The gist is there's a consortium of interests on the verge of suing BAC to buy back Billions of dollars in mortgages. The interesting thing is that BAC owns 34% of BlackRock and ironically BlackRock owns the biggest chunk of BAC, 5.35%-what a conundrum! Also an apparent conflict of interest, but Wall Street will eat their own young so that will be interesting to watch as it unfolds. The Proverbial Second Shoe? And it's second verse same as the first-MBS (MortgageBacked Securities)- back to where it all started.
Here's more from Bloomberg:
On GLD/Gold...
As 3C has been showing, GLD has been under distribution, gold itself was slammed today; it lost $38.70 an ounce. This in large part had to do with the Euro/Dollar, which I posted charts of earlier today-3C has also been showing negative divergences in the Euro and positive in the Dollar Index. The Dollar index (as posted earlier today) finally and decisively broke the downtrend and did so convincingly. Crude lost $3.50 a barrel- again another effect of the stronger dollar.
To put this into perspective, GLD lost 10 days or two weeks worth of gains today alone. USO lost more then 12 market days of gains today alone-both on increasing volume. UUP (proxy for the dollar) regained 10 market days or two weeks of losses, again just today and on huge volume, as noted Friday, volume had been rising in the Dollar/UUP. This is a classic Bull Trap.
On China...
China today also threw some noxious bull repellent in the stew by letting their benchmark rate slip 25 basis points, a symbolic move, but one that benefited the dollar and raised questions about growth in China-this is probably why, when I listed the bullish/bearish ETFs by 3C standards, FXI-China 25 Index ETF was on the distribution side and the ETF that is short the index was showing accumulation. This of course brings commodities into question as they are a major if not the major consumer of commodities and we saw, as mentioned above, commodities get hit. Think back to Yellen's speech last Monday and last week when I said, "that may have been the most significant event of the week". Specifically her talking about speculative asset bubbles and taking away the “punch bowl” and those who have been making a lot of money in those markets “not being happy about it”.
That's not all China did today, apparently certain rare minerals have been blocked from being shipped to Japan for about a month, guess who else was put on the embargo/ blacklist... The US of A. So we'll be watching to see which of these metals is about to surge as others may fall by the wayside. Anyone heard of Samarium Oxide? I'd like to find out which if any public companies mine this stuff. Here's more from the NYT:
On the Fed, Questioning the Fed...
Also today a bevy of Fed officials slammed Fed policy, such as Dallas President Fisher who openly questioned if Fed actions have done anything but create bubbles? Here's a few excerpts:
"In my darkest moments, I have begun to wonder if the monetary accommodation we have already engineered might even be working in the wrong places."
"A great many baby boomers or older cohorts who played by the rules, saved their money and migrated over time, as prudent investment counselors advise, to short- to intermediate-dated, fixed-income instruments are earning extremely low nominal and real returns on their savings. Further reductions in rates earned on savings will hardly endear the Fed to this portion of the population."
“The problem is that, presently, the efficacy of further accommodation using nonconventional policies is not all that clear.”
“The vexing question is: Why isn’t this liquidity being utilized to hire new workers and reduce unemployment? “
“In my view, changes in monetary policy may be desirable, but they should be used only to a limited degree in attempts to control movements in demand arising from non-monetary sources.”
and finally....
“
That's the Fed, doubting the Fed. The optimistic Fed outlook didn't stop there as Chicago Fed's Charles Evans said among other things:
1) It's likely the US in a liquidity trap, first time since Great Depression
2) He sees the US unemployment rate above 8% through 2012-now that is optimistic!
3) He says “temporarily boosting inflation may be hard pill to swallow, but potentially beneficial” Tell that to the 17+% U6 unemployed/underemployed/stopped looking for work altogether!
And GDP...
Certainly GDP, which is going to be very interesting, is clinging to the 2% mark, as I've said, a trend in motion is hard to reverse and there's not been much evidence that we can expect any better from Q3 2010 then what we saw in Q2 2010, which was a continuation of the slide since GDP hit 5% Q3 of 2009; it has been straight downhill from there. A trend in motion....
The $USD...
More specifically on the Dollar which may be at the last stage of a huge inverse Head and Shoulders top, and I thought this was going to be a rather small move compared to 2009. Take a look at this 5 day chart of the Dollar Index.
As the daily 3C chart shows, there is a bigger then I realized divergence present at the bottom of this right shoulder, this is an entirely possible outcome. You can see the last (the first white arrow to the left of the chart) was a very successful positive divergence leading the Index much higher. I added blue arrows so you can see the outline of the inverse H&S pattern. And just in time for the posting of this chart, “Little Timmy” speaks some surprising words that haven't been heard since the last divergence took hold and the index rallied. Here they are, hold onto your hats.
On Today's Market Breadth...
Don Worden talked about the market's breadth today, and to put it succinctly he said, “Trading stats today were about as negative as I've ever seen them”.
All ten of the important averages were down all over 1% and two over 2%. All 16 breadth groupings Don uses were for the first time I've ever seen, Super Decisively Negative. Two thirds of the Russell 2000 closed down on rising volume indicating panic selling.
Price Volume Relationships tell the story...
All NYSE stocks tracked...
Close Down/Volume Up: 3686 stocks Indicates Panic Selling
Close Down/Volume Up: 3686 stocks Indicates Panic Selling
Close Down/ Volume Down: 1836 stocks Thematic relationship of a Bear Market
Close Up/ Volume Down: 458 stocks Most Bearish Relationship
Close Up/ Volume Up: 608 stocks Most Bullish Relationship
The DOW Jones-30
Close Down/ Volume Down: 5 stocks
Close Down/Volume Up: 23 stocks
Close Up/ Volume Down: 0 stocks
Close Up/ Volume Up: 2 stocks
The NASDAQ 100
Close Down/ Volume Down: 24 stocks
Close Down/Volume Up: 67 stocks
Close Up/ Volume Down: 2 stocks
Close Up/ Volume Up: 6 stocks
The Russell 2000
Close Down/ Volume Down: 492 stocks
Close Down/Volume Up: 1322 stocks
Close Up/ Volume Up: 100 stocks
Close Up/ Volume Down: 30 stocks
The S&P-500
Close Down/ Volume Down: 101 stocks
Close Down/Volume Up: 358 stocks
Close Up/ Volume Down: 9 stocks
Close Up/ Volume Up: 24 stocks
In summary, the dominant and I mean DOMINANT, Price volume Relationship was Close Down and Volume Up, which at this stage indicates panic selling. In my opinion and from what I saw in 3C and the retracement of the Euro tonight this is enough to put the market into a short term oversold condition so I still would not be surprised to see a bounce. However, as I have been highlighting all this month, the breadth readings (internal health of rally) have been bad and have continued to deteriorate so no matter what we see tomorrow, even a complete retracement of today's weakness, it is just a tree in the forest.
For those wondering, "Is this the reversal", I'd say yes with the caveat that a top or bottom reversal, large or small, is a process, not an event.
I think strength or bounces in the market can be used to get your toes wet in positions, but we ultimately need to wait for price to go through the top process and confirm the reversal. There's plenty of room on the downside, now is not the time for swinging for the fences, but you also get paid to take risks -so long as they are calculated ad the odds are in your favor. PLEASE, BEFORE ENTERING ANY POSITIONS, READ OR RE-READ THE ARTICLE I WROTE AND LINKED AT THE TOP RIGHT SIDE OF THE SITE ON RISK MANAGEMENT-THIS IS THE "HOLY GRAIL OF INVESTING".
Until tomorrow.
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