Steel Price Charts, Futures (Scrap Iron, Hot Rolled Coils, Rebar, Plate)

While talking about US Steel (X) call action today and the 4.5% underlying move, when $SPY closed -1.13% (h/t @sellputs, btw what is going on with US Steel? $X options were active on AUG 19 as well through October), I came across a site (metalprices.com) that has embeddable steel price charts for:

(1) Scrap Iron #1 Dealer/Bundles (Chicago Mill) (2) Scrap Iron HMS (Chicago Mill) (3) Cold Rolled Coils (East of Mississippi) (4) Hot Rolled Coils (East of Mississippi) (5) Rebar (EoM) and (6) Standard Plate (EoM). They offer other metals as well, check out the site.

It appears that the prices lag, I'm not sure why. The data ends on July 13 for scrap iron and July 26 for steel. Today is September 7. It could be related to steel price reporting as other commodities show various end dates as well. Either way, check out the 6-month and 3-year charts for Scrap Iron #1 Bundles, Hot Rolled Coils and Rebar. Find more at the site. You can also chart out U.S. Midwest Domestic Hot-Rolled Coil Steel Index Futures at CME.com which trades everyday and the Steel Stock Index ETF (SLX). The steel price benchmarks look similar to the S&P.

Vinny Catalano's S&P Targets: 950 End of 2010, 750 in 2011 (Blue Marble Research) S&P Chart

Vinny Catalano, of Blue of Marble Research, on Tech Ticker six days ago (9/1/2010) said the S&P 500 was in a trading range between 1020 and 1150 and to watch support/resistance levels. Ultimately, Vinny believes the S&P will break to the downside and hit 950 by year end and 750 in 2011. He believes a political gridlock will not be good for the stock market and sees negative catalysts ahead. See the Tech Ticker video after the jump and S&P chart. I think the summer 2009 chop fest highs get tested around 950.

Let Housing Fall, Jim Rickards Interview, Strike in France

Omnis, Inc's Jim Rickards Interview, Says Sell Stocks - King World News

Unemployment in U.S. May Rise Toward 10%, `Feeble' Growth (BofA, Morgan Stanley) - Bloomberg

Housing Woes Bring a New Cry: Let the Market Fall - New York Times

BHP, Rio Tinto to Pay Mining Tax as Gillard Wins Support for Government - Bloomberg

10-Year JGB Yield Spikes 25bps (27%) in 12 Days (Japanese Bonds)

If you didn't notice, Japanese Government Bonds (JGBs) had a wild August. They reversed course abruptly starting on August 18. I told you to keep your eye on JGBs on August 9 and gave links to charts of various Japanese Government Bond yields at Bloomberg.com. Then on August 18 Kyle Bass (one of the few hedge fund managers who made bank shorting subprime mortgages using CDS) came on CNBC and said JGBs were a great short (lower price/higher yield). The market listened to him, 10-Year JGBs sold off hard and yields ran up to 1.15% from 0.90% in 12 sessions. (+25 basis points or 27%). They were overbought.

Paulson & Co. Update

Must read at Zero Hedge (featuring AG). Read the full post.

10Y Greek Bond Yield/Bund Spread Elevated, CDS 894bps, 3M Yield Plummets

Technical sovereign debt update for Greece. The Greek 10-year Government Bond Yield (11.324%) is in a steep uptrend and close to the May high. The Greek 3-month Bond Yield (4.72%) plummeted, so the yield curve just got steeper. More.. The 10y Greek Bond/German Bund (2.34%) spread widened and Greek 5y CDS (credit default swap) is in a symmetrical triangle inflection point, at 894bps (close to highs). The outlier is the 3-month Yield. Thoughts? People still think Greece will default or have to restructure (Do not fall for talk of European solvency - FT.com). More articles and Bloomberg charts after the jump.

Pento on Inflation, Gold, Housing, Consequences of Monetary Stimulus (Inflation)

Mike Pento, Senior Economist at Euro Pacific Capital, was interviewed by King World News last week. He's a specialist in "Austrian Economics". Here are a few points he made (full interview).
  • Bernanke promises "unconventional" methods to combat deflation. (read Jackson Hole speech)
  • "He (Bernanke) already purchased longer dated Treasuries and he's already purchased mortgage-backed securities, I can only assume he's ready to buy stocks and real estate...." (increase Fed Balance sheet)
  • "Monetary base has gone from $800 billion to just under $2 trillion...."
  • "(Gold) is absolutely, 100%, an inflation hedge"
  • "We've had decades of a massive increase in the money supply, a massive increase in lending and a massive increase in asset price inflation (Nasdaq stocks, real estate prices). When that ends the natural occurrence for healing would be for a deflationary depression"
  • Money supply has to shrink, consumers have to deleverage (pay down debt/sell off assets)
  • "You might get a nominal increase in the major averages, you might stop the hemorrhaging that's in the housing market, but at what cost?"
  • "When you increase the supply of currency it is never EVER evenly distributed"

Hear the full interview at King World News

Roubini at Ambrosetti Forum Italy (Video), Sees Stall Speed Growth

Nouriel Roubini  (NYU Professor/Roubini Global Economics) spoke with CNBC Europe Squawk Box before the Ambrosetti Forum in Italy. The view is from Villa D'Este on Lago di Como (Lake Como), Roubini Twitpic'd a better view. He still sees a 40% chance of a double dip recession. View the full 12 minute video below.

Today, the Labor Department reported that the economy lost 54,000 jobs, better than the 120,000 (economists) or 90,000 (wall street) loss expected. The unemployment rate rose to 9.6% (Aljazeera, Forbes). Also, Royal Bank of Scotland Plans to Cut 3,500 Jobs. Happy Labor Day people. Nice short covering today, $SPY closed at 110.91 +1.30%, see previous post for long and short term charts with moving averages. I parsed a few things from the video.

*Growth in the second half of the year will be worse than the first half, we'll reach a stall speed for the economy less than 1%.

S&P-Nikkei Performance Spread Wide, Nikkei >9000, E-mini S&P Future at Inflection Point (ES, NK, SPY, EWJ, Japan)

Right now I'm watching Nikkei 225 Index Futures (September/December), the ES-NK performance spread and E-mini S&P December Future. Starting in July, the performance spread between the E-mini S&P and Nikkei 225 Index widened dramatically. I wonder when and how the gap closes, or if Japan and U.S. growth rates (or prices) diverge from here. These are financial futures in case you are lost.


Nikkei (NK) vs. E-mini S&P (ES) - December Future (courtesy of optionsXpress)


Nikkei 225 Index Futures are still trading in a descending channels but could be forming a falling wedge reversal pattern. You can see the downtrend and apex point to break. 

Ben Bernanke, Sheila Bair at 2008 Financial Crisis Hearing (9/2/2010)

Federal Reserve Chairman Ben Bernanke and FDIC (Federal Deposit Insurance Corporation) Chair Sheila Bair testified before the Financial Crisis Inquiry Commission about the actions of the Fed during the 2008 financial crisis.

The U.S. Lost Decade is Over

According to Doug Kass (TheStreet.com)

U.S. Faces Deflation Risk Due to Indebtedness (Linda Yueh/Oxford Economist - Video)

Oxford University Economist Linda Yueh was on Bloomberg on 8/30/2010 talking about the Yen (BoJs recent move) and deflation risks in the U.S. and portions of Europe.
"I think there is a real (deflation) danger for the United States. It's less of a danger for Europe even though this was the big thing at Jackson Hole. Trichet is very worried about Europe going into a 1990s style Japanese deflationary trap because of all this debt de-leveraging which can cause a deflationary price spiral. As debt gets shed, prices fall, output falls, and then it's reinforcing. However, in the U.S. where this is more likely to be the case because of the scale of the financial crisis and the scale of indebtedness, Bernanke wasn't worried about deflation and he's really viewing the U.S. more as a slow growth story".

