30 Eylül 2010 Perşembe

On CNBC's Kudlow Report Tonight

Tonight at 7pm ET on CNBC:



WILL WASHINGTON WOO BACK BUSINESS?




- Joy Reid, ReidReport.com Editor; Miami Herald Columnist
- Andrew Busch, BMO Capital Markets; CNBC Contributor
- Ben Ferguson, Syndicated Radio Talk Show Host

BILLIONAIRE TAX, FIGHT OF THE FATCATS: GATES VS. BALMER

CNBC’s Dennis Kneale has the story.

DO THE RICH WORK HARDER?

- David Goodfriend, Fmr. Clinton W.H. Official; "Left Jab" Co-Host/Air America Co-Founder
- Steve Moore, Senior Economics Writer for WSJ Editorial Board; "Return to Prosperity" co-author

IS AN EPIC BULL MARKET RUN COMING?

- Anthony Mirhaydari, Founder & editor of EdgeLetter.com
- Joe Battipaglia, Stifel Nicolaus Market Strategist

AIG PAYING BACK UNCLE SAM

- CNBC’s Mary Thompson reports.

IS THIS REALLY THE END OF BAILOUT NATION?
IS THE TIMING SUSPECT?
- Robert Jackson, Columbia law school professor. Deputy Special Master for TARP Executive Compensation

LIQUID ASSETS: PRIVATIZING WATER
- CNBC’s Michelle Caruso-Cabrera reports.

Please join us. The Kudlow Report. 7pm ET. CNBC.

Dying is Living

Life's been fairly peaceful since I last blogged.  My friend John is giving me a ride to my parents' in Colorado tomorrow, for a visit until next week.  They got rid of their computer, so I'll probably be out of cyber touch for a while.

Immutable Law: One's Life Means Another's Death


Carolyn took some pics of a roadkill dinner I shared with her and David, and I told her I'd post them here.  I found this squirrel freshly killed on the river road.  It had an acorn stuck between its teeth when I found it, plus about 14 acorns stuffing its cheeks!  Their looks of contentment say it all!












A Loud and Clear Calling

A few days later, Carolyn, Aaron, and I went to a party of mostly rock-climber kids way out in the desert at Jug Handle arch.  Though I'm not really a rock-climber, I love rock climbers.  The times I've done it, I've realized rock climbing is a spiritual path that teaches perseverance and humility, minus dogma.  Okay, once in a while I meet a really cocky climber, but not too often ;-)

Anyway, they had set up a really really high swing, made with a rope and harness, from the overhanging rock near the arch.  It was absolutely exhilarating!  Then we jammed around a fire with drums and a guitar and my flute.  Even though I can't play the guitar, I eventually picked it up and used it as a percussion instrument, sort of strumming it, and it didn't sound half-bad.  "I wonder why I never learned guitar?" I thought.  All the sudden I had this almost mystical urge to learn how to play guitar.  "But I'm 49," an alter voice said.  "Should that matter?" was the reply in my head.  "But I don't have a guitar," the other voice countered.

The very next night (a couple nights ago) I went dumpster-diving at the thrift-store to find warmer clothes for winter.  The dumpster was so full of junk it was overflowing--stuff piled around it.  I dug around a bit and found a booklet on how to play the guitar.  "What a coincidence."  I thought, "But I don't have a guitar," my other voice reminded me, again.  As I was getting ready to leave the dumpster, I took a last glance back and noticed I hadn't checked the stuff piled against it.  I lifted up a box and noticed a guitar case underneath.  "Nice case.  I have friends who might need it,"  I thought.  I lifted it, and it wasn't empty!  I opened it up, and, voila, a guitar!  "Surely there must be something wrong with it for it to be here," I thought.  I brought it back to the farm,checked it out the next morning, and found it was virtually new and flawless!  There were also some instructional DVDs included in the case and two extra strings.  If ever I got a clear message to do something, this time it was, "Learn to play the guitar!"

So I've been practicing like crazy, like an excited kid, playing my fingertips raw.

More Mulling Over "Duality"

I've been mulling over blog comments today, and here are some brainstorms to share here.  I'm still working out rough edges, so feel free to point out any flaws you might see.  Ideas are no good if they can't be thrown to Natural Selection.

Now these are generalized statements, and I'm sure you'll find lots of people who don't fit the stereotypes. 

This gets into the "non-duality" thing I essay about in the website.  On the lower level, I find I often have a black and white, good and evil, view of things: as is the very nature of the binary human brain.  But on the Higher Level, it's All Good:

Sometimes I like to step back and watch 2 energies at play--one Conservative, one Liberal--one saying nothing's going to get better so why change it, one saying let's progress, evolve, and not discount possibilities.  Both are in myself!  Each annoys the other, yet each holds the other in check.

Social Conservatives, who don't want to change the social order, are usually Tech Liberals, welcoming new technology with little reserve.  Physically, Social Conservatives are generally older, less prone to sexual exploration, wanting to preserve the gene pool, Old DNA.

On the other hand, Social Liberals, envisioning a better social order, are usually Tech Conservatives, wary of nature-manipulation, new technology. Physically, Social Liberals are statistically younger, more prone to sexual exploration, wanting to expand the gene pool, New DNA.

Both conservatives and liberals are playing out the innate Law of Nature, the Grand Drama!

It's becoming obvious neither will go away any more than positive or negative will go away.  Social conservatives often persecute and often kill their own prophets, just like an ant colony will attack and expel ants that are a bit different.  Social Liberals persecute and often kill their prophets, too, but usually when they have ripened into Social Conservatives (like in the late USSR and Red China and North Korea). Yet religious conservatives preserve the teachings and traditions (Old DNA) for future generations of the ones they once persecuted.

Religious liberals are accepting of other people's viewpoints and new ideas (New DNA), but dislike tradition and are bad at organizing and preserving tradition.  The persecuted sages are secretly grateful to their persecutors for refining their character and catapulting their messages into view of all.  Those who survive rejection are refined, Naturally Selected, secretly admired by their persecutors (silencing or eliminating "heretics" physically often means promoting their message, their Mystical DNA).  The canal to the female ovum is full of spermicide to weed out the unfit.  Those that don't survive go the way of the extinct, and secretly know this is their lot, and they can rest in it.  The two are always with us, battling it out in the Grand Drama. 

