XOM double-top

Jim Rogers on bailouts and inflation

(Source: Bloomberg)

China, not the U.S., is the beneficiary of U.S. stimulus

"Made in China."

Whatever Washington decides to spend and inject back into the economy goes directly overseas. Fact of the matter is, stimulus packages are creating jobs but not here in the US.

The reason is simple: Producers take stimulus funds to make product overseas where the cost of labor is cheaper; employing people of developing countries and not the US.

Inflation will then come back to the US in the form of commodity prices. US workers will demand higher wages as a result. Higher wages leads to higher expenses for producers, who will pass those expenses onto consumers causing more inflation. The Fed will be forced to "sponge up" the excess liquidity by raising interest rates. Triggering massive bubble bursts around the world.

Day trade: Scalp $122.13

Markets are very resilient. It continues to shock me how long it can go up without a correction. I'd be blown away if SPY breaks out of its channel.

Market gaps into major resistance

Yields Spike on Qe-2

Investors are demanding more out of their investments

Intraday Bear-Flag

Based on the pattern the market could sell off soon. Target: 200-MA

Gold is down big on the day

Watch gold, treasuries, and the dollar tomorrow.

The 10-year treasury note yield has been steadily rising.

Get ready for tomorrow and understand Ben Bernanke and QE-2

During a period which we should be saving, we have to spend. Americans don't have an incentive to save. Artificially low interest rates and a depreciating currency. Why should we save today when our buying power erodes each day we decide not to spend?

Inflation is a huge problem for this country down the road. Huge. Ben Bernanke said he would have combated the Great Depression by giving consumers a false impression that a recovery was underway giving people the confidence to spend, therefore leading to a real recovery. That theory is in practice today.

The Fed, the controller of the US Dollar, has been doing its best to devalue the dollar. We've seen this 85% of the time for the past year; dollar up-markets down and vice-versa. By dropping the dollar, you prop the market, you inflate the value of the DOW. True wealth is not being created only a trick to fool the retail investor that looks at 2% gain on the DOW as something good not knowingly that his/her buying power has also diminished by 2% off-setting any real gain.

This, I believe, is a major flaw in Bernanke's theory. If our purchasing power drops by 2%, meaning we pay 2% more for everything like food and energy, people's living wages will not be able to keep up with the increase cost of living. So to compensate for the differences in wages and costs, Americans will have to reach into their 401K and whatever savings they have to pay for the difference. This in turn depresses asset prices, and if asset prices fall too much too fast, we can always count on the Fed to print more money and inject it back into the economy. Sounds great except the economy will forever be in a range, 2% gain on the DOW is not a guarantee that your portfolio saw a 2% gain if any, jobs are long gone, taxes will rise, inflation will rise.

In inflationary environments, it is better to be the debtor rather than the creditor. Why? Would you loan me a million dollars today if I paid you back in 10 years plus 1% interest? No. Because if inflation is 5% a year, when you get your money back, it wouldn't be able to buy as much as it could have the day I asked for the loan.

And who makes those loans? Banks. Who needs those banks? Businesses. The chart below shows sources of funds for nonfinancial businesses.



94% of a business's funds comes from bank loans, bonds, and stocks. 62%, 30%, and 2% respectively. So we know banks won't loan to businesses, because its worse to be a creditor during times of inflation. People won't buy bonds, because if you buy a bond you become a creditor so that's no good. Asset prices are no good because people keep withdrawing money from stocks for the reason mentioned earlier.

The last resort for funds--Government. How will the Government issue loans to businesses with money it doesn't have? Print more money causing even more inflation! This also equates to government takeover of businesses.

I don't know if Conspiracy Theories are true or if our officials are downright stupid. I think it falls somewhere in between. I think officials know the consequences of QE-2 but refuse to address it, because they want to get re-elected, and its hard to get re-elected if you're dragging down the economy. At least with QE-2 you can fool the Average Joe that the economy is doing better. But somewhere down the road the effects of too much spending will become irreversible and money printing and market manipulation will no longer work.

The only thing that does work is Capitalism, but we aren't allowing it to work. Recessions are good for an economy. It flushes weak businesses out of the economy so that only the strong ones are left. The government really needs to let the market situate itself.

Pivotal day for Americans

It's "Election Day," and it's very important that we elect officials who will represent us on Capitol Hill for the next 6 years.

I fear this could be the last chance we have to prevent our economy from getting any worse. Washington has to cut spending. We have freeloaded off of the rest of the World for too long, it's time to get back on our own two feet.