Former Lehman CEO Dick Fuld Testified Before FCIC (9/1/2010) $LEH

Dick Fuld testified before the Financial Crisis Inquiry Commission yesterday. Click the link to see the video at Cspan.org.

2008 Financial Crisis and Systemic Risk, Lehman Brothers Hearing (cspan.org)

"Thomas C. Baxter, Jr., General Counsel and Executive Vice President Federal Reserve Bank of New York Richard S. "Dick" Fuld, Jr., Former Chairman and Chief Executive Officer Lehman Brothers Harvey R. Miller, Business Finance & Restructuring Partner Weil, Gotshal & Manges, LLP Barry L. Zubrow, Chief Risk Officer JPMorgan Chase & Co."

SPY Pierces 50-Day Moving Average, Holds 200-Month But Growth Recession Upon Us

Simple Technical Analysis on SPY, S&P 500 ETF - 9/1/2010 (Distressed Volatility Research - For Internal Use Only*see charts after the jump

Today SPY pierced the 50 Day Moving Average and held the 50 Month moving average but still needs to conquer the 200 Day Moving Average, 50 Week Moving Average, 200 Week Moving Average and 50 Month Moving average. We'll see how the HFT bots trade the market between now and the elections. Bank of America/Merrill Lynch forecasts a "Growth Recession" ahead (From LA Times).
"Bank of America Merrill Lynch on Wednesday downgraded its forecast for the economy, calling for a “growth recession.”

What’s that? As BofA Merrill economists describe it, the U.S. would continue to grow in the fourth quarter and in 2011, but not fast enough to generate significant employment gains." (read article for more numbers)

Speaking of HFT, I think CNBC's Fast Money needs to hire an HFT Robot correspondent to tell people what's really going on in the market. Zero Hedge is the only site out there talking about it in depth.

Dan Rather Interviews SecondMarket CEO Barry Silbert, Revolutionizing Markets

Barry Silbert of SecondMarket.com is revolutionizing markets. Big things happening here! As of June they were managing $25 Billion in illiquid assets according to the Dan Rather interview. Centralize it! SecondMarket is a global platform for liquidity with competitive bids for illiquid assets. From their website, SecondMarket trades asset backed securities, auction rate securities, bankruptcy claims, collateralized debt obligations, limited partnership interests, private company stock (also see StockTwits "Private Ticker"), mortgage backed securities, bankruptcy claims, restricted securities, whole loans and soon to come, 363 bankruptcy sales, condo hotels, private REITs, and trust preferred securities (TRuPS).

Watch Dan Rather interview SecondMarket CEO, Barry Silbert - SecondMarket

Gunman James Lee In DiscoveryTV Building Holding Hostages (Video, Links)

This hostage situation in the Discovery Channel building (Maryland) has been going on for hours now. James Lee is holding a "small" number of people hostage. Watch the live video stream below for real-time information via WashingtonPost.com. First, read the initial incident.

"Money-throwing protester gets probation, fine
California man would face jail if he comes within 500 feet of Discovery building" (Gazette.net).

VIDEO: James Lee Throwing Cash In The Air During Earlier Stunt At Discovery Channel (BusinessInsider.com)

That was "Wave 1", now for "Wave 3"..

Jim Rogers Q&A, Gold Should Be >2,000, Prefers Silver (GLD, SLV)

Jim Rogers prefers Silver over Gold here but owns both in his portfolio. He made his case on CNBC on August 29.
  • Gold should be greater than $2,000/ounce if you adjust it for the 1980 high
  • If there's a currency crisis both gold and silver will rise  
  • Prefers Silver over Gold because (a) it's so depressed (b) potential for more gains on a percentage basis

Today I charted out $GLD and $SLV (Gold and Silver ETFs) and both are testing ceiling resistance levels. SLV is plotting a 2008 ceiling breakout which Gold took out 10 months ago (November, 2009). $SLV needs to rush the opposition (sellers) successfully at $19.50 resistance to run free (imo, mid-20s, top of ascending channel, see chart update link).

GLD, SLV Approaching Highs From May, June (Charts) - August 31, 2010

Chart Update, Ratio Analysis: GLD, SPY, SLV, IWM, TLT, UUP, GDX, GDXJ, SP-500 Index - August 25

FOMC Minutes From 8/10/2010

Find the August 10, 2010 FOMC Minutes release here (FederalReserve.gov) and read this article at Bloomberg.com: Fed Officials Saw Risk of Sending Wrong Policy Signal (Bloomberg). Here's a snippet.

Fed Allows CIC (China) to Acquire 10% of Morgan Stanley Voting Shares (MS)

I was looking for the FOMC Minutes PDF and found another interesting release. First off, CIC (China Investment Corporation) owns MS convertable notes from 2007:

CIC Sells Another 1.6M Morgan Stanley Shares--Filing (WSJ)
"CIC now owns 150.8 million shares of Morgan Stanley and will take possession of about 116.1 million of those shares when the roughly $5.6 billion in principal of mandatory convertible notes yielding 9%--bought in late 2007--convert into common stock, a conversion set to happen on Aug. 17."

From the Fed release:
"FEDERAL RESERVE SYSTEM
China Investment Corporation Beijing, People’s Republic of China
Order Approving Acquisition of an Interest in a Bank Holding Company
China Investment Corporation (“CIC”), Beijing, People’s Republic of China, has requested the Board’s approval under section 3 of the Bank Holding Company Act of 1956, as amended (“BHC Act”),1 to acquire indirectly up to 10 percent of the voting shares of Morgan Stanley, New York, New York. (read full PDF at Federal Reserve here).

Also read: CIC's bitter payoff for Morgan Stanley stake (8/8) (MarketWatch.com)

GMO's Q2 Letter

Read "Seven lean years: No recovery till 2016: 10 reasons Jeremy Grantham's betting $100 billion on historic game-changer" at MarketWatch.com.

Here is GMO's Q2 letter (from July)

GLD, SLV Approaching Highs From May, June (Charts)

GLD (SPDR Gold Trust) - FreeStockCharts.com (Gold ETF)

SLV (iShares Silver Trust ETF) - FreeStockCharts.com (Silver ETF)


*See previous post for more thoughts on this: Chart Update, Ratio Analysis: GLD, SPY, SLV, IWM, TLT, UUP, GDX, GDXJ, SP-500 Index (8/25/2010)

Nikkei Back Below 9,000 (-3.55%, 8,824), Nikkei Futures Charts (NKY, EWJ, NK_U, NK_Z)

The brief rally (1, 2) might be over in Japan after the initial Nikkei 9,000 breach on 8/24. The Nikkei blasted through that level again today, closing down 3.6% at 8,824. Anyone know where I can find a chart of the Nikkei Volatility Index ($VXJ)? I bet it was going crazy these past few weeks.

If I were forced to be a perma-Nikkei 225 bull, I'd watch for a downtrend breakout and of course a break above 9,000. Until then, like I said on 8/24, the Nikkei could swim in the 8000's for a bit and perhaps test the 2008/9 lows if Japan double dips. I'm watching to see what happens with the S&P at neckline support. U.S. E-Mini futures are currently unchanged to slightly lower at 5:02/6:02am. Below is the 1-day Nikkei Index move and the September (NKU10), December (NKZ10) Nikkei futures.

