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The Stock Market Is Overvalued, Caution Is Warranted

buffett indicator variant

Back in 2001, Buffett said in an interview with Fortune Magazine that “the single best measure” of stock market valuation is by taking the total market cap (TMC) and dividing it by the total gross domestic product (GDP). Today, TMC is equal to 114.5% of total GDP.

At the market top in 2007, just prior to a -54% crash in stocks, TMC was equal to 104.9%. According to Buffett’s “favorite” market timing indicator, stocks are more overvalued today than in 2007.

[Must Read: Shelley Moen: Pullback Ahead]

What’s more, since the market low in 2009 (when the ratio was at 56.8%–the first time in 15 years that stocks were truly “undervalued”), the ratio has climbed for six consecutive quarters and is now nearly two standard deviations above the mean.

However, just because a market is overvalued does not mean that a crash or even a significant correction is immediately imminent. Given the unprecedented negative 2.9% adjustment to US first quarter GDP figures, I expect this earnings season is going to be quite volatile. As usual, there will be good days and bad days but overall, barring any unexpected shock, I expect the current trend to be maintained.

That being said, Dow Theory is giving us some mixed signals.

The Transports are far stronger than the Industrials. There is no divergence as such but the flat-lining of the Dow 30 index is giving me cause for concern and I will be paying particular attention over the next 3 weeks for early signs of technical breakdown.

[See Also: A Second Quarter GDP Bounce-Back May Not Be Bullish]

The bell-weather consumer staples ETF: XLP is also giving mixed signals. While the overall ETF is technically strong, T J Max, Proctor & Gamble, Wal-Mart, Costco and Visa are showing early signs of price deterioration.

Thus, all in all, I think the July earnings season will tell us a lot regarding whether the bull is going to last. I am beginning to have my doubts. Caution is warranted.

Dow Transports: Daily
dow jones transportation avg.

Dow Industrials: Daily
indu

ETF: XLP: Daily
consumer staples

TJ Max Corp: Daily.
tjx cos., inc.

Proctor & Gamble Corp: Daily.
procter & gamble

Wal-Mart Corp: Daily.
wal-mart

Costco Corp: Daily.
Costco

Visa Corp: Daily.
Visa

 

Charts Courtesy of SharpCharts.Com.

© Christopher M. Quigley 1st. July 2014.


http://www.wealthbuilder.ie/

 

Capital Controls Rolling Into High Gear Under FATCA

sent into us to day 
By: Jeff_Berwick

The traditional banking system was already bad enough but now, with banks around the world rushing to comply with the Foreign Account Tax Compliance Act (FATCA) it is beginning to reach extreme levels.  And it isn’t just affecting the most financially restricted people on Earth: US citizens… it is affecting everyone.

Take myself for example.  I operate numerous businesses worldwide.  I am a Canadian citizen as well as the citizen of a Caribbean country and our business operations are also operated out of a non-tax jurisdiction in the Caribbean.  On top of that we hold no bank accounts, whatsoever, in the US… instead, we have bank accounts all over the world.

Yet, in the last two months we have had our accounts or transactions frozen, denied or questioned in different jurisdictions at least ten times.  And we have had countless other problems over the last two years.

Here are just a list of the most recent:

We got FATCA’ED.  We received a FATCA notice from one of our banks in Eastern Europe.  They told us that we must comply and contact them immediately.  We contacted them and let them know that the company is not a US company and no US citizen is involved with the company nor the bank account.  They told us that one of the phone numbers they had on file for us was a US number and therefore they’d have to close our account.  We informed them that the number they had was a virtual Skype number, one of many we have, that forwarded to the property departments in our companies around the world.  We are still dealing with this issue.

Constant Inquiries.  At the same Eastern European bank a few weeks ago they demanded to see detailed contracts and information on a large number of our transactions.  We are still also dealing with that.

Wires Constantly Scrutinized.  At one of our bank accounts in Canada with which I have had a 20 year relationship in good standing they have blocked numerous of our recent wires and demanded to see information on who the money is going to and why.  In more than one instance, when sending funds to the Middle East, we were informed that any and all wires sent to the Middle East were under heavy scrutiny causing us numerous problems.

