Do not take my word for it:

1. ·     In a few days time, there might not be a euro zone for us to discuss. - Nouriel Roubini, Roubini Global Economics  

2. ·     It's like Lehman Brothers and Bear Stearns. It is not so much the fundamentals as it is the unwillingness of the market to fund you. - Phillip Lane, Professor of International Economics, Trinity University

3. ·    I covered emerging market sovereign bonds for many years, but I've never seen anything like this: a country trading at levels where the bear case is terrifying, the bull case is very hard to articulate, and everybody is talking about a possible default even when the country has an investment-grade credit rating from two agencies and is only one notch below investment grade at the third. Maybe the only thing which really explains what's going on is that both yields and ratings are sticky. Which would imply that Greece has a long way to deteriorate from here. - financial blogger Felix Salmon

4. ·    The situation is deteriorating rapidly, and it's not clear who's in a position to stop the Greeks from going into a default situation. That creates a spillover effect. - Dr. Edward Yardeni, Yardeni Research

5. ·    The issue is rollover risk [referring to Spanish debt contagion]. Spain has to issue new debt plus roll over existing debt to the tune of 225 billion euros this year. Forty-five percent of their debt is held by foreigners so they are dependent on the kindness of strangers.  Jonathan Tepper, Variant Perception

6. ·    Spain's cash flows are extremely bad... Spain's living standards are reliant on not just the roll of old debt, but also on significant further external lending... - Ray Dalio, Bridgewater Associates (one of the world's largest hedge funds)

7. ·    Everything you knew or thought you believed about the European economy - and the euro-zone, which lies at its heart - was just ripped up by financial markets and thrown out of the proverbial window. ...This is not now about Greece... This is about the fundamental structure of the euro zone. Simon Johnson, former IMF chief economist

The Rosy Scenario’s Missing Basic Element: Systemic Liquidity. Despite heavy revisions by the Fed to money supply-related data in the last two weeks, the pattern of the worst annual contraction in modern economic reporting of real (inflation-adjusted) broad money supply continues, signaling looming deterioration in U.S. business conditions, an intensified economic downturn or "double-dip recession" in popular terminology. The implications here remain for severely exacerbated government (federal and state) fiscal and funding crises, for exacerbated banking system problems and for eventual severe selling pressure against the U.S. dollar.

The broad money measure used here is M3 (and the SGS Ongoing Estimate of same), which, before inflation adjustment, contracted at an estimated modern record pace of 3.7% year-to-year, where 4.0% had appeared likely before the recent data revisions. Net of inflation, the annual contraction is estimated now at 5.8%. On a seasonally-adjusted, month-to-month basis, the March 2010 nominal (not adjusted for inflation) decline was roughly $144 billion, or 1.0% — an accelerating pace of decline — where the major contributing components were monthly declines of roughly $84 billion in institutional money funds, $30 billion in large time deposits and $30 billion in M2. With year-to-year growth in M2 revised higher, due to new estimates of retail money market funds, March’s estimated 1.4% monthly gain will be negative after inflation, the second M2 real annual decline in three months.

Also right now as we see unfolding before our eyes we have Goldman Sachs, the proverbial “smartest guys on Wall Street,” the Iron-chefs of the financial world as they can turn chicken-shit into chicken salad and often they can turn it into Chicken Brieanne is currently under siege; and where there is one cockroach there are many. Its apparent that Goldman (and likely many other firms) sold poisoned pill-products, pieces of crap wrapped up to look like AAA products to their customers, and then made billions of dollars selling short the very same products they sold to their customers (this may not be technically illegal as I bet they had pages of disclaimers) but nevertheless the average investor is not dumb, and though fast money hedges funds may embrace the Goldman antics the average investor will not. And as the sage unfolds its likely to get ugly!  

Now as I see it Goldman has to decide whether to plead dumb and innocent or smart and sleazy. Of course, they’ll plead dumb and decent (“they had no idea of what was going on”).

On Tuesday we saw that Goldman Sachs placed almost the entire executive suite into the fire as these contrived well rehearsed leeches faced off against an ill-equipped, rather ill-informed and at time ill-mannered Senate subcommittee and they were sure playing to the cameras; it was a grueling 10+ hours for the Goldman gang, who endured very angry questions, lectures and a lengthy admonishments were released. Technically, the questioning was about Goldman's aggressive marketing of very questionable mortgage investments that should never had been packaged as AAA investments. But with animosity toward Wall Street at historic levels thanks to their direct involvement in the greatest financial crisis in over 80 years, and their incessant rhetoric that they had nothing to do with it, thought the world has seen countless images of them standing over the dead-economic body of our housing market with a knife in their hands dripping of blood….and they wonder why they are hates as such….not to mention the huge bonuses they steal from shareholders each year…Just when Goldman must have thought it was safe after the hearing dissipated and their stock rebounded, we saw several news outlets reported that federal prosecutors are considering criminal charges against Goldman, on top of the civil complaint filed earlier by the SEC. Then, to add insult to injury, S&P downgraded the firm lowering their rating on GS from "hold" to "sell," and BAC dropped its rating from "buy" to "neutral." GS coughed up 9.75% on the day.