Read: Canada Housing Market, Zhou Xiaochuan (PBoC), Oil, Gary Shilling on 3% 30y-Treasury Bonds

Gary Shilling (A. Gary Shilling & Co.) on Fast Money said the 30-Y Treasury Yield will hit 3% (you'd make 15% from here, or 28% on a 30-Year Zero Coupon Bond) (CNBC Video)

Why Canada's housing market may be heading for a correction - The Globe and Mail (h/t @FLYir)

Peter Beutel (Cameron Hanover) told CNBC Monday that oil should be at $10 (CNBC Video)

J.P. Morgan cuts 3rd-quarter oil price forecast to $75 a barrel (MarketWatch) (predicts $65 by October, Nymex Crude is at $73.59)

*Top China bank official's defection rumors quashed (Zhou Xiaochuan) - (Washington Post)

*Japan Confirms Meeting With Zhou Amid Speculation He Left China (Bloomberg)

Read the articles and watch a video from Stratfor.com today (found originally by Zero Hedge). The rumor was he lost $430 Billion holding U.S. Treasury bonds and would be punished by the Chinese Government, so he fled to the U.S. It's funny because the value of Treasury bonds are testing their all time highs and Gary Shilling (see first article) thinks they are going higher. The original thought from my Twitter stream was that maybe Treasury derivatives blew up in his face, or the losses were from GSE securities.

Dow Industrials P&F Chart Targets: 9750 (Daily), 9150 (Weekly) $INDU $DIA

Check out the Dow Industrial Average ($INDU) point & figure chart. P&F charts represent "filtered" price movements over time, or cut out the noise (read more at Stockcharts.com ChartSchool and see P&F Pattern Alerts). The daily $INDU P&F chart is giving a downside target of 9,750 and the weekly chart says 9,150. It's another form of technical analysis.

The Dow closed at 10,009 today, so the daily sees -2.5% downside from here and the weekly sees -8.5% downside. Keep in mind that big price movement tomorrow could change the P&F's mind. Below are the daily and weekly $INDU P&F charts and the wider versions.

President Obama Update On Economy (Video, 8/30/2010), Alaska Protester Wants Free Speech

"The President talks about his Administration’s focus on moving the economy forward and urges Congress to pass legislation that will benefit small businesses in remarks to the press after meeting with his economic team at the White House." (Whitehouse.gov) #Obama

Hurricane Earl and Tropical Storms Danielle, Fiona in Atlantic (Radar)

Hurricane Earl and Tropical Storms Danielle and Fiona are creeping in the Atlantic Ocean. Hurricane Earl is a category 4 hurricane and right around the Virgin Islands. Check out the radars of wind speed probabilities and 5-day forecasts at NOAA.gov. They forecast Hurricane Earl will hit the coast of New Jersey on Friday.



$SPY Symmetrical Triangle Approaching Vertex Point, Hedge Risk (S&P 500)

SPY is approaching the vertex point in the symmetrical triangle. If I was long I'd hedge downside risk. Below is the weekly chart. SPY is still below the 50 week and 200 week moving average resistance levels. The MACD (momentum) indicator is below the midline (-0.98).

SPY (SPDRs S&P 500 ETF) via FreeStockCharts.com

When Do Treasury Bonds Officially Breakdown (Schiff, Faber on CNBC, TLT)

Here's a post for my hyperinflationist readers. Nothing new here, just Peter Schiff (Euro Pacific Capital) and Marc Faber (Gloom Boom Doom Report) telling CNBC viewers that Treasury bonds are in a bubble. Marc Faber's view is that Treasury yields bottomed out (prices peaked) in December 2008 (2.08% on the 10-year and 2.53% on the 30-year yield). He said "there isn't much upside for Treasuries unless it's for the short term and even the short term is uncertain". He believes the weak economy and policies will expand the Government debt even further and said "one day the interest payments on the Government debt will become unbearable". Faber likes gold, farmland (+6% in the Midwest 8/26) and agricultural commodities.

Peter Schiff is also concerned about interest payments.

"What I'm afraid of is that when people realize that we can't pay this money back, we're not going to be able to roll over all this short term debt, and so it's not just paying the interest, we're going to have to start retiring the principal, and that is just impossible, so there's going to be massive inflation".

Schiff thinks the bond market is the mother of all bubbles: "when it bursts the losses will dwarf the combined losses of the stock market bubble and real estate bubble".

"This decade is going to be the worst decade for bonds in U.S. history. Bond holders are going to get wiped out, because either the Government's going to default or they're going to inflate, but either way the people holding the bonds are left holding the bag."

USD/JPY Volatility, Yen Intervention Rumor Was Sold, Dilute The SOB BoJ

Look at USD/JPY (US Dollar/Japanese Yen) volatility tonight. Traders bought the Bank of Japan Yen intervention rumor and sold the news, hard.

"The BOJ will boost the amount of funds in the facility by 10 trillion yen ($116 billion) to a total of 30 trillion, the bank said in a statement after an emergency meeting in Tokyo. Governor Masaaki Shirakawa led the gathering after cutting short a U.S. trip in the wake of increasing calls from politicians for the BOJ to help stem a surge in the yen to a 15-year high." (read full article at Bloomberg.com)

USD/JPY swung between 85 and 86 and the Nikkei closed +1.76%. Also read: Yen Erases Loss on Concern BOJ's Steps Not Enough to Curb Gains (Bloomberg.com). USD/JPY would be a decent long if it broke through that downtrend line. It is testing critical support from December (chart after the jump). Dilute the SOB BoJ!

Bernanke Pledge on Economy Gives Some Relief to Oil Prices - Guest Post

Guest post by OilPrice.com

Bernanke Pledge on Economy Gives Some Relief to Oil Prices

Oil Market Summary for 08/23/2010 to 08/27/2010

Oil prices recovered some lost ground Friday after Federal Reserve chairman Ben Bernanke said the Fed stands ready to do whatever it takes to support economic recovery.

USD/JPY Spikes on BoJ "Monetary Control" Meeting, Nikkei Up 3% (FXY, NKY)

USD/JPY spiked on this news and Tokyo's Nikkei 225 Index was up 3%. Traders last week were already gaming the Nikkei to the upside. S&P and Nasdaq E-Mini futures are up 0.80%. Recently the U.S. markets have been following the Nikkei. Check out the charts below and the BoJ release.

Quantitative Easing Will Resume (Zandi), Dollar Could Collapse (Hussman) USDX DXY

Moody's Analytics President, Mark Zandi, told Bloomberg on 8/26 that quantitative easing would resume when the unemployment rate picks back up again in the next few months. He also increased the odds of a double dip recession to 1/3 from 1/4.

"I do think that the Federal Reserve will restart quantitative easing over the next few months. I think the economy's going to be at best very weak, so weak that unemployment will begin to rise again and I think that will be the signal for the Fed to resume quantitative easing".

"It could be for example if angst about the European debt situation were to flare up again and we'd see the equity markets, stock prices fall another 5-10-15%, I think that would qualify and certainly push us back into recession".

Bill Ackman Bought BP CDS In May (280bps), Short BP Debt

Hat tip to Bloomberg via DealBreaker who posted Pershing Square's Q2 Investor Letter. According to Ackman's letter, Pershing averaged into BP CDS at 280 basis points per annum, or bought credit insurance on BP's bonds. He's betting that BP's credit risk is mispriced due to U.S. operation risk, balance sheet impairment risk ("clean-up costs, penalties and legal liabilities") and statistically speaking, the CDS is mispricing the probability that "the current liability estimates that have been publicly promulgated materially underestimate the ultimate costs to BP".

Back in June I reported that BP CDS spiked to 382 bps (+128% in 7 days) and BP bond yields hit 7.82% (chart) when oil was flowing like mad and killing birds. Ackman's letter stated that BP CDS peaked at 600bps. So if another event threatens BP's financial condition, even if nothing happens to the company, BP credit traders could buy BP protection again and run the CDS up to 600bps (test the top). The value of Ackman's CDS holding would rise 114%.

CDO Comedy: Customer Screwed Was Bank Doing the Screwing

Listen to this podcast on the rise and fall of CDOs (collateralized debt obligations) at NPR's Planet Money. Listen to the whole thing, it's kind of funny. Below is a quote 14 minutes in. This is why banks should not exist in current form today (imo)!

Bernanke's Speech in Jackson Hole; Committed to Fighting Deflation

Bernanke will fight deflation, to the death.

"At this juncture, the Committee has not agreed on specific criteria or triggers for further action, but I can make two general observations.

