Ignore Signs of Distribution at Your Peril

Beneath a façade of tedious price action, U.S. stocks appear to be weakening by the hour. On Thursday, for instance, the Dow couldn’t even muster a 100-point pop on news that jobless claims had fallen by 30,000 for the week ended October 6. Earlier this year, before our perennially recovering economy encountered stiff and persistent recessionary headwinds, that stat would have been worth at least 150 Dow points on the opening. This time around, though, DaBoyz could extract only a paltry 84-point short squeeze from it.  When a second-wind flurry of buying failed to drive the blue chip average any higher, it was time to unload. We said so in the Rick’s Picks chat room at the time, noting that the rally felt “doomed,” as it indeed was. Have investors finally figured out that virtually all employment-related statistics, especially with the election less than a month away, are economically meaningless at best and brazen lies at worst? Even if they have, it would hardly have mattered.  Since early 2009 and up until recently, any economic datum from the Labor Department that was less than catastrophic has been seized on by institutional traders as a catalyst to stampede bears into covering short positions. As we’ve noted here before, that’s the only kind of buying powerful enough to drive stocks past levels of supply or jolt them from doldrums.  Now this effect appears to be dead, or at least dying.

From a technical standpoint, there are disquieting signs of distribution as the Industrial Average and the S&P 500 Index hover within striking distance of new all-time highs.  With breadth deteriorating on rallies and S&P insider selling at flood tide, leadership has gone flaccid as well. Several key bellwethers that we monitor very closely and trade, notably Apple, IBM and GE, have turned lower without having achieved their respective “Hidden Pivot” rally targets. We had been looking to short GE at 23.70 by buying put options, but the stock went no higher than 23.18 before turning south.  With IBM appearing to home in on a similarly important rally target at exactly 215.59, our short offers became temporarily widowed when the stock dove $7 after getting no higher than 211.79.  Apple, meanwhile, has become a drag on the averages rather than leading them higher.  Is the stock just taking a breather?  It’s possible, since the long-term charts suggest that the AAPL’s 10% selloff in recent weeks might be nothing more than a healthy correction. Even so, because bells are unlikely to ring when the long-term bear emerges from a by-now 43-month hibernation, we are trading with a bearish bias and monitoring the lesser charts closely for signs of stepped-up selling.  When investors finally rush for the exits, we expect the Dow to shed 2500 points in three months or less (perhaps much less).  Bulls will get what they deserve, but there’s no reason why bears who understandably have been bored to complacency need suffer the same fate.  Want to receive real-time alerts when opportunities are ripe or danger signals flash?  Click here for a free trial subscription.

  • John Jay October 15, 2012, 4:32 am

    News from the Inflation Front:
    Zacky Farms, the big California poultry supplier to supermarkets has gone bankrupt.
    http://tinyurl.com/8fjnsf9
    It seems the price of proverbial “chicken feed” is now too expensive.
    Drought related inflation of livestock feed has also driven cattle ranchers and hog farmers to liquidate their herds, causing a glut for the time being.

    “It is a strain that has been felt across the nation’s livestock industry, as this summer’s drought led to a disappointing corn harvest. Larger producers are scouring the Midwest to snap up whatever feed they can find, or are sinking tens of millions of dollars into importing corn from Brazil.”

    At long last, some inflation that does not have the fingerprints of the Fed all over it.
    Never a dull moment in the markets!

  • Jill October 15, 2012, 4:01 am

    Erin– Brain dead is right. If the majority of Americans were as focused on making our economy sound as they are on American Idol, Dancing with the Stars etc., we would at least be heading in that direction.

  • Jill October 14, 2012, 9:07 pm

    Erin, I recently heard an interview of this book author on the Colbert report.

    Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else by Chrystia Freeland

    I haven’t read the book, so I can’t recommend it or not recommend it. But in the interview, the author said that there was a time when Henry Ford said that the best way for Ford to make good profits was for Ford & other companies to pay good wages to their employees so that they could afford to buy the cars they produce. She said that now that is no longer true.

    Now mega-corporation owners can live in the U.S. or wherever they desire, have their products produced in Asia in whatever country has cheap labor & little pollution regulation, & have the goods bought by consumers in China or elsewhere– people who are climbing up the income scale just as the American middle class is falling down it. For today’s mega-corporation owners (and stockholders), she says, if America turns into a 3rd world country, that’s no problem.

