LONG TERM SPX CHART TO PONDER

Is the recent splurt above wedge a "throw over", and would a fall back INTO wedge (below 1600) put this pattern back on the table?

If you think the market has either one more huge push up to make or has MUCH further to run then you don't even consider such patterns.

WHat has changed? late Friday selloff where traders don't want to hold for Monday? What we can see with our own 2 eyes is that BOND prices are falling (yields rising) with stocks, and commodities and that is new.

Rates are rising, so where is the flight to quality? FED has been sopping up $45B in demand a month. Their goal is to keep long term rates DOWN, so why are they rising? Where would rates be if there wasn't artificial $45B a month plus another $40B MBS.

Answer is FED controls ST rates, rates are still relatively low, but way off bottom.

JAPANESE MKT has turned very volatile, what a mess IMHO.

D

MISALLOCATIONS IN JAPAN

http://www.safehaven.com/article/29904/four-signs-that-were-back-in-dangerous-bubble-territory
" 4 signs we're back in serious bubble territory"

D

STOCKS REACT TO BERNANKECOMMENTS

It may be more just the market was tired, and needed excuse to take a rest, I am NOT convinced final highs are in. But we did have a significan reversal day where prices staged a strong rally to new highs (Dow was up 154) and then reversed on just the slightest suggestion the "FED could be easing its purchases of Bonds if labor market improves by end of summer"

The mere suggestion of the FED not backstopping market led to a rush for the exits? Tells you a LOT of what has caused the market to rally for 5 years. How ugly could it get should the music actually be FORCED to stop? ISNT IT AN "ALL IN"MKT NOW?

VIX ended at 13.82, hardly a panic.

D

"MOST SHALLOW SERVICES RECOVERY ON RECORD"

http://contraryinvestor.com/2013/05/18/manufacturing-some-perspective/

IS WEAKNESS PRICE OF GOLD A CANARY IN THE GOLD MINE

http://www.prudentbear.com/2013/05/financial-euphoria.html excerpt from Noland's "Financial Euphoria article linked to"

 "These days, the dynamic of over-issued, mispriced finance is a global phenomenon – the U.S., Europe, Japan, China, Asia and the “developing” economies. The perception that central bankers will ensure ongoing asset inflation is an unprecedented global phenomenon. The collapse in yields and risk premiums in debt markets across the globe is unlike anything I’ve ever witnessed or studied historically. These days, asset inflation, speculation and Bubbles prevail virtually everywhere. Moreover, the gulfs between inflating assets and weakening economic fundamentals seemingly widen everywhere, as Financial Euphoria engulfs debt and equity securities markets around the world. As noted this week by the great market watcher and historian Art Cashin: This market is unlike anything we’ve ever experienced."

My take on gold etc.


Gold initially has responded (its march to $1,900) to CB monetary inflation, the attempt to devalue world currencies, how will it respond to the END GAME, or are we already seeing that? IS the price of gold warning of a coming major top in world stock markets? Too hard to argue for deflation over inflation, so I won't do that, but in the end, when it all collapses, It is my feeling that debts will be crushed, defaulted on a massive scale.....the QE has only expanded and gone viral...with Japan now pumping $100B in equiv currency...yet Gold falters....interesting in the least

 

I have NEVER seen such complacency as it relates to what I hear, as I drive around most days, what people tell me (many of them financial professionals) and nowhere do I hear much worry. And I do hear "harder" to find value, but they keep looking and none of them are close to more "defensive" measures. Most say, "we are VALUE investors, if the shares fall, then further from underlying values then we will buy more". In the long run that probably works, in the ST to IT can cause lots of pain, when the PAIN gets too much to bear, weak hands succumb and we get the panic selling to create bottoms, like in 2008-2009 etc.

 

5 YEARS into 0% rate policies, and NO sign nor signal when it might end. Last 2 times maybe the FED remembers that as things got better they began to INCH rates backup, as they did that stocks topped. Now THIS TIME an even LONGER more AGGRESSIVE monetary easing and stoking of speculative juices, which have helped risky assets/stocks reach new all time highs.....this is not just a US phenom, it is now as Noland suggested this week a "worldwide affair".....so instead of a TECH BUBBLE, a FINANCE BUBBLE, etc..we now are in the midst, near the end? of a WORLDWIDE BUBBLE. (synchronized QE)

 

Many, like myself, preaching warnings....and not going along for the ride are ridiculed and made to look like the fool. We are all to smart to know that you cannot print your way to prosperity. If the current strategy, given the highs in markets around the world, has not given those responsible what they wanted....then what will??

