UPDATE:  8:00 PM

As all my regulars know, I love trend lines on RSI charts.  The VIX daily chart shows clearly just how valuable they can be.  Notice how clearly the yellow TLs guided VIX to its highs during the July crash.  And, the purple TLs guided it back down.  Now, we’ve broken out through the purple TLs and are following the red TLs up again.

The purple circles mark many of the important reversals, break outs, shifts from one channel to another and back tests.  Here’s a close up, showing just how effective they can be.  Any guesses as to what will happen when we next tag the red line (at the bright blue oval)?

I’ll be the first to admit that forecasting with RSI TL’s can seem a little like reading tea leaves or throwing bones.  But, more often than not, it’s helped me identify important events before they occur.  And, that’s pretty fun stuff.

Speaking of fun stuff…

I’m working this weekend to get the new website up. Take a moment to sign up as a follower of this blog; regulars will be offered preferential rates. And, while we’re on that topic, I’d like to offer the reader who comes closest to picking the price at which SPX closes on March 16, 2012 a free one-year subscription. Post your best guess in the Comments Section for all to see by this Sunday at 5pm PST.

Good luck!

Oh, and here’s a nice little article about TVIX.  Good blog in general, it seems.

UPDATE:  3:20 PM

VIX completing a back test and right shoulder for IH&S;?

Buying a little insurance with 40 TZA Apr 17 puts @ .61 (2.5%).  And, put on a straddle in FAZ with 30 Apr 22 Puts @ .69 and 20 Apr 28 Calls @ 1.33.  Total cost is 2.02, so I want prices to move below 20 or above 30.

FAZ is right up against a TL that dates back to October 4.  Its RSI has broken out to the upside.  I expect a big drop if the market rallies further, or a large increase in the event this rally is nothing more.

UPDATE:  12:45 PM

We’re pushing a little higher, topping 1365.  I suspect it’s an overshoot of the indicators mentioned an hour ago, but am watching closely.  Several positions in which we had gains are at break even.

The daily chart continues to look bearish to me.  In particular, I’m drawn to the daily RSI, which has completed a back test of the broken TL (yellow, dashed).

UPDATE:  11:30 AM

This seems like an excellent spot for the rally to fizzle.  We’ve retraced .618 of the drop from the presumed top (1378.04) and have bumped up against the channel I theorized about yesterday.  Furthermore, 60-min RSI is tagging the TL that’s marked previous tops.  And, last we’ve completed a back test of the broadening ascending wedge (megaphone) that’s formed since Feb 1, and the SMA 10 is just ahead at 1364.

I’ve added to several of my ETF positions in the model portfolio:

Initiated a new position in the bearish financial ETF FAZ:

And closed the remainder of my SPY Mar 135 calls for a nice gain.

ORIGINAL POST:

Lovely day for a gap and crap?

Big ramp overnight, follow-through to yesterday’s masterful ramp job that put the brakes on the downturn which began Tuesday.  Apparently, someone forgot to tell the guys at DOL — which just reported an increase in initial claims.

Ignore the seasonally manipulated numbers and focus, instead, on the raw data, which relects a 31,513 increase from the prior week.  That’s a 9.4% increase, which the markets will not like.

We discussed yesterday the possibility of a gap close from Tuesday’s plunge.  We’d need to reach 1359.13, which is going to be challenging unless the futures can hold on until the opening bell.  Eminis, which topped out at 1360, just broke their 60-min RSI TL.

On the EZ front, despite CNBS’s rosy headlines…

… ECB Presidente Supermario Draghi reports that the economic outlook for 2013 has been revised downward.  Recall that the 2012 forecast was revised from +0.3% to -0.1% a few months ago.  Now, 2013 — the year of the recovery — has been revised from 1.3% to 1.1%.  Wishful thinking, IMO.

Please note:  UVXY reflects a 6:1 reverse split today.