    • Erin October 15, 2012, 3:33 am

      Jill,
      Sounds about right to me…We are for sure headed that way and NOTHING will stop it until those pissants at the fed are stopped from destroying us and our way of life.

      But like Mr. Griffin says from “The Creature from Jekyll Island”, The cartel is there for one purpose and that is to bail out the banks, not help you or me!

      Freedom and Liberty will only come when they are put out of business.

      I continue to be amazed that people believe the 800 billion dollar bailout was the right thing to do and yet not one person can tell me where that money went nor do they care but they always say it was the right thing to do. Pure theft and they condone it. They choose to ignore the fact that that money was supposed to fix the system. How did that work out boys and girls?

      More trillions of debt and endless money printing needed after that 800 billion! Oh, but…but…stock prices are higher. Yes they are and so are the numbers of government checks being delivered to Americans in all forms.

      As far as I am concerned, America is completely brain dead. They deserve the crushing that is headed their way!

  • Jill October 14, 2012, 8:56 pm

    Big-Bear, we”goofie kiddies” are giving the explanations that have explained the stock market rise since 2009. If you have some facts or some rationale to explain why things should change now– why the current decline should be anything more than a pullback in a bull market– then let us know. I expect you will feel free to continue to insult us instead. But be aware that name calling is not a compelling rational argument that someone would take seriously.

    BC, my theory about why your phones for new customer inquires have stopped ringing is that people are in a state of uncertainty due to the upcoming presidential election. The market & the economy like certainty. This is very temporary & will be over as soon as the election is over. Regardless of whether various people or businesses like the candidate elected, they will know what to expect & how to plan & the phones will start ringing again.

  • BIG-BEAR October 14, 2012, 8:13 pm

    hey, dudes, you all want to worry about something?
    a mass-killer currently running rampant, unchecked?

    the huge monster, that can unhinge everything, in only 1 minute?
    unstoppable beast, that will make simon’s “dark vision”, occur INSTANTLY?

    HIGH FREQUENCY TRADING

    because it’s just gotten a lot crazier.

    “MYSTERIOUS ALGORITHM WAS 4% OF TRADING ACTIVITY LAST WEEK”
    Published: Monday, 8 Oct 2012 | 4:27 PM ET
    By: John Melloy, Executive Producer, Fast Money & Halftime

    (here are some of my favorite excerpts from the article,
    about the potentially SUDDEN destructive power, of HFT):

    “A -SINGLE- mysterious computer program that placed orders — and then subsequently canceled them — made up -4 PERCENT OF ALL- quote traffic in the U.S. stock market last week, according to the top tracker of high-frequency trading activity.” (caps and dashes mine)

    “The program placed orders in 25-millisecond bursts involving about 500 stocks, according to Nanex, a market data firm. The algorithm -NEVER EXECUTED A SINGLE TRADE-, and it abruptly ended at about 10:30 a.m. ET Friday.” (caps and dashes mine)

    “Just goes to show you how just -ONE PERSON- can have such an outsized impact on the market,” said Eric Hunsader, head of Nanex and the No. 1 detector of trading anomalies watching Wall Street today. “Exchanges are just not monitoring it.” (caps and dashes mine)

    “Translation: The ultimate goal of many of these programs is to gum up the system so it slows down the quote feed to others and allows the computer traders (with their co-located servers at the exchanges) to gain a money-making arbitrage opportunity.”

    “THE SCARIEST PART OF THIS -SINGLE PROGRAM- WAS THAT IT’S MILLIONS OF QUOTES ACCOUNTED FOR -10 PERCENT- OF THE BANDWIDTH THAT IS ALLOWED FOR TRADING ON -ANY- GIVEN DAY, ACCORDING TO NANEX.” (caps and dashes are mine).

    “Regulators are trying to see how they can rein in the -(HFT)- practice, which accounts for -70 PERCENT- of trading -EACH- day, without slowing down progress and profits for Wall Street and the U.S. exchanges.” (caps and dashes mine).

