This Week In Charts

Nothing much to add, market in overall downtrend as described at top of this blog. (click)
Natural Resources getting CRUSHED for the last few weeks, however a near term (long term?) bottom probably happened today.  Expect a bounce
The stock market is trading in a range, that I expect overall breaks downward eventually, for the next 6 months to a year.

The S&P 500 chart.

From WebSufinMurfs FinancialBlog2

Ok, what now?

We now have our answer, the Federal Reserve Banks announcement was not received well, as the market dropped like a rock as it announced.  The deflationary collapse is continuing today, and since Europe is in a deflationary collapse that cannot be controled, the rabbit hole may go deep.

If S&P 500 breaks below 1,100, gloves are off, next target support is 1,000 then possibly to 780-666 range.
I am holding some longs, but refuse to buy any longs until this indicator crosses upwards (click).
At some point, gold may stop losses and be the one to buck the trend if people start running to it as a safe haven. Over the looong haul (10 years) of course, this can't work either, but it may be a trade I jump into if I see support.

All resource stocks should fail with the market, the next couple of days wont be fun for anyone.
Good luck.

Two day Federal Reserve Meeting

Back on September first, with post titled "Know when to hold em, when to walk away", I stated I didn't like the market setup, between then and the Federal Reserve meeting late September. The market is slightly lower since then, and dropped quite a bit lower earlier in the month.

Today marks the second of a two day meeting for the Federal Reserve Bank.  They will of course announce today.

The question is, what can they announce to change anything?  Assuming they don't announce something extreme that immediately tanks the US dollar, there isn't anything they can do to "save" the global economy.  They cannot provide political and global leadership to stimulate economic prosperity.
The function of the Federal Reserve Bank is to set banking and monetary policies.  Although extreme banking and monetary policies helped put us into the global economic imbalance situation, it isn't purely caused by the banking actions.

Overall we have a deflationary situation with western countries not producing enough to cover their expenses, with Asian countries providing the production of goods and increasingly services at much lower cost.  The US does not have a new innovation driver that will pull the economy out of this funk, nor does Europe.   There is a fundamental economic imbalance between countries that must eventually correct.  Having the federal reserve bank lower rates, or do some other trickery does not provide a cure to the western economies, it can only provide pain killers to give short temporary relief.

I'll leave the door open it is possible the Federal Reserve announces something so extreme, that the markets move. Generally speaking the Federal Reserve Bank is near out of any significant options.  I expect in the years ahead their announcements will become increasingly marginalized as the wizard behind the curtain is exposed.

For me, this is very disturbing, back in 2008 and since then I have marginalized the Federal Reserve Banks ability to make any sort of dent in the fundamental economic driver of the USA and western countries.  Here I am now facing that very reality becoming more obvious to the world, and now that it's here, the precipice is presenting itself.   Now I hope that the fed proves me wrong!

David Hornick, venture capitalist interview

Interesting, brought to us by Slope of Hope.

The Bear is Back

From WebSurfinMurf's Financial Blog

The Bear is back, he has been violated and abused for over two years.
Out of ALL Long stocks, and even resource stocks should get somewhat routed. The next upswing I think will be an explosion for resource based stocks on the upswing.
My target for market turn around is around presidential election 2012. The deflationary collapse of Europe can make all of this much worse.
See post "Downturn ahead in stocks" for more detailed information. The lines have crossed, click here for latest charts.
A 1% gap or more between crossings is a more firm confirmation, I'll post once I see such a gap. For me, this is good enough to listen to. Those who think the USD is dead are in for a rude awakening, if they haven't gotten one already. The USD crisis isn't until after the next upswing and the next cycle of down pressure. I still think 2013-2014, possibly as late as 2018, depending on how events unfold.
S&P 500 sit at 1216, GLD at 173, TNX at 20.76, TYX at 33.41, OIH at 130, APPL at 400.5, USO at 33.4, AVL at 3.96, REE at 7.99, GDX at 64, RJA at 10.10, US dollar index at 77

Gold break trendlines

It is looking VERY grim for gold prices in the near term, broke trend line onto the downside. Considering how far and how fast gold went up, there could be a bit of a pullback in gold akin to what happened to silver. Keep in mind that China and other speculative countries likely are margined to the max on gold and silver. The price deceleration may accelerate, or quite possibly right here and now is the near term low and the price rise will resume, but I doubt it. I will likely just exit gold and sit this out, like I should have in the first place. Good luck

From WebSufinMurfs FinancialBlog2

Europe heading for all out implosion, 2008 style

America led the world into the first major wave of what I think will be a decade long crisis, back in 2008.
In 2011/2012, it is looking like Europe leading the world down rabbit hole number two.

