Sunday, November 29, 2009

Nikkei vs Dow 2 year chart

As a follow up to yesterday's charts on the Nikkei and Dow I have another chart today showing both indexes plotted on the same 2 year chart. As you can see there has begun a divergence of the 2 Indexes. The Nikkei has been going steadily down of late as the Dow continues to rise. It is my strong belief that the Dow will turn down and join the Nikkei once again, as the 2 indexes do track each other very well. At this time their spread is greater than it has been over this 2 year period.

With the Dubai troubles over non payment of their loans, this could increase the magnitude of the reversal. It's a good time to be on the Short side of this market. The ETF, TZA, should increase, as should FAZ as both are Ultra Shorts. TZA is a Triple Short of the Russell Index and FAZ is an Ultra Short of Financials.

Note, the chart is on a Log scale.

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Saturday, November 28, 2009

Keep watching the Nikkei to forecast the Dow's eventual move.

I was looking at my posts from October 20th when I said if you want to know where the Dow was going to go, watch the Nikkei 225 Index. As you can see above the fist chart shows where we were back on October 20th and it showed we broke above the resistance line but then retreated back below it. The 2nd chart shows where the Nikkei last closed. You will notice that the Nikkei did continue to go lower and, in my view, it foretells of the fate of the Dow. (Note, all 3 charts are on Log scale and are 5 year charts.)

The third chart below is a 3 year chart of the Dow. If you look at both the second chart above of the Nikkei and then look at the Dow chart below, it appears that both Indexes have retraced back to there they were near the end of October of 2008 where both Indexes dropped precipitously. There has been a divergence between the Nikkei recent drop and the Dow. It is clear to me that the Dow has gotten ahead of itself.

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Thursday, November 26, 2009

The word today is THANKS!

I wanted to thank all of my readers for coming to this site, as it has been a labor of love for me the past 4 1/2 years, with occasional days of wanting to throw in the towel. :) What has kept me going in the low points is the fact you visit and read my political commentary or are looking to my views on the stock market. I have tried to make this a friendly, bash free zone and only have deleted comments which were language inappropriate, never because of a differing view. I plan on continuing to do this indefinitely, so please come back and visit the site, read the posts and make the comments as you make me better at doing this.

A special THANK You so very much for your support. To my ever faithful readers:
Mitch, Tom, Laddy Brother, Alan, Mac, Joe, Cheshta, Stuart, Phil, Kirk, Pete, JW, Pam, Scott, Enrique, Bill, Uncle John, Chris, Michelle, Ventana and Larry, Curley and Mo. And a special thanks to ANONYMOUS for making so many comments these past years.

Happy Thanksgiving!

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Tuesday, November 24, 2009

3rd Quarter Final GDP numbers

CNBC reported this morning that the final GDP numbers came in at 2.8% versus a preliminary number reported a month ago at 3.5% 3Q Final sales numbers came in at 1.9% versus 2.5% preliminary numbers. So after some time when we were all excited because it looked like we had a 3.5% GDP, and the "Green Chutes" were everywhere, it looks like it wasn't that good after-all.

Business investment was down 4.1% for 3Q according to the numbers released today.

I believe we will hear a similar story on Monday morning when Retail Sales are reported for the Friday and saturday after Thanksgiving. It too will be revised downward after a few weeks into December. This entire season is being manipulated to get people to spend and save businesses. There isn't anything wrong with trying to save businesses if you have some money to spend. It's just that the average houshold doesn't have any right now. And 20% of them are unemployed as well.

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Friday, November 20, 2009

Congressman Kevin Brady Grills Timothy Geithner

Watch Congressman Kevin Brady, Republican from Texas, ask Sec. of the Treasury, Timothy Geithner, to resign and watch Geithner's response to the rude questioning and claims by the Congressman on this YouTube LINK.

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California's Unemployment rate for October is abysmal

California Unemployment rate has climbed, yet again. from 12.2% in September to an astounding 12.5% in October. Remember this is the official unemployment rate and does not include those who have stopped looking for work or have run out of benefits. Nationally, that number was 17.5% for October, but locally in California that number most likely exceeds 20%. That's 1 in 5 people are unemployed. The real economy is not going to get better until these people can get jobs, any jobs!

