Eurozone Failures Keep
U.S. Market Trading Sideways

 

By Dennis Slothower
Editor, Stealth Stocks

 

U.S. stocks fell on Thursday, snapping a three-day rally, as the European Central Bank dampened speculation it would boost debt purchases and regulators said the region’s lenders need to raise more capital than previously estimated.

Stocks took a nose dive on Thursday, frustrated with the disunity and mixed messages coming yet again from Europe and losing heart when ECB president Mario Draghi explained that loans to the IMF to purchase European bonds would be legally unworkable.

This wasn’t what the stock market wanted to hear from the ECB president on the eve of when EU leaders meet again (their 10^th meeting), as the euro-zone rests on the brink of dissolving.

 

Some time ago, we talked about buying time for the investment banks so they could prepare for the inevitable default of Greece and these constant rumors of plans to rescue Europe that ultimately fail, then new plans that again fail are becoming a pattern.

Market Collapse Could Begin at Any Time

“Any one of four triggers could send stocks crashing!”

One of the world’s most successful – and most accurate – stock market observers has just issued an urgent warning that stocks could begin crashing at any time.

At this moment, there are no fewer than four volatile “triggers” – each of which could immediately set off a devastating collapse.

This new video explains what these four triggers mean…it tells you what the top-ranked market analyst is predicting next…and it reveals the simple steps you should take right now to protect your wealth.

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The equity markets surge on these rumors (the pump stage) and then collapse (the dump stage) when the truth is revealed. But in each of these whipsaws, momentum investors and investors in search of trying to make some return on their money are caught in each of these bear traps.

What we are looking for as investors is a “persistent” trend, either up or down, in which to establish positions and accrue profits. In a whipsaw environment, you do not have persistency and this is where certain key indicators are crucial.

The S&P 500 has not been able to trend above its 200-day SMA. This rally ended at this key resistance level. Nor has the 50-day SMA been able to trend above its 200-day SMA.

The OTC new lows exceed new highs against a 10-day moving average, showing that most stocks in the OTC are struggling to advance.

The OTC McClellan Summation Index is -327, trending below zero or bear market territory. The index is also trending below the 10-month SMA.

I could go on with another 20 indicators that say the same thing. This market is not strong enough to produce “persistency” or enough upside momentum to establish positions at this time.

Frankly, downside momentum and persistency with the economy still holding its head above water for now has not become bad enough to warrant jumping in on the short side either with any conviction. But that could change in a hurry (in early 2012) should Europe fall into a deep recession and EU leaders remain deadlocked on any plan to save the Eurozone.

If there is one constant it is change. We have to wait for persistency to manifest itself. And it will, as it always has done in every economic cycle. But for now we are in a transitory stage in a cloud bank of deep uncertainty.

We have to fly by our instruments and having been a market pilot for over 30 years I don’t see a justification for going long or short right now. This is a pure sideways whipsaw market environment.

What about Gold?

 

 

I don’t like this short term chart of gold. Gold has made a top at $1,908 in early September and is now $1,709, falling $31.1 on Thursday. Notice, the wedge formation with short term cycles peaking. The pattern of lower highs shows a distribution pattern.

European banks anticipating a deep recession and a demand for cash by depositors are being forced to sell their gold to raise cash/euro. The new euro funds are then traded through the Fed for US dollars under the new Fed agreement with Europe.

This is a “tell” and it doesn’t bode well for the bullish uptrend in gold or for the economic prospects in 2012.

 

 

Notice that gold has had a consistent pattern of higher highs and higher lows until September and if the intermediate-term aborts here and rolls down a test of $1,584 is quite likely - or perhaps back to the lows of last June.

Understand that the gold market is a leading indicator of the CRB Index (Commodities) and if commodities roll over, the stock market rolls over.

Now notice, what is happening to the US dollar.

 

The dollar is advancing and looks poised to challenge its October highs as the intermediate-term advances.

On Friday, EU leaders will make an announcement from their 10^th crisis summit this year. The announcement could give us a complete new look but going into Friday this is the picture with the S&P 500 failing at the 200-day SMA and the DOW falling nearly 200 points on Thursday.

Stay defensive.

Eurozone Worries Have Wiped Out
Nearly All of October’s Gains

 

By Dennis Slothower
Editor, Stealth Stocks

Stocks were doomed from the start on Wednesday as Germany, the strongest Eurozone nation, failed to find bidders for nearly half of its bond auction while we were sleeping - and the market opened strongly negative and never turned back, closing at the lows of the day.

Though not completely confirmed, it appears that stocks may have just put in the worst Thanksgiving week in history, finishing today at -2.05% for the DOW, -2.21% for the S&P 500, -2.43% for the Nasdaq Composite, and -3.15% for the Russell 2000.

This makes for a 6-day consecutive selling streak for the S&P 500, falling nearly 8% in just over a week’s worth of trading. Given the tremendous volatility we have seen this year, 8% is not a lot until you match it with the rest of November’s sell-off.

 

Market Collapse Could Begin at Any Time
“Any one of four triggers could send stocks crashing!”

One of the world’s most successful – and most accurate – stock market observers has just issued an urgent warning that stocks could begin crashing at any time.

At this moment, there are no fewer than four volatile “triggers” – each of which could immediately set off a devastating collapse.

This new video explains what these four triggers mean…it tells you what the top-ranked market analyst is predicting next…and it reveals the simple steps you should take right now to protect your wealth.

Stocks have now retraced prices clear back to October 6^th, leaving only three days of gains in the October rally, October 4^th, 5^th, and 6^th. The S&P 500 closed at 1165 on October 6^th and it closed at 1162 on Wednesday! Losses from the October high are now almost -10% for the S&P 500 and nearly -12% for the small cap Russell 2000.

