June 11 Dow Intraday analysis and Updates throughout the day

The Dow Intraday chart shows we started high and then dropped to down as low as 88 points. It has recovered and looking at the first "W pattern, we were to head higher into positive territory, which didn't make sense given the drop in Retail Sales for May and the biggest drop in 8 months. That's called government intervention and manipulation. But then it formed another "W" pattern and it is pointed down, which does makes sense.

More charts to follow during the day so come back again today and every day.

UPDATE: 10:30am PST
The market has moved like a Yo-Yo today. The latest chart seems to show some positive momentum to try to retain all of yesterday's gains as the "W" patterns seem slanted up for the most part.

Dow and markets in for more trouble (Update)

As you can clearly see from the chart, the Dow is staying below its 3 year downtrend line, shown in red. This week's failed auction in Portugal to raise money was the catalyst for world markets selling off. It is a very fragile situation and this coming weeks auction on Wednesday should reveal more weakness in markets, unless someone steps into the breach and buys.

There has been concern shown in news articles that the Euro itself may fail. There are at least 4 Countries with the problem of high debt and a high % of their GDP allocated to paying it off. The US is not as bad as some of these countries but we aren't the best either.

In the meantime, be ready for another leg down in markets as more nervousness takes hold. This will cause the Vix to rise up again while Gold and Silver will take another drop.

I still have my ETF Shorts, TZA, FAZ and my Silver ETF Ultra Short, ZSL.

UPDATE 9:00AM

One thing I forgot but thought was important to add and that was that the Total Put to Call ratio on Friday closed at 1.21 which is the highest it has been since October. The rebound during the day from the 165 drop in the Dow most likely came because of this technical Buy signal. It may be good only or a day or two of trading but I think we are headed lower. Listen to the video of Noriel Roubini on Bloomberg.com to hear his most recent comments on the world financial crisis facing the EU.

Markets and politics rule the week. Whipsaw action in both

It has been a while since I have commented about the overall market. This has been because nothing much was different in the trend until now. We are currently at a very interesting point on both the Dow and the S&P 500, as the 2 charts above show. We have broken the uptrend line this past week and reverted back just to the critical 3 year downtrend line. If we go below this downtrend line we are headed dramatically lower and could finally have that major 20% correction. However, if we can stay above that line, we may avoid it, at least for now.

We have gone back to the previous, ever important, resistance level of 1090 on the S&P 500 when markets closed lower on both Thursday and Friday. Back in early December, December 5th to be exact, I had said that I expected the correction to begin the end of January into the first 2 weeks in February and we are just about there now. The next 2 weeks will determine where the market is headed for 2010. If you have been following the markets recently, when good news has been the leading story of the day, like how much GDP gained in the 4th quarter, the market did not stay up. And when the market seems to have some bad news, the market has a big selloff on higher volume. The market is prepared to go lower psychologically right now and it may just play out.

The political arena has also added to the volatility when the seat Ted Kennedy held went to a Republican and shook Democrats to their core. They were in disarray. But then the State of the Union speech given by President Obama had many feeling a sigh of relief that it was a great speech which boosted the Democrats morale. Yesterday, President Obama went into the mouth of the beast, being invited to a retreat by House and Senate Republicans, he took them up on their invitation but insisted that the event be televised. Republicans agreed and so it began with a brief introduction and then down to business. The President gave the Republicans a lesson in being honest with constituents and the American people, in an unscripted format. His command of facts was truly impressive and inspirational. The contrast between this President and President Bush couldn't be more striking. One commentator reported one Republican leader as saying that they should never have agreed to have the event televised because the President did so well and making Republican arguments look so empty of substance. Fox news even decided to cut away and trash the President rather than allow their viewers to hear the President answering Republican questions in a masterful way. WE need more of this type dialogue in our politics no mater what side of the debate you are on. It forces competency to rule rather than quick shots from either party. Independents had to like this format and discussion more than both Parties. I hope we see more of it. Stay tuned!

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.

Are there new worries in the markets as we begin October?

There has been a host of new data out the past 3 days that fly in the face of the Fed's Bernanke comments that the recession is over and the economy is recovering. For one, Consumer Confidence dropped for the month of September from 54.5 to 53.1. Next, the PPI also dropped for Sept. and foreclosures increased. The ISM number came out this morning too and it was also down for Sept. showing a contracting economic condition is still with us. The stock market, however, roared and had one of the best months in 11 years, counter to the economic news. Now comes this astronomical figure I had never heard before. It was the size of the Bank derivative market. Here is the headline news item followed by an excerpt from the article. (Click on the title to see the entire article.):

"Beware the Current Bull Market in Derivatives
September 30, 2009 by Matthew Goldstein

The Dow is near 10,000 again. The business press is full of stories about the resurgence in mergers, IPOs and even so-called blank check companies.

