Cara's Commentary & Community Chat, Fri., May 29, 2009

Sorry, but I cannot see the massive interest in July Gold calls. Looking at GLD, I see it in June @ 100.00

Anyone confirm the June/July difference?

Look for lots of window dressing today. Everything that has been strong will be up and everything that has been weak will be down. This will probably reverse itself on Monday. Should be an interesting day with stocks opening up (maybe near their highs for the day) and probably selling off near the end of the day IMHO. Volumes are still quite anemic from what I've seen

You know, here on the farm there is only one thing that really grows greenshoots.....to be polite we call it fertilizer.

ALOHA !!

HA!! Farmers know BS!

Lori,

I've had the same idea stuck in my head the last week or so. However, don't we have another month to go until the end of Q2?

That was my thought Mackinaw

Good Morning,

Could someone please clearly and concisely explain the so-called bond bubble, how it works, and its potential long term effects? Or direct me to source or post that has this info?

Thanks in advance for any responses.

Bill (if you can "hear me",

I am currently reading your book and find it to be very insightful. Wish I had known about this website a year ago.

Both GLD and GDX have RSI's above 70 for the 7 day and 7 week and the 7 month is in the low 60's.

I understand that this tool alone should not be used to make decisions. Are circumstances such that would indicate that GLD and GDX are going to continue up sharply despite these indications?

From my limited experiences in 2006, I recall many sharp spurts in the miners to the upside that would leave traders in the dust, which then continued shooting up beyond all expectations. Followed by sharp spikes down (sometimes gap downs) that would violently shake traders out. If you have large positions, you need to have your 'contingency plans' in place and execute quickly when the set-ups emerge. JMO.

...

...

2nd- I guessing your scalping, but I'm going to meet my friends that work there for drinks after work. I'll fill everyone in.

thanks for the explanation

2nd- We already use the product for our family. Very effective, clean, etc. I'm interested in how they are going to set up their distribution in the USA. I'm guessing they will seek a partner.

Wow.
http://news.bbc.co.uk/2/hi/business/8074218.stm

So, does GM go to ZERO today? That's going to be a bit of a drag on the market, isn't it?

Sorry to be just lurking.

The Magna deal is the biggest thing on the Canadian scene. but the stock is at
$35.45, off .71 (CDN)
May be very much underpriced.

MG.A TSX

Allen

No trades today (yet).

Despite the great move in PM's, people are hesitant to both buy and sell at these levels.

Waiting for a crash to go long (or an abiding upmove in gold futures). Oh wait...Obama is talking...Maybe this will do it:)

NYUGrad,

Over what period of time are those avg.vol. #s from?

Thanks,
G

Dreams can come true, they can happen to you, when your GOLD at heart.....

NYSE:RY TSE:RY

Pretty volatile today as the announced numbers are digested.

i am just taking it from google finance. didnt have time to narrow the time frames.

I have noticed an abundance of media blips in the last week or two of market pundits, fund managers, etc on television plugging stocks they are bullish on. Many pundits are predicting we eclipse 1050-1100 on S&P this year. I don't think these predictions are out of the realm of possibilities of course, but I am kind of appauled by the lack of caution with which these predictions are being presented.

Fund managers that wouldn't dare show their faces on television let alone recommend a stock during the last year are now on tv plugging very risky stocks as if another phase of panic is completely impossible. Just a reminder to us all that pundits are all selling something, so take it all with a grain of salt.

I am now learning about TA.

I was looking at GICS sectors and Cara 100's

I noticed that very few stocks were, performance wise, above their prices three months ago:
GICS
10 XOM
15 KGC,ABX,GG,POT
20 TGP
25 NONE
30 DEO
35 JNJ,AET
40 HBC
45 LLTC
50 CHL
55 NONE

These stocks are based on 3 month performance. I know bill watches DEO, although I am not clear as to why. AET has a strong financial component. I really don't know why GICS sectors 25 and 55 would be so weak together.

Maybe some other member with mad TA skills can shed some light or at least provide some empirical insight.

Don did his call yesterday. Could be titled: "Everything you ever wanted to know about bonds".

http://events.startcast.com/events6/122/C0018/Defa...

