Saturday, September 19, 2009

Sell Hummers - well how about Guns?

Hummers and Guns - to be honest, sounds more like something that would advertised in the back of the village voice.
In any case, I think this guy will be selling more guns than hummers. But it certainly something I don't think he ever would have thought he would have done (nor would I) with a car/truck dealership. I have to compliment him on the nice design for the gun shop though. Not many gun shops have a reception desk and free coffee.


St. Louis-area dealer thinks Hummers and firearms go together like Smith & Wesson

Lynch Hummer dealership in Chesterfield, Missouri – Click above for image gallery

Peanut butter and jelly. Burgers and fries. Hummers and, um, handguns? That's right, where else but in the good ol' U. S. of A. could such necessary staples of everyday life be bundled together under one roof?

Like many other Hummer dealers, Jim Lynch, the man behind Lynch Hummer of Chesterfield, Missouri (a suburb of St. Louis), found himself with lots of vacant floorspace after fuel prices, the economic downturn and the court of public opinion conspired to restrict vehicle sales at his fine establishment. What to do? Seems rather obvious to us – add firearm and ammunition sales, what else? According to Lynch, "It is a natural fit. Our customers enjoy outdoor sports and the firearms have been a big hit with our Hummer owners."

It's all about customer service, says Lynch, "We take our mission of providing a pleasant shopping environment for our customers very seriously... We sold our first Hummer online in 1995 and have been a leader in online sales of off-road parts and accessories through our Adventure Accessories web site for many years. We plan to do the same with firearms and accessories on our website."

Interested in adding both a Hummer and a new Glock (or Sig Sauer, Smith & Wesson, Kimber, Colt, Benelli, Beretta, Browning, FNH, H&K, Springfield Armory, Ruger, Walther, Stoeger, Franchi, Uberti, CMMG, DPMS, Bushmaster or Barrett) to your arsenal? Click here to visit and hit the jump for the official press release. In the meantime, we'll be waiting for the first Mini dealer paired with a Starbucks franchise.


Inflation Era Economics at work...

Clearly, this kind of thinking will not be allowed to go on in the future. Tax and Spend and Spend is not going to be an American past time forever:
At any one time, the New York City school system is forced to keep about 1,600 teachers on full salary and benefits (costing about $100 million per year) even though they cannot be required to work. Six hundred are in a multiyear arbitration process for terminable misconduct or incompetence, and 1,000 are long-term layoffs from shuttered schools but whom principals continually pass over for transfer. [The New Yorker, 8-31-09]

Unions promote the efficiency model...I think? Well, that model must be hopelessly inefficient, since this type of Unionization needs be replaced
Union Rules: One subway line in Boston is still forced to employ two drivers per train when the other Boston lines, and most all subway systems worldwide, use only one. A June Boston Globe analysis estimated that the second driver, doing virtually nothing useful, costs the government $30 million annually. [Boston Globe, 6-14-09]

Friday, September 18, 2009

Neck Lines Acknowledged

SP500 Earnings from 1936

"With second-quarter earnings largely in the books (over 99% of S&P 500 companies have reported for Q2 2009), today's chart provides some long-term perspective to the current earnings environment by focusing on 12-month, as reported S&P 500 earnings. Today's chart illustrates how earnings declined over 92% since peaking in Q3 2007, which makes it easily the largest decline on record (the data goes back to 1936). On the positive side, S&P 500 earnings have moved off their lows – slightly."

Some Possible Patterns

All of these charts show possible head and shoulders patterns with RSI testing 50. A failure of the RSI likely means a test of the HS neckline...

If overnight futures were to take us down as they did just after they reopened on the TF to below the 612 area for the cash index (RUT) then we may just be waking up to these patterns breaking down on the open. On the other hand, these trend lines themselves may be bounce points, so, if they are not broken we could get our next bounce there.

Again, we should hold the upper trend line on the wedge shown in my previous post and make an attempt up. I think a lot of this depends on what is happening with all that money market cash. If they are done reallocating it then I would say the probability of a significant pullback, if not top are greatly increased.

However, right now anything could happen and a blow off type scenario seems like the most painful way for the market to go...and given this market you can not take that for granted.

In any case, it does not seem like upside in the market is that substantial...and short and sweet would be most welcome.

