An Important Formation on the SP 500 Daily Futures Chart

The last few times these symmetrical triangles at rally tops have broken decisively to the downside.

We are in such a formation now. I have marked levels that might be good indicators of a breakout or breakdown and some short term targets.

I think the greater risk is to the downside while the European financial and political situation remains unresolved, but I do not wish to get ahead of this.

A lot of guys are expecting this to move up to a high around 1275 which is only about 15 points away. They might get the rug pulled out from under them. Some pundits are also talking book to 1310. That is possible. But first they need to take out the triangle, and then they have a clearer shot, but with a lot of overhanging headline risk. I'd rather stay out than risk it, and have to sleep with one eye on Italian and Spanish bonds.

Volumes in today's rally are laughably light. The adults in the bond market have taken the day off.

SP Dec Futures Intraday - Operation Twist Begins

Although this could break out and keep going, I have held the thought that this is just a short squeeze within the context of a broad trading range from 1100 to 1220. It should be noted that the futures tend to be a little 'sloppy.' These moves up and down in a broad channel are what is known as a 'wash and rinse' or 'wax on, wax off.'

There is a potential triple top at 1215.

If the futures can break and hold 1230 then we might see a more sustained bull market leg, but I have trouble seeing that until the European debt situation is resolved.

However it is possible. And since the Fed begins its bond purchases to implement 'Operation Twist' this week we may see some new liquidity providing an impetus for stocks, and some perception management activity as well.

Be careful of the short side until the trend breaks.

SP Futures This Morning

I am certainly not going to get in front of this.

But we are still in familiar territory.

Here are some markers to be able to see if things fall apart, or not.

A controlled decline would be harder to buy than a capitulation selloff, which would probably find its bottom near the prior lows as indicated on the second chart, IF a bottom was being made.

I own no stocks now, only bullion.

The market will have its eyes on Obama's Jobs speech, the continuing politics of excess in Washington, and the September FOMC meeting which is now scheduled for two days.

SP Futures Intraday - After Many a Summer Dies a Swan

As a reminder, this is an options expiration week for US equities.

Next week is an option expiration for metals on the Comex.

SP futures fell hard on the overnight and early morning to short term trend support. Gold soared.

The economic news sucked out loud.

Stocks must hold 1110 on the futures or they may activate what appears to be a bear flag.

"The woods decay, the woods decay and fall,
The vapours weep their burthen to the ground,
Man comes and tills the field and lies beneath,
And after many a summer dies the swan."

Tennyson, Tithonus

This is probably some portion of an option expiration scam, but the backdrop of financial danger in Europe is real.  So it becomes a difficult play.  The volumes remain light on the upside and heavy on the downside, and if one is playing bounces, a downdraft could take down weeks of profits.  I don't like to play near corners.

SP 500 and Gold Futures On Sunday Evening

The apparent lack of a viable debt deal sent stocks dropping and gold soaring in Sunday evening NY trade. 

Gold needs to break out from here, or risk a correction back down to support. The reverse is the story for broad equities.

Notice how the SP futures dropped right down to key support at 1322, to mark it firmly. While stocks remain above the 1320 level, Wall Street does not seriously believe that a budget impasse will prevail.

If stocks break down below 1300 we could be in for a Nantucket sleigh ride on the world market.  And below 1290 it might be time to head for the exits.

I thought all along that the teenage drama queens in Washington would take this into last minute sturm and drang to impress their constituents that they are major players with serious concerns and must be appreciated.

The financiers like to create crises when they wish to get their way. It is always a mistake to give in, since it just encourages them for the future.

As a reminder it is Comex option expiry this week.

SP 500 Futures Intraday

As can be seen on the chart, and I have marked it in blue for the non-technicians, the SP futures are in a tightening triangle.

The reflects the uncertainty in the market with regard to the Greek (and Irish etc.) default possibilities, as well as the upcoming FOMC decision next Wednesday the 22nd which is likely to reveal the nature of QE3, whatever the Fed may decide to call it.

I think it is more likely to involve a line in the sand promising action, rather than immediate new action itself. The Fed's balance sheet is quite large already. And the markets may test their resolve sooner rather than later.

Less remarked amongst Americans preoccupied with their Weiners is the semi-annual Russell 2000 rebalancing which will occur on Friday, and may drive volatility in individual stocks that are in and out of the club.

Whichever way the market breaks, it should have some impetus behind it since it has been winding up now for nine days.