Not much left of the October rally, huh?

Economic and Manufacturing Data
Pulls Down Equity Markets

 

It wasn’t just the German bond failure that equity markets had to deal with on Wednesday. Global manufacturing is signaling a strong contraction along with new orders for manufactured goods.

On Wednesday we learned from the U.S. Durable Goods report that the economy continues to contract, as new orders for durable goods dropped 0.7% in October. Now that is really not much of a drop, until you factor in the revised downward adjustment to the September figures at -1.5%, nearly double what was originally reported. And there you have the make believe accounting showing up in the details.

In addition to a 2-month decline of -2.2% in durable goods orders, the China growth machine suddenly reported underlying weakness on Wednesday as the Chinese manufacturing sector (China PMI) reportedly declined from 51 in October to a preliminary 38 reading for November, the lowest reading in almost three years.

Not to be underdone, the European manufacturing sector also reported a third consecutive contracting PMI number. New orders in Europe have no fallen for six consecutive months, with the PMI at 46.4 - the lowest level since July, 2009.

Attention Riveted to Euro Bonds

All of these negative data (above) probably contributed to a continued sell off in equities, but it is the failed German bond auction that is most disconcerting and most responsible for a continued equity decline.

First of all, German is the last bastion standing in the Eurozone, supposedly capable of fending off all fiery dragons that might attack the castle walls…until Wednesday. Money has been so steadily flowing into German bonds since the Eurozone credit crisis began that many thought Germany would forever have a market on any bonds it needed to roll over.

In a huge surprise, Germany tried to auction off 6bn euro of 10-YR bunds (bonds) and was only able to attract 3.6bn in bids, leaving the Bundesbank (Germany’s central bank) picking up the remaining 2.4bn, or nearly 40% of the total amount offered!

While this isn’t the first time for German debt auctions to fall short, it is shockingly notable when German bunds are perceived as the Euro safe haven over the last several months.

Adding insult to pain, Ireland is now complaining about having not received the same consideration given to Greece. Remember the 50% haircut on Greek bonds? So Ireland wants either a discount on bonds from the bond holders or they want better payment terms and interest rates on their bailout largesse.

Germany just got a double dose headache!

And now I am going to quote myself on the night that the Euro-TARP summit ended, October 27^th:

“Who then gets the 50% haircut? Private individuals who bought Greek bonds, foreign banks who did the same, hedge funds and pension funds who also bought Greek bonds. In fact, in an ironic backstab to Greece austerity measures it appears that the Greece pension funds were not exempted and will suffer a 50% cut. This means the retirement funds for a very many retired Greek citizens just experienced some “real” austerity. We may see some violent protests once this details hits home - and the little guy takes it in the rear again!

Now think about what this means going forward. How does Ireland feel about covering 100% of their sovereign debts when Greece gets this 50% discount?

Germany is the largest and strongest EU country. France is next, but is on a ratings downgrade watch. Spain and Italy are the next largest EU economies. And who do you think might be next up for the bailout window? It will be Italy and then it will be Spain.

Has a precedent been set here for 50% haircuts? What are Italians and Spaniards now expecting? Will haircuts like these for Italy and Spain destroy the financial markets?

And the most feared but unexpressed question - what will the bond yields need to be for future European bonds with the expectation that investor capital may be cut in half before the bond matures? Will there even be a market for European bonds anymore?”

-OnTheMoney Update, October 27, 2011

 

So now I ask the question once again, “Is there even a market for ANY European bonds anymore?”

Look, I am a little dummy hidden away in the mountains of Alpine, Utah and even I figured out what was bound to happen while the markets were celebrating the 50% haircut administered in the now infamous Euro-TARP summit.

And what about that multi-trillion dollar EFSF fund that was supposed to be a leveraged vehicle which could be used to ensure sovereign bonds and European banks? We are supposed to hear more about it in the next two weeks. But I can guarantee you that if no one wants to buy a German bund, only an alien from another world might be persuaded to take on a leveraged and twice-removed EFSF bond. These European leaders were foolish to think they could sell leveraged bond strategies as a way to bail out sovereign debts at the same time they were decapitating Greek bondholders!

 

The October rally has turned out to be nothing but fancy jawboning on behalf of a Eurozone deep-in-doo-doo.

U.S. Stock Market
“Could Get Ugly Quickly”

 

By Dennis Slothower
Editor, Stealth Stocks

 

Stocks fell sharply in early afternoon trading on Thursday as nervous investors bailed out of the market once the S&P 500 broke a key technical support level.

Once again stocks were hit hard on Thursday as intermediate-term cycles appear to be showing more evidence of rolling over to the downside.

Stocks failed to hold above the technical support at the 50-day exponential moving average (at S&P 500 1225), then sold down to near the 50-day simple moving average (at 1205) where the next support level held for now. The S&P 500 closed at 1216, 1 point above its monthly middle BB line.

This is the most likely place where a defense should develop if one is coming, but a breach and a close below 1205 would spell serious technical trouble for the stock market that could get ugly quickly.

Crude oil fell $3.77 to close at $98.93, so maybe a falling euro and rising dollar is getting to oil speculators now given Europe’s failure to put together a credible rescue package.

Gold also was hit hard, down $54 to $1719. Heads up, what you are seeing is gold and silver selling to raise liquidity particularly by investment banks who are being force to raise liquidity to meet cash demands, as Europe braces for the worst economic crisis since World War II.

 

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Exclusive Offer

 

“Market Collapse Could Begin at Any Time

“Any one of four triggers could send stocks crashing!”

