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Wednesday, September 17, 2008

technical update - small capitulation - big one months away

We had a reversal day at the crucial 1170 flag support (also 50% retracement ) with VIX close to 35 thats the basic making of a temporary low. But we need a few more days to oscilate around this level in volatile manner to make some mini capitulation distribution.

At a real low nobody would even speak of a low people would just dump and be in a mode just get out that was the March 2003 low by the way. Plus big institutional investors like life insurance would have dropped their equity positions substantially we are far away from such a scenario.

Some indicators are at extrems like RYDEX at .55 and VIX at 34 intraday but others have still a bit space so we were at 95% target parameters at the lows. many momentum indicators need another 2-3 days and also the price action is still due for a bit lower lows before a short covering rally will kick in.

Oil has extended the low to a 61% retracement and should have found a bottom - actually its always this pchyological special effect breaking through a big handle like 100. Even Livingston (the famous trader of the last century) describes it as a sure bet to go for the break follow through. The point is that this is still wave A so we will see a sever wave B up but another wave C down is due. We lost 57 $ and the reaction should bring an 50 to 62% retracement hich gives us a 28 to 32 $ upside move potential with a roughly 120 target. Now after Goldman has reduced the target - another indication for a temp. low.

Keep in mind thats a sucker rally and is an opportunity to sell since the real lows we will have in Q1 2009 at roughly 1060 SPX. We are at 15 times 2009 earnings which are far too high and the mulitple is too high as well - so by any means markets need to adjust the pricing to the downside and the deleveraging story is far from over. Hedge funds will have to adjust risk as well going forward. We are in the 6th inning of this bigger downleg. The earnings seasons Q3 and Q4 will have many negative suprises for non financial companies since the weak dollar gave the extra income which is obviously not the case anymore. Globaly the consumer is retreating and corporate spending will be negative in Q4 due too the negative momentum.

They die like flies the financial institutions - BSC LEH MER (I count them in since without BAC they would have been broke this week) FNM FRE AIG all American ıcon companies. Now HBOS after Northern Rock. Whoever dares to say we are not in a recession should be banned from this planet, thats the nicest thing to do. Its enoying to see the attitude of this Goldilock cheerleader morons to go after people and accuse them of painting gloomy pictures. Wake up - if you are sick the only way to heal is to admit it , when research the cause and reason and start the healing process. Ignorance leads to death and we have seen that 'everything is contained' ignorance of Greenspan, Bernanke, Paulson and Bush gang. We are at the brink of depression its not about recession at all. Faking phony statistics does not change the situation it only delays the remedy processing and makes tougher medicine inevitable.

AIG was not saved only due too their balance sheet implications which was not far bigger than LEH - I think more so due to the implications of the policies (car, life, house etc.). Millions of policies in jeopardy and voters in distress made this miracle switch in attitude of the Paulson and Bernanke boys possible. LEH was not politically popular and the unwinding is going nowhere by the way of LEH counterparty risk.

The structure of the deal has mobster quality AIG has to pay 11.5% interest to the FED and they had to give up 79% equity for the 85 bil. loan. I do not get the high interst rate - why srew a sick man's health by expensive doctor bill's. Be good if principal comes back - I do not get this guys - does not make sense to me. They have to unwind 450 bil. in CDS and sell assets in a firesale situation how should paying high interest help anyone

Why are stockowners the bad guys in capitalism, its not true they took risk - they never were told the truth about the risk they were in and that was the freaking responsibility of the supervising authorities to make sure they were aware. No they get punished and the CEO's and Administration responsible for the mess just walks of with all the perks. Thats not capitalism thats ugly communism.

Its kind of ironic that the REPs turned this country into this mess and finaly it seems that their deepest enemy has taken over their action. Bush has got his place in history books but not earned it - thats the worst administration ever and the implications will be felt decades after they left the scene. Most amazingly is the fact that the people (mainstreet) seems to have been turned in a passive goat class. They just eat all the ... and let the CEO's who earned hundred's of millions of bonus per person over the years as employees and destroyed trillions with their irresponsible behavior just walk away.

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