(Courtesy excerpt of the weekend’s Daily Briefing. Video ‘technical corner’ analysis and projections are posted nightly at www.ingerletter.com ; please visit for details.)
Gene Inger's Daily Briefing . . . for Monday May 3, 2010:
Good weekend!
The advertised ‘melt-up’ rebound . . . has stalled as we contended it would, looking both at economic facts and market sectors last week. The week’s semi-chaotic action proved a point; in addition to delivering the belief that April would experience troubles right before a troubling May commences. You know our timing comment regarding all this, and you realize we don’t believe they’ll let them out conveniently weeks hence. It seems appropriate to characterize the correctly-assessed fundamental and technical forecasts with a series of ‘economic’ charts this weekend that prove our point clearly.
Of course if you stir-in our concerns about ‘sovereign debt’; our higher Oil expectation as well; not to mention last week’s review of ‘sectors’ (including techs and Financials) under selling pressure while pundits claimed the opposite; you know why I allude to a depiction of Sherlock Holmes saying: dear Dr. Watson; ‘there’s something fishy here’.
Speaking of that; poor fishes (in the Gulf of Mexico). Aside BP, oil stocks doing great, while Oil itself is quite firm, while computers and the like are very weak, affirms what we were looking for. As to the disaster outlined graphically earlier in the week; it’s lots worse than the media reports. It’s basically an uncontrolled flowing undersea oil well, that experienced the last-ditch blowout preventer failure, and is flowing uncontrollably for now (with no realistic way I know of to gain a handle on it within a short timeframe by the way; because I think I know what happened). Appears that Halliburton was as reported ‘cementing’; we presume a ‘squeeze job’. That’s what you do (details here).
As to Friday’s forecast for a fade (short-sale) from the firm start, there was no reason to celebrate economic numbers we said at the morning’s start, because a lift on GDP data was flawed (not only because of a downshift in growth implied by the numbers), but as Gold rallied as Europeans clearly weren’t ready to buy-into the old argument about peripheral Europe’s sovereign debt issues resolved. (Balance for members.)
Daily action . . . suspects you’d have to believe the ‘kool aid’ about the economy in the U.S. and Europe (Asia is less relevant to the current issues) to be optimistic; but a lot of money managers are. They dismiss all the concerns and suggest that buying is appropriate in the big-cap stocks. We believe it is not, whether it worked a little bit higher or not, in-event there was a ‘doable’ salvation (discussion of risk follows).
An asteroid will not hit the Earth; but to believe the permabulls here, you’d have to be a believer that Wall Street will keep ticking higher no matter what fiascoes occur now or in the near future. That is not only absurd; but even the technical measures that at least some technicians have (1250 S&P is typical) presuppose that everyone will just sit back, ignore the world, not front-run their sales, and wait for a measured target. Of course I could say ‘perhaps’; but given the sector distribution we talked about a week ago, and the proof (just look at semiconductors and computers among others), and it is pretty evident we were right, as very few big-cap stocks gave an illusion of strength to the market, even though analysts kept saying the A/D was strong (it really wasn’t; and merely did an overwrought forecast snapback from the earlier breakdown before dipping in a new wave; with nobody needing to buy pending ‘proposed’ solutions the EU ‘may’ cobble together; and even then who is to say, aside ‘relief’ for the EU, that means prosperity..it does not; in fact reduces growth rates across Europe for -more-).
Then there is the UK and the U.S., which are about to discover what happens when a slew of Keynesians are nominated to run this Country (works but not when debt is so high, something I contended all along Keynes, who is still dead, said about all debtor versus creditor nations ability to engage in types of borrowing); plus a government’s focus on bailout, rather than investment in infrastructure and technological innovation (portion redacted for ingerletter.com members only). In America’s history we speeded the movement of people (partially monetary velocity), rather than slowed them down; and that was absolutely correlated with big progress it seems in American life. We’re technocrats, not bureaucrats; so tell it to Washington. Policies need to be pro-growth; and contrary to many preconceptions, they are not exactly that for private initiative.
