Market Clues

The stock market treaded water sideways on Thursday:

Security	Percentage Change	Change in Dow Industrials Points
Dow Industrials (index)	-0.04%	-5.44
DIAMONDS TRUST SER 1 (DIA)	+0.01%	+1.00
Ultra Dow30 ProShares (DDM)	-0.09%	-12.62
UltraShort Dow30 ProShares (DXD)	0.00%	0.00
S&P 500 (index)	+0.03%	+3.47
S& P DEP RECEIPTS (SPY)	-0.10%	-14.21
Ultra S&P500 ProShares (SSO)	-0.10%	-13.83
UltraShort S&P500 ProShares (SDS)	+0.18%	+24.09
Russell 2K (index)	+0.41%	+55.79
ISHARE RUS 2000 INDX (IWM)	+0.48%	+65.07
Ultra Russell 2000 ProShares (UWM)	+1.10%	+149.89
UltraShort Russell 2000 ProShares (TWM)	-0.94%	-128.68
NASDAQ-100 (index)	+0.63%	+86.49
NASDAQ 100 TR SER I (QQQQ)	+0.47%	+63.56
Ultra QQQ ProShares (QLD)	+1.26%	+172.00
UltraShort QQQ ProShares (QID)	-1.16%	-157.81
S&P MidCap 400 (index)	+0.56%	+76.00
ISHARE SP MC 400 INX (IJH)	+0.42%	+56.96
Ultra MC400 ProShares (MVV)	+1.22%	+166.94
UltraShort MC400 ProShares (MZZ)	-1.20%	-164.06
Amex Gold (index)	+3.25%	+443.06
MKT VECT GOLD MNRS (GDX)	+3.08%	+419.87
Semiconductor Sector (index)	+1.42%	+193.70
Ultra Semiconductors ProShares (USD)	+2.69%	+366.73
UltraShort Semiconductors ProShares (SSG)	-2.77%	-377.26

Friday morning brings the piece of fantasy known officially as the Monthly Employment Report. In it, the government attempts to convince the public that all is well and jobs are being created. Unfortunately, the initial report is usually a wild guess, often wrong by a huge error bar, but the market trades off it just as if it were real.

Revisions to the reports issued in the 3rd quarter of 2006 show virtually no non-governmental jobs were created. With an economy growing at only 0.6% in the 1st quarter of 2007, it's doubtful that any net new jobs are being created. A look at the last report, for instance, shows that the total number of persons employed dropped by almost half a million and the number of unemployed person rose by 77,000. But, if you read the headlines, you were told that the number of new jobs created in the non-farm sector was 88,000. If you don't believe us, read the report for yourself at http://www.bls.gov/news.release/empsit.nr0.htm - you don't really need the journalists to "filter" the news for you anymore. Look at the part of the table labeled "Civilian labor force" for the details the news filters don't give you.

The new report will be posted at the web address given above after 8:30am EDT (1230 UTC) Friday morning. It should be an interesting report, but probably not market-moving.

Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).

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posted by Bob Carver  # 11:21 PM

The Shanghai market dropped 6% Wednesday (and is on its way lower still on Thursday as it has bounced off its lower trading band in the morning session), but that didn't stop the US stock market from frustrating the bears once again as it took it all in stride and rallied to yet another fresh all-time high. While the minor correction in Shanghai was overdue, the next leg down may be far more severe. Avalanches start when a single grain of sand initiates the move, so the current dip may just be a foreshadowing of what's coming.

But, the US market put in a decent day:

Security	Percentage Change	Change in Dow Industrials Points
Dow Industrials (index)	+0.83%	+111.74
DIAMONDS TRUST SER 1 (DIA)	+0.78%	+105.99
Ultra Dow30 ProShares (DDM)	+1.44%	+194.61
UltraShort Dow30 ProShares (DXD)	-1.21%	-163.89
S&P 500 (index)	+0.80%	+107.95
S& P DEP RECEIPTS (SPY)	+0.81%	+110.13
Ultra S&P500 ProShares (SSO)	+1.65%	+223.06
UltraShort S&P500 ProShares (SDS)	-1.66%	-224.53
Russell 2K (index)	+0.68%	+92.36
ISHARE RUS 2000 INDX (IWM)	+0.56%	+76.26
Ultra Russell 2000 ProShares (UWM)	+1.45%	+195.89
UltraShort Russell 2000 ProShares (TWM)	-1.30%	-175.91
NASDAQ-100 (index)	+0.99%	+134.32
NASDAQ 100 TR SER I (QQQQ)	+0.81%	+109.76
Ultra QQQ ProShares (QLD)	+1.77%	+239.82
UltraShort QQQ ProShares (QID)	-1.85%	-250.34
S&P MidCap 400 (index)	+1.11%	+150.18
ISHARE SP MC 400 INX (IJH)	+1.17%	+157.92
Ultra MC400 ProShares (MVV)	+2.19%	+296.09
UltraShort MC400 ProShares (MZZ)	-2.27%	-307.42
Amex Gold (index)	-0.24%	-32.59
MKT VECT GOLD MNRS (GDX)	+0.11%	+14.25
Semiconductor Sector (index)	-0.36%	-48.97
Ultra Semiconductors ProShares (USD)	-1.19%	-160.51
UltraShort Semiconductors ProShares (SSG)	+1.49%	+201.81

The Fed released minutes from its previous meeting. They showed that the committee members were very much confused and worried by the numbers they are getting. Inflation is not subsiding as they had planned, for instance, which means they can't cut interest rates. The employment numbers are showing a relatively tight labor market, even in the rapidly-sinking construction sector. Fed staff expect the economy's growth to pick up gradually over the next year. However committee members have the opinion that growth will be stronger -- suggesting they are leaning toward a rate hike. In all, the minutes showed a Fed which doesn't have a good grasp on the economic levers and that should be a concern.

However, the journalists must have read a different report. And, traders may have been reading the journalists and not the minutes themselves. The market initially sold off after release of the minutes, but then rallied sharply higher. It turned out that one of the patterns we've been watching the market build out has this kind of conclusion. If so, relief for the bears may be close at hand.

Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).

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posted by Bob Carver  # 12:41 AM

The stock market wavered above and below the unchanged level on Tuesday as sellers were anxious to cash in chips on rallies. This is a sign that the market is in an advanced stage of an intermediate top. By the end of the day, the market showed a slight advance:

Security	Percentage Change	Change in Dow Industrials Points
Dow Industrials (index)	+0.10%	+14.06
DIAMONDS TRUST SER 1 (DIA)	+0.24%	+33.04
Ultra Dow30 ProShares (DDM)	+0.23%	+31.06
UltraShort Dow30 ProShares (DXD)	-0.28%	-38.09
S&P 500 (index)	+0.16%	+21.21
S& P DEP RECEIPTS (SPY)	+0.36%	+48.98
Ultra S&P500 ProShares (SSO)	+0.77%	+103.85
UltraShort S&P500 ProShares (SDS)	-0.21%	-28.63
Russell 2K (index)	+0.88%	+118.62
ISHARE RUS 2000 INDX (IWM)	+1.01%	+135.89
Ultra Russell 2000 ProShares (UWM)	+1.48%	+200.34
UltraShort Russell 2000 ProShares (TWM)	-1.69%	-228.21
NASDAQ-100 (index)	+0.65%	+87.53
NASDAQ 100 TR SER I (QQQQ)	+0.78%	+104.69
Ultra QQQ ProShares (QLD)	+1.28%	+172.67
UltraShort QQQ ProShares (QID)	-1.29%	-173.93
S&P MidCap 400 (index)	+0.55%	+74.30
ISHARE SP MC 400 INX (IJH)	+0.56%	+75.54
Ultra MC400 ProShares (MVV)	+1.43%	+192.86
UltraShort MC400 ProShares (MZZ)	-0.89%	-120.69
Amex Gold (index)	-0.63%	-85.37
MKT VECT GOLD MNRS (GDX)	-0.81%	-109.44
Semiconductor Sector (index)	+0.53%	+71.38
Ultra Semiconductors ProShares (USD)	+1.51%	+203.45
UltraShort Semiconductors ProShares (SSG)	-1.36%	-183.89

Rising interest rates are beginning to draw cash out of the stock market now. However, the strengthening US Dollar is attracting cash flow into the markets. While the crowd is recognizing that stocks are reaching a high, married puts (stocks purchased along with put options to protect against a decline) are popular now. This puts a floor under the market. In addition, covered call-writing provides a barrier to the upside. Given these barriers to the market moving substantially higher or lower, it's not surprising that it is taking the path of least resistance and trading sideways. This pattern is likely to continue for some time to come.

Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).

