Living Inside a Broken Clock: Thursday, Dec. 31, 2009.

by gmak

Happy New Year, or other Pagan festival of your choice!

Here is the game being played by Treasury, the FED, FCBs, and the political uberclass. It can only end in tears.

http://www.youtube.com/watch?v=tbq7GM9hBQo

Japan has huffed and puffed and inflated debt to GDP to a possible 200%, to no avail. Take warning those who believe that the FED can reflate a multi-trillion dollar hole in the balloon. Here is one take on Japan’s latest efforts as they try once again to push through the burning forest.

http://www.calculatedriskblog.com/2009/12/japan-twenty-years-later.html

Here is what, for now, is the definitive over-kill of charting inflation – using PPI and CPI-related measures – and well worth a look-see. IMHO, this is only one part of the story since inflation is ALL money divided by ALL goods, services, and ASSETS. However, we are seeing some upward price pressure.

http://www.financialsense.com/Market/griess/2009/1229.html

If credit is still contracting, then that extra money being spent at the producer and consumer level is coming from somewhere else – perhaps savings (and Asset prices). Here is an example of how the credit contraction is showing up. Those credit card write-offs are “money” that has now disappeared from the system.

http://globaleconomicanalysis.blogspot.com/2009/12/credit-card-delinquencies-chargeoffs.html

This is in spite of the massive expansion of the FED’s B/S. Notice in the chart how the expansion is under pressure. That attempt at credit creation is NOT making its way into the hands of the private sector and households. Remember that the MBS expansion – which is what has been driving the FED’s B/S expansion lately – is running out, and expires in March. A crisis is needed for this to continue.

http://dailyreckoning.com/the-mother-of-all-balance-sheets/

Wages and benefits are also under pressure, which begs the question ask to where the money for growing PPI and CPI is coming from.  A reduction in benefits affects total income and disposable income. Either money is shifted from one area to another (i.e. from TV to medical benefits) or savings are increased (to replace declining pensions), or the reduction in benefits results in a decline in expenditures in that area which reduces the income for those working in that area, and the vicious cycle continues.

http://globaleconomicanalysis.blogspot.com/2009/12/union-battles-in-las-vegas-simi.html

Will the world save the US? Northern Trust has everything you care to know about global economic growth. In a nutshell, they say that it will be staggering (no doubt under debt levels) upward slowly. They do mention the credit contraction but don’t really address how this impacts the growth story. Continuing weak unemployment, credit contraction, are supposed to be offset by growth elsewhere in the world. How many pyramids can China build? 

http://www.safehaven.com/article-15333.htm

http://www.youtube.com/watch?v=0h7V3Twb-Qk

What seems to be driving current growth, and the stellar Chicago PMI index result could be inventory re-building. The theory is that inventory rebuilding to long run norms means jobs for those where the inventories are being rebuilt. Those jobs mean more disposable income = more spending = more jobs in those sectors where the spending occurs to keep inventory levels going. The fly in the ointment is if the consumer does not spend but saves instead, or pays down debt. This blog saves me from having to cut and paste a whole bunch of charts. Remember, the inventory rebuild is only temporary GDP growth unless extra disposable income is created and actually spent on consumption – not on credit contraction. For the record, I find the GDP projections laughable, especially given the superficial treatment using seasonally-adjusted numbers.

http://accruedint.blogspot.com/2009/12/2010-forecast-hows-gas-mine-is-it.html

The PMI numbers are not what they seem and are (as usual) fudged with seasonal adjustments. I think that it’s best to look at non-SA YoY changes, not MoM or QoQ seasonally adjusted.

http://market-ticker.denninger.net/archives/1803-Chicago-PMI-Look-At-The-Comments.html

And it looks like the consumer is not buying into the “good times are here again” spin in the media. It seems the consumer is pulling their collective head back into the shell.

http://www.zerohedge.com/article/us-consumers-crossroads-spread-between-visions-present-and-future-record-divergence

And tax revenues are showing this, to the consternation of local and state governments everywhere.

http://online.wsj.com/article/SB126212283240009387.html?mod=WSJ_hps_sections_news

Here is a small break for amusement. We all need a bit of a chuckle about now.

http://www.nypost.com/promos/covers.htm

EQUITY

 I read the news today, oh boy! Unemployment hits its lowest level since July 2009. Now I’m looking for the details. the blogosphere is like owning your own personal research team. The world is mixed with Asia mainly green but Europe mainly red. Doctor Copper (with a PhD in finance) is rallying. All the signs are there for economic growth. Don’t be fooled.

Right to the meat. ES continues its shallow rally off the bottom from yesterday. PIvots:

  • R2: 1128.75 = Possible if anyone wants to play reindeer games.
  • R1: 1125.50 = Seems to be overhead resistance at this time, but TD thinks that ES = 1126 is going to happen (the blue line and blue picket fence).  Being overbought on a 5 min chart does not seem to matter.  Current floor is virtual (no TA) and at around 1122.50. ES will remain range bound and likely get turned back up on any dip by  the TD dashed red line at 1121.50.  This is the line in the sand for going long with stop, or to indicate time to go short if there is any dip.
  • Neutral: 1119 =  in the middle of support going back a number of days. Volumes have been low, but this is where the buying seems to come in.
  • S1: 1116 = Support from 24 Dec.
  • S2: 1109.75 = Doesn’t seem to have any importance today. The low from yesterday was 1113. Note it well.

