Tuesday, December 6, 2011

Morning Post 12/06/11 - SPX

Perpetuating the Ponzi. Mot of you know this, but for the noobs let me briefly explain. The global financial system is a Ponzi scheme. Think Madoff, It is the US's job to buy things and everyone else needs to make things. In order for this to work they supply us with cash and buy treasuries and we in turn use those funds to buy their stuff. Where the system breaks is when other countries stop buying our treasuries and become net sellers. Then we have to print money, thus deflating our currency, to buy our own treasuries (monetization - which Geitner and Ben said would not happen).

Yes, this is  crude and short explanation, but it catches the basic premise of what the real problems are. This is the crux of all the issues at this time. The only answer left is for everyone to print more money to pay off the massive debts incurred over the past 10 years and to support the sensational entitlement programs that the citizens rely on.

The global Ponzi is dead. There are no more resources to buy everyone's bonds to support all the economies. All funds simply go to service debt now. Thus you hear  to save the EU it needs to print, and Germany (bless their souls) resists after experiencing the Wiemar period of hyperinflation after WWII knowing the devastating effects of what that will do.

This carries into what I have been covering for year and covered in the AD last night. What Portugal is doing now. Raiding pensions to cover government debt to stave off default. This will come to the EU and to the US as well as desperation sets in to find funding to save the dying system.

This poped up this morning, ‘Gold For Bonds’ in Japan as Bond Buyers Get Gold Coins - May Enhance Returns 5.9 Times | ZeroHedge. This is a severe level of desperation. "This is a sign that the Japanese government like governments internationally is very concerned that they will not be able to sell their government debt." If you can't sell bonds, you can't support anything. Yes, we are that close to the end game.

After S&P went on the downgrade rampage yesterday, this pops out this morning, "Accordingly, we currently anticipate that if we lower the rating on EFSF, it could be by up to two notches." S&P Puts EFSF's Critical AAA Rating On Downgrade Review, Can Cut By Up To Two Notches | ZeroHedge. What's next, the IMF and then the Fed?

Kicking the can and printing hopium is all they are doing folks. The coming implosion of the global financial system will be devastating. Till then all we can do is prepare and wait for the inevitable.

SPX Daily - Looking at triple resistance. The 200dma, the diagonal off the last two tops, 1257 resistance and that pink "best fit" diagonal separating bull and bear moves are all weighing on price here. Some indicators have room to climb, but the SPXA50 pegged above 400 means most of the run should be complete.

SPX 60m - This chart is screaming sell, STB will remain in full caution mode with the EU needing to have a result to their issues by the 9th. Market should wait as well.

Index Comparison Monthly - You can see the backtest of busted support happening all over the indexes here very well.

Minis 1m - Last night the markets continued yesterday afternoon's slide all the way to 1245 even taking out the lower VWAP band. Price has now recovered (I guess that potential double downgrade of the EFSF was a rally cry) to the VWAP (pink) and the 1257 resistance area.

Remember the Reason for the season!

GL and GB.

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