Selling Wave About to Overwhelm Interventionists

At the end of last week’s Week In Review, I was rushing to go fishing. I added, “It ought to be an interesting week ahead. Painful for the Bulls, I think.” What comes to mind is the old joke, “So how painful was it?”

Oh, it was painful and I’m not just referring to the fact we caught only two fish on Sunday and then I fell down while running at the Hash on Monday, spraining elbow and knee, which is still an issue. Yes, the market also fell and the Bear ate more than one snapper and one grouper.

The DJIA, S&P 500 and NASDAQ Composite dropped -3.8%, -3.1% and -2.0%, respectively, this past week. Of the international equity indexes, the Sensex 30 of India was in worse shape, falling -4.1%. Only the closely located Hong Kong, Singapore and Philippines were up, although minimally.

This week, it appears that a selling wave has gained sufficient momentum to overwhelm the Interventionists aka the Plunge Protection Team [PPT]. If the DJIA breaks below the narrow 11,700-11,750 range, and I think it will this week, there could a rapid drop to 11,000. That would likely be the end of the second major selling wave. A couple months later, the third and possibly last one could take the DJIA down to 10,000, which is what I predicted a couple years ago as the market was in the process of finding a cycle peak.

That peak, by the way, was extended by the man I call Mr. Moral Hazard, who pumped up equity prices after taking an interim job as US Treasury Secretary -- prior to his return as leader of Humongous Bank & Broker (HB&B).

This coming week we get to look at the plummeting US Consumer Confidence index. Check the chart and you’ll see that the month following the hiring of Secretary Henry Paulson in May-June 2006, the US retail sales index started to plunge, and a year later the Consumer Confidence index started to crash.

You have heard this from me before, but I say the People won’t be happy until he’s removed, which will be a day of considerable disappointment for his banker friends. You see, Mr. Paulson wants to set up all banks and brokers as a self regulatory organization under the Federal Reserve Bank of the US. I am confident in saying that the rest of the world’s regulators and governments have different ideas.

While I may have pulled his leg a bit, I’ve never said negative things about Prof. Bernanke, who rules the roost at the Fed and who will report on monetary policy this Wednesday at the usual 2:15pm time. At least you and I can understand what this Fed Head is saying, even if I don’t always agree. Besides, I love to watch the grilling he gets in Congress from Rep Dr. Ron Paul. You can tell the truth hurts by the expression on Bernanke’s face, and that’s the way it should be.

The Fed meets on Tuesday and reports on monetary policy on Wednesday. There is something like less than a 10 percent chance that the Fed will raise rates after their meeting, and if that do-nothing approach comes true, I suspect (after the FOMC traders try to make it look good) that the $USD will tumble a bit more, which ought to help gold. But here is where I think the precious metal boosters may get to be disappointed because there could be changes forthcoming in the margin requirements on global futures exchanges.

I don’t know this of course, but I can feel it in my injured knee.

Comments

[Bear Stocks Report]

Guess its time to add to our short positions in CLMT, TSO, FMCN, KBH, BCSI, AIG and inverse ETFs like QID, PSQ, SJF.

[BlueDome]

Very exciting article. It should have been titled: "investor guesses at direction of market". Whoop-di-doo.

Is there one fact, or explain opinion, in here?

[skwestorange]

Sorry, this rather wordy and long post did not convey anything new or not known to those that visit this blog. In fact I don't understand what the point of this post was? If all the author wanted to convey is that no one can predict the future accurately all the time, that could have been said directly without all the ranting about Paulson or any one else for that matter.

[ds2007]

I take several interesting perspectives away after reading this article. The author states he anticipates the near-term level of support on the dow (something that should be important to traders and investors alike) , provides some insights into Paulson's motives and the fact that he won't achieve his end goals, and an interesting perspective on an up-comming gold play, complete with a cautionary footnote regarding margain rates which are about to change in order to cool some of the speculation. All and all, I found it to be a decent snapshot of the immediate state of the markets.

[bruin532]

What kinda fish how big and what did you use for bait?

[Whidbey]

Bill we love you because you are so predictably dull. What happened to Dr. Doom? Is he gone so you can have the title? In any case the margin requirements on PM are not going to change for a host of reasons but mostly for want of coordination with the EU, Russia and Japan, not to mention China. So that one is gone. I too am worried because I can not see what turns the herd before the cliff. Tells how that happens, or we will settle for when. Best

[User 139869]

I think BC is right about the general direction of the market, but if Paulson were replaced, and indeed, the entire administration, will that be better for investing?

[Did U Think The Ponzi Scheme Would Last?]

Dow 10000 is the big bottom here? Don't be so sure. 10000 is a nice round number, but 8k is the real support level.

Just remember that greenspan (traitorous bastard) said "most wrenching" since end of ww2. And Soros said worst market in his lifetime and he's in his late 70s. There are several swords of Damacles hanging over our heads right now. What happens when foreigners stop buying our debt or the dollar is removed as the world's reserve currency/petrodollar, or the derivitives bubble unwinds? Ponzi schmes always unwind rapidly (stair steps up, elevator down).