My Primary Sell Signal on the $SPX May Kick In Tomorrow - IF it's Another Down Day...

My Secondary Sell Signal was given today by the $SPX closing a fraction below the 5MA...The CCI downticked sharply today, and IF tomorrow is another down day, my Primary Sell Signal will be given when the CCI crosses below the +100 line...Today's candlestick was another Doji, though not a perfect one since the body is a bit on the large side, but the upper and lower wicks are of equal length...Volume was anemic today, and a down day on much stronger Volume would have been more convincing so that a call of another down day on Thursday would be much easier to call...Stochastics is still in Overbought territory near 90, and the fast line crossing down through the slow line today is somewhat Bearish...The MACD Histogram downticked for the second day in a row, and it's fast line leveled off for the first time in a week and a half...If tomorrow is another down day on higher Volume, my first target is down to the 15MA at 1089. and if that Support level fails the next target is the middle Bollinger Band at 1075. where it may find Support there...If the market rallies tomorrow, and the Index rises above Monday's intraday high Resistance level and looks like it will close there, the Bulls will be showing that they are in charge...See my notes on Fundamental Analysis below the chart...



Today's surprisingly negative Durable Goods Orders numbers and the weak Beige Book report from the Fed showed much more weakness in the economy than analysts expected...Analysts predicted that the Durable Goods number would come in a +1%, and it came in at -1%...

Orders for big-ticket goods fall 1 percent in June: http://tinyurl.com/34v5nlr

Dow ends 4-day win streak on Fed economic report: http://tinyurl.com/32f85rm

The Fed survey followed a disappointing Commerce Department durable goods orders report early in the day. Orders for durable goods, which are expected to last at least three years, fell 1 percent in June. Economists expected a 1 percent gain.

Investors have been trying in recent weeks to balance strong earnings and corporate outlooks with economic data that isn't as encouraging. A drop in consumer confidence Tuesday helped push stocks mostly lower although another batch of robust earnings reports came out.

Earnings reports were mixed Wednesday. Boeing Co. said its profit slipped from a year ago, but results still topped expectations. The airplane maker also didn't adjust its outlook.

Tomorrow's potential market moving events will be the weekly Jobless Claims number to be released an hour before the opening bell:

http://online.barrons.com/public/page/barrons_econoday.html

And a slew of earning reports from a number of Fortune 500 companies listed on the $SPX:



To see the full list of companies reporting earnings tomorrow, follow this link:

http://thestreet.ccbn.com/earning.asp?client=thestreet&date=20100429

Investors are really looking to the first read of the Gross Domestic Product (GDP) for the 2nd Quarter on Friday - an hour before the opening bell...If you recall, the first read of 1st Quarter GDP came in at 3.2%, the second read at 3.0%, and the final read settled at only 2.7%...

And it looks like the Consensus number for the first read of 2nd Quarter Real GDP will come in at 2.5%: (click on the "Consensus" button just below "GDP" on Friday's listings anytime before the report is released)

http://online.barrons.com/public/page/barrons_econoday.html

U.S. Stripped of AAA Credit Rating!...By China?...

http://www.zerohedge.com/article/us-stripped-aaa-credit-ratingby-china

By Dian L. Chu, Economic Forecasts & Opinions

Despite repeated warnings going back several years from Moody's, S&P et al that the U.S. could lose its top credit rating with ongoing fiscal deficits and heavy debts, the platinum-plated AAA rating of the United States seems all untouchable.

The top notch rating certainly has helped with continuing debt financing and bolstered the confidence of some government officials. Secretary Geithner, for example, said in a February interview that the U.S. government "will never" lose its credit rating, despite big budget deficits and a newly raised debt ceiling of $14.3 trillion.

Along came a Beijing-based rating agency--Dagong International Credit Rating Co. Its first order of business is to downgrade sovereign debt ratings on some major Western nations, while slamming its Western counterparts.

"The reason for the global financial crisis and debt crisis in Europe is that the current international credit rating system does not correctly reveal the debtor's repayment ability."

Dubbed as the world’s first “non-Western” sovereign credit rating agency, in its debut international report, Dagone (means Big Justice in Chinese) downshifted the US to AA with a negative outlook, while UK and France were given AA-; Belgium, Spain, Italy with A-.

It also rates debt risk of the US above China, and listed the US as one of the countries with exposure to increasing borrowing costs and default risks.

In June, the total US debt topped $13 trillion for the first time in history. The International Monetary Fund (IMF) projected that the U.S. deficit will stand at 64% of GDP this year, rising to just over 96% by 2020.

Concerned that high unemployment may force a double dip recession, the IMF just last week urged the United States to rein in its budget deficit.

Some see Dagong’s report as mere political propaganda by Beijing to counter the repeated pressure by the U.S. on its yuan policy. Nevertheless, the national debt by country chart (below) should say that Dagong's assessment is not entirely baseless, regardless of any possible hidden agenda.