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Subscriber Links: MyClues Home · Quarter-Hourly Chart Comments · Detailed Comments . . . .

posted by Bob Carver  # 11:02 PM

Last week, the government reported new home sales were actually up 16% and the market initially rallied. Of course, this was a trap, forcing shorts to cover before dropping substantially and wiping out all gains for the week. The figures are an outright government lie (big surprise?) and one of the most obvious lies we've ever seen. The government doesn't subtract cancellations from the gross sales figures and cancellations are running at about half of the actual "sales". That's clearly an attempt to deceive the public into thinking the problems in the housing market are being cured -- they are most definitely not. This means that the reported "gain" was actually a loss. Industry watchers point out that prices declined 11% in one month, the largest drop in history. This, along with the subsequent report that sales of existing homes actually dropped, almost certainly means the housing sector has much further to fall this year instead of the widely-held belief that housing is bottoming.

The market rallied on the bad news about existing home sales dropping on Friday. It appears that the stock market is welcoming signs of a weakening economy. This should not surprise anyone since it follows the very strange pattern of a weakening economy -- now just treading water sideways -- while corporate profits continue to zoom. And, of course, the stock market was bubbling over its all-time highs in the Dow last week (and, very soon, the S&P 500 Index will also surpass its 2000 Bubble High). There's a flood in the market right now and it's a flood of cash (mostly from China we suspect), lifting all boats higher. In other words, "Damn the torpedoes, full speed ahead!" appears to be the rallying cry on Wall Street. Main Street seems to be taking a much different attitude as it hunkers down for layoffs and receding profits.

For the week, stocks were mixed:

Security	Percentage Change	Change in Dow Industrials Points
Dow Industrials (index)	-0.36%	-49.25
DIAMONDS TRUST SER 1 (DIA)	-0.45%	-61.03
Ultra Dow30 ProShares (DDM)	-0.78%	-105.46
UltraShort Dow30 ProShares (DXD)	+0.98%	+132.37
S&P 500 (index)	-0.46%	-62.50
S& P DEP RECEIPTS (SPY)	-0.61%	-82.61
Ultra S&P500 ProShares (SSO)	-1.42%	-192.99
UltraShort S&P500 ProShares (SDS)	+0.89%	+121.23
Russell 2K (index)	+0.80%	+108.98
ISHARE RUS 2000 INDX (IWM)	+0.94%	+127.72
Ultra Russell 2000 ProShares (UWM)	+1.80%	+244.20
UltraShort Russell 2000 ProShares (TWM)	-1.83%	-247.97
NASDAQ-100 (index)	-0.52%	-70.67
NASDAQ 100 TR SER I (QQQQ)	-0.56%	-75.46
Ultra QQQ ProShares (QLD)	-1.18%	-159.45
UltraShort QQQ ProShares (QID)	+1.24%	+168.17
S&P MidCap 400 (index)	-0.21%	-28.83
ISHARE SP MC 400 INX (IJH)	-0.09%	-12.12
Ultra MC400 ProShares (MVV)	-0.67%	-91.15
UltraShort MC400 ProShares (MZZ)	+0.29%	+39.62
Amex Gold (index)	-2.15%	-291.44
MKT VECT GOLD MNRS (GDX)	-1.92%	-260.64
Semiconductor Sector (index)	-2.25%	-305.48
Ultra Semiconductors ProShares (USD)	-4.66%	-631.44
UltraShort Semiconductors ProShares (SSG)	+4.14%	+560.94

Despite all the buybacks and leveraged buyouts pumping cash into the stock market, along with infusions of up to $2.5 Trillion of cash from SWFs (Sovereign Wealth Funds) from places like Norway and other countries (China is officially joining the party, too), the smart money was selling into the rally last week. What do they know, anyway?

While the Federal Reserve Bank may believe the data the government produces, history shows they have been blindsided by bogus government data in the past. In 2001-2, the government consumer price index data suggested the strong possibility of inflation turning negative. The Fed quickly lowered short term rates to 1% to head off deflation. Later, the government revised the inflation data and those revisions show CPI had never indicated the possibility of outright deflation, which meant the Fed had lowered short term rates too low. The Fed then rapidly raised interest rates to usurious levels and flattened current economic growth. Is the government manipulating the Fed by feeding it bad data? Or, is the government as incompetent as the data suggests? The truth is probably a mixture of both.

Right now, we have an economy that's flat on its back, with consumers digging deeper into debt just to keep running in place, while corporations are making out like bandits. The stock market indicates the state of the corporate sector, but there has seldom been as large a disconnect between Wall Street and Main Street as there is now. In the past, Wall Street is the one that has needed a correction, once it realizes the vulnerability of earnings to a consumer virtually tapped out.

However, never underestimate the power of money with the floodgates open and banks full of liquidity. Enjoy it while it lasts because a drought is on its way.

Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).

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posted by Bob Carver  # 10:07 PM

The overdue correction got started Thursday as good news triggered a flash rally which exhausted the bears' stops and turned down sharply as the Dow fell almost 200 points from its record high scored during "Amateur Hour", the first hour of trading on the NYSE:

Security	Percentage Change	Change in Dow Industrials Points
Dow Industrials (index)	-0.62%	-84.52
DIAMONDS TRUST SER 1 (DIA)	-0.60%	-81.03
Ultra Dow30 ProShares (DDM)	-1.29%	-174.96
UltraShort Dow30 ProShares (DXD)	+1.44%	+194.44
S&P 500 (index)	-0.97%	-131.23
S& P DEP RECEIPTS (SPY)	-0.91%	-122.44
Ultra S&P500 ProShares (SSO)	-2.11%	-285.60
UltraShort S&P500 ProShares (SDS)	+2.10%	+283.65
Russell 2K (index)	-1.59%	-215.05
ISHARE RUS 2000 INDX (IWM)	-1.20%	-162.96
Ultra Russell 2000 ProShares (UWM)	-2.80%	-379.00
UltraShort Russell 2000 ProShares (TWM)	+2.76%	+373.73
NASDAQ-100 (index)	-1.30%	-175.79
NASDAQ 100 TR SER I (QQQQ)	-1.43%	-193.51
Ultra QQQ ProShares (QLD)	-2.82%	-382.10
UltraShort QQQ ProShares (QID)	+2.68%	+362.78
S&P MidCap 400 (index)	-1.57%	-211.74
ISHARE SP MC 400 INX (IJH)	-1.38%	-186.13
Ultra MC400 ProShares (MVV)	-3.45%	-466.21
UltraShort MC400 ProShares (MZZ)	+3.16%	+427.60
Amex Gold (index)	-3.14%	-425.31
MKT VECT GOLD MNRS (GDX)	-3.13%	-423.11
Semiconductor Sector (index)	-1.60%	-215.97
Ultra Semiconductors ProShares (USD)	-4.53%	-613.24
UltraShort Semiconductors ProShares (SSG)	+3.93%	+531.66

The market has been in rarefied air, moving higher on fumes, and a correction was definitely needed. Yesterday's remarks by Greenspan hit home as virtually everyone has been holding their collective breath, waiting for the Shanghai market to crash. And, this week's lack of progress at soothing sore trade relationships between currency manipulators China and Japan on the one hand and the US on the other troubled the market as it fears a trade war may be about to break out between the three nations. Both China and Japan have been forcing their currencies lower versus the other major currencies in order to build up huge surpluses of dollars, giving them an advantage over the competition for US purchases of goods and services. The Congress, which constitutionally is the authority which should be regulating trade relations, had delegated that authority to the Bush Administration, but appears on the verge of taking it back. Congressional Democrats seem bound and determined to tighten the screws considerably on these two trade manipulators. If they do, one good effect would be lower rates of inflation in the US, as much of the recent bout of high inflation has been due to currency differentials which have favored an influx of investment money into the US, swelling the M3 Money Supply figures, driving security and commodity prices higher and preventing the Federal Reserve from lowering short term interest rates to stimulate a slack economy. High interest rates have hit the US consumer hard, sending gasoline prices soaring, along with skyrocketing food prices.

One sign of just how slack the economy is comes from the new job figures reported by the Bureau of Labor Statistics every month. Originally, the government counted 498,000 private sector jobs created in the Third Quarter of last year. Shocking revisions to their data now show that only 19,000 new jobs were created that quarter, or an error of over 96% in counting! The US economy needs to create over 100,000 new jobs every month just to keep pace with population growth. Obviously, this is a sign that the economy is bouncing along only on momentum with virtually no jobs in the private sector being created. (Source: U.S. Economy's Mixed Vital Signs Flummox Experts.) Data for the Fourth Quarter may show a net number of job losses due to the much slower GDP growth rate already reported for that quarter.

And, we have other indicators which are pointing toward slowing growth in the economy. The Fed needs to lower interest rates right now, but are waiting for the inflation rate to come down into the 1-2% range before doing so. If the currency manipulators continue to export inflation from their countries into the US, that will not happen and the economy will plunge into recession. Therefore, it is imperative that Congress take the reins of trade back and get the job done of punishing the manipulators before the results are a national recession.

Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).

Is Your ISP Censoring Your Email? Internet email is dying, being choked to death by spam and overzealous service providers. If you're not getting these updates via email and you should be, switch to RSS, the spam-free alternative. For instructions, just visit: http://www.marketclues.net/rss.html.