    “Hunsader warned that regulators -BETTER DO SOMETHING FAST-, speculating that this -SINGLE- program could have led to something very bad if big news broke, or if a sell-off occurred and -ONE ENTITY- was hogging this much of the system. ” (caps and dashes mine)

    http://www.cnbc.com/id/49333454

    • Jill October 14, 2012, 9:56 pm

      I’d just as soon HFT trading were stopped. It does cause problems in the short run & I can’t see that it helps anything. But their trades are only milliseconds long. So while being a lot of the daily volume, I can’t see how the HFTs affect price that much on a daily, weekly, or longer basis. Their arbitrage trading seems to be about tiny profits, gotten over & over again by trading every millisecond.

    • fallingman October 15, 2012, 9:55 pm

      You don’t get it. THERE’S a surprise.

      The problem is that the algo bots will pull all their bids in unison when they sense unpredictable market conditions. The bids will just disappear. Remember the flash crash? Pull 70% of the bids in the market in a microsecond and see what happens in the next couple of minutes, much less on a daily, weekly, or longer basis.

      Any objective look at HFT reveals a trap door just waiting to be sprung on the clueless. Think I’m crazy? Just wait for the next shock to the system. Won’t matter much where it comes from. Or, what the hell, continue to sleepwalk through the minefield.

      http://www.peakprosperity.com/podcast/79804/nanex-investors-realize-machines-taken-over

  • BIG-BEAR October 14, 2012, 8:10 pm

    bottomline, this is what see I right now,
    a big ‘rubicon’ crossing, or not crossing.
    on the dji, it’s the last all-time high, 14,200.

    and on gold, it’s ‘rubicon’ now is
    $1,802 an ounce.
    yet not crossed yet–incredibly–
    despite many attempts, for 3 weeks.

    (and both gold and silver at MACD and RSI
    divergent cross-over 2 standard deviations levels,
    not even seen in last year’s, gold $100 1-day wipeout.

    gold bullishness,
    throughout world, is at a total extreme.
    thus—everybody is in.
    but, on the other side of coin, is the poor measly u.s.a. dollar—
    green fiat that all despise worlwide,
    since it is now being apparently raped annally daily, by it’s wizard, bernanke.

    ergo,
    gold is at near all-time high world bullishness,
    and the poor little u.s.a. dollar, at near an alltime low.

    and r.a. folks, these are conditions,
    from which explosive major rallies, are contrarianly born.

    and btw, r.a. dudes,
    marketvane bullish u.s.a. dji stockmarket sentiment, has been hitting highs,
    over last 3 months,
    highs of 70% bullishness, bull percentages not seen since—winter 2 0 0 7.

    you see, it’s this supposed ‘power’ of the FED–
    that all BELIEVING IN, and thus are piling in.

    additionally, fyi, I wrote last week herein,
    that shape of this last year’s (oct 11-oct 12) rise in dji,
    was nearly identical in shape, timing and angle, to the rise in oct 86-oct 87.
    yep.

    so does that mean anything, technically?
    does human nature, en masse, repeated itself?

    or does a bear shtt in the woods, or not?

    or is a huge dji crash just around the corner,
    before u.s.a. elections, altering the outcome?

    we shall soon see. but I think yes.
    it’s the door in the floor.
    and it’s all those bulls, so sure.

    tell you what.
    when dr. pangloss gary, and mr. magoo mario, start to worry,
    then, maybe, and only then, I might consider, a further bull leg. yet until then,
    be assured—these 2 are cliff-fodder. and more sure they are, more they are.

    —————-

    r.a. says:
    “…trying so hard to drum up business in these extremely slow times.”

    I say: DEflationary.

    bc says:
    “…our phones for new customer inquires have stopped ringing. This long range sales radar is dead, dead, dead. We are jacking up advertising expenditure to see if that will help. Not scared yet but a little worried. Feels like 2007 to me.”

    I say: DEflationary.

    ———–

    I tell you, if you REALLY believe big INflation is ahead, and u.s.a. dollar is dead,
    then,
    you are much better off buying crb index, and not gold, since crb commodities–
    have LOT of catching up (historically), to reach gold’s current’s OVERvaluation.