FX

USD is putting on a move down. INteresting given how TNX and the 10 year yield are ramping up 10 bps – which is a lot. Those FCBs who bought in auction are probably regretting it now as they are getting hit on the value of their Tbills but gaining a bit on the cost to buy USD to settle today.

CAD, EUR, and GBP are stronger. JPY is weaker. There’s a riddle for you as the risk trade is on but not in the USA.

Apparently, today is a normal trading day – so be careful of the reindeer games.

Here is a little mood music as we see the end of this bittersweet year. As the elites are saying: “We only meant well. It’s for the best.”  As gmak says: “The road to hell is paved with good intentions.” Tick. Tock. Tick. Tock.

http://www.youtube.com/watch?v=UYIAfiVGluk

This entry was posted on Thursday, December 31st, 2009 at 9:59 am and is filed under Market Outlook. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

  • gmak
    dontbfoold. The top is not in until the FED says it is, or they run out of money. heh.

    http://evilspeculator.com/?p=13929#disqus_thread

    NEW POST
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  • hamster time (before gmak kicks in or MasterMole returns to his lair)

    Gerbil linked a chart from Daneric (yes I can smell them) that I have mentioned before (in a previous version) and concentrating on something I keep talking about BPSPX... Hamster band interpretation? BPSPX breaking 77 and all hell breaks loose 69 breaks and it's armagedon

    SPX:gold front... before anything else we must break current level 1.01, next bounce zones, .96 and .91

    talking of gold... 1086 still looks like a good bounce zone but TIGHT STOPS PLEASE if it's taken out it should slide to 1060+- and with some strange shorts I've been seeing be careful

    well that's what the hamster had to say so far
  • goldpackers
    Happy New Year !

    Want the SPX to stay below 1023 or this sell off was just a 4th wave with upside targets to 1133 to 1147. Need a reversal and if so expecting 1080ish by Thursday.
  • CorporalCarrot
    2010 Greetings all from cold and snowy Ireland. Hope you all had a great xmas and new year holiday. I was working my ass off but still managed to enjoy it.

    Now that we're back and should be up to full volumes again, I wonder where the regulars are?

    Bob u out there?

    For my own part, I'm not convinced by the futures and the positive start by the Nikkei and Euro indices. Will wait to see the first half hour of NY open before drawing any conclusions about the likelihood of profit taking but I believe its quite likely that after a strong open, we see big selling volumes as sectoral rotation starts for the new years allocation process.
  • tradejane
    Not saying much because, well, other than some interesting forex/oil/gold movements there's nothing new to report. DAX essentially unchanged, banks going nowhere. I agree with your last paragraph.
  • Guest
    I am indeed back at work as of today.
  • CorporalCarrot
    Any views on the state of play? From a contrarian perspective it seems to be that we are almost universally bullish among money managers and the MSM, (I completely discount the blogosphere in this, as I don't believe they represent any significant market moving money, and are merely charting whats going on), but for the time being, I see no reason for the herd to be proven wrong, but today's action could prove interesting.
  • Guest
    Would also add the AAII Bear index has come in at extreme low levels, normally consistent with a correction of some form.
  • Guest
    I think things are finely balanced. Back end of last year did not play out for us - we called the dollar rally but did not get the equity retracement that should have correlated with that. My medium-term view was always for a rising dollar, yields, equities scenario but I did not expect to transition into that seamlessly.

    In actual fact, banks have pretty much been in a bear market since October and the index is merely a couple of percent higher. The bull market basically ended at 1100 in October, we are now in a period of rotation and divergence. The overall index may may move higher still but it is becoming increasingly unstable, driven by fewer and fewer stocks.

    In the very short-term, a pop in the first few days is not unusual as people tend to build up treasuries in their books over new year to manipulate balance sheets. When that gets put back to work, you can get a squeeze. ISM today will be important though and I still believe risks are to the downside (though perversely I think Banks look attractive on a relative basis). Either Banks or the market is wrong. Banks are saying we are heading for another deflation shock. There is no way the broader market can hold up in that. If we do sucessfully reflate, Banks will go beserk and Citi is the one stock you want to own. Either way, I like Banks relative.

    Triggers I am watching are 1) Government yields - the level of issuance globally is huge and without QE, the demand/supply imbalance is scary. Ultimately I think QE has to resume in even greater size but first you need to create the political environment to support that and that means a wobble first. Equities have struggled to go up of late with 10 yr yields above 3.70% in the US and current levels suggest they will wobble again. There is a lot of issuance in Jan which could pressure yields.

    Other key area is Copper. The relationship between Inventory levels and prices has totally broken down. At the moment, restocking is supporting prices but that has to be near an end. Prices could halve here. That will trash the Mining stocks and I think hit market growth hopes.

    Ultimately though I am still bullish. We are targeting 920 on the S&P where we will be going all out long.
  • fisheggs
    Hey BOB.

    Whats your timeframe on 920 S&P?
  • gsavli
    Total complacency, bullishness and optimism that come up in the rally after a serious stock/wholeworldfundamentals crash... Hm, isn't this precisely stuff, P3 starts are made of?
  • gsavli
    NQ up 1% or 19 points, ES 0.7% or 8 points, DAX 0.83% or 50 points so far. So, another happy year ahead :)
  • Gold_Gerb
    for the curious amateurs unable to sleep tonight who happened to stumble upon this forum..