To link to news item for other states click on this link below:
Unemployment news story and this article below:

Other Unemployment article

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Thursday, November 19, 2009

Market summary for Nov. 19th

Just a short entry today on the stock market action. First, it is clear we did go up above the 3 year downtrend line I have been discussing in many several previous posts. (see Nov. 14th post) Secondly, the candlestick pattern for all 3 indexes was a "Hammer" pattern. I was looking at the 6 month Dow chart, as shown above and the more easily seen 1 month chart and noticed that this Hammer pattern has not occurred on the way up in the entire 6 month chart. It is easier to see what a Hammer pattern looks like from today's close in the 1 month chart. The significance of the Hammer pattern is that it usually signals the end of a trend. In this case it is the up trend the Dow has had now for many months. Let's see if there is follow through over the next few weeks.

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Sunday, November 15, 2009

Change We Can Believe In?

I was watching a news clip yesterday and saw pictures of President Obama at an Asian Conference abroad. It had the heads of state of the Nations attending all dressed in local garb and then taking the obligatory photo. Included in the group was our President who was in local dress also and it reminded me of the phrase, "Change We Can Believe In". In that moment I asked myself was President Obama the change I was looking for. The answer is unequivocally, YES!

For the past 10 to 15 years, I have been embarrassed by our Presidents. Yes, first it was with Bill Clinton and his sexual escapades with the culmination of the Monica Lewinsky affair and subsequently his impeachment. Then it was 8 long years of President Bush. He was a terrible President, embarrassing not just me, but an entire nation. When he just sat there during the 9/11 attacks, reading with children in a classroom, staying seated even after being told we were being attacked. As President he not only did what he could to subvert the Constitution with his sidekick, VP Dick Cheney, and lied about WMD (Weapons of Mass Destruction) in Iraq, fudging stories, about yellow cake uranium in Niger, to scare us about yellow mushroom clouds in our future if we didn't authorize the attack on Iraq. But even a small matter embarrassed me, President Bush couldn't even pronounce the word "Nuclear". But yesterday, as I watched our President mingling with World leaders, I finally said to myself, YES, President Obama is the Change We Can Believe In. But because I have been so disappointed for so many years, I must add the words, So Far! I just hope we are not disappointed, as we have many times before. We are in year one of his Presidency, but so far so good.

You see, there are some things to be grateful for, this Thanksgiving. You may or may not like President Obama's politic, but I think you can agree that so far he has not embarrassed us as President. Thank you Mr. President, thank you so very much! Finally a President who is what he had promised us in many ways.

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Saturday, November 14, 2009

Market summary and outlook as we approach November Options expiration week

Friday the 13th turned out to be an important day after all in the stock market. It turns out that the Dow broke up above the downtrend line today as seen in the 3 year chart of the Dow above. While it is not a decisive move, it nevertheless was significant on the face of it. The only data missing to make this move up more profound was the Volume data. You see with the market move up this past week, Volume was down unfortunately. So this move above the downtrend line may be short lived. Yo can see this drop in Volume by looking at the 6 month chart of the Dow also posted above.

The S&P 500 barely closed over its upper resistance level of 1090 and closed at 1093. Next weeks action is important for several reasons. First, next Friday is November Options expiration. And secondly, if we truly have broken the 3 years downtrend line next week will determine whether there will be a follow through above the line or not. If we drop below the line and fail to stay above it, then the Bears may seize control of the next major move. Watch Volume too for helping to decipher the true bent of the market. It should be interesting to watch daily because I do not believe it will sustain itself and stay above the 3 year downtrend line.

I have also added a chart of the Put to Call ratio from 1/2/08 to the close on Friday. It will give you some sense of where we are versus where we have been with this indicator. I have also shown with red lines where I said back in August when we hit a 2 year low of 0.59 on this ratio that it was a time to start to unload heavy positions, take profits off the table and get ready for a correction. Since that time the index has a trajectory of up but the Dow has gained an additional 7.6% to the close Friday. For those who ignored my calls to start selling and taking profits off the table back then, congratulations, you made an extra 7.6% gain.

I have one other piece of data which convinces me we are not going to stay above the 3 year Dow downtrend line and that is the Nikkei 225 Index. You can see from the chart below that we have a similar pattern as the Dow over this 5 year chart, but the Nikkei has not broken above its downtrend line. Because of this I believe that the Dow will slip back below the resistance line next week.

