Value of Perfect Information

1. The International Monetary Fund could offer Italy between EUR400 billion and EUR600 billion in financial support to give Italian Prime Minister Mario Monti a window of 12 to 18 months to enact reforms sufficient to restore waning market confidence in Italy’s ability to repay its debt, Turin daily La Stampa reported Sunday, citing IMF sources.

2. German Chancellor Angela Merkel and French President Nicolas Sarkozy are planning more drastic means – including a quick new Stability Pact – to fight the euro zone sovereign debt crisis…..Euro-zone countries are weighing a new plan to accelerate the integration of their fiscal policies, people familiar with the matter said, as Europe’s leaders race to convince investors they can resolve the region’s debt crisis and keep the currency area from fracturing

3. The European Financial Stability Facility may insure bonds of troubled countries with guarantees of between 20 percent and 30 percent of each issue to be determined in light of market circumstances. The proposal to attach guarantees of up to 30 percent of future EFSF bond issuances’ worth may create a threefold expansion of the 440 billion-euro ($583 billion) fund.

Runner-up! Black Friday retail sales up 7%

Update 7:30 p.m. EST.

The good news continues…

The biggest bond dealers in the U.S. say the Federal Reserve is poised to start a new round of stimulus, injecting more money into the economy by purchasing mortgage securities instead of Treasuries. Fed Chairman Ben S. Bernanke and his fellow policy makers, who bought $2.3 trillion of Treasury and mortgage-related bonds between 2008 and June, will start another program next quarter, 16 of the 21 primary dealers of U.S. government securities that trade with the central bank said in a Bloomberg News survey last week. The Fed may buy about $545 billion in home-loan debt, based on the median of the 10 firms that provided estimates.

Follow Euro trading here:

http://www.sgxniftydowfutureslive.com/index_files/DOWFUTURES.htm

http://www.forex-markets.com/quotes.htm

http://www.kitco.com/ Scroll to bottom for exchange rate.

http://www.xe.com/

To see how FTSE will open go here:

http://www.igindex.co.uk/

or here:

http://www.financialspreads.com/public/

I leave you with this if you are like me and a market junkie!

So FTSE closed down 12 today, yet the FTSE spread betting for open tomorrow already has them down about 30 for open tomorrow.. not a pretty picture.. you can watch this live and then switch to 6 p.m. when our futures open!

http://www.igindex.co.uk/

Back from vacation, where the weather was as volatile as the stock market, I was happy to see little damage to my DITM covered call strategy, made whole by today’s rally. Although the VIX came off the 4 handle down to 36, the CBOE equity put/call ratio zoomed up to 74 – good for the market (as we saw today). NYSE new highs to lows were an incredible 33 to 1,296; 23/947 on the OTC. Both newsletter surveys – Inv.Intell. and AAII remained inverted, with more Bears. Insider selling to buying was a lowly 3:1 ratio. Money actually went into MMFs for the first time in a month; monthly data on ETFs showed money coming out of equity and international funds -level in bonds. The 2010 support level on the SPX (S&P500) held at 1100 -now trying to break resistance at 1200.

If you like what you see here, wait to see how this analysis can assist you in your everyday investing or trading strategy! Go ahead, check out my track record and

I am offering a 30 day free trial period to be followed by a new monthly price of $60.

Can we learn from the past? Can we at least adjust our attitude by examining the past? I think so. The first chart below is a composite chart that compares the market of 2007/2008 with the market of today. I find this study very interesting, even if it’s not entirely accurate. It helps me get the emotion out of my trading and analysis.

The first chart is the Weekly chart from late 2007 and imbedded in it is today’s Weekly chart. I tried to stop the data at a point where the markets are similar. These are shown in this way to demonstrate the similarities between the market today and the one in late 2007, early 2008.

The next chart below takes the main chart above from 3 1/2 years ago and reveals the Weekly candles in the 11 weeks that follow. It would be nice if today’s market would accurately reproduce that historic market action, but that is not the claim that is being made in this study. However, because the markets showed a similarity in their structure, it isn’t unreasonable to believe that because human nature hasn’t changed, we might see similar action as we move forward from today. What I hope we take away from this study is that we can get torn up trading if we let our emotions control our decisions and not pure technical analysis applied in an unbiased way. Especially look at the first three weekly candles and imagine what trading those weeks must have been like. I also find especially interesting that in the charts above, the PTI was low in both instances, and yet a successful, though barely, W5 developed in 2008 and took out W3 by a little. I use that fact in my analysis in the last chart to select my preferred target.

This is our useful 360 Minute chart. I have my favorite target and alternatives clearly marked. Because the market is extremely oversold, it will be tricky to find a good entry level for our next trade. The red oval on the chart is only to indicate that there is a wide range of entry levels possible. I’ll be looking at MA’s at different time levels to find a turning point.