    Yet Myself,
    I see nothing but huge devastating world DEflation, straight ahead, for all.
    I see worldwide riots, bank closures, rage, murder, mass world pandemonium.

    no escape from it. zero.
    it’s all been written in the cards for decades—like your tarot fortune tale.

    and no matter what ANY ‘powerful’ wizard does, it’s a’comin’ for sure.
    it’s only matter of ticking clock, of how many more minutes before it occurs.

    Myself, I think, big dji crash, before u.s.a. election,
    or, just after, if commie african obumba, wins again.

    the oct. 1987 crash fell down over 40% in only october,
    believe it or not,
    with 0ct. 19 alone, getting whacked in mass-madness, for about 22%.

    so, you think it can’t happen again?
    think again.
    because conditions are even more ripe now, than then.

    why?
    not just the quadrillion+ of world debt, but:

    3 letters—

    H.F.T.

    read my following post.

    • Rick Ackerman October 14, 2012, 9:45 pm

      Yeah, roger that — and good luck. You’re all-in for October puts then — or have you gone out to November?

    • BIG-BEAR October 14, 2012, 11:50 pm

      ackerman, I was wiped out last winter,
      of so-called ‘money can afford to lose’,
      because I couldn’t continue to believe,
      how huge lies could be stretched, so far.

      yet, they have. another year, with bigger lies,
      and with more lemmings following, down cliff.

      yes, I have few u.s.a. pennies in 2012 puts,
      of money, I can’t afford to lose. so what?

      life itself, is minute by minute—gamble.
      and for every breather, include you too.

      you think you are safe? think again.
      you think pangloss and magoo, are safe?

      less than you. Me, I’ll take my ‘3rd-world’,
      over your corrupted, ex-great, jefferson’s u.s.a.

      whether I win or lose, means little to me.
      what matters is playing the big game.
      hunting the ultimate pig. or die.

  • bc October 14, 2012, 7:56 am

    FWIW my little capital equipment company competes with GE. Our backlog is good, current field piloting is at normal levels suggesting new sales will come, and cash flows are good. However: our phones for new customer inquires have stopped ringing. This long range sales radar is dead, dead, dead. We are jacking up advertising expenditure to see if that will help. Not scared yet but a little worried. Feels like 2007 to me. We are way better prepared if another leg down comes.

  • mac October 14, 2012, 7:42 am

    Don’t Vote for Evil
    Paul Craig Roberts: “If Americans had any sense, no one would vote in the November election. Whoever wins the November election, it will be a defeat for the American people.”

  • BIG-BEAR October 13, 2012, 6:48 pm

    dr. pangloss, mr. magoo, and orphan annie—happy talk.

    confederacy of dunces, lead by fed pied piper, to cliff dive.

    but at least, they die—happy.

    poor little goofy kiddies.

  • John Jay October 13, 2012, 4:16 am

    Story in O C Register:
    “O.C. gas prices edge down to $4.66”
    That’s about a dime drop.
    The Rockefellers still have a thing about passing out dimes to the proles.
    Old John D is smiling up in skinflint heaven.
    He just celebrated the Diamond Anniversary of his ascension to Monopoly Valhalla in May.
    July 8, 1839 – May 23, 1937
    Four days after his death, the Golden Gate Bridge opened.
    His family is still hard at it, just like the Old Man wanted.
    Grandson David, born June 12 1915 may outlive his Grandfather yet.
    America’s Royalty, always good for tossing a dime to the bums!
    It’s been a Family Tradition for over 100 years!

  • Jill October 12, 2012, 9:41 pm

    Gary, you may be right. Just my guess there. Who knows how long the Fed & the government can keep the plates spinning in the air before it all comes crashing down? I do know that after the tech crash in 2000 to 2003, they kept it going about 4-1/2 years. So if that is any indication, we have at least until October 2013– & my guess is a couple of years longer than that.

    I don’t see any big austerity or large government cuts happening really– even though it would be better if we had them. In surveys people want to cut big government, but you give them a list of big government expenditures & ask what they want to cut & they answer “None of the above.”

    And, as one can clearly read on this site & others, no one wants to pay any taxes, so perhaps revenues won’t increase either. It’s political suicide to ask anyone to make sacrifices in any way, LOL. People talk about making the making of sacrifices by the OTHER Congress person’s consituents, not their own. But then the other Congress person votes against their brilliant “austerity for other people” law.

