90% DOWN VOLUME DAY

Market was in an extreme overbought condition, so today was excuse to sell and take some profits. Many think that since the market broke ABOVE a 2 month consolidation range, the worst is over and that level will serve as support.

D

LESS CONFIDENCE BUT MORE CONSUMER SPENDING?

Today’s numbers provide a monthly breakdown of the quarterly data released yesterday by the Commerce Department that showed the U.S. economy grew in the third quarter at the fastest pace in a year. Gross domestic product expanded at a 2.5 percent annual rate, up from 1.3 percent in the prior three months.
Household purchases, the biggest part of the economy, rose at a 2.4 percent pace, contributing 1.7 percentage points to growth.

Less Confidence  http://www.bloomberg.com/news/2011-10-28/consumer-spending-in-u-s-rose-0-6-in-september-as-incomes-increased-0-1-.html

Purchases are climbing even as confidence sinks. The Bloomberg Consumer Comfort Index dropped to minus 51.1 in the week ended Oct. 23, the lowest in a month, from minus 48.4 the prior period. Ninety-five percent of those surveyed had a negative opinion about the economy, the worst since April 2009 and one percentage point shy of a record high.

WILL IT WORK?

"Will it work? I highly doubt it, but it does buy some time - and the markets were content. It appeared to take near-term implosion risk off the table, which set the stage for a huge short squeeze and destabilizing unwind of hedges across virtually all markets."
http://prudentbear.com/index.php/creditbubblebulletinview?art_id=10589

LO AND BEHOLD THE MIGHTY RALLY

NO guesswork here folks, the US $ has been taking it on the chin all month, down another 2% today, so anything priced in $'s will be going up, gas, food etc.

Rally won't end until the excessive bearishness found at bottom in SEPT is vanguished.....might be closer than you think. One target we had was near 1300.

Mutual Fund cash at one of lowest levels ever record, so who is funding the rally? LEVERAGE? The FED GAME continues as unemployment claims remain over 400,000. STock rally helped to goose GDP to a not so rousing 2.5%, that level was higher than previous qtr, but it doesn't create jobs.

The EURO folk have agreed on another BAILOUT DEAL? Isn't that great news? Has what is broken been fixed?

We can all hope the lows are in, we are healing? my nose says different. CONSUMER SENTIMENT sank again to one of its lowest readings, not indicative of a recovery by any measure.....housing prices continue to fall....honestly a great number of Americans might be asking where is the recovery.

D

INTRODUCTION TO NEW CHARLES HUGH SMITH BOOK

http://www.oftwominds.com/investing-chapter1.html

"The monetary and fiscal “fixes” imposed by authorities around the globe since 2008 didn’t reduce the global financial system’s instability, they merely suppressed outward signs of instability. Beneath this tranquil surface, the “fixes” have greatly increased the global financial system’s instability. Like an apparently peaceful forest filled with dry deadwood, a single spark can ignite a new firestorm that will burn with greater ferocity and speed than the financial fire of 2008."

HERE COMES THE 200 DAY MOVING AVG.

I still think the analog with the 2008 rally right before the steep decline could be valid. A breakout of the then trading range preceeded the steep decline into 2009.

D

BREAKOUT OR FALSE BREAKOUT?

BREAKOUT FROM TRADING RANGE

Makes it more likely we get at least a test of the 200 MA.

D

THEN AND NOW

HOUSING RECOVERY

49 years

http://www.forecast-chart.com/graph-housing-starts.html

SELLOFF AT RESISTANCE

Price hits upper range of trading and we get an 87% down volume day. Players are buying the lower range, selling the upper range....there is no voting going on...that mechanism died years ago.

D

PBW WHY YOU DON'T JUST BUY AN IDEA

OBAMA gest elected in 2008 and PBW hits its high near $27, Obama promised clean energy investments and emphasis, also mentioned it in State of teh UNion Address.....lot of good that did.

D

VELOCITY OF MONEY AND WHY YOU SHOULD CARE

Understanding Velocity
velocity of money
Definition

Rate at which money circulates, changes hands, or turns over in an economy in a given period. Higher velocity means the same quantity of money is used for a greater number of transactions and is related to the demand for money. It is measured as the ratio of GNP to the given stock of money. Also called velocity of circulation.

 

Investopedia explains Velocity of MoneyVelocity is important for measuring the rate at which money in circulation is used for purchasing goods and services. This helps investors gauge how robust the economy is. It is usually measured as a ratio of GNP to a country's total supply of money.

