Tricky price swings will be the nature for most of Sep. but the overall bias will be down. The risk to the upside is very limited as we have not the momentum to break above that resistance and a consolidation is at hand. The odd part is that its broadly expected hence we can expect a trading range of 1500 -1650 until last week of Sep but the potential extension is rather to the downside especially in Oct – we should see 1350-1400 at some point within the next 8-10 weeks before another upside attempt towards yearend should follow. So for now sell any strength that is as I said ealier a very discriminating game as some sectors and stocks will still do well.

First off all sorry for the part one thing with no follow through but we have serious connectivity problems now for a few days nw still lasting. (Mercury retrogade is always a stressful period)

1. Lets start with the never ending miracle of 550k new jobless claims per week and only 219k of lost jobs for the whole month. They do a lot of manipulation with their birth/death spin and other gimmicks to lie to the public. The real number is rather above 20% and while the IMF which was the only one to call for a depression on the way down is again qıick to upgrade economic groth today -have a hard time to see how they dare to through around numbers after so many bad calls.

Excerpt

Real Unemployment Rate Hits 16.8%

Submitted by Tyler Durden on 09/04/2009 08:22 -0500

As markets digest the worse, yet somehow better, than expected 9.7% unemployment, the real state of the labor market is much worse, as indicated by the U-6 number, which has hit a recent record of 16.8% on a seasonally adjusted basis. As a reminder, the “U-6 represents total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers.” In other words, in reality the U.S. labor market is likely about as bad as Spain in terms of undoctored jobless data.

And while pundits were touting the inflection point in June when U-6 hit 16.5% and started to retrace, the most recent monthly data has crashed yet another green shoot in the great propaganda game.

2. Some good insights into one of Buffett’s top holdings Wells Fargo – which seems to be quite disastrous when it comes to their balance cheat risks. In any case the foreclosure siuation is getting worse as the underlying job situation keeps deterorating

excerpt from zerohedge

The fine folks over at WLMLab Bank Loan Performance have done a great job at updating FDIC loan data by various banks. Some of their conclusions:

• Total US Loans outstanding have dropped by another $110 billion QoQ
• Yet, there is an ever increasing mountain of charge offs coming in 1-4 Family First Liens
• At the same time CRE early stage delinquencies have dropped from 1.37% to 1.17%

Yet the most significant observations is the ticking time bomb that is Wells Fargo’s 1-4 Family 90+ past due loans.

WFC’s Construction & Development portfolio is also on the verge of implosion.

Conveniently, these loans are low on Non-Accrual rates, meaning that net interest income is not currently affected (and leading to a falsely high EPS number), yet once everything hits the fan, the bank will be forced to charge off a staggering amount of debt at much higher principal amounts. Perhaps any and all rumors about WFC’s viability should be evaluated very carefully going forward.

3. The tricky part for markets has started now with the Mercury retrogade almost through all Sep. and it will not be easy to trade as the bias will be down but too many expectations for a decline will make it a tough ride for bears and bulls. We have confirmed the top of last week by this weeks price action and as I wrote earlier the manipulators will screw the quadruple expiration in 2 weeks either way. The obama admin is leaning towards a follow through as they want to earmark a positive year end so they can credit themselves with turning around the recession. So far nothing really has been accomplished except some obscure data -trying to pull the rabbit out of the hat.

Its amazing to listen to all this Goldilock pundits who always come up with the same old fairy tail which is not earnings is important but the stockvaluation – well if that story had any backbone the Nikkei would trade at 40000. There are no magic smarter numbers than earnings but you have to think for yourself as todays earnings are realy cooked my many parameters and need to be discounted basically. Stocks are expensive right now and all forward expectations for the economy cannot be true as we have a global zero interest rate situation – never had that before and we have a good reason for that. Can not recall the name of the movie but the basic story line is 2 students find a dead houseowner in his fancy beach-house and pretend he is alive to get their good thing going ( girls and party) – that is exactely the situation with the banks and economies. So much debt has been accumulated on all levels the system needs a deep cleansing which has not happened yet. One part is reducing debt the other is to eliminate the insane risks still on bank books. Obama and the other Bilderberger puppets have done nothing so far to solve any of these problems and the big crash is still due or a slow but permanent death ( the Japanese version).

