$INDU:Timing the Market Opinion

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http://www.bloomberg.com/video/87080330/

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opinions blog:http://www.elitetrader.com/vb/showthread.php?threadid=237487

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so true http://video.cnbc.com/gallery/?video=3000075118

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Is the Smart Money Heading for the Sidelines?
Published: Thursday, 23 Feb 2012 | 2:14 PM

Retail investors have begun to take the driver's seat in Wall Street's aggressive rally, an indication both that the surge could have some life yet and that it's likely nearing an end.



Mutual funds — the vehicles through which most mom-and-pop investors play the stock market — had lost funds for nine consecutive months heading into February.

But over the past several weeks the tide has turned.

Stock funds have seen inflows in three of the past four weeks, with another $1.04 billion coming in for the week ending Feb. 15, according to the most recent data from the Investment Company Institute. Unless there is a major shift in allocation, February is shaping up as a solidly positive month for stock fund inflows.

Trouble is, the last time retail investors didn't take more out of their funds than they put in was last April, which saw inflows of about $6 billion.


That move coincided with the end of a stock market rally that looked much like the current one — a big surge higher as the year began that preceded an ugly six-month skid that made sell-in-May-and-go-away the trade of the year in 2011.

What's more, institutional investors — often referred to as part of the "smart money" in the market because of their insider position — have been slowly heading for the exits.

After pulling about $100 million from zero-yielding money market funds in 2011, the folks with the deep pockets are heading back toward the sidelines. Institutional deposits have increased by $9 million in February — a relatively miniscule amount, to be sure, compared to a total of $1.74 trillion on hand, but a number that's been steadily rising.

Finally, corporate insiders are taking an increasingly cautious approach as well.

They've dumped $4.2 billion in stock this month, about double January's level and — here's that warning sign again — the most since May 2011 as last year's rally fizzled, according to TrimTabs.

Company stock buybacks, meanwhile, are at a healthy $2.1 billion daily level, but are mainly concentrated among a few big purchasers. The number of daily buyback announcements is at its lowest level since the October to November period of 2009.



"The best-informed market participants — the top insiders who run U.S. public companies — are taking full advantage of the stock market melt-up to unload huge amounts of shares," TrimTabs said in its weekly market analysis.

The fear here is an important one — that retail investors will be the last ones to the party, buying high and selling low as the smart-money guys get out when the getting's good.

"One thing we know is money goes to where it's best treated," says Quincy Krosby, chief market strategist at Prudential Annuities in Newark, N.J.

"The fact is, if the market keeps moving higher without volatility pushing the market down dramatically or upward dramatically, you're going to see retail investors put money into equities," she adds. "But what about the professional traders who take advantage of that?"

Continued inflows of retail money might push those who have been in the market to start cashing out as the late money drives up prices.

Insiders are considered the smart money, Krosby says, because of "the notion that they know more."

"The classic rationale for insider selling at the stage we're in now is they know more than the average investor regarding the company's guidance," she adds.

The bright side: Those institutional outflows could represent simple profit-taking and an anticipation that a modest correction is in the cards.

Standard & Poor's strategist Sam Stovall sees resistance for the "500" in the 1360 to 1370 range, where a pullback of 5 percent or so is likely, sending the average down in the 1270 or so range. For the full year, he expects the S&P to hit 1400, which would constitute a 9 percent or so run from the pullback levels.

In other words, a pullback here could make an attractive entry point, and retail investors might be better off waiting it out.

"March and April tend to be favorable in terms of seasonality," Krosby notes. "If we do have a pullback, I think it brings in more buyers."

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The German scenario "cohabitation" euro and the drachma
Read the alternative German economists Greek drachma economy and the euro.

Mika Kontoroussis
Posted: February 23 2012 14:24 Updated: February 23 2012 14:29
An original economic model proposed by German economists international reputation for the development of the Greek economy, but also to save the common European currency turmoil created by the states - members of the South.
"Not only Greece has been a crossroads unsustainable options such as imposing a painful austerity measures or leaving the euro. European entire South in danger of collapsing dominoes downside caused by the crisis of recent years", admit Mario Ohoven economists and Oliver Holtemöller.
In today's article in the German newspaper "Die Welt", the head of the German SMEs, Mario Ohoven and economist at the Institute for Economic Research Halle, Oliver Holtemöller argue that to not be faced with a "European shock", Greece must resort to a solution: The use of dual currency.


"To place that is both national transactions in euro, and in DR", add the economists.
In fact that, as analysts note, is not so difficult to achieve, as there is a huge need to "squared circle" that is to drastically reduce the deficit and at the same time, improve growth rates, but also increased the tax revenue.
How does a country with 2 coins?
Mario Ohoven The proposal provides that in regard to payment of salaries, pensions, even in rents, payments will be made to DR, while trade with the outside can be made in euros, as the tourism industry.
According to economists, the deposits of Greek citizens in Greek banks should be in euro, provided that they reported to the Finance Ministry and will have full control over State finances and savings of individuals.
Regarding the crucial question is the actual rate of two parallel currencies, economists suggest that "initially it could be stable for a transitional period of two months and then it is logical and expected according to market rules, the continued devaluation the drachma, but not more than 2% per month. "
In the story, analysts are sounding the alarm of a possible exit of Greece and the euro are carefully study all the scenarios before reaching there, stressing:
"A withdrawal of Greece from the family of the euro will not only have negative consequences for other eurozone economies, but would stop or at least significantly slowed the process of European integration."
The German economist Oliver Holtemöller even ends by saying that "leaving the euro would have dramatic consequences for the purchasing power of workers, the unemployed, and pensioners in Greek society."

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as Global Woes Add
Investors are justified for viewing the Greek debt deal with skepticism and should reduce their risk allocation accordingly, Pimco's Mohamed El-Erian said.


Gillianne Tedder | Bloomberg | Getty Images
Problems in Greece are just the highest-profile set of geopolitical risks with which the market must deal — the others being Iran and Syria — which could cause disruptions sharply and quickly, said the co-CEO of the world's largest bond fund manager.