 

One of the world’s most successful – and most accurate – stock market observers has just issued an urgent warning that stocks could begin crashing at any time.

At this moment, there are no fewer than four volatile “triggers” – each of which could immediately set off a devastating collapse.

This new video explains what these four triggers mean…it tells you what the top-ranked market analyst is predicting next…and it reveals the simple steps you should take right now to protect your wealth.

 

The primary trend in gold is still intact but gold’s uptrend is suspect if Europe melts down.

There are a lot of issues at play but clearly Europe’s problems are making investors realize liquidity problems for banks are approaching similar concern levels seen in 2008, following the Lehman Brothers collapse.

In October, the markets were sold a bill of goods that the EFSF bailout fund would have the funding to deal with Greece and help stabilize Europe’s sovereign debt issues but it is looking like a lot of banks are not going to get bailed out in Europe and so a scramble for liquidity is once again a growing concern.

The markets are realizing Europe may not have the liquidity to fund the EFSF bailout fund.

No one seems to know how this is going to play out but the European markets have started another leg down, along with the euro!

 

The euro was very strong in October but is failing in November. It is rather obvious that without some sort of an answer for the fund-less EFSF bailout fund, the euro has plenty of downside risk here.

Is the Economy Getting Better?

 

I wouldn’t get too enamored about some of the meager improvements in the economy.

It is not that I don’t appreciate improvements, I pray for them. But you have to understand that when crude oil prices fell from $100 a barrel in August to $75 a barrel at the end of September and gasoline prices backed off from $4 a gallon to $3.40 a gallon, it took some pressure off the consumer.

 

Unfortunately, crude oil spiking $25 over the last 31 days will put pressure back on the economy again. On the other hand, if crude oil prices continue to back off, the stock market will back off – so the bullish picture is quickly starting to crumble.

Another reason why the market is on edge right now is time is running out for the super committee. We have not heard much and there are only six days left before the November 23 deadline to find $1.2 trillion in deficit reduction.

Talks seem to be at a standstill with the national debt having crossed above $15 trillion this week. Let’s hope something can be put together as the markets are very vulnerable right now if they remain deadlocked.

Technically, as I have talked about this week, the market is subject to oscillating between its 200-day SMA on the upside and the lower 50-day SMA. Prices are now testing the 50-day SMA, which needs to hold up or we will see a new drop into strong bearish territory.

Are Goldman and JP Morgan going to step up and defend this support level? We are about to find out.

Europe’s “Rigged Game” Could End
at Any Time and Send Stocks Reeling

By Dennis Slothower
Editor, Stealth Stocks

The panic selling paused Thursday as a new primary Italian bond auction successfully completed at a 6.8% yield, just under the dreaded unsustainable 7%, soothing the financial markets that perhaps Italy will not become another Greece after all.

The news from Europe was positive on Thursday, for a change. And having the jobless claims come in a little bit better as well didn’t hurt. But it was the Italian bond auction that halted the panic selling of Wednesday.

The headlines and news wires say that a billion euro bond auction in Italy went off without a hitch and managed to find buyers at only a 6.8% yield, compared to the high of 7.5% hit Wednesday. The euro strengthened on the news and the dollar weakened as stocks around the world bounced, though not much.

Let’s take a little closer look here. In the secondary market, similar Italian bonds are selling at 8% yield. No, not just similar bonds…exactly the same type bonds. Now if you were a hedge fund manager or a bond trader or a sovereign wealth fund or a bank and you had an opportunity to buy a certain bond that would bring 8% from one source or buy the same bond from the primary issuer for 6.8%, which would you buy, assuming prices were the same?

Only a fool would settle for 6.8% when you can get 8% around the corner. So what happened in Italy on Thursday? How did they manage to attract buyers at the 6.8% yield?

A lot of people are asking the same question, particularly since the ECB is prohibited from participating in primary bond auctions.

The Man Who Called the 2008 Market Crash Warns:
“We have 15 more months or more of trouble dead ahead.”

One of the world’s most successful – and most accurate – stock market observers has just issued an urgent warning.  At this very moment, our Oil Shock Recession could mean as much as 15 months of economic trouble ahead of us…with potential devastation even greater than what we saw back in 2008.

It’s important that you take action – now – to protect your wealth…and position yourself to actually make money during the rough times ahead. This short video explains the simple steps you should take right now.

 

Insider information and rumors strongly suggest that the ECB pulled a fast one here, perhaps negotiating with another buyer or buyers to buy the 6.8% bonds and then the ECB would either take them off their hands for a small fee or other assets at an adjusted margin between the 6.8% and the market 8% rate.

The Italian bond auction was backstopped by someone, either our own Fed or the ECB using some type of “scratch-my-back-I’ll-scratch-yours” deal. It worked on Thursday, in that the global markets paused their panic selling for a while. But it didn’t change the secondary market for Italian bonds.

The ECB can’t keep this up. They don’t have enough money or agreements in place to become the lender of only resort for all of the Italian bonds that will roll over month after month. It is believed that just under 400bn euro of bonds are needed for Italy to keep their government operating for the next 12 months.

Even the EFSF will never be big enough to keep this kind of tactic going.

Stocks Are Tied to Euro Apron Strings

The correlation between the euro and equity assets has become so tight, all one needs to do is follow the direction of the euro hour by hour to make equity purchase / sell decisions.

 

Notice how closely the S&P 500 has tracked the euro since the summer correction took place. There is a slight divergence occurring right now, though. The euro, while stopped in its downward slide a bit Thursday looks prepared to head down further, possibly to the lows seen at the first of October.