Subscriber Links: MyClues Home · Quarter-Hourly Chart Comments · Detailed Comments . . . .

posted by Bob Carver  # 10:10 PM

Alan Greenspan, former head of the Federal Reserve, warned investors Wednesday of a "dramatic contraction" ahead in China's stock market. The warning was similar to one Greenspan made in 1996 about the US stock market -- his infamous "irrational exuberance" speech, which might have had the exact opposite effect of accelerating the bull market rally. Stocks bubbled higher for the next four years, confounding the bears who tried to sell it short all the way up.

Asian markets took the warning to heart, opening sharply lower Thursday morning. The US market reversed a sharp rally and closed lower Wednesday after Greenspan's remarks were publicized:

Security	Percentage Change	Change in Dow Industrials Points
Dow Industrials (index)	-0.11%	-14.30
DIAMONDS TRUST SER 1 (DIA)	+0.03%	+4.01
Ultra Dow30 ProShares (DDM)	-0.04%	-5.65
UltraShort Dow30 ProShares (DXD)	-0.14%	-19.16
S&P 500 (index)	-0.12%	-16.35
S& P DEP RECEIPTS (SPY)	+0.01%	+1.78
Ultra S&P500 ProShares (SSO)	-0.11%	-15.25
UltraShort S&P500 ProShares (SDS)	-0.14%	-18.38
Russell 2K (index)	-0.36%	-48.22
ISHARE RUS 2000 INDX (IWM)	-0.40%	-53.62
Ultra Russell 2000 ProShares (UWM)	-0.89%	-120.74
UltraShort Russell 2000 ProShares (TWM)	+0.89%	+120.00
NASDAQ-100 (index)	-0.65%	-87.38
NASDAQ 100 TR SER I (QQQQ)	-0.47%	-63.31
Ultra QQQ ProShares (QLD)	-0.88%	-119.12
UltraShort QQQ ProShares (QID)	+1.15%	+156.20
S&P MidCap 400 (index)	-0.33%	-44.17
ISHARE SP MC 400 INX (IJH)	-0.19%	-25.50
Ultra MC400 ProShares (MVV)	-0.32%	-43.18
UltraShort MC400 ProShares (MZZ)	+0.52%	+69.92
Amex Gold (index)	+1.21%	+164.00
MKT VECT GOLD MNRS (GDX)	+1.18%	+160.28
Semiconductor Sector (index)	-1.30%	-176.04
Ultra Semiconductors ProShares (USD)	-3.07%	-415.05
UltraShort Semiconductors ProShares (SSG)	+3.24%	+438.67

It was interesting to see that a certain group of traders who have been mostly right about the market over the last several months were selling heavily into the morning rally. In today's Notes, we describe which chart told us to expect the selloff, linked below for subscribers only:

Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).

Is Your ISP Censoring Your Email? Internet email is dying, being choked to death by spam and overzealous service providers. If you're not getting these updates via email and you should be, switch to RSS, the spam-free alternative. For instructions, just visit: http://www.marketclues.net/rss.html.

Subscriber Links: MyClues Home · Quarter-Hourly Chart Comments · Detailed Comments . . . .

posted by Bob Carver  # 10:38 PM

The blue chips traded sideways to lower Tuesday, but the broad market soared, indicating life is returning to the market, probably due to liquidity from Yen-carry trades out of China and Japan. The results show how strong the small stocks have been as the Russell 2000 moved to another new all-time high Tuesday:

Security	Percentage Change	Change in Dow Industrials Points
Dow Industrials (index)	-0.02%	-2.93
DIAMONDS TRUST SER 1 (DIA)	-0.03%	-4.01
Ultra Dow30 ProShares (DDM)	0.00%	0.00
UltraShort Dow30 ProShares (DXD)	+0.20%	+27.44
S&P 500 (index)	-0.06%	-8.70
S& P DEP RECEIPTS (SPY)	-0.08%	-10.65
Ultra S&P500 ProShares (SSO)	+0.17%	+23.61
UltraShort S&P500 ProShares (SDS)	+0.33%	+44.79
Russell 2K (index)	+0.71%	+96.67
ISHARE RUS 2000 INDX (IWM)	+0.69%	+93.27
Ultra Russell 2000 ProShares (UWM)	+1.53%	+206.68
UltraShort Russell 2000 ProShares (TWM)	-1.37%	-185.11
NASDAQ-100 (index)	+0.15%	+20.06
NASDAQ 100 TR SER I (QQQQ)	+0.09%	+11.52
Ultra QQQ ProShares (QLD)	+0.12%	+16.00
UltraShort QQQ ProShares (QID)	-0.38%	-51.88
S&P MidCap 400 (index)	+0.21%	+28.42
ISHARE SP MC 400 INX (IJH)	+0.02%	+3.00
Ultra MC400 ProShares (MVV)	+0.42%	+57.36
UltraShort MC400 ProShares (MZZ)	-0.30%	-40.23
Amex Gold (index)	-1.65%	-224.06
MKT VECT GOLD MNRS (GDX)	-1.55%	-209.30
Semiconductor Sector (index)	+0.44%	+59.59
Ultra Semiconductors ProShares (USD)	+2.01%	+272.12
UltraShort Semiconductors ProShares (SSG)	-1.32%	-178.55

This week and next are showing up as significant turning points in a number of markets. But, much of the future depends upon how negotiations between China and the US on currency matters progress. We take a look at one significant turning point in a currency pair which has driven equities and commodities higher over the last few years in today's Notes. See below for the link:

Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).

Is Your ISP Censoring Your Email? Internet email is dying, being choked to death by spam and overzealous service providers. If you're not getting these updates via email and you should be, switch to RSS, the spam-free alternative. For instructions, just visit: http://www.marketclues.net/rss.html.

Subscriber Links: MyClues Home · Quarter-Hourly Chart Comments · Detailed Comments . . . .

posted by Bob Carver  # 11:38 PM

While the blue chips, which had been substantially outperforming in recent days, pulled back on overdue profit-taking, the broad market soared back to lead the way into new high ground on Monday:

Security	Percentage Change	Change in Dow Industrials Points
Dow Industrials (index)	-0.10%	-13.65
DIAMONDS TRUST SER 1 (DIA)	-0.22%	-30.01
Ultra Dow30 ProShares (DDM)	-0.53%	-71.71
UltraShort Dow30 ProShares (DXD)	+0.41%	+55.15
S&P 500 (index)	+0.15%	+20.92
S& P DEP RECEIPTS (SPY)	-0.05%	-7.11
Ultra S&P500 ProShares (SSO)	-0.14%	-19.44
UltraShort S&P500 ProShares (SDS)	-0.08%	-10.54
Russell 2K (index)	+1.22%	+165.78
ISHARE RUS 2000 INDX (IWM)	+1.26%	+170.85
Ultra Russell 2000 ProShares (UWM)	+2.41%	+326.79
UltraShort Russell 2000 ProShares (TWM)	-2.46%	-334.13
NASDAQ-100 (index)	+0.72%	+97.11
NASDAQ 100 TR SER I (QQQQ)	+0.64%	+87.07
Ultra QQQ ProShares (QLD)	+1.39%	+188.98
UltraShort QQQ ProShares (QID)	-1.20%	-162.47
S&P MidCap 400 (index)	+0.82%	+111.24
ISHARE SP MC 400 INX (IJH)	+0.87%	+118.17
Ultra MC400 ProShares (MVV)	+1.69%	+229.29
UltraShort MC400 ProShares (MZZ)	-1.62%	-219.21
Amex Gold (index)	+0.99%	+133.60
MKT VECT GOLD MNRS (GDX)	+1.18%	+159.86
Semiconductor Sector (index)	-0.17%	-23.43
Ultra Semiconductors ProShares (USD)	-0.56%	-76.18
UltraShort Semiconductors ProShares (SSG)	+0.03%	+4.47

In fact, a very significant milestone was reached in the Value Line Index, which surpassed our Measured Move Target of 2437.37, scoring an all-time intraday high of 2444.46 and a closing high of 2437.48. This represents an advance of over 191% in the last four years. Few believed that target was achievable, but we have finally made it.

Both the S&P 400 MidCaps and S&P 500 Blue Chips also scored substantial highs, with the former continuing to lead the way for its technology-ridden sister index. The Russell 2000 Index of small stocks also made a new all-time high fractionally. But, the Dow, although setting yet another intraday new high, ended lower as profit-taking was the name of the game.

Early trading in Shanghai, the most influential stock market in the world right now, shows that market at new highs, with an advance of over 1% over Monday's closing level.

Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).

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posted by Bob Carver  # 11:45 PM

Stocks continued to march higher Friday as options expired. The manipulators who pushed the market lower in the last hour of trading Thursday (in order to buy cheap calls with one day's life left in them) were able to move the market up by one strike on the OEX (S&P 100) Index in one day, earning them a very nice paycheck. According to those who keep track of this kind of manipulation, this was the 16th expiration in a row where this kind of market manipulation has occured. The regulators are either being bribed or don't mind the extra lift to the upside. We wonder what they would do were the manipulation to the downside?