Religion most clearly sets the stage for this Drama.  It is the very nature of Religion to give birth to both the Dogmatist Persecutor and the Persecuted Prophet!  Reading the Torah, for example, it is as sure as the sun shines that Dogmatic Pharisees will arise out of Judaism side-by-side with a prophet Isaiah or Zechariah or  Jesus that they can persecute.  In fact, the prophet Isaiah says himself that it is ultimately God who blinds people's eyes, and God who crucifies the Messiah.  This concept of divinely-imposed blindness of the persecutors is a strong theme in the Quran, too.  This is why the persecuted ultimately realizes: forgive them, for they're clueless what they're doing.  But there's also a blindness of the "persecuted."  Actually, each side often sees itself as the "persecuted."  The left hand becomes clueless of what the right hand is doing.  The lion species could not survive if lions felt the pain of their prey, if the right "knew" the left.  Nothing in nature would survive if the positive "knew" the negative.  In the same way, it is the very nature of the New Testament to give rise to an intolerant Church and a Saint or Reformer to persecute or burn at the stake.  Likewise, you see this in Islam.  It's not as pronounced in Eastern Religion, but it's there.  It was Hindu Fundamentalists who killed Gandhi.  The Word comes to its own and its own does not receive it.  Both the Baghavad Gita and the Tao Te Ching describe this phenomenon, as does the Quran, Torah, and New Testament.  You see it not only in religion, but in science and in every institution and organism.  Ultimately, the baby is a nuisance to be horrifically expelled from the mother's body!

It is the very nature of Nature to create a colony of bees to protect their homogeneity, but also to hone down innovators and prove them worthy to progress the colony.  It is the very nature of nature to create a pride of lions and a pack of hyenas to harass each other.

But on the Highest Level, the Wolf lies down with the Lamb, the Lion lies down with the Calf.

Yeah, ultimately, stepping back and looking at it all, you realize it's All Good.  Good Drama can't exist otherwise.  On the lower level, it's Duality.  On the Higher Level, it's All One--beautiful beyond the human mind's ability to grasp!

People think money is my enemy.  On the lower level it is, in a way.  But money has arisen in human consciousness, evolution, for some mysterious reason.  It's no more my enemy than an obstacle course is to an athlete or a puzzle is to a gamer.  A toy or a game is fun until we learn what we have to learn from it, then we move beyond it.

Now we see in a mirror darkly.  Then we recognize who's in the mirror.

Who Says September Is The Worst Month For Stocks?

The markets finished slightly lower on the day, despite being up sharply in early trading. Stocks got off to a strong start after the opening bell this morning, when the final revision to Q2 GDP showed that the economy grew 1.7%, from an earlier estimate of 1.6%, due to stronger than expected consumption.

Also, weekly jobless claims came in below expectations, and the Chicago PMI survey rose to 60.4, much better than the 56.0 expected. The various PMI reports have been somewhat weak lately, so this strong reading emboldened buyers.

There was no real news that accounted for the selloff, but within the first half hour of trading, stock prices peaked and the market began to selloff. Nonetheless, the S&P 500 finished the month of September with a gain of roughly +8.8%. The final figures aren't in, but I have heard that this was the best month of September since 1939 - quite a showing.

It's funny, because many market spectators were worried about September, as it has a history of being the weakest month of the year for stocks. But with a big down August this year, we had been saying that all of the negative stories were already well know and thus likely discounted in stock prices. Stocks ramped higher on the first day of the month, and pretty much added to those gains each week thereafter.

The dollar was flat today, although it has been weak this past month. That helped gold prices rally in September, finishing the month at $1308.

The 10-year yield rose slightly to 2.51%; the volatility index crept +2% higher to 23.70, right at its overhead 50-day average.

Trading comment: Given the sharp runup over the last month, most are expecting some sort of pullback over the next week. But given that it seems many portfolio managers are underinvested and in dip buying mode, it will be interesting to see at what levels buyers step up to the plate.

I'm still keying off of SPX 1131 as initial support, and then 1115. The 50-day average is currently at 1104.

29 Eylül 2010 Çarşamba

QUOTE OF THE DAY

"You can’t make big money, unless you think big money." Others have said it as well – you can’t achieve that which you can’t conceive. In the world of investments, if you can’t imagine something happening, like a stock or a commodity going up many times in value, then it is highly unlikely you would buy and hold such an item if it did, in fact, go up many times."  Izzy Friedman

Stocks Continue To Consolidate Recent Gains

The market continues to hold up admirably. Many investors, yours truly included, thought that the market might pullback more after its recent runup, but so far it has simply been consolidating around these levels without giving back too much.

Stocks are slightly lower in early trading, but not by too much. There were no economic reports to speak of, and a few corporate news items that were mostly positive (HPQ raised guidance, BA was awarded a contract, FDO reported strong earnings).

Among the sector ETFs, only energy (+0.29%) is higher, while financials (-0.90%) are the weakest so far. The financials have not participated as much in the recent rally, and their underperformance bears watching.

Asian markets were higher almost across the board overnight after a solid Tankan Survey, which measures corporate sentiment in the region.

The dollar is slightly weaker, while gold is back at new highs near $1308 and oil prices are down a bit to $75.80.

The 10-year yield is barely higher to 2.47%; and the VIX is +3% today to 23.27, but still hovering below its 50-day average.

Trading comment: Yesterday morning's dip in the S&P 500 again brought it down to that SPX 1131 level that I have been saying could act as initial support. That is the second time this level has held recently, and the market once again quickly bounced higher.

In the macro world, credit default swap (CDS) prices on European sovereign debt continue to move higher, indicating rising concern with Portugal, Spain, Ireland, etc. But so far it has not unnerved stock investors. I'm not sure it will, but I wanted to let you know what's on my radar. It will also be interesting to see what happens in the sentiment indicators this week given the recent rally in the market. Stay tuned for that.

28 Eylül 2010 Salı

QE2, QE1.5 . . . Whatever

There may be a new normal coming to Wall Street. It’s called: bad news on the economy opens the door for so-called good news on the Fed’s latest rescue mission to increase its balance sheet and pump up the money supply. I guess it’s QE2 or QE1.5. Whatever.

The Dow went up nearly 50 points in today’s trading, despite big drops in both consumer- and business-confidence measures. Obamanomics is still on the floor. That’s the key theme for the election.

However, the reflation trade is in full swing, with gold jumping $12 to $1,311 and the U.S. greenback sinking to its lowest point since early February.

So I guess an easy-money Fed is still creating a pretty good tailwind for shares. And I’m also gonna guess, even though most people disagree with me, that a continued dollar decline will result in a higher inflation rate sooner than you think. Whether it’s 1 or 2 percent more, whether it’s next month or next year, the message of rising gold and a dropping dollar is not good.

The Fed’s target rate, adjusted for current and expected inflation, is negative. And that abnormal situation, so reminiscent of the early and mid-2000s, is driving up gold and commodity indexes.

Treasury bonds keep rallying down to below 2.5 percent on the bet that in November the central bank will buy at least $100 billion of bonds if not more. The Fed believes the money supply has got to grow faster, and that somehow that’s going to break through the fiscal logjam and produce confidence in the economy and job-creation.

