TOP STORIES
Study: States must fill $1 trillion pension gap – AP
Discount-Rate Hike Signals End to Emergency Measures – Bloomberg
Bleak Economy Pushing Health Insurers to Raise Rates, Analysts Say – NY Times
Politics in America: What’s gone wrong in Washington? – Economist
Banks: We’ll give you money to save money – CNN/Money
Senate panel mulls watered down “Volcker rule” – Reuters
Wall Street’s Bailout Hustle – Taibbi, Rolling Stone
Debt-tastrophe – Hoenig, NY Post
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Scott Redler of T3Live
Let’s see if this economy will perform without the Stimulus. Last night’s somewhat surprise discount rate increase will throw some in a tail spin–and, it will give us “new headlines to trade against.” It’s time for some tough medicine across the board. Let’s change this mantra of bailouts around the world to some “tough love.” Something we are finally starting to see.
Now it’s time to see how the market handles this news.
No matter what we were overbought, considering that we just went from 1,044-1,110ish in two weeks. We retraced over 61.2% of that 9% correction off of highs. So, some weakness or corrective type action (AS I STATED YESTERDAY) would make sense.
We need to see where this market holds–and if it holds higher. If the market proves to hold, we can see some additional upside in the future. I would love to see a pull-in to test the break of that descending channel (around 1,080-1,085). That’s where I would take a very close look at the market’s composure and try to get back into some longs.
You plan your work and work your plan. With that in mind, I put together this forward looking chart of the S&P in anticipation of what to look for next. Click on the chart for a closer look at the details.
Hope everyone has a great weekend!
John Carney of Business Insider
The Fed just raised the discount rate from 0.50% to 0.75%.
The instant reaction: Futures are down after hours, and the dollar index is shooting up.
Right now this is being characterized as “normalization,” which is fine, but it’s obviously a clear sign of the beginning of the end.
Here’s the full announcement.
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The Federal Reserve Board on Thursday announced that in light of continued improvement in financial market conditions it had unanimously approved several modifications to the terms of its discount window lending programs.
Like the closure of a number of extraordinary credit programs earlier this month, these changes are intended as a further normalization of the Federal Reserve’s lending facilities. The modifications are not expected to lead to tighter financial conditions for households and businesses and do not signal any change in the outlook for the economy or for monetary policy, which remains about as it was at the January meeting of the Federal Open Market Committee (FOMC). At that meeting, the Committee left its target range for the federal funds rate at 0 to 1/4 percent and said it anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.
The changes to the discount window facilities include Board approval of requests by the boards of directors of the 12 Federal Reserve Banks to increase the primary credit rate (generally referred to as the discount rate) from 1/2 percent to 3/4 percent. This action is effective on February 19.
In addition, the Board announced that, effective on March 18, the typical maximum maturity for primary credit loans will be shortened to overnight. Primary credit is provided by Reserve Banks on a fully secured basis to depository institutions that are in generally sound condition as a backup source of funds. Finally, the Board announced that it had raised the minimum bid rate for the Term Auction Facility (TAF) by 1/4 percentage point to 1/2 percent. The final TAF auction will be on March 8, 2010.
Easing the terms of primary credit was one of the Federal Reserve’s first responses to the financial crisis. On August 17, 2007, the Federal Reserve reduced the spread of the primary credit rate over the FOMC’s target for the federal funds rate to 1/2 percentage point, from 1 percentage point, and lengthened the typical maximum maturity from overnight to 30 days. On December 12, 2007, the Federal Reserve created the TAF to further improve the access of depository institutions to term funding. On March 16, 2008, the Federal Reserve lowered the spread of the primary credit rate over the target federal funds rate to 1/4 percentage point and extended the maximum maturity of primary credit loans to 90 days.
Subsequently, in response to improving conditions in wholesale funding markets, on June 25, 2009, the Federal Reserve initiated a gradual reduction in TAF auction sizes. As announced on November 17, 2009, and implemented on January 14, 2010, the Federal Reserve began the process of normalizing the terms on primary credit by reducing the typical maximum maturity to 28 days.
