Wed SPX Recap

Although there did not appear to be any specific catalyst other than sagging foreign markets, stock futures in the U.S. were heading down a bit in the pre-market session. Key happenings today included Mr. Bernanke's testimony in front of the House Budget Committee at 10:00 am and the Treasury's 10-year note auction at 1:00 pm eastern. We didn't have any economic data to review before the open and there were no significant economic releases on the calendar today.

The midweek session began with negative futures and followed through with a small opening gap lower. After some choppy trading the SPX put the high of the day on the chart a bit before 11 am. Then sellers took the index quickly down seven points before stabilizing and trading sideways for an hour followed by an hour long bounce. But about 1:30 sellers again hit the tape once again taking almost seven points off to put the low of the day on the chart at 2:51 pm. The final hour saw dip buyers arrive and bid prices up from the lows.

Today's action may be the start of something more. But every single point the bears push down is fiercely contested as the market retraces the territory time and time again. Yet when the bulls advance the ball, they do it emphatically with unfilled gaps and strong intraday surged. 

The Dow yet again managed a positive close but it certainly appears to be an outlier. While Germany closed positively as well, the Emerging Markets and China were hammered. I know I have said this a few times recently, but the data tonight simply looks peculiar. The SPX lost less than four points but the data looks more like a 1% down day, again.

For the SPX Index there were 206 components advancing and 275 components declining. On the NYSE 3,138 issues were traded with 1,141 advancing issues and 1,883 retreating issues, a ratio of 1.65 to one declining. There were 200 new highs and 13 new lows. The five day moving average of New Highs is 234 while the five day moving average of New Lows is 11 and the ten day moving average of Net Advancing is 266. The Net Advancing data indicates a bullish trend.

Declining volume was higher at a ratio of 1.69 to one. The closing TRIN was 1.02 and the final tick was 244. The five day average of TRIN is .87 and the ten day average of TRIN is .98. The NYSE Composite Index lost -0.43% today while the SPX lost -0.28%.

For the NYSE, relative to the previous 30 session average, volume was -4.13% below the average. Of the last 15 sessions 10 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 22 sessions ended on a positive tick, 9 of last 10. For the SPX, the day's volume was 86.6% of the average daily volume for the last year. Volume was 88.9% of the last 10 day average and 105.5% of the previous day’s volume.

Market breadth was weak today. But as always, follow-through tomorrow is the key and the bears have lacked follow-through for six months. But notice that the broad NYSE Composite Index underperformed today.

Total tick for the day was -13,000 and the average tick for the day was -8. There were 25 ticks greater than 600 and 87 ticks more extreme than -600. There were 2 ticks greater than 1000 and no ticks more extreme than -1000. The tick action suggests institutional distribution.

Volume picked up a bit today (not much though) and the intraday pattern clearly shows spikes in volume on the downward moves. Looking at the Nightly Breadth Indicators this evening is clearly again showing a mixed bag of indicators suggesting at least another day of choppiness ahead. Worth noticing is that the percentage of stocks above their 40 and 200 day averages continues to fall. As bullish as this market continue to be, this doesn't seem bullish.

Looking for a target near 49

Sectors stronger than the SPX for Wednesday:

- Industrials -- Outperformed the SPX by +32%.

- Technology -- Outperformed the SPX by +16%.

- Consumer Staples -- Outperformed the SPX by +45%.

- Utilities -- Outperformed the SPX by +27%.

- Health Care -- Outperformed the SPX by +5%.

- Consumer Discretionary -- Outperformed the SPX by +95%.

Sectors weaker than the SPX for Wednesday:

- Basic Materials -- Underperformed the SPX by -51%.

- Energy -- Underperformed the SPX by -93%.

- Financials -- Underperformed the SPX by -37%.

The Real Reason Bernanke Funnels Trillions Into Wall Street Banks

We've been over the numerous BS excuses that US Dollar destroyer extraordinaire Ben Bernanke has made for QE enough times that today I’d rather simply focus on the REAL reason he continues to funnel TRILLIONS of Dollars into the Wall Street Banks.

I’ve written this analysis before. But given the enormity of what it entails, it’s worth repeating. The following paragraphs are the REAL reason Bernanke does what he does no matter what any other media outlet, book, investment expert, or guru tell you.

Bernanke is printing money and funneling it into the Wall Street banks for one reason and one reason only. That reason is: DERIVATIVES.

According to the Office of the Comptroller of the Currency’s Quarterly Report on Bank Trading and Derivatives Activities for the Second Quarter 2010 (most recent), the notional value of derivatives held by U.S. commercial banks is around $223.4 TRILLION.

Five banks account for 95% of this. Can you guess which five?

Original Source

Euro hit by debt worries

LONDON (AP) -- Stocks traded lower Thursday after Wall Street's recent rally ran out of steam and the Bank of England kept interest rates on hold. The euro, meanwhile, was shaken by renewed jitters in Europe's debt markets, where Portugal's borrowing costs spiked to a new euro-era high.