The Paypal Monster.  Paypal has frozen many of our numerous Paypal accounts that we have worldwide on an ongoing basis.  This shouldn’t come as news to any merchants who use Paypal as the company is notorious for constantly freezing funds and accounts for all manner of reasons.  In one instance, as part of operations in our hotel in Acapulco (Las Torres Gemelas Private Suites) they froze our account until we could show them proof of numerous very small denomination transfers.  The transactions were for room rentals that had occurred weeks or months prior and Paypal would demand that we show proof that the person had stayed with us and approved the transaction.  Often these were past guests who had just booked for a few nights, who we had no other relation with, that we would have to somehow try to contact afterwards and bother them to supply Paypal with their information and approval of the transaction!

No Cuba For You.  In another instance, just a few weeks ago, another Paypal account we had was frozen after we paid for a flight from Havana, Cuba (ironically I had just stopped there for one night because I wanted to avoid the pain and risk of flying through the US) via Paypal because it was nearly impossible to purchase a flight to or from Cuba by any other means.  Because we denoted the payment done was for a flight from “Havana” the account was frozen.  The total dollar amount was for just a few hundred dollars.

No Brokerage For You. Last year, a brokerage account I use in Luxembourg threatened to close my account.  When I asked why they said that the brokerage had recently been bought by a Canadian brokerage and there is a Canadian law that says that no Canadian can deal with a brokerage owned by a Canadian company outside of Canada.  Luckily they accepted my Caribbean residency and therefore let the account remain open.  US citizens are not so lucky.  The SEC has made it so hardly any brokerage outside of the US will accept US citizens effectively locking their accounts inside the US as a capital control.

And, we are most definitely not alone.  At TDV Offshore we hear dozens of stories per week from people scrambling to find a way to have international bank accounts after their accounts have suddenly been shuttered.  The great majority are US citizens who receive a notice that their accounts will be immediately closed due to FATCA.  FATCA is essentially creating capital controls for US citizens on banking making it harder and harder to hold funds outside of the US.

In short, it is getting more difficult all the time to transact in the traditional banking system.  And it seems to just get worse by the month.  There appears to be a worldwide effort underway to make it harder and harder just to transact financially.

THE OPTIONS

Luckily there is still options for getting around many of these issues but it isn’t cheap or easy… and not about to get any easier.

Passports.  For Americans the only way to really be able to internationalize your assets and get out from the unbelievably egregious US tax system is to get a foreign passport and then to renounce your US citizenship.  This may seem extreme to some but it seems like the most rational thing to do to us.  We foresee the US continuing to devolve, further capital controls to be erected and the US not being a place anyone will want to go for an extended period of time as it completely collapses… so why not get yourself and your capital out while you can?  The US government, as we have reported, has even gone to lengths to make it harder for US citizens to get foreign passports… which should be a big hint as to their intentions.  Just this month they have attacked probably the most arduous, respectable and legitimate “citizenship by investment” program in St. Kitts.  And the US government has pressured the Dominican Republic to increase the time to get a passport from an original two years to now eight years.  We foresee this continuing and by the time many do see the writing on the wall and want to get a second passport to get away from the US it will be too late.  The demand will be too overwhelming and the supply will continue to dwindle which will drive the cost through the roof… if it is even possible at all.  You can contact TDV Passports for a consultation on what your current options are.

Foreign Trusts.  Another option that is still available but may not be for much longer is to transfer your assets into an offshore trust thereby getting around FATCA rules and giving US citizens the ability to bank, have brokerage accounts and to do business internationally.  This is not easy or simple and our FATCA experts at TDV Wealth Management have a fulltime job trying to help US citizens to internationalize their assets.  Citizens of other countries may feel that they do not need to do something like this as their country does not currently have FATCA controls nor taxes them on worldwide income.  We expect this door to be closed very quickly as the Western countries all devolve into the Greater Depression and as tax revenue for their governments decline.

Bullion.  One of the best ways to retain your assets is to have them in hard assets like precious metals outside of the financial system and preferably geopolitically diversified to make it harder for any one government to seize.  This, also, is getting harder and harder but is still possible even though it is now nearly impossible for Americans to ship gold outside of the country and have it insured as we know of no companies that will now do that for US citizens.  There are many ways to international precious metals though and you can read more in the Getting Your Gold Out Of Dodge report.  As well, precious metals should rise tremendously as the modern banking and financial systems collapse during The End Of The Monetary System As We Know It (TEOTMSAWKI).