As I have stated all along, my research suggests to me that the rally out of the March 2009 low has been a bear market rally. Nothing has occurred to change that point of view. In light of that view, I have received a number of e-mails asking about manipulation and if “they” could prevent such an event from happening.

All throughout the period between 2003 and 2007 I explained that we were seeing a stretched 4-year cycle. I also explained that the efforts by the powers that be to hold things together would ultimately only serve to make matters worse. There is no doubt that the manipulative efforts seen during this period contributed in a very negative way to the credit and banking crisis. In my eyes, this was largely accomplished through the unscrupulous lending practices and mass financial irresponsibility, resulting in the housing bubble, which Greenspan tried to tell us did not exist and which I called, in writing, in late 2005, before the top became apparent.

In October 2007 the equity markets peaked. My subscribers were informed of that fact as we knew what we were looking for and as it occurred we knew exactly what was happening. As the decline took root the manipulative efforts became even more drastic than what was seen into the 2002 low. But, cyclically, none of this mattered as the market continued lower until the cyclical events required to make the 4-year cycle low and the Phase I low were achieved. It was from that point that this bear market rally began. In the eyes of most people and the politicians, they believe that they have “saved” the market and that the economy has bottomed. This is not so. The market and the economy merely reached a temporary bottom in March 2009, in which the rally that should ultimately prove to separate Phase I from Phase II of the bear market began. This rally has served to give the public a false sense of security and hope that the economy is now on the road to recovery. This rally has also given the powers that be a false sense of power in that they think they have every thing under control as a result of their manipulative efforts. According to the historical bull/bear market relationships and the longer-term phasing of Dow theory, this is not likely the case. Once the proper setup occurs, the bear will have his opportunity to cap this advance. Unfortunately, in the meantime, the hope and hype of Wall street and Washington keeps the public blindly optimistic.

I have gone back to 1896 and have identified a very specific cyclical “DNA Marker” that has occurred at every major market top. If the Dow theory phasing is right about this being a bear market rally, this DNA Marker will appear in accordance with very specific statistics, which will set the stage for the suspected Phase II decline in this ongoing secular bear market to begin. These details are being covered in my monthly research letters. Once this DNA Marker is in place it won’t matter what the powers that be do or say because the bear will have his way. The bailouts were a waste of money and were only associated with a temporary low. The powers that be cannot manipulate the entire world out of the natural forces and cyclical events that have to play out. Their efforts only serve to make matters worse and to postpone the inevitable. Again, the most recent example of this occurred as a result of the efforts to keep things going between 2003 and 2007. Were things not worse in 2008 and early 2009 than they were in 2001 and 2002? Yes, they were. Did the efforts between 2003 and 2007 prevent the downturn into the 2009 low? Did “they” warn you of the downturn in 2000, or of the housing bubble, or of the 2007 top? Have the efforts in 2008, early 2009 and the time since not been more extreme than they were in the 2003 to 2007 period? Yes, they have been and I look for the fall out from those extreme efforts to be worse than the fallout of the 2003 to 2007 efforts. So, if we see this DNA Marker occur, then we will have the proper setup in place for a meaningful correction. Such correction should at least correspond with 4-year cycle top and the decline into the next 4-year cycle low. The greater risk to the market is that if the longer-term Dow theory phasing is correct, this should also correspond with the Phase II decline. Just as I warned of the 2000 top, the 2007 top, the top in housing in 2005 and of the top in commodities in 2008, I am now warning that another surprise is coming. It is the appearance of the proper setup that will set the wheels into motion and the manipulation is once again not going to matter.

The following text on Manipulation was taken from Robert Rhea’s book, The Dow Theory.

“Manipulation is possible in the day to day movement of the averages, and secondary reactions are subject to such an influence to a more limited degree, but, the primary trend can never be manipulated.

Hamilton frequently discussed the subject of stock market manipulation. There are many who will disagree with his belief that manipulation is a negligible factor in primary movements, but it should always be remembered that he had, as a background for his opinions, a most intimate acquaintance with the veterans of Wall Street, and the advantage of having spent his life in accumulating facts pertaining to financial matters.

The following comment, taken at random from his many editorials, affords convincing proof that his views on the subject of manipulation did not vary:

‘A limited number of stocks may be manipulated at one time, and may give an entirely false view of the situation. It is impossible, however, to manipulate the whole list so that the average price of 20 active stocks will show changes sufficiently important to draw market deductions from them.’ (Nov. 29, 1908)

‘Anybody will admit that while manipulation is possible in the day-to-day market movement, and the short swing is subject to such an influence in a more limited degree, the great market movement must be beyond the manipulation of the combined financial interests of the world.’ (Feb.26, 1909)

‘…the market itself is bigger than all the ‘pools’ and ‘insiders’ put together.’ (May 8, 1922)

