Stock Market Tanks – Wedge Pattern Confirms

Today the stock market began catching up to the real world as the economy continues to show signs of slowing. Some would say the recent economic data proves we are entering a double dip recession. I still maintain my view that we never left the Great Recession.

The market (as measured by the S&P 500) has moved below the rising bearish wedge pattern that I have spoken about for nearly two weeks. The confirmation drop was on heavy volume and many other internal market breadth indicators all confirm the ferocity of today’s drop.

There will be much to discuss in tonight market video which will be posted later this evening.

stock market crash Stock Market Tanks   Wedge Pattern Confirms




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Dallas Fed Manufacturing Index – Drops to Lowest Level Since July 2009

There are still weeds popping up in the green shoots garden. The July manufacturing data released by the Dallas Fed was the worst since July 2009.

JULY DALLAS FED MANUFACTURING ACTIVITY: -21.0% Vs. -2.5% Expected

Components

  • Production 4.9 v -1.9 prior
  • New orders -9.6 v -8.2 prior
  • Raw materials prices paid 12.3 v 29.7 prior
  • Wages and benefits 8.0 v 4.8 prior
  • Employment 5.1 v 4.3 prior

While production was up it is the new orders that continues to be troublesome showing a further decline from the previous month. New orders is vital to keeping production and employment growing, or at least stable.

The raw materials prices gauge is somewhat indicative of deflation, not good. Wages and benefits showed a gain, however it all comes back to new orders for without an increase in future orders wages and benefits along with employment will suffer.




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Ben Bernanke States Economic Outlook is Unusually Uncertain

Ben Bernanke’s written opening statement to Congress says the economic outlook is “unusually uncertain”. Coming from the always rose colored glass wearer this is a rather bold statement.

Full written text is provided below:

Ben Bernanke Testimony to Congress

Market Intervention – Keynes vs. Hayek

Very unique way of explaining, albeit simply, the concepts of Keynes economics and that of the Austrian economist Friedrich von Hayek.

An Illusion Of Profitability

“There’s something of an illusion of profitability”, says Kenneth Rogoff, Harvard economist. At a gathering of the American Economic Association’s yearly meeting held in Atlanta. Economists from a wide range of backgrounds mulled over the prospects of growth in the United States for the next decade.

[...] experts from a range of political leanings were in surprising agreement when it came to the chances for a robust and sustained expansion:  They are slim.

Many predicted U.S. gross domestic product would expand less than 2 percent per year over the next 10 years. That stands in sharp contrast to the immediate aftermath of other steep economic downturns, which have usually elicited a growth surge in their wake.

It will be difficult to have a robust recovery while housing and commercial real estate are depressed,” said Martin Feldstein, a Harvard University professor and former head of the National Bureau of Economic Research.

Housing was at the heart of the nation’s worst recession since the 1930s, with median home values falling over 30 percent from their 2005 peaks, and even more sharply in heavily affected states like California and Nevada.

The decline has sapped a principal source of wealth for U.S. consumers, whose spending is the key driver of the country’s growth pattern. The steep drop in home prices has also boosted their propensity to save.

“It’s very hard to see what will replace it,” said Joseph Stiglitz, Nobel laureate and professor of economics at Columbia University. “It’s going to take a number of years.”

One reason is that U.S. consumers remain heavily indebted. Consumer credit outstanding has fallen from its mid-2008 records, but still stands at some $2.5 trillion, or nearly one-fifth of total yearly spending in the U.S. economy.

Another is that many of the country’s largest banks are still largely dependent on funding from the U.S. Federal Reserve and the implicit backing of the Treasury Department.

Kenneth Rogoff, also of Harvard, argued that if the U.S. government ever “credibly” pulled away from its backing of the financial system, then a renewed collapse would likely ensue.

He cited government programs giving large financial institutions access to zero-cost borrowing as artificially padding their bottom lines.

There’s something of an illusion of profitability,” he said. (Source: Reuters) H/T butch (emphasis mine)

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A Rebel Yell – The Stock Market, Government, And Other Thoughts

It has been said numerous times that RebelTraders is only a bear site, in that only bearish news is presented. Is that being objective, or is it merely an echo of reality?

Perhaps if you knew a bit more about me you might adopt a slightly different view of what is presented on my site and why it is I am so adamant about certain viewpoints. You may have a perception that I am a greedy, selfish, or even a stubborn individual who cares only about himself.

While I am bearish on the economy and the markets I am nothing of the above. Outside of the markets and this website I am told I am a very generous person. I give to others without asking anything in return. I volunteer a substantial amount of my time to help others through our fire department, being the coordinator for a local Community Emergency Response Team (CERT), and a member of our towns Office of Emergency Management team. Mrs. Rebel and I live in a very small community and we are both heavily involved in organizations that are all centered on helping those in need. And we never ask anything in return. What we do get in return is the satisfaction of knowing we made a difference in someone’s life in a time of trouble. But this is just how my Wife and I are, it is what we enjoy doing.

