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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: http://www.hoalantrangallery.com/MJC2.htm His writing portfolio can be found at:... More
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  • HOW DO YOU SAY 'MIXED PICTURE'? IS THIS RALLY THE REAL THING? 5 comments
    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:

    seekingalpha.com/instablog/428250-michae...

    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:

    seekingalpha.com/instablog/428250-michae...

    (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:

    seekingalpha.com/article/760141-china-s-...

    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.

    Date SPX CM ASP T11D Sum M4 21 Sm
    7/2/12 1365.51 20.90% 7.62%  
    7/3/12 1374.02 23.44% 7.62%  
    7/5/12 1367.58 23.24% 17.19%  
    7/6/12 1354.68 15.43% 18.75%  
    7/9/12 1352.46 12.89% 18.75%  
    7/10/12 1341.47 6.84% 16.99% 30.86%
    7/11/12 1341.45 5.47% 14.65% 26.56%
    7/12/12 1341.76 0.59% 11.52% 16.80%
    7/13/12 1356.78 11.33% 8.98% 17.58%
    7/16/12 1353.64 5.27% 8.40% 13.28%
    7/17/12 1363.67 7.03% 6.05% 10.55%
    7/18/12 1372.78 13.87% 4.30% 10.94%
    7/19/12 1376.51 14.06% 3.32% 12.50%
    7/20/12 1362.66 6.25% 1.17% 7.42%
    7/23/12 1350.52 -5.66% -1.37% -2.35%
    7/23/12 1350.52 -5.66% -1.37% -2.35%
    7/25/12 1337.89 -10.55% -8.59% -16.02%
    7/26/12 1360.02 1.37% -8.66% 43.55%
    7/27/12 1385.97 11.72% -8.40% 47.46%

    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.

    Momentum M2F ALT Mom Max SPX
    Date      
    17-Jul 95.698 67.743 1363.67
    18-Jul 95.519 72.95 1372.78
    19-Jul 100 80.233 1376.51
    20-Jul 75.206 69.166 1362.66
    23-Jul 36.469 51.253 1362.66
    24-Jul 0 31.625 1338.31
    25-Jul 0 26.819 1337.89
    26-Jul 26.005 35.05 1360.02
    27-Jul 73.921 58.241 1385.97

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

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

    NEW TRADING SIGNALS

    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 for Trades for  
    SYMBOL CLOSE Monday Friday  
        30-Jul 27-Jul  
             
             
    AKAM 35.86   Exit Short Akamai
    CLWR 1.075   Exit Short Clearwire
    CTIC 0.52 Enter Short   Cell Therapeutics
    EZCH * 37.46 Enter Long   EZChip Semiconductor
    GES 30.79   Enter Long Guess? Inc
    GSS 1.16   Enter Long Golden Star Resource Gold
    NFLX 58.92   Enter Short Netflix
    NSM 21.9 Enter Short   Nationstar Mortgage
    NTAP * 32.91   Enter Long NetApp Inc
    PEIX 0.327 Enter Long   PACIFIC ETHANOL
    RAVN * 34.38 Enter Short   Raven Industries
    TER 14.97   Enter Long Teradyne INC
    WPRT 38.52   Enter Long Westport Innovations
             
    * See chart        
             
    TRADING SYSTEM M2F ALT    
    (Short-Term)      
        Trades for Trades for  
        Monday Friday  
        30-Jul 27-Jul  
             