Graph source: visualeconomics.com

Meanwhile, the flock to the U.S. treasury in recent months due to the European debt crisis--temporary in nature—is by no means a testament to America’s credit worthiness.

This downgrade, although might not carry much weight and influence on the bond market, does give a sobering glimpse into the unthinkable……, well, at least to Geithner.

Government Lowers GDP Estimate for the First Quarter 2010:

http://stockmarketchartanalyst.blogspot.com/

Economy grows by 2.7 percent in first quarter, a slower pace than previously estimated.

Christopher S. Rugaber, AP Economics Writer, On Friday June 25, 2010, 11:17 am EDT

WASHINGTON (AP) -- The government lowered its estimate of how much the economy grew in the first quarter of the year, noting that consumers spent less than it previously thought.

Gross domestic product rose by an annual rate of 2.7 percent in the January-to-March period, the Commerce Department said Friday. That was less than the 3 percent estimate for the quarter that the government released last month. It was also much slower than the 5.6 percent pace in the previous quarter.

The economy has now grown for three consecutive quarters after shrinking for four straight during the recession -- the longest contraction since World War II.

In normal times, 2.7 percent growth would be considered healthy. But it's relatively weak for a recovery after a steep recession. After the last sharp downturn in the early 1980s, GDP grew at rates of 7 percent to 9 percent for five straight quarters.

"It's what I call a halfhearted economic advance," said Stuart Hoffman, chief economist at PNC Financial Services Inc. The economy is likely to grow at a similarly modest pace for the rest of the year, he said. That may reduce joblessness, but at a slow pace. He anticipated a slight reduction, from the current rate of 9.7 percent to about 9.3 percent by the end of the year.

The European debt crisis is likely to slow world trade in the second half of the year and businesses may pull back on spending once they have rebuilt their inventories, said Paul Dales, U.S. economist with Capital Economics.

"Overall, the U.S. economy may be performing much better than those in Europe, but this is still the weakest and longest economic recovery in U.S. postwar history," Dales said.

Factories are churning out more steel, cars, appliances and other goods, but not because consumer demand is particularly strong. Instead, they are producing the goods for companies that let their stockpiles drop during the steep recession, to bring them in line with lower sales. Now those companies are restocking their warehouses as sales revive.

Once that process is complete, inventory restocking will provide less of a boost to GDP.

Another factor inhibiting growth will be a reduction in government spending. The impact of the federal stimulus program is expected to fade toward the end of the year. Economists also warn that state and local governments are likely to rein in spending and raise taxes as they struggle to close budget gaps. That was apparent in the latest GDP estimate, which showed state and local governments reducing their outlays by about 4 percent.

The department's report is the third of three estimates it makes for each quarter's GDP, the broadest measure of the nation's economic output. The first quarter's growth rate declined from earlier reports because consumers spent less than previously estimated, while the nation imported more goods from overseas.

The government updates the figures with new information that is released after the initial reports.

Still, there were signs of health. Consumers boosted their spending by 3 percent, almost double the pace of the previous quarter. That's below the previous month's estimate of a 3.5 percent increase, but is still the largest increase in three years. Businesses ratcheted up their spending on equipment and software by 11.4 percent.

Growth of roughly 3 percent is needed just to generate enough jobs to keep up with increasing population. Many economists say growth needs to reach 5 percent for a full year to lower the jobless rate, currently at 9.7 percent, by one percentage point.

In the past three quarters, growth has averaged 3.5 percent.

GDP measures the value of all goods and services produced in the United States and is considered the best measure of the country's economic health.

http://finance.yahoo.com/news/Government-lowers-growth-apf-1988566378.html?x=0&sec=topStories&pos=3&asset=&ccode=

Here Is Why the Fed Cannot Simply Continue to Inflate Its Way Out of Every Financial Crisis That It Creates:

The return on each new dollar of US debt is plummeting to new lows according to figures from the Federal Reserve.

http://jessescrossroadscafe.blogspot.com/2010/05/here-is-why-fed-cannot-simply-inflate.html

The chart below is from the essay, Not Just Another Greek Tragedy by Cornerstone.



I have been watching this chart for the past ten years, as part of the dynamic of the sustainability of the bond and the dollar as the limiting factor on the Fed's ability to expand the money supply.

The ability to expand debt is contingent on the ability to service debt. If the cost of the debt rises over the net income of the country's capital investment, or even gets close to it, the currency issuing entity is trapped in a debt spiral to default without a radical reform.

In other words, if each new dollar of debt costs ten percent in interest, largely paid to external entities, and it generates less than ten cents in domestic product, it is a difficult task to grow your way out of that debt without a default or dramatic restructuring.

So we are not quite there yet. But we are getting rather close on an historic basis. Without the implicit subsidy of the dollar as the world's reserve currency it would be much closer.

As it is now, this chart indicates that stagflation at least, rather than a hyperinflation, is in the cards for the US. But the trend is not promising, and the lack of meaningful reform is devastating.