    S&P500
    http://1.bp.blogspot.com/_TwUS3GyHKsQ/Sz0vEpvfW7I/AAAAAAAADSk/HnlBUvKZzsA/s1600-h/spx.png
  • Still haven't checked but.... Daneric?
  • nice chart!
  • FormulaXTrader
    Seems like every blog is calling for the top now. That's a sure sign it's not. Another good fakeout for the bears coming.
  • roscoe_casita
    Jan 4th, The new highest building opens, already in negative equity, seeking stand still on its debt repayments!

    http://en.wikipedia.org/wiki/Burj_Dubai

    Wheres the news report on that?

    http://www.npr.org/templates/story/story.php?storyId=121091517

    WTF? NPR is even in the know on this? Say it ain't so!

  • Gold_Gerb
    http://www.youtube.com/watch?v=9pGp1LX8yZY

    don't forget to pack your chute.
  • Results of going 200% Short on Nov 23, per EW advice
    SDS closed at 35.95
    Now it is 35.05.
    But it hit a low intra-day of 34.26 on New Years Eve.
    On a closing basis, that is only a 2.5% loss for those that went 2X short on Nov 23, per EWI recommendation. Of course, if you were buying near term puts to achieve the short, you probably lost almost everything, or at least had a costly roll forward.
    But if you were stopped out by the drop to 34.26--thats almost a 4.7% loss. Not terrible, but sure painful if you saw it recover 2.2% of that value the same day.
    On the QID, your losses would be 8.6%, or 10.7% if you got stopped out on New Years Morning. Let the Gap Games roll....
    On TWM, losses of 11.9% and 15.4% for that wicked final day stop out.
    Charts of this data are at
    http://oahutrading.blogspot.com/2010/01/results-of-going-200-short-on-nov-23.html
  • Fibonacci was a 13th century mathematician. His family name was Bonacci, and somehow Family Bonacci became known at Fibonacci. He was famous in his day, and still is. Let me start at the end:

    WHY BASE 10?


    He came up with a series of numbers, that by sequential adding, created a ratio that quickly converged on a certain number .618. People call this magic number "phi". See the table below, it's pretty neat, I did it with my own spreadsheet.By dividing the fib numbers the reverse way, you converge quickly to Phi=1.618 which has its own interesting relations to phi.

    Some interesting relations 1-phi = phi Squared = 1/(Phi Squared) = 38.1%

    Some Math Head came up with phi = (SQRT (5)-1)/2, Exactly

    Since it's Sunday AM, my slow moving brain concludes that no other Base 10 number can possibly have these same properties. I wonder about other numbering bases. After all, we have 12 moons in a year, 12 hours in a half day, 12 eggs in a dozen, 12 fingers....oh wait. Base 12 is hard to work with and you can't count on your fingers.....

    The Elliot claim is that the Fibonacci Series also described precisely many growth patterns of shells, plants, vein systems. However, full disclosure...there are many growth patterns that are spirals that DO NOT use the Fibo phi or Phi as a base, but many do.

    Riddle me this---The Fib Sequence is based upon a numbering system called Base 10. There are an infinite number of counting systems, Base 2, Base 3, Base 23, Base 77, whatever.

    What would a Fibonacci Series look like in different numbering systems? Why is Base 10, somehow a "magic" system to create a Fib Series that then describes so many natural phenomenon?

    Did we as humans migrate to the Base 10 just because it somehow fit with our basic nature and effects upon the physics of the world in the way that natural items become ordered? This seems rather extreme.

    The base 10 appears to be an Indian invention, Centuries before the Family Bonacci.
    http://www-history.mcs.st-andrews.ac.uk/history/HistTopics/Indian_numerals.html

    Or are we forcing things into patterns? And the Base 10 Fib just happens to get lucky based on "things change a certain amount" while bouncing around in cycles. The human brain is great at finding patterns, it simplifies the massive information that comes at us. For the most part I think this is a valuable thing, but the potential for misleading information should not be ignored.

    Anyone have any input on this line of thinking?
    The following is the Fibonacci Series, created with a 5 minute spreadsheet.
    http://oahutrading.blogspot.com/2010/01/thoughts-on-new-years-growth-with.html
  • Schwerepunkt
    10 fingers and 10 toes. So the obvious options were either Base 10 or Base 20. For practical reasons, 10 makes more sense so we don't have to count using our toes, especially on cold days. What's the mystery? ;-)

  • Well said, the mystery is over...Happy New Year!
  • Schwerepunkt
    I wish you and all who read this a happy and prosperous New Year as well.

    10 fingers times 10 toes, equals profits of one-hundred fold!
  • Not that is a Base 10 system I can look forward to.
  • gregn
    If I hadn't been gone last week, I would gotten some SPY straddles, I might grab some on Monday. I hope you all had a great holiday.
  • raised_by_wolves
    vision_invisible, have your read "U.S. Loan Effort Is Seen as Adding to Housing Woes" in the NY Times? Why are they writing about this now as opposed to months ago? What do they want to accomplish? Does reading between the lines produce any tradable signal?
  • raised_by_wolves
    Do any of you stainless steel rats have any primitive wilderness survival skills? Can anyone make their own shelter, cloths, weapons? Can anyone fish and hunt with traps or weapons you have built yourself? Does anyone know how to make buckskin? Or for that matter, does anyone know how to skin a couple kittens and make shoes with them? Does anyone know shit besides trading? If no, does anyone have interest in acquiring hunter-gather skills with me?
  • Macrawn
    No but I saved an old 50 gallon barrel, some wood and a tent for when our economy collapses from our debt. I'll save some room by my barrel for you.
  • raised_by_wolves
    Thanks Mac! I think we need to do some more preparing though.
  • tradejane
    >primitive wilderness survival skills?