The S&P 500 is showing a little more bullish strength, though not much better than the euro.

So who is leading who here? Is the S&P 500 going to follow the euro down on further Eurozone chaos and contagion or is the S&P 500 going to pull the euro up by its bootstraps? And if you don’t know the answer to this question, you haven’t been following me closely the last few weeks.

Check out what the euro has done in the next chart…and what we are likely to see in the broader equity markets, as well:

 

I showed readers a chart of the euro / dollar relationship on Wednesday, pointing out the confirmed bearish head and shoulders pattern. Well, that same pattern exists for the euro by itself, as well – since there is virtually a 1:1 inverse relationship between the euro and the dollar.

Thursday’s pause in the equity sell off may be nothing more than the euro making a simple back test to the broken neckline of the bearish head and shoulders pattern. If this is the case, then the euro could easily continue to fall in the coming days. And remember that a fully played out bearish head and shoulders pattern would take the euro to the lows seen at the beginning of October.

This suggests that equities could take the very same path.

2011 / 2007 Deja’ Vu

I want you to closely study this next chart, especially the later part of 2007 through the collapse in 2008. Note the commonly circled areas and compare them to 2011. If this almost perfect pattern continues to follow the 2007 – 2008 path, then we are looking at a scenario that makes the October low potential pullback only the first of several declines ahead.

 

I have seldom seen a historical trading pattern repeated so precisely as 2011 is repeating the 2007 – 2008 timeframe. We will continue to follow this as long as the patterns continue to remain the same.

What About the SuperCommittee?

As you know, the upcoming SuperCommittee of 6 democrats and 6 republicans, have the task of coming up with at least $1.2 trillion in spending cuts or tax revenues to narrow the U.S. deficit. If they don’t succeed, then at least $1.2 trillion in cuts to defense spending and entitlement programs will take place…without a single congressional vote.

This plan needs to be completed by November 23^rd. And since the plan needs to be examined and priced out by the CBO, the bulk of the plan needs to be delivered to the CBO sometime next week.

This could get real interesting over the next two weeks.

The Current “Pump and Dump”
Environment is Still Very Dangerous

By Dennis Slothower
Editor, Stealth Stocks

Stocks advanced Thursday on the news that the ECB cut interest rates and Greece politicians have reversed their decision for a referendum vote on their recent bailout.

On any given day (or maybe any given hour!) the U.S. stock market can swing by several percent based on a rumor, a statement by a central banker, a world leader…just about anything these days can set the herd stampeding in either direction in a flash.

On Thursday, Greece’s Prime Minister Papandreou scrapped plans to hold a referendum on the Oct. 27 bailout agreement after the EU cut off all financial aid to Greece until after a referendum vote was held.

The political drama is not over. Papandreou has called a confidence vote on his government for Friday night, and his majority was reduced to the bare minimum 151 when Socialist lawmaker Eva Kaili said she would not vote in favor.

Not that any of this really matters as the European economy is going into the pooper.

Premier Silvio Berlusconi’s government in Italy is teetering like Greece after it failed to come up with a credible plan to deal with its dangerously high debts, and Portugal demanded more flexible terms for its own bailout.

Remember this so called European bailout fund is to be funded with “private investor” assets. And no one really has figured out who will put up the money now that China is now not interested.

The Man Who Called the 2008 Market Crash Warns:
“We have 15 more months or more of trouble dead ahead.”

One of the world’s most successful – and most accurate – stock market observers has just issued an urgent warning.  At this very moment, our Oil Shock Recession could mean as much as 15 months of economic trouble ahead of us…with potential devastation even greater than what we saw back in 2008.

It’s important that you take action – now – to protect your wealth…and position yourself to actually make money during the rough times ahead. This short video explains the simple steps you should take right now.

So who is going to bailout Europe? Well, I guess you are! This is why the Fed may come up with another stimulus package - to help fund Europe even if it means the global economy crashes over soaring energy prices.

Which it seems to be doing…

As I have warned and continue to forewarn, Europe is choking on $110 Brent crude oil and if the bankers keep printing more money it will only get worse. Kick the can down the road but you will pay even more for it later.

So while investment bankers/primary dealers are facing the grim realities and some are going bankrupt (MF Global) this much is certain, irrespective of a global economy that is suffering the effects of higher and higher inflation, the Fed and other central bankers continue to intervene, promising to stabilize the markets even though the global economy moves toward a certain recession.

It is clear Ben Bernanke believes he should keep printing money period and let the economic cycle take care of itself.

I would like to know how the US can grow economically if Europe is now in recession, with half of its countries and banks insolvent.

I certainly want you to make money, but I sure as heck do not want to you to be caught in a severe market collapse. It only takes one of these to put you out of the game permanently if you’re investing serious money.

Missing severe market drops is essential to investment success — and right now we can’t be sure of anything in a pump and dump market environment when it only takes a minor switch to start the next selling phase.

Technically, the stock market is still in a bear market, at best a trading range in one of the most whipsawed markets in history. The price of the S&P 500 benchmark is trading below the 200-day moving average but above its 50-day EMA.

In the meantime, we are extremely overbought an intermediate-term basis.

The Russell 2000 has back tested to its old support level that was breached in July which is resistance, while the weekly stochastics are now very overbought with %K at 92 and %D at 77.

Do you go long here? How much upside potential is there with crude oil prices pushing toward $100 a barrel in November?

As Doug Kass put it, “In one brief four-week period, the fear of return of capital has been replaced with the fear of an inadequate return on capital as fear of the downside has been replaced with fear of missing the upside.”

Crazy times.

