Bubble-nomics: SP and Nasdaq Straining at Resistance And the Remnants of Fear
by Chart School - March 17th, 2010 4:53 pm
Bubble-nomics: SP and Nasdaq Straining at Resistance And the Remnants of Fear
Courtesy of JESSE’S CAFÉ AMÉRICAIN
The SP is trying to break out of the trend and hold it’s gains. I would not get in front of this, unless you wish to guarantee an opportunity for an additional short squeeze. Remember, the wiseguys can peek into your collective hand at will, and read your strategy within milliseconds of your executing it. That is why playing short term trends is becoming increasingly difficult for the individual speculator.
It is useful to watch the Nasdaq 100 at key support and resistance levels, as well as the broader indices. The SP futures are generally the ‘push’ where the flash and sizzle of bull markets occur of late. Buying the futures drags much of the market behind it. But this can only last for so long unless additional ‘real’ buying steps in.
Formidable retracement. Now the rally must show its mettle and either confirm an economic recovery or the start of a new bubble led by financial assets, or not.
Little pricing in of fear, but the markets remain thin and a bit uneasy.
The Dollar is hanging on to support.
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Tempting Tuesday - Waiting on the Fed
by Phil - March 16th, 2010 8:13 am
The dollar is diving and the futures are flying this morning!
Word is that the Fed will remain doveish in their 2:15 statement today with no sign of tightening in the near future. That has (as of 7:30) rallied gold 1.5% to $1,115 and oil is back over $80 and copper is $3.35 again while the Euro jumps back to $1.375 and even the British Pound squeezes the hell out of the shorts as it flies from $1.497 at 3:30 to $1.514 (1%) in 4 hours, which is a pretty big move for FOREX!
The EU also helped themselves by laying out a groundwork for a financial lifeline to debt-stricken Greece, breaking a taboo against aid to cash-strapped governments in order to avert a crisis for the euro. Officials from the 16 countries using the currency worked out a strategy for emergency loans in case Greece’s plan for 4.8 billion euros ($6.6 billion) in tax increases and wage cuts fails to stave off fiscal disaster. “We clarified the technical arrangements that would enable us to take coordinated action which could be swiftly put into place in the event it is necessary,” Luxembourg Prime Minister Jean-Claude Juncker told reporters late yesterday after leading a meeting of Euro-area finance officials in Brussels.
The EU is also meeting to discuss ways to reign in hedge funds and credit-default swaps but the revised bill from Chris Dodd is now so watered down by compromise that it no longer requires regulators to agree that excluding a swap from being cleared “is necessary and appropriate for the reduction of systemic risk.” So what’s the point? The problem is that there are $605 TRILLION Dollars of CDS’s written against a Global GDP of $50Tn. Usually, it’s a red flag for the police when a person insures their home for 12 times what it’s worth, right?
Hexagon Securities LLC and at least 19 other financial firms are pressing regulators to force swaps clearinghouses to lower entry barriers in order to improve competition in a $605 trillion derivatives market dominated by the world’s biggest banks. They also seek tougher conflict-of-interest laws to ensure that a bank’s derivatives desk doesn’t influence clearinghouse decisions that could shut out new competitors. ROFL - move to Russia, you Commies! This is America, where big banks rule and "firms with less than $5Bn net worth" drool! See, my daughters taught me that one - wins every argument!
Speaking of people who rule our lives - Saudi Oil Minister,…
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Weekly Market Report
by Chart School - March 15th, 2010 12:08 pm
Weekly Market Report for March 14 - March 20, 2010
Courtesy of InTheMoneyStocks.com
The S&P 500 traded higher again this week. The index traded higher by 11 points from last weeks close. So far the January high of 1150 has held as resistance. Should the market break out and confirm above this 1150 level the next major weekly resistance area will be around 1200.00. Options expiration is on Friday March 19th, 2010. This usually makes for a volatile, and choppy week of trading as a lot of institutional games will be played into expiration.
The SPDR Gold Shares ETF (NYSE:GLD) sold off sharply losing nearly 3.00 points on the week. Last week we mentioned the possibility of a lower high pivot being formed and this is exactly what took place. The 104.50 - 105.00 area is still going to be some support on the weekly chart followed by the 100.00 area. This week the GLD declined even as the U.S. Dollar sold off. This is a rare event and could be signaling further weakness for gold in the near term. While gold continues to look like a great long term hold 2010 should be a volatile and choppy year for the precious metal.