These are short term things. All the Fed and the Europeans are doing is playing for time with a backdrop of a disordered, struggling economy.

SP 500 Futures and US Dollar Intraday

I cautioned in yesterday's commentary, with the metals charts, that a short term bottom might be at hand. The sentiment was getting overdone and the usual book talking suspects were spreading gloom and doom with gusto.

Since the end of May the US equity market has been in a downtrend, and selling the rallies has 'worked.'

So, is it time to sell the rally again?

Keep an eye for a breakout attempt. A key level would be 1295 for conservative purposes, but they have to stick a close and follow through. It may take more than one step to do it, to allow for a fakeout to suck more of the bears into an offsides position for the setup.

Then again it could simply fail and go back to retest the low. It is hard to say what will happen when great events are in motion, and the house and a few big players are in collusion.

One can use a number of charts for confirmation of a move by the lead dog, the SP. The dollar has proven to be particularly effective lately in addition to the usual suspects like NDX.

The big TBTF and their funds are batting the US financial markets (and the public) around like their favorite chew toy. Failure to reform the financial system is Obama's single greatest fault, overshadowing even his military adventurism perhaps. I do not think he is 'bad,' but merely weak, lacking in character, and not rising to his call to greatness. A very modern man. He could have stood out well since he is surrounded by amoral puppets and stooges, some in his own house but particularly in the opposition. But he has a fatal attraction of trying to please everyone, and therefore no one, lacking principle and conviction, and therefore remarkable leadership.

I have to chuckle when people send me simple indicators available on public charts, or the comments from people who are obviously talking someone else's book in order to prove some assumption they hold without any underpinning or foundation. I take this a few times, since everyone is entitled to be wrong, and then invoke the spam filters if it become distracting. A small price to pay for the real gems that wash up on the shores from those who have learned to think for themselves, and the genuine souls who struggle on in this troubled world.

It is important when playing for money not to allow distractions to affect your play. You are responsible for what you read and where you spend your time. I learned this lesson some many years ago in a different, more exuberant phase of my gaming career, from Lyle Stuart.

"He names names because he knew everyone. And everyone knew him. In his stories, he relates the occasions when he won big but also admits when the cards were going against him and he left the table a loser. But he always left the table before he lost everything." John Patrick on Lyle Stuart

If you cannot maintain the discipline required to trade you should do something else. Most (close to 95%) are not equipped for this, and should ride the long trends as investors, and not worry so much about the daily noise. There is no school for this, you must learn by experience, so you can own your decisions with some understanding and conviction.

In the end the market will teach you humility, and this is a particularly instructive market, being artificially constructed and rife with information assymetry, manipulation of the rules, and deception.

But the trends are resilient, if one has the eyes and the grace to see them.

US Stocks in a Pivotal 'Decision Square' - the Fed as Outlaw

The story of these markets is a slumping economy and a debilitated middle class versus currency debasement and excess liquidity, selectively spread amongst friends.

And also an undercurrent of manipulation of prices and information, to extract wealth and shape perceptions.

The management of perception is a facet of government, always. To think otherwise is to naively ignore history and the practicalities of leadership.

But when that management becomes a more powerful and self-serving impulse than the written law, than the public good and the very fabric that binds people together into a society, then it becomes an end unto itself, an extra-legal excess, literally outside the law, that invalidates the legitimacy of what may have been an otherwise legitimate organization.

This phenomenon is most often seen in organizations with a long standing individual leadership by strong personalities, and an embedded bureaucracy that is excluded from effective oversight and the customary balances of power. One example of this is the late stage Hoover administration of the FBI, which began to turn in on itself and its own ends, and use its control of private information to control and subvert the political process.

"Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one."

Charles Mackay

Of course these herds of the misguided often have a thought leader whose own perspective, and sometimes even delusions, become an almost unshakable set of core assumptions expressed as slogans and tenets of fundamental belief, the center of the whole, the familiar and comforting orthodoxy, and trusted filters of knowledge for a profession.

In the case of the Fed, it is based on similar principles as the efficient market hypothesis and of dogmatic deregulation, which are the natural goodness and incorruptibility of a highly educated and privileged elite, not subject to transparency and oversight, public checks and balances. These fatally flawed assumptions have been the cause of much misery in the last 30 years.

Power indeed corrupts all, and their thinking, even in the well intentioned.

And this is what I fear the Federal Reserve is becoming, or more likely, has already become. And so I would not necessarily argue that an independent central bank is a bad idea per se, although such an argument can certainly be made.

