Tuesday, August 12, 2014

We are now one or two weeks away from the first big test of this bull market. This test used to occur every four years and was called the “business cycle” but has increased to every seven years beginning before year 2000. The 65 day moving average of most major indicators is now being approached from beneath. Either it breezes up through and the bull market remains intact or next it falls toward the 200 day moving average to test for a bear market. If it hits that 200 dma level on high volume and bounces back up on low volume that would indicate the bear market has begun. Don’t listen to commentators because they almost always lie or do what they are told to say. You must check the volume of transactions at all times yourself. Usually you can find the transactions for the NYSE or in Barons.

If that is the scenario then any last rise up to the 65 day moving average is likely the last chance to get out without a large loss and also probably a good point to short a high priced weak company and anticipate that the 200 pt moving average will break down with another sell signal within a week or two. 
However if the market rises to the 65 day moving average on higher volume than when it declined, it signals that it  is likely just another bear trap and the bull market resumes looking toward new highs. 
 
When a bear market or a bull market begins volume often doubles or even triples the previous normal volume for a few days.
 
Regulators say repo markets still threaten the broader economy with instability.  During the 2008 crisis, the Fed had to backstop banks' repo lending to prevent broad panic across the financial system, but the 2010 Dodd-Frank law made it harder for the central bank to take such action again.  Broker-dealers could experience a funding freeze during future times of financial stress. That potential for problems has not been adequately addressed since the 2007-2008 crises.   Higher capital requirements are needed for broker-dealers that aren't owned by banks, and therefore aren't regulated by the Fed but that could eat up the capital of the investors.  The interest rate is a small daily fee but it is paid every market day.
In a repo, a hedge fund obtains cash by selling bonds to another party for cash with the promise to repurchase the bonds at a slightly higher price in the near future, that day or week. Borrowers are often hedge funds, and lenders are typically money-market funds. Banks stand in the middle, moving cash between the two.
Together, the unstable division of the balance of buying and selling of the mono-pole ETF leads to extreme swings in both directions while the repo market is instable to begin with. 
 
Aug 15
Cisco is cutting 6,000 jobs as CEO forecasts growth stagnation.
 
Aug 12 David Axelrod, the former top political adviser to President Obama, slammed Hillary Clinton for her sharp criticism of Obama's foreign policy.  In an interview with The Atlantic, Hillary said Obama summarized his foreign policy doctrine as “don’t do stupid stuff,” which is not an “organizing principle” worthy of “great nations.”
Axelrod, who knows Hillary supported Bush’s plan to occupy Iraq, fired back, "Just to clarify: 'Don't do stupid stuff’ means stuff like occupying Iraq in the first place”
The left wing is now attacking Hillary too.
 
"As democracy is perfected, the office of the President represents, more and more closely, the inner soul of the people. On some great and glorious day, the plain folks of the land will reach their heart's desire at last and the White House will be occupied by a downright  moron."
H.L.   Mencken, July 26, 1920
 
Tesla testing shows that problems emerged after the sedan had been driven more than 10,000 miles. Issues included the center screen going blank reducing access to most functions, and issues with the roof and front trunk lid release.  Tesla stock has had a long run and the aura is beginning to fade.
 
World Economy
Aug 15
Germany’s economy has begun to decline joining France, and Italy.  The BRICKs turned to stone with China’s and Obama’s economies made of smoke and mirrors.
 
Asset managers pulled 663 million rubles out of Russian mutual funds last month, four times more than in June. The year-to-date exodus stood at 17.2 billion rubles, more than in any calendar year since the company began compiling such figures in 2005.  Withdrawals are on track for a record this year as the standoff in Ukraine and a slumping ruble send investors fleeing.
 
The euro bloc’s economic recovery stalled and signs of ample global supply of oil caused Brent to falls to 13-Month Low along with domestic supplies.
 
Brent oil slumped to a 13-month low and West Texas Intermediate settled at the lowest level since February as.
 
Aug 12   The worst standoff between Russia and its former Cold War foes is curbing trade in the EU’s euro region’s economies.  As Russia responds to sanctions by banning food from the EU, the east’s No. 1 Germany export market, is facing a first contraction in two years with crumbling confidence.
 