What will happen when the World stops buying our debt? Hyperinflation with no jobs; Stagflation! The Federal Reserve Bank will be forced to buy up the debt. Although the Federal Reserve Bank is NOT a branch of the Government, it's ludicrous to think that someone can finance their own debt with more new debt. Debt and money will become worthless. For example, if you had bad credit, no creditor will be willing to loan to you ("you" being the U.S. and "creditors" being the World) but if you owned a printing press that printed US Dollars, you can spend as much as you can print, but sooner or later you'll realize, "What's the point of even having a dollar anymore?" The Dollar will turn into confetti; it holds no value.

After losing World War I, Germany had to pay war reparations to the allies. Annual installments of 2,000,000,000 (2 billion) goldmarks plus 26% of the value of Germany's exports. The total reparations demanded? 132,000,000,000 (132 billion) goldmarks. More than what Germany owned in gold and foreign exchange. To meet the demands of the allies Germany simply ran their printing press and severely devalued the Mark. The cost of living in Germany grew by 16 times in less than a year.


Hyperinflation was so rampant in Germany that people would buy bread with a barrel Marks



Fiat Money=Confetti

The US is headed down the same path and is why this election is crucial. We need to send the right politicians to Capitol Hill, Democrat or Republican, it doesn't matter. You can't argue FDR's Liberal, "New Deal," policy didn't work, and you can't argue Reagan's Conservative, "Reaganomics" didn't work.

I am neither Democrat nor Republican. Some issues I'm very liberal on and some issues I'm very conservative on. But altogether, I have no faith in politicians, I think some elected officials go to Washington with the intention to do the right thing but all turn corrupt half-way through their terms.

Cutting back on spending will have dire consequences of course. Like the Greece debacle, a lot of public services that people have grown accustomed to and have taken for granted will be cut and this will lead to civil unrest.

Civil Unrest or Stagflation? Stagflation EVERYONE loses and civil unrest will come soon after anyway.

"The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution. I am an Enemy to all banks discounting bills or notes for anything but Coin. If the American People allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will wake up homeless on the continent their Fathers conquered."
--Thomas Jefferson

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Marc Faber Interview with Margaret Brennan

Marc Faber talks about QE2 and how it will affect stocks.
(Source: Bloomberg)

$118.55 is a magnet

SPY $118.55, we can go above it, but we can never deviate too far from it.

It seems that each time the market gaps higher on the day and looks poised for a rally, it sells off toward the $118.55 by the end of the day.

And as expected, a sell-off today would be met with the Fed. The Fed comes in, buys up the market during the last hour of the trading session to close the market green. In time for elections.

If the market sells intraday, they might spike this market going into elections tomorrow.

PROFITS! PROFITS! PROFITS!

GU: +10% in 5 days

HRB: +14% in 5 days

BIOD: +13% in 1 day

What stock is next to run?

--KONG: KONGZHONG Corp.

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BIOD nearing support

BIOD has been trading in a range, it is nearing the bottom of that range. Support is $3.30 watch for a bottoming tail.

Markets look toppy

At the bottom of this rally in August, I said the market should find support @ $105. The market was oversold at the time and chopped around the level. It would trade below $105 only to recover it into the close. This established $105 as being a major level.

There is a similar situation going on @ $118.55, we've traded above only to close below it, or close above it only to sell off the next day. The market cannot escape $118.55, it's like a magnet.

In a normal market, the market would have sold off already. But with elections coming up, they will prop the market until then.

Accumulating short positions

There was only one way to trade the market yesterday; long.

I'm looking to accumulate some shorts. Most likely at the end of the day.

SPY coming into support

@ about $117.27

ASTI: Ascent Solar Technologies

This chart's setup is much like TWER before it made a huge run. If it could hit the thick blue sloping trendline; I'm in.

Stock on Watch: UWBK

Nice little pullback here on the stock. This stock is for the riskier traders out there. It could have a nice pop in the coming days.

Scalp $117.80

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SPY daily

These are the levels on my SPY chart

Downside targets are just not being met.

With every breakdown we get in the market the market just magically moves higher with no true correction.

Financials are lagging

Despite a big up day in the market. Financials can't catch a bid. Watch that triangle.

GU +15% in 2 trading days

October has been good for me as my swing trade portfolio is up 50% with just 4 trades. With no losers this month.

GU looks like it's setting up for an intraday run.

They won't let this market sell off too hard until after the elections.

It only makes sense.

CMM

This stock has been consolidating the past 3 months, it looks about ready to make a move either in November or December. Most likely November. If the pattern does play out: $3.40 would be target #1 and $4.00 would be target #2. The stock should not close below $2.10 on the Weekly Chart.

For the financial sector to stay bearish, XLF should not have a DAILY close above $14.75.

