Tuesday’s Trading – 6/1/2010

Summer Rally?
All of sudden on Friday, the talking heads on CNBC were speculating on a Summer Rally. That struck me as odd. Here we are “enjoying” a Summer Slaughter, and these jokers were all giddy? Something is up. Did the hedge funds that write CNBC’s talking points and rumors put on long positions and have now sent out the propaganda team to talk their book? Or were they already long and are now hoping that the CNBC spin will help them weasel out of their positions?

Floppy Futures
At 7:58pm EST, on Sunday night, the SPX futures went into a ten-point nose dive. That sort of sharp move on a Sunday night is not a bullish sign. It means that, even if the market recovers, things are still volatile and there is no steady bid under the market.

L. Fletcher Prouty

U.S. Air Force Colonel L. Fletcher Prouty will probably be remembered by history as one of the architects of the secret government. His job at the Pentagon was to provide the CIA with the military resources needed to carry out its clandestine operations. Prouty created a secret network of agents throughout the military, government agencies such as the FBI and FAA, and foreign governments.

Originally, all of this work was legitimate as part of US Cold War policy. And Prouty did in fact turn down CIA requests when they had not been previously approved by the National Security Council. But it wasn’t long before the monster that Prouty helped to build took on a life of its own.

After assisting the CIA with many coups d’état around the world, Prouty was shocked to see what he considered to be the same methods applied to President John F. Kennedy right here in the USA. Prouty, who presumably did not want to work for a CIA puppet regime, resigned from the Air Force shortly after the assassination and began to write books.

Prouty’s first book, “The Secret Team: The CIA and Its Allies in Control of the United States and the World” is available to read for free on this website. His second book, “JFK: The CIA, Vietnam, and the Plot to Assassinate John F. Kennedy” is available from Amazon. I recommend them both.

You will also find plenty of interesting things to read on www.prouty.org. My favorite page on the site is the one with the JFK assassination pictures (click the “Photos” link on the left). Prouty believed that Air Force General Ed Lansdale was the mastermind of the assassination. Lansdale was actually the CIA’s top “regime changer” and was only covered as an Air Force man. For example, in 1955 Lansdale installed Ngo Dinh Diem as dictator of South Vietnam for the CIA.

Prouty worked closely with Lansdale in the Pentagon for years, but Prouty was also a pilot. He flew many clandestine missions, some of which included Lansdale and his team. While Prouty has his critics, he was in fact a practitioner. He was there. He knew where the bodies were buried. Literally. His version of this part of the USA’s history must be taken seriously.

Lee Harvey Oswald
Prouty, not being a trained scholar, was frequently reckless with facts while striving to drive his points home. For example, while arguing that Lee Harvey Oswald was just a patsy, Prouty wrote on page 308 of his “JFK” book that at the time of the assassination Oswald:

“…was a nondescript twenty-four year-old ex-marine who was unknown to almost everyone. There is no way one can believe that these press agencies had in their files, ready on call, all of the detailed information that was so quickly poured out in those first hours after the assassination.”

In reality, Oswald was a rather notorious traitor for having defected to the Soviet Union. While he was in Moscow, American reporters interviewed him and the American press published stories on him. Not only did the media have plenty of information in their files, but Oswald was watched by several intelligence agencies, including the CIA and FBI, who had mounds of information about Oswald.

This doesn’t disprove Prouty’s assertion that Oswald was a patsy, but it does open Prouty up to criticism. Lansdale had sent Prouty off to Antarctica, literally, during the assassination, so Prouty had no first-hand knowledge of what happened. So, when reading Prouty, I trust his description of events that he participated in, but google assertions such as the one above to see if they can be verified.

Soft on Communism?
Prouty has been criticized for being soft on communism and maybe even a sympathizer. And it is true that Prouty barely even mentioned communism. One of the reasons for this is that the USA and Soviet Union were close allies during World War Two and Prouty didn’t see any reason whey the two nations should immediately become enemies. He also flew missions over Russia and saw first-hand the devastation caused by the war. He didn’t think that the Russians were in any kind of condition to launch a war against the USA.