Bitcoin.  Bitcoin offers not only a safehaven from the financial system and ability to transact worldwide in seconds for free and with no chance of any government or bank freezing the transfer… but it also offers tremendous speculative upside.  I believe that as more people awaken to the serious capital controls and inability to transact internationally easily that more will move to bitcoin as a way to hold their assets as well as to transfer them easily.  This alone could see bitcoin go up 1,000% in the next 1-2 years in my opinion, if not more.  In fact, bitcoin has surpassed Western Union and is now close to surpassing Paypal in terms of transaction volume which is no surprise to us here at The Dollar Vigilante (where we have been following bitcoin since $7 in 2011 at The Dollar Vigilante newsletter) as it is a much easier, better, faster, safer, more private and cheaper way to transact.

Graf source: http://www.statista.com/chart/1681/daily-transaction-volume-of-payment-networks/

MASSIVE CHANGES IN THE WORLD MONETARY AND BANKING SYSTEM

The perfect storm is developing and it is all going as we have predicted over the last five years.  The Western world will continue to inflate their currencies to keep the system alive as almost all governments are bankrupt.  Governments will continue to make it harder to get your assets outside of the country.  There will be further grabs on all manner of assets including retirement and pension funds and more bank bail-ins, like in Cyprus, as government bonds collapse and the currencies hyperinflate.

Luckily, as mentioned above, there are still options but the doors are closing at such a rapid pace now that if you haven’t begun to protect yourself from the coming collapse you had better start doing it yesterday.

Have you had a nightmarish banking experience abroad or in the US? Share it, and other stories, in the comment section by clicking here. Anarcho-Capitalist.  Libertarian.  Freedom fighter against mankind’s two biggest enemies, the State and the Central Banks.  Jeff Berwick is the founder of The Dollar Vigilante, CEO of TDV Media & Services and host of the popular video podcast, Anarchast.  Jeff is a prominent speaker at many of the world’s freedom, investment and gold conferences as well as regularly in the media.

© 2014 Copyright Jeff Berwick – All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors

Kind regards,

 

 Christopher

__________________________________,
Christopher M. Quigley,
B. Sc. (Maj. Accounting), M.I.I. (Grad.), M.A.
Self Administered Pensions & Investments.
See Website For Legal Disclaimer.
E:    Info@Wealthbuilder.ie
M:    086-8118-600
LIA, Registered Member.

Wealthbuilder Market Brief 6th. March 2014

The Stock Market’s New Normal: A Wall of Worry.

While I realize that fundamentals are important to investment success I also appreciate the relevance of technical analysis in gauging investor sentiment and in timing entry and exit points.

From the technical point of view the market is in a strong bull trend and would appear to be poised to reach new highs. However, when I research into the fundamental reason behind this strength I find little to support it other than the actions of the FED. To explain what I mean I attach 5 charts from two different sources. They outline real underlying weakness. Thus while I am fully invested in equities at the moment I have hard sell stops in place and I am prepared to quickly and solidly go short should my key technical positions break-down on high volume.

full report in PDF form Here: Wealthbuilder Market Brief 6th. March 2014

 

 

Essay on local currencies.

 By : Christopher M. Quigley B.Sc. (Maj. Accounting), M.I.I. (Grad), M.A.

1. Local Currency Objective: To establish a sound money unit with a constant purchasing power within a local group of traders to so promote a more efficient circulation of money and thus increase business and customer loyalty among the business group.

2. Guiding Principle: Learn and Grow:

It is anticipated that the group should modify and improve the workings of the money circle as their understanding of money and its potential to expand their business and community grows. By agreement new groups can be added to cover wider geographic areas. Eventually if the “local” currency covers the “county” area the local government should be lobbied to accept the local currency as payment for property taxes. This one act will greatly assist the acceptance of the currency and allow the group greatly increase money circulation and issuance.

