Phantasmix Stock Blog

“First Look” directional planner — reprinted with permission from Beat the Dart

September 23, 2009, 7:00 am

The Standard & Poor’s 500 index futures up 2.50 to 1069.80. Asian markets fell slightly overnight, while major European indexes inched higher in late morning trading. Traders are awaiting word from the U.S. central bank, which wraps up a two-day policy meeting later Wednesday, hoping for more clues about the strength of the economy’s recovery. As for FREE MONEY POLICIES don’t worry — Bernanke’s printing press working non-stop.

A weakening U.S. dollar supports higher stock and oil prices. Because crude is priced in dollars, investors outside the U.S. buy it up when the dollar drops. Olivier Jakob of Petromatrix in Switzerland said that while the Dollar Index — which values the dollar against a basket of foreign currencies — was now at same level as in September 2008, back then the Nymex contract was worth $109 a barrel.

Maintain resistance at 1105.40 and support at 995.20. Don’t fight the tape and go with the flow — maintain positive bias.

“First Look” directional planner — reprinted with permission from Beat the Dart

The Standard & Poor’s 500 index futures down 6.10 to 883.20, as the recession deepened with global trade off sharply — exporters like Germany, the euro zone’s biggest economy, badly hit. In the first quarter, Germany’s economy shrank 3.8 percent as demand for its high value goods, such as cars and machinery, collapsed. The first honest report without the ‘green shoot” noise.

Indeed, weak U.S. retail sales data, which was reported earlier this week showed American consumers — one of the engines of world growth — are not ready to spend again. The key problems – deleveraging, higher unemployment, reduced buying power and contracting fixed asset values.

Oil prices below $59 a barrel in Asia as signs of a weak U.S. economy led investors to mull whether this month’s crude rally was justified. Benchmark crude for June delivery was up 11 cents at $58.73; the contract climbed 60 cents overnight.

In currencies, the dollar weakened to 94.87 yen from 96.08.

Maintain resistance of S&P 500 index at 934.79, and support at 832.39. Trade stocks on both sides, take profits, reduce laggards, and increase cash position.

Reprinted with permission. Full commentary at Beat the Dart

The Federal Reserve said that the government is prepared to rescue any of the 19 banks that underwent “stress tests” and were deemed vulnerable if the recession sharply worsened. Since the 19 banks hold one-half of the loans in the U.S. banking system, they won’t be allowed to fail — even if they fared poorly on the stress tests.

“Too big to fail,” is the agenda. Indeed, taxpayer money remains at risk on behalf of banks that have received billions in government bailouts and guarantees. While the Fed released little new or concrete information, it was assumed that if the recession get worse, the Fed would have “an open check book” to pump more money into them without Congressional review, and further offered that a bank needing more capital to cushion against loan losses under its “adverse” economic scenario… should [be] considered insolvent.

To date, the government has committed more than $11 trillion in loans, investments and other measures to prop up troubled institutions and stabilize the banking system, and may need to triple that amount before the recession is over. Where the money is going to come from, is another story.

Reprinted with permission. Full commentary at Beat the Dart (”Market Outlook” link on the left)

The Standard & Poor’s 500 index fell 12.07, or 1.6 percent, to 752.83, as confidence in the solvency of the government, the solidity of the currency and the soundness of the economy — spells FEAR. What lies ahead is not the end of the world, but until the American public get straight answers, our existence as a functioning democracy may end.

You have schemers like John Asshole Thain, who took for himself $1.7 billion, while given purported bonuses to his coconspirators for a total of $3.2 billion as the government was giving Merrill’s merger partner Bank of America (BAC) – $50 billion in TARP funds.

To date over $1.1 trillion has been misused by bankers and insurance executives, while still earning millions of dollars as they collectively cry to Washington for more funds. Conversely, the average citizen is worried about obtaining the basics for living.

Obama Nation has submitted its $3.55 trillion budget plan for 2010. Dartline projects the budget would be increased to $5 trillion as the full extent of toxic bank assets are finally, but still not fully disclosed.

How can anyone be comfortable with a stock market like this, when the purported “leaders of industry” are a bunch of incompetent idiots? Apparently, Obama thinks they are going a good job and given them an additional $750 billion for the toxic banking system.

Why should investors buy stocks when durable goods orders fell sharply, initial and continuing jobless claims soared, and sales of new home plummeted? Obama nation assumes that the crisis has reduced potential output by one per cent, while Dartline’s view is that further reduction in expectations has drastic implications for the fiscal position: in 2009-10, the structural current budget would operate at a deficit of 6.1 per cent of gross domestic product. To get the budget under control, the government must reduce spending. How can it be done, when Obama has the printing press working overtime?

The government must borrow its way through the crisis. What what the pundits are saying as the reason to buy stocks and not miss the 500 point rally. BULLSHIT! … We predict the public sector net debt will peak at 71 per cent of national income. If the cost of rescuing the financial sector were to be 12 per cent of GDP, this would rise to 77 per cent of GDP. If the world economy is about to fall into a depression, losses in the financial sector could be far higher. Not good if you consider buying stocks for the long term.

Soaring real interest rates on public debt would add more pressure on funding and cause the Federal government to step in. A vicious spiral would then ensue. In short, Obama Nation would suffer the sort of crisis so many emerging economies have experienced — a currency collapse and a public debt crisis.

Right now, the government is okay: The fall in the external value of the dollar, combined with low rates of interest on government debt, despite the huge fiscal deficits, and the continued ability of the central bank leverage its balance sheet are the right moves to keep the good ship USA afloat. Indeed, keeping it above water would become much harder for longer than almost anybody imagined two years ago. But we can, with tough discipline and common sense.

But if you have hard assets in equities that are not positioned against these shocks, you will lose all your money. Obama Nation has already failed. In times so dangerous, we have a president that doesn’t have a clue what the real priorities are. Obama cannot disown responsibility for his inheritance; he knew the deal when he ran for president. If he fails to act decisively, Obama risks being overwhelmed, like his predecessor. If Obama does not fix this crisis, all the hopes from his presidency will be lost. Hoping for the best is foolish. We should expect the worst and act accordingly…

Continued at the source

Reprinted with permission. Full commentary at Beat the Dart (right on the home page, scroll down)

The Standard & Poor’s 500 index down 6.7 percent to the 752 level, below the closing low of 776.76 logged on October 9, 2002. Dartline, using the Subjective Probability Model (SPM), claimed that the index support would be at 755. However, when the index fell below 755, it established a major technical down trend to 491, last held on January 5, 1995 (500.71).

Indeed, the index can drop 35% and happen within 150-days. … We must consider this consequence based on the historical prediction that SPM correctly made. (Check our achives for the proof.)

“Unrelenting gloom has taken over the markets,” said Dana Johnson, chief economist at Comerica Inc. “The economic news, the concerns about some major financial institutions, the concerns about the auto sector, earnings reports, everything is coming out in a way that is just provoking a massive selling in the stock market. Back in October we were looking at a potential catastrophic meltdown of the credit markets, and that didn’t happen,” he said. “But that doesn’t mean tremendous damage hasn’t been done to the economy.” SPM predicted that event in May 2008.

Bond prices showed stunning advances as investors clamored for the safety of government debt. The yield on the benchmark 10-year Treasury note fell to 3.14 percent from 3.32 percent late Wednesday. Bond yields move opposite their price. The yield on the three-month Treasury bill, considered one of the safest assets around, fell to 0.03 percent from 0.06 percent late Wednesday.