Remember never forget the power of greed and fear, and the propensity for investors wanting to own stocks (taking long-side) and fund managers chasing performance as we saw today especially if they think the bull-train is pulling away they will want to hop on board.  Please, remember when in doubt as to market conditions/direction CASH is always king (or queen depending on your gender J ) please trade cautiously and be quick to protect your profits. I’m guessing that this the days ahead we will become embroiled in a major bull-bear battle as we head into earning season.

Wow what a week….I was sidelined for the last 2-trading days due to a McAfee virus; the very firm that I pay to protect me from others hit me with a huge left hook this past, their incompetence cost me $400 for IT-service fees and two lost days of trading….and just when we saw a flurry of strange earnings disappointments and several significant specific beta stocks dropping hard the bulls (thanks to the very same late day mystery buyer) once again managed right into the close to push the big-4 indexes to new 52-week highs. The selling in Amazon and Microsoft pressured the Nasdog/NDX most of the day but dip buyers arrived right on cue and once again the few-shorts-left were forced to cover as the indexes managed to rally into the close.

The big-4 indexes broke out to new highs on the strength of that late day short covering, as nothing seems to impact this market, not the Greek-contagion and the other PIGS, not lackluster earnings or geopolitical uncertainty, nothing seems to be able to sway this market from its objective "up…up…and away into the wild blue yonder"! 

To say that I'm a bit perplexed is an understatement as the markets should be in a full blown correction in my opinion by now as overall market sentiment has reached ridiculously bullish extremes and euphoria the kind of extremes that led to the January thru February selling event…but this correction should have started already…and it should have been twice to three time the magnitude at a minimum of the last pull-back, as that correction in my opinion separated the third leg of the bull-within-a-bear from the fourth, and now we are in an very extended fifth wave/leg.  But let’s face it, this overly giddy sentiment has been consistent for almost a month or better and the best we could muster for a correction was triggered last Friday on the news the SEC was filing charges against Goldman Sachs for fraud…this market is more than Teflon coated right now!

We’ve had more than three opportunities in recent weeks to “sell the news” especially after a huge plethora of built up profits are looming just to be booked and settled out into investors accounts…with the crummy April jobs report and recently with INTC, IBM, AMZN and AAPL earnings…but instead the market take a baby step back and to giant steps ahead after each contagion.  Market participants could have utilized use the Greek contagion as an excuse to trigger the sell-buttons as they did in January; but they failed to do so.  And now Greek short term bonds are tanking as the EU waffles about writing that check in front of the German elections next month, and the Greek debacle could easily turn into a Greek-Tragedy! So far the markets have had every opportunity to correct and they have failed to do so!

We’ve just experienced one of the most powerful bullish rallies out of the March 2009 lows since the Great-Depression!  Right now my technicals and fundamental analysis have failed me as for 8-days now the market has rallied since I though the near-term top was in….and it looks like they could run up to significant OHR before pulling back....then who knows as these areas could be breeched by the market participants on manipulated Gap-runs!

I'm playing for reversals major tops at the following levels and I am looking for a 40-68% retracement or better from the February reversal lows and this run….Remember the rules of a BEAR market…almost all are losers…..right now many a bear-market investor (Shorts are being forced to capitulate), the markets seem unstoppable as they climb a mega wall of worry…but this next leg down is going to be a huge bull killer as the usual breaker to stop the markets from plunging are not existing this time (short interest is anemic, so they will not be covering positions) we have a vast array of HTB-(hard to borrow) stocks meaning that on a selling event many will not be able to enter these plays again providing little fuels to stop a slide (very little profit potential as well on the short side unless you are playing puts!)…and worse yet the vast array of mutual funds are sitting on historic low levels of cash…hardly fuel to help mitigate the selling on a serious market correction!   

Current levels I intend to SHORT the indexes at!

Dow                           11,335 - 11,350

SPX                             1,230 -   1,238

Nasdog                       2,529 -   2,605

Russell-2000               759  -    766

I'm becoming more perplexed as the days go by as what I thought were tried and very tested technical's and fundamental analysis seems to be totally disregarded in this giddy market right now!  And right now it’s anyone’s guess (I keep attempting to make rational decisions) as to how much further these giddy-bullish moves will last. The last bullish rally in 06/07 lasted 7 months, and this one is approaching 14-months.  I can tell you that once a market gets drawn into one of these euphoric bubbles of massive liquidity like we saw in 1999-2000 we seem to have to throw out every trading tool as the mechanics of the rally just roll over any and all real trading strategies (back then we at least we had market participation, and no mega-bank and prop desk-trading (high frequency trading wasn't even conceived) and we had more retail-investors into the mix as volume unlike in this rally was robust.  Consumer/investor sentiment becomes a useless indicator, cycles get stretched to ridiculous lengths, technical analysis and oscillators are worthless; and worse yet the hype and outright manipulation are at extremes but so many have turned a blind eye!