Should a depression ever come about the ability of the local group to issue its own money will save that community from utter social desolation and disintegration. As Prof. Carroll Quigley pointed out in his last public lecture (The Oscar Iden Lecture of 1978, see copy below) when society fails it is up to communities to save themselves. There is no more powerful way a community can protect its children and itself than by developing its own local currency free from monopoly banking control.

3. The ideal entity to commence a money circle is a group of traders on one street or those operating within a given “farmers” market or “flea” market. There should not be competition of services within the group so formed.

4. Ethic: Keep things simple but fair.

5. The issuance of printed money negates the need for excessive back office administration.

6. Initially the group needs to agree the level of “credit” it will issue among itself and prints up its own uniquely designed money. Ideally this money should have a seal of recognition. This seal should be raised as with those used by incorporated companies. The following words should be printed on the circle’s money: “if the stamp is not raised this money is null and void and not valid”.

7. This money is then divided equally among the traders for issuance to customers as an incentive to barter and trade among the participating group……………………..

How To Form A Local Currency -2- – Copy

related item: http://www.wealthbuilder.ie/

 

 

 

The Investment Rule of 72 for Successful Stock Market Investing

By: Christopher_Quigley

The issue of  successful stock market investment affects us all. Even if we are not directly  engaged in the industry, all of us will need some form of pension to fund our retirement.  Whether we like it or not most of our retirement funds will find their way into  the financial markets. For this very reason, the issue of pensions has moved  politically centre stage, in particular the investment strategies used to  direct pension funds. Due to mismanagement, mainly over the last decade, many  retirement portfolios have become under-funded at best, or, at worst, totally  bust.

This situation is a direct result of the managed funds having been  speculated rather than invested. Many cynics will say that the whole investment  environment today has more of the characteristics of a casino than of a  professional market of equities and, therefore, they doubt that one can ever  achieve a faithful and fair return on capital. However, this view is erroneous.  This essay sets out to explain how to achieve superior stock market investment  returns through a simple yet powerful investment rule: “the rule of 72”. This  rule is based on investment and not speculation yet if you faithfully apply it  your returns, over time, will be worthwhile. Many believe that such degree of  return is only possible through “speculative activity”. They are wrong and I  will explain…………………

full article here: http://www.marketoracle.co.uk/Article43113.html

Trading with Machholz up-date

Stock UP-date

BAC

For those of you who have been trading with me I suppose a hardy congrats is in order as we are now almost 100% up on my buy recommendation( Buy BAC at $7.10)  and this is taking into account all of the costs of hedging our positions over the last 12 months. The cost of hedging has in fact shown a 150% plus profit and so has not cost us anything. Where do we go from here? Remain hedged, as we can expect a lot of volatility in the coming months but “the trend is your friend “and as the stock climbs we can sell calls to pay for the hedging and then when we are in profit we can then continue to accumulate put options covering our exposure and profits, this system has been very good to us and there is no reason to make any changes.

To-days news regarding the earnings was no big deal except a breakout into a new trading range $14 to perhaps $16 but we were hedged just in case and will remain just bring on up the hedging with some of to-days profits.IE Roll the put positions and remember to buy way in the money puts $ first $ 15 and if the stock continues to advance then roll into the 16 etc the mirror call options are making just as much profit as you are losing on your put options and so you keep all the stock profit as you continue to trade through the year .end of year target is still $16.50 to $17.50 and end of next year should bring us nicely up to $21.50.

Good trading and remember always be Hedged!

Want to learn more?  Then take a look over at one of our recommended  excelent educators in this field  http://www.wealthbuilder.ie/

Thomás

Brady Bonds for the Eurozone Are the Only Long Term Solution

By Christopher Quigley

Ireland’s presidency of the European Union ended last Friday. One of its last acts was to finalize the banking policy whereby future troubled Euro banks will be restructured using the Cypriot “bail-in” model. Ostensibly it would appear that the banking crisis is now behind us and the path is clear on how to move forward and achieve banking stability and re-capitalization.

But nothing could be further from the truth. I believe banking “Eurocrats” are living in a parallel universe, far beyond the framework of us “normal folk”. It is my fervent belief that bailing out a future failing bank with depositors funds, whether it is 8% (as proposed in the new Euro policy) or 80% (as in the case of Cyprus), will be no solution. Sequestering deposits of a bank, to achieve restructure, fundamentally undermines confidence in the overall banking system and I reckon that whilst its use in Cyprus was problematic, its further use will be an utter disaster for the Eurosystem. I do not understand how politicians just “don’t get it”.