 

And if the intensity of "digital" printing cannot propel Gold to NEW highs as it has paper assets, IMHO.....the current weakness in GOLD is the proverbial CANARY IN THE COAL MINE. I have a SIMPLE but proprietary measure of extremes, highest prior level at THE TOP was 138 (2007), we are north of 133 and the angle is straight up. IMHO we are in the latter stages of the final melt up in world equities.....and surely it could go higher than one would think.....and a TOP could melt down slowly at first so those who love the ADV/DECLINE signals will get theirs too. Riding the lows (post 2009), even as fundies were awful provided low risk to reward....not anymore.

 

And the weakness in the Gold sector, is screaming something is horribly wrong as the printing presses are kicking into another gear...

PERFECTLY NORMAL

"IT'S ALL ONE BIG HISTORIC BUBBLE"

http://www.prudentbear.com/2013/05/thoughts-on-electronic-printing-press.html

"In equities markets, well, speculative dynamics have taken full command. The bears have been squeezed into oblivion, with a dearth of selling pressure now allowing speculators to easily push prices higher. Bringing back memories of 1999, heavily shorted Tesla Motors was up 41% this week and Green Mountain Coffee jumped 33%. It was a week where I was again contemplating “how crazy could things get?”

The Fed and global bankers should never have become such active players in the financial markets. Asset inflation is indeed more dangerous than consumer price inflation. Central banks will actively support asset prices, while refusing to remove the punchbowl. At all costs, Chairman Bernanke will avoid being a Bubble Popper. And when you read his comments from Friday morning (below), keep in mind that as Bubbles become more systemic they actually become less conspicuous. Today, Bubbles proliferate throughout the securities and asset markets. It’s all become one big historic global Bubble. Yet the Bernanke Fed won’t even begin tapering its $85bn monthly “money printing” operation in the midst of increasingly conspicuous market excesses. "

Folks, it's not really an argument to be had as to whether the stock market rally from 2009 has enterred the speculative blowoff phase, or that what we are witnessing is BUBBLE DYNAMICS.

And what eventually happens to all bubbles throughout history? THEY POP. And what happens when they pop?

Goodnight. This time I think everyone will know exactlt where to point the finger, a loss of faith in the FED on top of the greatest bubble bursting in history, will prove to be a nasty combo.

D

BUBBLE TALK, BERNANKE HATERS, COMMON SENSE

http://www.prudentbear.com/2013/05/too-much-asset-inflation.html  Tid bits from last weeks CBB

April 30 – Bloomberg (Shobhana Chandra): “Business activity in the U.S. unexpectedly shrank in April for the first time in more than three years, a sign manufacturing may be a smaller contributor to economic growth this quarter. The MNI Chicago Report’s business barometer fell to 49 in April, the lowest since September 2009, from 52.4 last month.”

Federal Reserve Watch:

May 3 – Bloomberg (Steve Matthews): “Federal Reserve Bank of Richmond President Jeffrey Lacker voiced opposition to bond purchases by the Fed, saying the buying probably won’t spur growth beyond 2% while making an exit from stimulus more challenging. ‘The benefit-cost trade-off associated with further monetary stimulus does not look promising… The Fed seems to be unable to improve real growth, despite striving mightily over the last few years, and further increases in the size of our balance sheet raise the risks associated with the ‘exit process’ when it’s time to withdraw stimulus.’”

