Welcome to the first trading day of 2011! The first week of the New Year is typically bullish, so don’t be surprised to see further rallying within wave 5 up. Wave 5 should be nearing completion within the next couple of weeks in order to remain in proportion to waves 1 through 4.
Equity futures are higher this morning with bonds significantly lower (higher interest rates), the dollar is slightly higher, oil is setting new recent highs above $92 a barrel, while gold is higher too, pressing $1,420 an ounce.
There was another very small movement in the McClelland Oscillator on Friday meaning that odds are high a large price move is occurring today or tomorrow. Also note that the Bollinger bands are necking down against price in several of the indices as well as the VIX. That usually presages a large directional move as well. Also of interest in regards to the Bollingers is that the SPX closed right on the upper Bollinger in the monthly timeframe.
At 10:00 Eastern this morning the Manufacturing ISM and Construction Spending are released. The rest of the week will be fairly steady as well, culminating in the Employment Situation Report this Friday.
My take on the markets for this year is that should the “Fed” be able to keep the liquidity to the market artificially pumped up, then higher stock prices will be WORSE for the REAL economy than would lower stock prices! We’re already seeing skyrocketing commodities, oil and gas are shooting higher, and that’s absolutely going to destroy the quantity of REAL consumer goods that can be purchased. Thus reality, in my opinion, is once again exactly the opposite of the “conventional” wisdom espoused by the “Fed.” Should they stop owning the markets, then prices will fall and that’s exactly what will allow the economy to eventually move forward. Should they not abandon the money pumping route immediately then the economy will be in, and is already in, very grave danger.
Interest rates moving up is normally a sign that a new positive economic cycle has begun. I believe that in this case it is not a positive sign, it is a negative sign. The “Fed” is pumping money into the system to keep rates low… rising rates works against them, they have trillions in short term debts to roll. So do consumers and businesses. That makes what happens to rates very important in this debt saturated economy. Should rates continue to rise, then housing prices will also remain under increasing pressure as well.
This makes the TLT and TNX charts important to watch again. TLT (the 20 year bond fund) has made a dramatic move lower over the past couple of months. People like Bill Gross are saying that there is further movement to come, and this weekend Marc Faber said it was flat out “suicidal” to own long term bonds.
That makes what happens next in the bond world very important. Below is a weekly chart of TLT, you can see that price is heading back down to support once again that is in the 87 to 90 region. Should price break below that region, that will be our clue that much higher rates are on the way:
Again, I want to emphasize that a rising stock market at this juncture is NOT healthy for the economy. Wages will not keep up with continued price pressure, and those who are on fixed incomes will be in grave danger.
The route taken is and has been a choice. The decision makers are all located at the “Fed,” they are the private banks. They are acting in THEIR best interest, not yours. It’s quite obvious to me that they will continue on the path they are on until they blow themselves up and take all of us with them. We’re idiots for not removing them from power a long time ago. This year and the immediate years that follow are going to bring great upheaval be it with an initially rising stock market or with a falling stock market. The path will be determined not by us, but by those special interests. The ultimate destination, however, is a mathematical certainty – that destination is the destruction of our currency and it is our money system that underlies all of the economy and markets.