SPX and RUT to retest previous lows:   Will they hold, or is there more downside to come?

Turmoil in the Euro, which closed below 1.20 to the USD for the first time in 4 years.  Hungary suggesting that debt default is not out beyond exaggeration.  Continuing tensions on the Korean Peninsula.  AND, OF COURSE, the lousy jobs report where only 20,000 private sector jobs were created in May..   The list goes on for reasons to sell this market.

I ran the Hourly chart on both the S&P 500 (SPX) and the Russell 2000 (RUT) and discovered that the 30 Hour Moving Average (MA) has crossed under the 50 Hour MA.   The previous two instances where this occurred resulted in nearly 100 point losses on both indices before they bottomed.

SPX Hourly chart:

RUT Hourly Chart:

Follow the yellow line (30 Hour MA) as it crosses below the 50 Hour MA (blue line).

Very frightening, eh?

But it's possible that we may see a relief rally that takes us back up to that 30 Hour MA. That would likely be the time to sell or short, and look for a bottom. For the RUT, that short-term bottom may occur at RUT 570.

Scrutinizer

Bilderbergers throwing a Euro "Bash"??

It seems the Illuminati (err.. Bilderbergers.. ;0) are throwing their annual bash near Barcelona this year (love that city!)

http://www.timesonline.co.uk/tol/news/world/europe/article7142478.ece

Can they save the Euro?   Or are they actually behind it's demise?

I wonder how many of them are holding Credit Default Swaps on European debt, hoping the whole lot defaults and transfers considerable wealth into their coffers.

I always find it a bit humorous to read all the conspiracy theories about the Bilderbergers, Trilateral Commission, and CFR.   I'm sure that these guys probably like to think they have some control over the "New World Order", but I'm sure trying to control human beings is tantamount to herding cats.

 And I've no doubt that various groups are always plotting and scheming to impose their will (or profit from turmoil).   But they've got a lot of competition from the Arabs, the Chinese, and of course, the Hedge Funds.

For every conspiracy there's a counter-conspiracy, IMO.

Scrutinizer

SPX Monthly SAR "Flips".. Bearish signal?

The SPX Parabolic SAR has flipped downward.   Previous instances where this has occurred has provided a strong signal of an significant decline in prices.   The last time this occurred was in 2008.

Currently the Monthly PSAR is located at 1220, which coincides with the 50 Month Moving Average.   That may provide a powerful obstruction to higher prices and signal distribution.

HOWEVER, this doesn't mean that the index won't make an attempt to bust through 1220.   Should it do so, the PSAR will flip upward, at around the 200 Month MA.

One thing is clear, the SPX needs to maintain the 200 Month MA, or it's going to get VERY interesting.

And here's a bonus chart.. AAPL is knocking it's head on its Weekly PSAR. It truly needs to "flip" this if it's going to achieve new highs. Currently that "flip" point appears to be $267/share.

Also note that once they do manage to flip these SARs, we'll often see a period of consolidation to the middle of the Bollinger Band channel (the black dotted line).

Recall from a previous post that I'm watching AAPL very closely because it's the now the largest Nasdaq stock out there, having surpassed MSFT in market cap.   MSFT was the darling of the markets in 2000 and when it's stock declined, it signaled the end of the Internet Bubble, which also formed the left shoulder of this 10 year Head and Shoulders formation we've been putting in place.   So now I opine that AAPL represents the one stock that will indicate when the right shoulder of that Head and Shoulders has been put in place.   No new high and we could quickly see a sell-off to far lower prices.

Phytoplankton Declines and Rising CO2 levels: the missing link?

For a long time I've been a skeptic with regard to the effects of CO2 on our climate. CO2 levels have been higher and lower throughout Earth's history, long before mankind ever emerged as a parasite on the back of "mother earth":

500 million CO2 record

CO2 record for the past 400,000 years

Throughout those millions of years, nature has dealt with those excessive CO2 emissions that have emanated from various natural sources. Botanical life adapted to consume it until a form of equilibrium was established according to available resources. This floral bio-remediation took the form of both terrestrial plants, as well as oceanic plant life in the form of single celled phytoplankton that form the foundation of the marine food chain along with sequestering over 50% of all atmospheric CO2.

