What's in a headline? Misleading the public!

Headline reads: "Jobless Claims in U.S. Decreased Less Than Forecast.". So what does this phrase really mean for a Public who has only time to read a headline? Has our financial news media and our government finally perfected the art of clever Marketing, where there should be none? I think they have. Let me rewrite the headline for a more realistic result, "Initial Jobless Claims still too strong for a recovery!" You see the expectations were for only 400K Initial Jobless Claims and we got 422K. Remember, we were below 400K for about 4 weeks last month, but since then, we have been steadily gaining in these jobless claims. Additionally, last week's data of 424K was revised upward this week to 428K. Get the gist of the news now? Hope so.

Oh, and did you know that the reason the market turned around this morning from positive to negative was the fact there are news reports that the NY Attorney General has issued a Subpoena for Goldman Sachs over there testimony to Congress last month. Senator Levin of Michigan said then that Goldman Sachs had misled Congress about the company’s bets on the housing market. The firm has said its testimony was truthful.

Market outlook for July 20th: Rainy with Clouds

Well after the bell yesterday, IBM reported its earnings as did Texas Instruments. Both disappointed on top line Revenue expectations and that has set the stage for today's market action. Futures are down and Europe is down this morning. Also out this morning was Housing Starts and Building Permits. The news there was mixed. Housing starts came in at 549K for June compared to an expectation of 575K, which was worse than expected, and Building Permits came in at 586K compared to the expectation of 572K, which was better news than expected. That rallied the Futures a bit so they weren't as negative before the news came out Dow Futures were down about 100 before the Housing data, but after the data they came in at down only 75. However, currently the Dow Futures have slipped back down 93.

Expect today to show another leg down on this slowly unwinding market. I will post Updates here during the day today. So if you have read this once be sure to come back and see the Updates and commentary.

Also, news on Goldman Sachs missing expectations on their numbers also is causing some market turmoil. It is clear that the top line Revenue Growth is not there and the only way companies are making their earnings is but cutting costs. It isn't going to get better any time soon according to Pimco's Mohamed El-Erian, CEO and Co CIO who was on CNBC this morning.

I will also post today something on Silver and ZSL and that there is about to be a significant break below key supports on Silver and that this can be payed by buying ZSL or adding to previous positions. Look for tha post later this morning.

UPDATE: 9:45am PST

AS you can see from the above chart we started down about 125 for the Dow but have steadily risen up in spite of the news. Well the Dow formed a "W" pattern with the slant pointing down. We therefore should go lower from below the lowest leg of the "W" pattern. That would take us to Dow down over 100 again today.

Dow trend and prediction? See 10 year chart here

I haven't posted on the stock market recently so I decided to tell you where my head is right now. Above you will see the first 10 Year Chart of the Dow, which I assembled after the close today. The second c hart is from an earlier prediction I made which showed I expect the Dow to retest the lows. You will notice that there is significant resistance at Dow 11,000 looking at the first 5 years of the first chart. It has been an impressive rise form the lows of 6,400 but it appears to me now that we are in the process of forming a Head and Shoulder pattern that will mark the top. We have already formed the Left Shoulder in the past 2 months and are now making the head. From the Head formation we will drop somewhat and possibly as low as 10,000 but then will rise again to form the Right Shoulder. When that is complete the real correction will take place. This seems to me to be setting up for the May/June timeframe which will be the kickoff season for the November political Mid term campaigns.

We can come back in a few months and see if this plays out as I anticipate. It's just a guess as the markets really are being manipulated with excess dollars provided by the Fed in the form of significant liquidity in many forms. But I am very suspicious about Wall Street and their coziness with the Republican supporters. Much debate has begun regarding Financial reforms as evident by Sen. Chris Dodd suggesting his own reforms on his committee as he broke off working with Republicans. He is also retiring in November and I have written about the inherent conflict of interest he has because he will most likely go to work for one of these financial institutions after leaving the Senate.

So if the market begins its slide, the chance for meaningful regulations will be faced with a declining market and calls not to tamper with the market, as it is too fragile. It makes good strategic sense from the Financial Institutions own interests, as well as those elected officials beholding to those Institutions, to make this point. We already have Goldman Sachs working on the in the marketplace and former officials of Goldman Sachs are also working on this inside of the government. They have their bases covered. This is not good for remedying these concerns.

Foreclosures rise as banks make huge profits. What's wrong with this picture?

Here's several related stories which should cause great concern:
• "Foreclosures rise 15 percent in first half of 2009" versus then next two stories
• "JPMorgan Chase posts 2Q profit, surpasses Street"
• "Goldman Sachs sees record profit"

You see both JP Morgan and Goldman Sachs received significant Tarp money to ease the Credit crisis in the Mortgage industry to prevent foreclosures. In this earnings report, JP Morgan also said they had paid back all $25 Billion in TARP funds to the Government. Here's more details on the Mortgage article that should cause concern.

"The data show that, despite the Obama administration's plan to encourage the lending industry to prevent foreclosures by handing out $50 billion in subsidies, the nation's housing woes continue to spread. Experts don't expect foreclosures to peak until the middle of next year.
Foreclosure filings rose more than 33 percent in June compared with the same month last year and were up nearly 5 percent from May, RealtyTrac said.
"Despite all the efforts to date, we clearly haven't got a handle on how to address the situation," said Rick Sharga, RealtyTrac's senior vice president for marketing."

