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Michael Clark
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Michael J. Clark was born and raised in Sinclair, Wyoming. He is a poet, novelist, artist, historian, and market analyst. His fine arts portfolio can be found at the following address: His writing portfolio can be found at:... More
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    Jul 30, 2012 4:36 AM

    We're getting mixed messages from the markets. A clear two-day rally driven by what exactly? By promises from European leadership that they will do anything to save the Euro? Like they haven't been promising this for years? Buying sovereign bonds of Spain and Italy and France and Portugal and Belgium (it will come to that) will help keep interest rates lower -- but the basis of the problem in Europe is too much debt, a currency that only works for half of the EU, and a lack of economic competitiveness in European economies. Bond-buying won't cure those three major problems. Also, half of the EU needs a weaker Euro; a stronger Euro hurts, again, those 'weak sisters' needing a weaker Euro.

    Spending more money, taking on more debt, to buy sovereign bonds the market is say are worthless (or at least too risky to buy without higher interest rates) simply means putting EU citizens on the hook for overpriced bonds. This adds to the debt problem; it does not subtract from the debt problem. Too much debt is too much debt.

    So, we got a rally. I'm suspecting a lot of Fed buying of index futures as well. Anyone want to bet? Earnings are coming in weaker than expected. MacDonalds, Starbucks, and Apple Computer all reported earnings that fell short of expectations. Joshus Freed writes in his article "Corporate Earnings: A Return to the Bad Old Days":

    Based on the 291 companies in the Standard & Poor's 500 that have reported earnings so far - along with estimates for the rest - S&P Capital IQ expects overall profits to decline by half a percent from the same period a year ago. That would be the first time that profits have shrunk since the third quarter of 2009, just after the Great Recession. Analysts are predicting that earnings will shrink 0.3 percent for the third quarter, too.

    Revenue for those 291 companies has increased just 2.3 percent, compared with a 10-year average of 7.1 percent, according to S&P Capital IQ.

    Worse, companies are getting more pessimistic about the rest of the year.

    No mixed message on the economies of the world: the economies are heading down. The Richmond Fed Report showed revenues for both manufacturing and services falling to the lowest level since the 2008 meltdown. This comes after central banks spending sprees of trillions of dollars intending to jump start the global economy.

    The UK economy shrank more than the Spanish economy in the last quarter.

    There is no rational explanation for this last stock rally -- unless expectations of continued salvation by the Central Banks can be considered rational. I was always told that hope was not a rational response to reality -- although, as Pandora taught us, hope is all that is left after reason exhausts its tricks and has to admit that nothing it has done has alleviated the debt depression we are in.

    The ONLY thing that 'fixes' a debt depression is the elimination of debt, through repayment, default, bankruptcy.

    Those interested in this issue can look at a recent instablog I wrote on the coming Greatest Depression in Australia, drive by Debt Congestion:

    Also, another recent instablog I wrote on why we have been only denying reality from 2001-2012 -- treading water -- and why a major decline in stocks is required before a new bull market can begin:

    (click to enlarge)

    Remember when we were told that China (and the Emerging Markets, Chindia) was going to save the world economy? For an enlightening view of China's growth projection read Dee Woo's recent offering:

    Three charts from Dee Woo's instablog suggest where China is today, on the edge of the precipice or worse.

    What do our own internal indicators suggest? Two of our three indicators turned up with the stock rally of the last two days. Our favored of the three (most-long-term) did not turn up. It is shown below. We recalculated our indicators to show bearish dominance as a negative number, bullish dominance as a positive number.

    DateSPXCM ASPT11D SumM4 21 Sm

    Looking at just the SPX (Pending:GSPC) itself, we had the following 'momentum' readings. Note the 0 (zero) readings under M2F ALT below that began on July 24 with the SPX at 1338.31. Note also the reading of 100 above this on July 19 with the SPX at 1376.51. Clearly the SPX was oversold on July 24.

    Markets are a beast that 'breathes'. Rallies are out-breathing; declines are in-breathing.

