Another China Sell Off

oil demandOn Tuesday, China recovered slightly from another devastating day of trading. On Monday, however, The Shanghai Composite closed down just under 7%, as deflation fears and slow oil demand worried investors. This marked for the second large sell off for China in just two weeks. It is clear that deflation risks are hitting China at the core due to their large dependence on manufacturing and exports. Even though US markets have not reacted much to the global concerns, if such problems continue, we can be assured that selling pressure will increase.

The Dow opened up down this morning and traded down around 100 points throughout the entire day until the famous remaining 15 minutes, in which markets were able to recover a bit. Commodities are in serious risk of quickly depreciating prices and puts on metals, potash, and especially oil sound real appetizing at this point. In tonight's premium podcast (subscribe here), I also discuss some reasons banks are stalling on foreclosures and why this is problem for our economy in the future. Happy Trading.

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New Marvel at Disney

disney marvel mergerOn Monday, Disney announced that indeed they struck a deal with Marvel to purchase the company for $4 billion cash. In the deal comes over 5,000 Marvel characters that Disney will own the rights to. As a result, Disney shares were down, while Marvel shares jumped over 25%. For Marvel investors, $30 cash will be issued per share owned, as well as .745 share of Disney stock for every one share they own of Marvel. At present value, that puts the value of Marvel stock near the $50 mark, which was the big cause for the jump today.



As we head deeper into this recession, more Marquee mergers and takeovers will most likely take place. Some, where both sides feel good about the transaction (like the Marvel/Disney), others that are very one-sided ( a hostile takeover). At any rate, it can be good to find these companies, whose stock has taken an "over beating" and are primed for a takeover or buyout, because as we saw from Marvel today, rewards can be quite significant. I have (and still feel) felt that Yahoo is still on the cutting board for a buyout/takeover. If stock prices begin to go back down (which I firmly believe they will), I would not be surprised to see someone step in and buyout the company. Many other companies who have a niche following or technology may find themselves in that category very soon.

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More Bad Banks

bad distressed banksWell, we've seen the wrap up of yet another day of low volume, back and forth trading that conveniently closed the Dow up about 37 points for the day. It is very clear the unorthodox movings of the stock market has scared most investors out of the market (including myself). Even bulls are having a hard time pulling the trigger as we saw one of the lowest days of volume yet. We do need to factor in it being August and a very popular time to travel before the kids go back to school and I expect, as time goes on, many people will be forced to sell and liquidate as many consumer business continue to be strapped for cash. I do feel the still the present risk of deflation is a real risk that could cause a big turn in the market and is beginning its course.

Today, the FDIC announced that its list of distressed banks rose to its highest level since 1994. At the end of June, 416 banks were numbered on the FDIC's "problem list", which is pretty strong jump from the end of March's number of 305. What tickles me is that despite such big and large profits that many of the banks have supposedly been turning the past few months, the distressed list grows larger and larger at a rather aggressive rate. You can smudge the numbers to make them say whatever you want with altered accounting standards, but in the end, that pile of defaulted loans still stares the banks in the face. In tonight's premium podcast (subscribe here), I will discuss more problems that face the banks in coming months.

In addition to the expanding list of bad banks, the FDIC also reported a quarterly loss of $3.7 billion compared to last year's profit of $4.8 billion. The FDIC insurance fund has been drained of about $50 billion to about $10.4 billion (all that remains) in just a year. As times continue to struggle, which I believe they very much will, we can be sure that fund will be maxed out. It is no wonder that lending is scarce with banks right now (which if you are looking for a reasonable consumer loan, Lending Club could be a great option to look into).

Like I've said before, despite the recent gains on wall street, industries (including the financial sector) are still racking up massive losses. There is only so much investors can absorb until they are forced to sell. We are heading into the last quarter of the year, which as we saw last year, can be a scary time for wall street as it is usually redemption season. Cash has been looking very good to me as of late. Happy Trading.

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An Overlooked Index

demand for goodsMarkets traded mixed on Wednesday and once again ended with the miraculous end of day rally to push the Dow slightly into the green once again. However, the past few days have shown us that definite uncertainty remains with investors as volume remains extremely light, and selling is becoming more and more prevalent. Unfortunately, I still believe manipulation exists with such low volume levels, which continues to make it an unnerving market for me to invest in at the moment.

I wanted to discuss an interesting benchmark that I track that many overlook. In fact, CNBC actually talked a bit about it today in a good article, however, you had to dig a bit to find it. Click here to read more about it.