"The market is being very rational in saying it's a step but it's not a big enough step yet," El-Erian said of the Greek debt deal announced earlier in the week. "Fundamentally, Greece is going to have to find a way to restore growth and restore competitiveness. If it doesn't do that, private capital isn't going to come in and if private capital doesn't come in you don't get the oxygen that an economy needs."

In addition, the deal, which likely will see bondholders lose more than 70 percent of the principal plus reductions in coupon payments for the Greek notes, faces "implementation risk." The deal still must be approved by constituents of the Troika — the European Central Bank, the International Monetary Fund and the European Commission — that negotiated the pact. They include the Greek public as well as private and official creditors.

Greece faces debt in excess of 120 percent compared to gross domestic product and has been forced to adopt stern austerity measures as conditions of getting tranches, or installments, of international aid.

In doing so, though, the country risks hampering the growth necessary so it can pay its obligations in the future. Many economists believe Greece ultimately will leave the European Union so it is not bound by the euro currency restrictions.



"These are major decisions and only Greek society can make (them)," El-Erian said. "So far it's been let's kick the can down the road because nobody wants to make a major decision."

On a global level, El-Erian said the contagion risks from Greek as well as the disruptions to energy supplies from Iran and Syria pose even more economic risk.

Should any of those situations escalate, central bank policy makers will be limited in their ability to respond after the massive balance sheet expansion and zero-interest-rate policies adopted in the wake of the 2008 financial crisis.

Though healing, the U.S. economy, in particular, is in some ways more exposed to an event like the credit collapse that happened after Lehman Brothers fell in September 2008 because the economy is weaker now than it was then, El-Erian said.

"We have less economic and policy flexibility — that's the bad news," he said. "The good news is the central banks are doing all they can to limit the damages to the payments and settlements system."

With stocks rallying this year, El-Erian said investors should take some money off the table, have exposure to gold and oil, and concentrate bond exposure to the middle part of the yield curve — the five- to seven-year range.

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Clearly it's hard for markets to consistently produce 3%-5% monthly returns without taking a break. This is what we're now seeing absent--more positive news. Jobless Claims data Thursday should shed some light on conditions as will next week's Employment Report which needs to verify a better trend in conditions. Gallup is projecting an unemployment rate in excess of 9% again although they don't seasonally adjust like the BS BLS does.

We read yesterday some breathless financial commentators remarking that mutual funds showed the first positive fund flows since the previous January. That's a nice assertion, but January is always a time for people to invest for their IRA or 401K and so forth. Surprisingly ETF fund flow data from the previous bullish week showed $1.2 billion in outflows for both equity and bond sectors.

Basically, markets are just getting tired. We've remarked to members regarding weekly DeMark 9 count indicators which normally reflect "trend exhaustion". This is not to say these counts are perfect and may just indicate some sideways movement ahead. And, that's all we may be seeing despite how much liquidity global central banks are feeding bulls.

Meanwhile the SEC's Mary Shapiro said she's worried about HFT (High Frequency Trading). Worrying isn't a policy. Wake me when you're on to something real.

China reported another decline in manufacturing via an early PMI report there. Europe also reported a PMI below 50 indicating economic contraction. Back in the U.S. the NAR (National Association of Realtors) continues its serial misstatements as the current report showed a 4.75% increase in pending home sales but the previous report was adjusted from a 5% increase to a .05% decrease. How does that happen? Don't they have computers?

Wednesday markets felt a hangover from a poor Dell (DELL) report as we await Hewlett-Packard's (HPQ) report after the close (which missed revenue estimates $30.04 billion vs 30.72 billion expected but was a little higher on "adjusted" earnings). TJX Corp (TJX) matched earnings estimates but Toll Brothers (TOL) missed reporting a small loss versus a small gain. The latter along with the untrustworthy report from the NAR pushed REITs lower (IYR) and Homebuilders (ITB). The lingering uncertainty regarding the Greek situation also pushed banks (KBE) and financials (XLF) lower.

The downside of all this global central bank liquidity is well-seen in energy and precious metals markets. Oil fell a few pennies but remains quite high and gold (GLD) continued to soar. The dollar was down slightly and bonds were stronger. There's a lot of posturing by politicians over who's to blame for recently rising gasoline prices. All politicians and bureaucrats should just look in the mirror for an answer.

Volume was once again ultra-light making it rather easy for HFTs to push things around even as little was accomplished overall Wednesday. Breadth per the WSJ was negative.



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ART CASHIN: Okay, Let's Tackle This CDS Thing One More Time

Art Cashin, UBS Financial Services' director of floor operations, has gotten a lot of attention for his note last Thursday suggesting that the failure of the credit default swap market could send us back to the "Middle Ages." Traders told Cashin that one reason to be afraid was the opacity of the CDS market.
Yesterday, he retracted many of those comments, noting that the CDS market was actually not quite as opaque as he thought.
In this morning's Cashin's Comments, Cashin tackles the CDS issue once again.
It turns out that the CDS markets are more transparent than he thought on Thursday, but more opaque than he thought yesterday. One of Cashin's readers forwarded him these comments which suggests many of the huge pre-financial crisis risks still remain:
Please inform Mr. Cashin that his opinion of CDS is still fairly accurate. The most vanilla exposure is kept within DTCC. There are several exceptions, or as we call them outliers:
1. Credit linked notes which would reference Greece; these can be very large in size. Over 100mm is not unusual, these can be concentrated with 1 counterparty or spread (sold) to many retail investors through CD’s or other fixed income vehicles. If banks get desperate to unload risk they create these notes.
2. First to default baskets. This is where an insurance company sells insurance on a basket on names usually 5. These trades can be very large an involve loads of leverage. For example, if an insurance company wanted to get some juice 2.5yrs ago when Greece was at 300bps and wrote one of these baskets containing Greece, Spain, Germany Finland and the UK, the spread would be 500bps+ and the size would be 50-100mm easily.
3. Greece risk can sit in the CSO market, similar to the CDO market. These contracts are all private and only the 2 counterparties understand who holds what and there is often a reinsurance market for these (too further complicate matters.)
4. Lastly, legacy contracts can be outside the DTCC system. Say a vanilla cds contract written 7yrs ago with a 10y maturity.
So it is not as simple as some of your readers are implying when one accounts for the structured credit universe. The old shadow banking system that took down AIG still exists. And the scariest part is that the majority of it is sitting over here in Europe where transparency is at a minimum at the best of times.
Cashin also points to this morning's New York Times article on CDS to reiterate the point that the CDS debates rage on.