Thursday, September 17, 2009

Market Observations

As you can see from the rising wedge, we have broken out above the wedge and come back to support at the uptrend line. The first chart also indicates the 38% time projection of the entire 17 month bear market. If the market is going to rally, it need to do it SOON. If it break back below the trend line then we are looking very much like we got a throw over...and that may be it.

There are a couple of things going for this of the things is that the Transports had the highest volume reversal of the entire rally and I believe the whole year. The SP Midcaps also had a pretty nasty high volume reversal. Bearfund ETF's had their second high volume up day today. There are a few other charts of note which I have included. I will add more commentary later.

Also, at the end of this post is the ISEE Put/Call ratio which demonstrates a fairly extreme optimism. ISEE was discussed on Kenny's, I thought I would include a chart. it hit 242 today.

Wednesday, September 16, 2009

Money market guarantee by the Fed expires in the next few days

Regarding the bid for treasuries, meaning the persistent bid for them. The money market guarantee is set to expire on Friday. The treasury action may be from people exiting money markets trying to get into "safety"...and it has got to be giving stocks a bid too as we have seen. What do they say?...too many dollars chasing too few opportunities. If that's the case, this is definitely not what real bull market rallies are built on.

The fact must be, that some people feel safer in stocks where they can lose 30% in a giffy, than in money markets where the firm can lie to you and you lose everything.

This is what happens when you play GOD like the fed/treasury have done. The confidence is NOT really there...and as soon as god takes a break, people's true mood comes out...just as Dan has been pointing out.

Notwithstanding all of that, it seems like this could become another problem for the financial system...that much cash departing money markets can not be good. I think the money markets issue also is effecting currencies...

So what's happening to the institutions that used to invest that money?...what happens to their balance sheets?

I wish I had checked this out earlier...this rally would have been much easier to conceptualize.

I smell trouble.

you can see an article about this here.

Noteworthy Quotes of the Day

In a clear echo back to the salad days of the Great Asset Mania, the Wall Street Journal reports that day trading made a big comeback in August. Trading volume surged 14 percent or more last month from July at online brokerage firms Schwab, TD Ameritrade and E*Trade, according to the article. It also cites a Michigan money manager who is responding to requests from his high-net-worth clients to re-enter the market “because many are frustrated watching the rally pass them by.” If wave 2 (circle) is not ending now, the pressure to “get back in” will only intensify as the final subdivisions of the bear market advance trace out. People see the market close higher and naturally become more excited with each up day. Many cannot believe that prices can top amidst such growing optimism and good news. EWI subscribers know better. It is exactly these conditions that create market tops. Succumbing to this temptation, on the cusp of the start of the next Primary-degree decline, could ruin one’s financial life.
Short term yields were plunging last fall, even briefly turning negative last December, as investors clamored for “safety” in the wake of the vortex of selling pressure throughout the stock market. But that’s not what is occurring now in stocks, as prices persistently rise in Primary wave 2 (circle), the big bear-market bounce. We are not exactly sure why short-term government paper is plunging (yields), but it does bear watching since a slew of investors (or an investor with “big money”), for whatever reason, want to be safe and liquid.
--Steve Hochberg, Elliottwave International 
[My comment: Regarding the bid for treasuries, meaning the persistent bid for them. The money market guarantee is set to expire in the next few days. This may be people exiting money markets trying to get into "safety"... Notwithstanding that, it seems like this could become another problem for the financial system...that much cash departing money markets can not be good. P3 anyone?]

