Are these good looking charts?
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I added 5% lines to each one to show where we are. The Dollar is down 2.5% while pretty much everything that’s priced in Dollars is up 5% and that’s our normal 2:1 ratio of market to Dollar moves with commodities, like oil, typically taking it to extremes. Can it last forever? Probably not – it never has before but, for some reason, people love to believe this time is different even though 500 years of market history might suggest otherwise (and, if you count trade markets then it’s thousands of years of history).
Speaking of history, I mentioned to Members yesterday that even the Pharaohs knew that you had to keep the slaves happy and fed once upon a time but "this time it’s different" and our current Congress doesn’t seem to have read their bible or they’d know that it is, in fact, the Government’s RESPONSIBILITY to care for the people during years of famine – if only the fools hadn’t squandered our surplus in the years of plenty… Oh well, it’s only been 5,000 years – maybe next year we’ll be able to vote for people who get it.
The bible is meant to pass on certain lessons so that people will, hopefully, learn not to repeat the mistakes of those who went before them. After the bible, there were many fine books written on many, many subjects and, generally, they also helped us advance the cause of civilization but then, about 30 years ago, something went wrong. Suddenly, you didn’t have to be right to publish a book anymore – your point of view did not need to be correct or even accepted by serious academics. Suddenly, in the 1980s – not only could everyone have their own opinion but they could get it published as if it mattered. The internet and blogs have made matters worse because now, even the small barrier of the effort it took to do desktop publishing has been torn down and now there are so many opinions in the world that you can’t even separate fact from fancy.
Nonetheless – it all began going downhill with the advent of desktop publishing and THAT, my friends, is how Steve Jobs destroyed the World! What we have these days is essentially the Tower of Babel, with all the people of the World gathering together in this vast global network but, instead of sharing knowledge and furthering the species – we trade insults and pictures or videos of cats and babies doing silly things. In fact, ask your kids if they even know what the Tower of Babel is – it’s very hard to learn a lesson when we don’t even pass on the stories anymore. I don’t have a solution – just something I’ve been observing lately…
Anyway, something else I’ve been observing is that, if we zoom out to the six-month view of those same indexes we looked at above – they aren’t all that encouraging! Generally we popped about 12.5% from December through mid-February and then had a 5% pullback on the Japan quake and then almost took it all back and now we rest on our 10% lines. Unfortunately, the Dollar is down 7.5% over this same time period which means we’re only ahead on our equity assets by 2.5% after all this work. My overriding market premise remains – if the dollar rallies, Equities are screwed – as that’s pretty much all this rally is based on.
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Notice the SOX and Transports are failing to retake their 5% drops so far. We need to keep an eye on those. The Transports are feeling the pain of $105 oil and the the SOX are threatened by supply disruptions out of Japan that show no signs of abating any time soon. In fact, our friends at TEPCO say they HOPE to have the situation under control by September(ish) and Dr. Michio Kaku’s analysis of the situation certainly doesn’t inspire us to go apartment shopping in Tokyo for whatever the half-life of plutonium is (30 years is the estimate of how long before the material can be handled again).
Today, though, we are more concerned with our toxic 50 day moving averages and those must hold up this week or the 200 DMAs will begin to weaken and, once they turn down, it’s pretty hard to turn them back up. On the Dow, the 50 DMA is 12,187, S&P 1,305, Nasdaq 2,755, Transports 2,461, NYSE 8,343, Russell 820, Oil $101, Dollar 76.5 and SOX 442. So the Dow, the Transports and the Russell are over but the other indexes say no, no at the moment. Of course it makes no sense at all for the Transports to be flying on $105 oil and we can see how they are now one of the few indexes that couldn’t manage a 5% recovery and the Russell is another one that can’t close the deal at 5% so our "leaders" are our weakest recent performers – Uh oh!
Oh dear, the rest of the World is not looking too amazing either, is it? Compare the evidence in front of your eyes with the babble you hear from the MSM and ponder the origin of the word "babble." We have, over the past 30 years – been trained to ignore reality and to listen to the BS as BS trumps reality if they sell it hard enough. Even as you take $75 out of your wallet for a tank of gas you vote for politicians who tell you that people earning $280 a week (minimum wage) don’t need Government support as if those people buy food and gas and live in cardboard boxes on a different planet than the one we live on. Health care for them? Come on – they are living the high life, sucking off the government teat and whatever the latest catch-phrase is for too long already. It’s time we worried about us for a change!
As I often tell Members, when the markets ignore the fundamentals, then we need to just watch the technicals until reality makes a comeback. We thought we had a little yesterday as the S&P mentioned that the USA may not be able to keep it’s triple-A credit rating but that little (and obvious) bit of news caused such a panic that what it really did is illustrate for us that the Plunge Protection Team is still very much on the ball and they are not going let anything like a fact come along and mess up their rally.
This is not just a US thing either, the Greek crisis is spinning out of control and it’s getting bigger and more expensive to fix and it’s sucking in the surrounding PIIGS who then, in turn, need more bailouts so they can pretend that Greece isn’t affecting them but Greek 10-year notes are already selling for 60 cents on the Dollar (or Euro) and two-year notes hit 20% yesterday, indicating a 64.5% chance of default within 5 years as estimated by the buyers (and those are the ones optimistic enough to still be buying the debt!). This is MADNESS folks!
Now these rates are spilling over to the BRIC countries with China increasing borrowing costs 4 times since October and India raising rates 8 times since last March and Brazil’s Selic rate at 11.75%. Do you think these nations are doing this for fun? The real cost of money is going up all over the World except America, where we print another $5Bn every single day and export our inflation to the rest of the World.
What a mess of things Steve Jobs has made!