    “The best argument against democracy is a five-minute conversation with the average voter.”
    Winston Churchill

    So we will never do austerity until we are forced to from the outside, e.g. from other countries not taking our printed dollars or buying our Treasury bonds any more. Europe has saved us from this fate for a few years now, by having more immediate in-your-face problems than we do. We look good in comparison to them– at least in the eyes of most folks who give a superficial glance our way.

    • mario October 13, 2012, 4:52 am

      That’s an interesting set of thoughts Jill. Government leadership is in perpetual gridlock as you indicate, with the free society of being able to “make a difference” meaning less and less in the real world. How the hell do we break that gridlock? In behavioral terms we use what is called a “pattern interrupt”; some kind of unexpected slap in the face to break the person’s state so they can then get back in control and consider conscious choices.

      In this gridlocked govt, you suggest some kind of outside force may be the factor. But I am thinking they are in the same boat, so no way. In the same way our political leaders won’t shoot themselves in the foot (a spiraling, destructive reality), those outside forces you speak of, such as China, are in the same position! They also will not shoot themselves in the foot. If everybody doesn’t continue to play along and play nice together in the playground, the entire thing is going to come crashing down. China is in no position to threaten to stop buying treasuries as a negotiating tactic. I suggest the only way is the civil way of orderly government organizations (as self-serving as they all are) , no one has a taste for collapse nor war. No one party can make a move which is too disruptive. So the changes will happen gradually, one new choice and policy and agreement at a time. For example, in China’s case, they are doing more and more currency swap agreements, accumulating more gold reserves; slowly over time diversifying away from Treasury purchases. In America’s case, they are increasing exports and in fact, exports to China are now at record highs and steadily increasing with more and more support from Washington. That’s great news! That’s exactly the kind of progress that we need more of for the economies of the world to remain healthy enough.

      Cheers, Mario

    • gary leibowitz October 13, 2012, 6:07 pm

      Jill, you forget how politicians work. They set up conditions where neither party is to blame. How do they do this? They set up an automatic set of programmed spending cuts across the board. Everyone complains on both sides but no one party gets the blame. Genius!

      The other point is that most fiscal responsibility happens in the first 2 years of a presidents term. That way they can re-start the spending for the latter half.

      I am afraid the austerity winds are world wide. Even if it is done on a gradual reduction, the point is there is no accelerated government spending.

      The IMF recently warned the EU to go slow on their austerity measures. When was it that the IMF had to ask countries to ease up on cuts?

      We shall get a good indication on how well the spending cuts/tax increases develop around the new year. If it is pushed aside than your scenario might work out. If not, than the timetable will be compressed.

      As for seeing the world in a myopic view, I agree with Mario to a point. The world is now too interdependent. China will not be able to rely on internal growth exclusively during times of EU/USA recessions.

    • Jill October 14, 2012, 10:54 pm

      Gary, I will believe in huge spending cuts by Congress when I see them. They’ve been going on like this for a long time. Repubs complain a lot when Dems spend, but Repubs like Bush spend a ton themselves while also cutting taxes, claiming that this will make an improvment in the budget, but it doesn’t. I hear them talking the talk about budget cuts. I just don’t see anyone walking the walk.

  • BIG-BEAR-AWAKENING October 12, 2012, 9:29 pm

    friday, 15:20 e.t.,

    hey, r.a., your free comment $1753.5 gold BUY price today, got triggered!

    so, are you buying gold with both hands? ‘backing up truck’, as yu’all say?

    I recommend that fire escape. no buys, all cash; or, if yu got guts, then short.

    short all world markets except u.s.a. cash. for big bear is out of cave–awakening.