    The current reading at 73.921 suggests another day or two of rally. 'Suggests' being the key word. Momentum indicators are not totally trustworthy, because markets and individual issues can stay overbought or oversold for a long time.

    One of our most active short-term trading systems uses the M2F Alt indicator in conjunction with our trend indicators to trade relatively short-term movements in the markets. See below: we are getting another slough of SHORTSELL SIGNALS today using this indicator, as issues have rallied to overbought levels but have not rallied enough to change trends to positive readings.

    MomentumM2F ALTMom MaxSPX

    *M2F ALT: 90+ overbought; 10- oversold.

    **Mom Max: 70+ overbought; 30- oversold.


    Here is a list of our new trading signals for the last two days. Since we have 'mixed feelings' about this rally we'll show charts of two issues we like as BUYS (NTAP and EZCH) and as SHORTSELLS (INTC and RAVN, this latter one a short-term M2F ALT trade, meant to capture a short-term move.).

    TRADING SYSTEM T11D Sunmarry 10/Zero 
    (Intermediate-Term)Trades forTrades for 
    AKAM35.86 Exit ShortAkamai
    CLWR1.075 Exit ShortClearwire
    CTIC0.52Enter Short Cell Therapeutics
    EZCH *37.46Enter Long EZChip Semiconductor
    GES30.79 Enter LongGuess? Inc
    GSS1.16 Enter LongGolden Star Resource Gold
    NFLX58.92 Enter ShortNetflix
    NSM21.9Enter Short Nationstar Mortgage
    NTAP *32.91 Enter LongNetApp Inc
    RAVN *34.38Enter Short Raven Industries
    TER14.97 Enter LongTeradyne INC
    WPRT38.52 Enter LongWestport Innovations
    * See chart    
      Trades forTrades for 
    ^BVSP56,553.12Enter Short Sao Paolo Brazilian Index
    ^FCHI3,280.19Enter Short CAC French Index
    ^SMSI668.8Enter Short Madrid General Index Daily
    ADBE31.895Enter Short Adobe Daily
    AMAT10.895Exit Long Applied Materials
    AXP58.53Exit Long American Express
    BK21.39Exit Long Bank of NY Mellon
    BZF18.7Enter Short Brazilian Real long currency
    DSX6.77Enter Short Diana Shipping
    EEV28.03Enter Long Short MSCI Emerging Markets ETF Daily
    EL54.7Enter Short Estee Lauder
    ENZN6.88Exit Long Enzon Pharmaceutical
    EPP42.78Enter Short Asia (No Japan) ETF
    EUFN15.12Enter Short European Financial Index
    EWC26.53Enter Short Canada ETF
    EWG20.34Enter Short Germany ETF
    EWP22.91Enter Short Spain Index
    EWQ19.78Enter Short France ETF
    EWZ53.56Enter Short Brazil ETF
    FLR50.58Enter Short Fluor Corp
    FXI34.12Enter Short FTSE/XINHUA China 25 Index ETF
    GDXJ19.65 Enter ShortGold Junior Minors ETF Daily
    HAP34.3Enter Short Hard Asset Producers ETF
    HON59.01Enter Short Honeywell Daily
    ICN20.37Enter Short Indian Rupee ETF
    IES.DE0.988Enter Short Intesa San Paolo SA
    ILMN42.3 Exit ShortIllumina Corp
    INTC *26.02Enter Short Intel Daily
    IYJ68.65Enter Short Dow Jones Industrial ETF
    JPYRUB=X0.408 Exit LongJapanese Yen/Russian Ruble
    MAKO13.3Enter Short Mako Surgical Corp
    MT15.77Enter Short Arcelor-Mittal Steel
    MTL6.1Enter Short Mechel Open Joint Stock Company
    MYY27.72Enter Long Short Midcap Index Short
    NKE97.03Enter Short Nike Daily
    PBTH5.03 Exit ShortPROLOR Biotech
    PDLI6.81Exit Long Protein Design Labs
    PPA19.09Enter Short Aerospace and Defense ETF
    RHT55.81Enter Short Red Hat
    SGG84.66 Enter LongSugar ETF
    SINA48.45 Enter ShortSINA CORP
    SYK52.41Exit Long Stryker Corp
    SZK17.11Enter Long Short Consumer Goods
    THD68.91Enter Short Thailand ETF
    THLD7.18Enter Short Threshold Pharma
    VXX12.99Enter Long VIX ETF
    * See chart    
    TRADING SYSTEM ChartMeter  
      Trades forTrades for 
    ^SMSI668.8Exit Short Madrid General Index Daily
    AKAM35.86 Enter LongAkamai
    BBVA6.51Exit Short Banco Bilbao Argent SA
    CEW20.29 Exit ShortEmerging Currency ETF
    CLWR1.075Exit Short Clearwire
    COW28.91Exit Short Livestock ETF
    FNMA0.24 Exit ShortFannie Mae Daily
    FST6.53Enter Short FOREST OIL
    HAP34.3 Exit ShortHard Asset Producers ETF
    ICN20.37Exit Short Indian Rupee ETF
    IDI1.3 Exit ShortSearch Media Carry-Trade ETF
    IGOI0.51 Exit LongI Go INC
    IMAX22.76 Exit LongImax Corp
    IRE5.72 Enter LongBank of Ireland
    KGJI1.53 Exit LongKinggold Jewelry
    LD46.58Exit Short Lead ETF
    QRM1.35Exit Short Quest Rare Metals
    SAN5.93Exit Short Banco Santander
    SNP89.31Exit Short China Petrol & Chemical Co
    URS34.94Exit Short URS Corp
    USDTHB=X31.52 Enter ShortUSDollar-Thai Baht
    YNDX20.22Exit Short Yandex NV

