IT MAY BE TIME TO BOOK SOME PROFITS IN THE MINING STOCKS

It's been a great run over the last two months but it may be time to tighten stops on mining stocks. You can see in the chart below that at least during this stage of the new C-wave gold is still inversely tethered to the dollar index, as are miners.

During the period from September 2011 to July 2012 the dollar was moving generally higher out of its three year cycle low and that forced a 10 month correction in the precious metals sector. 

It's been my opinion that the three year cycle in the dollar topped at that point, and should drift generally lower until the next three year cycle low sometime in mid-2014 (with occasional counter trend rallies from time to time).

I've been expecting one more leg down in the dollar to test the February intermediate low before the first counter trend rally. However, this bounce is now on the 10th day and in jeopardy of generating a right translated daily cycle (a cycle that rallies longer than half its duration and tends to form higher highs and higher lows). If that occurs it will probably signal that an intermediate degree counter trend rally has already begun. As you can see in the chart above just as soon as the dollar started to rally gold stagnated, mining stocks started to correct, as did the stock market.

If this bounce in the dollar turns into a full-fledged intermediate degree rally then we can probably expect a 3-4 week correction in asset markets. 

I find it hard to believe that Bernanke is going to allow the dollar to rise and asset markets correct right in front of an election but the possibility definitely exists if the dollar doesn't turn down early next week.

Those of you not willing to hold through a 10-15% correction in miners should probably consider tightening stops, possibly right below Thursday's intraday low. If that gets violated it would start a pattern of lower lows and lower highs which is generally the definition of a down trend.

If on the other hand, Monday morning the dollar is getting hit hard then I think we may see gold test $1900 before the next intermediate degree correction. In my opinion what happens Monday & Tuesday to the dollar index will probably set the stage for market direction over the next month and into the election.

DOLLAR MISBEHAVING

And as often happens right when you think you have a handle on what's going on the market throws you a curve ball. In order for assets to continue rising the dollar has to resume it's downward trajectory. It didn't do that today. That's a warning sign that we may be on the cusp of an intermediate degree rally in the dollar, which would probably trigger an intermediate degree correction in stocks and precious metals. 

More in the weekend report.

Mitt's Tax Cut Mulligan

For some unknown reason, Mitt Romney dialed back his tax-cut plan yesterday, the same day new reports showed incomes are dropping.

Last month, median household income fell by about $500, and since Obama became president, income is down over $4,500. But under Mitt Romney’s 20 percent tax-cut plan, if he truly believes it and follows through with it, a married couple making $70,000 a year would save over $2,000. And take-home pay for a middle-class married couple earning about $140,000 -- with their tax rate dropping to 20 percent from 25 percent -- would increase by over $7,100. Obama has no such middle-class tax cuts.

So why would Governor Romney tell an Ohio crowd on Wednesday that they shouldn’t “be expecting a huge cut in taxes, ’cause I’m also going to lower deductions and exemptions.”

What is that all about? What kind of message is he sending? Is it pro-growth take-home pay? Or is he pulling back and hedging his bet?

I wrote in my last column about the potential benefits of the Romney plan. And I suggested that Romney should give specific examples of higher take-home pay from his tax cuts. And then I suggested that he draw a red line for middle-income taxpayers, and say “you will not lose you’re your deductions.” In other words, send a true growth message. And make it clear, not muddied.

This afternoon, one of the most senior people in the Romney-Ryan camp called me to say that Mitt misspoke, and that I should give him a mulligan. This person told me there’s no pull-back on the pro-growth tax-cut message, no new overemphasis on debt, and no departure from the Reagan-Kemp tradition.

Okay, even though I’m a tennis player, I’m willing to give Mr. Romney a mulligan. But I’ll say this: The growth message has to be crystal clear for the debate next Wednesday night. Mitt is slipping in the polls. People are confused about his message. He must clarify it.

Lower marginal tax rates. Higher middle-class take-home pay to offset lost income under Obama. More family financial resources. More growth and more jobs.

This doesn’t have to be so hard.

OIL HAS BOTTOMED

Oil has formed a swing and bounced off the 50% retracement I was looking at as a possible cycle low target. Gold, silver and stocks have clearly received the signal and are ready for the next leg up (which should mean the dollar cycle has topped and is ready for the next leg down).

Stocks may be locked in a runaway move which I discussed in last nights report in the premium newsletter.

SMT premium newsletter. $10 one week trial.

Just How Fragile is the U.S. Economy?

As if the looming "fiscal cliff" isn’t frightening enough, new results suggest it’s already doing very serious damage to the economy. And it’s only September.

According to a new survey released by the Business Roundtable, corporate America’s view of the economy is as bleak now as it was in 2009, when the economy was struggling to emerge from recession.

Also, the survey shows executives are now more likely to cut jobs over the next six months, and that companies are less likely to raise their capital spending.

Largely the CEOs who participated in the study cited the "fiscal cliff," or the confluence of tax hikes and spending cuts that could go into effect as soon as January 2013, as a major influence behind their decisions.

Dow Chemical CEO Andrew Liveris called the fiscal cliff a 'multiplier' that makes any negative catalyst that much worse.

As much as $500 billion in federal spending reductions and expiring tax cuts are due to take effect if Congress and the White House are unable to find a compromise on these issues by Dec. 31, 2012.
As a result, the CEOs also lowered their forecasts for U.S. economic growth.

“The government is failing us as a whole,” charged Liveris on The Kudlow Report. “This is self-inflicted uncertainty.”

They now expect real gross domestic product to rise 1.9 percent in 2012, down from a June forecast of 2.1 percent growth.

In turn, these concerns have already begun to ripple across the economy, and may in part explain the spate of lowered earnings forecasts from companies such as FedEx and Norfolk Southern.

The findings come less than two months ahead of the U.S. presidential election, in which the weak economy and stubbornly high unemployment are shaping up to be key elements in voters' choice between incumbent Democratic President Barack Obama and Republican challenger Mitt Romney.

The Romney campaign was quick to call out the results as a sign that Obama's economic policies were not working.

"Business leaders have the gloomiest outlook in three years and the President's failed economic policies of higher taxes and more regulations will only make things worse," spokesman Ryan Williams said in a statement.

