"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Thursday, March 1, 2012

S&P 500 keeps marching higher - shrugs off downside reversal

Yesterday the S&P 500 give a hint that it might be forming a sort of interim top as it shot to a brand new 52 week high only to move steadily lower throughout the rest of the session closing below the preivous day's low. That constitutes a downside reversal day on the price chart, normally a powerful bearish signal.

Once again, as has often been the case in this market, once the liquidity spigots are wide open, no downside followthrough was seen. Early in the overnight session there was some light selling but nothing heavy. Today, this market is once again working on testing yet another new 52 week high. The session is not over yet so we might still see some late selling efforts but no matter if that does show up, the perma bulls once again have prevailed in this one way market.

(I wish to interject here that no matter how high the US stock market might run and how long the rally lasts - you will be fortunate if you ever hear the word, "OVERBOUGHT"  pronounced by the talking heads, whom I might add are always SWIFT TO PRONOUNCE GOLD AND SILVER OVERBOUGHT. It seems that the stock market can never become overbought since that is equivalent to some sort of financial blasphemy). Nope, overbought is a one way term reserved for the gold and silver markets by these yahoos.

I am noting however that the bond market is showing some heavy selling pressure in today's session. Whether that too will last is anyone's guess, particularly with the Fed through its primary dealers fooling around in that market and working to artificially distort interest rates.

Note on the bond chart the market dropped to the bottom of the 4 month old trading range and is trying to bounce. My guess is that the crony pals of the Federal Reserve, the primary dealers, are buying furiously to try to prevent long term interest rates from getting away from their control.

What the dishonest Fed is trying to do is convince the investment/trading community that the economy is in decent shape and is moving in the right direction ( here is their subliminal message - GO AND BUY STOCKS; GO AND BUY STOCKS; GO AND BUY STOCKS), so that they can get their rising stock market and pull up consumer confidence, but is not in good enough shape to have long term interest rates begin a steady climb. That would be a gigantic NO-NO. "OH, it is good but not that good". Subliminal message repeats - GO AND BUY STOCKS BUT DO NOT SHORT THOSE BONDS.

If this bond market breaks down, it would signify a change in psychology among the interest rate community and illustrate the need for a new subliminal message crew from the Federal Reserve.


  1. Brent up another 5 points. Silver allowed to run to 33.50 and capped. Gold allowed to run to 1725 and capped.

    It looks like the cartel has one more push lower in the cards if they get the favorable conditions in the form of strong DXY and weak general markets. That would be my guess that they push the DXY back up to the 79.50 area or 1.31 on the EUR/USD/ I've already started scaling into an April/May/June Call option spread. If they knock it back down to 1705, 34.50 - I'll be right there hitting the bid.

    I don't see anything getting in the way of the equities market right through the elections. The ONLY thing that can bring Obama down at this point is inflation, and the powers that be still have some ammo to use before that gets completely out of control. (margin hikes, DXY tuning, Commodity complex market manipulation, saudi production increases, etc.) All short term, but effective nonethless to keep things in check for six months or so.

  2. And then their was that pesky little uprising over their in that sand ridden place called the "Middle East".

    Another breaking story is the central bank of Israel now investing in US Stocks...not to worry though, only 2% of their reserves. Swiss Central bank has been doing it for awhile. Now, the Fed cannot directly perform these miracles, but they can backstop these Central banks through the IMF. Then the Fed requests that they put up their money into the good ole US DJIA. What a wonderful continuation of the Ponzi to infinity.....Customer confidence up, stock market up, phoney baloney statistics showing inflation down, Big Bullion banks checking on gold and silver..All is well. All we have to do is just stop those pesky oil speculators and crush the uprisings.

  3. The Church gives us today “ the Golden Rule” in its reading of the Gospel of Saint Matthew 7,12 “ Therefore all things whatsoever ye would that men should do for you, do ye even so to them : for this is the law and the prophets.” OK it’s old English, but the message is always fresh – it is in how you treat others that you can be expected to be treated by the Lord. If the people that we entrust to produce price stability start meddling in the workings of the markets, I think that you can proclaim that the End is near – a question of moral hazard – to themselves, and towards others. This too you can find in the bible, Gospel according to St Luke chapter 16.
    The “Golden Rule” - not because of some relationship to gold, but because it applies to everyone. JFK said it beautifully, “Ask not what your country can do for you, but what you can do for your country.”
    We all want the banking system to work, but at what price? Do you really want someone accommodating the rules so that the system can continue to work a while longer? Granted we live in the present – so we ALWAYS have the freedom to choose what is best for us and our fellow man. Certain wonderful examples of this exist for eternity. I am thinking of the edifying example of Edith Stein who chose to stand to deliver – not for a few silver coins – but of her person. She was arrested the 2nd of August 1942 and sent to her death at Auschwitz. She was a Carmelite sister having converted to the Catholic faith. I leave her the last word (my translation):
    In attaching ourselves to Him (Jesus) we achieve the liberty and solidity that we should have to serve as a support and in our turn sustain others.

  4. SPX 555

    This market hype debt bubble will be ending so badly.

  5. I find your comments on Liquidity incisive, as this market puts me in mind of the Era of the "Greenspan PUT" which of course led up to the 2007-2008 Lehman, et al debacle. Liquidity drove that market, masking everything, until BAM !
    I note whole movement corrections for any given item tend to come in one day, but something like Decade bottoms will now come Quadrennially if the progression holds. I think caution will be the watchword. No problem taking money from a rising stock market AS LONG AS YOU OBSERVE YOUR STOPS. I find the Rising price, Falling volume -> LINK


    Pretty disturbing but a good way to visualize more more money being funnelled into fewer and fewer stocks.

    Thanks again for your insight, Dan !!


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  7. The Fed's weekly GSDS report shows a jump from 1/18 at $456b to $634b week ending 2/22 in gov't securities.

    The Securities Lending daily OMO has averaged about $19 billion the lat 10 days.


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