Can some say (in one sentence) what is the gist of this audio?
I'm at work and can't listen to this.
As some may have noticed, I'm watching the bond fiasco very closely as it could be a major event of this summer.

...

A little more of that incremental erosion:

Daily Pfennig: "This morning, there's news from the South Korean Pension Fund that is shaking the foundations of the Treasury market... The Fund has announced that they will reduce the amount of its exposure to U.S. Treasuries, and diversify into other assets... This fund is about $200 Billion in size... So, not the likes of China and Japan, but still... Just another outlet for Treasuries to be apparently closed..."

...

anyone have any ideas on these?

ASEI

thanks craig and les.

by the way, I believe there is a serious threat - and a serious area that should not be taken lightly.

Not taken lightly in this house.

Norton 2009.

PC banking is done with a combo USB hardware & software system

Just bought an ASUS router with integrated firewall and other privacy goodies packed into it.

And NO ONE touches my computer.

bio: dunno about that one. Our building is equipped with a bunker and nuclear/chemical filtered ventilation system.

I know there was a lot of talk about how 30 year rates jumped 30% in one day on Wednesday, but if you look now they are back down to where they were before Wednesday. Maybe people were overreacting? Plus, a 30 year rate of 5.3% is a far cry from being high, isn't it?...

The thought just crossed my mind that the US military is a large consumer of hydrocarbons, weren't they supposed to be switching over to clean coal use in the near future?

Pulled back for a pause.

check this, : http://www.canadamortgage.com/RatesShow/ShowRates.cfm

pump-fest on CNBC, we now have Goldman Sachs this morning telling the sheeple specifically to: "sell Petrobras October $34 put options for $1.95 because a U.S. economic recovery and lower petrochemical supplies will limit declines in the price of oil." What Goldman does not mention is that they were one of the "large speculators" that increased their net long positions in commodities 300% since they got their TARP money. This is just BRILLIANT - take OUR money and invest it in commodities, then pull out all the stops to run oil up 88% where these leveraged investment can pay off 10:1 and then give us our money back early at virtually no cost while keeping the 900% gains for themselves - BRILLIANT
from ZH

I've become MUCH more discriminating about the trades I will take. Good thing too, my win/loss percentage has shifted dramatically and the money's not getting wasted on commissions and small losses. It makes all the difference.

Bill, have an awesomely nice weekend.

allengg - Not sure what your point is, are Canada's mortgages limited to 10 yrs? I would much prefer a 30yr fixed, but I suppose nobody stays in the same home that long anymore? Maybe loannetter can point us to some average duration stats...

possible breakout soon from recent weeks highs.

Once May performance is printed after today's close, with the lack of buyers eveident in the markets, my guess is sellers will gain back control monday.

But hey, the mantra of the summer has been "its really not as bad as we thought"

Photogray

If you are tenuous about holding your PM's after this run-up, you might consider selling some out-of-the-money or at-the-money covered calls against your position. That will provide you income (premiums collected) should the position turn against you but will cap your gains above the strike+premium you sell at.

I only suggest this on liquid stocks of course like AUY and SLW where you should have tight bid/ask spreads on options. Not a suggested idea for less liquid stocks as they are much more difficult to enter/exit if there is an options market at all. This strategy will also decrease overall portfolio volatility.

Before i was born.
http://tinyurl.com/nam6j4

I sincerely hope the new company can kick butt.

"Question should be; why are rates better in the U.S. ?
Answer, greedy , profitable CDN banks."

Could be, need to compare their spread. US banks only seem interested in a couple of things lately: Quick evictions and stiff qualifications. Maybe they're working their way down the tree instead of just starting at the bottom.

sorry c-p your choice of analogous phrases

I noticed today that at approximately 62.5 (976/15.63) we have reached levels not visited since about 9/4/08 when the ratio began to breakdown and subsequently gapped up from about 62 to 65 in one day and ran up close to 85 by 10/10/2008.

I think it will be worthwhile to keep a close eye on how this relationship acts as this "gap" in the ratio is closed. I think this ratio can provide some very useful clues in determining the larger economic picture as many of the peaks of this ratio above 80 fell on very important market turns.

