Fear of a slack planet Marty Cej

Fear of a slack planet
The Chase by Marty Cej:

Asian stocks fell, European stocks are slumping and U.S. index futures indicate a drop at the open. What gives? Some are pointing to a decision by economists at Morgan Stanley to cut their forecasts for global economic growth, saying the U.S. and euro zone were "dangerously close to a recession."

But that's too easy. After all, Deutsche Bank lowered its forecasts for growth earlier in the day yesterday, Merrill Lynch moved its expectations for a rate hike in Canada back to December due to a weakening global economy, TD Securities yesterday moved its forecasts for rate increases in the U.S., Canada and the U.K. farther out into the future and Goldman Sachs has warned clients in recent weeks that while the probability of a U.S. recession sits at one-in-three, the risks are increasing. In other words, the Morgan Stanley report is one of many that have been circulating the markets in recent weeks so let's not overemphasize its importance to the markets today.

Instead, let's get at what led Morgan Stanley to its conclusions, ask what has changed in the last three days of data, policy statements or market moves that prompted the cuts by Morgan Stanley and others. Jim Flaherty and Mark Carney have not been summoned to testify before a parliamentary committee tomorrow because of an economist's report.

We'll get some help with that task today thanks to the release of U.S. initial jobless claims at 8:30 and, more importantly, the Philly Fed index at 10 am. The Philadelphia area remains a key manufacturing district for the U.S. so the report can dictate the market's performance in the short term. Economists polled by Bloomberg expect the index to drop to 2 from 3.2 though the spread between estimates ranges from -6 to 10, one of the widest ever.

Rather than driving stocks lower because of a Morgan Stanley report, markets are more likely pricing in the risk of another report showing a worsening U.S. economy. We'll also get a read on U.S. consumer price inflation at 8:30 as well as Canadian leading economic indicators and wholesale prices.

Our pursuit of the patent story continues today in the wake of Wi-Lan's unsolicited bid for Mosaid after the close of trading last night. Ron Shuttleworth, analyst at M Partners, will take us through the process of finding values in a patent portfolio at 10:10 am while Wi-Lan CEO Jim Skippen joins us at 2:15 to talk about his bid and why Mosaid has been resistant to his overtures so far.

Mickey Drexler will cap off our coverage of the U.S. retailer earnings season this week in a half hour conversation with Howard Green at 1:00. Credited with first saving The Gap by making it relevant to an entire generation and then growing J. Crew into a global brand and online powerhouse, Drexler can provide insight into the U.S. retailing industry that no one else can. Plus, he brought gingham back.

With my help, of course, but he gets most of the credit.
Retail stocks continue to be a focus for the markets this week as we examine numbers from Limited Brands – which sashayed past analyst expectations with an insouciant pout – and Dollar Tree, which beat and raised its forecast. Sears Holdings loss widened and sales fell.
The U.S. Justice Department is investigating whether Standard & Poor's improperly rated mortgage securities in the years leading up to the financial crisis, the New York Times is reporting, citing unnamed sources.

The investigation began long before the U.S. debt downgrade but is still likely to add fuel to the political rhetoric. We're pursuing.
Gold has rallied to a record high in early trading and oil is slumping ahead of the Philly Fed survey.
And that's just for starters.

BNK.TSE + Technical Analsys Of Current Roller Coaster Market

Bankers has 10.69% Of ALL Stock In Public Float Is Short

Hold Stock Short...This will explode upward at some point.

Bill Carrigan TA : Our first chart is the basic 8-wave count of a full bull and bear Elliott Wave count. Note the bull phase – impulse wave to (1) which is followed by a counter trend corrective wave down to (2). We then get an impulse wave to (3) which is followed by a counter trend corrective wave down to (4). We then get the final advance to (5) which is then followed by an A-B-C or three wave correction or bear phase.













The nasty selling panic that began three weeks ago has confused the fundamental and technical analysts. The fundamental guys fear a recession along with declining earnings and those risky European banks.
















The technical guys study the MACD, the RSI, stochastics and moving averages. The only thing that works is Elliott Wave because when the count is applied to long term charts we can see where we were and where we are going.

