30Y Bond/USD Decoupled, SPY, VIX, TLT, IEF, Copper, $UST, $USB Charts, Pre-Market Update

| |
Desayuno with Distressed Volatility for Monday 7/19: First off here are a few news items mostly from my
Twitter feed. These events aren't affecting Shanghai, EUR/USD or US index futures so far.

1. BP down 5%+ as FTSE opens, concerns over seepage detected near damaged well - @SkyNewsBiz

2. Hungary Forint Tumbles Most in Six Weeks as IMF Ends Talks With Hungary - Bloomberg
(*Here is Hungary CDS Quote at Bloomberg.com)

3. Ireland's credit rating downgraded by Moodys to Aa2 - Irish Times
(*Here is Ireland CDS Quote at Bloomberg.com)

4. Man buys Europe’s entire cocoa supply, analysts suspect market cornering - National Post

I saw that the 30Y Treasury Bond and US Dollar Index decoupled since mid-June. $USB is up 9.95% and $USD is only up 1.90% over 3-months. The US Dollar Index could eventually test the 200DMA and perhaps bounce at the March high. It's still trading in a descending channel with 50DMA resistance up above.

Stock Prices, Economic Data Buffet Crude Oil Futures in Lackluster Trading - Guest Post

| |
Guest post by OilPrice.com

Stock Prices, Economic Data Buffet Crude Oil Futures in Lackluster Trading

Oil Market Summary for 07/12/2010 to 07/16/2010

An unexpectedly sharp drop in a key consumer confidence index sent stocks plummeting on Friday and drove down prices for crude oil futures so that the benchmark contract finished the week virtually unchanged from last Friday.

Lawrence McDonald Thinks SEC Going After Lehman Next (Goldman Settlement)

| |
Lawrence McDonald, former Lehman trader/VP who wrote the book "A Colossal Failure of Common Sense", thinks the SEC will go after other firms more active in the synthetic CDO space after the Goldman settlement. He told PBS Newshour, "I think the big fish that the SEC wants is Lehman Brothers". The movie might not be over for $LEH.
"Goldman Sachs was actually a third-tier player in these kind of synthetic CDOs. Other firms were much more active. And I think you will see things there in terms going after the other firms on these toxic products.

But, more interestingly, I can give you some -- I can break some news tonight. Behind the scenes, I think the big fish that the SEC wants is Lehman Brothers. Lehman Brothers' bankruptcy is 10 times the size of Enron. It's bigger than Enron, WorldCom, Adelphia combined. And I'm hearing behind the scenes, the SEC, the FBI, and the Justice Department are active in going after Lehman Brothers executives."

Find the full article and video at PBS Newshour:

Was Record Settlement Against Goldman Sachs a Good Deal for Company? http://www.pbs.org/newshour/bb/business/july-dec10/goldman_07-16.html

Wall Riding in India (Videos)

| |
Sunday entertainment. I had to put these videos up. Watch people ride motorcycles and cars around a vertical track in India.

S&P 500 Failed at Death-Cross, Deflation Bid Rules Week $TLT, $IEF, $SPY, $QQQQ, $GLD, $UUP Charts, Links

| |
RISK ON, RISK OFF. The market took a hit Friday on option expiration due to lower consumer confidence, lower inflation, so-so earnings, economic data and technical resistance. Read the articles below. $SPY closed -2.75% at $106.66, $DIA -2.5% at $101.01 and $QQQQ -2.76% at $44.34. Last night the
Nikkei 225 index (Japan stock index) was down 2.86% at one point and Reuters mentioned a large futures seller, so that move could've diffused into the S&P. In my post two days ago (chart) I mentioned that $SPY was stuck at downtrend resistance and the 50 day moving average, also Adam Hewison's INO blog video warned about a sell off at the "death cross". So technicals were an important factor there imo. Below is a decent link fest and 1-week chart comparison of $TLT, $IEF, $SPY, $QQQQ, $GLD, $UUP and intra-day $SPY. I'll chart out each ETF individually and bond yields next.

Nikkei 225 Down 2.86%, Large Futures Seller #Japan

| |
Nikkei was active overnight to the downside (update: 2:15c)

1) Decent intraday downtrend in Nikkei 225 (1st chart), keep eye out for breakout
2) As noted in my previous post, 9,000 is an important support level (also $EWJ in there)  
3) "Large lot selling of futures by a foreign investor" -Reuters 
4) Nikkei September Future (2nd chart), sold off at 50 day moving average, downtrend resistance

    Nikkei 225 Intra-day -2.862%, 9,408

    Nikkei 225 Index Sep 2010 Future (Chart: OptionsXpress)

    Goldman Paying SEC, IKB Deutsche, RBS $550 Million Fine (Judgment)

    | |
    Today Goldman Sachs agreed to pay a $550 million fine to settle civil fraud charges by the SEC. $150 million will be wire transferred to German bank IKB Deutsche Industriebank AG, $100 million to RBS (Royal Bank of Scotland, formerly ABN AMRO Bank), $300 million to the SEC (Securities & Exchange Commission) and $15 million to payback fees (disgorgement). The judgment also said the Defendant (Goldman) must comply with a few "undertakings" which expire in 3 years (find the full SEC vs. Goldman Judgment PDF at SEC.gov).

    Financial Regulatory Reform Bill Passes, H.R.4173 Full Text (7/15/2010) #FinReg

    | |
    The the financial regulatory bill aka the "Restoring American Financial Stability Act of 2010", "Wall Street Reform Act" or Dodd-Frank bill passed today 60-39 by the Senate and is headed to President Obama for signature. The House of Representatives passed the bill last month 237-192. The bill is 1,616 pages long. Here is the summary and the full embedded PDF file after the jump. You can also find the full H.R.4173 bill in HTML format at the Library of Congress (Thomas). This is big time regulation.

    (H.R. 4173) entitled ‘‘An Act to provide for financial regulatory reform, to protect consumers and investors, to enhance Federal understanding of insurance issues, to regulate the over-the-counter derivatives markets, and for other purposes.’’.

    The Bear Market and Depression: How Close to the Bottom? - Prechter

    | |
    The Bear Market and Depression: How Close to the Bottom?