(Hear more: John Kaiser: Gold Demand Hurt by Global Slowdown)

full article at source: http://www.financialsense.com/contributors/christopher-quigley/brady-bonds-eurozone-only-long-term-solution

The ongoing death of the Euro: 1929 in slow motion.

The following is an article from Netzoners ” citizen reporter “financial correspondent.

Mr  Christopher M. Quigley B.Sc., M.M.I.I., M.A.

It is hard I am sure for Americans to fully comprehend the disaster that was the recent Cypriot Euro debacle.

Yesterday, Monday the 25th. March we were told that “the day has been saved”. The Euro is again “on solid” ground. “Ordinary depositors, with balance up to 100,000 Euro, have had their funds guaranteed”. “What a difference 14 days make” we are being told.

To get a sense of the panic that was swirling about in Europe last week I include a quote from the Irish Independent of 22nd March 2013:

Irish property speculators fear for cash in Cypriot account.

“A group of up to 30 Irish property speculators have been left sweating on their investments due to the Cypriot bailout crisis.

The group, mainly Irish nationals living in the Middle East, all invested in a fund to take advantage of the collapse in property prices back home in Ireland.

Under the scheme, each invested €20,000 or more with a property consultancy, which has been seeking to snap up cut-price Irish properties whose value is likely to increase in the coming years.

A further 20 British nationals are also thought to be involved in the scheme.

Investor funds were placed in a Cypriot client account.

However, the account cannot currently be accessed after banks on the Mediterranean island closed their doors last weekend.

And hundreds of thousands of euros could be wiped off the value of the fund should the Cypriot government cave in to pressure from the EU and IMF for a levy on bank deposits as part of a bailout deal.

Richard Jones (37), a project finance consultant from Ballyhaunis, Co Mayo, who is involved in the scheme, flew in to Cyprus earlier this week in an attempt to withdraw the cash before any proposed levy on the account.

“I came over yesterday because the banks were due to reopen, but they didn’t,” he told the Irish Independent.

“I found it hard to get into a hotel room here. Everything has been booked up by the Russians coming in to withdraw their cash. That just confirmed my decision to come out as there will be an almighty run on the banks once they reopen.”

He said the clients’ funds were held in a Cyprus bank because the country “has been seen as a gateway for investment from the Middle East into Europe”.

“Most of my investors are very small — around €20,000. But it is a lot of money to them. They are mostly Irish and British expats living in the Middle East and they see value to be had in Irish property now,” he said.

Mr. Jones said he believed the current crisis signals the “beginning of the end for the euro”.

He added: “I think what the EU has signaled is that bank deposits are no longer safe. At a single stroke they have reduced the European banking system to third-world status.”

For businesses and individuals with substantial funds in the banks in Cyprus the 100,000 Euro guarantee is of little benefit. As a result of the deal brokered with the IMF/ECB/European Commission “Troika” large account balances will be cut by up to 30%. What’s more the balance of funds outside the “cut” will be frozen until the situation has been fully stabilized. Many believe that it could be months maybe years before these client funds are returned to their rightful owners.

What a disaster the “bailout” turned out to be for the 50 Irish and British businessmen mentioned in the opening quote. In total they will lose approximately 300,000 Euros from their investment project overnight. Third-world status indeed.

Flight of Capital:

Now that the dust has settled somewhat we are being told that the “markets” have reacted favorably to the Cypriot bailout news.

However, this crisis is far from over. The “Rubicon” of the sanctity of deposits has been crossed.

No Eurogroup bank will ever be trusted again. Many believe that Italy and Spain have similar crises in the making and anxiety within Europe is starting to rise again. Can you imagine the “fear factor” welling within the citizens of these countries looking at how ordinary Cypriots have been treated?