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CNXT looks ripe for a move

I am also in GU @ $0.88

The dollar is very persuasive

A rebounding dollar is causing the market to sell off. Gold has been relatively weak today and is also selling off.

SPY $118.55 is establishing itself as a major level for the market

When the Dollar drops the Markets pop

HRB getting too bearish?

This stock has been punished this past week and down another 5% today as the S&P credit rating came out saying it could lower HRB's rating. Very bearish news on very heavy volume. However, HRB may bounce here as it approaches a 2 year old trendline. Watch for a bottoming tail to form this will signal a reversal in the stock price.

GU ready for a pop?

This stock looks ripe for a move up, but I can't trust this stock entirely. I give this chart a "B-" grade. I wouldn't bet the farm on this.

SPY

Another very out of character market today. As it looks like the market is no longer being propped up and the dollar can't be held down.

It is also worth noting that since we did breakdown, we have to see if the Fed dumps the dollar overnight, gap the market higher to recapture the trendline like they've done in the past.

The 60-min SPY looks like an "MA pattern" is developing. If this pattern is legitimate, SPY should not trade above $118.65.

O.M.G TWER

This stock will forever haunt me as being the earliest sell I have ever made. Up another 18% today!

TWER:

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I just came back from the gym and to my astonishment, the Fed isn't there to save the market again. Market behavior has clearly changed.

For the coming days expect a move down to the SPY 20-MA. Other supports are: $113.20, 50-MA, 200-MA.

Update: TWER

Up another 7.2% on the day.

Markets get slapped on the back of a stronger USD

SPY:


UUP:


SPY $116.76 is most likely the bottom of the day.

"Apple Profit Beats Forecasts, but iPad Sales Disappoint"

That is what the news is saying to explain AAPL shares falling 6% after hours.

Really? Come on, if AAPL shares were up 6% after hours the headline would read, "Ipad sales Disappoint, but Apple Profit Beats Forecasts." You know it, I know it--the news DOES NOT matter. For long-term investors, however, Apple beating forecasts is good news.

Let's analyze the stock. From August 31, 2010 to October 18, 2010, AAPL traded from $240.35 to $319.00; a 25% gain in just a little over a month. For a company as big as AAPL that is huge.

Earnings have already been factored in to the stock by Wall St. you see? Wall St. put the bottom in the stock, watch the stock rise and held it into earnings that they knew would beat expectations. The retail investor buys into the "good news of profits" and Wall St. sells to them. Needless to say, they are down 6% after hours.

CNXT: Conexant Systems Inc.

Another beautiful chart. I am a buyer. Although it can trade into the daily 20-MA.

Sold TWER

I sold TWER here for 8% gains. As you can see we're hitting double-top on the stock. This stock could go higher, but ultimately I think it will pullback before advancing higher.

Is the top finally in?

In April 2010, I said $121.10 was most likely the top of the 13-month rally on the SPY. We traded up a dollar more before it came crashing down.

Today, I'm saying $118.55 is the top of this 1-month rally. Assuming the market doesn't gap-up on Monday; the top is in.

3 more people approached me today talking about the amazing 1-month rally. DOW 11,000s is the hot topic on Main Street.

We had breakdowns on 9/23/2010 and 10/4/2010; 7-trading days from each other. We also have 7-trading days from 10/4/2010 to 10/13/2010

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Where the "bleep" is the Fed?

Unusual bearish behavior today. The time for the Fed to save the market is now. 2 hours left in the trading day, they better rally this market.

King Dollar

It's amazing to see how much the market hates the dollar. The dollar and the market continue their inverse relationship. The average American is completely oblivious and ignorant. But you can't blame them, they only know what the media tells them, they aren't traders who follow the market day-to-day.

I was approached today and someone said to me, "stocks have been going up like crazy ever since last month." And in my head I'm thinking: jobs are still disappearing, houses are still being foreclosed, consumer sentiment is down, etc.

All gains in the market are offset by the depreciating value of USD. Remember that. DOW 20,000 does not mean a booming economy.

Dollar:


SPY:

Will the Fed step up to buy the banks?

Bank stocks are getting slapped today. JPM, WFC, BAC, MS all on very heavy volume. The only bank stock holding up well, of course, is GS.

The blue trendline on the XLF is important and must be saved to sustain another rally for the market. Watch it. As the Fed may want to buy these depressed banks to lift the XLF.

Market bounces off of the blue trendline after an initial sell off

The blue trendline is being hit more frequently. A break of it will yield a drop to at least the daily 20-MA

Blue trendline on the daily chart:

The Fed saves the day again

As I mentioned in the previous post, the Fed was most likely going to step in to save the charts. That is exactly what happened. The DOW was down 70 points on the day and rallied to close only down 1 point. Amazing. A late day buy program kicked-in to save not one major trendline but two! A break down of both of these trendlines would have been very bearish.