    July 12, 2010

    By Elliott Wave International

    While many people spend time yearning for the financial markets to turn back up, a rare few have looked back in time to compare historical markets with the current situation -- and then delivered a clear-eyed view of the future informed by knowledge of the past. One who has is Robert Prechter. When he thinks about markets and wave patterns, he goes back to the 1700s, the 1800s, and -- most tellingly for our time now -- the early 1900s when the Great Depression weighed down the United States in the late 1920s and early 1930s. With this large wash of history in mind, he is able to explain why he thinks we have a long way to go to get to the bottom of this bear market.

    Here is an excerpt from the EWI Independent Investor eBook, which answers the question: How close to the bottom are we?
    * * * * *
    Originally written by Robert Prechter for The Elliott Wave Theorist, January 2009

    FOMC Minutes From June 22-23 (Federal Reserve)

    | |
    FOMC Minutes from from June 22-23. Read full release at Federalreserve.gov.

    "Committee Policy Action

    Illinois Plans to Raise Billions ($6 Billion Estimated in Unpaid Bills -Comptroller)

    | |
    Here's a quick summary of the CNN article today which includes an embedded video featuring Illinois Comptroller Daniel Hynes. Illinois plans to raise:
    1. $900 million through Build America Bonds
    2. $1.3 billion in short-term notes next week
    3. $1.4 billion in debt related to tobacco settlement funds in November
    4. $3.7 billion through debt markets to fund pension obligations

    "It could have as much as $6 billion in unpaid bills that have left schools, social service agencies and vendors waiting months to be paid, according to state comptroller Daniel Hynes."

    If you remember, Illinois took out Iraq on the CDS top probability of default list the other day (link).

    $SPY Stuck at Downtrend Resistance, 50 Day Moving Average (#Chopfest, July 14)

    | |
    SPY (the S&P 500 ETF) is stuck at downtrend resistance and the 50 day moving average (109.64). The 200DMA is at 111.41. SPY is currently +0.02 at $109.68. Oh now up +.09, chopfest.

    SPY chart courtesy of FreeStockCharts.com

    MCDX Spreads Up 100%+ Since November (Muni Bond CDS, Credit Default Swaps)

    | |
    Distressed Volatility has been alerting you about the municipal crisis since day one (see labels Municipal Bonds or Municipalities for recent posts). Here's an in depth post on the muni crisis from February 25 titled Municipal Crisis Is Spreading, Updates on Distressed Municipalities. Another memorable moment in history was six days ago, when the CDS (credit default swap) probability of default percentage on the State of Illinois was one notch above Iraq! They switched spots since then though. The point is, eroding tax receipts, debt interest payments and lack of funds are squeezing municipalities, some more than others. Illinois had $4.7 billion in unpaid bills and transfers at the end of last quarter (FY 2010).

    MCDX, an index referencing municipal bond credit default swaps, or insurance on muni debt, is up 100%+ since November of 2009. MCDX.NA 14 was not available at that time. On 11/9/2009 I put up Markit MCDX.NA End-of-Day Spreads in a Disqus comment.

    Ford (F) Call Options Active on ISE, Ford Sync Pandora Demo Video (AppLink)

    | |
    Interesting option action in Ford today, it was featured on my ISE widget. I saw that Ford (F) calls were active compared to puts, especially the August $11 (under open interest), $12 (under OI) and $13 calls (above open interest: volume 33,387, OI 19,630). September and December also saw decent call volume vs. puts but under OI. There are 633,000 calls already open between $12 and $15 in September which is interesting (option chain snapshots below).

    It looks like the January 2011 calls saw a spread of some sort but on minuscule volume compared to open interest. Ford had a high ISEE ratio today (ISE customer calls opened/puts opened x 100), ISEE Ratio: 1,802, Calls: 21,985 Puts: 1,220Speculating or hedgulating? $F closed at $11.66 so if it hits $13, those $11s-13s could be profitable.

    Ceglia Sues for 84% of Facebook, Aluminum Prices vs. Alcoa, Rent Miami Luxury Cheap, Delinquent Prime RMBS Up

    | |
    Links for July 13, 2010

    Man Sues Facebook for 84% of Ownership -

    US trade deficit widens to $42.3 billion in May, largest gap in 18 months, as imports rise - AP

    Charles Bradford (Affiliated Research): Aluminum Prices a `Headwind' for Alcoa: Bloomberg Video

    US corporation credit quality faces market threat (watching VIX): Moody's - Economic Times (h/t @asiablues)

    Miami's Downtown Comes Alive as Condos Fill With Renters - Bloomberg
    (Roomates pay $900/month each for wrap around balcony, water views, gym, spa, steam room)

    30-Year Treasury Bond, TLT Watch, Bond Vigilantes Here Yet? (+IEF, 10Y-Note Charts)

    | |
    If you're not already watching Treasuries, keep an eye on the 10-Year Note, 30-Year Treasury Bond, $TLT (20+ Year Treasury Bond ETF) and $IEF (7-10 Year Treasury Bond ETF) as they are all testing near term support levels. Look at the 30-year Treasury and TLT specifically as they are most at risk of breakdown here. Something to be aware of just in case the bond vigilantes are preparing something. There's still deflation risk in the air though, so if that's the case we'll see if the long bond gets invited to the bid. Any current or future bond vigilantes reading this? Take a look at the charts of $USB, $UST, IEF and TLT below. I'm also looking at a ratio, I'll post the chart tomorrow.

    S&P Trading 40% Above Historical Norms Based On Normalized Earnings -Hussman

    | |
    This week's "Weekly Market Comment" by John Hussman titled "Misallocating Resources" is a good read. He is the President of Hussman Funds. Read the full report at their website. Below I quoted the paragraph where he talks about S&P valuation. He takes on the price-to-forward operating earnings valuation ratio that analysts use.

    Place Your Hedged S&P Bet, $1,440 or $400 Target ($SPY, $SPX, All or Nothing)

    | |
    Vinny Catalano, president of 
    Blue Marble Research, was on Tech Ticker today and gave two potential outcomes for the S&P which I found interesting. He said the S&P will either trade at $1,440 on $80 earnings per share (EPS) x 18 price/earnings multiple (P/E) -or- hit $400 on $50 EPS x 8 multiple. Place your hedged bets folks, all or nothing. Below I embedded the Tech Ticker video along with an S&P 500 chart going back to 1990, the last time the S&P traded at $400. The S&P closed at 1,078 today so in percentage terms it's either 33% upside or 62% downside from here. Will it be higher EPS with multiple expansion or lower EPS and compression.