The Obama campaign did not immediately respond to a request for comment.

“Whatever president and congress we get in November, it doesn’t matter. What matters is that we get one that gives us solutions,” said Liveris.

CEOs who participate in the Business Roundtable collectively generate $7.3 trillion in annual revenue and employ some 16 million people.

Is Focus Turning Back To Spain?

Global markets are lower today with Asian selling off overnight and Europe lower this morning. 

The broad weakness in Europe comes amid continued protests in the streets of Madrid.  Spain's prime minister said the country would only seek a bailout if interest rates became too high for the economy.  The ECB has done its part to help keep a lit on yields, but comments like that are never well received in the bond market and Spanish yields rose 24 basis points overnight to hit 6.0% again.

To make matters worse, the Bank of Spain said that GDP will continue to contract in Q3.  Also, the province of Catalonia said it will hold an election to consider secession from Spain.  Ouch.  If Spain gets back in the crosshairs of global markets, one would expect Italy to get thrown in the mix and it would get harder for equities to continue their recent rally.

Asian markets were also lower overnight following the decline in the US yesterday.  Reports are that Japanese auto makers are cutting production in some Chinese factories amid the political turmoil.  China's Shanghai Comp fell below the 2000 level for the first time since early 2009.

In corp news, Jabil Circuit (JBL) became the latest company to issue downside guidance for the coming quarter.  It's stock is down roughly 10% on the news.

Investors are rotating back to defensive groups.  Although the markets are mostly lower today, the utilities are consumer staples sectors are bucking the weakness so far. 

The dollar index is higher again benefiting from weakness in the euro.  Commodities are lower across the board.  Oil prices have fallen back below $90 to $89.25.  Gold prices are pulling back to the $1746 level.  And copper prices are down as well. 

The 10-year yield is showing weakness and has dropped below its 50-day support to 1.63%.  The VIX is moving higher up more than 6% so far.  The VIX spiked higher yesterday and today's move has pushed it above its 50-day average.

Trading comment:   Signs of strains in the credit markets are on the rise today after months of easing angst in the indicators.  We knew that one day we would wake up and the issues that were with us earlier this summer would be back on the front burner.  The question is are those issue back now, or is this just a small flare up.  The S&P 500 has now pulled back roughly 3% from its recent highs to today's lows. If this is just a mild pullback one would expect the market to find support around these levels and bounce.  But if recent bullish sentiment has peaked, it could take a more prolonged and deeper correction to shake the confidence of the newly minted bulls-- as so often happens.

More Earnings Warnings Trickle In

Global markets were mixed overnight while US markets are higher this morning.

Asian markets were mixed overnight.  JPMorgan suggested that China has more room to cut rates while the China Securities Journal disputed the notion and said that the current monetary stance is appropriate.

European markets were mostly lower this morning after a weak Spanish T-bill auction.  The arguments over the ECB's bond buying program continues with the ECB and Germany's Bundesbank seeking legal advice to verify the ECB's new program.  Also, Angela Merkel reiterated her opposition to Eurobonds.

In the US, consumer confidence for September rose to 70.3 from 65.9 last month.  The July Case-Shiller home price index rose 1.2%.  I think a lot of consumer sentiment is tied to the housing market, and if prices continue to firm it should boost confidence.

In corporate news, we are starting to see more earnings warnings and guidance reductions creep up.  Semiconductor company Infineon (IFNNY) lowered guidance for the next two quarters citing demand.  Tesla Motors (TSLA) also lowered guidance.  But the one with probably the one with the biggest implications for the global economy is Catepillar (CAT).  CAT said recession remains possible but unlikely in the US, and while 2013 sales look locked in 2014-15 will be below earlier estimates. 

The dollar index is lower today, which is helping commodities.  Oil prices are higher to $92.71 and gold prices are up near $1775.  Silver and copper prices are higher also.

The 10-year yield is slightly higher to 1.72%.  And the VIX continues to hover around very low levels at 14.15.

Trading comment: Yesterday was another day where we saw early weakness in the market but dip buyers quickly came in and the market firmed by the end of the session.  Looking at the charts of the major indexes shows that since the big rally a couple weeks ago we have pretty much just consolidated in a sideways fashion.  This type of behavior is usually followed by more upside after the pause, as the market rebuilds its internal energy for another push higher.  There is some risk to chasing that next push higher as investor sentiment has become very bullish and the potential for a "fakeout breakout" is higher.

Monday Morning Musings

Who would have thought we would wake up today to find AAPL down more than $10 and weighing on the market due to lackluster iPhone sales.  I'm not sure how accurate the numbers are.  I don't think they include the orders from the website which haven't been shipped yet.  It's hard to believe there was weak demand when every store I heard about was sold out and didn't know when and how much more they were getting of the hot new phone.  I still think when the first full quarter of sales are reported we will see record unit sales.

Overnight, Asian markets were mixed to lower after continue conflict in the East China Sea.  Also, the People's Bank of China warned that the Chinese economy was still slowing with no end in sight.

In Europe, there is a lot of chatter surrounding the weekend meeting between Merkel and Hollande about how to implement the banking union.  Merkel would like to take a cautious approach while Holland prefers to move more aggressively.  Elsewhere, Der Spiegel  reported that the budget shortfall in Greece is nearly 20 billion euros, which would be double current estimates.

In the US, there is no economic data to speak of this morning.  And the corporate news is mostly being drowned out by chatter about the iPhone. 

The dollar index is higher today, which is weighing on commodities.  Oil prices are weaker near $91.80, while gold prices are also lower to $1767.  Copper and silver are lower also. 

The 10-year yield is lower again to 1.71% after peaking recently at 1.90%.  Yields are still on a path of higher highs and higher lows since bottoming in late July.

Trading comment: The market pulled back this morning but once again quickly bounced from its morning lows.  It is still early but it does appear that dip buyers once again took advantage of the early price drop to put more money to work.  Some of this could be window dressing related to this week's quarter end, while some of it could just be good old performance chasing.  Regardless, the market doesn't seem to want to give up much ground.  If this week plays out similar to many quarter end weeks, we can expect to see one big down day but that's about it.  The big question will be whether any weakness develops after quarter end and once we get into October? But so far we haven't seen many signs of it, expect for the fact that investor sentiment has been growing more and more complacent which is never a good sign.  More on that later.

