Nucor CEO Dimicco ..." Economy stinks"

DJIA 10339.39 +18.90 SPX 1105.49 +2.55 Russ2000 629.99 -.47 NASDAQ 2239.09 +4.87 VIX 19.44 -.66 Oil VIX 32.80

Dollar Index 80.39 -.44 Aussie Dollar(FXA) 89.56 EURO(FXE)1.36 31

TLT(20yrGov Bonds) 91.72 +.72 IEF (7-10Gov Bonds)90.87 +.31

XLK (Tech)21.70 +.04 XLE (Oil Index)56.09 +.08 XLF (Finan Index)14.70 +.11 XHB Homebuilders Index)15.81 +.09 GDX (Gold Miners Index)43.83 +.38 XLB (BasicMatIndex) 31.54 +.04

EEM(Emerging Markets) 38.87 +.30 FXI(China Index) 39.58 +.59 IEV(Europe350)36.10 +.26(Brazil)68.36 +.86

Gold 1118.30 +9.90 Silver 16.115 +.005 Copper 3.2265 +.0165 Oil79.74 +1.57 RBOB (Whsl Gas)2.0670 +.03 Nat Gas4.81 +.041

In an interview on CNBC fast money Nucor CEO and straight shooter Dan Dimicco said today that "we are in a rough economy, and its not a pretty picture out there. The economy stinks and we are not doing enough things to get it turned around, We are fiddling while Rome is burning and I hope the American people get folks shaked up. We have alot of work to do and we are not doing the right things yet."

Mellisa Wade told Dimicco that Commercial Metals CMC 17.73 was mentioned as a buy out target and that NUE name came up as a possible suitor for this company. She asked him if this was the sort of company he would like to buy? He replied "our policy Mellisa is not to comment on false rumors I should say our policy is not to comment on rumors(smiling)and we don't and we won't and we will leave it at that."

That is the kind of guy I would invest in but NUE is in the wrong business for the economy as it is now. If you believe that the economy is turning around buy this stock I just do not share that opinion.


The chart looks ugly here




Commercial Metals CMC..When a buyout rumor (2/22) hits that is not a good thing longer term
Here is the story and the chart:

NEW YORK (Dow Jones)--Commercial Metals Co. (CMC) shares shot higher Monday as the market returned to a rumor long propagated that the metal scrapping company would be the target of a takeover by a steel giant.

Shares of Commercial Metals rose 12% to $16.87 in recent trading, earlier hitting a high of $17.20, its highest point in more than a month. Nearly 6 million shares had changed hands Monday, or about three times the typical amount.

Meanwhile, options traders appeared to be actively speculating as well. In particular, they gravitated to near-term March $17.50 calls, which convey the right to buy the stock. At a premium of 70 cents, Commercial Metals would need to top $18.20 before the contracts' expiration on March 19 for the holders to make money.

Market chatter across the Internet and investing world appeared to be spreading the idea that U.S. steel giant Nucor Corp. (NUE) was looking to purchase Commercial Metals.

An analyst called that rumor "bogus" and noted it often makes the rounds on the rumor mill simply because the companies do have some overlap and it could potentially make sense.

Representatives from Nucor and Commercial Metals were unavailable for immediate comment.

CMC chart similar to NUE.. I would like to short this one if the rumor picks up again near the 18.75 area



Trading notes:
The VIX 19.44 is falling toward the low of its trading range of 17 indication that fear is leaving the market. I am starting to hear the correction talk fade.

IMF to sell 191.3 metric tons of Gold

IMF to Start Sales of 191.3 Metric Tons of Gold

The International Monetary Fund on Wednesday said it will shortly begin selling 191.3 metric tons of gold in the open market under a program launched last year to boost its resources.


To avoid disruptions of the gold market, the IMF said the sales "will be conducted in a phased manner over time." The fund kept open the possibility that central banks could still purchase some of the gold directly.

The IMF announced last year it would sell a total of 403.3 metric tons of gold, about one-eighth of its total stock, to diversify its sources of income and increase low-cost lending to poor countries.


Until now, the gold has only been made available to central banks. So far, India — the world's biggest consumer of gold — Mauritius and Sri Lanka have purchased a total of 212 metric tons of gold from the IMF.

India's central bank was the biggest purchaser, snapping up 200 metric tons of the IMF gold over a period of two weeks in October, increasing its gold holdings to the tenth largest among central banks.

The IMF said central banks could continue to buy the gold, which would reduce the amount of gold available for sale on the open market.

"The initiation of on-market sales does not preclude further off-market gold sales directly to interested central banks or other official holders," the IMF said in a statement.

The report today says China will buy the IMF auction. All I can say is they better because no one else has the money to do it. Today NEM announced great earnings and on Tuesday Cramer had the CEO of AEM on his show. Nicely done. Gold is rallying today right when the players were looking for a breakdown. Last chance to buy ..here fishy fishy

The ballgame is at 1060 as you can see by the chart below. The MACD is back up to the zero line for the second time. Below 1060 Gold is finished




The GDX is forming a nice head and shoulders pattern. The left shoulder between 43 and 50 in Sept and Oct the head between 50 and 55 in Nov and early Dec and the right shoulder and the right shoulder between 43 and 50 from early Jan to present. The neck line is at 42/43.

I would like to note that just as Gold reaches a critical point in the charts that Gold miners AEM and NEM announced their "great earnings and appeared on CNBC. The CEO of AEM is Cramer's buddy and appeared on his show.

NEM..The MACD is back up to the zero line. NEM announced earnings on 2/24 and is teading at 48.89 near the top of its short term trading range of 50



Notice the insider sales from November to present:




AEM..Acting weaker and a beautiful Head and shoulders formation The MACD is back up to zero. Eanings were re;eased 2/17 and the stock tradeed to the top of its current trading range at 61.50. The stock is now trading at 57.29




The earnings were touted as great and of course "the Fed is printing all that money" but look at the charts they are telling a different story. The high on AEM was 74 and now it is 57. The high on NEM was 56 and it is now 49. The miners and Gold bugs are circling the wagons now and it would not surprise me to see a merger or buy out just to put a high "value" on the group.

Keep an eye on 1060 and GDX below 43 that in my mind is the game




Here is a monthly chart of Gold. The target is the beginning of the move in Sept 2005at 454.




Mikey

Commercial Real Estate

The Congressional oversight panel for TARP issued a report that expresses the concern that a wave of commercial real estate loan losses over the next 4 years could jeopardize the stability of many banks especially community banks.

The report says that a significant wave of commercials defaults would trigger economic damage that would touch the lives of nearly every American.

This is of course a week after the Simom Property SPG 71.72 buy out of General Growth shares that was touted as proving that commercial real estate was cheap. SPG looks like a real interesting short here to me.

Mikey

Recovery news of the day..New Housing Sales at 302,000 Lowest on record

Sales of newly built U.S. single-family homes unexpectedly fell to a record low in January, according to government data on Wednesday that hinted at potential trouble for the fragile housing market recovery.

The Commerce Department said sales dropped 11.2 percent to a 309,000 unit annual rate, the lowest level since records started in January 1963, from an upwardly revised 348,000 in December.

It was the third straight month that new home sales fell and the percentage decline in January was the largest in a year. Analysts polled by Reuters had expected new home sales to increase to a 360,000 unit annual pace from December's previously reported 342,000 units.

Compared to January last year, sales fell 6.1 percent.

The drop in sales last month came despite the extension of a popular tax credit for first-time buyers, which was also expanded for repeat buyers.

The $8,000 tax credit and purchases of mortgage-related securities by the Federal Reserve have underpinned the housing market recovery from a three-year slump, which dragged the U.S. economy into its worst downturn since the 1930s.

The Fed's program ends next month, while the tax incentive runs out in June, leaving a potential void in the market.