The birth of RebelTraders on May 16, 2007 was out of that very same mindset of helping others.  I am told by my family that I sometimes care too much and that I give of myself more than I should. Even this very website is free and provided to all without asking anything in return. When the site readership grew I had to move to my own dedicated server because it outgrew the free blogger service ‘blogger.com’ which is where RebelTraders was born. The costs to maintain and operate this site come out of my own pocket each and every day. While there is some advertising on the site it does not make any profit for me. It just goes towards the upkeep of the site and even then I still must put out my own money. Some have suggested I put up a ‘tip jar’ on the site, but I have even resisted doing that for it would make me feel I’m taking money for something I enjoy doing which is helping others.

Some say I have a chip on my shoulders, that I hold extreme anger against those who speak bullish on the markets. The only chip that I have on my shoulder is angst against those who attempt to take money from others for their own financial benefit. Be it through deceptive marketing, misguided information, or outright lies. I know it is a chip that will always be there for a world that has an open and honest Government and honest business practices will never become a reality in my lifetime. But that does not mean I just lay back and just take it. As long as I have my voice and fingers to type with I will speak my mind and say what I see to be the truth, no matter how many people don’t care for it. I’m not here to please everyone all the time. For if that was my only goal then RebelTraders would have never been born.

I have attended many trading seminars over my lifetime. Some were here in my own neck of the woods around Philadelphia and New York, and occasionally by travel. My reason for attending these seminars once in a while is to meet people. I have met some of the best technical analysts and traders in those travels. One aspect of your web host here is that I am a ‘people’ person. I enjoy listening to all view points and believe it or not I am rarely one to tell others they are completely wrong. Instead I will just present an alternative view. I can’t force anyone, nor should I even expect anyone to adopt my alternate view if I have one. It is always up to the individual to decide for themselves what view point is right for them, whether it be right or wrong. I can only offer a viewpoint that may provide some balance to their views.

In early 2007 I became extremely frustrated with the quality and/or skewed information that was being presented to investors and traders.  The reason I was frustrated was that through my own observations, research, and analysis of the technical aspects of the markets led me to believe that a significant bear market was about to befall upon the world. This is why RebelTraders was born.

During those early days trades were discussed, macro and micro economic conditions were presented, and counter analysis was offered in the face of ever increasing bullish talk from CNBC and the Government. In the eyes of some readers, I was being unpatriotic to go against my own Government by disagreeing and even refuting their claims that all was well with the economy.  As time went on the economy continued to show all of the warning signs of significant and long lasting change was coming. And in spite of all the complaints from readers who kept trying to persuade me to think otherwise I kept my view.

As I stated earlier I am keen to other viewpoints, but they must be based on rational thought and data. As an engineer I have spent a good part of my life always debugging and designing systems that were based on facts. An engineer bases his or her work on empirical evidence and that is how I always have approached the markets my entire trading career.

The stock markets are full of individuals and corporations who only have one interest in mind, and it is theirs. Even large investment firms who specialize in managing other people’s money may say they have your best interest at heart but the naked truth is that for the majority of them they don’t care about you. Every company always operates under a ‘what is in it for me’ business model. The primary reason investment banks and other investment specialists are in business is to make money, not to make ‘you’ money. Yes, there are some that base their profits on the growth of your portfolio but that is not where the real money is being made. The real money comes from simply having your account in their files to show a bigger account base which in turn allows them to do more and grow bigger. They can’t grow and make more money if the deposit base is thin.

Your $250,000 portfolio with Acme Investment Advisers Incorporated (made up name) is worth more to them as an account, irrespective of how much money you make or lose under their guidance. Case in point, how many people do you know received a phone call from their investment advisor in late 2007 or even 2008 and were told to sell everything? How many were told that the markets are facing big problems ahead and it might be safer to get out? See what I mean. The only thing that matters to an investment firm is the fact that you have money in their ‘system’ and so why would they want to tell their clients to sell and get out when your account is part of their life blood.

When the financial crisis began to grow even larger some investment firms went as far as to tell their clients to ‘ride it out’, or that these problems were common and you should not worry. Even in my own family we were exposed to that very tactic. In a post I published back on December 2, 2007 I discussed how an investment service attempted to tell  its clients that they should essentially turn off the television and go take a walk. It was not about how much money any client stood to lose, it was about the company losing the account, that’s all that mattered. Your personal gains or losses means squat to them.

The following is the actual letter a family member received in December 2007, again this was in 2007 and was already one month after I called a new bear market (more commentary follows the embed article below).

Rather shocking isn’t it. Telling clients to, in not so many words, just go stick your head in the dirt and ignore everything.