Some basic tenents are the corrective (2) will never violate the low of impulse wave (1). Impulse wave (3) is never the shortest wave and the low of corrective wave (4) will never enter the space of impulse wave (1). The theory of alternation holds that if corrective wave (2) is short and simple than corrective wave (4) will be long and complicated. So there you have it as set out in our simple diagram

Now I am illustrating an Elliott Wave count on the Dow Industrials using weekly data to set out the 2009 to date 1-2-3-4-5 bull advance count and the subsequent A-B-C correction or bear phase. Note the last C wave corrective wave has been a sudden and sharp decline accompanied by fear, confusion and panic which is typical of a C wave bottom.












If this is a bottom then we start into a new Elliott Wave 1-2-3-4-5 wave advance that should run through 2013. Keep in mind that a new impulse was (1) is always thought to be a bear market rally





Dumpster diving with Wilbur Ross
The Chase by Marty Cej:

Global stock markets are mixed as we approach the North American open after a hastily thrown together "summit" between Angela Merkel and Nikolas Sarkozy yesterday failed to result in measures that buttress confidence in Europe.

We'll see whether President Obama fares any better today after an "unnamed administration official" told Bloomberg, AP and others that the president will give a major speech in September to ask Congress for additional money to boost the economy and stimulate job growth. The president will also ask for long-term spending cuts, the unnamed official said.

Presidential hopeful Rick Perry warned yesterday that any move to stimulate the economy by Federal Reserve officials would be considered "treasonous" and result in their "ugly" treatment if they ever let the sun go down on them in Texas. The White House, European leaders, ECB and Fed have now all made aggressive policy statements towards stimulating growth and easing financial conditions. Will that be enough, combined with healthy corporate balance sheets and billions in cash on the sidelines, to recharge global stocks markets?

We're about to find out.
BNN features today a conversation with billionaire Wilbur Ross of WL Ross & Co. One of the foremost bankruptcy and leveraged buyout experts in the world, Ross will sit down for half an hour with Howard Green at 1:00 pm Eastern. We'll ask Ross what he's buying, what he's selling and whether he believes the U.S. economy is tipping – like a stand-up paddleboard swamped by a Sea-Doo's wake – into recession.

Among the stories we need to pursue today are the repercussions of a tax on financial transactions proposed by Merkel and Sarkozy yesterday. Short on details, the mere mention of a tax – an idea that was rejected by the European Union in 2010 – drove shares of exchanges and banks lower. What might the tax look like? How would it hurt volumes and earnings? Would it affect Canadian banks and exchanges? Could it be good for Canadian banks and exchanges? Let's find out.

U.S. retailers continue to roll out their earnings this week with numbers from Target, which beat by 6 cents, and BJs Wholesale, which beat by as much as 8 cents a share. Abercrombie & Fitch, where Michael Kane purchases much of his leisure wear, topped the average forecast by 5 cents.

Deere & Co. is another stock to watch today after the world's biggest maker of cool farm machinery reported a short time ago, earning $1.69 per share in its third quarter, beating estimates for $1.67 a share. The company added that it remains on track for record annual revenue and profit.

Watch oil this morning. U.S. inventory data due out at 10:30 is expected to show a big draw down in gasoline after last week's unexpectedly big decline in crude and gasoline inventories.
There are many more stories but no more time, for me at least.

Cop Kills ...Phantom Alert Saves Lives

The Canadian Press

CALGARY — A police chief is backing an officer who shot and killed a man armed with a screwdriver, saying the public wouldn't want to see a member of the force turn and run "like a scared rabbit."

The man, believed to be in his late 30s, was being chased by the officer on foot in a northeast Calgary neighbourhood early Thursday when he was shot in a backyard.

The 10-year veteran and member of the tactical team fired more than once when the man threatened him and then "aggressively" approached with a screwdriver in his hand, said police Chief Rick Hanson.

"Screwdrivers will kill you just as quickly as a knife," he said at a news conference.