10/10/2008 84.92 Initial Peak
11/20/2008 82.90 First Retest
12/23/2008 81.33 Second Retest
2/23/2009 68.15 Subsequent Low
4/21/2009 73.26 Retrace High
5/29/2009 62.5 Subsequent Low Intraday (appx)

A large percentage of applications are turned away, and mortgage delinquent homeowners are quickly evicted. Inventory is piling up, further exacerbating the problems, housing has yet to bottom. The equities market is leading economic recovery in every aspect I can imagine, as expected.

Re: "The equities market is leading economic recovery in every aspect I can imagine, as expected."

Very true, but prone to false positive recovery of hope disconnected from realities. I subscribe to Grantham's VL recovery model and believe we are slowly approaching the mid to upper part of V (but not without some whipsaw ahead, we need to complete the inverted H&S, right?).

newbee - I got burned by owning rimm $75 calls.

So I'm guessing you bought the breakout. Vad in his trading class says that there are 3 basic things that happen on breakouts - in this case when RIMM went above resistance at "around" 78.

1) the stock shoots up and keeps on going for a time. Yay, this is fun!
2) the stock shoots up, then drops back down, tests support, and then goes back up again.
3) the stock moves up, drops back down, and fails support, going below the breakout point. Boo.

#2 is the same as #1, except there is a "shakeout phase" where weak hands (that's you and me) get convinced to sell, and then immediately after that, the stock rockets back up as if to taunt us.

To avoid being shaken out, place a stop below the breakout level - for RIMM somewhere below 77.50.

Also, on the breakout, look at the volume. Lame volume (in this case, RIMM volume wasn't all that fantastic) may mean the breakout won't be so good either. Compare the RIMM breakout at 77.50 with the GDX breakout on May 20. Nice volume on the GDX breakout confirms it's probably the real thing.

In answer to your question "are these guys being deliberately evil" - yes. Yes, they are. They are the enemy, and they want your money. And there are all kinds of sneaky things they will do your emotions to get it from you.

thanks

who us Vad?

Dave, good call! I believe we got the confirmation. I suspect the fed is buying. I have no TLT/TBT positions at present.

Stock is up .53 or 3.5% on double the volume, something is happening in silver. Ratio with gold?

FYI Rimm low yesterday $77.52 today $77.54

Can't really tell if its bouncing off that.

It's meandering around $78 now.

Thanks again

I believe Les was using Wall street think where the markets move in opposite direction of logic.
Bob

Since I'm short, I'm not so much a fan of these program buys going into the close.

Your Tax Dollars At Work, I suppose.

my thoughts..yeah, that was natural! lol

Who watches the watchers?

7 points in 5 minutes. Nice volume on SPY too.

Quite a slam down at the close. Now resting peacefully @$29.00 -2.79 (-8.81%). I would call that a large drop! I can only surmise that a whole lot of options traders believe the worst is really behind us. However, I still have those 1929-1933 chart visions dancing in head.

Duh, now why didn't they do that 10+ years ago. Put a v6 in it and make a high MPG rocketship. It's pushing all that weight around that makes a big SUV such a hog, while any IC engine converts 85% of the energy into heat.

I remember this one now Shark. Yet it seems to have lost its trading track record, but I remember it booming from $1.25 to $5.00 4-5 yrs ago on the TSX. It's aussie moly deposit. right? Sprott was all over it.

Same here!

However there might be a small silver lining for bears:

"The last time we saw this kind of four-week cluster was during the end of December 2006 through the first week of January 2007 (it's not surprising that many of these occurrences happen around holidays when volatility is dampened).

Using the S&P 500 since the late 1920's, we usually saw a quick move to the downside out of these consolidations - the next week was positive only 32% of the time. But after that, the returns turn considerably more positive."

http://sentimentrader.blogspot.com/

Collusion. The smart money. The big money. HBB. The Fed. Treasury.The status quo. Have been manipulating this market since Paulson. Maybe they are all PATRIOTS saving America or possibly saving the oligarchy. This is not change I can believe in. Just wish I would get the: "we are going long and large at 3:45." Memo.

