Ending the gridlock: Market comments for Sept. 2nd

It looks like a very bad day for the markets worldwide. The August Unemployment rate was unchanged at 9.1%, but the US Non-Farm Payroll number came in at 0 (zero). That was the lowest number seen since 1945. Also troubling was a decrease in Hourly earnings for workers from +0.5% in July to -0.1% for August.

The issue we have in our economy is that there is no demand for Goods and Services. Therefore the Unemployment rate has no hope of recovering until there is more demand. Cost cutting does not increase demand. Debt reduction does not create demand. Giving more money to banks does not create demand. Giving incentives to business to hire will not necessarily create demand. Decreasing taxes for the wealthiest Americans doesn't create demand.

What creates demand? Why haven't the Bush Tax cuts for the wealthiest Americans created demand, as many have argued it would? It's real simple, people who are wealthy already have pretty much what they want and desire, so there is no need. Middle Class Americans and the poor have many needs and the more disposable income they have, the more their needs would be satisfied by purchasing goods and services. We have more of a political problem right now because the Republicans and Democrats are at a logger jam and it seems the Republicans are saying no to any compromises.

How do we get them to work together for the good of the country? They seem to only be interested in serving there Corporate donors, who donate to their political campaigns and own these folks lock, stock and barrel! There doesn't appear to be any way to get them to come to agreements for the common good. But I believe the reason for this is that they are complacent to the plight of average Americans and until they have skin in the game, they won't work together. "The real question we should be asking is, "How do we get them to get skin in the game?" I have an idea that I think would work and I want you to think about this seriously for a minute.

What if there were a sudden significant drop in the Dow, say 1000 points in a day, followed by a second day of another 750 points? Do you think it would get their attention? I can tell you this, it would get the attention of the wealthiest Americans who own most of the stock anyway. They would be demanding action, just like when the banks collapsed. It would get the President to sit with Congressional leaders and get them to take some actions for the good of the country. We need a real crisis that gets us to all come together.

This could be created by all of us selling some of our stocks and as it builds up steam others would add more in panic selling. This could do it. The Fed has tried to protect the market when it should have allowed the market to fall as it should and by now these problems would have been addressed. Instead, our problems are still ahead of us. I really believe this will happen anyway down the line, but we could help it along by selling stocks en masse. Anyone can help this along by selling their stocks, either today or early next week, especially just before the President speaks on Thursday night. Remember, if you sell your stocks, you can eventually buy them back cheaper if what I am saying will happen does happen. You can help your country right now. And tell your friends to do the same! ACT in honor of Labor Day!!

I'm back! Here's my take on the Debt Ceiling crisis

I've been away on vacation for about 10 days so I apologize for not posting during that time, but you know that there are some remote places where there is no internet access. But I'm back now and ready to comment on this debt ceiling crisis.

I think there is now a 50% chance that both Parties in the Congress and the President will not come to an agreement to raise the Debt ceiling by Aug. 2nd. You know how this will affect the country in a negative way so I won't waste your time with those details. It seems obvious to me that President Obama has boxed himself into a corner as have both Republicans and Democrats over this issue. It seems to me the only thing left is for this President to make the unprecedented move to raise the Debt Ceiling using the 14th Amendment of the Constitution as the reason for this. This is what the 14th Amendment says:

""The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned." Many read this to say the President has the authority to guarantee payment since the Treasury of the United States reports to the President and is a Cabinet position.

I think that this President needs to consider the possibility that this may be the only way to guarantee the debt ceiling is raised in time. Politically he most likely would not want to make this choice, but he might just have to because it is clear to even the most casual observer that the House Republicans are demanding things that can't pass the Senate and the Senate are demanding what the House Republicans won't pass. So we have an impasse. This issue has held government hostage unnecessarily and never before in history have we ever come to this point. If you are into the blame game, you can either blame or praise the Tea party Republicans for where we find ourselves today. Those praising their stance on this, I hope you still feel this good when government spending is significantly reduced at a time where spending is required to keep this economy from relapsing into a Great Recession of worst, Unemployment rises, the cost of borrowing increases significantly and causes the housing crisis to get worse. This Republican Party with its Tea party activists will more than own the economic problems and crisis going forward, because in their zeal to ensure President Obama is a one term President, as Sen. Mitch McConnell has repeatedly said. God help us all.