Separate data from the Mortgage Bankers Association showed mortgage applications fell last week for a third straight week as demand home loans sank to the lowest level in 13 years. The association blamed bad weather for the slump in home loan demand. The Mortgage Bankers Association's index of mortgage applications, which includes both purchase and refinance loans, fell 8.5 percent in the week ended Feb. 19.

In a sign of possible renewed weakness in the housing market, Commerce Department report showed the median sale price for a new home fell 5.6 percent last month from December to $203,500, the lowest since December 2003. That monthly decline reversed December's gain.

Compared to January 2009, the median sale price fell 2.4 percent. The number of new homes on the market in January rose 0.4 percent to 234,000 units last month. January's poor sales pace left the supply of homes available for sale at 9.1 months' worth from 8.0 months in December.

All of this as Bernanke and the White House tout the recovery. The emperor has no clothes

MACD at the zero line

DJIA 10366 +83.67 SPX 1103 +8.63 Russ2000 630.35 +5.27 NASDAQ 2234 +21.19 VIX 20.71 -.66 Oil VIX 34.18 -.70
Dollar Index 80.55 -.36 Aussie Dollar(FXA) 89.29 EURO(FXE)1.3579 +.0070
TLT(20yrGov Bonds) 90.82 +.35 IEF (7-10Gov Bonds)90.24 +.06
XLK (Tech)21.73 +.22 XLE (Oil Index)55.98 +.34 XLF (Finan Index)1414.58 +.20
XHB Homebuilders Index)15.66 -.08 GDX (Gold Miners Index)42.71 +.21 XLB (BasicMatIndex) 31.72 +.08
EEM(Emerging Markets) 38.84 +.33 FXI(China Index) 39.22 +.57 IEV(Europe350)36.15 +.33EWZ(Brazil) 67.59 +.27
Gold 1098 -4.90 Silver 15.875 -.013 Copper 3.2450 +.0135 Oil 79.74 +.88 RBOB (Whsl Gas)2.0744 Nat Gas 4.869 +.091

The MACD is up to the zero line and they have killed the Feb puts. I need the MACD to roll over and the market to trade below the 50 and 20 day now. The 50 day is at 10373 and the 20 day is at 10197. Therefore, a close below 10197 would put the DJIA in a sell mode. The next object would be near the 200 day which is at 9600.


Stocks to watch:

Visa (V) Showing weakness in a up market just under the 50 day. This stock has been highly touted over the past 2 weeks.
Gold (GLD) Showing relative weakness with dollar up below 50 day just above 20 day at 107.28 close below day 20 puts it in downtrend
Apache (APA) same chart and comments as Gold
Gold Miner (GDX)below both 20 and 50 day resuming downtrend
The Shack (RSH) breaking under 20 and 50 after earnings news this stock has been highly touted
Aussie Dollar (FXA) weakening after a move to the 50

This rally today looks real weak to me.

Mikey

The "Recovery" Continues Consumer Confidence at 10 month low

DJIA 10317 -66.28 SPX 1097.96 Russ2000 624.23 -8.02 NASDAQ 2212 -29.14 VIX 21.13 +1.19 Oil VIX 34.76 +1.08
Dollar Index 80.81 +.23 Aussie Dollar(FXA) .8955 -.0062 EURO(FXE)1.3544
TLT(20yrGov Bonds) 89.93 +.83 IEF (7-10Gov Bonds)89.99 +.49
XLK (Tech)21.51 -.26 XLE (Oil Index)55.83 -.74 XLF (Finan Index)14.50 -.14
XHB Homebuilders Index)15.86 -.29 GDX (Gold Miners Index)42.72 -1.38 XLB (BasicMatIndex) 31.77 -.38
EEM(Emerging Markets) 38.86 -.58 FXI(China Index) 38.91 -.25 IEV(Europe350)35.93 -.66EWZ(Brazil) 67.66 -.57
Gold 1106.7 -6.40 Silver 15.93 -.287 Copper 3.2365 -.092 Oil 79.30 -1.01 RBOB (Whsl Gas)2.09 -.023 Nat Gas 4.82 -.069

In a government of the corporations, by the corporations, for the corporations the word recovery means "better than expected earnings". That message has been liberally used in the past 10 months to describe a corporate recovery that has not included the "consumer". The "consumer" is just a buzz word for the citizens of this country. The consumer is also 70% of the economy. Today's reading in consumer confidence and a Gallup poll on employment measure the real economy and highlight the disconnect between the government and its citizens.


Consumer Confidence Falls to 10-Month Low in February

U.S. consumer confidence fell in February to the lowest in 10 months, as consumers' short-term outlook for the jobs market worsened, according to a private report released Tuesday.

The Conference Board, an industry group, said its index of consumer attitudes fell to 46.0 in February from a revised 56.5 in the prior month. February's reading is the lowest since April 2009.

The median of forecasts from analysts polled by Reuters as for a February reading of 55.0. The expectations index fell to 63.8 from 77.3. The present situation index dropped to 19.4 from 25.2 in January, the worst since February 1983.

"Concerns about current business conditions and the job market pushed the Present Situation Index down to its lowest level in 27 years," said Lynn Franco, director of The Conference Board Consumer Research Center.

Consumers' labor market assessment worsened. The "jobs hard to get" index rose to 47.7 percent from 46.5 percent, while the "jobs plentiful" index fell to 3.6 percent in February from 4.4 percent in January.

Nearly 20 percent of the U.S. workforce lacked adequate employment in January and struggled to make ends meet with reduced resources and bleak job prospects, according to a Gallup poll released Tuesday.


In findings that appear to paint a darker employment picture than official U.S. data, Gallup estimated that about 30 million Americans are underemployed, meaning either jobless or able to find only part-time work.

Underemployed people spent 36 percent less on household purchases than their fully employed neighbors in January, while six out of 10 were not hopeful about their chances of finding adequate work in the coming month, the poll said.

Gallup surveyed more than 20,000 U.S. adults from Jan. 2 to 31. The results have a 1 percentage point margin of error.


The U.S. unemployment rate fell to 9.7 percent in January but remains near record highs. The poll's estimate of U.S. underemployment is higher than official statistics. The Labor Department says 16.5 percent of American workers were without employment or worked part-time for economic reasons in January against Gallup's 19.9 percent.

A Labor Department official said the government rate may be lower because it factors out temporary seasonal changes in employment to better reflect the underlying economy.

The Emperors new clothes

Reliance on authority figures and third party references can sometimes backfire when social pressure, ignorance, and negligence align to create a distorted reality.

When this happens, bad products, poor services, or inferior ideas propagate because "everyone’s doing it" and nobody stands up for the common-sense and obvious reality – exactly like the children’s tale of "The Emperor’s New Clothes."

Now, if you don’t remember the Hans Christian Andersen tale, let me give you fast a refresher.

The Emperor decided he needed some new clothes and called in tailors from around the world.

He was so self-centered that he could not see reality, and that made him an easy mark for a couple of con-artists posing as tailors (authority figures).

"Their colors and patterns, they said, were not only exceptionally beautiful, but the clothes made of their material possessed the wonderful quality of being invisible to any man who was unfit for his office or unpardonably stupid."

Thus they used fear of appearing stupid and social pressure of "everyone else sees it but me, so I’ll just keep quiet!"

Only in the end did the voice of reason come in the form of a small, innocent child who, immune to all these psychological tricks, pointed out the emperor’s naked form and brought most of the adults back to reality.

People get busy and it rates much easier to repeat what someone else said than to do your own research, myths, half-truths or downright lies get passed along without a second thought.

The more popular the idea or timely the topic, the faster it gets transmitted and the less research gets done.

The moral: if something does not look or sound right to you, no matter how many authority figures claim it’s true, do your own research and check the facts.