We been bombarded with warnings from folks like Al Gore, Tom Friedman, and so many others, all trying to convince us that our hydrocarbon emissions have increased CO2 levels to the point where we're on a unstoppable cycle of global warming (or is it climate change now?). It's claimed that CO2 levels are up to 30% above the known cyclical highs from previous warming periods and that ONLY man-made CO2 emissions can be responsible for that increase.

But could there be another reason that atmospheric CO2 levels have increased? Could it have something to do with the fact that phytoplankon levels have declined 20-30% over the past 30 years??

Isn't just a bit coincidental that CO2 levels have risen at a level that corresponds to observed phytoplankton declines?

If the ability of the oceans to absorb CO2 diminishes by 20%, does it not make sense that atmospheric CO2 levels would rise by the same level?

This, of course, assumes that all the necessary nutrients exist to permit phytoplankton to flourish. Anyone with a green thumb knows that it requires the proper balance of nutrients, temperature, and solar exposure, to make a garden grow. If any of these elements are lacking, plant growth is inhibited.

Many scientists have noted this decline, but have attempted to blame it on increased ocean temperatures, although I'm not sure the science upholds their theories.

Phytoplankton declines of up to 30% in several oceans

Decline in phytoplankton due to warming oceans?

Historical Decline in Phytoplankton coincided with Global COOLING.

Now.. one of the elements that's critical to ALL plant life is Iron. Without it, plants can't produce chlorophyll. Without chlorophyll, plants cannot absorb CO2, or conduct photosynthesis, by which they produce both their food and oxygen. Iron deficiency results in a condition known as Chlorosis:

Chlorosis

In numerous areas of the planet's oceans are "dead spots". Despite being rich in nutrients, they do no sustain significant quantities of phytoplankton. Dr. John Martin proposed during the 1990's that the addition of a small quantity of iron in High Nutrient, Low Chlorophyll (HNLC) areas of the ocean would produce large blooms of phytoplankton and sequester tons of CO2. In fact, the very fact that these areas ARE HNLC, but not producing phytoplankton, seems the most damning evidence against blaming warming oceans being the cause of phytoplankton declines.

John Martin and the Iron Hypothesis

Pros and Cons of Iron Fertilization

Given sufficient nutrients, there should be no limit to how much CO2 can be sequestered by botanical life forms. Plants will grow until they lack a vital element they require to sustain that growth. But since Iron is a rare element in our oceans, blown there as eroded dust from terrestrial winds, it's the one factor that limits the growth of phytoplankton.

And I'll admit that it's possible that anthropogenic emissions of CO2 from the burning of hydrocarbons has depleted oceanic deposits of Iron. But that only suggests that we have a responsibility to replenish that iron, if only because phytoplankton are also the foundation of the marine food chain. Every marine life form depend upon phytoplankton, directly or indirectly.

John Martin died many years ago, but his theories still live on. Various scientific expeditions have been launched to prove his theories, but have generated tremendous opposition from other scientists who reject the idea of "geo-engineering".

Yet.. we need Carbon Credits to "resolve" the alleged problem of "Climate Change"? We need to tax people, granting permission for them to emit a natural substance, CO2, which nature using as a vital element in the growth of botanical life on this planet?

This is crazy.. And it's dangerous because it leads us into Malthusian style thinking and population control. It's ultimately about the elite, who can afford to buy into the carbon credit scheme, controlling the masses, who cannot.

I'm just as much a conservationist as your average person.. But I'm not so stupid as to actually believe that CO2 is a "pollutant" as the EPA would like to have us believe. Too much of ANYTHING is bad. Too much oxygen would be just as bad for the existing ecosystem as too much CO2. But nature has experienced numerous periods where there was too much CO2 and plant life restored the equilibrium over time, as nutrients became available.