    S&P: U.K. AAA Rating Long Term, A-1+ Short, Negative Outlook (7/12)

    | |
    From S&P today, read the full release.
    # We are affirming our 'AAA' long-term rating on the United Kingdom reflecting our view of the U.K.'s resources, as evidenced by its wealthy and diversified economy, ample fiscal and monetary policy flexibility, and adaptable product and labor markets.

    # However, in our view, a number of large and politically challenging spending decisions are still to be made, and Standard & Poor's medium-term economic forecasts for the U.K. are less optimistic than the assumptions underlying the budget. We therefore believe there is still a material risk that the U.K.'s net general government debt burden may approach a level incompatible with the 'AAA' rating.

    # As a consequence, we have maintained the negative outlook on the long-term rating on the U.K.

    XLF July 15 Call Options Active, Second Mortgage Warning, Dagong on US Credit Risk (Reads)

    | |
    `Big, Bold' Bet on U.S. Banks Rallying Drives Surge in Call-Option Trading - Bloomberg

    Call Options on Financials ETF (XLF) in High Demand - Wallstreetpit.com
    [July option expiration is on Friday, could be placing bets on earnings next week,
    September/December calls also active, calendar spread]

    Google Working On Secret New Ad Format: "Interactive Video Ads" - Business Insider

    David Rosenberg: Odds Of Double-Dip Jumped Another 3% Last Week, ECRI - Business Insider (July 12)

    Liening on banks: Second mortgages are next housing crisis - NY Post

    Chinese credit firm says US worse risk than China  - AP

    Watching UUP (US Dollar) On Uptrend Support, 50DMA and Treasuries

    | |
    Something to watch going forward will be the US Dollar ETF (UUP) or US Dollar Index Future (as well as currency pairs).  I like watching UUP as a proxy for some reason. It's sitting on uptrend support when measured from the December 2009 low, before the Eurozone crisis hit and FXE (Euro ETF) lost 20%. We'll see if the USDX continues to rally or breaks down, and why. The 50 day moving average could act as resistance going forward. It's still above the 200DMA. I'm also watching Treasury bond yields and IEF/TLT. Some believe the deflation whale could send yields even lower from here. However, be careful of the bond vigilantes when Treasury yields break their uptrend line (see what Harvard's Niall Ferguson had to say). Below are links, the UUP chart and Mish Shedlock on Tech Ticker today.

    Illinois CDS Default Probability Above Iraq, Unpaid Bills $4.71 Billion

    | |
    Illinois Comptroller's Office released the state's fiscal year 2010 results and said "Illinois ended the year in the worst fiscal position in its history". They have a backlog of $4.712 billion in unpaid bills and fund transfers. Taxes took a hit as well, sales tax receipts were down 6.9%, corporate income tax receipts fell 20.5% and individual income tax receipts fell 7.7%. The Governor proposed a "$1.3 billion “revenue failure” short-term borrowing for late July".

    On May 17, 2010 I reported that Illinois had $4.5 Billion In Unpaid Bills for FY Q3, so unpaid bills are up $200 million. Today I saw that Illinois CDS (credit default swaps) were trading above Iraq when measured in CPD% (cumulative probably of default). According to CMA's most actives, Illinois 5Y CDS closed at 361.38 basis points with a 27.31% CPD, while Iraq 5Y CDS closed at 440.70 bps and 26.99% CPD (table snapshot below). California CDS is trading right below Iraq on the highest default probability list (343.67 bps, 26.65% CPD). What the hell happens now. Federal bailout? Legalize marijuana (tax revenue)? Higher tax rates? Google buyout? Municipal merger? Or default.

    Dan Gilbert Guarantees Cavaliers Win Championship Before Lebron (Letter to City)

    | |
    After Lebron James decided to leave the Cavs for the Miami Heat, Cleveland Cavaliers owner Dan Gilbert released this must read letter to the city. After his loss, Gilbert is coming back with a vengeance.  Hat tip Benzinga.

    "Dear Cleveland, All Of Northeast Ohio and Cleveland Cavaliers Supporters Wherever You May Be Tonight;

    As you now know, our former hero, who grew up in the very region that he deserted this evening, is no longer a Cleveland Cavalier.

    This was announced with a several day, narcissistic, self-promotional build-up culminating with a national TV special of his "decision" unlike anything ever "witnessed" in the history of sports and probably the history of entertainment.

    LeBron James Joining Miami Heat (Decision Video)

    | |
    LeBron James will join Dwayne Wade and Chris Bosh in Miami (ESPN). Watch the decision video below. Sucks for Cleveland and Madison Square Garden ($MSG).

    GLD, SLV, GDX at 2008 Uptrend Line, Put Hedge Up (Gold, Silver, Miners)

    | |
    7/7/2010: Here's an update from my previous
    post on 6/29 saying that John Paulson of hedge fund Paulson & Co. should hedge his gold denominated fund or massive $GLD ETF position with puts. Paulson & Co as of 3/31/2010 owned 31 million shares of $GLD which was his top holding. The August and September in-the-money $121 and $122 put contracts performed well during the technical sell off. As you can see from the chart below, the puts are up 25% to 50% in 7 days while $GLD lost 3.3%. $GLD is sitting right at ascending channel support from the 2008 low and being squeezed in an ascending triangle near the vertex point (where ceiling resistance crosses the uptrend line). The same can be said about $SLV (the Silver ETF) and $GDX (Gold Miners).

    REIS Vacancy Rates, Kass (Bottom's In), UBS Cuts S&P Target to 1,150 from 1,350, Overnight Gold Chart

    | |
    Below are interesting articles and the Fast Money video from tonight featuring Doug Kass vs. Brian Kelly (of Kanundrum Capital see Seeking Alpha articles). Kass thinks the market bottom's in for the year while Guy Adami still thinks the market is headed "significantly" lower, with 1040 as bogey level. Dow $1,000 anyone? I'm watching GLD and SLV here, they are both at serious inflection points (ceiling resistance/uptrend support are meeting). They held the 2008 uptrend today, we'll see about tomorrow. Overnight, GCQ10 (Aug Comex Gold) is testing the downtrend line from 6/28-7/1 peaks. Links, chart and CNBC video are after the jump.

    Dick Bove: Citigroup Headed Toward $8.50 (Down 93% From 2007 Peak)

    | |
    Here is Dick Bove of Rochdale Securities conversing with Harry Rady of RAM on Citigroup (on CNBC). Bove thinks Citi will trade at $8.50, 117% above today's close ($3.90). Citi's been making some moves recently, here are recent articles and a quarterly chart since '87.  In 2009 Citi hit the 1990 low, down 93% from the 2007 peak.

