H&S Top and "Iron Cross" on Weekly Dollar Chart Targets 66

The weekly chart on the US Dollar Index has rather awful technicals, as it has dropped to a recent low, and set the 'iron cross' in the moving averages that is generally the hallmark of a sustained decline.

There is a massive Head & Shoulders formation that *should* preclude a rally over 81 if it is working, limiting any gains to a further 'right shoulder.'

The ultimate objective of this formation remains 66 for this leg of the large formation.

It is difficult to square this with a technical outlook that includes a major decline in the US equity indices, since the pairs have been running inversely, that is, dollar down, and stocks up.

Anything is possible, especially when the governments are actively and aggressively 'tinkering' with the markets. It is possible that the Fed monetizes sufficiently to reinflate an equity bubble, essentially whoring out the Dollar and the real economy for the sake of the financial or FIRE sector.

Signs of an Approaching Decline in US Equities That Could Be Quite Impressive

There is a strong correlation between this US equity rally and the Fed monetization of debt, which indicates a 'hot money' flow into US stocks but with thin volumes from a significant market bottom. This points to 'technical price trading' by the financial sector, also known was price manipulation, or trading stocks like commodities.

Continued heavy insider selling from those with the best forward view of the real economy is a clear sign of a top. No one can trust what the Fed or the Administration are saying about an economic recovery, as much now as ever. Obama's administration is no reform government.

This surprisingly robust rally in US Treasuries is remarkable given the decline in the US dollar, based in part on a strong yen and carry trades. The short end is obviously quantitative easing, with strong buying from Asian central banks dumping Agency debt but continuing to manipulate their currencies. 'Free trade' is an illusion.

The long end rally in Treasury suspect is likely interest rate manipulation by the US Fed and its central bank cronies. It has been a huge mistake to allow the Fed to perform the non-traditional printing that young Ben touted so proudly in his famous essay. Clever in the short term is too often tragic overall.

Gold and silver are surging as investors largely outside the US seek safety in harder assets.

There is also a community of small speculators outside the US which has been buying stocks on dollar weakness, to play an arbitrage with their own currencies. There is a hot money crowd in eastern Europe for example, and in Asia. And so far this year it has been working. At some point that door will close, quite hard, and many will be caught offsides and out of luck.

A dollar devaluation? Technically one cannot officially devalue the dollar per se because it has no official peg. The more appropriate term is debasement perhaps, and de facto default, but the effect is the same; a decline in purchasing power by the dollar vis a vis other monetary instruments. But for now we are in a monetary matrix, and the central banks and their minions can continue to play their game.

Besides being the hallmark of markets made sick by central bank and other official manipulation, these are signs that indicate that the 'smart money' is battening down the hatches for a very rough September and October in US equities as the pros hand off their latest Ponzi scheme to the public.

We will not be surprised if there is a significant decline, first to a pullback of about 7 to 10 percent. Then we will see if the market can rally on renewed dollar devaluation and if not, then another major slide to test lower levels.

If there is an 'event' the pros will dump the market bids quite hard, perhaps precipitously. It is always easier to complete a market wash and rinse when a scapegoat is available.

Obviously no one can predict the future with certainty, and even within clearer trends the actual timeframes are always most difficult if barely possible when the markets are dominated by computer manipulation. But the auspices are ominous indeed, and we are proceeding with caution.

Until the banks are restrained, and the financial system is reformed, and the economy is brought back into balance, there can be no sustained US recovery.

CNN Money
Insiders sell like there's no tomorrow
By Colin Barr, senior writer
September 11, 2009: 7:27 AM ET

Corporate officers and directors were buying stock when the market hit bottom. What does it say that they're selling now?

NEW YORK (Fortune) -- Can hundreds of stock-selling insiders be wrong?

The stock market has mounted an historic rally since it hit a low in March. The S&P 500 is up 55%, as U.S. job losses have slowed and credit markets have stabilized.

But against that improving backdrop, one indicator has turned distinctly bearish: Corporate officers and directors have been selling shares at a pace last seen just before the onset of the subprime malaise two years ago.

