STB Morning Post 09/13/11

Not much to say other than China saved the day yesterday (again). It seems that you can always count on intervention of some sort to save the day (till you can't). Bottom line is they will continue to stick save till they can't. As noted on STB a few months back, it appears that the power brokers in governments around the world are tired of bailing out the banks.

The bankers have bled the system and their puppet politicians as much as possible (times two). The governmental representatives have gained nothing politically as their voter base has become increasingly dissatisfied with their performance. On the other hand, you would assume that the money flowing into their coffers from these special interests is coming in at an astounding rate. Quite the trade off, sacrifice your country and political career while you go for the big cash grab. How American!

I think they are thru throwing good money after bad. I think the politicians are actually beginning to see the light. After throwing a DISCLOSED $4 trillion at the problem (not the actual $30 trillion it took to bail out the world) and getting nothing out of it, maybe, just maybe they are growing a set large enough to take on the banks and the default issues that are coming.

I hope you all like the new look old blog. STB.com is still down and I am actually considering staying here at this point till the new blog is up and running. Comments and suggestions are always welcome. What you like and don't like I need to know so it can be incorporated into the new blog. Don't tell me after the fact, you need to tell me now.

Minis this morning have made quite the recovery (not sure who came in with the big stick (or wantons filled with dollars as sellputs put it yesterday). All it takes is a rumor to move the DOW 100 points either way in minutes. Thus, this is a dangerous playground to bring your ball to. Remember to have a trading plan for each trade and to always use stops.

Minis - yellow channel support being backtested. the blue triangle backtest is just above. 1161 (price at now) is first resistance and then 1178. Those can get run thru with the right "solution" today. Inversely 1123 is the magic number for severe downside action continuation. Bottom line is the markets are consolidating at these levels and remain range bound. Note - I adjusted the channel a bit this morning to what should be a more accurate representation of the channel capturing the last low at 1138 - where it was below the support diagonal yesterday. This is an allowable thing to do and is sometimes necessary when working with charts. STB always reviews his trendline positions and if adjustments are necessary, then I make them (and you should as well).

Morning Post

Snow day for Shanky here in South Georgis. Waiting on 4-6" of some pow-pow to show up on my doorstep. I'll believe it when I see it. What's the forecast for Vancouver today? I feel sorry for those people up there, but still looking forward to the winter Olympics and Daytona this weekend.

China has raised rates again. The big news that pissed me off this am is that Toyota hired  regulators to help hault investigations. The corruption is rampant. They care more about corporate health and profits than our own well being. You would think they are getting better and might be learning something from all this mess. Apparently they don't give a flip about our well being. Money talks.

Markets are at a precarious spot. The EWT folks are looking for another sharp move south very soon to save their most recent counts. They may get it as the markets try to hold upper resistance lines with the futures down. The mixed indicators have some (especially me) feeling a little leery about forecasting any specific direction at this time. The 60m overbought, the dailys have been bottoming for sometime and the weeklys are still headed south. I tend to lean to what the dailys have going on for true direction.

SPX daily - Which TL will be the upper resistance for the next turn? Trying to crack the dashed red TL now that has been proven resistance. On the other hand the blue TL below has been proven support. A break either way could be significant. Looking at the indicators the RSI 5 cracked it's downtrend line. Every other indicator is oversold and ready to turn. My old reliable S Sto has a bull cross. On the other hand the 60m is overbought and the weeklys are still headed south. Barring some reversal in the dailys forcing them to embed and even given the bearish action in the futures, I am going to lean to some more upside before any major turn south (which is coming). Maybe this move at the open today cures the 30/60m problem or they become embedded overbought. I'd call it somewhere in the 2 wave and not in 3 yet.1 is over. Possibly some more choppy consolidation. The BBs are still way to wide for any super volatile moves. 1103 max upside at this time. The bears party will just have to wait I guess. IF I AM WRONG (and since I decided to make a bold call against the grain) I'd say recent support at 1044 and the green bear market TL will be in play pretty quickly.

Have a great weekend. I'll be rooting for the old man in the #5 car as always at Daytona (I like the 38 as well). GL!