First, the FOMC will strongly resist deviations from price stability in the downward direction. Falling into deflation is not a significant risk for the United States at this time, but that is true in part because the public understands that the Federal Reserve will be vigilant and proactive in addressing significant further disinflation. It is worthwhile to note that, if deflation risks were to increase, the benefit-cost tradeoffs of some of our policy tools could become significantly more favorable.

Second, regardless of the risks of deflation, the FOMC will do all that it can to ensure continuation of the economic recovery. Consistent with our mandate, the Federal Reserve is committed to promoting growth in employment and reducing resource slack more generally. Because a further significant weakening in the economic outlook would likely be associated with further disinflation, in the current environment there is little or no potential conflict between the goals of supporting growth and employment and of maintaining price stability.

Dick Bove vs. CLSA's Mike Mayo on Citigroup Cooking the Books (DTAs)

Charlie Gasparino broke news on Fox Business that Citigroup (C) might be cooking their books. Read and watch it here: Analyst: Citigroup Is Cooking the Books. CLSA analyst Mike Mayo said Citi needed to take a $50 billion writedown on "deferred tax assets" and the result would be a $10 billion loss. Ha, Dick Bove said Citigroup is not cooking the books: Dick Bové: FYI, Citi Is Not “Cooking The Books” (Dealbreaker). In July, Bove said Citigroup was headed toward $8.50. I embedded the Fox Biz video. I'd like to see what the accounting blogs say. The chart says Citigroup either triples or goes to zero from here (chart).

Nikkei 225 Shorts Cover, 20-Year JGB Yield Spikes (Chart Comparison)

Today traders rallied the Nikkei 225 Index (Tokyo Stock Index) back into the green and dumped JGBs (yields rose).  Bloomberg articles on why:

1) Japanese Stocks Rise After Yen Weakens on Policy Expectations; Sony Jumps 
2) Yen Weakens on Speculation Japan Will Take Action to Curb Currency's Gains
3) Japanese Bond Slide, Yields Rise Most in 19 Months, on Policy Speculation
4) Japan automakers report solid production growth

Below is a Bloomberg chart comparing the Nikkei 225 (NKY) and 20Y Japanese Government Bond (GJGB20). Are JGB yields bottoming out? Some hedge funds are betting on it, see post: Kyle Bass: Wouldn't Be Long Stocks, Short Japanese Government Bonds, Bet On Higher Rates Cheaply (CNBC Video). Will U.S. markets copy this move tomorrow (higher market/lower Treasuries)? All eyes are on the U.S. Q2 GDP Growth Revision tomorrow via bea.gov. Consensus calls for 1.4% from 2.4% initially (Briefing.com). U.S. futures are unchanged and Europe is lower.

Energy and Security Issues in the Red Sea Transforming as “the Age of Gas” Begins in Earnest - Guest Post

Submitted by OilPrice.com

Energy and Security Issues in the Red Sea Transforming as “the Age of Gas” Begins in Earnest

Major new energy issues are about to transform still further the strategic balance of the Horn of Africa and the Red Sea, with foreseeable consequences for the global energy market over the coming decade. Soon-to-be-evident new wealth in the Red Sea/Horn of Africa region will transform the intensity of conflict there, which in turn will affect not only the region, but the world’s most important trading route: the Red Sea/Suez sea line of communication (SLOC).

Much of the anticipated change is developing around the flood of new discoveries and exploitation of natural gas fields in the Indian Ocean region, particularly extending through Ethiopia, Egypt, and other countries of the Red Sea region. Apart from the impending influx of new energy wealth into the region, facilitating new levels of confidence and capability in the security environment, the boom of the “Gas Age” also seems set to promise — within a decade — an oversupply of gas to the world market, almost certainly precipitating a collapse in price for gas and petroleum.

Albert Edwards: Heading Back to S&P 450 (1982), Long Treasury Bonds 10y+

Check out Société Générale's Albert Edwards recent research report on the market (Albert Edwards: "We Are Returning To 450 On The S&P (charts) - zerohedge.com). He sees the Long Treasury Bond/S&P inverse relationship continuing (bonds up, equities down). I posted a chart of TLT/SPY yesterday and you can see the clear relationship. It looks like Treasuries/S&P took over the US Dollar/S&P inverse relationship recently which is interesting.

This call is similar to Charles Nenner's target on the Dow: Charles Nenner's Cycles See Dow 5,000, Gold 2,500 in Few Years (Deflation, Military Conflict). Folks, if these people are right, that's a 50%+ haircut from here. You can protect yourself from these targets with far out-of-the-money put options (disaster insurance) and probably on the cheap. For more on Albert Edwards read this NYT piece from August 9: The Rise of the Permabears.

Charles Nenner's Cycles See Dow 5,000, Gold 2,500 in Few Years (Deflation, Military Conflict)

Charles Nenner, a market timer who studies cycles at the Charles Nenner Research Center, was on Bloomberg TV today and here's a summary of what he said:
  1. We are following Japan (deflation) worldwide
  2. Not much more the Fed can do
  3. Gold is risky in the short term, but sees it hitting $2,500 on a cycle of "major military conflict" starting in 2012-2013.
  4. Sees Dow hitting 5,000 in the next few years
Nenner did market timing models for Goldman Sachs for 12 years. All algorithms! I embedded the video below.

Chart Update, Ratio Analysis: GLD, SPY, SLV, IWM, TLT, UUP, GDX, GDXJ, SP-500 Index

It's been a minute, here's a fresh technical chart festival including ratios and one price comparison. The most appealing ETFs on the long side, strictly on price action, are the gold and silver ETFs (GLD, SLV) and gold stock indexes (GDX, GDXJ). I forgot to check out the silver stock ETF. If precious metals want to move in tandem, I say play the potential silver breakout. GLD broke through its all time high in October, 2009 while SLV lagged. Two months ago famed commodity investor, Jim Rogers, said silver looked cheap being "70% below its all time high" (see post with Jim Rogers on CNN Money).

All of these plays look good with put protection and a stop under support (imo). I think put options (depending on implied volatility, consult with an options pricer) would work well as a hedge if gold and silver failed at resistance. They'd probably blast through their 50 week, 50 day and 200 day moving averages and ascending channel support from 2008, which would bring massive downside volatility and make the puts profitable. The same thing happened in June but it was a correction. So in the near term, precious metals ETFs either break free from here or violate the lows from July (imo). If you're on the index page, 12 charts are after the jump link.

Roubini Sees Less Than 1% Growth in Q3, 40% Chance of Recession

FYI: Nouriel Roubini sees less than 1% GDP growth for Q3 and a 40% chance of recession. He tweeted this today:
"Q3 GDP growth very likely to be below 1%; and likely to be closer to 0% than to a pathetically lousy 1%. So double dip risk is now > 40%" (source: Twitter)

Also from a Bloomberg article:
“With growth at a stall speed of 1 percent or below, the stock markets could sharply correct, and credit spreads and interbank spreads widen while global risk aversion sharply increases,” (source: Bloomberg.com)

International Sanctions Inflicting Pain At Gas Pump, Stalling Energy Projects - Guest Post

Submitted by OilPrice.com

International Sanctions Inflicting Pain At Gas Pump, Stalling Energy Projects

Although the Iranian government insists that countries like China and Russia can make up lost Western investment in the petroleum sector, rising gas prices and stalled energy projects are signs that the regime is beginning to buckle under international sanctions.

The United States, Canada and Australia, as well as the United Nations and the European Union, have stiffened financial penalties over the last several weeks against Iran for its nuclear program, which Tehran argues is meant for civilian uses like power generation and medical purposes.

In recent weeks, Tehran has begun to feel “a lot of pressure” on the gasoline front, said Houchang Hassan-Yari, a professor of international relations at the Royal Military College of Canada in Kingston, Ontario. The government is now curbing from 100 liters to 60 liters (roughly 26.4 gallons to 15.9 gallons) the amount of subsidized gas consumers can buy each month, Hassan-Yari told OilPrice.com.