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1. What is not mentioned in this analysis is that all troughs occured at a PE below 10 Around 8), which was not the case so far we turned around at a PE of 12 approx. – what brings me back to my assumption that we are in wave 4 up and wave 5 down will bring earnings trough statistics back on track. we also have to keep in mind that we have extrodinary factors pushing earnings up on the bank side which we explained who make the earnings suspicious. That leads to an eve higher PE is the earnings do occur do accounting changes which were not the same as on former earnings – giving an obsure factor to the whole comparrison.

Excerpt zerohedge

Current Market Move Is Third Biggest PE Multiple Expansion Recorded In Shortest Time Ever

Submitted by Tyler Durden on 09/02/2009 22:04 -0500

Some historical observations: while readers may continue scratching their heads over just what the causes may have been for the torrid 5 month rally we have witnessed, two main things distinguish it among the last ten recessions stretching all the way back to 1953:

• While the S&P has increased by 50% to the (to date) peak, it has done so on a -6% decline in actual EPS, implying the rally has been one of PE expansion, 66% to be precise. As the chart below demonstrates this is the third largest recorded PE expansion in history, with only the 72% PE expansion recorded in 1982 and the 78% in 1974 surpassing the current market.
• Yet, what is unique about this market, is that while both 1974 and 1982 achieved their move higher in about a year (11 months for the trough to peak PE move in 1982, 16 for 1974), the S&P has hit its current PE peak a mere 5 months after the trough. This is an unprecedented record in the history of US recessions, and demonstrates just how much of a push influence Obama’s stimulus and Bernanke’s QE have had on the PE multiple alone, if not on actual EPS.

Another observation is that at a 19.9x PE through the current market peak, the market is almost 3x turns more expensive compared to the historical peak PE average of 17.1x, and was cheaper at the peak than just the recessions of 1961 (22.7x), and 1990 (21.6x). Any claims that the market is cheap at current earnings are outright lies.

At this point hope is exhausted (in the form of the PE multiple having plateaued), and any further gains will all have to come from an actual improvement in earnings. Yet for that to happen, more than just overhead will have to be cut: actual revenues will need to increase. However, with the record amount of slack still in the system, and the under investment in corporate CapEx, the probability of revenue growth at this point (and this EPS growth) is slim to none.

The graph below provides a convenient way to illustrate this. The past 5 recessions all attained their PE peak at 17x within a yea, at which point it was the Earnings turn to pick up. However, this is precisely where the risk of a double dip occurs: all the growth so far has been one-time in nature, due to various stimuli and subsidies. There is no continuous upward trendline that will encourage EPS growth as discussed above. This likely means that the market will exhaust its “hope” promptly and the current PE of 20x will collapse long before the EPS growth phase is initiated, resulting in either a double dip, a W, or whatever other soundbiting definition one wants to attribute to what the market will look like over the next 6 months.

Data from Morgan Stanley

2. One right step but I doubt it will end as it should since the rating agancies have commited fraud and still are but the implications of them being officially sentenced would be too big too let it happen for the government who has failed to regulate all this entities.

excerpt

M. Stanley, Moody’s, S&P Must Defend Fraud Claims

A U.S. federal judge ruled that Morgan Stanley and two credit rating agencies must defend fraud charges in a class-action lawsuit accusing them of masking the risks of an investment linked to subprime mortgages, and which eventually collapsed.

U.S. District Judge Shira Scheindlin on Wednesday rejected efforts by Morgan Stanley // [MS 27.09 --- UNCH (0) ]// , Moody’s // [MCO 26.10 --- UNCH (0) ]// Moody’s Investors Service and McGraw-Hill’s // [MHP 32.31 --- UNCH (0) ]// Standard & Poor’s to dismiss fraud claims brought by the plaintiffs, Abu Dhabi Commercial Bank and King County in Washington state.

She dismissed the plaintiffs’ remaining claims, and all claims against a fourth defendant, Bank of New York Mellon // [BK 27.95 --- UNCH (0) ]// , while granting permission for the plaintiffs to amend their complaint.

Scheindlin’s ruling could affect other lawsuits brought by pension funds and other investors, seeking to hold banks and credit raters responsible for hyping the value of complex debt to win fees and causing investor losses as the debt collapsed.

