S&P 500 - December 7th, 2010

Weekly chart of the S&P 500: Interactive Charts powered by freestockcharts.com

Hello 61.8% retracement.  Today candle stick pattern was a Shooting Star

Lets attempt to overlay some Elliot wave

A bearish candle, off a 61.8% retractment is interesting.  Tomorrow look for confirmation.

On the monthly, it is always nice to see where we are currently over the longer term.

Why Economics Matters by Satnam Lehal

New Palgrave Economics Writing Prize Winner 2008–9

We are very proud and happy to announce the winner of our competition launched in association with the Financial Times and the London School of Economics– ‘Why Economics Matters.’ Satnam Lehal, 31, a graduate of Oxford and Cambridge Universities who works in financial services, won the £1000 prize this year. For more information and updates about future competitions, please keep coming back to this site.

Why Economics Matters by Satnam Lehal

Located on this site: The New Palgrave Dictionary of Economics


"The New Palgrave Dictionary of Economics (2008), 2nd Edition, is an eight-volume reference work, edited by Steven N. Durlauf and Lawrence E. Blume. It contains 5.8 million words and spans 7,680 pages with 1,872 articles. Included are 1057 new articles and, from earlier, 80 "classic" essays, 157 revised articles, and 550 edited articles. It is the product of 1,506 contributors, including 25 Nobel Laureates in Economics. It is also available in a searchable, hyperlinked online version with added content from quarterly updates. The publisher is Palgrave Macmillan. The first edition, The New Palgrave: A Dictionary of Economics (1987), was published in four volumes.^[1][2] Institutional access to full-text online articles for both editions is available by subscription.^[3]  "

Wikipedia: The New Palgrave

GOLD hits new all time high, Sabina Gold & Silver SBB on TSX news release

Today a new high was made in gold.  Impressive yes, unexpected not really.  This commodities will continue to rise as long as USD is being hammered and the world is fearing a breakdown in Euro zone.

I have mentioned previously that my strategy for markets right now, is when I am feeling bullish I long gold / silver mining stocks, some of these that have done extremely well are: AXR, FR, SBB, GPR, FVI, EDR.
If I am feeling bearish I just stick to inverse ETF to short the stock markets.

Currently, I am holding only SBB, with a Buy - stop on FVI at 4.64
I also mentioned previously that the $5 stock range is interesting, as it seems that additional investors get involved after this price level is breached for junior mining companies.

Daily chart of SBB below

Some strong volume has recently entered the market as you can see last week there was a massive increase in the price.  I picked up on the pull back.

What is excited is a release at 4:20pm after market close from Sabina Gold and Silver corp on the final 2010 reading for their mining properties.

Here is the Article from marketwire

Also the report from the company website 

The highlights are the following

"Hole 10GSE136 returns 8.74 g/t Au over 79.9m including 45.20 g/t Au over 6.0m and 25.27 g/t Au over 4.9m

Hole 10GSE140B returns 18.95 g/t Au over 4.35m and 26.43 g/t Au over 2.9m"

Based on previous results for the same property these are significant results.  This stock will be very interesting to watch this week.

Also they have targeted potential drilling targets for their 2011 exploration program.

Source: Sabina News Release Dec 6th, 2010

A sobering wake up call to the world

Well I guess reality will be extended for a few more days/months. 
This video basically sums up the situation:




In addition, it seems there are a few people that are trying bring reality back.  Remember in Europe nations such as Greece and Ireland were forced into  austerity measures since they do not have control over their monetary policy.  IMF and European Central Bank imposed measured to raise taxes, cuts spending, and even lowering minimum wage in Ireland.

As the states are the quasi-world bank, they are in complete control of their monetary policy there is no pressure to reduce debt.  This is abundantly clear from the below bloomberg article.

debt plan rejected

“This plan will make an important first step forward in proving something, in proving our nation understands the peril of our ever increasing deficits and that our leaders are prepared to do something real,” said panel co-chairman Erskine Bowles before commission members began announcing their votes.

There is 0 political will to actually do what is required.  There will come a time where it is realized that the unpopular choice is the only choice.

Additional proof of the failure of the current path we are on is:

Unemployment Rises to 9.8% as U.S. Adds Just 39,000 Jobs

So rising unemployment as billions of dollars a DAY are pumped into the system (today 6.8 billion), should open some peoples eyes. 

I starting going long metal mining stocks again, but I am not counting out STRONG selling coming in at any point probably within the next couple weeks.  If not, I guess the extend and pretend mentality wins until the next sovereign debt issue.

Below is a current US debt holding, Something doesn't seem right that the FED is the number one debt holder
This is borrowed from ZeroHedge article here

Explosion of debt ......

Nov 30th: World markets in for a bumpy ride

As mentioned in my update to my last post, the S&P500 and other US markets at 2:30pm rallied fearlessly off.......  not really sure.  There was absolutely no reason for this action but it is expected when you have 2 POMO's in a single day.  As pointed out before, watch the volume in the SPY to see how this game is played.  Those that bought into the rally that didn't realize it is a setup will be banging their heads tomorrow when the market gaps 10-15 points down.

First thing to note is we are in a sideways to bearish trend.  We have not made a new high for weeks now.... until we do why buy?  trying to pick the bottom will be a losing game in this market.
Second thing to note is the geopolitical and macroeconomic forces at work.

Borrow some charts from this post from zerohedge

This is the AUD/JPY on a 1 minute chart.

you can see the nice rally at 2:30 when the S&P500 shot straight up, however all of that and more (currently 80.82) has been recovered by the bears.  So what happened at 10 pm ?