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Greek Crisis Raises New Fears Over Credit-Default Swaps

Published: Tuesday, 21 Feb 2012 | 11:26 PM ET Text Size
By: Peter Eavis
Greece’s debt restructuring is dragging credit-default swaps back into the spotlight.

The last time this financial instrument was on the global stage was in 2008, when the American International Group’s [AIG 27.55 0.22 (+0.8%) ] credit-default swaps brought the insurer, as well as the wider financial system, to the brink of collapse. A.I.G. had unique weaknesses, and regulators have started to overhaul the credit-default swap market since 2008.



European policy makers have nonetheless looked warily at credit-default swaps, at least until recently, while they structured the Greek rescue over the last six months.

They aimed for a voluntary debt exchange that would not initiate the default swaps, fearing that payments on the swaps might set off destabilizing chain reactions through Europe’s financial system.

But now, with Europe’s $172 billion aid package for Greece, it appears that the nation is going to take a step that substantially increases the likelihood that its swaps take effect.

To get maximum debt relief, Greece needs to have as many qualifying bonds as possible join the restructuring.

Toward that end, Greece may insert something called a collective action clause into bonds issued under Greek law. If the clause is inserted and then invoked, all bondholders will be forced to take a haircut, making the exchange involuntary. That would set off the default swaps.

The official decision on whether a default swap has been activated is made by the International Swaps and Derivatives Association, an industry body.

“I have very little doubt that they will be triggered,” said Darrell Duffie, professor of finance at Stanford.

The Greek government said Tuesday that it was sending a bill to Parliament that, if passed, would insert the clause into bonds issued under Greek law, which make up more than 90 percent of the country’s bonds. (Other Greek bonds were issued under English law.)

Some chance remains, however, that the exchange could be done voluntarily, avoiding a default swap event. That outcome would most likely prompt a torrent of criticism that the swaps did not cover holders against losses, as they were intended to.


RELATED LINKS
Europe Seals New Greek Bailout to Avert DefaultGreece Deal Will Only Last Until Next Election: GartmanWe're Not Greece: Italian Prime Minister Monti
“The whole nature of the C.D.S. contract would be called into question,” said Richard Portes, professor of economics at the London Business School.

In response, supporters of default swaps say bondholders can choose to hold their bonds and not put them in the exchange. The moment Greece fails to make a payment on at least $1 million of bonds, the default swaps will come into play, they say.

“If one investor had $1.1 million of debt and decided not to tender in an exchange, and the debt issuer stopped making payments on that debt, it would trigger a credit event,” said Steven Kennedy, a representative for the I.S.D.A.

The swaps will also come under heavy fire if there is any indication that activating the Greek instruments is leading to stress in the financial system. Nearly $70 billion of default swaps are held on Greece, but the net number is only $3.2 billion, once the instruments that sell credit protection are subtracted from those that bought it. For Italy, the numbers are far higher, with $314 billion in total and $22.5 billion net.

European leaders have not explicitly identified where they feel any default swap risks in the region may lie. A stress test of the region’s banks last year did not reveal large, unhedged exposures on swaps written on government debt. In nearly all cases, banks that sold insurance also bought a similar amount, which balances out their exposure.


MORE FROM NYTIMES.COM
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Still, there may be cause for concern. This system can break down if a large bank collapses, because counterparties might not be able to collect on the failed bank’s default swap obligations.

“Counterparty risk has been the great amplifier,” said Walter Dolde, associate professor in the School of Business at the University of Connecticut. “Sometimes an avalanche starts with a snowball.”

The default swap market’s defenders say counterparty risk is mostly eradicated with the practice of posting margin. If a bank owes money on a trade that is still open, it has to post cash or Treasury bills to the counterparty of an amount that is equal to, or even above, the amount that is owed. As a result, if it collapsed, the counterparty could keep the margin payments. A.I.G. was for a while exempt from posting margin on many of its swaps, which is one reason it became a systemic risk.

“The fears about the market are small potatoes,” Professor Duffie of Stanford said.

This story originally appeared in The New York Times

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Fitch Cuts Greece, Near-Term Default 'Highly Likely'
Published: Wednesday, 22 Feb 2012 | 7:10 AM ET

Fitch ratings agency on Wednesday slashed its rating for Greek sovereign debt to “C” from “CCC”, indicating that default is “highly likely in the near term”.


Scott E. Barbour | Getty Images

The downgrade comes just after the country secured a second bailout from its creditors and the subsequent announcement by the Greek government that private investors holding Greek debt would be forced to accept a debt swap, in which they exchange their bonds for lower-value debt.

“In Fitch's opinion, the exchange, if completed, would constitute a 'distressed debt exchange' (DDE) in line with its criteria and consequently yesterday's announcements set in motion the agency's process for reviewing Greece's issuer and debt securities ratings,” Fitch said in a statement.

Fitch said it would review its stance on Greece again once the debt swap had been completed.

"Shortly after completion of the exchange with the issue of new securities, Greece's sovereign rating will be moved ... and re-rated at a level consistent with the agency's assessment of its post-default structure and credit profile," the statement said.

