Fractured market...herding can overlook anything...

“I believe that the public wants to be led, to be instructed, to be told what to do. They want reassurance. They will always move en masse, a mob, a herd, a group, because people want the safety of human company. They are afraid to stand alone because they want to be safely included within the herd, not to be the lone calf standing on the desolate, dangerous, wolf-patrolled prairie of contrary opinion.” - Jesse Livermore

Today's action while manic and somewhat amusing is characteristic of the need for market participants to herd. Notwithstanding the CME lowering margin requirements...the action was tortured. My signals are still in place and a bullish  turn for defensive assets is about to be triggered and a bearish one a most risk assets is pending as of tomorrow.

Today, silver, gold and many other commodities did not perform. Performance, it appears, was relegated to equity risk assets. A fractured market is not a healthy one. The euro was unable to get follow through and did not confirm the end of day highs in any of the equity markets and nor did the dollar fall to new lows as those highs were made. All in all, not a pretty picture. My systems added short at the close.

Headline: "World Market Cheer Japan and Greece" - what will they say this afternoon

This afternoon or tomorrow when the scenario has failed to play out, what new version will they trumpet? "World Markets Jeer Japan and Greece News". Of course the media don't and won't have a view worth considering since they are often simply a mouth piece for waste information and ideas. They are also quite happy to be trumpeting the dollar collapse scenario via the UN report and Debt Ceiling issue. Funny how when the dollar rallies, they stop talking about the debt ceiling...too bad they don't get it...

Are you ready? don't let the dollar smack you on the way up...

The reality is that the market putting on "happy happy joy joy" again...the charade is continued and the world is doing very well thank you very much. Well, well, well...we have quite a few charts which I posted this weekend which tell quite a different story. My expectation was for additional strength into the open and early trading Tuesday...followed by significant weakness. There are very strong indications for a resumption of the down move...and a rather more stronger version of it...possibly as soon as tomorrow. The Greece announcement has signficant implications and they are not compatible with the market reaction...even if leadership would like them to be. If ever there was a finishing touch for the market - this is it. People are going to make full end run out of EURO's and just about anything in any bank in a country being attacked by the central planners and straight into dollars via US treasuries. Don't be surprised to hear a lot more about bank runs through out the world in the next days and weeks. People who withdraw money from a non US bank will have no choice but to go into Dollars. For the USA, rates will drop as people panic and try to figure out what to do...and ofcourse the dollar will ramp hard, fast and relentlessly. Risk assets stand no chance in this environment.

Now lets look at what is going on. The risk markets are not participating in the overnight party. Clearly, the centrally planned markets are rather ebullient. However, there are quite a lot of issues to contend with. On a fundamental note, giving Greece more money as a pathetic ploy to prevent them from forcing bond holder to take haircuts on debt is a highly ineffective way to accomplish the task. Taking control of their privatization process will not help either...the reality is that debt slavery keeps on ticking and the interest keeps on clicking...Greece will never be able to cover the outstanding interest...not if they sold the last grain of sand in Mykonos. Further, there are very dangerous underpinnings for the sovereign state and for the unrest inside it. There are significant accusations that the prime minister not only arranged, facilitated and likely pressured the sale of CDS purchased by the Hellenic Postbank of Greece (the state bank) protecting it in the case of a Greek default. The CDS contracts qualify as an asset of the state and were sold for 1.3 billion to a group that the prime minister and his family have significant interest in and connection to. Those contracts are now worth $27 billion – a huge 2,000%+ gain. He certainly knew that the value of the CDS would rise substantially and his leadership certainly has the ability to positively affect his returns...now, should this guy not be in jail?...and quite a few others? Well how about some of the guys whoe decided that the Central Bank of Greece redfine settlement for government bonds from  the standard T+3 (3 day) to T+10 - yes 10 days! If you happen to be naked short you get to keep your position for 10 days without having to locate the underlying to borrow...nice!

Regardless of this, the reality is the social upheaval and resentment will only be fueled by these developments. As the Greek citizen watch their most precious assets being sold to the CEO's of banks that should have taken losses and watch their government officials become ery wealthy of their countries demise...the result will be rather predictable...and it will happen in short order.

The sniff test is not panning out...and the markets tend to be rather interested in the stench when it becomes unbearable. With all these IMF, EU and ECB guys farting up the place combined with there brethren in the US competing to see who can be the loudest and the smelliest...I do think that it seems that DSK might be scoring good wins for the IMF in those departments...However, the situation is getting rather untenable regardless of the bureaucrat debauchery. The dollar is primed to a large run from here to the upside as people panic about the smell coming from Europe...with suitable effects on risk assets.

Massive fraud and cronyism is not just confined to BURNanke and his cartel...

What centrally planned capitalisim and democracy look like...

Not to be left out, this WILL be coming to america at some point not too far off...

Incidentally, woudl you really want to buy the ECB centrally planned constitution and currency unit scam

Yes...the constitution is alive and well...