Furthermore, at he very bedrock of Prouty’s criticism of the CIA is his assertion that the CIA’s special forces doctrine was based upon Mao’s Little Red Book. So, the CIA-trained Green Berets who were sent into Vietnam had been trained to believe that setting up a dictatorship was the most effective way to stop communism. That “exporting dictatorship” doctrine was implemented all over the world, and I doubt that many Americans are proud of it.

Prouty also did not believe that wars such as Vietnam were fought for ideological reasons, but to make profits for the military-industrial complex, and to capture markets for Corporate America. “Fighting Communism” was just a cover story.

Vietnam
Compared to World War Two, the history of the Vietnam War seems all fuzzy and blurry. What exactly was the problem there? Prouty’s take is very interesting: it was a CIA project to help the military-industrial complex make a lot of money. CIA puppet Diem expelled the “imperialist” Frenchmen who were operating the criminal-justice system in South Vietnam. That left the villages with no police or courts. Then Diem expelled the “communist” Chinese merchants who were just there to buy rice. That destroyed the economy of the villages. The previously prosperous peasants suddenly had no way to market their crops, and no money to by necessities such as drinking water. They turned to banditry. The CIA designated them “communists” and Huey helicopter gunships were sent in to slaughter them.

It is also interesting that the most intense “communist activity” took place in the southern part of the country. You would think that the hot spot would have been up north, with guerrillas sneaking across the border from North Vietnam. Prouty explains this mystery: After World War Two ended, CIA transport aircraft, along with US Navy ships, relocated very large numbers of peasants from North Vietnam to the southern part of South Vietnam. They became bandits too. Prouty says that CIA “psychological warfare specialists” (a.k.a. terrorists) were deployed to North Vietnam to “inspire” this mass migration. Once a large number of refugees were introduced, and the economy smashed, South Vietnam was set up to make fat profits for American defense contractors.

The Cabal
Prouty asserts that there is a grand cabal that commands governments of the world. While he has been criticized for this, he is only using Winston Churchill’s phrase. Churchill is said to have complained bitterly about the cabal in private conversation during World War Two. That was before President Dwight Eisenhower made his military-industrial complex speech. Notice that Eisenhower gave that warning during his farewell speech at the end of his presidency. Perhaps Eisenhower knew what he was dealing with better than the next president, JFK, who vowed to “break the CIA into a million pieces” while still in office.

Ancient History?
Perhaps you are thinking that this is all ancient history? But take a look at this video where former Governor of Minnesota Jesse Ventura states that he was grilled by CIA agents in 1998. What did he do wrong? He was elected by the people of Minnesota. Apparently, the CIA still frowns upon democracy.

More on the Cabal
Churchill is said to have received loans from the Rothchild banking family, so perhaps they are who he had in mind when complaining about the cabal. And before her death in 1849, Gutle Schnaper, wife of Mayer Amschel Rothschild, said “If my sons did not want wars, there would be none.”

I couldn’t google-up any formal references for these two items, so they could be phony. However, Prouty tells a similar story regarding Vietnam: Before the war, CIA agent Frank Hand sent a banker to talk to Prouty about helicopters. First National Bank of Boston then financed Textron’s takeover of Bell Helicopter and made a fortune selling choppers to the CIA. Says Prouty:

One year earlier, in 1959, Frank Hand had directed a Boston banker to my office. At that time I worked in the Directorate of Plans in Air Force headquarters and my work was top secret. Few of my contemporaries in the Pentagon knew that I was in charge of a global U.S. Air Force system created for the dual purpose of providing Air Force support for the CIA and for protecting the best interests of the USAF while performing that task. My door was labeled simply, “Team B”; yet that Boston banker knocked and entered with assurance. Somehow he knew what my work was and he knew that I might be able to help him.

So, there you have it: a modern eyewitness account of the cabal in action: a banker helping to start a stupid war just to profiteer. See the bottom of this page for Prouty’s complete story.

