DOUBLE DIP RECESSION (DEPRESSION?): Handwriting on the wall?
Latest ECRI economic data revisits 2007 pre-recession levels
Mish's take on the ECRI data
It's pretty damn clear, despite the refusal to admit the reality, that we've re-entered a double dip recession.
The recent unemployment data, exacerbated by the BP disaster, as well as mounting pressures to fire public (state and local) workforces will continue to decrease demand and likely create even more foreclosure risk. And as a previous post demonstrated, we had the lowest New Home Starts data since data started to be recorded (adjusted for population). The stimulus package was wasted paying benefits while providing no return in goods/services to the taxpayer (community service and/or infrastructure improvement). Additionally, bailing out TBTF banks meant they just took the money and invested it in Government debt, the interest for which comes out of taxpayer pockets.
And now we have the additional uncertainty, as well as the failure to deal with Credit Defaults Swaps, created by "FINREG" (Financial Regulatory reform). There is NO DOUBT IN MY MIND that this will add to deflationary pressures as banks come to terms with the new rules and regulations.
Don't get me wrong, we DEFINITELY NEED to regulate this financial casino we have created. Opaque derivatives trading need to be brought into the light of day. We need to limit the equally secret Credit Default Swaps markets to ONLY INSURABLE INTEREST so we don't have people trying to commit financial "arson" by buying insurance on assets they don't even own. (eventually I'll address this further in another post).
And now we have a Tropical Depression heading for the Gulf, which threatens to spew all of that oil up onto the beaches, if not picking it up and flying it inland. Let's face reality.. Two more months of 100K barrels of oil per day is going to most likely wind up impacting the keys and even finding it's way into the Gulf Stream.
And there's always the European uncertainty. But it's possible that, with this renewed interest in necessary, but deflationary, austerity measures, the US will HAVE TO follow suit. If we don't we may find our own currency under attack by the supra-national hedge funds.
I'm really looking for some good news out there.. I REALLY AM!!
If you have some... feel free to comment.
Scrutinizer
Friday, June 25, 2010
Wednesday, June 23, 2010
WORST NEW HOMES SALES SINCE 1981.. IN FACT, IT'S EVEN WORSE!!
US New Home Sales had the biggest drop since 1981.
New Home Sales data
HOWEVER, when adjusted for population, they were actually EVEN WORSE, as a very astute comment below reflects:
Housing starts actually lower than previous 1981 decline
To repeat this person's comments:
1980 USA population: 226.5 million ( ~228 million to approximate 1981)
2010 USA population: 309.2 million
1981: .338/228 = .001482 houses/million peeps or 1.5 houses per 100,000 peeps
2010: .300/309 = .000978 houses/million peeps or 1.0 houses per 100,000 peeps
[So, adjusting for population, this low is fully 33% under the 1981 low...
So.. that housing tax credit was all well and good, but it didn't put a bottom into the home sales market. That means, in order to clear out inventory, prices will have to come down EVEN MORE. And sadly, those folks who bought homes using that tax credit MAY actually find that EVEN THEIR HOMES will soon be under water soon.
Scrutinizer
US New Home Sales had the biggest drop since 1981.
New Home Sales data
HOWEVER, when adjusted for population, they were actually EVEN WORSE, as a very astute comment below reflects:
Housing starts actually lower than previous 1981 decline
To repeat this person's comments:
1980 USA population: 226.5 million ( ~228 million to approximate 1981)
2010 USA population: 309.2 million
1981: .338/228 = .001482 houses/million peeps or 1.5 houses per 100,000 peeps
2010: .300/309 = .000978 houses/million peeps or 1.0 houses per 100,000 peeps
[So, adjusting for population, this low is fully 33% under the 1981 low...
So.. that housing tax credit was all well and good, but it didn't put a bottom into the home sales market. That means, in order to clear out inventory, prices will have to come down EVEN MORE. And sadly, those folks who bought homes using that tax credit MAY actually find that EVEN THEIR HOMES will soon be under water soon.