The main scheduled event of the day was the Bank of England's interest rate decision.

Though its decision to keep its benchmark rate unchanged at 0.5 percent was largely expected, there had been some speculation in the markets in the run-up to the decision that the Bank might raise rates. That speculation has supported the pound in recent weeks, particularly against the dollar. Higher rates attract investors to a currency because of better returns on interest-bearing investments.

Despite recent figures showing that the British economy shrank by 0.5 percent in the final three months of 2010, there are worries within the rate-setting Monetary Policy Committee that inflation is getting too high due to sharp rises in energy and commodity costs -- in December, the annual rate of inflation spiked to 3.7 percent, way ahead of the Bank's target of 2 percent.

Original Source

Friday Recap "A look inside the market"

Foreign markets were higher overnight but all eyes were focused on the jobs report. The Labor Department reported that Nonfarm Payrolls rose in the month of January by just 36,000. This was well below the consensus estimates for an increase of 142,000. The private sector showed gains of 50K jobs, which again was also well below the estimates. However the November/December reports were revised higher by a cumulative total of +121K jobs. The big surprise in the report is the nation’s Unemployment Rate dove to 9.0%, which was well below the expectations for a reading of 9.5% and December’s level of 9.4%.

This report is a head-scratcher (thats sarcasm ladies and gentlemen) for sure as the data appears to be contradictory (err BOGUS). It was the largest two-month decline in unemployment rate since 1958. Private sector employment has now grown for eleven consecutive months (yeah right). But the participation in the labor force has dropped to a 26 year low as discouraged job seekers have given up looking for work. While this improves the unemployment numbers it does nothing to improve the economic outlook for the country.

The final session of the week began without a significant gap, quickly moved down four points, bounced and recovered, and then moved down almost six points to put the low of the day on the chart at 11:05. Then, as we have seen so often recently, the morning low gave way to a slow creep higher throughout the day as the buying any dip continues to be the trade. The session and the entire week closed at the highs.

This market has shown a remarkable resiliency(LOL). Not even a world crisis can shake the dip buyers for more than a few hours. Yet Friday’s market internals were about as odd as we have seen. The entire session was ruled by institutional distribution yet we once again saw the low volume force the indices slowly higher. The NYSE tick action was easily the most negative we have seen on an up day.


The SPX gained 34.53 points during the week. The range for the week was 34.50 points, 2.7% as the week opened at the lows and just missed closing at the high. The four week RSI of the four indices (SPX, Dow, NASDAQ, and Russell 2000) is 78. When the market repeatedly moves into overbought territory it is a sign of an extreme bullish trend. The largest market moves come at these extremes. The four indices have not neared oversold territory since the first week of July. We have to be aware of the fact that when so much money is being pumped in that I think these technicals just don't matter. Its becoming an exercise in stupidity to keep up with this. Just throw your money at anything you want its all going up, damn the debt just buy! buy! buy! The Dow will be at 40000 soon enough. But it'll cost you 10$ for a gallon of gas.


For the SPX Index there were 305 components advancing and 175 components declining. On the NYSE 3,132 issues were traded with 1,481 advancing issues and 1,536 retreating issues, a ratio of 1.04 to one declining. There were 221 new highs and 12 new lows. The five day moving average of New Highs is 201 while the five day moving average of New Lows is 11 and the ten day moving average of Net Advancing is 410. The Net Advancing data indicates a bullish trend.
 
Advancing volume was higher at a ratio of 1.08 to one. The closing TRIN was 0.89 and the final tick was 709. The five day average of TRIN is .99 and the ten day average of TRIN is 1.16. The NYSE Composite Index lost 0.01% today while the SPX gained 0.29%.
 
For the NYSE, relative to the previous 30 session average, volume was -4.56% below the average. Of the last 15 sessions 13 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 20 sessions ended on a positive tick, 9 of last 10. For the SPX, the day's volume was 86.5% of the average daily volume for the last year. Volume was 84.4% of the last 10 day average and 89.5% of the previous day’s volume.
 
SPX breadth was stronger than the overall market breadth as the NYSE posted a declining ratio but with advancing volume. Overall volume was light.
 
Total tick for the day was -10,000 and the average tick for the day was -6. There were 7 ticks greater than 600 and 65 ticks more extreme than -600. There were no ticks greater than 1000 and 3 ticks more extreme than -1000. The tick action suggests institutional distribution SOLD to the unsuspecting retail mom or pop investor. 
 
Intraday volume clearly spiked on the morning down move and tapered off during the end of session rally. The Nightly Breadth Indicators are extremely mixed but worth noticing is the continued decline of the percentage of stocks above their 40 day moving average and above their 200 day moving average.





Sectors stronger than the SPX for Friday:
- Industrials -- Outperformed the SPX by +13%.
- Technology -- Outperformed the SPX by +36%.
- Consumer Staples -- Outperformed the SPX by +30%.
- Health Care -- Outperformed the SPX by +18%.
- Consumer Discretionary -- Outperformed the SPX by +41%.
 