The U.S. Oil Fund ETF (NYSE:USO) finished last week basically flat. Oil is trading at its high range for the year as it continues in a long sideways base since June 2009. Every time oil has reached these levels it has pulled back. Until it can break out and confirm a close above the 42.00 level we are likley to see more range bound trading in the USO. Currently the weekly resistance level for the USO is 42.00 and the weekly support is 34.00.
The U.S. Dollar Index sold off this past week losing 0.66 cents for the week closing down at 79.77. This may not sound like much, however, this is a lot of meat and potatoes when it comes to the dollar index. Generally, a strong dollar will have a negative effect on the major indexes. Currently the dollar still looks to be consolidating just under the weekly 200 moving average. Therefore, this could ultimately be a bullish pattern for the U.S. Dollar index. It is important to remember that a stronger dollar usually adversely effects commodities and inflationary stocks. The opposite effect is true when the dollar declines.
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Market Club’s Monday Outlook
by ilene - March 15th, 2010 11:34 am
Market Club’s Monday Outlook
Via Market Club’s Adam Hewison
a. Sneak Peek At The S&P 500This week could be shaping up to be an extraordinary week in the markets. I strongly recommend that traders everywhere take precautionary measure measures to protect capital.
While the S&P 500 made new highs for the year last week, it did not do so in a very convincing manner. In today’s short video I show you some of the elements that I think should be cause for concern.
b. Is The US Dollar Reversing Again?
The euro/dollar relationship may be reversing again based on recent price action. In today’s short video on the euro/dollar, I point out some of the changes we see happening in this market.
Watch the EURO/DOLLAR VIDEO HERE.>>
c. GOLD
And lastly, let’s see what’s happening with GOLD.
The move down in gold yesterday surprised many traders and flashed an exit signal based on MarketClub’s daily "Trade Triangle" technology. As we have mentioned before, we felt that gold was in a broad trading range and were not optimistic that it would shoot higher.
The action yesterday confirms that we have more of a two-way market. I expect we’ll see further selling on any rallies from this level.
In today’s video, I share with you my thoughts on gold based on one important element: how gold energy fields propel this market.
More on GOLD HERE.>>
(What's this?)
(Gold Versus Paper, 3/13/10)
(market folly, 3/19/10)
(market folly, 3/16/10)
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Feldstein: Worry About the Dollar, Not the Euro: Keep an Eye on Sterling
by ilene - March 11th, 2010 9:03 pm
Feldstein: Worry About the Dollar, Not the Euro: Keep an Eye on Sterling
Courtesy of JESSE’S CAFÉ AMÉRICAIN
Here is Marty Feldstein’s view of the economic fundamentals in the euro and dollar portion of the forex markets.
Fundamentals mean little in the short term for trading purposes, at least in my own judgement. However, it does look as though the euro/dollar cross is a bit overdone. If that is correct, then it is likely that this correction in the precious metals should be almost done as well. But we will have to see what happens. The markets are shallow and edgy, almost wobbly. In a liquidation everything gets sold on the short term. Selling and buying on the margins makes price, no matter what size the market. Such it is with most auction markets disconnected from rational valuation.
On the fundamentals, however, Feldstein makes some good points. The problem with Europe is that it is sitting on the fence with its union, and the Greek debt crisis merely highlights their weakness which are largely structural. What is the EU likely to become.
As for the US, its day is fading, and it is in the grip of financial interests that will wring the last drop of vitality out of it given their way.
There are several roads to losing weight. One is to engage in healthy exercise and a good diet. The other way is starvation either through deprivation or disease. In both instances one ‘loses weight.’ The modern day Liquidationists favor starvation, for the other guys, not themselves. The modern day Keynesianians seem to wish to indulge in overeating with a change in diet to be left for another day.
The American economic system cries out for meaningful reform. Deficit spending without reform is futile, the road to addiction. But no government led structural repair efforts is the sure road to stagnation and a zombie-like existence such as has been seen in Japan, or even worse, a third world status and regional fragmentation.
My own bellwether is the UK. I believe quite strongly that Britain will reach its crisis before the US. And it may provide a proper warning, but all things considered, it may be too late. While there are many good signs in the financial reform regime from regulators aghast at the mindless venality that has brought the country to the brink of ruin, there is still the matter of the current political leadership, and its…
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Tuesday - Bill Gross Gives Us 90 Seconds
by Phil - March 2nd, 2010 8:28 am
Our favorite bond pimp is in some mood this month!