Scrutinizer
Tuesday, June 22, 2010
China's market foretelling a Double Dip Recession?
Was perusing some of John Mauldin's postings and came across a guest article where the author posits that China is foretelling that the US is facing a potential Double Dip recession. He asserts that China's market leads the direction of US markets by at least 4 months. This would make sense as US buyers would require at least 1/2 year in "lead time" between goods manufactured in China, which would subsequently be shipped to the US for sale. Thus, China provides an interesting "Canary in the coalmine". This is all the more interesting given China's declaration over the weekend that they would show flexibility in pegging their currency to the USD. Some analysts are asserting they would not do this unless they felt confident about the stability of their economy. But other analysts suggest that China may actually find itself forced to devalue in order to improve the competitive desirability of their exports.
China: The Economic Elephant in the Room?
Figure 1 - Weekly chart of four major market indexes showing the Chinese Shanghai Shenzen Composite peaking along with the rest of them in October 2007 but bottoming well in advance of the others in spite of impressive Chinese economic numbers. So which indicator is right? Chart courtesy of GenesisFT.com.
Pay particular attention to the chart the author provides (as well as the notation below that chart that I posted above) showing the performance of the Shanghai index in comparison to the S&P500, the German DAX, and the Indian "Nifty" market.
For the past year, the Shanghai market has been in decline, having peaked in July, 2009. In comparison, the other 3 indices have continued their uptrend. The author, as I understand his comments, suggests that this would be an indicator that these three indices are due for a substantial pullback if they are resolve the divergence that exists with the Shanghai market.
The author also makes a compelling case that China is "cooking the books" and is in a SUPER-BUBBLE which, when it bursts, will have significant ramifications to global commodity prices.
The last thing the Chinese economy needs is a stronger Yuan, but they are facing tremendous political pressure from the G20 to let their currency appreciate.
Is it any wonder why Chinese officials have been so reluctant to let their currency, the renminbi, appreciate in response from demands from the U.S. and China's other trading partners? If the economy is in a bubble, the last thing it needs is a strengthening currency to exacerbate the problems.
The reader may also will recall my previous posting from Monday discussing the Ponzi Scheme that is Chinese real estate. Putting savings into a home, only to obtain a home equity loan against the appreciated value of the home, only to take the funds and RE-LOAN that money to a Loan Shark, who pays 20-150% interest (presumably charging their borrowers even more) is incredible, if true to the extent this is allegedly happening in Chinese "black markets".
Thus, in sum, if the Shanghai index is an indicator of the future for other global indices, that would suggest at least a 20% drop in the DOW and SPX.
Finally, I would offer this CNBC article by Herb Greenberg, which discusses how many Chinese companies have been engaged in reverse mergers into US corporate shells in order to gain access to US capital. Many American investors/speculators have been buying these up in the belief that the companies behind them have been properly vetted as legitimate companies. This could not be further from the truth as there are almost no mechanisms for legally requiring these Chinese companies to fully disclose, except US securities laws, which are extremely difficult to enforce against a Chinese company, even if it's stock is listed in the US.
Chinese Firms Using 'Back Door' to US Exchanges
Reverse Mergers often involve private US companies attempting to take the "fast track" to public status, avoiding the IPO phase, and the vetting that normally involves. Many of them are of extremely dubious credibility, if little more than scams and frauds, but they are accountable to US securities laws. So if the most common reverse mergers are "sketchy", having an unaccountable Chinese company go public in the US exchanges is potentially the quickest manner in which to lose your entire investment.
Most of all it's indicative of the "con-game" that China is playing against Western investors foolish enough to invest in China's bubblemania.
Scrutinizer
Was perusing some of John Mauldin's postings and came across a guest article where the author posits that China is foretelling that the US is facing a potential Double Dip recession. He asserts that China's market leads the direction of US markets by at least 4 months. This would make sense as US buyers would require at least 1/2 year in "lead time" between goods manufactured in China, which would subsequently be shipped to the US for sale. Thus, China provides an interesting "Canary in the coalmine". This is all the more interesting given China's declaration over the weekend that they would show flexibility in pegging their currency to the USD. Some analysts are asserting they would not do this unless they felt confident about the stability of their economy. But other analysts suggest that China may actually find itself forced to devalue in order to improve the competitive desirability of their exports.