I still believe that the stock markets are undeniably in what I believe is a long term secular bear market; and has been since March of 2000.  And, it’s a bear market that the Fed and every central bank in the world have chosen to fight tooth and nail with the one weapon at their disposal (free and easy money for the lecherous bankers to reap mega profits)…as they and most governments have for 2-3 years now (several stealthily since 2000) have been stomping on the printing press throttles. And unfortunately it’s a battle that is only producing temporary periods of false prosperity and their actions keep inflating bigger and bigger bubbles, and anyone with a little common sense (the Fed seems to have little common sense), you cannot drive an real economy by creating more and more bubbles.  Bubbles always pop and are followed by periods of economic devastation. They can’t fix this kind of problem with a hyper drive printing press; as all this does is make the problem far worse and it just pushes it off for a future date and ultimately the fix will be significantly more painful.

I dread and loathe the end result of the B-52 man's liquidity experiment and when the governmental debt loads become so great the Implode from their very own monstrous mass, and the debt and currency bubbles burst.  Unfortunately, there is no short term cure for a currency crisis.  I’m afraid the global economic gurus are unfortunately going to learn this lesson the hard way, once again.

The major indexes have now posted gains for eight consecutive weeks a stellar record on anemic volume; as we have not seen eight consecutive weeks of gains since January 2004…helping to depress some lackluster earnings disappointments was news that the New Home Sales in March spiked to an annualized rate of 411,000 compared to the February rate of 308,000, a whopping 26.9% jump and the biggest monthly gain since 1963. Obviously to most with common sense this is directly related to the homebuyer tax credit that expires next Friday. Despite the sharp spike in sales the overall pace of sales is still significantly below the pace in early 2008 with sales over 520,000. The high was set back in Oct 2005 with sales running at a 1.4 million pace. Seeing a spike from 308K to 411K may be encouraging to the struggling home sector today but it is far from signaling an all is clear signal. Once the tax credit expires next Friday we are likely going to see sales implode (unless they extend the bailout). 

Again the market participants ignored the mass layoff report for March which showed the number of layoffs for 50 workers or more rose to 1,628 from 1,570 in February.  The weekly jobless claims refuse to decline under 450,000 with a high of 480,000 on the April 10th report, while there is still some very pronounced weakness in the job market. we must remember that the census hiring will soon pick up but it will be delayed for maximum political impact a sort of free gift in the form of positive jobs growth that the democrats can tout into the fall elections…we saw last week that the ATF said it was putting a two week hold on various requests from local law enforcement agencies for finger print searches in order to process their backlog of 500,000 census worker applications. That is a clear sign there will be a major jump in jobs for likely in May/June and we could see a spike in April as well….remember that the next payroll report will issued on May 7th just 10-trading days away from here!  Recently Joe Biden our VP said he expects the U.S. economy to create more than 250,000 jobs in April and 500,000 in May. Absolutely no mention was made that up to a million of those jobs would be just temporary 9-10 week census jobs.

Moving on the Durable Goods Orders report was negative and responsible for some of the early morning weakness on Friday, as we saw that orders dropped 1.3% for March compared to a gain of 0.7% in the prior month and expectations were for a 0.7% gain…this is hardly bullish news; however, the headline number didn’t reflect the full picture as there was a sharp drop in nondefense aircraft orders after a monster spike of 22% in February (so is Boeing really doing so well?)…so excluding transportation equipment orders rose 2.8%, shipments increased 1.2%, and we saw that core capital goods and shipments rose 4.0% and 2.2% respectively…so all in all the report was decent!  The internal components for the durable goods orders report suggest the 2010Q1 GDP number could be manipulated as high as 3.9% or higher; and we will get this first look at the number this Friday. Initial predictions several months ago were in the 2% range now I'm seeing numbers bantered about as high as 4.9-5.5%. 