KAM Advisors has long positions in AAPL

OIL STILL IN THE DRIVERS SEAT

We will continue to watch the oil cycle next week as it is driving all other asset markets. As I pointed out in my last article, the rally in stocks, commodities, and gold are on hold until the oil cycle bottoms.

Oil did form a swing low on Friday, but I think there is probably one more leg down before the cycle forms a final intermediate bottom. If oil does have another leg down next week, that has the potential to cause the stock market to break lower out of the volatility coil that it has formed.

As most of you probably remember the initial break out of a volatility coil ends up being a false move about 70% of the time. The initial break is soon followed by a more powerful and durable move in the opposite direction. In this case, a move down would form a stretched daily cycle low, which would be followed by, presumably, another move to new highs next month, and on into the election.

A further decline in oil would probably mean more upside for the bear flag forming on the dollar index, and presumably the dip down into a daily cycle low for gold that I noted in my prior post (although I wouldn't rule out one more attempt to tag the $1800 resistance level on Monday or Tuesday first).
 

Note that the above charts are only intended to illustrate trajectory not actual targets.

S&P Poised To Finish The Week About Flat

The S&P 500 finished last week's rally at the 1465 level.  I was one of many who expected a mild pullback this week on profit taking, but the action has been more sideways than anything.  Currently the SPX sits at 1464, and is poised to finish the week about flat.

Overnight Asian markets were mostly higher despite further comments about slowing growth in the region.  The IMF lowered its 2012 GDP growth target for S. Korea from 3.25% to 3.00%.  And Barclays wanted that China's Q3 GDP could come in below expectations.

European markets are mostly higher this morning.  A Financial Times article suggested Spain was close to revealing a rescue package that could come out next week.  Germany's finance minister projected slower growth in the back half of the year.  Last, Greece is said to be considering raising the retirement age for the country to 67.

In corporate news, Oracle (ORCL) shares are slightly higher after the company missed revenue expectations but matched earnings.  Michael Kors (KORS) is more than 5% higher after raising full year earnings guidance.  This flies in the face of other high end retailers who have lowered estimates recently, which says that either KORS is taking share of just executing extremely well.

The dollar index is lower today which is helping commodities.  Oil prices are higher to $93 after a few really weak days.  Gold prices are also higher near $1774.

The 10-year yield is steady at 1.77%.  And the VIX is also flat at the 14.0 level where it has been sitting basically all week.  It did have a couple of intraday bounces higher from these levels, but by the close usually settled back in at these low levels.

Trading comment: Markets can work off overbought conditions in a variety of ways.  Sometimes they have big correction, sometimes mild pullbacks, and sometimes they merely trade in a sideways fashion while resting.  The latter appears to be what has transpired this week in the markets.  From a technical standpoint, this is usually a bullish occurrence.  A market that sits near its highs and refuses to give up any ground after reaching overbought levels is often a strong market.  I would not be surprised to see this market make another push higher as we near quarter end.  We have also been talking about underinvested managers needing a pullback in the market to put more money to work, but Mr. Market does not seem to be in a giving mood and is causing them to play catch up and chase stocks.  Can you say performance anxiety?

KAM Advisors has long positions in KORS

Ode to The Holy Invisible Hand of the Free Market

Ode to The Holy Invisible Hand 
of the Free Market

Oh Holy Invisible Hand of the Free Market, we adore Thee above all,

and we sacrifice all our values and all that is life to Thee!

We are the Righteous Right of Evangelicals, LDS, Catholics, Jews, and Atheist Libertarians and rabble-rousing Tea Partiers!
How is it that we have put aside all our historical differences and come to perfect agreement?
We exceedingly rejoice, for we have found the reason! 
Yes, we have found the one god  we all have in common, through His Holy Profit, Ayn Rand (Blessed Be Her Name).
Thou art the god who trumps all our core values, who trumps all our differences:
Thou art the Invisible Hand of the Free Market, and anything that stands in Thy way we call evil!

Thy wisdom in calling Thyself the Invisible Hand of the Free Market is awesome.  For thy holy sake we hide the fact that "Free Market" is an oxymoron.  For Thy sake we hide the fact that only that which is not owned and cannot be purchased is free.  But Oxymorons fool the simple-minded and glorify Thee, and for that we praise Thee, Oh Invisible Hand of the Free Market!

Yes, we sacrifice the very foundations of our religious traditions and the foundations of our American democracy and thousands of years of moral evolution to Thee with thy holy oxymoronic lingo!  

Even as we Righteously Right Evangelicals, LDS, and Catholics mouth praises to Jesus, we sacrifice him and all that he taught on Thy Altar of Profit, Oh Invisible Hand! 

We have found, like our Holy Prophet Ayn Rand (Blessed Be Her Name), that Jesus and laissez faire Capitalism are utterly incompatible. 

But, because of our unwavering devotion to Thee, Oh Invisible Hand, we deny this blatant contradiction, we pretend to serve and praise Jesus.  What better tactic to feign devotion to the most popular guy in history in order to promote Thy Cause, oh Thou beloved Mammon, our god above all gods!

Tar Sands Mining in Canada

We sacrifice all that is life to thee: our water, our air, our earth and all the living creatures depending on these things.
We will gladly sacrifice all life, including our own, to extinction for Thee, Oh Invisible Hand of the Free Market.  We even sacrifice our dignity and rational thinking and all Reality to Thee!  We love Thee that much, and we are all yours! 

Yes, it's because of Thee and Thy Profit Ayn Rand  (Blessed Be Her Name) that we Righteously Right Evangelicals, LDS, Catholics, Jews, and Atheist Libertarians and Tea Partiers miraculously see beyond our seemingly irreconcilable differences, joining in Perfect Harmony as One Mind!

For decades, we condemned atheistic regimes.  We hated the USSR, claiming it was because of its atheism.  But now we find that we adore Red China, because Red China, though its government still claims strict atheism, and still commits unspeakable acts against human rights, has bowed in devotion to Thee, Oh Invisible Hand of the Free Market, and serves us with its sweatshop slavery! 