China: The Economic Elephant in the Room?
Figure 1 - Weekly chart of four major market indexes showing the Chinese Shanghai Shenzen Composite peaking along with the rest of them in October 2007 but bottoming well in advance of the others in spite of impressive Chinese economic numbers. So which indicator is right? Chart courtesy of GenesisFT.com.
Pay particular attention to the chart the author provides (as well as the notation below that chart that I posted above) showing the performance of the Shanghai index in comparison to the S&P500, the German DAX, and the Indian "Nifty" market.
For the past year, the Shanghai market has been in decline, having peaked in July, 2009. In comparison, the other 3 indices have continued their uptrend. The author, as I understand his comments, suggests that this would be an indicator that these three indices are due for a substantial pullback if they are resolve the divergence that exists with the Shanghai market.
The author also makes a compelling case that China is "cooking the books" and is in a SUPER-BUBBLE which, when it bursts, will have significant ramifications to global commodity prices.
The last thing the Chinese economy needs is a stronger Yuan, but they are facing tremendous political pressure from the G20 to let their currency appreciate.
Is it any wonder why Chinese officials have been so reluctant to let their currency, the renminbi, appreciate in response from demands from the U.S. and China's other trading partners? If the economy is in a bubble, the last thing it needs is a strengthening currency to exacerbate the problems.
The reader may also will recall my previous posting from Monday discussing the Ponzi Scheme that is Chinese real estate. Putting savings into a home, only to obtain a home equity loan against the appreciated value of the home, only to take the funds and RE-LOAN that money to a Loan Shark, who pays 20-150% interest (presumably charging their borrowers even more) is incredible, if true to the extent this is allegedly happening in Chinese "black markets".
Thus, in sum, if the Shanghai index is an indicator of the future for other global indices, that would suggest at least a 20% drop in the DOW and SPX.
Finally, I would offer this CNBC article by Herb Greenberg, which discusses how many Chinese companies have been engaged in reverse mergers into US corporate shells in order to gain access to US capital. Many American investors/speculators have been buying these up in the belief that the companies behind them have been properly vetted as legitimate companies. This could not be further from the truth as there are almost no mechanisms for legally requiring these Chinese companies to fully disclose, except US securities laws, which are extremely difficult to enforce against a Chinese company, even if it's stock is listed in the US.
Chinese Firms Using 'Back Door' to US Exchanges
Reverse Mergers often involve private US companies attempting to take the "fast track" to public status, avoiding the IPO phase, and the vetting that normally involves. Many of them are of extremely dubious credibility, if little more than scams and frauds, but they are accountable to US securities laws. So if the most common reverse mergers are "sketchy", having an unaccountable Chinese company go public in the US exchanges is potentially the quickest manner in which to lose your entire investment.
Most of all it's indicative of the "con-game" that China is playing against Western investors foolish enough to invest in China's bubblemania.
Scrutinizer
Monday, June 21, 2010
Market Crash Warning?!!
The Chartist at Perfect Stock Alerts has been incessantly warning investors that the current market technicals are warning of a market crash. They have reiterated this warning in tonight's video:
Market Crash Warning?
It will be interesting to see if their predictions come true.
We did start off very strongly this morning, as predicted in my last post. But the market couldn't seem to hold the gains. Despite the fact that the SPX was up 12+ points over Friday's close, it gave all that back, plus an additional 4 points. That's not encouraging and smells strongly of "distribution" (selling into market strength)..
You can also see from the following chart that the market is overbought and ready to turn down.
SPX daily chart
Again.. what has to be watched in that Exponential 100 Week MA currently sitting at about 1103 on the SPX.
SPX with 100 Week MA (note: Bigcharts is not particularly accurate with it's MA plotting. I've confirmed the MA support level on my real-time trading platform).