SPY:


XLF:


I am an all out bear on this economy. The DOW can shoot to 20,000, and I will still doubt this economy. There is a disconnect on Wall St. and Main St. please understand this. The Fed is trying to paint this rosy picture for the "Average Joe." It may work in the near-term but the long-term effect will be worse than it should have been.

I am against Government intervention with the market. Free markets have their down times, yes, but recessions are needed to flush out the weak companies and make way for stronger and emerging companies. That is true capitalism. Bailing out large firms is not the solution. They should fail. And when they fail there will be extreme pain initially, but the economy will recover on its own eventually. Recessions are like wildfires, forests need wildfires to flourish. Prior to the 1960s, the government extinguished wildfires fearing that it would burn down an entire forest. But it was later discovered that wildfires were essential to a plant's life cycle. Fires would burn causing pine cones to dry and drop to the forest floor so that a new tree could grow.

The same principles found in nature can be applied to the economy. The Fed policy and the country's appetite to spend spells big trouble for the American people; I assure you. If the dollar continues to lose its value, we will all be paying more for everything. It doesn't matter if you're below the poverty line or a multi-millionaire; your wealth is being eroded away.

I fear inflation more than anything else. At least in deflation, asset prices fall but your purchasing power goes up; offsetting any losses you may incur in the stock market. Inflation, however, can spike stock prices initially but eventually they will become too expensive to buy. (Food will become expensive, people will have to sell stock to use the money to live off of, because their living wages will not be sufficient to support them.)

According to investors, the Great Depression failed in comparison to the recession of the 1970s. Why? Because even though asset prices saw a steeper decline during the Great Depression, people were able to buy more with their money because of deflation. But during the 1970s asset prices fell while everything else was rising in price because of inflation!

Can you draw parallels with the past? Imagine an economy with no jobs, falling asset prices, rising standards of living, and inflation. Majority of the people in this economy would not have a job the few that do would be working for wages that could only buy them a loaf of bread. A grim economy indeed.

By no means am I saying inflation is a problem now, but it will be if the Fed and the government continue to print more money and spend more of what it doesn't have.

Will the Fed save the market?

The DOW is only down 70 points. But today's sell off is doing techincal damage on the charts. It's the final hour of the trading day. Will the Fed attempt to rally the markets and save the blue trendline? Or will they let it break down and have a strong gap up tomorrow morning?

Financial sector is breaking down

As the SPY continues its relentless advance toward the April highs one sector has not, the financial. This is a big red flag as a recovery cannot be sustainable without it.

The market has been rallying due to a weak dollar. Oil companies like Exxon and Haliburton will benefit from a weak dollar because a weaker dollar means higher oil prices which translates to profits for these companies.

But oil companies aren't the only ones to benefit from a weaker currency, IBM and Apple do as well. These 2 major technology companies have a market around the world. And because the dollar continues to weaken, selling to foreign countries become cheaper.

Commercial banks, however, are more America-based companies. They do not have much of a market outside of the United States. Wells Fargo and Bank of America, for example, hold foreign assets but the majority of their business is ran here in the States. And because the banks got us into this mess, you have to expect them to be the ones to get us out of it. If they do not lend, companies will not hire, jobs will not return. But they can't lend because the government requires them to have a certain amount of reserves in case of another panic, and they do not wish to lend in an economy like this. It is increasingly risky for the banks to loan to anybody when companies keep going out of business and homes are taken back by the banks. It's a vicious cycle.

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What is there to say about these markets? It cuts through resistance like it isn't even there. Bear patterns have no respect. The market keeps going up because the dollar keeps falling. This is 100% manipulation.

This country does not want to see a rising dollar. Nations are having currency battles to devalue their fiat money.

There will be no way of getting out of this inflationary spiral once the dollar has fallen enough. The bond market has been a bull-market for 30 years. But it will go down in flames because of inflation; bonds are only valuable in deflationary environments.

If the World switches to a new reserve currency that will be hell for the American people. Our money will become worthless. Imagine buying bubble gum for $200...China will dump their holdings of US treasuries and the world will follow and by then Americans will be left to finance their own debt. The only thing preventing this from happening right now is the fact that all nations are devaluing their currencies. Which currency will be more valuable than the dollar?

-DO NOT short the market and DO NOT short Gold. They are due for pullbacks but there is no telling when or if they ever will.

Watch DOW 11,050!

DIA rising wedge