If the US Government is to bail-out various financial institutions including insurance companies, buying their toxic assets, as part of the package; a dramatic pay-cut for all executives needs to be part of that package. If your money, the
US government funds, are being used to buy- and steady these firms, we all become equity holders in the assets that being purchased. Thus, when these assets are sold, if they ever will be sold, they will bring a profit/loss to our government’s balance sheets.
The seven figure pay packages and golden parachutes, of many of these financial companies, needs to go the way of the “Dodo Bird.” If these executives were stupid enough to have allowed this sort of mess to occur, they too need to pay the price of failure. As to the government’s agreement to insure money market funds, it is a good idea and will help protect the little investor from total devastation on failures in short-term unsecured debt like that of Lehman Bros.
When we enter into a really awful trade, we loose. We remember Refco, a really awful purchase which is near worthless today. Did Uncle Sam bail us out of that mess? No! The economy has lost more than 600,000 jobs; shouldn’t a lot of the job losses come from that upper management that was a part of this toxic mess? Yes, but do they…..no, they don’t. Who is going to bail out GM and Ford? Uncle Sam to the rescue?
We have seen this tsunami coming for several years. Here is a question: we are not the brightest, or the best in the world, if we could see the mortgage mess coming, why couldn’t the alleged bright guys and gals get a handle on it? Was it purely greed that motivated their action? What happened to the conservative bankers….ah yes, the Dodo bird!
Back to the market which, is where we have our expertise. The chart tells us that there is more room to the upside, but that as we rally we quickly enter into an area of resistance on the chart. That resistance broad area is at 1300. We are not overbought and continue to trade at just the positive side of neutral which tells us, that there is more room to the upside. Is this the all-clear for the market? NO it is not. There are other messes looming out there. As to our growing unemployment rate, we should take some of this “free” government money and use it fix this countries bridges, tunnels, and roads and by doing so, employ our citizens to do the work. The citizens will make money and perhaps, be able to pay-down some of their looming debt.
As to last week’s actions in the market, not only were we spooked by the news, but we also endured quadruple witch expiration. These actions in concert were what exaggerated the action of the market. On Friday, many of the traders were so used up that they simply didn’t want to trade and refused to make markets.
Tuesday: Testimony from Chairman Bernanke, Sec’s Cox and Secretary Paulson all before the Senate banking committee. Wednesday: Chairman Bernanke testifies before Joint Economic Committee, and August existing home sales are released at 10:00. Thursday: Chairman Bernanke and Secretary Paulson on the “Hill.” August durable goods are released at 8:30, August new home sales are released at 10:00, and Dallas Fed President Fisher speaks.
The US Dollar index retreated in the Friday session, but continues to remain above the uptrend line at 77.40. So long as the market remains above 77.31 on a closing basis, the uptrend will continue. Remember, many times we dip below the line perhaps for a day and then rally again to close above the line. This isn’t an unusual occurrence. The Stochastic indicator continues to issue a sell-signal. The RSI is going sideways, our own indicator is curling to the upside and will issue a buy-signal within a day or so and the Thomas DeMark Expert indicator is oversold and going sideways. The 5-day moving average is at 78.583. The top of the Bollinger band is at 80.729 and the lower edge is seen at 76.706. Should the market close above 79.38, the shorts or sideline money will jump into this market and could propel it higher. We remain above the Ichimuko clouds for both the daily and the weekly time-frames but below the clouds for the monthly time-frame. The weekly chart shows a 9-count. The sell-set up is done. All the indicators that we follow are uniformly issuing a sell-signal on the weekly time-frame. We continue to believe that we will see some more backing and filling for the US Dollar index. So far, we remain constructive however; that could quickly change.
The Euro is above the uptrend line of 142.00 and seems to be following that line higher. All the indicators that we follow herein are overbought and all are pointing higher. The 5-day moving average is at 146.853. The top of the Bollinger band is at 148.29 and the lower edge is seen at 138.49. We are below the Ichimuko clouds on the daily chart but are below the clouds on the weekly chart. For the monthly time-frame, we are above the clouds. Should we really further, we will stop at 145.80 and 148.12. The chart looks okay for now but more follow thru will be needed to attract fresh funds.