Now mind you, there are differences in Moving Averages. I use the Exponential MA because it more heavily weights RECENT price data, as opposed to the simple MA which smooths the MA out over all available data. Exponential is supposed to react quicker to current market sentiment:
Exponential MA explained
There are a lot of different ways to use MA's. As previous readers may recall, someone turned me on to the fact that the SPX only infrequently violates it's 100 Week MA and when it does, it's usually a strong buy or sell signal (depending on if it's penetrating up or down through the MA). Over the past 6 months, the S&P has been struggling to make an upside penetration of that 100 Week MA, after the 2009 violation of it. It's been above and below it all throughout the spring, and right now the SPX is precariously close to penetrating back down (again) beneath that 100 Week MA. If it does that, one would think that it would send a powerful signal that it will be going down for a retest of Mar, 2009 lows (or at least back to July, 2009 levels @ SPX 900).
And then the question is how long it will take to regain the 100 Week MA.. It could take months, or even years. Such is the suggestion latent in the video posted above.
Very frightening to think we're looking at a chart formation that was seen once before in 1929, isn't it? If investors aren't intimidated by such a comparison, they have no business being in the markets. Some folks fail to recall that the market highs seen in 1929 were not seen again until 1954. That's correct.. it required 25 years before the market was back at the level it was in 1929. Now.. maybe some of you can wait 25 years, or even 15 years, for the market to return to it's previous highs, but most Baby Boomers can't.
And all along the way down, there are people who are shorting this market, standing to profit at the expense of current investors as the markets decline and stay down. Think about it.. if you shorted the market now @ 10,000 and it follows the '29-32 course, within a few years the DOW will be at 1,000 (10% of current value).
That amounts to a loan you don't have to pay back until 20 years from now.
Again.. I hope that I'm incorrect. I truly do.. But I'm just a small fish trying to get a few scraps from a feeding frenzy of financial sharks. They pumped up all of this bad debt with sub-prime loans and derivatives, making a fortune in the process. And now they are setting themselves up profit again (using Credit Default Swaps) as that bad debt collapses and defaults, destroying the money supply at a rate not seen since the Great Depression.
A relative asked me tonight how money is destroyed and walked her through it. You deposit (loan) money to a bank and they pay you interest. Using the fractional reserve lending standards, the bank can then CREATE MONEY by extending $9 of loans for every $1 in deposits they hold. Therefore, if you deposit $1 million dollars in the bank, that bank can extend $9 Million in loans, thereby increasing the money supply by $9 million. Get it?
And if they are paying you 1-2% on your million dollars, and they are collecting interest on $9 million in loans. So they can still make a lot of money even if a few loans eventually default. And when a loan is repaid, or defaults, it destroys a percentage of that money supply.. Get it?
And if you take your money out of the bank, you've suddenly pulled the rug out from under those $9 million in loans they have outstanding forcing the bank to then borrow from the Fed, or another bank, to make up for the money you withdrew, or their $9 million in loans will be undercapitalized. That's what many banks are doing now. They are borrowing from the Federal Reserve discount window at near 0% interest and then loaning it to the US Government (via US debt from the stimulus) at 3-4%. And for those who still have money in the banks, they are taking your deposits and loaning it to the US Government, which is then taxing you to pay the interest on that government debt.
Simply put, there's just not a lot of private lending taking place. Businesses are deleveraging, paying down debt, or just defaulting on their debt obligations. All of this is CRASHING the money supply and there's not enough government stimulus that can replace the rate at which debt is being extinguished.
Shadowstats Money Supply indicators
And since the financial system, and especially the markets, are like balloons that need a constant flow of monetary "air" to keep them inflated, when there is a reduction in the "air" money flow, the balloon deflates. Simply put, visualize a windsock.. Without a flow of air, it droops. Same with the economy.
So we remain a critical inflection point in the markets and the economy. This is going to resolve within the next few weeks (days?!!) and we'll going to find out which way this market is going to go.