While a wave of insider selling doesn't necessarily foretell a stock market downturn, it suggests that those with the first read on business trends don't believe current stock prices are justified by economic fundamentals.

"It's not a very complicated story," said Charles Biderman, who runs market research firm Trim Tabs. "Insiders know better than you and me. If prices are too high, they sell."

Biderman, who says there were $31 worth of insider stock sales in August for every $1 of insider buys, isn't the only one who has taken note. Ben Silverman, director of research at the InsiderScore.com web site that tracks trading action, said insiders are selling at their most aggressive clip since the summer of 2007.

Silverman said the "orgy of selling" is noteworthy because corporate insiders were aggressive buyers of the market's spring dip. The S&P 500 dropped as low as 666 in early March before the recent rally took it back above 1,000.

"That was a great call," Silverman said. "They were buying when prices were low, so it makes sense to look at what they're doing now that prices are higher..."

Obama to Make A "Major Address on the Financial Crisis" On Monday

This news has appeared on the Agence France-Presse (hat tip Michel Proulx) and I have translated this into English for now.

One has to wonder if the great Speech Organizer will actually say anything that is worthy of the adjective, "major."

Someone has possibly told him that if he makes speeches often, it will reassure the people of his country, in the manner of Franklin Roosevelt's "fireside chats" from the 1930's.

This sort of remedy wears thin quickly if one has nothing of substance or new to say. Roosevelt had a great flair for oratory, but first and foremost he was a man of substance and of action, like him or not. He was an experienced governor, and knew how to lead by action and example, as well as by words.

It also appears that he wishes to 'send a message' to the G20 about their upcoming meeting at the end of September. He is setting the tone, as he most recently did before the Congress with regard to his health care reforms.

President Obama may seem to many to be a man only of words, of rhetoric, treading lightly on the status quo especially when dealing with the corporate funders of his political party, the banks and the health corporations. This is a great obstacle to his Presidency.

He has perhaps another six months to change this perception, or deliver his Party to a serious setback in the 2010 mid-term elections.

In the meanwhile, gold and silver appear to be an attractive hedge against incompetence.


Agence France-Presse
Discours "majeur" d'Obama sur la crise financière lundi
Publié le 10 septembre 2009 à 20h44

(translation into English)

U.S. President Barack Obama will deliver a speech on this coming Monday, described as "major" by the White House, on the financial crisis, one year after the collapse of Lehman Brothers and ten days before the G20 summit, his administration announced Thursday.

It will address the strong measures that his administration has taken to move the economy from the abyss, its commitment to reducing the role of government after their recent interventions in the financial sector, and the need for the United States and the international community to prevent the repetition of such a crisis...

The developed countries and major emerging economies are striving to overcome their differences and agree on measures to prevent a repetition of financial crises, and also to appease those who are outraged by the excesses of the financial sector.

The G20 leaders will be in Pittsburgh on 24-25 September. Mr. Obama intends to advance the proposal for new "rules of conduct" in finance.

With the prospect of the end of the recession, Mr. Obama will also put the fight against unemployment at the center of their discussions.

Japan: The Triumph of Crony Corporatism Over the Individual

Japanese officials sometimes have the endearing quality of coming out and openly saying what they are doing, or intend to do, in support of dodgy political and financial arrangements that would make a Wall Street banker blush, if they are still capable of such an act of modesty.

The former Japanese Central Banker Toshiro Muto said in March that '"in principle equity values should be set by the market and authorities should avoid manipulating prices because doing so would hurt the stock market’s reputation."

Apparently in this case 'in principle' means 'theoretically, as is convenient," because Mr. Muto goes on to recommend that the Japanese Central Bank and government throw principles aside and buy stocks to support the Japanese banking cartel, which has crippled that country for the past fifteen to twenty years.

Notice how in his talk, Muto says that this arrangement will be temporary, until Japan can export its way out of its financial difficulties.

The challenge might be that most of the countries intend to 'export' their way out of their central bank created economic difficulties. China and India have already passed on the notion of becoming mass importers in the foreseeable future.