Scrutinizer

Conspiracy Corner: Goldman Sachs, Carbon Credits, and the BP oil spill.

Ok.. I'm not generally one who is given to conspiracy theories, but I've found one that's has, even me, saying "WTF!!".

We all know how this BP oil spill on the southern coast has proven to be extremely difficult to contain. Failure after failure has been the result and now this final attempt to cut the well-head pipe has resulted in the saw getting stuck.

The environmental fallout is seen as a catastrophe that rivals Katrina in it's potential for devastating the fishing industry and sullying any number of gulf coast beaches. In an attempt to contain the spreading oil slick, they have sprayed dispersing chemicals (very toxic in their own right), and attempted to use booms and skimmers to contain and collect the slick.

But there is a conspiracy theory that is starting to go viral regarding the entire event. I'm not going to suggest that I subscribe to this theory, but it raises questions that deserve to be answered.

Let me start here.. A report that Goldman Sachs sold over 4 million shares of British Petroleum in the 1st quarter of this year:

According to regulatory filings, RawStory.com has found that Goldman Sachs sold 4,680,822 shares of BP in the first quarter of 2010. Goldman's sales were the largest of any firm during that time. Goldman would have pocketed slightly more than $266 million if their holdings were sold at the average price of BP's stock during the quarter.

If Goldman had sold these shares today, their investment would have lost 36 percent its value, or $96 million. The share sales represented 44 percent of Goldman's holdings -- meaning that Goldman's remaining holdings have still lost tens of millions in value.

Goldman Sachs big oil "spill"

How convenient!! How fortuitous for the company that had 100 STRAIGHT DAYS of trading profits (which means, for 100 days, anyone that traded against them lost). How fortuitous for a company that's banking serious cash using High Frequency Trading (recall that, reportedly, these HFT systems were turned off during the "Flash Crash" that led to a 1000 point drop in the DOW.

GS, the "Vampire Squid"?

According to a SEC filing released earlier today, Goldman Sach Group Inc.'s traders made a total of $9.74 BILLION in net revenues in Q1/2010. This number works out to a total of 76% of the company's first quarter revenues.

An even more incredible number - of the 63 trading days in Q1/2010, the traders at Goldman Sachs did not have even ONE losing day.

That's right - Goldman Sachs hit .1000 in the first quarter. This stunning result doesn't exactly help the firm remove the perception that the markets are rigged by and for Goldman Sachs.

Of the 63 trading days in Q1, Goldman Sachs reported profits of over $100 million in 35 of them. So, the traders at Goldman Sachs managed to rake in over $100 million for the firm in over half of the days in Q1/2010.

The Gold Sach Profit Machine.

Not a single losing day for GS in 1st Quarter 2010.

Ok.. so now we see the foundation of the the financial conspiracy. GS sells BP.. BP has a terrible accident that STILL DEFIES EXPLANATION, and now we find out it may be August before the spill is contained. It's a disaster!! A catastrophe!! It's ruining Obama's opinion poll numbers!!

Heck, even Thomas Friedman, is becoming hysterical, sitting in his energy gulping, Bethesda, MD mansion, declaring that the BP oil spill is Obama's "9/11":

No, the gulf oil spill is not Obama’s Katrina. It’s his 9/11 — and it is disappointing to see him making the same mistake George W. Bush made with his 9/11. Sept. 11, 2001, was one of those rare seismic events that create the possibility to energize the country to do something really important and lasting that is too hard to do in normal times."

BP disaster is Obama's 9/11.

Now what kind of "Lemonade" could Obama possibly make from this box of sour citrus?

How about shutting down all offshore drilling in the Gulf, a major political issue for the more environmentally minded liberals?

How about getting that darn "Cap & Trade" legislation passed? This BP event has the potential for re-instilling some serious "mojo" into the Carbon Tax concept re-energizing the idea that we need a Carbon tax to force us to use alternatives to hydrocarbons

Goldman Sachs is a founding member of the "Green Exchange"

Big Money to be made in trading Carbon Credits!! And with their demonstrated expertise in going for an entire quarter without a loss suggests they want to rig the Carbon markets too!!

