Bill Cara's Blog for Jul 29, 2011 [See Post-Close report]

thanks for reminding me on $VIX Ron. The weekly suggests a bit of upside possible. Maybe a pop to the 30 - 32 range in order to panic traders. We shall see.

That would fit hand in hand with an extremely oversold market oscillator like $NYMOT. Uncharted territory it would be should negotiations fail, but buying the bounce will likely be good at some point. Sell the greed, buy the fear.

Good Morning.

08:30 GDP-Adv./Deflator
08:30 Employment Cost Index
09:45 Chicago PMI
09:55 Michigan Sentiment - Final

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BBD - Banco Bradesco upgraded to Overweight from Neutral at HSBC.

POT - Potash downgraded to Sector Perform from Outperform at Scotia Capital.
Scotia believes Potash's earnings growth is unsustainable beyond 2015/16 and reduced its valuation multiple. Price target is $66.

RCL - Royal Caribbean downgraded to Neutral from Overweight at JP Morgan following the Q2 report citing lackluster demand. Price target lowered to $33 from $48.

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"President Obama urged the American people to call Congress and demand that both parties work together on a compromise. The calls are 99 cents for the first minute, and a trillion dollars for each additional minute." -- Jimmy Kimmel

Anyone have a take on the news by SLW yesterday?

definitely love the game. 1k shares for $150 or thereabouts is such a small door entry fee. One can then follow the money, adding as the bet shows itself to be working.

That makes DHM.V, MGS.V and ROF.V for 1k each.

Tyrone Docherty appears to be a decent jockey of Deer Horn Metals, having rewarded his investors in an iron ore project on the east coast in the boom years before we crashed. It was called Quinto and sold to Consolidated Thompson. Here's the chart:

http://tinyurl.com/3kncdr3 (pull the time frame out to 5 years).

He's now sitting on a rare earth metal in the Central West important to the solar industry. His company presentation is given in Chinese and English, so he knows where he wants to sell his stuff.

Got the recommendation from an analyst on MGS.V. Will start digging around for more info on this company.

We're apparently in a commodities bull market, so any early entry commodity play you can suggest with a solid crew in charge is welcome.

New ATHs

CELG - PT Lifted from $58 to $62 @ RBC. Sector Perform

Good morning Baz; been here before, it's looking like today could be the day.
regards,
Earl

edit; July 29 11am ET http://phx.corporate-ir.net/phoenix.zhtml?p=irol-e...

time to cover?

Amen to that Vad; I bought SLW yesterday as an investment. I have not been able to sit here and had to modify my trading months ago. I like your charts but can't seem to get mine to line up with yours using Fidelity ATP. I'll figure it out.
regards,
Earl

CELG - estimates, target increased at UBS. Shares of CELG now seen reaching $71. Estimates also increased on strong beat and raise in 2Q. Buy rating.

POT - estimates, target boosted at Goldman. Shares of POT now seen reaching $67. Estimates also upped, to match the company's new guidance. Buy rating.

SBUX - estimates, target raised at UBS. Shares of SBUX now seen reaching $47. Estimates also raised on higher medium term revenue and free cash flow. Buy rating.

I have to admit to being profoundly disappointed in the action in the miners today. They've already lagged the rise in POS/POG a good bit and now they're getting spanked again in the face of another spike in POS/POG. At some point, this decoupling action has to reconcile - especially on the likes of SLW & GDXJ (as Bill has pointed out their lead/lag nature).

Of course, I'm just mad at myself for not being a little more patient in putting on my long calls, but I would not have expected another trip to the woodshed for the miners with all that's now swirling about us. The techinical damage needs to repair quickly here, or a bad trade will quickly become a bad investment for moi'.

FD: Long SLW, GDXJ, SLV & GG calls from SEP to JAN.

Hi Nebish; I bought 300 SLW yesterday - and just picked up 3 Jan 2012 35s calls 5.70 - I was hoping to buy back my 10 RBY calls but not going to happen, that will be called but I'll keep the premium.
regards,
Earl

Here you go Jock...one day the bottom will drop out....

http://www.youtube.com/watch?v=SSIRAmwmBks&feature...

Every day lately it's been "fade 'em" not "trade 'em". Talking with my son today, we discussed how the behavioral finance guys have to be loving this.