The Baltic Dry Index (BDI) is an index measuring shipping activity along 20 of the world's biggest routes. As a result, many economists use the index to measure overall demand of goods. I really like this indicator, because I believe it is a good measure of consumer progression (which is the biggest contributor to GDP growth). Also, conveniently, it has an almost flawless record of predicting recessions.

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Despite all of the big gains we've seen on Wall Street the past few months, the BDI has been consistently declining since June, which as a whole, has been about a 43% decline. The indicator has found to have a large influence on China's economy, which since August, The Shanghai Composite is down 16%. The large decline in the BDI is believed to be largely due to lower demand of metals, which in turn could be a very strong indicator for a near deflation, which I have feared. Believers in this demand measure fear that more economic problems are headed for the US and the global economy and recommend investors to take higher cash positions.

This is just one more indicator that has been thrown to the side as we have seen nothing but green in the markets. As unpopular as the index has been, like I said, its track record is impeccable in predicting recessions and usually is directly related to consumer demand. One more caution for those believing we are out of the woods. Happy Trading

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Missed Budgets

white house budgetsThe White House Budget Office released their "revised" calculations of the current state of the economy, as well as the future outlook and recovery. Amazingly, (I hope you sense the sarcasm) the numbers for 2009 performance are much less than originally anticipated, as is the numbers for the predicted recovery. It was only a few months ago that the White House was calling for a end of year recovery. However, now they are predicting a 2.8% contraction for the economy as a whole for 2009, which is more than doubled their earlier projections.

In addition to that, they still are predicting a recovery beginning in 2010, however, they're prediction is now a 2% growth for next year, compared to the initial 3.2% estimate. The office is also expecting the deficit to rack up an additional $9 trillion more of debt from the periods of 2010-2019, which would essentially be doubling what we started at in 2009.

I remind you, these are the INTERNAL budget projections, which usually are set much more favorable, even more so in uncertain times. Slowly, the economy is forcing the government to whittle away at these initial projections and to come back down to earth. If they are budgeting for $9 trillion of deficit spending, I can only imagine what that actual number will be.

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The market got off to another quick start this morning due to some favorable consumer confidence and homes sales data. However, much like yesterday, buying has slowed down as the day gets closer to close due to increasing concerns. Volume remains critically low. Happy Trading.

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Monday Mid-day Nerves

existing home salesMonday opened up with yet another strong green day of trading, mostly reacting to yet another positive month of existing home sales. An increase in sales from the prior month brings no surprise, when considering the amount of bank owned properties that are currently on the market, which are being sold for extreme discounted prices. However, as the trend tends to be as of late, anything positive begets positive trading, at least for now.

There have been a few people who have asked why I haven't made more trades the past month. The very simple answer to the question is because we are not in a logical trading market at this time. I have always said that I am not a "day trader." There were recent times where I saw benefit to making quick, daily trades to take advantage of volatile swings, however, we have changed a lot since then. I believe there is plenty of opportunity in the future for much less riskier plays with a lot more upside. Sure, it may seem boring to the active trader, but it has not failed me yet. So, I apologize for those looking for a more active trader. I will continue to give my commentary on calculated plays that interest me, but until I see a deflationary trigger (which could be very soon), the portfolio will remain pretty status quo.

After the big green morning, the market has taken back all of its profits and is actually, currently, slightly trading in the red. With the so called "positive" home sales news, came some other data that doesn't have such a positive light. With the number of home sales increasing, the inventory actually rose more, which is discouraging, given the amount of distressed, foreclosed homes that were sold. With all of this, home prices continue to go down, which is not a good outlook, when considering an increase in sales.

This being said, reality has sunk in a bit today and could easily head into close, pending there is no intervention. So watch out for a selling close. An industry I see prime for shorting at this point is the autos. Due to the recent closing of the popular "cash for clunkers" program, buying a vehicle almost seems like an annoyance, more so than a luxury. I can't see auto companies making strong profits to close out the year, especially without Uncle Sam sparking interest with incentives.

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New Trading Activity

wall street sellingAs I said in the previous post, I think we will be experiencing some significant trading days in the coming weeks, if not days. I know I have been rather "stubborn" (as some would say) in believing that the worst was not over for the market and have consistently expressed my opinion of a second leg downward. Well, unforeseen intervention and ridiculous amounts of government spending and policy changed mixed things up quite a bit and have helped put us in this current, crazy state. Despite recent gains, I do feel that recent data has indeed been significant enough to support the notion of a severe short term risk of deflation, that would indeed send us spiraling down.