Now.. did you listen to Obama's speech this afternoon? It was vehemently political, blaming Republicans for obstructing all manner of policy initiatives put forth by Obama's administration, including Carbon Credits:

And the time has come to aggressively accelerate that transition. The time has come, once and for all, for this nation to fully embrace a clean energy future. (Applause.) Now, that means continuing our unprecedented effort to make everything from our homes and businesses to our cars and trucks more energy-efficient. It means tapping into our natural gas reserves, and moving ahead with our plan to expand our nation’s fleet of nuclear power plants. It means rolling back billions of dollars of tax breaks to oil companies so we can prioritize investments in clean energy research and development.

But the only way the transition to clean energy will ultimately succeed is if the private sector is fully invested in this future -- if capital comes off the sidelines and the ingenuity of our entrepreneurs is unleashed. And the only way to do that is by finally putting a price on carbon pollution.

Obama June 2, 2010 speech at Carnegie Mellon

And who's to set that price for "Carbon Pollution".. Why Goldman Sachs, of course!!

So there's the financial foundation for the BP conspiracy.

But wait.. There's another tangent to this BP oil conspiracy. Some have asked the question as to why it's taken so long to FINALLY figure out a NATURAL MEANS of dispersing and eliminating these millions of barrels of Hydrocarbons spewing from ocean floor? They've spread dispersing agents, which are just as toxic as the oil itself, but ONLY NOW are we seeing commentary about using PROVEN natural microbes that feast on hydrocarbons. In fact, these microbes evolved in response to NATURE'S own little oil spills, which have occurred over the eons.

Watch this video.. as tens of thousands of other people have, and ask yourself why this technology wasn't deployed immediately?

Oil Eating Microbes could mitigate much of the damage to the Gulf oil spill

Yes indeed... Why weren't oil consuming microbes immediately deployed to consume the oil spewing from that well? Especially since these microbes would then recycle that oil back into the marine food chain, serving the purpose for which nature evolved them?

Nature has dealt with oil leakages for Billions of years and we think we can do a better job?

Scrutinizer

Two items for this morning.. "“Individual investors placed a greater emphasis on return of capital last month because of the volatility in the stock markets. The movement of portfolio dollars out of equities and into bonds/bond funds and cash corresponds with the latest AAII Sentiment Survey, which showed bearish sentiment at 50.9%, the highest level of pessimism recorded since November 5, 2009. (Bearish sentiment is the expectation that stock prices will fall over the next six months.)”"

Are small investors popping smoke and leaving the stock market?

It's worth going back and reviewing this article on what likely caused the flash crash of early May:

"According to this Wikipedia article on quantitative trading strategies, HFT recently accounted for more than 70% of all trading volume on US stock exchanges. Does it matter when these firms stop trading and pull all their bids? You bet it does."

Dress Rehearsal for fully automated crash.. Flash Crash revisited

Pretty frightening prospect to know when you're buying a stock you're trading against computers who can pull the rug out from under the market for your company's shares in a split second.

It's apparent the markets are not so much about human decisions regarding "price discovery" in assessing the fair market value of a particular asset. Computers are making these decisions and they are non-emotional, calculating devices. So essentially people are just feeding money into these digital trading systems, systems that can quickly manipulate prices for a stock with the flip of a switch.

Little wonder that investors saw the "flash crash" as a sign that the market is rigged against them and have decided to seek safer havens. And certainly that decision has been influenced by the tremendous event risk I spoke of in my previous post.

Scrutinizer

When will the pain end (at least for now)??

There's a sentiment indicator that some technicians utilize to help assist in determining bullish/bearish sentiment.

This is for the Dow Industrials.

$BPINDU bullish sentiment

Note that the trend line indicates that the likely potential bottom will be when bullish sentiment reaches 36%. It may go lower, it may reverse higher than that trend line.. It's just a reference and we can see that it's bottomed at previous points on the trend line.