Thursday’s Sell-Off Could
Trigger a “Crash-Like Scenario”

By Dennis Slothower
Editor, Stealth Stocks

Stocks sank on Thursday; Treasury 10-year yields slid to a record and the Dollar Index rose to a seven- month high amid concern central banks are running out of tools to prevent a recession. Commodities were crushed.

The commodity markets were absolutely clubbed after the Fed took away the inflation punch bowl.

Crude oil fell $5.41 a barrel to $80.51. (The economy desperately needs this relief.)

Gold fell $66.3 to $1,739. Silver (SLV) plummeted $38.83 to $34.92, a 10.3% correction closing below its 200-day moving average. (Watch out below)

Given that the S&P 500 index is correlated 80% to the direction in crude oil prices these days, the stock market didn’t take well to this news either.

One of the points the Fed made on Wednesday is their $400 billion intervention is not going into POMO’s as it did with QE2, which caused inflation to soar.

This new “twist” intervention is targeted to drive down long-term interest rates. Ten-year Treasury yields fell as low as 1.6961 percent, the lowest in Federal Reserve figures starting in 1953. The Fed is determined to reward investors with nothing if you invest in Treasuries and for much of the world that’s better than losing their shirts.

Exclusive Offer

Urgent Video: The Coming U.S.

Stock Market Collapse Will Be Devastating

Dennis Slothower – the stock market guru who called the crash of 2008 – has issued an urgent warning to investors:

“The economy is breaking down due to “oil shock.” The evidence continues to mount that the economy is fast falling into recession.”

This short video will teach you the simple steps you can take – right now – to protect yourself from danger.

Click here to view this critical new video right now.

Meanwhile, the Dollar Index rose 1.3 percent. (US Dollar is now at the monthly middle Bollinger Band line—key resistance—a push above 78.77 pushes the dollar into bull market territory. Amazing given how popular the dollar was just a couple of months ago! I told you to watch for this, didn’t I?

The Fed said on Wednesday that it saw “significant downside risks” in the economy.

What happened to the slow growth, soft landing spin the Fed was promoting just a couple of months ago, or the temporary weakness talk due to the Japanese earthquakes?

Unable to explain away the truth we get the truth! I told you not to buy their spin. This is a classic oil shock recession developing, not a soft patch and now the Fed is acknowledging “significant” risks.

As investors we have to think very clearly, focusing on the steps we take in this mine field within a fog bank.

Notice, the Fed said their focus on the long-bond will last until June of 2012! This implies the Fed will not take any further action until after this time. No massive POMO’s support and that means we need to prepare for bear market conditions to persist, perhaps at least until this time period.

Then it will probably be time to bring out the POMO’s again to support the markets going into the elections.

The Stock Market is Breaking Down

Since making an intermediate-term bottom on August 8^th, the stock market has seen a series of bungee cord swings, gaps and reversals and here we are now the S&P 500 within just a few points of retesting its August 8^th lows.

 

 

On two different occasions the S&P 500 has tested its 50-day EMA downside resistance level, missing its 200-day moving average by a mile.

As I said before this is classic bear market behavior but we have also seen 4 separate whipsaws of dramatic fashion designed to snake you.

The strongest of the indexes is the Nasdaq 100, due to Apple, Amazon and Google, which has been bid up ahead of quarterly earnings due out next month.

While at the same time we see the financials getting killed as we saw going into the 2008 recession. The surge in the US dollar is damaging the steel stocks and now with commodities getting killed, the emerging market indexes are completely falling apart, with the last two days breaking down through the wedge formation.

Near term, the S&P 500 is now approaching its August lows at 1,100. Most stocks are very washed out at the moment, so we can’t rule out another snap back rally again to retest the 50-day EMA, or attempt to do so but I can’t see anything really that is going to support this market for long.

If we breach 1,100 we could sell off to the lows of 2010 at 1,000, which is where the bottom of the monthly middle Bollinger Band line rests.

If we take out the lows of August we could be looking at this scenario.

Remember we are coming up on the end of the month and quarter, next week. The Fed has just said it’s not looking so hot, so we could be setting up for a crash like scenario if we can’t hold support at 1,100.

Beware.

Why September 20, 2011 is
a Critical Date for Investors

By Dennis Slothower
Editor, Stealth Stocks

I want you to know that something potentially explosive that is scheduled to happen on September 20-21. It is crucial as an investor that you are aware of this.

At the 66^th session of the United Nations, on September 20^th, acting Palestinian PA Chief, Mahmud Abbas will present a request to UN Secretary General Ban Ki-moon for UN recognition of Palestine to become an independent state.

It is an almost foregone conclusion the UN will recognize Palestine as a new nation.

“Ron Prosor, Israel’s ambassador to the United Nations, told the Foreign Ministry last week that Israel has no chance of rallying a substantial number of states to oppose a resolution at the UN General Assembly recognizing a Palestinian state in September.

Prosor - considered one of the most experienced and senior Israeli diplomats - offered a very pessimistic estimate as to Israel’s ability to significantly affect the results of the vote. Even though he did not state so explicitly, Prosor implies that Israel will sustain a diplomatic defeat.

“The maximum that we can hope to gain [at the UN vote] is for a group of states who will abstain or be absent during the vote,” Prosor wrote, adding that his comments are based on more than 60 meetings he held during the past few weeks with his counterparts at the UN. “Only a few countries will vote against the Palestinian initiative,” he wrote.”

- Haaretz.com

However, on Thursday, September 8 the Obama administration confirmed it will indeed cast a veto vote on Palestinians’ statehood bid at the UN Security Council.