Thou, Oh laissez faire Capitalism, art our Righteously Right New World Order, even as we belittle, call naive, and witch-hunt any real love, compassion, and authentic cooperation and ecumenical-ism as the evil "New World Order."  How beautiful are thy Orwellian and oxymoronic ways, Oh Invisible Hand!

We especially adore how Thou denounceth Big Government even as Thou art the source of all Big Government and Tyranny!  How sexy is Thy tyranny!

We praise Thy Holy Name, laissez faire Capitalism, and we denounce as Anti-American and Anti-Christian anything that stands in Thy way, even as we sacrifice our very US Constitution and our most basic Christian values to Thee!  We adore Thee that much! 

All that stands in Thy way is collectivist and altruistic.  And we know thy Holy Profit, Ayn Rand (Blessed Be Her Name) said that anything collectivist or altruistic is evil.
Yes,  anything collectivist is contrary to Thee, Oh Invisible Hand of the Free Market.  Collectivism is moochism.  How dare we fall into the barbarity of Northern European and Canadian socialistic ways, when we could uphold the real man values of Somalia, a beacon of no government regulation!  African Americans and Children had secure jobs, privileged to work sun-up to sun-down, in the old days before government regulated greed!

Yes, Thy Profit Ayn Rand (Blessed Be Her Name), imparted to us amazingly profound principles and tweaked them to Serve Thee, and Thee Only, Oh Invisible Hand.  She claimed that to serve the self is in the best interest of society, but to act altruistically is evil.  How we nostalgically return to our black-and-white, wonderfully adolescent, humorless reasoning as we follow Ayn Rand (Blessed Be Her Name). 

What a genius she was to reject the "collectivist" part of the Soviet system she escaped from, yet how she kept the Soviet black-and-white, humorless adolescent thinking that made the USSR the great empire that it was, throwing out the thousands of years of moral evolution with the bathwater.  It was this black-and-white throw-the-baby-out-with-the-bathwater thinking that was Ayn Rand's (BBHN) genius in appealing to generations of adolescent thinkers of whatever theistic or atheistic dogma.  For these are Thy Disciples and Thy Power, Oh Invisible Hand of the Free Market!  

How oxymoronically beautiful that she denounced mysticism, just as fundamentalists of all religions denounce mysticism, even as her mystic devotion to Thee went beautifully beyond all rational thought and reality!

Ah, yes, Collectivism is Evil, saith the Holy Profit (Blessed Be Her Name).  This is why we, Thy Disciples, denounce all that is life, all that is real, because all of life, all of reality, is Collectivist.  And Ayn Rand (Blessed Be Her Name) knew, like us, that reality stinks and fantasy rocks!

We must privatize, because privatization, ownership, is an illusion of fantasy, is Thy Holy Character, oh Invisible Hand of the Free Market, Oh Grand  Illusion!

Yes, collectivism, sharing, is evil.  Every single bit of sunlight, all air, all water, and all earth are collectivist, shared by all, shared by just and unjust alike.  This is why we must not stop until all nature is destroyed!  How can anything without a money value, not under ownership, be worthy to exist?  We know that Thou art a god of fairness, which is why Thou hatest nature and all that is natural, because we all know nature is unfair.  Sun shines and clouds rain and the earth sprouts food freely for the undeserving.  How dare mooches get sunlight and rain!  Yes, collective air fills the lungs of lazy moochers.  This is why we must choke out the sun and poison the air with toxic emissions, why we must destroy our wild rivers and our land and forests and bring all under ownership.  We must privatize everything, even selling water in bottles (whooodeverthunkit?), so that only we, the deserving, who work for money, can afford it.  We are the only creatures that have to pay rent to lay our heads down on the earth, because we are the superior ones, Thy servants.  We must destroy all who break Thy Holy Law, Oh Invisible Hand!

Common sense is no fun, which is why we must destroy common sense.  Common sense and our dictionaries tell us anything under ownership, possession, is not free.  This is why we have oxymoronically given glory to Thee and declared that what is not free is free in our Holy Crusade to bring every single atom in the universe under private ownership!  How beautiful and glorifying to Thy Name to call purchased slaves free!


Quotes from Thy Prophet Ayn Rand (Blessed Be Her Name) and her devoted disciples:

"It is precisely the 'greed' of the businessman or, more appropriately, his profit-seeking, which is the un-excelled protector of the consumer."  (Alan Greenspan)

"It is the self-interest of every businessman to have a reputation for honest dealings and a quality product."  (Alan Greenspan)

Ayn Rand and her Disciple,
Alan Greenspan,
in Gerald Ford's Oval Office

Alan Greenspan so graciously spread the gospel of Rand's ideology, even as he deregulated the banking industry and sacrificed the American Economy to Thee, Oh Dearest Invisible Hand of the Free Market.  Today, many Randians claim Alan Greenspan went against Randian philosophy, willfully ignorant that, at Rand's bidding and blessing, Greenspan entered the Federal Reserve and continues as her unwavering disciple to this day.

Yes, we worship and serve Thee above all, Oh Mammon, Oh laissez faire Capitalism!

I grew up reading Ayn Rand, and it taught me quite a bit about who I am and what my value systems are and what my beliefs are. It’s inspired me so much that it’s required reading in my office for all my interns and my staff.  
(Paul Ryan, quoted in Daily Kos 2012-09-04 01:30:00)

The invisible hand of the market always moves faster and better than the heavy hand of government.  
 (Mitt Romney)

I made a lot of money. I’ve been very successful. I’m not going to apologize for that. 
(Mitt Romney)

What I have, I earned. I worked hard, the American way. (Mitt Romney)

Laissez-faire in the beginning

"Civilization is the progress toward a society of privacy. The savage's whole existence is public, ruled by the laws of his tribe. Civilization is the process of setting man free from men."  
(Ayn Rand, The Fountainhead)

...the person who loves everybody and feels at home everywhere is the true hater of mankind. He expects nothing of men, so no form of depravity can outrage him. 
(Ayn Rand, Fountainhead) 

