Financial Market Report for Monday January 14, 2013, and Tuesday January 15, 2013
1) … Shanghai Shares top out completing Liberalism’s Peak Prosperity
On Monday, January 14, 20123, The National Bank of Greece, NBG, and Greece, GREK, traded lower; while Turkey, TUR, New Zealand, ENZL, and Shanghai, CAF, traded higher.
Bespoke Investment Group asks Has a New China Bull Market Begun? The Shanghai Composite is currently stuck in the longest bear market it has ever seen (going back to 1990). From 11/08/2010 to 12/3/12 the $SSEC, CAF, fell 38%. Should the Shanghai gain another couple percentage points, a new bull market will be at hand.
The Shanghai Shares, ^SSEC, began to trade lower as QE1 came on line and the US Shares, VTI, and the S&P, SPY, started their current rally. The Shanghai shares fell lower as Liberal Finance, specifically the value of US 30 Year Government Bonds, EDV, and 10 Year US Government Notes, TLT, propelled VTI, and SPY, higher. But, in December 2012, as the value of Aggregate Credit, AGG, traded lower on a steepening yield curve, as seen in the Steepner ETF, STPP, steepening,, the Shanghai shares, $SSEC, CAF, traded higher, so as to participate with all the World Carry Trade Markets, EFA, in Liberalism’s final risk-on global debt, and currency carry trade, rally with the monthly chart of Chinese Yuan, CYB, showing a strong rise beginning in November 2012, coming from an Elliott Wave 4 of 5 bottom, to complete an Elliott Wave 5 High. The Shanghai, $SSEC, CAF, is at its market top, trading in completion of its up cycle, with all the World Carry Trade Markets, EFA, at their market tops.
All the Major World Currencies, DBV, the Emerging Market Currencies, CEW, and the Chinese Yuan, CYB, will be falling lower in value as investors derisk and deleverage out of World Socks, VT, and World Carry Trade Stocks, EFA, on the exhaustion of the world central banks’ monetary authority.
Competitive currency devaluation, will induce a see saw destruction of World Stocks, VT, and Bonds, BND, LIberalism’s Peak Prosperity has arrived with World Stock, VT, Major World Currencies, DBV, and Emerging market Currencies, CEW, topping out.
Gold, GLD, is on the verge of breaking out. Soon physical possession of it, either in Bullion form, or in Internet trading vaults, such as Bullion Vault, and Diktat, will be the only two forms of sovereign wealth, as the fiat money system breaks down, and the diktat money system comes online, as national leaders meet in summits and renonce regional sovereignty, announce regional framework agreements which pool sovereignty regionally, and as regional sovereign bodies, and regional sovereign leaders replace nation states, to produce seigniorage, that is moneyness, where the word, will and way of authoritarians serves as credit money and wealth. Authoritarianism’s seigniorage of diktat will replace Liberalism’s seigniorage of choice.
And on Monday, January 14, 2013, a number of the World Banks, IXG traded to new rally highs, including LYG, RBS, BSMX, BAP,CIB, CS, SAN, IRE, which took European Financials, EUFN, only to trade lower from a hanging man candlestick rally high on Tuesday, January, 15, 2013.
Yet, on Tuesday, January 15, 2013, Major World Currencies, DBV, led by the Swiss Franc, FXF, and the Swedish Krona, FXS, as well as the Chinese Yuan, CYB, and Emerging Market Currencies, CEW, led by the Indian Rupe, ICN, traded lower, and the Brazilian Real, BZF, rose on short sell covering forming a hanging man candlestick. All of which induced International Corporate Bonds, PICB, to trade lower from its rally high. The currency demand curve, that is the ratio of the Small Cap Pure Value Shares, RZV, relative to the Small Cap Pure Growth Shares, RZG, RZV:RZG, traded for the first time below 50 day support, communicating that competitive currency devaluation has commenced. Confirmation of such comes from the Proshares 200% Inverse ETF, YCS, falling parabolically lower.
