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Market Recap: Close Day Volatility In The Last 30 Minutes, Per Usual

Well, I mentioned that today was a close day and have mentioned many times that those days are generally marked by huge volatility in the last 30 minutes or less. I mentioned in a post that “if they want to sell this down into the close they will spike it to a new high and then reverse it”.  That is exactly what happened. We made a new high and reversed. I said “we have to be above 9400 at 3:15 EST or I think they will try and sell this down”. We closed below it and boom, down all the way to 9200. The SMA lines saved the market I believe and it reversed in the last 5 minutes to pop 150 higher.

At any rate, this is why I mention “close days”. This crazy nonsense generally happens rapidly into the close and can make moves that are startling and rapid. We could have easily gone negative at the close and lost all gains and they tried, but failed. If we had a few more minutes on the clock we may have gone negative. The move came too late.  Another crazy close day. Have a good weekend.

Market Update: All Numbers Have Cleared, It Is Now A Close Day

If we did not have key long term SMA not far above this move we would likely really pick up steam here as all numbers have been cleared. We saw a 50 point pop once 9380 cleared. It is now a close day and we may see big move into the close. We have to close positive today I believe.  Dow SMA is a hair above 9500, that could be an issue, I am not certain. Normally the first time a line is touched I do not like it, on any level.

In addition, we have the election coming. I am not sure if traders want to be long going into that. No idea. Personally I think it is a bit risky. An Obama win might make the market nervous, but not certain of it. That may also depend on the makeup of congress. History suggests the markets will NOT like the Dems in control of all 3.

Market Direction: Long Term and Short Term SMA’s Are On A Collision Course

The market is in a holding pattern right now. For today it is clearly leery of Wednesday’s highs. The bigger picture is this: The long term moving averages and the shorter term moving averages that I watch are growing ever closer. The short term charts say any weakness should be contained above 9000 on the Dow. Long term chart says 9600 right now may be an issue. Something is going to have to give in the next couple of days or less.

If we pop above Wednesday’s high here, the action should get going and we may see big moves again. Longer term i am still very skeptical of this move as we still have zero firm numbers to be long this major move. I just cannot say where we are headed here with any degree of certainty. Probably why the market is in a very tight range today.

Market Update: My Numbers 9014 Dow and 938 SP

Currently my numbers are 9014 Dow and 938 SP. If those clear we should see more pressure. At the very least they are the only firm intraday numbers to be long, as i see things. The outcome of this is still undecided but the wedge pattern is broken to the upside BUT we have Wednesday’s and yesterday’s high to contend with. In addition, if we clear those, it will be a close day and could see a big move into the close.

If we clear Wednesday’s high, I believe we will clear 1000 on the SP today on another bs short covering move. If….. It refuses to move right now…. Wednesday’s high is an issue here…

Close Update” Ok, was wrong, we only went to 984 and change. The pop after we cleared Wednesdays high was only 50 points so I became skeptical that we may see weakness late.

Morning Call: Futures Down, Economic Data Out at 10:00 EST

The futures are down a bit this morning. Thirty minutes before the bell the Dow is down 112. I mentioned that key sma support is coming and that a big gap down could be bought. However the size of the gap is not enough for that to come into play and intraday charts should dictate today. The key I believe is still taking out Wednesday’s low to maybe get some selling pressure here. If we break below that low we would need a reversal to keep contained the selling i believe. As I have mentioned before, there are zero reversals down below and why I have mnetioned this move is a complete house of cards waiting to tumble.

Intraday charts should dictate but I believe being long today is going to be difficult if we clear Wednesday’s low. We have Chicago PMI and MI Sentiment out at 10:00 EST. I would be shocked if the sentiment index isn’t far below expectations. PMI will likely be worse as well. PMI will likely move the market as I think everyone already assumes the sentiment will be bad.

Update: The futures have improved a bit. Keep in mind, even if we clear Wednesday’s high, we could still reverse. If we clear it then today will be a “close” day, and it may get very volatile into the close again. If we clear Wednesday’s low, it is not a close day, but I expect pressure if that happens. We will see. In addition, it is the last day of the month. I do not pay much attention to the monthly charts, but if we close here, the trend is clearly down for November and the trendline is about 1050 on the SP. To break out of that line, we would need a huge rally today.

Open Update: We only opened down a couple of points, so the open is not meaningful. If we cannot break down soon, the sma lines are coming. Normally this sideways action with sma support on it’s way leads to another push higher. I just do not like long this train wreck as we have nothing to stop any downside other than sma support.