But I would propose that the Greenspan-Bernanke Fed itself has outlived its lifespan as an effective organization, and is in dire need of reform and refocusing, and it must come from outside the group think of their bureaucracy. And the Congress and the Executive seem insufficient to the task having been severely compromised over the years through participation in the Fed's decisions and its control of money flows.

So the question of reform is problematic. The current government, both Republicans and Democrats, seem to be up to their elbows in the muck, beholden to a powerful elite and their vested interests that operate behind the scenes, and too often outside the law.

Terrible thoughts in their implications, and so most cannot bear to even think them. In times of the big changes people may desperately cling to the familiar, even if it is a rotting corpse of what it had once been. Reform is hard and often tedious work, never easy, and it has it own dangers. The cure may be as dangerous as the disease, and so it bears much thought and careful action. But action is required, it must be done.

Transparency and disclosure are always a first step, if not a prerequisite, to expose the true dimensions of a problem and the impediments to its resolution, and the flaws and conflicting priorities, and too often corruption and coverup, that always seem to underlie such systemic failures. 'Let justice be done though the heavens may fall' is a principle not in favor amongst those embroiled in a corrupted system. And so they rush to push out ineffective and superficial solutions in order to control the impulse to reforms and control the subjects of the debate in their own favor.

And this is what is paralyzing an effective response to the financial crisis in the US today.

"The control of information is something the elite always does, particularly in a despotic form of government. Information, knowledge, is power. If you can control information, you can control people."

Tom Clancy

Let's see which way the market breaks, perhaps before the long American holiday weekend.

SP 500 Futures Intraday - Options Expiration - Fitch Downgrades Greece, Metals Rally

Here is what I am watching in US broad equities in the May option expiration. There is support for the SP around 1321-1324. If it breaks that and sticks the close there might be something to this, moreso than the usual option wash and rinse.

On the NDX chart the intermediate uptrend is more pronounced with strong support at 2330.

Update at 11:10 - FITCH DOWNGRADES GREECE TO 'B+'; RATING WATCH NEGATIVE

Fitch has downgraded Greek debt, which has caused a flight to safety in the dollar and precious metals.

SP Changes US Debt Rating Outlook to 'Negative' and SP Intraday, NAV Of Precious Metals

This is the same SP whose ratings were for sale to the banks throughout the build up to the financial crisis, and which has largely escaped investigation and indictment. So, even though their opinion here may be valid, how are we to know that it has not been bought again, with regard to timing and impact?

And of course the word of the downgrade was held completely confidential, even from insiders, right?

As I had cautioned last week, something wicked this way comes.  Its tracks were on the tape, most likely in word leaking out to insiders who succeed as they usually do, not in any personal merit, but by breaking the rules for their benefit.

That is the problem in dealing with an unreformed, unindicted, and corrupt financial sector. Who do you trust? And this has a decided drag on economic recovery.

The failure to reform when he held the mandate was Obama's greatest mistake. But others made the same mistake, from the Congress to the Fed. Their motivation for this policy error will be the subject of much future speculation.

This negative outlook is not a surprise. It is consistent with a growing crisis in the US.

Notice that gold and the Swiss franc, and to a lesser extent silver, were safe havens choice of the people. The bonds were hit especially on the long end, with a flight to the short end. Stocks were hammered in the flight from risk down to support in a fairly cynical manner it seemed to me.

Of course in the secondary action the wiseguys took the opportunity to stage a calculated bear raid on the metals. Kind of like machine gunning the refugees and burning the life boats. Their criminality knows no bounds, has little self restraint, and is lawless, respecting nothing but power.

"Give me control over a Nation's Currency and I care not who makes its Laws."

I am not certain of the attribution of this quote, but as my old school economics professor demonstrated to us again and again, it is certainly the case as we analyzed the development of the European Union and World Trade Organizations in a transnational fiat currency regime.

There is opportunity in these short term swings but only for those will a cool head tempered by experience. In the short term fraudulent pricing and manipulation is widespread, with deceit as their currency. For most it is better to hold to your long term trend investments and not be overextended.

I shifted the weighting in my trading portfolio out of the overweight to the short side taking profits, to overweight bullion on the dip, still hedged.

If you wonder why these bear raids happen, and why the paper bullion bankers defend certain price levels so viciously, often stepping in to hold gains to one or two percent in a day, this may help.