And don’t forget that this week you had both the Budget head and the Fed Chairman in agreement with me. That’s probably why their testimony was squashed from TV as it related to the future (they were stern with warnings), while Goldman’s hearing was ubiquitous in terms of broadcast coverage (and it dealt with resolving the past with a touch on reform, almost all of which is minimal compared to what yours truly; Volker, or even Bill Clinton believe is essential… ie: separate commercial/investment banks). Bipartisan support exists because they are reforming comparatively little, as stepping on the big contributors toes has been avoided. After all, the only winners have been a slew of over-bonused proprietary traders at firms, plus politicians, as also contributed to the backdrop for years that required us to call the secular top in early 2000 and the warning for an ‘epic debacle’ commencing from the Spring of 2007 forward. Not over.
Engulfed by chaos, next week could be particularly interesting; including any rallies of a temporary duration, ‘if’ the IMF-Berlin directed resolutions are employed upon very nervous financial authorities in Athens. Before that can be sorted though, there is the risk of further peripheral European issues we’ve already warned about (recall my little ‘it’s raining on the plains of Spain’ remarks weeks ago before most heard about those similar issues there, although Spain is not Portugal, and Italy is not Spain). If there is a realization (and we think there is per our ‘forest of debt’ discussions) that Greece is just a sick tree in that leveraged forest, then again all rallies will be false; temporary; and prone to failure. As we take-out the lows of April’s second half; the affirmation of our projected decline will be achieved. Then (reserved portion) within a keyhole exit.
Just a few words (will skip most; they’re in the archives if you’d like to review them) of our past week’s points, then the weekend’s newest video ‘technical corner’ analysis.
An unprecedented winning-streak . . . which saw the longest S&P rally since 1980 without at least a 3-day decline, had actually seen a short-term overbought condition eliminated without a meaningful break in the market. We would not however be lulled into a sense of false security for several reasons: a) most hard breaks historically do have a ‘preparation’ period, with the actual sharp drop occurring from oversold later;
we have addressed the prospect of temporary rallies related to European efforts to intervene and seemingly plug-the-holes-in-the-dikes (not dissimilar to the US in 2008) which is something that is dynamic and makes day-to-day trading challenging; c) the cobbled-together European efforts, actually are not occurring solely in all of the most over-leveraged countries of the world, which would not exclude the UK and the US; and, d) there are numerous other reasons professionals should look to nail-down the past year’s gains in-part rather than pressing their luck (reasons follow for members).Our perspective for May continues to foresee market vulnerability, especially if we’re able to get temporary upside reprieve based on a German-led EU intervention effort. Late Thursday reports suggest (I’ll note more in the video) an IMF-jiggered bailout for Greece (the IMF primarily funded by the U.S.A.) and that was suspected. It’s why we have forewarned that the tricky dynamics of this ‘bandaging’ do not eliminate debt or further issues, nor does it imply the short-covering and foreign buying represents any sign of a ‘roaring bull market’ or any of that; however it did mean (redacted portion).
To me, the most significant ‘grilling’ was not Goldman Sachs, but Bernanke’s remarks at the Debt Hearing yesterday, in which he issued stern warnings about what tension and impossibilities will (not may) exist if Congress doesn’t move before we get closer to being broke (my word but his intimation). His point was that there will be no money borrowed or otherwise (we’re already broke in some respects) for anything unless we get a cut in spending, cuts in Social Security, cuts in Medicare, and cuts in Defense.
It was clearly stated that there will be nothing left for Defense if the entitlements were not addressed, and they (the Congress) lets this again run us up into the wall before they panic (as usual behind the curve, in this case potentially disastrously so, and I’ll note my language isn’t exaggerated from that the Chairman used as very few heard).
