Stock market fractal, post-election year.

Have not done a market post in a while, but today was a sharp down day and all sorts of ST/IT trend signals have been broken. However I don’t think it will be that easy and in particular I have been keeping my eye on a certain fractal that might indicate the future direction of the market. As with all fractals they can fail at anytime and their success can be just a mere coincidence. Still, as of now it appears that we are more or less following the yellow line. I have included the chart for your viewing pleasure.

Trader Tax or let traders and investors pay for TARP act of 2009!

Liberals are continuing their assault on investors, traders and the stock market. Peter DeFazio introduced the Let Wall Street Pay for Wall Street’s Bailout Act of 2009 bill in another utterly audacious attempt to stifle private enterprise. What is especially sad, the purpose of this bill as officially stated is to pay for TARP! TARP was shoved down our throats by the liberals, largely rejected by the GOP and force fed to the American public.

This bill was introduced several weeks ago, but I am just learning about it now and someone that participates in the market find this to be repulsive and disgusting to the core.

The way it will work, is to simply levy a .25% on every transaction. So let’s say for example that you have a 200,000 account and make $1,000,000 worth of transactions, which is as easy as buying and selling several hundred shares of things like BIDU, APPL, IBM, etc. With this tax, you are paying an extra $2,500 win or lose! This is important, you can lose your shirt by making the wrong decisions, pay for the transaction costs and now be forced to pay taxes on top of that!

This will sap liquidity an already growing problem in the market, where more and more people are cashing out their positions and saying good bye to the market for a long time. This will discourage small time traders and investors, discourage new participants and ultimately shift the behavior of big money managers to reduce the number of transactions and enforce a more buy and hold strategy. The big fund managers perform transactions in the hundreds of millions and will be looking at tens of thousands in new taxes, this like any new tax will cause a behavioral change.

In case you are not angry enough, think about the twisted cruel of fate that is being proposed on the American people. We are essentially being asked to pay for the failures of all the companies and all the banks that already destroyed our 401Ks by half and to fund the TARP program, a program sold to us as a loan! We were promised that this loan will not cost us anything and now traders are being asked to foot the bill for the tremendous failure of CEOs. We are spiraling out of control and fighting every new proposal, every new spending bill and every liberal agenda is becoming harder and harder.

What can you do?

Send a letter to Congress and make yourself heard!
Tell Peter DeFazio what a massive schmuck he is.

While you are here, check out Jim Cramer today blast the Obama administration. Cramer may be a loudmouth, but sometimes he just nails things.

Market breaks down officially, Dow below 7000.

As I wrote a few days ago, the market found itself at a very critical level and had to hold in terms of supply and demand. Down 7,000 is both a psychological and technical level that if breached would usher in a new wave of selling and it did so with 4-5% across the board drops.

The MSM will certainly try to explain this as a response to AIG’s 60+ billion loss, but of course that is not true and has little to do with today’s action. In fact AIG’s cash losses are a mere 2 billion, but the assets that they insure dropped 60B in value. Oops? If anything, our mindless torpid government pledging ANOTHER 30 Billion to this company would be a catalyst for a sell-off.

So right now, one would wonder what the correct course of action is for those who have been holding on desperately to their 401Ks and watching their accounts wither away. At about these levels, we are looking for capitulation, a mental white flag where the pain becomes too great and people sell in droves. We should experience a strong washout day, where the market opens down and sells off hard only to reverse and stage an impressive comeback on massive volume. Once this happens, a rally lasting anywhere from 20-30% could start. Why? Because history shows that no bear market goes past 40-50% without some kind of rally. As in everything with the stock market, patterns can provide a beacon in the all too foggy landscape of investing.

Those seriously considering closing down their 401k and moving to cash, could be rewarded with an exit point.

Rough targets for the capitulation area on the S&P500 could be somewhere in the 650 range and then rally back into the 800-900 range. Problem with washout days of course, is that they always get retested, since we have such a broken market with such a broken economy that this retest will be a scary situation. However this could be months from now and if we DO see a rally, then the most likely time for a retest will be in September or late August – two of the worst months of the year for the stock market. As of now, focusing on the short term is the most important and easiest in terms of prognostics.

Disclosure:
As of now I am still long on my 401k because someone my age really does not care, but even I will exit if I see S&P 800-900 again.
Short term, despite all the bounces and head fakes a washout day is a must and I hold my short positions.

Obama’s stock market on the brink of collapse

I have not done a stock market post in a while, but this one is important considering the latest developments. The latest time I spoke about Dow 7000 and why a hold of that support line is extremely crucial.

Unfortunately it seems like the break will happen inevitably and doing so will essentially open the flood gates. I have provided a chart for you that someone else made and it illustrates a very obvious long term pattern, a chart of the S&P 500.