The European banking system looks much worse than America's.
The major advantage the US has, is the US printing press for new currency has not hit any significant limitation.

Europe however doesn't have the same luxury. The Euro is basically a currency PEG among all member nations.
The Euro can't just print trillions of dollars and drop it from helicopters like Ben Bernanke.

This difference will result in a very harsh, and nasty deflationary collapse in the European union.
I suspect with Europe going down, the world will follow just like the world did with America.

Unfortunately, all of this will continue to add to the strain to the global system.

Two American banks with 4.3T dollars are at a stunning 22x leverage to capital, a recipe for disaster.
Four European banks with 4.8T Euros are at 69x leverage, and without unlimited currency printing, a sure fire collapse is fast approaching.
I had thought this would be kicked into much later 2012, but the posts I keep reading is starting to sway me that we may not make it out of 2011 without fireworks.

High Frequency Trading explained

You may hear the term High Frequency Trading quite a bit.
Here is a video series that explains HFT, how profit is made, and implications.

Brought to you by ZeroHedge, click here

Down Market Ahead in Charts

This week, I am refocusing on the one market indicator that has been accurate in the last 20+ years indicator for market rising and declines.  Even when wrong, it is wrong for very short period of time, and does not result in significant market earnings miss.  As video explains, you can wait for a 1% gap in the line cross to help rule out false positives.  The line decline is so steep however, I think when they do cross, we will likely cross a 1-2% difference quite quickly.  As I posted on July 17th, I expect this to happen in September.

If you haven't done so, I strongly encourage you to watch the video at the end of this post, and reflect on the chart below.   This market indicator should be respected as an emotional-less, fact driven indicator.  You can see my own mistake of disregarding this old indicator, and it did hurt my own accounts.

If we experience a year long bear market, chances are, everything will do poorly, including natural resource related investments.  At the tail end of this however, I suspect resource stocks will bounce back with a viscous vengeance.   I will keep my core position in gold miners purchased back in 2008, as well as AVL and other ETF's like REE, as longer term plays.   GLD (Gold) or Silver prices may do well, but could have a severe correction at any moment and carries significant risk.

Using the last two major 20/50 SMA line crossing, we can see the market declined about 35-37%.  Assuming a 35% decline from the current market value, it would target S&P 500 of 780.   Once the lines do cross, I'll re-adjust for a final target for market bottom in the years ahead.

I am of the belief that this next decline may actually be the final leg down in the years ahead, it will depend on the government reactions and currency war progression.  A related read I highly recommend is An Imminent Downturn: Whom Will Our Leaders Defend? 

As always, seek a professional investor, I am not one, just an arm chair observer.
NOTE: The indicator hasn't yet crossed, but a cross does look imminent, I will post when it does cross.
UPDATE: For latest chart, click here

Good luck!

From WebSufinMurfs FinancialBlog2

An Imminent Downturn: Whom Will Our Leaders Defend?

John P. Hussman, Ph.D. of Hussman funds posted a well thought out description of the choices that face us ahead.  I am not going to do it injustice by creating a couple sentence summary.

It's a good read, I highly recommend it, click here An Imminent Downturn: Whom Will Our Leaders Defend? 

US dollar on the move

Just fyi, USD exploding up, breaking out of trading range.
Unsure what if anything effect on stock market.

One effect should be cheaper imports.
Gold is taking a hit.

From WebSufinMurfs FinancialBlog2

Past fear, time to rally?

First, Obama's speech was more forceful than I thought.  But overall its more of the same, spend now, save later.  Notice how its 3 YEARS after the 2008 crisis, and the country knows we are STILL in a crisis.  Notice how root cause of the crisis is never addressed, what is addressed is pandering to the people most affected, the under and unemployed.  In general I liked his speech, but I'll wait to see what is actually done to render a final verdict.  (Full text here)

Anyway, to the markets, Gary of the smart money tracker pointed how how extreme the market is oversold.  The futures seem neutral, so I will follow his lead an rebuy my longs.