GTU, does it track bullion price? Since I mentioned that it was sold off on its share offering on 5/6 lets see how it performed since against Gold Futures vs CEF vs GTU.

The results are:
GTU CEF Gold Futures
5/6/2009 37.20 11.41 912.70
5/29/2009 39.77 12.65 980.30
% of change 6.90 10.86 7.40

*37.20 was my entry point

So, the numbers say, GTU does track bullion if that is what your are after. The only provision is that both GTU and CEF will generally bomb on share offerings. The key is not to panic if you believe that gold is in a bull trend and look at it as an opportunity.

Thanks again. I learned a painful and expensive lesson the last 2 days and your pointing out that I should have looked at the chart (I did at one point) and set a limit order to buy back the calls close to that point is a valuable one.

As far as looking up Vad's posts, isn't there a way to search for all of someone's post's.

I tried searching for Vad and only got posts by other's that mentioned his name.

I tried searching for Vadiiym Grafir and got nothing.

It seems I saw a post telling how to pull up all the posts by an individual (I think it was function + something (F4 maybe). Anyway, if you know how to do this please let me know.

Once again, thanks for your help.

This is a highly controversial stuff but Estulin had a good track record in predicting major economy moves based on the leaks from this meeting.

from http://issueswire.com/releases/Bilderberg_Group_Me...

"According to Estulin's reading of the report, it looks as if there are serious disagreements within the group. The hardliners are for dramatic decline and a severe, short-term depression, but there are those who think that things have gone too far and that the fallout from the global economic cataclysm cannot be accurately calculated if Henry Kissinger's model is chosen. Among them is Richard Holbrooke. What is unknown at this point: if Holbrooke's point of view is, in fact, Obama's.

Estulin says that the consensus dealt a blow to those in the group who were hoping for economic revival, agreeing that the recession will be deeper, and the road to recovery longer and harder, than the happy talk coming from world leaders. The terms used were ''relatively slow and protracted.'' Estulin says pay attention to the press dailies: you will see quite a bit of these two terms in the weeks and months to come.

Estulin notes that some of those who attended the annual conference will give another, more moderate view, stating that ''the economy requires a period of healing and that it will take time.'' While this helps create a dialectic in the press from two Bilderberg camps, both will pay heed to the idea of ''great uncertainty over the outlook.'' According to Estulin, over the next several months the Bilderbergers will purposely refuse to commit to any specifics, simply pointing out "that there exist big risks to a recovery still reeling from financial turmoil, making it very difficult to assess developments."

Estulin reports that some leading European bankers faced with the specter of their own financial mortality are extremely concerned, calling this high wire act "unsustainable," and saying that US budget and trade deficits could result in the demise of the dollar. Recent fears about their own survival have not been quelled because, as one Bilderberg attendee pointed out, "the banks themselves don't know the answer to when (the bottom will be hit)." According to the group's report, however, all agreed that the level of capital needed for the American banks may be considerably higher than the US government suggested through their recent stress tests.

Estulin says that someone from the IMF pointed out that its own study on historical recessions suggests that the US is only a third of the way through this current one; therefore economies expecting to recover with resurgence in demand from the US will have a long wait. As another individual pointed out, "Equity losses in 2008 were worse than those of 1929." This individual then added, "The next phase of the economic decline will also be worse than the '30s, mostly because the US economy carries about $20 trillion of excess debt. Until that debt is eliminated, the idea of a healthy boom is a mirage."

Estulin reports that according to a World Bank representative at the meeting, government officials around the world have proposed more than sixty new trade restrictions since the beginning of the financial crisis, which some attendees found distressing, as governments, in a downward spiraling economy embrace protectionist policies to try and protect employment and generate internal economic activity."

Next week (presuming this thing continues to trade like a stock, not like real estate) I will be all over the drops like hair on a gorilla.

Vad's sight. http://www.realitytrader.com/

"Next week (presuming this thing continues to trade like a stock, not like real estate) I will be all over the drops like hair on a gorilla."

Lookin' in the mirror again shark :)

Sorry....

ALOHA !!

WOW ... 200 million temps! Imagine that dilema here in America?