    &&&&&&

    I searched my laptop hard drive for $1753 and it returned…nothing. If that number was important to me at some point in the past, it isn’t now. (Searching my desktop PC from a remote location, I now see that my protege, Doug McLagan, posted 1753 as a minor point of reference.) Although I see little in the technical picture to excite me about gold at the moment, the close proximity of Comex December to peaks near 1800 recorded last Feb and Nov should make one think twice about shorting the stuff. It would take only a small rally to turn the weekly chart impulsively very bullish. Meanwhile, the pullback from just shy of that threshold has been very shallow and looks like consolidation to me. RA

  • Jill October 12, 2012, 9:22 pm

    Big Tom– I highly recommend Rick’s great work. He could tell that yesterday’s early moring rally was going to sell off. His guidance to subscribers is great. And if his pivots show a bullish market, he makes coin on bulish plays too– even if he expects the market party to end sooner than I expect it to.

  • Jill October 12, 2012, 8:50 pm

    I see things in a different time frame. It’s often said that QE takes time to work its way into the economy. We won’t see its full positive effects for a couple of years.

    I’m with Gary on the market rising overall into the end of the year, with the lows of this correction on or before the end of October.

    I do a agree that QE’s effects are destructive. However, I don’t think we’ll see destruction in the stock market for several years now– after the big QE rally where the Dow tops at around 30,000, with huge inflation in commodities & other items. And despite Rick’s bearish inclinations, his hidden pivot system is going to be guiding him @ us through this correction here, and then the huge bounce out of it & eventually up toward Dow 30,000 in a few years, and then back down to who knows how low from there.

    • BigTom October 12, 2012, 9:04 pm

      Interesting comment Jill – brings to mind you know how many times I have gone to RA’s site to click on the free trial button? then I start reading his column and then get into the comments and get caught up in the ‘comment moment’ thing and never get to the free trial button. LOL – sometimes, most of the time rather, i forget this is a traders site and not a social commentary web site….though interesting comments are posted here!

    • gary leibowitz October 12, 2012, 9:18 pm

      Wow! 30K? I would never expect to see that type of move. I am only looking at a short time frame, perhaps 6 more months. The recent data suggests a nice rebound in economic activity, but I am betting it will not be sustainable, only tradable.

      I also see huge headwinds in the future. We are afterall using lopsided math to explain how we can thrive on government cuts and an austerity mindset going forward. It will never work. In fact the race to be the first political party to announce these “doable” cuts is already here. If we hadn’t seen the monster debacle from the mortgage implosion I would agree with your assessment of a long term stock market move up. Political winds are going against this scenario. I believe we will pay the piper next year.

    • Erin October 12, 2012, 9:34 pm

      Jill,
      Very interesting comment indeed…You see the Dow rising to 30,000 at some point in the future? Could you explain how that could happen? Markets move in tandem in general…So if the Dow were to rise to that point…would not commodity prices be much higher as well? And if so, how would corporate profits rise when input costs soar? Would productivity soar? Certainly if productivity soared, then people would be losing their jobs at quite the clip and then where would they get money to buy expensive food and energy and then stuff on top of that? Or maybe were talking about price controls? Or some new income source for society as a whole that would put money in the pockets of people so they could buy stuff and afford to eat and heat their homes?

      Or maybe your suggesting incomes are going to start rising along with the markets and the economy is really turning the corner from all the money printing and we will have one last gasp of good times for all? Please explain?

    • mario October 13, 2012, 4:15 am

      Hi Jill, (Gary, Erin…the thread)

      Mmm, Setting aside the self-serving Wall /Street/Washinton/banking issues, I’m with Jill on the Dow 30k scenario and there is very good reason to expect it. My current “macro-view” speech on China contains a load of rigorous data clearly indicating the simple fact that the world, and therefore the world’s GDP IS expanding and growing.

      We must caution to naively take an isolated statistic or value, such as Dow 30k, for indeed the Dow will be 30k and the S&P500 will still have a reported P/E of 16-1, but to complete the picture we need to ask two more highly indicative questions: 1) What will the cost of a widget be? (any consumable, needed item) and 2) What will average wages be in the society? Taken all those factors, we will have a more accurate picture of the future for the average world citizen.

      Let’s note: the “average” profile world citizen are becoming and more and more alike, not more and more different. A future profile American will have a more similar lifestyle to an Asian/Chinese. And the daily life of a future profile typical Chinese middle class citizen is more and more infused with American (Western) characteristics.