    Niall Ferguson: Treasury Bond Vigilantes Coming, Default Or Inflation Choice For US

    | |
    Harvard Professor Niall Ferguson was at the Aspen Ideas Festival and met up with Eric Shatzker of Bloomberg. He said the Treasury bond vigilantes are coming. Meaning US Treasury bonds will be under attack by short sellers, like Bear Stearns and Lehman Brothers.
    "Sooner or later, maybe after Japan has felt the pain, the bond vigilantes will get to the United States. I don't think it will be this year, because the worse things get in the Eurozone, the more attractive US Treasuries look. But in the absence of any political will to address this problem and the latest numbers from the congressional budget office should scare everybody in this country. This is simply an inevitability."
    "So we really have at this point a kind of choice before us. Is it going to be inflation or is it going to be default.  Right now what's really troubling is that there's no sign of inflation, which is the easy way out of a debt burden in the United States. On the contrary, we have monetary contraction at a really quite alarming rate and effectively zero inflation in terms of core CPI.  So the [option?] of inflating this debt away, which a lot of people think will be exercised, doesn't seem to be there right now. What you're left with is therefore default and I think it's a fair bet that the United States will default, at least on the unfunded liabilities of social security and Medicare at some point in the foreseeable future."

    Tokyo Nikkei Index Around 9,000 Support, EWJ Similar (Chart)

    | |
    Watching floor support and downtrend resistance levels on the Nikkei Index (Tokyo) and $EWJ (iShares MSCI Japan Index ETF). The Nikkei tested the 9,000 level three times since summer 2009. It is currently trading at $9,255.94, -0.88% tonight. Also take a look at the long term downtrend/descending triangle on EWJ since 2007. Something has to give at some point. Here are a few articles and charts.

    James Altucher vs. Roubini and Prechter, S&P 1,500 or Dow 1,000? WTF!

    | |
    Watch James Altucher and Professor Nouriel Roubini battle it out on CNBC. Altucher sees 1,500 on the S&P with S&P EPS hitting $80 in 2010. By the way, Barton Biggs just slashed his 2010 EPS estimate to $70-75 and liquidated US stocks aggressively, at least that's what he said. Backing out cash, Altucher said stocks are trading at 11x earnings, below the historical average of 15, so he wants the S&P to fill that gap. Doesn't 80 x 15 = 1,200? The S&P already hit that level in April. Nouriel disagrees with James, he thinks the market is overpricing Q2 growth. Roubini sees 1.5% GDP growth vs. the 3% consensus estimate in the second half of the year. More estimates: Doug Kass sees $90 on the S&P in 2011 with 2%+ growth in the second half and Robert Prechter of Elliott Wave thinks the Dow will hit $1,000 over 5-6 years. Yes $1,000. Who to believe, who to believe.... Video courtesy of CNBC.com.

    Barton Biggs Sells Stocks, Expects $70-75 EPS, Double Dip and Afraid of Policy Errors (1930s Redux)

    | |
    After being bullish throughout Q1 and Q2 (1, 2), Barton Biggs (Traxis Partners) on Bloomberg TV said he reduced his long exposure in US stocks aggressively. He was mainly in tech. Biggs is afraid of policy errors tanking the market and singled out 1937 as a template.

    S&P Death Cross Imminent! Non-Event So Far (S&P Future, Index Chart)

    | |
    Below are charts of the September S&P E-mini Future (ES_U) and S&P Equity Index. The death cross is underway, when the 50-day moving average crosses below the 200-day moving average. The S&P is trading below both moving averages so they act as resistance.

    Some people think the death cross is backward looking or a BS event. It could already be priced in, but should be respected. It confirms the fact that shorter-term price action (50 days) is beating out longer-term price action (200 days), to the downside. Ultimately, the death cross could confirm a new bear market. But you know what I find interesting people?

    If Lebron James Leaves Cleveland, City Could Lose $10s of Millions

    | |
    That would not be good for Cleveland, but... go to the Bulls Lebron! Video source: Associated Press.

    Nice to See CDS Quotes (Credit Default Swaps) On Bloomberg.com

    | |
    Source: Wikimedia Commons
    Humankind might have a decent chance of survival now. I found credit default swap quotes on Bloomberg.com, but they are still unsearchable on their site. I found sovereign CDS quotes and a few corporates via Google. Most are labeled as the symbol itself so it's hard to find them by name. Quotes are the 5-year credit default swap priced in spread (premium payment/year) which protect against a bond default, ranging from corporate bonds, state debt, Treasuries and foreign Government debt. I could not find CDS indices (NAIG/investment grade corporate bond CDS, NAHY/high yield CDS, ABX/asset backed securities CDS, CMBX/commercial mortgage backed securities CDS, MCDX/muni bond CDS and more). *For those indexes,
    Markit actually has quotes and charts available on their website. Basically you're watching credit quality trade on a daily basis (real-time credit ratings).

    Any piece of debt with a pulse can be insured with a credit default swap. The contracts are originated and traded by banks (Goldman Sachs et al.), insurance companies (AIG) and hedge funds. It's actually a great way to hedge debt and capitalize on credit volatility, until the insurer can't pay up on the claim (AIG haha). With the sovereign debt crisis upon us, you can find most government bonds and CDS on Bloomberg.com. Most have historical charts going back 5-years.

    June HSBC China PMI 50.4, -4.3% in June, -12% From January (Chart)

    | |
    The HSBC China PMI (Purchasing Managers' Index) was down 4.3% to 50.4 in June (over May) and down 12% from January (peak).  It measures growth in Chinese manufacturing.  Here is a historical chart and articles.