    I can teach you to skin porcupine if you like.
  • raised_by_wolves
    >I can teach you to skin porcupine if you like.

    At first I mistook that for a creative come on, but then I remembered that you have a man.

    Presumably, you've skinned porcupine before. What's the story there? Do you wear the skin? What uses do you have for the quills?

    Practically, you would have to conduct a video workshop since we live on different continents. Thank you for offering.
  • tradejane
    [poof]
  • raised_by_wolves
    Even though you did a magic trick with you comment, I was still able to read it in my inbox. That's an interesting real-life story you had there. Thank you for sharing.
  • Schwerepunkt
    I missed it.
  • raised_by_wolves
    I think she changed her mind and decided not to share the story with everyone. So, I'll respect that.
  • well, if you skin those kittens for shoes and you're near Tampa your survival rate goes way down, I seem to recall anna is armed and dangerous
  • No your dead! :-)
  • raised_by_wolves
    I'm actually fond of cats—not emasculated, declawed, obese indoor cats that resemble their obese domesticated owners—but any stray cat that can make it on his or her own has my respect, and feral cats like the one pictured on Wikipedia . . .

    http://screencast.com/t/OTgzNWE2

    . . . well, just look at that facial expression. For hell's sake, this bad ass mother fucker looks like it could stare down a coyote. I, for one, would not do anything mean to that cat, and this coming from a wolf.

    My favorite animals, besides wolves, are leopards. I would never wear leopard fur. That would be sacrilegious.
  • Now that's what I like to hear!
  • raised_by_wolves
    Looks like I have some redemptive qualities, eh?
  • TWD
    http://whenshtf.com/
    Encyclopedia brittanica to the end of the world...
    I've done some back woods stuff, have above average wilderness, disaster, survival IQ.
  • TWD
    wrong reply
  • Cool site, good ideas
  • raised_by_wolves
    Upon my cursory perusal, this looks like an extremely useful resource.

    If 2010 is the biggest, baddest bear raid of all time but then the markets shut down in 2011, what do you plan to do, Depravity? Maybe we can meet up?
  • TWD
    A little paranoia can save your life ;) If you have any interest in preparedness, that is the site for it. Great tips. I plan on moving near the northwest, out of most major cities and thoroughfares, within the next couple of years, closer to canada. If anything were to happen, say police state/martial law, plague, biological attack, nuclear fallout, zombies :D, I want access to the northern hemisphere fast. In those situations, the remote colder region has the best survival longevity/probability. As for gear, and education, just read the site. Gotta run.
  • Here's my conspiracy theory for the week!
  • This second bubble, 1999 and 2008's back to back, has people, instead of saving 0%, moving to 4% to 5%, this is what the stimulus bill is trying to replace.
    Forecasts say, people will eventually reach a 10% savings rate.
    Now that's what I call some true, governing using market forces.
  • The big one must be going to hit, somewhere far down the line, cause the gov't wants you to save 10%
  • This guy did a funny video on taking advantage of Gov handouts.

    http://www.youtube.com/watch?v=lveqjUaLDwI

    I went to the site he used to calculate his benefits. There are so many Government benefit programs, it is almost beyond belief.

    http://www.govbenefits.gov/govbenefits_en.portal?_nfpb=true&_pageLabel=gbcc_page_home&_nfls=false

    In my business, we design and build renewable energy systems. Solar Hot Water and Solar Electric PV mostly. The systems we installed just last year will probably save our customers $10,000,000....that much less oil burned to produce electricity.

    If I calculate the hourly rate I would receive after taxes and the like, it would be....well, not that great in relation to the responsibility and the headaches involved.

    So instead of working hard to advance the economy and make our country stronger, if I backed off and just took an occasional project that I won through "sales" at a high price, I could maybe only work 1.5 days per week.

    I could do whatever in the rest of the time...maybe trade.

    AND I would be eligible for 67 Government Assistance Programs.

    This country is doomed until this entitlement thinking and expectations are eliminated.
  • Macrawn
    Seems unbelievable but the neighbor of the apartment building I own hasn't worked a full day in about 5 years and is making out great. Nice thing about it is that in bad times you get even more help while the rest of us have to cut back a little.
  • http://financialservices.house.gov/Key_Issues/Financial_Regulatory_Reform/FinancialRegulatoryReform/Bills_as_reported/hr4173.pdf


    If you have nothing better to do, read this balderdash.


    Some year, we will all look back at this decade and say -- "it was so obvious" easy money bubbled up various asset classes, and finally we bubbled up the money supply, and that last bubble went with a bang.


    We went to a Jinsha (Shrine) on New Years Day, as is tradition.



    It works like this:



    * You first clean your hands under a traditional water spout with rocks. Cleanliness VERY important.
    * You make a small donation, ring a bell, clap a few times, bow, and be blessed by a Jinsha preist.
    * Then drink a Sake (cleansing, even if at 11 AM)
    * Some Jinsha has a food, and a traditional Mochi soup with Bonito flakes really hit the spot. These are given freely and you can donate at a different spot if you wish, so there is no pressure.
    *

    * Finally, you have brought last years Omamori, and you place these in a bin....they have done their job. And you can buy more of these good luck amulets, for business, vehicle, pet, or other special purposes.