Don’t mind the wave count, but do realize that flirting with 2001 lows really illustrates the weakness of this market. If in the next few weeks Dow 7000 or in this case S&P 750~ is broken then expect the market to shave off another 50% of it’s value! There is good news in all of this though, once a breach of that vital support occurs, a reflexive bounce will occur via a powerful bear rally. Thi rally could be a 30-50% move and will provide an opportunity to exit all long-term positions, however for the most part it will only suck more unsuspected individuals into a powerful move down to the ultimate lows of (Dow ~4000, S&P ~400). This happens in history all the time and will happen again.

If these long term projections are met, then it might take anywhere from 5-12 years to recover back to the highs of 2007!

I call this the Obama stock market because his administration and his policies are completely and utterly responsible for this vicious sell off. Even though the financial collapse is not his doing, the amount of damage his promises and policies do to the market cannot even be measured. War on the wealthy, nationalization of banks, corporate tax increases via loop holes and wealth distribution all have massively detrimental effects. Suffice it to say that we have broken all records for post inauguration week, January, February and will continue making new records. Consequently Obama can be blamed for the destruction of 401ks and I am just afraid at this point that we will go the way of Argentina and confiscation of private IRA accounts. In fact, the worse the market performs the more reason our government officials can procure to exercise control of our moneys. Certainly a very foreboding cycle considering they are very much responsible for the current decline.

Full Disclosure:
I am long on my 401k, given my time projection of about 40+ years.
I am short the market for the short term given the possible collapse of support levels.

Stock market rejects stimulus bill and TARP2.

There is no single better indicator of future economic projections than the stock market. Traditionally the market always signaled what direction the economy is heading by a good six to nine months. The market is talking to us and if we listen, the following has been said since late 2008.

1. The market did not like Barack Obama. Ever since the reality of him becoming president set in, the market shaved off a tremendous amount of value. Obviously September and October are traditionally bad months and that contributed to the sell-off, but if there was one mandate made in November, it was done by investors and traders.
2. The market continued to dislike Barack Obama with the worst post-election week sell-off in American history.
3. The market did not like the TARP. Since TARP most of the companies involved and the precarious $BKX (Banking index) are now lower than they were when TARP was announced.
4. The market does not like the stimulus bill nor does it like TARP2. Today the market shaved off close to 5% on all major indices.

S&P down 42.74 closing at 827.16.

Regardless of what your opinions on the stimulus package may be, America’s financial markets are feeling the ever growing pressure of the government’s probing hand. This means further damage 401K’s and a continued decline in confidence both domestic and international. While the market has always been a buy the rumor-sell the news creature, it is impossible to ignore the precipitous declines since the emergence of Barack HuSedGovtIsBad Obama.

Jim Bunning a senator I can support!

Jim Bunning is the senator this country needs, listening to his debate regarding the stimulus package I am growing quite fond of his ideas. His name previously showed up when TARP was being discussed and he was vehemently opposed to what at that time obviously looked like a horrible idea and one of Bush’s worst legacies.

In fact Jim referred to TARP as socialism, which is precisely what it is shaping up to be.

Today he proposed an amendment that I believe is extremely overdue and as someone who has experienced stock losses before I believe is essential in modifying. As it stands, investors can write off up to a maximum of $3,000 in losses per year. This tax break was proposed in the 1970s with absolutely no regard for inflationary pressures what so ever. In 2009 the original proposal of $3,000 has eroded over 70%! Jim Bunning has therefore proposed, what I believe to be an extremely stimulative idea, that is to raise the limit from $3,000 to $15,000! His thinking is based on a simple concept that the stock market declines in the past year have caused massive damage to the portfolios of a great many Americans, stifling retirement among other things. His amendment for the time being is only going to extend to this year, but ultimately his ambition is to make this permanent. Jim also identified about 4+ billion dollars being given to corporations in the form of a tax credit, even if they do not require it. He dubbed this corporate welfare and suggests striking it from the bill.

Good man, Kentucky is lucky to have a man like this representing.

Market rallies 5% in one hour, CNN has explanation!

Stocks rallied Friday, with the Dow industrials bouncing as much as 550 points, after reports surfaced that President-elect Barack Obama will nominate New York Federal Bank president Timothy Geithner as his new Treasury Secretary

Oh really? So market rallies like crazy and it’s because Obama finally made a great selection, however when the market tanked 20% in the past few weeks it must have been because of our economy? See, folks – this is not only a perfect demonstration of how useless CNN is, but also how silly these explanations are. Markets do what they do and it has nothing to do with a Treasury Secretary selection or any other goofy explanation they generally come up with.

That brings me to another point. Obama ran on a platform of change you can believe in. What kind of change was he referring to? Change back? So far everyone he appointed worked in the Clinton administration! Emanuel, Holden, possibly Richardson and Hillary. Nice change.

I bet that most people will fondly remember how great the economy was under the Clinton administration and will probably think that picking Clinton folks is a good move.

What they do not remember or simply do not know:

1. Economy was coming out of a recession by end of Bush Sr’s term.
2. In 1994 Gingrich and Republicans took over the Congress for the first time
3. Under that congress; welfare reform, spending cuts and a massive capital gains tax cut occured.
4. Clinton was the first impeached president and the rest of the world laughed at us.
5. By the time Clinton left al-Qaeda has built up a big enough force to create 9/11.