The creators were not selfless. It is the whole secret of their power-that it was self-sufficient, self-motivated, self-generated. A first cause, a fount of energy, a life force, a Prime Mover. The creator served nothing and no one. He lived for himself.  
(Ayn Rand, Fountainhead) 

Laissez-faire yesterday

America's abundance was created not by public sacrifices to the common good, but by the productive genius of free men who pursued their own personal interests and the making of their own private fortunes. They did not starve the people to pay for America's industrialization. They gave the people better jobs, higher wages, and cheaper goods with every new machine they invented, with every scientific discovery or technological advance- and thus the whole country was moving forward and profiting, not suffering, every step of the way.  
(Ayn Rand, Capitalism: the Unknown Ideal) 

Laissez-faire today:
Direct product and backbone
of US capitalism

When I say “capitalism,” I mean a full, pure, uncontrolled, unregulated laissez-faire capitalism—with a separation of state and economics, in the same way and for the same reasons as the separation of state and church.  
(Ayn Rand, The Virtue of Selfishness)

I swear by my life, and my love of it, that I will never live for the sake of another man, nor ask another man to live for mine. 
(Ayn Rand)

--------------------------- 

Quotes from the Mormon Enemy of the Invisible Hand of the Free Market

Right wing Evangelicals, who have always loathed Mormons, now, all the sudden, adore Mitt Romney.  Why?  Because just as right wing Evangelicals have sacrificed the core values of their very own Jesus to the Invisible Hand of the Free Market, so Mitt Romney has sacrificed his own core LDS values to Thee, Oh Invisible Hand of the Free Market!

It's pretty damned obvious what the Bible says about accumulation of riches and oppression of the poor and basic sharing 101 (see The Way of Christianity and The Way of Judaism).  But, even so, the Holy Christian Right, in their unwavering love for Thee, Oh Invisible Hand of the Free Market, can still deny the very Bible they love to thump and their very own human dignity for Thy sake!

But what about the Book of Mormon and other LDS scriptures and scholars?  They must be totally capitalistic and pro-greed, right?  Think again.

Because of prominent Mormons like Mitt Romney, Orrin Hatch and droves of LDS leaders who wallow in wealth and serve Thee, Oh Invisible Hand of the Free Market and Thy Prophet Ayn Rand (Blessed Be Her Name), most people don't have a clue what the LDS scriptures really say.  To know our evil anti-capitalistic enemy, lets take a look at their own LDS scriptures and Mormon scholars that are completely opposed to Thee, Oh Invisible Hand of the Free Market, and against Thy Holy Profit (Blessed Be Her Name):

But wo unto the rich,
who are rich as to the things of the world.  
For because they are rich
they despise the poor,
and they persecute the meek,
and their hearts

are upon their treasures:  wherefore,

their treasure is their God. 
And behold, their treasure shall perish with them also.
(Book of Mormon, 2Nephi 9:29)

But it is not given that one man 
should possess that which is above another, 
wherefore the world lieth in sin. 

(Doctrine and Covenants 49:20)

But the laborer in Zion shall labor for Zion;

For if they labor for money they shall perish.

(Book of Mormon, 2Nephi 26:31)
 

 
Perhaps thou shalt say: The man has brought upon himself his misery; therefore I will stay my hand, and will not give unto him of my food, nor impart unto him of my substance that he may not suffer, for his punishments are just --
But I say unto you, O man, whosoever doeth this the same hath great cause to repent; and except he repenteth of that which he hath done he perisheth forever, and hath no interest in the kingdom of God.
For behold, are we not all beggars? Do we not all depend upon the same Being, even God, for all the substance which we have, for both food and raiment, and for gold, and for silver, and for all the riches which we have of every kind?  . . . .
And now, if God, who has created you, on whom you are dependent for your lives and for all that ye have and are, doth grant unto you whatsoever ye ask that is right, in faith, believing that ye shall receive, O then, how ye ought to impart of the substance that ye have one to another. 
And if ye judge the man who putteth up his petition to you for your substance that he perish not, and condemn him, how much more just will be your condemnation for withholding your substance, which doth not belong to you but to God, to whom also your life belongeth; and yet ye put up no petition, nor repent of the thing which thou hast done.
I say unto you, wo be unto that man, for his substance shall perish with him; and now, I say these things unto those who are rich as pertaining to the things of this world. (Book of Mormon, Mosiah 4:17-23)


...and some were lifted up unto pride and boastings 
because of their exceedingly great riches, 
yea, even unto great persecutions;
For there were many merchants in the land, 
and also many lawyers, and many officers.
And the people began to be distinguished by ranks. . . .   
And thus there became a great inequality in all the land 
 (Book of Mormon, 3 Nephi 6)


Yes, the Book of Mormon is a Socialist conspiracy against Thee, Oh Invisible Hand:

And they had all things common among them; 

therefore there were not rich and poor, bond and free,

but they were all made free,

and partakers of the heavenly gift. . . .

There were no robbers, nor murderers,

neither were there Lamanites,

nor any manner of ‘ites;

but they were in one,

the children of Christ,

and heirs to the kingdom of God.

(Book of Mormon, 4Nephi 1:3,17)

Now let's expose Thy Enemy, the late Hugh Nibley, 
one of the foremost scholars of the LDS church:

Hugh Nibley

The idler shall not eat the bread of the laborer has always meant that the idle rich shall not eat the bread of the laboring poor, as they always have.
– Hugh Nibley

All my life I have shied away from these disturbing and highly unpopular—even offensive—themes. But I cannot do so any longer, because in my old age I have taken to reading the scriptures and there have had it forced upon my reluctant attention that, from the time of Adam to the present day, Zion has been pitted against Babylon, and the name of the game has always been money—"power and gain." . . . .  Babylon and Zion cannot mix in any degree. A Zion that makes concessions is no longer Zion.