The huge yellow/red caution flag is now waving…. as I have written about in the past in addition to my extensive fundamental and technical analysis I do I believe that it is very important to measure the herd's sentiment regarding the markets and I watch as one tool the Investors Intelligence survey of investment advisors. According to the latest reading (4/27), a whopping 54.0% of advisors are bullish (up from 34.1% in February) and 18.0% are in the bear camp (down from 27.8% in February) this is a huge swing and bears watching. As shown below, the last time bullish sentiment was at this level was in December 2007 when the SPX was trading 26% higher at 1,520+/-….I have used this indicator for years and when the bulls run over 52 and there are fewer than 20% bears…this is a clear indicator way to many are all leaning to the same side of the proverbial boat and a market top is close at hand.  

I also like to follow the money flows…

We saw this week withdrawals add to a recent streak of money-market outflows, extending the 16-week trend that has amounted to about $444.49 billion in outflows, as reported by ICI. Four weeks ago, the total funds tracked by ICI fell under the $3 trillion mark for the first time since October 2007 (please take not of this). We have seen that cash has been leaving money-market funds as investors seek higher returns; since yields have been close to zero for months. And of course on Wednesday, the FOMC affirmed plans to keep interest rates low for an "extended period."  

For the week ended Wednesday, total fund assets dropped to $2.872 trillion, according to the ICI report I read. Earlier this year, iMoneyNet reported assets in money-market funds it tracked fell below the $3 trillion level for the first time since November 2007.  Stock funds had inflows of $4.76 billion in the latest week, up from $2.14 billion a week earlier. U.S. stock funds had inflows of $2.86 billion, while $1.89 billion was added to foreign funds. At the same time, bond funds took in $6.66 billion, up from $5.83 billion the previous week, said ICI. Taxable funds had inflows of $5.95 billion, while municipal funds had inflows of $710 million.

The real worrisome numbers that I saw this week in the ICI report (Investment Company Institute) was that currently on whole mutual funds have the lowest cash to asset ratio ever (historic lows 3.4% this is a huge warning signal a contrarian indicator) meaning that they are almost fully invested, every time we even came close to 4.5% the market started to unravel; and now we are at what I call dangerous crash levels! Very little fuel is left to move this rally further, unless the draining of market-funds continues and it will create another herd of bag-holders!  This indicator has never failed me!

As many of you are aware I have been and still am on a quest to accumulate vast knowledge of the most important technical indicators to time the markets and one of the most important I have found to mark market tops are a signal that is called a market distribution day. And I have now seen 8 such days during the pasty 5-weeks!

A distribution day occurs when a major index or stock or asset declines at least 0.4% on significantly higher volume than the previous session(s). It indicates large-scale liquidation of shares by institutional investors (we have seen that selling days the volume is 2-3 times heavier than the subsequent buying days)….it's very important to track this data as institutions (big funds) are the heavyweights that largely determine the market's direction (they move the markets). They and their trading desks account for perhaps 77% of daily trading volume. In a nutshell, when they buy, or accumulate stocks, the market goes up. When they sell, the market falls…simple supply and demand function! 

Distribution days almost always appears near a market top and usually occurs on 6 to 8 specific days over a period of four to five weeks. These signals of a market top often come while the market is still churning upward (the little energizer bunny). Another way that distribution shows up is stalling price action. This occurs when indexes see heavy volume without further price accretion.

SEASONALITY    Research published by Yale Hirsch in the Trader’s Almanac shows that the market year is broken into two six-month seasonality periods (good and not so good) from May 1 through October 31 is seasonally unfavorable, and the market most often finishes lower than it was at the beginning of the period. From November 1 through April 30 is seasonally favorable, and the market most often finishes this period higher. While the statistical average results for these two periods are quite compelling, trying to ride the market in real-time in hopes of capturing these results is not always as easy as it sounds.  

First GDP report for 2010Q1 showed some distinct signs of economic growth [3.2%] down from the robust [5.6%] rate in 2010Q4 but as I have mentioned many times the GDP numbers are not the result of real growth. It was basically due to inventory adjustments and cost cutting and expense control rather than growth. Even in 2010Q1 private inventory adjustments accounted for a mere 1.6% and half of the growth.

The economy is expected to grow over the next several quarters but that I believe the best is now behind us as these GDP numbers will continue to decline (likely significantly) as the impact from the inventory build diminishes as will the government's massive stimulus infusions. Homebuilding declined in 2010Q1 and was a drag on the GDP; strangely though personal consumption rose 3.6% compared to only 1.2% in 2010Q4; and sales of durable goods rocketed higher at an 11% annualized rate (where are all the goods, they are not in all the new homes being built are they).  