Central bankers have no clue. In the first place, the financial crisis was not a black swan. It was perfectly predictable. They ignored the phenomenal buildup in leverage since 1980. They acted like airline pilots who'd never heard of hurricanes.  
Today we still have the same amount of debt, but it belongs to governments. Normally debt would get destroyed and turn to air. Debt is a mistake between lender and borrower, and both should suffer. But the government is socializing all these losses by transforming them into liabilities for your children and grandchildren and great-grandchildren. What is the effect? The doctor has shown up and relieved the patient's symptoms – and transformed the tumour into a metastatic tumour. We still have the same disease. We still have too much debt, too many big banks, too much state sponsorship of risk-taking. And now we have six million more Americans who are unemployed – a lot more than that if you count hidden unemployment.  
Ben Bernanke saved nothing! He shouldn't be allowed in Washington. He's like a doctor who misses the metastatic tumour and says the patient is doing very well. The first thing I would tell Chinese officials is, how can you buy U.S. bonds as long as Larry Summers is there? He's a textbook case of overconfidence. Look what happened to Harvard's finances. They took a lot of risk they didn't understand, and it was a disaster. That's the Larry Summers mentality.  
It's good to have more than one profession, in case your own profession goes out of style. A Wall Street trader who's also a belly dancer will do a lot better than a trader who winds up driving a taxi.  
--Nassim Taleb
"Both the United States and China are members of the [Group of 20 nations], and the G20 has taken this stance that they shouldn't have recourse to trade restrictive measures during the crisis" 
--Pascal Lamy, World Trade Organization 
We are going to see harsh reality in September. U.S. industry results are a disaster.”  
--Sergio Marchionne, the chief executive officer of Fiat and Chrysler
H.R. 1207 is one of the simplest bills imaginable. Unlike the healthcare bill which is over 1000 pages, H.R. 1207 is a page and a half. The bill lists the existing exclusion of the Federal Reserve from oversight by the Government Accountability Office (GAO) and allows the GAO — an independent body — to audit the Federal Reserve Bank. I am very sure the bill will pass — possibly by the end of September, but more likely by the end of October.
They are performing a truly remarkable, surreptitious transfer of wealth from public to private hands. They are taking their ability to print money and shore up failed banks. They are simply stuffing money into the pockets of private interests.
In the case of the half a trillion dollars, they stuffed the money into foreign private pockets. In the case of another $230 billion, it has been tracked as a secret bailout to Citicorp in the US. The fact is the Federal Reserve continuously puts all of us on the hook for decisions they make to play favorites with private interests to the tune of trillions of dollars.
These are not conspiracies. The Federal Reserve’s own website has some incredibly interesting information about the general state of the US economy and the distribution of wealth in our country. I was recently reading our national wealth capped out at $62 trillion two-years ago has crashed to $50 trillion since. Those are Federal Reserve statistics on their website.
--Congressman Alan Grayson

Market Scenario

From my perspective, today's rally limits the scenarios fairly significantly. I do not believe that we are looking at any of the patterns playing out that most people have been watching. I think this sets up a deer in the headlights situation. Shorts, who have endured the pain and no longer understand the pattern are going to get confused or capitulate and perhaps even go long. Longs only know that everyday they keep missing the rally in a big way - if they sold much lower and missed out, up to here, they will capitulate. This panic move seems to be in love with the inflation trade.

I had hoped that we would get the inflation trade - which would entail a rise in Gold, Silver, Oil and stocks and a fall in the dollar. Well, this is a signifcantly larger trade than I imagined. I fail to see any room for nice consolidations and neat patterns here. It looks as if its more likely going to get disorderly and fast.

Today's break over the rising wedge is not something I would have liked to see at this point. And that pattern does not suggest an orderly pull back to consolidate the gains. Nor does it suggest an orderly sell off after we top. I would much more imagine that the pattern will continue to break divergence up until we have achieved a blow off of some kind and then without cash available from shorts or buyers - a strong (possibly even waterfall) type selling reaction.

As an example:
Tomorrow: market opens, possibly makes a small downward test (as today) and grinds higher accelerating into even higher levels. 1090 for the SP500 would seem like a magnet if this were to occur.
The Next Day: market could open gap up reflecting total panic by the shorts and euphoria from the bulls, only to sell off hard and close red. 
This is simply one scenario to keep in mind. It could take until next week to happen. But I am not that excited about scenarios that would indicate a drawn out push. Breaking the divergence here at the top of the wedge, is highly emotional and seems to defy a type of calm reaction.

I think the goal now needs to be to retain composure as this move plays out, and to be prepared for a highly charged emotional environment. The VIX is already indicating as much. But, the setup seems to me to need capitulation.

The other thing of note is that the BDI (Baltic Dry Index) and DBA/DBC have not really participated in this push - that is not inflationary. Clearly paying through the nose for companies who do not need to buy commodities due to demand issues is out of sync with a truly inflationary trade. People are panicked. We need to be prepared for a buying panic that will quickly reverse and mark the top of this never ending wave P2.