StockBlade: The Big Picture

It is easy to get caught up in huge swings in stock prices. It is money and important. However, sometimes people need to step back and look at the forest, not the trees and look at the big picture. While it is clear that we need to clear 9380 on the Dow to have any more upside here short term, the question remains, will it last? I strongly say no.

If you recall, when the market was far higher, about 1300 on the SP, i said one day ” I do not care if the market goes up another 1,000 points, they are wrong”. While the markets can and will be wrong for a very, very long time, sometimes you have to step back.

Here are the facts:

1. Consumer debt is at all time highs, $900 billion in credit card debt alone

2. Consumer incomes are falling (real incomes have fallen since 2000)

3. Disposable income came out today and recorded the biggest drop in history

4. The economy will get far worse before better

5. The rising dollar will hurt manufacturing and global trade which has held much of the large cap profits

6. Housing is no where near a stable bottom, let alone rising

7. The massive fiscal and trade deficits will restrain the ability for future responses to downturns

8. Baby Boomers are coming of age and will need to sell the market for cash

9. State pensions are underfunded by many trillions (not reported as public companies are required to do) and will eventually cause another panic if not corrected

10.  Social Security and other federal long term obligations dwarf the current financial crisis by a magnitude of at least 20, probably far more.

While I have long said that I would prefer not to be all doom and gloom, these problems are very real and cannot be ignored forever. The economy cannot expand without real gains in incomes, and real incomes cannot increase without a net increase in goods produced, IMO. This notion that we have transformed into a service based economy is the biggest economic hoax in history. I have said this since the beginning of time.  Economic “experts” have strongly said otherwise, and I have strongly said they are wrong.

If you examine what is likely in a free trade environment, I would suggest that most all of the benefits of trading with significant unequals would occur in the first few years, possibly a decade. After that, a serious economic decline should begin. The reason for this is simple. The first few years of trading with economic unequals results in a huge surge in disposable income as prices drop because of cheaper imported goods. Real incomes enjoy a pop higher because of the reduction in cost of imported goods- until wages fall. This “benefit” should gradually decline over time as  wages increase in the third world trading partner countries,  and more importantly, manufacturing begins to deteriorate and reduce wages and benefits to compete globally. This erosion should lead to lower wages and benefits for workers over time. This is exactly what has happened and could have easily been predicted.

While I would argue that we do need some level of trade with these countries, to make the case that it should be free trade regardless of the consequences is foolishness. It should have been limited trade. But that cat is already out of the bag and this will likely be very difficult to correct. If we stopped trade now, or put significant restrictions on trade, I believe we would see another financial panic. So we have to be very careful on the response to our massive trade imbalances. This concerns me, as i believe if the Democrats take over and enjoy huge majorities, they may be tempted to reverse our trade policies. Swift action in this direction would likely also see a swift action in the financial markets - to the downside. And the move would probably be very severe.

The only reason we did not see the economic decline earlier was because of foolish monetary policies that created asset bubbles. They were fake economies created with paper and leverage.They weren’t real. While most will blame Bush for this, this started way before President Bush. Unfortunately, it came to bear while he was president, so the general populas will cast the blame on his door.  While I do strongly argue that this is complete nonsense, he could have stepped in and dramatically changed course. But you have to keep in mind that the leading economic minds have said that this free trade with unequals, such as China and Mexico, was in our best interest and the economy was better for it. Therefore, to blame Bush for real incomes dropping since, well, the day he took office,  is foolishness. This began 15 years ago, or longer.

The reason for this post is to remind readers of the big picture, regardless of daily market action. Several months ago I made a post that said Briefing.com and their President, Dick Green, was 100% wrong on the economy and the market.  I made the case that he, and most others, simply did not understand what was going on. I have been proven correct on this issue thus far. Unfortunately, I believe I will continue to be correct, possibly for many years. This is not a long term investing market, it is a suckers and uninformed bet. This is a traders market as I have said for over a year.

Lastly, the Talking Heads need not insult my intelligence that a “depression has been priced in”. Not even close. If a depression were priced in the Dow would be at least 6000 probably far lower. It has priced in at the low a recession, not a depression. I highly doubt it has even priced in a severe recession, which I believe is coming.  What we have in place is a tradeable low, nothing more.