The economic calendar for this week is full of regional manufacturing reports plus we have a potential critical a two-day FOMC meeting. The Fed meeting is the most important event for the market this week but analysts will still be hoping for a significant increase in activity in the various regional reports which have been quite lackluster of late. I heard several so called experts this past week that believe the FOMC will change their "extended period" statement this week (I doubt it but if it does happen the markets will not act favorably) . This would be a major stumbling block for the markets if the Fed changes the statement dramatically and even hints at an easing to their free and easy money policies.  

We saw that this week June delivery crude added $1.39 to a prior settlement to $85.09 per barrel. Heating oil prices for June gained $0.0368 to close at $2.2765 per gallon. Reformulated gasoline blend-stock prices for June increased $0.0475, $2.3578 per gallon. Henry Hub natural gas prices for June added $0.134 to $4.349 per million British thermal units. NYMX light, sweet crude for June delivery traded actively between $83 and $84 a barrel Friday, and at a significant discount to longer-dated contracts. The discount is being caused by an oversupply of crude (hardly bullish) at a key U.S. supply bottleneck in Cushing, Okla. reflecting both the oversupply at Cushing, and hopes that this economic recovery and crude demand will improve later this year.  

It's amazing that supplies have grown in the U.S., and around the globe on hopes of a recovery. Oil's near-term discount and the prospects of higher prices in the future creates an ideal situation for refiners, who can get wider profit margins by buying oil cheaply and refining it into gasoline and other petroleum products one reason why I like Long-play on (VLO, WNR and TSO). These positive conditions tend to boosted activity in the crude markets as buyers interested in taking physical delivery of oil increased their trading activity as they haven't seen conditions as positive as these in nearly 25-monthss.

Interesting…….I read this weekend that Venezuela will ship 100,000 bbl/day of crude oil to China for 10 years to pay off a $20 billion loan (what a great trade). The per-barrel price was not specified but their average basket price is now currently around $75/bbl. Chavez announced the oil-for-credit agreement on Saturday. Venezuela has been working for some time to foster relations with China, as they need a powerful partner. The loan will be used for highways, infrastructure as well as investments in the oil industry; Venezuela currently ships 460,000 bbl/day to China.

Back in the US debt spotlight this week…our Treasury is going to auction $118 billion in various types of debt this week….there will be $44-billion in 2-year, $42-billion in 5-year, $32-billion in 7-year and $11-billion in 5-year TIPS….we can thank the Greek-contagion and the recent weakness in the euro, as our auctions have been going relatively smoothly since their goose is in the proverbial oven! I will be watching these auctions very closely as any hiccups and down the markets go!  

Potential market driving news worth reviewing·        

• A key Greek economic official expressed confidence Sunday that his country will be able to secure billions of dollars in emergency loans from European countries and the International Monetary Fund to avoid a crippling debt default. Full Story 

• Europe faced mounting pressure to quickly bailout debt-stricken Greece on Saturday amid fears the crisis could spread and threaten the global economic recovery. Full Story

• Interesting article on Goldman Sachs and how they do God's work!

• Goldman Sachs bet on the demise of the US housing market as the economy teetered on the brink and as the firm sold mortgage-based investments to clients, company emails released on Saturday showed.

• Emails sent by Goldman Sachs Group Inc's executives on money the firm made by betting against risky mortgage securities highlight the need for transparency in financial markets, senior White House adviser Lawrence Summers said on Sunday

• With official interest rates near zero and the Federal Reserve unable to cut them any further, every policy meeting by definition brings the central bank one step closer to an eventual monetary tightening. Full Story

• Countries must not be complacent about the state of the global economy, despite brighter signs of recovery, Japanese Finance Minister Naoto Kan on Saturday warned his counterparts at the International Monetary Fund. Full Story

ARE RETAIL Sales strong because of real demand, or are their other stealth issues?

Sales at U.S. retailers rose better than expected in March as consumer stepped up purchases of vehicles and wide range of goods (foregoing mortgage payments), data showed on Wednesday, suggesting to the talking butt-head's being pranced about on the various bubblevision networks a significant increase in the so called manufacturing-led economic recovery.

The Commerce Department said total retail sales jumped a whopping 1.6%, the largest increase since November, from an upwardly revised 0.5% increased in February…it was previously reported to have gained 0.3%. Motor vehicle and parts purchases surged 6.7% last month, the biggest increase since October, after dropping 1.9% in February. Consumers are defying high unemployment and tight access to credit and somehow they are still spending if we are to believe the numbers being reported, offering what I believe is false hope that the recovery from the worst economic downturn in 80 years will reverse on a dime and rebound as if the contagions and damage are but a distant memory thanks to massive government stimulus and the swing in the inventory cycles.