"Open interest in gold futures and options traded on the Comex typically exceeds supplies held in its warehouses. If the holders of just 5 percent of those contracts opted to take delivery of the metal, there wouldn’t be enough to cover the demand, Bass said."

University of Texas Takes Delivery of Bullion

The US markets cannot withstand a determined run on the assets which the banks, and funds, and probably even the Fed have already sold. The financial sector is a deepening cesspool of cover up and deception resembling a confidence scheme, an accident waiting to happen. If it did not involve so many of the well placed and powerful it would have already fallen of its own weight and arrogance.

What more can I do, what else is there to say? What wonders will persuade a people determined to be as gods? What, indeed, is truth, in times of general deception, when even the caretakers cannot be trusted to hold their sacred oaths and duties? And yet this is nothing, compared to what is to come. Walk carefully in the light of God's love, holding to His tender mercies, unless you be misled, gaining some objects and advantages, but losing yourself.

"Let him who walks in the dark, who has no light, trust in the name of the Lord, and rely on his God." Is. 50:10

AFP
S&P adopts 'negative' outlook for US debt

WASHINGTON — Ratings agency Standard & Poor's on Monday revised its outlook on US sovereign debt to "negative" from "stable", citing Washington's looming debt and fiscal deficits.

"Because the US has, relative to its 'AAA' peers, what we consider to be very large budget deficits and rising government indebtedness and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating to negative from stable," S&P said in a statement.

SP 500 Futures Intraday and NAVs of Certain Precious Metal Trusts and Funds - A Whiff of Fear

I would start shifting to a net short if the SP futures crack 1290 to the downside.

Until then I would rather be long gold and silver, including some miners, from the dip as mentioned yesterday, and use any stock index and other asset shorts to hedge positions in miners and perhaps silver.

The Net Asset Value Premium chart is included below.  There is hardly a bubble like activity in those premiums although the divergences are interesting.  They indicate a fear of a break in supply in the physical silver market in my opinion, and not just among retail investors. 

People in the trade know Sprott has the silver AND that they can take delivery of it if push comes to shove and they need actual possession of it for some reason.  There is no other way that I can explain this except as some arbitrage trade.  There must be a fairly sophisticated fear of a risk of a default in the silver bullion market and PSLV is being used to hedge that risk. At least that's my take on this, but I could be wrong.

The economic data continues to indicate a growing stagflation in the US.  Fresh information out of the European sector suggests that a 'retructuring' of sovereign debts may be coming.  The same could be said of the US, but its nice to own the ratings agencies and be providing liquidity lifelines to half the worlds multinational banks.  It adds a panache to one's financial profile,  and is certain to buy at least a few friends amongst TWCTF (those who control the flow).

There could be a cage match brewing between the Anglo-American controlled World Bank, and the European dominated IMF, especially if the BRIC's obtain some representation there.   In most cases of intense diplomatic discussion it is wise to follow the money, and war, including currency war, is continuation of diplomatic efforts by other means.

Carl Levin has referred Goldman Sachs to the SEC and the Justice Department for multiple counts of perjury and violations of various securities laws.   His YESness is trying to raise a billion dollars for his presidential re-election campaign, and those internet donations are not flowing freely from the masses.  So would you like to place any bets on a meaningful investigation and any forthcoming indictments?  Well apparently some are willing to make that bet.  Goldman CDS Jumps on Levin Claims

I'd rather bet that this is some variation of the Chicago-style extortion rackets, with a bait and switch kicker. Been there, seen that done last election. But make little mistake there is almost no one keeping almost anyone of size honest these days between the government and business. The Wall Street satanspawn have co-opted the process.

Without reform of the international trade regime and the imbalanced FIRE sector there will be no sustainable recovery.

SP 500 Intraday: New 7.4 Earthquake and Tsunami Alert In Japan

7.4 Earthquake 60 miles east of Sendai.  One to two meter tsunami alert.  Fukushima workers evacuated.

US equity futures took a plunge on the news, breaking the morning ramp, but have since regained some of today's gains as the market consider the implications.

I would expect the market to try and shrug this off at least until after the European close, and probably until about 11 PM Central Europe Time.

My heartfelt sympathy to all my friends in Japan. Tokyo was shaken but not damaged as Sendai is quite some distance to the northeast.

The full impact of these natural (and manmade) disasters is not fully factored in to the markets in this interconnected global economy, being smothered at least for now by monetary expansion and excess liquidity, the almost euphoric complacency of the Bernanke put.

