Financial topics

[Higgenbotham]

http://news.yahoo.com/s/nm/20110206/bs_ ... _outlook_1

Interesting article on "Bernanke the Politician", state bankruptcies, and budget conflicts.

http://www.cnbc.com/id/41429486

Government getting out of the mortage business.

[burt]

Thank you, I still have a lot of studies to do to give an "intelligent" answer (I mean not too emotional) to the different interesting remarks I read here.

Another thinking from cnbc.
http://www.cnbc.com/id/41408510/
Usually (for me) when cnbc makes a prediction the opposite becomes the reality

Then if you look at the TASE market (in Tel-Aviv), a small market but considered to be an advance signal for the markets during next week (mostly because it is open on sundays), it is up today... and not only up, but at the all-time highest level.

http://www.tase.co.il/TASEEng/MarketDat ... llar=False

For me, the optimism could still stay for a while (even if the situaton is really rotten), let's see....

[Higgenbotham]

I just read this interesting comment from an analyst. I edited it a bit because I probably shouldn't be reproducing it word for word, but the general idea about the 1307 futures level I mentioned earlier, which is about equal to the 1310 cash level, is here too.

The 1310 level is important...with two closes above it, then the Fed and ECB have lost control of the financial market inflation...QE is finding its way into commodity speculation. Sure it is generating some real economic expansion, but on balance it is driving another bubble. If this market blows past 1310 you do not want to be short...two closes above S&P 500 1310 and this market can go much higher.

[John]

I just read this interesting comment from an analyst. I edited it a bit because I probably shouldn't be reproducing it word for word, but the general idea about the 1307 futures level I mentioned earlier, which is about equal to the 1310 cash level, is here too.

"Fair use" allows you to quote up to 250 words.

John

[Higgenbotham]

Full quote. From David Knox Barker's Long Wave Dynamics.

Since late 2010 I have indicated the 1278.95-1310.32 Normal range in the Level 2 grid as major resistance. The market has rallied to the top end of that range. It is possible that QE2 is having a far more dramatic impact than I am giving it credit. It is possible that it pumps this Wall cycle to historic size that makes tracking it with any precision next to impossible. The 1310.32 level is important. If Mr. Market blows through this target, with two closes above it, then the Fed and ECB have lost control of the financial market inflation situation. The QE in the U.S., Europe and China is finding its way into commodity speculation. Sure it is generating some real economic expansion, but on balance it is driving another bubble. The Fibonacci targets serve as entry, exit and stop losses targets. If this market blows past 1310.32 you do not want to be short, and being long the highest yielding lowest P/E large caps would be a form of hedge against the politicians and central banks destroying the money world. Two closes above S&P 500 1310.32 and this market can go much higher. A drop below 1278.95, and this market will be in Wall cycle correction mode. The Level 1 price of 1228 is the target for this Wall cycle decline, with 1146 the next stop.

[OLD1953]

Just MHO, but something will happen to pull the props out of this market, war or natural disaster or defaults, I don't know, but something. And when it drops, it will be free fall.

[John]

Full quote. From David Knox Barker's Long Wave Dynamics.

Since late 2010 I have indicated the 1278.95-1310.32 Normal range in the Level 2 grid as major resistance. The market has rallied to the top end of that range. It is possible that QE2 is having a far more dramatic impact than I am giving it credit. It is possible that it pumps this Wall cycle to historic size that makes tracking it with any precision next to impossible. The 1310.32 level is important. If Mr. Market blows through this target, with two closes above it, then the Fed and ECB have lost control of the financial market inflation situation. The QE in the U.S., Europe and China is finding its way into commodity speculation. Sure it is generating some real economic expansion, but on balance it is driving another bubble. The Fibonacci targets serve as entry, exit and stop losses targets. If this market blows past 1310.32 you do not want to be short, and being long the highest yielding lowest P/E large caps would be a form of hedge against the politicians and central banks destroying the money world. Two closes above S&P 500 1310.32 and this market can go much higher. A drop below 1278.95, and this market will be in Wall cycle correction mode. The Level 1 price of 1228 is the target for this Wall cycle decline, with 1146 the next stop.

On Friday, the S&P closed at 1310.87. Does that count as one close above 1310.32?

John

[John]

Was today day #2?

[Higgenbotham]

Not sure, John. I asked him if it was OK to quote within fair use and he said, sure, and to feel free to post any of his charts. When he wrote back granting permission this morning, he said - It looks like Mr. Market is trying to break out above 1310 today. A two day close above and it may want to break out.

The way I personally will handle this is to stay short if it moves away from 1310 on the downside and look to lighten up if it moves up from 1310. The importance of 1310 can be seen with the gap near that area on today's bar.

