Michael Clark's  Instablog

CGTS WEEKEND EDITION 
18 SEPTEMBER 2009

I do not think it reasonable that public money --taxpayer money -- be indirectly available to support risk-prone capital market activities simply because they are housed within a commercial banking organization.

Paul Volcker, 2009.

Readers should check out a couple of instablogs from Bob English this week.  Bob has found the smoking gun showing that the Fed has been financing this phantom rally in stocks; and Bob has many insights into why and when the rally won't end, and why and when the rally may begn to get into trouble.

seekingalpha.com/article/162305-funding-a-rally-extension#comment-683606

seekingalpha.com/article/161925-another-185b-could-soon-hit-the-markets-as-u-s-approaches-debt-ceiling#comment-683613

I'm not sure that the Fed's funding stock and bond market rallies is legal.    The Fed impetus is to help preserve the capital of banks and insurance companies they have already bailed out to the tune of ???billions of dollars -- essentially helping to provide private companies with avenues to acquire more money without directly involving bailouts using tax-payer money, which is politically costly.  This seems like insider trading in its most naked form -- fixing the markets so that all the casinos can get healthy again.  Is this what free-market capitalism is all about?

I'm not sure I'm much a believer in free-market capitalism -- I think the game has been fixed for centuries and what we are seeing today is just a fluke nakedness of the game the way it has always been played, although a very extreme version today -- the tide has come down to expose all the corruption and the criminality in the light of day.

We keep trading.  The markets keep floating upward -- the markets are being fellated upward....seems to have no intention of coming back down again.  That's what bubbles are -- until they pop or develop a leak.

Keep your eye on your money market funds.  Late this week the federal protection of money markets expired.  Make sure your balance doesn't start to diminish.  I would be surprised if it did -- but this has been a year of surprises, hasn't it?

We continue to be almost 95% long in the market.  Our weekly portfolio is up 49.19% for the year.  Our best trading systems  are our short-term trading systems M5 7 (up 145.75%) and M5 10 (up 222.93%) -- and then our long-term system M4 Sum Plus Long-Term (up 88.14%)

% Gain	Weekly Trades		Profit	Active	Active	First
	9/20/09			Trades	Cost	Trade
145.75%	M5 7 Tr Syst		$160,323	11	110000	1/9/09
222.93%	M5 10 Tr Syst		$89,171	4	40000	3/6/09
4.09%	M2F alt Trade		$1,638	4	40000	8/14/09
5.70%	M2F alt LT		$2,851	5	50000	7/9/09
14.05%	Momentum		$66,049	47	470000	6/26/09
20.07%	M4 Sum Plus		$90,334	45	450000	7/17/09
88.14%	M4 Sum Plus LT		$431,896	49	490000	2/20/09
46.12%	MA5 MA 40 LT		$161,422	35	350000	3/20/09
11.85%	M4 Sum Plus Rev		$4,738	4	40000	8/21/09
0.01%	M5 Sum Plus Avg		$1	1	10000	9/5/09
49.19%	Total		$1,008,424	205	$2,050,000

This rally is for real -- and we are still long and adding to our long positions but we are looking at some issues through the lens of our M5 Indicator to try to gauge the real momentum of the markets.  M5 tends to lead the price of issues, pulling up before the price does, and pulling down while the price is still climbing.  We want to show a few issues this week and look at what M5 is telling us about them.

First we look at a few indexes: We show three pictures of the Taiwan Index, hoping to show how the M5 Indicator looks in different stages: the first chart shows mainly the healthy rally, with M5 leading the rally; also, we can get a glimpse of the M5 fall on the right side of the chart.  The second TWII chart shows how M5 led the TWII down.  The third chart is the current chart of TWII -- the price has been rallying strongly -- but M5 seems to have been expecting a decline.



How do other indexes look now.  Almost all the American and European indexes look fine.  Asian indexes do not look so good.  I show the DJIA (Industrials) and tell you that American and European indexes all look much the same in term of M5.  It looks like Asian stocks really want to go lower, in terms of M5.



How do individual stocks look?  Please note: the Adobe stock is not a current picture, but a picture back in March 09 showing what a healthy rally looks like, in the beginning.  Adobe's current picture is relatively healthy, although it has topped for the short-term.  Applied Materials (AMAT) does not look so good.  AMGN is currently attempting to bottom but the M5 is not especially positive.  Citicorp is quite negative; we expect this one to go lower.  DHI seems to be hitting overhead resistance; and M5 could go either way.  Dawson is a very negative M5 picture at the moment.  The rally in Callahan Golf seems to still be in good shape.  I would remind the reader that trend readings are even more important than momentum readings in terms of see where the market is going.  Momentum indicators can be overpowered by strong trends.  Momentum indicators 'predict' what the trends will do; but trends have the last word.