So despite the earnings looking very god in the banking and financial industry, things are not getting better. Compare that to the rising tolls of the unemployed, now expected to go as high as 13% by some estimates, and you have a recipe for a calamity ahead of us. This must affect the stock market negatively if the stock market is truly free of manipulation. But we know it isn't, don't we. My friends, it used to be one could generally predict market direction based on certain outcomes in the economy and based upon data which supports future predictions. The truth is I can't any more and I doubt any one else can as well. That should be the biggest concern of all. When the stock market becomes unpredictable, it is time to consider ending the trust placed in the system and cash in. There is an expression made famous by the man who was shown by the psychologist a series of ink blot charts. Evert time the man was shown a chart and asked what he saw, the man would say, "people naked". The psychologist turned to the man and asked him, Why do you keep seeing naked women. The man replied, it's not my fault, you're the one with the pictures! I see the same thing in the stock market right now, reason to give great pause as to the integrity of the entire system. Just because we are on a slower decline than we were before, we are still in decline with much more expected over the next several years with more people losing jobs begetting more foreclosures and less disposable income to prop up corporate profits and so the cycle continues. Help me see something differently here.

Market view: July 15, 2009

Yesterday's rally was a surprise, especially because of all the hype about Goldman Sachs profit of over $3 Billion this quarter. What did you expect? They got free government money and lent it out to make a profit. The real news is that they plan to use 49% of it to give out to employees. They calculate that to be about $900,000 per employee. Where are you working now and why aren't you at Goldman Sachs?

I looked at the Charts again and we have formed a perfect "W" pattern on all 3 indexes, with the 2nd leg of the "W" lower than the first leg. The question many are asking is this. Are we back into a rally and are going up from here? Well, my guess is still the same, lower, but in this manipulated market it is anyone's guess. It may not go lower today or even tomorrow but we still have not broken the downtrend line of 2 years on the Dow nor the S&P 500.

Market outlook for Jan 23rd and into next week: The first dose of fear

Markets are set to go down today. The Dow is down about 137 and the S&P500 is down 13 at 4:30am PST. It appears to me that we are going to go try another retest of the lows of 7,300 on the Dow and 750 on the S&P500 starting today and going into the coming days next week. The fear level is rising about the economy, the banks and what's happening to constrict the economies in Europe and China. Some are predicting instability in China because of the slowdown in the economy and the possibility of social unrest.

It is too late to venture in and buy the ETF Ultra Shorts SDS and TZA in my opinion because this market can turn the other way on a dime. Volatility has been rising since the beginning of January, as measured by the VIX. It was at 39 and closed yesterday at 47, for a 20% increase and I expect it to go higher.

The Put to Call ratio closed yesterday at 0.88 and I expect it to go lower to 0.80 or lower which would be a signal to sell more. We are now in a cycle, where bad news does drive the market lower. A few weeks ago many had declared that the market was handling bad news very well. That has now changed. Fear is starting to come back again. Gold is rising again. In my view this is not bad as I wrote earlier in the week. We need a little fear right now so President Obama can get his changes approved by Congress. I also wanted to report that my read on the charts for the Dow actually shows a distinct sloping uptrend lines starting with the low in the year 1988 and going to 1995. This line crosses the axis today at 7,300. But if you go back to 1983, which is the year the Dow started to rise after the recession of 1982 and connect that point with the 1988 data point, you get an uptrend line which crosses today at about 5,200. If we break the 7,300 level on the Dow and can't get above it, we will be heading for a Depression, not just a bad recession. Let's all hope this 7,000 level can hold. As we get close to it fear will rise almost to a panic state again. When you watch the financial news on outlets such as CNBC, you will start to hear the fear bounce between hosts and guests. Sorry again for the gloomy outlook but in a way we need this fear to help get the changes implemented. Otherwise it will be business as usual.

They knew this Financial crisis was coming in 2004

This is a NY Times article and a must read as to how we got in this financial mess. Readers will be as surprised as I was. Here are a few excerpts and a link to the entire article:

"How could Mr. Cox (SEC Chairman) have been so wrong?

Many events in Washington, on Wall Street and elsewhere around the country have led to what has been called the most serious financial crisis since the 1930s. But decisions made at a brief meeting on April 28, 2004, explain why the problems could spin out of control. The agency’s failure to follow through on those decisions also explains why Washington regulators did not see what was coming.

On that bright spring afternoon, the five members of the Securities and Exchange Commission met in a basement hearing room to consider an urgent plea by the big investment banks.

They wanted an exemption for their brokerage units from an old regulation that limited the amount of debt they could take on. The exemption would unshackle billions of dollars held in reserve as a cushion against losses on their investments. Those funds could then flow up to the parent company, enabling it to invest in the fast-growing but opaque world of mortgage-backed securities; credit derivatives, a form of insurance for bond holders; and other exotic instruments.

The five investment banks led the charge, including Goldman Sachs, which was headed by Henry M. Paulson Jr. Two years later, he left to become Treasury secretary."

To read the entire article click here.