THE FAIRYTALE RECOVERY

Well here we are sitting on the Golden Cross and the markets loving it. The 50 day moving avg has crossed the 200 and it has everyone sitting up. The big thing here is out of the last 14 recessions 13 put in a 19.2% gain the following 12 months after such a cross. So it really is a big indicator .

Now for the killer blow .

The one time that it failed was, you guessed it 1938. I think that this time the Golden Cross was manufactured. We have seen very low volume. Each day we have seen the big buy the market at the close along with big pops at support levels which would indicate the computers were kicking in as they were programmed to. We know that of late a lot of people in companies are selling into this rise so who's buying? Well I think it's Government Sachs . The idea is if we get the markets up we create wealth and in the end we save the world. Well I'll have you know this Algorithmic Trading could be the downfall of this very plan that they are using. It has indeed dragged many to the market with their own systems triggering their buy signals . But what happens when someone spots that the Devil himself is pegged to the Cross. Yep they run for the exit only to fall through the trap door to Hell.


We have some clever company insiders selling into this rise. Who would blame these captains of industry cashing in as they know better than anybody how things stand on the ground. According to the latest figures from Bloomberg $800m took flight from the market, the first time money left the market in some time. This number is important as the latest figures show that Americans are saving more now. I wonder if in fact this $800m is the same cash that's been saved.

I have noted from many stock bulletin boards that many are having a nice ride up with the market. The one thing that stands out with many of these traders is they are ready to short this to the floor on the expected turn. If the computers kick in with their sells and these traders get to work I'm thinking there is a Hell after all.


A FAIRYTALE RECOVERY INDEED .

END OF FIRST HALF OF YEAR

Well it's been some run. Can the market break out in the second half? This chart shows the bear market rally.

http://img269.imageshack.us/img269/6481/bearmarketrally.jpg

The big number I was waiting for today was the US Consumer Confidence level . The consensus was for 57.00 but the number came way lower at 49.30. How can they have confidence when their looking at their friends and neighbors loosing their jobs daily. Tomorrow the car sales numbers come out with an estimate of 8.6m

Another number that came out was the
US - Redbook (wk6/27,2009) Store Sales Y/Y change which came in at -4.30% . I'm not a bit surprised there as the personal savings number that came out last time was up.

Then later in the day we got the terrible news of the Delinquencies Rise in the prime mortgage market. This number rose by more than double. Prime mortgages 60 days or more past due climbed to 2.9 percent of such loans through March 31 from 1.1 percent at the same point in 2008. Well you can't really be surprised with the continued job loss of around 600,000 each time the number comes out. Also there are many that took wage cuts or are on short time that are now struggling with payments. Foreclosure filings crossed 300,000 for a third straight month in May, according to RealtyTrac Inc., and the U.S. economy has lost about 6 million jobs since the recession began in 2007.

Serious delinquencies on prime loans, which account for 2/3 of all U.S. mortgages, rose to 661,914 in the first quarter from 250,986 a year earlier, according to the report. Overall, mortgages 60 days or more past due rose 88 percent from last year, according to a report by the Office of the Comptroller of the Currency and the Office of Thrift Supervision .

Data also showed a continuing emphasis on preventing avoidable foreclosures to keep families in homes and mitigate losses, as servicers continued to implement more home retention actions (loan modifications and payment plans) than home forfeiture actions (foreclosures, short sales, and deed-in-lieu-of-foreclosure actions). Prime borrowers received about twice as many home retention actions as home forfeiture actions, while subprime borrowers received more than seven times as many.

“While I’m very concerned about the rise in delinquent mortgages and foreclosure actions, the shift in emphasis by servicers to more sustainable, payment-reducing modifications is a positive step that should show significant benefits in the coming months,” Comptroller of the Currency John C. Dugan said. “In addition, as the Administration’s Making Home Affordable program gains traction and helps offset the impact of this very difficult economic cycle, we should continue to see progress in future reports.”

“We continue to drill deeper into the mechanics of foreclosure prevention actions, thereby gaining more insight into what works,” said OTS Acting Director John E. Bowman. “This report provides a valuable roadmap for how financial institutions can best ensure that more Americans will stay in their homes.”
The report covers the performance of 34 million loans totaling more than $6 trillion in principal balances from the beginning of 2008 through the end of the first quarter of 2009. The impact of the increase in modifications, particularly those with reduced monthly payments, will be seen only in future data. Likewise, data presented in this report do not reflect modifications made under the Administration’s Making Home Affordable program, which was announced in March and began to be implemented after the reporting period, and changes to the Hope for Homeowners program.

