The Great Recession

Now that was impressive! An earthquake, of all things, shakes the Big Apple yesterday as it hasn’t been shaken since 9/11, and Wall Street never even breaks stride. Early reports suggested that some denizens of the Bowery were fearful the city might be under attack again.  They may have breathed a sigh or relief, however, when it became clear that the tremor was “only” a magnitude 5.8 earthquake, not a suitcase nuke. Before the Virginia-centered quake hit shortly after 2 p.m., a strong rally was already in progress from the night before, propelled by who-knows-what.  The temblor had no discernible on the markets, but it rattled big cities up and down the Middle Atlantic coast.  Breaking news pushed Hurricane Irene temporarily off the front page even as the mounting storm, with sustained winds above 90 mph, threatened to wreak havoc on the East Coast this weekend. Traders were unfazed by it all, however, and by day’s end the buying spree had become a runaway freight train, sending the Dow up 322 points. The mania steepened in the final hour, sellers evidently having realized that resistance was futile.  At the same time, Gold and Silver were getting pummeled, as so often occurs when the stock market behaves as though all were right with the world.  December Gold came off its overnight high by $93, hitting a low of $1819 in the late afternoon, while September Silver was off a whopping $2.78, or a little more than six percent.   As the Great Recession tightens its grip, we look forward to a resumption shortly of the buying in bullion and the continuation of the stock market’s penitent decline. Even so, we are forced to acknowledge that there is nothing in the technical picture that would preclude a very strong bounce here – to new highs, even. We said as

The news media will eventually figure out the truth -- that stocks got pulped yesterday simply because they are in a bear market. The Mother of All Bears, quite possibly.  The Dow finished the day down 419 points after trading more than a hundred points lower than that intraday.  The selloff was attributed to the usual suspects: “fears” over Europe’s shaky financial condition, and America’s apparent relapse into recession. Although both concerns have been with us in spades for more than a little while, they seem, suddenly, to have become overwhelming and unmanageable now that the world’s stock markets are imploding.  Of course, there will be equally spectacular rallies in the days, weeks and months ahead, and, as was the case during the 1930s, they will be interpreted as signaling a glimmer of hope for the economy. The press will do the interpreting, but most Americans will know better. The Great Recession has returned with a vengeance, and predictions of 2% GDP growth are about to be trimmed to sub-zero by the same morons who were so optimistic just a few weeks ago. With Dow stocks down 500 points in the opening hour yesterday, Reuters and some other news sources initially theorized that “investors” – a euphemism these days for algorithm-driven machines -- were despondent over a Philly Fed report that factory activity in the Middle Atlantic region had “unexpectedly” fallen to its lowest level since March 2009. Reuters tactfully refrained from identifying by name the experts who had been looking for better numbers, but they would have to have emerged from a sarcophagus to have been surprised by the bad news. Meanwhile, although the eggheads who compile economic statistics may be deaf, dumb and blind to the real world, Joe Sixpack, unemployed for the last 36 months and no

Wall Street’s Christmas-in-July revelry proved short-lived when it was reported on Friday that the U.S. economy had created just 18,000 non-farm jobs in June. Recall that a day earlier, speculators goosed the Dow Industrials more than 200 points above the previous day’s lows on word of a faint blip in retail sales and a drop in jobless claims. Not much to celebrate, really, but it was all the mainstream media (MSM) needed to cheerlead the officially sanctioned story of a strengthening U.S. economy.  Alas, as the week drew to a close, traders sank back into apparent despair, evidently persuaded by the news of the moment that Thursday’s statistical oasis had been but a mirage. For their part, the news media showed no discernible embarrassment over their ongoing, schizophrenic coverage of the economy’s supposed ups and downs.  When will they cop to the fact that regardless of whether stocks are rising or falling, the economy is down-and-out and likely to remain so for as long as the government acts out the fable of a Keynesian recovery? We wonder whether the financial press is even capable of understanding that it’s not the news that causes stocks to rise and fall, but cyclical forces that lie beyond our understanding. Moreover, it is the movement up or down of stocks that colors our perception of news rather than the other way around. Thus, on days when the broad averages have rallied on “bad” news, the network anchors will assert that “investors,” prescient and wise as ever, have looked beyond the negatives to glimpse sunshine on the horizon. Similarly, when stocks fall on “good” news – say, a downtick in unemployment -- the mainstream media (MSM) will play down the statistic and magnify another that seems more simplistically compatible with falling stocks. Obama's Fate Overall,

You don’t need to be a chartist to see that the stocks will need to test the key low made in mid-March before anything serious happens. For the Dow Industrials, that would imply a fall of 378 points from these levels to 11556, or about three percent. What then?  Although a bounce seems likely,  we wouldn’t expect it to last for more than a few days, if that long.  Moreover, because the support is so obvious, we should expect the Indoos to dive toward it in the days ahead rather than approach it gingerly.  After all, why would traders buy the blue chip average as it is falling if they “know” it’s going to fall at least to the support?  We might expect such buying and for a bullish turn to come from somewhere above 11556 if the market had a reason to rally. In fact, The Great Recession seems to be edging toward another flirtation with Depression – one predicated on further, intractable weakness in the real estate sector, along with whatever psychological fatigue is about to hit as a result of QE2’s epic failure to stimulate much of anything. With respect to the stock market, we would ordinarily employ the Hidden Pivot Method to forecast price action for this summer. (You can learn to do this yourself, and to do it impressively well, by clicking here).  In this case, however, our target of 11506 only gets us halfway to the next logical low.  Once again, you needn’t be a swami to see that the Industrial Average will fall to 11000 if the mid-March low gives way.  The only question is, how quickly will it happen?  Our hunch is, very quickly, especially given the prospect of a budget battle on Capitol Hill. Although until recently we had viewed the

Helicopter Ben was deep in denial yesterday following a two-day Fed meeting, telling reporters he’s puzzled by recent signs of deterioration in the economy.  "We don't have a precise read on why this slower pace of growth is persisting." Is this guy a hoot, or what?  Earth to Bernanke: The Great Recession never ended!  In fact, the term “Great Recession” itself is popularly used by plain folks to assert that economic hard times are very much with us, notwithstanding brazen statistical claims to the contrary.  As anyone can see, many trillions of stimulus dollars have yet to improve a dismal employment picture one iota -- only kept it from getting worse; nor have those “dollars” boosted household incomes or real estate prices. What they have boosted are bank profits and the prices of stocks, commodities and basic goods.  Surprising no one, Mr. Bernanke also failed to mention the still-deflating housing market as a possible reason for the punk economy.  Who but a Fed chairman could fail to connect the dots?  It seems not to have occurred to him that consumers are no longer binging because their homes have continued to plummet in value – another 4.2% in the last quarter alone. In a policy statement issued after the meeting, the Fed muckety-mucks blamed the usual suspects for the weakening economy: higher energy prices and the disaster in Japan.  Perhaps Bernanke had second thoughts about trotting out such a lame explanation, however, and that’s why he deflected the matter by feigning cluelessness. Whatever the case, although he further widened the cognitive gap between the government’s spinmeisters and the working stiff, the Fed chief may have bought time to feign yet more cluelessness when he admitted that the..."sluggish recovery" could linger into next year.  We wonder what he sees for 2012 that