Mind Boggling News Events Continue To Boggle The Mind

Let's start with the HufPo's Priceless: How The Federal Reserve Bought The Economics Profession. This one will blow your mind and is a must read. "Even the late Milton Friedman, whose monetary economic theories heavily influenced Greenspan, was concerned about the stifled nature of the debate. Friedman, in a 1993 letter to Auerbach that the author quotes in his book, argued that the Fed practice was harming objectivity: "I cannot disagree with you that having something like 500 economists is extremely unhealthy. As you say, it is not conducive to independent, objective research. You and I know there has been censorship of the material published. Equally important, the location of the economists in the Federal Reserve has had a significant influence on the kind of research they do, biasing that research toward noncontroversial technical papers on method as opposed to substantive papers on policy and results," Friedman wrote." ROF LMAO - they own 'em ALL. No one on the payroll or with any thought of advancing in the field will ever speak against them. the funniest part, how the 220 PHD's on staff all missed this one coming. Simply mind boggling.

The FT brings us, Court rejects SEC settlement with BofA Judge Rakoff holds serve and sends 'em to court in February of 2010. "In Monday’s order, Mr Rakoff wrote that the settlement “does not comport with the most elementary notions of justice and morality, in that it proposes that the shareholders who were the victims of the bank’s alleged misconduct now pay the penalty for that misconduct”." What is mind boggling about this one is that justice may actually be served and may be gaining momentum.


Calculated risk has Failed Banks and the Deposit Insurance Fund. this is a real gem that hits home to me. "The cumulative estimated losses for the DIF, since early 2007, are now over $42.5 billion.Regulators closed three more banks on Friday, and that brings the total FDIC insured bank failures to 92 in 2009. At the recent pace, regulators will probably close around 150 banks this year - the most since 1992." That is a mind boggling $42.5 billion they are now in the hole and possibly hundreds or thousands of more banks to fail? Heloooo?

And from Pragcap.com - DAVID TICE: THE S&P IS GOING BELOW 400 You know I could not resist this one. "David Tice is undeterred by the 50% rally in stocks. In his latest interview he says the market will fall over 60%." There is a link to the full interview there. Nice to hear one realist out there with a mind boggling prediction the pundits at CNBS can not fatham.

And last but not least our friends at Zero Hedge dug this up at Bloomberg: China Probes ‘Unfair Trade’ in U.S. Chicken and Auto Products. Mind boggling to think that China is complaining about fair trade practices. "Chinese industries complain that they’re being hurt by “unfair trade practices,” the nation’s Ministry of Commerce said on its Web site yesterday. The dumping investigation relates to poultry alone, a spokesman said in Beijing today. The ministry didn’t specify the value of imports of the products."

GL trading.

Teetering At The Top? This Is One Heck Of A Balancing Act!

But the top of what? Is the game coming to an end? The end Tom Brokaw says that we're too ignorant to see, and that we can't figure out on our own on the Internet without mother media being the deliverer of such news? The end CNBS refuses to report? The end the government and TBTF banks refuse to allow? The end the Fed may have allowed to happen? The end that was inevitable since this credit bubble was unleashed? The end that was foretold before fractional reserve banking was allowed?

More and more this appears to be a time to socialize, or to further the process of socialization begun many years ago. Everywhere you look this once great nation of nations is becoming one massive government sponsored program after another. Unfortunately they have failed at a high majority of these and hopefully this is just the end of a cycle. A time of purging excess from the system.

Zero Hedge has Excess Liquidity Game Is Coming To An End. I which TD brings us this from David Rosenberg's daily notes, "In his daily notes, Rosie looks at what is sure to cause a few sleepless nights to all trend chasers who believe that the trillions in excess liquidity will be there to forever prop up artificially high stock prices. News flash - it won't, and it has already started to contract aggressively, yet computers seem to have problems with pulling down St. Louis Fed time series in their quest to constantly front-run one another." David, Big Ben is "making it rain" man just like Packman does in Vegas. Don't you ever get out to have any fun? What's so wrong with a little excess funds floating around?