China spoke above interest rate hikes.  Remember since the Yuan is tied to the USD right now, any interest rate hike has the same effects if the US raised interest rates.   Which means stronger USD and since the markets are only rallied off the suppression of the USD it means lower markets.  If China is serious about a 0.50% hike before January this could have dire consequences for the markets.

Why is China raising rates?  Unlike here their economy actually is growing quite fast.  Some speculate that they have a housing bubble etc which could be true. 
Many people have been saying that the reason QE is not going to work is simple because if you make holding USD less valuable thus increase risk appetite a lot of the money will just go fund oversea companies mainly in Asia since they are growing offering higher reward for each unit of risk.  As an investor it makes logical sense, so that is why we see strong growth in nations like China, Singapore, South Korea, etc.

Anyways, I have maintained a short position which I got into a couple of days back at a top.  And since we haven't taken out a previous high I will maintain this position unless there is real reason not to.

Last note on what  I believe occurs at market tops and more specifically this potential market top. 
The market increased ruthlessly since QE2 was announced, there was never a really entry into the market unless you straight chased.  No definitive pull back that reversed on strong volume.  So this is the first time we have seen real sideways action.  Well investors that are under the believe that things are all good will buy into this market. Who is selling? major institutional investors.  They are buying when the time is right 2:30pm and they are slowly off loading their shares when time is right like today at 3:55 pm.  But Net they are holding less than they did yesterday and that is the key here.  Over this massive choppy action each day the "smart money" is getting out of this market.

We will see what tomorrow brings but I am still calling at least 10 point gap tomorrow leaving everyone that bought into the rally yesterday wondering what happened.

S&P 500 critical level, Dow trading below 11000

Today's low so far was 1173.60 which if you look back in time is approximately where the rebound after the flash crash failed.  This level also was just below the 50 MA meaning we have pierced it.  Piercing a trendline is an early warning of a trend line break.  This isn't to say we can bounce up for a week or so.  However, closes below the 50 MA should be viewed as extremely bearish as there is little support under the market.  Next stop 1140 where the 200 MA is then I would think 1040 is a likely target for a test.  If the market gets above the 20 MA and holds then maybe start looking for long positions, I stress maybe as eurozone and all of the instability with Korea is not a positive for the markets.

Also note today is the first double POMO day which apparently doesn't work the way the FED had hoped as geopolitical instability trumps bond purchases.  VIX is up past the 23 level and dollar is in a strong up trend both a negative for the overall markets.

UPDATE: close

I used the SPY here to demonstrate the volume on a 5 minute chart.
Like the past few weeks, a common volume trend is strong sell volume...

Looking at the magical rise of prices exactly as the clock hits 2:30, the volume is telling....
At the end of the day, the buyers have cashed out.  Leaving whoever chased holding the hot potato.

Like Nov 22nd, I expect a gap down to start the day.

Nov 28th, 2010: Eursula, and STL indictmento Debt burden, Wikileaks, Korea Penin

4 major geopolitical and macro-economical news items to be aware of

1 - Euro Debt Burden

ZeroHedge: Eurozone Cheat Sheet

There is a million things to say about the above statistics but I will limited my comments to the graph on the bottom right.  It shows the maturity due dates as a % of total debt for each country in the Euro Zone.
Coupled with the overall Debt to GDP ratios a stalk future awaits us.  Yes we will be able to push off this Ireland situation off for a few more years, but what happens in 3-5 years? Portugal, Italy, and even Belgium doesn't look in very good shape.  I think a lot of people are short sighted on global debt situation.

2 - WikiLeaks ~2.8 million leaked documents

WikiLeaks threat sparks massive review of diplomatic documents

Wikileaks: US warns allies on potential diplomatic leak

"Reports say Turkey, Israel, Denmark and Norway have also been warned to expect potential embarrassment from the leaks."
"State department spokesman PJ Crowley warned on Wednesday that the release could weaken trust in the US as a diplomatic partner."

It is rumored that the leak will be coming 4:30 pm Sunday 11/28/2010, but having seen mainstream acceptance of that time frame.

3 - Korea situation heating up, US and South Korea continue with joint exercises

Artillery Heard in North Korea; U.S. Carrier Enters Yellow Sea

"The echo of shots rang out this morning, said a South Korean Defense Ministry official who declined to be named, citing military policy. While residents were later allowed out of shelters, the aircraft carrier USS George Washington joined South Korean vessels for four days of drills.

U.S. Admiral Michael Mullen, chairman of the Joint Chiefs of Staff, said the U.S. is trying to prevent the tensions over North Korea’s Nov. 23 attack on the South Korean island on the disputed maritime border from escalating into a more significant confrontation."

US, South Korea Begin Military Exercises

"Earlier Saturday, China launched a flurry of diplomatic activity to ease tensions on the Korean peninsula after North Korea's shelling of the island.
China has warned it opposes any "unilateral military act" in the area without its permission, referring to the U.S.-South Korean drills.
Admiral Mike Mullen, chairman of the U.S. Joint Chiefs of Staff, told CNN (in an interview due to air Sunday) that, as North Korea's closest ally, China has as much at stake as anyone if the region is destabilized."

4 - CBC leak and upcoming indictment

This situation will cause an escalation in the region.  It will be interesting to see how the UN approaches this announcement which apparently will come Thursday Dec 2, 2010.

CBC Investigation: Who killed Lebanon's Rafik Hariri?
Phone Chart

 
STL: Saudi envoy expects a major breakthrough soon

"Ad-Diyar reported that the Lebanese Foreign Affairs Ministry received a notification from Lebanon’s Embassy in the Netherlands that the Special Tribunal for Lebanon (STL) will issue its indictment on December 2. Lebanese Ambassador to Netherlands Zaidan as-Saghir has reportedly also confirmed that the indictment will be issued on December 2"