In yesterdays’ closing post, I cynically remarked that the powers that be (TPTB) would manufacture a good-sized bounce after the drubbing the markets took:

” I expect at least some bounce (1355?) tomorrow morning — perhaps a result of overnight news designed to stabilize the markets… Keep an eye on news in the morning — euro zone, of course, but also the ADP employment figures (pathetically always great) and crude inventories.“

ADP reliably reported better than expected employment gains, gasoline inventories fell 1.6 MM barrels instead of the 100,000 gain expected, TPTB across the pond were all agog at how well the debt swap is going and — just for good measure — a QE rumor was leaked to WSJ reporter and Fed mouthpiece Jon Hilsenrath.  Even the WSJ’s Marketwatch thinks this PPT reaction was a little too obvious.

Last Night’s Forecast

Today’s Markets

Bears could be excused for feeling like the deck is stacked against them — because it is.  The plunge protection cabal is alive and well.  Of course, it was alive and well last July, too, when the market fell 18% in a matter of 12 sessions.  Hmmm…

UPDATE:  8:30 PM

If only it was always this predictable…

In yesterdays’ closing post, I cynically remarked that the powers that be (TPTB) would manufacture a good-sized bounce after the drubbing the markets took:

” I expect at least some bounce (1355?) tomorrow morning — perhaps a result of overnight news designed to stabilize the markets… Keep an eye on news in the morning — euro zone, of course, but also the ADP employment figures (pathetically always great) and crude inventories.“

ADP reliably reported better than expected employment gains, gasoline inventories fell 1.6 MM barrels instead of the 100,000 gain expected, TPTB across the pond were all agog at how well the debt swap is going and — just for good measure — a QE rumor was leaked to WSJ reporter and Fed mouthpiece Jon Hilsenrath.  Even the WSJ’s Marketwatch thinks this PPT reaction was a little too obvious.

Last Night’s Forecast

Today’s Markets

Bears could be excused for feeling like the deck is stacked against them — it is.  The plunge protection cabal is alive and well.  Of course, it was alive and well last July, too, when the market fell 18% in a matter of 12 sessions.  Hmmm…

Interesting article here about the troubles small businesses are having in China.  Growing problems include rising labor and materials costs, rising yuan, shortages of labor, lack of credit.   We saw the markets react when China lowered their official growth projections from 8% to 7.5%.   Of course, if the carefully managed number is 7.5%, we can only assume it’s really closer to 2%.

Most investors understand how important China’s continued success is to the global economic recovery story.  If China falters, it changes everything.  Stay tuned.

UPDATE:  12:45 PM

Slow and steady, SPX RSI working its way higher in a tight little channel that has taken SPX prices to the limit of the steeply declining channel established yesterday.  I think we’ll break out of it a bit, widen the price channel and possibly reach 1359-1363.  But, anything above 1354 is on borrowed time — as I still believe this to be a contra-trend rally.

Big solar storm expected to hit tomorrow morning — could put a punctuation mark on this rally:  “biggest radiation and geomagnetic storm the Earth has experienced in five years.”

UPDATE:  11:45 AM

The retracement has picked up steam, reaching 1352.37 so far.  The contra-rally is losing momentum.  Will it have enough to close the gap at 1359.13?  Perhaps, especially if we get take a breather to reset the RSI and reach it on negative divergence.  Yesterday’s target of 1354 still looks doable.

VIX also seems to be thinking about closing its gap (19.25.)  But, check out the RSI TL tag on the 60-min chart.  Any further weakness in prices will be a stretch.

ORIGINAL POST:

Getting a little bounce this morning, nothing to write home about yet.  Though from the 30-min chart RSI and MACD, I wouldn’t be surprised to see us up over 1350.  The key is the TL on RSI — if we break it we should easily reach 1354.  I’ll keep the SPY calls in place until I’m satisfied that the retracement has played out.

I made two changes to the model portfolio this morning.  First, I sold our TVIX position and bought a 4.5% UVXY position instead.  It’s a leveraged ETF with 2X leverage, based on a blend of near month VIX futures.  It has been reported that investors are dumping TVIX since Credit Suisse suspended creating more units — creating overhang that’s hampering prices.  Yesterday, when TVIX was up 4.4%, UVXY was up 15.2%. 

I also increased our EUO position — the ultra-short Euro ETF — to 4.5%.  This had mistakenly been listed on our spreadsheet as a short position.  The ETF profits when the Euro drops, but is itself a long position.   We now have a total long position of 250 shares.

UPDATE:  5:30 PM

Closing positions for the day. 