Stock market Outlook: As it is above, so it is below!

I have posted 2 interesting charts of the Dow. One covers the past 6 month period and the other the past 30 years. The patterns are very similar. They both form Head and Shoulder patterns which I like to call "W" patterns for short. Focusing on the 6 month chart first, you can see I have drawn a red line connecting the bottoms of the "W". You will notice that this red line slants down. This indicates that the market will most likely head lower. Well it has in the case of the 6 month chart as the market closed down below their support levels the past 2 days, shaking up some long in the market and exciting those short in the market. But one thing I have learned is not to bet that this trend will continue. There is too little data at this point to know if the market will continue down or simply reverse just looking at the pattern so far. However, if you use this data in conjunction with a broader view much can be revealed.

Let's now take a look at the 30 year chart above. It too has formed a "W" pattern, although the right side of the "W" pattern is still forming. You will notice that the granularity is not as distinct when you look at this time period. Moves of 100 to 200 points get blurred and it is difficult to predict immediate short term moves. However, longer term moves become apparent. In this case the red line drawn shows a slanting downward pattern suggesting a much lower low is what we are in store for. In fact the second bottom leg of the "W" pattern was at 6,400, if you remember. You can see the implication is that we will go below this level when we go down. This is why I have been shouting and trying to get people's attention to this. These patterns are very predictable and to ignore them and their meaning is to do so at your peril.

Many have the view that charts don't mean anything and can't really predict future direction. That is not true as I have shown countless times here. Just read my previous posts for the past 3 months when I look and analyze daily chart patterns or when I predict drops in coming weeks and months. This is not because I am psychic or something. It is because market action is based upon actions and reactions of human beings. Human beings are for the most part predictable as their social moods tell us the probability of certain things happening again.

Have you ever heard the phrase, "history is about to repeat itself"? Or the phrase, "will they ever learn?" This is being played out today in the actions in the Eurozone in dealing with the sovereign debt issues and their stock markets as well as here in the U.S., where Fed Chariman Bernanke and Treasury Secretary Geithner are pleading with the Europeans not to take the austerity path, as the recovery is still fragile. Bernanke and Geithner worry about Deflation while Europeans are worrying about Inflation.

The history of the Great Depression was studied by Bernanke and he is trying to avoid making the same mistakes which were made back then; belt tightening. That is what happened to continue the length of the Great Depression and is the main reason why he and Geithner have advised for more Stimulus. And because we are human beings and play politics, the Party out of office, the Republicans, are driving like the Europeans for austerity, belt tightening and cutting the debt at a time when the experts believe this will throw us not only back into a double-dip recession but another Great Depression. You see humans are predictable as the need for winning is strong in us as is the desire Not to lose. Both positions are equally challenging positions in the face of a crisis and bring out the worst in us all.

So my friends as we enter this long weekend to celebrate our Independence as a Country, we will never be independent of our emotions in crisis as we are human and often do repeat history unfortunately. However, knowing this should get you to at least give this viewpoint some consideration, as your financial well being hangs in the balance. Good luck with your choice. I tell you these things to try to wake you up, in case you are sleeping at the switch. I have nothing to gain or lose in your choice. I trust the charts. Happy July 4th and your Independence!

Stock market to go much lower. Which President do you want answering this crisis call?

Yes, we are headed into a recession if we aren't already there. Why should you be worried? Because who is in charge of fixing this is the Bush Adminstration who still haven't responded to the Katrina disaster. Woe is us indeed. This is the time to ask yourself the big question. It's 6:30am in the White House. Who do you want to answer this call? It isn't President Bush, it isn't John McCain, it isn't panicky Hillary Clinton. It's soft spoken, reassuring and hopeful Barack Obama who can bring both Democrats and Republicans together to address this in a manner of confidence and good judgment. Don't you now wished you had voted for Barack Obama in your State's primary. If you haven't voted in one yet, then you can soon. Make the right choice when you do vote!