 

SIMPLY :"how quickly money moves around economy the rate at which money circulates in an economy"

Read more: http://www.investopedia.com/terms/v/velocity.asp#ixzz1ax6BHPAA

THE IMPLICATIONS OF WHAT MY CHARTS SHOW   **(below is what the FED has tried to do to stimulate economy and economic growth an historic RAPID rise in the money IN CIRCULATION)

Declining Money Velocity and Its Implications

Our economy has a severe circulatory problem. While the Fed has greatly increased the amount of available money in its efforts to restore economic growth (Figure 1), the rate at which money has been flowing through the economy — the “velocity” of money — has been plummeting (Figure 2).

BUT the policies are NOT working, prices of things have gone higher, wages have not, employment is stagnant, pushes to cut govt spending will make it even worse. In the meatime, these FED policies of near 0 interest rates give savers a 0% retrun on money...and VERY LITTLE else to invest in except? THE RISKY STOCK MARKET!!! YOU GOT IT.....which the avg American has littel invested in (unlike the 1%) and their homes are still declining in value....(where most have or HAD investment)

D

UNDERSTANDING INFLATION AND WEIMAR HISTORY

http://www.johnmauldin.com/frontlinethoughts/can-it-happen-here   to access full article all you need do is fill in your name and email, no big deal, Mauldin a good read.

TOO SIMILAR FORMATIONS TO IGNORE

“Risk On” or “Risk Off”? Place your bets"

...." And if you don’t like the game, go protest at the door of your nearest friendly central banker. "
http://prudentbear.com/index.php/creditbubblebulletinview?art_id=10583

WEEKEND REVIEW

Divergence still in place, I am still expecting a retrace to begin shortly. SOme other divergences are beginning to appear, 120 SPX points since the new low was registered, go figure!

This HISTORIC action in the form of unrelenting down and up action, 90% volume days will in the end cause another million or so investors to never put money into stocks again.

1300 SPX or above is possible, at the break of 1100, BEARS were roaring, obviously TOO MUCH. The market basically breaks down into waves of sentiment, and when they reach extremes...like the EURO SKY is falling, and the break BELOW the trading range.....eager bears, especially newbie bears were RIPE for the slaughter.

What you see now is NOT a statement on the economy or earnings, it is a rush to cover by those short a bit too long, and it may have a bit more to go. Then there will be MANY long converts, and if it goes too far north, then you could see an EPIC decline swell when the gas is gone..especially when many see the smoke lift and the anemic FED FED party cannot go on forever.

D

TEST OF 200 SMA COMING?

It has now started to decline in its trajectory

BAFFLING?

Tricks or Treats?

IS THE ALL CLEAR SIGNAL HERE?

"Fitch may downgrade BofA, Morgan Stanley, Goldman

Fitch eyes downgrades for Bank of America, Morgan Stanley, Goldman Sachs, 5 big European banks "

"NEW YORK (AP) -- Gap Inc. plans to close stores in the U.S., while expanding in China."

"S&P downgrades Spain's debt rating on weak economy

Standard & Poor's downgrades Spain's long-term debt rating, citing weak economy, bank risks"

PARIS (AP) -- French President Nicolas Sarkozy promised an "ambitious and humble" year as leader of the Group of 20 rich and developing economies, and he has a lot to be humble about.
Despite a warning earlier this year from Christine Lagarde -- then his finance minister, now IMF chief -- that a failure to address global imbalances would "lead us straight into the wall of another debt crisis," that is exactly where the G-20 has wound up.
Now the finance ministers and central bankers gathering for two days of talks here beginning Friday must explain how they let the global economy run straight towards the edge of a clearly marked cliff -- and what they can still do to stop it from falling over it.

NOT if you keep your eyes open. What is our "OFFICIAL" unemployment rate 2.5 years into some kind of recovery? Anhistoric high of 9.1%

OH yes THEY will keep trying to prop up the stock market, as the squueze continues on interest rates giving savers the shaft....and gd knows what else...

D

GOOG'D

Supply and demand play a part in determining the extent of the social mood and underlying strength in the points move.

Triple digit gains brought about as much movement in these 2 quantifiers as today's lackluster day

Of course GOOG always has the upside surprise, as it did AH.....I DO NOT think GOOG can pick up the mkt, if its time to correct....before maybe that one more push up EW seems to indicate before iii

Yet we are entering a more bullish period approaching xmas. LOOKING for divergences.....could get one tomorrow with a push up and lackluster demand. Ticks say a move down should be upon us.

NO PROBLEMS

NEW YORK (CNNMoney) -- The city council of Harrisburg, Pennsylvania, voted to file for bankruptcy protection Tuesday night.
But the mayor of the state's capital, as well as the governor and a state senator, quickly called the action illegal. State law prohibits the city from filing for bankruptcy, they said.

Nothing money printing and piling on more debt wont cure

D

TICK CHART SAY ST TOP IS NEAR

We also have divergence of lower highs in the ticks with price still rising. Early OCT we had bullish divergence at lows blue circle, which led to this rally.

DO you believe the economy is heading in the right direction?