Another headwind…..now that the homebuyer tax-bailout credit is history; homebuilders were frantically pulling out all the stops to get people to sign a contract. Lennar (LEN) was offering homes for a $25 down payment. Ryland (RYL) was doubling the tax credit. Every builder was offering some kind of incentive to beat the clock. Now they will probably be considering who to layoff. I suspect that housing starts are going to plunge now that the tax credit carrot has vanished. Mark Zandi said on Friday that counting new homes, existing homes, homes in foreclosure and bank owned there are more than 10.2 million homes for sale. The ideal number for an active market is between 7.5-8.25 million. That means there are roughly 2-million too many homes for sale and with home sales running about 365,000 per month and now with no bailout tax credit it could take 8-10 months or longer before inventory levels correct.

A bullish near term development……the American Trucking Associations' advance seasonally adjusted For-Hire Truck Tonnage Index rebounded in March following February's revised 0.3% drop. The index grew 0.4% during March, landing at 109.2, its highest level since November 2008. Compared with March 2009, tonnage jumped 7.5%, the fourth straight year-over-year gain and the largest increase since January 2005. For the first quarter of 2010, tonnage was up 4.9% compared with the same period last year.

Freight appears to be moving in a recovery direction and I continue to read reports from motor carriers that both the demand and supply situations are steadily improving, but unfortunately future orders are weakening I attribute the first-quarter improvement in tonnage to the inventory build after some sectors slashed inventories by too much in 2009.

ATA calculates the tonnage index based on surveys from its membership and has been doing so since the 1970s. This is a preliminary figure and subject to change in the final report issued around the 10th day of the month. 

Congress will likely stop extending the limit for receiving unemployment benefits (republicans are fighting hard against it, and threatening other actions) because of concern about the exploding deficit (no problem, on one hand as they want more tax cuts for wall-street, just not main street) nevertheless….this means the number of unemployed Americans who will stop getting the aid, after 99 straight weeks of checks, will breech 1.2-million in coming months.

Congress already has lengthened the period for which the unemployed may receive aid ~46 weeks originally – three times since the recession began in 2007. Democrats who have provided the support for past extensions say deficit worries (they are seeking election this fall) make it impossible to go any further. The deficit totaled $1.42 trillion last year and is likely to hit $1.53 trillion this year. Unemployment aid has become one of the federal budget’s fastest-growing components, with costs this year likely to reach $200-225 billion. That’s six times what was typically spent before the recession.

The Labor Department just reported that initial applications for jobless benefits dropped by a mere 11,000 to 448,000 last week, the lowest level in four weeks…thanks to seasonality and other calculation shenanigans. Earlier this past week, Fed-head Bernanke warned that failing to curb federal budget deficits would do "great damage" to the U.S. economy in the long run.

WEEKLY CLAIMS REPORT
In the week ending April 24, the advance figure for seasonally adjusted initial claims was 448,000, a decrease of 11,000 from the previous week's revised figure of 459,000 (it was revised upward by 3,000, hence the reduction looks bigger). The 4-week moving average was 462,500, an increase of 1,500 from the previous week's revised average of 461,000. 

The advance number for seasonally adjusted insured unemployment during the week ending April 17 was 4,645,000, a decrease of 18,000 from the preceding week's revised level of 4,663,000. The 4-week moving average was 4,639,000, a decrease of 9,000 from the preceding week's revised average of 4,648,000.  

UNADJUSTED DATA:  The advance number of actual initial claims under state programs, unadjusted, totaled 423,286 in the week ending April 24, a decrease of 11,171 from the previous week. There were 583,457 initial claims in the comparable week in 2009. The advance unadjusted insured unemployment rate was 3.7 percent during the week ending The advance unadjusted number for persons claiming UI benefits in state programs totaled 4,779,335, a decrease of 144,978 from the preceding week.

Blackberry-maker Research in Motion broke into the top five cell-phone makers in January-March for the first time ever, helped by booming smart-phone demand. The global handset market has been dominated by five major players Nokia, Samsung, LG Electronics, Motorola and Sony Ericsson for the last five years.  Over the past two years Sony Ericsson and Motorola have struggled with falling sales and market share, and despite fast market growth, both firms reported sharp drops in sales volumes.  

IDC estimated RIMM shipped 10.6 million phones in January-March, just ahead of Sony Ericsson's 10.5 million. The research firm said all vendors in total made 295 million phones in the quarter, up 21.7% from a year ago, and stuck to its 11% market growth forecast for 2010. 

The entrance of RIMM into the top 5 underscores the sustained smart-phone growth trend that is driving the global mobile phone market recovery. Motorola, who was the second largest phone maker just six years ago, sold 8.5 million phones in the quarter, falling also behind Apple, who sold 8.75 million iPhones.  Nokia shipped 107.8 million phones in the quarter, with Korean vendors Samsung and LG selling 64.3 million and 27.1 million phones, respectively.

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...(ands we are very close to this level) if they break out the greenback out above $84.50 its clear sailing to $87.70....we gained 0.76 on the month and 0.42 on the week...we are still in a bull-confirmed mode but this rally is getting tired a reversal here could help put a floor under commodities and the sectior they support!

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).