A far more common sensical view would be this. If the U.S. and Europe did not have free trade agreements with unequals, would they be in economic peril? The answer is rather obviously no. They may have sluggish economies, maybe, but peril would not be an issue. it would be a cyclical downturn, not fundamental.  However, while this near financial collapse was not the direct result of global free trade, it was without question an indirect result. World financial leaders attempted to “prop up” their economies via debt and leverage and keep everything the same “as it ever was”. The problem was it wasn’t the same -  real incomes said otherwise. That game has ended and we are now seeing the result - or some of it. I would argue not all, possibly not even close.

Market Recap and Tomorrow

The market open did just as I thought and had told readers last night - we had to clear yesterdays high. Once the big futures open was under it,  I assumed the open would be sold and it was. That was the days high, which happens the vast majority of the time. The only reason we did not see pressure is we could not get under yesterday’s low. If we had, selling would have likely picked up steam. I also mentioned that today.

For tomorrow, the action is very likely to pick up. The market is poised to break here - one way or another. If we gap down, the low needs to be bought to avoid trouble. There is key sma support coming below at about 912 on the SP currently and about 8800 on the Dow. Those have to be bought if we gap lower as I see things.  If we gap higher, the gap has to be bought as we still have nothing to stop the fall to the downside. I am mentioning this because I do believe we may see a gap tomorrow, one way or another.

Again, my “guess” is that a gap down to those areas will likely be bought. While I always mention to never guess, you have to know what may happen there. If we are going to get severe weakness, it would likely not come until next week and would have to spend a significant time below those areas.

Market Update: Volatility Should Pick Up Soon

The market has sat in this range for most of the day. The open was sold and this generally creates a high for the day and generally the pressure comes late in the day. The SMA’s have provided support for this, nothing more. It should be at an inflection point near the close or sooner. We either have to get moving to the upside or it will break down and 8800 is in the cards near the close.

Right now we have to get over 9145 to have any chance of taking out the highs. I do not like the intraday lows on any level. This house of cards is growing by the day.

Morning Call: Open Sold

Well, I said last night that traders have a firm number to short the market now, yesterdays high. Where did we open? Up huge, just under yesterday’s high. It was a suckers move. The open was sold and down she goes. Only a 250 plus drop from the open, but still there was no reason to be long that open as I gave people the number last night. The key is probably yesterday’s low to get more downside here. We need a reversal to be long this today and even that is most likely a scalp.

Staying up here is important however. Key sma’s are slowly catching up to the huge move higher. Those will likely be support to the downside soon and give traders something as a target for any weakness. They are about 8700 now and will be higher before day’s end.

Think The $700 Billion Bailout Cannot Be Repaid? Try This On, Americans Have $900 Billion In Credit Card Debt

People are worried about the near trillion dollar bill that will be handed to U.S. taxpayers because they think it cannot possibly be repaid and will put our grandchildren in debt forever. Fair enough, but the government can create inflation and reduce the “real” size of this number and I believe that is exactly what they will do. Therefore, the number will never be truly repaid in today’s dollars.

A far more troubling problem, that i have long warned about, and possibly the next tidal wave to hit the market is credit card debt. Actually, it will more likely resemble a slowly rising flood than a tidal wave. But either way, it ends up being an ugly flood with serious consequences. U.S. consumers have a staggering $900 Billion dollars in credit card debt. Keep in mind that is accruiing at an interest rate of well over 10% while the federal government can borrow at 3% or less. So if you are concerned about the federal deficit, and believe it cannot possibly be repaid, you want to reconsider the true problems facing the country - consumer debt.

I have long mentioned that real incomes have been falling since 2000 and I believe that trend will continue. The economy had forged ahead on massive leverage and debt, for which we are now paying the severe price for. It was not built on anything real. It was borrowed time. Consumers financed the economy via their house that was used as an ATM machine and credit card debt. The housing fiasco has already come to bear. Next up - consumer credit.

There is no possible way, period, that this money will ever be repaid. Ever. It is not possible.  It is not inconceivable that consumers cannot even afford to repay the interest on this debt, let alone actually paying down the principal. You will begin to see this as an issue soon i believe. Banks and credit card companies are going to have to take huge losses on this debt - at some point.

The five largest companies that issue credit cards (they issue 90% of all credit cards) are Discover, Citi, Bank of America, Chase and Capital One. I would consider avoiding these companies like the plague. As we have seen, the balance sheets cannot be trusted as they refuse to own up to the problems until the ship is calling mayday, mayday. If you must be long this train wreck with the Dow approaching 10,000 I see no reason to buy these companies. There are thousands of other stocks that likely are financially better off, longer term, IMO.

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