D

OCCUPATION OF WALL STREET

http://www.cnbc.com/id/44787637

“We are all rooting for them and hoping they get (President) Obama and some other people moving in the right direction for a change,” he added.

“The banking system has become a system, which is one large hedge fund supported by the free money of the depositors and by the taxpayers whenever it loses," Edelman said. "That was not the banking system of the 1980s."

WHAT A MOVE....BUT STILL IN CONSOLIDATION ZONE

Even a move to around 1230 is just more of what we've seen last few months.

YIELD ON 10 YEAR TREASURY A CLUE?

Low in yield as we entered 2009, that actually signalled a bottom was coming in the equity market, as the flow OUT of bonds helped fuel a cyclical bull market. yields topped in 2011 and 2001 has not been a great year for stocks. It has also been a record for volatility.

Just recently yields bottomed BELOW 2009 levels, yet stock prices are nowhere near the lows of 2009. Has the 2001 LOW in yields marked a LOW for stocks?

I'm just throwing that out there, just ONE measure, of course historically rates remain VERY LOW.

Stocks tend to rise with a falling $, EURO ZONE supposedly all fixed now so they dumped the $, gold jumped, oil jumped, stocks jumped.

EWT in many circles are calling this a Wave 2 move, which could rise above 1200 before ending helping to correct bearish sentiment.

This time of year also sets up the usual gaming for the Santa end of year rally. I do NOT see the players accumulating here, neither demand, nor selleres have moved enough to signal a CHANGE of trend away from bear mkt action.....it may in the coming weeks.....I still see this move as a reaction to the new down trend, which will resume when this wave does its job

D

WEEKEND COMMENTARY " WHERE ARE WE?"

What a wild few weeks? The most intense selling registered since the 1940's, followed by a jubilent rebound rally cut short with Friday's losses. Did the rebound from the NEW LOWS appear because of a deal in Europe, Greece news, jobs, consumer spending, or just oversold bounce?

Because of the change in trend that appears to be in place from the April highs, with NO signs of ACCUMULATION but only of DISTRIBUTION.....it is more likely any rebound is just a reaction to the new primary trend decline than a new bull mkt, IMHO

Stocks have risen because sentiment got too bearish, oversold condition, and there is always ebb and flow, but I had posted an article entitled "Bear MKT rules apply" and so if we look at what is going on keeping in mind the primary trend has chaned to DOWN.....that changes things.

We could have begun a protracted fall rally, we usually get one into XMAS...the fabled "Santa Rally".....players position for this, and doing it EARLY when sentiment is LOW, is a good way to make good returns....then when the late comers, as they always do hop on, they will sell out their positions leaving thenew comers to take the hit...AGAIN.

Nat GAs may be a play with weather turning soon....lots to think about. End of 3rd year of Pres cycle, 3rd years usually positive for market. I see 2012 possibly a tough year.

With the 50 day moving avg below the 200, I have always found this good indicator to be more cautious and defensive. Selling intensity has swamped the buyers, and last weeks rally did not see sellers pull back much to indicate they are done.

We still have persistent unemployed at 9.1% "officially", we know it is much higher....can companies continue to SURPRISE to the upside in earnings? How many companies like NFLX were buying their stock back at HUGELY INFLATED PRICES?

The current climate has proven to be VERY stubborn and none of the fixes tried have been effective. Current FED policy is KILLING SAVERS and is an attempt to leave NOWHERE xcept stock mkt as a place to find returns....such a long lasting one sided approach....may have unintended disastrous consequences when THAT BURSTS...like a gallup higher in interest rates.....let's hope that doesn't happen....but all bull runs do end...even falling rates (since Volker attacked inflation)

"Volcker's Fed is widely credited with ending the United States' stagflation crisis of the 1970s. Inflation, which peaked at 13.5% in 1981, was successfully lowered to 3.2% by 1983.^[12]
Volcker raised the federal funds rate, which had averaged 11.2% in 1979, to a peak of 20% in June 1981. The prime rate rose to 21.5% in 1981 as well.



As you can see....since 1981 then interest rates have been in a FALLING TREND 30 YEARS!!!

Duratek

HERE'S YOUR WEEKEND READ

"And it all seems to boil down to this: Credit cannot be stable within a backdrop of such extraordinary uncertainty. And, I would argue, no amount of central bank liquidity (“money”) and bank capital is going to engender sufficient certainty to stabilize global Credit, financial flows and asset markets. "

http://prudentbear.com/index.php/creditbubblebulletinview?art_id=10581

RALLY ON THE JOBS NUMBERS?

Jobs Report: Behind the Numbers- Daniel Gross, Y! Finance
The metrics in the report, particularly from the household survey component, remain pathetic: an unemployment rate of 9.1 percent, 6.2 million people employed for more than 27 weeks, an employment-population ratio at an anemic 58.3 percent.