Worse yet the incessant hype on the bubblevision networks and the carryover to other venues has created a growing confidence in the recovery, encouraging households to tap into the savings and other segments of their assets to fund purchases of goods, including some luxury items.

Nevertheless…when we excluding motor vehicles and parts, retail sales rose 0.6% in March after rising 1.0% the prior month as a combination of an early Easter holiday and warm weather boosted sales at clothing stores.

Core retail sales, which exclude autos, gasoline and building materials, rose 0.5% after increasing 1.2% in the month of February. Core sales correspond most closely with the consumer spending component of the government's gross domestic product report. Clothing and clothing accessories sales increased 2.3%, while building materials and garden equipment rose a whopping 3.1% (I find this hard to believe) as it was the largest advance since November 2007. Receipts at sporting goods, hobby and book stores rose 1.0% in March. Sales at electronics and appliance stores, strangely dropped 1.3% (technology segment is flashing strange divergences) and receipts at gasoline stations dropped 0.4% (less driving).

The biggest component to the increase in March was the Motor Vehicle and Parts Dealers, which increased from $53.4 billion to $69.9 billion (I was amazed at this sales-pull-through). What I find surprising is that in light of all the rage over technology spending, sales at Electronic and Appliance Stores declined by 1.3%. How these stellar numbers were generated was interesting….so I explored other possibilities to better understand these numbers and to determine what to expect in the future….as with ever increasing "strategic" mortgage defaults is beyond us. We can't wait to see the latest consumer savings rate data.

The increase of equities (the market indexes has made many feel that their IRA's 401k's and retirements are doing much better so they will have to save less…so many after the late year rally and this recent rally took this as a signal that the coast is clear and that they can spend instead of save (oh how wrong they will be)!!

I also found that this probably helped to spur retail spending (we all know it's not repeatable)….The average tax refund is up nearly 10% (about $3,000) this year…and that there are more than a dozen Recovery Act (Stimulus) tax cuts that over 100 million Americans can take advantage of this tax season!   Overall the Recovery Act contained just under $300 billion in tax relief.  And so, again, as of the end of March, over $160 billion of that has gone out.  And we anticipate that April may likely be one of the largest months that we’ve seen in terms of tax relief and that doesn’t include the tax cuts that are going to be going out this month. Of that $160 billion, the primary beneficiaries of that tax relief are working families and small businesses.  Working families under the Recovery Act have received about $100 billion in tax relief and they have nearly $100 billion more that is yet to come according to releases….here is a catalysts for some consumer spending another government bailout-windfall!

I have disclosed on numerous occasions how excess refunds by the Federal Government despite sub par withholdings is helping to goose consumer spending….and that the stimulus is coming to an end…now we have another avenue opening up!

Mark Zandi of Moody's Economy that the government's tacit encouragement for "homeowners" to not pay their mortgage dues is freeing up $8 billion each month that is artificially increasing consumer spending and iPad preorders. And with banks not marking anything to market, all these houses that generate no cash flow are still marked at 100 cents on the books. If you ever needed a justification to not pay your credit card, your mortgage, or anyone else you owe money, now you know - contract law in America no longer exists. Just stop paying everything. And please don't save. Saving is for non-banana republics. Remember - the market is never wrong…just buy with reckless abandon as Cramer says!

ender Processing Services just put out its "Mortgage Monitor Report," and we made another new record as the nation's foreclosure inventories reached new record highs (how the hell is this so darn bullish and where are these homes sitting as we have not seen banks acknowledging them on their books). February's foreclosure rate of 3.31% represented a 51.1%t year-over-year increase. The percentage of new problem loans also remains at a five-year high. The total number of non-current first-lien mortgages and REO properties is now more than 7.9 million loans. More than 1.1 million loans that were current at the beginning of January 2010 are now at least 30 days delinquent or in foreclosure by February 2010 month-end. so what is the big deal right so what if a mere 8+/-million Americans are not paying their mortgages…the rest are right (or will they get wise and start to back away from their obligations as well….creating a very nasty slippery slope)!  What are the implications of not paying….hell I've heard that some folks have been in their homes over 24-monthsw after they stopped paying their mortgages!  I've been reading report after report pointing to many studies that show Americans are now far more likely to pay other bills first before their mortgage…no big deal right…some are electing to go into what are called strategic defaults… where the benefits far out weight the ramifications!