Hi Jock - Here is my pick: Chuck E. Schumer who assisted the banks in setting the progressive agenda for homeownership increases that led to our dilemma -Moments before a conference call with reporters was scheduled to get underway on Tuesday morning, apparently unaware that many of the reporters were already on the line, Charles Schumer of New York, the No. 3 Democrat in the Senate, began to instruct fellow senators on how to talk to reporters about the contentious budget process. After thanking his colleagues for doing the budget bidding for the Senate Democrats, who are facing off against the House Republicans over spending for the rest of the fiscal year, Mr. Schumer told them to portray John Boehner as painted into a box by the Tea Party, and to decry the spending cuts that he wants as extreme. “I always use the word extreme,” Mr. Schumer said, “That is what the caucus instructed me to use this week". It is time to shrink government period. Happy Trading

LOL! Now if we can only get into the big R tent we can hear their talking points. It's a THREE RING circus Luggie! Schumer let you in the room?
You know that won't happen in Ring two, the price of entry is rather prohibitive.

We may see today if Boehner is in a corner or if he can herd his cats.

Repeating a discredited meme doesn't make it so, although you do repeat it often.
Ah...those evil progressives. OOOPS!
http://www.usatoday.com/money/perfi/housing/2004-0...

http://articles.cnn.com/2002-06-17/politics/bush.m...

"What if we changed our foreign policy and we didn't just build weapons, what if we took care of sick people instead?" Bingo!
"We're going to fail to keep the value of our currency".
"All these cuts are fictitious"
http://www.bloomberg.com/video/73234160/

"The test of a first-rate intelligence is the ability to hold two opposing ideas in mind at the same time and still retain the ability to function." F. Scott Fitzgerald

Craig - nice article references. If the die-hard conservatives bother to read the historical record they'll see it wasn't just Barney Frank, it was a bipartisan banker-bought government who fed subprime borrowers to the wall street banker machine that was desperate to have more borrowers to make money from.

When they let the subprime crowd into the party, you know it is nearing the peak. The police are on the way, and they just want to sell the last few tickets before it all blows up.

As for the caucus talking points - duh. Dems call the republicans extreme. Reps call the hedge fund managers "job creators." Its a bipartisan theater. Clever people behind the scenes write the script for these guys. Only, the Reps seem to have cleverer people writing the scripts, IMO. Really - job creators. How masterful is that? If you can turn an overpaid CEO who was responsible for outsourcing a few thousand manufacturing jobs to Vietnam into a "job creator" you really are a miracle worker. Its especially masterful if the guy who gets thrown out of a job by this "job creator" ends up voting republican. Perhaps if he's lucky the "job creator" will end up hiring him as a gardener.

Just in case if you missed,

http://bit.ly/rcoOTT

ALOHA!!

Wall Street motto: "ALL THE WORLDS' A FEE!"

Hi Bull.. wild ride ! do believe they are low-balling celg... (re: biib estimates in 2010 )... moved take-out target to $ 85 in not too distant future...

whenever this situation arises, I always hear two voices in my head
one is saying "gold is making new high, miners will follow to go up soon."
another one is "if the all time high price of gold can not make miners go higher, what if price of gold starts to decline."
and all those emotions twisted inside so I basically lost the ability to take action.Trading is tough. More than half of the time, I feel I do not know what to do. In the rest of the time when I feel I know what to do, a good chunk of it turned out to be wrong. That is just amazing -:)

SmallCapFan -

"I always hear two voices in my head"

Paracusia, dude.

Or DID!

They have trading systems for these disorders....my bet is there are a lot of Caraistas suffering from one or more of these maladies.

Time Mag's 30 best ever music videos are more fun than I expected. Visually intriguing, musically full of memories, and a "time" capsule:

http://www.time.com/time/specials/packages/article...

ALOHA!!

I just got a call from the nice folks over at the offices of CAMPAIGN FOR LIBERTY(CFL). They had me listen to a message from RAND PAUL, which I did. Then later a solicitor came on the line and asked if I would sign a debt petition and make a donation. I have donated in the past so that is how they got my phone number.

Here is how the exchange took place:
K-While I understand the issues you speak of I am not interested in supporting the two party political system.

CFL-This is not party centric, but more fiscal centric, Sir.

K-Have you ever studied Judo? Essentially you use the weight and the balance of your opponent against them. The debt is the weight and for me to make any attempt to reduce that debt would mean I could possibly save the two party system and the status quo in banking and money. That would greatly hamper my efforts to have the monopolistic system completely collapse, which I do believe is the only viable solution to all our issues of value.

CFL - Click ... Nnnnnnnn!!

K-Hello?

Nothing directly implicates him ... but I still don't LIKE it ... Put him on the No-Fly list ! I understand he doesn't like to leave his island much anyway ....

What I think of when I think of monocles....
http://www.worldofmonopoly.com/history/candcc/rupc...

Actually, I think of this a lot lately.
when I think of Bernanke, Hank Paulson, Congress, Onixon, Goldman, Dimon, the list goes on....

All those nearing the end of their working lives are looking forward to receiving their Social Security payback. Most MUST receive it as they have little savings to fall back on and will have no other means to survive. Many no doubt are questioning whether they will receive benefits due.

