Cara's Commentary & Community Chat, Tuesday, Jul 7, 2009

http://www.boston.com/business/articles/2009/07/07...

"Mortgage lenders don’t try to rework most home loans held by borrowers facing foreclosure because it would probably mean losing money, a study released yesterday by the Federal Reserve Bank of Boston concludes."

"Frank, a Newton Democrat, said he is holding a hearing Thursday on his proposal to provide government loans to homeowners who have lost their jobs and can’t qualify for loan modifications and other help because they don’t have income."

Not to sound like a heartless SOB, but people lose jobs and can't afford the home, so you give them money to afford the home? In other words, we've just expanded the Section 8 program...well at least that's what they call it in Massachusetts when the government pays the landlord for your housing.

"Not to sound like a heartless SOB, but people lose jobs and can't afford the home, so you give them money to afford the home? In other words, we've just expanded the Section 8 program...well at least that's what they call it in Massachusetts when the government pays the landlord for your housing."

LOL.

Section 8 is what was considered a "ticket home" from WWII — mental problems.

Appropriately named the government program for once.

SU - Price Target Raised from $49 to $50 @ Barclays. Overweight

VCP - Upgraded to Outperform @ BMO

XOM Price Target Lowered from $91 to $87 @ Barclays. Equal Weight

...

Short term target is $56

http://chart.ly/n9wxy7

Did you read the entire article, nemo? It is more about how loan servicers are not modifying loans of people who need the help - NOT that it should be focused on those without a job. In fact, the author of the study and Dean Baker were quoted as saying the government money would be better spent by giving the money directly to the people rather than the lenders. As it is, it is juts another giveaway to banks.

The program has been a failure. Obama's Treasury is a failure.

I missed it last week but James Picerno posted some somber notes also:

"But let's not mince words here: job destruction remains potent. The month-after-month declines are adding up and the economy is sure to take a heavy blow as a result. At the top of the list of likely victims: consumer spending, as we've been discussing, including here.

In short, there's minimal hope for the moment that we're about to turn the corner and return to the glory days of 2007, when conspicuous consumption created a powerful tailwind for bull markets in just about everything.

Why, then, do we continue to talk about the technical end of the recession?"

http://www.capitalspectator.com/archives/2009/07/s...

KSS - Upgraded at Goldman Sachs to a buy from neutral and price target increased to $50 from $44. As an aspirational/desperational winner and Mervyn's consolidation beneficiary, KSS should continue to outperform, averaging SSS declines of (2.7%) since Jan. vs. its department store peers' declines of (8.8%). Assuming 2-yr trends across revenue and GM hold firm, there is upside to estimates and, as such, are raising 2009/2010 EPS estimates to $2.76 and $3.02 from $2.63 and $2.83. Against these revisions, KSS trades at a compelling 14.1X 2010 EPS, below the 2/5 year averages of 14.3X/17.3X, respectively, providing a compelling entry point for shares.

NUE - estimates raised at Goldman because of higher cost-cutting efforts. Buy rating and $50 price target.

Yes, and I consider the sources and agendas and political biases...simply they want the government to handout the money.

............................

"It's certainly comforting to discover that the administration is creating jobs, but I think governmental jobs aren't the only jobs we need. I suggest the administration stimulate revenue-generating jobs as well, and even more of them to support newly forming governmental stimulus green shoots."

I made commentary on some articles I posted. Government jobs are tax driven, they do nothing for the economy. Blood from a stone as it were.

"all commodities of finite supply."

I take that to specifically refer to gold."

If so, it must be another one of those confusing code words...

nemo - Well, maybe the stimulus bill is adequate after all, consider the advantages brought on by economies of scale...:

"The local bar was so sure that its bouncer was the strongest man around that they offered a standing $1000 bet. The bartender would squeeze a lemon until all the juice ran into a glass and hand the lemon to a patron. Anyone who could squeeze one more drop of juice out would win the money. Many people had tried over time (weightlifters, longshoremen, etc.) but nobody
could do it.

One day this scrawny little man came in, wearing thick glasses and a polyester suit, and said in a tiny, squeaky voice, "I'd like to try the bet."

After the laughter had died down, the bouncer said okay, grabbed a lemon and squeezed away. Then he handed the wrinkled remains of the rind to the little man.

But the crowd's laughter turned to total silence as the man clenched his fist around the lemon and six drops fell into the glass.

As the crowd cheered, the bartender paid the $1000, and asked the little man, "What do you do for a living? Are you a lumberjack, a weightlifter, or what?"

The man replied, "I work for the IRS."

Bull Hunter,

Perhaps we should go for anything GS recommends since the government is 100% behind them. On the other hand GS has hyped others only to cut and run away with their gains.

Saying they are a "good buy" because they are only losing 2.7% sounds while others lose 8.8% is like the ads for mutual funds which lost big time last year but beat the S&P.

They said the money would be better used giving it directly to the people. That's a criticism of the program to achieve its stated objective -- to prevent foreclosures.

You have your own political bias, as do we all.

Of course, the article didn't detail how the program could be restructured to ensure that the money got into the right hands. But instead of working through that problem, Treasury relied on the banks and servicers to do the right thing, and they haven't. Big surprise.

"Treasury relied on the banks and servicers to do the right thing, and they haven't. Big surprise."

Which are you concluding: that the Treasury is insane, inept, or corrupt? I'm unsure which of these fits into the category of change voted for by the American citizens.

The calorically/horizontally challenged female hasn't sung yet.