Rather than wait for protective capital controls to be introduced in Spain and Italy it is expected that focused entrepreneurs and savvy chief executives will start moving funds out of their Euro accounts and Eurogroup banks. People no longer have any confidence that their financial leaders will be able to deal successfully with a full blown Spanish or Italian banking melt-down. To understand this perception one must comprehend the degree of incompetence displayed by the European Central Bank. The astonishing mismanagement and lack of insight shown during the Cypriot crisis was so clear for all to see that confidence in the Eurogroup banking system has utterly vaporized.

Why? Let us look at a few simple figures.

The total private banking deposits in the two main Cypriot banks was “only” about 68 billion Euros. As of last December private sector banking deposits in Italy was 1.497 trillion Euros and in Spain 1.52 trillion Euros.

On the 18th. March the ECB was alarmed with regard to deposit destruction and capital flight from Cyprus.  In order to protect this “base” it closed all banks indefinitely and intimated that all banking deposits were going to share in a “cut” to recapitalize the crippled financial institutions. In one fell swoop Brussels destroyed the primacy of the 100,000 Euros deposit guarantee scheme which supposedly applied to ALL Euro account holders within the Eurozone. When the dust settled the final deal agreed did protect this 100,000 Euros deposit level but, as we have already noted, some individuals and many businesses and corporations were eventually “robbed” of 30% of total deposits. If this was the ECB’s reaction to “save” banks with only 68 billion Euros of private deposits many concerned citizens cannot even begin to comprehend how Brussels intends to deal with any similar crisis that may develop in Spain and Italy which has a deposit base of 3 trillion Euros.

Are you beginning to get the picture?

This issue is not vacuous chatter. I have just read a story in a Dublin newspaper stating that the head of one of the largest Irish industrial conglomerates has instructed his financial chiefs to move all free bank balances out of the Euro ever Friday and move it back for business every Monday. When questioned about this practice the chief executive’s answer was: “Everybody is starting to do it. Fool us once shame on you, fool us twice shame on ourselves”.

How it that for a vote of confidence in the Euro zone?

It is my guess that as more and more corporations execute such deposit protective measures many will soon begin to limit the funds they actually return to Euroland every Monday. Such a development would make the introduction of capital controls a self-fulfilling certainty. With capital controls in place the Brussels/Berlin trap will be set. In such a scenario it will be finally comprehended that the Euro really is not a currency as such (it is my contention that it never was) but rather a fixed exchange rate mechanism. It is about time the ECB emperor was seen to have no clothes.

I fervently believe events will show that the Cypriot “deposit robbery” was a seminal event in European social history. Confidence once taken from a “currency” cannot be restored. When the financial controllers of Google Europe, Apple Europe, Microsoft Europe, McDonalds Europe, Facebook Europe, Microsoft Europe, IBM Europe, Oracle Europe etc. gradually wake up and have the epiphany that 20% – 30% of their corporate banking deposits could be up for grabs in a future Italian or Spanish crisis (Cypriot banking a-la Angela Merkel style) the writing will surely be on the wall for the Euro project.

The free movement of capital is a bulwark “right” of the European Common Market. Introducing capital controls to “save” the Euro is the total antithesis of such free trade rights. At such a juncture the decision will have be made whether to save the European Common Market or save the Euro. I think at this point the result is obvious. It is just a matter of time and a few more mis-handled “crises”. The European Common Market operated very well for over four decades without a common currency. It is time some brave European statesmen make some tough choices and commence opting for community solidarity and social cohesion rather than economic hara-kiri.

Accordingly, a colleague of mine has written an open letter to the Prime Minister of Ireland today. This letter urges Premier Kenny to establish an emergency finance committee to develop a plan of action to save the Irish banking system should the Eurogroup fail. His letter summons the government to act without delay and requests that contacts be made at the highest level with friendly American and British Commonwealth institutions to prepare for the possible need for an alternative Irish currency to the Euro. Such a currency would act as a back-stop to the financial tsunami currently rising within the sub-terrain depths of ECB mendacity and European Commission incompetence. Preparation for such an eventuality may seem “pie-in-the-sky” but to be fore-warned is to be fore-armed and if the bungled Cypriot deposit grab is anything it is just such a fore-warning.

© Christopher M. Quigley 26th. March 2013

Bad Prospects for Extension of Stock Market Rally

By Andre_Gratian

SPX: Very Long-term trend – The very-long-term cycles are down and, if   they make their lows when expected (after this bull market is over) there will   be another steep and prolonged decline into late 2014. It is probable, however,   that the steep correction of 2007-2009 will have curtailed the full downward   pressure potential of the 120-yr cycle.