      At the same time, we can easily notice the American system of government moving more TOWARD central planning in its society (China’s govt) while China’s govt moving more TOWARD free market / capitalism in its government in its society. So then the future looks more like a global one world government/society and blend than not. That is not to say the governments will fight like hell with each other as expected every step of the way. I am simply pointing out what is clearly the global trend in these two primary governments and societies.

      Isn’t THAT interesting?!

      Many thought leaders who have done the research expect today’s world GDP of 40 trillion to be 200 trillion in the next 40 years. In addition, for example, the U.S. will add 100 million more to its population and China will add 400 million more to its population.

      People in the west MUST understand that, while the economic cycle will ebb and flow, speed up and slowdown, China is and will remain on an expansionary cycle which began at a plateau level of 10 trillion GDP with a population of 1.3 billion. The United States expansion began 60 or so years ago from a much lower GDP and population plateau. The implications are astounding, yet many of these global sized macro trends can now be easily identified and understood.

      For example, of course we can assail the inefficiency and unfairness of the bailout approach. However, in many ways, it did have intended effect. This can not be argued. If you wish to argue it, ask “What WAS the intended effect?” The intended effect was to prevent the collapse of the United States economic and banking system which would have also caused further worldwide damage. Indeed, it DID, remember? For example, 7000 miles away in the Guangzhou, China basin, thousands of factories shut down and a million workers were out of jobs, etc.

      I absolutely agree that at the federal level, the government and Fed of the United States should have stepped in as they did to prevent disaster and they DID prevent disaster! These are the facts. Note I am NOT agreeing with the details of the way they did, favoring themselves far too much. So in that sense, I have no disagreement with the vast majority of negative views here at Rick’s forum. But I have said before, all that bad stuff AND all the good stuff do and are in existence together, they are not mutually exclusive and that is where I think many of the “doomsday/collapse” crowd are not allowing themselves to see the realistic big picture.

      As an unintended consequence, the unfolding and decisions of the 2008 crisis exacerbated and supported China’s rise in many ways. This is well-documented and understood.

      So, here we are, with all the bad and all the good; an unexciting conclusion to this particular set of thoughts.

      Cheers, Mario

  • Erin October 12, 2012, 8:31 pm

    Gary,
    We have (as in, past tense) seen the positive results of all that money and bailouts that you speak of. Now the reality is setting in and people are awake and stirring that quite possibly the side effects of the medicine we have been taking is causing some other side effects like the destruction of the free world!

    Another great consumer confidence report today at just the right time. (the good news just keeps coming)

    You are a buyer of the great fraud and others not so much. Much different perspectives…Your’s would be thru corrective lenses that might need adjusting and the rest of us are looking at the world with 20/20 vision.

    • gary leibowitz October 12, 2012, 9:34 pm

      No fraud my friend, just impatience. If you would get over the Jack Welsh type conspiracy theory you would see multiple segments from many different data points showing the same thing. I am talking from private sector and public sector reports. Disregard employment, confidence, car sales, home prices, low loan rates, stable wages, earnings, productivity, etc.. Me, I’ll assume the sun rises as it has before without any adjustment to my notion that Newton’s laws still apply (with some modification from Einstien).

      Just becuase you can’t understand why the market and economy doesn’t react as you expect, doesn’t mean you are right and everyone else is on meth. Just a matter of timing. These things are a slow process, and once the real top is formed realization comes quickly. Where and when is the top? This time frame certainly isn’t it given the long drawn out correction after a big move up. Not while there is no “shake up” news to change course.

      Hey, if i am wrong than I would be caught with my pants down. Wouldn’t be the first time.

    • Erin October 12, 2012, 9:46 pm

      Gary,
      I got a great laugh out of the jack welsh conspiracy theory comment…Thanks. Not really my thing, but it made me chuckle.

      I am not saying there is not a bounce as economies do eb and flow which is exactly what they should do…But the fed is trying to centrally plan an economy to go up, up and only up…Not going to happen without disastrous consequences.

    • fallingman October 15, 2012, 9:40 pm

      The man’s name is WELCH for Christ’s sake.

      Jack WELCH….like the Grape juice. How could you not know that?