If that’s insufficient, consider that the President’s top budge adviser, Peter Orszag, is also quoted as saying that the Government must significantly alter its policies in order to tackle a growing mountain of debt. He warned that huge deficits could cause the market to lose confidence in a government’s creditworthiness (it doesn’t have that we say; it’s simply been engineered up to where we got..few believe there is confidence in the way government has tackled this crisis and that’s doubly so at the state levels.)
Out-of-control deficits could also ‘require increased borrowing abroad (is it available?) further mortgaging our future income to foreign creditors,’ Orszag told a 1st meeting of the 18-member National Commission on Fiscal Responsibility and Reform. Usually I don’t quote these officials, but since there is such little reporting of this important as well as timely concern, we have. Reining in the deficit, which was $1.4 trillion in 2009, would "require significant changes in policy that build on what we have done," Orszag said. I can’t help but wonder if airing that on CSpan would have been more pertinent, not to mention the financial networks, versus gavel-to-gavel Goldman Sachs media coverage, which reflects more on the past and little on reforms, and nothing at all as relates to curtailing the spending which we cannot survive if not contained. (Not at all to minimize the issues surrounding Goldman and others, including banks like UBS or more; but to emphasize that intelligently directed spending is key to the U.S. future.)
Given that, one may wonder if it was easier to report to American citizens on certainly important news of the Goldman hearings and the aftermath (which should stretch far-and-wide itself), while it strikes me certain people don’t want Americans realizing the levels of compounding growth and new employment that would be needed to ‘thread this needle’ successfully. Yes we have to deal with the past; but must focus on future policies and initiatives that go way beyond recriminations over what happened as we forecast would, all the way back in 2007. A handle on debt and deficits is fully crucial.
I suspect the Fed Chairman ‘gets it’ (just as I suspected he did back in 2007; as up to this day they have not come-clean with the American people about the Fed waivers the Fed signed-off on, which enable the failed efforts to recapitalize the brokers and some banks, before the ‘graffiti’ hit the fan). Oh; that toxic ‘graffiti’ is still not unwound.
The Fed is going to have to (reserved for members); you will suppress demand just because the stimulus is coming to an end, and there is not enough momentum that’s available to keep the recovery speeding up (and certainly not adequately in this debt environment); while there will be a decline from the tax changes alone. Timing is the debate as far as we’re concerned (not the issue); and that has already begun simply put (written before last week’s selling commenced visibly). However, an interruption in the flow of things by a German intervention might of course modify the timing a bit; but that’s simply a ‘bet’ on what happens when. They are crowding everything out of the Budget or better; as our states have a collision in front of us that everyone knows about, but hardly any states have really addressed, or analysts really are confronting.
How nasty could it get?
Depends on what the world does next. The IMF issued assurances; but within those there were opaque warnings of the alternative. So far you’re looking at alternatives. I will include an S&P chart (last) night with notes suggesting minimum downside goals, and more realistic goals for …shall we say… now until about mid-late May. Clearly no goal or measure is a target; NOR should anyone question ‘what if’ they don’t get that far or exceed the levels for that matter. After all this is very ‘fundamental’ dynamic is at work now. That means actions taken (or not taken) by governments make a really big difference, at least in terms of short term timing. Therefore it would be idiotic to do a forecast ‘requiring’ the market to reach a certain level at a certain time, or even just to say it can’t rally back. If you want an opinion; any snapback based on assurance or just a nominal bailout to try to extinguish the Greece fire, will be shortly ‘snuffed-out’. (Editor: again this was early last week; by now we had a break; rally and it’s snuffed.)
There is thus a ‘debt wish’ the world economy would like to avoid (pun intended) of course; and there is no doubt that financial crises are long-drawn-out-affairs that take a while to develop, because the powers-that-be trying to ‘hold-the-line’ resist giving-in as well as allowing a modicum of candor from time to time. Truth-be-told, financial wreckage can be enduring longer than lingering ash cloud residue from the volcano.