Market Observations - Optimism and Fear

Below, I show a chart of the Russell 2000. This index has broken over the top its upper trend line in what looks like a parabolic throw over. At the same time VIX closed positive and has failed to close below support...this is a significant non-confirmation to the throw over prices that we are seeing in the indexes.

The fear and extreme optimism (92% bulls) are not painting a clean picture for the bulls. Clearly what is happening is that the bears are blowing up out of shorts and giving up and longs are over extending and pushing the cash reserves to near 0. This means there will be very few buyers when we start moving down...

I am looking for a this throw over to reach some sort of emotional extreme imminently. Clearly the diagonal that most have been watching is not playing out. The action today shortens the end of P2, in my opinion. Other patterns, including a diagonal, would likely last longer.

Keep in mind that this action is most definitely NOT bull market action. In bull markets, panic buying does not often occur...additionally, patterns allow for consolidation and testing. The only testing going on with this market is highs...this is representative of advanced countertrend type activity. Bears are at wits end and Bulls can't get in quick enough or risk missing the bull market.

I am imagining that this will also cause a spike in Gold and capitulation in the dollar...due to this impression, I have exited most of the dollar contracts that I bought when $DXY was 76.7.


We are in the gap resistance...I would not like to see it to fill.

VIX Chart

Market Observations

VIX is failing to make a new low...and bouncing.

Looks like market is setting up a very emotional disconnection from reality. We need a big volume close over these levels to trigger further upside - not just stops being taken out and bears being squeezed. At this point, mutual funds have less than 4.2% of assets in cash. This sets up a scenario where when the market sells off...there are no more buyers to buy the dips. Clearly the market is hallucinating. The trick is to not get squeezed out before it falls over. Right now, targets for the Russell 2000 are in the area of 618 to 623...once we hit these...the reversal could be dramatic as the orgasm of cash being spent on inflation assets evaporates. Right now, buyers feel good because that's what seems to be working and everyone else is doing...but if it were to actually playout that way...I would be surprised.

Dollar Update

The 2 - 4 line is just below and the dollar is extending its throw over, it we want to call it that, of the wedge. Dollar is losing downside momentum, despite the prognostications of the media and hyperinflationists.
Similarly, the recognition gap on the SP500 between 1070 and 1090 exists. Ideally, we would come to just underneath that gap, or very slightly into it for our move up. Filling the gap would be something I prefer not to see happen - and am not expecting. 

Tuesday, September 15, 2009

Dollar - Big relative strength

The dollar is now at yesterday's highs while the market is above yesterday's highs. This scenario is reinforcing the sell-the-news case that I presented previously, potentially occuring sometime in the day today or possibly tomorrow .

Watch 60 period stochastics for cues on a roll over.

[update: 9:27 pm:] 60 period stochastics never crossed down...will have to keep watching them tomorrow
thanks to: matt fraily,

Dollar update

The dollar needs to bounce solidly into and over the declining wedge. Its hanging around the lower wedge area as you can see, which coordinates with a 61.8% of wave 1. The dollar needs to get moving pronto. This setup points to a relatively big reversal in the dollar and likely the market soon or a continuation of the dollar decline and therefore a market rally.
I would not be surprised with a better test of the 2 - 4 line and then a large reversal. This would be in keeping with a potential for the market to test 1061 to 1069 tomorrow and then reverse.

Monday, September 14, 2009

Market Observations - SP500 Updates, Oil and Financials

This is an updated chart of the SP500 gap resistance. Notice the confluence of trendline resistance from the wedge that cluster in the area of the open of the gap (indicated by the black line) from Oct 07. Down volume distribution days are now more than 4 in 6 weeks...that is the allowable limit. In addition all the distribution days except one are larger than the accumulation day volume. Please keep in mind that the Dow and SP do not show gaps on stockcharts...thats why I drew the gap in with the green box.
Oil's head and shoulders continue to play out...we are holding support at the 50 SMA...but things don't look good for oil. This reinforces the relative strength that the dollar showed today.
XLF was saved (by whom, I wonder) by the hair of its chin...its the lowest up volume candle of the entire rally and still below the range day from early sept. Things do no smell great in financial land.