    (click to enlarge)

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    (click to enlarge)

    Michael J. Clark, Hanoi, Vietnam

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Comments (5)
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  • basehitz
    , contributor
    Comments (1551) | Send Message
    Agreed on expanding the debt bubble's futility. Enjoy your insights.


    I have one request. If I read correctly one of your weekend posts, you label people of faith as following "myths". You're entitled to whatever opinion you like. So am I.


    I still respect your financial insights. I hope I misread your comment, because this is beneath you.
    30 Jul 2012, 08:02 AM Reply Like
  • Michael Clark
    , contributor
    Comments (10357) | Send Message
    Author’s reply » To me myths are not negative. I love and study mythology all the time. The connotation that myths are falsehoods is one given by modernity and science. Blake believed the constant war of the world was between Reason and Imagination -- and he believed Jesus intentionally sided with imagination.


    So, when I use myth or mythology, I don't mean it negatively, because I admire greatly the wisdom hidden in mythology. I am a person of faith also.


    I believe the dichotomy between monotheism (Day-Cycle) and polytheism (Night-Cycle) is arbitrary and false. I do understand where it comes from -- and how Night-Cycle Chaos tries to kill the New Day (Herod and Jesus)...but that is truth the meaning of which is hidden in mythology. Day-Cycle religion and Night-Cycle religion (mythology) all come from the same source.
    31 Jul 2012, 04:19 AM Reply Like
  • basehitz
    , contributor
    Comments (1551) | Send Message
    Your thoughtful reply is appreciated.
    31 Jul 2012, 10:49 AM Reply Like
  • Spin
    , contributor
    Comments (244) | Send Message
    I enjoyed your article this morning. It helped make sense of the garbage put out by the MSM over the weekend.


    Basehitz, I was surprised by your reaction, because faith and myths have always overlapped. A Greek mythology, for example, might loose its significance within the community when separated from its religion.


    Faith is faith. It is an individual experience, while religion speaks to a group of people who find strength in communion. Keep the faith.
    30 Jul 2012, 09:42 AM Reply Like
  • Michael Clark
    , contributor
    Comments (10357) | Send Message
    Author’s reply » Thanks for your note, Spin.
    31 Jul 2012, 04:20 AM Reply Like
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