I think they mean households, not individuals, and this is my favorite part...

Mark Weinberger, vice chairman of New York-based Ernst & Young LLP, said that while Republicans won’t back higher tax rates, House Democrats at this point don’t need bipartisan support.

“Strategically, what Democrats have to do is just move the ball forward,” Weinberger said. “Whatever revenue raisers they have in the House or Senate bills will change throughout the process.”

problems....

I am sure its long ways off but should impact the markets nonetheless. Maybe the usd goes up counter intuitively.

Russia, China to push global currency at G8 summit
Tue Jul 7, 2009 10:50am EDT
http://tinyurl.com/n5wrbv

India will be receptive to debate about replacing the dollar as the world's global reserve currency when Prime Minister Manmohan Singh attends this week's G8 summit in Italy.
http://tinyurl.com/kwngv7

Maybe i can ask my employer to pay me in gold rather than usd.

.

Health Care.

Is it an economic problem? (conservative take)

Is it a practical problem? (a middle of the road point of view)

Is it a moral problem (a position of the center-left and left)

The answer of course is, it's all 3. Now I'm no expert, but this thing would probably not be happening if it weren't a solution to an economic problem. That problem being in fact NOT the lack of coverage among the hoi polloi but rather the affordability issue among what's left of the middle and upper-middle class.

Doctors. We need more of them, and a new class of health pro below that rank but able to see, treat, and co-prescribe. We need to GET RID OF private health insurance which is nothing but a for-profit cabal of vampires and grave-robbers. The public plan will do just that. As critics charge, the public plan SHOULD AND WILL pressure private insurance and force it to compete. Because that, my friends, is the ONLY WAY rates will become competitive.

Finally, let's do something for the people of this post-capitalist wasteland. We already do enough for the corporations who've busted out the nation with help from Washington do-nothings and who have basically shut out the lights on the American way of life.

From original message:

"Maybe i can ask my employer to pay me in gold rather than usd."

My late great-uncle died some years ago in his early nineties and he always provided some great stories for me to think about. He told me that he worked in a power plant in Illinois during the early 1930s and always looked forward to his $33 per week pay envelope. He said that his pay consisted of a mix of 5 and 10 dollar U.S. gold coins with rest being made up of silver. There were no taxes taken out as most Americans didn't yet pay any federal income taxes; that was only for the rich. He said that when Roosevelt outlawed gold ownership his company started giving out payroll checks instead of coins. After that he told me that he never again felt like he was getting real money when he was paid. Based on how our currency is now under constant government and Federal Reserve slight of hand games I can't help but think that he was correct.

i have still some SLW on hand...
do you think it's a better to buy AUG 10 call or sell AUG 10 put?

This excerpt is taken from a Bloomberg report on Goldman having its codes nicked by the Ruskie. I almost fell off my chair when I read it:

“The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways,” Facciponti said, according to a recording of the hearing made public yesterday.

Did I read it correctly? Does it say someone could use the program to manipulate markets in unfair ways?

So what is it exactly that GS do with it?

Twilight Zone stuff really.....mind you, isn't it all these days...?

http://www.bloomberg.com/apps/news?pid=20601087&si...

yeh noted the same Ad. You'd think such a suggestion would be enough for the SEC to inquire into the nature of such a program...

and pigs may fly.

Either its a theft as they say, and it may affect markets as they presume, but its really of no use unless you have the programming and mathematics chops to sort out just what it does.

It would be ironic should anyone really buy into it and apply exactly the same programmes to their own trading platforms and discover that their positions are all based on assumptions that were formerly a part of GS' outlook that have now been discarded, and GS has by now simply moved on.

thank you Grasshopper....we of the horizontally/somewhat follicularly challenged are quite sensitive :(

That spooky little BAA is starting to look interesting... Don't know Bill's thoughts ( Congo, etc.. ), but dang, the financing is complete and still don't see any large selloff yet...

30min chart - H&S - target 7700-7800 with a decisive break of the neckline.

http://tinyurl.com/lqppq6

I have a very close childhood friend who recently lost his family, home, savings, and livelihood to the oxycontin monkey he couldn't get off his back. Started as pain medication for a shoulder injury...all downhill from there. What's worse, opiates rewire the brain...most never make it back

SPY H&S breakdown analysis attached.

Volume is insanely low today and the battle isn't over yet (as we can see).

Target would be ~$82.00 IMHO.

Nemo, I don't often use Rush as an example, but if Rush Limbaugh, a national radio star could be hooked enough to lose his hearing and require cochlear transplants, this stuff is insanely addictive.

When I found out about the drive home and the 7 911 calls, I moved her out of my daughter's house the next day and took her home to her brother who got her into Schick Schadel. They made her deathly ill and shocked the crap out of her for twelve days (no inpatient care, just a detox, she needs the therapy) and she was doctor shopping the day after she was released. The lost productivity and insurance costs alone would pay for all the treatment of the existing addicts and pay for the testing and computerized records that would prevent the vast majority of the problem. It is truly an epidemic.

health care is much more tricky and nuanced that people are being led to believed in the current american debate happening.

using specific examples of socialist health care failures like "mrs. x in canada waited 2 years for a hip-replacement...oh no, we dont want that in america!!" these specific examples obfuscate the issue.

further obfuscation is the fact that its difficult to compare various systems as most are a mix of private and public as it is currently in the US, and it also varies from state to state in some way.

what do we know for sure about different health-care regimes:

1. there is no proof that more health care services in first world nations give better health outcomes. having the best facilities in the world may help you survive a heart attack, but diet and genetic factors are the most significant in preventing the disease and making sure you live long after you suffer an attack.