What about Oil, the US. Dollar, the VIX index?  DBO (Oil ETF) is suggesting that oil is going lower.  It is trying to bottom at the moment, and might have another leg up, in fact.  The U.S. Dollar (UUP, Bullish Dollar ETF) hasn't had a chance, not since Ben Bernanke has made it his personal mission to further emasculate the money in our pocket.  An attempted streangthening was quashed in early September.  I don't see much hope for the Dollar until Ben decides that bond yields should move with supply and demand instead of with Ben's ideology.   The VIX is predicting a rally (a concurrent decline in stocks), but as long as Ben and his thugs at the investment banks are playing Hans Brinker with their thumbs stuck in NYSE holes that sprout up, we have to understand that their will be no stock correction until the Fed demands it or loses its power to hold back a wall of water building by the second.  How strong is Ben Bernanke?  He doesn't look that strong -- but he has a lot of goons behind him that don't want prices (of anything) to come down.  Clearly the rich like the poor paying more and more for the goods and services that they own.  Deflation is God's way of punishing the greedy for their distemper and their lack of modesty.



MOMENTUM READINGS

Our strongest momentum readings in our database of stocks for the whole year remain fairly consistent with last week.  Along with this list we are also showing issues with the strongest momentum gains in the last three weeks.  You will notice a lot of precious metals appearing again in this second group.  With Bernanke's insistence upon buying every TBond that no one else wants, in order to keep interest rates down, dollar weakness is a given and gold strength continues to go along with that.  What happens when Ben hiccups, or leaves the room for an emergency of continence, no telling what will happen.  But for now, gold and silver look like the only currencies in the world that are worth their weight in gold.

The weakest momentum 'leaders' in our database are old songs: ETF Shorts, bankrupt bailout-kings and relaltives of the same (AIG, Citicorp, SLM), and some surprise names: McDonalds, Walmart, Conoco Phillips), and a few issues that seem destined to crash through March lows before any others do: Electronic Arts, Dry Ships, Verizon and First Solar.

Those showing special weakness over the last three weeks -- such as Amgen, Merck, Teva Labs, SGP, BAC and HOV -- should be watched carefully as they may either be pulling back for another buying opportunity or they may be beginning the topping process.  Interesting to see all the pharmaceuticals showing up together.  Are they a buy?  In fact, we are getting buy signals on AMGN, HOV, and ENMD from our list of weakest-momentumed issues over the last three weeks.  (See below.)

TOP 30 MOMENTUM WINNERS (M5 INDICATOR: YEAR
HAL	HALIBURTON
PCLN	PRICELINE
MRK	Merck Pharmaceuticals Weekly
EMC	EMC Corp
SGINX	DWS GNMA S. FUND
AMSC	AMERICAN SUPERCONDUCTOR
IAU	IShares Comex Gold Trust
RHT	RED HAT INC.
ECH	I-SHARES MSCI CHILEAN INDEX
TEVA	Teva Labs
GG	Goldcorp
EDU	NEW ORIENTAL EDUCATION & TECH GROUP
BWLD	BUFFALO WILD WINGS
SSTGX	DWS GLOBAL BOND FUND
AAPL	Apple Computer
SBUX	Starbucks
SGP	Schering Plough Weekly
^HUI	Gold Stock Index
JPM	JP Morgan Chase
IBM	International Business Machines
HD	Home Depot
BEN	Franklin Resources
^XAU	Philadelphia Gold and Silver Stock Index
IBB	Biotech ETF
HPQ	Hewlett-Packard
ORCL	Oracle Inc.
GES	GUESS INC
HMY	Harmony Gold Mining
^KS11	KOSPI South Korean Index
RGR	STURM RUGER INC.

TOP 30 MOMENTUM WINNERS (M5 INDICATOR: LAST THREE WEEKS
TBT	Ultrashort T-Bond 20+ Year ETF
HMY	Harmony Gold Mining
IAU	IShares Comex Gold Trust
HAL	HALIBURTON
GG	Goldcorp
NEM	Newmont Mining
^HUI	Gold Stock Index
HURN	HURON CONSULTING
^XAU	Philadelphia Gold and Silver Stock Index
HK	PETROHAWK ENERGY
UPS	United Parcel Services
PDE	PRIDE INTERNATIONAL
KO	Coca-Cola
BJS	BJ Services
SCGDX	Scudder Gold Fund
ABX	Barricks Gold Company
FSLR	FIRST SOLAR
RHT	RED HAT INC.
PG	Procter & Gamble
EQR	Equity Residential
FXE	Euro vs Dollar ETF
XME	Spider Metals and Mining ETF
UDN	POWERSHARES DB US DOLLAR BEARISH
RS	RELIANCE STEEL
CDE	Coeur D'Alene Silver Mining
AMSC	AMERICAN SUPERCONDUCTOR
KBH	KBH Home Builders
YHOO	Yahoo Weekly
KSU	KANSAS CITY SOUTHERN
^DJT	Dow Jones Transport Index