Perhaps today, Tuesday January 15, 2013, with a small trade lower in currencies is the termination of the rally in stocks, and the beginning of a global bear market.
On Tuesday, January 15, 2013, Country Stocks, EFA, trading lower included the following:
South Africa, EWA
South Korea, EWY,
On Tuesday, January 15, 2013, Global Producers, FXR, trading lower included the following:
ARMH … UK
LPL and MX … South Korea
REGN and AMGN …. US
ERIC … Sweden
ASML and ASMI …. Netherlands
TSM … Taiwan
ABB and LOGI …. Switzerland
CX … Mexico
SLT … India
BHP … Australia
On Tuesday, January 15, 2013, World Banks, IXG, trading lower included the following:
Argentina Banks, BMA, BFR, GGAL,
India Bank, HDB,
Brazil Banks, BBD, BSBR, ITUB,
UK Banks, RBS, LYG, BCS,
South Korea Bank, KB,
Peru Bank, BAP,
Japanese Banks, NMR, MFG, SMFG, MTU
Spain Bank, SAN,
German Bank, DB,
Greek Bank, NBG,
Mexico Bank, BSMX
Ireland Bank, IRE
European Financials, EUFN,
Emerging Market Financials, EMFN,
An example of debt deflation causing stocks to turn lower is that of Germany’s software giant SAP. SAP falls short of expactoins. Quarterly earnings from SAP AG fell short of expectations on Tuesday, showing the German business software maker failed to keep up with arch-rival Oracle Corp and sending its shares sharply lower.
Zero Hedge reports Hedge funds most levered and long since 2004. Yet, I believe that World Stocks, VT, World Carry Trade Markets, EFA, have topped out on the topping out of Major World Currencies, DBV, and Emerging Market Currencies, CEW, and that these will be falling lower on the exhaustion of the world central banks’ monetary authority, as bond vigilantes, have called the Interest Rate on the US Ten Year Note, ^TNX, higher from 1.70%, as well have induced the 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, higher, as reflected in a steepening of the Steepner, STPP.
Bespoke Investment Group writes US 10-Year Yield: Breakout or Fake Out? While equities have been the place to be so far in 2013, some of the gains have come at the expense of US Treasuries where yields have been on the rise. Less than two weeks ago, the yield on the 10-year US Treasury broke out above significant resistance and traded as high as 1.97% on January 4th. At the time, it looked as though the yield was staging a textbook breakout. That breakout in yield, however, is quickly beginning to look like a fake out. As shown in the chart below, after the last few days the yield on the 10-year has now drifted back below its breakout point. Commentators have been quick to write the obituary of the bull market in treasuries, but based on the 10-year yield in the last few days, the market may be saying not so fast.
As World Stocks, VT, trade lower, it is likely that the Interest Rate on the 10 Year Note, ^TNX, will decline for a while higher, before it trades higher, and then rises first above 1.85%, and then above 1.90%, as bond vigilantes call a steeping of the 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, which will be seen in a steepening to the Steepner ETF, STPP. At that time, the 10 year US Government Note, TLT, and All US Government Debt, GOVT, will be falling lower in value, and be participating in a see saw destruction of fiat wealth. Currencies, DBV, CEW, Stocks, VT, and Bonds, BND, will all be falling lower into the Pit of Financial Abandon together, on the exhaustion of the worlds central banks’ monetary authority. An investment demand for Gold, GLD, is coming as physical wealth replaces fiat wealth.
Mortgage Backed Bonds, MBB, have turned lower from their September 2012 highs reflecting a growing aversion to real estate investing, and a growing risk aversion the implied underwriting of Freddie Mac and Fannie Mae by the US Congress. Mortgage REITS, REM, saw a sharp sell off in November only to participate in a risk-on recovery with a blow off top in the US Stock Market, VTI, and the World Stock Market, ACWI. Total Bonds, BND, have turned lower on lower US Government Debt, especially lower 30 Year US Government Bonds, EDV, and lower 10 Year US Notes, TLT.