The PPI numbers on Tuesday are just part of what makes up my belief. As such, I believe there are going to be some great opportunities for me to make some money in my Zecco.com account. The inverse etfs, which have been dogs as of late, could definitely be ready for a second wind. Also, other industries I see weakness will be credit card companies as well as health insurance companies. Obama is on a mission for health care and I believe he has some serious regulation in mind for insurance companies that will dig into their profit margins. Credit Card companies should get hit by a more "saving minded" consumer as well as the risk for more regulation heading their way as well.

Long term, airlines and autos look like decent plays as I believe there should be a short term cut to gasoline prices, as well as the continued "success" of cash for clunkers. However, all industries are in risk of a deflationary down spiral, so if such things were to occur, longs would be a tough call (aside for the US Dollar).

All my beliefs are obviously based on natural workings of the market and could once again be stalled by yet another government explosion of stimulus. I do, however, believe that the government is getting close to the edge of what they can do monetarily, as they are maxing out their sale of treasuries. The next few weeks should start to become very interesting, in my opinion, and hopefully, we start to see some direction. Happy Trading.

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Dangerous Deflation Levels

ppi deflationLast month, many threw out the notion of the fear of deflation due to higher than expected PPI and CPI numbers. I cautioned at the time, that there were still many other contributing factors pointing to a deflationary down spiral and that one month of positive growth was nothing significant. On Tuesday, PPI numbers once again came in worse than expected with a NEGATIVE trend (-.9%). Sure, there is a lot of influence with the radical movement of energy prices as of late (which will require some more analysis), but such numbers have us flirting with serious problems.

Housing Starts also disappointed the market's expectations as new development is still severely struggling. Despite these very critical readings, however, the market is still finding some way to go up the last couple of days. Still, volume remains very low as most investors are finding it safer to hold onto their cash at this point. I believe we are week, maybe even days away from the big turn in the market. I will make sure to keep the site updated much more during this critical time. Happy Trading.

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IMF Joins Bandwagon

IMF economistOliver Blanchard, a top economist for the International Monetary Fund (IMF), declared on Tuesday that indeed the global recession has ended and a slow recovery has begun. This announcement, of course, is following one of the largest one day declines in the Shanghai Composite as well as a rather strong sell off in the US markets. All of these "public declarations" are done very carefully with strong warnings. It feels much like a catchy slogan one would find on a medicine bottle, followed by all of the side effects and warnings that could accompany you if you decide to take the drug.

I found the following phrase comical, considering that it was found in the same address that declared the global recession is over:

"The United States can't rely on low interest rates to sustain the recovery, nor can it rely on consumer spending or investment filling the gap. Consumers are likely to save more in coming years. Businesses don't need to invest much for the next few years, because so much of their capacity is idle."
At least they are admitting that we cannot rely on the consumer to bail us out of this. However, unfortunately, our GDP is 70% based on the actions of the consumer. So to say such things is an oxymoron. After the very positive headline, the rest of his remarks consisted of explanations of how slow the recovery would be and how we may never return to the growth levels we were at originally.

It is clear that indeed it is the goal of government and political figures to maintain the confidence of consumers throughout the world. But I take these "declarations" with the smallest grain of salt.

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Have We Experienced Growth?

economic growthSince March, we have seen a violent rebound in the stock market that many are saying is a result from seeds of growth that is being in found in the economy. For those that are active readers of this site know very well where I stand in regards to what has caused such an inflated stock market. Sure, there have been reports that have temporarily shown a reduction in the rate of deterioration, but I am not sure how much "growth" has been found in all of this.

The stock market is often referred to as a "forward looking indicator," which means that historically it tends to be a few months ahead of the actual economy. This is many of the bull's argument regarding not needing a full recovery of the economy to be out of the woods for the stock market. Even though there is some truth to that, there is one thing that the stock market needs to rebound...and that is growth.

Much of the recent green trading has resulted from "better than expected" earnings reports from corporations. However, when looking closer at the numbers, one will notice that increasing sales (growth) are not causing for the loss of revenues gap to narrow, but cutting expenses has been the reason. Sure, cutting expenses is a vital part to these companies becoming more profitable, but alone, it is unsustainable. What is also needed is what the stock market has chosen to ignore the past several months, this being the consumer.