‘One of the greatest of misconceptions, that which has militated most against the usefulness of the stock market barometer, is the belief that manipulation can falsify stock market movements otherwise authoritative and instructive. The writer claims no more authority than may come from twenty-two years of stark intimacy with Wall Street, preceded by practical acquaintance with the London Stock Exchange, the Paris Bourse and even that wildly speculative market in gold shares, ‘Between the Chains,’ in Johannesburg in 1895. But in all that experience, for what it may be worth, it is impossible to recall a single instance of a major market movement which depended for its impetus, or even for its genesis, upon manipulation. These discussions have been made in vain if they have failed to show that all the primary bull markets and every primary bear market have been vindicated, in the course of their development and before their close, by the facts of general business, however much over-speculations or over-liquidation may have tended to excess, as they always do, in the last stage of the primary swing.’ (The Stock Market Barometer) ‘…no power, not the U. S. Treasury and the Federal Reserve System combined, could usefully manipulate forty active stocks or deflect their record to any but a negligible extent.’ (April 27, 1923)

‘The average amateur trader believes the stock market is guided in its trends by a certain mysterious ‘power,’ this belief being the one factor, next to impatience, most responsible for his losses. He reads tipster sheets avidly; he scans the newspapers industriously for news likely, in his opinion, to change the trend of the market. He does not seem to realize that by the time the news of real importance is printed, its effect, so far as the basic trend of the market is concerned, has long ago been discounted.’

‘It is true that a flurry in the price of wheat or cotton may influence the day to day movement of stock prices. Moreover, sometimes newspaper headlines contain news which is construed as bullish or bearish by market dabblers, who collectively rush in to buy or sell, thus influencing or ‘manipulating’ the market for a short period. The professional speculator is always ready to help the movement along by ‘placing his line’ while the little fellow timidly ‘lays out’ a few shares; then, when the little fellow decides to increase his commitments, the professional begins to unload and the reaction ends, and the primary movement is again resumed. It is doubtful if many of these reactions would ever be caused by newspaper headlines alone unless the market was either overbought or oversold at the time—the ‘technical situation’ so dear to the hearts of financial news reporters.’

‘Those who believe the primary trend can be manipulated could, no doubt, study the subject for a few days and be convinced that such a thing is impossible. For instance, on September 1, 1929, the total market value of all stocks listed on the New York Stock Exchange was reported to have amounted to more than $89,000,000,000. Imagine the money which would have been involved in depressing such a mass of values even 10 per cent!’

Today’s total market cap is some 50,000,000,000,000 and QE 2 was valued at 600,000,000,000, which is 1.2 percent of the estimated total US market cap. So again, the manipulation will not matter.

I have begun doing free market commentary that is available at www.cyclesman.net The specifics on Dow theory, my statistics, model expectations, and timing are available through a subscription to Cycles News & Views and the short-term updates. I have gone back to the inception of the Dow Jones Industrial Average in 1896 and identified the common traits associated with all major market tops. Thus, I know with a high degree of probability what this bear market rally top will look like and how to identify it. These details are covered in the monthly research letters as it unfolds. I also provide important turn point analysis using the unique Cycle Turn Indicator on the stock market, the dollar, bonds, gold, silver, oil, gasoline, the XAU and more. A subscription includes access to the monthly issues of Cycles News & Views covering the Dow theory, and very detailed statistical-based analysis plus updates 3 times a week.

This time of year you will here a lot of people talking about faith.

In the currency markets it is all about “full faith and credit”, in the central bank, in the government backstopping.  In the case of the European central bank it is the full faith in the principle backstopping.  The commitment to a sound currency.  This is the rationale behind the exodus into Europe.  That, no matter how many PIGS the Germans try to throw on the tracks, the ECB rate hike machine will plow ahead.

A massive short dollar trade came out of Asia on 4/20 -see “breakaway gap?” lower in UUP (below):  This ignited the ‘Carry Trade’ into hard assets worldwide.  Most commentators missed the point of the rally completely and no one challenged them.  QUESTION:  Why would oil rise $3.00 back to our top target of $112/$114 when the conflict in Libya is winding down – When Saudi Arabia says no demand in sight for additional oil – when IEA officials promise more oil on the way by June   .   BECAUSE OIL IS PRICED IN DOLLARS!

Faith!

As I alluded to in ‘Sympathy for the Dollar’ traders have faith that the US central bank, Treasury, powers that be, have opted for hyper-stagflation vs. deflationary recession as they drive the dollar lower, punishing international bondholders.  This could get ugly!

I have faith also.  Faith in human nature.  Faith in traders resolve.  With the Dollar Index approaching all-time lows last seen just over eleven hundred days ago, I have faith that traders will challenge that mark (closing low of 71.67 set on 3/24/08) before the sun sets many more times.  Then Mr. Geithner will face his own Waterloo moment.  Will he let the dollar go quietly into that goodnight?  Is Dollar Index @ 65 the ‘New normal’?  Someone find out which side of the trade Mr. Soros is on, he’s been too quite lately.

One of my favorite quotes from one of my favorite actors:  “I can’t see it yet but It’s coming very close now!” Max von Sydow -Dune.