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Tom DeMark Says U.S. Stocks to Trade sideways

http://www.ustream.tv/recorded/20608535

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ART CASHIN: Oops! Forget All That Stuff I Said About CDS
Sam Ro | 4 hours ago | 1,089 | 4
A A A
CNBC
So, many of you will remember last week's Cashin's Comments, in which UBS's Art Cashin communicated a gloomy tone from the NYSE trading floor.
Specifically, he commented on how the traders were less worried about a potential Greek debt default, but more worried about the potential cascading effects in the credit default swap (CDS) markets.
Here's an excerpt from last week's note:
But, traders fear a worse outcome might occur if the CDS contracts do not kick in. What good is insurance that doesn’t pay off. That could lead to the assumption that all CDS insurance was useless. That would stratify debt around the globe. Great credits could get all the money they wanted, but less than great credit would be shut out because it could not be insured. That could make the future one in which “the haves” will have whatever they want and all others nothing. Welcome back to the Middle Ages.
However, Cashin has now issued a somewhat bizarre retractment in this morning's Comments:
Oops! Or As Caesar Might Say – Mea Culpa – Last week, I wrote about several of the concerns that I, and some other floor types, had about potential risks in credit default swaps (CDS) in the somewhat shaky rescue negotiations on Greece.
A few nice people contacted me to kindly note that the CDS world has changed greatly since I first learned about it back in the clay tablet era.
I had suggested that no one knew how much CDS exposure there was on Greek debt. That is not the case. I have been informed that these days market participants “have been required to provide details of all CDS trades to a central reporting repository (The Depository Trust and Clear Corporation).” Further, “DTCC publishes summarized information of all CDS trades in the warehouse on a weekly basis (http://www.dtcc.com/products/derivserv/data/index.php). Based on this week's data, there are currently 4,204 trades outstanding that reference the Hellenic Republic with a net notional of $3.2bn.”
Additionally, “Global regulators have access to detailed trade level information from DTCC. As such, the regulatory community knows exactly which counterparties (both bank and non-bank) would be exposed to a Greek credit event.”
So, despite my mistaken apprehensions, the size of the CDS situation is not opaque and is actually quite visible. As Alexander Pope almost said - “A little knowledge is a dangerous thing”. Thanks for the corrective input.
So, there you have it.
But some questions remain. Did the traders misinform Cashin? Was Cashin just speaking to the wrong traders? Did Cashin make up the trader buzz? We'll update when we find out.


Read more: http://www.businessinsider.com/art-cashin-oops-forget-all-that-stuff-i-said-about-cds-2012-2#ixzz1n2bKTj1I

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STOCKS DOWN OVER 600 HUNDRED POINTS...
THAT'S THE HEADLINE WE GOING TO WAKE UP TO WITH IN THE NEXT 60 DAYS.

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02/20/2012 17:00pm
Greece's fate uncertain as bailout talks drag on


International Monetary Fund managing director Christine Lagarde speaks with Greek Prime Minster Lucas Papademos at a meeting of eurozone finance ministers in Brussels.
NEW YORK (CNNMoney) -- Eurozone finance officials remained behind closed doors late Monday as a crucial round of talks over a second bailout for Greece looked set to run late into the night.
The meeting of finance ministers from the 17 nations that use the euro, known as the Eurogroup, is widely expected to culminate with a decision on a second €130 billion for Greece, which the nation needs to avoid a potential default next month.

But European Union officials declined to say when an announcement would be made. The negotiations leading up to Monday's meeting have been fraught with delays.
Speaking to reporters ahead of the meeting, Eurogroup president Jean-Claude Juncker stressed that Greece should remain a member of the euro currency union.
"It is the intention of nobody to have Greece outside of the eurozone," he said. "That would be a bad solution for Greece and ... a bad solution for the euro area."
To qualify for the bailout, the Greek government passed a package of deeply unpopular austerity reforms and has taken additional steps to meet the conditions set out by the European Union, International Monetary Fund and European Central Bank.
Eurozone economy shrinks
Greece has also hammered out a plan to write down €100 billion euros worth of Greek government bonds and swap existing debt for securities with lower interest rates, a deal that would result in losses of up to 70% for the private sector.
Despite progress on those fronts, a final decision on the second bailout is reportedly being held up by disagreements over Greece's debt reduction targets.
Under terms reached in October, Greece agreed to lower its debt load to 120% of gross domestic product by 2020 from about 160% currently.

But the nation's worsening recession has raised worries that Greece will not achieve those targets without additional support from official creditors such as the ECB.
Greece has struggled to meet the conditions of its May 2010 bailout and many eurozone governments have been calling for greater control over how any additional funds would be used, as well as increased oversight of the nation's budget policies.
In particular, officials have suggested that bailout funds would be placed in an escrow account and used to pay off debt before Greece paid other obligations.
Europe's debt crisis originated in Greece nearly three years ago and the situation there has yet to be fully resolved.
Europe stock rally faces a perilous road
The concern is that if Greece defaults it will be forced to leave the euro currency union, a development that could have severe and unknowable consequences for the global economy.
But fears of a full-blown debt contagion in the eurozone have eased this year amid aggressive moves by the ECB, which has flooded the banking system with cheap, low-cost loans.
Still, many economists say the long-term outlook for Greece is highly uncertain.
The nation's economy has been mired in recession for years and the austerity measures it is required to impose will further drag on growth.
At the same time, the eurozone's strongest members, including Germany, have been increasingly reluctant to provide more support for Greece given its lack of progress on debt reduction and economic reforms.

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Bearish Signs in a Bullish World
Specialty: MARKETS
Monday, February 20, 2012
By Jim Fink