Yes, this monetarist view can build up the money supply. But will it solve the economy? Not unless there’s a change in the spending, taxing, and regulatory wall that Obamanomics has built.

Chart of the Day: Bond Yields Hit New Lows

Today's chart shows the continual move lower in bond yields. A couple of months ago I highlighted the bounce back to the overhead 50-day average (blue line), and the failure to break above that resistance level.

The 10-year yield has since come back down to test its August lows, near 2.47%. Today, bond yields fell further and the 10-year yield ended at new lows for the year - 2.45%.

Part of this is likely due to the accommodative stance on the part of the Fed, who said they are likely to continue to purchase bonds in the open market to help keep interest rates low. Bond traders are well aware of this, so they have little incentive to sell their bonds at current levels, since a big buyer waits in the wings.

Many pundits keep talking about inflation being right around the corner, but this picture sure doesn't lend itself to the notion of imminent inflation. I am not in the deflation camp either, but I think a more likely scenario at least for the near-term is for the markets to continue in this disinflationary environment.

Higher bond yields? Check back in 2011...


long TBT

On CNBC's Kudlow Report Tonight

Tonight at 7pm ET on CNBC:


BIG BIZ CONFIDENCE DOWN ON THE ECONOMY





-WHY IS CONFIDENCE FALLING?
-IS WASHINGTON THE OBSTACLE?
-WILL ELECTION ROLL BACK THE SCOPE OF GOVERNMENT?
-UNCERTAINTY VS. CONFIDENCE - ELECTION IS EVERYTHING
-IS TEA PARTY FREE MARKET CAPITALISM BULLISH?

- Art Laffer, Chief Investment Officer, Laffer Investments; Fmr. Reagan Economic Advisor
- Julian Epstein, LMG CEO; Fmr. Democratic Chief Counsel
- James Pethokoukis, Reuters Money & Politics Columnist
- Joy Reid, Editor of ReidReport.com; columnist for the Miami Herald

THE FED: QE2, QE1.5 . . . WHATEVER

- Jon Hilsenrath, Chief Economc Correspondent; The Wall Street Journal - DC/WSJ Bureau
- Michael Pento, Euro Pacific Capital; Senior Economist/Vice President Managed Products

NEW GOP LEADERSHIP: WHERE'S THE SENATE'S PLEDGE TO AMERICA?

- Sen. John Barrasso (R-WY)

FOLLOW THE MONEY: NEW RUNNERS RAISING MORE MONEY THAN INCUMBENTS

- CNBC’s Eamon Javers reports.

ARE DEMOCRATS PLAYING A GAME OF TAX CUT CHICKEN?

- Robert Reich, Fmr. Labor Secretary; "Aftershock" author; CNBC Contributor; Univ. of CA., Berkeley, Prof. of Public Policy
- Steve MooreSenior Economics Writer for WSJ Editorial Board; "Return to Prosperity" co-author

Please join us. The Kudlow Report. 7pm ET. CNBC.

Consumer Confidence Sinks Despite Recent Stock Rally

The market was flattish near the open, after a benign housing report, but then took a quick dip lower after the Consumer Confidence report came out. I guess the recent rally in the stock market didn't sway participants in this survey, as consumer confidence for September came in at 48.5 vs. expectations for 53.0. It was also the lowest reading since February.

That led to some selling in stocks, but as of this post, the market seems to be coming back. Surprising how this market sure doesn't stay down for long lately. AAPL was down $15 at the open on rumors the COO might leave to HPQ (no way this is true), but it has already climbed all the way back to down less than $2.

Walgreens (WAG) stock is up sharply after the company reported better-than-expected earnings.

Among the sector ETFs, consumer staples (XLP) have been bucking the weakness so far (+0.29%), while materials (XLB) are the biggest laggard (-0.66%).

Asian markets were lower overnight. The dollar is also lower, despite renewed worries over sovereign debt in Europe (namely Spain and Ireland). Gold hit new highs near $1306 earlier, but has since reversed those early gains. Oil is also lower near $75.82.

The 10-year yield is back down to 2.47%. This is the level that market the lows at the end of August, so a close below this level would be new lows for the year.

The volatility index (VIX) is up +3.55% to 23.35 currently, knocking on the door of its overhead 50-day moving average.

Trading comment: I talked about that S&P 1131 level as initial support. Today it was tested again, as the SPX briefly dipped to 1132 on this morning's selloff. You have to be on your toes to take advantage of these pullbacks, as we are quickly back at 1140. It is possible that portfolio managers looking to put cash to work ahead of quarter end are moving quickly to buy the dips. If so, does that mean we could see a bigger pullback after quarter-end?

27 Eylül 2010 Pazartesi

TARP Again?

President Obama is crowing about his small-business bill, signed into law on Monday. “It was critical that we cut taxes and made more loans available to entrepreneurs,” he said. Trouble is, small businesses and community banks don’t want Obama’s $30 billion program. That’s right. They don’t want it.

An AP story quotes community bankers who do not want the Treasury Department or other federal agencies to own stock in their banks. They know the regulatory takeover risk that will come with this program. Next thing you know, the government will order banks to make unaffordable mortgages available to low-income folks, or perhaps force business loans on the basis of race or gender.

“We have taken a strategic decision not to have our primary regulator, the government, also be a partner in our bank,” said William Chase Jr., CEO of Triumph Bank in Memphis, Tenn. The upshot is that Obama’s whacky $30 billion mini-TARP is likely to be rejected by the vast majority of small banks. They took a look at the TARPed-up regulation overhanging the big banks, and they don’t want any part of it.

Triumph’s Chase also said that his “business customers are mired in uncertainty and are reluctant to invest in their businesses.” Chase is onto something. According to the National Federation of Independent Business (NFIB), only 4 percent of small-business owners surveyed in August cited a lack of financing as their top business problem. And a full 91 percent say all their credit needs are met.

So what’s the real problem? It’s the economy, stupid. And it will get worse should the entire Bush tax-cut plan, including the alternative minimum tax, wind up in flames at year-end. If the Bush rates expire, an already sluggish recovery will be doomed. That’s the real issue.

But Obama thinks his $30 billion mini-TARP will do the trick. Most folks may not know it, but as part of this plan, the Treasury would buy stock in the community banks that qualify, with those banks having to pay an annual dividend of 5 percent to the government. If those banks make loans to small businesses, the dividend payment might drop to 4 percent. But if they don’t use the money for loans, the dividend payment becomes a penalty at 7 percent. That amounts to Treasury control of the small banks that play this silly game.

Who in their right mind would sign up for this? This is government-planning intervention almost beyond belief.