The Euro trades in sink with the close correlated risk taking approach. It still might need a little spike towards the 1.44 before the decline towards 1.20 starts. After so many ‘gurus’ declared the Dollar to be poised for a extended drop we can be quite sure that first we will see the other side of the Moon. The German elections may enforce more Euro weakness as the sure thing of ‘Iron Lady’ (that was how the economist described her far from any truth) Merkel is now getting obviously less sure and trouble ahead is the only sure thing going forward. Germany is plunging back to the Weimarer Republic syndrom of the 30’s in perfect sink with the markets. The only reason we have Dollar weakness anyway is because America has an competitive advantage and therefor let it drop to a certain degree which keeps all foreign investors from running for the exits. The weekly chartdoes give a clear time frame of another 10 days before the downside move should start. Start selling any strength of the Euro going forward.

1 Defcon 1 for longs as I put out the red alerts the last 2 weeks the picture gets overall more fragile as even ‘good news’ start to get ignored and we have strong after hour selling action. The tricky part will be as stated earlier that the move in Sep will be limited due to a big anticipation but the overall correction ( new lows) will take its course over the next 6-9 months.

Excerpt 1
from zerohedge

Repeat after me: There is nothing wrong with buying all day, gunning into close, then dumping insane volume after hours… There is nothing wrong… etc

2. The dimensions of the OTC derivative markets nuke potential is described by the simple fact that some banks make outstanding profits on broking them ( the usual suspects Goldman, JP Morgan etc. ) but will not be the ones who clean up the mess after the next explosion. If Obama does not make a bold move as exactely this instruments caused most of the current 1.5 tril of official losses he even did not understand the problem ( every second grade can work that out ) or he is a manchurian candidate. Since he made it through Harvard on his own merits we can assume he has the intellect.

Excerpt
Wall Street Stealth Lobby Defends $35 Billion Derivatives Haul

Aug. 31 (Bloomberg) — Wall Street is suiting up for a battle to protect one of its richest fiefdoms, the $592 trillion over-the-counter derivatives market that is facing the biggest overhaul since its creation 30 years ago.

Five U.S. commercial banks, including JPMorgan Chase & Co., Goldman Sachs Group Inc. and Bank of America Corp., are on track to earn more than $35 billion this year trading unregulated derivatives contracts. At stake is how much of that business they and other dealers will be able to keep.

“Business models of the larger dealers have such a paucity of opportunities for profit that they have to defend the last great frontier for double-digit, even triple-digit returns,” said Christopher Whalen, managing director of Torrance, California-based Institutional Risk Analytics, which analyzes banks for investors.

The Washington fight, conducted mostly behind closed doors, has been overshadowed by the noisy debate over health care. That’s fine with investment bankers, who for years quietly wielded their financial and lobbying clout on Capitol Hill to kill efforts to regulate derivatives. This time could be different. The reason: widespread public and Congressional anger over the role derivatives such as credit-default swaps played in the worst financial crisis since the Great Depression.

1. The same Mr Olmert once said that America was actually run by Israel

Excerpt

Olmert Indicted in Corruption Cases

By JOSHUA MITNICK

TEL AVIV — Israel’s state prosecutor indicted former Prime Minister Ehud Olmert on multiple counts of fraud and breach of public trust in connection with a trio of corruption scandals spanning his terms as mayor of Jerusalem and as minister of trade and industry from 2002 to 2006.

Mr. Olmert will be the first former Israeli prime minister to be put on trial on criminal charges here. He was forced to resign in September 2008 amid political fallout from the police investigation into alleged corruption.

Representatives for Mr. Olmert weren’t reachable to comment. A spokesman for Mr. Olmert told Israel’s Channel 1 public-television news that the indictment is filled with inaccuracies and contradictions. “We are sure that when we arrive in court, things will look differently,” said the spokesman, Amir Dan.

In the introduction to the 61-page indictment submitted Sunday to a Jerusalem district court, the state accused Mr. Olmert and his office manager, Shula Zaken, of exploiting Mr. Olmert’s position to reap “ongoing and systematic financial favors” through “acts of fraud against public institutions and bodies, as well as the state and its employees.”