At some point reality and the markets will converge.

90 minutes later: Bloomberg reports the tsunami warning has been called off.

SP 500 Futures Intraday

The bear raid on the metals is coming in as expected. This always happens when there is a dodgy Non-Farm Payrolls report, which is most of the time these days.  They cannot break the trend it seems, but can make it uncomfortable to go against them in the short term, those who are not able to keep the longer term trend and overall economic landscape in mind. 

As for US equities, I could not bet against broad stocks here until I see a genuine failure of a trend. The monied interests seem determined to take this tragic comedy higher, because they do not know what else to do, but to deceive and loot, and do again what has failed twice before.   They may not care, as long as they end up with rents and income producing assets.

There was a double dose of Dick Grasso and David Kelly on Bloomberg this morning, extolling the virtues of Wall Street and the wonders of the economic recovery.   That was painful to watch.  The brood of vipers on parade.

Who cares?  We'll all be rich, with more dollars than we could have ever imagined.  Just put your faith in the financial powers and your own false pride. 

And if and when that falters, then turn on the weak, the unfortunate, and the different in your prideful anger, and bully and abuse them for their 'failure' which is dragging you down.  Since we're perfect, there must have been insidious influences working against us from within.  Certainly there was no fault in the status quo and those made wealthy by deceit, fraud, and human misery.

This is what passes for reform in some circles.

I am afraid it will be getting worse before it gets better. 

SP 500 March Futures Intraday at Noon: Credibility Gaps Abounding

Here is an additional interpretation of the big inverse H&S bottom from July 2010 showing a target around 1280 that appears to have been met.

I cannot stress enough how manipulated these markets are, so use caution if you choose to play on their tables.

I was watching some individual stocks on Level II quote feeds and they were marching the prices up and down using 100 share bid/ask transactions. There was a noticeable lack serious buying at most times.

The intraday price manipulation in these markets, and particularly in silver, is becoming so blatantly obvious as to be getting almost silly. It reminds me of our little girl showing me one of her 'card tricks' when she offers me the deck with one card sticking way out and says 'pick one,' and then moves the deck around furiously if I try to pick one of the others.

I think there is a nice setup for a 'flash crash' developing with perhaps some trigger event this time that will be used as a justification for that and perhaps other things.

These fellows on Wall Street and in Washington have gotten through most of their lives by using special privilege, private influence, and simply cheating. By now dishonesty and deception is like a familiar friend that they turn to whenever the going gets tough, so how can we be surprised?

As a reminder, The Quiet Coup - Simon Johnson

“For every credibility gap there is a gullibility fill.” Richard Clopton

SP 500 December Futures Intra-Day And General Comments

The market is playing around with these consolidation patterns that start off with a dire overnight trade, that gives way to an intra-day rally and a squeezing of the shorts.

Artificial to be sure, but likely to continue until something happens to stop it. It is unlikely that the government will intervene ahead of an election and in a fragile economy to stop the inflation of an obvious bubble. To the contrary, they are most likely deeply complicit.

This provides emphasis to our caution of waiting for a downturn to develop rather than trying to get in ahead of it. You will just feed the speculative increase.

The more the Fed and Treasury debase the global fiat currency, the higher gold and silver will rise.

"The world will soon wake up to the reality that everyone is broke and can collect nothing from the bankrupt, who are owed unlimited amounts by the insolvent, who are attempting to make late payments on a bank holiday in the wrong country, with an unacceptable currency, against defaulted collateral, of which nobody is sure who holds title."

If the model of the former Soviet Union (empire) holds, at some point the oligarchs will start seizing hard and income producing assets for themselves using their command of fraudulent paper and a corrupt system of governance. This may already be underway when the Congress gave in to the Bankers' threats and passed TARP. I have heard that Wall Street will be taking about 8 percent of M1 as its bonus this year, despite being bailed out at enormous costs, both explicit and hidden, to the American public. Bernanke is transferring over a trillion dollars in interest earnings from savers, institutions, and retirees to Wall Street through this quantitative easing without reform and restructuring.

At some point this may erupt into a crisis with a resolution, but in the meantime it will continue to spread slowly like a wasting disease, concentrating more real wealth and assets in the hands of the politically well-connected few.

Obama is more like a business friendly Herbert Hoover than a reforming Franklin Roosevelt, and this lack of will and a vision forged by determined accomplishment against suffering, moral courage and certitude if you will, is his tragic flaw and America's misfortune.