I will make one additional point here for my own defense, I had warned many to get out of the Nasdaq when it too was climbing that steep climb in the year 2000 to a peak of 5,000. I sent the alarm at a Nasdaq level of 4,000-4,200 to take profits off the table as back then the Put to Call suggested a major change in direction was ahead of us. Those who ignored my words back then made an additional 20-25%. But then the market plummeted to 2,500 and those who continued to hold lost 50% of their holdings. My point is no one, especially me, can time the market. But I would rather be a bit more conservative than taking imprudent risks. Good luck in whatever you feel comfortable with and may the force be with you. :)

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Friday, November 13, 2009

Friday the 13th of November, 2009 Consumer Confidence

Michigan Consumer Confidence data came out a minute ago and was 66.0 for October versus 70.8 for September. The Dow was up 45 points before the numbers were released and now up only 15. The August number was 65.7 and so we really have no gain in confidence by Consumers going into the holiday season. This is not good news for Retail Merchants.


Thursday, November 12, 2009

545 People

This was sent to me this morning via email and I thought so much about the message I had to post it here. Please read it all the way to the end. Charlie Reese is a former columnist of the Orlando Sentinel Newspaper.

By Charlie Reese

Politicians are the only people in the world who create problems and then campaign against them.

Have you ever wondered, if both the Democrats and the Republicans are against deficits, WHY do we have deficits?

Have you ever wondered, if all the politicians are against inflation and high taxes, WHY do we have inflation and high taxes?

You and I don't propose a federal budget. The president does.

You and I don't have the Constitutional authority to vote on appropriations. The House of Representatives does.

You and I don't write the tax code, Congress does.

You and I don't set fiscal policy, Congress does.

You and I don't control monetary policy, the Federal Reserve Bank does.

One hundred senators, 435 congressmen, one president, and nine Supreme
Court justices equates to 545 human beings out of the 300 million are directly, legally, morally, and individually responsible for the domestic problems that plague this country.

I excluded the members of the Federal Reserve Board because that problem was created by the Congress. In 1913, Congress delegated its Constitutional duty to provide a sound currency to a federally chartered, but private, central bank.

I excluded all the special interests and lobbyists for a sound reason. They have no legal authority. They have no ability to coerce a senator, a congressman, or a president to do one cotton-picking thing. I don't care if they offer a politician $1 million dollars in cash. The politician has the power to accept or reject it. No matter what the lobbyist promises, it is the legislator's responsibility to determine how he votes..

Those 545 human beings spend much of their energy convincing you that what they did is not their fault. They cooperate in this common con regardless of party. What separates a politician from a normal human being is an excessive amount of gall. No normal human being would have the gall of a Speaker, who stood up and criticized the President for creating deficits. The president can only propose a budget.. He cannot force the Congress to accept it.

The Constitution, which is the supreme law of the land, gives sole responsibility to the House of Representatives for originating and approving appropriations and taxes. Who is the speaker of the House? Nancy Pelosi. She is the leader of the majority party. She and fellow House members, not the president, can approve any budget they want. If the president vetoes it, they can pass it over his veto if they agree to..

It seems inconceivable to me that a nation of 300 million cannot replace 545 people who stand convicted -- by present facts -- of incompetence and irresponsibility. I can't think of a single domestic problem that is not traceable directly to those 545 people. When you fully grasp the plain truth that 545 people exercise the power of the federal government, then it must follow that what exists is what they want to exist.

If the tax code is unfair, it's because they want it unfair.

If the budget is in the red, it's because they want it in the red.

If the Army & Marines are in IRAQ , it's because they want them in IRAQ

If they do not receive social security but are on an elite retirement plan not available to the people, it's because they want it that way.

There are no insoluble government problems.

Do not let these 545 people shift the blame to bureaucrats, whom they hire and whose jobs they can abolish; to lobbyists, whose gifts and advice they can reject; to regulators, to whom they give the power to regulate and from whom they can take this power. Above all, do not let them con you into the belief that there exists disembodied mystical forces like "the economy," "inflation," or "politics" that prevent them from doing what they take an oath to do.