Note... you can also pull up a Point and Figure (PnF) chart (the Grand-Daddy of all Technical Analysis) for the DOW and SPX ($indu, $spx.. and throw in the Russell 2000 for good measure, $rut)

They will show you that the SPX has a downside target of 925 on this Pnf chart:

S&P 500 PnF

And for my friend Megan, here's that Video I promised you where the Karl Deninger makes a analogy between current market conditions and 2007:

Whistling past the (Investors) Graveyard


Scrutinizer

Commodities are collapsing.. Bear signal we haven't seen since fall of Lehman..

Bear Signal... Commodities show biggest drop since Lehman collapse.

Watch the RUT (Russell 2000). It's being cannibalized to prop up the larger indices so they can distribute.

As Richard Russell stated, we have a "Hard Rain" coming.

Hard Rain a'coming!!

Scrutinizer

How to define "Event Risk".

Ok.. I'm motivated to write another post today because my head is reeling over what transpired overnight with Israel's boarding of that Turkish vessel filled with "humanitarian aid" for Palestinians living in Gaza.

First off.. I'm going to try and maintain my objectivity with regard to Israel's actions. I'm not Jewish, nor am I a die-hard Zionist. The only reason I support Israel is because it's the only truly democratic state (flawed as it may be) in the region. Hamas, although it was elected, can hardly be considered "democratic", nor do they permit any effective opposition. Furthermore, they have publicly stated that it's not just the elimination of Israel that they seek, but also the restoration of the Islamic Caliphate, as well as conquest of Europe and the "Two Americas"..

Don't believe me? Watch for yourself (courtesy of MEMRI):

From the Horse's mouth.. Dirka, Dirka, Jihad

It's clear that Hamas is in a perpetual state of war with Israel until they have succeeded in destroying the Jewish state. They will not make peace because it would be against their political charter and undermine their very "raison d'etre".

But politics aside, the issue at hand is how Israel should respond to attempts by so-called "humanitarian" groups attempting to assist Hamas and remove the blockade/seige.

I think Israel didn't think this through very well. Obviously fast-roping commandos onto the decks of this ship didn't turn out the way they thought it would. Now they have created an ENORMOUS problem for themselves because the 9 deaths that resulted have made their former ally, Turkey, extremely angry, possibly to the point of open hostilities.

Israel should have relied upon non-lethal means to disable the ship. The use of heavy netting, laid in front of, or bracketed by several Israeli patrol boats, would likely have fouled the ship's propellers and forced it to be towed.

And now that these groups are threatening to send another ship to break the blockade (the RV Rachel Corrie, registered in Ireland), they DEFINITELY need to get a grip on a non-lethal deterrence or interdiction technique that separates protesters from IDF personnel. The Israelis have already stated they will stop and detain this, and any other ship, that attempts to break the blockade.

However, in the process Israel has now essentially alienated any allies that it possessed, so we should not understate the level of tension right now. Egypt, which had been also blockading Gaza, has suddenly opened up those gates. It's even possible that Egyptian forces may be mobilized to establish a presence in Gaza. If this occurs, hopefully it will lead to the overthrow of Hamas (which Egypt truly despises as it is an offshoot of their own Muslim Brotherhood).

But how are the markets going to take this is the question? Who in their right mind is going to believe that a potential war between Turkey and Israel would be a reason to buy stocks, either in Europe, or the US?

North Korea

North Korea is a situation that is also factoring into global "event risk". NK is a nuclear power and therefore, presents a scenario where they could choose to create significant turmoil in the region with only the risk of economic sanctions (which already exist). There is no way the UNSC is going to vote for any military response in answer to the sinking of the S. Korean ship.

One should also remember that NK has several hundred artillery batteries within range of Seoul, S. Korea. Any outbreak of hostilities would lay the SK capital to ruins and result in a horrendous refugee problem, as well as economic tumult for the 15th largest economy in the world. It would become a war of attrition fought across the 38th parallel and via naval engagements and bombing raids.. All because no one in their right mind would be willing to risk a nuclear attack that would be the obvious response to any threat to the NK regime.