    And most important, for $.50 you can find out how to harness your own infinite energy and knowledge source. Mine is attached below, this ought to be an excellent year. In terms of speculation --- "just wait or you will lose".

    http://oahutrading.blogspot.com/2010/01/4-trillion-bailout-and-50-power-to.html
  • I think long TBT (rising yields), Short EEM (Emerging markets, esp if your trading account is in USD), and individual stock plays as detailed in my infamoud Boatload O' Charts

    http://oahutrading.blogspot.com/2010/01/boatload-o-new-years-charts.html
  • SHORT GMCR 83-85
  • Macrawn
    The Japanese debt is an interesting topic. Looks like they borrowed their way to growth much like we did and the end result is they really couldn't create any lasting jobs for their economy. Looks like all of our borrowing will lead to a similar end result because we outsourced our manufacturing and cannot compete with people willing to work for less than $5 per day.

    By the Japanese standard looks like we can continue to borrow unfortunately. I do think we can have a nice couple of years of growth and see jobs come back enough to push stocks up next year and possible the year after but we refuse to come to terms with our real problems.

    There is going to be a lot of reckoning in the next decade with jobs in the areas of blue collar labor, state and local employees and probably small business. I've really what be the only end result in 3rd world countries. In Peru there is a small middle class that has decent jobs and a huge population of unemployed and near slave labor workers who are employed. You can hire a live in nanny for $400/ mo. A cook full time cook for the same price. You wouldn't dream of a do it yourself project because at $2 per hour you can hire an army of workers to do it for you. The only real jobs are ones that need someone who can't be substituted that easily for someone else.

    We treat eduction like it's a joke here but you can see the real value of it in a developing country. Here you can just swing a hammer and make out well but those days are numbered because there is going to be a lot of downward wage pressure on those jobs in the future unless we start requiring that the rest of the world create some minimum standards. Make sure your kids get the best education possible they will need every bit of it. Rant over.
  • Trader_Steve
    Well put.


    Steve
  • amokta
    ewstu 30/12: "The latest call has yet to work out as we anticipated but any frustration is due more to time than price"
    anyway theres always 2010 for P3 to make a show!!
  • goldpackers
    HAPPY NEW YEAR TO ALL!

    Monday sets the tone for the week and favor down. Believe a test of 1080 by Wednesday/ Thursday then straight back up into 1-14/15 for another important top. Gann high on 12-24/28 holding still.

    If I am wrong about Monday, then we are up into 11-14/15 and ~ 1140 before a BIG down.

    1-5/6 1-14/15 1-22/25 should provide very good turning points.
  • K.I.M.
    Good year and trading to everyone!
  • tradejane
    Happy New Year.

    http://www.youtube.com/watch?v=ZzNu9wUO-YM&feat...

    "All these markets are yours except Europa, attempt no shorting there. Use them together, use them in peace. " ;D
  • LOL an Asimov 2010 joke.

    Another SciFi fan?
  • tradejane
    >Another SciFi fan?

    I had a bout of Arthur C. Clarke and a mild overdose of Star Trek as a child.
  • the_first_dude
    Imagine the look on hedge fund managers eyes as the market melts higher in January and their annualized rate of return starts deviating dramatically from the S&P. PANIC! They will sure wish they hadn't taken profits into the year's close. That's exactly the dynamic that will cause the market to explode in January. We're talking the biggest blow off top in history, as the S&P will rise approximately 150 pts in a matter of weeks. This isn't a joke. Strap yourself in and get ready to buy even if you think it's crazy. The % bears will move to single digits to create a mirror reflection of the bullish % at the March lows. That's the way things work...

    And by the way, rising yields are bullish for stocks and the economy. There are many people out there claiming the opposite who understand very little about finance or economics.
  • Trader_Steve
    >>And by the way, rising yields are bullish for stocks and the economy. There are many people out there claiming the opposite who understand very little about finance or economics.<<

    Do you have any formal training in economics? (I do) Because when there is no demand-push behind the rise in rates and it is instead due to questions of default and the "demand" for higher rates coming from the lender and not those in the economy willing and able to afford the rates and pass them on to the consumer (10%+ unemployment), the reasons you have cited happen to be incorrect.

    We are in unvisited territory for America as demand for money to service debt begins to push small and intermediate size businesses out of the ability to find loans.

    You might wish to do some additional reading and give this more thought before you marry an opinion based upon past recoveries where employees demanded signing bonuses and plants ran at almost full capacity.

    IOW, "DON'T BET THY WHOLE WAD" on the assumptions you are making.

    Steve

    P.S. Denninger covers our debt explosion quite well and you can find 13 minutes on YouTube. Search "Denninger Monetary Collapse"

    EDIT: US may soon enter Fiscal Death Spiral (higher rates demanded) Washington Times:
    http://www.washingtontimes.com/news/2009/dec/23/tempting-the-tipping-point/
  • Thanks for the additional information TS
  • Trader_Steve
    Economics is a "social science"....where it went wrong was that when Einstein was discovering things with hard science to back it up and coming up with equations, economists thought they could come up with equations (econometrics) to predict what was going to happen. There are many sayings about economists and the one I like the most is "predict, and predict often."