"It's pitch dark. He's between two houses. He doesn't know where the individual went. The suspect made a conscious decision to confront the officer in a way that clearly articulated a decision to do the officer harm.

"I can't think of anybody in this city who would say the police officer should have turned on his tail and ran like a scared rabbit. The reality is these are dangerous people who commit mayhem and havoc in this city and their intention is to do harm."

Hanson said police became aware of two stolen trucks that were being driven erratically in north Calgary. There were reports they were speeding the wrong way on a major road.

There was no pursuit, but a police helicopter kept the trucks under surveillance until a spike belt was laid down. It managed to stop one of the vehicles. Two people jumped into the other truck and fled.

Hanson said two passengers, a male and female, were dropped off and ran in separate directions. The truck was eventually corralled by police vehicles and officers removed the driver with the help of a police dog and a weapon that fires rubber discs.

The backyard shooting happened while officers were searching for the couple. The woman was arrested without incident, but the policeman involved in the shooting had to make a split-second decision when it came to the male, the chief said.

Hanson said the motive behind the joyride is unclear, but he noted the size of the trucks -- Ford F-250s and F-350s.

"Those vehicles are generally stolen because they are used as weapons," Hanson said. "They are used to cause destruction. They're very difficult for police vehicles or officers to disable."

The shooting is under investigation by the Alberta Serious Incident Response Team, which reviews encounters involving police that result in serious injury or death.

Hanson said, as far as he is concerned, the officer acted in a responsible manner.

"I'm proud that we have officers that are out on the road arresting bad guys at 1 o'clock in the morning, especially when the bad guys are people who are putting other innocent people at risk," he said.

"So my job is to say I've reviewed the circumstances leading up to the shooting. I'm satisfied that the officer acted appropriately. I believe that the actions of the officers were what any reasonable person would expect."

The head of the Calgary Police Association said he fully supports the member as well.

"I've spoken with the officer. He's confident that he relied upon his experience and training to respond to this situation," said John Dooks.

"It's always regretful that an officer is forced into this situation where he has to use lethal force, but ... (he) knows in this situation he had no choice."

It was the second fatal police-involved shooting in about two months in Calgary.

In June, an armed man confronted officers who had gone to a home where a woman had called police for help.

Lock And Load says Ivan Lo Equedia Weekly

Crazy can't even come close to describing what happened last week.

The Dow had four 400-point swings in a row for the first time in its 115-year history. Trading was a complete sideshow all week. The yield on the 10-year Treasury note hit a record low. Gold hit $1,800 per ounce. And nearly every one of the 500 stocks in the S&P index ended down midweek.

You want a better breakdown?

The Dow dropped 634 points Monday, rose 429 points Tuesday, plunged 519 points Wednesday, then surged 423 points on Thursday. Despite the fear, we ended Friday in the green. Believe it or not, it was the first time since early July that the Dow and S&P index rose for two consecutive days.

Bear Market Territory?

Since the market highs of April 29, the Dow is down 12 percent. The S&P 500 is down 13.5 percent. No shallow bear market yet. But there's still a lot of pessimism in the market with everything that's going on around the world.

If you read last week (see The Dangerous Unknown), I said the bottom for the market's recent sell off was forming and to buy on the dips.

If you would've bought on the dips, I think you're going to be happy (if you're not already). As a matter of fact, because many of my investments (and probably yours) are Canadian-listed stocks on the TSX, you would've more than likely made some money.

The S&P/TSX index had posted its best week in more than a year, up 6.26 per cent while its little brother, the S&P/TSX Venture, was up 4.85%. Buying on the dips could've netted you more than that.

But as I said before, I can't predict political events. I still don't know what Europe has in store for us or what Bernanke's breakfast will be next week. I am still looking for a catalyst on August 26 when Ben speaks at Jackson Hole (see The Dangerous Unknown), but I don't know what he'll say.

That's why it's always better to focus on what we do know, instead of what we don't know.

What We Know and What We Don't

We don't know if this is the bottom, but what we do know is that if you look at stocks and treasuries the evening of August 10, the S&P 500 closed cheaper relative to treasuries - cheaper than any time in the last 36 years, since 1975. That means for the first time in the last three decades, the yield on the S&P exceeded the yield on the 10-year US Treasury.

