Some Market Thoughts..

My apologies, beforehand, for any haste I show in putting this post together.

The Dow was up over 200 points today on the lowest ISM number since we "emerged" from the recession, but one that came in within estimates and still reflect positive economic growth.

Poor Christian, at PSA, failed to see the possibility of this low-volume uptrend being able to continue, despite his many short calls.. But this rally one can't be ignored, even though it's built upon flawed fundamentals and market technicals. It happened before during the period between January and April, and it appears to be happening again, potentially setting up for an October crash, which seems to be a favorite period for crashes.

Bulls can't win, Bears can't lose..

I actually agree with Christian, but I'm not as adamant about believing the crash is around the corner now. There are some financial "forces" at work that are hell-bent upon avoiding succumbing to bearish market readings.

And here is a look at global markets from Colin Twiggs who offers a free subscription to his excellent Technical Analysis insights:

Consolidation in a Bear Market

All of this economic data can be spun any number of ways, but the analyst must remember that it's based upon numbers that still include, BUT NOW ABSENT, government stimulus. And as the ECRI numbers (see below) indicate, we're ALREADY at a level where every other previous instance has resulted in recession. And any future data will reflect an economy not "juiced up" by government stimulus.

So I'm still not sold on a recovery, nor the resumption of a bull market.. No.. Not YET... This next two quarters will be the determining factor and we'll have to watch the weekly economic data before we're able to determine where we are.

But just because I'm not "sold" on recovery, not until I see the S&P 500 trading above 1250 which would quell fear of the Head and Shoulders, and set the index to revisit previous highs, AND we see positive trending economic and employment data. But it's hard to visualize such an event naturally occurring for the foreseeable future. And it's even more difficult to understand how this market has been climbing, on pathetic volume, and in the face of proven market indicators that suggest it's due for a 20% retracement and consolidation from it's March, 2009 lows. Even experienced market professionals are being whipsawed by this market action and it's undermining the public confidence in the equity markets.

But don't let it be thought that I want the market to continue crashing, or to live through another depression. I don't. I have NO INTEREST in seeing us slide into an economic hell. I only want to identify when it happens and protect myself, and my friends and family, from its effects.

And that's why I remain a short-term trader, buying and selling both ultra-bullish and ultra-bearish ETFs until we see some actual market and economic direction we can believe in. And many other investors are just selling out completely and hoarding cash. We've also seen hedge funds de-leveraging and standing on the sidelines waiting for direction.

But one thing that is paramount in avoiding recession, at least in the eyes of the Federal Reserve and Treasury dept, is that if consumers are not spending, a recession is nearly guaranteed. The velocity of money in the economy must be restored, as well as halting the de-leveraging consumer and debt defaults. If the "wind" (money) flowing through the economic "windsock" tapers off, then the economy will, like an actual windsock, sag and decline.

Now, I think there is significant evidence that would suggest that the value and direction of the stock market is critical to impacting the psychology of the average consumer, especially if their 401Ks have basically "flat-lined" for the past 12 years.

So.. is it possible that the Fed has been either directly buying, or facilitating the purchase by banks/institutions, of equities and equity futures, in order to ward off the insidious Head & Shoulders formation that I've been discussing and restore investor confidence, and therefore, consumer confidence?

Actually, this is not a new thought.. There was some commentary back in March from the CEO of Trimtabs, a VERY REPUTABLE firm that tracks all kinds of market data suggesting that the markets are being rigged by the Fed (or someone):

Who's buying the market?

It's frightening (to me) when such a reputable firm starts to question the independence of the markets from Fed/Gov't interference. And recall that this was BEFORE the "flash crash" of May 6th when investor money REALLY started flowing out of the markets.

Here's another article that discusses the global banking systems increases in Money supply over the past year. And it suggests that this is, in good part, reason for why the stock markets haven't crashed.

Money Supply expanding?

But that's also called a HUGE "moral hazard", if not a huge violation of the concept of "Free Markets" which could quickly ignite major inflation if people start believing the Fed and other Central Banks are effectively putting a floor under equity prices.

There's also another possibility, for which I have absolutely no evidence, but could explain why the Fed would be tempted to take the unprecedented step of intervening in our equity markets. Could it ALSO be that our markets have been under attack by foreign sources/governments via Credit Default Swaps? Could it also be that these "supra-national financial forces", only holding loyalty to profit, also attacked European based financial interests via our own CDS attacks against European debt? This is a theory that I've been trying to accumulate evidence for ever since I finally understood the destructive nature of CDS as a financial instrument.

Since CDS make perfect financial "weapons" due to their nature as "private contracts" not transparent to the rest of the markets, their use can be perceived as a national security threat. And such an attack could necessitate an active defense of our financial system and equity markets until such instruments are fully regulated and controlled (supposedly via "FINREG").

Here's another article comparing the housing bubbles in other parts of the world compared to the US. We weren't the worst, but given what the US is enduring, it will be not be very pretty as these other bubbles get popped.

Global Housing bubble choking World banking system

And Mish had some discussion of the under-reported (didn't see it on any business news websites or broadcast) ECRI data that's indicating we're set for another recession. Remember "double-dip" is essentially the same as a Depression.. They just don't want to call it that until the history books are written.

ECRI data is negative, practically guarateeing another recession

So.. the bottom line is that while the economic data doesn't support a higher stock market price at this time, it's likely we're going to get it for the foreseeable future because the "powers that be" refuse to let the markets fall.

The question is how long they can keep up this charade without publicly revealing their hand?

That's all for now..

Scrutinizer