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Without growth of sales, having no consumer in the market will essentially drive many of these companies to bankruptcy. We saw yet another historic company, Reader's Digest, file today. Though the initial cutting of expenses may have surprised many when evaluating their bottom line, if no consumer prevails, it will inevitably lead to many more corporate bankruptcies. I refute the idea that the economy is recovering and that businesses are once again starting to bloom. Instead, I see recent successes as a result of trillions of government spending, extreme cuts to expenses, and manipulated accounting changes which has caused such a quick, violent response from Wall Street and created a mirage of bettering circumstances.

I will discuss more reasons why indeed I cannot jump on the recovery bandwagon and why we could be in for a long haul downward in the coming months on tonight's premium podcast (subscribe here). However, the notion to claim that such success in Wall Street is a result from growth in the corporate sector is ridiculous. Such is maybe the reason Asia suffered such tragic losses in yesterday's trading and why we opened up the week on the wrong foot. Shorts are looking very tasty as of now. Happy Trading.

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Doggy See, Doggy Do

shanghai crashHopes for yet another week of rallying were quickly put to rest as the Dow opened down just under 200 points on Monday morning. Asia first set the trend with the selling yesterday, as the Shanghai Composite closed down 5.8%, which was the biggest one day decline they have seen since November of last year. Japan also suffered deep losses in their markets, so to see the week begin on the red side is not such a surprise.

Lowering commodities, metals especially, was a big factor in sending the Asian markets down. Also, continuing worries in the financial sector are, once again, bringing up doubts about the sustainability of many of the big banks. Friday closed in the red with the help of a worse than expected consumer confidence report, which to me was no big surprise. If such deflationary trends continue, this two-day selling trend could be extended for a much more lengthy period.

The market has been waiting for a pullback, and here it is. The question on everyone's mind is how long will it last. In recent times, these pullbacks have been very brief. However, if a deflationary down spiral gets thrown into the mix, we're in a whole new ball game. Beware of a sell off close.

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Retail Sales Slump

wal mart salesAlthough markets were still able to end today in the green, having the Dow close up 36 points, there was some discouraging data that hit Wall Street. After an encouraging, positive 0.8% increase in retail sales for June, July posted a drop of .1%. Analysts were expecting the number to at least match last month's number if not be better. This number proves to be even more disappointing, when you take into consideration the "cash for clunkers" stimulus program. Excluding autos in the number, retail sales actually fell -.6%.

These numbers are a wake up call for investors that even though there has been much success in the markets, consumers are still suffering. We cannot expect to get this economy back on track without the consumer. The news was slightly dulled by a strong earnings report from Wal-Mart. This is no surprise, as Wal-Mart tags themselves with the slogan, "the low price leader."

Other discouraging data that reached Wall Street today was the significantly greater initial claims number that came in. It would be no surprise to me if we were to see a severe drop in GDP towards the end of this year and early next year. Taxes are increasing, gas prices are more expensive, and more jobs are being loss. Even Tiny Tim warned of the plans to begin new regulations with the banks.

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We saw extremely low volumes of trading today. The fundamental signs continue to point to a very problematic, decaying economy, one of which that is walking on ice. Sure, sentiment seems to be better, mostly due to the performance of the stock market, but take that away and there is not much to brag about. I worry if this market goes any higher, the weak foundation will cause it to crash even quicker. In tomorrow's premium podcast (subscribe here), I will discuss some other fundamental changes that are causing a quick decay to the economy. Happy Trading.

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Fed Stays Status Quo

bernanke fed meetingMarkets cheered The Fed's decision to keep rates at essentially 0% for an extended period of time as the Dow closed up another 120 points. It is very evident that indeed we are and have been in the midst of a vicious bear market rally, one of which I wished I could have capitalized on more. However, markets have performed in a very unorthodox manner and I fear that many have been fooled into thinking that we have seen the last of a declining stock market. Unfortunately, market crashes usually take investors by surprise, so to see such mass positive sentiment is not that surprising to me.

In addition to The Fed keeping the rate the same, they also announced their plan to slow down the purchase of US Treasuries. Really?! Who is going to buy the trillions that are left to sell? You know China isn't. Down the road, they may consider slowing that process, however, I don't see how they can begin that anytime soon, considering the amount of debt that we are in and the state of the global economy.

Despite the craziness of the market, Market Trend has done a great job of technically tracking buy and sell points in recent trading. I am posting a link of their most recent video showing their flawless technical trades they have called the past 24 months. Click here to watch the video, it is pretty impressive.