Kim Jong Il is getting old and he wants his son to assume power upon his death. But the military, it is rumoured, doesn't think Kim is being aggressive enough and it's possible they are following their own course of action with regard to war with SK. Generals derive their power from their "toys" and if they don't get to eventually use them, they can assert the current regime is not assertive enough in advancing NK's interests.

So, regardless of whether Kim actually ordered that attack on the SK ship or not, he owns the situation now and has to save face and stand firm and defiant. He will not bow to Chinese pressure, IMO. And China has no desire to see hundreds of thousands of NK refugees flooding across their border with NK.

It's also possible that Bejing has an interest in permitting a bit of turmoil to erupt in order to advance their own global political position. I don't see them exerting too much pressure on Pyongyang without obtaining some valuable concessions in return.

Thus, why would anyone want to buy stocks when such a scenario lies before them?

Europe

Then there's the problems with the EU.. I'll be short with this since it's been covered all over the internet. The Euro came within a hair's breath of breaking long-term support this morning and sparking a decline that some postulate would result in parity between the USD and Euro. (1:1). It's possible that this may happen tomorrow..

Understand this. Europe NEEDS AND MUST HAVE a lower Euro if they are to grow their way out of this debt mess in which they find themselves. They need to EXPORT BABY, EXPORT!! to generate revenues. So they are pursuing a "beggar thy neighbor" policy that has been followed by both Japan and China for years now. And all of this will be at the cost of US exports and markets. We'll buy more and sell less, thereby reigniting the long-standing problem of our trade deficits.

So don't expect Europe to get it's act together anytime soon. They want a cheaper Euro, but they have to be careful how they go about achieving it without appearing to be waging the mercantilist economic war they require.

Also remember that China owns over $600 Billion Euros worth of reserves. If the Euro falls to parity with the USD, China takes nearly a 20% haircut on that cash stockpile. That's not going to sit well with them.

Flash Crash.. Is this fixed, or just a preview? Or can the computers get switched off again and send the DOW down another 1,000 points in the blink of an eye??

I'll be honest.. I'm playing TZA, which is a Ultra-short ETF that's inverse to the Russell 2000. I figure that even if the Dow and S&P manage to stabilize in the short-term, it's going to come at the expense of the small caps. They are going to become a source of funds for propping up the large cap indices as a last gasp effort to stave off what appears to be the inevitable collapse from that 10 year H&S formation we're forming.

So that's what our markets are facing right now.. Why do you want to buy when your potential loss is upwards of 40-70% before all is said and done?

And lastly, I'll leave this to ponder.. What if you were any number of leaders of a tyrannical rogue state. And what if you had considerable assets (all of which you've exploited from your oppressed masses) squirreled away in foreign bank accounts? And what if you happened to be savvy enough to see that 10 year H&S formation and wondered, "What can I do to initiate, and therefore profit from, that collapse? Kim Jong Il has billions of dollars worth of assets in foreign accounts, all managed by his son.

Seems to me that's one hell of a motivation to create as much tension as possible short of outright war and risk to the regime.

That's all for now.. more later...

Scrutinizer

Been about a year since I've blogged.. Things have been hectic and full of family crisis..

I've decided that I need to post this chart for everyone to ponder. It involved a chart formation that Technical Analysts refer to as a "Head & Shoulders" formation. It's EXTREMELY BEARISH if it resolves to the downside.

Here's the chart:

Mother of All Head & Shoulders

One must recall that while this chart covers from the 1960 to present, the most important portion to review is the past 11 years from the popping of the internet stocks, through 2008 and the popping of the real estate bubble, to present day, where "event risk" is in all the headlines. This event risk can range from the breakup of the EU to potential conflict on the Korean peninsula or mid-east.

In understanding H&S formations, there is a left shoulder (formed in 2000), the head (formed in 2007), and now the right shoulder (formed over the past 2 years).