Maybe it’s because, despite PimpCo’s best efforts, they failed to tank the markets last week but Gross starts his March newsletter off with this harsh chart but his words are even harsher - saying of cocktail parties:
I suppose the parties wouldn’t be so bad if there was something original to be said, or if “you” had a genuine interest in “me” as opposed to “you,” but let’s face it folks, no one does. The only reason any of us really cares about cocktail conversations is to quickly redirect someone else’s stories into autobiographies that we assume to be instant bestsellers if only in print. If not, if the doe-eyed listener seems simply fascinated by what you’re saying, you can bet there’s a requested personal favor coming when you finally shut up. “Say Bill, I was wondering if you knew somebody at…that could…” Yeah right! But, as my chart shows, 90 seconds into a typical conversation, no one gives a damn about you and your problems – maybe those shoes and that dreadful eye shadow you’re wearing, but not anything audible coming out of your mouth.
Yow Bill! Tell us how you really feel… After telling us how appalling he finds it to endure 90 seconds of our time at a party, Bill then asks for his own 90 seconds to teach us about economics. I’m not going to edit as it is about 90 seconds worth but after that opening - don’t you find it kind of hard to read what he has to say without looking for a place to throw a virtual punch?
To begin with, let’s get reacquainted with the fundamental economic problem of our age – lack of global aggregate demand – and how we got to where we are today:
(1) Twenty years of accelerated globalization incrementally undermined the real incomes of most developed countries’ workers/citizens, forcing governments to promote leverage and asset price appreciation in order to fill in what is known as an “aggregate demand” gap – making sure that consumers keep buying things. When the private sector assumed too much debt and asset prices bubbled (think subprimes and houses, or dotcoms/NASDAQ 5000), American-style capitalism with its leverage, deregulation, and religious belief in lower and lower taxes reached a dead end. There was a willingness to keep on consuming, there just wasn’t the wallet. Vigilantes – bond market or otherwise – took away…
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Weekly Market Report
by Chart School - March 1st, 2010 3:21 pm
Weekly Market Report for February 28th, 2010 - March 6th, 2010
Courtesy of InTheMoneyStocks
The S&P 500 closed the week lower by less than 5 points. The broad based index has recovered 60 points from it’s February 5th pivot low. The 1150 level was the January high and is still resistance. The current pattern on the chart can go either way. It is possible that last week was a pause before another push higher. However, it is also possible that it is a short term retrace pattern before another move down. Technically the chart is still strong as the weekly 20 moving average is still significantly above the weekly 50 moving average and this signals that the trend is still up on the weekly chart. Should the SPX decline there is still weekly suppport at the 1050 level.
The SPDR Gold Shares ETF GLD finished the week basically flat this past week. The action was volatile throughout the week as the GLD traded as low as 106.60 and as high as 109.97. It is important to remember that gold is a double edge sword trade. Investors buy gold often as a play against the U.S. Dollar and most fiat currencies. They also buy gold as play aginst overall market fear. Technically the GLD is still in very good shape as the weekly 20 moving average is still above the weekly 50 and 200 moving averages. The one short term bearish case that can be made against the GLD is that it is possibly making lower highs and this must be watched. The dollar should also be monitored closely as gold and the dollar generally trade inverse to each other.
The U.S. Oil Fund ETF(USO) finished the week basically where it began. The USO is now nearing the high range that it has been in since June 2009. Until the the USO breaks out or below the range these levels should serve as good resistance and support. While the USO is trading above it’s weekly 50 moving average it is still not technically very convincing. However, as long as the USO stays above the weekly 50 moving average it can trade higher.
The U.S. Dollar remains one of the most important charts that must be followed and watched. When the dollar declines it gives a lift to most commodity and inflationary stocks. Since the late November rise in the dollar the stock market has paused and pulled…
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China and Germany: The Perils of Vendor Financing
by ilene - February 27th, 2010 12:13 pm
China and Germany: The Perils of Vendor Financing
Courtesy of JOHN RUBINO at Dollar Collapse
In response to Why Would Anyone Buy a Spanish Bond?, reader RAID 3000 pointed out that the U.S. has far more serious problems than Europe (no argument there!) and included a link to LEAP2020, a European site doing great work on this subject. One of its articles contained the following chart:
This got me to wondering if it would be possible to construct a similar chart for China and its main trading partners. (The U.S. would dominate that one.) From there it occurred to me that China and Germany are in more or less the same boat due to their practice of vendor financing. They’ve gone about it differently but the effect has been the same. Consider:
China lends money directly to the U.S. by using the dollars it receives from us to buy Treasury paper. This lowers U.S. interest rates and supports the dollar, which allows us to continue to buy Chinese stuff.