Yesterday a friend was telling me of an article he had read regarding the actual IOU's left by the government in the SS kitty. Most have thought treasury notes were left in exchange for taking the cash. We have known for years that the money was taken, but trusted the government to pay back the cash when the benefits when due. Apparently the IOU's left are not marketable securities but some hybrid intergovernmental scraps of worthless paper. So the money really is gone. The article also mentioned a Supreme court decision decades old, ruling that receiving Social Security payments are a privilege not a right. So there is no contractual right to the money paid in and all the money paid in is gone.

So all those still contributing must have rising levels of anger, and what will all the baby boomers be feeling if benefits promised are not delivered. That's a helluva lot of pissed off people.

Grym mentioned today how much money he would have if his lifetime contributions were his and he had been able to compound the balance over time. At least you're getting some back... think of all those still paying and those close to
receiving benefits. And on top of that, with the deflating currency, any benefits buy less and less each day.

A sad state of affairs.

Wonder how long the closing Carry trade will "carry the Yen" higher and how high?

Wow. Up 1.78% today. Is that a vote against the euro or the USD? Both, me thinks.

http://wiki.uiowa.edu/display/theatre/Mr.+Peanut

and some modern new-agey stuff, as embracement of social media continues...

If you read the last minutes of the log (beer/carrot juice bet) and look at DJI move on 1 min (zoom in to see it close), you will see some real conflict, tension, resolution...

http://tradinglog.realitytrader.com/2011/07/jul-29...

It seems that many have been sitting on their hands today elsewhere. A little poetry here.

http://www.minyanville.com/businessmarkets/article...

Good weekend all.

yes but if it happens after you die its an estate plan not a retirement plan..G..

edit: Conga ( not Congras ... sorry )..

"It's Not My Fault" doesn't need to be stated... this was released yesterday and no real adverse reaction thus far imo

He's has been a disaster thus far... not to mention his poor math skills were displayed not once, but twice...

Kaimu, laughing my butt off. Thanks!
Regards
Earl

LYB; I can't buy my own company but I can say NG feedstock will remain cheap (I will not buy NG now or any time soon), we will increase C2= (ethylene production OL toward 2015/16) then we have to do something with the additional capacity and I'm very happy to say what I produce, EO, and am very good at it if I may say so (new ops engineer came in, listened and assisted with making some simple process changes that hitherto was held up by 'it's not my idea folks so it won't happen). We've increased production and successfully proven we can... Talk of increasing production so if ethylene expansion goes in you can bet downstream is a done deal. Bottom line, 2015 new shipping lanes go in (panama). Without NG you need naphtha to crack to make EO&Ds (goes into everyday life even Kaimu can't easily do without) so all but Russia have to use expensive naphtha feedstock. Point is, it might be worth taking a look. Not likely a good trade but you might be able to.
Regards
Earl

(This is like a junkie hoping someone else will stop them from buying and taking heroin. Good luck. If it does pass the only way for these OPM addicts will be outright devaluation of the currency. Gold is going to go parabolic and the $USD will go subterranean.)

And those companies with good balance sheets who arn't spending will be forced to unass that money.

I don't know what your answer is Craig but you're one of the many writers i admire on this board. Complaining never did much. It's OK to just keep borrowing? Gold is telling me this country has been on the wrong path. Onixon is just wanting to get back on the campaign trail, and hand his supporters SEIU thugs more of my money.

Regards
Earl

The global currencies are so screwed-up ( and ain't nothing going to change, except interest rates ) I am looking for $ 2,000 by years end...

Exactly Grym.

Boehner wants O to have to come back to have the debate again for the same reasons as O wants to pass the debt ceiling until 2013.

Aside from the obvious politics, I can't understand Boehner's idea.
Why, aside for politics, should we not apportion enough to pay our bills for the remainder of the term? Is it that Congress fears itself? I think so.
More OPM please.

Isn't that the oath?....including getting my long term goodies?

This balanced budget idea is about as effective as speed limits, the Ten Commandments, the tax code and the nuclear proliferation treaty. As they say, laws are meant to be broken, and they will be.

Kudlow just said Dodd/Frank prevents the treasury from covering them. Turns them into high risk.

Hey BH....I'll gladly pay you tomorrow with an IOW for work done today.

See? All it does is turn the government into Whimpy.

Craig, I think, I believe he was refering to those holding accounts you transfer money's to after trade settlements and such. And as best I could tell it was related to say someone with a 401k who moves money from a fund to a 'cash account'. Then, again I believe he was refering to the treasury no longer being able to even be the backup of last resort. That's the best I can recall.
Take care, have a great weekend.
Earl

ea32da32 -

"Kudlow just said Dodd/Frank prevents the treasury from covering them. Turns them into high risk."