Second, charlatans and con-artists depend on you to get swept up in the "hype" of promotion.

This fact drives the classic "pump and dump" scam where unscrupulous promoters tout a stock, drive up the price, then sell off their own shares before people get wise.

The moral: become extremely wary whenever people tout a product or service using hyped up promises of instant wealth or results without any real substance or proof.

Third, people will use your fear of appearing stupid or different from others to drive your behavior.

This "social pressure" is perhaps the most dangerous because it is so ingrained in us that we often act because of it with no clue as to why we do things.

The moral: any time you feel pressured into buying or doing something where fear is the primary driver, take a step back and reevaluate before moving ahead.

That is Capitalisim as it stands today. The story is created by those who have a need to drive prices. Assets are accumulated and distributed. As Joe Granville says, the public is the bag holder. They are always driven to believe what the storyteller is saying. The investment bankers, investment firms and business media passes along the story and makes sure the public knows not only the message but that prices are going up. The public passes along that story to each other as prices continue to advance at a faster pace.

The word spreads and the system (I'll uses that word) disposes of the assets that it acquired when prices were cheap. The story reaches absurd levels in the end but price continues to go up. In the end, the story has no fundamental support and just becomes a media hype. You hear people talking to each other about how much money they are making. You wonder why the responsible people in government are allowing their naive citizens to invest to unwisely. Everyone is making money and the investment manager jumps on that pile too. Prices go to levels that you never believed possible.

Their are those who raise the red flag but they appear to be foolish because as the end nears the story becomes louder and the price turn parabolic. Thus, the voice of reason is shouted out and discredited. The end of the story has only one side and one message. That message is buy and get rich and everyday as the prices move up the media makes sure that you see that message every where you go.

In a top, the last 2 months of the move have no pullbacks. Prices are relentless in their move higher. You see the local media commenting on this on the evening news. The Cramers of the world are crowing about how they told you so. Everyone is a expert on the subject because they hear so much about it.

In the end, the public owns the asset and the story changes. The message is then changed to be a long tern holder and do not sell even though prices are declining and the story is starting to unravel. The public has been trapped and the system has survives to tell another story on another day.


I have watched this for 33 years and it has NEVER changed. The biggest hype I have seen and the story that the public has been sold and has bought, hook line and sinker, is the inflation/commodity/emerging markets. That story is going to end bad for those who believe it.

Mikey

Fed Raises Discount rate...Happy Feb options expirations day

DJIA 10404 +12.17 SPX 1109 +2.74 Russ2000 631.37 +2.36 NASDAQ 2244.76 +3.05 VIX 20.09 -.59 Oil VIX 34.07 +.71

Dollar Index 80.68 +.29 Aussie Dollar(FXA) 89.69 -.0054 EURO(FXE)1.3586 +.0056

TLT(20yrGov Bonds) 89.36 +.39 IEF (7-10Gov Bonds)89.50 -.01

XLK (Tech)21.85 -.03 XLE (Oil Index)57.37 +.23 XLF (Finan Index)14.47 +.03
XHB Homebuilders Index)16.06 +.02 GDX (Gold Miners Index)44.97 -.09 XLB (BasicMatIndex) 32.38 +.27

EEM(Emerging Markets) 39.45 FXI(China Index) 39.18 IEV(Europe350)36.48 -.07 (Brazil) 69.98 +.14

Gold 1120.90 +2.20 Silver 16.32 +.12 Copper 3.368 +.0625 Oil 79.78 +.72 RBOB (Whsl Gas)2.0851 +.0159 Nat Gas 5.049 -.12



The Fed raised the Discount rate on Thursday and the reaction from their pimps was predictable:

Forget the cosmetic move of raising the discount rate—the day the Federal Reserve really decides to start putting the brakes on growth could actually be a happy occasion for the stock market.

Raising interest rates and stemming the flow of liquidity to the economy might otherwise be considered a barrier for stock market growth, but many investors are in fact eagerly anticipating that the move will add another level to investor confidence.

That is laughable and I can rant on that statement or just laugh. I will say that the emperor has no clothes. The Fed is starting to walk away from the markets and this is the first move. I heard today that a record 15.02% all loans are delinquent but first time delinquencies fell to 3.63%. The pimps tell us that it is a sign that the crisis may be ending. The fact that the FED raised the discount rate is supposed to tell us that the economy is OK. The Fed raising the rates has zero impact on anything and is only a symbolic ploy for the spin misters to use.

The chart below shows that we have rallied to the first breakdown area on January 21st. The breakdown at that point was at about 10400. I mentioned that we would need to off that breakdown and this move will do this that. They now need to sell the idea that the correction is over. Notice that the MACD (lower indicator) dropped below zero and is now turning up and is nearing the zero line.. The DJIA is now breaking above the 50 day average. The shorts have to respect that and will cover.



Notice that every new high the chart made on the way up reversed and sold off toward
the 50 day average. In each case, the MACD remained above the zero line. The 20 day (white line) fell but remained above the 50 day (red line) and the 50 day average continued to rise. The most recent hit took the MACD below that line and the 20 crossed below the 50 and the 50 day average rolled over. The 20 day is now rising toward the 50. This is the reverse of the uptrend so something has changed. The story is still the same but the price is acting differently.

Short area at 10500

Here is a 3 month chart of the DJIA the break came on 1/21 the day before options expiration. The 50 day average was broken on that day and that is when the "boys" started to buy stock and the shorters came in. The game is to make those sellers a loser. In most of these charts the price retraces to the beginning of the sell off. You can see that there were clear tops at 10550 in November and December and a "breakout" in early January.

The shorters were looking for a reversal of price below that breakout at 10500 but probably were convinced at 10200. I think a rally above the 50 day, now at 10390 and into the 10500 will run the shorts. I will short any weakness from that point.

When all else fails, play the buy out card

Simon Property Group made what it called a $10 billion offer for General Growth Properties that would end one of the largest U.S. bankruptcies on record and combine the two largest U.S. shopping mall owners.

Simon [SPG 74.25 2.25 (+3.13%) ], the largest U.S. real estate investment trust, said Tuesday that it would offer $6 per share, or roughly $1.9 billion, plus a stake in property assets it valued at about $3 per share.

Simon controls about 15 percent of the malls in the U.S., according to Bank of America. General Growth controls about 14 percent.

General Growth shares [GGWPQ 11.85 2.45 (+26.06%) ] leaped more than 20 percent Tuesday.

Simon expects the transaction to add to its funds from operations, a key profit measure for a real estate investment trust, in the first year after closing.

General Growth's official unsecured creditors committee supports the offer, Simon said in a statement.

The offer would provide a 100 percent cash recovery of par value plus accrued interest and dividends to all General Growth creditors, an amount totaling about $7 billion.


General Growth declared bankruptcy in April with 158 of its 200-plus malls after trying for months to refinance its debt. It listed total assets of $29.56 billion and total debt of $27.29 billion.

The Chicago-based company, the second-largest U.S. mall owner, owns such valuable properties as South Street Seaport in New York and Fashion Show in Las Vegas.

Indianapolis-based Simon owns or has an interest in 382 properties comprising 261 million square feet of leasable space in North America, Europe and Asia. These include such well-trafficked malls as Roosevelt Field on New York's Long Island and Sawgrass Mills Circle near Fort Lauderdale, Florida.

The transaction is not subject to a financing condition. Simon plans to finance it with cash on hand, existing credit facilities and equity investments in the acquisition by institutional investors.
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They will try to say that this purchase just means that the commercial real estate market is cheap and bottoming. The fact remains that the consumer is getting choked by the banks and there has been nothing to help them. In the beginning of 2007 there were a number of buy outs that "valued" the properties higher take a look at the IYR in early 2007.