Now, the Obama plan includes some tiny targeted tax cuts for capital gains and faster business depreciation. But why not universalize those ideas for all businesses on a permanent basis, instead of just small-ball targeting? If you believe those investment-related tax cuts will work for a year for small businesses, why not believe they will work permanently for all businesses?

Just lower the cost of capital and raise the investment return permanently to reignite sagging animal spirits in the economy. Then let markets — not government planners — make the final decisions.

Another business-tax point: In the Pledge to America, the GOP House leadership unnecessarily plays small ball with its own small-business tax plan. The Republicans want a tax deduction equal to 20 percent of small-business income. But they would be much better advised to take a big-bang approach that would lower the marginal tax rate on all business profits, large, medium, and small. Take the top rate of 35 percent down to 15 or 20 percent. Better yet, replace the corporate-profits tax for all businesses with a sales tax net of all investment expenses. This would end the double tax on business capital and provide new tax-rate incentives.

And one other bee in my bonnet: Republicans should support a 5.25 percent tax holiday on the repatriation of $1 trillion in U.S. corporate profits that reside overseas. This Bush-era idea worked in 2005 by bringing about $350 billion of new investment into the United States. And the stakes are even higher now. At the lower tax rate, American firms will bring their money home. Since some portion of that new money will go into new investment and job hires, this plan will pay for itself.

So I encourage the GOP to think big on business taxes, not small. And also to think big on major flat-tax reform to radically simplify the crazy IRS system, slash the marginal rate, and broaden the base to get rid of all special-interest tax subsidies.

Let free-enterprise know that change is really coming.

On CNBC's Kudlow Report Tonight

Tonight at 7pm ET on CNBC:


RAILROADS & RECOVERY
PLUS…BUSINESS' PERSPECTIVE ON OBAMANOMICS & THE GOP PLEDGE TO AMERICA



-Matt Rose, BNSF Chairman & CEO will be on set.

REPUBLICANS & RECOVERY: OBAMA ATTACKS GOP PLEDGE TO AMERICA...DOES THE REPUBLICAN PLAN HAVE ENOUGH TEETH?

- Rep. Eric Cantor (R-VA) will be aboard.

SENATE ELECTION WATCHLIST
- Scott Rasmussen, founder and president of Rasmussen Reports has all the latest election details.

Please join us. The Kudlow Report. 7pm ET. CNBC.

Monday Morning Musings

The market is pulling back just slightly in early trading, after posting huge gains on Friday which capped the fourth consecutive up week for the market. Many participants were worried about the market as we headed into September, but as of now we are on pace for one of the best months of September on record. Go figure.

There are no major economic releases today, and no real corporate news to speak of. There was some M&A over the weekend, with Unilever buying Alberto-Culver (ACV), and Southwest Air (LUV) buying AirTran (AAI).

Asian markets were higher across the board overnight. The dollar is a bit higher this morning, but oil is also up near $77 and gold is also higher near $1298.

Among the sector ETFs, tech and energy are leading the way and bucking the early weakness; while healthcare is leading on the downside, but not by much.

The 10-year yield is lower again to 2.54%; and the VIX is up +4.05% to 22.59.

Trading comment: Stocks only staged a brief pullback last week, when the S&P 500 dipped to 1122 Thursday morning. You had to be on your toes, but if you bought that pullback you likely are happy as the growth stocks I've been writing about bounced sharply.

Many of the leading stocks are extended after their rallies, so it is time to watch for the ones that consolidate and offer better entry points. Chasing stocks is never a good strategy. Much better to exercise patience, as opportunities are easier made up than losses.

26 Eylül 2010 Pazar

GOLD RISING AGAINST ALL CURRENCIES

The question was posed that perhaps gold is only rising because the dollar is falling. While every C-wave has been driven by a collapsing dollar you will see in the next several charts that gold is rising in every currency. Every country is debasing their currency.









As you can see gold is rising in all currencies even in the strongest of all currencies, the Yen.

What's more, gold is also rising against all other commodities since late `05.


Remember how I've pointed out that oil was the leader during the first phase of the commodity bull and how it should under perform during the second phase. That is because the fundamentals are now impaired in the energy markets but are improving in the precious metals sector.

I've been of the opinion that the gold:oil ratio will now remain in a range above 13 for the rest of the commodity bull with occasional spikes above 20 as C-waves progress.


At the moment the gold: oil ratio is at 17. I expect that will move up to or above 22 by the end of the current C-wave sometime this spring.

24 Eylül 2010 Cuma

Alright I've had enough of the troll investation for the time being. If you want to comment on the blog you will have to create a google account.

Early Look: Stocks Surge Out Of The Gate

Stocks are surging out of the gate. Maybe the market is getting psyched for the new Wall Street movie out tonight, Money Never Sleeps. I know I am.

The durable goods report (ex-transportation) was much stronger than expected, and a new home sales report showed that the supply of homes available is at a multi-decade low.

Also, strong earnings reports from Nike (NKE) and Lennar (LEN) helped boost things. And big hedge fund manager David Tepper made some very bullish comments on stocks.

The dollar is lower again, helping boost commodities. Oil has rallied above $76, while gold has hit new all-time highs above $1300.

Asian markets were mixed overnight. Japan was lower, but China was closed; the 10-year yield is bouncing to 2.60%; and the volatility index (VIX) is -8% lower to 21.91.

Trading comment: Yesterday I mentioned the S&P getting down to initial support levels, where I only did a little buying. But today the SPX is getting a big bounce from those levels, and testing its highs from earlier this week (1148). This will be the fourth straight positive week for the market, which has mostly capped the length of rallies over the last year or so. Plus, the market is still overbought, so maybe we will see more pullbacks next week to do some buying.


PRECIOUS METAL SECTOR REACHES MAJOR RESISTANCE

It's been my expectation that gold would manage to rally at least to $1300 before dropping into the now due daily cycle low. We are now ready to test that theory as gold has tagged $1300 this morning.


The rest of the sector is also mashed right up against all time or bull market highs.


I have my doubts that we will see all these resistance levels broken on the first try. We are also deep into the timing band for a daily cycle correction. This would be the most logical level for a corrective move to initiate from.

If gold is in a runaway move then any correction should hold within a 25 to 40 point range. My thinking is gold should drop about 35 points to test the breakout level at $1265.


A throw back to test the triangle breakout by the HUI would also be a normal corrective move.


Once silver & miners join gold at new highs the entire sector will be trading in a vacuum with no overhead resistance. This will be like throwing gas on the fire. And that is the recipe for huge moves.

23 Eylül 2010 Perşembe

Weak Economic Data Out of Europe Weighs On Stocks Early

The market opened lower after weak economic data out of Europe had their markets down before the open. There were disappointing PMI readings out of Germany and a contraction in Ireland's GDP.