I read some reports earlier this week that some prominent MM settlement funds at Vanguard, Fidelity, and possibly others were heavily weighted into short-term european gov't treasuries! Yikes.

Read this and freak.

http://www.reuters.com/article/2011/07/05/moneyfun...

Not sure what Larry's talking about though.

Over at Vanguard, its Prime Money Market Fund (VMMXX) has an undated but presumably current 'portfolio composition' of 38.9% U.S. Gov't obligations and t-bills and a whopping 42.2% in "Yankee/Foreign" which I guess means 2-year Portugese/Irish/Italian/Greek/Spanish (PIIGS) gov't DEBT through complex european bank instruments.

Gold bars are less complex.

Cheers.

ALOHA!!

From the Close Report:
Someone pointed out early this morning that Apple (AAPL-0.29%) will have more cash on-hand than the federal government by the end of the weekend.

Is it any wonder we the people are increasingly wary of our fearless leaders?

Yes, the WARY FACTOR is high!

I love this! I see the fact that AAPL has more cash on hand than the US Treasury as being "AS IT SHOULD BE"! When government has more cash they spend it on "broken windows". When Steve Jobs has more cash he spends it on more JOBS, direct productivity! Steve Jobs is much better at creating JOBS than any present or past politician the US has ever had. Now if we could unravel government largess and its attending regulations of business strangulation then perhaps AAPL would open a factory in America instead of India. There is no incentive for corporations to create productive units within the US borders. Between unions, regulations and government intrusion into market efficiency and all the legal peripherals that glues Americans into permanent unemployment lines there can be no room for productive labor.

Remember the US government has never produced a single job in its illustrious history. The job of government is not to compete by intervening with the private sector.

I have yet to see anything stamped "MADE IN DC"! There are no factories in Washington only bureaucrats and the lobbyist who infest the process of tainted legislation.

"Pritzger" is an anagram derived from the language of the planet "Extortionistica Gangsterium" whose root base is CAPONE.

A Penny for your TRUE thoughts!

Sitting in a saloon this evening in Carbondale Colorado with wifi access, I pulled up my Bloomberg screens to see that the TED spread CRASHED by over 10% today..down to the .16 area...Is this a fluke?

I've been in and out of the 'loop' for more than a week so ANY explanation would be appreciated.

Have we declared war on the Grand Duchy of Fenwick and lost again??? Very queer happenings of late!

Thanks

Ross

Markets were focused overwhelmingly on Washington, DC this week as the Congressional Republicans fought with President Obama and the Democrats over the debt ceiling. There were several attempts to push a deal through the Congress to cut spending and raise the debt ceiling, none of which garnered enough support to pass as the political atmosphere grew progressively more poisonous and dysfunctional.

As of Friday, Speaker Boehner was scrambling to maintain control of his caucus, while Senate Majority Leader Reid said he would begin negotiating a last-ditch plan with Senate Republicans. The US debt circus obscured much more fundamental problems in Europe, where contagion from Greece kept up pressure on Italian and Spanish yields. Ironically, as trouble has jangled markets on both sides of the Atlantic, investors have continued to seek shelter in US government debt, even as President Obama uses the 'd' word (default).

Gold, the Swiss Franc, and the Yen have emerged as the other major safe havens. Corporate earnings were relatively strong again this week, although steady declines in equity markets from risk aversion obscured this story. On Friday, the advance reading of US Q2 GDP was +1.3% v +1.8%e, while Q1 GDP was revised from the previously reported +1.9% figure to a nearly flat +0.4%. Taken together, the data indicated that the "soft patch" in the US economy during the first half of the year was even softer than previously believed. For the week the S&P fell 3.9%, the Dow declined 4.2% while the NASDAQ dropped 3.6%.

- Most of the multinational oil firms reported earnings results this week. Exxon surprised investors by missing earnings estimates, despite the fact that profits hit three-year highs. Analysts blamed the miss on trouble at the firm's international downstream business, most likely due to the impact of FX issues. Downstream earnings weakness also got in the way at Royal Dutch Shell.

BP's profits were weighed down by continuing costs from the Gulf of Mexico cleanup and lower income from refining operations. Income at ConocoPhilips and Chevron was stronger than expected, with profit up nearly 50% on a y/y basis at Chevron. Refiner Valero felt the bite of high oil prices, with very soft profit levels in its Q2, even as revenue widely beat expectations. Profits at driller Anadarko blew out on strong pricing, while shale gas major Chesapeake Energy's quarterly revenue crushed expectations, though its earnings were light.