The results of this manipulation looked pretty good to the bulls:

Security	Percentage Change	Change in Dow Industrials Points
Dow Industrials (index)	+0.59%	+79.81
DIAMONDS TRUST SER 1 (DIA)	+0.42%	+56.93
Ultra Dow30 ProShares (DDM)	+1.20%	+161.26
UltraShort Dow30 ProShares (DXD)	-1.30%	-175.87
S&P 500 (index)	+0.66%	+89.09
S& P DEP RECEIPTS (SPY)	+0.87%	+117.58
Ultra S&P500 ProShares (SSO)	+1.51%	+203.15
UltraShort S&P500 ProShares (SDS)	-1.46%	-196.21
Russell 2K (index)	+0.97%	+130.87
ISHARE RUS 2000 INDX (IWM)	+1.18%	+158.49
Ultra Russell 2000 ProShares (UWM)	+2.19%	+295.51
UltraShort Russell 2000 ProShares (TWM)	-2.11%	-284.26
NASDAQ-100 (index)	+0.65%	+87.73
NASDAQ 100 TR SER I (QQQQ)	+0.82%	+110.54
Ultra QQQ ProShares (QLD)	+1.64%	+220.78
UltraShort QQQ ProShares (QID)	-1.67%	-225.68
S&P MidCap 400 (index)	+0.55%	+74.38
ISHARE SP MC 400 INX (IJH)	+0.62%	+83.35
Ultra MC400 ProShares (MVV)	+1.07%	+144.53
UltraShort MC400 ProShares (MZZ)	-1.00%	-135.16
Amex Gold (index)	+1.87%	+251.46
MKT VECT GOLD MNRS (GDX)	+1.96%	+264.18
Semiconductor Sector (index)	-0.12%	-16.15
Ultra Semiconductors ProShares (USD)	+0.69%	+93.20
UltraShort Semiconductors ProShares (SSG)	+0.21%	+28.94

The advance was across the board as the broad market showed some of the muscle it had been lacking since mid-April. Does this indicate that the market might be getting ready for another leg to the upside, or is the market heading for a train wreck? We discuss this, as well as the one key stock market to watch which will set the direction for all others in the next few trading sessions in our Notes page, linked for subscribers directly below.

Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).

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posted by Bob Carver  # 1:23 PM

Friday is the last trading day before options expire on Saturday and it is usually a day when program traders push the stocks which make up the S&P 100 Index (OEX) into "parking slots" which maximize their gains. In particular, one game involves pushing the market down on Thursday, buying cheap out-of-the-money calls, then pushing the market back up on Friday and exercising those calls which are conveniently now in-the-money. Otherwise, Thursday was a run of the mill consolidation day:

Security	Percentage Change	Change in Dow Industrials Points
Dow Industrials (index)	-0.08%	-10.81
DIAMONDS TRUST SER 1 (DIA)	-0.14%	-18.97
Ultra Dow30 ProShares (DDM)	-0.24%	-32.48
UltraShort Dow30 ProShares (DXD)	+0.52%	+70.77
S&P 500 (index)	-0.09%	-12.38
S& P DEP RECEIPTS (SPY)	-0.20%	-26.69
Ultra S&P500 ProShares (SSO)	-0.25%	-33.57
UltraShort S&P500 ProShares (SDS)	+0.35%	+46.67
Russell 2K (index)	-0.56%	-75.32
ISHARE RUS 2000 INDX (IWM)	-0.80%	-107.66
Ultra Russell 2000 ProShares (UWM)	-1.35%	-181.90
UltraShort Russell 2000 ProShares (TWM)	+1.49%	+201.49
NASDAQ-100 (index)	-0.39%	-52.39
NASDAQ 100 TR SER I (QQQQ)	-0.47%	-63.74
Ultra QQQ ProShares (QLD)	-1.07%	-144.74
UltraShort QQQ ProShares (QID)	+1.13%	+152.27
S&P MidCap 400 (index)	+0.10%	+13.00
ISHARE SP MC 400 INX (IJH)	+0.07%	+9.11
Ultra MC400 ProShares (MVV)	+0.16%	+21.52
UltraShort MC400 ProShares (MZZ)	-0.13%	-18.18
Amex Gold (index)	-0.77%	-104.45
MKT VECT GOLD MNRS (GDX)	-0.47%	-63.16
Semiconductor Sector (index)	-1.05%	-141.78
Ultra Semiconductors ProShares (USD)	-1.16%	-155.90
UltraShort Semiconductors ProShares (SSG)	+0.62%	+82.95

Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).

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posted by Bob Carver  # 11:20 PM

The trading range correction ended Wednesday as the Dow reversed sharply higher and closed at a new record high. The US Dollar helped by moving higher versus the Japanese Yen, facilitating Yen-carry traders to buy US securities. The carry trade continues to be a major source of buying pressure for the US market. Our short term indicators, of course, flashed buy signals for traders.

The day started weak as the Euro fell against the Yen. During the past few years, stocks, especially European stocks, have benefitted from the fall in the Yen versus the Euro (again, due to carry trading). European weakness bled over into the US in the morning, sending not only the broad market, but also the blue chips, lower. However, once the European business day ended, buyers flocked to the US market, drawn by US Dollar strength and by the strong bounce off our intermediate term support trendline in the Dow Industrials. By the close, the entire market had registered good gains, with the Dow ending at a fresh, all-time record high:

Security	Percentage Change	Change in Dow Industrials Points
Dow Industrials (index)	+0.77%	+103.69
DIAMONDS TRUST SER 1 (DIA)	+0.75%	+99.79
Ultra Dow30 ProShares (DDM)	+1.51%	+202.01
UltraShort Dow30 ProShares (DXD)	-1.78%	-238.76
S&P 500 (index)	+0.86%	+115.46
S& P DEP RECEIPTS (SPY)	+0.68%	+91.55
Ultra S&P500 ProShares (SSO)	+1.60%	+214.34
UltraShort S&P500 ProShares (SDS)	-1.61%	-215.17
Russell 2K (index)	+0.76%	+102.11
ISHARE RUS 2000 INDX (IWM)	+0.56%	+74.37
Ultra Russell 2000 ProShares (UWM)	+1.49%	+199.51
UltraShort Russell 2000 ProShares (TWM)	-1.32%	-176.96
NASDAQ-100 (index)	+1.05%	+140.66
NASDAQ 100 TR SER I (QQQQ)	+0.98%	+130.65
Ultra QQQ ProShares (QLD)	+1.86%	+249.31
UltraShort QQQ ProShares (QID)	-1.93%	-257.96
S&P MidCap 400 (index)	+0.61%	+81.18
ISHARE SP MC 400 INX (IJH)	+0.46%	+62.03
Ultra MC400 ProShares (MVV)	+0.96%	+127.89
UltraShort MC400 ProShares (MZZ)	-0.92%	-122.60
Amex Gold (index)	-1.00%	-133.75
MKT VECT GOLD MNRS (GDX)	-1.61%	-215.81
Semiconductor Sector (index)	-0.11%	-14.78
Ultra Semiconductors ProShares (USD)	+0.31%	+41.71
UltraShort Semiconductors ProShares (SSG)	+0.15%	+20.05

Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).

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posted by Bob Carver  # 10:21 PM

The stock market staggered sideways through the trading range Tuesday. Although it got a boost early on from the inflation data, causing the Dow to reach our first target, it couldn't hold by the close and put in a shockingly poor showing for a day which saw an all-time high for the Dow 30:

Security	Percentage Change	Change in Dow Industrials Points
Dow Industrials (index)	+0.28%	+37.06
DIAMONDS TRUST SER 1 (DIA)	+0.30%	+39.92
Ultra Dow30 ProShares (DDM)	+0.67%	+89.98
UltraShort Dow30 ProShares (DXD)	-0.49%	-65.81
S&P 500 (index)	-0.13%	-17.40
S& P DEP RECEIPTS (SPY)	+0.03%	+3.55
Ultra S&P500 ProShares (SSO)	-0.27%	-36.46
UltraShort S&P500 ProShares (SDS)	+0.30%	+40.51
Russell 2K (index)	-1.01%	-134.89
ISHARE RUS 2000 INDX (IWM)	-0.88%	-117.62
Ultra Russell 2000 ProShares (UWM)	-1.94%	-258.95
UltraShort Russell 2000 ProShares (TWM)	+1.76%	+235.31
NASDAQ-100 (index)	-0.83%	-111.11
NASDAQ 100 TR SER I (QQQQ)	-0.77%	-103.42
Ultra QQQ ProShares (QLD)	-1.44%	-192.22
UltraShort QQQ ProShares (QID)	+1.75%	+233.91
S&P MidCap 400 (index)	-0.40%	-53.80
ISHARE SP MC 400 INX (IJH)	-0.37%	-49.61
Ultra MC400 ProShares (MVV)	-0.84%	-112.25
UltraShort MC400 ProShares (MZZ)	+0.91%	+120.80
Amex Gold (index)	-0.16%	-21.21
MKT VECT GOLD MNRS (GDX)	-0.23%	-30.67
Semiconductor Sector (index)	-1.20%	-160.17
Ultra Semiconductors ProShares (USD)	-2.27%	-302.49
UltraShort Semiconductors ProShares (SSG)	+1.71%	+228.25

NASDAQ, tech stocks and the broad market were all losers on the day, with the bearish divergence between the blue chips and the NASDAQ-100 Index being especially strong. Typically, the NASDAQ-100 will top before the blue chips, so a strong warning has been sounded now by this classic divergence.