Friday’s Trading – 5/28/2010

NYSE breadth closed at an extreme on Thursday. The last time that it closed up in the +2500 range was on May 10th. So today, perhaps the market will act like it did on May 11th where it ran up some more, but was unable to hold onto the gains, and closed down a bit.

How does the Clown Man on Tout TV get away with his nefarious schemes? The market manipulation is so blatant that there is only one explanation: it must be one of the oligarchy’s protected criminal enterprises like war profiteering, bank bailouts, Peak Oil, and “wayward” CIA “contractors” flying plane-loads of cocaine up from South America.

Wednesday’s Trading – 5/26/2010

CNBC squeezed the shorts again yesterday afternoon by broadcasting yet another rumor. During his “Stop Trading” segment, Jim Cramer floated the rumor that John Claude Trichet was going to announce that the ECB would begin a quantitative-easing program today. Shorts covered in a panic, and the market made a straight-up move into the close. Searching the news this morning, I see no such announcement from Trichet.

Crash Over

Am I tempting fate, or what? But the market has set a new record low for breadth. Look at this chart of the McClellan Oscillator (click to enlarge):

Thursday’s low of -414.13 took out the previous record set on October 9, 2008 (red “x” on chart). My data goes back to 1965.

So, that’s a rather epic over-sold level.

And what happened on the day after the previous record? On October 10, 2008? Well, things started off rather badly…

But then, BOOM!

Here is a 15-minute chart of that period:

The red arrow points to the close on October 9th were the previous McClellan Oscillator record was set. The next morning, the market gapped down and plunged. But soon recovered, and as the day progressed, a bullish falling wedge pattern formed (blue lines). It exploded upward in the last hour of trading, and kicked off an astounding 200-point SPX rally.

With only one ES futures contract, that was a $10,000 profit – or loss if you stayed short.

The moral of the story is that when the whole world is leaning short, absurdly huge short-squeeze rallies become possible.

It’s Time to Conquer Mexico

Today, Mexican President Felipe Calderon addressed Congress and gave Arizona a stern lecture over its new immigration law. But who is he to talk? According to an Amnesty International report, Central Americans who immigrate into Mexico are robbed, beaten, and sexually assaulted before being kicked out.

Not only that, but George Friedman thinks that Calderon’s government condones drug trafficking into the USA, and that the US military may attempt drug interdiction in Northern Mexico. (Article here.) But why stop there? Mexico is clearly a failed state. Is it not time for a little regime change?

Take that Calderon!

CNBC Wolfpack

German Chancellor Angela Merkel has recently criticized traders as “wolfpacks” viciously attacking the pristine European Union governments. Did the wolfpacks run up all that EU debt? Not hardly, but traders have been, shall we say, somewhat enthusiastic about shorting the markets recently. And there is, of course, nothing wrong with that – unless you are posing as a “journalist” perhaps? In the past few days, I have pointed out several examples of CNBC leading the wolfpack here in the USA, and they were at it again this morning.

When the S&P 500 Index dipped below its 200-Day moving average (1102.16) at 11:50am, Matt Nesto came on CNBC to report the fact. But he also delivered an editorial comment: this breach of the moving average should “trigger program selling.”

Is that so, Nesto? And just where may I ask were these alleged panicky trade-bots? (click chart to enlarge):

As a matter of fact, an experienced trader as Nesto was pretending to be, might be forgiven for spotting a bullish inverse head-and-shoulders reversal pattern on the chart. Right? CNBC then went to commercial. When they came back, they sent Nesto out to do the exact same story: the market breached the 200-day moving-average and should plunge any second now.

Was that any way for a journalist to behave? Wouldn’t it have been better practice to say something like: I was expecting the market to drop, but it looks like dip-buyers were waiting to buy at the 200-day? Quite frankly, this looked like another blatant attempt to knock the market down.

In a low-volatility market, CNBC has less of an effect. But in a wild market such as this, CNBC has the power to make large waves, and they are not shy about attempting to do so. However, in this case, the market was dramatically oversold, and the wolfpack attack failed. As a matter of fact, that was the exact low of the day:

The reality appears to have been the exact opposite of what Nesto was trying to sell you. There were no trade-bots programmed to go berserk, but rather a large contingent of dip-buyers lying in wait.

