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Bulls Turn into Chickens

By: Rick Ackerman, Rick's Picks


-- Posted Wednesday, 4 August 2010 | Digg This ArticleDigg It! | | Source: GoldSeek.com

Rick’s Picks

Wednesday, August 4, 2010

“Phenomenally accurate forecasts”   

Bulls failed a key test yesterday when they were unable to push the Dow above 10719.  All it would have taken was a measly 44–point rally, but the blue chip average never even made it into positive territory. What does that mean? Our hunch is that August will be a so-so month at best for the stock market. Using Hidden Pivot analysis, we explain why in a five-minute video, “Bulls Are Chickens Underneath,” that you can access by clicking here. Our flat-to-bearish outlook is notwithstanding headlines earlier in the week that waxed optimistic about a global economic recovery. Those stories were based mainly on strong Q2 earnings reported by European banks, but banks in Euroland are no healthier than American banks, which only seem healthy because they were allowed to unload more than a trillion dollars of worthless paper on the Federal Reserve.  The Government’s strategy is to sell the debt securities when the financial system gets stronger, but we don’t expect that to happen.  Instead, we look for deflation to continue for at least a few more years – long enough that the Fed governors, the politicians and the spinmeisters will eventually be forced to acknowledge that the securities, which are mostly collateralized by real estate, will have to be written off.

In the meantime, Wall Street seems untroubled by the gathering storm. Yesterday, for instance, although the economic news more than hinted that the U.S. is slipping back into recession after a failed, multitrillion dollar stimulus, the Dow gave up a mere 38 points.  That is surely no show of strength, as we have noted above, but it is indicative of the blissful ignorance that has more or less inured stocks to bad news since March of 2009, when the Mother of All Bear Rallies began. Here are a few headlines from Tuesday’s edition of the Wall Street Journal — and judge for yourself whether traders may have been rash in propping up the broad averages:  Home Data Slide Again; U.S. Slowdown Worse Than First Thought; Cautious Consumers Save More; and, Barnes and Noble on the Block.  If Barnes & Noble is looking for a buyer, can Borders be far behind? Picture both chains shutting down more or less simultaneously and it looks like nuclear destruction for malls across the land.

Whom to Believe?

A couple of other headlines in the Journal underscored the deflationary theme that we have been sounding here relentlessly and at the top of our lungs for years: “Score One for the Deflationistas,” read the headline atop Gregory Zuckerman’s MarketBeat column. And here’s another article from Zuckerman in the same issue: Big Investors [i.e., Bill Gross, Jeremy Grantham and Alan Fournier, to name three biggies]  Fear Deflation.  Welcome to the club, guys. You could have seen the deflationary bust coming ten years ago if you’d read any of a score of financial newsletters that got it right — including the housing bust — instead of Forbes, Fortune and…The Wall Street Journal.  The same newsletters are saying the global economic recovery is a fraud.  Who’rya gonna believe this time? 

***

 

Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. There is a substantial risk of loss in futures and option trading, and even experts can, and sometimes do, lose their proverbial shirts.  Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2010, Rick Ackerman. All Rights Reserved. www.rickackerman.com


-- Posted Wednesday, 4 August 2010 | Digg This Article | Source: GoldSeek.com




 



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