I do see how people have adjusted to the ‘new normal’, or have reduced debt overall, so that in a sense they are indeed able to more comfortably enjoy life (at retail if you wish to view it that way, or via restaurants and so on). The problem is that this all has been accomplished by playing the same game they (led by politicians) did before and the outcome was rarely pleasant. In a sense it’s building a new bubble without all the reform and stabilization against future problems that generally were expected by now in many areas, as for which there may be less impetus if many are ‘comfortable’ with this as they are (clearly means risk is essentially increased minus the safeguards).
I ‘ve called this a controlled Depression since forecasting it about three years ago; that the Fed and Treasury would facilitate systemic stabilization, but not much more. I regret to inform you that we were and continue correct. It dovetails in that businesses and even municipalities (we know of two) who concurred with our specific expectation back then, circled their wagons, harbored their cash, and properly rode-out the storm. Watch and see what investors do when (not ‘if’) the market reluctantly breaks anew.
Conclusion: stabilization efforts notwithstanding; overall recovery and deleveraging conditions will prevail (not may prevail) through this year, and probably into next year as well. Intervening rallies in markets will occur (some fairly wild), of limited duration, at this point. If other developments unfold that could change prospects we’ll evaluate.
Bottom line: continuing characteristics; include (consolidated) the following bullet points:
· Economic disequilibrium continues; especially for nations with fixed pegs; crisis expanding.
Further bullet points provided members; please visit ingerletter.com site for details.
MarketCast (intraday analysis & embedded Daily Briefing audio-video). . . remarks forecast substantive failures by markets; particularly as 2010 evolves (whether just as a correction of a worse case remains to be assessed). Remember back in early 2007 we denied the 'liquidity' momentum as a canard; believing housing only the first asset bubble to deflate. We then outlined structured investment vehicle failures; banking issues, the confluence of asset deflations, and more; continuing with interruptions per projecting long ago: 'a perfect storm'. New sets of storm clouds are quietly gathering.
As the debt bubbles continue to deflate, alternating tradable moves continue from a trading perspective. Against that backdrop retaining a macro (adjusted) Sept. S&P 1600 +/- short irrespective of interim oscillations. Technical analysis via video follows.
Daily Briefing Technical-Corner MarketCast Videos
Bits & Bytes . . . provide investors ideas in a few stocks, often special-situations, but also covers primary technology issues (needed for assessment of general factors in tech, or as compelling developments call for) that are key movers in the NDX, SOX or S&P, plus ideas ingerletter.com thinks might merit further reflection. (Individual stock comments generally are provided in video overviews only; occasionally I'll have some thoughts here; however increasingly most all analysis is via video, as it should be.)
Three years ago I commenced projecting an 'accident waiting to happen'; affirmed historically after long-duration periods of free money (Gilded Age mentality). Now a market may struggles with over-extended rebounds as this economy restructures.
Though enormous efforts have avoided systemic disaster on the banking front; there is no equivalent rescue of the overall economy besides perception; nor restoration of engines for sustainable growth. People are adjusting to lower expectations; which will never be a favored approach to American life. Actually we don’t see it as permanently alternating the future; but we still have major adjustments to work-through. That’s the reason we warn about chasing rallies; not to mention major ‘commercial’ adjustments as are ongoing. And as stated; increasingly visible new storm clouds have gathered.
Enjoy the weekend!
<h2 style="">Gene</h2>
Gene Inger,
Publisher
~Gene Inger’s Daily Briefing™ (The Inger Letter daily analysis on www.ingerletter.com)
~Gene Inger’s MarketCast™ (Intraday audio updates emphasizing S&P futures and market action)
Updates about 10 minutes after: the opening bell, 10 a.m. ET, noon, 3 p.m., with a nightly final issued at approximately 8 p.m. In times of volatility, an additional interim report update is frequently provided.
