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Ok: short and simple. Momentum is still down. Mario Draghi is a paper tiger: all hot air and bravado; another European gasbag. He can't buy bonds. It's against German law for Merkel to agree with bond buying. Even if he could buy bonds, like Bernanke did, this solves nothing. It merely adds debt to a mountain of debt -- and debt IS the problem. The high cost of Spanish debt is a way the market says Spain has too much debt-risk. Having EU citizens now buy overpriced Spanish debt resolves nothing, it only adds more risk to the system, while pretending to buy more time, until that miracle 'growth' component arrives to stimulate the economies of the world so they can grow their way out of debt. However, DEBT IS ANTI-GROWTH. Debt must be destroyed, on a grand scale, on the same grand scale that debt was assumed, before growth can return.

Only deflation and debt struction (Austrian Austerity) solves the problem. Higher interest rates help solve the problem -- Austerity hurts, yes. We all enjoyed the party. We didn't pay for the party with our own money. That was the mistake. We borrowed 'future-money' to pay for the party. What hurts is that we now have to pay back our creditors, or default on the loads -- and this at a time when the global economy is hurtling into a black hole.

Austerity is the pain. This pain is the cure. The Crisis cannot be fixed by some monetary hocus-pocus. It can't be wished away. In this case, as Jim Morrison wrote and sang so explicitly thirty years ago: "You cannot petition the Lord with prayer". Denial is not going to work.

The EU Crisis, like bank deregulation, was a bad idea, based in and colored by human greed. The only solution to the EU Crisis is the abandonment of the EU and the Euro, and a return to separate national currencies. One currency cannot serve many economies and many peoples without creating imbalances that surface during economic contractions. Such economic contractions ARE NOT abberations. They happen like clockwork: every 36 years a contraction starts and lasts for 18 years. Debts don't seem to matter as long as the economy is expanding and inflation is expanding incomes and asset prices. But debts do matter -- I'm speaking mainly of PRIVATE DEBT, the kind that makes the banks so rich, at first, and then, after the contraction starts, makes these banks and bankers the great white whale in the room no one wants to mention.

If ALL the EU countries are willing to sacrifice their sovereignty to unelected bureaucrats in Brussels, so they can keep their attachment to the Euro, then they might be able to solve this EU Crisis. Of course, this solution creates the next political crisis, as EU citizens realize they have given up their soverign democracies for the sake of easier accounting and loftier trade principles and freedom of travel.

Once countries start willingly leaving the EU (the surplus nations I mean, Finland, maybe Germany also), then the EU is finished. The great divorce will gain speed and mometum quickly. As fast as the Soviet Union fell apart, so to will the EU break apart, another arbitrary collection of misalligned parts pulled together by good intentions.


The markets have further selling ahead. Although you will note we do have some short-term buy signals below in our M2F Alt trading system -- so there could be a bounce for some stocks. We also closed some of our short positions in Facebook last night.

Here are our three internnal momentum charts:

Keep an eye on the US Dollar. The attached updated chart shows the relationship (Inverse) between the Dollar and the SPX (S & P 500 Index, GSPC). When our M2F Alt indicator (second pane down, gray line) bottoms for the USDEUR stocks top. This seems to be indicating we will have more selling for the next few days.

(click to enlarge)Click to enlarge

Support is at 1329.24 on the SPX. If this breaks, then the generally positive short-term up-channel of the SPX breaks, portending an end to the rally.


Momentum is down; but we are getting trading buy signals from our short-term M2F Alt Trading System. We might get a bounce up in some stocks over the next few days.

We still like short trades over long trades today and we would choose the shortsale of BMI and the long trade of DTO (Double Short Oil ETF) as our two most attractive new positions today.

    Trades for Trades for  
    Friday THURS  
    3-Aug 2-Aug  
TRADING SYSTEM T11D Sunmarry 10/Zero  
SYMBOL CLOSE Today Yesterday Company
ARX 5.84 Enter Short   Aeroflex Holdings
AXPW 0.302 Enter Long   AXION
BMI * 32.99 Enter Short   Badger Meter
DTO * 49.71 Enter Long   Short (Double Short) Oil
GG 35.48   Enter Long Gold Corp
KGJI 1.51 Enter Short   Kinggold Jewelry
TTI 6.45 Enter Short   Tetra Technologies
VMC 36.9 Enter Short   Vulcan Materials
* See chart        
SYMBOL CLOSE Today Yesterday Company
^HUI 400.466 Exit Short   Gold Stock Index Daily
^XAU 147.73 Exit Short   Philadelphia Gold and Silver Index Daily
ADBE 30.58 Exit Short   Adobe Daily
AMTD 15.37 Exit Short   Ameritrade Corp
BZF 18.38 Exit Short   Brazilian Real long currency
CCU 62.4 Exit Short   Compania Cerveceria S.A.
COW 28.27 Exit Short   Livestock ETF
CTSH 56.28 Exit Short   Cognizant Tech Solutions
EL 50.88 Exit Short   Estee Lauder
GDXJ 19.02 Exit Short   Gold Junior Minors ETF Daily
GLD 154.13 Exit Short   SPDER Gold Shares
IAU 15.47 Exit Short   Gold Daily
NKE 92.54 Exit Short   Nike Daily
PG 63.51 Exit Short   Proctor and Gamble Daily
INRRUB=X 0.585 Enter Short   Indian Rupee/Russian Ruble
QRM 1.3   Enter Long Quest Rare Metals
^DJT 4,984.15 Enter Long   Dow Jones Transport Index
^RUT 768.6 Enter Long   Russell SMall Cap Index Daily
AFG 36.58 Enter Long   American Financial Group
AKAM 34.69 Enter Long   Akamai
AXPW 0.302 Enter Long   AXION
BAL 46.73 Enter Long   Cotton ETF
CYTX 2.43 Enter Long   Cytori Therapeutics
FISV 68.19 Enter Long   Fiserve Inc
FXB 153.61 Enter Long   British Pound ETF
GG 35.48 Enter Long   Gold Corp
HMY 9.72 Enter Long   Homestake Mining
INTL 18.4 Enter Long   Intl Assets Hold Co.
IO 6.48 Enter Long   Ion corp
KGN 2.96 Enter Long   Keegan Resources Gold
LLL 68.58 Enter Long   L3 Communications
MUB 111.55 Enter Long   I-Shares Muni Bond Index
PDLI 6.68 Enter Long   Protein Design Labs
XRT 58.03 Enter Long   Retailers ETF
DGZ 12.51 Exit Long   Short Gold ETF Daily
* See chart        
SYMBOL CLOSE Today Yesterday Company
AOBI 0.39 Enter Long   American Oriental Bioengineering
BCRX 4.3   Exit Long BioCryst Pharmaceuticals
COW 28.27 Enter Short   Livestock ETF
FST 6.33 Enter Short   FOREST OIL
GBPCNY=X 9.881   Enter Short British Pound/Chinese Yuan
ICN 19.87 Enter Short   Indian Ruppee ETF
ITMSF 0.142   Enter Long Intermap Technologies
JOY 48.77 Enter Short   Joy Global Machinery
LD 44.66 Enter Short   Lead ETF
LULU 54.48   Enter Short Lululemon
VXX 13.03 Enter Short   VIX ETF
* See chart        
Click to enlarge

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Michael J. Clark, Hanoi, Vietnam