Put all shares up over 10% in the sell block

Market forces May 8,
Signs of market peaking:
Yesterday the market declined on an increase (36%)over average volume. Jim Cramer likes to say that bulls and bears make money but pigs get slaughtered. It is clear the pigs that refused to take their profits will lose all their gains if they hold on in this next decline. The last market bottom was lower than the one before that. And this current rally peaked 9% short of giving a Dow Theory bull market signal. Even the S&P's last market bottom was lower than the one before that and its current rally peaked lower than the last rally. There has been no bull market signal. At this point there is no evidence that the stock market has bottomed yet. The Obama rally we hoped for never happened. This week the Tech slide and the poor Treasury bond auction began to sink Wall Steet. The bank managers are reporting that Obama's stress tests were "feather tests." The situation is still very serious

Hedge Fund shorting is once again encouraged:
The mark to market rule avoided the valuation fraud that was going on in the hedge funds but lowered bank equity and thus increased bank leverage, valuation volatility, and instability. Obama has re-instituted the old fraud so banks can pretend to have more equity. It would have been better to just tolerate the higher bank leverage volatility but keep mark to market everywhere. So now Obama has condoned stock market valuation fraud. That means the funds can use valuation fraud once again to increase margin above FED margin rules. That combined with the failure to impose the up-tick rule for shorting stocks means Obama now condones massive hedge fund stock shorting as well.

Jim Cramer was right:
He said the recent rally was focussed on "junk stocks", stocks that were doing terribly but had survived and could rise the quickest in the bear market rally. Coffee stocks like DDRX have made 3000% gains since Jim Cramer proclaimed this rally in junk stocks. To date they have had less than 0.3% short selling so this is no short squeeze. Americans are now drinking less coffee and the fad is declining so it is likely that a many investors who bough DDRX and other coffee stocks are in for a rude awakening. Jim Cramer calls such people pigs that deserve to be crushed. Yes, Jim Cramer said that junk stocks with little future are what would gain in this rally. He was right about that. One Canadian stock VTNC doubled in just four weeks. But the junk prices may drop like a rock when the market declines. And junk is what hedge funds love to short. These stocks could be closed down for good. All of Jim Cramer's huffing and puffing cannot sell anymore junk to pigs when this stock rally ends.

Treasury debt dilemma:
To afford debt the interest rate has to be low. When there is a crisis people flee to safety so the interest rate of treasuries is indeed low. Lots of debt is being taken on by Obama to slow the world economic collapse. But if the world economy is stabilized then there is no risk and no need to own treasuries. Treasuries are then sold and the cost of the US debt skyrockets. High debt and high interest rates then pop the economic bubble. So that is the dilemma for the socialists.

They cannot afford debt at high interest rates. They want debt to make the economy safe. But a safe economy means no one will own treasuries unless their interest rate is high and unaffordable.

We pointed out yesterday that investors worried that poor demand for government debt could raise the cost of capital and hamper chances of a U.S. economic recovery. That actually has begun to happen. The treasuries were a safe haven for investors getting out of the stock market. As the market rallies those investors sell their treasuries causing the US cost of debt to rise thereby putting strain on interest rates and causing stagflation. Yesterday U.S. debt prices slid, sending the 30-year Treasury bond yield to its highest since November. This confuses the media and they suggest that maybe the Chinese don't want US bonds any more. Either way, if the cost of capital for the US becomes more expensive, then the recession is going to last much longer.



Market Outlook

Bonds tumbled and U.S. stocks slid yesterday from a four-month high as declines in technology shares snuffed out an early rally. Treasury 30-year bonds fell the most since February, as investors demanded higher yields at an auction of $14 billion of the securities.

Last night's results: China is up 1%, Hong Kong is up 1%, India is down 2%, and Japan's market is up 0.5%. That is half a good as yesterday.

European markets are up in the range of +1.9% to +2.8% mid way through their day. That is very similar to yesterday.

US futures indicate the markets will start higher today similar to the start yesterday.