Range of Inger & Co. service details (current as of January, 2009):
Gene Inger's Daily Briefing™. .posted nightly by 9 pm on www.ingerletter.com. Analysis and chart forecast of short-term market conditions. Posted with text and streaming video each evening. Focuses on events of significance, plus potential monetary or psychological impacts & focus on next day action.
Gene's Daily Briefing™. . available at $159 quarterly, at our site or via the California office. American Express, Visa & MasterCard accepted; and are auto-renewed quarterly, unless otherwise instructed by the subscriber. 'Inger Seven' at $26 weekly provides access to that week's Dailies only (one-time trial, which is from Saturday-to-Saturday only). A Secure Server is used. If preferred, DB's may be ordered through our office by phone or via mail. Daily Briefing subscribers select user name / passwords at the site; while 'Inger 7' is issued automatically. Subscriptions are licenses to read or view; not redistribute.
(MarketCast members receive complimentary Daily Briefing access. Daily Briefing only members, may upgrade to full MarketCast 'flash-based' video intraday service at any time. Tech support staff doesn't assist upgrading; please email ca.office@ingerletter.com or call Lynn or Laura at our California office. As of 2008 all comments are digital video with charts; the era of audio-only comments is historical.)
Gene Inger is essentially one of the few remaining (post-modern) Inquiry Analysts. Inquiry Analysts, as a definition; combine technical, fundamental, monetary and market psychology perspectives, vs. just a mere assessing of retroactive or current markets. The focus is: staying up-to-date interrelating a slew of current and prospective events, identifying trends or probabilities; goal is making tactical or strategic suggestions, as to how to best take advantage of markets or sectors. That's especially so in disruptive or revolutionary changes, that go beyond evolution of existing knowledge; plus economic, structural, or in certain scenarios, geopolitical influences that may impact markets beyond conventional perceptions.
Gene’s been quoted over the years in Barron’s, The Wall Street Journal, Investor’s Business Daily, major newspapers (New York and LA Times etc.); financial websites and radio stations etc. He has been a guest on CNN, PBS, an original CNBC market maven, and is the daily financial TV pioneer. Investors focused on the overall picture should subscribe to Gene Inger’s Daily Briefing posted at our website. Pattern ideas are postulated in the Daily; while intraday guidelines are provided via intraday MarketCast video commentary (email link sent to Adobe™ Flash streaming video; no downloading).
Gene Inger's MarketCast™ . . enables intraday views of pattern evolution given rapid changes in this era's ongoing economic, psychological, and geopolitical volatility. MarketCast is primarily intended for short-term traders in S&P futures, in technology, or investors concerned about T-Bond and the Dollar markets, as well. Current analysis along with postulations for the next trading day's action is provided.
MarketCast is the primary intraday service: $390 / quarterly. MarketCast is updated after the opening bell; at 10 a.m. ET, 12, 3 p.m. (or pre-announced on prior remarks during volatile activity), with nightly video embedded within the complimentary Daily Briefing access. Distributed via email links in Adobe™ Flash format; plays in any popular browser; equally in PC's or MAC's. Streaming video; no downloads.
Active investor/traders: please contact Laura, Lynn or Alan in our California office at (805) 496-6441 (Pacific Time hours) to ask questions, establish service, or via email: office@ingerletter.com. Our webmaster doesn't assist MarketCast orders. Our California main office coordinates MarketCast services. Orders may be charged to major credit cards. International customers: checks in U.S. funds or foreign bank drafts on U.S. correspondent banks acceptable, should you prefer to order by mail.
Subscriptions are non-discountable or refundable. Electronic distribution is evolving technology; so we refine service conservatively over time (2008 is a major upgrade to high-resolution streaming video). In rare events affecting Gene's scheduling, we endeavor to issue text comments, or preannounce if able. Unforeseen events or natural disasters may occur; extensions are automatically provided. Gene tries departing natural disasters in advance, as ahead of hurricanes, to ensure continuity of service. As of 2008 virtually all comments are in video, with charts; the era of audio-only commentary is historical.
