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[Chris G]

The VRTrader.com VR Silver Newsletter - Monday 9/9/2013
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LEIBOVIT FILES | by Mark Leibovit

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Leibovit Files
Monday, September 09, 2013

The Stooges In Washington Are Playing A Dangerous Game Of Russian Roulette!

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Mark Leibovit will be attending and speaking at the Traders Expo Las Vegas - November-20-23, 2013 at Caesar's Palace. Mark your calendar! There is no charge for attending, unless, of course, you cannot control yourself at the blackjack tables!
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STOCK MARKET - ACTION ALERT - BEAR - WE'RE EXPERIENCING A SHORT-COVERING RALLY AND I'VE BEEN LOOKING FOR A BOUNCE BACK TO SPX 1675-1680 TO AFFORD RENEWED INVERSE ETF (SHORT) ENTRY. OVERALL, I AM STILL ANTICIPATING A LOWER MARKET WITH POTENTIAL IN THE S&P INTO THE MID 1500S IN THE WEEKS AHEAD. A YEAR-END RALLY OR NEW YEAR'S RALLY SHOULD THEN BEGIN.
THAT SAID, I AM MORE CONCERNED ABOUT THE NEXT COUPLE OF YEARS WHERE DOWNSIDE POTENTIAL COULD BE AS MUCH AS 50% - THAT'S 500 POINTS OR 1200 IN THE SPX- MEASURING ROM THE 667 BEAR MARKET LOW IN 2009 TO THE 1710 PEAK HERE.
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While the 'Three Stooges' are loading up their weapons, the 'majority' in the U.S. are dead set against them. Will it make a difference? Does it ever make a difference? The real comedy here is that all the anti-war liberals (mostly from Hollywood) who stood up against George Bush and the Iraqi war are now eerily quiet. Is it that a black man in the White House can do no wrong? I hope not. This is why as Michael Savage writes 'liberalism is a mental disorder'!

It is clear to me that the Russians and Chinese have it right and the U.S. has it wrong! If you haven't already, check into the 'Russia Today' satellite network. Here you will at least hear the other side of the story - a story not being told by the 'lap dog' alphabet networks here in the U.S. Russian President Vladimir Putin said his country will assist Syria in the event of an external attack. However, Russia and Syria have been allied for years, thus Mr. Putin's comments were not necessarily a new development. Putin has it right because 'democracy' or the so-called 'Arab Spring' is really an 'Arab Winter'. Democracy allows the enemies of civilization to gain a foothold as they did temporarily in Egypt until sanity returned and the Muslim Brotherhood were thrown out.

It's high time for a regime change in the U.S., but not necessarily into Republican hands. Look at the idiot John McCain, a Republican, who votes for a war that his own constituents in Arizona don't want!

Now on to the markets. Or should we? Does it make a darn bit of difference if we're thrown into a World War? Hardly!

Prior to the opening bell, it was reported that August nonfarm payrolls (a phony number) increased by 169,000, which was below the 177,000 expected by the Briefing.com consensus. Private payrolls came in at 152,000 while the consensus expected a reading closer to 180,000. More notably, July nonfarm payrolls were revised down nearly 36% to 104,000 from 162,000 while private payrolls saw a 21% revision to 127,000 from 161,000. The unemployment rate ticked down to 7.3% from 7.4%, but once again, that was the result of a drop in the labor force participation rate to 63.2%. This represents the lowest rate since August 1978. The one bright spot could be found in aggregate income, which increased 0.6%.

A recent stretch of better-than-expected data played into the expectation that the Fed may lower the pace of its asset purchases at the upcoming September 17/18 FOMC meeting. However, Friday's jobs report painted a more uncertain picture, which sparked a market reaction consistent with lowered expectations of tapering in the near term.

We already know that Fed Chairmen are puppets on a string controlled by the largest banks. The Fed itself (now 100 years old) is at best a criminal institution made legitimate by the power of government. Even if we give Bernanke credit for being a 'free thinker' we know he was way off in missing the seriousness of the housing collapse back in 2007-2208 when he publicly stated at that time that all was well. We also know he is a firm believer that the Fed was responsible in part for the Great Depression of the 1930s by failing to act aggressively at that time. Wall Street loves Bernanke, but Main Street has more reason to despise him as put the interest of the elite ahead of the man in the street.

Immediately following the report, crude oil, equity futures, Treasuries, and gold futures jumped to their highs while the Dollar Index tumbled to its lows. Most notably, the 10-yr note saw its yield slide from 2.96% to 2.87%. However, Treasuries surrendered a portion of their gains intraday with the benchmark 10-yr yield closing at 2.94%.