There’s one statistic, however, that should give investors pause: the growth in the total dollar value of derivative contracts at the top too-big-to-fail banks in the United States.

In the second quarter of this year, the notional value of derivatives contracts at JPMorgan Chase (JPM), Goldman Sachs (GS), Bank of America (BAC) and Citigroup (C) increased by $1.92 trillion, to $191 trillion. Shockingly, Citi is responsible for most of that gain from the end of the first quarter.
Overall, the total dollar value of outstanding derivatives transactions at the top 25 U.S. commercial banks was $203 trillion, according to the Office of the Comptroller of the Currency, meaning that the nation’s four biggest banks account for 94 percent of the industry’s total exposure to derivatives."

If this article doesn't scare you, I don't know what will. The net to me with this large a derivative market is that the true value of our currency is zero! The phrase, "It isn't worth the paper it is printed on" comes to mind!

Markets are sending a clear message. Can you read it correctly?

That's correct, the markets are sending a clear message to us all if you are looking for the message. Today Gold went above $900/ounce to $907/ounce. Remember what I said about Gold leading the way. I said if Gold goes up the market will come down. That is happening. In addition the Put to Call ratio had dropped to 0.76 yesterday. And add to that Existing Home Sales for March were down lower than February, which actually were up for that month. And lastly, the earnings news has not been that bad and yet this market has not gone up. Did you ask yourself why? It would not make sense given all the bad news we have had before this on unemployment, Durable goods orders and other pieces of data. The reason all this makes sense to me is that the people who move the markets, Institutional Investors, see more systemic risk in the system than most everyone else is seeing right now that they are not yet willing to commit Capital to the market. A reality check on that viewpoint would be to look at the Volume. For a second week in a row, the Volume is declining each day with Monday having the larger Volume and then Tuesday is less than Monday's Volume and Wednesday is less than Tuesday's Volume. You have the picture. So this market will drift lower and lower, as this pattern continues.

Ideas for Recovery: A Special Treat

Back when I worked at IBM, my mentor, Dr. Richard Lazar, I was impressed as to how he was always looking for ways to help an individual improv , an organization, a company, and yes even our Country. In the 1970's we were all concerned as a Country about whether Japan was going to surpass the U.S in Manufacturing by ever increasing quality in their products and Richard was always looking for ways for IBM and U.S. Manufacturing to compete better globally and preserve jobs.

I received a copy of his latest work this morning titled, "DRIVING ON THE ONLY ROAD TO ECONOMIC RESURGENCE, 17 Innovative Products for Jobs" I am going to reprint a portion of his and his wife Caron's paper with a link below to contact him or if you would like a copy of the entire report. Richard is a great American and real patriot in the best sense of the word. He helped me get a start in this profession. I learned so much from him I will be eternally grateful. Now for the excerpt:

"The Heart and Brain
Without understanding the heart and the brain of our system, the CPP*, they do understand that non-regulation and runaway greed have been involved. They call the financial, banking and mortgage markets the Oxygen of our system. It is! However without the Heart and Brain, Oxygen is not enough. This error is the “sine qua non” to the restoration of the USA. We must build and sell new innovative products. We must develop excellent prime movers and key players. The second urgent piece to revitalizing the American economy is described in my “USA—The Innovation Nation” piece. I believe strongly that our new President, Barack Obama, will get it right, if helped by advisors and staff, as he has “gotten it” on so many vital issues that all Americans want resolved. In summary, jobs will come from our innovative products sold here and abroad in successful, victorious competition with China. We need our market share to provide jobs to produce sufficient income to enable our middle class to pay their mortgages, credit card debt and to finance health care for all. Prolonged war has hurt badly . . . very badly. At this time, 93% of Americans are hurting. There is no end in sight. They only way is through peace, progress and profit through the rigid adherence to the CPP and the prescription I advance in USA The Innovation Nation. Now let’s get it on!

(*CPP refers to Central Productive Process)

The Central Productive Process (CPP)
By Richard G. Lazar, PhD and Carôn Caswell Lazar

In 1987, Richard first constructed what he called a Behavioral Economic model that describes what it takes to have a strong and sustainable economy and called it The Central Productive Process or CPP. In fact, when we met 22 years ago our very first conversation was on the US economy and product building.