In one instance, Mr. Olmert is accused with overcharging Israeli government ministries and American and Israeli nonprofit groups by $92,164 to fund personal and family travel abroad. He is charged with intentionally double-billing U.S.-based Jewish charities such as the Indianapolis Jewish Federation, the Simon Weisenthal Center, and Israel Bonds.

In a separate instance, Mr. Olmert is charged with failing to report accepting hundreds of thousands of dollars, allegedly in cash-filled envelopes in some instances, from U.S. businessman Morris Talansky.

Mr. Olmert also is charged with ignoring conflicts of interest in policy decisions when he was trade and industry minister under Prime Minister Ariel Sharon that affected companies who had hired a former legal partner and political adviser of Mr. Olmert’s, to represent them.

The state prosecutor also alleged that Mr. Olmert tried to cover up the scandals by falsifying corporate documents and by fraudulent nondisclosure of income.

The charges relate to Mr. Olmert’s dealings from 2002 to 2006.

2. Uranus /Saturn opposition shows again its earmarks after allowing the first (half)black president to occur now in Japan we have a dramatic change as well the DPJ takes over after 50 years.

Excerpt

Rise of a New Era in Japan

A 50-Year Dominance Ends as Voters Oust LDP; Rivals to Spend More, Weigh U.S. Ties

TOKYO — Japanese voters overwhelmingly rejected the party that has largely ruled their nation for most of the past half a century, choosing instead an untested rival to grapple with an enfeebled economy and an aging society.

The historic change in government could usher in a new era for Japanese politics that replaces the staid consensus that guided Japan in its postwar boom years with a more fractious, competitive environment. The upstart Democratic Party of Japan and the establishment Liberal Democratic Party share similar positions on a number of issues. But the more-liberal DPJ is pushing an ambitious and expensive domestic spending agenda with an eye toward reigniting Japan’s economy.

3. We can add one more indicator for a top – Chinese Investors are not the smartest (even are contraindicators) like Japanese investors it seems – they have recently decided to get into Hedge Funds and Private Equity again. They earmarked the top with the very interesting timing of Blackstone’s IPO and their big purchase , which was almost exactely at the high.

Also the sentiment factors are getting closer

Posted in technical analysis ]]> http://behindthematrix.wordpress.com/2009/08/31/brainstorming-monday-2/feed/ 0 behindthematrix Market Sentiment http://behindthematrix.wordpress.com/2009/08/31/oil-tech-update/ http://behindthematrix.wordpress.com/2009/08/31/oil-tech-update/#comments Mon, 31 Aug 2009 15:56:27 +0000 behindthematrix http://behindthematrix.wordpress.com/?p=1839 ]]>

Oil is still heading for the high target at 78/80 and it should take another 3-4 weeks to get there. Confirming my sector choice that oil stocks have still to go a bit higher against all odds but they look really cheap in comparison to other sectors. Thereafter we should see a sharp pulback towards the 60 level. The BDI (Baltic Dry Index) clearly points to an sharp decline in global activity and oil is again not driven by fundamental demand but the same manipulation we had 2 years ago to the biggest fraction of the equation but its also an expression that real inflation is creeping into the commodities as a result of the excessive money printing of global central banks.

0. Some unusual and contradicting activities make me think

a) for a few days the ISE -Index produces unusual high put activity for a top which confirms on one hand that we are not done yet as too many are waiting for a correction. That is also puzzling as in the forward VIX future we have a lot of buying activity as it trades at a rich premium – that is not good for the top scenario (except the case that Goldman and JP Morgan are buying).

b) on the other hand we had unusual activity at the low as well as extreme call buying just one day before the low started ( very unusual I have never seen such a thing in over 20 years).

c) Some sentiment indicators are contradicting with Investor Intel at a top level now but Rydex and ISEE MA’s not confirming yet as they are rather neutral.

1. The BDI is an early indicator as it seems turned around in DEC and peaked in June – thats a 3 month lag for the stocks – hence another hint for the SEP top.

The Baltic Dry Index, not exactly a phrase that rolls off an investor’s tongue, is signaling plenty of caution these days about the global economy.

Elaine Thompson / AP

As a gauge of shipping activity along 20 of the world’s busiest routes, the BDI is a leading economic indicator used by market insiders to gauge demand for goods.