Also, jobless claims in the U.S. were a bit higher than expected (465,000), so our markets opened under a fair amount of selling pressure.

After the open, there were two economic reports that came in above expectations, and helped the market bounce. Existing home sales for August rose 7.6%, above expectations. And leading economic indicators were also higher than expected.

The market quickly bottomed this morning, and as of this post, the Nazz is back in positive territory, and the S&P is down only -0.2%.

Among the sector ETFs, all are lower with the exception of tech (+0.40%) which is bucking the weakness.

Asian markets were mostly closed overnight; the 10-year yield is lower again to 2.51%; and the VIX is +2.2% higher so far to 23.01.

Trading comment: The S&P 500 has pulled back to its recent breakout level at 1131, which is the area where I said I would start to put the first tranche of money to work. As such, I will likely to a little buying today, and then take a step back. My second target zone to put more cash to work would be the 200-day average near SPX 1117.

Destroying King Dollar Is Not the Solution

Fed head Ben Bernanke and the FOMC dropped a new policy bomb at their meeting this week. Now they say inflation is too low. That’s the real problem. And the solution? Punch up the money supply and punch down the dollar — or what I used to call King Dollar. No more.

In the 24 hours following the Fed announcement, gold rocketed up toward $1,300, a new record high. And the dollar plunged. It’s a big vote against the central bank and its constant tinkering and fine-tuning.

The Fed actually has opened the door even wider for more money-creating, balance-sheet expanding, Treasury-bond-buying actions at its next scheduled meeting, which will come the day after the midterm elections on November 3. That’s when QE2 may sail. “Quantitative easing” is what they call it. I call it dollar whack-a-mole.

Here’s a currency-trader quote from the Wall Street Journal: “Quantitative easing is broadly viewed to be corrosive to a currency’s value.” Right on, brother. Even though Bernanke doesn’t get it, the weaker dollar will rev up inflation mighty fast.

But right now, the reflation trade is king, not the dollar. Gold, commodities, some stocks, and foreign currencies are the place to be.

And do we really need more inflation? And should the Fed sacrifice the value of the dollar to get it?

Wall Street economist John Ryding doesn’t think so. He notes that over the past four-and-a-half decades, the consumer price index (CPI) has increased six-fold. So Ryding believes it’s absurd for the Fed to worry about a low inflation rate over the past year or so. Ryding is right.

Regarding the so-called too-low inflation rate, here are some facts: The CPI over the past year is up 1.1 percent. Producer prices paid by businesses are up 3.1 percent. And import prices are rising 4.1 percent. So it’s not as though all these indexes are actually plunging. And to the extent that the CPI and the personal consumption deflator (1.5 percent) are rising only a bit, well, that should be a good thing.

But here’s what the Fed is really missing, or ignoring: All of these price indicators are backward-looking. Sensitive, forward-looking inflation proxies — like gold and the CRB spot raw-materials index — are surging upwards. And the dollar downwards.

One of the cornerstones of economic growth in a free-market model is domestic price stability and a stable, reliable dollar. This is crucial for confidence and capital formation. In fact, Nobelist Robert Mundell always argued for low tax rates to spur growth and a steady dollar linked to gold to ensure price stability.

But now we are moving deeper into monetary Keynesian fine-tuning to control the economy. That, plus an overspending Keynesian fiscal policy, may be combined with higher tax rates and an ever-weakening dollar. It’s totally wrong. It’s exactly the reverse of Mundell’s thesis. Sinking the greenback and pumping more money into the system while raising tax rates and overspending is, over time, a prescription for stagflation: too much money chasing too few goods.

Now think of this: With all the Fed’s pump-priming since late 2008, there is still $1 trillion of excess bank reserves sitting on deposit at the central bank. This massive cash hoard suggests that liquidity is not the problem for the financial system or the economy. And putting another $1 trillion into excess reserves only doubles the problem.

A much better idea would be a fiscal freeze on spending, tax rates, and regulations. This is apparently what the tea-party driven Republican congressional leaders intend for their election platform.

Such a freeze would go a long way toward reducing the massive overhang of uncertainty that has plagued the economy and stifled the animal spirits. The Fed can print money, but it can’t print new jobs or growth. On the other hand, a rollback of the big-government obstacles to growth would get folks to put money to work. Not only the $1 trillion in excess bank reserves, but the massive corporate cash hoard, estimated at roughly $2 trillion.

And a lot of that corporate cash is lodged overseas to avoid punitive U.S. taxation. So, in addition to freezing tax rates at home, why not move to a 5 percent tax-rate holiday on repatriated foreign corporate profits? The result would be $300 billion to $400 billion flowing back into the U.S. economy for investment and job-creating purposes.

In other words, pro-growth fiscal action is the solution, not wrecking the value of the dollar or somehow boosting the future domestic inflation rate.

Historically, nothing good has ever come to our economy from a steadily rising gold price. Doesn’t anybody around here have enough common horse sense to see that? Maybe that’s what this midterm election is going to be all about.

22 Eylül 2010 Çarşamba

On CNBC's Kudlow Report Tonight

Tonight at 7pm ET on CNBC:

WHAT IS GOLD'S HISTORIC RALLY TELLING US?

- Don Luskin -Trend Macro Chief Investment Officer
- Dean Barber - Barber Financial Group President



STOCKS VS. BONDS: WHERE TO PUT YOUR MONEY

- Jack Ablin - Harris Private Bank
- Jim Iuorio - TJM Institutional Services...Options Action Contributor

FORBES WEALTHIEST PEOPLE IN THE WORLD

- Forbes Bruce Upbin joins us.

THE NEW REPUBLICAN AGENDA: IS IT THE SAVIOR FOR THE ECONOMY?

-Joy Reid - editor of ReidReport.com and columnist for the Miami Herald
-Ben Ferguson - syndicated Talk Radio Host

THE NEW GOP REPUBLICAN AGENDA

Rep. Cathy McMorris Roders (R) Washington/House GOP Conference Vice Chair

Please join us. The Kudlow Report. 7pm ET. CNBC.

Chart of the Day: Bond Yields Break Down Again

The market is roughly flat in early trading. Yesterday, the Fed released its latest statement that indicated that they will remain extremely accomodative with monetary policy. It looks like they have no intention of raising rates anytime soon, and stand ready to inject more easing if necessary.

In the chart below, you can see that earlier this month it looked like bond yields were poised to break above their multi-month downtrend line (see pink line below). But yesterday's reaction to the FOMC had bond investors rethinking their position, and the rush to buy more bonds pushed yields back down near the 2.50% level.