The monetization of debt by the US Federal Reserve has caused debt deflation in Aggregate Credit, AGG. Overall US Treasury Bonds, GOVT, are trading at the edge of a massive head and shoulders chart pattern, which will in time progress to a turn lower in all US Debt. Interest Rates on Sovereign Debt began rising globally in January 2013, forcing World Treasury Bonds, BWX, and Emerging Market Bonds, EMB, lower
Municipal Bonds, MUB, started their fall lower in December 2013, only to participate with Mortgage REITS, REM, in a recover; these were literally drawn up by Liberalism’s final risk-on rally. The only debt that has risen consistently has been is the most toxic of debt, Distressed Investments, FAGIX, which is held by the US Federal Reserve, and serves as the basis of what has been unlimited quantitative easing, Leveraged Buyouts, PSP, Senior Bank Loans, BKLN, Call Write Bonds, CWB, and Junk Bonds, JNK.
2) … Inflationism will be turning into Destructionism on the exhaustion of the world central banks’ monetary authority, and as a result Liberalism will be pivoting into Authoritarianism.
Nature economist Elaine Meinel Supkis writes Desperate Fed Reserve copies Bank of Japan while US pundits still think the US is strong. The Federal Reserve has completely changed its formative activities since the banking collapse. It is now the capital holding tank for international speculators and banks.
From today’s news, Bloomberg reportsFed’s Little-Noticed Escape Clause Allows for U.S. Growth. He’s made his third round of quantitative easing open-ended, meaning the program doesn’t have a set time frame, and signaled he may adjust its pace if needed. In December, the policy-setting Federal Open Market Committee added outright Treasury purchases to its mortgage-bond buying, saying it would acquire U.S. government debt “initially” at a pace of $45 billion a month on top of $40 billion in home-loan debt. “The extra flexibility will work both ways: They can stop sooner or keep going longer” than if they had set out parameters from the start, said Dana Saporta, U.S. economist at Credit Suisse Group AG in New York … See? This is an ETERNAL change, not a temporary emergency action. This is a radical departure, not more of the same thing but bigger. This is new. And where was the debate? I didn’t see it much. This sailed through without so much as a peep. The same people who yell nonstop about government spending are silent about this for the most part. That is, Congress seems pretty unconcerned.
The Banking community loves this, people who want infinite government spending love this, people who want eternal war with no tax hikes love this, who hates this aside from the old guard ‘gold standard’ people and a few libertarians?
The need to make the Fed the funding machine for war is paramount and never mentioned except by maybe Ron Paul. This machine funded WWI, WWII, the European debts from both mega-wars, the Cold War, the Vietnam War and the War on All Muslims. And it is also responsible for the collapse of our financial welfare system as all systems break down more and more.
Here is a ‘liberal’ editorial supporting the debt state that never mentions our huge trade deficit but does recognize the need to stop the madcap wars: E.J. Dionne: America is not in decline or retreat – The Washington Post
Obama’s harshest critics are essentially charging that he has accepted American decline. They are convinced he wants to pull back from the world and slash the Pentagon budget to make room for more domestic spending. He’s often accused of making the Western European choice: less for the military, more for the welfare state.
News to E.J. Dionne: the US is in decline, severe decline. All data points to the obvious. Our industrial base has nearly vanished. Our natural resources are being sucked dry. The middle class is disappearing. Our children do worse in school than foreign rivals. Our trade deficit is horrendous. Our debts are the biggest on earth, bar none. We have the least sovereign wealth of all nations and the most expensive military, healthcare system on earth. When Reagan talked merrily about morning in America, what he brought was doubling and quadrupling the national debt, trade deficits, inflation and wars. We have been on the wrong road since Reagan and we are very much still on the wrong road.