Urgent Video: The Coming U.S.
Stock Market Collapse Will Be Devastating

Dennis Slothower – the stock market guru who called the crash of 2008 – has issued an urgent warning to investors:

“The economy is breaking down due to “oil shock.” The evidence continues to mount that the economy is fast falling into recession.”

This short video will teach you the simple steps you can take – right now – to protect yourself from danger.

Click here to view this critical new video right now.

 

Could the Federal Reserve also be saying that on September 20-21 that its range of tools should be respected as an economic weapon should the UN grow more militant against Israel?

September has the potential to be a Pandora’s Box, particularly towards the end of the month, from a geopolitical perspective.

From an economic perspective, Pandora’s Box has already been opened when oil consumption breeched 4% of GDP this summer, which has always triggered “oil shock” recessions historically. And it is still above 4% at $90 a barrel WTI and $114 Brent.

Technically, we remain caught in a bearish wedge trending below a 50-day EMA in bear market territory, with rumors changing day by day.

Beware: Higher Inflation and a
Global Recession are Now a Reality

 

By Dennis Slothower
Editor, Stealth Stocks

Stocks were hit hard on Thursday following a series of extremely poor economic reports suggesting that, indeed, our economy is falling into recessionary conditions.

The stock market was caught off guard at how absolutely horrid the economic data is becoming, clearly confirming what we had feared — the economy is falling into an “oil shock” recession as inflation heads skyward and the global economy falters.

The economic news was very ugly on Thursday, with the Philly Fed Index crashing, the CPI soaring, existing home sales falling again and a worrisome speculation that Europe’s banks are beginning to suffer the contagion of Europe’s sovereign debt crisis.

Philly Fed Crashes to
a “Catastrophic” Number

 

On Thursday, we had a truly “shocking” report from the Philly Fed. I figured it was going to be bad but this takes your breath away.

The Philly Fed Index crashed to -30.7. This is being reported as a “catastrophic” number, which no one saw coming, particularly to those who pay little attention to oil prices.

Wall Street economists had forecasted the Philly Fed Index to slip just a bit to 1.0 from the previous month at 3.2. Remember, their line of bull is that we are going through just a “soft patch”, nothing to worry about.

Does this chart look like just a soft patch to you?

Companies are seeing sales drop with new orders taking the biggest hit, falling from 0.1 in July to -26.8 in August.

Unfilled orders followed suit and declined from -16.3 to -20.9. Given these two readings, there was no way for shipments to expand; the sector fell from 4.3 in July to -13.9 in August. For those who are not familiar with this report, this represents an incredible collapse.

 

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Exclusive Offer

The Man Who Called the 2008 Market Crash Warns:
“The Economy is Breaking Down”

One of the world’s most successful – and most accurate – stock market observers has just issued an urgent warning.  Simply put, we could be in for a sustained market crash potentially more devastating than the one we saw back in 2008.

It’s important that you take action – now – to protect your wealth…and position yourself to actually make money during the rough times ahead. This short video explains the simple steps you should take right now.

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I just want to remind you of what we talked about last June, concerning Stephen Kopits’ “oil shock” analytical work.

“Stephen Kopits, Oil analyst of Douglas-Westwood explains:

“In every case when oil consumption breeched 4% of GDP, the US has suffered a recession, and indeed, the current US recession (2008) began within two months of oil hitting the 4% threshold, that is, when oil reached $80/bbl.”

In 2010, Mr. Kopits pegged that price as $84 a barrel.

When oil prices hit $115 (WTI) on May 2^nd we had more than breeched the 4% of GDP level and now three months later we are seeing crashing economic numbers.

 

More Bad News:
Prices are Killing Consumers

It gets worse! Inflation at the consumer price level is soaring!

The headline CPI report came in at 0.5%, or annualized at 6.2%, far above the economists’ expectations, as usual. This was the strongest monthly increase since March.

Thursday’s CPI number is really a scary number, especially when you consider the Fed could announce another massive POMO injection / QE3 program to prop up the commodity market which in turn, props up the equity market, while killing the consumer from inflation.

Will the Fed Move for QE3?

With inflation running this hot there is steep opposition at the Fed to continue to be this loose with money infusions.

There are now three Fed governors in open opposition to Bernanke’s decision to cap interest rates and one more dissenting vote could bring on full mutiny at the Fed.

Three dissents from the FOMC’s ten voting members is highly unusual. The last time it happened was October 1992 under former Fed chief Alan Greenspan, but that opposition was split between inflation hawks and doves, unlike last week’s hawk-led resistance.

The Fed’s annual Board of Governors meeting in Jackson Hole, Wyoming takes place a week from Saturday, on August 27^th. Another dissent vote from this meeting would essentially be a “no-confidence” vote, as too many Fed Governors begin splitting from Bernanke’s Keynesian economic approach.

 

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Exclusive Offer

Urgent Video: The Coming U.S.
Stock Market Collapse Will Be Devastating

Dennis Slothower – the stock market guru who called the crash of 2008 – has issued an urgent warning to investors:

“The economy is breaking down due to “oil shock.” The evidence continues to mount that the economy is fast falling into recession.”

This short video will teach you the simple steps you can take – right now – to protect yourself from danger.

Click here to view this critical new video right now.

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I hate to be such a cynic but I firmly believe the Fed knew ahead of time how long and how much stimulus they needed in order to drive up commodity prices in order to induce a global recession. Come on, didn’t we just see this scenario in 2008?

Ben Bernanke is no idiot. The man is an authority on “oil shock” recessions, having authored scholarly papers on what causes oil shocks and what the Fed’s response should be in the aftermath of one.