But while it remains a somewhat arcane measure, the recent sharp drop in the index has drawn increased attention, despite the dramatic rise in US equity markets and the accompanying hopes for economic recovery.

It’s been a rough summer for the index, which is not a measure of activity in the Baltics but rather an instrument that traces its name to 1744 and the Virginia and Baltick coffeehouse in London’s financial district. The index is weighted toward activity in the Pacific.

The BDI has tumbled about 43 percent since peaking on June 3. That followed a stunning upturn off a low of 663 on Dec. 5, 2008 to the June 3 high of 4,291.

2. The Obama admin against all this upbeat Goldman like Wallstreet bull market pushers have lowered their economic outlook as they have to win the mid term elections and are getting cautious on blowing out to rosy pictures. I saw Hatzius ( chief economist of Goldman) now the last 2 times on Bloomi TV with his upside revisions and although I am not an expert in reading people it was quite obvious to me that he was very uncomfy with what he said like people who are forced to lie and can not really deal with it.

Excerpt

Published: Tuesday, 25 Aug 2009 | 11:22 AM ET

The US economy will shrink far more than expected this year and will rebound much more slowly than forecast after that, according to a bleak new assessment by the White House Budget Office.

The federal government also faces exploding deficits and mounting debt over the next decade, far worse than what the Obama administration had estimated just a few months ago.

The revised estimates project that the economy will contract by 2.8 percent this year, more than twice what the White House predicted earlier this year.

Obama economic adviser Christina Romer projected that the economy would expand in 2010, but by 2 percent instead of the 3.2 percent growth the White House predicted in May. By 2011, Romer estimated, the economy would be humming at 3.6 percent growth.

Figures released by the White House budget office foresee a cumulative $9 trillion deficit from 2010-2019, $2 trillion more than the administration estimated in May.

3. If the true test of the FED is the market they have failed big time M(o)r(on) Geithner as the market has lost big time the last 10 years – he is really a disgrace for this post as many Obama choices are. The FED is one of the major reasons for this crises and needs to be audited together with all dealings of the Treasury the last 3 years in a full fledged investigation.

Excerpt

Geithner: “Fed Audit Would Be Problematic For The Country”

Submitted by Tyler Durden on 08/25/2009 14:34 -0500

It is the esteemed Treasury Secretary’s opinion, that anything that has to do with demystifying why the Fed is hell bent on destroying the US dollar, killing the middle class, and allowing Lloyd Blankfein to purchase Larry Ellison’s yacht collection, is squarely in the “problematic for the country” camp. Never mind that more than half the country (in fact almost two-thirds) have indirectly voiced their support for HR 1207. But at least it is good to know where Geithner’s allegiances lie, and even better to see how good at totally perverting facts (not just taxes) the SecTres is.

And the punchline: “The true test of the Fed is the market.” Is there a way to give Mr. Geithner an economics test because it seems he might have graduated with a biz-econ degree from Devry.

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Posted in technical analysis ]]> http://behindthematrix.wordpress.com/2009/08/26/brainstorming-wednesday-2/feed/ 0 behindthematrix container ship http://behindthematrix.wordpress.com/2009/08/25/ndx-market-update-4/ http://behindthematrix.wordpress.com/2009/08/25/ndx-market-update-4/#comments Tue, 25 Aug 2009 20:15:00 +0000 behindthematrix http://behindthematrix.wordpress.com/?p=1827 ]]>

The NDX is in the final stage of building this top and selling is highly recommended for longs – one can even start to build a short position slowly at these levels as some indicators besides the price action do give signals and one segment which is barely represented here is coming to a top as well the XBD and BKX are about to reach tops. The strong resistance line matches the 200 week MA which can be recognised as the invincible barrier for the next 2-3 months. A pullback to the 1350 -1400 zone is the least we should expect in Q4 but within Q1-Q2 next year new lows are the real deal one should trade for. The tricky part as stated before is that even bulls are waiting for a correction soon but with a very limited scope no one sees the lows being tested or even new ones. Tough times are unfortunately ahead as the basic problems have not been solved and the Obama admin has proven the can not handle it but that is also true for almost all governments.