Prices of U.S. single-family homes declined in April from the prior month,but the pace of the decline moderated, suggesting stability is emerging in someregions, according to Standard & Poor's/Case Shiller home price indexesreported on Tuesday. The index of 20 metropolitan areas dipped 0.6 percent in April from March,
after a 2.2 percent decline the month before, for an 18.1 percent downturn from
a year earlier.

For details, see [ID:nNYS005189] Reuters Messaging: ryan.vlastelica.reuters.com@reuters.net
0844 ET 30June2009-Bove raises price target on State Street

Remember the first shoe to drop was the sub-prime catastrophe . Could the job losses be the second. The banks were stress tested to 10% unemployment and I wonder how much of the prime mortgage was taken into account. Dare I say that we will get round two of stimulus spending.

Links for further news on this post http://www.ots.gov/

http://money.cnn.com/data/irc/index.html

Another interesting link for the day

http://www.tradingtheodds.com/

THE NEXT LEG DOWN FOR THE MARKETS ?

There are many chartist out there and the one chart most are watching is the Elliott Wave on the S&P. The thing about these charts is each person can have their own interpretation as in which leg we are actually in at a given time. Here is a link to a short lesson on the Elliott Wave Theory http://stockcharts.com/school/doku.php?id=chart_school:market_analysis:elliott_wave_theory









I'm also posting this Excerpt which I came across at this link http://www.elliottwave.com/freeupdates/archives/2009/05/01/Dow-Below-1000-Seriously.aspx









Excerpted from The Elliott Wave Theorist by Bob Prechter, published April 18, 2009 Yes, Below 1000 in Dollar Terms

Readers sometimes ask if I am serious about the Dow eventually falling below 1000. People can understand that the Dow can fall in terms of gold, but they are so convinced about coming hyperinflation that they consider the idea of the nominal Dow in triple digits to be simply out of touch with reality.

The primary reason I believe the Dow is going to fall that far is its Elliott wave structure, which calls for it. But I can also see a monetary reason for this event. The tremendous inflation of the past 76 years has occurred primarily by way of instruments of credit, not banknotes. Credit can implode.

The only monetary outcome that will make sense of the Elliott wave structure is for the market value of dollar-denominated credit to shrink by over 90 percent. Given the eroded state of capital goods in the U.S. and the depletion of manufacturing capacity, it is not hard to see why all these IOUs have a deteriorating basis of repayment. The future has already been fully mortgaged; it's time to pay. But there is no money to pay, only more IOUs, which cannot be paid, either. So the credit supply (after a brief respite) will continue to shrink, which means that wealth, and therefore purchasing power, will disappear along with it. In the broadest sense, this change will constitute a collapse in the "money supply."

Such a monetary background would be consistent with the Dow falling below 1000 in nominal terms. It is one of the reasons that Conquer the Crash is subtitled How To Survive and Prosper in a Deflationary Depression . To be sure, the central bank does have the capacity to print banknotes. But I expect that the final implosion in credit value will be so swift that the authorities will not act in time to counter it. They will continue to try to maintain the fictions of full face value for IOUs until they fail spectacularly to keep up the scam. Then they will start to scramble, but it will be too late.









.............................................................................................................................................................................









Now I personally don't think the DOW is worth following as it's way to easy to manipulate with so few companies in the index.You get a much better picture when you look at the S&P which has a better spread of companies to get the story of what is happening out there. Here is a chart of the S&P with an Elliott wave plotted on it.

Link for this chart http://img7.imageshack.us/img7/5790/elliottwave1.jpg

Here is a second chart which I put a Fibonacci retracement on . The RSI on this chart could easly pull down from here also the slow sto is in danger zone here. The last two trading days are showing selling vol but not exceptionaly high. I'm beginning to think that with the first half of the year complete it's time to be very vigilant. Many stocks have had a tremendous run and the most likely ones to fall hardest are in my view the banks. Some posted great profits for the last quarter, but as we know these didn't reflect the true picture as they changed the accounting rules . The toxic assets are still there and will have to come into play sooner or later.

Link for this chart http://img7.imageshack.us/img7/8756/fibspx.jpg





Again This is only for discussion . Read my disclaimer at the bottom of this page.