Timing Projections for the Dow Jones

We are just below the 34 EMA and at the 38.2% of the 17 month bear market 5 wave move down. This represents optimal timing...

Market Observations - Sell the News Setting Up?

Today's action strikes me as a short squeeze and hedging prior to an important number...I imagine that given the abuse bears have had to endure, a chance of a rallyable report is beyond a reasonable risk at this point. So, I think people attempted to set themselves up for their trades for tomorrow. In general breadth was not great at less than 2 to 1 and up/down volume was equally unimpressive. 

So, whether a higher high is made tomorrow on the retail sales numbers, or whether one has already been put in today, likely is of little consequence to the sell-the-news potential of the Retail Sales Report announcement tomorrow

this chart is from 9/10/09 and does not reflect today's prices

If a new high is made tomorrow, I would imagine it could be a throw over up to the 1062 to 1069 area that I previously pointed out. The stock market has tended to be at its weakest after retail sales reports, therefore, a new high, especially a gap up and throw over could be an ideal place for a strong reversal to start. A high here is also within my timing window presented a few days ago. 

this chart is from 9/10/09 and does not reflect today's prices

Given the state of new stimulus (nothing new coming to impact retail sales anytime soon) and the extreme expectations this report would require to support the market prices at or above these levels, downside risks far outweigh the upside risks. 

Below is a chart of the Dow...we are at formidable trend line resistance as you can see.

The ghost fleet of the recession...

The biggest and most secretive gathering of ships in maritime history lies at anchor east of Singapore. It is bigger than the U.S. and British navies combined but has no crew, no cargo and no destination  -  and is why your Christmas stocking may be on the light side this year

Dollar - Ending Diagonal Update

Dollar completes a small throw over and bounces back into diagonal - bouncing off the 2 - 4- line support area. Break of 78.35 would be the first step in confirming dollar rally - which likely could also be a confirmation of a stock market top.

China...effectively declares war on US and Obama taxes Tires?

To start out, this situation is much bigger than trade. When you read the headline, that is not what i am referring to. China and the US in a trade spat would be relatively meaningless. China can inflict relatively little damage on the US with trade sanctions and vice versa. That's not to say there would not be damage from these types of actions. But there are bigger problems.

I believe that markets are not news driven...though news can be a catalyst to reflexive market price reactions. I do believe though that markets are credit driven. A china trade war does not impact credit directly...and therefore, itself, is not a great excuse for the market to selloff or rally. 

However, what has happened recently as illustrated in my recent posts, is that the conflict between the US and China has escalated rather than defused regarding China's authorization of defaults on derivatives agreements that could collapse our entire financial system in very short order. 

China is a counter-party to trillions of dollars of derivatives obligations with JPM, GS, BAC, C etc that they have threatened to default on. This is the main issue going on right now - trade is just a smoke screen. Any affirmative moves in this direction, would create credit issues and trigger the need for huge amounts of cash to be raised very quickly. Obama, in his typical wisdom, decided the best way to prevent China from pursuing their defaults agenda, and thus collapsing the JPM 89 trillion ponzi scheme derivative portfolio (and GS and C portfolios as well) was to add a tariff to imports of tires from china...

China answered back...but this escalation overall raises the stakes and makes it that much more likely that JPM, GS and C will not get paid by China...If China's business with the US is collapsing, why do they need to continue to pay derivative obligations on which they are losing significant sums and on which they believe they were hoodwinked? The upside is too great for them not to do so. If they have little business with us and get into a trade war, why not make a ton of money on their treasuries and long dollar positions by collapsing the theoretical dollar caches that the largest banks have been using to further a bankrupt and corrupt system. If China were to follow through with this (which we can not control), the result WILL collapse the entire US financial system. Additionally, it would enable China to hijack our system by leveraging the strength of the dollar purchasing power (derived from their treasuries and long dollar positions) that they hold. This would work, provided that interest rates remained low. Given the fear of further deflation in bank owned assets and misguided policies from the Fed, it is highly unlikely, even in this case, that US officials or banks will be in a rush to raise interest rates. Rates will likely remain low in an attempt to manage and contain deflationary pressures. 

Effectively, what has happened is that china has suggested they were thinking about declaring war on the US - and the best Obama could answer was - "OK, we are going to tax your Tires"...this situation is much bigger than trade.