The increase in the discount rate announced Thursday widens the spread between the primary credit rate and the top of the FOMC’s 0 to 1/4 percent target range for the federal funds rate to 1/2 percentage point. The increase in the spread and reduction in maximum maturity will encourage depository institutions to rely on private funding markets for short-term credit and to use the Federal Reserve’s primary credit facility only as a backup source of funds. The Federal Reserve will assess over time whether further increases in the spread are appropriate in view of experience with the 1/2 percentage point spread.
This report is a mix of both current market action and educational material on how stocks and commodities trend (move).
Since mid October I have been on the look out for the market to top or make a multi wave correction. The market did top in January and has formed an ABC retrace (3 wave correction).
The question everyone wants to know is, is this market topping out or just a bull market correction?
Well the brutal truth is no one really knows what is going to happen next. So the only way to make consistent profits in the market is to clearly understand the main technical analysis skills (Chart Patterns, Trend Lines, Support & Resistance, and Volume). You must also understand how to manage your money/trades. I scale in and out of positions during key support and resistance levels to keep downside risk low.
One of the toughest parts of trading is “Trading Discipline”. If you cannot take losses easily then trading is not for you. You must be able to exit a trade when your stop level has been reached or you think the trade is starting to go wrong. Holding onto losers will blow up your account very quickly.
Other than those key skills, all you can do is watch the charts and re-evaluate each time a new bar (candle stick) pops up on the chart. Remember to trade with the larger trend of the chart 2-4 times longer than your actual trading chart.
Example: If you trade the 30 minute chart for entering and exiting trades, then you should be watching the 2 hour chart (120 minute chart) to understand the full picture.
Market Trends and Price Movement
As we all know, when the market is trending up we are seeing a series of higher highs and lows and the reverse for a down trend. We also know there are several different ways a market can top before reversing. The charts below show how the market generally moves on all time frames.
The market will top and bottom in 1 of 4 ways which are shown below:
Sideways Trend – A consolidation or triple top
Head & Shoulders – This is a great trading pattern
Double Top – Lower volume rally and sharp selling once high is reached
Blow Off Top/Bottom – This is when volume spikes and the price moves quickly (great for panic trading)
Silver and NYSE Daily Trading Charts
Take a look at the charts below and you will see exactly how the market moves and where the market is currently trading.
Trading Conclusion:
In short, stocks and commodities have been in rally mode for all of 2009. So far this year prices have started to slide forming some bearish looking charts. But it’s not the end of the world by any means. Depending what happens in the next 1-3 weeks we should know if the market is back in rally mode or still in sell off mode.
I am somewhat neutral at the moment and maybe a little bearish because from a technical stand point there are just as many arguments/technical analysis points for prices to move up as there are to move down. When I get in this situation I just site back and wait for a clearer picture before putting my money to work. When In Doubt, Stay Out!
I will update subscribers tomorrow on our current long positions as we need to tighten our stops to lock in more profits. And thank you everyone for your kind words and support for my new daughter 
Get my reports send to your email: www.GoldAndOilGuy.com
Chris Vermeulen
The headline number showed improvement, but two key numbers to watch are new orders and inventories. The new order index fell, and the inventory index rose sharply – and the declining gap between new orders and inventory points to a possible future slowdown in production.
From the NY Fed: Empire State Manufacturing Survey
The Empire State Manufacturing Survey indicates that conditions for New York manufacturers improved at a healthy pace in February. The general business conditions index climbed 9 points, to 24.9. The new orders index fell, though it remained positive, and the shipments index inched downward as well. The inventories index rose sharply, to 0.0, its highest reading in considerably more than a year.
…
Employment indexes were positive for a second consecutive month, although at relatively low levels.
Below is the general business conditions index. Note that the data only goes back to July 2001 (chart from Jan 2002). Any reading above zero is expansion, so this index shows manufacturing was expanding since August. (chart from NY Fed)
by Tyler Durden
The Federal Reserve’s balance remained at an all time high of $2.233 Trillion in assets, after a $3 billion increase in MBS and Agency purchases week over week.
