Short it Blind

Well not just yet. Friday’s action shows that it’s a good idea to short anything in this very short deserving stock market with some respect. My advice is keep one eye open, for a rally. Yes I said a rally, the FED meets December 11. By the 12th the fed funds rate could be under three percent. Regardless of the size of the cut they will stage a rally attempt: if success it could be fierce, but don’t buy the rally beware it. As the price action on bond insurers Ambac and MBIC Friday shows this market despite being in a confirmed down trend is still capable of snapping at the shorts. Not that Ambac or MBIC are roaring to new highs anytime soon or ever, their action on Friday was due to BS and short covering and ditto for the overall market. First let me say for novice investors BEWARE. Not that the pros are cashing in, but they are probably not reading this as this blog is primarily for novice investors.

This market desperately needs a crash to levels where oxygen isn’t required, but will we get it? It has attempted to crash at least three times in 2007, but was rescued each time by the plungers, the FED, et.al. In fact the crash would have occurred in February when the DOW tanked over 500 points intraday, although it recovered to close down only some 300 or so points. Interestingly CNBC reported that the DOW’s apparent free fall was due to a computer glitch. Yea I got ya glitch right here pal. It crashed again in August when the global credit crunch first raised its ugly head and run ques on Northern Rock began to form. That’s when the FED steered the US economy more steeply into the hyperinflation curve than ever by cutting 50 basis points in September, making a bold and powerful statement in so doing. They proclaimed that day they would sell us out one and all for the benefit of a small cabal of credit addicted privileged insiders. The waste by product of this credit crack lab is a stealth tax called inflation. And of course the market should be crashing now as the banks have reported massive record losses for the quarter, cut dividends, jobs and took out and shot their culpable CEO’s. Then they revealed that shockingly, unbelievably, they don't even know what their future losses are prone to be.

-[Their accountants went overseas beyond oversight to create a stealthy little off balance sheet assassin called the structured investment vehicle(SIV) (Link 1). The banks buy long-term assets usually in the form of bonds. Of course no one on Wall Street really pays their bills anymore they just borrow the money by issuing short term commercial paper (CP). The banks repay the bond at a rate of interest which is less than the rate on the bonds they bought and get a fee for managing the SIV. They can also keep the SIV's debt off their (the banks) balance sheet because they don't take on the credit risk. Unless the banks can refinance short-term at favorable rates, they may be forced bring the SIV’s assets (debt) back onto the balance sheet and sell the asset into a depressed market. This economy is built on infinite debt-a continuous river of credit which must keep flowing. Three months ago I had no idea what a SIV was, but the idea that commercial paper markets would dry up overnight was laughable.]- (Link 2)