Market rises on Capital One Default rise, options expiration and lower dollar

DJIA 10193 +94.70 SPX 1086.31 10.80 Russ2000 614.55 +3.83 NASDAQ 2201.54 +18.04 VIX 22.59 -.14

Dollar Index 80.01 -.42 Aussie Dollar(FXA).90.12 +.0138 EURO(FXE)1.3714 +.0131

TLT(20yrGov Bonds) 89.89 -.30 IEF (7-10Gov Bonds)90.01 -.10

XLK (Tech)21.54 +.08 XLE (Oil Index)56.47 +.88 XLF (Finan Index)14.01 +.06
XHB Homebuilders Index)16.01 +.13 GDX (Gold Miners Index)45.00 +1.06
XLB (BasicMatIndex) 31.49 +.52

EEM(Emerging Markets) 39.13 +.68 FXI(China Index) 39.30 +.44 IEV(Europe350)35.99 +.39(Brazil) 68.32 +1.69

Gold 1116.5 +26.5 Silver 16.03 +.583 Copper 3.213 +.111 Oil 77.06 +.293 RBOB (Whsl Gas)2.0067 +.0772 Nat Gas 5.475 +.007


Capital One Financial's U.S. credit-card defaults rose in January, in a sign that consumers continue to remain under stress, it said in a regulatory filing.

Capital One [JPM 39.00 0.05 (+0.13%) ] said the annualized net charge-off rate—debts the company believes it will never collect—for U.S. credit cards rose to 10.41 percent in January from 10.14 percent in December.

Accounts at least 30 days delinquent—an indicator of future loan losses—were up marginally to 5.80 percent from 5.78 percent.

Capital One is the third-largest U.S. issuer of Visa [V 85.75 0.97 (+1.14%) ] branded credit cards, and the fifth-largest issuer of MasterCard [MA 226.55 1.07 (+0.47%) ] branded credit cards.

For U.S. auto loans, Capital One's charge-off rate was 4.27 percent in January, down from 5.68 percent in December, and the delinquency rate fell to 9.61 percent from 10.03 percent.

In credit card international operations, including Canada and Britain, the charge-off rate fell to 9.03 percent from 9.58 percent, while the delinquency rate rose to 6.66 percent from 6.55 percent.
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As I mentioned in this blog the market would rally into options expiration and all the Feb puts would go up in smoke. Options expire this Friday. The market was also helped by the lower dollar which boosted commodities. Bank stocks also rallied on the Capital One news. It makes sense if you factor in options expiration.

There is no question in my mind that the the Fed goosed this rally by adding liquidity to the system. This is after all last week when they were talking about exit strategy. Feb was also the month that they were going to withdraw the special liquidity they were providing to the system. Notice how Gold, Oil rallied and the Dollar Index fell. I guess they chickened out on that one at least for now expiration week anyway.

The market is still just one giant currency trade where prices rise and fall on dollar strength and weakness. Economic factors are secondary to currency manipulations. The dollar drops and they make up stories why it went up today is a prime example of that. Defaults rise at Capital One and the market rallies as the dollar get hit.

Mikey

Dubai World offers 60%...Why is is a buying opportunity

No Love Lost Between Dubai World, Bankers on Deal Talk
Published: Monday, 15 Feb 2010
If Dubai was floating a trial balloon with a rumored debt offer proposing a scant 60 cents on the dollar, it may have to think again.

Stock markets tumbled and bankers turned glum following a report that Dubai World was mulling offering creditors two options, neither one reassuring to investors already spooked by Dubai's debt debacle.

According to the report, Dubai World will offer creditors either 60 percent repayment over seven years and a government guarantee, or full repayment with a debt for equity swap for property assets of Nakheel and no guarantee.

Neither option is palatable to bankers and the government was quick to distance itself from the report by Dow Jones.
"If anything is a surprise, it's in the figures," said a banker at a large international bank. "I thought they would have proposed a little better than 60 percent. This doesn't look promising."

Aside from the steep 40 percent haircut, creditors are unlikely to welcome getting assets in Nakheel, the developer behind man-made islands shaped like palms and a map of the world.

Nakheel had net tangible assets of 73.7 billion UAE dirhams ($20.07 billion) as of June 30, with properties under construction, including land, valued at 112.8 billion dirhams, according to Mac Capital Advisors.

"This gives an indication of what they're thinking — they're considering some sort of discount," said one Gulf-based banker who asked not to be identified. "It implies the government could have senior position, which the banks may not want to accept. And if it (the deal) doesn't guarantee interest payments, it's not a great deal for the banks."

The government reiterated last week that financial aid to Dubai World, through the Dubai Financial Support Fund (DFSF), was being delivered on commercial terms.

Sovereign Debt Pain Has Only Just Begun Dubai Firm Sells Part of Merlin Stake: Report Saudi Banker: Dollar Still Key Reserve Currency
In Denial

Dubai World rocked global markets in November with plans to request a delay on repaying $26 billion in debt linked to its main property units Nakheel and Limitless World. It staved off default on a $4.1 billion Islamic bond linked to Nakheel, after a last minute bailout from Abu Dhabi.

Criticized for its lack of transparency, Dubai said on Sunday it had made no formal restructuring proposals and nothing was expected until March or April.

"Although today's restructuring rumors have been denied by Dubai authorities, the risk of a deep haircut and extension of maturities still remains high — given the combined solvency and liquidity problems facing Dubai World and a number of its subsidiaries, including Nakheel," said Goldman Sachs in a note to clients.

Dubai's main index fell to its lowest level in three weeks on Sunday in response to the news report, closing 3.5 percent lower.

"The stock market's reaction (today) reflects how bankers have interpreted this," said a senior Abu Dhabi based banker, adding that no official announcement has been made to the bank's representatives at creditor meetings with Dubai World.

The company is negotiating with an informal bank coordinating committee and has yet to make a formal proposal on how it plans to repay some $22 billion in debt.

The conglomerate is relying on the goodwill — and self-interest — of creditors to patiently wait for such details on how it plans to meet its obligations.

"It's a double-edged sword — how much can Dubai World push down on UAE banks that hold this debt?" said Ali Khan, managing director and head of brokerage at Arqaam Capital. "This will have wider implications, given the bank sector's weight on the stock market."

On Friday, the cost of insuring Dubai's debt soared to 2-1/2 month highs and bond yields rose as growing uncertainty over the fate of the debt-laden conglomerate World sent investors scrambling to hedge their exposure.

"I think it's for real, just gently priming the market," said an Asia-based banker at a major international bank. "Tomorrow will be very interesting, when London and the U.S. are in."
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They said it was a buying opportunity, remember? They said the same thing about Japan in 1991. They said techs were a buy in 2001 a year after the bubble. They said the same thing about housing in 2006 a year after the bubble. They said the same thing about sub prime loans in 2007. They were saying that even though real estate prices were in full collapse in 2006 and 2007. Cramer touted the low in housing in the summer of 2007. The Fed Chairman told us the crisis was contained in 2007 and would not spread to the other areas of the economy. They said the same thing about Bear Sterns and Citi bank in 2008.

What is being touted as a buying opportunity now?...THE COMMODITIES. The banks are knee deep in inflated assets and THE DEBT AND ASSETS NEED TO BE DEFLATED. It is all part of worldwide deleveraging and it going to take years. After a bubble cheap means nothing because debt needs to be unwound. Please review the charts below and see if you think the commdities are a buy. Please notice the parabolic spike at the end of each bubble and what happens afterwords.


Historical Nikkei,an example of deleveraging from an asset and debt bubble



INTC stock bubbled with the techs in 2000



KBH KB Homes bubbled with the housing bubble in 2005. It is now 5 years off of the top and still falling. In 2007 Ctamer said the housing stocks were bottoming




Example of current bubbles that have bounce from first hit, They are all commodity related. The commodities bubbled in 2008 and were heavily touted by the experts and heavily bought by the public. The theme is the dollar in going down and inflation is coming. That makes sense to the public, but as you see from the above examples once the sector bubbles it takes years to unwind.