Although indicators are mixed, the potential for the blue chips is still there. That's something we discuss in more detail in our Subscriber Notes page, linked in the paragraph below.

Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).

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posted by Bob Carver  # 10:33 PM

Short term trading indicators flashed sell signals on the market early Monday and the broad market lost substantial ground while the Dow eked out a very modest gain on the day:

Security	Percentage Change	Change in Dow Industrials Points
Dow Industrials (index)	+0.15%	+20.56
DIAMONDS TRUST SER 1 (DIA)	+0.12%	+15.96
Ultra Dow30 ProShares (DDM)	+0.26%	+34.31
UltraShort Dow30 ProShares (DXD)	-0.22%	-28.85
S&P 500 (index)	-0.18%	-23.89
S& P DEP RECEIPTS (SPY)	-0.22%	-29.15
Ultra S&P500 ProShares (SSO)	-0.37%	-48.83
UltraShort S&P500 ProShares (SDS)	+0.50%	+66.06
Russell 2K (index)	-0.84%	-111.38
ISHARE RUS 2000 INDX (IWM)	-0.73%	-97.15
Ultra Russell 2000 ProShares (UWM)	-1.92%	-255.34
UltraShort Russell 2000 ProShares (TWM)	+1.65%	+219.97
NASDAQ-100 (index)	-0.63%	-84.57
NASDAQ 100 TR SER I (QQQQ)	-0.68%	-91.16
Ultra QQQ ProShares (QLD)	-1.44%	-192.05
UltraShort QQQ ProShares (QID)	+1.42%	+188.92
S&P MidCap 400 (index)	-0.39%	-52.17
ISHARE SP MC 400 INX (IJH)	-0.30%	-40.40
Ultra MC400 ProShares (MVV)	-0.81%	-108.35
UltraShort MC400 ProShares (MZZ)	+0.74%	+98.23
Amex Gold (index)	-2.07%	-276.25
MKT VECT GOLD MNRS (GDX)	-1.90%	-253.71
Semiconductor Sector (index)	-0.14%	-19.27
Ultra Semiconductors ProShares (USD)	-1.22%	-162.01
UltraShort Semiconductors ProShares (SSG)	+0.73%	+97.74

Despite the Dow's modest gain for the day, internal measures showed that insiders were selling into the rally as this broadening top continues toward its conclusion. Following completion of the top, the largest correction in years could send stocks careening back down the mountain. However, nothing is a foregone conclusion in this Sea of Liquidity and the next correction could be just a few percentage points, setting up another run to new highs, this time to Dow 16,000. We'll assess the market as it unfolds, of course. The problem with liquidity is that it can be excessive one day and completely disappear the next. If you are invested in stocks, remember that fact, for it will come back to haunt you someday. When someone yells "Fire!" in the crowded theater, the surge through the exits inevitably creates many victims.

As you would expect, the public has been herded back into the market by that elemental emotion called "greed". Investor's Intelligence reports that the number of bulls outnumber the number of bears by a factor of 2.66:1. Our own option sentiment gauges have been flashing warnings that the typically bearish speculators of the last four years have completely throw in the towel and switched to a bullish stance, buying call options on dips. This is exactly the type of financial insanity we saw at the Bubble Top of 2000.

This doesn't mean the market will roll over to the downside immediately, of course, and traders are very likely going to have a golden opportunity to sell the S&P 500 Index short after it hits an all-time high above its 2000 high of 1552.87. Greed is an emotion which can last for a very long time -- at least, it can last until the "Greatest Fool" has bought into the mania!

Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).

Is Your ISP Censoring Your Email? Internet email is dying, being choked to death by spam and overzealous service providers. If you're not getting these updates via email and you should be, switch to RSS, the spam-free alternative. For instructions, just visit: http://www.marketclues.net/rss.html.

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posted by Bob Carver  # 11:29 PM

Welcome to options expiration week in the stock market. Barring external developments, this is the week when options typically lose their remaining time premium and expire worthless. Although there is still some evidence pointing to higher highs in the bluest of the blue chip indices, strength probably won't be felt in them this week, but will be postponed until the week afterward to avoid paying May call buyers.

Friday was a bounceback day in the market. On Wedneday, we saw the commercials shorting the market into the close, resulting in a waterfall decline on Thursday. But, Thursday's action saw those same commercials covering their shorts and buying heavily, resulting in Friday's up move. Overall, the week was basically good for traders, but a wash overall:

Security	Percentage Change	Change in Dow Industrials Points
Dow Industrials (index)	+0.46%	+61.60
DIAMONDS TRUST SER 1 (DIA)	+0.62%	+81.94
Ultra Dow30 ProShares (DDM)	+0.87%	+114.83
UltraShort Dow30 ProShares (DXD)	-0.88%	-116.45
S&P 500 (index)	+0.02%	+2.03
S& P DEP RECEIPTS (SPY)	-0.04%	-5.27
Ultra S&P500 ProShares (SSO)	-0.14%	-18.03
UltraShort S&P500 ProShares (SDS)	+0.31%	+40.59
Russell 2K (index)	-0.41%	-54.17
ISHARE RUS 2000 INDX (IWM)	-0.69%	-91.24
Ultra Russell 2000 ProShares (UWM)	-0.85%	-113.14
UltraShort Russell 2000 ProShares (TWM)	+1.13%	+149.73
NASDAQ-100 (index)	+0.25%	+32.61
NASDAQ 100 TR SER I (QQQQ)	+0.32%	+42.67
Ultra QQQ ProShares (QLD)	+0.24%	+31.70
UltraShort QQQ ProShares (QID)	-0.36%	-47.54
S&P MidCap 400 (index)	+0.20%	+26.91
ISHARE SP MC 400 INX (IJH)	0.00%	0.00
Ultra MC400 ProShares (MVV)	+0.48%	+63.33
UltraShort MC400 ProShares (MZZ)	-0.39%	-51.26
Amex Gold (index)	-2.01%	-267.27
MKT VECT GOLD MNRS (GDX)	-1.94%	-257.41
Semiconductor Sector (index)	-0.15%	-19.68
Ultra Semiconductors ProShares (USD)	+2.72%	+360.81
UltraShort Semiconductors ProShares (SSG)	-2.45%	-324.44

In this weekend's Notes (linked below) we delve into more details of the YCT (Yen-carry Trade) and why this "positive feedback" system is presenting the possibility of a repeat of 1987 ... or 1929. We tell you what might trigger YCT unwinding, as well as a specific investment recommendation to use in the event of YCT unwinding.

Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).

Is Your ISP Censoring Your Email? Internet email is dying, being choked to death by spam and overzealous service providers. If you're not getting these updates via email and you should be, switch to RSS, the spam-free alternative. For instructions, just visit: http://www.marketclues.net/rss.html.

Subscriber Links: MyClues Home · Quarter-Hourly Chart Comments · Detailed Comments . . . .

posted by Bob Carver  # 1:42 AM

It appears that the bubble in the Chinese stock market is finally becoming a concern as Goldman Sachs is warning that:

"It is now a critical time for the government to take action and prevent the excess from building up further."

Here are some interesting factoids about the Chinese stock market:

• The total value of all stocks on the Shanghai Exchange exceeds the value of all other Asian stock exchanges combined -- including Japan, the second largest stock exchange in the world.

• The Shanghai Index has quadrupled in the last 22 months.

• PE Ratios are in the 40-50 range.

• Goldman Sachs economist Hong Liang said new stock account openings in the month of April totaled 4.79 million, exceeding those of 2005 and 2006 put together. About 17% of total accounts were opened in the past four months.

• Beijing is aware of the risks, and over the weekend, Gov. Zhou Xiaochuan of the People's Bank of China told reporters that he, too, is concerned about a possible bubble forming in the stock market.

If it were possible to let the air out of a bubble slowly, of course that would be the right course of action. However, at this stage of overvaluation, that's not possible. Probably the only way the government could prevent a crash is to shut the market down completely for some period of time (say, a few years). That isn't really practical and would likely be a cure worse than the disease. There's really nothing good that can come out of the situation, so just expect a crash sooner or later.