Our country wasn’t really weak after Vietnam, it was in fiscal trouble due to war spending while tax cutting and this caused inflation which was fixed by killing the unions, offshoring our industries and above all, using the stupid floating fiat currency which caused our immense trade deficits
And we are perched on the edge of the Congressional Fiscal Cliff but that is all about cutting social services and denying the Northeast the sort of hurricane aid the South has enjoyed for the last 60 years: Obama Says G.O.P. Won’t Get ‘Ransom’ to Lift Debt Limit. He is digging in his heels because the average American wants this spending. But NONE of the leaders in DC are at all concerned with the core problem which is how our floating fiat currency has caused us to lose all our sovereign wealth via this floating fiat currency system we are using today.
The Fed kept Wall Street and the City of London’s traders alive via this rescue operation which dwarfed anything that ran before. What was a ‘spare change’ business of rescuing people from their own follies turned into a gigantic scam to capitalize Wall Street gnomes who were being gored by the Derivatives Beast. It shot up from being less than $5 billion to a quarter trillion. Zero gratitude from the gnomes when they were rescued from their deep Cave of Wealth and Death disaster.
The sudden huge mountain of securities held by the Fed still remains, this was ‘only’ nearly $200 billion.
(I remark that the sudden surge of securities held by the Fed is comprised of toxic debt like those traded by the Fidelity Mutual Fund FAGIX. This so called investment came at the bequest of JPMorgan’s James Dimon)
And this is hideous and amazing and ignored: the $3.2 TRILLION in securities held in custody from those noxious and utterly evil foreign banks and bankrupt countries in the EU system.
And the Fed used to hold only a handful of Treasury securities but began buying it up rapidly exactly the same time the Bush Jr. tax cuts, so beloved by the entire GOP and which the GOP still wants to keep, began screwing up things while we went into two very expensive, privatized wars. It is now at $75 billion and going up.
Same here, a sudden shoot upwards of repurchase agreements which continue high. There were virtually none before the Bush tax cuts. Now on to Krugman again: Paul Krugman: Jon Stewart Is ‘Ruining His Brand’ By Belittling The Trillion Dollar Coin (VIDEO). Stewart mocked the idea on his show last week, saying “we don’t need some trillion-dollar coin gimmick, we need a way to get the world to take the U.S. dollar seriously again.”…
“Obviously neither he nor his staff did even five minutes of looking at the financial blogs,” Krugman said of Stewart in the web interview. “Lots of people think it’s a bad idea. Lots of people think it’s a good idea. But it’s not just, ‘Oh, those idiots.’”
Krugman has defended the coin as a “silly, but benign” way of preventing Republicans from taking the nation’s economic health hostage by demanding spending cuts in exchange for raising the country’s borrowing limit. As usual, Krugman is all defensive yet he, himself, calls the coins scam ‘SILLY’. Yes, it is silly. But NOT ‘benign’. It is an end run around our political system with dire consequences. The world doesn’t hate the US dollar, they all want it as strong as possible and this is where the silly man, Jon Stewart, is being stupid. Both men don’t understand how money works and why our trade rivals torment themselves in order to make the dollar stronger. They do this to eat up our industrial base, take our sovereign wealth and to become the owners of America. Duh. Because neither man wishes to understand this salient and obvious fact that all our foreign trade partners understand perfectly well shows us how hubris works.
They all think the US is strong, special and smart. This is foolish and sad.
Mike Mish Shedlock writes German economy shrinks most in three years German economy shrinks most in three years. Germany is in recession. It’s not a “technical recession”, no matter how anyone labels it. And the recession will pick up steam as the year progresses.