A 'soft default' through inflation is the choice of those countries that have the latitude to inflate their currencies. Greece, being part of the European Monetary Union, did not. The US is not so constrained, especially since it owns the world's reserve currency.

The economy is out of balance, heavily weighted to a service sector, especially the financial sector which creates no new wealth, but merely transforms and transfers it. With stagnation in the median wage, and an historic imbalance in income distribution skewed to the top few percent, with the banks levying de facto taxation and inefficiency on the economy as a function of that income transfer, there should be little wonder that the growth of real GDP is sluggish in relation to new debt.

Or as Joe Klein so colorfully phrased it, the elite have been strip-mining the middle class in America for the past thirty years.

Along with the 'efficient market hypothesis,' trickle-down economics is also a fallacy. This is why the stimulus program being conducted by the Federal Reserve, in an egregious expansion of its authority to conduct monetary policy, in subsidies and transfer payments to Wall Street is not working to stimulate the real economy. It merely inflates the bonuses of the few, and extends the unsustainable.

So obviously one might say, "The Banks must be restrained, and the financial system reform, and the economy brought back into balance, before there can be any sustained recovery.

First Quarter 2010 GDP Advance: by Karl Denninger...

Friday, April 30. 2010

http://market-ticker.denninger.net/archives/2010/04/30.html

So the data is out....

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 3.2 percent in the first quarter of 2010, (that is, from the fourth quarter to the first quarter), according to the "advance" estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 5.6 percent.

Well, that's not what the previous quarter was, but it's also no surprise.

The deceleration in real GDP in the first quarter primarily reflected decelerations in private inventory investment and in exports, a downturn in residential fixed investment, and a larger decrease in state and local government spending that were partly offset by an acceleration in PCE and a deceleration in imports.

The inventory cycle is about done, residential fixed investment hasn't turned around at all and in fact is still declining, and state and local government spending is down - they're out of money!

There are some interesting data points inside the release. Of note:

* Durables were up big - 11.3%. Most of this is probably improvement in vehicles, if the reports from the first quarter automakers are to be believed. Considering that they were in all-on crash mode last year and into the end of 2009, this is good for them - not so good for anything else.

* In domestic private investment the only place we saw gains was in "equipment and software." Residential and non-residential structures were both down big, seasonally adjusted (10.9% and 14%, respectively.) But the CapEx cycle that everyone is counting on for continued expansion is slowing q/o/q; it was up 19% last quarter, and is now up 13.4%. While that's a significant positive print if this was a short spurt and is now tapering off we got trouble in the back half of the year. The jury remains out on this one.

* Net exports were up nicely. Hint-hint: Policies that strengthen or stabilize the dollar will help this continue - like, for example, abandoning ZIRP! We need this to continue - if it reverses, we're cooked and fast. Bernanke needs to raise rates to above that of the ECB. He may get some help if a few European nations collapse, of course - but if they wind up at zero, we need to be at 1%, and that divergence needs to be established right now. We do NOT want a skyrocketing dollar, but because we import too much of our raw materials and it is the "value added" that we get to keep, we want cheaper imports of those materials - and we get that by being able to buy them with a stronger buck. The specific issue here is energy (oil prices); we can't have oil going back over $100, and the best way to prevent it is to get rid of ZIRP.

* Government spending is very interesting. The Federal government, of course, continues to spend. But most of the government's deficit spending isn't going into direct expenditures - it is instead going into transfer payments and handouts of various sorts, as the total federal spending was up only 1.4%. State and local spending were down big, as they're simply out of money.

* Finally, disposable personal income was up just 1.5%. Where is all the federal borrowing going?

I'm concerned with these numbers - quite concerned in fact. The Federal Government borrowed (and presumably spent) $462 billion in excess of tax receipts over the first three months of 2010.

But PCE - personal consumption expenditures - was up $83 billion and federal spending was up only 3.5 billion.

Where did the other $375 billion go?...

Into a black hole of covering existing obligations, it appears, and the final private demand GDP deficit covered by this is almost exactly 10% (GDP for the quarter is ~3.650 trillion, so $375 billion is roughly 10% of that.)

What does this mean? It means we've not turned the corner on this graph, which was current as of 12/31/2009 (and which I can't get an accurate read on until the end of this year):



I don't like it folks. All the claims of "economic recovery" are in fact claims of "government is propping up 10% of final demand, and that propping up is disappearing into a black hole."

There's no evidence in this report that the economy is recovering - that is, that the artificial "borrowed and spent" support the government has been providing for the last two years is being replaced with actual final demand.

The positives in the GDP report are automobiles (strong this quarter) and a positive, but weakening CapEx cycle in business spending.

But the key item for me in this series, which is evidence that the federal government's replacement of final private demand is moderating and being picked up by private economic activity, is utterly absent. In fact the influence of those dollars, as shown by the final print compared to last quarter, is waning.

One-sentence summary: The rocket is running out of fuel.