    Biggs Sold His Stocks, Inventory Cycle Over -Goldman, Prechter vs. Acampora, Krugman vs. Paulson, Pending Home Sales -30% (May) - Distressed Volatility Link Fest

    | |
    Barton Biggs sells stocks aggressively on concern "soft patch to worsen" - Bloomberg
    (*read post from 5/10: Nothing Fazes Barton Biggs, Next Move in US Market is Up 15-20% Led By Tech, Sees Lower Euro)
    Krugman or Paulson: Who You Gonna Bet On? - BusinessWeek
    Beijing's new home sales -44% in first half - Bloomberg
    Pending home sales plunge record 30 percent - Reuters
    Manufacturing slips in June, but key ISM report still shows sector growth - SmartTrend Video
    Lunch with David Rosenberg July 2 - Zero Hedge
    Gross, Rosenberg Say Employment Growth an Illusion: Tom Keene - Bloomberg
    Goldman Sachs: "The Second Half Slowdown Has Begun" (inventory cycle over)- Zero Hedge (7/3)
    A Market Forecast That Says ‘Take Cover’ [Prechter vs. Acampora] - New York Times (7/2)
    Bill Gross: Bonds are priced for depression (CNBC Video)- Pragmatic Capitalism
    Credit Suisse still bullish, sees 1,270 on S&P - Pragmatic Capitalism
    RBS: On "cliff edge", sees 2% on 10-year yield - Pragmatic Capitalism
    Bill Fleckenstein: Market could easily trade at 10x earnings, can't trust P/E multiples - Zero Hedge

    US Dollar Index, Euro, UUP/FXE Ratio -8.3% in June ($XEU, $USD)

    | |
    Hopefully Jim Rogers scooped up some Euros in early June when he said he was "thinking about" getting long the Euro on CNBC. The US Dollar and Euro broke their respective near term trends and today the USD broke below its 50DMA ($XEU pierced it to the upside). The UUP/FXE ratio is down 8.3% from early June. These moves could run for a bit, $UUP and $FXE could test their trend lines from December 2009, then we'll see. Also UUP's RSI (strength index) is below 50 and the MACD pierced the zero line.  It will be interesting to see how SPY and GLD react here. Charts are courtesy of StockCharts.com.

    Goldman FCIC Hearing: Watch Gary Cohn Explain What Happened

    | |
    The Financial Crisis Inquiry Commission had two hearings regarding Goldman Sachs and AIG's use of over the counter securities and derivatives (credit default swaps) that led up to the financial crisis. Click the links for the CSPAN video (update 8/4/2013, the links might be broken now, but I embedded the Gary Cohn vid again).

    Doug Kass Calling For Classic Market Bottom On Twitter

    | |
    Here is Doug Kass (@DougKass) of Seabreeze Partners calling for a classic bottom on Twitter today. I'm not sure what his exact time frame is. For recent posts with Doug Kass media appearances click the label. Snapshot of Twitter:

    ETFs Trading Below 200DMA: SPY, DIA, QQQQ, IYT, IWM - Not IYR! (Charts)

    | |
    This is an update from my post on June 24. On that day, $IYR, $QQQQ, $DIA, $IYT, $IWM, $FXI and $XLK closed above or at their 200DMAs while $SPY, $XLF, $XLV, $XHB, $ITB, $SSEC did not. Six days later, IYR is the only ETF in the sample trading above the 200 day moving average! Who would've thought. I bet it tests it though. The red line is the 200DMA in the charts (courtesy of stockcharts.com).

    Roubini: 1.5% US Growth + Global Slowdown = Market Vulnerable (CNBC)

    | |
    Nouriel Roubini (Roubini Global Economics) was on Kudlow's show on 6/28. He expects slower economic growth (1.5%) in the second half of the year, not a double dip recession but will feel like one. Regarding the stock market, Roubini believes the economic slow down in the US and abroad [Eurozone double dip likely, Japan falling off cliff, evidence of slowdown in China] will be negative for earnings and the stock market. "Half of US profits come from abroad". So WHEN will the slowdown be priced in.

    Robert Shiller: Market Slightly Overvalued, Housing Risks Double Dip

    | |
    Yale Professor Robert Shiller gave his outlook on the economy yesterday. He said the
    "depression scare is kinda back", "market is slightly overvalued" and there's "substantial probability of a double dip" for the economy. He also warned about the risk of Japan-style deflation and a double dip in housing.

    Shiller's meaning of a double dip: "Situation in which unemployment doesn't return to normal between recessions".

    GLD Decoupled From SPY, JJC, Joined Safe Haven Bid, GVZ Outperforming GLD! (Charts)

    | |
    GLD, SPY, JJC, TLT, UUP 6/29
    GLD made an interesting move this morning. It started trading in the red with $SPY (S&P) and $JJC (Copper), however, at 9:50am GLD decoupled from the S&P and Copper and joined the safe haven and deflation crew ($UUP (US Dollar ETF), $TLT (20+ Treasury Bond ETF), $VXX).  Look at the chart below. GLD is at a critical point, it is testing December 2009 support, May resistance, channel support and an ascending triangle inflection point. Hedge it up (see below). Today's action was also interesting because it pierced channel resistance in the morning, decoupled from the losers at 9:50am, and gathered enough strength to form a bullish tail into the close (although weak, +0.15% to $121.27). It showed GLD's resiliency when the safe haven/deflation bid was in play.

    Deflation, Safe Haven Bid? 10-Year Treasury, IEF, UUP, TNX

    | |
    The 10 Year Treasury Note Yield made a new low today, riding a death cross (50D/200DMA cross) and is testing a shelf from early 2009. $IEF (7-10 Year Treasury ETF) pierced through the December 2008 high and $UUP (US Dollar ETF) held its 50 day moving average. Are we experiencing a little safe haven/deflation bid at the moment? UUP is trading in a pendulum on 50DMA support. Either it falls hard to the uptrend line or spikes to test the recent high. Gold, silver and E-mini S&P are correcting overnight.  What's up.

    Meredith Whitney, Gary Shilling See 10% Further Decline in Housing Prices (Videos)

    | |
    Video 1: Meredith Whitney, during yesterday's Fortune interview, predicted a double dip recession in housing, fueled by banks releasing inventory. Prime real estate coming to market will affect housing prices on a larger scale. She sees a 10% decline in home prices over the next 6 months and is concerned about municipalities (states underfunded by $200 billion!).  Also, the mortgage and consumer lending market are shrinking which will affect bank earnings.

    Video 2: Gary Shilling, in a recent interview with Tech Ticker's Henry Blodget, predicted a 10-20% decline in housing on excess inventories, possibly new lows on the S&P 500 and is long the US Dollar and Treasuries.