Germany, on the other hand, has lent its credit rating to the whole Euro Zone, allowing countries like Greece and Spain to borrow more and at lower rates than they could have otherwise. The borrowers use some of this money to buy cars, pharmaceuticals, and solar panels from Germany.
Now both China and Germany have discovered that their surpluses were based in part on bad loans to weak borrowers, and that some of the assets they thought they owned are 1) not really theirs or 2) worth way less than face value.
China has a lot of dollars, but can’t unload them without destroying the value of the dollars it retains. It’s trying to move out slowly, scaling back its purchases of U.S. debt and buying gold and oil resources, but it has to walk a fine line because spooking the markets would defeat its purpose. So it’s stuck with big dollar balances for the foreseeable future, while the U.S. is actively destroying the currency’s value.
Germany doesn’t own a lot of Spanish or Greek assets, but is now on the hook for what might end up being hundreds of billions of euros of PIIGS country debt. Which is to say it has to eat some of the loans it made during its vendor financing days.
Either way, those surpluses — and the balance sheets built on them — have turned out to be, in part, illusory.
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The Dollar Holds All The Cards
by Chart School - February 25th, 2010 5:19 pm
The Dollar Holds All The Cards (NYSE:FCX), (NYSE:X), (NYSE:GLD), (NYSE:NEM), (NYSE:GDX)
Courtesy Nicholas Santiago at InTheMoneyStocks
Since the U.S. Dollar has fallen lower by more than 0.40 cents off the highs to go negative on the session the major indexes have traded higher. Many commodity stocks such as Freeport McMoRan Inc (NYSE:FCX), U.S. Steel (NYSE:X), and the SPDR Gold Shares (NYSE:GLD) have moved higher on this dollar decline.
There is also a rumor on the street that China is buying gold from the International Monetary Fund. This has given all gold mining stocks such as Newmont Mining (NYSE:NEM), and the Market Vectors Gold Miners ETF (NYSE:GDX) a strong rally especially from the intraday lows.
As we say, every trade is a dollar trade. Continue to look for the market indexes to trade invese to the dollar especially when we have volume in the market indexes.
(What's this?)
(Fund my Mutual Fund, 1/28/10)
(Jutia Group, 2/10/10)
(Gold Versus Paper, 12/24/09)
US Steel,
Newmont Mining Corporation,
Freeport-McMoRan Copper & Gold
at Wikinvest
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Beijing is not Washington’s banker
by ilene - February 23rd, 2010 6:12 am
Edward Harrison of Credit Writedowns agrees with Michael Pettis that China is not "bankrolling" the US government and will not stop buying US assets. - Ilene
Beijing is not Washington’s banker
Courtesy of Edward Harrison
Michael Pettis really gets at the heart of the fallacious argument that China is somehow bankrolling the United States government. The fact is the Chinese have fixed their currency at an exchange
If China runs a current account surplus, it must accumulate net foreign claims by exactly that amount, and the entity against which it accumulates those claims (adjusting for actions by other players within the balance of payments) ultimately must run the corresponding current account deficit. And as long as China ran the largest current account surplus ever recorded as a share of global GDP, and the US the largest current account deficit ever recorded, and especially since China also ran an additional capital account surplus (i.e. other non-PBoC agents ran a net capital inflow), it was almost impossible for the PBoC to do anything but buy US dollar assets. Given the sheer amounts, a substantial portion of these assets had inevitably to be USG bonds.
This was not a discretionary lending decision. It is the automatic consequence of China’s currency regime, in which it pegs the RMB to a foreign currency, in this case the dollar. Why? Because when the PBoC decides on the level of the RMB against the dollar, it does not do so by passing a law, and making it a capital crime for anyone to trade at a different price. What it does is far simpler. It offers to buy or sell unlimited amounts of RMB against the dollar at the desired price.
No one will sell dollars for less than what they can get from the PBoC, nor will anyone buy dollars for more than what they can pay the PBoC, so all transactions get done at that price. That is how the PBoC (or any other central bank that intervenes in the currency market) sets the foreign exchange value of its own currency.
This means that as long as it wants to set the exchange rate, then, it must take the opposite position of the market. Since the rest of the market is a net seller of dollars (China runs a current and capital account surplus), the PBoC has no choice but to be a net buyer of dollars, which of…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
(