As one of the Chinese ecomists points out in this video CHINA has a quarter of the Worlds population to kep fed and happy. As I have pointed out in the past many times Chinese have family and a farm to go back to when they lose their city jobs ... Americans do not! Americans used to ... during the Great Depression! Perhaps CHINA would just be another USA JR if the government had to pay Social Security, Med, unemployments and food stamps. Maybe that is a big reason CHINA can post such impressive growth numbers since GDP is not diverted to government welfare PROMISES.

So the US government taxes the hell out of us then takes that tax money and hands it out as "ant-riot" bribes to SS, MED, FDIC. Sedating the masses! VALIUM COMOTOSES as the Romans called it! HA!!

The CHINESE do not have that handicap to impede competition and quality of life. America has become the "LAND OF INFINITE DEBT"!

Nice to see an open and frank discussion amoung a number of Chinese economists all in the same room! HA!! Its NOT the SITUATION ROOM we are used to! There is no WOLF!

Here is a link to the article and the video, with text transcripts as well.

From McKinsey & Co ...
IS CHINA RECESSION PROOF?
May 2009

Link: http://www.mckinseyquarterly.com/China/Is_China_re...

The good news is that you can prop this market up forever. SPX going to be 2000 by year end. And $10 for Loaf of bread,$20 for gallon of gas. Base on that market is way under value. Our economic expansion is being fueled by debt leverage & asset inflation not by innovation & production.
I think ther was a raging bull market in Zimbabwe's stocks too.

I guess if HB&B + Fed + Tres keep markets flat for a few more weeks by devaluing $, MA50 could cross MA200 and then there would be a major explosion in buying and probably a great shorting opportunity. Food for thought.

I said the same thing couple of days ago.
Market IS the ultimate confidence indicator, as people are voting with their money.

Just another lunch break at the White House: President Obama today zipped down to the Five Guys burger joint near Nationals Park -- just him, a couple aides, a motorcade's worth of security, the traveling press pool, Brian Williams, and the NBC camera crew that just happened to be trailing him today for a "day-in-the-life" documentary about POTUS.

The president, in shirtsleeves, shelled out at least $80 in cash, according to press-pool observers, to get sandwiches for his entourage and the crew -- including a burger with ketchup and fries for Williams, a cheeseburger with jalapeno, lettuce, mustard and tomato for himself. Chit-chatted with fellow customers, got a group photo with the restaurant staff, took his order out in two large paper bags to go. It's his second burger lunch in recent weeks -- Obama and Joe Biden ventured to Ray's Hell Burger in Arlington. Michelle Obama also visited another Five Guys in D.C. earlier this year.

I thought Michelle's vegetable garden ground-breaking at the White House set a better tone for O's term. I guess, like Kaimu has just pointed out, they realized that Americans don't own any land for vegetable gardens, so I guess cheap burgers are the next best thing. The stupifying effects of obesity and poor nutrition might also make it easier to stomach what's in store for the US in the next few years.

http://www.financialpost.com/executive/story.html?...

Put up a daily 6mos chart of either. You need six mos because they've been trending sideways for a while, but the trend that remains in place starts in the last days of December 08. TLT tops before and TBT bottoms before, but the moving averages cross over about Dec. 28, confirming the trend change. Then they move around the 50 period and cross UP (down for TLT)in April. A correction we had today(so far) does not a trend change make.

Another reason to use the 6 mos chart is to see the overhead resistance for TBT (support for TLT) that has to be worked through in time over on the left. That's what TBT hit today. Note it only corrected to first support around 52.60. Not that we don't pay attention to such things, but to get a bite out of the middle with lower risk means we have to wait to see verification.

tgifbipo,

If you like Bob Hope and James Cagney then you might like Gene Kelly and Van Johnson from Brigadoon.
The best part starts about 3 minutes into the piece.

Brigadoon
Go home with bonnie Jean
Video 5.08 minutes
http://www.youtube.com/watch?v=lJPmW2LYhDo

CP, My Canadian investors are seriously jealous of our 30 year terms! In protection mode, some of the local Credit Unions are only offering 5 year fixed terms amortized for 20 years.

