In what appears to be an attempt to influence the political debate in Washington over federal government deficits, Standards & Poor's rating firm downgraded U.S. debt to negative from stable. Yes, the raters who blessed virtually every toxic waste subprime security they saw with AAA ratings now see problems with sovereign government debt.
The decision of a Toronto-based analyst with Standard & Poor's to change the outlook for America's AAA credit rating from "stable" to "negative" is a small step in ratings terms, but a giant leap in almost every other sense.
[[wysiwyg_imageupload:360:]]Its been an interesting week with stocks, commodities and currencies having a knee jerk reaction to the FOMC minutes released Tuesday afternoon. In short the Fed clearly said there must be more quantitative easing before things will get better. It was this news which triggered a rally in both stocks and commodities.
Quantitative easing is a fast way to devalue the dollar and the Fed is doing a great job at that. As long as the dollar continues to decline the stock market will keep rising.
This week kicked off earning season with INTC and JPM beating analyst estimates. We usually see the market trade up the first week of earnings and then start to sell off by the end of earnings season. Both INTC and JPM sold off on strong volume today despite the good earnings and today’s broad market rally. This just goes to show the market has not forgot about buy on rumor sell on news… The big/smart money sold into the morning gaps exiting at a premium price. Is this foreshadowing for what is to come?
Take a look at the chart below which shows the falling dollar and how its helping to boost stocks and commodities.
[[wysiwyg_imageupload:254:]]After a fierce equities rally on Friday, which I figured would happen, just not that strong; I have to wonder if there is some event or major decision in the works we don’t know about?
Friday’s rally could be something simpler like window dressing by the funds. This is when the funds buy up all the top performing stocks for month end reporting. They do this so that their investors think they are on the ball and know what they are doing. Window dressing will end Monday and from there we could see some profit taking (selling) start. But for all we know Obama could be extending the tax cuts for everyone or cutting payroll taxes etc…
By Chris Vermeulen
It’s been a wild ride the past few days. Now, thanks to comments from Obama and FOMC, it seems like everyone is waiting to see what the market will do from this pivotal point onward.
Since the market topped in April and has since been trading sideways in this rather large range, everyone has small positions at work but waiting for a decisive move before fully committing to one side. There could be a few opportunities in the coming days using bonds, the dollar and the SP500 if all goes well which I explain below.
Lets take a look at the charts…
By Clif Droke
Now that we’re only two weeks or less away from the 4-year cycle bottom, it’s time to start thinking about the year-ahead outlook and what the coming months may bring. This year has been a rough one in patches due in no little measure to the influence to the 4-year down cycle. In previous years when the 4-year cycle has bottomed by itself it has tended to be rather mild in terms of the bottom itself (the cycle always bottoms around late September/early October) but has always created turbulence for the stock market in the months leading up to its bottom.
[[wysiwyg_imageupload:157:]]The Great Marc Faber on the markets:
Current views are extreme. Marc sees the markets in a trading range. It could go down down Oct-Nov, then rally by end of year.
Wouldn't bet that S&P support at 1040 won't be broken, but he doesn't think we'll get below March 2009 lows.
Markets may not be happy with additional stimulus.
Geopolitical concerns may lead to correction.
Advises investment in physical gold.
(Click the "read more" link below to watch the video.)
by Ronald Griess on Wed, 8 Sep 2010
The following chart compares Moody’s Aaa bond yields with the dividend yield of the S&P Composite. Notice that stock yields remained above bond yields from 1929 until the mid 1950’s.
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Yesterday, Bloomberg reported that Morgan Stanley views that a government default on U.S. debt is inevitable.
Investors face defaults on government bonds given the burden of aging populations and the difficulty of increasing tax revenue, according to a Morgan Stanley executive director.