Please consider the Financial Post article Germany’s economy shrinks most in 3 years as crisis hits eurozone powerhouse. The German economy was hit hard by the eurozone crisis in the final quarter of last year, shrinking more than at any point in nearly three years as traditionally strong exports and investment slowed, the Statistics Office said on Tuesday. Economists expect Germany to bounce back after forecasts for weak growth in the first quarter but Europe’s largest economy will be less of a pillar of support for the rest of the currency bloc, where many of its peers are deeply in recession. Gross domestic product shrank by 0.5% in the final three months of 2012, the worst quarterly performance since Germany fell into a recession during the global financial crisis in 2008/2009 and only the second contraction since it ended. The 2012 figure was a tad below a Reuters consensus forecast for growth of 0.8%. The government is due to publish an estimate for 2013 growth on Wednesday. An official from the Economy Ministry said growth would be 0.4% this year, less than half the government’s existing forecast of 1.0%.
Note the GDP downgrade from 1.0% to .4% for 2013. Expect another and another. The only thing that Europe has going for it is a recovering bond market but don’t expect that to last either. Italy and Spain are known basket cases. More importantly, France, the Hidden Zombie in Europe, is about to take a deep plunge. Finally, the recent pickup in China is not sustainable, and the US is clearly weakening. Since Germany cannot export to itself, its export machine will grind to a halt as I said well over a year ago.
A European Superstate will emerge out of a soon coming Financial Apocalypse which will introduce the Ten Toed Kingdom Of Regional Governance replacing British Hegemony and Dollar Hegemony that has governed the world since the late 1700s. There has been two iron legs of global hegemonic power that have underwritten Liberalism since the late 1700s: British Hegemony and Dollar Hegemony.
The City of London, is the government and policing services for the financial and commercial heart of Britain, known as the Square Mile. The City of London is the black shrouded reality of British Hegemony. The Washington Post article reveals a truth, the City of London Financial District, is the Sovereign UK, while the Parliamentary UK, is simply a mirage sovereign nation state. The Economist wrote describing the City of London’s global hegemonic power, “In continental Europe, the City is viewed with a mixture of loathing. London, is by many measures the world’s biggest financial centre, and weakening it is in nobody’s interest, least of all Britain’s. Better regulation of banks is certainly needed, especially to protect British taxpayers. And so far the City bashing has been mainly rhetorical. But running down one of the world’s most successful, and mobile, commercial clusters is folly, and it is surely not the legacy Mr Cameron would wish to leave his successors.”
British Hegemony together with Dollar Hegemony, has governed the world as Two Iron Legs of power since the late 1700s. This is the objective truth foretold by the Prophet Daniel in Daniel 2:25-45, where he interprets Nebuchadnezzar’s Dream as a Statue of Empires that would govern mankind until the arrival of the end times. There has been, and will continue to be a succession of beastly and fearsome world empires or kingdoms; these are
- Head of gold – Babylon
- Breast and arms of silver- Medo-Persia
- Belly and thighs of brass- Hellenistic Greece
- Two legs of iron – Rome flowing out into British Hegemony and Dollar Hegemony
- Feet partly of iron and partly of molded clay – A Ten Toed Kingdom of Regional Governance, which is presented in Revelation 13:1-4 as the Beast Regime of Regionalism, Totalitarian Collectivism and Authoritarianism, that will come to rule in the world’s ten regions and in mankind’s seven institution, replacing the Banker Regime of Crony Capitalism, European Socialism and Liberalism, that was based upon the sovereignty of nation states.
Jesus Christ is at the helm of the economy of God, Ephesians 1:10, and is pivoting the world from British Hegemony and Dollar Hegemony, and into the End Time, Ten Toed Kingdom of Regional Governance, through the prolificacy and related banking and debt crises of the PIGS, that is the Mediterranean countries of Portugal, Italy, Greece, and Spain.