Just as a note, gaps are considered by chartists to fall into 3 categories - breakaway gaps, continuation gaps, and exhaustion gaps. I'd say it's not possible at this time to know what this is, but a strong continuation of the trend above 1310 seems to the author to indicate that the system may be moving toward hyperinflation. If not, then we can see that things have been taken to the absolute limit and the market may snap back under 1310.

I quoted it because I've mentioned that area a few times. I looked in the archives here and had mentioned 1302 some time ago and then 1307 late last year. It just seemed to me that moving the market over the pre-Lehman levels could only be done through inflation and would indicate inflationary forces are winning out. That's my 2 cents on what 1310 means to me. The 2 closes aren't something I considered but it seems reasonable.

Obviously, David and I can't be the only ones who have seen the importance this. I believe there is no specified time limit to this test. It will depend on the market and probably how the Fed responds. If the dollar strengthens and the market sells off under here right away, then the Fed may do nothing. That seems unlikely to me. Bernanke already talked last week. The markets are going to push and test. It could be a wild couple of months. My guess is it's going to end with Congress clamping down on Bernanke. I haven't thought enough about it though because I didn't think the Fed could or would push this extreme. Vince obviously did so I'm sure he will have something more to say about it. My take is that we are now in immediate crisis mode.

[John]

One theme that I've been hearing a lot in the last couple of days is
that "emerging markets are no longer hot."

Cairo is down sharply.



Cairo's market was supposed to reopen yesterday, but they kept it
closed, I assume because they couldn't find any buyers. Now they've
said that it will open on Sunday.

Perhaps they've learned their lesson from Bangladesh:



Other markets, including China and India, are said to be in trouble as
well.

Last year, all the experts were saying that emerging markets were the
best place to invest, because American and European markets weren't
growing enough. Presumably that's why these countries had stock
market bubbles that are now crashing.

Now if emerging markets are no longer hot, that means that money is
flowing back into Wall Street, adding to that bubble.

Boy, when I realize what's going on, it really depresses me.

From Dhaka's Daily Star:

> Stock investors go berserk again

> Dhaka index loses 324 points; SEC lifts suspension order on five
> stockbrokers

> Star Business Report

> A steep fall in share prices sent hundreds of investors out on the
> street in Motijheel to protest the plunge yesterday, with many
> taking to vandalism for the second day. They vowed to continue
> their demonstration until the market bounces back.

> The General Index (DGEN) of Dhaka Stock Exchange came down to
> 6,394 points, registering a 324 points or 4.8 percent fall at the
> end of a four-hour trading session yesterday.

> With yesterday's fall, the market remained in the red for a third
> trading session, marking a cumulative drop of 915 points. ...

> Although the investors started gathering in front of the premier
> bourse from the opening bell of the trading session, the
> demonstration began at around 1:30pm after the DGEN plunged over
> 300 points.

> The aggrieved investors set fire to paper and wood, burnt an
> effigy of the finance minister, and chanted slogans demanding
> resignations of the finance minister, central bank governor,
> market regulator's chairman and presidents of two bourses.

> They also smashed up a bus and a pickup van in the area and broke
> windowpanes of some buildings adjacent to the DSE by throwing
> brickbats.

> "My portfolio has been wiped out by 75 percent. I have invested Tk
> 20 lakh, but now the value is Tk 5 lakh only," said Mizanur
> Rahman, a shocked investor who was in tears. "I am losing
> everything. I don't know what to do.”

> Many others were expressing their feelings the same way, most of
> whose money was lost to the recent slump in share prices.

> Stockbrokers said share prices kept declining without any
> let-up. "Frightened investors started offloading the shares from
> the opening bell. Sliding confidence of investors prompted huge
> sell pressure and buyers were inactive in fear of further
> debacle," a leading stockbroker said in its regular analysis. ...

> Meanwhile, the Securities and Exchange Commission (SEC) has
> withdrawn a suspension order on trading of five stockbrokers.

> The stockbrokers are: Al Arafah Islami Bank, Dhaka Bank
> Securities, NCC Bank Brokerage, PFI Securities, Alliance
> Securities and Management, and IIDFC.

> Earlier, the SEC suspended the stockbrokers' trading activities
> for 30 days on charges of their involvement in the ongoing
> volatility in the secondary market.

> However, the probe activities on these firms by the SEC will
> continue.

> "Considering the current market situation and investors' interest,
> the commission has decided to withdraw the trading suspension on
> these stockbrokers," said Saifur Rahman, a spokesman and executive
> director of the SEC.

> http://www.thedailystar.net/newDesign/n ... nid=173298

John