EU job losses accelerated to the highest rate on record

Warning
This was a red-flag warning about the broader stock market from the folks at the S&A Digest, which they issued when the S&P exceeded 940 last week.

"The combination of a market rally and rampant new share issuance from issuers whose future isn't terribly bright reminds me of 1999 and early 2000. That's when the NASDAQ soared from about 2,500 to a peak of just over 5,000, and IPOs were popping up everywhere like stretch marks on a fat man at a pie-eating contest. Back then, nobody thought stocks were risky, and hot tips oozed from every cabby, bartender, and shoeshine boy. No one knew for sure why the tech stocks and dot-com stocks were doing so well, but who cared, as long as you owned them and they kept going up, up and away. Well, maybe it's not exactly like the tech bubble, since IPOs aren't the hot ticket today. But new equity is nonetheless being printed at a record pace... According to a recent Bloomberg story, more than 150 companies raised $82.2 billion in new equity last quarter – a faster pace of equity issuance than at the height of the equity bubble in 2000."

Market forces June 16

MSNBC/GE/Pravda bull market theories have collapsed
The recent past rally was based on the perception that America was recovering later this year and the world economies of Asia and Europe were stronger. Consequently by definition the American market was perceived as undervalued and the dollar was perceived overvalued. Those were all erroneous MSNBC/Pravda type perceptions and so the dollar declined because European currencies seemed like a better place for countries to hold reserves. That is at least what China and Russia were saying even early last week. That caused entertainers like Jim Cramer to conclude that oil and copper demand were moving up due to the growth of emerging markets such as China not because the dollar was just declining in value due to the belief that the EURO was better. That theory was wrong but the rising oil and commodity prices nevertheless reinforced the false theory that the economy was recovering because demand was supposedly increasing for commodities. That reinforced the false theory that the emerging markets were driving the recovery. It was a nice theory while it lasted. If that theory was true then logically the US currency should and did weaken and US inflation could be coming back soon. That lead to threats by China and Russia that they would abandon the dollar as a reserve currency. But this theory fell apart as the economic contraction in Germany and other major exporters became apparent. Clearly China has to be a living economic lie because they must be contracting the most because they are the most export dependent.

News
U.S. stocks and commodities fell sharply Monday, hurt by the following weak economic signs. The Fed buys Treasurys to help keep rates low, but paradoxically is now pushing rates higher. The New York region manufacturing sales decline is accelerating. Homebuilder confidence in U.S. declined again in the NAHB market index. The Dollar suddenly has no rival as world currency and the consequent decline in commodities shows the previous increase in oil and copper prices was not due to emerging market demand but the irrational decline in the dollar. The recovery of the dollar now hurts the recovery of US exports.

Ecuador defaulted on $3.2 billion of debt six months ago and then repurchased the bonds at less than 40 cents on the dollar.

The Dow Jones Industrial Average, which last week tiptoed into positive territory for the year traded down 2% yesterday. All 30 of its components fell. Commodities are now stuck in a range just like stocks in a secular bear market with cyclical rallies.

With triple witching this week preceded by a slide in volatility over the past weeks rally traders said there is a strong negative bias this week.
"There is a lot of room for the market to fall as more stocks are closer to call resistance than put support," said Todd Salamone, vice president of research for Schaeffer's Investment Research, noting the 4% gain for the Dow in the past month. "When it is negative, it will likely be big negative."


Market Outlook
We continue the countdown and go very far out on the limb to estimate that the current market rally has at most two business days of life remaining. The socialist Obama administration and its redistribution of the American worker's wealth to the corrupt, the indolent socialist voters, and 12 million illegal immigrants could easily create a hole deep enough to take America 20 years to get out of.

We reversed our former buy position last week on emerging markets. We now have zero confidence in Red China, India, or other emerging socialist markets.

Last night most Asian markets were down again. China was down -0.5%, Hong Kong down -1.8%, S. Korea down -0.9%, and Japan down -2.9%.

European markets are slightly improved today in a narrow range of 0.6% to 1% mid way through their day.

US futures indicate the American markets will be starting slightly higher today. Over the next three months we could see a sell-off of 28% as investors realize this Obama crisis of socialism will get deeper and will last at least another one or two years.

The MSNBC/GE/Pravda/Jim Cramer theory collapsed their theory that commodities were increasing in price because a recovery was already under way in emerging markets and America was already in bull market and would recover this year.