Those 545 people, and they alone, are responsible.

They, and they alone, have the power.

They, and they alone, should be held accountable by the people who are their bosses.

Provided the voters have the gumption to manage their own employees.

We should vote all of them out of office and clean up their mess!

What you do with this article now that you have read it.......... Is up to you.

This might be funny if it weren't so darned true. Be sure to read all the way to the end:

Tax his land,
Tax his bed,
Tax the table
At which he's fed.

Tax his tractor,
Tax his mule,
Teach him taxes
Are the rule.

Tax his work,
Tax his pay,
He works for peanuts
Tax his cow,
Tax his goat,
Tax his pants,
Tax his coat.
Tax his ties,
Tax his shirt,
Tax his work,
Tax his dirt.

Tax his tobacco,
Tax his drink,
Tax him if he
Tries to

Tax his cigars,
Tax his beers,
If he cries
Tax his tears.

Tax his car,
Tax his gas,
Find other ways
To tax his ass.

Tax all he has
Then let him know
That you won't be done
Till he has no dough.

When he screams and hollers;
Then tax him some more,
Tax him
He's good and sore.
Then tax his coffin,
Tax his grave,
Tax the sod in
Which he's laid.

Put these words
Upon his tomb,
Taxes drove me
to my doom...'

When he's gone,
Do not relax,
It’s time to apply
The inheritance tax.
Accounts Receivable Tax
Building Permit Tax
CDL license Tax
Cigarette Tax
Corporate Income Tax
Dog License Tax
Excise Taxes
Federal Income Tax
Federal Unemployment Tax (FUTA)
Fishing License Tax
Food License Tax
Fuel Permit Tax
Gasoline Tax (currently 44.75
cents per gallon)
Gross Receipts Tax
Hunting License Tax
Inheritance Tax
Inventory Tax
IRS Interest Charges/IRS Penalties (tax on top of tax)
Liquor Tax
Luxury Taxes
Marriage License Tax
Medicare Tax
Personal Property Tax
Property Tax
Real Estate Tax
Service Charge Tax
Social Security Tax
Road Usage
Sales Tax
Recreational Vehicle Tax
School Tax
State Income Tax
State Unemployment Tax (SUTA)
Telephone Federal Excise Tax
Telephone Federal Universal Service Fee Tax
Telephone Federal, State and Local Surcharge Taxes
Telephone Minimum Usage Surcharge Tax
Telephone Recurring and Non-recurring Charges Tax
Telephone State and Local Tax
Telephone Usage Charge Tax
Vehicle License Registration Tax
Vehicle Sales Tax
Watercraft Registration Tax
Well Permit Tax
Workers Compensation Tax

STILL THINK THIS IS FUNNY? Not one of these taxes existed 100 years ago, and our nation was the most prosperous in the
world. We had absolutely no national debt, had the largest middle class in the world, and Mom stayed home to raise the kids.

What in the hell happened? Can you spell 'politicians?' And I still have to 'press 1' for English!?

I hope this goes around THE USA at least 100 times!!! YOU can help it get there!!!

Attack life! It's going to kill you anyway.

"It's Your World, Pay Attention"

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New idea on Afghanistan strategy for President Obama

There has been breaking news on the issue of the war in Afghanistan. Evidently it has been reported that the President didn't like any of the options presented to him by his Military advisors or State Dept. officials like Special Envoy, Richard Holbrooke, and has scrapped all of these alternatives and sent the Generals back to the drawing board with new instructions. Journalists report that President Obama wants an exit strategy to the war in Afghanistan.

I would like to give the President my idea on Afghanistan. I think we should leave Afghanistan as soon as we can and cause a vacuum there that the bad guys want to fill. Once we have drawn sufficient numbers back there from places like Pakistan, our drones should make mince meat out of them. This protects our soldiers and allows us to engage those who would wish to plan to destroy us from this "safe haven". Leave Afghanistan to the Afghans and let them decide what society they want to have. We gave them a chance and it looks to me that they never rose to the occasion.

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Wednesday, November 11, 2009

Dow prediction for the next 2-3 years

I had some fun this morning and checked my psychic abilities and decided to share it with you all on where the Dow will be going over the next 2 years. I have also taken the liberty to do this as a chart of the Dow. I have drawn the 3 year downtrend line on the chart in red and used a "W" pattern to show where I see the correction going to 8,000 and then a reversal going back up in a more Bull market pattern through 2011.