    Two Potential Outcomes For GLD, Look at Spot Gold Move Earlier Today

    | |
    Like I said on June 23 ($GLD at Very Important Support Level (Dec 2009 High/2010 Uptrend), GLD is testing ascending channel support and the December 2009 peak (now floor).  Two potential outcomes:

    Microsoft's Death Cross and P/E Ratio Analysis (Moving Averages, MSFT)

    | |
    MSFT 50DMA/200DMA Cross
    I see a 
    death cross on Microsoft's chart (the 50 day moving average crossed below the 200 day moving average). The chart needs an injection of green volume at $24 support. Unless a positive catalyst presents itself, I'd wait for exhaustion and a solid base. As of today's close, MSFT is trading at 12.6x trailing earnings, 11.7x 2010 estimates and 9.64x 2011 estimates (S&P report/operating EPS estimates). The mid-range for MSFT's P/E over the years has been: 2009: 14, 2008: 14, 2007: 22.5, 2006: 21.5, 2005: 23, 2004: 36.5, 2003: 29, 2002: 39.5, 2001: 45, 2000: 47.  The earnings multiple is down 70% since 2000 and more than half the 9 year average (29.2x). It's interesting that the P/E mid-range found support at 14 in 2008 and 2009 (double bottom?).

    Hugh Hendry on the Euro, Asia and George Soros Germany Speech

    | |
    Hugh Hendry of Eclectica Asset Management, who recently battled professors Joseph Stiglitz and Jeffrey Sachs on BBC, said the "Euro is finished" ("analogous to the gold standard in the 1920s") the "noose is getting tighter" in Asia and dissed George Soros mildly. Soros made a speech on Germany and had an op-ed in the Financial Times last week on Germany and the Euro  (Germany must reflect on the unthinkable).  The video was from last week.

    Rick Santelli to Liesman: Read Austrian Economists Not Funny Pages (Ohhhhhhh!!!!!!!!)

    | |
    Oh sh**! Steve Liesman vs. Rick Santelli on CNBC 6/28/2010 during the personal income, spending, saving rate and pce price index report.

    Japan Public Debt 2x GDP With Deflation Threat, NIKKEI Down 75% Since 1990, What If Deflation Invades US

    | |
    Check out a video update on the Japanese economy reported by Al Jazeera at BondSquawk (hat tip). In summary, Japan has "$9.5 Trillion in public debt", 2x GDP (192% 2009 estimate, #2 behind Zimbabwe at 3x from CIA.gov) with threats of deflation and falling wages. This is after 2 lost deflationary decades and a loss of 75% on the NIKKEI index since 1990 (39,000 to 9,700 today, 1st chart below). The good news is, most of Japan's public debt is held domestically in Japanese Yen. Some analysts believe US Treasuries could end up like Japanese Government Bonds (JGBs) and catch a bid even with hardcore reflationary policies (see David Rosenberg's debate on March, 2010). What about the S&P, would it follow in the NIKKEI's footsteps in a deflationary environment?  Or is the US economic machine too strong for that to happen.

    US Unemployment Rate at 9.3% (Chart 1981-May 2010), Michigan, Illinois, California From 1990

    | |
    I came across this chart of the US Unemployment rate (not seasonally adjusted by the US Bureau of Labor Statistics) from 1981 to May 2010 on Google - public data. I also included Michigan, Illinois and California (from 1990) who have been hit hard. Unemployment could be rolling over from its peak. I'm trying to figure out what the market is saying here.  Are we setting up for a double dip or mild slow down, and how will unemployment react? There might be an issue with loading the flash chart. US 9.3%, Illinois 10%, California 11.9%, Michigan 12.8%.

    Is Silver Ready? Jim Rogers Prefers Silver, SLV August $19 Calls Active (SLV, Comex Charts) UDPATE

    | |
    (Charts, option activity from Thursday) Both Comex Silver (Sep, SIU10) and the ETF $SLV are knocking up against solid 2.5-year ceiling resistance and could break out, unless a few trilli's in charge of the money supply decide to sell it off here :]. If $SLV takes out $19.50 it could rally to $25-26, which is channel resistance extended. The structure of the trend could change and not sure about an exact time frame.  It could chop around between $19.50-$22 (2008 exhaustion peak). GLD took out its 2-year resistance level in October and I wondered in March if SLV would do the same. Hedge fund manager Eric Sprott of Sprott Asset Management was bullish on silver on CNBC in May. He also started the physical gold ETF ($PHYS).

    Jim Rogers (see recent posts) was bullish on silver last week on CNN, as well as sugar, oil and commodities in general as usual. Video below courtesy of CNN Money.

    S&P E-mini Future Update, 1,045 Neckline MUST Hold (ESU10)

    | |
    E-mini S&P Future (OptionsXpress)
    I'm watching the September E-Mini S&P Future trade overnight during the House-Senate Conference Committee - Financial Regulation hearing.  It's still going on at 2:45 eastern time on
    CSPAN2.  The S&P future could be forming a head and shoulders pattern with 1,045 as the neckline.  It is currently trading at 1,072.  Also read: S&P 500 Past ‘Neckline’ Could Slump to 883: Technical Analysis at Bloomberg.com.  For ETF chart analysis on SPY, DIA, UUP, GLD, TLT, QQQQ and VIX at yesterday's close visit my previous post.

    BP Oil Spill Cam Live via PBS Newshour Ustream, CBS News Update on Suicides

    | |
    Here's the live BP oil cam on Ustream via PBS Newshour. Also, BP's stock made a new low today and a fisherman who lost his business committed suicide (see CBS Video below). Not good.

    Greece CDS, New BP Low, Albert Edwards on Recession, EUR/USD May Weaken 20%, XLF Put Protection (#finreg), VIX Upside Calls, Hungary Bond Auction

    | |
    Greece puts its islands up for sale to save economy - Guardian
    Greece Closing CDS: 1126.85bps +192.66 +20.62% (#1 sovereign default risk) - CMADatavision 
    One Big Difference Between Chinese and American Households: Debt - Forbes
    VIX traders get into AUG upside calls - OptionMonster video
    Hungary Debt Auction Misses Target for Second Time - BusinessWeek (h/t fuTuRe_sHOcK)
    ChartCast - Market Update - 6/24 - SPY Descending, DIA Below 200-DMA, UUP at 50-DMA - Link
    Meet The New Regime: Welcome AUDJPY, Goodbye EURJPY - Zero Hedge
    Albert Edwards Sees New Recession By End Of Year, Market Collapsing - Zero Hedge
    Gross Vows This Time Different as El-Erian Leads Equities Push- Bloomberg
    Guy Adami, Jon Najarian, Steve Grasso and Patty Edwards see lower market - Fast Money
    Euro May Weaken 20% Against the Dollar on Deflation, RBS Says - Bloomberg
    "Pessimistic options players establishing bearish positions on the XLF (#finreg) - OptionsIntel
    Homebuilder Default Swaps Rise as New Sales Fall to Record Low - BusinessWeek (6/23)

    and last but not least, BP made a new low today and closed at $28.74.