Oil index bubbled in 2008 and has rallied from its first sell off. Oils continue to be highly recommended.



EWZ Brazil bubbled with the commodities I hear recommended now by the experts




FCX Freeport Copper and Gold Bubbled in 2008 with the commodities




FXI China has bubbled and bounced



Silver




IYR Commercial real estate bubbled with the top of the consumer bubble in 2007




EEM Emerging Markets still being touted have bubbled



The CRB Commodities



Gold Near the top is masking the decline of the other commodities





When a sector bubbles, the public gets in on the last year of the run. The public is ALLOWED to make money. They believe the story because they got to make money. The thing the public does not know is that after the bubble the game is over. The leverage that created that bubble must unwind. The commodities and the debt bubble that went with it have to unwind. That means the whole gain that was made during the bubble will evaporate and then some. All the while the experts will be touting them as buying opportunties so they can liquidate the assets of their clients,the banks and insiders, to the public. That is what is happening now with the RECOVERY STORY.

Dubai is just another example of this process. The bankers are balking at 60% but before it is over 60% will look good and they know it. Why are they balking at 60%? They don't want the truth to come out now because other assets on their books will have to be devalued. They want to keep up the illusion that it will be worked out and they need time. This annoucement puts them in a bad spot because they have many more assest that will be hurt by this kind of news. A buying opportunity? That's the message the banks want to put out but this news outs that message.

The US recovery story is just as big a scam as Dubai world and is being told to cover up assests that are highly leveraged and overvalued. The US banks need that story just as the European and Mideastern banks need to tell the public that Dubai is a buying opportunity so they can sell the assets to the public and get them off of their books.

In the US overly leveraged real estate is the problem. In the world, the commodities markets are leveraged to the hilt. The reason the experts are telling the story of worldwide growth, the lower dollar and strong commodities is to hold those markets together just like the banks wanted Dubai to keep the story together. It looks like to me that story is coming undone. Of course, they can prolong that story by bailouts and renegotiations or maybe tomarrow Dubai will say they make it 85% we were just kidding, or they can deny the story completely.

In the end, the assets will be valued on their true value without leverage. The banks know it, the experts know it, the governments know it and now you know it.

Volker for Fed Chairman? Maybe....When Ben leaves in a pile of XXXX

Volcker Says Must Let Big Financial Firms Fail
Published: Sunday, 14 Feb 2010 Large financial institutions that engage in speculative activities for profit should be allowed to fail if they get in trouble, White House advisor Paul Volcker said Sunday.


"If a big non-bank institution gets in trouble and threatens the whole system, there ought to be some authority that can step in, take over that organization and liquidate it or merge it -- not save it," Volcker said on CNN.

"It's called euthanasia, not a rescue." As Congress debates financial reform in the wake of the worst financial crisis since the 1930s, Volcker has argued for fencing off investment firms primarily engaged in market speculation from commercial, deposit-taking banks.

The former Federal Reserve Chairman, most famous for raising interest rates sharply in the early 1980s to quell double-digit inflation, said the central bank and other regulators were amiss in preventing the crisis.

"I don't think there's any question the Federal Reserve and other regulators were not on top of the housing picture," Volcker said.

What a Mess..A buying opportunity?....Santa Maria!!!!

DJIA 10087 -57 SPX 1074.54 -3.93 Russ2000 606.88 +1.40 NASDAQ 2180.13 +2.72
VIX 23.80 -.16
Dollar Index 80.49 +.49 Aussie Dollar(FXA).8883 -.0035 EURO(FXE)1.3599 -.0059

TLT(20yrGov Bonds) 90.11 +.29 IEF (7-10Gov Bonds)90.12 +.29

XLK (Tech)21.38 +.06 XLE (Oil Index)55.53 -.07 XLF (Finan Index)13.90 -.04
XHB Homebuilders Index)15.82 +.06 GDX (Gold Miners Index)43.57 -.41
XLB (BasicMatIndex) 30.97 -.08

EEM(Emerging Markets) 38.51 -.42 FXI(China Index) 38.95 -.73 IEV(Europe350)35.48 -.43EWZ(Brazil) 66.42 -.51

Gold 1091.40 -3.3 Silver 15.49 -.10 Copper3.083 -.0685 Oil 73.86 -1.42 RBOB (Whsl Gas)1.9168 -.0189


Global markets have been shaken in recent weeks by concerns that debt trouble in countries like Greece, Portugal and Spain would unravel a budding global economic recovery. And David Hefty, chief executive of Cornerstone Wealth Management, told CNBC that Europe’s sovereign debt issues are just beginning.

“When you look at what’s going on right now with the PIIGS [Portugal, Italy, Ireland, Greece, Spain]—that’s just the tip of the iceberg,” Hefty said.

“When you go to the larger economies in Europe—Germany’s total debt to GDP is over 170 percent, France is over 230 percent and UK is over 400 percent.”

During the Asian debt crisis in 1997, Hefty said the Asian countries only had around 160 percent total debt-to-GDP, making them look like “fiscal conservatives” compared to the European nations today.
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Look at this article...Remember what they said about Dubai

The tremors from Europe and China are sparking selloffs in stocks, but the turmoil could be setting up the US market for a strong buying opportunity, strategists say.

Stocks have wobbled through much of 2010, thanks in large part to worries about the debt crisis in Greece and other members of the European Union as well as China's recent efforts to slow its rapidly growing economy.

As those developments have prompted some nervous investors to sell stocks and lock in profits, others have moved in to take advantage of the market dips.

"It's just an excuse to take some money off the table," Michael Cohn, chief investment strategist at Global Arena Investment Management in New York, says of market drops like Friday's. "There are going to be these fits and starts. We had the rise off the panic bottom but we're still in a long-term bear market. Until the bear market is over the market is going to chop around."

Wall Street is coming off a 60 percent rally from the March lows that showed no signs of stopping. Investors disregarded rising unemployment, weak earnings and a generally dismal outlook to snap up stocks and rebuild cash-laden risk-averse portfolios.

Tremors like the debt crisis in Greece and the unexpectedly rapid moves in China to increase capital requirements for banks have rattled the markets in a way that global moves could not during the rally.

The result has been some fairly steep sell-offs that some portfolio managers have been using to scout out value.

"With new money coming into clients' accounts we're dollar-cost averaging on these kinds of dips," Larry Rosenthal, president of Financial Planning Services, said in a CNBC interview. "I think it represents a wonderful buying opportunity."

Dollar-cost averaging entails investing consistent amounts in the market over intervals; during a market drop buying more of a certain stock would lower the price point an investor would need to break even.(Just in case you don't know what that means)

The strategy could be especially important at a time when the market seems to lack direction.
------------------------------------------------------------------------------------

We are in serious trouble and it is not just in the US or Europe. The buzz word here is cheap. In the stock market, when stocks get cheap they will usually get cheaper. Not until they become scary do they bottom. Dollar cost averaging is a very very long term process. We are in a bear market and rolling off of the first bounce. Not a place to buy. Short term we probably rally

Greece Debt problem another sign of deleveraging..Remember Dubai World

DJIA 10123 +86.76 SPX 1075.72 +7.59 Russ2000 600.94 +5.12 NASDAQ 2172 +24.66
VIX 24.21 -1.19

Dollar Index 80.19 +.05 Aussie Dollar(FXA).8906 +.0145 EURO(FXE)1.3642 -.0064

TLT(20yrGov Bonds) 89.65 -.64 IEF (7-10Gov Bonds)89.76 -.25

XLK (Tech)21.35 +.25 XLE (Oil Index)55.48 +.84 XLF (Finan Index)13.93 +.02 XHB Homebuilders Index)15.74 +.35 GDX (Gold Miners Index)44.01 +1.67 XLB (BasicMatIndex) 30.95 +.44

EEM(Emerging Markets) 38.69 +.75 FXI(China Index) 39.50 +.27 IEV(Europe350)35.71 +.06 EWZ(Brazil) 66.98 +1.65

Gold 1092.40 +16.10 Silver 15.54 +.245 Copper 3.1495 +14.10 Oil 75.30 +.79 RBOB (Whsl Gas)1.937 +.008

European leaders said they were ready to support heavily indebted Greece to stave off a crisis in the euro zone, but disappointed markets by failing to offer any details on how aid would work.
EU President Herman Van Rompuy told a news conference after a summit of the bloc's leaders in Brussels that Europe was sending Greece a "clear message of solidarity."

