CIT trading now halted.

Some unconventional unregulated lenders like GE and GMAC were given government loan guarantees so that they would not fail but their coverage is up on October 31. CIT stock trading was halted yesterday because CIT did not get the guarantees. Will some of the banks fail as soon as they lose their guarantees? Probably they will, but many of them should have been folded anyway. Japan's socialists did not want to let their miss-managed banks fail and they are still suffering the consequences since 1990. Will Obama socialists keep us in an extended depression as FDR socialists and Japanese socialists did? Placing incompetence in high positions becomes an entitlement that allows the incompetent bureaucrats control every aspect of our life as they still do in totalitarian states.

Market forces July 16

Well were we ready for a short technical correction or are the broker-banks channeling federal funds into stocks? In 1933 the Glass Steagall bank regulation act was passed to make sure that co-mingling of funds would not allow the risky stock market to benefit from federal funds. Could it be that the broker-banks couldn't resist throwing federal money into stocks when they are supposed to be making loans to small business? Will this be yet another Wall Street scandal? The volume yesterday was not above the average so it looks more like a short technical correction.

Typically inflation under Glass Steagall was bad for the market. But record 21.6% annual inflation hit producer prices, which usually is followed in six to nine months by consumer price inflation. Yet the market rallied 3% on high commodity price inflation news. Certainly INTL cannot explain the 3% market move because computer chip sales is a drop in the bucket of China trade.

Market Outlook

The four-day rally with a 3% rise yesterday puts the market in an overbought position again. We expect U.S. stocks to resume the steeper slide after the realization that bank and other corporate earnings reports still do not reflect any write down of toxic and obsolete assets.

Meanwhile, in June there was a 1.8 percent jump in the Producer Price Index (a 21.6% annual rate), which tracks the costs of goods before they reach store shelves, the Labor Department said. The gain was twice what analysts expected signals a reversal of a trend in the past 12 months that sent wholesale prices down 4.6 percent.

Last night Asian markets were mixed: China down -0.2%, Japan up 0.8%, Taiwan up 1.5%, and India down -0.1%.

Today most European markets are up in a range of 0.2% to 1% half way through their session.

US futures indicate a flat market opening this morning.

The rally this week signals that this current decline will take at least a month longer to unwind than we had expected. We will be cherry picking into the market during what we expect to be at least another two months of market decline. We expect the decline will be the typical rotation with sharp drops in individual stocks while other stocks flatten out and then decline so the change in the market indices will be much more gradual. The new democrat-socialist administration destroys every free market sector they touch. Solar and energy sectors are still in decline. Retail clothing stores are incredibly overvalued. Health care is ready to plunge again as soon as congress passes the health care bill. Why is it that congress and federal employees will get better health care than what they give the rest of us with their bill? Is that another entitlement?