I will likely close out the USO Mar 40 calls in the morning.  I opened a position of 30 SPY Mar 135 calls towards the end of the day strictly as a hedge, to play the bounce I saw developing.  They largely negate my portfolio’s short bias, as I expect at least some bounce (1355?) by tomorrow morning — perhaps a result of overnight news designed to stabilize the markets?

In any case, we’re at a pivot point that might serve as a neckline for the next H&S; pattern to shape up, and we’ve yet to see a meaningful back test of the recently broken TLs.

We’re currently at 19% for the options portion of the portfolio.  This will be reduced to our target 15% when the SPY and USO calls are closed out.  VIX is also due for a breather, and might deserve a little trimming back.

I will shift much of this to ETFs in the next few days now that I see a sustainable trend to the downside.  Keep an eye on news in the morning — euro zone, of course, but also the ADP employment figures (pathetically always great) and crude inventories.  Oil is still a huge wildcard with respect to GDP both here and abroad.

Just realized I hadn’t posted a gold chart lately.  I had been watching a Crab pattern that should have reversed at 1802 and was prepared to short around 1800.  Needless to say, the $100 instant meltdown on the 29th dashed those plans.  I’ve been waiting for a nice bounce back to short, aware of the SMA 50 at 1691 and the 200 at 1676.

We got a $39 bounce, and have since eased down to the SMA 200 (closed at 1675 after an intra-day low of 1663.)  Also at this level, we’re back testing a fan line off the August highs and an important internal RSI TL (both shown in solid yellow.)  While gold is certainly vulnerable here, I’m leery of a flag pattern breakout, and will wait for things to sort themselves out before committing to a new position.

The bullish scenario, if it were to play out, would see a bounce off the fan line and completion of a big inverse H&S; pattern coinciding with a breakout of the flag.  Such a scenario could see GC up to 2055 if we were to get back to the neckline at around 1780.  Note: this is not a forecast, just thinking out loud.  It’ll start to seem more a serious possibility if we bounce off the fan line over the next few days.

UPDATE:  2:45 PM

Possible bounce coming at 1337-1340.  Might play the bounce if the intra-day charts indicate.

On the news front, an event everyone’s been wondering about…. Ireland to postpone its next interest payment.  As every parent knows, once you let one kid get away with something, it’s usually about a nano-second before the other kid cries foul.  This one payment from Ireland isn’t enough to do serious damage, of course, but the precedent is very, very dangerous.

To torture the metaphor, the other kids are all watching…wondering why Greece always gets away with it.  Bankers are only too keen to stick to the deal; their allegiance is to the CB’s.  But, if someone comes along and stirs up voters to the point where they toss out the bums who sold them out, watch out.
 
UPDATE:  12:40 PM

Quick look at the SPX…currently off 20.75 to 1343.58.

We’ve broken both the rising triangle (yellow) and the secondary supporting TL (red, dashed.)  Just below is the TL off the October 1074.77 lows (purple, dashed.)  It looks to be around 1325 currently.

Recall that Butterfly patterns, like all harmonics, like to reverse by .618 of the AD distance.  In this case, that would work out to 1242.46 — which correlates with the .618 Fib of the original pattern (since we came so close to the 1.618 target — 1378 v 1375.) 

This is also reasonably close to the .618 of the giant Gartley we’ve formed since the Oct 2007 top which targeted 1381.50.  I find it really interesting that SPX failed to reach it yet again — missing by 3 points this time versus 11 last May.   Coming that close to a pattern ideal point D, BTW, is a hit — not a miss — when you’ve traveled 1622 points to get there (dropped 910 and subsequently rose 712 points.)

The 60-min RSI has hit a TL going back to last August (red, dashed.)  In each previous case, the initial tag proved to be an interim low.  Following a bounce, the index went on to make a new lower low while the RSI made a higher low — setting up positive divergence.  This pattern can help in determining when to take profits on or add to our shorts.

Looking at the daily chart, we see a similar pattern.  A trend line going back to the summer of 2008 has stopped every RSI plunge except for one — this past July/August.  RSI dropped to a low of 16.46 on Aug 8, the lowest value since Sept 21 2001 when it dipped to 13.64.  On that day, SPX closed at 965, but went on to a low of 768 on Oct 10, 2002 — with RSI back at 41.

