Ron Paul…his message is "restore america"

Somehow I find that significantly more believable than some amorphous ambivolent “Change you can believe in” rhetoric.

Government Approved…as ECB gets the shaft...

This is good news?…not it you judge a book by its cover...

This cover says exactly what I posted yesterday, financial engineering at its level best of its worst. These guys fabricated lower yields, fabricated data and fabricated the leverage with which to create the illusion. They made this whole thing up. Ususally exceeding expectation is a good thing - NOT IN THIS CASE.

The banks that borrowed, borrowed from an already insolvent ECB and with their appetite, confirmed just how desperate everyone involved really is. What’s more, is that this loan facility just makes everything worse, with the exception of the ONE DAY bounce we got…and that, as you can see, will not be a lasting legacy.

The dollar responded by testing the support level in the neckline of the Cup and Handle pattern and came down to the lower trend line as marked. Now the ridiculous policy of lending bankrupt institutions money that they can not and will not be able to repay will be justly rewarded.

Risk assets are now likely toast and the weekend charts that I posted are still 100% on track though they may have to wait for this holdiay week to pass. Of course, the equity volatility was higher than I would have liked but, all in all, NOTHING has changed and NOTHING has been FIXED.

Hopium is all this market has left

For all the hoopla, the dollar is simply retesting a breakout. This was something that I expected but with Cup and Handle patterns you quite often will not get a real retest. However, today’s move in equities and he EURO essentially could only move the Gold market roughly up $16.50 (it should be up roughly $110 higher at this point given the action in other key markets - but Tyler Durden or Morgan Stanley are all to happy to ommit that part) and silver around 50 cents at the time of this writing…this indicates just how much hopium is embedded in the moves.

Below is an example of more freshly smoked hopium…Tyler just does not give up...

The pullback in the dollar offered wonderful opportunities for attractive prices which apparently insolvent European banks are not letting pass without being noticed…I also, did not let the dollar prices go unnoticed.

The spread between the Dollar and inverted S&P500 has not come in and will likely lead to a brutal resumption of the previously scheduled programming in the not too distant future.

The Dollar and the EURO

Lets see if a directly engineered yield in a single new spanish bond issuance and games with German confidence numbers really means anything…likely it will not.

Not so happy holidays for the markets

more charts to come...

Self-fullfilling prophecy and nuclear market fusion...

Much to the chagrin of many of the bulls and pseudo professionals out there, I posted the “Panic” post Fed Panics, ECB Panics, China Panics last week. I think that it is painfully clear that this post was a more than apt description of what has occurred. I find it interesting that one Steve Nelson found it necessary to publicly denounce, in a dubious manner and moronic fashion, my analysis with a highly disapproving and demeaning review.

As I have said many times, I state my view and I do not attempt to be more or less right than I deserve to be. However, I must say that the death nail for trading is complacent and ambivalent analysis. One can be short and wrong in a bull market and still make money and long and wrong in a bear market and still make money. One can also be short and wrong in a bull market and/or long wrong in a bear market and get totally killed. The difference is subtle but significant. There is no room for ambivalence or complacency n markets or analysis. The thing is getting it “wrong" is not a disaster - whipsaws, unclear thinking and lack of discipline, however, are a disaster. Half baked and ambivalent analysis that is committed to nothing, leads directly down that path and sets a trader up for compromised decision making and half hearted reactions to conditions that may come to pass. markets and trading, as living life to maximum potential, requires maximum integrity. So, as you may deduce by now, we did not waffle with regard to our analysis, trades or systems and are having a stellar month after a particularly strong November as well.

At this point, I wanted to indicate that, there is still lingering hysteria in the air of that has led nearly every Elliot wave analyst and nearly every blog I have been sent or seen to promote bullish scenarios as of the weekend, people continue to be very bullish expectant of a bounce to 1340 on the S&P500 into Christmas and expectant of more support from invisible hands. To me this is just horse hockey complacency from people who are focusing their efforts on following the least controversial call. The reality is we have just about crossed the line to where the selling we are seeing will create a fairly long-term and persistent state of selling which leads to more selling which will in turn lead to even more selling. There are many reasons for that, among them the mass insolvency in our leveraged financial system in addition to the de-amplification of money that is currently propagating like malaria in South African plains. Dollar funding is acutely in short supply yet equity markets appear to be holding up - a case that emboldens silly arguments from bulls promoting the ideas suggesting "bad news is now good" since equities are holding up.

To my way of thinking two very bad things happened today, the markets dropped below support with the euro suffering a tremendous breach and the VIX also dropped indicating total lack of preparedness or concern over the state of the risk in the markets. Additionally, the absolutely mammoth divergence I presented in my weekend charts between the EURO and risk assets continues to expand. This will be closed and is now requiring a significant double digit drop in the equity markets just to come back into something near correlation. Everyday the EURO drops the internal tension in the markets becomes more acute increasing the risks of a MAJOR market dislocation of some kind. The financial engineers have played their game and lost, the Central planners have too. They are now lost without their GPS.

In either case, there is not much that planners can do to create market stability and available funding for the rapidly contracting pool of available dollars…as the risk markets tail off here they will create  the flatulence of rapidly disintegrating values. This is NOT the time to try to bottom or top tick anything, its the time to keep your powder dry and make sure that you are SAFE. Now is the time to stop thinking “How much am I going to make” but rather “How much am I going to keep”. This includes getting some of your money somewhere safer than a leveraged institution.

We are now headlong before a massive Tsunami and the financial system is Fukushima.

Ron Paul…that’s all I have to say

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As the conflict moves towards a UK exit from the EURO project…things are bound to get complicated

EURO Summit a total failure as the masquerade of unanimity unwinds

Quotes from Finland courtesy of businessinsider.

This deal is a total swindle by bankers: NO more investor responsibility, NO more Private Sector Involvement(PSI). Taxpayers will pay the profits to bankers and speculators. Democracy and Sovereignty crushed. 

This deal compounds the problems by piling more debt on the fiscally irresponsible and the fiscally prudent ensuring total destruction in all countries of europe in a few years under crushing debt and continual malinvestment and destruction of competetiveness. 

Taxpayers will pay the future bill IF the markets believe this newest set of fairytales and wishful thinking from the incompetent and anti-democratic EU-leadership duo Merkozy and Brussels bureaucrats. 

However... 

The Finnish Parliament will NOT confirm this agreement signed by Jyrki Katainen and this should have been crystal clear to the Merkozy duo before the summit because grand committee of Finnish Parliament stated this clearly in advance. 

ESM is dead in the water and once again thanks to the arrogant crushers of democracy and destroyers of sovereignty Merkel and Sarkozy absolutely NOTHING has been solved.
It would require 133 seats(2/3 of parliament) to approve recent EU-agreement where unanimous decision making has been removed from ESM. Since The Finns party led by Timo Soini and Center Party are both opposed this will NOT happen. 

Further the Social Democrats (In Finnish government with Coalition party and a bunch of smaller parties) have also said through Finance minister Jutta Urpilainen that they will NOT support majority decisions in ESM and one smaller party Christian Democrats also said the same recently. Practically only real supporter is Mr. Katainen who is the most euro enthusiastic politician in Finland. 

So hell will freeze over before current EU-agreement which removes unanimity from ESM goes through Finnish Parliament.

Some charts of a masquerade and the witches ball

When looking at the chart below, please keep in mind that I expect the euro to drop as I indicated on the chart…but regardless of that the S&P500 needs to drop roughly 20% just to catch up with the EURO which gives us a 300+ point drop for the index. Given that the scenario includes a drop in the EURO the point drop may well be SIGNIFICANTLY more.

All this is likely to happen rather quickly too…some christmas rally that will be…and just in time to draw the laser focus of the debate theme to finance and currency which will make the only guy in the room at the debates who can answer any question related to finance with any credibility - Ron Paul.

However, all is not perfect with Ron Paul’s knowledge of finance…perhaps the initial 15 to 20% drop for gold implied by the chart below, will call into question the Gold money thesis. BTW…Gold is likely going MUCH lower than a simple 20% drop…possible (and not unreasonable) projections for Gold place the metal down 50 to 60% and of course, Silver in the single digits.

Government via Finance and the Fed has failed...as our liberties have been trashed

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Some charts...

We are setting up another visit to the islands in the indexes. We have gapped with no real support below…additionally, it seems likely that we end up setting another island here rather than a fantabulous bounce and rally into the year end. There is a little bit of room for the market if it wants to try to play some pretty challengine resistance. Of note today is the nearly 2% net divergence in the performance of the EMD S&P Midcap 400 futures. These contracts usually outperform significantly, however, as of today they are underperforming by 16 EMD points…that’s 2% of the index in underperfomance and highly unusual. Additionally, the market is fractured on ething is going up while other correlations are going down. To add to this mix, one need only look at all the US Treasuries, they closed near the highs of the day…and most importantly the FIVE YEAR TREASURY broke to a new high (low in yield) and closed at the highs…

Save the Euro, Save the Banks…Save the Planet

Time for some different thinking…from the brilliant George Carlin:

A date with destiny...

This week this market has a date.

It is a blind date. For the subject, the market has chosen an idyllic figure. She is beautiful, she is thin with pretty eyes and teeth not only pristine skin. As of today her figure has been generously enhanced and her seductive power has been emboldened. She does not smoke, she does not stink…she does not even drink. She is the savior, she is the dream, she is the single most attractive thing ever seen by this very lonely and isolated market. 


The irony is that many of the attributes that are so boldly now part of the psyche of her vision were created with photoshop and the whole thing was arranged on Facebook or match.com…what’s more is that when the market meets her this week, it will be even better than could ever be imagined…she will arrive on horseback and prepared for an evening of joy and passion.

Geeze…this is getting just plain silly. One thing after the other is being promoted about mystery illusions that will NEVER satisfy the expectation. The reality is that if there is just one pimple or scar, if there is a rather less sumptuous figure or potentially even an equally sumptuous one but perhaps anything less than a obsessed Pamela Anderson 2X…there is going to be some pretty big adjustment to expectation. This blind date is starting to smell pretty much like Village Voice ads for hookers that used to walk 10th avenue in New York in the winter in the 1980’s - someone is not only going to be rather likely to be disappointed, even if they are on the inebriated side, but they are also likely to get some sort of disease.

To this blind date, I have to say today was remarkable. The rumors coming out of the woodwork just pump up expectations so powerfully, so perfectly and persuasively that even a slight reality will likely be a large disappointment - photoshop notwithstanding. To anyone, who has been on blind dates before, especially highly hyped ones - I suggest not investing too much into it.

To wit, the dollar is near it recent swing highs, as are quite a few risk markets…Treasuries are looking rather bullish after bouncing off the levels I posted last week and it looks like theose levels will continue to be powerfull support and the equity market has made nearly no headway since last week…(it has held in there longer than I thought it might however) something has to give and it is probably going to be the place with the highest capacity for disappointment. A lot has changed in the last week and none of what changed really matters - the situation is still getting worse not better and the illusions are now bigger and more profound that real. Any expectations that remain when the date happens should quickly turn to disappointment. In fact the odds that the EURO stays together are now dramatically lower than the odds it makes its voyage to oblivion I have discussed on thesse pages years ago.

Perhaps, the genius, Trichet wishes that he had not insisted on raising interest rates which now need so much downward adjustment and have cost so much for the ECB? But I think Tritchet was clearly focused on the welfare of 300 million and not the few…yeah right!

p.s.: for my Female readership…I actually tried to do this post with pictures of women and men and it just lost its effect…showing pictures of highly idealized women in this case won out…especially because I preferred to use Merkel in the bathing suit in the above image, rather than Sarkozy.

What's it worth to them anyway?

It seems like the absolutely ridiculously persistent focus by France and Germany at maintaining stability of the EU with bailouts, handouts and standouts for their weaker union members has gotten to an absolute extreme. Well, what do you say to someone when they try REALLY, REALLY hard to convince you of a story or their pitch? You immediately question their motivations and following that their integrity. To be frank, German and French leaders have sold their countries down the river and they have had serious ulterior motivations for doing so. You don’t see the UK thrashing around with ridiculous statements like those that came out of the Merkosy, I mean Merkle and Sarkosy meeting today.

See for yourself:

• SARKOZY CITES COMPLETE AGREEMENT WITH GERMANY REACHED
• FRANCE, GERMANY SEEK TO PREVENT REPEAT OF CURRENT CRISIS
• FRANCE, GERMANY WANT `NEW TREATY' FOR EU
• AUTOMATIC PENALTIES BACKED FOR BUDGET VIOLATORS, SARKOZY SAYS
• SARKOZY SAYS PREFERENCE IS FOR TREATY AMONG 27 EU COUNTRIES
• EUROPEAN MONETARY FUND BACKED
• EURO BONDS ARE `IN NO CASE' A CRISIS SOLUTION, SARKOZY SAYS

What total rubbish. Sarkosy and Merkel are saying the same exact things they have said for the last few years with very minor adjustments like the “new treaty” bit. All their rhetoric has amounted to a total catastrophe. Why should’nt it again this time?

So, lets focus on why these guys are so damned persistent at trying to get something, anything - even just a single thing moving that represents the perception of progress to the outside world. Well, its because their banks, financials and governments have gorged themselves on every last concept of the leveraged financial engineering. They gorged on all the products and the result now is that Germany and France have been hiding for years some of the most insolvent banks in the global financial system. What is going on here is that these people are willing to do anything to try to prevent their manipulations and the results from seeing the light of day. Its like a little kid who tries to tell you one story after the next to distract you from going into bathroom to see that he flooded the joint. The more stories the child has to tell you. The more he tries to delay or distract the worse the situation will likely be that you discover when you get past the obfuscation.

Certainly these guys would prefer to be focusing on something better than trying to cover up their disastrous misdeeds and miscalculations? Certainly there are far better things to invest resources in domestically than desperately throwing good money after bad? Think nothing of that, the system as it currently works focuses on dysfunction and moreover, rewards it.

The whole scheme behind the EU was to dramatically expand the banking system and government. The reality is that all countries that joined were looking to expand their banking enterprises - of course they were simply following the lead of their mentors…Germany and France.

Germany’s banks are a disaster…France’s are even more of a disaster. Both countries preyed on the opportunities to use modern financial engineering and theory to pursue maximum money amplification…by targeting the emerging EU members and expanding their banking tentacles all over the EU. We can now see the results emerging. Only no one is really seeing just how bad the situation is within the financial systems in France and Germany. That will change soon…and we will be shortly finding out just how flooded the joint is…its likely to be a doosey.