The European FTSE is at the highs of 2000 and 2007 but MSNBC/PRAVDA is still saying buy and by-by.
 
If you look at Germany where the people have perhaps the strongest work ethic in the world, their stock market has topped out too but their trend is upward only because the dollar is continually weakening.
 
Japan’s stock market appears to have topped and begun a new decline. It has declined since 1990 when it began Quantitative Easing because their Yen is dropping faster than the dollar.
 
The French market is only about 60% of what it was fourteen years ago. At it most recent highs it is still is still down 50% from 2008 and down 60% from 2000.
http://in.finance.yahoo.com/q/bc?s=%5EFCHI&t=my&l=on&z=l&q=l&c=
 
The Swiss market still indicates stagnation since 2007. It has hit the highs of 2003 but could not make it to the highs of 2007. Obama has destroyed Swiss banking by attacking Swiss confidentiality that had protected people from the Hitlers and Stalins of the past.
http://finance.yahoo.com/q/bc?s=%5ESSMI&t=my&l=on&z=l&q=l&c=
 
American Economy
We will no longer list Obama economic statistics that are clearly unbelievably wrong or intentionally corrupted.  It is hard to say whether China’s or Obama’s statistics are more manipulated.
Lagging US economy resulted in jobless claims climbing to 311,000 last week, the highest in six weeks.
Aug 12
Job Openings Jun 4.671M flat from 4.635M
Aug 13
MBA Mortgage Index 08/09 -2.7% slowed down from 1.6% ---
Retail Sales Jul 0.0% slowed down from 0.2% ---
Retail Sales ex-auto Jul 0.1% slowed down from 0.4% ---
Aug 14
 Initial Claims 08/09 311K up from 289K ---
Continuing Claims 08/02 2544K up from 2518K---
Export Prices ex-ag. Jul 0.3% up from -0.3% -
Import Prices ex-oil Jul 0.0% no change -0.1% 
 
The Markets
Aug 15  If the 65 day moving average acts as an upper resistance level it will be evidence that a bear market has begun.  In that case a 10% decline over a week or so would set in motion the bulls to counter the decline in the following period.  But we would sell everything in that following bull rally to the 65dma especially long ETFs.  ETFs, once the decline begins, will show that they have likely been much smoke and mirrors too because they cannot be balanced by shorting.  Short ETFs will then advance with full smoke and mirrors because those derivatives cannot be countered directly by bulls.
 
Aug 12   The ETFs will be recognized as another type of treacherous and faulty derivative once the next bear market evolves.  It will be the first major test.  The few long side ETFs that existed in 2007 were a disaster and URE is presently at 15% of its origination value even six years later.  But that is much better than the low it hit.  Look it up yourself.
First click on 200 days and select “all” URE data.
 
Two weeks ago we showed several public indicators that pointed to a downturn in about two more weeks.  Our own market cash flow indicator is nearing a turning point signal too.  But usually there is a recovery of about half the first decline before the long term decline ensues.
 
Now the volatility index below is starting to rise.  That normally accompanies a market decline. 
 
Safe Bulker’s income dropped 92%.  Global Ship Lease revenue is in decline.  Transocean never picked up on bulk cargo activity.  Either China owns its bulk shipping fleet or else all the financial trade numbers the governments use make no sense.  How can we believe China is growing at 6%+ and bulk trade (other than a Chinese owned fleet) has done nothing since Obama took office?
Look at the last 1+ years of world trade! Use the graph or snapshot option. Unfortunately they do not show back to 2008 when world trade (excluding China’s bulk shipping) was more than five times higher than it is today.
 
 Look at the volatility index and you see that the market could fall much faster. This market has little volume or volatility.  So when volume picks up past history says the market will plunge.  This is not a good moment in time for holding equities.
 
 World market updates:
http://finance.yahoo.com/intlindices?e=europe
http://finance.yahoo.com/intlindices?e=asia http://in.finance.yahoo.com/intlindices?e=asia
 
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