BOTTOM 30 MOMENTUM LOSERS (M5 INDICATOR: YEAR
SLM	Sallie Mae Inc.
TWX	Time Warner Weekly
XGCSX	Scudder Global Commodities Fund
PEIX	PACIFIC ETHANOL
AIG	American International Group
PG	Procter & Gamble
FMCN	FOCUS MEDIA HOLDING GROUP
PNC	PNC Financial Svc Weekly
VZ	Verizon Communications
FXM	Mexican Peso ETF
FSLR	FIRST SOLAR
COP	Conoco Philips Inc
ELY	Callahan Golf
FST	FOREST OIL CORP
XOM	Exxon Mobile
C	Citigroup
DRYS	Dry Ships Weekly
ERTS	Electronic Arts
MCD	McDonald's
WMT	Wal-Mart Stores
^VIX	CBOE Volatility Index
DOG	Short DOW 30
UUP	POWERSHARES DB US DOLLAR BULLISH
MYY	Short Midcap Index ETF
SH	Short SP 500 ETF
DXD	Short Dow Index ETF
QID	Short Nasdaq Index ETF
PSQ	Short QQQ Index ETF
HURN	HURON CONSULTING
TBT	Ultrashort T-Bond 20+ Year ETF

BOTTOM 30 MOMENTUM LOSERS (M5 INDICATOR: LAST THREE WEEKS
PCLN	PRICELINE
^TYX	30 YEAR TREASURY BOND
PSQ	Short QQQ Index ETF
SH	Short SP 500 ETF
FITB	Fifth Third Bancorp Weekly
MKL	Merkel Weekly
PFE	Pfizer
INTC	Intel
TXN	Texas Instruments
MCD	McDonald's
PDLI	Protein Design Labs Inc.
CA	Computer Associates Inc
AMGN	Amgen Corp
DOG	Short DOW 30
DHI	DR Horton Inc.
SGP	Schering Plough Weekly
UNH	United Healthcare
BAC	Bank of America Weekly
ENMD	Entremed Corp
HOV	Hovnanian Enterprises
MYY	Short Midcap Index ETF
ORCL	Oracle Inc.
WMT	Wal-Mart Stores
VZ	Verizon Communications
F	Ford Weekly
RGR	STURM RUGER INC.
MRK	Merck Pharmaceuticals Weekly
QCOM	QUALCOM CORP
UUP	POWERSHARES DB US DOLLAR BULLISH
TEVA	Teva Labs

NEW SIGNALS FOR THE WEEK
We sold Sallie Mae's long positon for a loss of 7%.  We sold our long position in the Semiconductor Index for a gain of 8.36%.  We have new short and long positions for the week (see below).

9/18/09
Weekly
M2F alt Trading System
Issue	Price	Position	Shares
IBM	122.11	Enter Long	81.89
UHN (30)	25.33	Enter Long	394.79
ENMD 30)	0.475	Enter Long	21052.63
M5 7 Trading System
Issue	Close @	Position	Open @	Date	% Gain
SLM	8.81	Exit Long	9.47	8/7/09	-6.97%
Issue	Price	Position	Shares
EL	36.79	Enter Long	271.81
FXB (30)	162.07	Enter Short	-61.70
HOV (30)	4.61	Enter Long	2169.20
ENMD (30)	0.475	Enter Long	21052.63
M5 10 Trading System
Issue	Close @	Position	Open @	Date	% Gain
SOXX	326.48	Exit Long	301.3	8/21/09	8.36%
Issue	Price	Position	Shares
AMGN (30)	60.8	Enter Long	164.47
EL (30)	36.79	Enter Long	271.81
M2F ALT LT 2 Trading System
Issue	Price	Position	Shares
EOC	47.53	Enter Long	210.39
AMGN	60.8	Enter Long	164.47
M4 sum Plus Trade
no trades
Momentum
No Trades.
M4 Sum Plus LT
No Trades.
MA5/MA 40 T
No Trade
M4 Sum Reverse
No Trades
M5 Average Sum Plus
No Trades

Everyone, have a good weekend.

More information on this system can be found at
www.home.mindspring.com/~mclark7/CGTS09.htm


Those interested in reading a draft of 'Turn Out the Lights', my description of the metaphysical causes of the financial collapse, can find it at:

www.hoalantrangallery.com/Turnoutlights.htm

 

Michael J. Clark
Clark's Gate Timing System
Hanoi, Vietnam
84 4 221 92210

Disclosure: the author personally owns none of the issues mentioned in this article.