Sectors weaker than the SPX for Friday:
- Basic Materials -- Underperformed the SPX by -27%.
- Energy -- Underperformed the SPX by -40%.
- Financials -- Underperformed the SPX by -31%.
- Utilities -- Underperformed the SPX by -105%.

Time for people to wake up!

You can't find a parking spot at malls, people are feeling really good about their 401K's. The financial media are acting like cheerleaders for the markets as the SPX makes new highs almost daily. 


So how high will gas prices have to get before people notice something is wrong? How high will copper, meat, wheat, and other goods we use( $CCI, commodities index is at all-time highs)? How many banks will have to go under (a few go under almost every month)? How high will unemployment have to rise? How many cities will have to go bankrupt (23 cities are on the verge of bankruptcy)? 


How much debt will we have to accumulate before people stop lending us money (buying our bonds)? Our government's deficits are out of control. Our national debt has doubled since 2005. We've borrowed more money in the last five years than we had in the entire history of our government until then. The first $1 trillion deficit came in 2008 – and the government explained it away as the consequence of the financial crisis. But we racked up another $1 trillion deficit in 2009 and yet another in 2010, to allegedly promote job growth and stop deflation etc. We're running almost a trillion a year in deficit spending and there is no end in sight. 

Running all this debt would be so bad but we just can't raise enough money to pay it back. The government cannot increase tax revenues enough to cover our spending or repay our debts, EVER. Our annual deficits have become completely unlinked to taxes. Total federal income taxes and corporate taxes generate $1.1 trillion a year in revenue, and we still ran a $1.3 trillion federal deficit last year. So even if we increased tax revenues by 100%, we would still have fallen $200 million short!

So where is all the money going 1. Special-interest groups, particularly government unions are  have completely hijacked government spending. We now spend $200 billion a year on federal pensions. 2. We're spending another $450 billion on welfare, what created most of the folks on welfare (Tech bubble, Housing Bubble, Financial Crisis, all thanks to our government, particularly the Federal reserve). 3.Our defense spending ($700 billion), exceeds total federal tax revenue and leaves nothing to pay the $200 billion in interest on our debt, nothing to pay for actual government services (like roads), and nothing to pay towards the inevitable Social Security/Medicare shortfall.

We're now also printing money to support the government's runaway spending, the Federal Reserve is now continuously buying government debt (Peter to pay Paul). This process was commonly called "monetizing the debt". The way they are doing it incredibly funny (not Ha Ha funny). They allow big banks, say like Goldman Sachs to borrow money from the Fed at ZERO, with that money Goldman buys Bonds and then for a handsome profit sells the FED the same bonds. WHAT?!? 


Yes, this is happening, right here in America (where is the Media, probably checking to see what Charlie Sheen's doing). I know what you are thinking, surely this can't happen in an open democracy like the US. surely were talking about some third world country. Its crazy right?  


Then you might ask, whats' the harm in printing more dollars, the fact of the matter is that its devaluing our currency (And it could have been worse for it not for the problems in Europe and Japan), leading to inflation in the price of everything you buy on a daily basis. Check your grocery bills, your heating bills, prices at the pump, college tuitions, healthcare, everything is up year over year. 


Total debt outstanding in the U.S. currently exceeds $55 trillion. That's $681,165 in debt per U.S. family. There is simply no way to repay (or even maintain) debt this huge using the income of the average American family, which is slightly less than $50,000 per family per year. Interest alone on these debts (based on a 5% rate) would total $34,000 per family every year. Total debt in the U.S. economy is unsustainable and can't be financed without printing vast new sums of money.


Despite all the evidence that the U.S. economy carries far too much debt, both public and private debt issuance soared to new record levels in 2010. ,  Overall, more than $3 trillion in new corporate debt was issued last year – the second record year in a row.

And junk-bond issuance set a new, vastly higher record. In 2010, 509 speculative-grade corporate borrowers sold $287 billion worth of new debt. That compares to the previous record (2009) of $167 billion. 

So what do you do to protect your self? Look I am no expert on the economy, I don't have a business degree, so I can't tell you what to do but I can tell you what I am doing and that is buying precious metals (on dips, right now we have had a decent correction and its a good time to buy), holding the metal is the best way to play this but you can buy the mining ETF's (GDX or GDXJ) or GLD(gold) or SLV(silver). There is a caveat to GLD and SLV though and I am not clear on this so do your own homework, there seems to be a dislocation between the amount of gold and silver they actually hold versus the amount of money people are putting into the trust. As we all know there are no crooks on wall street so these guys could like Enron actually hold nothing or fake numbers and we all know the SEC boys aren't the sharpest tools in the shed.


In any case, I would buy silver over gold as Silver has more uses than Gold and is in shorter supply and will rise greater in percentage terms over gold in the next few years. Another thing to do is to buy commodity related ETF's I own DBA(Ag), and MOO(Fertilizer) as well as the XLE(Petroleum) and URA (Uranium).


Since I began writing this blog even with a big correction in gold and silver the Blog portfolio is up 31% as of this am.