On Oct 10, 2008 (hmm…) RSI made a low of 22.68 with SPX closing at 899.  Five months later, on Mar 6, 2009 (hmmm…!) SPX closed at 683 after making a low of 666.79 — yet RSI was way back up to 28.47.    The pattern continues on the weekly and monthly charts as well.

I’m going ahead and taking profits on the QQQ Mar 65 puts — just to throttle back the option exposure in our portfolio and because they expire next Friday.  The profit is just shy of 50% —  $1,130 on a $2,400 investment.

I’m also extending the USO option position out with 10 APR 42 calls.  Although CL is down 1.25%, we got a nice bounce off the SMA 20 and an internal RSI TL on the daily chart.  With our USO position at roughly break even, and the existing option position off less than 20%, I’m inclined to give CL a little more rope — but just a little.  

I’m giving it the benefit of the doubt primarily because of the fan line from the 2008 high (yellow, dashed.)  We broke through it on Feb 21 and appear to be back testing it.

In addition to the SMA 20 (104.62) we also have support at 103.7 — the .618 of the larger (purple) harmonic pattern.  That’s likely the line in the sand for the downside.

ORIGINAL POST:

Thrilled to see a serious sell-off overnight, but watch for a bounce.  The daily RSI on the e-minis is tagging a long-term trend line right here.

More later.

Regular readers have heard me discuss the ongoing battle between “the powers that be” and truth sayers.  TPTB make more money when markets are going up.  They love the status quo.  They love assumptions that you can plug into a spreadsheet and take to the bank. They love steadily rising markets that encourage consumers to spend.  And, they especially love it when the public gets excited about stocks.

Most of us have heard it said, “if you’re playing poker and you’re not sure who the sucker is, you’re the sucker.  On Wall Street, small investors are the suckers.  They’re the last to get meaningful research.  They’re the last to be presented actionable ideas.  And, they’re the last to clue in when something is overpriced — because they’ve been sold on the idea that it’s the deal of a century.

If an investment is being offered to an individual investor, it’s because institutional investors have already turned up their noses at it.   When I was a newly minted stockbroker in my 20s, every other week the tax shelter product specialist would show up (with donuts!) and explain all about the next big thing being made available to our clients.  Whether it was Greyhound buses, mini-warehouses or luxury hotels — there were always glossy brochures, impressive pro-formas… and commissions.  Big commissions.

Before long, someone would shout out “what’s the yield to broker?”  In other words, how much money can I make by peddling this crap?  And, it was a lot.  Typically, there was a 7-8% commission involved, of which brokers could keep 30-45%.  So, a client who brought in $100K in response to an ad they saw during TV golf on Sunday would get fleeced for $8,000 on Monday.  The broker could take home $3,000 at the end of the month.  Three or four of these per month made for a pretty good living for a young master of the universe.

Best of all, these deals didn’t go south the day after the closing.  So, it took a while before the client realized how badly he’d been hosed.  In the meantime, he’d sign up for several more of these sterling deals — making the broker even more money.   Eventually the deal would flop, the client would get pissed and either leave or sue (oops, guess he shouldn’t have signed that arbitration agreement.)

The broker would be sad to see him go, but was busy taking in more new customers who had yet to make their contributions to the cause.  There came a point, when Sears bought Dean Witter (“how ’bout some stocks with those socks?”) that it became apparent to many of us young Turks that the game had changed.  We were in the business of selling stuff.  And, our firms didn’t care so much about clients leaving by the back door because so many were coming in the front.

I grew up watching my grandfather invest.  As the treasurer of a major corporation who cut his teeth at the Pittsburgh Fed during the Depression, he knew his way around the world of finance.  I thought it would be a noble calling — helping investors achieve financial independence.  When I realized during those first couple of years that I was simply a cog in the world of retailing, I lost all interest in being a stockbroker.

Are all stockbrokers snake oil salesmen?  Nope.  Some have figured out how to maintain their integrity and put their clients first, even if it means being hassled by the sales manager.  But, if your broker is new and works for a firm that advertises a lot on TV, odds are he’s a salesman — not an investment advisor.  Might be the smartest, nicest kid in the world — but, still a salesman.