2. about %75 of all health care costs are incurred by people in the last 6 months of their life. this is reality, we cant introduce a system to save money if the biggest costs incur while trying to save the dying. its up to the person and their family how far the system goes, in a rationed health care system the state has final word on how much they will spend to keep someone alive under cost-intensive circumstances.

3. health care in canada is varied, you wait 8 hours in an emergency room for most conditions, and 6 months to see a specialist, yet if you have a good family doctor you can see them within a week for an appointment, physio is easily accessible but not covered by the government, and meds are supplemented cost wise.

some remote regions health care is poor and you wait much longer.

the difficult quesiton is: how long does a wait time go from inconvenience to health issue? if you break your arm, you typically would wait about 8 hours in an emergency room to get it set. no harm really, just a hassle. but if you have cancer you may have to wait a few extra months before treatment that is considered critical.... in this case canadians flock to the US for care and seek reimbursement from the provence. at great cost, time and red-tape.

so people discussing the success of the canadian system neglect to realize how much health care is paid for by citizens going to the US for various types of car, easing the pressure off our system. (something health care socialists dont like to admit)

4. doctors in france and germany make much less than doctors in canada and the US but their educations are generally cheap or free. you cant make people incur $100,000 med school bills but then ask to cap their salary at $125,000 a year. if school was free, then no problem.

doctors and nurse wages make up huge costs in health care delivery, they belond to powerful lobbies and unions, asking them to take wage cuts will not happen plain and simple. people thinking it will happen by government decree in the US are delusion. period. dont think for a second this will be tabled or enacted.

people think that if only we rearrange or reshuffle the cards the health care system will be fixed, they dont realize that wages are a massive costs and without lowering them you wont magically have affordable care.

5. if the state can direct your health care and your pension plan and your taxes, well then they can do whatever they want at all times, you have no rights other than to be a worker bee and buy stuff. the amount of red tape and government staff required to maintain an public health care system is immense, people that think eliminating private insurance to be replaced by a public system are only taking costs borne by private corporations and passing them onto government payrolls.

6. canada has private insurance plans, many services arent covered including ones that are critical like post injury physiotherapy, chiropractors, most meds, and foreign medical care. these plans are becoming more popular as the goverment slowly has cut back on what it covers, and there is no trend reversal in sight, if anything the wait times will grow as will the amount of obfuscation to make it appear that things are getting better when anyone in the industry will tell you its not. its a ponzi scheme to convince the populace weve got it better than anyone else in the world.

7. on ontairo we recently were forced to pay a "health care premium", for me its about $800 a year, thats about $70 a month (or about $130 a month in gross income) for care and that amount will increase each year. the system is not able to fund itself without more and more cash injections, all while service is slowly grinding slower and old hospitals are getting older...

the system in its current form is not sustainable in canada. period. more taxes must be extracted to keep it going. thasts fine if you dont mind paying more and more each year for slightly less.

8. all that being said its still a good sytem in terms of care and research and innovation. we just need a better way to both manage costs, and to allocate resources to illness that should be covered while non-lifethreatening things like cods, coughs and small injuries are delath with elsewhere at less costs. you dont need a $125 per hour doctor treating someone with a scratch, a broken arm or a cold.

9. we need to stop treating doctors like shamen, they go to medical school for 4 years then do a residency, its not magic, and increasingly people are more interested in care and how the system works, perhaps we dont need a guy earning $225,000 per year directing care alone...

10. studies have shown that vitamin d and fish oil supplementation alongside some reasonable diet improvements can help prevent or lessen the vast majority of the biggest killers in the US: heart disease, diabetes, blood pressure and cancer. consider low cost alternatives.

11. costs are costs, just because the governemnt oversee's the process doesnt mean people will be suddenly treated with dignity and not in a suspicious manner as they are with insurance, it would stand to argue that they might be worse as costs borne for care are considered tax dollars and it is in the gov't interest to ensure the costs are kept down to make it appear public health care is working.

remember that, health care either way will be spun by the left as a grand success no matter what, and a grand failure by the right no matter what, you will never really know if its working or not because of the difficulty in measuring and tracking the data reliably.

canada is 1/10th the side of the US and helath care is a massive and complicated bureaucracy, just imagine how big it woudl be for the US...
for those who think the goverment is more inefficient than private secotr, imagine how it will manage upwards of 1 million health care workers who only handle the non-medical costs and billing issues.... ha!!

12. people who think public health care = better care....
wake up!!

baz22 - I'm currently watching HXL, there's some long-term debt but could be a good play for energy(consumption reduction) and BA is still shipping plenty of aircraft...

Hmmmm

"Mackinsaw"
______^

What's that Bev? You've done that a few times now. :)

Talking about shipping aircraft,just read this today.

Airbus rides the Chinese dragon
In the time it takes to complete the paper work for planning permission in Britain, a factory in Tianjin has been built and is producing passenger jets.

AVIC in turn holds a stake in the Commercial Aircraft Corp of China (COMAC) which has already launched its own Chinese-designed regional jet, the 90-seat ARJ-21. Under the Communist Party's 13th "Five-Year Plan", it now aims to challenge the West head on with a 180-seat jet.
"We believe after six to eight years development, our aircraft will over take Boeing and Airbus," said COMAC chairman Zhang Qinqwei last year.

http://tinyurl.com/nejwly

Heads up that ung is halted-wonder if it has to to with limited trading positions in commodities?