We all know the stock market is speculative and involves risk. But when it comes to the stock market it is also the breeding ground for the largest corruption, lies, scams, false statements, and outright deception. The larger the company is so too is the potential for even larger scandals, lies, and even illegal activity all in the name of making even more money. Just look at the major banks that have become so large that they can’t be killed. Instead their pilferage of the innocent grows to the pilferage of everyone in the form of the largest tax payer bailouts in history.

An individual investor is seldom told the truth of what is going on. They receive nice and glossy year end reports from companies they are invested with. They show beautiful photographs of people hard at work, speak of corporate ethics being at the top of their priority list, and speak about how great the future will be. Remember Enron? How about WorldCom? Take the many other thousands of companies that throughout history have been reduced to rubble, or left impotent by their own lies and fraudulent activity. The only entity that is worse than the stock market with respect to lies and deceptive statements is the Government itself.

So just how does a person who wants to invest money in the markets find any real information. Many turn to the financial news shows and get guidance from the likes of Jim Cramer, the team at the Fast Money desk, or listen to any number of large financial institution spokespersons speak about how this stock or that stock is a great investment. The financial media is just as guilty of always presenting a bullish sentiment regardless of the facts in front of them. Unfortunately no one in the big financial media outlets ever gets held to account for their actions. I read an article just today about Jim Cramer and how many death threats he has had against him. Gee, could it be that his ever bullish mantra has cost people to lose money and they are mad at him? He is on TV so he must be smart and must know what he is doing, right? Unfortunately so many innocent people watch him and think that very thing. If Cramer says it then it must be true is what these innocent people think. So sad a world it is that a screaming manic on television who has even admitted in the past to breaking Securities and Exchange Commission (SEC) rules is being taken seriously.

My mission here at RebelTraders is to do my best at presenting a view of the markets based on technical analysis, macro and micro economic events, and real world observations. My statements sometimes rub people the wrong way, they may disagree completely. Some may even think I have no capability at all for seeing anything good when it comes to the markets and economy. On the contrary, I am not that at all. I so desperately want to report good things going on, I desire the day I can say to everyone that I see green pastures ahead, and to report that the economic problems are all behind us. But wanting to report good things is different than reporting the truth. One thing I will never be is persuaded to do is report what I know to be incorrect. The word ‘Rebel’ may mean to go against a popular view but it does not indicate that I am a permabear, or even stuck in my ways. In the case of RebelTraders it simply means speaking what I see through my own research, which may often go against the mainstream media. In this regard I am a rebel.

My view of where we stand now remains the same. We are in the midst of a secular bear market (not cyclical), the rally from March will fade, and a return to a downward path in the markets will resume yet again. I await the signs of organic growth to return which to date has not. It remains my view that any market advance should be an opportunity to sell (or go short if you are an astute trader).

I foresee home prices declining much further still, credit contraction in the consumer sector will continue well into the year ahead, if not much longer. Foreclosure activity will continue to increase, personal and corporate bankruptcies will rise much faster in the coming year, and the growth witnessed to date in the form of corporate earnings will deteriorate once again after the artificially created growth fades away.

There is still much danger facing our markets and the economy as a whole. Agree or disagree that is my view and I will continue to report what I see, not what I’m told to say.

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Economic Collapse Warnings From Societe Generale

Clients of the large French bank Societe Generale are being told how to prepare for a possible global economic collapse.

[...] In a report entitled “Worst-case debt scenario”, the bank’s asset team said state rescue packages over the last year have merely transferred private liabilities onto sagging sovereign shoulders, creating a fresh set of problems[...]

In a report entitled “Worst-case debt scenario”, the bank’s asset team said state rescue packages over the last year have merely transferred private liabilities onto sagging sovereign shoulders, creating a fresh set of problems[...]

[...] “As yet, nobody can say with any certainty whether we have in fact escaped the prospect of a global economic collapse,” said the 68-page report, headed by asset chief Daniel Fermon. It is an exploration of the dangers, not a forecast.

Under the French bank’s “Bear Case” scenario (the gloomiest of three possible outcomes), the dollar would slide further and global equities would retest the March lows. Property prices would tumble again. Oil would fall back to $50 in 2010.

Governments have already shot their fiscal bolts. Even without fresh spending, public debt would explode within two years to 105pc of GDP in the UK, 125pc in the US and the eurozone, and 270pc in Japan. Worldwide state debt would reach $45 trillion, up two-and-a-half times in a decade.[...]

[...]The underlying debt burden is greater than it was after the Second World War, when nominal levels looked similar. Ageing populations will make it harder to erode debt through growth. “High public debt looks entirely unsustainable in the long run. We have almost reached a point of no return for government debt,” it [the report] said.[...] (Source: UK Telegraph)

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No Money For Funerals

This is just sad…

We can bailout the nations largest crooks corporations and CEO’s walk away with multi million dollar pay packages yet the victims of this financial disaster can’t even bury their loved ones.

What the hell is this nation becoming?

(hat tip Butch for story)