When he calls with a very special deal for a very special client — 500 shares of Yelp! — it’s because he’s been told by his sales manager it’s a special opportunity.  It’s special because institutional investors won’t touch it with a ten foot pole.  And, the only reason [insert bulge bracket name here] was hired as an underwriter is because they happen to have thousands of other salesmen whose clients trust them when they call with a special deal.  That means more money for the sellers.  Period.

In this greater fool world in which we invest, it’s entirely possible Yelp will make a lot of investors a lot of money.  But, remember when your broker calls — or when you see a politician or TV talking head doing their part to prop up the market — the only ones sure to profit are the stock’s sellers and the brokerage firms that do their bidding.

UPDATE:  3:15 PM

SPX attempting a comeback.   Could be nothing more than a back test on the small H&S; pattern just completed that indicates 1352 to the downside.

I’m watching the 30 and 60-minute RSI’s for signs that it’s more than just that.

The daily RSI is still looking quite bearish, having broken the yellow TL.  However, the purple line awaits.

ORIGINAL POST:

Building on short positions…

Added 300 SDS @ 16.24
225 UUP @ 22.12
-125 EUO @ 19.39

ISM Services survey results out…read the entire report here.  Overall positive, except for slowing employment and rising prices — which will be seen as problematic in a market addicted to QE.

SPX has finally joining the party — making what looks like a definitive break from the rising wedge and reaction off the 1.618 Fib level of the Butterfly and .786 of the big Gartley patterns.

We’ve seen a clean break of the SMA 10 and a test of the SMA 20 coming up at 1358.04.  The EMA 3 is about to cross the SMA 10, which would be further sign of a trend change.

The daily RSI appears to have broken its trend line.  The hourly definitely has.

RUT continues to show weakness.  Recall that it already broke down from its rising wedge and its RSI TL on Feb 29.  The SMA 50 is just ahead at 792.72.

VIX showing strength, up over 8% this morning.  Note how the RSI has obeyed the rising TL as we suspected it would.

We can see a completed IH&S; pattern and a clean RSI TL break on the 60-min chart.  The IH&S; pattern points to 21.38 in the near run.

I’m going to load a 5% position in TVIX — buying 300 shares here at 16.55.

Here’s a snapshot of the current positions in the model portfolio, showing prices as of mid-day.  We are still in 64% cash, as I’d like to see more downside momentum (moving averages broken, MACD’s turn negative, etc.) before adding to our current shorts.

My call to American Express the other day…

Nancy:  American Express, this is Nancy.  How may I help you?
Me:       Hi, Nancy, I’m calling to request an increase in my credit line.
Nancy:  Okay, I’m looking at your account, here… how much were you thinking about?
Me:       I’d like to double it.
Nancy:  Double?  That’s quite a large increase.  May I ask the reason?
Me:       Well, the thing is, I’m in kind of a bind.
Nancy:  I see.  Some sort of emergency?
Me:       That’s exactly what it is.  I don’t have enough money to pay my bills.
Nancy:  And, having a higher credit limit…
Me:       Well, if I could borrow more, I could pay my bills and still buy the stuff I need every month.
Nancy:  I see.  And how would you pay off your American Express bill?
Me:       You guys don’t make me to pay it off every month.
Nancy:  Yes, but we do want you to be able to pay it off eventually.
Me:       Oh, sure.  But, “eventually” is so far away, ya know?  It’s like, in the future and everything.
Nancy:  How about your income… has it increased lately?
Me:       No, not really…
Nancy:  Maybe a reduction in your expenses…?
Me:       Nope.  One in college, two on the way.   And, they’re driving now.  Seen gas prices lately?
Nancy:  How about investments?  Any money coming in?
Me:       If my brother-in-law would pay me back… but he’s broker than I am.  Nope, it’s pretty bleak–
Nancy:  I’m sorry, sir.  I wish there was something–
Me:       But, wait.  Things are getting better!
Nancy:  Okay, great.  Tell me about that.
Me:       Don’t you watch TV?  The economy is improving.  It’s all over the news.
Nancy:  Uh-huh.  Okay, well your credit report shows your debt has increased quite a bit, lately.
Me:       Oh, yeah, everyone’s been really cool.  I just got off the phone with Household Finance.
Nancy:  Don’t they charge a pretty high interest rate?
Me:       It’s insane!  But, I’m getting a new big screen out of the deal.
Nancy:  You mean a TV?
Me:       No.  A 70-inch 3D, LED, flat panel.  The detail is so incredible–
Nancy:  I’m sure it is.
Me:       Did you know Katie Couric had really bad acne?
Nancy:  I happen to like Katie Couric.
Me:       Exactly!  Everyone likes her.  But, if they had a big screen like this…  know what I mean?
Nancy:  Sir, if your debts keep rising, all your creditors could double your rates.
Me:       They can’t do that.
Nancy:  I’m afraid they can, and they probably will.
Me:       But… but, my payments would double.
Nancy:  Exactly.
Me:       How would I pay the rent, insurance, groceries…?  Groceries are going through the roof.
Nancy:  That’s what I’ve been trying to say.
Me:       Ah, jeeze.  What was I thinking?   How could I be so stupid?
Nancy:  It’s okay, sir.  It’s not too late to change course.  We can help.
Me:       Wow.  Really…?
Nancy:  That’s what we’re here for.
Me:       I can’t thank you enough.  Okay, so if we triple my credit limit instead of doubling it–
Nancy:  [click]
Me:       Hello?  Hello?  Nancy, are you there?  Hello…?