The thing that makes this difficult and unscientific is that I am not using any data to predict this. I am using my intuition, which is not precise to say the least, but does see a "W" pattern in process right now. The first leg down from the high of Dow 14,000 went all the way down to 6,440. Then the leg up goes up to where we are now, about Dow 10,300. That is a move up from the bottom of 3860 points. Then use Fibonacci as a guide.

Fibonacci retracement is a very popular tool among technical traders and is based on the key numbers identified by mathematician Leonardo Fibonacci in the thirteenth century. retracement is created by taking two extreme points (usually a major peak and trough) on a stock chart and dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8% and 100%.

Using a Fibonacci retracement of 61.8% (because I do not see us going back and retesting the 6,440 level but do see us testing the 7,800-8,000 level again in the 1st quarter of 2010) that gets us to a retracement back to 8,000 on the Dow. That would give us a slanted "W" pattern with the second leg higher than the first and hopefully start a Bull market rally back up to 14,000 again.

This is all wishful conjecture but not totally mad. Let's assume that Christmas Retail Sales disappoints and the economy does show Consumers not spending as more continue to lose their jobs in Q1 of 2010 to an Unemployment rate of 11% or more. That would cause the stock market to pull back because the rise was based on a smooth recovery. That could get us back down to 9,000 and then add the Commercial Real Estate collapse that will come from poor retail sales. That will get us down to 7,800-8,000 level. The Government will provide another stimulus and it will atke some time to work, say about a year. That gets us to the beginning of 2012. This is just in time for the Presidential reelection of President Barack Obama. See there is a method to my madness. That will mark the end of the Bear Market.

I hope this is all clear to you now. I wouldn't bet the farm or even 1 dollar on my prediction. But I do believe something like this will occur and the Dow stock pattern will show a "W" pattern something like I have shown. The best prediction I have said to reiterate it is that we will not retest 6,440 level and that we will have a Bull Market Rally in 2 years. Check back, as this unfolds, to see. :)

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Tuesday, November 10, 2009

Did the Dow break above the 3 year down trend line?

I have attached the 3 year chart of the Dow and drawn the 3 year down trend line on it as you can see above. Did we break above it? It is the question of the day as investors determine whether we are going to make a significant move up on the Dow and other indexes. The answer to the question depends on something usually not apparent. It depends on the thickness of the line I drew. If I use a standard 2.0 weight line, which is the weight of the line I have been using since drawing these charts, the unexpected answer is No! If I use a 0.5 weight line, which is almost the thinnest weight line I can draw using Powerpoint, the answer is Yes! So how does one decide whether to Buy into this rally at this late stage or not? You wait for a clearer breakout.

I know everyone is going to be screaming at me about this, but the signal is not yet clear that we are going to rise to 11,000 or higher on the Dow at this time or if we are going to retreat and have a correction. I know that sounds wimpy, but I only want to use data to decide, not my emotions. So there you have it. I will continue to use this thinner downtrend line when I draw this chart in the future. But when I can't say something for sure I look for alternative measures. In this case I give you the 3 year chart of the SP500. On this chart below, you can see that we have not broken the 3 year down trend line. That adds to my caution in telling people we are going to go up. If the S&P 500 also broke through this down trend line, I would be more optimistic.

I hope this helps understand why I have not declared that we are going up.

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Sunday, November 08, 2009

The Economy and Unemployment: A discussion of current times.

I thought a discussion was in order since the release of the 10.2% Unemployment rate data on Friday. It is difficult for most Americans to really see the impact of these numbers but I am going to share some observations with you on how America is slowly changing like a faucet dripping water or the boiling of a pot of water, it takes time to really notice the change.

Let me start with a quote from Haver Analytics which was published on Saturday.

"The official unemployment rate continues to pale in comparison to the rate which includes "marginally attached workers" and those who are working part-time for economic reasons. It rose to a record 17.5%. Another tally of joblessness indicates that with "discouraged workers" the unemployment rate rose last month to 10.7%. Not only are more individuals unemployed or have stopped looking for work, but the median duration of unemployment jumped last month to a record high of 18.7 weeks. The ranks of those unemployed for 27 weeks or more rose to 5.594 million (145.9% y/y), also an historic high."