While the markets are posting solid numbers, there are still some outliers that could knock the global recovery off its pins, writes Jim Fink of Investing Daily.
The Nasdaq Composite Index rose to a more than 11-year high this month (its highest since February 6, 2001), and the S&P Small Cap 600 Index hit an all-time high as well.
It's extremely difficult to remain bearish when stocks are hitting multi-year new highs, as evidenced by technical analyst Louise Yamada's reversal from bear to bull. She now believes that the Nasdaq has entered into a "new structural bull market."
Yamada is not as bullish on the Dow Jones Industrials or the S&P 500. But all of these stock indices have high correlations with each other, so the Nasdaq can't go up much more without pulling the other stock indices along for the ride.
Most of the time, the stock market is a leading indicator, which suggests that the US may avoid a new recession (despite ECRI's call for one). The growth rate of ECRI's weekly leading index (WLI) hit a 22-week high last week, and although still negative at -5.2%, is now less negative than the -5.5% reading at the height of the economic rebound in May 2008 before the stock market crash that followed.
ECRI must be having doubts about its recession call. Even NYU Economics Professor Nouriel Roubini-known as "Dr. Doom"-thinks the stock-market rally will continue into midyear!
Keep in mind, however, that the S&P 500 and Dow Jones Industrials hit all-time highs on October 9, 2007-right before the Great Recession and bear market of 2008-2009 got underway. No doubt about it: uncertainty continues to reign supreme.
US Economic Outlook Remains Cloudy
The January employment report of 243,000 new non-farm jobs was very positive, showing the biggest gain since last April and the third-best monthly gain since 2006. Furthermore, the unemployment rate fell to 8.3%, the lowest rate in three years.
According to Gallup, however, the employment picture has shown "deterioration" since mid-January, so the good times may not last. Even Federal Reserve chairman Ben Bernanke recently testified before Congress that the job market isn't as strong as the declining unemployment rate might suggest, because it doesn't include discouraged workers or part-time workers who would like a full-time job.
In addition, consulting firm Challenger, Gray & Christmas announced that job cuts in January were up 28%, the largest increase since last September.
Lastly, the Congressional Budget Office (CBO) released its economic outlook for 2012 and 2013, and the news is not optimistic. The CBO warns that real GDP growth in 2013 is expected to decelerate to only 1.1%, and the unemployment rate will rise to 9.2% if the Bush tax cuts, the payroll tax cut, and jobless benefits are allowed to expire.
Congress has apparently put aside its dysfunctional acrimony and reached agreement over how to extend the two-percentage-point payroll tax cut (affecting 160 million American workers) and unemployment benefits (affecting 3 million people), both of which are scheduled to expire at the end of February. That's the good news.
The bad news is that Fed Chairman Ben Bernanke recently told Congress that the scheduled expiration of the Bush tax cuts in December 2012 jeopardizes the economic recovery, as do the $1.2 trillion in automatic spending cuts scheduled to take effect in January 2013.
Of course, none of this dour economic news has made a dent in the stock-market rally, which has been fueled by three years of unprecedented monetary easing and investor expectations that another round of quantitative easing (QE3) is a virtual certainty later this year. Investors may be bitterly disappointed, however, if Dallas Fed President Richard Fisher is right in calling QE3 a "fantasy of Wall Street."
Money supply growth has grown by double digits over the past year, which further supports additional stock buying. All of this monetary easing has caused BlackRock CEO Laurence Fink (no relation) to recommend that investors have 100% of their investable assets in equities.
$300 Per Barrel Oil?
The big wild card is the Middle East-particularly the chance of a war between Israel and Iran. According to investment newsletter veteran Richard Russell, the stock market would sell off big time if an Arab-Israeli war unfolds:
I've been sensing something BIG and ominous is in the offing. What could it be? Ah, a front page article in Sunday's NY Times supplies the answer. Israel will attack Iran with nuclear bombs. Israel must attack this year for this is the year when Iran will have nuclear capabilities.
Actually, the stock market is acting as though something momentous and frightening is 'out there.' The roof of a monster top is building.
Sounds a bit apocalyptic, and I usually don't reference such wackiness, but Russell has been publishing his Dow Theory Letters since 1957, is widely respected, and by no means a crackpot, so his opinion is worth noting. Other crystal-ball gazers predicting a stock-market crash are John Hussman (also respected) and Joe Granville (no comment).
Intelligence analyst George Friedman of recently-hacked Stratfor places the odds of an Israeli strike at only 25%, but says that crude oil prices would skyrocket to $300 per barrel if it did occur.
Several energy-related master limited partnerships involved in exploration and production (E&P) as well as gathering and processing (G&P) are energy sensitive. Imagine how well they would do with $300 oil!

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Angela Merkel, Mario Monti and Lucas Papademos ‘confident’ deal on €130bn (£108bn) bailout would be struck on Monday, but concerns are growing behind the scenes.

The German news weekly Der Spiegel reports that a majority of eurogroup finance ministers are readying themselves for a collapse of the latest rescue package on Monday – or, at least, leaving it to a planned EU summit on 1 March to decide.

Greek hopes of winning the final go-ahead for a new €130bn (£108bn) bailout when eurozone finance ministers meet on Monday could be shattered even though Athens has agreed to further bruising savings.

The optimism seeped into global markets with the Dow Jones rising towards 13,000 points in New York and the FTSE 100 inching close to the 6000-mark. But, behind the scenes, sources indicated it could be seriously misplaced.

“Scepticism is especially strong among the AAA-rated states (Germany, Finland, the Netherlands) whether Greece can turn it around,” said Maria Fekter, Austrian finance minister. “The threat of a Greek default is not off the table.”

In Berlin officials rebutted widespread reports of a growing rift between Merkel, who backs Greece staying a member of the euro, and Schäuble.

Amid growing evidence of a significant split between Merkel and her finance minister Wolfgang Schäuble on a new Greek bailout, some officials spoke darkly of Athens being allowed to default within the eurozone by early summer.

In a seemingly endless tussle between stability and solidarity, finance ministers could end up agreeing to the bailout but only in tranches – with the first one, required for Greece to repay €14.5bn of debt by 20 March, held in an escrow account. This account would be topped up only if Athens did indeed service its debts and implement reforms.

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Is Germany Trying To Force A Greek Default?
February 19, 2012
Germany is proposing harsh measures for Greece, such as suspending the democratic process to assure things are done the way the EU wants. You can make an argument the harsh demands from Germany are meant to force Greece to say “enough”. In a Financial Times column, Wolfgang Munchau touches on that subject (excerpts below):

The most extreme proposal is to suspend the elections and keep the technical government of Lucas Papademos in place for much longer. A senior German official has told me that his preference is to force Greece into an immediate default. I can therefore only make sense of Mr Schäuble’s proposal to postpone elections as a targeted provocation intended to illicit an extreme reaction from Athens. If that was the goal, it seems to be working. The situation highlights the political vulnerability of the current eurozone rescue strategy.