OK, I just lowered the sell limit order on the fraction of my UXG that I wanted to sell today to $2.85 and it was sold. I think a break through S&P 880 is inevitable -- S&P is attracted like a magnet to this level, and I can't imagine UXG (or any other random stock) going up when S&P breaks through 880 and reaches 850 (and then maybe even 700's).

it sure looked like a lot of covering going on in mygn since 2 pm. yesterday ( monday ).... especially from 10:00 - 1:00 today.... guess I'll see...

All they need is Brazil and they can go play by themselves. But... if they do Obama will void their GM warranties. That'll show'em.

How much of this is UNG-related? All of it?

Anyone know the reason for the halt?

Yes, we need more doctors and nurses. We have nurse-practitioners who fill a part of the void, but too many grads chose Wall St. or the law over medical due to the money.

I am afraid a government managed health care program would work about as well as a government managed economy is doing. Too many people and too few people to care for us. Since I was born in 1938 the US population has grown 2.5 times — counting only the legals.

Thirty years ago my wife's cousin (a Swedish nurse) visited us and was amazed at the equipment and quality of care in our local hospitals. Our city of 100,000 has three MRIs England back then had three. At that time a hip replacement had a wait of eight years in Sweden — a long time if you are in pain.

A friend of ours in London, tired of waiting on a list to get on a list for an x-ray of her knee a couple years ago, gave up and went to a private clinic.

I would like to hear personal experiences from people in Canada, Sweden and other countries.

I've already decided after seeing several friends and relatives who are now in retirement homes and have been declared indigent that I will swallow a bullet rather than submit to such discomfort and degradation.

1.Barclays upgraded SU and downgraded XOM...dollar weakness?

2.AET was upgraded and it possesses a financial component...it also is involved in negotiations, I hear, with the white house. Edit: not sure on the upgrade...it is up appr. 7.5%.

3.How would lower resource cost effect GDX...not talking about electricity cost necessarily.

4.At what point do the fundamentals have the most impact...at turning points, during trends, when markets are oversold or overbought...is price necessarily always a function of fundamentals?

Many questions and not many answers...just trying to generate reasoning and thought.

is all about timing... hearing light rail more and more...seems large contracts are starting to come in ( see FLR today ) anyway, any thoughts ?

Compare the halt in UNG with the Nymex chart:

http://www.nymex.com/ng_fut_cso.aspx

What do you see? Did the halt in UNG affect the futures market, or vice versa?

...

Health Care in Canada,

Like everything else, you usually here about the bad experiences. I for one have had very little problems with our health care. I just call up the doctor and go. I will disagree with Dr Cosa statement on smaller communities. I have lived in smaller communities for the past 7 years and have found the level of service to be extremely "great". A person I know recently got diagnosed with cancer, operated on and treated in less than one week. My friend got medivac to the big city for an appendix issue. Get this while I was getting muscle relaxents for neck pain (waited 1 hour), a homeless person came in for an infected cut and got treated for free. I have no issue paying a little more if someone else gets to be treated. At least I know I will not bankrupt myself if I get sick and yes I do have the option to go private if I need to but at a price.

The big push now is on preventive measures Vs treatment. Educating people on healthy life styles.

Thank you, 2nd_ave, for pointing out a similar drop in NG futures. What I found even more interesting, though, is the fact that January 2010 futures are 63% above the August 2009 futures. When such a strong contango was present for USO in January/February, we know what happened to USO next. Should we expect UNG to rise above $20 by January 2010?

So if the s&p closes below 880, then no reflation gold minder trade? its downhill for everyone?

ALOHA !!

I think that if you use Canada as an example of how successful universal healthcare in America will be you are making a major error. AMERICA IS NOT CANADA ... Just look at the Canadian banks as an example of which country is the most corrupt.

Please universal healthcare is coming to America, but it will renege on the current over burdened Medicare program. Payroll tax deductions for the new UNI will supplant the MEDI and rise considerably as the services diminish considerably. Nothing in America ever actually changes, it just gets "reshuffled"! The only stability Americans have now is expanding government and expanding DEBT ...

I believe that private clinics in places like Thailand and Singapore and Brazil will see a boom in business as America moves into universal healthcare. Perhaps even some of the private clinics now here in America will move to other countries nearby, maybe even the Bahamas in order to get away from the restrictive POLITBANK system. I could see the huge medical community in Houston,TX moving overseas. When competition dies so does Liberty ... You can see that result with the MONEY MONOPOLY we now have.

"Liberty is always freedom from the government.
-Ludwig Von Mises

Imagine that "audacity"?

Taking head fakes and bear traps into consideration.

So today at 1:00 gold spiked up nicely, I'm guessing because of the 3-year treasury auction today. Econoday reports:

"Today's 3-year note auction was a bit sloppy with the high yield of 1.519 percent about 2 basis points over the 1:00 bid. Coverage was no better than average at 2.62. Today's results may raise some caution for tomorrow's $19 billion 10-year auction. Demand for Treasuries slipped off highs in reaction to the results"

Tomorrow we have the 10 year auction, and Thursday a 30 year auction. I think miner and gold strength today in the face of a decent move in the buck AND an overall market drop may be an indication of auction nervousness. TBT spiked up briefly on the news, but has trailed off as the SPX fell in the afternoon.

Just my two cents.