But he also made clear that Athens had not submitted a formal request for aid and therefore the bloc could not make concrete pledges at this time, describing the promise of support as a "political statement."

European leaders are keen to prevent Greece's problems from spreading to other highly-indebted members of the euro zone and plunging the currency area into a bigger crisis that could reverberate around the globe.

But they also want to keep the pressure on Greece to implement a tough austerity programme designed to cut hundreds of billions of euros in debt and a deficit that totalled 12.7 percent of gross domestic product (GDP) last year—more than four times EU limits.

"The question of pledges (to Greece) was not raised because the Greek government has not requested any financial support, which means the Greek government believe they do not need this financial support, that is why I think we should not now speculate about scenarios that are so far not present," European Commission President Jose Manuel Barroso said.
Even with EU support, the Greek government faces a daunting challenge to consolidate its budget and restore confidence in an economy whose imbalances were exacerbated by the economic and financial crisis and where social unrest remains a threat.

Greece is part of the European union. It is one of the weak sisters. The problem will spread to the stronger countries in that union.

The blowup in Greece over their inability to pay their debt is another sign of deleveraging. Of course the EU will step in and aid the Greeks and "calm" the markets. It a just the tip of the iceburg. The most recent blowup was in November with Dubai World. Here are some comments from my November 27 post. Notice how the "strategist says in may be a good thing.

From 11/29/09 Michael Ganske, head of emerging market research at Commerzbank in London, said a default, which could ultimately benefit the region, "is becoming more likely." "At the end of the day it should be positive for Dubai, Dubai's sovereign risk should go down," he said.
.
From 11/27/09: Dubai Spooks Investors But May Bring Buying Opportunity
While the immediate reaction Friday to the Dubai crisis was to sell stocks, many investors are more likely to wait for the issue to unfold before making any big decisions. In fact, caution rather than panic prevailed after the United Arab Emirates nation's ability to pay on its debts came into question

From Feb 10 2010. This news in more on the back page now
Dubai World Seeks 6-Month Debt Standstill: State-linked indebted conglomerate Dubai World intends to ask creditors for a six-month standstill on $22 billion in debt this month, until it completes restructuring, an Arabic-language daily said on Wednesday.


This is the way they are reporting this problem. Sound familiar.
Greek Debt Woes Could Be Good for Europe: Strategist
Published: Wednesday, 10 Feb 2010

Concerns over Greece's public deficit could end up being positive for the euro zone even though there is evidence of contagion in the region, Adrian Mowat, chief Asian and emerging markets equity strategist at JPMorgan, told CNBC Wednesday.
"You've seen a flight to quality, so the funding costs in France and Germany have fallen and the euro has weakened. So the events that are going on in Europe are ironically probably quite good for core Europe," Mowat said.
Greece makes up only 4 percent of the euro area's debt and 3 percent of its gross domestic product, Mowat pointed out. But concern over Greek debt has spread to other debt-laden euro zone countries such as Spain and Portugal, Mowat noted.

Oh Goodie...another "buying opportunity". I am sure will have many more of these buying opportunities over the rest of this year.

They same thing happened in early 2007 with the blowup of sub prime loan mortgages. They told us that it would be contained and that the problem would not spread to the big banks. This is the same thing but it is a world wide problem now. The problem is spreading. This process leads to Deflation not inflation. They cannot shovel money into the hole fast enough because they underestimated the problem. They also know it is just throwing good money after bad. What is happening now is an attempt to cover the problem and keep the public from panicking. Every new problem that is made public the same game will be played. The bailout followed by the rally that tells us that it is OK. This will continue until the problem is so visible that they come clean. It takes time to unfold but it will come.


EURO



IEV European 350 market.. Just starting down.Notice how it is lagging the FXE



This is the DJIA notice the action AFTER 11/30 when they told us that the problem in Dubai was a buying opportunity. The confusing part about the market is that it will rally off of this kind of news. They do not want sellers coming at them on this type of news. The sell off will be later. Remember they told us that this is a good thing, now they give us the rally.



Notes: I would like to see the VIX at around 22 to put on more shorts it is now 24.26

Mikey

Here comes the rally

DJIA 9985 +77.24 SPX 1061.83 +5.09 Russ2000 590.62 +4.13 NASDAQ 2135.26 +9.31 VIX 25.94 -.57
Dollar Index 80.16 -.28 Aussie Dollar (FXA) .8728 +.0078 EURO(FXE) 1.37 +.0063
TLT(20yrGov Bonds) 92.12 +.029 IEF (7-10Gov Bonds)90.70 -.06
XLK (Tech)21.09 +.11 XLE (Oil Index)54.67 +.93 XLF (Finan Index)13.67 uch
XHB Homebuilders Index)15.18 +.01 GDX (Gold Miners Index)41.74 +.97
XLB (BasicMatIndex) 30.30 +.32 EEM (Emerging Markets)37.50 +.67 FXI (China Index)37.90 +.73
Gold 1075.30 +9.10 Silver 15.24 +.175 Copper 2.9425 +.129 Oil 72.51 +.59 RBOB (Whsl Gas)1.8953 +.0013

Bear market rallies are very sharp and designed to run the shorts and give the longs hope. The target will be just above the 50 day at about 10300.

Asset prices rolling over...Today is chart day

Today I will say nothing and let the charts do the talking

Consider the following charts


Silver



Gold



Oil



Copper



CRB



DJIA




See the pattern.....Where have they told you to be????




Look at this Duck (APA). Compare this to Oil chart, CVX chart, XOM chart

APA


Oil


CVX


XOM




Currencies:
The EURO and the DUCK (FXA)

The EURO....Notice how it hug around the 200 day for about 3 weeks and before it rolled over it spiked back up to the 50 day.




The Duck...now at the 200 day the 50 day is at about 90



DJIA...at the 200 day..the 50 day is at about 10300

Europe takes the fall for this sell off.

Problems in Europe is being blamed for the sell off in the DJIA. What is not being blamed is the US economy. The Dollar is rallying as the crisis in Europe broadens.

They are telling us the part of the strength in the dollar is the recovering US economy. That is a bogus story. The truth is that the European economy is falling faster than ours because they sat on their hands when the problems surfaced in Sept 2008.

They are the one's that will be printing money now and we are the responsible ones now. Remember the FED stopped the special liquidity on Feb 1st and by coincidence Volker showed up in front of congress to kick bank booty this week. In other words. no more freebie trades now.

The employment numbers are a hoax and it is easy to see it. The "hedge funds" can't rely on Uncle Sugar now and so the market has to deal with reality, whether they own up to it or now.