--Hugh Nibley ("What is Zion?" CWHN 9:58)

Closing Invocation For Guitar
(to the Tune of "Leaning on the Everlasting Arms", words re-written by me)

v.1
{G} WHAT A COMPETITION,

{C} WHAT SWEATSHOP TOYS ARE MINE!
{G} LEANING ON THE MARKET'S 
{D} INVISIBLE HAND!
{G} WHAT A LIP-SERVICE,
{C} CALLING JESUS MINE,
{G} LEANING ON THE MARKET'S 
{D} INVISIBLE {G} HAND!

chorus
{G} LEANING, {C} LEANING,
{G} SAFE AND SECURE TRUSTING 
{D} AYN RAND!
{G} LEANING, {C} LEANING,
{G} LEANING ON THE MARKET'S 
{D} INVISIBLE {G} HAND!

v.2
{G} WHAT A FEAT TO HOCK
{C} ALL THAT'S FREE AWAY!
{G} LEANING ON THE MARKET'S 
{D} INVISIBLE HAND!
{G} WE KNOW WE'RE ON THE RIGHT RIGHT PATH
{C} SELLING SOULS DAY TO DAY,
{G} LEANING ON THE MARKET'S 
{D} INVISIBLE {G} HAND!

v.3
{G} WHAT HAVE I TO DREAD?
{C} WHAT HAVE I TO FEAR?
{G} LEANING ON THE MARKET'S 
{D} INVISIBLE HAND!
{G} UNREGULATED GREED,
{C} MY LORD MAMMON NEAR,
{G} LEANING ON THE MARKET'S 
{D} INVISIBLE {G} HAND!

Profit Taking and Slowing Growth

Global markets are lower in early trading on the heels of some weaker economic data in both Asia and Europe.  Asian markets were lower overnight after China's HSBC manuf. PMI came in at 47.8 which still signals contraction.  China's stock index fell -2.1% to its lowest levels since Feb. 2009, not a very good sign.

In Europe, markets are also lower after manuf. PMI readings in several countries point to slower growth.  France had a disappointing reading (42.6) while the overall Eurozone PMI fell to 46.0 vs. expectations of 47.4.  Investors may cheer the stabilization in bond yields for peripheral Europe, but all of this belt tightening and austerity measures are only going to continue to slow growth without some pro growth measures.

In corporate news, Norfolk Southern (NSC) lowered their Q3 earnings outlook due to slumping demand and lower revenues from fuel costs.  This news is hitting transportation stocks.  NSC is one of the first high profile companies to warn about Q3 earnings, but as we get closer to the end of the quarter we could hear from more companies.

The dollar is higher vs. the euro today which is weighing on commodities.  Oil prices are weaker near $91.85 while gold prices are also down a bit to $1766.

The 10-year yield is easing back further to 1.75%.  And the VIX is getting a little bounce to 14.30, up 3%.

Trading comment: Global markes are pulling back on today's economic data which points to further slowing.  The markets have also risen a lot recently so some folks may just be taking some profits.  My sense is still that portfolio managers remain in dip buying mode, so if today's selling can't pick up any steam I would expect to see markets firm a bit late in the session.  The S&P 500 is holding that 1450 level that it tested this morning and bounced from.  The other change in character today is that money is flowing to defensive areas like consumer stables, telecom, tobacco stocks, etc. 

MARKETS ARE WAITING ON OIL

At this point I think even the most diehard perma troll has to admit that my cycles technique has navigated the markets almost perfectly. When everyone was calling for the end of the commodity bull market this summer I correctly predicted what we were seeing was just a move down into a three year cycle low that would soon bottom and generate a tremendous surge higher. 

In May and June I warned traders to watch the oil cycle as it would govern the rest of the commodity markets, and the three year cycle would bottom along with the intermediate oil cycle. 

I also warned at the time that the dollar's three year cycle would likely top at about the same time as the CRB bottomed. This also has come to pass and the dollar is now set up to drift generally lower into its next three year cycle low in 2014. As I have outlined previously, this should drive the extreme inflationary scenario as commodities build into a final parabolic spike, as Bernanke's monetary policy slowly destroys the purchasing power of our currency.

When everyone was calling for a bear market in mining stocks, I pointed out the 1-2-3 reversal that was setting the stage for a major bottom and once in a lifetime buying opportunity.

While many others were predicting $1400-$1200 gold I correctly spotted a B-Wave bottom in progress.

I've said it many times in the past, that while my system of cycles analysis, sentiment, COT reports, and money flows in combination with a secular bull market, isn't perfect, it's better than anything else I have ever found. And so far no one has demonstrated anything else that comes even remotely close to generating the long term gains of the SMT system.

Now that system is signaling that all markets are again waiting for the intermediate oil cycle to bottom. 

Once it does we should see another strong leg up in the CRB, another leg higher in stocks (possibly to test the $1500 level), and probably a final surge in gold to test the all-time highs at $1900 (expect a brief move down into a daily cycle low later this month before the final surge into an intermediate top).

  SMT premium newsletter. $10 one week trial.

Japan Jumps On The QE Bandwagon

The markets are flattish in early trading after big gains in Asian overnight but fading enthusiasm as European trading got underway.

Asian markets rose overnight after the Bank of Japan became the latest central bank to announce more stimulus.  The BoJ increased its asset purchase program by 10 trillion Yen to 80 trillion.  Japan and Hong Kong rose by more than 1% while China rose only 0.4%.

Europe's markets are not higher this morning after an ex-ECB memeber commented that the bond purchasing program is not a silver bullet capable of fixing the underlying problems in the region.  For its part, the Bank of England decided to keep its asset purchase program unchanged.

In economic news in the US, existing home sales for August hit an annualized rate of 4.82 million units, which is up from the prior months rate of 4.47 million units.

The dollar is slightly lower and commodities are mixed.  Gold prices are a bit higher to $1773, but oil prices continue to take it on the chin and are now down to $92.30 from almost $100 at the start of the week.

The 10-year yield is pulling back a little more to 1.78%.  And the VIX is back near its August lows down -3.3% to 13.70.

Trading comment: The stairstep market continues.  The market has had a chance the last few days to pull back from last week's gains, but it hasn't given back much at all.  The market has basically traded sideways for the week so far as it works off its overbought condition.  It still feels like underinvested portfolio managers are looking to put money to work on any dips and this could last into quarter end.  Bullish sentiment continues to rise and this is a bit of a red flag.  But sentiment is a secondary indicator and it won't likely kick in until we first see a break in the price action and some selloffs that have volume behind them.

