Just yesterday, I wrote credit deflation commenced July 27, 2010 as bonds and the yen turned lower.
And today, debt deflation turned the equities, specifically the European financials, financials, dividend payers, emerging markets, the Russell 2000, semiconductors and Nasdaq biotechnology shares lower as the rally that led up to last Friday’s European Financial Institutions’ Stress Tests is likely over.
Today’s Financial Market Report (Note: all prices and percentages obtained from Stockcharts.com)
The chart of the EUR/JPY relative to the European Financials, EUFN, Spain, EWP, the Financials, XLF, the Russell 2000, IWM semiconductors, SMH, and the Nasdaq Biotechnology, IBB, shows that the European Financials sparked a number of US market sectors to turn lower today … EUFN -0.6%, EWP -0.9%, XLF -0.9%, IWM -1.6%, SMH -1.7%, IBB -2.0%.
The dividend payers that have been rally leaders, that is TGP, WMZ, HCP, GXG, and BCH, traded lower today.
Utilities, XLU, popped 1.5% higher on awesome volume yesterday. But today, utilities have been stopped out showing a 0.33% loss, and manifesting the lollipop hanging man candlestick.
Most of the natural gas pipelines SXL, HEP and ETE traded lower today.
Health care REITS HCP, OHI, VTR, and NHP traded lower today.
World currencies, DBV fell 0.8% and emerging market currencies, CEW, fell 0.2% …. World shares, VT, fell 0.45% and emerging market shares, EEM, fell 0.56% .. Aggregate Bonds, AGG rose 0.2% .. US Treasuries, TLT, rose 0.3%. Chart of DBV, CEW, EEM and VT.
Most all of the emerging market bank leaders, BCH, BMA, CIB, BCA, and SAN traded lower today; however SAN rose 3.5%.
Small cap value shares, RZV, fell more than small cap growth shares, RZG, for a second straight day suggesting a bear market downturn is underway. Chart of RZV and RZG. Confirmation comes from housing XHB turning 2.8% lower, retail, XRT, falling 1.4% lower, health care, XLV, 1.4% lower and solar stocks, TAN, 0.8% lower.
The stock market rally is over and done; and the chart of super performer, Cummins, CMI, reported on by Trader Mark, shows the lollipop hanging man candlestick on an ascending wedge with today’s 0.4% gain to barely hang on; this industrial company is at the top of my suggested short selling list for institutional accounts.
The other top short seller on my list is Anworth Asset Mortgage, ANH, as it still up and performing well at the top of an ascending wedge, and will be falling lower soon as credit deflation comes to strike at the 10 Year US Government Note, IEF.
American Express, AXP, and Capitol One Finance, COF, represent excellent long-term financial sector short sellers in as much as I reported, credit deflation commenced yesterday. Perhaps some day when credit becomes extremely tight, these companies will be integrated into the Government and serve as its credit outlets distributing credit to the strategically important companies.
US Treasuries, TLT, rose 0.3% after falling parabolically lower for four straight days. Chart shows a double market top, and today’s rise to the edge of head and shoulders pattern suggesting either a fall lower or a bounce up.
Carry trade monies flowed in base metals, DBB, which rose 1%; oil, USO, fell 0.9%; gold, GLD, rose 0.2%; the US Dollar, $USD, traded unchanged at 82.15.; the Euro, FXE, traded unchanged at 129.44. The Yen, FXY, traded up 0.6% to 113.23.
The European Financials rally is most likely over; and the debt deflation bear market rally that commenced April 26, 2010 in response to the European sovereign debt crisis has recommenced; yet is only worse now that it involves credit, that is bonds as well.
I am not a licensed investment professional. I am a blogger who perceives an investment demand for gold coming from a steepening yield curve, $TYX:$TNX, and debt deflation, and therefore I am invested in gold coins. Institutional accounts should consider trading the bear market ProShares 200% inverse ETFs seen here in this Finviz Screener of SRS, SJH, SSG, EEV, SMN, BZQ, SIJ, EPV, FXP, SCO, JPX, BOM, EWV, INDZ, BRIS, BIS, SDP, RXD … Chart of SJH rising from a head and shoulders pattern. Debt destruction is most likely going to fall fastest and hardest on the Russell 2000 companies so dependent upon properly functioning credit markets which they use to pay accounts payable, buy inventory and pay employees. Yes, small business America is going to be literally decimated very, very soon. Click on chart to enlarge.
And Institutional investors should consider the Morningstar report that The Profunds UKPSX, 200% short Japan, and the Direxion DXRSX, 200% Small Caps have been a consistently good performing bear mutual funds. And the investment prospects look good for TMV, 300% inverse of the 30 Year US Government Bond as well.
Disclosure: I am invested in gold coins