Scrutinizer
The Chartist at Perfect Stock Alerts has been incessantly warning investors that the current market technicals are warning of a market crash. They have reiterated this warning in tonight's video:
Market Crash Warning?
It will be interesting to see if their predictions come true.
We did start off very strongly this morning, as predicted in my last post. But the market couldn't seem to hold the gains. Despite the fact that the SPX was up 12+ points over Friday's close, it gave all that back, plus an additional 4 points. That's not encouraging and smells strongly of "distribution" (selling into market strength)..
You can also see from the following chart that the market is overbought and ready to turn down.
SPX daily chart
Again.. what has to be watched in that Exponential 100 Week MA currently sitting at about 1103 on the SPX.
SPX with 100 Week MA (note: Bigcharts is not particularly accurate with it's MA plotting. I've confirmed the MA support level on my real-time trading platform).
Now mind you, there are differences in Moving Averages. I use the Exponential MA because it more heavily weights RECENT price data, as opposed to the simple MA which smooths the MA out over all available data. Exponential is supposed to react quicker to current market sentiment:
Exponential MA explained
There are a lot of different ways to use MA's. As previous readers may recall, someone turned me on to the fact that the SPX only infrequently violates it's 100 Week MA and when it does, it's usually a strong buy or sell signal (depending on if it's penetrating up or down through the MA). Over the past 6 months, the S&P has been struggling to make an upside penetration of that 100 Week MA, after the 2009 violation of it. It's been above and below it all throughout the spring, and right now the SPX is precariously close to penetrating back down (again) beneath that 100 Week MA. If it does that, one would think that it would send a powerful signal that it will be going down for a retest of Mar, 2009 lows (or at least back to July, 2009 levels @ SPX 900).
And then the question is how long it will take to regain the 100 Week MA.. It could take months, or even years. Such is the suggestion latent in the video posted above.
Very frightening to think we're looking at a chart formation that was seen once before in 1929, isn't it? If investors aren't intimidated by such a comparison, they have no business being in the markets. Some folks fail to recall that the market highs seen in 1929 were not seen again until 1954. That's correct.. it required 25 years before the market was back at the level it was in 1929. Now.. maybe some of you can wait 25 years, or even 15 years, for the market to return to it's previous highs, but most Baby Boomers can't.
And all along the way down, there are people who are shorting this market, standing to profit at the expense of current investors as the markets decline and stay down. Think about it.. if you shorted the market now @ 10,000 and it follows the '29-32 course, within a few years the DOW will be at 1,000 (10% of current value).
That amounts to a loan you don't have to pay back until 20 years from now.
Again.. I hope that I'm incorrect. I truly do.. But I'm just a small fish trying to get a few scraps from a feeding frenzy of financial sharks. They pumped up all of this bad debt with sub-prime loans and derivatives, making a fortune in the process. And now they are setting themselves up profit again (using Credit Default Swaps) as that bad debt collapses and defaults, destroying the money supply at a rate not seen since the Great Depression.
A relative asked me tonight how money is destroyed and walked her through it. You deposit (loan) money to a bank and they pay you interest. Using the fractional reserve lending standards, the bank can then CREATE MONEY by extending $9 of loans for every $1 in deposits they hold. Therefore, if you deposit $1 million dollars in the bank, that bank can extend $9 Million in loans, thereby increasing the money supply by $9 million. Get it?
And if they are paying you 1-2% on your million dollars, and they are collecting interest on $9 million in loans. So they can still make a lot of money even if a few loans eventually default. And when a loan is repaid, or defaults, it destroys a percentage of that money supply.. Get it?
And if you take your money out of the bank, you've suddenly pulled the rug out from under those $9 million in loans they have outstanding forcing the bank to then borrow from the Fed, or another bank, to make up for the money you withdrew, or their $9 million in loans will be undercapitalized. That's what many banks are doing now. They are borrowing from the Federal Reserve discount window at near 0% interest and then loaning it to the US Government (via US debt from the stimulus) at 3-4%. And for those who still have money in the banks, they are taking your deposits and loaning it to the US Government, which is then taxing you to pay the interest on that government debt.