    ^BVSP 56,553.12 Enter Short   Sao Paolo Brazilian Index
    ^FCHI 3,280.19 Enter Short   CAC French Index
    ^SMSI 668.8 Enter Short   Madrid General Index Daily
    ADBE 31.895 Enter Short   Adobe Daily
    AMAT 10.895 Exit Long   Applied Materials
    AXP 58.53 Exit Long   American Express
    BK 21.39 Exit Long   Bank of NY Mellon
    BZF 18.7 Enter Short   Brazilian Real long currency
    DSX 6.77 Enter Short   Diana Shipping
    EEV 28.03 Enter Long   Short MSCI Emerging Markets ETF Daily
    EL 54.7 Enter Short   Estee Lauder
    ENZN 6.88 Exit Long   Enzon Pharmaceutical
    EPP 42.78 Enter Short   Asia (No Japan) ETF
    EUFN 15.12 Enter Short   European Financial Index
    EWC 26.53 Enter Short   Canada ETF
    EWG 20.34 Enter Short   Germany ETF
    EWP 22.91 Enter Short   Spain Index
    EWQ 19.78 Enter Short   France ETF
    EWZ 53.56 Enter Short   Brazil ETF
    FLR 50.58 Enter Short   Fluor Corp
    FXI 34.12 Enter Short   FTSE/XINHUA China 25 Index ETF
    GDXJ 19.65   Enter Short Gold Junior Minors ETF Daily
    HAP 34.3 Enter Short   Hard Asset Producers ETF
    HON 59.01 Enter Short   Honeywell Daily
    ICN 20.37 Enter Short   Indian Rupee ETF
    IES.DE 0.988 Enter Short   Intesa San Paolo SA
    ILMN 42.3   Exit Short Illumina Corp
    INTC * 26.02 Enter Short   Intel Daily
    IYJ 68.65 Enter Short   Dow Jones Industrial ETF
    JPYRUB=X 0.408   Exit Long Japanese Yen/Russian Ruble
    MAKO 13.3 Enter Short   Mako Surgical Corp
    MT 15.77 Enter Short   Arcelor-Mittal Steel
    MTL 6.1 Enter Short   Mechel Open Joint Stock Company
    MYY 27.72 Enter Long   Short Midcap Index Short
    NKE 97.03 Enter Short   Nike Daily
    PBTH 5.03   Exit Short PROLOR Biotech
    PDLI 6.81 Exit Long   Protein Design Labs
    PPA 19.09 Enter Short   Aerospace and Defense ETF
    RHT 55.81 Enter Short   Red Hat
    SGG 84.66   Enter Long Sugar ETF
    SINA 48.45   Enter Short SINA CORP
    SYK 52.41 Exit Long   Stryker Corp
    SZK 17.11 Enter Long   Short Consumer Goods
    THD 68.91 Enter Short   Thailand ETF
    THLD 7.18 Enter Short   Threshold Pharma
    VXX 12.99 Enter Long   VIX ETF
             
    * See chart        
             
    TRADING SYSTEM ChartMeter    
        Trades for Trades for  
    Symbol Close Monday Friday  
        30-Jul 27-Jul  
             
    ^SMSI 668.8 Exit Short   Madrid General Index Daily
    AKAM 35.86   Enter Long Akamai
    BBVA 6.51 Exit Short   Banco Bilbao Argent SA
    CEW 20.29   Exit Short Emerging Currency ETF
    CLWR 1.075 Exit Short   Clearwire
    COW 28.91 Exit Short   Livestock ETF
    FNMA 0.24   Exit Short Fannie Mae Daily
    FST 6.53 Enter Short   FOREST OIL
    HAP 34.3   Exit Short Hard Asset Producers ETF
    ICN 20.37 Exit Short   Indian Rupee ETF
    IDI 1.3   Exit Short Search Media Carry-Trade ETF
    IGOI 0.51   Exit Long I Go INC
    IMAX 22.76   Exit Long Imax Corp
    IRE 5.72   Enter Long Bank of Ireland
    KGJI 1.53   Exit Long Kinggold Jewelry
    LD 46.58 Exit Short   Lead ETF
    QRM 1.35 Exit Short   Quest Rare Metals
    SAN 5.93 Exit Short   Banco Santander
    SNP 89.31 Exit Short   China Petrol & Chemical Co
    URS 34.94 Exit Short   URS Corp
    USDTHB=X 31.52   Enter Short USDollar-Thai Baht
    YNDX 20.22 Exit Short   Yandex NV

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    Michael J. Clark, Hanoi, Vietnam

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Comments (5)
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  • basehitz
    , contributor
    Comments (1541) | 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 (11589) | 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 (1541) | 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 (11589) | Send Message
     
    Author’s reply » Thanks for your note, Spin.
    31 Jul 2012, 04:20 AM Reply Like
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