May 1 – Bloomberg (Fergal O’Brien): “Harvard Economics Professor Martin Feldstein comments on Federal Reserve in CNBC interview: The Fed has ‘stopped talking about early exits or slowing down but frankly I think they’re not accomplishing very much and they are adding to risks in economy… There’s good reason -- not in the way they think about it there’s good reason to be slowing down this process. There are some serious bubbles developing in this economy.’ Feldstein says 10-year Treasury yield not sustainable. ‘I think it has risks and it’s spreading over into things like the stock market.’”
April 29 – Bloomberg (Willow Bay, Jeff Kearns and Jeanna Smialek): “Former Federal Reserve Governor Kevin Warsh said the central bank will probably press on with its ‘aggressive’ easing as growth this year may fall short of the pace needed to put millions of Americans back to work. Job growth requires a 3% to 3.5% expansion that won’t be in reach for the world’s largest economy this year, Warsh said…”

"We are forming balloons......why is the German stock market at new highs with the economy doing so poorly......" said a noted economist on Bloomberg yesterday.

Because the STOCK MARKET and other RISKY asset classes is exactly where the record QE is going. SO you play or go home.

These foolish men are not concerned nor do they really know where this will end, the consequences of BUBBLE CREATION.
You may think I don't like a rising stock market by my comments, that is not true. I don't like a MANIPULATED, FED TARGETED stock market which now solely relies on the FED continuing what they are doing and perhaps even in greater doses to keep the asset inflation going.

We can't even create enough economic growth to create enough jobs for those looking, 3-3.5% GDP.
MAJORITY of jobs in the last report were "part-time".

Each time we have a boom that ends in a BUBBLE, the FED has stated "didn't see that coming". FED was not worried about housing market in 2006, saying " never been a case of year over year price decline.....NO BUBBLE, NO WORRY"....remember how that turned out.

How about the TECH BUBBLE of the pate 90'S, how did that work out? What helped cause and feed that? ULTRA LOOSE MONETARY POLICY, which ramped up into Y2K over FEARS over what might happen when the 1999 calendar turned over to 2000.

To fight that Recession, we got 1% rates, they held it there so long it helped create the next BUBBLE, the HOUSING REAL ESTATE MORTGAGE FINANCING BANKING CRISIS BUBBLE. How'd that turn out?

AGAIN, the FED or policy makers didn't see the excessive speculation going on? NO ONE stepped in to protect us, to put in measures that would have helped us to avoid an almost 1930 like Depression?

Now, it is a WORLDWIDE open spigot, money printing, QE war from the world's Central banks, everyone is IN THE POOL HERE!!!!!

OF COURSE the worlds stock markets are soaring, even as WEAK economic data comes in.
GOOD is GOOD and BAD is even better, so it insures MORE And MORE of the same.

0% rates, no place safe for Conservative investors, savers.....if everyone isn't in the pool, they will be soon. IS there a BEAR left standing now? IS there a CHORUS of non believers and furry folk running around? EVEN perennial bear Roubini sees no trouble for at least 2 more years.

Good news is good, bad news is great....so it would appear BULLS have nothing to worry about. The current policies and 0% rates will continue until they don't.

BUT when you consider how ULTRA LOW RATES misprice risk, if you understand YES THIS IS A BULL RALLY, but NO it cannot stand on its own 2 feet.

AS soon as the FED signals they will pull back, even a little, or inflation is undeniable, or LONG TERM RATES RISE out of control of the FED to signal GAME OVER....
..THAT will leave a HORDE, a CADRE of players that will want to make their way to the exits.....LIKE NEVER BEFORE.

Also keep in mind, that to SAVE US in 2008-2009, the Banks were bailed out, AIG etc and most of the risk was taken off THEM, and given to US the avg people. WE are now saddled with all of their debt and malfeasance, and they are free again to use FREE (FED) MONEY and let their computer algorithms run the market, jump in front of your trades, use unlimited leverage and derivitives with basically no one policing or giving a hoot as long as the trickle down (thought this was Rep Reagonomics?) stock market inflation would spur the real economy. WELL HELOOO IT IS NOT!!! BUT THESE IDIOTS PERSIST!. I'm not a Bernanke hater, I'm a BAD POLICY hater!

Help me see where you can reach prosperity and economic job creating growth by printing money and leaving rates at 0%. How has it worked out since 2008? No one can stop them, but at least they should have courtesy to use a rubber while f'ing us!

The market can fall a lot faster than it rises, most of 2007-2009 losses came in a matter of months, it took 5 years to gain it back.....all through FED QE pumping and printing.