Mikey

DJIA Slimes through 10000 on "Good Jobs Numbers"

DJIA 9941 -56 SPX 1056 -6.32 Russell 2000 585.94 -3.74 VIX 27.06 +.98 Gold 1051 -11.8 Silver14.80 -.54 Oil 70.68 -2.46 RBOB (Whsl Gasoline)1.873 -.07 Dollar Index 80.60 +.53 EURO 1.3618 -.0122 TLT(Long Term Gov Bonds 92.15 +.37 IEF (7-10Yr Gov Bonds)90.87 +.33 XLK (Tech)20.88 +.02 XLE(Oil Index)53.25 -.98 XLF (Financials Index)13.67 -.10 XHB (Homebuilders Index)14.85 -.33 EEM (Emerging Markets)36.52 -1.10 FXI (China Index)36.98 -1.04 GDX (Gold Miners Index)40.39 +.18 XLB (Basic Materials Index) 29.90 -.02


U.S. payrolls unexpectedly fell in January, but the unemployment rate surprisingly dropped to a five-month low, according to a government report Friday that hinted at labor market improvement.

The Labor Department said the economy shed 20,000 jobs after losing 150,000 jobs in December. November was revised to a gain of 64,000, up from 4,000. Annual benchmark revisions to payrolls data showed the economy has purged 8.4 million jobs since the start of the recession in December 2007.

Analysts polled by Reuters had forecast payrolls gaining 5,000 and the unemployment rate to edge up to 10.1 percent in January from 10 percent. Median estimates from the top 20 forecasters expected payrolls to be unchanged last month.

"It shows net-net that we are seeing a slow improvement in the labor market. There are some encouraging signs in the report ... but it wasn't quite good enough to push us into positive territory just yet," said Boris Schlossberg, director of FX Research at GFT Forex in New York.

Stocks opened lower, while Treasury debt edged higher. U.S. dollar trimmed gains against the yen.

The White House said the report contains encouraging signs of gradual "labor market healing."

"Even as today's numbers contain signs of the beginning of recovery, they are also a reminder of how far we still have to go to return the economy to robust health and full employment," said White House economic adviser Christina Romer.

While a sharp increase in the number of people giving up looking for work helped to depress the jobless rate, some details of the employment report were encouraging. The number of "discouraged job seekers" rose to 1.1 million in January from 734,000 a year ago.

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In other words, the the drop in the unemployment was caused by "discouraged job seekers" leaving the workforce. They are spotlighting the 9.7% number and saying it is an improvement. That dog won't hunt. The market is doing a slime, just like the jobs report, through 10000. The commodities are also breaking down and Gold is at 1049 and silver 14.76 slowly setting in the sunset. The emerging markets EEM are at 200 day average now. FXI is below 200 and DJIA to follow 200 day at 9427.



Added to GLL shorted JWN 33.80 Covered GDX 40.39 buying TYP 11.16

Notes GDX +.02 today as Gold breaks down. Stocks lead gold now the miners buyers will have a reason to sell. I am covering here. Probably way early
Techs look ready to crack when they are ready to bottom this sell off techs will break. TYP 11.16 3X short techs looks good now.

S&P removes BKR.B AAA debt rating

Warren Buffett's Berkshire Hathaway has lost its last remaining triple-A credit rating.

Standard & Poor's dropped its ratings on Berkshire and its core subsidiaries from the top-level AAA to AA+.

S&P says Berkshire's planned acquisition of Burlington Northern Santa Fe prompted the move.

In a statement posted on its web site, S&P says "We believe that the railroad acquisition will reduce what historically has been extremely strong capital adequacy and liquidity," as Berkshire uses cash and borrowing to help finance the $26 billion deal.

S&P adds: "Investment risk remains very high in our view, compounding the need for extremely strong capital and liquidity given potential investment volatility. A key concern is that BRK's risk tolerances appear to have increased, yet we believe they remain ill defined while the organization increases in complexity."

Dollar Highest since July ...On European fiscal problems..Really!!!

Dollar Shoots to 7-Month High Against the Euro
Feb 2010 | 12:20 PM ET

The dollar rose to a fresh seven-month high against the euro Thursday amid growing concerns over the fiscal health of debt-laden euro zone countries.

European Central Bank President Jean-Claude Trichet predicted many members in the bloc will have large, sharply rising fiscal imbalances.
The ECB chief spoke at a news conference after the ECB left its benchmark lending rate unchanged at 1 percent. Trichet said high public debt and deficits would place additional burdens on monetary policy.
Worries over debt levels in Spain and Portugal have increased as investors speculate the two countries may face budget deficit and debt problems like those of Greece.

Such concerns helped lift the relatively safer haven U.S. dollar and yen.

Traders sold the single European currency on the view dismal public finances in euro zone countries may hinder any economic improvements in the region.

"Basically (Trichet is) acknowledging a very drawn-out, sluggish recovery subject to intense uncertainty," said Brian Dolan, chief currency strategist at Forex.com in Bedminster, New Jersey. "The key thing is that rates are not moving anytime soon. With that and continued concerns over the fiscal situation, it's just another weight around the euro's neck."

The euro [EUR=X 1.3765 -0.0123 (-0.89%) ] was trading down nearly 1 percent on the day at about $1.37, close to an earlier low of $1.3778, its weakest since June 2009. Weakness was partly attributed to widening Greek, Portuguese and Spanish bond yield spreads over German benchmarks.

Traders said an options barrier at $1.3800 was broken by sellers, opening up further downside.

"Looking ahead, the Governing Council expects the euro area economy to grow at a moderate pace in 2010," Trichet said. "The recovery is likely to be uneven and the outlook subject to uncertainty."

Sterling [GBP=X 1.5785 -0.0097 (-0.61%) ] trimmed some losses against the dollar after the Bank of England announced a pause in asset purchases under quantitative easing, as expected. It left the door open to more purchases should the outlook warrant it.

But the pound still traded at around $1.57 against the dollar, down on the day but above an earlier three-and-a-half month low of $1.5760.

Strong US Data

Euro zone fiscal problems increase chances the U.S. economy will recover more quickly and the U.S. central bank will lift interest rates before the European Central Bank. Such a move would make dollar-based assets more attractive.

Mostly strong U.S. data this week supported this view, though risk-averse traders flocked to the yen, particularly after data showed initial U.S. weekly jobless claims unexpectedly rose last week.

The dollar was lower at around 90 yen [JPY=X 89.08 -1.89 (-2.08%) ]. The euro fell nearly 2 percent to about 124 yen [EURJPY=X 122.65 -3.69 (-2.92%) ].

Investors are now largely focused on the key U.S. non-farm payrolls numbers due on Friday.

The dollar index, a calculated measure of the dollar's performance against a basket of six currencies, rose toward 80 against a basket of currencies, it's highest since July, 2009.

The New Zealand dollar hit a five-month low after data showed the country's jobless rate hit a 10-year high while weak Australian retail sales data helped push the Aussie to a four-month low.

------------------------------------------------------------------------------------

The rest of the world follows us. They are now getting the results of their fiscal irresponsibility. In the world of currencies everything is relative and now its the developing countries that will be exposed.

I have blogged until I am blue in the face that there will not be a world wide recovery and that the rest of the world follows the US. The DJIA and S&P are full of multinational companies that have been doing relatively better than those in the US only but in the relatively near future the rest of the world will be catching up.

The break in the Euro has buried the, "dollar is going down...Fed is printing mony crowd. Gold is 1062 and on the edge of a cliff. The GDX 40.21 is back to its May highs. The street was touting the weak dollar play all of last year and that was and is going to be wrong. The Gold bugs will view this hit as a buying opportunity but they will be flying this plane into the ground with a smile on their face because they believe the story.

The rally in the dollar was said to be because an improving US economy. I believe that time will show that the strong dollar was because of a weaker world economy.

They are blaming the sell off on the Europeans, specifically Greece and Portugal. Those are the latest cracks. This is not the first crack to appear. See my blog of 11/25 on Dubai. I mentioned is was the Bear Stears of the developing world. I also mentioned that they would tell us that they solved that problem. They did that a week later.