Is A German Slowdown Next?

Global markets are lower again this morning after some profit taking after last week's rally as well as further signs of economic slowing.

Asian markets were down across the board overnight.  Tensions are still running high in the East China Sea with Japan shutting factories amid worries about violent protests.  Additionally, Chinese housing data recently showed that 53 of 70 cities showed year-over-year declines.  That's a pretty big figure.  Also the Reserve Bank of Australia in its recent minutes noted a weakening of the Chinese economy.

In Europe, markets were also down across the board as the focus turns back to Spain and whether they will request a full bailout.  A recent ZEW pull suggests the German economy is expected to lose momentum over the next six months.  George Soros was out with comments over the weekend supporting the same notion.  Germany has been the lone pillar of economic strength in the southern eurozone, so if their economy weakens you can expect the recession in the region to deepen.

In the US, the NAHB Housing Index rose to a reading of 40 in September, above last month's views.

Separately, FedEx (FDX) is lower this morning after beating earnings but issuing disappointing full-year guidance for 2013.

The dollar index is higher today, but commodities are mixed.  Gold prices are higher to $1773, and silver and copper prices are higher also.  Oil prices remain a bit weak at $96.22 after a big negative reversal yesterday that left many scratching their head.

The 10-year yield is easing back more to 1.80%.  And the VIX is down -1.75% today despite the negative headlines and weak open.  The VIX is hovering near very low levels at 14.30.

Trading comment: Yesterday's pullback was extremely mild.  It started to pick up a little steam in the afternoon but then rallied back in the last hour to post little damage by the close.  Today is looking similar, though we still have a lot of time left in today's session.  If the market can't pull back much, dip buyers may grow impatient and look to put money to work sooner rather than later.  Recent leaders like AAPL and GOOG haven't given back any ground and remain near their highs.  Ditto AMZN, ALXN, BIIB, etc.  The NYSE registered nearly 500 new highs last week, so the list of potential market leaders has certainly broadened recently.  Now we just need to watch to see which ones can continue to add to those gains.

KAM Advisors has long positions in AAPL, ALXN, BIIB, GOOG

Monday Morning Musings

Global markets are a bit sluggish this morning after another strong week last week amid investor enthusiasm over the last round of quantitative easing by the Fed. 

Overnight, Asian markets were mostly lower led down by a -2.1% decline in China after some local Chinese governments reintroduced property price controls in an effort to weed out speculative buying and cool their property markets.  This has some investors questioning further easing measures by the PBOC.

The Reserve Bank of India left its overnight interest rate unchanged at 8.00% while cuttings its reserve ratio 25 basis points to 4.50%.

In economic news in the US, the Empire Manuf Index came in at a very weak -10.4.  This is actually the lowest level since April 2009.  This may be one of the reasons that the Fed was willing to enact further QE despite the stock market near 5-year highs-- the economy has hit another soft spot and continues to offer weak datapoints.

The dollar is off a little and commodities are mixed.  Gold prices are flat near $1772 while oil prices are higher to $99.30.

After a big spike higher on Friday to nearly 1.90%, the 10-year yield is pulling back to the 1.83% range.

And the volatility index (VIX) is bouncing from very low levels to 14.80 this morning, up 2%.

Trading comment: The markets appear a bit extended after last week's spike higher.  I wouldn't be surprised to see some mild pullback and consolidation at these levels.  But I also think it is premature to start betting on more than a mild pullback until we see a change in the price volume action of the indexes.  We have been in a stair-step higher mode, and until we see some rallies that fail to make new highs and some selloffs that come on volume and take out support levels I think those betting against this market will continue to be frustrated - which is pretty much Mr. Market's primary objective.

THE NEXT RECESSION WILL BE TRIGGERED BY OIL

I was confident that the Fed had already begun printing. That seemed pretty evident by the overall action in the commodity markets, the dollar, and the fact that stocks were unable to correct in the normal timing band for a daily cycle low. However, I didn’t really expect Ben would come out and publicly admit it. That one took me by surprise Thursday. I guess Bernanke wants to get full value for his attack on the dollar and make sure that markets are rising into the election.

At this point all the pieces are in place for the inflationary spike and currency crisis I’ve been predicting for 2014. We now have open ended QE that is tied to economic output and unemployment. But since debasing currencies has historically never been the cure for the bursting of a credit bubble, all the Fed is going to produce is spiraling inflation. So as this progresses we are going to see the Fed printing faster and faster as the result they are looking for never materializes. This is what will ultimately drive the currency crisis at the dollar’s next three year cycle low in 2014.

At this point watch the price of oil if you want to know when the next recession is going to begin. As I’ve pointed out many times in the past, recessions, well at least since World War II, have all been preceded by a sharp spike in the price of energy. Any move of 100% or more in a year or less, has historically been the straw that breaks the camels back. Modern economies can not survive that kind of shock. It invariably triggers the collapse of consumer discretionary spending and economic activity comes to a grinding halt.

In 2007 oil surged out of the 3 year cycle low into a parabolic advance as Bernanke trashed the dollar in the vain attempt to halt the sub prime collapse. That 200% spike in oil is what tipped the economy over into recession, which was then magnified in the fall of 08 as the financial bubble and debt markets imploded.

 

I think it’s safe to say the Bernanke doesn’t understand his role in causing the recession of 08/09 as he is now making the same mistake again. I think he believes the recession was solely triggered by the financial meltdown. That was the icing on the cake, but not the initial trigger that caused the recession.

Despite the complete inability of QE to heal the economy or job market, and since he really has no other tool, Bernanke just keeps doing the same thing over and over expecting a different result, but never getting it.

Commodities are the check that prevent Keynesian economic policies from healing the global economy. Keynesian academics either don’t understand this, or refuse to acknowledge it. Until they do, or we install Austrian economic advisers in the government, we are destined to continue making the same mistakes over and over.

So we will watch the price of oil as it rises out of it’s three year cycle low. If it hits $160 by next summer that will probably be enough to start the economy on the next downward spiral. If politicians get involved (and I’m sure they will) and try to impose price controls, they will multiply the damage, and probably guarantee that the next economic downturn escalates into a truly catastrophic depression.