Sunday, September 13, 2009

Obama - just does not get it - trade war with china?

Lets analyze this. He hires the most wall street executives into his cabinet in the history of any president. Comes up with a plan that is about as good as turning under crops in order to fix prices - calls it Cash for Clunkers. Gloats about it being green - which it is most definitely not. Comes up with stimulus plans that are not stimulus - but wealth transfers. Designs a health care plan that "...will not add one dime to the deficit". Now, mind you this plan costs roughly 2 trillion dollars. That is 14% of GDP. If you believe this can be implemented without increasing the deficit then there are only two options...fuzzy math or delusion.

Clearly, though Obama may attempt to back up his rhetoric with some numbers...I am quite sure those numbers are selective and that not increasing the deficit does not mean what any normal person thinks it would mean. Whatever the excuse, I do not care. The answer is simple - this health care proposal will increase inefficiency of the system and further bankrupt the country. And now just to make things more interesting...Obama apparently has decided to add tariffs on tires from China. Clearly, Obama's cabinet is misguided, has failed economics 101 and has no understanding of what is going on within the confidence game of the special interest fiat system that many including Obama  (just as bush) have abused to the detriment of our country.

The last thing we need is a trade war with China for several reasons. First and foremost, is the defaults that they are proposing on derivatives agreements with our largest banks. We definitely do not want to give china any additional ammunition to use to keep capital in their borders or renege on commitments that could collapse our theoretical money supply. This would result in driving the remaining money up in value dramatically. Quite frankly, there is no reasonable way to enforce those agreements. It simply has to be based on mutually beneficial relationships that promote fair business dealings and an honor system. War with china is not an option. So, what are we thinking? Please Mr. Obama give me the legal platform you are going to use to enforce financial agreements, that if defaulted, send our economy into oblivion? There is none. China is a separate country with the ability to print its own money and force their bankers who may not want to lend to do so anyway under threat of capital punishment. Their system can inflict quite a bit of damage on us right now. (see: All we need now is a big hit to theoretical money - derivatives anyone?)

I recommend that everyone read all the dollar related articles I have posted under the featured articles list at the right in order to understand what the shortage of cash dollars will do to our financial system.

Overall, I am very disappointed with Obama. (that is an understatement) I am even more disappointed that we were not able to get Ron Paul into Whitehouse now that we see how much we really needed him there. I think Ron Paul or his son will be elected to that office if the US does not descend into governmental destabilization. But Obama is making a big mess and bill that we or our children will not be able to afford to pay.

To me, republican or democrat is not the question...both represent the interests of the financial elite that fund their campaigns, get them media exposure and embody the system that creates the fiat money that furthers their ability to execute unreasonable plans that are perceived will impress their constituents but clearly can not be afforded.

Think about it...if you are a politician is credited with building a transportation system, governmental aid plan, park, school, bridge or casino that creates the perception of wealth creation, standard of living increase or general benefit for his constituents...the voters will most likely vote for him next time he runs. Since there is not enough tax revenue money to fund most of this kind of needs to float government debt using the fiat currency/fractional reserve system to enable the perception to be that the budget is reasonable and manageable. The idea is that the taxes for the benefits will not perceived by constituents at that time - but rather simply delayed - this is a deliberate misdirection and slight of hand. The logic is: they won't notice if the taxes are come later - so the politicians will get the vote they need and their jobs back if the constituents think they have been benefited in some way. This symbiotic relationship is enforced by the fed and the shareholders of the fed who are able to grant or deny almost tacit capability to elected officials to retain or gain their positions.

Do you realize that the Fed for instance has hired a staff of lobbyists to fight the HR1207 Audit the Fed legislation. They have already manipulated, Pelosi and Frank in an attempt to disembowel the legislation by incorporating it with other packages and that enable typical tit-for-tat vote buys that would neutralize the bill. Please explain to me why the Fed should be employing lobbyists at all Mr. Bernake?


The fiat money system is a political manipulation system guided by the needs to be ended.

Art Cashin - Recalls similarities to 1987

Warren vs Geithner...Score: W: 1, G:-1

How many times can you try to avoid answering a question when attempting to answer one question...and how many times can pat yourself on the back while answering one question that you are attempting to avoiding answering?

Watch this video to find out...

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