Houston, we are not cleared for take-off. We need to see the S&P 500 close above 1313.50 to convince us that the worst is over. The market does have more room to run on the upside and we would expect to see the market trade as high as 1307.75. We remain below the Ichimuko clouds for both the daily and weekly time-frame but above the clouds for the monthly time-frame. The spike seen in the VIX indicated that we might have seen a short-term bottom in the S&P 500. The recent two-day rally is not enough to convince us that the worst is behind. The 5-day moving average is at 1204.90. The top of the Bollinger band is at 1321.34 and the lower edge is seen at 1182.299. All the indicators that we follow herein are issuing a continued buy-signal with plenty of room to the upside. When we look at the weekly chart, we see that the only indicator pointing higher is the stochastic indicator. The other indicators continue to point lower. Both the weekly and the monthly charts show that the S&P 500 is in a downtrend.
The NASDAQ 100 enjoyed a wonderful two-day rally last week. The downtrend line on the chart is at 1825.20 for the Monday session. All the indicators that we follow herein are uniformly issuing a continued buy-signal approaching neutral levels. In other words, we have plenty of room to the upside left. The 5- day moving average is at 1710.16. The top of the Bollinger band is at 1960.90 and the lower edge is seen at 1642.26. We are below the Ichimuko clouds for both the daily and the weekly time-frame but above the clouds for the monthly time-frame. The weekly downtrend line is at 1822.15. The indicators on the weekly chart are mixed with only the stochastic indicator pointing higher, for the monthly chart all the indicators are pointing lower. Although the market seems to have bottomed, for the short-term, we could see further shake-outs in the days to come so, keep your trigger finger flexed and at the ready.
The Russell 2000 has a terrific looking chart. This index of small capitalization shares jumped higher last week removing the downtrend line and closing above the Ichimuko clouds. The 5-day moving average is at 726.98. The top of the Bollinger band is at 762.78 and the lower edge is seen at 688.46. All the indicators that we follow are approaching overbought levels yet continue to point higher. We will be watching this index for clues regarding any weakness in the larger capitalization indices. This index never took out the July lows and has out-performed the other indices. The only danger we see is that the rally on Friday took this index above the top Bollinger band. We did close below that upper band but we also know that we can not push that line for too long without risking a retreat. This past week’s range was truly remarkable!
The Continuous Commodity Index moved higher in the last three trading days of the week. So long as 451.36 holds, on a closing basis, we expect to see this market rally further. All the indicators that we follow herein are issuing a buy-signal. The 5-day moving average is at 505.97. The top of the Bollinger band is at 537.388 and the lower edge is seen at 443.51. The best news is seen on the daily chart, once you look at the weekly chart, depression sets in. We have a doji-candle on the weekly chart and a close below the lower edge of the Bollinger band. Obviously, we can’t stay at these depressed levels for too long. The indicators on the weekly chart are also positive having just issued a fresh buy-signal. We are below the Ichimuko clouds for both the daily and the weekly time-frame. Should the US Dollar continue to retreat, naturally, this index will be the beneficiary of that decline.
Crude oil enjoyed a rally during this time of turmoil in the market. The downtrend line is at 107.83. We remain below the Ichimuko clouds for the daily chart but above the clouds for both the weekly and the monthly time-frames. The indicators that we follow are all pointing higher. The 5-day moving average is at 97.29. The top of the Bollinger band is at 121.66 and the lower edge is seen at 91.69. Crude oil looks as though it could rally further but will have some difficulty at the 112 +/- level. Until we can see a close above 121, the bears will be in control with short and quick moves as short sellers cover their positions. Watch the US Dollar for clues as to the direction of crude.
Gold really took off to the upside last week, opening the door to the old highs. Although we are overbought on a short-term basis, some of the instability of the
US economy will play well for the gold-bugs. The 5-day moving average is at 832.44. The top of the Bollinger band is at 878.70 and the lower edge is seen at 740.36. We continue below the Ichimuko clouds for the daily chart and we are in the clouds on the weekly chart. Once this market trades above 873.60 it should quickly rally to the 940 area. A decline below 772.80 will bring out the gold bears and increase the selling pressure on this market. Although we are overbought and find some indicators issuing a sell-signal, we continue to look favorably on gold.