The last time the Shanghai market had a 10% correction in February, it quickly pulled the rest of the stock markets around the world down with it. Since then, just 3 months later, Shanghai is now 33% above the level it reached before that correction, after having pulled stocks higher along with it worldwide. No doubt, a much large correction will happen this time and it will have a much stronger impact on the rest of the planet's stock markets. In fact, it may have already started. And, it will come at the worst possible time for the US stock market, which has been pushed to an extreme of overvaluation by Yen-carry loans to fund private-equity buyouts of public companies and massive share buybacks by corporations.

The US market fell sharply Thursday. More troubling was the fact that option speculators bought call options on the dip. Normally, option specs buy puts on dips because they expect the market to continue down. Only very rarely are they so bullish as to actually buy calls, expecting the market to immediately turn around and rally to a new high before those calls lose a substantial amount of value (options are a wasting asset which decay with every tick of the clock and if a market doesn't move quickly in the "right" direction, they fall in value). In fact, we can only recall one other time when the option speculators bought calls on a dip. That dip was the one which followed the absolute high in the S&P 500 Index in March 2000. If the market is able to rally back here to a new high -- and we certainly wouldn't be surprised by such behavior -- it would indicate that the top being built now is a larger degree top than even 2000. And, of course, we know that last top was followed by an 80% decline in the NASDAQ.

In any case, here are the results of Thursday's bubble -- er, stock market -- trading:

Security	Percentage Change	Change in Dow Industrials Points
Dow Industrials (index)	-1.11%	-147.74
DIAMONDS TRUST SER 1 (DIA)	-0.80%	-107.05
Ultra Dow30 ProShares (DDM)	-2.14%	-285.41
UltraShort Dow30 ProShares (DXD)	+1.66%	+221.22
S&P 500 (index)	-1.40%	-186.50
S& P DEP RECEIPTS (SPY)	-1.05%	-139.68
Ultra S&P500 ProShares (SSO)	-2.27%	-302.72
UltraShort S&P500 ProShares (SDS)	+2.11%	+281.32
Russell 2K (index)	-1.92%	-257.07
ISHARE RUS 2000 INDX (IWM)	-1.31%	-174.68
Ultra Russell 2000 ProShares (UWM)	-2.79%	-373.21
UltraShort Russell 2000 ProShares (TWM)	+2.73%	+364.65
NASDAQ-100 (index)	-1.44%	-191.81
NASDAQ 100 TR SER I (QQQQ)	-1.37%	-182.62
Ultra QQQ ProShares (QLD)	-2.51%	-335.19
UltraShort QQQ ProShares (QID)	+2.77%	+370.72
S&P MidCap 400 (index)	-1.39%	-185.39
ISHARE SP MC 400 INX (IJH)	-0.82%	-109.22
Ultra MC400 ProShares (MVV)	-2.69%	-359.12
UltraShort MC400 ProShares (MZZ)	+2.60%	+347.19
Amex Gold (index)	-2.87%	-383.81
MKT VECT GOLD MNRS (GDX)	-2.76%	-368.63
Semiconductor Sector (index)	-2.10%	-280.83
Ultra Semiconductors ProShares (USD)	-3.38%	-451.65
UltraShort Semiconductors ProShares (SSG)	+3.26%	+436.12

As Confucius might have reminded us after seeing the state the world's stock markets are in,

"By three methods we may learn wisdom: First, by reflection, which is noblest; Second, by imitation, which is easiest; and third by experience, which is the bitterest."

Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).

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posted by Bob Carver  # 10:56 PM

The House Ways and Means Committee met Wednesday to hear testimony on the ongoing currency manipulation by China and Japan. Fred Bergsten, director of the Petersen Institute for International Economics, was reported by AFP to have told the panel that the 857-billion-dollar US trade and investment deficit has boosted US debt to other nations to 14 trillion dollars.

"The global imbalances probably represent the single largest current threat to the continued growth and stability of the US and world economies," Bergsten said.

Bergsten said that China, by keeping its currency artificially low, is "exporting unemployment to other countries."

He said an "orderly" correction of the imbalances could be achieved by an increase of at least 15 percent in the value of the yuan against other currencies, "which would imply an appreciation of about 35 percent against the dollar."

Despite this and other testimony, the Japanese Yen slipped lower due to intense selling pressure during Wednesday's session. The currency manipulators are not only inflating stock prices into the stratosphere, they are one of the main providers of inflation in energy prices, as well as food, both of which components are ignored by the Federal Reserve in setting monetary policy. Even so, prices on other items are clearly feeding the inflationary engine.

The FOMC (Federal Open Market Committee) released a statement following their meeting Wednesday which included the following:

"Core inflation remains somewhat elevated. Although inflation pressures seem likely to moderate over time, the high level of resource utilization has the potential to sustain those pressures."

The reason the FOMC is being required to maintain a relatively high level of interest rates in the context of an economy which is bumping along barely in positive territory is that the currency manipulators are driving core inflation, as well as headline inflation, above the Fed's upper target band. This is costing the US consumer and businesses billions of dollars every year in extra interest expense.

Some say that the US consumer is benefitting from lower prices from Chinese goods. What they fail to see is that the US consumer is paying more after interest costs are factored into the total equation. And, the lower price tags on goods imported from China come at a price -- that price is the loss of manufacturing capacity and jobs in the US. This transfer of jobs and markets to Asian nations is depleting the base of manufacturing which is vital for the US to maintain its lifestyle. Certainly, the US consumer is not benefitting from the Asian-induced rise in the price of energy, a direct result of Asian currency manipulation.

Although we don't think punitive tariffs are the solution, it is imperative that something be done to undo the damage which continues to be done to the US economy, mostly from the communists of the Chinese central bank.

The stock market reacted to the FOMC statement by jumping around like a flea and ended up on the day. However, strong selling by insiders was evident all day, even after the statement was released. Yes, the rats are deserting the sinking ship. Maybe they are simply seeing that some action will be taken against the currency manipulators who are driving prices to the moon and they're getting out while they can. Every day we see that a rally in the Yen causes the stock market to fall. Then, when the manipulators sell the Yen down, the stock market rallies higher. Once the manipulation stops, it will be a one-way street down the hill in the stock market, as well as in most commodity markets.

In any case, it's doubtful these stock prices will hold for long:

Security	Percentage Change	Change in Dow Industrials Points
Dow Industrials (index)	+0.40%	+53.80
DIAMONDS TRUST SER 1 (DIA)	+0.34%	+44.99
Ultra Dow30 ProShares (DDM)	+0.80%	+106.01
UltraShort Dow30 ProShares (DXD)	-0.70%	-93.76
S&P 500 (index)	+0.32%	+42.90
S& P DEP RECEIPTS (SPY)	+0.27%	+36.20
Ultra S&P500 ProShares (SSO)	+0.66%	+87.71
UltraShort S&P500 ProShares (SDS)	-0.25%	-33.03
Russell 2K (index)	+0.50%	+66.33
ISHARE RUS 2000 INDX (IWM)	+0.40%	+53.37
Ultra Russell 2000 ProShares (UWM)	+0.45%	+60.50
UltraShort Russell 2000 ProShares (TWM)	-0.97%	-129.64
NASDAQ-100 (index)	+0.35%	+47.14
NASDAQ 100 TR SER I (QQQQ)	+0.21%	+28.48
Ultra QQQ ProShares (QLD)	+0.74%	+98.58
UltraShort QQQ ProShares (QID)	-0.80%	-106.25
S&P MidCap 400 (index)	+0.67%	+89.74
ISHARE SP MC 400 INX (IJH)	+0.67%	+88.51
Ultra MC400 ProShares (MVV)	+1.77%	+235.11
UltraShort MC400 ProShares (MZZ)	-1.44%	-192.18
Amex Gold (index)	-0.25%	-32.81
MKT VECT GOLD MNRS (GDX)	-0.37%	-48.99
Semiconductor Sector (index)	+1.69%	+225.48
Ultra Semiconductors ProShares (USD)	+3.96%	+527.14
UltraShort Semiconductors ProShares (SSG)	-3.98%	-529.63

"Every day that passes brings us closer to that ultimate smash." The higher this market goes, the further it has to fall. Welcome to a replay of the manias of the past: 1929, 1946, 1962, 1987 and 2000.

Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).

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posted by Bob Carver  # 11:58 PM

For communists, the Chinese central bankers are playing the capitalist trading game very well. However, they may just be about to run into some trouble in the form of a US Congress that's ready to crack down on their trade practices.

For several years, China has been building up a huge surplus of US Dollars, well over $1 Trillion now and growing at more than a million dollars a minute, as a result of their growing trade surplus with the US. Or, so we thought. But, it seems the books don't add up. China's horde of dollars exceeds their earnings from exports to the US. This little bit of information was described in John Mauldin's Outside the Box E-Letter on Monday. John included an article by Louis-Vincent Gave of Gave-Kal Associates of Hong Kong in which was revealed that,

"Why a country like China has been able to save so much more than it has earned? We must realize that, behind a large part of the growth in central bank reserves lies not "earned US$" but "borrowed US$". And these "borrowed US$" may, one day, need to be repaid (in 1983-85 and 1997- 2001, the need to repay previously borrowed US$ led to a true short-squeeze on the US$ and the greenback reached silly values)."