At some point, the bond market will worry about all of this monetary stimulus and its potential effect on inflation. I also think that our fiscal budget concerns could lead to higher rates in the coming years. But for now, betting on an imminent rise in bond yields has been a losing bet, so one needs to remain patient.


long TBT

Morning Look

The market is down slightly in early trading. Housing prices for July showed a -0.5% month-over-month drop, even though most participants probably knew this since we are already in September.

Adobe (ADBE) issued mixed guidance last night on its earnings call, which is whacking the stock today. And despite raising its dividend 23%, shares of MSFT are also -2.5% lower. Apple (AAPL) and RIMM are bucking the overall weakness so far.

The dollar is lower following yesterday's Fed meeting, while the euro is surging again. The weak dollar is helping commodities, with oil higher to $75.75 and gold up again near $1294.

Asia was mixed overnight, and China's market is closed for the rest of the week. The 10-year yield is lower to 2.54%; and the VIX is up slightly to 22.70.

Options players came out of the gate very bullish this morning, with the ISEE call/put ratio elevated at 239. This does not bode that well for today's action, but it's still early.

Trading comment: Nothing new since yesterday. Still waiting for a bit more of a pullback before putting money to work. My first target zone is for the S&P to pull back to 1131 or so, the level from which is recently broke out.

long AAPL, RIMM

CURRENCY CRISIS HAS BEGUN

It's been my position for a while that Bernanke's monetary policy would eventually create a currency crisis in the worlds reserve currency.

I warned that crisis would begin as soon as it became apparent the dollar was caught in the grip of the 3 year cycle decline.

I had three conditions that had to be met before I'm was willing to call the beginning of the end. The first condition was for the dollar to move below 82. That was the warning shot that problems were developing.

The second and third condition were a move below long term support (80) and a failed intermediate cycle.

The drop below 80 this morning has now completed the final two conditions.


I've marked the last three intermediate cycles with the blue arrows. The move below the last intermediate cycle low this morning initiates a failed intermediate cycle. This is also an extremely left translated cycle. Left translated cycles tend to produce the worst losses as they have a long time to move down. The ongoing cycle shouldn't bottom until it puts in a larger degree yearly cycle low in November or December.  I expect that low to test the `08 bottom at 71.


Finally we should see a full on mini crisis by the time the dollar drops into the major 3 year cycle low next spring or early summer.


I've been pointing out for months that deflation just isn't a possibility in a purely fiat monetary system. A determined government can create inflation any time it wants as long as they are willing to sacrifice the currency. I think it's safe to say the United States has no compunction against destroying the dollar.

We are now heading into an inflationary storm that will expose deflation theory as the pure nonsense that it is.

21 Eylül 2010 Salı

On CNBC's Kudlow Report Tonight

Tonight at 7pm ET on CNBC:


LARRY SUMMERS LEAVING THE WHITE HOUSE?

- CNBC’s Eamon Javers reports.



THE FED

- Jeff Saut - Raymond James Chief Investment Strategist
- David Goldman - First Things Magazine
- Vince Reinhart - Former Federal Reserve Board's Division of Monetary Affairs Director

THE REPUBLICAN PLAN FOR ECONOMIC GROWTH

- Rep. Paul Ryan - (R) Wisconsin
- Sen. Judd Gregg - (R) New Hampshire

VIEW FROM THE CORNER OFFICE
Is Washington assaulting business and undermining economic recovery?

-Jim Tisch. Pres. & CEO of Loews

CAN THE TEA PARTY FIX THE ECONOMY?

*Steve Moore - Wall Street Journal Editorial Board Sr
*David Goodfriend- Fmr. Clinton W.H. Official

THE CASE FOR ZERO PERCENT CAP GAINS

-Allen Sinai - Decision Economics Chief Global Economist

Please join us. The Kudlow Report. 7pm ET. CNBC.

Successful Debt Offerings In Europe Ease Fears

The market is basically flat in early trading, despite a strong housing report here in the U.S. Housing starts for August climbed +10.5%, which was much better than expected.

The euro is also bouncing this morning after successful debt offerings in Ireland, Greece, and Spain eased fears there. The bounce in the euro is coming at the expense of the dollar, which is down a bit. Commodities are also down slightly, with oil down to $75.91 and gold off a bit to $1277.

The big news event today is the Fed's meeting and the policy statement that will be released at 2:15pm EST. I don't expect any change in their directive or language. They will probably acknowledge the slowdown in the economy, and say that policy will remain attentive to that. Either way, with the market still overbought, we could see some selling once the news is out.

Among the ETFs, financials and industrials are leading the sluggish action so far, while consumer staples and basic materials are lagging.

Trading comment: Yesterday's action was pretty impressive. We now have new support levels for the S&P 500. The first area of support on a pullback should now be the 1131 level that the market broke through yesterday. After that, the 200-day should come in as support, which is currently near 1116.

Most of the leading stocks are now a bit extended after a multi-week sprint higher. I haven't trimmed any of our positions, as I still think these stocks will be strong into year-end. But the market has been up for three straight weeks, so I still think that some pullback is in order, even as I have been early in calling for it to start last week.

Apple (AAPL) broke out to a new high yesterday, which is one of our biggest positions. I think the iPad is going to do monster numbers this holiday season, and AAPL stock is still cheap on a valuation basis. My 6-12 month target remains $350.

long AAPL

Kyl Rebuts Obama on Bush Tax Cuts

During CNBC's live townhall yesterday, President Obama refused to back down from his opposition to an extension of all the Bush tax cuts. He said such a move would be irresponsible. Shortly afterward, Senate Minority Whip Jon Kyl of Arizona joined me to offer the Republican response.

























SHORT TERM TOP?

The market is now 16 days into the current daily cycle. We typically see a minor half cycle correction around day 15-20. I'm guessing the Fed is going to give the market exactly what it wants to hear today. I also think the market has already discounted that.

I expect the "news" will be used to take profits after the strong rally of the last three weeks (the pullback into the half cycle low). I also expect bears will mistakenly see this as the market finally coming to its senses and heading back down.

Unfortunately I'm afraid they will be wrong again. This should only be a brief profit taking event to dampen sentiment before the next push higher. Possibly to test the April highs. 

20 Eylül 2010 Pazartesi

On CNBC's Kudlow Report Tonight

Tonight at 7pm ET on CNBC:

REACTION TO PRESIDENT OBAMA’S CNBC TOWNHALL

-Evan Newmark -"Mean Street" columnist for the online Wall Street Journal
-David Goodfriend -Fmr. Clinton W.H. Official
-CNBC’s Rick Santelli

MARKETS & ECONOMY
SO THE RECESSION’S OVER, NOW WHAT?