There is no nerve in my body pushing me to consider to go long at this point. Although, there may be a bit of steam still left in this push, I cannot see the markets going much higher. We have bought this market back up to levels with expectations of a non-recession economy by next quarter. If such lofty goals are not met, the market risks falling quicker then it climbed. Fundamentals, where are you? Happy trading.

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Commerical Real Estate Problems - But Not on Wall Street

maguire properties defaultFeatured on the front page of Monday's Wall Street Journal was the announcement that Maguire Properties, downtown Los Angeles' biggest real estate owner, would be giving the keys back to seven of their high profile office buildings in LA and Orange county. Being head deep in the commercial real estate market, I knew of this news a while back and know of several other groups who will also do the same. Due to extreme pressures of the deep recession as well as increasing vacancies with lowering rental rates, Maguire could no longer afford to pay off the debt.

The article went on to say that essentially, Maguire was insolvent and they are finding themselves in heap of trouble. You would think after such a revealing day of their troubles, their stock would respond in a negative reaction. However, it was the opposite that happened. Yesterday, Maguire's stock price was up over 16% at one point. This just sums up the recent unorthodox movings of the stock market and that indeed it has recently had a mind of its own. Maguire stands as an early example of many to follow suit. Even with the stock market going up, consumer income still suffers as does corporate and retail earnings. As more time goes by, more and more landlords will have no other choice but to give the keys back. Many have tried already, but due to the amount of distressed properties, banks are selectively choosing the properties they are taking back at this point.

Today the market closed in the red having the Dow close down just under 100 points. This was a long overdue selling day that could spread depending on retail earnings this week. As of now, there has not been much action in my Zecco.com account, however, I continue to believe in the severe turn of this market. To think that indeed a full recovery could be here so quickly after almost a mass bank failure is ridiculous. Sooner or later, once again fundamentals will realign with market performance. Lets see if another round of profit taking kicks in tomorrow. Happy Trading.

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More Lost Numbers

consumer credit lossWith all the chatter and cheering going on by Friday's "better than expected" unemployment number, many failed to catch the almost doubled then expected consumer credit loss report, which came in at a loss of $10.3 billion. Keep in mind, last month's the number was later revised from an announced loss of $3.2 billion to $5.4. You can only imagine what this number will be revised to.

Sure, the number is not as significant as the unemployment, but the huge miss in expectations tells a story of where a lot of this money is coming from in the economy. More debt. Just as the popular "cash for clunkers" is temporarily bringing relief to the battered auto industry, it is also piling up more debt for the consumer into one of the biggest money pit purchases people can make. A car is not an investment, it is an income eating luxury.

Thus far today, markets have been down, mostly due to profit taking and more weakening commodities. Financials still continue to perform, with help from Freddie Mae claiming profits as well as stating their cutting the umbilical chord from the government (we'll see about that). Hopefully, we'll see a pullback here, as we are far overdue. I still remain very bearish.

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Unemployment Nervous Nellys

no consumer with retailFear of the possibility of yet another depressing unemployment number, which will be released tomorrow, kept markets trading in the red throughout the day as the Dow closed down about 25 points. Another end of day close on the gap dulled the pain as the losses were more than double earlier in the day. All eyes are on tomorrow's unemployment number as analysts have once again thrown out a very nasty expectations number. If we get even close to their expected number, I would consider it as a very bad indicator.

I found a rather funny headline today at the very popular CNBC website. I enjoyed it so much, I am showing a copy of it at the top of this post. I think it very well sums up exactly what I've been saying the past 3 months (even though I think they were referring to it in a different light). You will notice the headline reads, "Retail Stocks are Rebounding - Even Without The Consumer." The statement is almost an oxymoron, considering that the success of retailers is based on the purchasing power of consumers. However, the headline does not lie. Despite a gash in consumer spending and personal income, retail stocks continue to rise. I don't see this as a positive phenomenon, more so as I see it showing how the stock market behave in unnatural form.

From within a company, any retailer would tell that you that the consumer is number one. To think that companies are better off with a wounded consumer would be crazy. Sure, companies can position themselves, cut costs, and take measures to help themselves endure such difficult times, but in the end, it will be the consumer that keeps them alive. I just thought the headline was worth sharing. Thanks CNBC.