I am sure they will do the same with this problem too. It, however, they cannot solve anything because what is done is done. Once the deed is done it has to play out. This one has a long way to go.


In the "flight to quality of the dollar" the Long Bonds are trading higher. The Gold bugs gotta love that one. Of course, we know the reason for the bonds going up is a weak economy...but don't let out our little secret.
Mikey

Employment numbers revised down 900,000

The employment numbers first, 9 months of last year, were revised down 900,000. In other words there were almost 1 million more jobs lost last year than were reported. This matters because when they report the new number they can say that the numbers are improving faster than expected. Why? because the new numbers are being compared to a lower base. That,of course, means that everything they reported last year was wrong, but what the heck. Like Mark Twain said there are lies, damn lies, and statistics.

They do alot of revisions and then proceed with the new numbers. The game they used to play with the inflation number was they would report a number then revise it up before the next one and then use the new number against the revised number to show no inflation growth.

I heard a story today from an "investor" that said he missed the low in March but he would buy a 10% correction from this level. He said that if you would have bought 9/11 it would have been a great buy. They missed the low and now they remember 9/11 as a great buy.

First of all, no one bought 9/11 until the end of that year. The market was at around 10000. They felt the worst was over and it was a good time to get back in. That is similar to where I think we are now. They missed the low and now it is a good time to get back in.

What they don't remember or are not telling you is that the low on 9/11 was at 8100. The bounce off of that low was to 10600 and it topped in early March of 2002. In other words, the rally lasted 6 months. In October of 2002 it was making new lows at 7200. What I am saying is we are going to take out the lows made in March and then this guy will sell again.

The best short will come when this rally runs it's course. They need to be convinced and again I think the employment numbers will be good.


Mikey

The Last piece of the puzzle

The earnings have been great, the manufacturing numbers have been great, the consumer sentiment numbers have been great...what's next? Oh of course, it's great employment numbers. You know the drill ...much better than expected.

I see that "traders" don't believe this last rally so let's convince them with great employment numbers on Friday. I think you would get a buy signal off of that piece of news. The catch is does it reverse off of that report. The reverse does not have to be the same day. I would suspect they will give the "traders" time to buy back the longs they just sold which may take 2 weeks. That reversal will be my short signal.

The beat goes on....MIkey

The Volker Rule ...

DJIA 10284 +99.85 SPX 1101 +11.86 Russell 2000 612.46 +3.24 VIX 21.21 +1.38 Gold 1117 +13.20 Silver 16.73 +.07 Oil 76.95 +2.52 RBOB (Whsl Gasoline)2.008 +.0759 Dollar Index 79.15 -.265 EURO1.3942 +.0037 TLT(Long Term Gov Bonds 91.25 0 IEF (7-10Yr Gov Bonds)90.19 +.10 XLK (Tech)21.39 +.19 XLE(Oil Index)56.93 +.63 XLF (Financials Index)14.52 +.10 XHB (Homebuilders Index)15.85 +.69 EEM (Emerging Markets)39.53 +.22 FXI (China Index)39.77 +.22 GDX (Gold Miners Index)43.17+.23 XLB (Basic Materials Index) 31.44 +.10


White House economics adviser Paul Volcker will urge Congress Tuesday to rein in risky investing by big banks to help prevent them becoming "too big to fail," according to testimony obtained by Reuters.

The former Federal Reserve chairman, whose star is rising in the Obama administration as it pushes harder for Wall Street reform, will face questions at a Senate hearing from lawmakers seeking details on last month's proposed "Volcker rule."

President Barack Obama stunned financial markets in late January by calling for new limits on banks' ability to do "proprietary trading," or buying and selling of investments for their own accounts unrelated to customers.

Since then analysts have speculated widely about exactly what sort of activities would be off-limits if Congress adds the proposal, formulated by Volcker, to a sweeping package of financial regulatory changes still being debated.

Volcker, a monetary policy sage whose tight-money regime broke the back of stagflation when he was Fed chairman in the early 1980s, will tell the Senate Banking Committee that there is little reason for uncertainty about what he is proposing.

"Every banker I speak with knows very well what 'proprietary trading' means and implies," Volcker will tell the committee, according to the written testimony.

"My understanding is that only a handful of large commercial —maybe four or five in the United States and perhaps a couple of dozen worldwide — are now engaged in this activity in volume," he will say.

"In the past, they have sometimes explicitly labeled a trading affiliate or division as 'proprietary,' with the connotation that the activity is, or should be, insulated from customer relations."

Hedge Fund Ties Targeted

In addition, Volcker wants banks to sever their ties to hedge funds and private equity ventures.

"Hedge funds, private equity funds, and trading activities unrelated to customer needs ... should stand on their own, without the subsidies implied by public support for depository institutions," he will say at the afternoon hearing.

Left largely unaddressed in the testimony is a third proposal — limiting the future growth of large financial institutions. Obama in January called for a new market share cap for banks that takes into account not only their deposits, as currently limited, but also non-deposit funding.

In addition, no explicit mention is made in the testimony of an idea associated with Volcker that he has lately been soft-pedaling — reimposing the 1930s-era Glass-Steagall laws that required separation of commercial and investment banking.


"I am not so naive as to think that all potential conflicts can or should be expunged from banking or other businesses," Volcker said in his prepared remarks.

"But neither am I so naive as to think that, even with the best efforts of boards and management, so-called Chinese walls can remain impermeable against the pressures to seek maximum profit and personal remuneration," he said.

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Meaning that the banks are giving money to traders and are trying to earn their way out of the mess they created. The money is not going into the economy it is going into their pockets. That is the reason for such a large disconnect between the stock market and the economy. The whole thing is being back by the "too big to fail" rule and Volker is addressing that with his testimony. In other words, he is saying this thing is going to get out of hand and we are going to do something if you you don't rein it in.


Rally today is pushing toward the 50 day of 10432. Employment numbers Friday will be interesting.

Mikey

ISM numbers a good excuse to run the shorts

DJIA 10185 +118.20 SPX 1189.19 +15.32 Russell 2000 609.25 +7.21 VIX 22.59 -2.03 Gold 1106.80 +23.80 Silver 16.71 +.52 Oil 74.99 +2.10 RBOB (Whsl Gasoline)19.46 +.0326 Dollar Index 79.38 -.27 EURO 1.3905 +.0066 (Long Term Gov Bonds 91.25 -1.05 IEF (7-10Yr Gov Bonds)90.09 -.61 XLK (Tech)21.11 +.56 XLE(Oil Index)56.15 +1.65 XLF (Financials Index)14.43 +.18 XHB (Homebuilders Index)15.11 unch EEM (Emerging Markets)39.30 +1.02 FXI (China Index)39.56 +1.20 GDX (Gold Miners Index)42.77 +2.05 XLB (Basic Materials Index) 30.85 +.71


I mentioned in a past blog that after the first signal there would be a rally to challenge that signal. I will not rant over the strength or weakness of the economy, that "produced" this rally today, although I want to. I am looking for a place to get short again. Just as this downtrend had a sell signal there should be a buy signal that will call this sell off into question. The short will come when we have had that buy signal and then reverse sell off of that buy signal.

I think a rally above the 50 day, now at 10432 would do the trick. I will wait until we close above that number and then have a close below that number to short. The chart to take a look at is the GDX when it broke above the 50 at 47.5 and then closed below it. Notice the action from 1/06/10 to 1/15/10. That was 8 trading days.


Notes: Gold and the commodities had a hiccup today. Gold closing at 1106.80 +23.60.
A close below 1073 after this type of bounce will be, in my mind, the death blow for gold. The same applies to the DJIA if we close below the last low of 1043 then game on. My guess is that the bounce has further to go.


Mikey