The class wars are starting...

Now big business is "demanding" a bailout. Not just Financials, but a much bigger slice of Big Business.

http://www.reuters.com/article/domesticNews/idUSTRE48S96O20080929?pageNumber=1&virtualBrandChannel=0

This is directly in conflict with the will of ordinary people. It is already becoming clear the the U.S. population is starting to make the association between some elements of the business community (mostly Financials) and contempt for the "little guy".

Recent revelations of give-away money to Auto firms is part of the publicly disclosed bailouts of non-Financials.

If these bailout moves directed towards the wider business community get picked up on the people's radar (I'm betting it will) then the stage is set for a true and novel conflict within American society.

This is "metanews" - too deep and too hot for the general media to talk about glibly...

By now you know the Bailout was defeated..

This is a good thing, but there is still much pain down the road. We still are in a major credit debacle, and we will probably still go into some level of economic malaise normally referred to as a "depression" but at least the damage to the dollar could be somewhat less. Assuming this verdict on the bailout holds, of course...


Now, looking at the $NDX monthly chart, there are two things that stand out. (1) I think I see a huge A-B-C pattern, with a terminus around 1485.16. Also the price action has fairly deeply penetrated the MONTHLY Bollinger Bands. Very rare event. On the face of it, it could produce a violent snap-back rally. But be careful, we are still in a vicious bear market, it could still go lower tomorrow. In fact the $SPX log chart pictured shows that we are close but not yet on the lower trendline for that index. But we are close as you can see....

The $NDX log chart is coming, but just to let you know, it has busted right through all of it's trendlines...

$NDX - Somewhat cleaned up chart...

It does look like a bottom off of the trendlines, although bottoms are much stronger when they reach major time nodes like .5 or 1.00. This bottom is engineered, not natural, doesn't meet that criteria...

Watch this video...kind of explains what has happened and what could happen...

http://www.youtube.com/watch?v=s7tTwssCoZg

Please write or call your congressman or congresswomen about the bailout and stop it. Although I think a dollar collapse is inevitable, there are obviously different levels of collapse. The more debt is transferred from the private sector to the public sector (we, the taxpayers) the more dramatically the dollar will fall, and the more hardship we will feel as Americans...

Something you should read...Adieu, stage 1 collapse! by Dmitry Orlov

This guy lived in Russia during their collapse, so he has some authority....He has seen these patterns before...

http://www.energybulletin.net/node/46667

Check out the last paragraph:

As this process runs its course, the US will lose access to imports. Most significantly, it will find it more and more difficult to obtain the 2/3 of the transportation fuels that come from abroad, which are needed to keep the economy functioning. And that will bring on Phase 2: Commercial Collapse. That is probably what we are getting for Christmas this year, or shortly thereafter.

In the meantime, enjoy Stage 1. You will miss it once it's over.

I have added a link to his Blog..check it out...

Also be aware that many sites are pointing to an article on the Army Times (official Army mouthpiece) that battle hardened troops from Iraq (Third Infantry Divisions' 1st Brigade Combat Team) will be brought to the U.S. to "assist" in defending the homeland. From what? They are supposed to be practicing using "non-lethal" means. We'll see. Total number of troops 5000-8000. Deployment starts October 1st.

Empires always announce their impending failure when they bring troops back from the fringe to defend the "homeland". Rome comes to mind here....

Futures down sharply...

The patient construction of a bottom, by the "powers that be" that was showing up in positive divergences yesterday is about to be shattered by reality. Fortunately, a bunch of gutsy Republicans decided not to roll-over and accept the bailout in it's current form. Let's see if they can hold out against it after the market tanks. I'm on their side as I am against any bailout. But we'll see what unfolds..

Pretty good positive divergence in the markets right now...

So a rally indeed appears to be coming....Although if you duplicate this chart for yourself, and plug $NDX into Bigcharts instead of $SPX, you'll see far less positive divergence. This rally is hand-tailored for the Banks, so the difference in relative divergences between the two indexes should be no surprise...

"Not worth a Continental"....Remember that phrase?

This was the phrase used to express the disgust that early Americans felt when dealing with the wreckage caused by the use of one of America's first experiments with unbacked, widely (and wildly!) printed money. It's value eventually collapsed to 1/100 of it's face value...read the link below...

Let's see..we're now printing $trillions of dollars annually with no backing..no wait! It's different this time...

http://historywired.si.edu/object.cfm?ID=437

If anyone believes that, I'll sell them the Brooklyn bridge...Shown is a picture of the overprinted and despised "Continental" currency of Colonial days, from which the phrase, "not worth a continental" was derived ...

Guess what, we're about to do this again! Whether the inflation will be as bad as back then, or only one quarter as bad, that's still very bad indeed!

Results so far...

Here you can see the high points reached in the "bailout" of the U.S. Financial system. I don't think it's going to work,do you?

The next financial hurricane could be....

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DEFAULT!



All,
You should check out Jim Willie's column over at the financialsense website.

The link is:
http://www.financialsense.com/fsu/editorials/willie/2008/0918.html

Jim Willie is making the valid point that the appearance of several of the U.S. Treasury Note price charts is not unlike what you see before a country goes into default.

That really would be "game over" for the United States.

With all credibility gone, the government will probably quickly use up what little gold bullion it has left to pay for whatever they think is still essential (for a while). After that, shortages of many things would/should start to appear..(my interpretation)...

For U.S. Citizens, it could seem like Armageddon...