Make sure to keep your eye out for the hours per workweek number that will also be announced tomorrow. Many times that number gets cast aside as everyone focuses on the unemployment rate. This can be a great indicator if firms will still be cutting jobs in the future. In times past, a down trending number can point to further future job losses, with the theory being that companies cut hours before they cut jobs. If you're looking for a job RiseSmart.com can be a great place to find high paying jobs. Happy Trading.

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Earnings Stop Rally

cisco bad earningsFinally, we get a breather from the nothing but green we have seen in recent trading. Slumping earnings put a dull in trading as investors felt that maybe two weeks of green is good enough. Personally, I feel that the market is extremely overbought and has some severe correcting to endure. Much of the boost in buying has been due to the illusion of "better than expected" results. The genius who came up with that manipulation strategy should receive a reward, because for the past month, companies have been able to report 30-60% loss in revenues from the previous year, all while investors received it with open arms and cheering. It is times like this, where I step aside.

Like I've said in other posts, such "bear market rallies" like what we've seen are present in all recessionary periods. They can be violent and very vicious. However, as we have learned from the past, they can also be a false hope for investors, which in turn can amount to mass losses in the market. I believe it is a false hope and that we will shortly see markets reach much lower levels. What really is paving the way for this is the fact that hundreds of thousands continue to lose their job every month, as we will see this Friday with the unemployment report.

As much as it seems that we are coming out of this hole, we're not. Here are a few reasons why: Personal income continues to trend down, massive monthly unemployment, a commercial real estate market hanging by a string, massive corporate revenue losses, and hundreds of billions being sold in government debt monthly. The market can go up all it wants for a while, but with these economic factors, it is unsustainable. Investor's income is getting eaten into every month, the value of their house continues to fall, and they continue to spend less and less. For me, it is not a question of if it will happen, but when it will happen. Happy Trading.

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PS - In the previous post there was a comment wondering if I responded using an "alias". I would hope that readers of this commentary would not suspect me of such immaturity. I always use my name when responding in both the chat or the comments. I will discuss more woes hitting commercial and residential real estate markets in tonight's premium podcast (subscribe here).

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Watch For End of Day Rally

pending home salesRecently during days of flat trading, markets have been finding a trend of last minute rallying into close. I would definitely be on the lookout for such a closing today, as once again the volume is remaining very light.

Real estate REITS are on fire today, which are mostly due to the big jump in pending home sales data that was released today. One thing that doesn't make sense, is that residential and commercial real estate are in completely different markets and are experiencing completely different economic pressures. A seasonal jump in pending home sales has no effect on the large suffering in the commercial sector. However, ignorant investors see some connection as pretty much all REITs were on fire today, which as a result crushed SRS.

The markets are dangerously flirting with complete craziness as despite continuing destructive data, markets keep going up. Despite the home sales, today's personal income number came in at -1.3%, which was worse than analysts expected. Out of all the data released, personal income is by far the strongest that directly contributes to the direction of GDP. Considering personal income has dropped so far just in a month, I am very surprised we did not see a more negative reaction from the market. 'Tis the market we are currently in.

This rally can't last much longer, oil's performance separation with stocks shows that indeed commodities may be a bit overbought (what isn't at this point?!). I will probably be pulling the trigger on some DIG puts as well as FAZ shares and maybe URE puts before close today.

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August Rush

ford salesNo signs of breaking for the rally today as Monday's trading closed up with yet another 100+ day for the Dow. Strong performance in commodities helped lift the markets today as Bull's fears of a slow August beginning have quickly vanished. Sure, as always the green markets were once again bought on very low volume, but somehow there continues to be buyers.

As I mentioned would probably be the case on Friday, autos received a lot of today due to early earnings reports, in which showed Ford actually turning a profit for July. This is no surprise due to not only the billions of dollars that was given directly to them from the government, but also from the "cash for clunkers" program that has no doubt caused for a lot of transactions in automobiles. I'm sure that will also resort in more credit defaults as well.

Historically, August has been a month of "moderate" gains for the market. However, during times of rebounds, it has shown in times past to produce quite higher results. I can't say I believe that this will be the case for this August, especially having our markets already in a considerably overbought position. Also, something interesting to note is that this Friday will be the exact same duration from when the rally began during the Great Depression and when it started to crash again. Even though such coincidences most likely bear little significance, the similarity is interesting and worth noting. If markets are crazy enough to rally yet again tomorrow, I will definitely be pulling on some short positions. I expect to see a rather strong day of selling this week, especially as profit taking kicks in. Happy Trading.

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