Monday's economic data will be limited to the July consumer credit report, which is scheduled to be released at 15:00 ET.

The VIX Volatility index is known as the "fear index," but another good gauge of fear in the equity market is how stocks perform in the last hour of trading. A positive last hour of the trading day for the market is a sign that traders are comfortable holding stocks overnight and into the next day, while a negative last hour means they aren't. Last-hour performance is also a good gauge of how traders feel about foreign markets and geo-politics in general since Asian and European markets open for trading while we're all sleeping here in the U.S. The world has been on edge lately over the conflict in Syria, and markets here have been responding accordingly by selling off into the close on a regular basis. Over the last month (22 trading days), the market has declined in the last hour of trading 18 times (82%) for an average change of -0.14%. More recently, the index has now declined in the last hour 8 of the last 9 trading days, and even this week when the market rose, it sold off in the final hour 3 out of 4 times! Traders are just doing whatever they can to get stocks off their hands by the time the 4 o'clock close rolls around. Back in March when the market was charging nicely higher with not a care in the world, investors were bidding up stocks in the final hour of trading. Since July, however, we've seen a steady downtrend in last-hour performance, and today it hit its worst level of the year. When will traders be comfortable holding stocks overnight again? Definitely not until the Syria situation gets more clarity.
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The DJ closed down 14.98 at 14922.50. Was the August 28 low at 14760.41 (coming off the August 2 peak at 15658.43) the end of the correction? Except for a bounce perhaps back up 15300.00, my feeling was that we're not through to the downside. However, a Leibovit Positive VR was posted on September 3 and that is the dominant short-term signal in my work. If the August 28 was THE LOW, the market is pulling a trick on traders and investors (myself included) by bypassing normally expected September and/or October weakness. Should that low come out, the next big support is 14,650.00 followed by 14,200.00. Assuming the rally resumes, the next big upside target in VR analysis would place the DJ into the 16000.00 to 16250.00 range. We are on the sidelines with regard to long or short trades at this time, but willing short above the market (see Current Portfolio) or buy a big break (no trade guidelines yet posted).
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The S&P 500 was up .09 at 1655.17. On August 28 the SPX touched 1627.47 intraday, a new reaction low as compared to the August 2 bull market high at 1709.67. Next big support is at 1610.00 and 1550.00-1560.00. An expected technical bounce back to 1680.00 would provide a short-entry opportunity.
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The Dow Transports were down 8.50 at 6371.11. This 'market leading' index touched a new reaction low on August 30 as compared to the August 1 high at 6686.86. Should we clear 6686.86, the next big technical target is 6900.00. Support is at 6180.00 followed by 5700.00. On a bigger picture basis, a 'theoretical' bullish reverse 'head and shoulders' pattern has formed pointing to potentially 8900.00 in the Transports. There is no time associated with that projection and I am not holding my breath, especially since I am concerned that the next couple of years may be a doozy to the downside for all markets.
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The Russell 2000 was up .86 at 1029.55. On August 30, it touched a new reaction low of 1009.46 as compared to the record high from August 5 at 1063.52. I would look for a possible correction back to the 960.00 area.
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The Nasdaq Composite was up 1.23 at 3660.01. The record high of 3694.19 was posted on August 5. So far, we retested that high at 3684.22 on august 26 and again on Friday at 3677.07. The lowest low to date occurred at 3573.57 on August 27.
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The CBOE Volatility Index (VIX), which measures the cost of using options as insurance against declines in the S&P 500 (i.e., the higher the number, the more fear in the marketplace) was up .08 at 15.85. The VIX touched 21.91 intraday on Monday, June 24 - the highest high since the March 15 low of 11.21 - the lowest level since February 2007. It was unchanged at on Friday. The higher we go in the VIX, the more likely a bear cycle is upon us.
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Four of the nine market sectors were lower on Friday:

XLB -0.12% Materials
XLE -0.01% Energy
XLF +0.00% Financial
XLI -0.04% Industrial
XLK +0.06% Technology
XLP +0.25% Consumer Staples
XLU +0.71% Utilities
XLV +0.04% Health Care
XLY -0.12% Consumer Discretionary
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NYSE Advance/Decline 2505/1540.
NASDAQ Advance/Decline 1197/1303.
NYSE UP volume to DOWN volume was 20 to 13.
NASDAQ UP volume to DOWN volume 9 to 7.
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