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.

Double Witching Friday: Will the stock markets hold? UPDATE

This is the question of the day and many are nervous it won't. There isn't much data to point to, to answer that question. The only data I could bring forth today, as a piece of encouragement, was that the VIX Volatility Index closed at 47.08, down 1.38, as it still stays under 50. When the Volatility Index comes down it doesn't mean that markets will go up, it just means that people aren't panicking and selling like a mob, they are much more calm about it.

This latest market drop, back to the November lows, looks well managed, in my view. The daily moves are modest and not like what it was like when we first reached the lows, back in November, when the VIX was between 70 and 80. I tend to think it is Wall Street wanting to send a message to the politicians in DC that they don't like what the Obama Administration is doing to solve the Credit crisis, the Mortgage crisis nor the Stimulus package. The problem with this point of view is all those voices have come up with no new ideas other than reducing taxes. It is the only action most right wing Republicans can come up with.

So I still believe we are going to hold around this current level. We may go as low as 7,200 on the Dow, When I first put the chart together projecting the lows of about 7,300 when no one thought we were ever going that low, I also said it could go to 7,200. The reason for the discrepancy was that the uptrend line which I constructed and analyzed started from about 1975 to the mid 1980's. I did not enter all the data in a spread sheet and use an equation to determine best fitting line. I used existing charts for the period of 1970 to September of 2008 and drew a line that while imprecise hit at around 7,200 to 7,300. So when I said we will hold, I really believe we will. We just need to get through today rightfully labeled "Double Witching" for this month's Options expiration. It will be a measured test not a panic drop but the shorts want to extract every penny they can from these lows. Keep the faith!

UPDATE: 8:45am PST.

Well we have gotten as low as 7,311 today and still appear to be holding, and the S&P 500 has gone as low as only 762, which is also good news. The VIX has risen to as high as 50.36 but went back below 50 again.

UPDATE: 10:00am PST.
I wanted my readers to know what I am currently doing. I have just purchased additional shares of the ETF Ultra Long of the S&P 500, symbol SSO for $18.48/share and also purchased additional shares of the other ETF I own, symbol TNA, for $17.49/share.

The VIX is now up over 51 and the Dow is down to 7260.

Market outlook: The week of Dec.15th

I was watching 60 Minutes last night, and (if you haven's seen it please do) when I heard we are at the beginning of a second wave of Mortgage foreclosures, which will peak in 2010-2011. This is just awful going forward. It shows that even if the stock markets rise, it is only temporary. The news is going to depress people for the next few years and we are all going to be wishing the pain would stop for so many. Even President Barack Obama will have difficulty getting in front of this mess. I can't think of a single thing to turn this coming crisis around and that is unusual for me.

So my outlook for the market, not only for this week but for many weeks and years is not good. This temporary bubble of a recent rise in the markets is truly temporary. After the holidays we are going to face another round of reality and scary market drops. The best place to be will be on the Short side of the trades. ETF's such as SDS, DXD, TZA and others will be the place to be. Even if the market rises, it is not going to go up enough to get the shorts to dump them, because all they have to do is wait a bit for the bad news to put a damper on any rise. short term trades to get any profit will become a skill worth having.

This Friday's Options Expiration is quadruple witching, so watch for considerable volatility in the market. Playing the channel should work if you traded near either end of the range between 73,00 and 9,500 on the Dow and respective ranges on the Nasdaq and the S&P500. I still own my SDS and will be looking for a way to sell it if we get nearer to the extreme. If it doesn’t get there this week, I will just keep holding it and either hold or add to my position in it. Good luck my friends.

Market update - Where are we going short term?

It looks to me reading the charts we are still headed lower short term. For the Dow that means going back to 8,000, for the Nasdaq it means 1500 and for the SP500 it means 850. That's about another 8% drop from here. That is the bottom of the range we hit in this Sept./Oct crash. We will bounce off these lower levels but will be testing them. Don't be fooled again when they bounce back up, as we will drop down on the Dow to about 7300 before we can truly say we are at bottom. That is where real capitulation is and I have been saying this for a couple of months now. So on rises sell, and repurchase at the lows of this band. The Dow will stay in this band of 8,000 to 9,700 for a long time or until we go down to the 7,300. If we do that money will come back into the market on much heavier volume than has been attracted back. However, longer term, volume will be a casualty of the market crash and loss of confidence in Banking, Insurance and the Government.

Bill Seidman, the man who was in charge of the Savings and Loan rescue plan back in the late 1980's, early 90's, was asked on CNBC this morning, when he thought this Mortgage crisis will get resolved. He said he hoped maybe by 2010 but there was serious doubt it would be resolved by then. That means we are in for a turbulent time.

Making money in the stock market is only going to come with increased trading in positions for smaller percent gains. You can get 5% gains with this volatility but then you must consider taking your profit. Hedging with Shorts is also something that can help stabilize the large moves. But those too must be traded when gains appear. The days are gone when the average investor hoped for a 8-10% gain in a year. Be happy now with 3-4%. That will be terrific if you don't have the time or skill to trade.