I'm pretty sure something really evil would happen to the dollar at that point, and it may not be usable to buy anything sourced outside the U.S. (like OIL, for instance! We only import, like, 65% of it! What happens if we can't buy it!?!... Guess!)

Speaking of bottoms...It's very possible that Gold and Commodities have just made a very important bottom....

Looking at the USO (United States Oil) chart, oil has declined and bounced, off of the 62% retrace of the run up from January '07 to July '08. My guess is that we will now start the process of taking out the July '08 highs in crude oil, with the coincident rise in gasoline prices. Doubters of Peak Oil, may have a hard time next summer...

This is also my way of saying that the bottom in commodities, gold and oil we just made in here, will be more lasting and more significant in long term impact then the the short term bottom we just made in the general equities markets..

Will this engineered bottom hold for a while?

If you look at the $NDX chart, yesterdays bottom lies right on the trendline support, for the $SPX, it's a ratty bottom relative to the trendlines, not well supported...

Look at the Chart of $NASI, the $NDX breadth indicator. It doesn't look too good, does it?

Current $SPX and $NDX charts...

Watch the descending green trendlines for resistance...

The Moment of Truth

I think that the moment of truth comes not from the dollar, which may not in the end, decline to zero, but in the unwillingness of any entity, foreign or domestic, with money denominated in dollars, yen, francs, marks, or anything else to loan any of it to institutions that may be "nationalized" at any time.

The way this works is that the oncoming depression and deflation destroys the few businesses that are still functioning, and with zero credit, no new businesses can form to re-employ anyone.

In one way this was the story in the first great depression, but confidence in the American Culture allowed glimmers of recovery before WWII "rescued" us. This time, we will get a vote of "no confidence" that will last for perhaps 1 or 2 generations. Without trust, no credit, and no recovery. This will accelerate the transition to the world that James Kunstler (see link) has been describing...

I'm sure it hasn't escaped the notice of potential sources of future capital, that the shareholders in these nationalized businesses end up with nothing....

oil trading under $100 a barrel...

I said a while back oil might get to $75 to $85 a barrel before a bottom gets put in..I think that will be correct...it's currently trading at $89.75 a barrel...On the West Texas Crude Oil Index there is strong resistance level at $85 a barrel...

We have gotten through Ike...

We are quite lucky here, the power just came on, and we have 4 million+ people without power, so we are very fortunate....I recorded a minimum Barometric Pressure here of 28.67 inches of mercury as the eye passed close by here about 4:30 A.M....

Downsloping channels in the $SPX and $NDX...

So far, calls by many for a huge crash have been premature...Arguably, we are in a gentile downsloping channel on both major indexes...Note that the $SPX is a little steeper than the $NDX... I'm sure that's the admixture of Financials doing that...

Getting ready for some wind here in Houston...

I will probably post some charts tomarrow morning, just to catch up..some chance we won't have power here in Houston over the weekend...

Two views of the $NDX and one of the $SPX...

Note the $NDX chart (middle chart) with price action sitting on a trendline, and at a .500 node...Could be a bounce in here somewhere, although it won't negate the Bear market...

As always, click on the charts to enlarge them...

What hath the Republicans wrought?

The rise of Sarah Palin, in my view, is a rogue event, a game changer. She is tapping into a reservoir of angst among some sections of our society, and though her rise was engineered by Karl Rove, it may be beyond their capabilities to control the outcome.

This is good for neither the Republicans nor the Democrats. YouTube has a video of her addressing the Alaskan Independence Party, which advocates that Alaska should secede from the United States. This is reminiscent of the Confederacy and the Old South, and has shades to some degree of the candidacy of George Wallace, 60 years ago, but probably with less overt racism.

The great unseen underclass of the United States has been courted by both parties, but recently has affiliated most strongly with the Republicans. "Family Values" has become a coded phrase that means far more then merely supporting families. It is a statement of a group that is pushing back against modernism in a variety of forms, and a statement of anger at being "left behind" economically by the forces of change wrought by technology.

Originally, most of the people we are speaking of were aligned with the Democratic party, but that was a long time ago..The Republicans welcomed this part of the electorate into itself when the Democrats championed civil rights under Kennedy and Johnson in the 1960's and 70's. Now the party is being swallowed whole by this long-ago ingested organic force, with consequences no-one can foresee....

It's predictable that an economy in crisis would produce populist candidates, but this could be a particularly toxic brew. As the economy continues to worsen, any failure by the conventional parties to right things will probably feed more candidates such as this one, which abhor complexity and want things reduced to extreme simplicity. Needless to say, truth is often complex, and a ruthless drive for simplicity is usually associated with tyranny.

As our population is relatively unschooled and undisciplined, it will make this temptation and the danger of it all of the greater.

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I've been alerted there's another blogger, using more colorful language (and making more assumptions then I would), but if you want to raise your blood pressure a bit, visit this site:

http://elainemeinelsupkis.typepad.com/war_and_peace/2008/09/triumph-of-the.html

Warning: She uses some rough labels...

The dam finally broke on the $SPX...

After a few days of non-committal chop, the markets broke down with a vengeance today. Whether this was purely technical, based on fundamentals or from the fiery start of a new round in the culture wars at the Republican convention, is hard to say.

Notice the vicinity of the 1.00 node (upper chart) and pulling away from the blue descending trendline (lower chart) that has limited up moves so far...

$NDX in definite downtrend, $SPX is thinking about it...

The $SPX looks like it might be making a rounded top just under the thick blue declining trendline. The $NDX is pretty clearly going down, (which started in the approximate time frame where the blue and violet lines crossed, as predicted) but in a volatile fashion.