The stock market does not work the way most people think. A commonly held belief — on Main Street as well as on Wall Street — is that a stock-market boom is the reflection of a progressing economy: as the economy improves, companies make more money, and their stock value rises in accordance with the increase in their intrinsic value. A major assumption underlying this belief is that consumer confidence and consequent consumer spending are drivers of economic growth.http://mises.org/daily/4654Read more…
By Nicholas Santiago on August 30th, 2010 5:45pm Eastern Time
Every week I take a few minutes and vent my opinions and possible frustrations to our readers. This writing is strictly about out politicians. Is there really any difference between a Republican or a Democrat? These parties seem to be one in the same. They are spending addicts and unfortunately spending other peoples money such as the U.S. taxpayers. Many will argue that this current administration is on a spending spree and really does not know any other way. While this certainly seems to be true this current administration seems to have taken over from where the last one left off. Has anyone looked at the U.S. debt clock lately? The U.S. debt is now $13.35 trillion. Yes, that is a trillion with a 'T'. The United States gross domestic product is only $14.48 trillion and seventy percent of that is consumer spending. Are you kidding me?
Personally, I could not run my household on my credit cards. Eventually, the banks would shut my credit limits off once I could no longer pay my bills on time. When does this blank check by the U.S. government stop. These politicians on both sides of the aisle are absolutely reckless when it comes to spending. The only politician that has voiced a true concern about spending is Ron Paul the Texas Republican. I really don't think that his own party even likes him. Honestly, he is really the only politician that seems to make any sense. These other politicians talk about capitalism, then vote in favor of bailing out another failing business or institution. Has anyone looked looked at Fannie Mae or Freddie Mac lately? These failing institutions are killing America. However, the politicians will vote in the evening on a Christmas Eve to lift the debt ceilings on these financial institutions. Come on give me a break.
Often during the Intra-day Stock chat I will talk about things that I have observed or noticed during the week. Recently I was in a book store looking around and noticed a section in the book store entirely devoted to serial killers. I was shocked that they had a huge section of books written about these criminals and decided to walk through the area. As I walked through the aisle the serial killer section ended and the politician section began. I could not believe my eyes that these two groups shared the same aisle in the book store. That is scary.
Come on politicians get it together. Use your heads and stop enjoying all the perks you get from the lobbyists and special interest groups. Our country is falling apart at the seams. America can still be a great nation. However, due to the politicians we are just piling the debt and getting deeper in the hole. Don't you know the U.S. is in debt up to our necks? The people have had enough. That is my two cents.
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The BOJ OPTED FOR easing than actual FX intervention, via expanding its 6-month fixed rate lending facility to 30 trln yen from 20 trln yen. The yen rose as a result of the confirmed absence of intervention. See previous IMT explaining why I continue to see no yen-selling intervention. Yen gained further ground when US markets took a turn to the worse despite better than expected 0.4% increase in July consumer spending. This may be a week where many US and European players are away on holiday, the concentration of US economics reports (ADP, ISMs, NFP/Unemp) could provide the data equivalent to the Feds economic downgrade. With S&P500 currently trading at 1056, it seems inevitable that we will see a retest of the key 1040 support, through which could lead USDCAD and AUDJPY towards 1.0630s and 75.00. Also watch tomorrows US Aug consumer confidence index, which risks falling below the 50 level.
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By Nicholas Santiago on August 30th, 2010 10:48am Eastern Time
This morning the large major financial institutions continue to struggle. Recently all the financial stocks have traded down towards or at new lows for the year and today the weakness remains. Stocks such as Bank of America Corp (NYSE:BAC), J.P. Morgan Chase & Co (NYSE:JPM), and Wells Fargo & Co (NYSE:WFC) remain at or near the lows for 2010. Financial stocks such as Goldman Sachs Group Inc (NYSE:GS), and Morgan Stanley (NYSE:MS) are both still trading above their July lows. However, while these two stocks are categorized as bank holding companies they are still basically giant hedge funds.
The financial stocks are still the most important sector in the market. Remember, this is the sector that was saved by the Toxic Asset Relief Program (TARP) by the U.S. Treasury in 2008. These stocks have had huge amounts of liquidity pumped into them since that time. They can still borrow money from the Federal Reserve Bank at basically zero percent today and buy U.S. Treasuries to make money. These financial institutions can maintain their credit card business and make money. Essentially, they no longer need to lend money to make money. Therefore, if these stocks continue to decline it could be signaling bigger problems are ahead.
When the financial stocks fail to rally for more than a day or so it is a sign of market weakness. Many economists are now beginning to call for more stimulus by the government. If the first stimulus plan only worked for a year how long would another stimulus package work? Recently the European Union bailed out its banks with a $1 trillion injection into the financial stocks. So far the European Union remains off its recent lows, however, it still remains weak. This week we may just drift sideways. However, once volume comes back into the market after the Labor Day holiday these financial stock must be watched with a microscope.
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The Semiconductors Holders Trust (NYSE:SMH) has a very bearish head and shoulders top pattern in place at this time on the weekly chart. This semiconductor sector usually leads most technology stocks higher or lower. While the weekly bearish pattern is in place, ensuring that price closes below the rising black neckline on the chart it is always prudent. This past week the price of the SMH closed basically on the line as shown below, and that does not offer clear confirmation of a close below which would trigger the bearish pattern. Therefore, it is still possible that the price of the SMH could recapture that trend-line and bounce higher. Should the bearish pattern play out on the weekly chart the downside target would be around $20.00 for the SMH. This coming week is expected to be a light volume trading period due to the holiday in the U.S. Please remember that light volume will often favor the upside. Hence the old market adage, never short a dull market.
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Daily making a Bullish outside bar at previous support and 61.8% fib of previous swing.This is a chart for the September futures Mini Dow contract btw.
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DON'T CONFUSE INTERVENTION WITH QE in the case of Japan. Japan's Fin Min Noda made it clear last week that any yen intervention would make little difference and that chances of US stepping in were "zero". So Japan is now moving in the way of further QE as was seen in December when the BoJ's fresh bond purchases placed a cap in the yen successfully (but temporarily). FRIDAY's YEN SELL-OFF was INITIALLY TRIGGERED by a Nikkei News report (early Saturday edition), stating the BoJ may move forward its September 6-7 meeting to next week. The already weak yen was further hit by a positive market reaction from better than exp US Q2 GDP. 90 mins later, stocks fell and yen strengthened temporarily after Bernanke's speech. But as we neared Friday's London close, the yen resumed its broad selloff, closely followed by the falling USD. I've already mentioned the high targets for selected yen crosses in the IMT well before Friday's GDP (all of which were taken out). LOOKING FORWARD, traders will keep the yen pressured as they await Japanese words to tun into policy action (new loans by BoJ). The latest attempts at a fresh political coup against the Japanese PM are also helping to push the yen lower. And the 3rd force likely to weigh on the Jpns currency is a positive Monday Asian equity reaction to Friday's Bottom-Fishing rally. I've already mentioned on twitter last week that 1040 in SP500 served as a key support before and after the flash crash, with the exception of the late June sell-off. Further gains in yen crosses in Monday Asia + Europe will face their test in Monday's US data schedule.
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