Here are some historical facts. The unemployment rate for the years 1923-29 was 3.3 percent. In 1931 it jumped to 15.9, in 1933 it was 24.9 percent. It then steadily decreased until 1941 when it stood at 9.9%. In 1942, after U.S. entry into World War II, the rate dropped to 4.7%.
(Source: US LABOR STATISTICS.) Looking at the data announced on Friday, October's unemployment rate jumped a whopping 0.4%, one of the highest jumps in over 5 months according to the chart above. You see we may be starting a higher monthly rate increase than the previous 5 monthly increases.

Let me put a face on the above quote by using an example. Last time I walked around the famous Newbury Street area in Boston, a prized Chic upscale shopping area, I noticed how many small shops and sizable buildings had "For Lease" signs plastered over windows of empty store fronts. Some advertised whole Floors in the multistoried buildings For Lease. The streets were full of people and bustling from one place to another, but not many carried bags of purchased goods. I grew up in Boston and in all my years I have never seen so many empty store fronts in this neighborhood. You see it isn't just the lower class areas being affected by this economy, it is the upscale enterprises as well. This is a change in American's behavior of seismic proportions. With more Small businesses going out of business, it will mean more layoffs, more foreclosures, more vacant apartments and more suffering for far too many people. I am afraid this is going to be commonplace in the next year. I saw the same thing in an Francisco neighborhoods as well.

The importance of this isn't just in the Retail Sector, it is affecting all Small Businesses because credit has dreid up for most or their savings and cash reserves for a rainy day are spent trying to hang on until the economy turns around. But wait, you say the experts have said the economy has begun to turn around and the stock market is up, The Fed has proclaimed the recession is over and we will be coming out of this eventually. Call me a skeptic, but I do not see things getting better any time soon. The next big shoe to drop is Commercial Real Estate. And with all the small shops closing you can see the ripple about to happen to the buildings too. There will not be buyers of these properties until the prices drop more. And so it goes on and on.

Think about the airlines now for a moment. With much business being curtailed for small business and the number of layoffs in large companies still continuing, the airlines will be standing next in line for a bailout. I purchased 2 tickets to go from the East Coast to San Francisco one way and non stop. Can you guess what the price was for the combined tickets? It was less than $270 total! That's less than what it costs to pay for gas to drive across the country. This can't be good for the airlines. They are selling tickets across the country for about $135 a piece. This is amazing and can;t be profitable when you consider the costs of airplanes, the salaries and benefits for pilots, flight attendants, mechanics, ticket handlers, baggage handlers and all the corporate office functions needed to run a company like IT, accounting etc.

The American Consumer is going through a fundamental seismic change in sending habits that will be permanent for this generation. We are not at the end of this economic downturn. If it were a baseball game I would say we are in the 5th inning with still more baseball to come. Cash is KING and will be for some time to come as well. It has been the American Consumer who has spurred our economy the past 30 plus years. They have been responsible for 70% of our economic growth and for now and for years to come, they are going to be restrained. A good test of this hypothesis is to ask yourself about your planned spending for the holidays. My guess is that it will be about as restrained as it was for last year.

You can try and fight this tend or you can go with the flow and accept it for what it is. Some are calling this period, The Great Recession. Does it remind you of another similar phrase? It does me and for good reason! No wonder Consumer Confidence is way down. And the differences between Wall St. and Main St. need to be reconciled.

For another commentary on the unemployment data read this article from Seeking Alpha titled, "And Bernanke Didn't Think Unemployment Would Reach 10%."

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Friday, November 06, 2009

Nov. 6th, 2009. Are we headed up now that yesterday had such a big day for the markets? UPDATE

What now? That is the question. My close friend said he thought we broke the 3 year downtrend line yesterday. As you can see from the Dow 3 year chart above, we didn't. we are still in that tight wedge area on the right and could go along in this area for another 3 weeks at least without a breakout. But as each day passes with no clear breakout, to me it signifies the strength of this red line above. If it weren't that meaningful, then why haven't we easily broken above it? The reason is because IT IS MEANINGFUL to at least the 40% of analysts which are technical chart readers lime myself. Those analysts advise their company's who place all bets. And if you look at the S&P 500 chart, you can see if anything we may have broken below the support line a few days ago when there was the big selloff.