Paul Jackson, publisher of Housingwire.com, wrote a fascinating article this past week that put this into real cash perspective. He described a case study of someone who applied for the government's Home Affordable Modification Program they had an $1,880.00 monthly mortgage payment on which they'd defaulted, while this person (with integrity, honesty and morals 's…what a joke) monthly bank statement showed payments to a tanning salon, nail salon, liquor store, DirecTV bill with premium charges, and $1,700.00 in retail purchases from The Gap, Old Navy, Home Depot, Sears, etc. ***here is what is helping the spending/retail sales**

Jackson wrote that even if we assume that just half of the current 7.4 million currently delinquent mortgages (older number) fit this sort of "spending profile" (that is, they are spending their mortgage) and you assume a $1,000 median monthly mortgage payment for most homeowners we get a nice $3.7 billion boost per month into the retail-stream called "consumer spending" what a great world we now play within….this is certainly enough spending to prop up the sagging retail complex (but for how long is the $64,000 question to be answered) while other studies have shown that borrowers are more likely to default on loans if they have friends or neighbors who have….so is this nuance development starting a nasty domino scenario? 

On top of that, the rate at which formerly current borrowers are defaulting now is rising. I guess it's just another, innovative way of using your home as your so called stealth ATM machine.  It currently takes well over a year, in some cases nearly two years, to go from missing a payment to being kicked out of your home depending where you live and as the back log increases so does the time lag.

According to Jackson most Americans behind on their mortgage have gone more than a year without making any payments. The average age of a loan in foreclosure is now 410 days delinquent, after all, according to LPS; and that’s just the average. Many delinquent borrowers are able to stay in their homes for even longer than that.

Please remember….GDP = C (consumer and business consumption which is somewhat lifter artificially) + I (investments…the markets have been on a tear) + G (government spending-all time high) + E (net exports) Regardless of how you see it, the usual dominant variable in the GDP equation above has been historically consumer spending (C); it’s always been roughly 70% of GDP, including health care costs (half of which are actually a government expenditure, but let’s not get too deep into the fuzzy-math manipulations of how the data is reported for now); Which means, in the end, that as consumer spending goes, GDP generally normally follows.

As I had previously forecasted The U.S. dollar has been embroiled in a very decent relief rally these past weeks/months as it has been enjoying a respite from its declining trend over the past several years, as evident on the dollar index charts below, it bounced from the 74.24 level as I had forecasted it would.  I'm expecting another bullish run in the near-term....back up to $83.75-84.00 before the next leg down starts...if they break out the greenback out above $84.50 its clear sailing to $87.70

After forming a near perfect falling wedge pattern pattern, which is a TYPICAL reversal pattern...A primary reason why we undertook a contrarian long play at the $74.00-$74.50+/- level....just over 8+/-weeks ago I recommended buying that support at the climax of the weekly falling wedge-pattern.  As I stated then we were ripe  for a correction (I also recommended Shorting Gold and the metal-stocks especially (gold stocks, copper and other commodities); remember strength in the greenback depicts weakness in commodities, if demand holds steady      The Dollar index has breeched (moved above) the important $79.15 level **which is now near-term support** we could retested 79.51 level this week....but the momentum seemed to return later this past week and as such we could see a run to 81.95-82.55.

Far to many folks are of the belief that the dollar rally is over, I disagree as I believe this summer there’s a good chance that the greenback rallies further another leg up…but a minor retracement is in order.

I’m sure the threat to the consumer has not fully abated because of all the foreclosures looming and additional job losses at the state and municipal levels (and of course the later abatement of the census workers), there are still hundreds of thousands of loans still out there in the system that were originated during the sub-prime slime years and the ARM-years that will start to reset higher, back then the greenback (2003-2005) was trading in the 90’s to high 80’s…..in my opinion its going to be a very nasty challenge for these people to pay back those loans with dollars earned with a dollar trading above $88.00 as the threat of a really strong greenback pushing the economy into a deflationary depression lessens the deeper we get into what I believe will be a massive and damaging ATM reset contagion and nasty foreclosure wave simply because those easy dollar loans get washed out of the system. **(We can see just by the reaction this past Tuesday as the FED stayed pat that a lower Dollar still drives stocks higher despite weakening fundamentals).