By Gareth Soloway on March 12th, 2010 12:02pm Eastern Time
As I research the markets day after day, I find some interesting technical signals and signs recurring. One that I mentioned recently was in relation to the previous 52 week high on the SPDR S&P 500 ETF (NYSE:SPY). The previous 52 week high was $115.14, until it was taken out over the last few days. My previous thesis and call was that the institutions, seeing the markets hit the 52 week high of $115.14, would take the market through that level to approximately $116.00. The reason for this theory is due to the weak handed amateur shorts in the market. When any major stock or market hits a key major resistance level, amateurs and pros will sell or short it. That creates the key resistance at that level and the reason for the markets to stall. The key is to understand the institutional money and realize they will push the market through this level to scare the amateur shorts out of the market, grabbing their money. When the $115.14 level was hit, traders shorted the market. Sure enough, the market was driven higher today, jumping to $116.00. Once the weak hands are out, the market can then fall and institutions bank even more money.
This is a sad but true fact of the markets. We must all understand the game. I said to my premium subscribers in last nights Research Center video that I would look for the markets to go to $116.00. Sure enough, that is the high range of the day. Since then, the markets have faded beautifully. Learn the game, profit from the game.
The markets today are hovering flat, after a gap higher. The gap higher came on the back of 8:30am ET Retail Sales numbers that were slightly better than expected. As soon as the market opened, it dumped. The selling continued on some poor consumer sentiment numbers. The University of Michigan index came in less than expected. The markets sold from a high of the day on the SPY at $115.97, all the way to a low of $115.14. Notice the number of the low of the day? Yes, the previous 52 week high. Poetic in many ways. Since that low, the markets have gone sideways to higher, floating on extremely light Friday volume.
Stocks In Motion
Potash Corp. Saskatchewan (NYSE:POT) gapped higher today on the back of comments from the company. They said their earnings would be higher for the first quarter. Potash Corp. stated earnings would be in the range of $1.30-$1.50, well above the initial guidance of $0.70-$1.00 per share. The stock soared almost 7% on the day.
The financial sector is strong today and one of the main reasons the markets are holding flat on the day and not selling. The key today seems to be Goldman Sachs Group, Inc. (NYSE:GS). This stock is single handedly keeping the markets up. Goldman Sachs is higher by 1.40% today.
Another key to the markets holding flat is clearly Apple Inc. (NASDAQ:AAPL). The technology sector is not very strong today but Apple is making up for it. The stock continues to hold most of its gains today up $1.36 to $226.86. Optimism over the release of the IPAD is still luring buyers into the stock. Both Goldman Sachs and Apple Computer are near term overbought and due for pullbacks. However, due to the light volume this may be hard to come by.
The last key to the market holding up today instead of selling hard is the dollar. The dollar is getting hammered. As the dollar drops, bids come in the market. To understand this one must understand money flow and commodities in relation to the dollar. When money flows out of the dollar it looks for someplace else to go. Someplace where returns will be decent. The answer to that is stocks. In addition, when the dollar drops, commodities must move higher to compensate. As commodities jump, so do commodity stocks which are now a huge part of the S&P 500. Therefore, this takes the markets up a little as well.
Gareth Soloway
Chief Market Strategist
InTheMoneyStocks.com
The U.S. government this week reported a record monthly budget deficit for February 2010 of $220.9 billion. Total tax receipts for the month were only $107.5 billion compared to outlays of $328.4 billion. The total U.S. deficit for the first five months of fiscal year 2010 was $651.6 billion, with tax receipts of $800.5 billion and outlays of $1.45 trillion. The deficit was up 10.5% for the first five months of fiscal year 2010 over the same period in fiscal year 2009.
We are now at a point where if the U.S. government taxed Americans 100% of their income, the tax receipts generated would not be enough to balance the budget. Likewise, if the U.S. government cut 100% of its spending including defense, but kept paying Social Security, Medicare and Medicaid, we would still have a budget deficit. NIA believes it will be impossible for the U.S. to have a balanced budget ever again.
The U.S. national debt is now $12.55 trillion of which $8.061 trillion is public debt. Due to the Federal Reserve's artificially low interest rates of 0% to 0.25%, interest payments on our national debt last month were only $16.9 billion, an interest rate of only 2.548% on our public debt. The reason for the spread between our 2.548% interest rate on the public debt and the federal funds rate of 0 to 0.25% is that a portion of our national debt is made up of long-term bonds at higher interest rates.
Our debt ceiling was recently raised to $14.3 trillion, which we are on track to reach in less than a year, sending our public debt up to about $10 trillion. If the Federal Reserve raises the federal funds rate up to just 2% during the next year, NIA believes the interest rate on our public debt could rise to 5% and our annual interest payments will likely rise to $500 million or 23% of projected 2010 tax receipts of $2.165 trillion.
The White House is not projecting for interest payments on the national debt to break the $500 million mark until fiscal year 2014. By then, even if we go by White House projections that the deficit will be cut to $828 billion in 2012, $727 billion in 2013 and $706 billion in 2014, in 2014 we will still be looking at a national debt of over $18.5 trillion with a public portion of around $13.14 trillion. We find it shocking that the White House is projecting an interest rate on our public debt in 2014 of only around 4%.