I am hearing from Charley G. on CNBC alot about the PPIP, I think it starts action tomorrow.

Is this bullish for stocks?

ALOHA !!

The infamous RULE XVI(16) ...

"A Senate amendment based on Congressman Ron Paul’s successful House bill to audit the Federal Reserve was blocked by the Senate yesterday evening on procedural grounds, as Jim DeMint slammed the Fed for refusing to disclose where trillions in bailout funds had gone, while a top Obama administration advisor called for a second “stimulus” package to be prepared.

Republican Senator DeMint had attempted to get a provision attached to the 2010 spending bill that would have removed restrictions on auditing the Fed’s discount window operations, funding facilities, open market operations and agreements with foreign central banks and governments.

However, the amendment was blocked by Senate authorities who claimed that it violated rules for provisions attached to spending bills."END

16 LINK: http://tinyurl.com/lfv6bd

Imagine ... its okay to write in accounting rule changes in pencil in the margins of other Senate bills at 3am for the benefit of insolvent banks, but not an honest and open amendment that would benefit WE THE PEOPLE!

TAXATION WITHOUT REPRESENTATION ...

"The system of discriminatory taxation universally accepted under the misleading name of progressive taxation of income and inheritance is not a mode of taxation. It is rather a mode of disguised expropriation."
-Ludwig Von Mises

http://tinyurl.com/m7wjjj

Placing a buy limit order at $2.35 for the 1500 shares of UXG I sold today at $2.85. Also, placing a sell limit order at $3.51 for 1000 shares I bought at $3.11 in March 2008. Now I have my traps set for UXG and I can now focus on something else.

Thanks for the chart Bev!!

Many of the REITs I follow are showing (bearish) descending triangle formations, and IYR (the REIT ETF) is getting quite close to breaking the lower line. I am considering getting some SRS either on a breakdown of IYR's formation, or on the next IYR rally to its upper trendline.

http://tinyurl.com/lpk78g

EDIT: the equivalent pattern on SRS is a cup and handle

EDIT2: gee I suppose that could be Bev's head & shoulders formation too :)

Bev- Keeping in mind you are already positioned in QID/SRS, at what point would you press the trade?

Bev,

Thanks for the charts today. I think that you are spot on...

Also, appreciated the lunch-time humor.

Monty

Thanks to those who have given accounts of Canadian health care. You are right, I had only heard the bad ones. But I do think Kaimu is right when he says it's different here. My civilian experience is that the insurance companies set the prices and in many cases the treatment.

I have had good care from the VA (Veterans Affairs) and if gov care was like it I would have no problem, but am only signed on for meds. Don't think all VA hospitals and clinics are created equal from stories I've heard.

I have noticed that they are way overloaded since 9/11. My annual Dr. visit is longer between times each year and I have had no emergency or surgical experience there.

A stronger $USD is in store:

This is a delayed, partial version of the Whisper Report prepared before the beginning of trading on Monday, July 6, 2009

As we begin the second half of 2009, it is important to take a look at where we are most likely heading. As we have been saying for the last couple of months, we expect the recession to end once General Motors begins production at its recently closed plants but the end-of-the-recession trade was likely over once the May employment report was announced.

The S&P 500 ended 2008 at 903.25, which was 18.24 times trailing earnings. Since World War II, we have yet to see the S&P 500 trade at a lower PE multiple the year a recession ended than it did the previous year. We believe a trailing PE multiple of 19.0 to 21.5 is a reasonable target for the end of 2009 assuming a double-dip recession does not occur in the first-half of 2010, which is also a reasonable possibility.

Standard & Poors tells us that the consensus top-down operating earnings estimates for the S&P 500 is $43.03 per share. However, given the recent estimate raises at Morgan Stanley, Bank of America-Merrill Lynch, and others, we believe $50 per share is the true expectation at the moment. The next couple of weeks will say a lot about how reasonable this expectation is and where estimates are likely to move next, but at the moment this suggests a year-end target for the S&P 500 in the 950 to 1,075 range.

How the stock market gets from here to there is likely the bigger issue and the topic getting the most attention from nearly every technician recently is the formation of a head and shoulders pattern. This suggests downside risk for the S&P 500 to the 875 support line and a potential break. So, in the short-term, this is the pattern we need to watch most closely heading into second quarter earnings season and it implies we need to look for short opportunities at least to start out the season.

From a sector view, most data points have changed little over the past several weeks. Consumer Discretionary stocks continue to manage inventories well with upside risk from a better-than-expected economy. Technology tracks well from both an inventory basis with demand also holding up well. Financials have macro tailwinds with among the most profitable spreads on record and the possibility of inflation increasing the written-down assets on the balance sheets.

The recent surprise has been the Consumer Staples. At the beginning of the year, as the group was preparing their budgets, production was apparently cut too far and production is currently rising to meet demand. Our informal checks suggest the production isnt too the point of hiring back laid off workers, but many production lines are running well above the targets set at the beginning of the year just after the financial crisis started and many workers within this sector are seeing overtime. Meanwhile, material costs are declining, the U.S. Dollar has weakened, and few have lowered the prices that were raised this time last year before Lehman Brothers collapsed.

On the other hand, the inflation trade continues to appear much too early for the cycle and, in fact, continue to see weakening trends with lower demand and rising inventories. The data points for the Industrials, the Materials, and Energy suggest these continue to be the sectors with the most downside risk at the moment and only the weak U.S. Dollar is supporting the stocks.

