Feeling a little nervous .......................?

Man if you don't believe that this market is floating on a mass of hot air, the last few days should have  convinced you otherwise. The bad news comes early in the day and  the market reacts negatively but by closing time the Momo's have bid the market back up to save the day. If you're still not concerned, the following charts will at least give you pause in your conviction.

One of the charts you should take a look at on a regular basis is the Institutional Index. These are the very large organizations that move large pools of money and as such tend to move the markets over the long term. (Types of typical investors include banks, insurance companies, retirement or pension funds, hedge funds, investment advisors and mutual funds. Their role in the economy is to act as highly specialized investors on behalf of others. For instance, an ordinary person will have a pension from his employer. The employer gives that person's pension contributions to a fund.)
The chart shows you a comparison of the Institutional Index relative to the SP500 index in the lower window. Note how the XII continues to make lower highs and lower lows while the SP has made a higher high after the 2000 high. The take away from the chart is that the big money is not all that impressed with the market rallies. The XII is approaching the downward sloping yellow trend-line that has stopped its progress in the past.

Dow vs Transports

The second chart is another comparison but this time its the Dow Transportation Index vs the Dow Jones 30 Industrial's. This is one of the charts the Dow Theorists use to confirm whether the market is in-sync or not. The Industrial's have been on a terror of late but the Transports (which consist of the guys like FedEx and UPS)  are not keeping pace. If you think the market is as healthy as the media portrays then the guys who deliver all the goods we are supposed to be buying should be going all out. Not so.

Alright, you still have some questions about where we really are. Here are some statistics that will help you to understand the situation we are in as found at — The Economic Collapse Blog

One very famous author once wrote that “people are destroyed for lack of knowledge”, and that is exactly what is happening in America today. Most Americans simply don’t understand what is happening economically, politically, socially, morally or financially in this nation. Please help me wake the sheeple up.

The following are 20 economic statistics to use to wake sheeple up from their entertainment-induced comas….

#1 The United States has more government debt per capita than Greece, Portugal, Italy, Ireland or Spain.

#2 The European Commission has formally declared that Europe has now entered another recession. German banks are leveraged 32 to 1 and the European financial system is rapidly approaching a nightmare. Lehman Brothers was only leveraged 30 to 1 when it finally collapsed.

#3 There are clear signs that economic activity is also significantly slowing down in the United States. For example, new orders for goods manufactured in the United States experienced the biggest drop in three years in January.

#4 U.S. consumers are busy racking up staggering amounts of debt once again. Total consumer debt rose at an annual rate of 9.3 percent in December. It is now sitting at a grand total of 2.498 trillion dollars.

#5 The U.S. Postal Service has announced plans to eliminate 35,000 more jobs.

#6 There are more unemployed Americans than there are people living in the entire nation of Greece.

#7 The percentage of American men that have jobs is near an all-time record low.

#8 Right now, there are 88 million working age Americans that do not have jobs and that the government says are not looking for jobs.

#9 The average duration of unemployment in the United States is nearly three times as long as it was back in the year 2000.

#10 In January 2009, there were 2.6 million “long-term unemployed workers” according to the federal government. Today, there are 5.6 million.

#11 The average price of a gallon of gasoline in the United States has risen by 14 cents in just the past week, and the average price of a gallon of gasoline in the state of California is now an astounding $4.29. Sadly, the price of gas is expected to continue rising over the next few months.

#12 The U.S. housing market continues to struggle deeply. Home prices in the 4th quarter of 2011 were four percent lower than they were during the 4th quarter of 2010. Overall, U.S. home prices are 34 percent lower than they were back at the peak of the housing bubble.

#13 Large numbers of Americans are putting off basic health procedures due to the declining economy. Just consider the following example from a recent Huffington Post article….

Americans between the ages of 50 to 64 got 500,000 fewer colonoscopies, or screenings aimed at detecting colon cancer, during the recession, compared to the two years before, according to a recent study from researchers at the University of North Carolina’s medical school.

#14 The number of Americans on food stamps has increased by almost 50 percent since Barack Obama first took office.

#15 Right now, 48 percent of all Americans are considered to be either “low income” or “living in poverty”.

#16 The U.S. government is stealing about 150 million dollars from our children and our grandchildren every single hour of every single day.

#17 If Bill Gates gave all of his money to the U.S. government, it would only cover the U.S. budget deficit for about 15 days.

#18 Since the Federal Reserve was created, the U.S. dollar has declined in value by more than 95 percent and the U.S. national debt has gotten more than 5000 times larger.