David Singer pointed out this H&S formation and potential implications in the following chart. Pay particular attention to the potential scenarios he draws out at the bottom left of this chart. Note that he is describing a "minor" H&S potentially forming within the time range of 2008 to present, while the chart I show above is over 11 years:

Anyone got a parachute?

And another market analyst who sees the same thing and posts his opinion on the DOW, as well as many other critical charts important to future economic growth:

Even more frightening charts

Now for those who have paid attention, they will recall that in 2000 Microsoft (MSFT) was the largest cap stock in the Nasdaq and that marked the top of the "left shoulder". Right now Apple (AAPL) has surpassed MSFT's market cap for the first time and it's my belief that it will determine when (or if) that right shoulder manifests itself. I see that there was a upgrade for AAPL today that puts a target on the stock well over $300 (currently $264 as I type this). A new high in AAPL, or breaching of the Weekly Parabolic SAR at $267-268, could provide a respite to the downturn. It's a critical price level I'm watching.

Additionally, we had the "Flash Crash" where the DOW dropped 1000 points in under 15 minutes. We still have no explanation for that event. I suspect that it reflects the fact that more and more investing is computerized and when the computers shut down (especially those conducting "High Frequency Trading") it pugs the rug out from under the market. I don't see anything that prevents another repeat of such an event.

Does that make you want to go long in this market?

The implications are clear.. We're at an inflection point in the American stock markets that we haven't seen since the 1930's. If this market resolves into a H&S formation, the consequences (and price declines) will be incredibly severe. Support on this chart is not likely until DOW 3,000.

Now.. many readers might question and say.. "Hey Scrut.... Most US companies have posted better than expected earnings this past quarter.. so how can the markets go down??!!!"

Listen.. we had a Trillion $$ DIRECT STIMULUS package, almost 10% of US GDP, that has only yielded 3% economic growth. That's a 3:1 ratio of taxpayer funded debt to generate 3% economic growth.

JPM has a balance of almost $1 Trillions, yet could only obtain 3 Billion in profit:

"JP Morgan has a balance sheet of $1 trillion and can borrow at essentially zero, he notes. So if they just go out and buy 10-year bonds at 3% they should be able to earn $30 billion a year. Yet the bank announced a profit of $3.3 billion last quarter."

How to make $3 Billion on a Trillion dollar portfolio (scroll halfway down)

Furthermore, commodities are no safe haven (beware gold bugs):

Commodities Con

Richard Russell, noted student/teacher of the Dow Theory has issued a dire warning of impending collapse (and he has considerable credibility).

Hard Rain a'coming!!

What we're seeing is deflationary pressures and de-leveraging. A world gone crazy and extremely vulnerable to event risk. M3 money supply contracted at rates not seen since the 1930's.

M3 money supply contracts at 1930's pace

That's people paying off, and/or defaulting on debt. Debt that is erased equates to destruction of money supply. Destruction of money supply that exceeds creation of new money (via new interest bearing debt) is deflationary.

Most importantly, the speculation in unregulated "naked" Credit Default Swaps is creating a domino effect where asset prices are being undermined by "non-insurable interests". That's a fancy way of saying that your neighbor can speculate that your house will burn down, buy an insurance policy against such an event, and the proceed to perpetrate arson against your home in hopes they can collect on that insurance.

Why would any company, or nation for that matter, want to issue new debt under such conditions? Without regulation of the CDS markets, there is no incentive take on risk to create economic growth. That's incredibly deflationary.

Therefore I'm recommending either people move to cash, bonds, or "Bearish" ETFs (though not without their own inherent risk given that several ultra-bear ETFs were just as affected by the "Flash Crash" as the long ETFs).

Bearish ETF list

I'll try and post more often now.. We're at a very critical inflection point in our markets, IMO.. And I'm advising all my friends to get defensive until we see clear signs of a buy signal. One of the means I use to assess that is using Parabolic SARs as a TA indicator. I'll try to speak more on that in a future post.

Scrutinizer