-Bob Froehlich - The Hartford, Sr. Managing Director-
-Jim LaCamp - Macroportfolio Advisors
-CNBC’s John Carney

OBAMA REACTION FROM CAPITOL HILL
- Sen. Kyl (R-AZ) will be aboard.

UNTRA-EASY FED & RECORD GOLD PRICES

- Vince Reinhart - Former Federal Reserve Board's Division of Monetary Affairs Director
- Andy Busch - CNBC Contributor & BMO Capital Markets

Please join us. The Kudlow Report. 7pm ET. CNBC.

Monday Morning Musings

Despite the market advancing for the third straight week, despite the market being short-term overbought, and despite options expiration on Friday, stocks are higher again in early trading. The strength in surprising, but it seems in the absence of any bad news investors are looking to put more money to work.

There was some more M&A activity over the weekend, with IBM buying Netezza (NZ), and Safran buying L-1 Identity Solutions (ID).

The euro is getting a boost today, at the expense of the dollar, after Moody's said that the Aaa rating of the UK will withstand economic challenges. Boy, if the UK's rating is intact, it sure seems we don't need to worry about the U.S.

The lower dollar is helping boost commodities, with oil higher to $74.25, gold up again near $1275, and silver hitting a 30-month high.

Among the sector ETFs, energy (+1.17%) is strongest so far, followed by industrials (+1.10%); utilities (+0.58%) are lagging, but all of the sectors are higher so far. Among industry's homebuilders (+1.86%) are strongest after Lennar (LEN) reported better-than-expected earnings, and steel stocks (+0.04%) are lagging after a Goldman downgrade.

Asian markets were mostly flat overnight; the 10-year yield is flattish near 2.74%; and the VIX is down near 21.78.

Trading comment: I thought after the market got overbought that we would trade sideways to down while we worked off the overbought condition. So far that hasn't really been the case, as the market has essentially continued to creep higher. In the chart below, you can see the June and August highs near SPX 1131 (pink line), and the fact that today we are peaking our heads above that resistance.

I still think that we are overdue for some sort of pullback, so even thought I have not trimmed many of our positions, I am still waiting for a pullback before putting new money to work. I think if the S&P were to pull back into the low 1120s, that would be the place I would like to make my first round of buy/adds. I mentioned last week that with the market over the SPX 1115 level, we could see performance anxiety set in, and I think that is exactly what we have been seeing.


19 Eylül 2010 Pazar

THE S&P TREND REVERSAL: GOLD TREND CONTINUATION

The S&P has now joined the Nasdaq 100 in completing the 1-2-3 reversal.


Now whether we get any follow through next week will depend on if the dollar continues down to test 80. Note that Friday was day 14 of the current daily cycle. We usually see a minor half cycle correction sometime around day 15 to 20.

So we should expect a short term top any day now. However I expect the pullback will just serve to dampen sentiment a bit so the next push higher can begin. If I had to guess I would say the market will likely find support at 1100.

The move to a higher high also puts this rally into week 11 of the larger intermediate cycle. (Today's move now moves the rally into week 12.)


That means we are now dealing with a right translated cycle. The majority of the time right translated cycles hold above the prior cycle low. In English that means it's now unlikely that the market will drop below the July low of 1010 at the next intermediate cycle bottom due in mid to late November.

How is that possible you ask? The economy is in dumper. Well first off never make the mistake of thinking the economy determines whether the stock market goes up or down. From 1932 to 1937 we saw one of the greatest bull markets in history. The Dow rallied almost 700% and it did it with unemployment holding above 14% and occasionally rising to over 20%.

Let me show you what is driving the stock market.


The dollar is in the process of it's own 1-2-3 reversal. If it breaks below 80 we will have confirmation that the counter trend rally that started last year is over and the secular bear trend has resumed.

I've been warning for sometime that the dollar is due to drop down into a major 3 year cycle low. A falling dollar is a sign that Bernanke is printing too many of them. He's trying to support asset prices and create the illusion of prosperity. He is probably going to succeed in creating asset inflation. However, in the process he is going to do tremendous damage to the global economy.

At some point the market will recognize that, and the global stock markets will roll over into the third phase of the secular bear market that began in 2000. But until the market wakes up to the fact that a currency crisis is brewing don't be surprised if we have a brief period where it will appear that everything has been fixed.

The initial phase of a currency debasement is often mistaken as an improving economy. It's not. In reality Bernanke will be doing massive damage to the economy.

At the dollar's next 3 year cycle low, due next spring, we will be dealing with a mini-crisis in the dollar. That is going to cause surging inflation problems.

Gold is already trying to warn us what is coming for those that will listen.

Since we were talking about trend lines let me say this again for those that forgot during the July correction. In a bull market all trend line breaks will eventually be recovered until the secular bull finally comes to an end.

In July I saw gold bears falling all over themselves  because the trend line from the Oct. `08 bottom had been broken.


I knew at the time that it was a mistake to attach any significance to the trend break. At the end of the article I said the "the bears are going to be wrong again". And of course they were wrong again. Gold has gone on to make new highs just like I knew it would. And we now have a new trend line to watch.


Sooner or later this trend line too will break and just like the last one it also will be meaningless. These trend breaks are one of the most effective tools the bull has to shed riders and punish shorts.

When the next break comes are you going to let the bull sucker punch you again or are you going to see it for what it is? A major buying opportunity.

17 Eylül 2010 Cuma

Canary in the Inflation Mine

Gold hit a fresh record high of $1,277 today. Lately it’s been on another tear. People have a thousand reasons for the gold rally: Safe havens. Uncertainty. European debt. American debt. Better than stocks. And on and on.

My take?

Gold keeps rising because of bad money. The Fed’s target rate is negative and will remain so. The dollar and other paper currencies are in a race to the bottom. The Fed is contemplating printing even more money. And when you add all this up, the inflation outlook is higher, not lower.

Gold is the canary in the inflation mine.

Now, today’s CPI is low: only 1.1 percent over the last 12 months. But producer prices are 3.1 percent. And import prices are 4.1 percent. Meanwhile, commodity indexes are rallying everywhere. Silver has gotten back to $20.

In the short run, I know that inflation is not a big problem. I also know, whatever the unemployment rate, that deflation is not a problem. And I continue to believe that proper economic reform should re-link the dollar to gold. If the Fed and Treasury do not do this, inflation is going to become a problem.

A Bullish Tea-Party Revolt

This past week I gave a speech to a group of investors. The organizer of the event e-mailed me the night before, asking that I please try to be optimistic. Well, that’s my usual habitat. But optimism has been hard for me this year. Our muddle-through economy and lackluster stock market, challenged by so many taxing, spending, and regulating problems coming out of Washington, are the reasons why.

In fact, until recently, I’ve been advising people to take profits in the stock market, rather than buy-and-hold. You should keep your money before the Obama IRS takes it from you.