#19 Approximately 25 million American adults are living with their parents. Most of them are doing it for economic reasons.

#20 According to a new Politico poll, only 30 percent of all Americans believe that the next generation will be “better off economically” than the previous generation.

— The Economic Collapse Blog

Oil prices vs Liquidity.......................

The market continues its climb higher on h-opium fueled by a false sense that the European problems have reached a final solution, the massive amounts of liquidity the Global Central Bankers have injected into their economies are showings signs of rejuvenation and the media's constant lies of how everywhere there are signs of a  U.S. economy that is about to break out to the upside.

The facts remain that:

1. The European economies are no where near a final solution.
2. The U.S. economy is closer to recession than recovery.
3. The market is now getting smarter in that the price of oil now reflects the belief that all that liquidity will result in massive inflation. Remember that we've shown that the demand for oil and gas is falling.
4. Wage growth is declining and 
5. The consumer is saving not spending.
6. The housing market is still flat on its back despite the lies from the NRO. (see chart Below)
7. The Auto industry is selling vehicles only because they hired the loan experts from Countrywide Mortgage.

Here's a quote from Tim Straus at http://www.theburningplatform.com/?p=30195 and the comment covers my feelings on this market to a tee:

In the meantime, from one who has totally underestimated the power of the combined strength of central banks providing massive liquidity injections in unison, I remain as concerned by what I see going on in this country as I have ever been..............................

Here's a chart that we need to keep our eyes on for the next few months. I really feel we will know if this market will continue to rise on fairy dust or will finally succumb to reality by the Ides of March.

Crude Oil

On the chart we have the oil (WTIC - West Texas Intermediate Crude) shown vs the US dollar as a solid blue line. In the lower window is the SP500.
Note the green dotted line at the $110 dollar level on the right hand scale. The key takeaway here is the fact that the last two times the WTIC pushed above the line we had a major correction to the SP500. Odds favor the same results this time as the economy is not strong enough to handle the effects of oil at this price for very long.

Dumb Money- Guy Lerner

When the h-opium  gets too high the market starts flashing signals of too much greed or fear. Right now the dumb money is way too enthusiastic about their chances of the market going to the moon. The indicator (Dumb money) is  a composite of 4 inputs. Go to TechnicalTake to see the details. Time to reign in the exuberance.

One last chart - on Housing. You tell me if you can see the same turning point the mass media was so giddy about this week. Looks like we are still flat-lined for the moment and you have to wonder what's going to happen when that inflation thing gets going and interest rates start to rise. We are as close to zero as we can get thanks to good old Ben.

We are getting to the point where you are going to need to put your Plan B into action very soon. You do have one don't you?

Time to sell............................?

Here's a chart and comments from Lance Roberts at Streettalklive.com that mimic my position from yesterday. First the chart showing the SP500 with Bollinger Bands at the 2 and 3 standard deviation levels. His point is that when the market starts to touch the extremes, which are near the 3 standard level, its time to get conservative. Below are selected comments from the article  (bold and italics are mine)

"However, with the market now pushing higher, and "Dow 13,000"being flashed across CNBC with a point by point count of the potential crossing, investors are once again giving into their"greed" emotion. The reality is that the market is already pushing extremes and the opportunity to buy into the market has already passed. This emotion based, lemming, response to very advanced rallies is the same "siren's song' that has lured many a ship's Captain to their watery graves. Listening to the media will lead you to ruin."

"While the media continues to tout every advance to a previous level as the coming of the next great bull market - keep in mind that this has nothing to do with your money or investing. Bonds and cash have outperformed the stock market over the last decade - yet individuals, chided along by the media and Wall Street, still chase the worst performing asset class over that time frame."

Here's another chart of mine that shows extremes in two well known indicators. The middle window on the chart is a measure of the number of puts/calls. If you're bullish you'd be buying call options and if you're bearish you'd be buying puts. Currently we are working off extreme optimism. (Note sell signal upper right hand side of chart)

The lower window on the chart shows the volatility index (VIX) which measures fear or greed. It works inverse to the SP500 index and it too is at an extreme for complacency (lack of fear) and will start to turn up in the near future.



All things considered .................... I'd have to say we are getting close to some sort of top.

Never short a dull market.....