While we believe the overall risk to the stock market for the year is to the upside and believe the Financials have the most wind at their backs, we are less confident about the group at the beginning of this earnings season than we were last quarter. Weve yet to have a meaningful rally in the overall market without the Financials rallying, so while the S&P 500 is forming a head and shoulders pattern, the Financials are failing to break the trend line set since the markets high in October 2007.

We are more than a week away before the major Financials release earnings, but even though checks are positive for the group if we are going to trade the stocks going into their earnings release in anticipation of an earnings beat, the 875 line needs to hold as support for the S&P 500 and the trend line for the Financials needs to be broken.

The past several weeks since the Presidents decision to give unions priority to assets over debt holders in the General Motors and Chrysler bankruptcies the U.S. Dollar has been the primary focus for the markets. At the moment, we are seeing long-term professional currency traders go long the U.S. Dollar on the view that we are still in the early stage of a multi-year bull market for the Dollar and we have professional macro traders bet on a long-term bear market for the Dollar for political reasons. We are not comfortable assuming either side will win out in the long-term and, therefore, are only short-term Dollar traders and anytime there is Dollar strength, we want to short the Industrials, Materials, and Energy sectors.

At the moment, we see more upside risk to the Dollar. When we watch the Dollar, we focus our attention on the Euro the anti-Dollar and sentiment continues to suggest small traders are extremely bullish the Euro and commercial traders are adding to their short positions. We will always take the side of the commercial traders in this scenario and, to support this view, we have a stochastic cross at a lower-high for the Euro.

On the fundamental side, the Eurozone continues to ease while Australia, Switzerland, New Zealand and other countries have been publicly discussing the damaging impact of the weak U.S. Dollar on their respective economies and have either taken steps to weaken their own currencies or have suggested they plan to cut rates and/or take additional easing steps.

At the same time, we are in a seasonally strong period for the U.S. Dollar as Japanese summer bonuses tend to leave Japan for the U.S. Furthermore, the Chinese cycle suggests there is downside risk to the inflation trade from economic data points and from a U.S. Dollar story. As we have mentioned previously, China tends to see a peak in production during the month of April, restock inventories in May, and, starting in June, begin a period of buying U. S. Treasuries. Perhaps China will divert more capital into its own stimulus plans, but we tend to believe this is more likely priced into the market rather than the possibility that its previous cycle trends will resume and that means upward pressure on the U.S. Dollar and downward pressure on commodities. It is our view that, political issues aside, the relative value of the U.S. Dollar vs. the rest of the globe that is lagging in terms of economic activity as well as central bank easing policies. We also believe that the stock market does not have to depend on Dollar weakness to rally. However, in order to be truly bullish now that the end-of-the-recession trade is over, we believe the sectors that are seeing favorable data points need to outperform those that have rallied simply because of the weak Dollar. This week and early next week, as the initial earnings releases for each sector come in, should provide the basis for trading during the remaining weeks of earnings season.

One recent data point that we have neglected to discuss thoroughly is our Earnings Expectations oscillator shown on the front page of our website and on the first page of this report. Analysts are conservative by nature and when they, as a group, become increasingly optimistic about the possibility of a near-term upside earnings surprise from the companies they follow to the point that more expect an earnings beat than expect an earnings miss, it tends to be a positive indicator for the overall market. We have not had a buy signal since the recession began in late 2007, but data checks have been positive and we have had a handful of buy signals over the past few weeks.

The market could be a sign that there is too much optimism going into earnings seasons and we are setting up form disappointing results, which is where we are leaning, but that is not the signal this indicator has given us in the past. Therefore, we have to view the recent stock market activity as a consolidation ahead of another move to the upside until we are shown otherwise. Consequently, we are giving the 875 support area the benefit of the doubt and will look to be buyers near this level, but will wait for overall price action and earnings news to confirm before we become too aggressive.

Alcoa

There was a tremendous amount of buying of shares of Alcoa (AA) in mid-March and this has created a support base that likely needs to be respected, but the stock is currently a long way from this point on a percentage basis and we have yet to see any positive data points for the company. In fact, all data points suggest production continues to outpace sales so that decade-plus inventory levels continue to climb. To make matters worse, Chinese production of the metal appears to be picking up, which means inventories levels are likely to continue to climb and that is very bearish for the stock in the longer-term.

The stock generally trades at 12.4 times forward estimates, which suggests the stock should be trading closer to $5 than its current $10 range and, unless Alcoa gives evidence that trends are going to change soon, the stock is likely to trade below most of the recent target prices established by the analysts, which are in the $8 to $9 range.

For the quarter, the consensus estimate is a loss of $0.34 per share and the Earnings Whisper number is a loss of $0.40 per share.

This is the delayed, partial version of the Whisper Report. For the full report, which includes a preview of Family Dollar Stores (FDO), Shaw Group (SGR), and Chattem (CHTT), please go to http://www.earningswhispers.com/article.asp?artno=255

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Thanks, Chickenpookie. With foreclosures up 22% the shocking news of the day is the 'better FICO score borrowers' are now getting Notices of Default stapled on their doors in better neighborhoods. Egads! Maybe this is helping lenders who may be embarassed by their neighbors asking for social mercy?

From www.sec.gov

RONTO, ONTARIO, July 6, 2009 - YAMANA GOLD INC. (TSX: YRI; NYSE: AUY; LSE: YAU) today announced that its second quarter results will be released after market close on August 4, 2009. A conference call and audio webcast have been scheduled for August 5, 2009 at 11:00 a.m. E.T. to discuss the results.