- Securities held outright: $1,913 billion (an increase of $57 billion MoM, resulting from $52 billion increase in MBS and $5 billion in Agency Debt), or a $3 billion increase sequentially. The fed is now 95% complete with its purchases of MBS.
- Net borrowings: $127 billion. The monetary base increased by $50 billion in the past fortnight to $2.06 trillion. The ratio of total assets to Monetary Base remained constant at 1.08x, elevated from the historical ratio of 1.00x.
- Float, liquidity swaps, Maiden Lane and other assets: $193 billion. The CPFF program was at $8.5 billion. FX liquidity swaps declined by were flat at a nominal $100 million. Maiden Lane I and Maiden Lane II were at $26.9 and $15.3 billion, while Maiden Lane III continues pretending it has value and came at $22.2 billion.
Custody foreign holdings increased by $9.3 billion to $2,956 billion.
A maturity profile of the Fed’s assets indicates a skewed maturity distribution. Of a total of $2 trillion in dated assets, $132 billion mature in under 15 days, $226 billion in under 1 year, and $976 billion in under ten years.
When EWI President Robert Prechter sat down to write the first edition of “Conquer The Crash” in 2002, the idea that the United States would enter a period of what news authorities coined “economic Armageddon” several years later was unheard of.
Flashing back, the major blue-chip averages were rebounding off a historic bottom, the notorious dot.com bust was making way for a powerful housing boom, Fannie Mae’s chief executive was named “the most confident CEO in America,” then President George Bush was enjoying a 60%-plus approval rating, Gulf War II hadn’t begun yet, and when it did, a “quick and easy victory” was supposed to follow, and the Federal Reserve was largely credited with slaying the big, bad bear via the sharp blade of monetary policy.
Five years later, the tables turned. The U.S. housing market endured its worst downturn since the Great Depression; Fannie Mae’s CEO was ousted amidst a mortgage crisis of incalculable damage. George W. Bush left the oval office with a record low approval rating of 25%, and the expected “cakewalk” victory in Iraq became a “quagmire” and national dilemma.
Anticipating these and other “shocks” to the global system is the unparalleled achievement of “Conquer The Crash.” Here, the following excerpts from the book put any doubt to rest:
Housing: “What screams bubble – giant historic bubble – in real estate is the system-wide extension of massive amount of credit.” And “Home equity loans are brewing a terrible disaster.”
Bonds: “The unprecedented mass of vulnerable bonds extant today is on the verge of a waterfall of downgrading.”
Fannie Mae & Freddie Mac: “Investors in these companies’ stocks and bonds will be just as surprised when the stock prices and bond ratings collapse.”
Politics: “Look for nations and states to split and shrink.” And — “The Middle East should be a complete disaster.”
Credit Expansion Schemes “have always ended in a bust.” And — “Like the discomfort of drug addiction withdrawal, the discomfort of credit addiction withdrawal cannot be avoided.”
Banks: “Banks are not just lent to the hilt, they’re past it. In a fearful market, liquidity even on these so called ‘securities’ [corporate, municipal, and mortgage-backed bonds] will dry up.” (176)
If the tools in Bob Prechter’s analytical toolbox, namely Elliott wave analysis and socionomics (Prechter’s new science of social prediction based on the Wave Principle), enabled him to foresee these “sea changes” in the economic, social, and political landscape — the only question is: What else do the pages of the “Conquer The Crash” reveal?
Well, your opportunity to find out just got a whole lot easier. Right now, you can download the 8-chapter Conquer the Crash Collection, free. It includes:
Chapter 10: Money, Credit And The Federal Reserve Banking System
Chapter 13: Can The Fed Stop Deflation?
Chapter 23: What To do With Your Pension Plan
Chapter 28: How To Identify A Safe Haven
Chapter 29: Calling In Loans & Paying Off Debt
Chapter 30: What You Should Do If You Run A Business
Chapter 32: Should You Rely On The Government To Protect You?
Chapter 33: Short List of Imperative ‘Do’s’ & ‘Don’ts”
Visit Elliott Wave International to learn more about the free Conquer the Crash Collection.