I don’t believe the Fed did this out of stupidity or just overshot the mark. I believe it is related to putting pressure on China and their currency peg to the dollar and towards driving up commodity prices to ignite the Arab Spring revolts. Is this conspiracy? Let’s call it economic warfare and financial global positioning and just leave it at that.

Some argue the Fed will soon announce QE3 and others are convinced the Fed will not fuel more inflation now.

This is why gold has gone parabolic as of late. But just remember, gold is no different than any other commodity when it comes to buying the rumor and selling the facts – and is highly vulnerable to a strong correction, too.

 

Beware: The Market is Now Oversold
on an Intermediate Basis

 

Check out the intermediate-term charts as we go into the Fed’s meeting.

 

This chart argues for two very important points. The market is now in bear market territory and it is also highly oversold.

The stock market is also oversold on an intermediate-term basis, as well now. It doesn’t mean there won’t be any more decline here but it does mean that if the Fed announces QE3 or a stimulus program of some version you don’t want to be caught short in an intermediate-term reversal (advance). This market is truly a puppet of the Fed masters at the moment – at least until we get the Fed’s Jackson Hole discussions and decisions out of the way.

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Insider Wealth Alert (“IWA”), a general interest newsletter is not liable for the suitability or future investment performance of any securities or strategies discussed. IWA is published by Eastman Communications, Inc. (“ECI”). Website content is for informational purposes. Communications contained herein shall not constitute offers to solicit, sell, offer or purchase securities, futures, options, currencies (spot or otherwise) or any other instruments of a financial nature. Not suitable for all investors.

 

Trade involves risk, and may result in financial loss. Under no circumstances does ECI or its affiliates guarantee results of any kind, beneficial, detrimental or otherwise. Recommendations and/or issues are neither endorsed nor guaranteed by ECI. All content displayed is strictly of informational nature, and is not suggested or intended to replace skilled research, advice or guidance from licensed investors or otherwise. Not responsible for broker errors.

This is not investment advice. Content reserved for informative purposes only. This is not an offer to buy or sell stock. Any investment questions should be directed to qualified, licensed, professional financial experts from both private and governmental sources. All performance results, hypothetical and/or otherwise are speculative, limited and unrelated to those from other accounts or individuals. Profits and losses are inherently unique, and should never be expected to meet or match those of any other account. Differences should be expected. Results achieved by other programs and/or accounts are neither implied nor guaranteed. Hypothetical trading does not account for financial risk impact, accountability and penalties.

Hypothetical performance results are not implied, and should not be expected to occur. Any and all adverse results and effects should be considered. Success is neither implied nor guaranteed.

ECI is not a registered investment adviser. We do not and will not provide personalized investment advice. We publish opinionated information about companies that we believe our subscribers may be interested in. This site contains “forward looking statements,” inside the definition of Section 27A of the Securities Act of 1933 and Section 21B of the Securities Exchange Act of 1934. Statements that express or involve discussions with respect to predictions, goals, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance are not statements of historical fact, and may be “forward looking statements.” Such statements are based on projections, estimates and expectations at the time the statements are made, and may involve risks which could cause actual results to differ than those anticipated.

ECI and its officers, directors, partners, affiliates, contributors, consultants or employees may hold positions in securities mentioned on the website. We will not initiate a position in any stock recommended for one (1) business day before our original recommendations, and one (1) day following subsequent recommendations. In order to reduce the risk of too many traders possibly influencing the market by attempting identical trades, ECI may limit the number of subscribers in any one service. For access to our full disclaimer and disclosure policy regarding editor securities holdings, go www.stealthstocksonline.com or call 800-524-4832.

Eastman Communications is the publisher of Stealth Stocks, Hidden Values Alert, & Insider Wealth Alert

© 2011 by Insider Wealth Alert, All rights reserved.

The Oil Shock Recession is Now Inevitable

By Dennis Slothower
Editor, Stealth Stocks

For the last several months, I’ve talked about what will happen to the economy when oil prices move higher. Since February, when oil prices moved above $85 per barrel, I’ve been telling investors how the economy would contract in spite of Wall Street’s rosy 4% growth predictions.

You likely know by now that the 2Q11 GDP figures came in at 1.3%, but as the Fed acknowledges, this estimate is incomplete. The government sharply lowered the 1Q11 GDP from 1.92%, reported on April 28, to just 0.4%!

What this means is that we likely can expect another adjustment to the downside in August, which would push the GDP into negative territory for the second quarter. What’s more, we learned that real personal consumption expenditures plummeted to just 0.1% in the second quarter, compared to 2.1% in the first. Durable goods decreased 4.4%, in contrast to an increase of 11.7% in the first quarter.

---

 

Exclusive Offer

The Man Who Called the 2008 Market Crash Warns:
“The Economy is Breaking Down”

One of the world’s most successful – and most accurate – stock market observers has just issued an urgent warning.  Simply put, we could be in for a sustained market crash potentially more devastating than the one we saw back in 2008.

It’s important that you take action – now – to protect your wealth…and position yourself to actually make money during the rough times ahead. This short video explains the simple steps you should take right now.

Click here to watch this urgent video.

---

According to the most recent Fed beige book, economic activity in eight of twelve regions is markedly slowing, which the Fed largely blames on droughts, flooding and still-lean inventories due to the Japanese supply-chain disruptions.

Wall Street economists want us to believe this is only a “soft patch”—a period of slow growth, short of a recession, with the economy hovering just above a contractive state—and that once we work through the natural disasters, the economy will recover in the second half of the year. C’mon…do they think we would really believe that?