Simply put, there's just not a lot of private lending taking place. Businesses are deleveraging, paying down debt, or just defaulting on their debt obligations. All of this is CRASHING the money supply and there's not enough government stimulus that can replace the rate at which debt is being extinguished.
Shadowstats Money Supply indicators
And since the financial system, and especially the markets, are like balloons that need a constant flow of monetary "air" to keep them inflated, when there is a reduction in the "air" money flow, the balloon deflates. Simply put, visualize a windsock.. Without a flow of air, it droops. Same with the economy.
So we remain a critical inflection point in the markets and the economy. This is going to resolve within the next few weeks (days?!!) and we'll going to find out which way this market is going to go.
Scrutinizer
Sunday, June 20, 2010
China: Ending the Dollar "Peg"?
China announced this weekend that they would show "flexibility" with regard to pegging the value of the Chinese Yuan to the US Dollar. This peg has been in place since 2007, as financial markets demonstrated turmoil. This, of course, has become a major economic issue as the US policy makers see it as blatant currency manipulation that prevents decreasing the US trade deficit (buying more from China than we sell to them).
So overnight futures markets are taking this as some sorely needed "good news" that could propel future US economic gains. Yet, there has been no change in the exchange rate peg and China has stated publicly that it will not make any moves in permitting it's currency to appreciate, nor can anyone truly expect that they would. Some are predicting that China's currency will actually DEVALUE against the US Dollar, given their dependence upon US and European markets to sell their goods. I have a feeling the Chinese will likely keep any variation very limited so as not to stir of financial chaos as people unwind positions they've held based upon the speculation that China would not de-peg the Yuan from the dollar. And China has stated that such "flexibility" is not going to solve the financial morasse we're ALL in (including China).
Flexible yuan won't rebalance world economy
Given my previous post, and the mounting evidence of China's real estate bubble posing a MAJOR problem, it's likely Bejing might even let their Yuan devalue against more transparent currencies in order to boost the demand for their products. Additionally, China is facing mounting pressures from it's workforce for increases in their salaries. Raise salaries in China by 25% and they will eventually have to devalue their currency to maintain their export competitiveness.
So much for the fundamental picture...
So what does all this mean? Well.. if you're short (as I am to a limited degree), we're going to feel some financial pain tomorrow and possibly into most of next week.
If you're long the market, you have to ask yourself whether this is going to truly make a major difference to the data I've been reporting over the past several weeks. Does this mean a new Bull market is underway, or did you just get handed the chance of a lifetime to sell your holdings into the short-squeeze that may possibly erupt this week? When the squeeze is over, it's likely this market is going to fall hard.
Remember.. if you're long the market, the most you can lose is 100% of your investment (assuming it goes to zero). If you're short, your losses are technically "infinite" if the market never declines. And there are lot of people who are short this market, for very solid fundamental reasons, and there could be a mad scramble to cover their short positions this week. They've all been looking for 1150 on the S&P to be the top of the Right Shoulder of this H&S. SPX 1250 will definitely prove them wrong. Anything lower than that level will either be a H&S right shoulder, or a Double Top of the previous 1200 April, 2010 high.
To repeat.. for those holding stocks (longs), your signal to stay long for a new Bull Market is if the S&P reaches 1250 (11300 Dow). If the market turns down hard before getting to that point, then your sell signal is a close below 1103 on the S&P500 and definitely be out if it gets back to below 1040.
Remember Longs.. for a Head & Shoulders formation to be nullified, it HAS TO MAKE A NEW HIGH on the right shoulder that exceeds by a good percentage, the previous high evidenced by the "Head". Again, that's exceeding at least 11,300 on the DOW and 1250 on the SPX.
SPX chart with 100 Week MA
Now.. here's the kicker.. remember that 12 years DOW chart I posted a few weeks ago?
Mother of all H&S revisited
For THAT long term H&S to be nullified, we need to see the Dow get back to 14,500 level we saw in 2007.