Yeah, good times.

By the way, regarding the market. That price action is borderline criminal and was engineered by program buying. This looks like a head fake and should be all given back by next week. They never make it easy. Commodity rallies always end the same way.

Sick market, sick congress

Two quick points.

1) Democrats asked the auto industry to formulate a plan and get back to congress by December 2nd. You know my position on the matter and I find it sickening to see this kind of government involvement.

Let the free market work! If people are not buying American cars, then it is a clear signal that these American cars are over priced. The price information being telegraphed from the auto industry is being rejected by the population, the answer is to adjust the price – not grovel to Congress. Absolutely appalling. Is there anyone out there that thinks we should bail out the auto industry? Let me know and if so, explain to me why we should violate free market principles. Do not use the financial bailout as a benchmark, because according to Wall St. the financial bailout did nothing to stem our declines.

2) Stock market is extremely weak. Today’s bounce attempt should be shorted for short term traders, because they underlying weakness is glaring. Energy shares are leading while small caps are in the red. This is a perfect recipe for Dow 6,900-7,000. This is a magnet support line and will be hit within the next few days.

Key sector overview as of 1:40pm, Friday November 21st.
This is the opposite of what you want to see on a bounce.

XLE
Energy
41.42
+1.46
+3.65%
2008-11-21, 13:22ET
XLF
Financial
9.00
-0.39
-4.15%
2008-11-21, 13:22ET
XLI
Industrial
19.49
-0.51
-2.55%
2008-11-21, 13:22ET

Obama market continues…how to invest?

As of today the market has lost 22% since Obama won the election. Can we attribute this decline to Obama? Not completely. There are several factors that must be taken into account.

1) We are in a bear market (this is the prevalent direction)
2) There has been a disruption in natural market activity via the bailout.
3) Least important, some economic news is worse than expected.

However, under normal circumstances there are these considerations

1) We are in the seasonally best time to be in the market (November to January)
2) We only had one appreciable bear market rally (week before election)
3) Commodities have been falling at a tremendous rate (oil especially) and this alleviates inflation.

The fact that this market has been unable to mount any kind of serious move despite the substantial drop in commodities and considering that government intervention has been largely priced in, there remains only one major wild card.

President-elect Obama.

As discussed in a previous article, the week immediately after the election was the worst in history and the trend continues. Every time Obama opens his mouth and bashes “thriving Wall St” or chooses another Clintonista appointee, the market shudders. Investors can forgive candidates for saying outrageous crap during the campaign, but when the rhetoric continues after the election – investors will not be so forgiving.

So in conclusion, we can certainly blame Obama for this decline, acknowledging of course that he is no 100% responsible.

So where do we stand?

The market is now facing critical support at Dow 6,900-7,000. This represents long-term bottoms form the ’03 bear market and the ’98 Asian currency crisis. These levels will hold with a roughly 85% likelihood. If they hold, expect a massive bear market rally that can propel this market a good 30-40% in the upcoming months. But rest assured, that this will not be a V bottom and these lows will be revisited. So from a strategy standpoint, establishing intermediate longs in virtually any sector (except energy) is a good bet.

IF, IF this support fails and Dow 7000 is breached – look out below. We can discuss it if it happens.

Let me know if you have any questions about the market!

Obama slams thriving Wall St? Stocks plunge.

In the weekly address from the “office of the president-elect”, an office that exists only in Obama’s world, a troubling quote was delivered.

Apparently Obama does not believe that that we can NOT have a thriving Wall St. when Main St. is suffering. What is interesting to note is that this speech was delivered Friday where the market action was peculiar at best. Stocks were in a hole all day and finally went into positive territory at around 3pm, suddenly within an hour the market shaved off all of it’s gains. This kind of action can certainly be attributed to profit taking before a weekend, perhaps the Summit was spooking people – or maybe it was this beauty of a speech.

You see, when half of the working families in America have a 401k retirement fund – a thriving Wall St. ensures that Americans can retire peacefully. A thriving Wall St not only helps companies tap into funds, but also puts money back into the pocket of Americans. Lastly and most importantly a thriving Wall St. always indicates a thriving economy. When the economy is in a full blown recession, not much thriving is going on – if you catch my drift. Not counting the delay (market always turns before the economy) I challenge Obama to point to a time in history where the market thrived, but Main St. suffered, such allegations are nonsensical at best and criminal at worst.

However when you consider that the other half of the working class does not even pay income tax, let alone have a 401k fund then why would they care? Especially when you realize that this group of people make up Obama’s constituency. Not only will he distribute money via tax credits to them, but he can wage war on Wall St and feel safe knowing that this base will always support him – because they DO NOT CARE. They might begin to care later when companies begin staging mass layoffs, but linking the two events together is beyond the capacity of most Americans.

Disturbing. This is all disturbing.