Ireland Index Technicals Predicted CRH Earnings Cut, Bank Worries and S&P Downgrade (CDS Also Made Moves In August)

On Saturday, I posted a chart of the Dow Jones Ireland Stock which pierced firm support on big downside price action on Friday. You could tell traders were nervous about something when the red candlestick creeped through support on a line that held 3 times during the last 4 months. Technicals matter. Look at the headlines on Monday and Tuesday and the -6.35% move in the Ireland Index. I also threw up a chart of Ireland 5Y CDS during August. Credit default swaps insure debt for a fee. Credit traders who bought naked CDS in the beginning of August are up 50% on their money, or a financial institution hedged their long exposure in Irish Government Bonds.

Hugh Hendry's Eclectica Fund is Top Macro Fund YTD

Link: Congratulations To Hugh Hendry For Achieving The Best Macro Hedge Fund YTD Return (Zero Hedge). 

Don't know who Hugh Hendry is? See recent media appearances here, you won't regret it. He and partners run Eclectica Asset Management in London.

"Requiem For Detroit" Documentary, It's Now a Depressed Turn Around Story!

I found this interesting film documentary on the city of Detroit titled "Requiem for Detroit", directed by Julien Temple on BBC Two. I couldn't find the film anywhere else on the internet. It went through the rise and fall of Detroit during the 20th century. It was an hour long history, economics and social study of Detroit.

It started with Henry Ford's invention of the automobile and the subsequent economic boom. It then traveled through a bunch of ups and downs throughout history including the 1929 stock market crash, Great Depression, WWII/industry bail out, 50s car boom, highway system, racial riots burning down the city, mass flight out of Detroit occurs to surrounding suburbs, 70s oil crisis brings Japanese competition, plants close, the last cheap oil/gas guzzling car boom occurs (Hummer) and of course ends with the $4 gas spike, credit crisis, housing bust, unemployment and GM bankruptcy.

July Existing Home Sales -27% over June on Tax Credit Expiration, Prices Hold Up But Inventory Months Up (Data Table, ITB Chart)

A dismal existing home sales number rocked the market today but should've been expected given the expired tax credit. July preliminary existing home sales came in at 3,830,000 versus 5,260,000 in June or -27.2%, and -25.5% over 2009. Existing inventory on the market clocked 3,984,000, +2.5% over June but -1.9% over 2009. Given the slower pace of sales, months of inventory on the market rose 40.4% to 12.5 months over June, and 31.6% over July 2009. Prices were relatively stable, we'll see what happens going forward though with the months of inventory on hand. If mortgage rates head on down to 2% that would provide a decent backstop (see the recent 30-Year fixed rate mortgage chart going back to 1975). Here's what Lawrence Yun, chief economist at NAR (National Association of Realtors) had to say and I embedded the existing home sales data below via Scribd. ITB (the US Home Construction ETF) might've already priced the news in, it's up 0.46% to $10.85 (chart below). Looks vulnerable at support though if it rolls over again.
"July Existing-Home Sales Fall as Expected but Prices Rise

Washington, August 24, 2010

E-mini S&P, Russell, Nasdaq Futures at Inflection Point (Head and Shoulders, Descending Triangle, Dark Cross)

The E-mini S&P, Russell and Nasdaq are at a serious inflection point. They all formed a head and shoulders pattern, are trading inside a descending triangle from the April peak to July low and all have overhead "dark crosses" in play (when the 50 day moving average crosses the 200 day). We can't hold this sideways channel forever. I wouldn't want to be long the market until the descending trend gets violated. I could see SPX testing the July 2010 low, which is about 4.5% downside from here on the S&P index. We are technically still in a sideways channel but the chart looks creepy no? Hopefully you're already hedged accordingly with short exposure or put insurance, given the Hindenburg Omen and 1987 crash signals out there (Aug 12: Bob Prechter: Dow Chart Similar to 1987 Top, Bullish on US Dollar, 100% Cash (Video).

The VIX futures curve (volatility index curve) is steep with spot at 25 and October at 32, meaning volatility traders are expecting a higher read between now and October expiration. This same type of action occurred in late 2009. Check the Daily Options Report and VIX and More for more information on the VIX. Get ready for some interesting action in equities and Treasuries. Blow off top coming for TLT? Charts are after the jump link.

Nikkei 225 Index Breached 9,000 Support (Charts)

On July 16, I told you to watch the Nikkei 9,000 support level when it rolled over at downtrend resistance (see charts). It breached that level today in Japan, closing at 8,995, down 1.33%. It hit an intra-day low of 8,983. The S&P E-mini future is down 0.82% overnight and could follow tomorrow. I charted out the Nikkei 225 September Future and the Index* (as of yesterday's close but zoomed out). You can see the obvious descending triangle breach in the future. The September future was trading at 8,935. If 9,000 turns out be to be new confirmed resistance, there's a chance Tokyo's Nikkei could sell off to 8,000 (-11%) or even double dip to early 2009 levels. If I was a long only mutual fund, I would not want to own Japan yet until a) 9k support was set in stone and b) the Nikkei took out that downtrend line from 2007.

Tokyo Nikkei 225 Index Sep 2010 (NKU10) - OptionsXpress

Reading: Market Risks, Silver, Japan Breaches 9,000, Illinois Debt

I'm trying to find some good news folks, I really am. I guess you could say temporary employment +23% in Q2 year over year is good news, but it better translate into permanent employment or we'll be in a wage raping contract economy with zero benefits just to keep EPS and stocks up.

Housing Slide in U.S. Threatens to Drag Economy Into Recession - Bloomberg
China Stock Futures Drop; Commodity Producers May Fall on Slowdown Concern - Bloomberg
Nikkei down 1%, breaches 9,000 level - Reuters
Taleb's Pessimism Lures CIC - WSJ
If S&P Breaks 1010, Back To 878? - CNBC Fast Money
Japanese 10-Year Bond Futures Advance on Stronger Yen, Economic Concerns - Bloomberg
Wheat Futures in Chicago Plunge as Much as 2.1%, Extending Earlier Losses - Bloomberg
Credit Suisse's Morse Says Wheat Price Gains `Overdone': Video - Bloomberg
Facebook Deletes Accounts Purporting to Be From North Korea - Bloomberg
Housing in 'Double-Dip': Economist Mark Zandi at Moody's Analytics - CNBC
Jim Cramer Sees ‘Very Negative’ Trend in Market - CNBCs Mad Money
Retail Investors Don’t Trust the Market: McCaughan of Principal Global Investors - CNBC
Current Bubble: Bond Bubble Believers! - CNBC Fast Money
Commercial Real Estate Gains for First Time in 2 Years: Study - CNBC
Hurricane Danielle Forms in Atlantic, Seen Strengthening - CNBC
Is Illinois Worse Off Than Greece with a Little LTCM and Bear Stearns Thrown In? - Zero Hedge
IOU Part Two: California To Issue IOUs For Second Year In A Row - Zero Hedge
James Turk - Upside Explosion In Silver - KingWorldNews
KWN Weekly Market Wrap-Up with Art Cashin - KingWorldNews
Richard Russell - The Stock Market Is Crumbling - KingWorldNews
Why Coffee Is Getting More Expensive - NPR Planet Money

Bond Bubble? H0A0, HYG, JNK, PHK, TLT, LQD, Baa/S&P Spread, OAS (Chart Action, Part 2)

This post takes off from part 1Bonds in Bubble Mode! Spreads to S&P, Treasuries Narrowing (JPM's Tom Lee, CDR's Tim Backshall and Wharton's Siegel). Below I charted out TLT, LQD, JNK, HYG, PHK, the Merrill Lynch US High Yield Master II Index, OAS (option adjusted spread to Treasuries), Baa-S&P 500 earnings yield spread and the Baa-10Year Treasury yield spread.