But following the tea-party primary victories in Delaware, New York, and New Hampshire this week, I’m once again getting energized.

Free-market capitalism is on the comeback trail. That’s one of the key tea-party messages. And make no mistake about it: The free-market power of the tea-party political revolt is totally bullish for stocks and the economy.

In short, this is a revolution.

The political elites in both parties don’t get it. Nor do the mainstream media. But the tea-party movement is stopping Obamanomics dead in its tracks. And it will overturn the Keynesian big-government planning effort now in full force in our nation’s capital. The tea parties are Reaganism reincarnate, and then some.

It’s all there in the Contract from America: Limited government, individual liberty, economic freedom. Defund Obamacare. No tax-and-nationalize energy scheme. Stop the tax hikes and move to a flat-tax system. No special favors and subsidies. No crony capitalism.

Oh, and let me underscore the tea-party revolt against runaway government spending and debt-creation. No TARP. No stimulus. No Obamacare. No Bailout Nation for GM, Fannie, Freddie, and AIG. Instead of federal spending running up to 25, 26, or 27 percent of GDP, look for our new tea-party representatives to move it back to 20 percent of the economy, or even less.

There’s a great story in Friday’s Wall Street Journal called “Tea Party’s Rise Gives Business Pause.” The thrust is that big businesses and their K Street lobbyists are worried that special tax breaks and subsidies for Wall Street, timber, fast food, road building, energy, farming, autos (such as cash for clunkers for the car lobby), and housing (including homebuyer tax credits for the realtor and homebuilder lobbies) will be blown away by the new tea-party representatives. Well, they should be worried.

Quoted in the article, Raul Labrador, the tea-party-backed House candidate from Idaho, says he opposes all government programs that help one segment of business over another. “I’m against all of them,” he tells the Journal. “I don’t think the government should be picking winners and losers. We should have taxes low for everybody, and not just for a particular industry or segment.”

In other words, this is not going to be your father’s Congress. Nor is it going to be your father’s Republican party. The party of George W. Bush and George H. W. Bush is about to be totally transformed. Constitutional spending limits. Low flat-tax rates. Slam-downs on budget baselines. Pitchforks maybe, but not pork.

A few months ago I wrote about the emergence of a new free-market nucleus, motivated by tea-party ideals, in the Republican caucus of the Senate. That nucleus is set to grow. And that’s exactly why I’m getting more optimistic.

The new blood includes Carly Fiorina from California, Ken Buck from Colorado, Pat Toomey from Pennsylvania, Rand Paul from Kentucky, John Boozman from Arkansas, Mike Lee from Utah, Marco Rubio from Florida, Joe Miller from Alaska, Kelly Ayotte from New Hampshire, John Raese from West Virginia, and Linda McMahon from Connecticut. And who knows, maybe even Christine O’Donnell from Delaware.

They will join free-market Senate stalwarts like Jim DeMint, Tom Coburn, John Thune, Jon Kyl, Richard Shelby, and Jeff Sessions. Again, I repeat, this will not be your father’s Republican Senate. This is a new transformational breed. This is a free-market revolution powered by the tea party. Along with a likely Republican takeover in the House, we could be looking at a free-market Congress, something I never dreamed possible.

The new tea-party breed in Washington will unleash entrepreneurship and capitalism by holding back the government tide. In other words, folks, tea-party economics are very bullish.

16 Eylül 2010 Perşembe

Gold Breaks Out To New Highs

The market is a little lower in early trading, which is not surprising given the recent gains. Economic data was mixed this morning, with jobless claims a little better than expected but the Philly Fed Index below expectations.

FedEx (FDX) also weighted on the pre-market after posting an earnings miss and issuing mixed guidance for next quarter and 2011.

Among the sector ETFs, nearly all are lower so far, except for materials (XLB) which are bucking the trend after Eastman Chemical (EMN) raised its earnings outlook. Energy (-0.62%) is the biggest laggard so far, but its still early.

The euro is bouncing, at the expense of the dollar, after two successful bond auctions in Spain. Hopefully this will help push down some of the CDS prices on W. Europe which have been on the rise lately (namely Portugal).

Asian markets were lower overnight, led by China which fell -1.9%. Commodities are mixed, with oil lower to $75 but gold breaking out to new highs above $1272. Gold hasn't gotten as much fanfare as it did last year, but I think the stories will heat up now that it is back to new highs. One big gold company yesterday said that it plans to remove all of its price hedges by next year. Moves like this, along with continued buying by central banks, should continue to support the yellow metal.

The 10-year yield is higher to 2.76%; and the volatility index (VIX) is up to 22.72.

Trading comment: Despite being overbought, the market continued to push higher yesterday. Bullish sentiment is on the rise, with the bulls in the AAII poll rising sharply this week. Those ingredients make it more likely that we will experience a pullback shortly. This week is also options expiration week, which could be exerting some influence on stocks. I remain of the opinion that I want to look for opportunities to put cash to work on pullbacks, but I want to remain patient until we actually get one.

long VXX

15 Eylül 2010 Çarşamba

Bank of Japan Intervenes To Knock Down Yen

The market opened lower in early trading, but has once again rebounded and is roughly flat as of this post. There hasn't been much news this morning. One economic report was the Empire Manufacturing Index which came in below estimates at 4.1 for September.

The big news was Japan's government intervening in the currency markets to weaken the Yen, which has been hovering at 15-year highs. Being an export driven economy, a strong Yen hurts their economy as it makes Japanese products more expensive on the global market.

Currency interventions don't always work. Today it is having its desired effect, knocking the Yen -3% lower on the day, which is a big one-day move. But it remains to be seen if it will work longer term. On average, it is usually easier to move a currency lower, as the govt. can print more money, etc, but it is harder to prop up and support a falling currency when the rest of the globe is selling.

The action in Asia overnight was mixed, with Japan spiking +2.3% on the lower yen, while China got hit for -1.3%. European markets were generally weaker this morning.

The dollar is higher today on the weak yen. Commodities are down a bit, with gold off slightly to 1269 and oil down $1.40 to $75.40.

Among the sector ETFs, tech (+0.40%) is leading the way, followed by healthcare (+0.36%); energy (-0.68%) is the biggest laggard so far.

Trading comment: I have been saying how the market was back into overbought territory. The graph below shows what I am talking about, as you can see how high the oscillator has moved. So far, the market hasn't given up much ground, but in my experience it's better to hold off on new buys until the market has worked off this overbought condition, one way or another.

As we head into the back half of September, we are also getting into preannouncement season. Earnings estimates have held up pretty well all summer, but there is always the possibility of some big companies preannouncing that they had a weaker than expected quarter, which would weigh on the market.