And so here we are like so many things in nature the markets are at or near their pinnacle and paradoxically at their most vulnerable. Like the overgrown old oak in the yard whose largest branch we propped up with steel scaffolding when it's began to sag, each time the stock market’s overbought momentum indicators signaled a crash its lofty price conditions were worsened by inflationary liquidity schemes and criminal acts of market manipulation by the FED and the Plungers and others.
That oak is dead now, split down the middle by the sheer force of its own obesity which we forced on it. As for the stock market Ben Bernanke is finishing the scaffolding job began by Allan Greenspan and the Bush administration is praying that he can keep the old oak up till January 2009. If it rips in two after that some else will be remembered for ushering in history's greatest depression. The one that has been here since that glitchy February free fall, but that topic is for another post. See if we'd just left that dam old oak alone it would have lost several big branches but would be alive today and if the stock market had been left to dry out completely after the dot bomb it could be in full blown recovery mode now. But seven years is too long to wait for the petulant greedy Wall Street crowd. So instead of nursing the patient back into full recovery it was given another fix: the one which will kill it. This dirty little needle had the mortgage scam label attached to its syringe.
For anyone who really believes that Bush grabbed the heaviest of Wall street's heavy weights to be the US Treasury secretary for the markets good, the economy's good or the good of the nation, and that there wasn’t a payoff to GS to boot sit tight, you’ll soon be hearing about a bridge in Brooklyn. His job is control the stock market. He may prosper as he wishes and he has: he was sworn in July 10th 2006 (Link 2) and the chart of GS says it all, but he has to pump it up. And now again as it has ever been, THEY ARE FEEDING ON US. Down to bare bone, then into the trash like a used provolatic. They want to sucker novice investors into the long side of the market making them believe it will go up and up and up forever without you, unless you park your savings, pension and Jr’s college tuition in the stock market. To counter the round earth theorists they parade the suits on CNBC and Faux business news to proclaim with amazement the strength of the stock market. "At all time highs despite 100 dollar/barrel oil, going higher despite massive accumulating trade deficits, able to leap tall buildings in a single bound.” Then to provide credibility they say seriously “I just can't explain it". I can. It's a scam. Don’t let them feed on you.
There are a lot of people a lot smarter than me who are a lot better technical analysts than I’ll ever live to be and who sometime in 2008-2009 will lose big and whose client’s maybe die broke. You see the street pros have returns to meet or beat like the major averages, and therefore risks to take, with your money. If they lose you lose, if they win you win minus 20% at least. The hedge funds and mutual funds will take a beating, but almost all the real losses -to the penny- will be borne by their clients. Real losses being loss of principal. Wipeout.
These fund managers and their employed co conspirators are extremely intelligent and highly trained- on too much business and economic BS to my mind. I have a friend who's a bond trader for ING who calls me crazy because he thinks there is no such thing as the plunger gang. Really? (Link 3) You have no business dealing with other people’s money. They are deliberately trained at the business schools in advanced math and esoteric economic BS. The result is a Street brain trust perpetuating the scam most of them are unaware of. When the suits strut around on the financial news yikiti-yak shows shooting of at the yap about the business cycle the interest rate cycle and on and on and I’m gonna be sick, just be aware it’s a smoke screen. Those things are not natural economic phenomena, they are a creation of and a manipulation by the FED. (More rich material for another day)
Since at least the dot stink bomb the stock market was more properly viewed as a reflection of the will of Street criminals to blow up, prop up, and then pop the stock market bubble for the immediate gratification of insanely massive, instant profits: Insiders only need apply. But in this year there has been the most significant change I can think of: for now through at least the 2008 election the market must be viewed as a reflection of the ability of Street criminals to keep it propped up, can they? Answering that question correctly is what can lead to the greatest all time short in history.

So how do we proceed from here? Well the big thing i am looking for is a loss of control by the insiders. A market correction (a euphemism) is by definition a 20% decline or more from the top. We have not suffered more than a 10% correction since 2002. It's clear that the cabal won’t stand for more. So if the real and natural correction is to take place one signal will be a 30% retracement below the high and I will take it seriously if and only if the market corrects at least 30% then fails to mount a recovery. Only when that event occurs will I consider the notion that another rabbit is not coming out of the hat.

The DOW is the smallest of the three major indices and the one most under the influence of the insiders. So one signal for me is 11400 on the DOW.
It appears also that they just don’t want to give up 13000 on the DOW. Support is about 12800 so until that level is abandoned with force I will not consider the capitulation scenario on the DOW. Do you see how the DOW came off the 12800 area this last time? So there you have it,

Early warning indicator DOW 12750
Loss of control say 11000.

A 50% decline from there is a long way down over the following two years.
They are not ready to concede yet, but they are getting arm weary and that market is awfully heavy.

Link 1:http://housingdoom.com/2007/11/15/roubini-worried-about-the-economy/

Link 2:http://en.wikipedia.org/wiki/Structured_investment_vehicle

Link 3:
http://www.nypost.com/seven/05152007/business/no_freedom_of_info_on_plunge_protection_team_business_john_crudele.htm?page=2