While it's true that on average people tend to stay in their homes 5-7 years in our mobile culture; this statistic does not account for how many people may actually keep their home as an investment...enjoying that nice long low rate!

In answer to davefairtex's quote of 8% Jumbos last night, I raised my head to look across the board after lock desks closed (what a week) and while all our lenders were lowering rates twice during the day, my better Jumbo lender was offering $600K (our area is not benefiting from raised conventional limits like Seattle) at 5.5% with no points. Hard to argue these rates are still TOC for first time buyers and repeat performers alike!

The main 'hits' to price are for FICO scores <720 and LTV's >75%.

Loannetter thanks for the info. Please tell me to bug off if you wish, but how is business? Is anyone refinancing. Is Obama's new home buyer bonus helping? Any action in Jumbo's? I believe you said early this year that your area was not hit hard by falling values in homes.
Bob

if a war really break out in the north east asia, can i expect aero and defense industry to rally?

i know that US's defense budget is as big as the sum of the rest of the world. But with Washington cutting it's defense budget, what will happen to BA LMT NOC? are they allowed to work with other countries eg: China, India, Brazil etc?

what do you think?

Hi GC and Oldgoat,

Here is an article I just read.

World of opportunity spied in cyber securities

Scroll down to the **

http://tinyurl.com/nv92or

As companies jostle for exposure to customers and niche technology, the M&A market has heated up.

According to data providers Dealogic, in 2005 defence companies bought about 29 IT software and services companies in deals worth $3.1bn. In 2008 they bought 32 companies for $7.2bn.

In the UK, Cobham, the aerospace and defence group, has conducted forays in the area. In 2008 it bought Sparta for $416m, which gave it a US presence in information management for the intelligence services.

But the company is also doing more to pack security measures and functions into its other products, be they communications or battlefield systems, says Jeremy Wensinger, president of Cobham’s defence systems unit.

“Whether it is ones and zeros to protect platforms on the battlefield or ones and zeroes to protect the electricity grid, cyber security is a requirement,” he says.

But taking on US incumbents will be challenging. Lockheed Martin has a solid lead in the sector as a major provider of IT to the federal government. Its offerings run from high-end systems for US intelligence agencies, to software for the payment of social security benefits.

***
Boeing and Northrop Grumman have both said that they will look at acquisitions in the space while Raytheon and General Dynamics have recently set up cyber-focused units.
***

Defence companies will also butt up against commercial suppliers, as they tackle security issues for civilian federal agencies. And experts worry their military experience may not read across to commercial situations as well as expected.
--

How about Symantec ? anyone have a nomination for the cyber czar?

CP - I think we were discussing a short term trade of possibly less than one week...

In some sense I'm trying to keep disciplined using TA and look at volume and candlestick patterns, even when all my fundamental feelings about the underlying are telling me something different. Honestly, I wouldn't buy a treasury for all the tea in ... hehe that would be China I guess.

If I were one of those aggressive and nimble traders I'd have bought the reversal when it showed up yesterday, but really I'm just looking for a re-entry point for my TBT that I cashed out of early a few days back.

Looking at the daily chart of TLT I saw a massive 1M share spike at 1pm yesterday that marked the low point and actually the moment of reversal. Perhaps that's when the Fed PPT employee responsible for the bond market came back from lunch and saw the horror. "Quick, spend 100M and get that frown turned upside down!"

I'm gonna guess it was as CP said before - serious intervention.

RE:>You lost me there. Why would the S&P rally on record foreclosures of prime loans?

Because, the S&P will - and did - rally spectacularly on particularly bad news!

The logic is simple. One needs to be a contrary contrarian in this market!

Thinking that HB&B will play this to at least Q2 earnings, as others have suggested. Remember all the fudging and beancounter tricks that the banks have up their sleeves for next quarter earnings.

May 29, 2009 -- Economists' sentiment -- Ninety percent of economists expect the recession to end this year, according to a National Association for Business Economics poll. But 74% thought the recession will end during the first quarter of 2010.
...........................................
What are the two most difficult things to do in this business? Here they are: (1) Buy early in a primary bull market and then ride the bull market all the way to near its completion. (2) Sell out on a Dow Theory bear signal, and then stay out of the bear market until it's nearly completed.