SPX: Intermediate trend – SPX has made a triple top, which is a   bearish pattern. It has now given a strong indication that an intermediate   correction is underwayAnalysis of the short-term trendis done on a daily basis with the   help of hourly charts. It is an important adjunct to the analysis of daily and   weekly charts which discusses the course of longer market trends.Market Overview

After several days of resisting the downtrend, the indices finally started to   rally on October 26. The SPX tacked on 31 points from Wednesday’s 1403 low, but   met with heavy selling on the next day after nearing its top declining channel   line, and retraced .618 of its advance. The Dow and NDX suffered the same   fate.

I had warned that the SPX would reach a resistance level at the opening and   to expect at least a consolidation. However, what started as profit-taking   became more intense as the day progressed and, by the close, the index had lost   all of its previous day’s gain, and filling the gap which had been created on   Thursday. In the process it came to rest on the support level created by the   base which had formed prior to the rally. Now the question is whether this was   only a severe but normal correction of the uptrend which started at 1403, or if   the counter-trend rally is already over. With cycles expected to start making   their lows as early as next week, the uptrend does not have time on its   side.

There is also a matter of an unfilled P&Fcount to 1395 and Fib projection   to 1386. While (near-term) the election may play a role in the background   uncertainty and resulting volatility, we know that the odds favor a continued   decline of intermediate proportion into January 2013.

Because of its influence on the market (especially the NDX), AAPL has to be   considered a key — if not the most important — short-term indicator. On Friday   it made a new correction low, losing almost 20 points, and was definitely partly   responsible for the overall market weakness. There was relentless selling until,   by the close it had reached what could be an important Fibonacci projection.   That projection taken from the high of 705 has already proved its effectiveness   by producing several temporary holds on the way down: at 626, 613, at 591 – all   of them important Fib measurements………………………….

full article at source:  http://www.marketoracle.co.uk/Article37345.html

Market Brief 21st. October 2012

A US election too close to call causing uncertainty:

The charts below clearly show that the Dow Transport and the Dow Industrial indices continue to exhibit divergent modalities. Since November 2009 the charts indicate that the Industrials have reached higher highs but the Transports have failed this test and have been range bound for nearly all of 2012. The direction and the momentum with which the Trannies break from this range will be most significant. I believe the market is awaiting with trepidation the results of the November presidential election. As we speak the polls are indicating that either candidate can win and this is bringing a fair degree of uncertainty into price action.

The major concern is the position of Mr. Romney with regard to Iran given his predisposition to quickly consider war as a policy option. A new Middle Eastern conflagration is the last thing the world economy needs right now but unfortunately he has been boxed in by powerful interests. It is hard to see how he can march himself down the hill of imminent warfare, formal or covert, should the hand of destiny finally fall upon him.

The forward looking indications from Google, Microsoft, IBM, Intel, UPS and FedEx are negative. I think this is due to the contraction in world demand caused by European austerity. However the results from financials, banks, brokers and real estate are more positive. This is due to the low interest and quantitative easing policies being imposed by the FED. Short term earnings disappointments aside, should the issue of the war with Iran be taken off the table quickly and if American real estate and banks continue to gain strength then the scenario could be set for solid future American economic growth. Such a recovery would help Europe stabilise its sovereign debt problem and allow national economies to end austerity and invest again in expansion initiatives.

This action would save the Euro from a catastrophic demise and allow another uncertainty to be cancelled from market calculation. Such a situation would consolidate the grounds for a sustainable US recovery over the next decade.

Thus I reckon a lot will be decided in the next few months, not least of which what type of administration will be entrusted to attempt to finally end the greatest structural recession since the great depression. The stakes could not be higher.

European déjà vu:

Irish Times, Saturday 20th. October 2012:

“GERMAN CHANCELLOR Angela Merkel has upended a carefully crafted plan to resolve Europe’s banking crisis, delivering a sharp setback to Taoiseach (Irish Prime Minister) Enda Kenny as he battles for a debt relief deal.