Edit:

Conference Call Information:

Toll Free (North America):
800-732-1073
International:
+1 416-915-5762
Participant Audio Webcast:
www.yamana.com

Conference Call REPLAY:

Toll Free Replay Call (North America):
877-289-8525, Passcode: 21310486#
Replay Call:
+1 416-640-1917, Passcode: 21310486#

The conference call replay will be available from 1:00 p.m. ET on August 5, 2009 until 11:59 p.m. EST on August 19, 2009.

For further information on the conference call or audio webcast, please contact the Investor Relations Department or visit our website, www.yamana.com.

Thanks for some clarification. I believe your figures are more relevant than theirs...I love this blog because contributers here are willing mostly to share their knowledge freely...now if the dollar does go up, I will be ruined...just kidding.

Sprott issued a new report asking this question. The answer, of course, is the Fed, but they go through each current holder of debt and describe whether they are likely to buy more or not this year.

Note: each buyer last year must purchase TRIPLE the amount of debt they bought in 2008 for the US budget to balance. And that's just this year.

http://www.sprott.com/Docs/MarketsataGlance/June_2...

Sobering stuff.

A lot of meaningless chatter crossing "tout TV", and mainstream conduits.....read this 2 years from now,a comment made regarding the 2nd stimulus package proposal,

Ludwig von Mises describes the endgame brought on by reckless expansion of credit: "There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved."

"When" is the question I am wondering......possibly a bank holiday this year or next when the dollar is "re-valued", an idea put forth by an author a few days ago................many of us are all already screwed financially but we don't know it.....kind of like a frog slowly cooking in the pot.......

I work in hospitals.......trust me, service can get worse, and workers can be less motivated than they are currently...a fact,

however, a thought......Do you wish your local hospitals to have the efficiencies of a local bank or private business or that of a local fire department?

I'm beginning to think, let the rich have their private plans and options, (they always have, history proves), and while the gubermint is in the hyper printing mode, add healthcare to the mix and screw the dollar........I'll buy canned goods and gold to barter with......

and some JNJ for my IRA

http://tinyurl.com/kkodos

GATA today urged the U.S. Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission to investigate the Goldman Sachs Group Inc. computer trading program that, according to a federal prosecutor, the bank acknowledges can be used to manipulate markets.

deberryclan, according to a report on NPR frogs do leap out of a pot when it starts to heat up! I am witnessing the pronounced change in mood of folks who only--two years ago--were eagerly snapping up more debt in the guise of 'investments'. Now, these same folks are pulling the plug via short sales and starting to get the idea that their health and sanity are worth more than any fiat 'net worth' in real estate.

Nymex NGas Aug 3.37
Nymex Crude Aug 62.12
Nymex Gold Aug 921
Nymex Silver Sep 13.02

Do the above numbers (as of 20:30 tonight) not represent important psychological support levels about to get taken out (or not)? If they get taken out, do we begin to see forced margin sales?

Whenever I look at our current market I cant help but look at the price action in the 30's. After the late 1929 crash, the market rallied for about 5 months through it's 200 day moving average, at which point it took about a month until it dipped back below and retraced about 30 to 35% of its move from the crash low to the rebound high. It rallied again to near the 200 DMA but never could go above it and then it continued to go lower and lower. I can't help but think we're going to go through the same process, which means a short term low of about 830 or so, a rally back to the 200 DMA and then a cascade lower....

http://finance.yahoo.com/echarts?s=^DJI#chart10:symbol=^dji;range=19290701,19310102;indicator=sma(50,200)+volume+rsi(7);charttype=line;crosshair=on;ohlcvalues=0;logscale=on

do a 18 month range from July 1929 to Dec 1930 to see the price action and look how similar it is so far to the past 8 months or so...

Man, any help on this would be great. I've always played the counter side and would love to hear from you all.

If/when we break 880, isn't 800 the next solid support area? (my chart).

I've been really busy, but still holding UNG, TBT, SLW. Added to UNG today and TBT yesterday. Looks like I'll have to slow play SLW. (-11.08%)

2nd wrote..........

"The DJIA closed below 'support' (as identified by Twiggs). Is that enough? Would you wait for 'confirmatory' breaks of support on the Dow Transport, the S&P, and/or the NDQ?

Once you decide to go short, do you open positions on the break, or would you wait for a retracement? Will you scale in?"

.................

While I started a "scaling into" positions in QID and DXD the last hour myself, I would love to hear from Vad on your great question!!!

"It made me think it was kind of like a thief robbing a bank and getting robbed himself on his getaway only to then turn around and call the police for help."

Lori- Ask any player in Vegas who wins more than a 'reasonable' amount of the time. Most bullies can't handle it when someone beats them at their own game.

As I've mentioned here before, Dave Landry has a wealth of info on his site with examples, charts, patterns, how to identify trends, etc.

Anyone can read about it here: http://davelandry.com/lesson.htm

The following is from Dave Landry dot com.
For his intro to trends try this:
http://davelandry.com/PDFs/091208--num1intro-trend...