In other words, China's central bank has been flooding the market with US Dollars, shorting them against other currencies and driving the US Dollar down while China's own currency, the RMB, has been "allowed" to slowly, very slowly, appreciate against the USD. This explains why the trade deficit with China has been growing despite this price appreciation of the RMB. It also explains how the Chinese are able to keep their competitive position vis-a-vis other trading partners of the US: they are shorting the USD to maintain a relative trade advantage.

Of course, the flip side of this process is that the weak Dollar has raised the prices of products imported into the US from other countries, essentially importing inflation and driving the money supply higher in the US. And, our own Federal Reserve Bank has lost control of this money -- it was created out of thin air by China's central bank. That's why the Fed is so concerned with the prospect of inflation and why they have kept interest rates so high in the face of a rapidly deteriorating US economy -- it's the only weapon they have available to fight the Chinese inflation threat. If it pushes the US into recession, it will be quite ironic that it was due to a communist trading partner. Perhaps this is what Nikita Krushchev had in mind when he banged his shoe on the podium of the UN and declared that the communists would "bury the West."

The US House will meet today (Wednesday) to conduct hearings into this matter. If matters come to a head, it's possible that they will enact punitive tariffs against China. Unfortunately, this "Chinese Perpetual Motion Machine" won't be able to stand the friction created by trade tariffs and could shatter to pieces, much as the trade situation shattered in the last Great Depression of the 1930's. While we don't think tariffs are the answer, we suggest that it's something to watch. With all markets now synchronized to the currency clock, all the markets could deflate togther in the same way they have all inflated together.

The stock market was hit by a blip up in the Japanese Yen Tuesday and slipped lower. It could have been much worse, but intense selling of the Yen in the US sesssion pushed it back down, pulling stocks back up:

Security	Percentage Change	Change in Dow Industrials Points
Dow Industrials (index)	-0.03%	-3.90
DIAMONDS TRUST SER 1 (DIA)	+0.06%	+8.01
Ultra Dow30 ProShares (DDM)	+0.19%	+25.84
UltraShort Dow30 ProShares (DXD)	-0.04%	-5.21
S&P 500 (index)	-0.12%	-15.52
S& P DEP RECEIPTS (SPY)	-0.13%	-17.64
Ultra S&P500 ProShares (SSO)	-0.11%	-15.30
UltraShort S&P500 ProShares (SDS)	-0.02%	-2.54
Russell 2K (index)	-0.15%	-19.68
ISHARE RUS 2000 INDX (IWM)	-0.36%	-48.36
Ultra Russell 2000 ProShares (UWM)	-0.19%	-25.89
UltraShort Russell 2000 ProShares (TWM)	+0.70%	+92.67
NASDAQ-100 (index)	+0.06%	+8.28
NASDAQ 100 TR SER I (QQQQ)	+0.21%	+28.55
Ultra QQQ ProShares (QLD)	-0.05%	-7.25
UltraShort QQQ ProShares (QID)	+0.06%	+8.40
S&P MidCap 400 (index)	+0.04%	+5.97
ISHARE SP MC 400 INX (IJH)	-0.20%	-26.96
Ultra MC400 ProShares (MVV)	-0.25%	-33.91
UltraShort MC400 ProShares (MZZ)	+0.02%	+2.56
Amex Gold (index)	-0.82%	-109.57
MKT VECT GOLD MNRS (GDX)	-0.56%	-74.72
Semiconductor Sector (index)	-0.54%	-72.13
Ultra Semiconductors ProShares (USD)	+0.02%	+3.31
UltraShort Semiconductors ProShares (SSG)	+0.40%	+53.19

Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).

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posted by Bob Carver  # 12:09 AM

As the formerly lagging blue chips (Dow Industrials) soar into record territory virtually day after day after day, they are head-faking the public into turning bullish. This is a sure sign that once the investing public (perpetual rubes when it comes to investing) are all loaded up with expensive shares, the trap door will be dropped by the smart money and those poor souls will be swimming underwater once again. The investing public is so impressed by higher prices on the Dow that it very dutifully "herds" into the market, lining up for the slaughter. The image of the Eloi marching to be eaten by the Morlocks in George Pal's Time Machine movie comes to mind here.

The opposite behavior is seen at bottoms. The crowd runs away in a great herd, selling virtually at bottom tick, when they should be buying with both fists. As the saying goes, a fool and his money are soon parted.

Monday's trading results show just how easily the crowd can be parted from their money:

Security	Percentage Change	Change in Dow Industrials Points
Dow Industrials (index)	+0.36%	+48.35
DIAMONDS TRUST SER 1 (DIA)	+0.23%	+29.98
Ultra Dow30 ProShares (DDM)	+0.34%	+44.50
UltraShort Dow30 ProShares (DXD)	-0.27%	-36.23
S&P 500 (index)	+0.26%	+34.01
S& P DEP RECEIPTS (SPY)	+0.02%	+2.64
Ultra S&P500 ProShares (SSO)	+0.06%	+8.32
UltraShort S&P500 ProShares (SDS)	+0.19%	+25.37
Russell 2K (index)	-0.08%	-10.83
ISHARE RUS 2000 INDX (IWM)	-0.34%	-44.82
Ultra Russell 2000 ProShares (UWM)	-0.31%	-41.14
UltraShort Russell 2000 ProShares (TWM)	+0.49%	+65.37
NASDAQ-100 (index)	+0.02%	+3.15
NASDAQ 100 TR SER I (QQQQ)	0.00%	0.00
Ultra QQQ ProShares (QLD)	-0.23%	-30.25
UltraShort QQQ ProShares (QID)	+0.30%	+39.15
S&P MidCap 400 (index)	+0.01%	+1.64
ISHARE SP MC 400 INX (IJH)	-0.18%	-23.83
Ultra MC400 ProShares (MVV)	-0.04%	-5.63
UltraShort MC400 ProShares (MZZ)	+0.35%	+46.14
Amex Gold (index)	+0.76%	+100.90
MKT VECT GOLD MNRS (GDX)	+0.66%	+87.97
Semiconductor Sector (index)	-0.35%	-46.17
Ultra Semiconductors ProShares (USD)	-0.45%	-59.04
UltraShort Semiconductors ProShares (SSG)	-0.05%	-6.62

In today's Notes (linked below), we'll concentrate on the leader in this market and why it continues to be the one to watch for overall market direction.

Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).

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posted by Bob Carver  # 11:13 PM

Since the stock market lows of March 2003, every dip has represented a buying opportunity for bulls to buy and a trap for the bears to sell short. We are now on the verge of a trend which will see every rally as an opportunity for bears to sell short and a trap for bulls to buy.

Friday continued the string of rallies which are twisting the minds of the few bears who remain short from lower levels, as well as the bulls, who are exhibiting strong bullish sentiment, a sure sign that they are being psychologically trapped by rising prices:

Security	Percentage Change	Change in Dow Industrials Points
Dow Industrials (index)	+0.18%	+23.24
DIAMONDS TRUST SER 1 (DIA)	+0.26%	+35.01
Ultra Dow30 ProShares (DDM)	+0.60%	+79.28
UltraShort Dow30 ProShares (DXD)	-0.50%	-66.82
S&P 500 (index)	+0.21%	+28.47
S& P DEP RECEIPTS (SPY)	+0.38%	+50.20
Ultra S&P500 ProShares (SSO)	+0.71%	+93.41
UltraShort S&P500 ProShares (SDS)	-0.49%	-65.51
Russell 2K (index)	+0.49%	+64.41
ISHARE RUS 2000 INDX (IWM)	+0.70%	+93.33
Ultra Russell 2000 ProShares (UWM)	+1.04%	+138.33
UltraShort Russell 2000 ProShares (TWM)	-1.21%	-160.14
NASDAQ-100 (index)	+0.00%	+0.42
NASDAQ 100 TR SER I (QQQQ)	+0.09%	+11.37
Ultra QQQ ProShares (QLD)	+0.24%	+31.72
UltraShort QQQ ProShares (QID)	-0.15%	-19.51
S&P MidCap 400 (index)	+0.43%	+57.08
ISHARE SP MC 400 INX (IJH)	+0.67%	+88.31
Ultra MC400 ProShares (MVV)	+0.99%	+130.53
UltraShort MC400 ProShares (MZZ)	-1.01%	-134.24
Amex Gold (index)	+0.08%	+11.12
MKT VECT GOLD MNRS (GDX)	0.00%	0.00
Semiconductor Sector (index)	+1.05%	+138.40
Ultra Semiconductors ProShares (USD)	+1.79%	+236.63
UltraShort Semiconductors ProShares (SSG)	+0.17%	+22.07

Despite all the bullish sentiment and the money flowing into the laggard blue chips, the S&P 500 Index has yet to retrace even a substandard 38% of its 2000-2003 decline when those losses are revalued in terms of Euros. Thus, while the nominal S&P 500 Index in US Dollars is near a new high, the value of the stocks which make up the index are still showing a 36% loss in Euros over the last seven years.