There is an old adage that says "never short (sell) a dull market". This market  is rising on fumes in terms of volume and that was the scenario for the last two topping moves. On the left is the long term chart of the SP500. As can be readily seen on the chart, we are completing a long term bearish wedge that had appeared to end in May of 2011 with a truncated wave "E".The last several months have seen the index put in a intermediate bottom with a subsequent rally back to the May top. The indicators suggest that there is a possibility the index could break out and attempt a new high near 1600. The timing to complete the move higher could last the balance of 2012. The odds, however, seem to indicate that we will know the direction  for the market by at least the "Ides of March". We still have mixed signals with the middle box showing a turn in the making and the lower box showing the long term indicator is still holding above the zero line and flat lining at the moment. So we are neutral to bearish for the time being.

The following charts should give you pause on jumping into to the rally like the saps on TV.  Everyone who drives knows whats happening with the price of oil and as a result its derivative gasoline. Here's a chart showing the relationship of spikes in oil prices to the onset of recessions. We are watching the price of oil and gasoline rise as a result of the sword rattling by Iran in the Straits of Hormuz and the price of gasoline being seasonal will be largely effected by the changeover to the summer blends as well as any geopolitical inputs. We could see a double dip recession like the one shown for the early 80's.

Gasbuddy does an annual forecast for the price of gasoline and as is normal the peak in prices tends to come around Memorial Day. The chart shows the price is moving higher and the $4-$5 dollar range is not out of the question. California is already near $4.00. The geopolitical issues could drive the price significantly higher if they come to pass.

The red line on the chart is the average price and the black bars are the range.

Now there is a mystery surrounding the real level of gasoline demand. If the economy is actually starting to get better then we should see more people driving to their jobs and more fuel being used to deliver the goods and services companies are producing. There doesn't seem to be any increase at all in gasoline sales and the fact that the price of gas is rising will not provide the lift to the economy, on the contrary, it will lead to less demand.

Chart via dshort.com

ZeroHedge article and chart

Then there is the incessant government and media lying on the BLS reporting of unemployment numbers. 

Sick of the BLS propaganda? Then do the following calculation: using BLS data, the US civilian non-institutional population was 242,269 in January, an increase of 1.7 million month over month: apply the long-term average labor force participation rate of 65.8% to this number , and you get 159.4 million: that is what the real labor force should be. The BLS reported one? 154.4 million: a tiny 5 million difference. Then add these people, who the BLS is purposefully ignoring yet who most certainly are in dire need of labor and/or a job, to the 12.758 million reported unemployed by the BLS and you get 17.776 million in real unemployed workers. What does this mean? That using just the BLS denominator in calculating the unemployed rate of 154.4 million, the real unemployment rate actually rose in January to 11.5%. Compare that with the BLS reported decline from 8.5% to 8.3%. It also means that the spread between the reported and implied unemployment rate just soared to a fresh 30 year high of 3.2%. And that is how with a calculator and just one minute of math, one strips away countless hours of BLS propaganda.

The world markets are being held captive by the Government policymakers and central bankers. The headwinds facing the market are not getting fixed but merely band aided. Sooner or later the market will begin to grasp the magnitude of the problems facing it, then fear will replace greed. Until then, please use caution in placing any large bets until the market shows its hand. Cash is a good thing at the moment.

The Momo's are at it again.

I don't like to post when there is really nothing to say. The last several trading days you would think that the markets have been stuck in neutral. Today the market is rallying for no good reason which just means traders are just testing the waters to see if they can suck in as many folks as possible before pulling the rug out from under them. We are in that twilight zone where all news is good news and all the Momo's need is a little encouragement and they jump in with both feet.

This mornings miss on the ADP jobs number for NFP report is typical of the news of late. And as is always the case when the numbers are bad, they are announced with the standard pre-qualifier "unexpected miss". Below is a comment from TrimTabs, courtesy of Zerohedge, that shows you that anyone studying the economy seems to know:

“The weak job growth in January has us concerned,” says Madeline Schnapp, Director of Macroeconomic Research at TrimTabs. “It appears that the economy has hit stall speed due to lackluster demand and a deleveraging consumer who would rather save than spend.”

“We see nothing on the horizon to knock the economy out of its slow growth mode,” notes Schnapp.  “The economy faces substantial headwinds from negative real wage and salary growth, high unemployment, waning government support, expiring tax incentives, contracting state and local governments, elevated fuel prices, and a sluggish housing market.”

