Thursday Thump

I'll keep calling the Thursday wrap-up "Thursday Thump" until everyone starts recognizing a pattern!

Last week it was the St. Valentine's Day Massacre that caused the drop as we fell from 12,550 at the open to 12,350 at the close while people talked about how crappy the economy was.  Today we fell from 12,500 to 12,250 as the Philly Fed Index fell to -24, the lowest reading since 1991.  It was far worse than the -10 expected but only a little worse than last month's -21.  Leading Economic indicators also declined but that was expected and Jobless Claims FELL 9,000 to 349,000, still a good 51,000 off "recession levels."

Unfortunately, since it was Thursday the market was in no mood for good news so we fixated on the bad with a very broad sell off on low volume – which is in line with my theory that we are clearing out the last of the suckers this week.  If people were looking to get out of the market you would expect a little more volume on the 250-point rallies as people take the opportunities to get out while the getting is still good…

Energy traders were gettin' today with a quick pullback to $98 and I never mind a market sell-off that is led down by the energy sector (especially when we've been shorting them).  Other commodities started falling as well but we are very unlikely to get follow-through into the weekend and we'll very likely finish this short week pretty much where we began it and pretty much exactly were were were last Tuesday, when we last ran the big chart:

That's right you wimps, while we added a red box to the BSE, the Nikkei and the Hang Seng, Europe held their levels and NONE of the US levels fell.  NONE!  I read the very entertaining comments about bearish wedges forming "everywhere" with no comment of my own in last night's chat as I'm not really a TA guy and I do respect the charts but I also think fundamentals do trump squiggly lines over time, it's just the short-term we have to worry about.

Have no doubt about it, the Hang Seng and the Nikkei are in very bad shape and if the CAC crossed that last line I will be VERY concerned about the international trend but our premise for being bullish is that the US, despite all it's problems, is still not looking too bad to international investors, who have very few "safe" places to park their capital.  This is why commodities are out of control, they also appear safe for now.  Should money come out of the commodity sector, once the US markets recover from the energy sell-off, techs and transports are going to start looking pretty darned good to global investors.

Speaking of global investors, in one of the most embarrassing financial moments in US history, it looks like Russia will have to bail US out as they are announcing that they will use their Sovereign Wealth Fund to buy bonds in FRE and FNM.  Arkady Dvorkovich, President Vladimir Putin's chief economic adviser, told financial officials that "Russia can attract investments and can also use this opportunity to expand Russian investment abroad and stabilize the situation in other countries with our money."  That's right, Time's Man of the Year is buying US bonds – praise the lord and disarm the ammunition!

I guess what we never imagined when we demanded the fall of communism for all those years was the the Russians and the Chinese would end up being better capitalists than we were and end up with all the money!  Ha ha, very funny, joke's on us – can we go home now?

Like China, Russia is sitting around with Billions of US dollars (in Russia's case it's oil and commodity money) and needs to diversify their virtual portfolio and, since their trading styles are not driven by fear and ignorance and since they don't speak hyena, they are happy to put some capital into our beaten-down financial sector, which promises them many years of good, steady returns with relatively low risk (US investors already took all the risk, and losses, out of the equation).  Just like the carpetbaggers in the old south, sovereign wealth funds can now rummage through the wreckage of the US markets and pick up our stocks for pennies on the dollar while US investors just stand there shocked and demoralized by their crushing defeat at the battle of the bubble.

Meanwhile, our convicted LACK of a coherent energy policy insures we continue to send Russia and other nations $90+ per barrel for oil while taking that same $90 out of the hands of US investors so that we are unable to effectively compete when bidding for the same assets.  It's like going to an auction with $10,000 and giving $100 to everyone who walks in the door – once the bidding starts, you're broke and everyone else buys the stuff you wanted with your money!  Actually it's worse, because we still NEED the oil, even after we're broke, so we now have to go back to those 100 people and borrow back our $10,000 which we will then immediately turn around and give back to them for more oil (which we burn), forcing us to borrow more money just to pay the interest on the last batch of money we borrowed and, OOPS, we need more oil again…

This is the insane US policy that has driven the value of a Euro up to $1.485 today, a new record, while the dollar sets up to retest a record low of 74.50.  Russia's willingness to step in and help us is a good sign that they really don't want one of their best customers to go bankrupt (but then again, who does) but notice the direction of the bailout is to place themselves firmly into the lending loop as, like any good capitalist, they have learned the value of playing the banker.