Yea, I panicked  Monday, but the indexes are only slightly higher than they where on Monday.
Back to buying gold miners, AVL, and natural resources.  A break below S&P 500 of 1,100 will still freak me out.  (News Alert, that affect AVL here)

The most extreme wild card out there is europe.  If European union breaks up, who knows what the market reaction will be.

Good luck

Obama's speech.

Obama speaks Thursday, will market be disappointed?

In my post last week titled "Know when to hold them, when to walk away", I pontificated that Obama's job speech may disappoint this week.
Obama has not yet delivered his speech, and he still may give a huge surprise resulting in a market upswing as optimism returns to the USA economy.

However, early leaks are saying the jobs bill will be 300 billion out of an annual 3.5 trillion dollar government budget.   The 300 billion will be comprised of tax cuts, as well as jobs programs.

Considering the US GDP is marked at about 14 trillion, US government annual budget is at 3.5 trillion, and less than 50 billion will be in direct jobs programs, I'll make a call on the market reaction Friday after Obama's speech.

It will be a non-event, and may even disappoint.

Greece bonds, a great buy at 88% ROI for 1 year?

The US 1 year US treasury bonds pay 0.005%, yes, you read that correctly, essentially zero.

For baby boomers in search of fan-tastic rates of return, one has to look no further than Greece.  Greece 1 year bonds are now offering OVER 88% interest rates.

Basically a 1 year investment in a Greece 1 year bond, your ROI will far exceed any other investment offered in the world.  The currency, the Euro, is currently relatively strong compared to US dollars.  Germany and France keep throwing billions at Greece, Italy, Spain, Portugal, and any other country in the European union facing challenges in the bond market.

So if you have faith that the European union will NOT be dissolved in the next year, and the Euro value will be maintained, look no further buy Greek 1 year bonds.

I for one, do believe the European union is headed for a cataclysmic disruption, that will result in either a Euro fractional-zation or economic implosion by all its members.  I have no idea about timeline or depth that the debt defaults will come.

But quite obviously, people living IN Greece and Europe do not have faith that Greece will be around in a year as part of the euro.  For if they did, they would be buying 1 year Greek bonds and driving rates below 88%.

Now imagine, if you are a retiree in Greece, and you purchased long term fixed income assets, like US retirees are doing in droves right now, a year or two ago.

What would those long term fixed assets be worth, when the 1 year rate is 88%?  Answer is simple, a complete routing of your retirement savings locked in at a much lower lower rate.  Those retirees would be dumping longer term debt notes at huge losses just to "get out" of their lower rate lock in.

Greece serves as an example of what retirees are facing in the USA.  High risk investments for mediocre returns, or near zero rates (US 30 year at 3.75%).  For those locking in a great 3.75% rate for 30 years, the warning of unseen dangers can be illustrated by Greek bonds.

In honor of this post, I added a US Government bond rate link on the right, reflecting current bond rates for future reference.

NOTE: I don't believe US debt will have significant rate issues probably until 2013-2020?  (I suspect 2014).

This week in charts - All hands on deck

Due to various reasons, I am not very well positioned to capture the market plunge that was experienced Friday and likely this week.
I am positioned to avoid the pain that should come to those long the market, as I posted Thursday night to GET OUT OF THE MARKET!
A market plunge below S&P 500 of 1,100 is very ominous, next stop is likely on the express train down to 2009 lows of 666.  For those that read this blog regularly, you will remember on market plunge day back on August 8th, I did not panic...well, now I am. :)

I give you this week in charts, and lets just say it may not be a very Merry Christmas this year.
Good luck, and Obama, prove me wrong and give the country some juice, even if it is BS, and lets kick the can yet again, in hopes tomorrow someone fixes this mess.......which of course, there is no Santa.....

Short call outs!
DXD - 19.61  - double inverse short, should go higher! HIGH risk
FAZ - 60.62    - Triple inverse short banks, should go higher! HIGHEST risk
NFLX - 213 - should go much...much...MUCH lower. (dropped from 235 on Thursday to 213 already)
                     - lost access to many movies, the bandwidth issue will get them eventually, raised prices, and
                     - my guess is many ordinary people bought this stock, so pro's will crush them
PCLN - 528 - good company model, hard to bet against....but I still think lower
DECK - 85.90 - eh, probably lower, really a coin toss, but its an old short I can't let go.
ODP - 2.29 - Shorted on 7/1 @ 4.24, probably going to zero...Office Depot.
DGP - 71.76 - DOUBLE Gold ETF - if you like gold, you'll love this ETF, with 2x daily moves than gold.
                      - Crazy high risk!

