Michael Clark's  Instablog

CLARK'S GATE TIMING SYSTEM
  FOR: 19 AUGUST 2010 - THURSDAY

A.  MARKET MOMENTUM

CGTS VIEW: The rally back from oversold conditions is in progress but it is not really very impressive.  GSPC (S&P 500) Index is at 77 M2F alt.  90 is overbought.  We expect one or two more days of a rally before selling sets in again.

Our key short-term momentum indicator -- numbers hitting +1 (positive) or -1 (negative) is now 51% bullish, up from as low as 9% bullish.  It's up + 126 since Monday.

The key intermediate-term Momentum Trend (those in the positive zone of 1-0 versus those in the negative zone of 0-negative 1) has stabilized at 58% bullish.

The Advance-Decline Line (most recent moves are either up or down) bounced back up to 73% bullish.  This one is very sensitive and is reaching an overbought level.

Only 25 issues meet our criteria for a long trade (+1 M4 Sum Plus and Intermediate trend positive) -- while 85 meet our criteria for a short trade (-1 M4 Sum Plus and IT Trend negative).  This is only 8% bullish -- showing how much the last sell-off took out of this market.

The intermediate-term trend of most issues are still positive (188 to 120), but this iindiator continues to deteriorate, down  -6 from Monday, indicating that this trend is still breaking down.

August 19, 2010
	Positive	Negative
Key Short-Term
TRADING MOMENTUM				% Bullish
PLUS ONE OR NEGATIVE ONE	31	30		51%
Yesterday's Reading	26	151	126	15%
			diff
Key Long-Term
MOMENTUM TREND				% Bullish
ONE/ZERO OR ZERO/MINUS ONE	181	129		58%
Yesterday's Reading	180	130	2	58%
			diff
ADVANCE/DECLINE				% Bullish
UP OR DOWN MOST RECENTLY	225	85		72.58%
Yesterday's Reading	103	207	244	33.23%
			diff
				% Bullish
LONG TRADE VS SHORT TRADE	25	15		8.12%
Yesterday's Reading	20	75	65	6.25%
			diff
				% Bullish
Intermediate-Term Trend	188	120		61.04%
Yesterday's Reading	191	117	-6	62.01%
			diff

B.  THOUGHTS ON THE ECONOMY

Inflation is one side of the 'evolutionary' coin: growth. I have no problem with growth. I love growth. But it is only one side of the coin. With inflation comes the problem of higher prices for everything, goods and services; and when wages can't keep up, you have the separation of the world into the rich and the poor, the creditors and the debtors.

Deflation is built-in to the system to lower prices when they have gone too high, to punish over-indebtedness, the reduce the division of the society into haves and have-nots.

We need both inflation, growth, the filling up with goods, services and debts and deflation, rest, the emptying out of goods, services and debts. But we can't have only one side of the coin. We have had inflation/growth from 1983 through 2001 when it was supposed to end, and now it is being extended through manipulation of monetary policy by frightened monetary bureaucrats, which is only making our problems worse.

We have day and night to regulate the earth. We have inflation and deflation to regulate the economic earth. Idiots who want growth 12 months of the year are like cancer cells devouring the body out of fear of not having enough. Greed. Ambition for personal gain no matter what it does to the body its is serving, a body through which it is given life.

What was it John Maynard Keynes said about inflation -- and this was not in praise of inflation:

“By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens.”
-- John Maynard Keynes

If we're really lucky and succeed in rebelling against deflation (the night), we might get hyperinflation. Hyperinflation, as in....a suitcase of money for a loaf of bread, street battles between fascists and communists, a fascist victory in the streets, the rise of an Adolph Hitler who is going to raise the country back up to an earlier image by idealizing the country's historical/mythological values and by killing his neighbors and stealing all their gold and expensive artwork and natural resources.

Is this what Ben Bernake is engineering so subtly behind that cute innocent beard?

I've got nothing against inflation if you have nothing against deflation also.

        *         *           *        *          *           *             *          
Stocks have topped short-term.  We'll see if the buy-the-dips philosphy continues to work.  I believe stocks will seek a much lower bottom, based on an economy that can't be fixed, and a Fed Chair who has run out of ideas and ammunition.


^{Some pictures tell a thousand stories -- this picture tells us two.  (1) Ben Bernnanke is running on empty. And (2) he is running out of time.}

C.  STOCK WATCH

We like to keep our eye on stocks that meet certain long-term criteria.  "Caution criteria" are a topping M5 3 Average indicator confirmed by two consecutive days of M4 Sum Plus negative trend (-1); "Interest' criteria consist of an oversold M5 3 Average indicator moving up and being confirmed by two consecutive days of M4 Sum Plus positive trend (+1).  These are not necessarily buy or sell signals -- but they allow us to pull up stocks that could be chainging intermediate or long-term trends.

ARE THESE STOCKS BOTTOMING?



I''m not sure TEVA Pharmaceutical is bottoming.  It meets our criteria of generating "interest" -- but its trends are still in a negative pattern (lower lows and lower highs) -- See pane two from the top, blue and red lines.  However, TEVA is trying to bottom.  Note how M5 3 Test (brown line, Pane One) is indicates the future movement of an issue.  It is climbing now; the price is in a holding pattern.  Note how in March this indicator declined BEFORE the price declined.  We expect a rally in TEVA -- but we're not sure it will be a sustained rally.  There is reason to believe that health-care's protected status has been lost and won't ever really be regained.  A protected status is not really good for consumers in terms of inflationary costs.  The cost of health-care (insurance, mediacations) has been killing America's middle class now for many decades.  Seeing stock prices coming down is really a good sign for this protected bubbly cartel.  (I realize Teva is really not a part of the protected class, the bubble cartel.  It is an anti-bubble, generic drug manufacturer.  But many health-care stocks are retreating because of this lost protected class status.  I'm quite fond of Teva as a company -- and wish it well in the future.)

ARE THESE STOCKS TOPPING?

If you read my post on Tueday, you'll realize I'm expecting hard sailing for many currencies: Euro, Australian Dollar, Great British Pound...  FXB is the Pound ETF and it seems to be running out of gas.  Trends are still positive, so I think this 'top', if it is a top, will take a while to develop.  I think support at 150.61 will eventually be tested.



UTX, United Technologies: Short-term trend has popped down (blue line, second pane from the top).  UTX is right at short-term support now, and seems ready to drop through that level.  65.75 is next level of support.



BBL, BHP Billiton.  I'm a couple days late in posting this.  It gave a 'caution' signal two days ago, and has since fallen through a support level.  M2F alt, bottom pane, is short-term momentum: it attempted to participate in the oversold bounce with other stocks and was not able to.  This is a negative.  Next support at 54.89.




More information on the CGTS systems can be found at:

http://home.mindspring.com/~mclark7/CGTS09.htm

 

MICHAEL J CLARK
Clark's Gate Timing System
Hanoi, Vietnam

84 4 221 92210

Disclosure: No positions to disclose

Disclosure: Nothing to disclose.