To use an expression my Mother says when she is angry…

I’m so mad I can’t see straight!

This is how I feel with regard to the latest proposals that Secretary Paulson put forth today in his speech. It is my view that all the Government wants to do is find ways to ‘hide’ the problems from the public and create additional layers of crap, which the investing public, would have to wade through in order to get the facts from financial institutions.

I am for a ‘free market’. Transparency and full disclosure of assets is absolutely mandatory for all public companies. If they don’t want to be transparent, and truthful, with their stakeholders then they need to go private… period.

Please read Karl Denninger tonight, while his way of ‘talking’ may be a bit harsh, he speaks the way it is and you should read his view on this matter tonight.

As we have now closed out the month. I thought I would show you the monthly chart of the S&P 500. There are a slew of technical indicators, computer programs, and even some fancy trading methods that have sprang up overnight. But tried and true technical analysis is still the choice of the professionals. One of the most widely used technical analysis indicators on long term charts remains the MACD. 

Developed by Gerald Appel, Moving Average Convergence/Divergence (MACD) is one of the simplest and most reliable indicators available. MACD uses moving averages, which are lagging indicators, to include some trend-following characteristics. These lagging indicators are turned into a momentum oscillator by subtracting the longer moving average from the shorter moving average. The resulting plot forms a line that oscillates above and below zero, without any upper or lower limits. MACD is a centered oscillator and the guidelines for using centered oscillators apply. (from stockcharts.com)

Some modern day technical analysts think the MACD is no longer as useful of a tool as it once was. Nonsense, most of the critics of standard technical indicators I feel comes from those trying to sell new systems. Don’t get caught up in some web site or software company trying to sell you some "new and improved" technical analysis method. Just as there is corruption in corporate America, there is even more crooked people on the Internet trying to lure investors and traders with fancy sounding systems and names. And beware of any company that says they use a "proprietary" system. If  you hear the word proprietary used to describe something your being asked to pay for… run away…  Anything in a "black box" that they can’t show you is your clue to keep moving along.

There are numerous technical analysis indicators that we use here, Nothing proprietary about our analysis. Just old fashioned hard work and applying the tools of the trade. Some of the tools work very well in a healthy market, and some don’t work at all in a bad market. So we use the right tolls for the right time. Point I’m trying to make here is this, don’t get suckered into spam emails and advertisements touting some new system or the next "make big money now" thing. The ones making the big money are often those selling it, not the ones buying it.

Back to the MACD… it is very useful for identifying major shifts on long term charts. Observe on the chart below how the MACD has not printed a ’sell’ signal since the last bear market which began in 2000. And it has once again printed another signal here in 2008.

 

 

 

 

 

 

 

 

 

(S&P 500 monthly chart)

 

The Financial Sector (XLF) is still in a down ward channel…

 

 

 

 

 

 

 

 

 

(Financial Sector - Weekly Chart)

 

And the last chart for tonight is the volatility index (VIX). This chart is the VIX is with the S&P 500 combined. As long as the volatility remains in the ascending triangle then the markets are at risk of increasing sell offs. We are sill maintaining a "sell the rallies" here. There is nothing yet to tell us that a bull market is going to return any time soon.

 

 

 

 

 

 

 

 

(VIX vs S&P 500)

I just want to say that events are unfolding at a pace not seen in the markets for many decades. The amount of money that has been pulled out from the market is substantial, and all it will take it a failure of the recent lows to trigger the next substantial leg down in all of the major indices. The way I see the technical’s on the charts is a consolidation over the past couple of weeks with weakening support. All rallies should be considered "bear market rallies" until further notice.

News tonight:

Merril Lynch (MER)    Q1 EPS EST REVISED TO -$1.38 FROM -$1.20 AT DEUTSCHE

A FINANCIAL TIMES EDITORIAL LOOKS AT THE LOOMING DANGERS FOR THE US DOLLAR
- Article notes that in just a few months, sovereign wealth funds have lost billions of dollars by re-capitalizing western banks.
- The article adds that such losses and the rapid fall in the USD increase the risk that foreign investors will lose their appetite for dollar assets.
- The article adds that Abu Dhabi’s implied capital loss on its investment in Citigroup is about $2.5B since last Nov and Temasek lost about $600M on its Merrill Lynch investment
- Article comments on last week’s comments from the South Korea National Pension Service ($220B of assets) suggesting that it may sell US Treasuries and buy higher yielding European government debt.

CitiGroup (C) - THE 6 MUNI-BOND FUNDS OF CITIGROUP HAVE FALLEN TO VALUES RANGING FROM 10 CENTS TO 60 CENTS ON THE DOLLAR - WIRE CITING A SOURCE
- Citigroup bailed out these funds with $600M earlier in March.
- According to the report, the funds had $15B in assets and about $2B in capital earlier in March.

NIKKEI REPORTS THAT MANY JAPANESE COMPANIES MAY ASSUME A RATE OF ¥100 IN COMPUTING FY09  EARNINGS - NIKKEI
- Nikkei notes that at the ¥100 level, industry wide corporate profits could fall by double-digit percentages

Remember that tomorrow we get the first of two ISM data releases. The one tomorrow will be the manufacturing ISM.