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Demark’s Trend Lines

How would we know if what we search and studied for would benefit us at the end of our forex journey? Where in there are a lot of websites and articles that are claiming to be an online source. Tom Demark’s is one those authors and strategist as well as a trader himself who has proven his work in so many ways, and that is through his discoveries, theories and books.
With our previous post we have illiterate and introduce who Tom Demark is and provided you a brief background of his career and experience. Today, we will further discuss what he was famous for, the Tom Demark Trend Lines. I have given a few notes on how it works this time a step by step on how to draw the trend lines.
The book is consist of the following steps on how to use his trend lines analysis. First of all, It needs focus and understanding for you to fully absorb every word and even the charts that he is illustrating. Just like other finance and marketing strategy Tom Demark’s trend lines in general focus on currencies and determining the future price. He wants to avoid that you will commit the same mistakes as what other new traders often committed. As a guru Tom Demark’s goal is to guide you with a simple way using the obvious indicators that are available on the charts.
What is Trend Lines?
We always hear about trend being use in any discussions and analysis by traders but what is trend? Or in forex trading what is trend lines? Trend refers to the direction and how a subject turns out as the processor circumstances affects its change. It is also define as the pattern or motions that an individual follows or monitors during a period of time. In forex, trend is more often called trend line a term that traders refer to as the technical analysis. A diagonal trend lines happen when you follow and draw a specific direction from left to right.
Usually the trend lines connect point A to point B with the chart as it compares the previous price of the currency and the current one. A trend line is also or more oten use when they look at the perfect timing as when the entry or exit point will be when it comes to placing their trades. Making it an important tool to use when you are looking at the direction of the currency price on both major and minor pairs; it also indicate if the price trend goes out or down or if it bounce back or if you are expecting a reversal.
To follow the steps on drawing Tom Demark’s Trend Lines, must note terms that Tom Demark uses. These are the swing cycle high and swing cycle low. It indicates the direction of where the trend is heading. The very top trend is where you will find the candle’s wick that is in a swing high mode and the wick of a candle is noted higher than the trend from left to right. Meanwhile the bottom or the lower trend shows the candle’s wick is much lower than the direction from left to right. A regular swing direction is from left to right where it has a higher and lower level with regards on looking at the candles wick.
Steps to Draw Demarks’ Trend Lines
First we will define and lists how to draw the Tom Demarks trend lines in an uptrend direction. If you look at the chart, you must check the lower part of the candle and determine the current status of the candles wick. This is the bottom wick from the right to the left. Towards your left, find the past bottom wick that is much higher of the same direction from right to left. If you see those indicators you can now draw the trend line and this is from the recent lowest wick up to the past lowest wick. Finally, at the very end of that line draw it further towards your right and this time take it to a distance.
Now let’s take how to draw the Tom Demarks trend line from the bottom trend. The same as the uptrend, you must identify the higher wick of the chart and look for the current one which is more than the wicks from the right to left direction. On your left, determine the past high wick which is less than the candle wick from the direction right to left. You can now start to draw the trend line diagonally, and this is from the recent top wick to the past top wick illustrating it from the direction of right to left. After drawing the line take the very end of that line which usually stop on the recent top wick and draw an extensions line going forward to the right.
These two trend lines are what Tom Demark’s theory is all about. By following these pointers on how to use them you will be able to predict the future developments and movements of the price. Tom Demarks trend lines are often drawn with in the period of 5, 10 to 15 minutes on the charts. For other this is done daily and with point out gaps or in between 2 to 3 days of extensive comparisons on prices for both the current and previous dates. With simple math you will be able to find the difference and determine if the trend goes up or if it goes down. . Since events, interventions and even reversal happens and it affects the price action of the currency. This is a simple step that any of us whether you are a new trader or a seasoned trader could learn and grow of liking it.
Have you look into Tom Demarks Trend Lines Indicator? What do you think about his process would it work for you to? Please let us know by sending us your comments below. To find out more about foreign exchange or they market you can subscribe with our News letters or RSS Feed.
I hope I am able to contribute for your trading success.
Warm Regards
Wellsie Fisher

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By Jeffrey Miller Feb 17, 2012 4:10 pm
While most people view default as a disaster, it actually may be the better of two bad options facing Greece and Europe as a whole.

1 COMMENT
Real-time Trading Ideas Throughout the Trading Day.

Cole Sear: I see dead people.
Malcolm Crowe: In your dreams? [Cole shakes his head no]
Malcolm Crowe: While you're awake? [Cole nods]
Malcolm Crowe: Dead people like, in graves? In coffins?
Cole Sear: Walking around like regular people. They don't see each other. They only see what they want to see. They don't know they're dead.
Malcolm Crowe: How often do you see them?
Cole Sear: All the time. They're everywhere.
-- The Sixth Sense, 1999

The members of the eurozone are dead people. They only see what they want to see. The eurozone as currently configured is on life support. Greece, Portugal, Spain will likely have to leave the euro.

When they leave is unknowable – politicians seem concerned with keeping the current members from returning to issuing their own currencies. But at the same time, they are imposing incredibly harsh conditions on Greece. They are pushing them into an untenable position financially, and worse, they are humiliating them publicly. At some point soon, the Greek people are going to tell the Germans to go pound sand and deal with the consequences, as “being rescued” is clearly worse than simply defaulting.

While imposing these impossible conditions on Greece, German Chancellor Angela Merkel at the same time insists that she doesn’t want Greece to default and leave the euro.

However, German Finance Minister Wolfgang Schäuble is now apparently pushing for Greece to default. He doesn’t think Greece will pay back the new loan, and so doesn’t want to waste the money. See this article in the Financial Times for more information, or my article from October 28, 2011, titled This Isn’t My Problem, on why the Germans won’t bail out Greece.

While most people view default as a disaster, I actually think it’s the better of the two bad options facing Greece and Europe as a whole. For Europe, restructuring Greece’s debt through a “voluntary haircut” would be the worst option. It would call into doubt the viability of the whole credit default swap market. And that is the beginning of the end.

On December 8, 2011, I wrote that the downward spiral had begun, and the trigger was going to be the “voluntary” losses taken on Greek debt. (See This Week's EU and ECB Meetings Can't Fix Europe or US Stocks.)