    ChartCast 6/14: SPY Descending, DIA Below 200-DMA (QQQQ, UUP, GLD, SPY, DIA, TLT, VIX Charts)

    | |
    I went over SPY, DIA, QQQQ, UUP, GLD, TLT and the VIX at today's close on DVtv's Chartcast.  RIMM is trading lower in after hours trading by the way.  These charts are courtesy of FreeStockCharts.com.  SPY is approaching the shelf of judgment again, after possibly forming a right shoulder in a descending triangle. What do you think? It could test the shelf and decide from there, like July 2009 1, 2, 3.  The market could be pricing in a double dip recession or slow down.  I always thought that the June 2009 plateau looked like decent support for $SPY, which is $96, down 10.2% from here.

    ETFs Above/Below Their 200 Day Moving Average (*IYR, *QQQQ, DIA, IYT, IWM, FXI, XLK vs. SPY, *XLF, *XLV, XHB, *ITB)

    | |
    I few hours ago I tweeted "ETFs Above 200DMA: DIA, IYT, IWM, FXI, QQQQ, XLK, IYR, Below 200DMA: SPY, ITB, XHB, XLF, XLV" so I thought I'd chart them out to show you visually.  Some ETFs are testing the 200 day moving average as we speak.  $IYR (real estate etf) is trading 8.8% above the 200-DMA, the highest in the sample.  Housing, financials and health care are the losers and must get back above the 200D or they could pull everyone down. Thoughts?  Charts are courtesy of StockCharts.com.

    ETFs Trading Above 200-DMA:

    Warren Buffett Testifies About Moody's, Einhorn Says Shut Down Ratings Agencies (MCO)

    | |
    If you haven't seen Warren Buffett testify on the role of credit rating agencies during the sub-prime mortgage crash, check it out. He also gave his thoughts on the financial crisis.  If you remember, Buffett's Berkshire Hathaway owned 20% of Moody's at the same time they set up a municipal bond insurance entity when AMBAC and MBIA (who were supposed to boost bond ratings by providing insurance) were insolvent.  David Einhorn (Greenlight Capital) on Bloomberg said they should just look at market spreads (credit default swaps, yield spreads). I agree!

    The backward looking nature of these credit ratings agencies allowed John Paulson and other forward looking thinkers to short subprime CDOs (Abacus CDO 2007) with reference obligations rated one notch above junk before the downgrade occurred. The business model doesn't work when there's volatility and credits get taken advantage of easily.

    $GLD at Very Important Support Level (Dec 2009 High/2010 Uptrend) - UPDATE

    | |
    GLD is testing December 2009 floor support, uptrend support in an ascending channel since Feb and a near term ascending triangle using May as ceiling resistance.  It's hard to put it in words.  $119.50 is where the December 2009 high and 2010 uptrend cross, which is an important level to hold.  I added two more charts to show the ascending triangle.  With GLD trading in an ascending channel and ascending triangle it means near term ceiling resistance is magnetizing buyers, but the next breakout/breakdown decision point is imminent.  I'm going to chart out more ETFs tonight, it looks like there's appetite for Treasuries.  As always, protect yourself from breakdown risk.

    Bernanke Leaves Fed Funds Rate at 0 - 0.25%, June 23, 2010 FOMC Statement

    | |

    DJIA's 200-Day Moving Average: Will the Dow stay above or below this demarcation line?

    | |

    May New Home Sales Down 33%, ITB Fades Data, Months Supply Up 46% to 8.5 (From April)

    | |
    May New Home Sales (Census.gov)
    As I said in my
    post last night on existing home sales, the lumber contract and Home Construction ETF ($ITB) could have been pricing in the poor housing data after the April 30 tax credit expired.  After today's new home sales release showed a 33% decline in May over April, ITB made new lows but rallied back into the green.  Watch the downtrend line for a potential breakout (or continuation) on the chart below.  ITB is currently up 1.19% to $11.95.  Below is the New Home Sales Data with a table snatched from Census.gov.

    May Existing Home Sales Down 2.2%, Market Eyeing New Home Sales Data, Lumber and ITB Moving in Tandem

    | |
    The existing home sales number knocked down the market today (I believe).  Here's a 
    Bloomberg Vid explaining what happened.  Get ready for the New Home Sales number tomorrow.  The Bloomberg survey (average economist estimate) sees new home sales down 17.4%.  With the price of Lumber down 42% from its peak in April, it could be pricing in lower new home sales, construction permits and housing starts going forward.  I'm not sure which data point tracks lumber directly, but I threw up a 6 month chart of Lumber and $ITB (Dow Jones Home Construction Index ETF) and they pretty much moved in tandem. 
    • Existing Home Sales (SA) -2.2% vs. last month (unexpected), +19.2% vs. last year (not bad)
    • Existing Home Inventory -3.4% vs. last month, +1.1% vs. last year
    • 8.3 Months of Existing Housing Inventory, -1.2% vs. last month, -14.4% vs. last year
    • Median Sales price +2.7% vs. last year
    • Average Sales Price +3.8% vs. last year

    Energy Analyst Urges New Approach In Egyptian Offshore Production - Guest Post

    | |

    39 Conduit Cancellations, Henderson Land Update (0012, HLDCY)

    | |
    Distressed Volatility (仿旧波动):  Here is an update on Henderson Land Development in Hong Kong.  The company trades on the Hong Kong Stock Exchange (HKG:0012) and in the U.S as an ADR (OTC:HLDCY).  It appears that the record breaking $57 million 39 Conduit unit sale back in October 2009 was canceled!  In total, 20 of the 24 flats were canceled.  Were the transactions used to prop up prices or were people thinking Florida 2007 (or just saw Jim Chanos on TV).  The Hong Kong Government is investigating the cancellations.

    In November 2009 a Tomson Riviera unit in Shanghai broke a record as well.  Keep an eye on the Hang Seng Property Index and the important 30,000 resistance level (chart below).  Below are articles and charts of Henderson Land Development and the Hong Kong Property Index.  For your viewing pleasure I also embedded a Google Map (street view) of 39 Conduit Road so you can visit Hong Kong.  Is Jim Chanos about to be right regarding China's property bubble?