- Online retailer Amazon comfortably beat Q2 top- and bottom-line expectations and offered a relatively strong Q3 guidance. Meanwhile the shorts finally met their reward as Netflix fell sharply post-earnings after profits came in well below consensus in Q2 and guidance for Q3 was also weak, thanks to slowing net additions.

Semi names STMicro and Texas Instruments offered soft quarterly results: TI met lowered expectations on a noticeable decline in profit margins while STMicro had a terrible Q2, and warned that things would not get better in Q3 as Japan and FX translation continues to hammer the firm's profits. Sprint is no closer to profitability this quarter, as losses were more than twice the expected amount. Net subscriber additions were stable on a sequential basis, and overall customer base grew by 4M on a y/y basis.

- Manufacturing names did quite well, despite the soft patch. Boeing reported very strong profits in its Q2 thanks to higher margins, contained costs and moderate revenue growth. Ford continues to outperform analysts' expectations and engine maker Cummins crushed top- and bottom-line estimates and hiked its FY11 guidance on very strong sales. AK Steel and US Steel both had puny Q2 profits and disappointing revenues, thanks to weak demand and higher costs. Materials names 3M and DuPont both offered solid results.

- Consumer staples producers Kellogg and Colgate both offered solid results, meeting expectations and reaffirming guidance. Starbucks modestly exceeded analysts' estimates and raised its FY11 guidance slightly. The firm's comp sales held up nicely, as price increases seemed not to substantially cut the firm's business. Newell Rubbermaid cut its FY11 outlook slightly, even as profits and revenue topped expectations.

- Profits at major mining names Vale, Newmont, and Arch Coal missed consensus expectations blaming higher costs. Despite reporting 74% y/y increase in net income, rising costs and the big gains in the Brazilian Real killed Vale's profits, and the company warned that these trends would continue to be an impediment moving forward. Newmont Mining blamed its miss on higher costs and lower production, especially copper, production of which fell 45% y/y. Arch Coal blamed its miss on the bad weather impact this spring, plus higher costs.

- Against the backdrop of a circus-like atmosphere in Washington, US Treasury yields fell to their lowest levels since late last year. Almost paradoxically, demand for the relative safety of US government debt was amplified by investors' realization the United States was likely to see a ratings agency downgrade in the wake of the ongoing debt ceiling debacle. Also aiding safe haven flows were disappointing US economic data along with renewed stress in European debt markets.

Countries with AAA sovereign ratings performed best. The US 10-year yield finished the week near 2.8% and now sits below that of the UK's 10-year Gilt. The German Bund has seen its rate fall towards 2.5% and the spread against Italian and Spanish debt ballooned once again. Despite the relative calm in US Treasury pits other US financing markets indicated real positioning was taking place ahead of the August 2nd deadline.

One month Treasury bills that mature on August 4th rose to 28 basis points, the highest rate paid since they were issued on back in February. The cost of borrowing funds in the overnight repo market also jumped sharply on Thursday and Friday as money markets chose to move money into cash rather than offer short term loans collateralized by Treasury paper.

- With debt problems simmering in both Europe and the United States, investors piled into gold, the Swiss Franc and the Japanese Yen this week in search of safe harbor. In Europe, yields on peripheral debt remained stubbornly high; dealers took little comfort from seeing their predictions that euphoria from the Greek bailout pact would not last long come true.

Only days after Europe's leaders trumpeted a deal that would halt contagion from the Greece situation, yield on the Spanish 10-year note climbed back above 6.0%, while yield on Italian 10-year bond yields edged higher (but still held below the 6.0% level). In the US, fund managers and analysts warned that the US was at the point where it could lose its AAA credit rating even if lawmakers reached a plan to avoid a default. Dissident credit ratings agencies Dagong and Egan Jones slammed the nation's rickety fiscal situation and Dagong said it might cut the US sovereign rating from A+ as soon as Aug 1st.

- EUR/USD inched higher during the early part of the week as President Obama and House Speaker Boehner jousted ahead of the August 2nd line in the sand. FX markets did not like Obama's comment that the failure to raise the debt ceiling would result in a US default, sending EUR/USD above 1.4520 earlier in the week.

The market did not take long to reverse course, however, as traders recalled that default was a much more likely proposition in Europe, which was still struggling to prevent contagion. The euro stumbled mid-week after comments from the German finance minister rejected bond market purchases by the EFSF/ESM. ECB member Provoploulous added a dovish tone when he commented that euro zone inflation might fall below 2% later this year.

Technical factors helped push EUR/USD below the 1.4330 level and subsequent break the pair's 200-hour moving average, electing stops as the pair proceeded to test 1.4229. The situation settled down with renewed rumors that the ECB might be purchasing peripheral debt (something that has not been done since the end of Q1). The weaker US GDP reading and debt impasse sent the EUR/USD back up to 1.44 as the weekend approached.

- Sterling was slightly weaker against the major pairs ahead of Tuesday's GDP data, as whisper numbers suggested the reading would be in negative territory. However the pound received a boost after the numbers squeaked by in line at +0.2% y/y. The GBP/USD surged over 70 pips to touch above the 1.6410 area in the aftermath of the data.

In Japan, there was constant chatter that intervention could take place at any time to curb yen appreciation, although rumors said any action would involve the BoJ flying solo, not a coordinated G7 move as was seen back in March at the 77.70 level. USD/JPY hit four month lows around 76.90. Japan Econ Min Yosano commented that any intervention would likely come after August 2nd when it was clearer what the outcome of the US debt issue would be.

- Despite the apparent slowdown in the emerging economies of the Far East, regional commodity-based currencies were back in favor on impressive economic data and relative weakness of the greenback and the euro. AUD/USD reached a new post-flotation record high of $1.1080 after strong Australia's quarterly CPI, with 0.9% q/q and 3.6% y/y prints both beating consensus forecasts by two-tenths of a percent.

Hotter than expected Australia inflation, long-perceived as the key factor for RBA policy bias in months to come, effectively killed the unlikely event of a rate cut as the next central bank move, and fixed income market probabilities for next week's meeting moved from a 10% chance of a rate cut to a 15% chance of a rate hike. Over in New Zealand, the RBNZ rate decision further paved the way to an eventual resumption of policy tightening in the wake of stronger than expected quarterly GDP and CPI data in recent weeks.

Gov Bollard indicated there is now little need to keep the extra 50bps in accommodation from its March 9th cut, even though the record strength of the Kiwi dollar reduces the need for exorbitant tightening over the near term. Kiwi dollar hit its own post-flotation record high above $0.8780 late on Friday.

https://www.tradethenews.com/

excerpts:

While I feel a new secular bull market is not too far off (2014-2015), I believe we have at least one more bear market between now and then. The median cyclical bull market within a secular bear market lasts 371 days and the present cyclical bull market that began in 2009 is now 875 days old, which is why the risks of a bear market occurring are obviously increasing.

I believe the markets will peak this year since the economy is not able to support its own weight without the twin crutches of monetary and fiscal support, both of which have or are winding down. I also believe a bear market will most likely begin this year and ends in 2012 accompanied by a recession.

One of my favorite economic breadth charts for the U.S. is the Philadelphia Fed’s State Coincident Index which measures coincident economic activity for all 50 states. The Philly Fed also calculates a one-month diffusion index with 50 representing a key threshold.

Once the 50 level is breached to the downside after an economic expansion we have ended up in a recession every time except for last year when the markets and economy reversed as the “Bernanke Put” was in play with QE2. The current reading for June came in at 34 and is decisively below 50. We will have to see if it gets revised and what July’s reading shows. Further deterioration is obviously not bullish for the economy or stock market.

Potential Secular Bull Market Catalysts.

1)Weak USD = Strong Exports and Foreign Profits
2)Asset Class Secular Cycles & The Lesser of Two Evils

Often at times when one asset class is in a secular bear market another is in a secular bull market. This is most commonly seen between hard assets and paper assets where commodities outperformed stocks and bonds in the inflationary 1970s and the last decade, while underperforming in the 1950s-1960s and the 1980s-2000.

Already shown above was the 10-year annualized return in commodities and stocks by Barry Bannister which shows that stocks are near the lower range of their 100+ year historical results while commodities are near the upper end of their 200+ year range...

As losses in the bond market begin to pick up investors are likely to head for the exits in search of better returns. If the bond bear market builds momentum due to rising inflationary pressures some of the capital from bonds will find its home in gold bullion, but there is only so much bullion to go around and it is quite likely some of the asset flows will be driven to U.S. equities. (more)

http://www.financialsense.com/contributors/chris-p...

I'm particularly concerned by Puplava's suggestion of the market's yearly high having already been put in, because that's what the following 2 monthly charts look like to me. Bonds look like they have upside and SPY is a trendline support away from being a sell signal.

Monthly charts don't turn on a dime, so I'm inclined to see them as having potential upside/downside at this point before they turn. I've the nagging suspicion that debt resolution will be met with selling, not buying if these charts follow through.

The only thing I can see changing that would be operation cupcake aka QE3. As always we shall see.

From Robert Reich's blog:

"Don’t Fall for the GOP Lie: There is No Budget Crisis. There’s a Job and Growth Crisis. 

THURSDAY, JULY 28, 2011

"In economic terms, we will not “run out of money” next week. We’re still the richest nation in the world, and the Federal Reserve has unlimited capacity to print money."

Robert Reich is correct in this statement, but fails to see that this is NOT the solution, but the problem.