  • gary leibowitz October 12, 2012, 8:04 pm

    http://www.bloomberg.com/news/2012-10-12/surprise-jack-welch-missed-shows-better-u-s-growth-economy.html

    Why everyone ignores such surprising good news is beyond me. We are now experiencing a fast recovery, as fast as a super tanker economy can go. I look at the technicals and see a coil-like reaction upwards soon. We have had months of very good news as this market treads water.

    I have never seen a crash when all indications are showing an improved economy across the board.

    I can’t for the life of me understand how a person that developed a proprietary system talks against his own system indicators. This has been going on for a very long time, and so far the non-emotional system is winning, hands down.

    The earnings season is here and there is no new lowering of future expectations. In fact the news so far is better than expected. Homes, consumer confidence, jobs, unemployment, inflation, oil/gas, etc… are all pointing to a much stronger future.

    I stated 10 months ago that not only would we have a really good year but inflation fears will start creeping up over the possible heating economy. I know no one believed me then, and most still think this is a silly notion, but i am looking at the whole picture and it is telling me we are about to embark on really good numbers.

    I love it when I go against the crowd. Does anyone here really think that given enough time we would NOT see a positive result of all that money and bailouts? The payoff however will never equal the money spent, but there will be dividends drawn from it. I believe those dividends are here.

    Enjoy it while it lasts. Betting against it is a bet on the roulette wheel. Time frame: end of month should be the lows.

  • PhotoRadarScam October 12, 2012, 3:25 pm

    November is going to be bad for the markets…

  • Tech-trac October 12, 2012, 3:17 pm

    Happy Anniversary!

  • mario cavolo October 12, 2012, 9:27 am

    And I’m still waiting for crude to join the party and drop like a rock to $80 as it “should”…

  • BIG-BEAR October 12, 2012, 1:23 am

    saw how you took 3 things I wrote you earlier, and ran with it, your way. good.

    only 1 thing. you say dji 2,500 drop, in 3 months. IMO, 3 weeks is more likely.

    for it will be thing of beauty, how collective breaths of world, are gasped away.

    and do add your beloved gold to that gasp, since 1530usd gold, is dead ahead.

    &&&&&&&

    You’re right, three weeks is hardly out of the question. Incidentally, I don’t take your or anyone else’s ideas and run with them, since I trust my own eyes. This is the most important thing I try to teach students who take the Hidden Pivot Course. A beginner who understands, for one, the simple concept of the impulse leg is equipped to forecast circles around many gurus who do it for a living.RA

    • BIG-BEAR October 12, 2012, 8:14 pm

      friday, 2pm e.t.

      so far, r.a., you’re looking like a genius, with your 13,251 dji, still holding.
      and if it holds, you’ll make ‘ever rosy-glasses gary’ (this site’s linear bull-y),
      look like he has yet another bull win after all, from another ever-linear call.

      however, this is MY opinion. big technical barriers, like your 13,251 dji,
      are broken—overnight.
      in a BIG gap down. no chance to get out. and that’s how it works, IMO;
      specially in OVER-bullish markets (just like gold’s mega-bullishness is now).

      because there’s uber-surety now, throughout world, that u.s.a. dollar is ‘trash’–
      and that gold, ‘is king’. so, we shall soon see. since I think, the total opposite.

      for IMO, legal tender u.s.a. fiat $ is still king, at food&supply&water level.
      and gold is uneatable, undrinkable, unfixed-price (fool’s-gold?) yellow metal.

      btw, some of you big ‘gold bulls’ should check out the crb index, occasionally,
      compare it, to gold price. and you’re in for shocker, on just how OVER-valued
      the current gold price is—compared to crb basic human-life commodities.

      &&&&&&&

      I try to avoid the temptation of attempting to look like a genius and of making Big Predictions that are unsupported by hard technical evidence, BB. If a recent headline number has caught your fancy, it is my fault for trying so hard to drum up business in these extremely slow times. No matter what, though, you will never see a
      Rick’s Picks promo touting profits of, respectively, 217%(!!), 305% (!!!!!) and 196% (!!) on my most recent option-trade recommendations. In fact, there will never be any such claims at all — only passing mention of real profits or losses on actual trades reported by my subscribers in the Rick’s Picks chat room. Moreover, it is my practice to use the worst outcomes reported by subscribers, not the best, to establish a cost basis for tracking guidance. RA