Requisite disclaimer: Trading in securities of any type may not be suitable for all individuals. Futures or options can entail risk and volatility, versus investing. In our view, futures or options aren't investments, but speculations. Decisions are always solely a responsibility of, and at the discretion and risk of any trader. Discussions, or guidelines, in stocks & futures, are structured solely for purposes of giving shape and flow to our work. Patterns should be considered as guidelines only; to compliment your own or other good judgment, or that of your financial advisor. Market or economic forecasts are intended to be of a general nature, and should not be taken directly as a recommendation to buy or sell referenced securities, debt instruments, or futures contracts. To consider doing so; please consult your own broker or professional to determine suitability. No commentary is to be considered an offer to buy or sell securities. While we may own securities discussed, it's our custom simply to provide ideas; not to buy or sell stocks mentioned in opposition to directions projected, and to provide reasonable opportunity for subscribers to contemplate our ideas; unless fast market conditions do not provide sufficient time as sometimes is the case. If we do own an initial position, we'll say so. We do not sell on our initial coverage, unless a stock runs-up quickly, and then we say so; nor do we usually short anything, also unless referenced in our commentary. We also explicitly caution against chasing stocks after initial discussions.
Most strategies are short-to-intermediate in nature. Many traders who prefer equities to trading S&P's, will find similar moves among major tech stocks, that often can be treated as surrogates, or may consider utilizing 'mini' S&P, Dow, or the well-watched QQQ's. There's never a direct or indirect marketing relationship between our firm and any brokerage, hedge, mutual, advisory or financial PR firm. Right or wrong; our thinking is totally independent. We should be considered an independent resource; merely to supplement your own work and due diligence. Good past performance cannot be said to be an assurance of future results.
Intraday videos are confidential for use of subscribers to Gene Inger's MarketCast™ service. If you are the addressee you may view, but not regularly copy, forward, or disclose any part. Comments are Mr. Inger's observations at time of recording; thus not intended to constitute specific investment advice. Investment decisions are solely the responsibility of each investor. If you have received any communication or message in error, please notify office@ingerletter.com as well as the sender.
Internet communications cannot be guaranteed to be timely, secure, error or virus-free. However, all messages are sent in the Adobe™ 'Flash' video format, is simply a perfectly safe link to the streaming video on a Server. The sender does not accept liability for any errors or omissions, as well as any market decisions. Mr. Inger's market analysis makes a best effort to interpret events, technical factors and fundamentals from his perspective, and are intended to augment the information from which an investor makes his or her decisions, but not replace the responsibility of each investor entirely for their own decisions.
E.E. Inger & Co., Inc., its officers and staff, shall not be liable for decisions made, or taken by you or others, based upon reliance on information, or material published by our resource services. All information provided is to be used, considered or evaluated by investors or readers, on an 'as is with all faults' basis. Finally, we fully respect subscriber privacy (as our own); reader names or email addresses are never rented or made available to any party for any purpose; period. We've never rented mailing lists in 38 years since first starting the Letter, the heritage for all services; it's Daily Briefing successor; or video MarketCast comments.
Office address:
E.E. Inger & Co., Inc. (The Inger Letter)
100 East Thousand Oaks Blvd.,
Suite 227,
Thousand Oaks, CA 91360
~ Telephone 805.496.6441 ~
E-mail contacts:
Website tech support or password activation questions (not MarketCast):
tom@ingerletter.com
Alan or Laura Raphael for MarketCast or office questions; email:
office@ingerletter.com
Mr. Inger (if needed; not for website tech support please) directly:
gene@ingerletter.com
© 2010 E.E. Inger & Co., Inc. All rights reserved. Reproduction in any form without permission prohibited; brief excerpt quotations are allowed, providing full accreditation with web-link or reference to our website is concurrently included.
Copyright© 2010 The Inger Letter- Daily Briefing™ & Gene Inger's MarketCast™. All rights reserved.