Perhaps the fate of the world rests on the ability of the nations of Africa and Polynesia to obtain the suitable credit ratings and FICO scores to become mass consumers with debts that can not possibly ever be repaid, à la mode Amerique? Is South America willing to once again mortgage its future for the sake of the financiers? I am sure that any appropriate arrangements can be made by the Central Banks with the target nations' ruling elites.

Japan is one of the worst examples of crony capitalism in the world. Its ruling LDP party has been a disgraceful example of serving private corporate interests, and acting without honor, honesty, and integrity.

Why doesn't the Bank of Japan just give the money to the banks, and let them buy stocks higher using leverage in the futures index markets like the Anglo-American crony capitalists? This is considered much more respectful of the market driven economy in the West.

"As the boom developed, the big men became more and more omnipotent in the popular or at least the speculative view... the big men decided to put the market up, and even some serious scholars have been inclined to think that a concerted move catalyzed this upsurge." J. K. Galbraith, The Great Crash of 1929

After all, as the industrialist, financier, and Democratic National Chairman John Jacob Raskob observed in August 1929, "Everybody ought to be rich." And so for a time they were, seemingly all powerful, invincible, as gods.

And the abyss swallowed them all. And then the descent into madness in Asia, Africa, the Mideast, and in Europe: and finally a world in flames. Monstrous actions done in the name of economic necessity, room for growth, fuel for industry, a new order for the ages, and at all times the will to power of the few. All the gods of greed.

And at last, the twilight of the gods. Götterdämmerung. Until the old gods rise again.

And so here we are, trembling at the veil.

(Note: this news piece below is not current. It is from earlier this year. It demonstrates the 'roots' of the rallies which we are seeing today in the world bourses. They are an illusion.)

Bloomberg
Japan May Need to Buy Stocks, Ex-BOJ Deputy Muto Says
By Mayumi Otsuma

March 10 (Bloomberg) -- Former Bank of Japan Deputy Governor Toshiro Muto said the government and the central bank may need to buy shares temporarily to support the country’s ailing stock market.

When global equities plunge, “it’s very meaningful for the government’s share-buying institution and the Bank of Japan to buy stocks to support the market,” Muto said at a forum co- hosted by Bloomberg News in Tokyo today. “However, such purchases cannot last forever and should be justified only as a tool to avert a crisis.”

The Nikkei 225 Stock Average is at a 26-year low, eroding banks’ capital and making them reluctant to lend. Finance Minister Kaoru Yosano said today that the government has a “strong will” to combat the credit squeeze resulting from the stock-market slump.

Muto, currently head of the Daiwa Institute of Research, added that "in principle" equity values should be set by the market and authorities should avoid manipulating prices because doing so would hurt the stock market’s reputation.

The government has already allocated 20 trillion yen ($203 billion) and the Bank of Japan has set aside 1 trillion yen to buy shares owned by banks. Yosano last month ordered lawmakers within the ruling Liberal Democratic Party to study ways to bolster stocks, including the feasibility of the government directly purchasing equities in the market.

Keidanren’s Plea

Keidanren, Japan’s largest business lobby, yesterday called on the government to allow a public entity to sell state-backed bonds and funnel the proceeds into the flagging stock market.

The Nikkei slid 0.4 percent today to 7,054.98, the lowest since October 1982, on concern shrinking global demand and rising fuel prices will weigh on company earnings.

An unprecedented drop in exports since last quarter has forced Japanese manufacturers to cut production at a record pace and fire thousands of workers. The central bank forecasts the economy will shrink 2 percent in the year starting April 1, the worst in 60 years.

Muto said exports will drive Japan’s eventual recovery. Deflationary risks outweigh concerns about inflation in the world’s second-largest economy, he added.

Muto served as the central bank’s deputy chief for five years following a 37-year career at Finance Ministry. He was the government’s first choice to succeed Toshihiko Fukui as governor last year, only to be rejected by the opposition- controlled upper house, which said his stint at the ministry may hamper the bank’s independence.