We now have a full scale CRACK ADDICT MARKET, GD help us when we run out of crack, or an unintended consequence raises its head, with ultra, near historic NEAR ZOMBIE like indifference to fear, the next PRICK of this NEW BUBBLE, the depth to where it takes us could surpass anything experienced so far.
If what I suggest is possible, what can we do to protect ourselves, and will we see it coming?

D

10 YEAR YIELDS TELL A STORY

We are still sitting at generational LOWS for yields on the 10 year notes, these are BELOW the real inflation rates. These LOW FED induced rates are mispricing risk in the economy and creating MAMOTH BUBBLES.

5 YEARS into recovery, STOCKS AT ALL TIME NEW HIGHS.....but yields are LOWER than they were at 2009 crisis bottom?

If everything was all peachy keen, why then don't we begin to normalize things?

D

IS BROADENING MEGAPHONE PATTERN NEGATED?

Possibly, I try to present what is, not just what I think what SHOULD be. Advance delcine lines hitting all time highs, with all manner of stocks doing so cannot be taken as BEARISH.

The world markets are showing strength, like it or not. Economic fundies may be weakening, more on government assistance than ever before....but stocks still rising.

The FED, for now trumps all other developments. I would still argue this will not end well, but that is just my opinion, current stock action does not bear that out. Charts don't lie.

Does above "breakout" signal maybe Roubini comments looking for 2 more years of bull are accurate...then he says lookout. SPX could be at 1900 or more by then.

This is NOT a typical rally, or bull, let's at least get that straight. World Central banks are blowing bubbles like crazy to save us from the financial abyss and for now, judging by stocks it is working.

STock markets are supposed to be "discounting mechanisms", then they for now appear to be saying blue skies ahead.

When stocks continue higher, with fewer and fewer stocks participating, this will be seen by lagging Advance Decline line, THAT will be one of your warnings....THIS is not present today.

With 0% returns on anything else, stocks and riskier asset classes appear to be about only game in town....play or go home.

IMHO, what this WILL do, is set those staying TOO long to the FED punchbowl party for an Historic crash/decline. It would seem there is barely a BEAR left in the house.

Even if sentiment corrects, stocks develop a LITTLE weakness.....greedy hands await.....for now.

This can all change, like the grain of sand analogy....we dont know what or when, but a single grain of trouble could set the whole mess tumbling...we will either SEE it coming as suggested above, or we won't at all (Crash scenario)

D

MONEY FOR NOTHING

"With no recovery in sight, where's all this money going? It is creating bubbles. Bubbles in the housing sector, the stock market, and government debt. The national debt is fast approaching $17 trillion, with the Fed monetizing most of the newly issued debt. The stock market has been hitting record highs for the past two months as investors seek to capitalize on the Fed's easy money. After all, as long as the Fed keeps the spigot open, nominal profits are there for the taking. But this is a house of cards. Eventually, just like in 2008-2009, the market will discipline the bad actions of the Fed and seek to find the real normal."

http://www.safehaven.com/article/29718/federal-reserve-blows-more-bubbles

A CRASH IS COMING

Here for anyone who thinks or believes what the MEDIA is telling everyone that NEW HIGHS is bullish for mkt. IMHO we are STUCK in Secular BEAR, and only 2 things can happen.....a NEW LOWER LOW comes in the future within 3 years or a LOW COMES without lower RSI, MACD etc....giving us hint that is THE LOW....for decades.

 SO over last 13 years we have higher highs and lower lows....a REAL oddity

MUST READ ON FED LED DESTRUCTION

"At some stage, central banks inevitably realize, regardless of whether they admit the catastrophic nature of their own failings, that the cessation of money-printing will cause an instant depression. Even though at that point the cessation of money-printing may be the only action capable of saving society, that becomes a secondary consideration compared to the desire to avoid immediate pain and blame. The world’s central banks are in very deep with QE at present, and the risks continue to build with every new purchase of stocks and bonds with newly-printed money."

http://www.zerohedge.com/news/2013-05-03/elliotts-singer-bernanke-destroying-value-money-and-uprooting-basic-stability-societ

SOMETHING HAS TO GIVE