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As predicted we had another down day on the SP 500.
What we didn’t get was an opening bump in order to get a better short position
Since we broke through R1 – I’m confident the target bottom of the channel / 50 DMA around 1368 will be reached
For those that don’t trade the e mini futures contracts, you can either play SPY or SDS the 2x short ETF.
My choice would be to short SSO the 2x Bull ETF, but no shares seem to be available.
The corresponding trade on SDS would be a Buy @ or near 14.51, with a stop loss at 14.30 and a target price around 15.41
That trade would represent 6.2% gain with 1.4% risk
We printed a doji today with a lower high and lower low. We did see a bounce off the R1 1405 area I mentioned yesterday.
My guess is tomorrow the Bulls will try to run it back up to the top of the channel early. My inclination is to short that as I don’t think they have the firepower to break through R2 at 1431. I also see MACD rolling over as well as declining RSI
A stop will be placed 1433 in case I am wrong
I thought we would have seen this around Aug 6 based on the time frames since the June 4 Low.
If you’re playing this short the R1 at 1405 is a likely target and now support – Likewise this is a good place to buy if you believe it’s going higher.
Should that fail then the pivot and 50 DMA converge almost exactly at 1365.
I find it very difficult not to be a Bear now -
- Economy / unemployment
- Overall mediocre earnings
- No QE3 is coming
- Greece default still looming
- Fiscal cliff in 2012
Yet the market continues to move higher. and as Jesse Livemore said so succinctly:
“They say there are two sides to everything. But there is only one side to the stock market; and it is not the bull side or the bear side, but the right side”
In this case though Price is the ultimate arbiter and price tells us the market is going higher.
Here’s a three year weekly chart of S&P 500. The Andrews Fork (blue), Channel (black) and trend from the June 4 bottom (green) all point one direction – up. That it broke into the upper half of the Andrews Fork off the June lows was the final decision point for me.
Even the Euro appears to be breaking out of its consolidation pattern:
When price tells me it’s time to sell – I’ll listen, But for now it’s the Bulls Market
Decision Point keeps track of this percentage for the S&P 500 Index, and it indicates that there are fewer stocks pushing the SPX to the current highs than there were at the April highs. Also, we can see that the percentage in April was lower than it was at the 2011 highs.
Taking 2011 by itself, we can see the rapidly erroding percentage at the July 2011 tops just before the sharp decline in July and August.
Of course, we must note that as of this writing both price and the indicator are making new highs since the June bottom, so it is possible for the appearance of weakness to be remedied if the rally continues.
Conclusion: The percentage of stocks above their 200-EMA shows fewer stocks participating in the advance than there were at the 2011 top and the March 2012 top. This is not a healthy condition, and will probably result in a correction fairly soon; however, the market needs to stop going up before it can go down.
This should surprise no one – Greece, Spain & Portugal according to Paul Donovan at UBS.
Real disposable income grew the most between 2000 and 2010 in those peripheral countries.
Donovan and his team at UBS have looked at eleven of the larger eurozone countries, breaking down income levels in deciles to get an insight into how income inequality has changed over the decade within countries and between countries.
To do this more accurately, they sought to identify income-specific inflation rates because headline figures only offered average rates, reflecting average spending patterns. The latter are not much use if you’re trying to understand income growth across income levels as a country’s high-spenders have a disproportionate impact on its inflation rate:
This matters because the last two decades have seen a growth in inflation inequality. Essentially, it is more expensive to be poor, because the goods and services purchased by lower income households have tended to rise in price by more than the goods and services purchased by higher income households. Lower income households tend to have a higher concentration of food, energy and housing in their consumer baskets. This is not a Euro-specific phenomenon, but something that has been observed across industrialised countries since the mid 1990s.
the “peripheral” countries tended to have higher overall levels of income growth, and all sections of their society enjoyed growing incomes. So, everyone got richer. (The authors stress that the data set ends in 2010, so the impact of the more recent austerity measures is excluded.)