Get ready for the E-ticket ride starting at 9:30 AM tomorrow.
Scrutinizer
China announced this weekend that they would show "flexibility" with regard to pegging the value of the Chinese Yuan to the US Dollar. This peg has been in place since 2007, as financial markets demonstrated turmoil. This, of course, has become a major economic issue as the US policy makers see it as blatant currency manipulation that prevents decreasing the US trade deficit (buying more from China than we sell to them).
So overnight futures markets are taking this as some sorely needed "good news" that could propel future US economic gains. Yet, there has been no change in the exchange rate peg and China has stated publicly that it will not make any moves in permitting it's currency to appreciate, nor can anyone truly expect that they would. Some are predicting that China's currency will actually DEVALUE against the US Dollar, given their dependence upon US and European markets to sell their goods. I have a feeling the Chinese will likely keep any variation very limited so as not to stir of financial chaos as people unwind positions they've held based upon the speculation that China would not de-peg the Yuan from the dollar. And China has stated that such "flexibility" is not going to solve the financial morasse we're ALL in (including China).
Flexible yuan won't rebalance world economy
Given my previous post, and the mounting evidence of China's real estate bubble posing a MAJOR problem, it's likely Bejing might even let their Yuan devalue against more transparent currencies in order to boost the demand for their products. Additionally, China is facing mounting pressures from it's workforce for increases in their salaries. Raise salaries in China by 25% and they will eventually have to devalue their currency to maintain their export competitiveness.
So much for the fundamental picture...
So what does all this mean? Well.. if you're short (as I am to a limited degree), we're going to feel some financial pain tomorrow and possibly into most of next week.
If you're long the market, you have to ask yourself whether this is going to truly make a major difference to the data I've been reporting over the past several weeks. Does this mean a new Bull market is underway, or did you just get handed the chance of a lifetime to sell your holdings into the short-squeeze that may possibly erupt this week? When the squeeze is over, it's likely this market is going to fall hard.
Remember.. if you're long the market, the most you can lose is 100% of your investment (assuming it goes to zero). If you're short, your losses are technically "infinite" if the market never declines. And there are lot of people who are short this market, for very solid fundamental reasons, and there could be a mad scramble to cover their short positions this week. They've all been looking for 1150 on the S&P to be the top of the Right Shoulder of this H&S. SPX 1250 will definitely prove them wrong. Anything lower than that level will either be a H&S right shoulder, or a Double Top of the previous 1200 April, 2010 high.
To repeat.. for those holding stocks (longs), your signal to stay long for a new Bull Market is if the S&P reaches 1250 (11300 Dow). If the market turns down hard before getting to that point, then your sell signal is a close below 1103 on the S&P500 and definitely be out if it gets back to below 1040.
Remember Longs.. for a Head & Shoulders formation to be nullified, it HAS TO MAKE A NEW HIGH on the right shoulder that exceeds by a good percentage, the previous high evidenced by the "Head". Again, that's exceeding at least 11,300 on the DOW and 1250 on the SPX.
SPX chart with 100 Week MA
Now.. here's the kicker.. remember that 12 years DOW chart I posted a few weeks ago?
Mother of all H&S revisited
For THAT long term H&S to be nullified, we need to see the Dow get back to 14,500 level we saw in 2007.
Get ready for the E-ticket ride starting at 9:30 AM tomorrow.
Scrutinizer
Chinese Real Estate: A huge Ponzi scheme?
Found this article this morning and thought it provided an interesting take on the Chinese Real Estate boom. In sum, it would appear that Chinese home owners get a loan against their home, and then loan that money out to "Shark Loan" organizations.
Chinese Real Estate one huge Ponzi scheme?
More later.. Happy Father's day!
Scrutinizer
Found this article this morning and thought it provided an interesting take on the Chinese Real Estate boom. In sum, it would appear that Chinese home owners get a loan against their home, and then loan that money out to "Shark Loan" organizations.
Chinese Real Estate one huge Ponzi scheme?
More later.. Happy Father's day!
Scrutinizer
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