Bond ETFs look ripe for a correction, especially when looking at the yearly charts of PHK and LQD. PHK (Pimco High Yield) retraced the entire 2008 crash and LQD is testing the 2003 highs! In the immediate term, watch to see how HYG and JNK break their symmetrical triangles and if the 20 week moving average crosses the 50 week moving average.

Bonds in Bubble Mode! Spreads to S&P, Treasuries Narrowing (Tom Lee, Tim Backshall, Siegel Videos) Part 1

Bonds are in parabolic mode across the risk curve, from Treasuries to High Yield Corporate Bonds, mainly due to Fed policy, banks surfing the yield curve for spread (borrowing at 0% and investing in 30 Year Treasuries at 3.66%) and funds flowing out of equities and into bonds. Tom Lee, Chief U.S. Equity Strategist at JP Morgan, mentioned a few days ago (video below) that we could see a huge refinancing-boom for mortgages and corporate bonds. However, he sees risks on the other side of the trade.

Oil Prices Spiral Downwards as Economic Gloom Intensifies - Guest Post

Guest post by OilPrice.com

Oil Prices Spiral Downwards as Economic Gloom Intensifies

Oil Market Summary for 08/16/2010 to 08/20/2010

Crude oil prices continued their downward spiral during the week as new data confirmed that U.S. economic growth is slowing.

The benchmark West Texas Intermediate contract settled 2.6% lower for the week on Friday, at $73.46 a barrel compared to the $75.39 close a week ago, itself a decline of 7% from the previous week.

Ireland, Italy, Spain Stock Indexes Pierced Technical Levels (Charts)

Hat tip to @gold_tracker on Twitter for this post at Gold Versus Paper - Ireland - First PIIG to Break Down. It looks like the Dow Jones Ireland Stock Index ($IEDOW) broke $180 support, closing at $178. It tested that level 3 times since May and finally gave in yesterday. Italy also blew through its 50 day moving average and has the risk of violating a symmetrical triangle. Spain pierced its 50dma and must hold 370 next week or there's risk of further downside. Is a new EUR/USD downside wave about to occur on growth risk? Be careful with European equities. Here's what currency hedge fund manager John Taylor had to say 10 days ago on Bloomberg (if still relevant): John Taylor (FX Concepts) Eyeing EUR/USD Trend Reversal, Greece, Spain Will Default, COT Chart (EUR/USD, USDX, DXY, UUP, FXE). Charts after the jump.

Doug Kass: Approaching Time to Re-Risk (Buy), Likes Financials Not Technicals (Fast Money Video 8/20)

Doug Kass of Seabreeze, who called for a classic bottom a few weeks ago (correctly), now thinks it is time to get "longer". He said "it's approaching a time to re-risk" in the "contained" trading range between 1020 - 1150 (or 11-13x his 2011 SPX earnings estimate of $90/share). He also said, "if the market continues to decline I will expand the long book further". He bought Citigroup and Bank of America on Friday. Kass does not believe in technical analysis.

The consensus view seems to be that the market will rally into the November midterm elections, betting on Republicans getting elected (Gallup: GOP Shows Strongest Positioning Yet in 2010 Vote Test). Does it even matter what Congress does at this point? I thought the market was supposed to rally on reflationary policies, not without them. I guess we'll have to see what the big money HFT trading algorithms decide to do, collectively.

Link to Interview w/ Paul Denlinger on China Economy, US Relations

Check out this interesting interview with Paul Denlinger at the competitivefutures.com blog. Here's the direct link -> Paul Denlinger: China’s Strategic Future. Denlinger writes the blog chinavortex.com and I follow him on twitter.

California Controller: Cash Will Run Out In Late October (CDS at 284bps)

Jane Wells spoke with California State Controller John Chiang today on CNBC. 150,000 State workers took an unpaid day off today (a furlough Friday). Chiang said if nothing is changes "we will run out of cash in late October". They are facing a $19 billion deficit with tax revenues down 14% in 2009 and might have to issue IOUs again. Read Jane's blog post today (California Acts Stoned Over a Rock). So are they going to legalize marijuana in November with proposition 19? Maybe they should bump it back a month. State of California credit default swaps, or insurance on its debt, actually tightened a bit in July and August. The 5Y California CDS is currently trading at 284 basis points (2.84%) to protect $10 million in bonds. I found articles from yesterday on Cali CDS in the LA Times (How a credit default swap deal works, Credit default swap deals unnerve California). I also embedded a video from Arnold Schwarzenegger (8/13).

$SPY Trend Update; Be Aware Of Weekly, Monthly Moving Averages

The market is falling today on an unexpected jump in jobless claims and disappointing regional manufacturing (Stocks drop as jobless claims rise unexpectedly - Associated Press). I'm thinking technical vulnerabilities (head and shoulders) are at stake here as well. There are ways to protect yourself against technical risk. You can hedge long exposure with put options or offset with securities or ETFs that move inversely with the risk asset, which changes as well. Treasury Bonds (TLT), the U.S. Dollar (UUP) and Volatility (VXX) have moved inversely with the S&P (SPY) since the April peak. The Dollar didn't gain much but it still preserved capital. I first did technical analysis on $SPY using weekly and monthly charts with trends and moving averages and then compared UUP, TLT and VXX performance with SPY since April (backward looking).

US Steel (X) Out-of-Money Call Options Active on Takeover Rumor (August-October)

U.S. Steel (NYSE:X) had mucho out-of-the money call options active today, from August to October, on rumors that ArcelorMittal (MT) was interested in buying U.S. Steel for $80/share. Steel analysts thought it was highly unlikely.

Slicing the Neckline: A Classic Technical Pattern Agrees with the Elliott Wave Count - Guest Post

Slicing the Neckline: A Classic Technical Pattern Agrees with the Elliott Wave Count

By Elliott Wave International

In the August issue of his Elliott Wave Theorist, market forecaster Robert Prechter alerted readers that the U.S. stock market was slicing the neckline of a classic head-and-shoulders pattern in technical analysis, and that this may send the market into critical condition.

Prechter said that when the Elliott wave count and a head-and-shoulders pattern are saying the same thing about the stock market, it's best to pay attention.

Kyle Bass: I Wouldn't Be Long Stocks, Short Japanese Government Bonds, Bet On Higher Rates Cheaply (CNBC Video)

Kyle Bass, managing partner at hedge fund Hayman Advisors, was on CNBC today giving free institutional advice on how to make big money risking very little capital. Remember credit default swaps on sub-prime mortgage CDOs? Kyle Bass, along with hedge fund managers John Paulson and Michael Burry, also bet against sub-prime mortgage pools using CDS (8/2007 Forbes article, 6/2007 investment letter, 12/2007 Bloomberg) and even warned former Bear Stearns co-workers about the risks he saw in the mortgage market in 2006 (See the FCIC hearing below).

This time Bass is betting against Japanese Government Bonds (quotes) using interest rate derivatives or CDS. He thinks JGBs are mispriced, unsustainable and susceptible to the "Keynesian endpoint". I'm sure U.S. Treasuries will be vulnerable at some point in the future. I can see the Government hearings now. Here's a WSJ article from December 2009:

"Traders are betting against Japan's debt in myriad ways. Some bearish traders are entering into option contracts betting on "forward rates", or the direction of Japanese yields. These options are among the most heavily traded of the commonly used bearish tools, so some beginners to the game are embracing them. The downside is investors can find themselves exposed to big losses if yields fall further.