"better than expected"  sure......Some segments are being percolated by historic low rates, but even worse than 2003-2007 the effect on avg American is miniscule and a jobless recovery it is.

Under the conditions I montior, I cannot see this as a continuation of BULL MKT, but more a bounce in a new Bear Mkt, I am hoping I am wrong. But under the numbers, the hype and daily news related rallies is a whole heap of PAIN.

D

UNDER THE INFLUENCE

BEAR MKT BOUNCE APPEARS

My trusty tick chart did spot the divergence and oversold bounce forming, and it turned out to be formidable. Here's the rally, all coming after 3pm!

Stocks Stage Late Rally, Erasing Early Losses, Amid EU Bank Aid Plan Report- AP 

And it came in the last hour of trading!? AS the EURO rose on speculation of addt'l banking measures, blah blah, US $ weakened all coordinated so to speak.

DO you think also after 3 of last 4 trading days contained over 90% down volume, a bounce was near? of course, that's how it works, and shorts covering at close caused even further stampede.

The market is SO volatile, this is not the playground for the avg Joe, or for most. LOW LOW LOW interest rates are sparking a surge of refinancing, could inject some consumer spending, is making some well positioned Mortgage companies and brokers some nice dough, but JOBS JOBS JOBS are what is needed to sustain any kind of recovery.

FED BIG BAD BEN said "the slowdown was worse than we thought, the recovery weaker than we had hoped...." SO we will keep right on doing what we've been doing that isn't working....because of course it could be worse.

THE WORLD is unwinding from years of abusive central bank behaviour and living beyond means...Even now, in the darkest hour, when all the tricks and gimmicks haven't worked, they are doing even more! Selling short term notes for longer dated ones.

Just when the US lost its AAA rating, treasuries have had one its greatest quarters. What will come next? How far can the rally go? Did an important bottom form today?

Now more than ever, technical analysis will play an important role, as the market heaves and ho's on every news report and Eurpoean save effort. Meanwhile.....be careful out there.

D

BOUNCE COULD BE NEAR

THAR SHE BLOWS, SUPPORT BROKEN

**click to enlarge

3 of last 4 days have been 90% down days, but volume wasn't blow out type volume. Here's the issue, sentiment is very bearish, and EWT calling a wave 1 low setting up nice Wave 2 rally and a market wounded like this one, that doesn't rally could be setting up MUCH lower prices immediately before any sustainable rally can begin.

I'm just not sure at this point. My feeling was when that SPX 1100 area broke down, prices would fall deep enough to allow a retest of that break in trading range. But as we feel pretty confident a NEW BEAR MKT is underway, the primary trend is DOWN, and rallies used for selling.

I did my best to pre pare and warn my readers as to the potential dangers lurking. Even with this going on, I've tried to grow my other business, so I can't throw in long posts every day as before.....if you need to make living and survive, just keep plugging away giving it your best efforts.....the market action may be out of your hands, your life isn't.

D

KNOW YOUR FACTS

 "When the facts change, I change my opinion. What do you do, sir?" - Keynes

Arnold Kling and Megan McArdle have pulled a funny and embarrassing quote from Paul Krugman, published in a 2002 NYT column:

The basic point is that the recession of 2001 wasn't a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance.To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.

Read more: http://articles.businessinsider.com/2009-06-17/wall_street/30100530_1_housing-bubble-slump-fed#ixzz1ZeqBC600

"TESTING A THESIS" Doug Noland

September 29 – Bloomberg (Joshua Zumbrun): “Federal Reserve Bank of Philadelphia President Charles Plosser said the central bank may be undermining its own credibility by pushing forward with monetary easing that will do little to boost growth. ‘The actions taken in August and September tend to undermine the Fed’s credibility by giving the impression that we think such policies can have a major impact on the speed of the recovery,’ Plosser said… ‘It is my assessment that they will not.’

http://prudentbear.com/index.php/creditbubblebulletinview?art_id=10578

BEAR MARKET TAKES HOLD

The diving 50 day moving average has repelled rally, and is exerting its presence. The price action looks to me to be a CONSOLIDATION of the decline, not a basing for a new move up.

The sideways price movement is going to break, and I think it will be to the downside, when that happens, selling may intensify and really rock investors just sitting and watching. For months I have suggested taking some off the table and for me that's 100% out of the market. I was also one of the first to suggest the bear market has returned.

Life goes on, and you try to make the best of it, say positive on LIFE by all means, just don't be a patsy for those who play you for a lemming, or the last handoff in a Ponzi scheme and pyramid scheme...the game of musical chairs known as the stock market.

Like any gaming scheme, the insiders (house) almost always wins.....you are told everybody wins if they just STAY IN. When is the last time a Financial Advisor told you to sell?

D