If rates return to the 2000’s 6%, however, the annual interest burden would rival our annual expenses for Social Security, Medicare or Defense.  At 1980’s rates, it would eclipse Social Security and Defense combined.  These figures, by the way, assume we miraculously and immediately balance the budget — which would require a 66% increase in taxes or a 40% drop in expenditures.  Don’t hold your breath.

Bernanke and friends are doing the only thing they know how to do — they’re keeping their patient alive with an adrenaline drip.  Congress and the White House are slipping him pizza and smokes when no one’s watching.  And, the American public…we’re so engrossed in daytime TV in the hospital lounge that we can’t hear the heart monitor blaring.

Does the national debt matter?  Not at all.  Until it does.

ORIGINAL POST:

Stocks are off to a modest sell-off.  The RUT continues to move ahead of SPX, trading below the SMA 10 and 20.  I’m adding an additional 150 shares to my model portfolio which, as of yesterday’s close, looked like this:

Some of the charts I’m watching…

RUT has broken its rising wedge and completed a back test of its RSI TLs.  I’m comfortable adding to my shorts.

SPX looks like it’s breaking down on the daily chart.  Looks like a back test on RSI…

But, the 60-min chart shows the importance of watching a variety of time lines.  I’d want to see a break of the red RSI TL before adding to my modest shorts.  In a normal market, I might not be quite as cautious, but this melt up has faked us out too many times to throw caution to the wind.

TZA with a solid break of its TL.  Tiny little back test, we might see more…

Oil is taking a breather today, with CL off 2.37 at this time.  I might be tempted to pull the plug and take the remaining profit, but look at the 60-min chart:

The decline was only to the bottom of a well-defined channel, and the RSI depicts a back test (of the yellow trend line) — albeit a deep one.  I’d like to see prices climb back above the red TL in order to maintain the medium-term uptrend.  As I mentioned when I put the position on, the price channel will be my guide.

On the high octane side, AAPL is hanging onto a slight gain, while NDX itself is flagging.  AAPL broke through its weekly rising wedge, but the monthly chart is still hanging on, with obvious negative divergence on all time frames.

NDX, currently at 2641 is looking good for a reversal around 2687-2696, the confluence of two crab patterns and a rising wedge and on negative divergence.  The RSI TL on the daily chart is showing signs of breaking down.

More after the close.

Feeling bullish?  Excited about auto sales after headlines like these?

Take a closer look.  From GM’s own investor relations website:

Notice the 3.9% year-over-year decline from Feb 2011?  How about the 2.2% decline versus ytd 2011?  They’re made all the more negative when you consider the channel stuffing going on.  Channel stuffing, for those who aren’t familiar with the term, is forcing sales through dealer channels even though there’s no demand for them.  It’s deceptive.  Period.