Germany, Ireland, most of Italy and the French middle class all experience a decline in their standards of living. In most of these countries, the highest income groups do relatively well.
What stand out are Greece, Portugal and Spain. These economies have benefited from increased standards of living under the Euro (at least, until 2010), as nominal incomes have overcome inflation pressures. There has also been a concentration on improving the lot of the lower income groups in these societies.
This chart shows Eurozone by country. The income classes start lowest to the left in each country’s section
Three California cities – Stockton, San Bernardino and Mammoth Lakes – have filed for bankruptcy so far this year.
They are not likely to be the last, Moody’s said it this article from Associated Press
Moody’s reports that some cities are turning bankruptcy as a new strategy to take on budget deficits and avoid obligations to bondholders, an emerging dynamic that could have ripple effects throughout the investment community.
The municipal bond market has long been characterized by low default rates and relatively stable finances, Moody’s said, but that outlook is beginning to change as bankruptcy becomes a tool for cash-strapped cities.
As a result, the agency will reassess the financial position of all cities in California, which issues about 20 percent of the municipal bond volume nationwide, “to reflect the new fiscal realities and the governmental practices.”
The agency also will examine the outlook for municipal bonds in other troubled states, according to Robert Kurtter, managing director of public finance at Moody’s.
Moody’s would not say which states it will review, though Kurtter mentioned Michigan and Nevada as possibilities. Friday’s report noted that cities across the country are in financial distress but said that a greater share of bankruptcies are expected in California.
In California, officials rushed to downplay the report.
“Moody’s has an obligation to review changing circumstances, but we would just suggest that their assessment of the framework and ground activities is perhaps exaggerated,” said Chris McKenzie, executive director of the League of California Cities.
The state treasurer’s office also cautioned against overacting to three bankruptcies among California’s 482 cities.
“No city’s going to blithely skip into bankruptcy court to avoid its obligations,” said treasurer’s office spokesman Tom Dresslar, who called the report “a little hyperbolic.”
More than 10 percent of California cities have declared fiscal crises, according to the Moody’s, with the most troubled areas lying inland in the middle of the state and east of the Los Angeles area.
Kurtter said the declarations of emergency were “a reflection of the broader fiscal stress in the state.”
Moody’s floated the idea Friday of an across-the-board ratings adjustment for California cities, a move McKenzie warned “would have a terrible impact on taxpayers.”
The agency will consider ratings downgrades for embattled counties, school districts and special districts.
The report highlighted growing doubts in some corners about whether cash-strapped cities are making good-faith efforts to pay their debts.
“Credit analysis is based on the ability to pay and the willingness to pay,” said Paul Rosenstiel, Principal at DeLaRosa & Co., a San Francisco-based municipal bond investment-banking firm.
Investors have historically assumed that cities are willing to pay their debts because they want continued access to the bond market, Rosenstiel said.
Now, some are not so sure.
“What is being considered is whether the willingness to pay is something that needs to be factored in more than in the past – and if so, how would you measure it?” he said.
Lower bond ratings would increase borrowing costs for cities at a time when many already are struggling financially because of a steep drop in tax revenue. Because of that, Friday’s report is raising alarms for city leaders who fear that it could trigger a crisis of confidence that would hinder their ability to borrow for needed projects.
“Every city in the state is looking on with some concern,” said Dave Vossbrink, spokesman for the city of San Jose. “Governments of all kinds borrow money, usually to build infrastructure that lasts a long time. It’s like getting a mortgage to build roads, a sewage plant, whatever it might be.”
San Jose has shuttered libraries and laid off police officers to cut costs, and residents voted this summer to cut the pension benefits for city workers. But while the city is taking steps to reassure investors of its fiscal health, there is frustratingly little it can do to control larger fears about the municipal bond market.