Why are those two actions so difficult? They're difficult because a bull market tries in every way to frighten you out of its clutches. And a bear market tries in every way to draw you back into its grip. In both situations, both the bull and the bear markets make full use of secondary reactions.

The reaction (correction) against the prevailing primary trend is the curse of the investor. One of the most difficult tasks in investing is to identify the start of a downside correction in a bull market or an upside correction in a bear market.

As I write, many of the smartest and most experienced veterans in this business disagree as to whether we are now dealing with a rally in an ongoing bear market or a new bull market that started from the March 9 low.

I've taken the stand that what we're experiencing is a bear market rally. I've discussed my reasons for this designation ever since March 9. The current advance started without the usual signs of accumulation. The advance began without the usual great values that are characteristic of a classic bear market bottom (i.e., price/earnings in the 5 to 8 area and dividend yields around 5-6%).

Lowry's valuable statistics have been available for over 70 years. Normally, as a bear market nears its final low, Lowry's Selling Pressure Index sinks dramatically, thereby providing evidence that the supply of stocks for sale is sinking. The Selling Pressure Index continues to decline after the bottom has passed. This is NOT what has happened before or since the March 9 lows.

On the low of March 9 Lowry's Selling Pressure Index stood at 884. At yesterday's close the Selling Pressure Index stood 868, only 14 points lower than it was on March 9. Meanwhile, on March 9 Lowry's Buying Power Index stood at 120. At yesterday's close, Buying Power was at 156, which was a gain of 36 points from the March 9 low.

So since March 9 Buying Power advanced at twice the pointage as Selling Pressure declined. What is obvious is that the advance was powered mainly by buying, not by an easing of selling. This is NOT typical of new bull markets of the past, when Buying Power rising pointage tended to match Selling Power loss of pointage. What's happening now is that any easing of Buying Power leaves the market virtually unchanged. To move the stock market higher in a healthy way, Buying Power must rise while Selling Pressure must decline. As things stand, there's still too much Selling Pressure (supply) built into this market.
.................................................................
Gold -- Gold is now trading decisively above its resistance level of 960. The upside target now is the high around 1003. Again I want to remind subscribers that we don't trade in-and-out during a primary bull market. We stay with the rising trend and buy more during the sporadic corrections.

Many gold fans sold out months ago when gold broke below the 960 resistance level. Now with gold well above 960, these sellers are out of gold and don't know what to do. Lesson -- you don't try to out-trade and out-smart a bull market. You ride on the back of the bull and add more on corrections.
..............................................
Bonds -- The bond market dwarfs the stock market, which is only one of the reasons why the bond market is so important. From an investment standpoint, stocks are always competing with bonds. In a corporation, bonds (since they represent debt) have a priority over stocks (stocks are equity) on liquidation. Bonds are considered generally safer than stocks since most bonds have a maturity date. When you buy a bond, at some future date you are supposed to get your money back, usually at par which is 100. When you buy a stock, there's no guarantee that at any date you'll get your money back.

Bond yields are always in competition with stock yields. Bond yields are typically fixed and are to be paid regularly while stock dividends (yields) may vary or they may be raised or they may even be omitted at the option of the company. Bonds are sensitive to many factors -- bond yields set the general level of interest rates, depending on the maturity of the bond.

Recently, the Treasury notes (they are the bellwethers of the bond market) have acted poorly. The longer the maturity of a bond, the greater the risk, since, for instance, on a 30-year maturity bond you are tying up your money for three decades, and who knows what will happen (particularly to the dollar or inflation) in 30 years.

The bond has been collapsing over recent days -- yesterday the 30 year T-bond lost almost three points (almost 30 dollars per thousand). As the bond sank, its yield rose. Since bond yields compete with stock yields, this put pressure on the stock market. It also put pressure on all US creditors who own T-bonds. The US today depends on selling its bonds, many to foreign creditors. For instance, China owns $750 billion in US bonds, and China is not happy about what's happening to the US bond market -- and it is saying so.