All of this means that the While House expects the Federal Reserve to leave interest rates at artificially low levels almost indefinitely. However, we know it will be impossible for them to do so without creating a huge outbreak of inflation in the prices of food, energy, clothing, and just about everything else Americans need to live and survive. In order to prevent hyperinflation, we need interest rates to be higher than the rate of inflation.
NIA believes the real rate of U.S. inflation to already be approximately 5%. If the Federal Reserve doesn't raise the federal funds rate to above 5% in the short-term, in our opinion, an outbreak of double-digit inflation is inevitable. By 2014, it is possible the Federal Reserve will be forced to raise the federal funds rate up to above 10% and the public portion of our national debt could exceed $15 trillion. Therefore, in 2014 we could see the interest payments on our national debt reach $1.5 trillion, about triple what is currently being projected and 43% of the government's projected tax receipts that year of $3.455 trillion.
NIA believes hyperinflation is possible by the year 2015. Besides the rising interest payments on our national debt, another major catalyst for hyperinflation will be social security payments, which adjust to the CPI-index. As the government's CPI-index rises, so will the social security payments that it owes. This could cause a death-spiral in the U.S. dollar. Inflation is still the last thing on the minds of most Americans, but soon it will be their primary concern.
Please spread the word about NIA and have your friends and family subscribe for free at: http://inflation.us
I guess that backs my comments on joe salluzi's appearance.That's how the game is played,another man's losses are another man's gains (institutional money).
How do I know this,I'm a genious not,just had to learn the hard way(been burnt too many times).
Comments
The U.S. government this week reported a record monthly budget deficit for February 2010 of $220.9 billion. Total tax receipts for the month were only $107.5 billion compared to outlays of $328.4 billion. The total U.S. deficit for the first five months of fiscal year 2010 was $651.6 billion, with tax receipts of $800.5 billion and outlays of $1.45 trillion. The deficit was up 10.5% for the first five months of fiscal year 2010 over the same period in fiscal year 2009.
We are now at a point where if the U.S. government taxed Americans 100% of their income, the tax receipts generated would not be enough to balance the budget. Likewise, if the U.S. government cut 100% of its spending including defense, but kept paying Social Security, Medicare and Medicaid, we would still have a budget deficit. NIA believes it will be impossible for the U.S. to have a balanced budget ever again.
The U.S. national debt is now $12.55 trillion of which $8.061 trillion is public debt. Due to the Federal Reserve's artificially low interest rates of 0% to 0.25%, interest payments on our national debt last month were only $16.9 billion, an interest rate of only 2.548% on our public debt. The reason for the spread between our 2.548% interest rate on the public debt and the federal funds rate of 0 to 0.25% is that a portion of our national debt is made up of long-term bonds at higher interest rates.
Our debt ceiling was recently raised to $14.3 trillion, which we are on track to reach in less than a year, sending our public debt up to about $10 trillion. If the Federal Reserve raises the federal funds rate up to just 2% during the next year, NIA believes the interest rate on our public debt could rise to 5% and our annual interest payments will likely rise to $500 million or 23% of projected 2010 tax receipts of $2.165 trillion.
The White House is not projecting for interest payments on the national debt to break the $500 million mark until fiscal year 2014. By then, even if we go by White House projections that the deficit will be cut to $828 billion in 2012, $727 billion in 2013 and $706 billion in 2014, in 2014 we will still be looking at a national debt of over $18.5 trillion with a public portion of around $13.14 trillion. We find it shocking that the White House is projecting an interest rate on our public debt in 2014 of only around 4%.
All of this means that the While House expects the Federal Reserve to leave interest rates at artificially low levels almost indefinitely. However, we know it will be impossible for them to do so without creating a huge outbreak of inflation in the prices of food, energy, clothing, and just about everything else Americans need to live and survive. In order to prevent hyperinflation, we need interest rates to be higher than the rate of inflation.
NIA believes the real rate of U.S. inflation to already be approximately 5%. If the Federal Reserve doesn't raise the federal funds rate to above 5% in the short-term, in our opinion, an outbreak of double-digit inflation is inevitable. By 2014, it is possible the Federal Reserve will be forced to raise the federal funds rate up to above 10% and the public portion of our national debt could exceed $15 trillion. Therefore, in 2014 we could see the interest payments on our national debt reach $1.5 trillion, about triple what is currently being projected and 43% of the government's projected tax receipts that year of $3.455 trillion.
NIA believes hyperinflation is possible by the year 2015. Besides the rising interest payments on our national debt, another major catalyst for hyperinflation will be social security payments, which adjust to the CPI-index. As the government's CPI-index rises, so will the social security payments that it owes. This could cause a death-spiral in the U.S. dollar. Inflation is still the last thing on the minds of most Americans, but soon it will be their primary concern.
Please spread the word about NIA and have your friends and family subscribe for free at: http://inflation.us
How do I know this,I'm a genious not,just had to learn the hard way(been burnt too many times).