We know that once the yield on equities relative to Treasuries exceeds 4%, equity markets tend to do very well in subsequent months. So while there is a lot of risk out there, there is also a lot of risk factored into the prices of bonds and stocks.

We know confidence in our markets is very low. But again, we know for a fact that when confidence hits a trough over a 12-month time period, we typically get double digit returns on stocks. So while I don't know if this is the bottom, I do think stocks are cheap.

We know insiders are buying at a pace not seen since the market bottom of March 2009, when the rally began. They are buying big time. According to Vickers Weekly Insider Report, the long term average of the ratio of insider sells to buys falls in the 2:1 and 2.5:1 range. In other words, the norm is that insiders sell more than they buy. Recently the ratio was 1.68:1, which is bullish. After last week's 513-point plunge, the ratio was 0.33:1, extremely bullish. Just weeks ago, the Vickers report had the sell-to-buy ratio at 6.43 to 1. This is higher than 95% of other weeks' readings over the last decade. The insiders sold, forced the market downward and are now buying back millions upon millions worth of stock at much cheaper prices (see Far From Over).

We know that when you see stocks that have been badly battered more on fear and panic than fundamentals, you tend to see a strong rebound over the following few months. The way the markets tanked was a clear indication to me of panic selling over the last 7 trading days.

We know this isn't 2008. A week before that (see The Real Deadline) I said:

"The phones of my brokers haven't stopped ringing - but they're not phone calls from retail clients - those are dead. They're phone calls from deal makers and institutions. That means deals are being done and some hot issues are being worked on in anticipation of the next rally."

Trading ideas and projects are still being pitched to money managers. In 2008, no one would even try to pitch anything because everyone had gone into hiding. Not so today. Pitches are still being thrown around, and in Canada at least it's clear that many are acting on them. This is not 2008.

The Bottom Line

With all that being said, I remain cautiously bullish - especially towards the gold miners and the juniors.

If I see a bigger dip, I am looking to buy. There's a reason I haven't sold any of my mining shares lately.

My current portfolio is clearly focused on emerging production stories and strong exploration plays. Almost all of my stocks or stocks I plan on buying have a resource in hand or have drilled into something special. These are the projects I think will really flourish way when the rally begins.

I am expecting a very strong rally in the gold sector so if you see something that's good value with good management, I'd be picking away at it. Don't stay out of the market because the media says it could go lower. Why? Because aside from the history-making volatility last week, there was one signal that mattered more to my portfolio than any others.

The Big Signal No One Talked About

When the indices plunged mid-week, gold hit a record high of $1800. That's hardly a surprise for me and if you have been reading the Equedia Letter for a long time, you would know this. I think gold will continue to go much higher.

But that's not what caught my attention.

When the indices plunged mid-week and gold hit a record high of $1800, guess what companies soared? That's right, all of the gold majors.

For the first time in a long time, I saw gold stocks rally with the price of gold. Every gold major surged when gold hit $1800: Barrick, Goldcorp, Kinross, Freeport McMoran, Yamana...you name it.

Just take a look at the Market Vectors Gold Miners ETF (GDX) which surged 4 out of 5 days, ending up nearly 6%. Even the Market Vectors Junior Gold Miners ETF (GDXJ) soared, ending up just over 7%.

This is a big signal - one I am shocked that media outlets and other prominent newsletter writers failed to mention. All they saw was the volatility.

The gold mania is beginning and gold stocks are going to be a lot higher soon as gold looks to crack the $2000 threshold. The gold producers climbed significantly when gold rallied to $1800 last week. Imagine what they will do when gold hits $2000. Imagine where gold will go once QE3 is announced. Imagine where gold will go once Europe spends its way out of trouble.

Just imagine.

Once the majors get rolling, the juniors will follow as buyouts and takeover rumours begin. The majors will take advantage of beat up juniors and this will fuel speculation into that market segment. Then the triple digit returns will begin.

Lock 'n load.

Until next week,

Ivan Lo

Equedia Weekly