    What I posted is, IMO, pretty clear. Rates flew higher at times in the past as there was competition for money and the consumer could afford it and was also seeing inflation and buying sooner so as to not pay more later. With jobs gone and never coming back, and unemployment for college grads at above 20% and those with jobs being paid half of what they would have started at 5-7 years ago, we are going to have a lowered standard of living. I've not ruled out a depression equal to exceeding the 1930s. No generation in US history has ever avoided it. We resemble Spain who got fat and happy on what they could make of other nations and now with many foolish law, such as NAFTA, we has had oligarchs more corrupt that those of Russia. I don't believe that we have solved any problems and I an cynical enough to believe that this mkt was pushed up to pass some bills, and that where they need the mkt in 2010 is down to have more people dependent upon government. Obama is beholding to Goldman Sachs as is most off Congress to many large corporate interests. Agai, the little guy gets squeezed out and the Fed seems to be doing what it was created to do - save the asses of the elite.

    This is nothing short of a Marxist coup that is taking place with large corporations now dictating the rules. Our corruption on Wall Street rivals that of the last days of Rome when they fought for all scraps that were left, knowing death wwas on the horizon. We are, in many ways, a banana republic like Simon Johnson - president of the IMF 2007-2008 - said we would become if we allowed the oligarchs to dictate policy (May Atlantic "The Quiet Coup"). And we are as corrupt as we have ever been. Most of our politicians are a disgrace.

    I'll use Mark Levin's words, "Obama is is delusional demagogue" and despite lower tax rates bringing in more money, "He" doesn't think it's fair and I expect capital gains rates to go to 25%+ this year. Not a good thing for markets or states that are starving for revenue. None of this is going to put more money into the consumer's pockets. They aren't going to push rates up and banks won't lend. We have class warfare started, contract law violated, and the most despised president since Nixon. His neo-Marxist policies are going to solve these problems by spending like Mad King Ludwig? That is illogical and has no basis in history or economic thought. I think we could implode at any time. All we need are GAAP account rules to be enforced on banks. IOW, this economy is a mess and it is a sham. I must know 10 guys with businesses that employ 3-10 people and ALL are hurting. A few are in business still only as they spend savings and hope things turn around.

    Nothing ads up to firms and individuals spending. And with the numbers I have seen on the velocity of money, it doesn't matter if they create $3 trillion more as it is not going to go out into the economy. To me, it's pretty clear that deflation is feared. And rates can go up and exacerbate the situation as the consumer can't pay up for goods.

    I hope I'm wrong. But I don't think there's a chance that I am. We had years of excess and a Marxist believing President with a corrupt administration where only 8% ever worked in private industry is going to solve our problems by spending more? I had thought Keynes was discredited, but apparently not. And it is known that he was a Fabian socialist who believed an elite needed to control the people and the means of production. We are quite a fascist nation (as FDR desired while he was enamored with Mussolini) and it is getting worse. If this fraud gets a second term, he is going to economically destroy America. Bush gave it a good start with his bypassing Congress for bailouts and backing Paulson. Bush opened the door. Summers, Geithner, Bernanke, and Obama have ripped it off the hinges and we have an imperial presidency. About all we can do is try to educate others. But most are not bright enough to follow what I just wrote as their education sucks as well as their willingness to face the truth. They willingly kick the can of responsibility of citizenship down the road and this administration is happy to not let them know what is coming. Whether we will eventually have Argentina like inflation is still an unknown, but that's not where we are headed now. But things like that happen almost overnight. The situation we have today is untenable. We have been a cause for good throughout our history. But when you think that Dodd and Frank still have their jobs one has to wonder if De Tocqueville was right in saying that if the politicians ever remove themselves from the wrath of the people, they will no longer represent the people.

    Steve
  • roncofooddehydrator
    I don't necessarily disagree with everything you've said, but you've thrown out Marxism and Facism in the same breath and those two are polar opposites. Obama can't be a Marxist and also beholden to corporate interests, as those two just don't mix. Nor is he a facist, as that requires nationalism without question. He's probably closest to a corporatist, but then most economies have some level of corporatism, since there are few pure capitalist or socialist economies out there.
  • Trader_Steve
    >>Obama can't be a Marxist and also beholden to corporate interests,<<

    Oh sure he can...when he uses the corporations and the mkt to be his "useful idiot" to keep the votes he needs close. It's a means to an end. A Dow at 5000 would have had health care dead. Now, it might well pass.

    I do not see Marxism and fascism as being mutually exclusive at all. Orwell believed, as do I after reading "Liberal Fascism" that there is no firm definition and Orwell's use of the word "bully" might be as good as any other. Marx wished to walk amongst a destroyed mankind as a creator. Obama, days before the elections, stated "we are three days away from fundamentally changing America." Yet people still did not listen to what he was going to do.

    I think that Obaama is enough of a delusional demagogue to take what he wants from different political views and the reason for that is that he is not an ideologue. he is every bit a crook as Nixon was (but Nixon was a patriot for many years at least) , got their faster, and will abuse the power of an Imperial Presidency to change America into his vision, even if that means growing pains for twenty years - ones he and his family will never suffer. Obama is destroying the Constitution and Liberty. For without the fruits of your labor and contract law you haave no liberty. He should be impeached sooner rather than later.