Art Cashin of UBS, who I think is the best writer on financial markets, revisited the issue of making this default “voluntary” in his note yesterday. Since he clearly stated the issues, I have copied it below. From Art Cashin, Cashin’s Comments, February 16, "Is There More at Risk Than Greece in a Greek Default?":

Recently, there has been a buzz building on trading desks and trading floors that there may be a lot more at stake in a potential Greek default than the media has been talking about.

As of now, most of the public discussion has centered on potential contagion among the banks as most of the Greek sovereign debt is held by the European banking community.

Traders, however, fear that the real risk is in the area of credit default swaps (CDS). They are insurance policies, individually written, that basically say - if Greece defaults, we’ll pay you what they should have.

Credit default swaps have grown exponentially over the last decade. Since they are individually written, there is no clear visible record of how many CDS contracts are outstanding. Also unknown is who is involved. The two parties obviously know who the counter-party is but there is no public record that would allow a regulator or a third party to find out who was involved.

As things unraveled in 2008 that lack of records exacerbated the crisis. Bank A could examine the balance sheet of Bank B and see how their assets looked. But were they guarantors of some unseen credit default swaps? If they were, they could be a great risk and not as solid as they might appear. That fear helped freeze the markets. Bank A would not lend to Bank C fearing some unseen CDS exposure. Look at what happened to AIG.

Okay! If you’re still awake, let’s get back to Greece.

No one knows how much CDS exposure there is on Greek debt but it is assumed to be a lot. Banks and others looked at the very high and attractive yields on Greek bonds and began salivating. But, what about that risk - better buy some insurance.

So, the regulators and finance ministers worry about the great unknown. They know how many Greek bonds are outstanding and who is involved in them. That is not true of CDS contracts.

Recall that, months ago, negotiators on the Greek debt bumped into part of the CDS problem. If the holders agreed to take 50 cents on the dollar, would that trigger their CDS on that bond (paying them the conceded 50 cents and making them whole).

At that time, many contended that if the bondholder “accepted” the offer of 50 cents on the dollar, that made the event voluntary and it would not “trigger” the CDS payout. That caused lots of folks to ask for a ruling from the ISDA (the ruling group on CDS contracts). If you “accepted” an offer with a gun to your head, was it really voluntary?

The finance ministers stopped that conversation immediately as if one of the children had suddenly walked into the room. Fearing a potential panic if a ruling was issued, the ministers quickly swept the CDS question under the rug.

Now traders fear the issue will come back again with a vengeance. The ministers do not want to see a lot of CDS contracts triggered since they don’t know who owns them or, more importantly, who wrote them. That could become a domino-like contagion ala 2008.
But, traders fear a worse outcome might occur if the CDS contracts do not kick in. What good is insurance that doesn’t pay off. That could lead to the assumption that all CDS insurance was useless. That would stratify debt around the globe. Great credits could get all the money they wanted, but less than great credit would be shut out because it could not be insured. That could make the future one in which “the haves” will have whatever they want and all others nothing. Welcome back to the Middle Ages.

Beware of people who don’t know they’re dead.
This week’s trading rules (with thanks to Phil Cuthbertson):
Anxiety is good if it focuses the mind.
Constantly ask where your conviction could be wrong.
Ask how much you are prepared to lose before you start a position.
S&P 500 (SPX) Support and Resistance Levels:
Support: 1358, 1354/1355, then 1349, followed by 1342/1344.
Resistance: we’re right at it at 1360, then 1365.


Read more: http://www.minyanville.com/businessmarkets/articles/greek-debt-angela-merkel-german-chancellor/2/17/2012/id/39487#ixzz1mlv0N7RF

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Market Outlook: Everyone Is Waiting for a Stock Pullback
Published: Friday, 17 Feb 2012 | 8:09 PM ET Text Size
By: Patti Domm
CNBC Executive News Editor

Markets head into the week ahead on a tentative note, even as Greece looks set to get its bailout funds.

Rose | Mueller | Stock4B | Getty Images

Analysts have been saying for much of February that the market is ripe for a pullback, but the indices continue to rise, taking the S&P 500 close to its 2011 high and the Dow and Nasdaq to multi-year highs.


The S&P 500, in the past week, rose 18, or 1.4 percent to 1361, and it is now up 24 percent from its October low and nine points below its 2011 high. The Dow, up 1.2 percent for the week to 12,949 is in reach of 13,000, a key psychological level. It is also at the highest level since May, 2008.

“The market continues to work its way higher. We are knocking on the door of the April 29 recovery high. It feels like there are an awful lot of people calling for a correction—or at least a digestion—and I’m one of them,” said Sam Stovall, chief equity strategist at S&P Capital IQ.

Stovall said with history as a guide, when stocks rally, off a ‘baby bear’ correction, like the one that ended in October, they on average rebound by about 23 percent within six months. The current market rally is ahead of schedule, and stocks have made similar gains in just 4-1/2 months.

“We think we’re going to get to where we are now, or even as high as 1380 (on the S&P) and then maybe go down to the low 1300s before approaching 1400. That’s the scenario our technicians are talking about,” he said. He said he would then look for a steeper correction in the second or third quarter.

Even if things go well for Greece at the European finance ministers meeting Monday, stocks could still give up some gains in the near future, analysts say.

U.S. markets are closed Monday for the President’s Day holiday. The ministers are deciding on a 130 billion euro bailout plan that would stave off default for Greece.


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“I honestly don’t have much faith in the deal though I think the ECB (European Central Bank) swap plan is technically to get them out from under and being swallowed up when a deal comes between Greece and its private creditors,” said Art Cashin, director of floor operations at UBS.

The ECB is reported to be planning to swap its Greek bonds for new bonds, in a move traders say will help it avoid the steep losses private investors are expected to take.

As Greece has edged closer to a deal, stock prices have increasingly appeared to be getting toppy.

“It’s tough not to be bearish. They do look overbought. There’s a lot of people saying the number of new highs have declined as the rally moved on. That’s a divergence and usually negative,” Cashin said. “I’m cautious in here.”

Many expect a shallow sell off but that has yet to be seen. “I won’t know until it starts,” said Cashin.

Citigroup’s chief U.S. equities strategist Tobias Levkovich, in a note Friday, points out the market appears to be at a near term top.