Brent crude oil averaged north of $115 a barrel in the month of July, which crushed the global economy. And this summer’s high gasoline and food prices have already fractured the economy. It will become more obvious in the third and fourth quarters how much damage QE2 has really caused.

The trend I’m seeing—a deceleration in the slope of almost all the economic charts—doesn’t suggest just a soft patch, but a fractured economy just beginning to feel the effects of extreme commodity prices. Currently, I’m seeing demand for factory goods contracting. June’s durable goods was a very disappointing -2.1%, on expectations of an increase of 0.3% from 1.9% in May.

Manufacturing in many regions is slipping into recessionary territory, with the Empire Manufacturing Index at -3.76. The Federal Reserve Bank of Philadelphia’s July report came in at 3.2. The Dallas General Business Activity Index improved in July from -17.5 to -2, but anything below zero is considered recessionary. The Richmond Fed Index fell from 3 in June to -1 in July.

The Chicago Purchasing Managers Index slipped from 61.1 in June to 58.5 in July. The PMI Employment Index printed far lower, from 58.7 to 51.5, even as prices paid increased (inflation) from 70.5 to 71.7, while new orders declined from 61.2 to 59.4. Also, the Chicago Fed National Activity Index is just a sliver above 35. A drop below 35 is a precursor to recession. I think you get the picture.

What Should You Do Next?

 

Let review a few things. In February when crude oil prices rose above $85 a barrel I warned the stock market was moving into oil shock recession territory. At that time I had you in commodity positions, but the positions began to lose momentum and we were forced to the sidelines.

---

Exclusive Offer

Urgent Video: The Coming U.S.
Stock Market Collapse Will Be Devastating

Dennis Slothower – the stock market guru who called the crash of 2008 – has issued an urgent warning to investors:

“The economy is breaking down due to “oil shock.” The evidence continues to mount that the economy is fast falling into recession.”

This short video will teach you the simple steps you can take – right now – to protect yourself from danger.

Click here to view this critical new video right now.

---

Market breadth began to erode more forcefully with fewer and fewer stocks holding up the market and the stock market began to whip saw. My advice was to stay out of the market, warning you of a broad market top, transitioning into a double dip recession.

The Fed recently explained that it intends to keep interest rates at zero for two years (indefinitely) but it added a new line to its statement, a very key line.

“The Committee discussed the range of policy tools available to promote a stronger economic recovery in a context of price stability.”

On August 26^th, Ben Bernanke spoke at the annual Jackson Hole, Wyoming Fed conference.  Rather than launch a real “shock-and-awe” stimulus program, Bernanke is keeping his cards close for the time being.

Bernanke reasoned that the long-term growth picture for the United States remains strong.  But he conceded that “the economic healing will take a while, and there may be setbacks along the way.”

Those setbacks could include another  major wave down which could send the S&P 500 plummeting down to  the 600 range before the next bear market cycle bottoms.

The speed of this market is mind numbing, like the crap tables of Las Vegas with you betting against the house. Shorting the stock market may seem the most sensible thing to do but remember – right now the market could move 10% in either direction on the drop of a dime.

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Insider Wealth Alert (“IWA”), a general interest newsletter is not liable for the suitability or future investment performance of any securities or strategies discussed. IWA is published by Eastman Communications, Inc. (“ECI”). Website content is for informational purposes. Communications contained herein shall not constitute offers to solicit, sell, offer or purchase securities, futures, options, currencies (spot or otherwise) or any other instruments of a financial nature. Not suitable for all investors.

Trade involves risk, and may result in financial loss. Under no circumstances does ECI or its affiliates guarantee results of any kind, beneficial, detrimental or otherwise. Recommendations and/or issues are neither endorsed nor guaranteed by ECI. All content displayed is strictly of informational nature, and is not suggested or intended to replace skilled research, advice or guidance from licensed investors or otherwise. Not responsible for broker errors.

This is not investment advice. Content reserved for informative purposes only. This is not an offer to buy or sell stock. Any investment questions should be directed to qualified, licensed, professional financial experts from both private and governmental sources. All performance results, hypothetical and/or otherwise are speculative, limited and unrelated to those from other accounts or individuals. Profits and losses are inherently unique, and should never be expected to meet or match those of any other account. Differences should be expected. Results achieved by other programs and/or accounts are neither implied nor guaranteed. Hypothetical trading does not account for financial risk impact, accountability and penalties.

Hypothetical performance results are not implied, and should not be expected to occur. Any and all adverse results and effects should be considered. Success is neither implied nor guaranteed.

ECI is not a registered investment adviser. We do not and will not provide personalized investment advice. We publish opinionated information about companies that we believe our subscribers may be interested in. This site contains “forward looking statements,” inside the definition of Section 27A of the Securities Act of 1933 and Section 21B of the Securities Exchange Act of 1934. Statements that express or involve discussions with respect to predictions, goals, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance are not statements of historical fact, and may be “forward looking statements.” Such statements are based on projections, estimates and expectations at the time the statements are made, and may involve risks which could cause actual results to differ than those anticipated.

ECI and its officers, directors, partners, affiliates, contributors, consultants or employees may hold positions in securities mentioned on the website. We will not initiate a position in any stock recommended for one (1) business day before our original recommendations, and one (1) day following subsequent recommendations. In order to reduce the risk of too many traders possibly influencing the market by attempting identical trades, ECI may limit the number of subscribers in any one service. For access to our full disclaimer and disclosure policy regarding editor securities holdings, go www.stealthstocksonline.com or call 800-524-4832.

Eastman Communications is the publisher of Stealth Stocks, Hidden Values Alert, & Insider Wealth Alert
© 2011 by Insider Wealth Alert, All rights reserved.