Here is the Economic Forecast from the Economic Report of the President. The last column is average payroll jobs per month per year.
Click on table for larger image in new window.
The forecast is for an average of 95,000 non-farm payroll jobs to be added per month in 2010, with the unemployment rate averaging 10.0% and real GDP growth of 3.0%.
Although there is no way to directly calculate the unemployment rate based on payroll jobs growth – because the data is from different surveys and depends on the number of people in the work force and other factors – there is a fairly strong relationship between payroll jobs and the unemployment rate.
Based on my estimates, it would seem that 3.0% real GDP growth in 2010 would lead to about 160,000 payroll jobs per month and a slight decline in the unemployment rate.
Conversely, 95,000 jobs per month is probably consistent with real GDP growth at just over 2%, and an increase in the unemployment rate to over 10%. Based on their forecast for real GDP growth of 3%, it appears they are being conservative on their jobs forecast.
Everyone is wondering if gold, silver and the indexes have bottomed after last week’s heavy selling. To put things into perspective there were over 30 sell orders for every 1 buy order at the NYSE. That is pure panic and to confirm extreme fear, several of my broker buddies said last week was crazy with clients demanding to liquidate their positions ASAP to be 100% in cash.
This type of sentiment and price movement warns us of a possible market bottom. I am getting the feeling that traders and investors have been expecting this sharp drop I don’t see or feel a large amount of fear in the marketplace. Last Thursday and Friday war crazy but I think we need one more drop to really shake things up before a bottom is set.
Below are some charts showing where the market currently stands and what the charts are pointing to.
GLD Gold ETF Trading – Daily Chart
Gold is clearly trending down on the daily chart. One more thrust down should shake things up enough to trigger the next rally.
SLV Silver ETF Trading – Daily Chart
Silver has formed a Head & Shoulders pattern and has broken through multiple support levels. A measured move to the down side would be $14 for silver which could happen in the coming days.
SP500, NYSE, GOLD Futures, US Dollar Index – Intraday Charts
These charts clearly show the price action of the past month. As you can see the trend of stocks and gold are down with consolidations (pauses). This is the exact reason why you must trade with the trend and not do counter trend trades. Bounces are more like sideway movements making it very difficult to try and play bounces in a down trend.
If you focus on selling at key resistance levels then moves tend to be much more profitable. That being said, we did go long last Friday because of the extreme oversold market level. I was expecting a follow through Monday or Tuesday which has yet to happen. We have now moved our stops to break even or better to eliminate our down side risk.
Spot Gold 24Hr Trading Chart
This chart says it all. The market and gold is very volatile making it difficult to trade right now. Bulls and bears are battling it out. Only time will tell!
Stocks & Commodity Trading Conclusion:
In short, it’s been a slow week without any real exciting moves. Thursday and Friday could be interesting if traders exit their positions going into the long weekend in order to protect themselves from any surprise economic news.
From the looks of gold, silver and the indexes I sense selling could be just around the corner. We are currently long a few positions with our stops are break even or better in hopes for a pop and rally going into the holiday weekend but only time will tell.
My wife and I have our first child due on Saturday so I may disappear for 1-2 days in the coming week as we welcome our little princess into this new and exciting world.
If you would like to receive my trading reports directly to your inbox please visit my website at:
Chris Vermeulen
www.TheGoldAndOilGuy.com
By STEVENSON JACOBS
AP Business Writer(AP:NEW YORK) Dow Jones & Co. is selling a 90 percent stake in its stock-market index unit to CME Group for $607.5 million.
The joint venture, announced by the companies Wednesday, will allow the Dow Jones industrial average to keep its famous name.
Dow Jones will retain a 10 percent stake in the business, which offers more than 130,000 stock indexes that are used as benchmarks by investors and licensed for use by mutual funds and other investment products.
Its best known index is the industrial average, which began as a basket of 11 stocks in 1884. Today, it includes 30 stocks including Caterpillar Inc., Microsoft Corp. and Wal-Mart Stores Inc., and is used as an indicator by investors around the globe.