And, although he and we have refined the model over the last 21 years, it remains as true today, December 2008, as it was then. At the CPP’s core is the “Building and Producing of High Quality and Market Driven Products for Sale in the U.S. and Abroad,” (step #1 of model). Everything progresses from this single strategy for economic prosperity. Everything depresses from ignoring this single strategy. Economic wellbeing starts, or stops, with building and producing products domestically.
To believe otherwise, that a successful economy can be created, grown and maintained by the financial and service sectors, has driven us to one of the lowest economic points of our history.
From the production of tangible, market driven products all other sectors of an economy develop. When a company employs people to build a tangible product it will soon employ people to sell and service that product. The company will hire others to improve the design and function of its product. As the company grows more people will be needed to administer the affairs of the company. All of these employed people will need homes, furniture, food, and even books. Many want coffee and donuts from the coffee truck that comes at 10:15 in the morning or from Starbucks. The building of products springs forth all sorts of businesses that employ many times the number employed by the product producer (spin-off job factor estimates are 3.5x to 12x). All of the people employed in the construction trades to build the homes, the furniture makers to fill the homes, the farmers and food processing companies to feed the families that live in the homes, and the authors and publishers who produce the books to fill the minds-hearts-and shelves of peaceful inhabitants’ homes, and the coffee truck owner and Starbucks—all of them derive their income from the product builders.

They, in turn, also financially support the providers of goods and services and they all then pay taxes that combined with the taxes of others provide for the common good. But take away product building and there is no foundation upon which to grow and then a once mighty economy will begin to move towards the tipping point that can almost overnight reverse the fortunes of whole local communities, nations, and even a world. We are on the verge of that collapse now The key to a strong economy is income, taxable income. And the way to ensure income for individuals and government is with jobs centered in product building and then moving out in circles around that center—like the ripples formed when a rock is thrown into water. That’s the ripple effect to aim for. Have you noticed that when the rock sinks to the bottom, the ripples also end? That is not the ripple effect to aim for. We need to re-establish our economy as diverse product builders that provide a continuing stream of expansion. The financial sector is not one of the rocks it is one of the ripples. No product-building, nothing to invest in. A strong economy is founded on ideas made tangible and consumable. Believing that the financial markets can continue to offer sound investments and flourish while selling dying ripples is just foolish. There has been a misguided notion of what creates ripples."

To contact Dr. Richard Lazar you may email him at Richard@TheLazarGroup.com

The Stimulus package: Today there was a shift towards compromise

Markets have reacted positively to the work of finding a compromise on the Stimulus package, led by two well respected Senators, Sen. Susan Collins (R) of Maine and Sen. Ben. Nelson (D) of Nebraska. As soon as the two of them spoke to CNN, about what they were doing, and Sen. Collins said she believed she could get it done today, the markets reversed and started to go up. The Dow now is sitting at 8,082, up 129 at 11:30am PST. Indeed, this is what all Americans want, a sense of reasonableness from their elected officials. Sen. Collins gets it, but those hard core Republican Senators and Representatives from strongholds around the country from States like Texas, Mississippi, Alabama and Kentucky, would rather feed their own egos, and help create a defeat for this new President, than to truly compromise and work with him. The Democratic far left from strong holds of people the likes of Nancy Pelosi, has its own people also who don't just get it. The world has changed and they are still playing the game of politics like everything is the same. They all need to wake up to the realities of a new day.

Update on this week's market outlook

The big tell this week will be to watch the politicians on the Stimulus package as the markets will react to the politics and what's in the package. It must be bipartisan to enough of a degree to have a positive reaction on Wall Street. Watch for the fear level to rise. This is very necessary to get the politicians back on the same page on the stimulus plan.

UPDATE 12:30pm PST

3 Month Libor rates have risen from a low of 1.09% a few weeks ago to now at 1.23%. Maybe this is a signal that banks have started to lend and want to get something more for the trouble bank to bank.

The reasons the stock market will rise this week!

Ok, this is what you have been waiting for, the resons the stock market will rise this week. First, President-Elect Obama officially announces his economic team today. This will boost confidence. In addition, the government has agreed to guarantee the Loan portfolio of Citigroup to the amount of $300 Billion and added $20 Billion additional funds from TARP. It makes Paulson look ridiculous because he had said there wasn't a need to spend any more TARP funds and that the he was successful in stemming the financial crisis and calming down markets. He now has to eat his words. But that is a small price to pay for getting it right.

Also, reason this week will see markets rising is that this is Thanksgiving week, and the last thing Retailers want is to see the stock market go down just before Friday, the biggest shopping day of the Christmas holiday.

And finally, markets abroad in Europe are showing very positive gains in premarket action here as did Asian markets last night. The world is linked together more now than ever.

So sit down and watch the markets rise this week and hopefully see your portfolio a little fuller than it was last Thursday.