The week that was...

Again...most of the elliott wavers and traditional analysts are looking for the huge up move...will they be blindsided again just like last time? Is the rally on the back of the troika really sustainable? I think people will be blindsided...

Very Interesting Jim Rogers Interview

I have to say that there is one thing to measure commodities against...and that thing is the exponential bell curve. The reality is that a society in decline, decline often triggered by a peaks in the availablility of and demand for resources, tends to accellerate its contraction of demand in many ways. One of the ways that the bell curve resolves issues for us is though events that seem not to be associated with the issue. For example, excessive demand for oil that has now passed the peak of the bell curve will likely be resolved both with new technologies that do not require oil and smaller populations that will use less of it. The fact is that nature is brutal in its pursuit of balance and the reality is that Oil is in less demand now that the markets are taking into account.

Even the CEO of Exxon stated that given the end user demand he sees, prices of oil are over valued and should be in the 40 to 60 dollar area...and he's an oil pumper. Remapping of supply and demand in the context of imbalances in the credit system caused by money printing and malinvestment is torturous and likely to result in contraction on many other assets and commodities. That is what massive credit contractions tend to look like. Therefore, though I find this interview to be very interesting, I disagree with the premise that the other side of the bell curve has to be accompanied by higher prices.

Things are not always what they seem...

 

Goldman Tax says up - means down, says down - means up

There are several charts that only need to be referred to historically since they pertain to Goldman's terrible calls, so I will not publish new ones...Oil and the dollar.

Goldman of course downgraded the dollar the day before it broke out over resistance and they upgraded Oil apparently just before it begins it trek to below $20. Here are my charts from a few days ago, they are still valid and appropriate...and how much do you want to wager that Goldman is on the other side of those calls?

We have no right expect munipalities not to default...

Hollywood Beach Florida is apparently a little late checking the balances in their checking accounts and the expected receivables on their account rolls. The interesting thing, and example of the credit fueled complacency that the world has adopted, is that a town with revenues of less than $8,500,000, needs a $7,900,000 fire house and I'll estimate a $1,250,000 disabled water tower so you can see it from the expressway. How interesting, when you find out how it really works when your complete business model is built on spending money you don't have, before it comes in and in amounts that can only be visualized on a perpetual exponential curve...These guys must be taking lessons from BURNanke. They certainly have eaten his cooking and believed his rediculous fairy tales.

None of these people are taking into account he collpase that is going to happen in their assets and their constiuent's assets and homes...I can hear the default bells ringing.

During Wednesday’s City Commission meeting, leaders learned Hollywood was short $8.5 million of the money needed to stay afloat through the end of the budget year, which is Oct. 1.

The commission approved raiding its emergency reserves — leaving just $2 million in the city’s coffers — and making $2.1 million in cuts to upcoming expenses.

But Mayor Peter Bober said the fact that Hollywood was poised to be millions of dollars in the hole should have been reported to commissioners months ago.

Bober is now calling for the removal of Hollywood Director of Budget and Procurement Services Cynthia Forrester, although the decision ultimately rests in the hands of City Manager Cameron Benson.

If you look at the numbers from months ago, a budget person would have seen that things are not shaping up as they should be," Bober said in an interview Friday. "It should have been brought to the attention of the commission sooner. It would have allowed us to have taken strategies earlier to make necessary reductions.

He pointed to several projects approved by the commission in the last couple of months that might have been reconsidered — including using $500,000 from the current budget to finance a $7.9 million fire station being built along Hollywood Beach and approving an additional $86,000 to refurbish the city’s light blue water tower visible to motorists driving along Interstate 95 and Sheridan Avenue.

"If the rest of the commission had known then as they know now, then every expenditure from copy paper to fire stations, everything would have gotten a much higher degree of scrutiny," Bober said. "The fact that this information was not brought to our attention sooner is negligent."

In order to shore up reserves and address any financial shortcomings for the 2011-2012 budget year, Bober said the city should look at cost saving measures like outsourcing some jobs or determining if certain tasks can be handled by "new technologies."

To bolster the city’s finances, the city may also have to take a look at raising its tax rate, said Matthew Lalla, the city’s director of financial services.

Last year the city commission approved raising the rate to $6.71 for everything $1,000 of a property’s assessed value, but even then, because of declining property values, the city was projected to bring in $2.6 million less than it had brought in the year before.

An Island and an oncoming storm...

I would like to make one comment regarding all the rediculously bullish commentary regarding gold and silver due to central bank and sovereign purchases of the metals. People seem to have a short memory and have forgotten that when all the same governments that are now buying gold and silver could not figure out what else to do with their gold and silver vault deposits and paper receipts for same - they sold them. As I recall that was when gold was $250 and silver was in the low single digits when most of the official selling occured...So, the time to be selling assets which have been so hyped that governments and central banks are buying them at highly inflated prices and many are even referring to them as currencies...is when it is obvious "everyone wants to buy them". Yes, and especially when its central banks want to buy.