He is also right that it is a "jobs crisis", but here is his solution, rather than cut spending, is to increase gov. spending and add debt.

"And the best way to get jobs and growth back is for the federal government to spend more right now, not less – for example, by exempting the first $20,000 of income from payroll taxes this year and next, recreating a WPA and Civilian Conservation Corps, creating an infrastructure bank, providing tax incentives for small businesses to hire, expanding the Earned Income Tax Credit, and so on."

As Clinton's former Secretary of Labor (and therefore part of the cause) it is no surprise he ignores the Democrats role as equal to the Republicans in creating this sad condition.

I continue to hear more friends who say they no longer pay attention to the news and blathering about the "Debt Crisis" and hit mute or change channels. Yet, politicians, bureaucrats and MSM continue their monologs and finger pointing without addressing the problems of American citizens.

Grym

Grym , You are right ! We need 30 to 35 million full time jobs both for the unemployed as well as those Americans working part time jobs . We should encourage those who can find employment outside the country to get that job and make their earnings tax free . That would free jobs in this country for the unemployed . Example geologist , oil industry workers mining engineers ex cetera . If you want to discourage something tax it . If you want something to grow set it free , TAX FREE . We did that with the internet businesses and look how they grew . ex Amazon . Real jobs may not be important to Washington , they are very IMPORTANT to real people . Bob .

Hi Grym, I have to announce that yesterday we just hired our first employee to help us at the store. My daughter is looking for another location in north Houston, Conroe or Huntsville.
Take care
Earl

Bill,

I'm wondering if we're heading back to the depths of oversold last seen in the miners in 2008/9?

Weekly SLW:$SILVER looking like a roll over, GDX:$GOLD too.

All the while gold continues to strengthen against $SPX.

I can't help but recall the Eurodollar COT correlation which set 52 weeks in advance suggest the biggest drop since 2008 coming.

http://www.mcoscillator.com/learning_center/weekly...

Thinking of lightening up on the explorers if debt resolution doesn't resolve the miners to the upside.

Pulling money out of the economy is a way to create jobs? Of course the answer is more spending by the employer of last resort - the government.
There's never been a better time in our lifetimes to borrow money to invest in cap ex spending at large. The USG can borrow at negative real interest rates!
We don't have a deficit problem we have a jobs problem. And in any event the best way to attack the deficit/debt is to put people back to work.
We're losing a generation of human capital by this silly focus on a fake non-crisis.

Apparently an index given a lot more attention when Bill was starting out. I'm certainly paying attention to what I see.

Bill, you ever encounter this work in your early days? It's an interesting story of the character behind it. Punch card computers - I've heard about those :)

http://www.mcoscillator.com/learning_center/weekly...

I could be leaning short soon if the tape action begins to confirms some bearish indicators I'm seeing in my weekend reading.

Chaikin money flow is suggestive of some sort of correction beginning in the SPY weekly chart. I am eager to see how this coming week plays out.

Included in the BEA's first ("Advance") estimate of second quarter 2011 GDP were significant downward revisions to previously published data, some of it dating back to 2003.

Astonishingly, the BEA even substantially cut their annualized GDP growth rate for the quarter that they "finalized" just 35 days ago -- from an already disappointing 1.92% to only 0.36%, lopping over 81% off of the month-old published growth rate before the ink had completely dried on the "final" in their headline number.

And as bad as the reduced 0.36% total annualized GDP growth was, the "Real Final Sales of Domestic Product" for the first quarter of 2011 was even lower, at a microscopic 0.04%.

http://www.consumerindexes.com/index.html

Jesse's speaks more on the subject: http://jessescrossroadscafe.blogspot.com/2011/07/g...

As I have been harping: if anyone thinks the recession is over, for the past 2 yrs, I have said...

Try
Selling your home
Quit job and find better one
Start a brand new retail business

All prices have been traded in fake data and relatively low volume

The Kool aid is running out.

It took just two months from this WIR for all hell to break loose.

http://billcara.com/archives/2007/07/week_in_revie...

I have seen NSPD 51 posted as the possible target for the current activity of the White House verses Congress.

"Subject: National Continuity Policy

"Purpose

"(1) This directive establishes a comprehensive national policy on the continuity of Federal Government structures and operations and a single National Continuity Coordinator responsible for coordinating the development and implementation of Federal continuity policies. This policy establishes "National Essential Functions," prescribes continuity requirements for all executive departments and agencies, and provides guidance for State, local, territorial, and tribal governments, and private sector organizations in order to ensure a comprehensive and integrated national continuity program that will enhance the credibility of our national security posture and enable a more rapid and effective response to and recovery from a national emergency.