    I-Shaped Lumber Recovery Turns Into Upside Down V-Shaped Crash ($LUMBER, $ITB)

    | |
    Lumber Contract
    Remember lumber was going parabolic in late April? (link:
    Lumber Contract In I-Shaped Recovery, Up 91% On Year).  Housing stocks were breaking out left and right, riding that tax credit to the moon.  Here are housing posts on my blog from March to May 2010 sorted by date to see options activity and various predictions by Meredith Whitney, John Paulson (Paulson & Co.) and Whitney Tilson (T2 Partners).  If Paulson hasn't changed his view, he expects 8-10% housing price gains in 2011 and sees a V-shaped recovery.  Whitney Tilson went public with a research report on May 20 giving reasons to short $ITB (Dow Jones Construction Index).  ITB was at $13 at that time.  Guess where it's at today people, $12.  Tilson made you 7.7% in a month on the short side.  Back to lumber.  Lumber went parabolic and as you can see from the chart below, the I-shaped recovery turned into an upside down V-shaped crash.  It lost 42% from the April peak and wiped away all of 2010's gains.  I'll be watching for support, which looks like $170.

    Gold Decoupled from US Dollar Index During June (Futures Charts, GCZ10, DXZ10, UUP/GLD)

    | |
    I was watching the Gold/US Dollar relationship recently waiting for a divorce (see posts on 6/2 and 6/3) and since the beginning of June they decoupled.  The December Gold Future (GCZ10) broke out of an ascending triangle to the upside and the December US Dollar Index Future broke below an uptrend (ascending channel) to the downside.  Since May 21 ( over 1-month), Gold is up about 8% and the USD is unchanged.  You don't see it on the chart but the US Dollar Future is approaching its 50 day moving average which could act as support.  The Sep S&P E-Mini Future (ESU10) is up 1.51% (16 points) tonight on breaking news regarding the Chinese Yuan and a lower US Dollar.  September Crude oil is up 1.79% to $80.60.

    Stocks, Commodities, U.S. Futures Rally as China Lets Yuan Gain on Dollar - Bloomberg
    Yuan Climbs Most in 18 Months as China Signals End to Peg; Forwards Jump - Bloomberg

    Gold Comex December 2010 vs. US Dollar Index December 2010 (OptionsXpress)

    Gold Move is "Reserve Driven", Euro is Doomed Currency - Dennis Gartman

    | |
    Hat tip Miss Trade for this Bloomberg video featuring Dennis Gartman (of the Gartman Letter). He's still bullish on gold in non-US Dollar terms, thinks the Euro is a doomed currency and Gold's move is strictly "reserve driven" (currency driven), meaning Central Banks could be diversifying out of Euros, Pound Sterling, Yen or US Dollars (eventually?) and into Gold. For recent posts on Gartman, click the label.

    Chinese Yuan Peg In Play, BP Spilling 100,000 Barrels, Mich Unemployment Rate Drops, Chavez Battles Prices and Venezuela CDS Tops Default Percentage, Elliott Wave Thinks Dow Going Below 1,000!

    | |
    Chinese Yuan peg in play!!!!!  Links for Sunday Night 6/20/2010:

    Nouriel Roubini on Chinese Yuan (Saturday June 19): - "China's decision to move away from its currency peg might mean the yuan weakens against the dollar instead of strengthens as Washington wants" -

    Beijing Move Threatens to Shake Up Its Neighbors - WSJ (h/t @FLYiR)
    Dollar Weakens as End to Yuan Peg Signals Confidence in Global Recovery - Bloomberg
    Yuan Forwards Strengthen After Central Bank Signals End of U.S. Dollar Peg - Bloomberg
    China Turns Tables on AAA Time-Bomb Nations: William Pesek - Bloomberg
    Asia Company Bond Spread Gap Shows Battered Junk Debt May be Set to Rally - Bloomberg
    BP estimates oil spill up to 100,000 barrels per day in document - Reuters 
    Chinese Yuan Under Scrutiny Before G20 Meeting - CNBC (Reuters)
    US Treasuries retreat after China's yuan move - Reuters (h/t @alea_)
    Hugo Chavez Spearheads Raids as Food Prices Skyrocket - CNBC (Reuters)
    Venezuela Using $1B Of Reserves To Meet Dollar Requests- WSJ
    Venezuela 5-Year CDS at 1242.4 bps, default probability at 55.16% (6/18) - CMA DataVision
    Venezuela Has No Plans to Lift Currency Controls, Chavez Says on State TV - BusinessWeek
    Michigan’s unemployment rate drops to 13.6% in April - Crain's Detroit Business
    Rahm Emanuel expected to quit White House - Telegraph.co.uk
    Wall Street's cues differ in looking at historical and technical trends - MarketWatch
    Gold Bubble? What Bubble? - Zero Hedge
    US manufacturing crown slips - Financial Times (h/t @upsidetrader)
    Elliott Wave predicts triple-digit Dow in 2016 - MarketWatch

    Michael Pento: Double Dip Recession Assured, US Never Healed (Debt/GDP 370% and Rising)

    | |
    Click for Bloomberg TV Video
    Going back a week here.  Michael Pento (
    Delta Global Advisors), who called the recent gold run in 9/2009, was on Bloomberg TV on June 9 saying a double dip recession was "virtually assured". He's betting against Ben Bernanke's positive stance given his poor track record and would rather take cues from oil, Treasury prices and "Dr. Copper".

    Pento also mentioned a Debt/GDP statistic:

    Yale's Shiller: Significant Risk of Further Declines in Stocks, Housing, Also Case Shiller Home Price Index ETF Coming Soon

    | |
    Click for Bloomberg TV Video
    Yale Economics Professor and
    MacroMarkets LLC Co-founder Robert Shiller was on Bloomberg TV on June 11 talking about the chance of a double dip recession.  He first brought up the savings rate.
    "The saving rate in the United States, the personal saving rate, has been declining since the early 1980s.  We used to save 10% of our income, it got down to zero or negative, and so I think we were in an abnormal state, it wouldn't surprise me if we returned to something more like a normal saving rate and I think that would be a good thing in the long run, maybe not the short run."
    "The short run fear is it will be a depressant on the economy".
    Robert Shiller on the stock market and housing: