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PRESSURE VALVE DAY

The news-flow headline risk and downside market pressure has been non-stop and unrelenting, culminating with Sunday nights CNBC “Markets in Turmoil” show where Cramer told us “to not touch a thing here”.

Almost every market, save Treasuries, has been wildly oversold for the past few weeks as the downside pressure had built. It began slowly at first, back in early April. It picked up speed on April 17 near SPX 1395 and has picked up steam over the past few weeks as the Euro Credit Crisis has gained steam. It is by no means over, but rather, being “talked about” by the Powers that Be.

I’ve begun to talk about quality European Companies, just as we are told to keep away from them. I also appreciate stocks whose fundamentals have not changed much yet has been halved in a month or two (not speculative).

Look, we’ve talked about how the market had priced in another FED rescue, near the market’s peak, because it wouldn’t correct in the face of obvious economic weakness. Then the Euro thing happened again and liquidity was needed. Again. So everything got sold. Again. And as soon as prices dropped, the talk of a stimulus guarantee began to circulate. Again.

Today is a picture perfect countertrend day to last Friday when markets begged for any scrap and Jawboning was nonexistent . This week the Jawboning is coming fast and furious and its just what the market needs for the first summer counter-trend move.

Soon you’ll hear about new and massive intervention to save the world, because it needs saving. Think about that as we make back about half of what we’ve recently lost. Enjoy!

 

 

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GROWTH at ANY COST?

Why must there be growth at any and every cost? Isn’t a little shrinkage what is in order?

If the Central Bankers finally get smart, they will not do one thing to “save” the markets. More liquidity-based stimulus cannot stop the realization that actual solvency is the problem and that all the liquidity in the world cannot stem a one way markets to the downside.

If the market is to crash 10% this week there is nothing that can stop it. And Biz-TV wants you to “be prepared”. Fuck you very much for the timely advice.

Every time I’ve said the words “Bank Run in Europe”, I would get that look. Those of you who read me regularly are ready for this. Your exposure is minimal. You’ve known this was coming.

I had thought it would come late last year but the marketplace bought one more Bullshit stimulus-induced, “Europe is Saved” rally. So my timing was a tad off. But the result is the same nonetheless.

All the most histrionic and bearish pronouncements made over the past few months are being parroted by the press. Now everyone knows the truth and its time to be ready for the next move.

The answer is simple. What must fail must fail. Prices that belong lower must go lower. There can be no “propping up of asset prices”. Sure, it will be tough for the wealth of the world and most certainly will trickle down. But there can be no new start without a return to reality.

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All Those Mornings…

How many times did you wake up to Futures up 12 points? Many. And why was the market up? Because.

Now we are creating new technical terms: “Stick Save” is when markets are saved from the precipice in the last half hour of trading, like yesterday. And today we have the new term “Ugly Stick” when Futures are dramatically lower because of fears that the end of the world is neigh.

Realize that the major market indices are ONLY NOW TESTING their May 18th lows. In fact, some of the great European companies are starting to look very attractive from a value standpoint. And if American multinational corporations are smart, they will aquire some of them while they are crashing!

All that I’ve been ranting about is coming to pass. Once great change is finally realized by the stubborn market, the true opportunity arises…

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Examine It All Very Carefully

You’ve been following the news and are understanding of the investor risk. You never blindly “just follow the trend” in the stock market because that only works for Daytraders. You’ve judiciously pruned you account of losers, and have taken some hard-won profits in the winners. Your value-oriented approach has you buying fractional positions in attractive franchises and has kept you out of the more risky high-fliers.

Market participants have had weeks and months in which to look behind the day to day market action when examining the intermediate to long-term picture of the worlds financial situation and the state of The System.

So now we wait. Wait for more printing as the economic numbers deteriorate. Wait for the inevitable short covering pop at the end of the day that signals the All Clear. Wait for the video of the Europeans waiting in line for their money at the bank. Wait for the Communist Chinese to save the Free World. Wait to hear that your investment position, whatever it may be, is affirmed by the talking heads on biz-TV.

Or you could just be in cash watching the shitshow from the sidelines and getting your capital ready.

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Swinging Sentiment

It’s been postulated that “Everyone is too Bearish”. That may be true but it won’t necessarily mean what it has in the past for near-term market direction.

You see, everyone was too Bullish due to the simple fact that the market was rising. They thought that the domestic economy was growing and that Europe was saved and both are far from the truth. So all that misplaced Bullishness means we need a balance of way too much Bearishness to kind of “even things out”. That is how, technically, that works, right?

But it is with certainty that I say that the environment has and is undergoing a significant change, and not just because QE is seemingly on hold. There are structural changes underway that have major significance to the investment landscape. Yet, through it all, the major indices are still levitated and seemingly enjoy a “stick save” in the 3pm hour.

But allow me to repeat; if you are an individual investor,  you are not forced to be a part of the uncertainty. Everyone “just knows” that “they” will throw enough new money at the problem and get the markets up, even from here.

Sure, there may just be a major investment opportunity sometime in the near future, but buying the market because there is too much bearishness is not a reason to throw your hard earned capital into the fire that is burning now.

Happy Birthday to Senor Fly and enjoy the holiday weekend!

 

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Are You Surprised by This Action?

Even before the latest Eurozone bank run and the Facebook debacle, which will kill the IPO market for a while (UNDERSTATEMENT) the equity markets were under classic Distribution as we’ve pointed out on many occasions.

Certainly the April 17 date was a Clarion Call. But enough about the past.

We are now in the midst of giving back all of the “Europe is Saved” gains. Because, well, Europe is not saved. Frankly, there is little positive to hang your hat on except the hope for more Free Money. And that may not work either.

FACT: The reality of price is always transitory. Sometimes it pays to ignore what the market is telling you because it lies, regularly. But out of almost everyone who knew the truth of reality, only a few choose to heed its warnings. Now the market leadership, levitated by psudo-inflation, has crashed. The most gargantuan liquidity push in history has left the markets highly illiquid. Only the biggest and most defensive of issues have held up relatively well, in turn keeping the major indices close to positive for the year. These last holdouts will eventually succumb to the need for liquidity, as they always do. That will be coming soon.

Then, and only then, will the equity markets be set up for a proper washout and accumulation phase that will be infinitely more rewarding to investors.

 

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