Reflation ETF Call Options Active on ISE: TBT, SLV, USO, UNG, MOS

Reflation ETFs had the most customer call options/puts opened today on the ISE (International Securities Exchange). The ISE widget on the right column shows the most actives from the ISE Put/Call Ratio. The ISEE ratio is actually measured by Calls/Puts (opened) * 100. Today the reflation squadron topped the list (QE2?). In words:

Reads: Highland Hospitality, Treasury Butterflies/ES, Gross on GSEs, Waddell's Steve Avery on Markets

  • Hotel Chain Explores Bankruptcy (Highland Hospitality) - WSJ
  • BREAKING: Ex-Illinois Gov. guilty on one count, faces retrial - Reuters 
  • *Presenting The New Correlation Regime: Treasury Butterflies And Risk (2s10s30s/ES Chart) - Zero Hedge
  • U.S. bankruptcy claims trading hits record in July - Reuters 
  • Manager in flash crash: markets too fragile (Waddell's Steve Avery) - Reuters 
  • Trading Group Fined for Driving Up Oil Price ($12 million fine for 2008 $100 Oil)- FT
  • Pimco's Gross Urges `Full Nationalization' of Housing Finance - Bloomberg
  • Fed Buys $2.551 Billion Treasuries in Resumption of Purchases - Bloomberg
  • Dana in talks to buy more Suncor assets - sources - Reuters 
  • Dollar Libor dips again on low rate forecasts - Reuters (via Yahoo UK)
    • Gold rises to highest since July as euro gains - Reuters 
    • GM recalls Chevy Traverse, GMC Acadia, Buick Enclave, Saturn Outlook over seat belt - USA Today

    Similarities/Differences Between Japan of 1990 and U.S. Today (National Inflation Association Video)

    Will the U.S. experience hyperinflation or deflation from here? The National Inflation Association thinks hyperinflation. They put out an interesting video explaining Japan's lost deflationary decade(s) and showed similarities and differences between "Japan of 1990" and the U.S. today. For example, the Japanese Government borrowed from its own citizens who saved their money, while the U.S. borrowed "$4 trillion" from foreigners and "$1 billion" from Japan", the narrator said. U.S. citizens are starting to save though. The Nikkei 225 (Japan Stock Index) peaked in 1989 at 38,900 and troughed in 2008 at 6,900 (-82% in 21 years). In 2008 it revisited the 2003 AND 1982 lows. See my post from 3/2009 with a long-term Nikkei chart. Deflation and unemployment were so bad in the 1990s that the Bank of Japan lowered rates to 0% in 2001. The Nikkei then followed the U.S. leverage bubble/bust and Yen carry trade/unwind. Which will it be, chronic deflation (Gary Shilling), hyperinflation or stagflation? Watching $TLT, $GLD and $SLV.

    Gregor Macdonald: We're in a Debt Deflation Depression, Nominal-to-Real Values Widening (MacroTwits Video)

    Macro-economist, energy analyst, investor, Gregor Macdonald (@gregormacdonald on twitter), who writes about energy and economics at Gregor.us (w/ premium newsletter), StockTwits.com and runs the MacroTwits Hour on StockTwits TV (Sunday/9pm eastern) had an interesting show last night. I embedded the video below. Here are a few topics he covered:

    • Fake Pound coins in circulation, Gresham's Law (bad money drives out good)
    • Treasury bond prices haven't broken their 2008 highs yet, how will they react to QE2?
    • We're in a "debt deflation depression" not recession; we're not in a 1930s style depression yet
    • Fed printing money vs. debt deflation and money velocity
    • Post-war economics and contemporary economists
    • Deflation in "real" vs. "nominal" terms, spread widening between nominal and real values
    • Potential end game for Japan and the Yen (JPY)
    • Downward revisions to GDP

    30-Year Fixed Rate Mortgage at Record Lows 4.44%, Falling Wedge Reversal Pattern (chart)

    As of 8/12, the Freddie Mac 30-Year Fixed Rate Mortgage stood at 4.44%, a record low. I threw up a chart from the St. Louis Fed which starts at 1975. There will soon be a crazy multi-decade falling wedge reversal. It will be hard to time, but watch out for the bond vigilantes when rates start breaking out and Treasury volatility moves. Hopefully as a result of reflationary growth instead of stagflation. These rates are currently being fueled by the Fed and appetite for Treasuries by banks, savings et al. Also 78% of all "loan applications nationwide", according to the Mortgage Bankers Association, are refinancings (Washington Post).

    MORTGAGE30US - 30-Year Fixed Rate Mortgage US Average (Freddie Mac)


    Chronic Deflation Will Send 30-Year Treasuries to 3% (Gary Shilling)

    Gary Shilling still sees a 3% yield on the 30-Year US Treasury Bond and a lower stock market due to "chronic" deflation. His views haven't changed since July 21, when he was interviewed on Bloomberg. Since then the 30-Y Treasury yield ($TYX) lost 93 basis points and price ($USB) gained 1.5% to 132. The yield is sitting on floor support and could breakdown tomorrow. You can also see a clear descending channel, so if support gets violated 3.6% looks like support. Bonds are in bubble mode and could spike to form a capitulative top (yields move inversely with price). In my opinion, either Gold or 30-Year US Treasuries move parabolically from here to new highs. Which will it be.. I put up a chart of the 30-Year Treasury yield and embedded the Shilling interview courtesy of Tech Ticker. The deflation topic is hot right now. I'm writing about about the high yield bond-S&P yield spread on my next post with charts and videos. HY overvalued here?

    David Rosenberg: Bring Out Post 1700 History Books, Not Post 1945 (Video Interview)

    From this article at WSJ.com (Is a Crash Coming? Ten Reasons to Be Cautious), I found this 26 minute WSJ interview with Gluskin Sheff's Chief Economist David Rosenberg (former Chief Economist at Merrill Lynch).

    7:00 mark
    "This is a whole new paradigm. This is where we bring out the history books, not post 1945, maybe you know post 1700. This is a credit contraction of historical proportions and what happened was that for a period time, say for 3 quarters, maybe 4 quarters, we had this tremendous policy stimulus at the same time we had the green shoots from the effects of the inventories. That's all behind us right now."

    "The range of outcomes right now is extremely wide, wider than I've seen certainly in my professional lifetime. So I'm willing to say that there's tremendous uncertainty out there."

    "When I look at the economy bottom up, it's tough for me to get GDP growth rates much above 1% and in fact I think the odds that we could be contracting by the 4th quarter, barring some major unforeseen exogenous positive shock, I think that the odds that we slip back into recession, if we ever left the first recession, I think are a lot higher than a lot of market pundits are talking about right now."

    Rick Santelli Goes Off On The Federal Reserve, Quotes Zero Hedge (CNBC Video)

    Rick Santelli went off on the Fed again Friday and quoted Zerohedge.com (CNBC Video). For more rants click the label below. Off to drink beer in Chicago.

    Crude Oil Prices Fall Below $80 Again as Officials Anticipate Slower Growth - Guest Post

    Guest post by OilPrice.com

    Crude Oil Prices Fall Below $80 Again as Officials Anticipate Slower Growth

    Oil Market Summary for 08/09/2010 to 08/13/2010

    Crude oil prices slumped below $80 a barrel again this week as the Federal Reserve and other official forecasters took a dimmer view of the economic recovery.

    Friday’s closing price for the benchmark West Texas Intermediate futures contract of $75.39 a barrel marked a retreat from the contract’s short-lived foray outside the $70 to $80 a barrel range it has been trapped in for months. Prices fell nearly 7% from last Friday’s close of $80.70 a barrel.

    A Dow Candlestick Signal and Historical Nasdaq Pattern (Guest Videos)

    In the videos below, Adam Hewison of MarketClub charts out the Dow and Nasdaq and integrates his trade triangles technology. He saw an interesting historical pattern in the Nasdaq and a Japanese candlestick signal in the Dow.

    Wharton's Siegel: No Double Dip Recession, Sees Dip in Treasuries (Long-Term Bonds)

    If you missed it, Wharton's Jeremy Siegel was on Bloomberg TV on August 9 before the FOMC statement:
    "I think there is now a very broad consensus that this slow patch is not going to develop into a double dip recession and despite the slow GDP growth in the second quarter, another good quarter of corporate earnings. So I think there's some good things that are coming through that are more than just what we expect tomorrow from the FOMC."