Until we see the spike in oil and the corresponding damage to the economy, no one has any business try to short anything, well maybe bonds, but even that will be risky because the Fed is going to be actively trying to prop the bond market up and keep interest rates artificially low.

All in all there is going to be so much money to be made on the long side, especially in precious metals, that no one needs to fool around with puny little gains on the short side, especially in a market that is going to be hell to trade from the short side. The time to sell short will be in 2014 after the dollar’s next three year cycle low. The dollar’s rally out of that bottom will correspond with the next global economic collapse, ultimately caused by the decisions made by the ECB and the Fed this past week. I dare say if they could see the damage their decisions are going to inflict upon the world and the dire unintended consequences, maybe they would finally stop kicking the can down the road, and let the economy heal naturally. Of course that would entail several years of severe pain, and politicians as we all know, are extremely allergic to that.

2014-2015 is when we are going to see the stock market drop 60-75% and the next great leg down in this secular bear market. But until then there’s probably a pretty good chance we are going to see the S&P at new all time highs in the next 6 months – 12 months.

The rest of the weekend report is available to SMT subscribers. $10 one week trial.

Stocks Run For The Roses

The Fed came through yesterday and gave the market what it wanted in the form of additional quantitative easing. Markets around the globe rallied in response to the FOMC decision to purchase additional agency mortgage backed securities at a rate of $40 billion per month.
Asian markets rallied strongly, with more than 2% gains in Hong Kong, Indonesia, S. Korea and Tawain. China lagged with a gain of only 0.6%. But not everyone was happy with the Fed's actions. The People's Bank of China suggested the Fed's action could spark global inflation. The Hong Kong Monetary Authority warned that the risk of a property bubble in their housing market is higher now. And the Bank of Japan was put on the defensive as the yen soared vs. the dollar sparking speculation the BoJ might have to intervene in the currency market.

Europe's markets are also higher despite continued debate over whether Spain will need to ask for a full bailout. There is also increasing unrest in the middle east with violent protests in Egypt, Yemen, and elsewhere.
In economic news, the Univ. of Mich. consumer sentiment index rose to 79.2 for September, near its high for the year and well above last months' reading of 74.3. Separately, retail sales for August rose 0.9% which was above expectations.

The dollar index is well lower today which is helping commodities.  Oil prices have risen to $99.70 and gold prices are up a bit to $1772 after a nice rise yesterday.  And the breakout in copper prices continues.  The copper etf (JJC) is up over 5% for the week.

The 10-year yield is also rallying.  I'm not sure if this has more to do with operation twist moving its focus to agency securities or simply an allocation move out of bonds and into stocks and commodities.  The 10-yr is currently at 1.87%, its highest level since May.

For its part, the VIX had a big plunge yesterday down to the 14 level where it has pretty much bottomed each time down there this year.  Today it is actually up 1.5% to 14.25 despite another up move in the stock market.

Trading comment: The markets staged a follow on breakout yesterday and pushed further into high ground for the year.  This is a tough juncture because the market has had a big move and does look a bit extended.  Investor sentiment is also growing more and more bullish, and we know that when the herd gets complacent the market is often ripe for a pullback.  But with the Fed in QE mode, the ECB adding liquidity, and portfolio managers chasing stocks to avoid underperforming their benchmarks it does seem that dips in the market will continue to be bought until the macro backdrop turns negative again.

Burrito bet

I do believe I'm going to earn a whole lot a burrito's :)

There will be a lot to go over in the weekend report, but basically everything is now in place for my inflationary shock in 2014 scenario, including the stock market at new highs, which has now already happened.

Fed Decides On More QE

Here is their press release:

Information received since the Federal Open Market Committee met in August suggests that economic activity has continued to expand at a moderate pace in recent months. Growth in employment has been slow, and the unemployment rate remains elevated. Household spending has continued to advance, but growth in business fixed investment appears to have slowed. The housing sector has shown some further signs of improvement, albeit from a depressed level. Inflation has been subdued, although the prices of some key commodities have increased recently. Longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee is concerned that, without further policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee also anticipates that inflation over the medium term likely would run at or below its 2 percent objective.

To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee agreed today to increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month.

The QE Conundrum

Global markets were mixed overnight as investors around the world await today's FOMC decision and whether or not the Fed will initiate more quantitative easing (QE) measures in the near-term.  Many strategists have said the anticipation of more QE is the reason that global markets have been rallying and if we don't get any there could be some disappointment.

I have been on record as saying I don't think the odds are as high as everyone says, considering the stock market is at new highs and the Fed might like to keep some powder dry for when we need it more.  We still have the economy slowing and the fiscal cliff ahead of us.  For the near-term, the ECB seems to have done some of the heavy lifting with its recent bond purchase programs.

The FOMC statement will be released at 12:30 ET with the economic projections released at 2:00 ET followed by Bernanke's press conference.

There hasn't been a lot of market moving news this morning. US producer prices rose more than expected by 1.7% in August vs. the 1.2% expected.

Overnight in Asia, several central banks held interest rates steady.  Indonesia held at 5.75%, New Zealand at 2.5%, Phillipines 3.75%, and S. Korea held at 3.00%.  Asian markets finished mixed.

In Europe, markets are also mixed to lower this morning.  German Finance Minister continues to try to pour cold water on recent ECB announcements.  He said that he does not believe the ESM can get a bank license.

The dollar is slightly lower today and commodities are mixed.  Oil prices are higher to $98.20 while gold prices are roughly flat near $1735.

The 10-year yield is a bit lower to 1.73% after a nice bounce higher yesterday.  And the VIX is also slightly lower to 15.68 still hovering below its 50-day overhead resistance.

Trading comment: The major indexes are holding up in new high territory.  The SPX is at new highs again, but the Nasdaq is a few points below its yearly highs.  More growth stocks continue to lead the market.  But with investor sentiment growing more bullish and this recent uptrend in the market getting long in the tooth, I would not be surprised to see some volatility and choppiness pick up in the near-future.  I feel like investors are getting lulled into a sense of complacency and Mr. Market usually doesn't like it when that happens.  But for now, let's see what the FOMC has to say about further QE now or in the near future.