Greece is an insolvent sovereign, and its banks are insolvent financial institutions; at the bottom of all of this is the fact that it cannot make good on its Treasury debt. Greek Socialism is the most extreme form of European Socialism. It cannot exist having huge numbers of employees on the public payroll, having no viable tax collection system, and having a high levels of public corruption, and having immense legal barriers for private corporations to enter the economy. The Telegraph reports Greek opposition warns bail outs are a ‘bottomless pit’. Greece’s left wing opposition leader has warned Germany that his country is a “bottomless pit” for European taxpayers and claimed Berlin’s austerity drive was “inhuman”. It is no wonder that in Revelation 13:1, that the Apostle John, saw the Beast Regime of Regionalism, Totalitarian Collectivism rising from the Mediterranean Sea. In other words, what the Economist Magazine calls Greek “pork and patronage” in its article What have we become, will be the springboard for the rise of Regionalism and Diktat to replace Crony Capitalism and European Socialism.
Credit Liquidity under Liberalism provided prosperity for many. But as moral hazard has come of age, all of humanity will be booked into Authoritarianisms’ California Hotel of austerity and debt servitude, by country leaders, as they meet in summits to announce regional framework agreements, which renounce national sovereignty and pool sovereign regionally for structural reforms, wage reductions, and the establishment of public private partnerships to manage regional economics, as well as to appoint both a regional political leader, and a regional banking, fiscal and monetary pope to deal with an impending Financial Apocalypse, that is a credit bust and financial system breakdown.
3) … The short selling opportunity of a lifetime has arrived
The monthly chart of World Stocks, ACWI, shows an Elliott Wave 2 of 2 High in December 2012, at 48.08. And the monthly chart of S&P 500, SPY, shows an Elliott Wave 5 High in September 2012, at 142.96.
Mike Mish Shedlock writes Consumers cut back on toilet paper, Pampers, Huggies. While one could short sell the Consumer Staples, KXI, seen in this Finviz Screener, more attractive short selling opportunities exist.
Given a stock market top, I see short selling opportunities in the following:
.. Sector ETFs .. such as PSP, IBB, RZV, FAA, CARZ, BJK, KWT, FXR, TAO, DRW, XRT, COPX, VIG, WOOD, ROOF, IGN, ITB, FEMS, SEA, FAN, REM, JJT, PXR, FLM, ICLN, AUSE, XPH, EWX, SOIL, ZIV
.. Country ETFs .. such as EPHE, EPOL, EWW, THD, TUR, ECNS, EWO, ENZL VNM, EWZS, GREK, URTY, EWY, EWX, ARGT, EIRL, EWP
.. and Banks .. such as BAC, C, BCS, LYG, RBS, SAN,DB, IBN, HDB, NMR, MTU, UBS, WF, CS, GGAL, BFR, BMA, BPOP, IRE, CHIX, SMFG, MFG, BSMX, IRE
I see opportunities in going long in the following:
.. Proshares 200% Inverse ETFs .. such as BIS, FXP, SQQQ, SMK, SDD, EEV, EFU,
.. Direxion 300% Inverse ETFs .. such as EDZ, YANG, RUSS, DPK
.. Metal Based ETFS .. such as FSG, UGL, AGQ, NUGT.
These financial instruments can be viewed on my public chart site http://stockcharts.com/public/1270699
4) … In today’s news
Christoph Dreier writes in WSWS article Greek SYRIZA leader meets with German finance minister, Alexis Tsipras met with the German finance minister to discuss the credit agreements between the European Union and Greece.
MarketWatch.com reports Animal spirits in full stride: investor appetite for risk rises to 9-year high, survey finds.
CNBC reports First shots are fired in global currency war
Zero Hedge reports Pictet’s Four Horsemen of The Euro-pocalypse.
Retail Sales, XRT, blasted 2% higher to a new high. Scott Grannis provides the chart article Retail sales recovery. Retail sales have now staged a complete recovery, both in nominal and real terms. No sign of any impending recession here, that’s for sure. Indeed, the recovery in sales is impressive given that there are 4 million fewer people working today than there were at the peak in early 2008. Yet I relate that many of the Retail Shares, seen in this Finviz Screener have fallen sharply. Retailers which have not fallen more than their peers constitute reasonable short selling opportunities; these include TUES, CRI, DDS, KORS, COH, as is communicated by their combined ongoing Yahoo Finance Chart.