And, lest you think this is an aberration, check out this very telling Zerohedge chart reflecting GM’s growing inventory:

As they say, a picture is worth a thousand words.  Although, if GM were in charge, it would be worth two thousand (but dealers all over the country would be holding clearance sales on them, come December.)

Dig into the numbers a bit, and the 30,410 fewer vehicles sold ytd in 2012 versus 2011 is positively dwarfed by the 150,096 increase in inventory since a year ago.  The month-over-month increase of 2,278 vehicles was crushed by the 47,641 inventory increase.

I get tired of saying it, and you’re probably tired of hearing it, but financial reporting has become largely a confidence game.  Companies like GM have no compunctions about blurring, shading, or even outright lying about their results.  And, the mainstream media has absolutely no problem reporting this crap as gospel.

Why?  Because good news is good for markets.  And, strong markets are good for bank, brokerage and investment banking profits.  You know, the same guys who buy all those ads in the WSJ and on CNBS.  Even (some would say “especially”) our government encourages this outrageous conduct. Rising markets virtually guarantee reelection; it ain’t folks who emptied their 401(k)’s to pay the rent that contribute to campaigns.

The SEC used to care, and would occasionally prosecute someone for lying to investors.  Now, it’s up to the blogosphere, fringe guys like me who are drowned out by the incessant bullish drumbeat of the Murdocks and Buffets of the world.  

Like all good soothsayers, I take this responsibility seriously.  But, there’s just too much for one person to keep up with.  So, check Zerohedge, ShadowStats and Mish daily.  And, ignore us tin foil hat wearers at your own peril.  As Julius himself would tell you, better safe than sorry.

Stay tuned.

UPDATE:  11:15 AM

The market is shrugging off the horrible economic news, meaning it likely has more upside in store.  Remember, we have several targets we’ve been discussing for the past few weeks.

The big Gartley that started in October 2007 at 1576.09 never quite reached its .786 Fib level in May, coming up 11 points shy of the 1381.50 target.  With yesterday’s new intra-day high, I’d say it’s definitely back in focus.

Likewise, watch the Butterfly pattern that started on 10/27/11 at 1292.66.  Its 1.618 is immediately ahead at 1375.47.  We reached the inverse H&S; targets (1272) we discussed on Feb 23.  The larger of the two was triggered was back on Dec 27.  And, because yesterday’s intra-day dip broadened the rising wedge, the apex has risen to about 1396.50.

After yesterday’s rally, our model portfolio is 100% in cash.  We booked a quick 1% gain on the opening plunge, then closed almost all our shorts/puts.  The AAPL position I tried at the double top was quickly stopped out.

I will look to initiate more shorts around 1375 and 1380, but will place fairly tight stops.  I might try a little put position on AAPL when it hits its 2.618 at 529.25.  More on specific trades later.

ORIGINAL POST:

Lots of big economic news out today…  starting with the durable goods orders decline of 4% month-over-month.  Ignoring the seasonal adjustment, which I hope I don’t need to mention by now, the actual drop was a whopping -15.3%.  While still 8.8% better than 2011’s January figures, both the 4% and the 15.3% data suggest all is not well in recovery land.  BTW, inventories were up 3.1%, a figure that will weigh heavily on tomorrow’s GDP report. 

Next up, the Case-Shiller housing data at 9:00 and Consumer Confidence at 10:00 AM EST.

Case-Shiller home price indices just out, and they’re not pretty.  The national composite was off 3.8% in 4Q2011, and down 4% versus 4Q2010.  The 10 and 20-city composites were both down 1.1% in December over November, and fell 3.9% and 4.0% respectively versus December 2010.  All three composites are at their lowest levels since the housing crisis began in mid-2006.

Nationally, home prices are back to their late 2002 levels.

Consumer Confidence from the Conference Board just out — up to 70.8 from 61.5 with the bulk of the increase coming from “expectations” as opposed to “present situation”.  The expectations index increased from 76.7 to 88.0, while the present situation index increased from 38.8 to a still dismal 45.   From briefing.com, a graph showing how far we’ve fallen, and how long the road back.

Remember, there’s a lag with survey reports like this — which means that the recent run-up in gas prices hadn’t yet been felt when these results were tabulated.  Look for the cheerleading-amped numbers to ease once consumers experience a few weeks of $80 fill-ups for the Sienna.