David has been spot on thus far and his exit from Mother Merrill was timely and I would love to know the true reasons as to the timing of his exit. His successor surely is towing the corporate line as ZH brings us Rosenberg Replacement Reaches For The Stratosphere, Sees 1,200 S&P On "Strong Earnings Growth". "The Chief US Equity Strategist and Rosie replacement sees an S&P earnings of approximately $70, or roughly a Div/0 compared to the most recent negative trailing EPS for S&P companies. How Bianco sees earnings growth on limited cost extraction and a persistently declining top line is just slightly beyond our meager calculating skills." Another glowing report from ML! Surprise! Someone care to do the math on a 1200 P/E for the market? Did you hear about the JPM upgrade of GE? This is NUTS!

Then from The Market Ticker Denninger delivers FLASH: Consumer Credit RECORD Contraction. "The inevitable contraction that is necessary to put the financial system back into balance is happening - whether The Fed wants it to or not." What Karl, you mean the reflation trick isn't working anymore?

Mish tells us the great news in Job Creation Down 35%, Consumer Spending Down 33% From Year Ago. "Bear in mind I think unemployment is going to continue rising for another year, then come back down slowly and reluctantly as noted in Structurally High Unemployment For A Decade. Thus a jobless recovery is a given, assuming there even is a recovery worth mentioning." I would love to get Mish geeked up on about five 5hr energy drinks before he does his next post. Nah, that would make him more like me and we don't need another me.

The Big Picture has a great post New Week, New Links where you can glean such delightful tidbits like, 86% of all mortgages are taxpayer backed in some form or another or Study Says World’s Stocks Controlled by Select Few and The Sorry Tale of America’s Out-of-control Spending. This post summarized all sorts of delightful information of our green shootless economy.

Folks, I have not mentioned the dollar, treasury auctions, gold, oil, FNM, RE, CRE, CDS, MBS, China, medicare, social security or pick a war that were funding. That is a huge heap of shit we're dealing with and our president has time to have a twenty minute 9/11 conspiracy interview with Charlie Sheen (not really). The purging of excesses is JUST underway and will continue till some form of sustainable measure is attained. Remember without a gold standard of valuation you can exponentially expand your lending capabilities to exponential proportions and we have done just that. There is more shit off balance sheets than we can count.

Our government has allowed the vastly unregulated banks to run all over us. You were given the keys to the kingdom in exchange for allowing (unintentionally) them to rape you of your financial freedom all for greed, profit and power. The house of cards is teetering and will crumble soon. It is inevitable. Just be ready when it hits. It may be sooner than you can imagine. Tom Brokaw will let you know when.

More P3 Evidence - Things Will Get Worse

Just a few notes to get the holiday weekend off to a good start. As I like to say - enjoy them while you can.

Bloomberg - ‘Buy China’ Pesticide Withers Those Green Shoots: William Pesek "One possible explanation is protectionism, as China works to encourage exports while curbing imports. The country objects to the “Buy American” provisions in U.S. stimulus efforts, yet it is using similar tactics. Another reason may be that China’s revival is more spin than reality."

Bloomberg - Muni Downgrades Add Risk, Prize to Bond Game: Jane Bryant Quinn "Downgrades are just starting to pour into the muni market. States, having run through their rainy-day funds, are slashing subsidies to towns and cities, which are already struggling with reduced sales- and property-tax collections. Some 48 states face fiscal stress, the Center on Budget and Policy Priorities reports, a situation that’s likely to continue for the next two years."

Mish - Jobs Contract 18th Straight Month; Unemployment Rate Hits 9.5% "Looking ahead, I expect the service sector to continue to weaken. Mall vacancy rates are rising and a huge contraction in commercial real estate is finally started. There is no driver for jobs and states in forced cutback mode are making matters far worse." You should ALWAYS read Mish's (un)employment reviews.

OK, so China's fudging, unemployment WILL get worse (it's worse than you are being told) and the muni market is under severe stress. If this is all new news to you, where the hell have you been for the past year? The muni thing scares the hell out of me. The green shoot cheerleaders rarely add it all up for you, what I like to call the multifecta - unemployment, reduced dividends, reduced credit, increased savings rates, market values 40% off of highs, real estate values crumbling and now the possibility of muni defaults is not a good combination for any economy. Folks, that was just the obvious short list of factors facing the CONSUMER ONLY. It is only a matter of time. 2009 is our 1930.