, Barney Frank, Chris Dodd, Janet Reno, Deval Patrick, Henry Cisneros, Barack Obama, Nancy Pelosi, Ted Kennedy, Charles Schumer, and many others, aggressively pushed banks to make trillions of dollars in loans to individuals who should never have received them.

Meanwhile, Clinton forged a new form of state capitalism in which the big Wall Street financial companies were repeatedly bailed out—with their profits intact—from a series of costly errors, leading them to take ever larger risks. Both financial policies had profoundly distorting effects. The result was the bursting of twin bubbles in mortgages and mortgage-backed derivatives, in turn leading to a global economic collapse.

This tale of liberal "Robin Hood capitalism run wild" has never been told. But more than just a story about the past, it is also an urgent warning about the future. For today, the very same people who planted the seeds of the collapse are back in Washington, tasked with cleaning up the mess and determined to use the crisis they caused as cover for a massive overhaul of the American economic system.

These people have learned nothing from their past mistakes and are busy applying the same methods to other sectors of the economy—health care, the auto industry, real estate (again!), and above all the promotion of "green" technologies—inflating bubbles that are sure to bring about another crisis. Ordinary Americans who foot the bill for the last state-capitalist bubble have reason to be afraid—very afraid—of the inevitable result.