See.....
http://www.fas.org/irp/offdocs/nspd/nspd-51.htm

Who knows? The next week or two will be interesting!

EDIT

Also from Ron Paul

http://goldsilver.com/video/a-must-watch-ron-paul-...

NYUGrad,

I couldn't agree more. In some ways we are in worse condition than the Great Depression.

• More than twice as many citizens in US (plus an unknown number of non-citizens).
• The loss of all so many manufacturing jobs (the backbone of the Middle Class income folks) and rise of tech.
• Unlike the switch from farming to industry, this happened in less than one generation.
• The internet's warp-speed transfer of info, money, jobs.
• The need for far fewer workers with each new tech advancement.
• The idea that globalization is a Win-Win
• The end of national loyalty by the wealthiest individuals and corporations

All of these points are obscured by welfare and other government programs. Comparisons such as, "In the 1930s unemployment was 25% and now only 9.5%." Back then we had bread lines and people selling apples on the corner." Well, real unemployment and under employment are at least as bad and food pantries have disguised the lines. After massive government subsidies and stimulus — we are even worse off.

It's time to force congress and the administration to face the real issues and cut the crap over debt ceiling increases.

We must readjust our thinking.

SS, Medicare, pension reform, health care, home ownership, education, must be addressed in a rational fashion to make them sustainable or we will go down the historical path of formerly great nations.

I believe one of the first things needed is a totally new tax system which bypasses no one — loop holes and deductions for the wealthiest can/must be erased by a flat tax or consumption tax.

But there will be no change at all until we revise the role and rules for congress and eliminate unelected agencies' control over us.

Grym

tbar,

I've been in a similar mode for some time. (see #90606 comments)

Grym

To me, this "agreement" isn't particularly a victory, or even a Pyrrhic Victory for anyone. Well, perhaps if one is in the top 0.5 percent of wealth in the US, you won.

Austerity in a time of no economic growth isn't likely to create jobs, and we know that state and municipal hiring is negative.

One analyst I talked to today, said, "so my portfolio goes up 20 percent in the next year. I'm not creating a single job."

This pseudo-crisis allows politicians to give the Bernanke-esque "we saved the world", without boosting economic growth, without creating jobs, and without fixing the structural problems that got us here. Hip, hip hooray.

Here is what I mean and feel free to compare it to mid 2008:

Dollar very oversold and oscillates, but support holds, and sentiments are raising.
SPX trades sideways with sentiments weakening.
Miners trending down with poor sentiments that are getting poorer.
Gold sentiments peaking.
Silver failed to recapture the previous peak, despite sentiments peaking again.
Copper and emerging markets (that I consider leading) have been in downtrend for several months now.
Oil speculation burst already.
Big surprises for markets could be coming soon (the US rating downgrade could be significant I believe).

Did I forget anything?

FD: all in cash.

...

Seems Mr. Obama got something done on the limiting emissions front with the State of California and auto makers on Friday. (UCS Union of Concerned Scientists).

"According to UCS analysis, these new standards will cut U.S. oil consumption by as much as 1.5 million barrels per day by 2030—about as much as we currently import from Saudi Arabia and Iraq."

http://www.ucsusa.org/news/press_release/ucs-appla...

people are expecting a crash and when you have this many people expecting something to happen it almost always does. But for some people they will gain while others wont. These are interesting times indeed. I think its just a matter of how you position yourself in it.

a few days ago.

This is exactly why. 200 pt move making news events spawned on weekends or mid day. The new wall st is in DC.

price discovery mechanism? i think not.

Hi NYUGrad - Politics are the fountain of the market's largesse over the last number of years. Here are Boehner's comments of the resolution(?): We got 98% of what we wanted, adding that the framework cuts more spending than it raises the debt limit. It also caps future spending to "limit" the growth of government. Heck I was hoping for a 12.5% haircut for all of the Federal minders - shrink government forthwith! Happy Trading

"We have a glimmer of hope. The key indicators of the US money supply are at last firing on all cylinders, a dramatic turn for the better that would normally signal recovery or even a mini-boom within the next six to 12 months...(more)

http://www.telegraph.co.uk/finance/comment/ambrose...

dnfrm -

When I review the text here it seems to me the bill DOES call for draconian spying:

http://www.govtrack.us/congress/billtext.xpd?bill=...

The Electronic Frontier Foundation opines:

"The data retention mandate in this bill would treat every Internet user like a criminal and threaten the online privacy and free speech rights of every American, as lawmakers on both sides of the aisle have recognized. Requiring Internet companies to redesign and reconfigure their systems to facilitate government surveillance of Americans’ expressive activities is simply un-American. Such a scheme would be as objectionable to our Founders as the requiring of licenses for printing presses or the banning of anonymous pamphlets."