In first chart, I reference the long term trading indicator, read more here.
I STRONGLY reading latest news this week at Mish's blog, click here.

From Mish's blog, I can't believe this guy said this publicly. Geesh:
Deutsche Bank CEO says "It's Obvious Many Banks Will Not Survive if Forced to Value Sovereign Debt at Market Prices"

To the charts!

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

James LeGrand, Author of Evolve

James Legrand is a former coworker at my previous company, Navisys.

James is one of the most positive individuals I have had the pleasure to work with. James is also author of a book called Evolve!

James is also concerned about the Economic shift ahead. I have already stated I favor natural resource investments, preparing personal resources, and yes, own a gun. While I am not ready for calling mad max, but being prepared is a good thing.

James favors gold/silver for reasons slightly different than mine. I am not concerned of USD collapse in the next few years. But I do like gold/silver increasing as China and India rise with wealth, and the 2.5 billion people in that country buy more precious metals.

Other than that one point, everything else James talks about I completely agree with, be prepared.

Very scary news items released

Last night I posted "Know when to hold them, when to walk away". When I did that post, I had NOT looked at the blog Zero Hedge yet. I wish I had.

This morning, while checking my RSS feed, to my surprise is very disturbing news, making FAZ and other inverse funds look great, and me wishing I had posted "when to walk away" on Wednesday night instead.

Item 1, Regulators going after High Frequency Trading firms, reviewing code to understand their scalping logic. This is a milestone step for the government to change trading rules to reduce or eliminate HFT. While I support the idea, I also recognize that about 70% of the trading volume of stocks is now computers. Any disruption in the perverted trading arena will likely be a negative one.

Item 2, US Government filing suite against a dozen banks, including BAC for fraudulent practices on mortgages. Filing may happen TODAY (Friday 9/2). Obviously a massive pile on lawsuit from 50 states and now federal regulators can't be good for banks in the near term. Granted once the dust settles, and accounting practices returned to pre-2009 era rules, I'll be optimistic once again about banking. But that means quite a bit of volatility between these two events.

Item 3, Wikileaks releases 65 GB of email archive stolen from Bank of America, uncensored. I am pretty sure executives in BAC did not envision their private communications years later being placed on a global bit torrent. I am also pretty sure at a minimum one damning email will emerge to support the federal and state lawsuits. It isn't unreasonable to think BAC may become the fall guy in this next wave of state and federal lawsuites.

Well there ya have it, quite a bit of significant news. This post has achieves the status of entering Financial Ground Zero series. Good luck.

Know when to hold them, when to walk away

For those who may have not heard, President Obama is giving a speech that includes a job plan next week.

Considering all I have written in this blog over the years - since GW Bush was in office - I am not one that is optimistic of quick fix schemes.

So while it is possible Mr. Obama surprises me with his speech, it is more likely to disappoint.

What will likely follow is a market swoon, which may eventually reach a climax with the Federal Reserve Board making an announcement late September about QE3, or some other action, to pump the system, yet again.

Given where the market is, the questions I have over Obama speech next week, and the Federal Reserve Board's 2 day special meeting at end of September, I just don't like the setup.

When your gambling at a poker table, and the participants make your skin crawl, sometimes it just best to not play.

The market hasn't yet hit S & P 500 at 1250 like I had hoped, but its close enough. Today's high was 1,229. Reflecting back, today was probably the best day to sell.

So I will be a day late, but it is better to act than to be a deer in headlights.

Bottom line:

Selling longs

Keeping core gold miner positions

Keeping AVL

** Update 2013 ** Below looks simply insane to me, the 3x funds are a horror show and PCLN hit 1000

I may add some to DXD or other inverse funds. For those of a true gambling nature, FAZ right here may be interesting. Take a look at this chart, looking good. FAZ at 55 is a true gambler's play, a 3x inverse banking fund, that can explode or implode on any given day.

Oh and the short of the year? Probably PCLN, look at the last 10 days...up 20%!!

The counter argument is bad global economy will drive people who will vacation to PCLN.

DISCLOSURE: I am short PCLN at about the current price, 529.

Good luck.