The bull market, such as it was in the broad market, is basically over. The leaders of the bull market are very close to the ultimate highs we've been targeting and what's left are crumbs on the table. Yet, the headline blue chips are making nominal new highs and attracting buyers who are in almost a panic thinking they are missing out. That's the sentiment you will always see at the top. It is exactly the sentiment we saw at the 2000 top. There's only one missing element in sentiment to confirm a top is already behind us: bullish sentiment on dips. When the average investor is so anxious to get in on the "rally" that they throw caution to the wind, you know the top is confirmed. And, we haven't seen that emotion quite yet.

The final chapter of this market uptrend will probably record the S&P 500 Index making a nominal all-time new high. The measured move target from the last dip is 1559, putting the index comfortably in the record books -- and trapping the bulls in a turnaround not unlike the manic, bubble top of 2000.

Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).

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posted by Bob Carver  # 11:36 AM

Uptrends climb a Wall of Worry, as this uptrend has done since the low of March 2003. That Wall of Worry is crumbling as the blue chip indices have moved into new high ground.

Sentiment measures are showing that the public is getting close to overly-bullish on stocks. Our OEX measure is approaching the level where about twice as much money is being spent on upside bets versus downside bets. This carries through to the S&P 500 measures as well. It's clear that a major correction is needed soon.

The April Employment Report will be released by the government Friday morning and it's expected to be weak. However, due to a fudge factor which is added to the data, it's always a bit of a surprise. Recent reports have been stronger than expected. Earlier in the week, the ADP Report showed a substantially lower number of new jobs created in April and that report uses actual payroll data (ADP cuts many payroll checks for private firms across the country). But, the number is always something of a surprise.

Recent economic indicators have been mixed, but it does appear that a mild slump has hit the US economy. Some of it is from the dip in housing. On the positive side, the weak US Dollar (against most major currencies, except the Japanese Yen) has translated into higher profits for multinational companies and has compensated for a slower-growing economy.

Thursday's result showed the market, after a mostly blue-chip rally, is very tired:

Security	Percentage Change	Change in Dow Industrials Points
Dow Industrials (index)	+0.22%	+29.50
DIAMONDS TRUST SER 1 (DIA)	+0.19%	+25.00
Ultra Dow30 ProShares (DDM)	+0.44%	+57.78
UltraShort Dow30 ProShares (DXD)	-0.52%	-68.88
S&P 500 (index)	+0.43%	+57.14
S& P DEP RECEIPTS (SPY)	+0.54%	+71.56
Ultra S&P500 ProShares (SSO)	+0.90%	+119.30
UltraShort S&P500 ProShares (SDS)	-1.22%	-161.42
Russell 2K (index)	+0.02%	+2.55
ISHARE RUS 2000 INDX (IWM)	+0.17%	+22.52
Ultra Russell 2000 ProShares (UWM)	-0.07%	-8.62
UltraShort Russell 2000 ProShares (TWM)	-0.02%	-2.08
NASDAQ-100 (index)	+0.31%	+41.32
NASDAQ 100 TR SER I (QQQQ)	+0.37%	+48.39
Ultra QQQ ProShares (QLD)	+0.77%	+101.46
UltraShort QQQ ProShares (QID)	-0.92%	-121.26
S&P MidCap 400 (index)	+0.27%	+35.49
ISHARE SP MC 400 INX (IJH)	+0.19%	+25.44
Ultra MC400 ProShares (MVV)	+0.44%	+58.30
UltraShort MC400 ProShares (MZZ)	-0.38%	-50.35
Amex Gold (index)	+1.08%	+142.31
MKT VECT GOLD MNRS (GDX)	+0.87%	+114.57
Semiconductor Sector (index)	+0.40%	+52.22
Ultra Semiconductors ProShares (USD)	+0.37%	+48.40
UltraShort Semiconductors ProShares (SSG)	-1.72%	-227.23

Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).

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posted by Bob Carver  # 11:42 PM

The stock market continued the bounce back from Monday's selling as the Dow went to another new all-time high. However, the broad market is lagging, failing to follow to new highs of its own and that constitues a case of bearish divergence. In other words, we have a cadre of bulls leading the charge higher while the troops follow reluctantly. That can persist for a short while, but, historically, it has always ended badly:

Security	Percentage Change	Change in Dow Industrials Points
Dow Industrials (index)	+0.58%	+75.74
DIAMONDS TRUST SER 1 (DIA)	+0.65%	+85.05
Ultra Dow30 ProShares (DDM)	+1.19%	+156.97
UltraShort Dow30 ProShares (DXD)	-1.26%	-165.30
S&P 500 (index)	+0.65%	+85.02
S& P DEP RECEIPTS (SPY)	+0.59%	+76.87
Ultra S&P500 ProShares (SSO)	+1.22%	+159.61
UltraShort S&P500 ProShares (SDS)	-1.17%	-153.74
Russell 2K (index)	+1.50%	+196.68
ISHARE RUS 2000 INDX (IWM)	+1.24%	+163.51
Ultra Russell 2000 ProShares (UWM)	+2.96%	+388.28
UltraShort Russell 2000 ProShares (TWM)	-2.78%	-365.00
NASDAQ-100 (index)	+0.87%	+114.29
NASDAQ 100 TR SER I (QQQQ)	+0.67%	+88.31
Ultra QQQ ProShares (QLD)	+1.28%	+167.85
UltraShort QQQ ProShares (QID)	-1.50%	-197.03
S&P MidCap 400 (index)	+1.14%	+149.18
ISHARE SP MC 400 INX (IJH)	+1.18%	+155.04
Ultra MC400 ProShares (MVV)	+2.28%	+299.30
UltraShort MC400 ProShares (MZZ)	-2.09%	-274.49
Amex Gold (index)	+2.56%	+335.85
MKT VECT GOLD MNRS (GDX)	+2.70%	+354.31
Semiconductor Sector (index)	+0.87%	+113.78
Ultra Semiconductors ProShares (USD)	+1.10%	+144.26
UltraShort Semiconductors ProShares (SSG)	-1.97%	-259.43

One of the bright spots remaining is that option speculators have not yet chosen to buy calls on the dips. They are quick to load up on puts (protection against the market falling substantially). This "fear factor" is a hallmark of an advance that can continue.

Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).

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posted by Bob Carver  # 11:19 PM

The Dow was strong on Tuesday as it recovered well from its dip Monday:

Security	Percentage Change	Change in Dow Industrials Points
Dow Industrials (index)	+0.56%	+73.23
DIAMONDS TRUST SER 1 (DIA)	+0.47%	+61.98
Ultra Dow30 ProShares (DDM)	+1.07%	+140.24
UltraShort Dow30 ProShares (DXD)	-0.85%	-111.12
S&P 500 (index)	+0.27%	+34.63
S& P DEP RECEIPTS (SPY)	+0.26%	+33.47
Ultra S&P500 ProShares (SSO)	+0.25%	+32.39
UltraShort S&P500 ProShares (SDS)	-0.50%	-65.19
Russell 2K (index)	+0.20%	+26.30
ISHARE RUS 2000 INDX (IWM)	+0.50%	+64.72
Ultra Russell 2000 ProShares (UWM)	+0.76%	+99.03
UltraShort Russell 2000 ProShares (TWM)	-0.76%	-98.96
NASDAQ-100 (index)	+0.30%	+39.73
NASDAQ 100 TR SER I (QQQQ)	+0.33%	+42.63
Ultra QQQ ProShares (QLD)	+0.61%	+80.32
UltraShort QQQ ProShares (QID)	-0.57%	-74.72
S&P MidCap 400 (index)	+0.28%	+37.08
ISHARE SP MC 400 INX (IJH)	+0.33%	+43.55
Ultra MC400 ProShares (MVV)	+0.54%	+70.84
UltraShort MC400 ProShares (MZZ)	-0.83%	-108.76
Amex Gold (index)	-0.83%	-107.94
MKT VECT GOLD MNRS (GDX)	-0.66%	-85.85
Semiconductor Sector (index)	+0.24%	+31.54
Ultra Semiconductors ProShares (USD)	+1.05%	+136.53
UltraShort Semiconductors ProShares (SSG)	-0.84%	-110.23

Option traders in the OEX and SPX were quick to buy puts on the dip, which tells us we aren't on the downside yet of a top in those blue chips. But, QQQ traders were almost overly-bullish in their pursuit of upside bets, suggesting that the NASDAQ's rally may be close to ending.

Although the blue chips did put in a nice rally and ended the day on the upside, the performance of the small stocks of the Russell 2000 left a lot to be desired. It appears that their 7-year stretch of outperformance is behind us now. That's a sea change that has important implications for the future course of the market.

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posted by Bob Carver  # 10:58 PM