    Back in March he thought there'd be a mid-year correction as the Fed started raising rates. The Europe sovereign debt crisis threw him a curve ball.

    Marc Faber: Buy Farm With High Voltage Fence! Jurassic Park?

    Marc Faber who writes the GloomBoomDoom report said some interesting things in his most recent report. This was from MoneyNews.com on 8/5/2010:

    "With tongue apparently in cheek, he says buy a farm you can tend to yourself way out in the boondocks. And protect it with high voltage fences, barbed wire, booby traps, military weapons and Dobermans."

    Hey, I've come to respect all potential black swans. According to the article Faber also said that Robert Prechter's Dow 1,000 call "shouldn't be excluded" given his track record. Prechter is in the deflation camp (see recent video comparing Dow to 1987). However, in the CNBC video below he said that all of the stimulus and money printing would be positive for equities if investors ditch Treasuries and the US Dollar, given the US fiscal situation. That could happen if inflation hits the economy and bond vigilantes invade the Treasury market (Niall Ferguson). Wouldn't Treasury Bill rolls and gold compete with equities for "real" return protection? What if it's stagflation. Also, would the risk free rate be replaced by stable US investment grade corporate bond yields, instead of Treasuries? Interesting days lie ahead!

    8/3/2010: Printing will Create 'Final Crisis' (CNBC)

    Bob Prechter: Dow Chart Similar to 1987 Top, Bullish on US Dollar, 100% Cash (Video, 8/12/2010)

    After calling the market top in late March, Elliott Wave's Robert Prechter told BloombergTV yesterday that the Dow chart looks similar to the 1987 top (*see post with NBR and FNN videos reporting the 1987 stock market crash). We already experienced a stock market crash on May 6 at the head, is a right shoulder crash next? The chart does look vulnerable here with the potential head and shoulders setup. I'll post Dow charts tomorrow on multiple time frames. Prechter is still bearish on the stock market and bullish on the US Dollar (in 100% cash) and thinks deflationary forces will drag down commodity prices, including gold.

    Reads: Nassim Taleb (stay in cash), Cisco Uncertainty, Gold (Goldman and Cramer), GLD, CSCO, TBT

    Links for 8/11/2010

    Taleb Says Government Bonds to Collapse, Avoid Stocks - Bloomberg
    Cisco sees "unusual uncertainty," sales disappoint - Reuters
    Goldman Sachs: "Gold Market Poised For A Rally As US Real Rates Head Lower" - Zero Hedge
    Jim Cramer: Why You Should Buy Gold Right Now - CNBC
    Trade gap likely points to slower economic growth - AP
    Guest post: El-Erian on violent market moves - FT Alphaville
    Yen Advances Versus Euro, Dollar as Growth Concerns Spur Demand for Safety - Bloomberg
    JGB 10-yr yield hits 7-yr low with yen near 15-yr peak - Reuters
    U.S. Two-Year Treasury Yield Is Near Record Low as Investors Seek Safety - Bloomberg
    Exotic debt in US spreading its wings - Economic Times
    Bankrupt Vallejo Should Pay Debt With Car Fees, MBIA Unit Says - Bloomberg
    UBS Sued for Copying Oil Reports in Investor Research - Bloomberg, DealBreaker
    Youth unemployment hits record high (UK) - Guardian.co.uk
    Judge orders Wells Fargo to pay back $203M in fees - AP
    Debts Rise, and Go Unpaid, as Bust Erodes Home Equity - NYT
    Fortress to buy most of AIG consumer finance unit - Reuters
    Is There A Liquidity Problem At Goldman Prime? - Zero Hedge
    New York Times article on Société Générale's Albert Edwards - link
    Spanish Crisis Threatens Second Front as Catalonia Rates Rise - Bloomberg
    Soaring food prices hit Pakistan - Al Jazeera English

    DV Link Arbitrage LLC
    North Canal Street
    Chicago, IL 

    If $SWKS Trend Breaks, 200 Day Average or $12.5 Support Next (Chart)

    If you read my previous post on Skyworks Solutions (SWKS) a few weeks ago [Skyworks Breaks Out of 8 Year Channel (SWKS, RFMD, TQNT, SMH, AAPL, QQQQ)], I said it broke out of an 8 year channel, which could be good thing, structurally, for the long term. However, if the market rolls over here, specifically the Nasdaq, there's a chance $SWKS could violate a rising wedge and test the 200 day moving average (hits today at $15.14) or floor support line ($12.55). It closed at $17.29 today, below the 50 day moving average.

    I'm not seeing that much option activity, but the $17.50 August and November call strikes are loaded with open interest (Aug $17.50 C: 13,976 open contracts, Nov $17.50 C: 30,396). Wondering if it's long or short exposure (or hedging). Check out the SWKS chart. Click the image above (courtesy of FreeStockCharts.com) for a larger view.

    William Black: We're Following Japan Hiding Losses, Rating Agencies Need To Go, Disses Wall Street Pay

    Professor William Black on Tech Ticker touches on the "perverse" incentive structures on Wall Street and how executives and professionals aid the frauds instead of protect from them, fueled by accounting firms, auditors, appraisers, rating agencies, lawyers. Haha, pretty much the majority of the labor force. He then wants to know why these Wall Street institutions still exist since they are too big to fail, essentially borrowing at zero and buying long-term Treasuries, at the expense of unemployed America. He stresses that we're going down the Japan deflation route by hiding losses on bank balance sheets. He says look at the Nikkei, it lost 75% in nominal terms. In the third vid he says get rid of the ratings agencies. If interested read my post Knock Down Existing Financial Infrastructure, Accredited Investor Rule is Nonsense (Exposed in 2008).

    E-Mini S&P 500 Future -1%, ES Technical Analysis and ETF Action (SPY, GLD, UUP, TLT)

    Here's an update on UUP, SPY, TLT and GLD and the overnight S&P Future (ESU10). When the FOMC Statement hit, you can see that GLD and SPY rallied while TLT (Long Treasury Bonds ETF) and UUP declined. TLT fell pretty hard from its high. When looking at the full trading day though, TLT, UUP and GLD closed up around 0.25% while SPY closed down 0.55% (2 charts below).

    It's 3:38am eastern time and the E-Mini S&P 500 September Future (ESU10) is down 1% at 1,108. ES is hitting ceiling resistance at the January and June highs (potential shoulders) and is sticking to its 200 day moving average (1,105).

    FOMC Statement: Maintains Rate at 0-0.25%, Reinvesting Agency Debt, MBS Principal In Long-Term Treasuries (SPY, UUP, GLD, TLT Reaction)

    Federal Reserve "FOMC Statement" for August 10, 2010, from FederalReserve.gov. Market reaction as of 2:55pm:

    $SPY/S&P ETF -0.36% (regains losses)
    $UUP/US Dollar ETF  +0.14% (erases gains)
    $GLD/Gold ETF +0.42% (new highs on day after initial gap down)
    $TLT/20+ Treasury ETF -0.14% (takes steep fall from high on day)
    Release Date: August 10, 2010
    For immediate release

    September and October VIX Call Options Active In Futures (Volatility)

    Videos below are from the OptionMonster Volatility Sonar Report, which provides updates on VIX options daily (OptionMonsterTV). VIX September and October calls were active today and yesterday. The curve is in contango, the Aug VIX Future is at 24.10 and Oct VIX Future is 29.60, with VIX spot bouncing around multi-month lows at 23 (see chart). It's always interesting to see what's going on in the VIX options, in size. VIX options and futures hedge or speculate on the price of volatility going forward. There are two ETFs that play the short term and mid term VIX futures (VXX and VXZ), but they have monthly rolling risk. The ETFs move with the VIX Futures not the spot measure you see streaming everywhere. The VIX (Volatility Index) is the overall price of fear or insurance in the S&P Index options (http://www.cboe.com/micro/vix/introduction.aspx).