    I don't believe that the mkts have three years of freedom in trading and may very well not exist at all in 10 years. Those who do not understand history fail to see this coup, or to admit that they voted it into power. Obama despises capitalism. And without it, mkts do not work, That lone piece of meat hanging in the butcher shop is the daily delivery and weighed out for the first 100 people on line. He said he was going to "change" the face of America. Why doesn't anyone listen to what a man says and believe his intentions? We have been sucker punched and we are not getting up too easily right now.

    Steve
  • raised_by_wolves
    Hey Steve and Ron, let's take the discussion over to HOB or SOH since Mole's patience is wearing thin for any political discussions. Sorry for being a party pooper.
  • roncofooddehydrator
    The NY Times had a nice graphic about the issues facing the US government regarding debt back in November:

    http://graphics8.nytimes.com/images/2009/11/23/business/1123-biz-RATES2web.gif
  • Lot of money in LED lights,
    Click here to see CREE chart, CREE, may make it to $62, but I doubt it!
    CREE once before traded at 53 P/e, and then crashed.
  • cree? I'd short it to 45, drop half adjust stops and wait for 40
  • Thanks ssh,
    Sounds like I should just it now--It's at least break even, ( short term) at these prices!
  • Happy 2010 (here it's already 1:20) I didn't get my 1111 for bounce
  • crush1618
    Happy New Y(B)ear!
  • vic_vega
    Mole, thanks so much for this blog, including gmak, cd and ssh (and all those I left out, you too!)

    Have a good 2010 everyone!; to 2009 - good riddance and f you.
  • Darkthirty
    Any clue on ES hours today and tomorrow?
  • Gold_Gerb
  • alessiov
    orale gavachos those spys just hit new lows
  • PeterK80
    I dont post here much but I just wanted to thank you GMAK for your postings of late. I think a lot more people pay attention to your work than you will ever know. Mole, thanks for your hard on the site as well... and everyone who contributes.

    Have a great new year everyone!

  • bradley model has a trend from 12/28 to late february (that trend is shaping up to be down)
    chris carolan's model also has a downtrend from 1/7 to mid february
  • greenbuckeye
    Sounds like that cycle vibes with a chart cycle that has been posted over on hope of slope...
    for a least a year there has been a 40 day cycle (trading days) that there has been tradable
    pivots within a couple days of that 40 day cycle that have been very accurate. The cycle is
    due now. Given that and how overbought most of the market is I'd be lookin to short any
    strength in the next few days.
  • Rightside_ot_trade
    Thanks gmak for noting ES at 1113 well, I did :^)
    And closed below the 1116 SPX which technically voids peak of {i}
    I enjoyed the vibe here at ES this year,
    Mole thanks for putting & keeping it together !
  • goldpackers
    I had my Gann high 12-24/28. Favor down into 1-7 bounce into 1-14/15 down into 1-22/25 very imp

    Need $ to 80 for 1000 spx.

    Scottrade does not allow vix options. Who does?

    HAPPY NEW YEAR!
  • You don't want to trade VIX options.
  • BigHouse(Aka Mr Vix)
    hee hee .Your right. You only want to play Mr Vix during wave 3 of 3's at a larger degree. That time is coming but later in 2010. Happy New Year Mole.
  • goldpackers
    Thanks!  Happy New Year!
  • spudthorpe
    VIX options are tricky. They're priced off the corresponding futures contract, NOT the current VIX value. So if there is heavy contango in the futures (which there often is) you can be right about the future value of the VIX, and yet lose your entire option premium.

    Basically, as Mole said, don't trade these unless you fully understand how they work. They don't behave the same way as options for which there is a liquid spot market for the underlying.
  • shortcover
    i love how they wait until the last 15 min for the lemmings to swat the sell key...glad 2009 is over...
  • Gold_Gerb
    hallelujah.
    glad i hung in there last 20 min.
    little bear-gerbil delusions live!
  • see, I said keep those delusions.....
  • JAN 4th, GS starts trading stocks again! This could get ugly, if you are on the wrong side. Remember this, that division has to make a $100,000,000 a day, or they get fired!
  • Joe8888
  • WTFed
    Nice, clean work Joe. Thanks.
  • texpresso
    picked up a little QID, should have shorted GE, oh well...
  • WTFed
    breaking down now. Wow.
  • elliott_surfs
    holy....
  • I guess someone is expecting a sell off on the 4th ;-)
  • Joe8888
  • goldpackers
    I'm a little confused. Are your Charts signalling bullish or bearish?
  • Joe8888
    Look at my Avatar,,,,,! I'm a Bear,,,and the Chart is pointing Bearish....
  • Joe8888
    Just Wanted to Wish Everyone All The Best in the New Year !

    Oh and ,,,This Chart on the ,Dow Jones ..is Still Holding True:

    http://www.screencast.com/users/chartwiz/folders/Jing/media/7cb4cf26-d65c-4097-a257-2aeea04469f2
  • WTFed
    That's pretty. Happy New Year.
  • Rightside_ot_trade
    Nice Work!
  • Gold_Gerb
    DOW 10,500 most the day.
    gee, looks familiar - <surprised> - it's December 14th all over again.</surprised>
  • bubble jeopardy
    The naive portion of me wants to believe that the bulls and bears are in a tug of war right now but the cynical side knows otherwise.
  • I_got_Prechterized
    It's time for a market crash. Treasury yields are creeping too high and threaten the recovery. It's time to crash the shit out of equities and bring rates down. And I use the term "recovery" facetiously.
  • WTFed
    Time for the market to get Prechterized.
  • Gold_Gerb
    Amen.
    Bulls want to see some bargains.
    Bears want to see some true valuations.
    let's get on with it!!!

    EDIT: any slim chance, that some hedgie gets nervous before end of day and DUMPS!? any?
  • Nightwind
    Guys, I'm shutting her down and running some errands. I wish each of you a prosperous 2010 and hope that GS gets a bear analoscopy next year.
  • charles_smith
    Thank you for your excellent work, gmak, and best wishes to all stainless steel rats for a healthy, safe, prosperous 2010. May the Bear-Force Be With You!
  • Baby Dragon
    Yep certainly this may be a interesting point to short.....

    you wise ones.
    Please what is your opinion on GS boys and their clients are trapped short with
    whopping 350 Billion USD ? and everyone is out for their blood...
    Is this a rumor or there is some sense of truth in it ?

    So this is the greatest short squeeze markets have ever seen.
    Or Markets are going for the fastest crash in history to make GS boys some more cash ?

    My observation is a when market moves down GS is going up...
    when market is moving up GS is going down....
  • interesting. i haven't heard that rumor
    do you have a link?
  • Gold_Gerb
    I think it would be safe to asses that GS is the dominant force now.
    I would be wary of trying to explain a simple answer to your question.
    My thought is GS is smart, verrry smart. Also, probably cheats when it can get away with it.

    here's some insight to GS
    http://seekingalpha.com/article/60586-why-goldman-sachs-was-short-cdos
  • vasiltrade
    HAPPY NEW YEAR EVERYBODY.SEE YOU ALL NEXT ONE! WISH A HEALTHY AND HAPPINES NEW YEAR!


    ADIOS!
  • Rightside_ot_trade
    ES is outside (below) of all 3 of SSH BB's on a 5 min chart. Hardly ever see that.
  • that's called a "slide" ;-)
  • Rightside_ot_trade
    Love those!
  • texpresso
    NYSE trin has been moving positive all day, GE and SPY at support, worth watching this afternoon
  • redvetttes
  • blue moon is at 2:16pm. hoping for some technical damage on the downside
  • Gold_Gerb
    if it does, post the lunar chart you had.
    Monday.
  • Gold_Gerb
    EDIT: plus or minus two days. (i couldn't resist)
  • candycane trading ruined my lunar chart :(

    also annoyed by strength of the banks on this down move
  • Shaka_Zulu
    "annoyed by strength of banks on this down move"

    Ditto. I guess EOY window dressing on GS, JPM, etc. Who wouldn't want to own a diamond in the rough like C?
  • the window dressing is understandable but i'd imagined there be
    some money out there looking to front-run potentially volatile january profit-taking

    i guess we haven't broken any technicals yet
  • Rightside_ot_trade
    Yeah, $BKX may have found support for awhile at $42.6 low yesterday, chinga
  • texpresso
    QID ready to run?
  • Gold_Gerb
    not sure...3rd or 4th attempt.
    might be a sideways channel for days.
  • texpresso
    last time NQ was overbought on the daily it dropped 100 points, like QID's chances
  • Rightside_ot_trade
    ES neutral pivot (1119.2 ) breach, can it continue to drop?
  • Gold_Gerb
    NATTY gas backtested, waiting to see if it drops more, or just holds flat today.

    EDIT: I mean XLE.
  • bubble jeopardy
    A near 20% move up in one month in the ten year interest rate certainly cannot be good for the housing industry.
  • raised_by_wolves
    Watching $TRAN to see if it holds at those MAs.

    http://screencast.com/t/MmYxZDM1MmI
  • Rightside_ot_trade
    It sure does like that 200 ma, held it except the Nov breach, which the broke up out of a flag to go on a major run
  • Gold_Gerb
    excellent point. IMHO, they'll hold today, just to end the year proper.
    but MOnday...we shall see.
    keep us updated!
  • raised_by_wolves
    Well, I'm leaving to go panhandle for the rest of the day. I'll be watching $TRAN closely next week.
  • Nightwind
    I knew those panhandlers were secretly rich all along.
  • raised_by_wolves
    Small trading account. So, not rich. Just smart. "Smart cub," the Hamster has said before.
  • Nightwind
    If you ever decide to write an autobiography,...it would definitely be an interesting read.
  • raised_by_wolves
    It would be a memoir, the some lies, some truth variety for sure. Hehe.
  • so be smart and be ready to take advantage of the bounce from spx 1111
  • raised_by_wolves
    Yes, Hamster. That's in the cards for next week though, right? I'm leaving for the rest of the day, possibly the entire weekend. The market doesn't go on without me, does it? ;-)
  • likely today
  • Rightside_ot_trade
    SPX 1111? Today?
  • have a strange feeling that yes
  • Gold_Gerb
    We have one near our favorite restaurant.
    The restaurant service said he has a family and kids and house nearby.
    Pays pretty good apparently.

    EDIT: I left out the part, he's a "professional" panhandler, not a temporary desperate dad.
  • raised_by_wolves
    Unfortunately, I'm running into more and more temporary desperate dads.
  • bergs
    Lets see if this count works.

    http://screencast.com/t/MjdmNjk0O

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