Hell, even Zimbabwe, the only modern nation inept enough to officially create 11,200,000% inflation...is now smart enough to futher constrain their remaining purchasing power by basing their new currency on gold. So, it is happening now...all the charletans and economists are buying Gold and silver regardless the fact that they are NOT currencies and stand very little chance of becoming functional currencies. Despite the fact that they are at inflated prices and despite being an easily manipulatable and unstable basis for exchange...especially as a basis currency.

So, now is a very interesting time to be highly skeptical of the populist perception that "WE NEED GOLD NOW"...and try to look at these metals for what they are...simple assets and a source of liquidity...which makes them highly susceptible in case of a liquidity contraction. And a liquidity contraction is exactly what we have.

The apex of the storm

The most bearish pattern - a bullish declining diagonal

Characteristically, people look at falling diagonals (often referred to as wedges) as highly reliable bullish price patterns. That is true in general if you are in an uptrend. However, at trend chenges...people become very used to the trusty pattern for their profits. So, they attempt to continue to use the pattern to no avail...just as many bears did on the rally out of the 2009 lows.

The irony is that the traders trapped in these patterns tend to be very well trapped and so a failed pattern produces a very powerfull move in the opposite direction. For a bullish falling wedge...expect big downside if the pattern fails...for a bearish rising wedge...expect big upside when the pattern fails.

The banks, from this participants perspective, are not looking likely to hit the positive targets for this pattern.

Want to see the future of stocks and commodities

Ask yourself a simple question...were the run ups in commodities, silver, gold and equities funded with savings and/or the results of productive economic activity? The obvious answer is NO. They were funded by awarding incompetent people, in fact the ones who caused the last crisis and have always used accounting fraud to cover their losses and malinvestments, more money and credit. The public has not received more money or credit neither has small business. The result of this arrangement has been malinvestment...and its highly combustible at this point...which is why I loaded up on the dollar overnight near the lows around 75...

If you ever wonder what the charts of commodities, silver, gold and equities will look like...look at the last Federal Reserve funded manic asset inflation - housing...and ITS STILL COLLAPSING. Whats more is that its responsible for the destruction of our currency to the tune of more than 2.5 trillion over the last 8 months...anyone wanting to put that in persepctive will quickly understand that before the fed induced malinvestments in commodities started to implode the Fed was simply pumping enough money into the system in an attempt to compensate for this destruction of money. The reality is that, in addition, credit has contracted further which has exacetbated the money supply contraction even more. Then, when one compensates for the malinvestments in risk assets that are imploding (and have MUCH further to fall incidentally), the money the fed has printed has already vanished (and will ultimately significantly exacerbate money contraction) - with one caviat...the participants in the economy paid inflated prices for consumable products and commodities and that money is also gone without having the chance for productive velocity...so its a more than double whammy...

Ben has taken trillions of dollars dropped them from helicopters into buring fields and they have simply inflamed the inferno and now apparently Ben BURNanke thinks that adding some gasoline to the mix will improve the situation...the result of this nuclear destruction of money is a lack of supply and availablity of our currency - which will translate to a VERY VERY strong dollar.

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of the further credit expansion, or later as a final and total catastrophe of the currency system involved. - Ludwig Von Mises, Human Action

And Sovereign Debt...

And one last point, the collapse of sovereign debt throughout the world is a grave contributor to the net money supply. The US dollar is the reserve debt instrument of the world. Gold, Silver or any other commodity backed currency IS NOT DEBT MONEY...the unwind of this mess requires debt money to transact and insolvency to repair. Contrary to Eric Sprott's highly misinformed views regarding silver...Metals will NOT be a good store of value in this environment - his reputation will lay in tatters with the amount of money he will lose people with his rediculous hyperbole. Silver is at this time, a terrible investment, not a currency and not a good store of value/purchasing power.

In my view, Gold will most likely retain similar purchasing power as it does now. If you can buy 10 tanks of gas now with an ounce of gold, then I imagine in the future you will still be able to buy 10 tanks of gold or something near that. However, with cash you will likely be able to buy 25 to 40 tanks of gas...take your pick.

As many sovereign nations find the hand of the ECB, IMF and World Banks trembling with Parkinsons and dripping with disease, they will not be able to extract much of value from them...this will directly effect the US money contraction and fuel the dollar shortage. Mark the words...this is going to be a while and its going to be painful. The dollar money supply contraction implies an asset and credit over-consumption. Those instruments will collapse much further than anyone is expecting...or imagining.

The Dollar...so goes the market.

Forget all those crazy elliot wave counts out there...they are too distracted coming up with scerario 1, 2, 3, 4 with alt B. One needs to watch real patterns in the market not imaginary ones.

The EURO lends credibility to the Dollar Index pattern indicated above.