If the bonds remains weak, how will the US sell additional bonds? The US will have to raise rates in order to render the bonds more attractive. Rising rates in a time of recession is the last thing the government and the Fed want. Therefore, the action of the bond market is now critical. It is one of my BIG THREE -- bonds, the dollar, and gold. Bonds have been supported by the Fed's buying. Dollar was very weak today, breaking to a new low for the move. Gold surged over 17 dollars, well above the 960 resistance level.

Check out the daily chart of the 30-year T-bond. Note the coming "death cross" (red arrow) as the 50-day moving average is about to sink below the red 200-day MA. MACD at the bottom of the chart is in its negative mode.
(Bloomberg) -- Yields on Fannie Mae and Freddie Mac mortgage bonds rose for a fourth day, after exceeding for the first time yesterday their levels before the Federal Reserve announced it would expand purchases to drive down interest rates on loans.

Yields on Washington-based Fannie Mae’s current-coupon 30-year fixed-rate mortgage bonds climbed to 4.55 percent as of 3:15 p.m. in New York, the highest since Dec. 5 and up from 3.94 percent on May 20, data compiled by Bloomberg show.

Rising mortgage-bond yields, driven higher in part by climbing Treasury rates, means the Fed now “faces a challenge to its ability to sustain low mortgage rates,” according to Jeffrey Rosenberg at Bank of America Corp. The Fed, seeking to use lower home-loan rates to stem the housing slump and bolster consumers, said March 18 it would increase its planned purchases of so-called agency mortgage bonds by $750 billion, to as much as $1.25 trillion, and start buying government notes.

Treasuries fell for a fifth day amid concern record supply will overwhelm investor demand as the economy begins to show signs of stability. The U.S. will likely sell $3.25 trillion of Treasuries in the fiscal year ending Sept. 30 to fund bank bailouts, stimulus spending and a record budget deficit, according to primary dealer Goldman Sachs Group Inc.

Ten-year notes have lost 10.3% this year, according to Merrill Lynch & Co. indexes, while 30-year bonds have lost 27.5%. Two-year notes have gained 0.2%.

Russell Comment -- The Fed's efforts to halt the bear market and halt the decline in asset values are in the process of busting the nation. Can you believe -- an insane $3.25 trillion of Treasury bonds to sell? How can the dollar hold up? Will all those bonds be sold, or will the auction fall flat?

Stock market notes -- The stock market acts like a living, thinking organism. If Industrials rally to a new high above their May 8 peak of 8574.65, it looks as though the Transports won't confirm -- bearish. If both Averages sink from here, they'll be in a trading range. But if both Averages decline too far, they'll be violating their March 9 lows. It "feels" as though the market doesn't want to get into trouble by way of a new unconfirmed Dow high -- or by way of new lows below their March 9 lows in both Averages. The solution -- a "safe" trading range where nothing is accomplished. Why do I get the feeling that there's a lot of manipulation going on here?

The VIX was down 1.32 to 30.35.

Late Notes -- Today was the second plus 8 in a row for my PTI. That would suggest a possible new Dow high next week and the question is will it be confirmed by the Transports?

Today's feature was another rise in gold. But this time the rise was 17 points and I have to wonder whether gold is ready to go parabolic. Gold has been in its corrective mode for many months and thus a lot of energy has been stored up in the yellow metal.

This is the end of the month -- will it be "sell in May and go away," or "June is busting out all over?"

I sense excitement coming up.

See you in June,

Russell

Grym - ""We learned just days ago that the Federal Reserve, which has little or no real oversight by anyone, has "loaned" two trillion dollars (that is $2,000,000,000,000) over the past few months, but will not tell us to whom or why or disclose the terms. That is our money. Yours and mine. And that is three times the $700 billion we all argued about so strenuously just this past September. Who has this money? Why do they have it? Why are the terms unavailable to us? Who asked for it? Who authorized it? I thought this was a government of "we the people", who loaned our powers to our elected leaders. Apparently not.""

There's one important aspect left out of the discussion here. If the FED loaned out $2 trillion over the past few months, from where did they obtain this money?

If the FED loaned out $2 trillion over the past few months, from where did they obtain this money?

From a little mouse perhaps?

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