“Metrics suggesting complacency and increasing margin pressures all argue that share prices may need to consolidate. Anecdotally, investors also seem more willing to buy now, fearing being left further behind the index benchmark,” he wrote.

Levkovich added, however, that his constructive view on the market is not changed, and his year-end target remains 1,425 on the S&P.

There is little U.S. data in the coming week. In the past week, jobless claims and a few other economic reports provided a few positive surprises, giving support to the market’s gains. There are weekly jobless claims, as well as housing data in the coming week. There are also three auctions for a total $99 billion in Treasury notes scheduled.

Earnings season is winding down, but retailers are among the final companies to report this quarter, with Walmart and Home Depot reporting, among others.

“What’s particularly interesting about the earnings from retailers is they’ll tell you something about the different income brackets. You’ll have Saks on one hand, which will tell you about the upper income bracket and on the other hand, you have Walmart and Dollar Tree,” said Daniel Greenhaus, chief global strategist at BTIG.

Analysts have said an increasing concern for the consumer is the rise in gasoline prices, which are up 15 cents in the last month and are 40 cents higher than at the same time last year. Gasoline prices helped push the CPI higher, when it was reported up 0.2 percent Friday. Gasoline was up 0.9 percent for January.

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Global investors either have extremely short memories or they are far too concrete, as my wife the psychologist would say. Saying that Greece is not a bank but a country means nothing. Almost all Europeans argue that a default by the Greek government would now be more straightforward and not as significant as the collapse and bankruptcy of Lehman Brothers in September 2008, especially since the Eurozone, under the influence of the surplus countries, has effectively ‘ring-fenced’ Greece from the other 16 members. Lehman was not a very large factor in the global banking scene with less than one quarter the capital of the biggest US banks and with assets below those of more than 100 banks around the world. Greece might represent less than 3% of the GDP of the Eurozone, but when lined up against Lehman, Greece stands larger in its relevant market. Anyone can read the newspapers, blogs, and Internet scribblings before the Lehman collapse and see that the impact of its collapse was not expected to be significant.

Rereading the documents and remembering the situation as I set out for a weekend cruise on the Chesapeake, the world was not worried. The market had already seen the rescues or restructuring of Washington Mutual, Countrywide, Fannie Mae, and Freddie Mac, so no one was worried. This looked like another Bear Stearns, a manageable problem but this time the Bush administration was not interested in getting involved – ‘let the market solve this, don’t throw good money after the bad.’ So, what is the difference now? The world is as blasé about a Greek default or departure from the euro as it can be – credit spreads are dropping, the other weak Eurozone sovereigns are financing themselves easily, and everyone thinks the LTRO has solved the problem for the next year or two. Why should we worry about Greece?

The market has not opened its eyes to the impact this Greek unraveling will have. The Eurozone will be mortally wounded and the world will suffer a significant recession – maybe as deep as 2008. European banks will lose much of their capital base and many should be bankrupt, but just as in the Lehman aftermath, the governments will try to save the banks and the banks’ bondholders, solvent or not. As the bank appetite for Eurozone sovereign paper will be decimated, austerity will probably follow shortly, followed by deflation and uncontrollable money creation. The European recession should be one for the record books.

This entry was posted on Thursday, February 16th, 2012 at 11:01 am and is filed under Currencies. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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chanos kynikos video: http://money.cnn.com/2012/02/16/news/economy/china_chanos/index.htm

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S&P 500 Faces Big Test Below 1,368
To put today’s action into some context, the comments below were posted on Wednesday:

One more push toward 14.91 [in XLF] would fit well into an intermediate-term topping process; the same can be said for an S&P 500 move toward 1,363.

Given the extended nature of the markets and current DeMark counts, the odds of a reversal remain elevated as long as the S&P 500 fails to close above 1,364.01, based on the 9-13 Sequential count. DeMark indicators are proprietary tools developed by Tom DeMark of Market Studies, LLC. The daily Combo count still allows for three closes above 1,352. The Combo count in the S&P 500 E-Mini futures also allows for two more closes greater than 1,349.

The Combo count on the daily chart of the S&P 500 moved one step closer to an exhaustion signal after today’s close. It could reach exhaustion in as little as two trading days. The range of possible S&P 500 resistance comes in between 1,358 and 1,368. Several markets have similar counts aligning with a few more days of strength/consolidation.

Is it possible stocks will blow through the DeMark exhaustion signals while sprinting higher? Absolutely, it is possible, but regardless it is prudent to see how it plays out since we are only talking about a few points on the S&P 500.

[payupnow]

Art Cashin
Now traders fear the issue will come back again with a vengeance. The [finance] ministers do not want to see a lot of CDS contracts triggered since they don’t know who owns them or, more importantly, who wrote them. That could become a domino-like contagion ala 2008.

But, traders fear a worse outcome might occur if the CDS contracts do not kick in. What good is insurance that doesn’t pay off. That could lead to the assumption that all CDS insurance was useless. That would stratify debt around the globe. Great credits could get all the money they wanted, but less than great credit would be shut out because it could not be insured. That could make the future one in which “the haves” will have whatever they want and all others nothing. Welcome back to the Middle Ages.

[payupnow]

Art Cashin
Credit default swaps have grown exponentially over the last decade. Since they are individually written, there is no clear visible record of how many CDS contracts are outstanding. Also unknown is who is involved. The two parties obviously know who the counter-party is but there is no public record that would allow a regulator or a third party to find out who was involved.

As things unraveled in 2008 that lack of records exacerbated the crisis. Bank A could examine the balance sheet of Bank B and see how their assets looked. But were they guarantors of some unseen credit default swaps? If they were, they could be a great risk and not as solid as they might appear. That fear helped freeze the markets. Bank A would not lend to Bank C fearing some unseen CDS exposure. Look at what happened to AIG.

[payupnow]

STOCKS DOWN OVER 600 HUNDRED POINTS...
THAT'S THE HEADLINE WE GOING TO WAKE UP ONE MORNING WITH IN THE NEXT 60 DAYS. FEELS LIKE THAT.