After reading that, how could the government economists have "missed" the call due to unexpected inputs? Aren't they the jackasses that work these types of numbers day in and day out? There must be a reason for all those very high paid economists and analysts missing the numbers and its probably contained in the subject matter below: (Lance Roberts,StreetTalkLive.com and John Crudele, New York Post)

ECONOMY WORSE OFF THAN YOU THINK
Posted by Lance Roberts on Tuesday, 31 January 2012 13:50

NEW YORK POST
By JOHN CRUDELE
Last Updated: 12:34 AM, January 31, 2012

The economy did horribly in the last three months of 2011.
I know that's not what you've been hearing.

During this past Christmas season you were first told that consumers were dying to get to the malls and shop. That turned out to be true — for a couple of days at least, while stores were desperately discounting everything they had.

Then you were told that manufacturers were having a bang-up month and that automakers were selling cars like it was the old days.

And Apple — who could forget Apple? — was selling iAnythings like they were some sort of lifesaving device and every American was in the hospital emergency room.Last Friday the Commerce Department released its tally of business conditions in October, November and December. And it was, well, quite disappointing if you actually know what to look at.The headline number you saw on the evening news that night and in the newspapers on Saturday was this: the nation's gross domestic product rose at a 2.8 percent annual rate in the 2011 fourth quarter, which was better than the 1.8 percent growth in the July-September period.In the first place, 2.8 percent isn't a good rate of growth for any year.Take out your calculator, divide 2.8 percent by the four quarters of the year, and you'll see that fourth-quarter growth — even if you take these numbers at face value — was just 0.7 percent.Tepid. Lukewarm. Disappointing. Not what should be happening four years into a recession (oh, right, that's supposed to be over) after the Federal Reserve has used all its tricks and our elected officials have bankrupted the country.But it gets worse.(If you start coughing up blood while reading this column I suggest you dial 911. Remember, I'm just the skeptical messenger trying to set things straight, so don't take it out on me.)And that meager 2.8 percent annual growth really isn't what it seems to be.That's because 75 percent of that 2.8 percent growth involved businesses restocking inventories. Who says? The Department's Bureau of Economic Analysis, which released this data.So people like you and me weren't really buying all that stuff in the last months of 2011. It was businesses buying stuff and putting it on their shelves in hopes that people would soon come along and buy it from them.Inventories will only build up so much before companies say "no more." So these restockings are not considered a particularly good thing when the ultimate buyer — the consumer — is still uncooperative.But that wasn't the only scary thing in the GDP report. In fact, it wasn't even the most important thing.In order to get to that 2.8 percent growth the Commerce Department used a very unrealistic level of inflation in its calculations.Let me explain: The government comes up with a figure on how much it thinks the economy grew, or shrunk. Friday's figure was a first estimate for the fourth quarter, so most of the numbers used in the calculation are only guesstimates anyway. (But that's for a different story.)The government then takes that growth figure, subtracts the rate of inflation and comes up with the real growth it reports in its press release.So, in other words, if inflation is rising it reduces the rate of actual, after inflation, growth — which is the figure that Washington reports.In Friday's number the government used 0.4 percent as the rate of inflation. Zero. Point. Four. Percent.In which country is inflation that low? Certainly not in America. Absolutely not in the last four months of 2011.The consumer price index, which is put out by the US Census Bureau, had prices up 3 percent for the year.And the rate of inflation used in calculating the third-quarter 2011 GDP was 2.6 percent; in the first and second quarters, combined, the rate was 2.5 percent; it was 1.9 percent in the fourth quarter of 2010.So how does the Zero-Point-Four-Freakin' percent sound now?That's how Commerce got to the not-very-inspiring 2.8 percent growth it reported last Friday.Let me put this another way in case you are missing my outrage.If the inflation figure used in last Friday's GDP figure had just remained the same as the 2.6 percent rate from the third quarter, Washington would have had to report fourth-quarter annualized growth of just 0.6 percent.(Calculation: Inflation was lowered by 2.2 percentage points. So subtract 2.2 percent from the 2.8 percent growth to get 0.6 percent.)And that's an annualized rate. So divide the 0.6 percent by four quarters and the economy expanded at an itsy-bitsy, teeny-weeny 0.15 percent in the fourth quarter.

 On Friday, the Labor Department will issue its employment report for January.Wall Street had better get out the Depends.

john.crudele@nypost.com

The numbers you get from the MSM media and the financial press are being massaged to the nth degree. This after all is an election year and the party in power owns the pen that prints the numbers. Take it for what its worth and only believe the numbers you see on your stock charts. Eventually they will lead you in the right direction. Still waiting for the direction to become clear.