“We know that even though we have a good reputation for our own affairs, if you are in a marketplace where some of your counterparts may be in a less desirable position, then it could have some bearing,” Vossbrink said.
Moody’s said it will review all California cities in the coming weeks and conduct in-depth reviews of stressed cities in September, with reports issued as the reviews are completed.
According to Moodys
Just listened to a very interesting podcast over at marketplace.org
In an interview with Economist Michael McDonough from Bloomberg.
McDonough offers a theory regarding the correlation of Trash to the Health of the Ecomomy as a trailing indicator:
Ryssdal: Yeah, that’s right. Explain to me how this works, because it’s not like iron and steel — which are the biggest components of all this stuff — and demolition. It’s not like that has anything to do with consumers buying more stuff and then throwing more stuff away.
McDonough: That’s what’s great about this indicator. It’s holistic because it’s not isolated to a single part of the economy. It’s people throwing things out, it’s buildings being demolished — it’s everything. The current levels are indicative that you may be seeing a weakness in new construction. I mean, if you’re going to build a new building, there might be a building that’s already there. If you buy a couch, you might be throwing out an old couch. If you go out to McDonald’s and you buy something, you’re going to throw something out. So the fact that it is as weak as it is right now means something’s wrong in the economy, potentially, in the underlying economy.
Ryssdal: So what kind of trash we talking here? Is this everyday household waste?
McDonough: You know, it’s a whole mix of trash, actually. What you have is almost half of what the trash is iron and steel waste, and then the next biggest component is your demolition and your municipal waste. So places like New York City, Seattle — these guys are putting a lot of their trash onto trains, shipping it out to other states, and then dumping it there.
Ryssdal: And we should say that’s where the data comes from, right? You get it from the American Association of Railroads or something, and those guys actually measure carfuls of stuff?
McDonough: Exactly. On a weekly basis — that’s what’s even more interesting about it. When you think about the concept of using trash as a proxy for GDP, it’s not a leading indicator. If anything, maybe it’s a slightly lagging indicator, because you have to wait for people to throw things out, possibly. More than likely, it’s a coincident indicator. Except, you know, for GDP, you need to wait a month or two after the quarter ends before you actually get that figure.
If this is indeed an indicator, and it shows in the past it has been, then I see a significant divergence forming for Q3 GDP announcement
Nice infographic here from the folks at memeburn on the battle for internet supremacy. What always surprises me in these comparisons is that you’re talking about 3 different business models -
AAPL wins hardware which is great as long as you keep customers in that replacement cycle with pads and phones every few years. Their itunes revenues contribute a little, but not much in comparison to valuation.
GOOG rules the search space and hence, the ad dollars. The move to mobile contiues to hurt their revenues, however. Here in KC they’re trying to get into ISP business with Google fiber. That may open up some interesting opportunities down the road
MSFT owns the business world. 90% of all the corporations use MS products from Servers to Office. It’s not a market that’s at risk either, in spite of what salesforce.com (CRM) or Linux (RHAT) users would have you believe. Xbox adds a little to the bottom line, but again it’s just a blip in comparison
Great article today in the Wall Street Journal – as FB sets new lows day after day with the lockup period expired, founder Mark Zuckerberg is holding daily Rah Rah sessions with employees to raise spirits
Mr. Zuckerberg has long exhorted employees not to pay attention to the stock price, instead pushing them to focus on developing the social network. But in a companywide meeting earlier this month, he conceded that it may be “painful” to watch as investors continue to retreat from Facebook’s stock, according to people familiar with the meeting.
The meeting was part of a new effort over recent weeks to buck up morale.
Mr. Zuckerberg’s turnabout may have steeled employees ahead of Thursday, when some early Facebook investors—but not employees—were able to cash out for the first time since the company’s initial public offering in May.
Facebook shares hit a new low on Thursday, falling 6.3% to $19.87 as more than 271 million shares—or nearly 13% of those outstanding—became eligible for sale.