Look, I heard on CNBC that the Fed, and Chairman Bernanke himself, don't really believe in the recovery they have proclaimed these past 2-3 months. That is why there is no hurry to even signal interest rates are going to go up anytime soon. With the Unemployment rate at 10% and the real unemployment at about 17%, there amount of squeezing by companies to get some profit will continue. That means, unfortunately, even higher unemployment. With the Congress about to extend Unemployment benefits again, the those Unemployment numbers will rise as more are counted again who were dropped from the counting.

If you believe the recovery is real, I have a "bridge to no where" I would like to sell you. And remember this, when there is a breakout to the upside, I will be the first to proclaim it, even if it doesn't fit where the real economy is. That I promise you!

UPDATE: 5:35am PST

Unemployment reached 10.2% for October, up from 9.8% in September. Non Farm Payrolls were down 190,000 jobs.

UPDATE: 6:50am PST
Market opened down about 50 points but then after a half hour of trading, went positive. Confused yet? Why is bad news for Main St. good news for Wall St? They may think we have peaked at 10.2% Unemployment and I expect it to go over 11% anyway so that's a long time yet to play out. I see more Small Businesses closing and laying off more people as their reserve cash becomes depleted. They can't get money from banks as the banks are hoarding still.

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Sunday, November 01, 2009

Markets will be down for the coming week. Why?

I have been thinking about the market drop on Friday on accelerated volume. I was trying to come up with some possible reasons which have not ben the usual suspects. This is difficult to do as I have been expecting this pullback for months and I seen signs everywhere that things aren't going to get better any time soon on the economy even though Wall St. seems to defy Main St. So what did I come up with this time and what would be the rationale that this time the market drop is for real and will continue at least for Monday or Tuesday and then possibly on Friday.

So first, Treasury Secretary Geithner was interviewed on Meet the Press by david Gregory. Geithner when pressed seem to say Unemployment will continue to rise even while the economy is recovering as employment is a lagging indicator. But there was more in Geithner's head tilting, a sign of not wanting to answer directly the questions as he knows more than he is saying. I think Geithner knows that next weeks announced Unemployment numbers for October are going to take us over 10% and then the heat will be on. That happens on Friday I believe.

But besides that big piece of news, there are elections being held in several States for Mayor's and for Governors as well as a Congressional opening in Upstate NY, which will reflect a defeat for Democrats which Republicans will play up with the media, as they should. One can rationalize President Obama has had only a short time to fix the problems and one could argue that he may have made some problems worse. But that will be decided by historians and I am not a historian. But I believe that this gives impetus for the markets to correct specifically at this time. It is before Thanksgiving and the start of Christmas Shopping season, so the damage might not be that much of a drag on business than what the economic conditions are already saying about Consumer Spending this year. So what better time for a correction.

This is also in advance of proposed legislation for Regulatory reforms which have already passed Rep. Barney Franks Committee. There is nothing Wall Street would like more to do than to cause alarm to be slow about imposing additional regulations as the market is fragile, they will say. Gee, all this at a time when Executive Compensation is being ratcheted down in 7 of the largest firms bailed out by the Fed. Oh, and late me remind you that this past Friday was the end of the year for many Funds. So, yes, this is the best time politically, financially, economically and emotionally to have this correction. It is all part of the manipulation we have come to expect. To me it is long overdue and I have been saying so for months. But heck, what do I know, I'm only the 200 lb. Gorilla in the room. :) Yes, the market should end down for the week. Hedging with some ETF Shorts might be a smart play for some quick profit.

My Direxion 3x Short of the Russell index, symbol TZA, was finally up for a week. It went up 19.4% since last Friday, Oct.23rd. I see it going up another 20-30% this week as well. It closed Friday at $14.28/share. The ETF of the Financials, symbol FAZ, also moved up this week gaining 18.5% since Oct. 23rd.

The NIKKEI has taken the lead tonight and is down over 250 points. The reason for this can be twofold. First, it could be a reaction from the Dow drop on Friday but it could also be because CIT has announced it is declaring bankruptcy protection.

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