Here is an excerpt. The examples are in the above pdf link.
"Recognizing Trend"

Notice that in figure 1 I drew an arrow from (a) to (b) and (c) to (d). I usually to go to great lengths to explain how to recognize trend. When I speak, I usually spend a lot of time explaining my “trend qualifiers” which include gaps/laps, wide range bars, higher highs (or lower lows for downtrends), the slope of moving averages, and moving average “daylight.” However, in its simplest form, you should be able to quickly draw an arrow
on a chart to determine trend. If you can’t, they’re probably isn’t a trend. Referring to figure 2, whenever you analyze a market make sure you keep this picture in mind. If the market is an obvious uptrend, then consider buying it.* If it is in an obvious downtrend, then consider shorting it.* And, if it’s going sideways, then leave it alone!
*See my notes under “Trading Trends” below though!

"Trading Trends'

"Keep in mind that just because a market is trending it doesn’t mean that you should just blindly buy it (or sell it short). Trending markets are prone to correct. And, you never know if what initially appears to be a correction, may in fact be the end of a trend. Therefore, it’s much wiser to wait for the correction to occur and then look to enter if (and only if!) the prior trend begins to re-assert itself. In other words, wait for a pullback.

All of my patterns are based on identifying trend (or change in trend) and then looking to enter them on a pullback. Next week I’ll explain how to enter trends (or trend transitions) on pullbacks."

You can read more at his web site at the above link.

Craig- Thank you for the link(s). However, (and being a fellow musician I know you'll appreciate this) rather than reading "Turnarounds, Riffs, and II-V-I patterns" (which, to be honest, never helped that much), I'm looking for real-time posts along the lines of "Breaching 8200, opening DXD; or Breaching 8200, DXD limit 50." I need to sit and watch Vad play in front of a live crowd- that's how I learn.

Oh, you're like me, you play by ear! Let's jam and I'll pick it up....

2nd- Just about everything I track on the short side is RSI +70, long side RSI -30. Maybe a pull back is the entry point we are looking for. Either way, I don't feel this will go sideways/drifting lower for long. I know what you mean by watching things real time. I look back over the blog at the end of the day and look at the time of the posts and compare it to the major indices at any given moment. Time consuming, yes, but as a rookie it is worth it to me.

"That member of Congress has to be right once in a while. On many other matters she is very wrong and extremely lopsided in her neocon, partisan views, IMHO. She must have drawn the straw among right wing Republicans last year to be the one to accuse Obama of being un-American (during the campaign). I don't trust what she says."

Maybe she was channeling Von Mises...anyway, the link was posted for the message, not as an opportunity for an ad hominem attack against the messenger.

Being "un-American" carries different definitions depending on your political persuasion.

http://tinyurl.com/mu3j2l

excerpts:
In recent years, the dollar has gone in only one direction and that is down,” said Huang, 45, in his second- floor office in Pingxiang, a town set amongst karst limestone hills and sugar-cane fields in China’s southwest Guangxi Zhuang Autonomous Region, three kilometers (1.9 miles) from Vietnam.

“The Chinese see an opportunity at this point to raise questions about the dollar and its status as a reserve currency.”

“The Chinese see an opportunity at this point to raise questions about the dollar and its status as a reserve currency.”

The Chinese have been complaining about the USD for many years now. Apparently they don't understand how the economics of global trade work. Hard to believe - but when they make noise, the dollar seems to hold up. What is CIC buying this week?

http://ronsen.blogspot.com/2009/07/not-here-to-red...

-Moody Blues
-John Lee summarizes SPDR sectors
-XLY up close and personal
-Cara style RSI7 weekly oversold stocks
-DBA
-Triangles (an Amibroker screen)
--Randall Forsyth reminds us about the technicals
-The "National Hero" quiet these days. Better to remain silent and be thought a fool and speak and remove all doubt?

More cyber attacks

U.S. sites over last weekend; South Korea this week.

http://tinyurl.com/nnhwgz

Illini,

I would say Obama has done a lot to give what can easily be construed to be an anti-American impression. In fact he seems to go out of his way to impress foreigners with his comments and actions.

During the campaign Michelle and he both dropped a couple previews:
He — "Americans clinging to their guns and Bibles."
She — "For the first time in my life I am proud of America."

Think of the way your family might feel if you repeatedly told strangers, "In the past my kids have done many things for which we need to apologize." "We are not a Christian family."

He is out to pacify or "bow" to (both figuratively and actually) anyone who has a gripe against the US. Each of these comments were clearly made to cater to the foreign audience with little regard for the feelings at home.

His going along with the "Don't ask, don't tell," program was followed by naming June as "Homosexual Month" — give me a break! He seems to think he can compartmentalize his commentaries and nobody will remember.

I think we're getting out there now.

1. Americans DO cling to their guns and Bibles.
2. As a black woman Michelle MUST have a different frame of reference than an old white guy in Ohio.
3. After 8 years of ignoring the rest of the world we have a leader that understands no man..or nation, is an island.
4. It is un-american to ignore or mistreat any group of people based on a genetic condition, like hair color, race or gender. Look at livestock or genetics kids, gender isn't black and white, male or female, it is all mixed up for some. You have to look a little outside your own experience.
BTW, it's "Gay Pride month". Nothing wrong with being proud of who and what you are, is there?

BTW, if we're as wonderful and strong as we delude ourselves into thinking, then why can't we take a little positive talk with the foreigners?
Are we men or mice?

Mapquest from Twiggs: "The Dow broke through support at 8200 to complete a head and shoulders reversal. Confirming earlier warnings, from breakout below the rising trend channel and from bearish divergence on Twiggs Money Flow (both 21-Day and 13-Week), the pattern signals a down-swing to test primary support at 6500."

AND...
I notice YOU didn't leave it alone either ;-)