Moments after Mr. Kenny declared in Brussels that he had achieved solid progress overnight at a tense EU summit, Dr Merkel moved abruptly to curtail the scope of the effort to break the link between bank and sovereign debt.

The chancellor’s intervention, which took high-level EU figures by surprise, has cast a new cloud of uncertainty over the feasibility of Mr. Kenny’s demands.

For the first time in public, she backed her finance minister Wolfgang Schäuble in his assertion that national bodies must remain responsible for most banking debts.

This is markedly at odds with the push from Mr. Kenny and the leaders of France, Italy and Spain for the European Stability Mechanism bailout fund to pay for historic banking losses”.

 

As the above quote clearly indicates the Euro crisis is far from over. In fact all I see is a political civil war breaking out. In addition to the problems being experienced by Mr. Kenny David Cameron, the British Prime Minister, announced at his recent party conference that he wished to totally renegotiate the terms of Britain’s membership of the European Union. Should he not get want he wants he has indicated that he may consider withdrawing Britain completely from Euroland. Such an outcome would be a disaster for Europe in general and Ireland in particular. Where England goes Ireland may be forced to follow given the close relationship between the Dublin Financial Services Centre and the City of London.

What is at stake here is the future of the “City” itself. Frankfurt wants to be the pre-eminent financial centre in Europe. However London refuses to give up its pole position. This is why Cameron is against the imposition of greater banking regulation based in Europe and is totally opposed to the financial transaction tax proposed by the European Commission. London quite rightly fears that if it starts applying this imposition business will flee from the “City” to more liberal destinations like New York and Hong Kong.

No job no money, no money no life:”

This statement made by a youth in Greece last week sums up the general frustration of young European graduates living not only in Athens but in Dublin, Madrid, Lisbon and Rome. Nearly 50% of youths under the age of 25 are unemployed in these capitals. For this abandoned generation the European Stability Mechanism offers no solution. This is because the central issue is not banking recapitalization and sovereign debt support but jobs and growth and hope. To achieve real growth Europe needs to become more competitive. It requires debt write off. It demands investment not draconian austerity. It needs real leadership.

For many observers the 500 billion Euro ESM is a diversion that is mis-guided and conceptually flawed. It will not achieve the objectives of banking recapitalization and sovereign debt stabilization for two main reasons. Firstly it is being partly funded by those countries needing funding, which is going to play havoc with its S & P ratings down the road. Secondly it is too small for the task at hand. The task will require in the region of 4-5 trillion Euro to adequately do the job, yet the federal courts in Germany have put a limit on Germany’s contribution. This renders the fund’s potentiality suspect from the get-go. Even though the ESM is inadequate and problematic all political energy is currently going into its gestation.

There is no other political game in town even though national economies and concomitant institutions are collapsing due to rapidly falling money circulation. This situation cannot continue indefinitely without serious consequences. That which cannot continue, won’t.

Currently, as we speak, the main fascist party in Greece “Golden Dawn” is growing at an alarming rate. This development is due to the fact that people are desperate for solutions to their social and economic problems. However, solutions are not forthcoming from mainstream political parties. This is worrying. Peter Drucker in his 1939 classic: “The End of Economic Man the Origins of Totalitarianism” spelt out the consequences of such failure. The end result was the horror of the Second World War. Unfortunately Angela Merkel is ignoring the lessons of history and is making the same mistakes again. I think Dr. Merkel will go down in history as the worst chancellor of Germany since you know who.

To alter this perception she must strive to lead her nation in a new direction. She must help her people understand that Germany is the main beneficiary of the Euro currency in that it allows cheap German goods flood into France, Portugal Spain, Italy, England, Ireland, Poland, Russia and Turkey. Should the Euro fail, any new Deutschmark would be so over valued that German exports would quickly collapse, contracting its economy to the level of its austerity bound neighbours. Thus the type of political leadership desperately needed in Germany now is not the style that focuses on narrow national party politics but one that values a shared European vision for the future, a vision that is creative not destructive.  What is sorely needed now more than ever is statesmanship not political cunning. Let us hope that Dr. Merkel will have such an epiphany soon, very soon.

 (C) Christopher M. Quigley 21st. October 2012. Wealthbuilder.ie

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