And then CNBC changed tactics.

Jim Cramer came out at 2:36pm with a mission to ignite a short-squeeze. Yesterday, the SPX dropped 5 points as Cramer sowed panic. Today, the SPX rallied 5 points as Cramer ran the squeeze play.

Cramer’s performance today put the lie to his BS from yesterday. On Tuesday, Cramer put on his serious, reasonable, cautious guise to deliver the “LEHMAN CRASH #2 IS COMING!!!” message. He advised CNBC viewers to “be cautious” on the stock market; that is, SELL! SELL!, SELL!

Now, you would think that Mr. Cautious’s advice might be good for more than one day, right? After all, Cramer was posing as a very, very serious financial advisor yesterday. But no, today he totally flip-flopped. If you had a “financial adviser” like this clown, exactly how many seconds would you tolerate him for?

What did Cramer do today? He taunted the bears: If you don’t deliver a Lehman Two within a couple of days, this market is going higher. Do you feel lucky punk? Where’s your big crash? Huh? Huh?

Meanwhile, it was Cramer who threw out the “Lehman Two” meme just the day before!

Cramer and his hedge fund “fans” did indeed squeeze the shorts into the bell. Did they take profits before the close, or will they try to keep the squeeze going into Friday’s options-expiration? Has the CNBC wolfpack returned to its den? I will be paying attention to the editorial comments of the usual suspects on CNBC tomorrow.

Note: During World War II, squadrons of German U-boat submarines were called wolfpacks. So, it’s sort-of ironic that Merkel would use that term.

Wednesday’s Trading – 5/19/2010

When the market is going up, bears who are losing money criticize CNBC for cheerleading the market up. But when the market goes down, they do not thank CNBC for sowing panic. CNBC commentators are just as happy to “pass along” the rumors of short hedge funds as they are long funds.

For example, will any bears send a thank-you note to Jim Cramer for saying that “Lehman Two is coming” while the market was open on Tuesday? Cramer said that at 2:33pm and the SPX immediately dove 5 points while he kept talking, and didn’t bounce until they went to commercial.

And that’s only one example of many of CNBC coming through for the shorts.

In other news, the A/D line on the chart that I posted back here finally cracked on Tuesday.

Hammer Time?

The market formed a bullish hammer candlestick today. Have we seen an important swing low just as we did with the February 5th hammer? I don’t know, but I will be watching to see if the chart develops the same way as it did back then. Here is a 5-minute SPY chart showing the Feb-5 Hammer (click to enlarge):

Look at the blue arrows. Notice how the low point of the hammer morphed into the head of an inverted head-and-shoulders reversal pattern. The test of the left shoulder came at the close of the next trading day, February 8th.

Now let’s look at today’s hammer:

Did we already test the left shoulder in the last hour of trading? Film at 4pm on Tuesday. In any case, the 3:23pm low is likely to be an important level if the market heads back down to it.

If you shorted “into the hole” of today’s hammer, look back at the Feb-5 hammer. Notice that anybody who shorted “into the hole” back there is STILL underwater. Right? They couldn’t get out even even when NYSE market makers pulled their bids in a panic during May 6th’s historic crash!

The moral of the story is that a hammer candle such as today’s is often an important, long-lasting development. However, a powerful bear market could steamroll this candle, so the rest of this week should give us an important glimpse into the character of this market.

Monday’s Trading – 5/17/2010

On Friday, everybody and their mother was repeating the “France will be downgraded” rumor. The market put in its low a few minutes after CNBC itself broadcast the rumor via the mouth of Art Cashin, which you can see a couple of minutes into this video (sorry CNBC took the video down). And with that climax of ultra-bearish sentiment, it is logical to expect the market to make some sort of bounce today – unless there is some real disastrous news as opposed to rumors.

Expanding Economy vs. Sinking Sovereigns

The US economy is expanding while sovereigns in Europe are tottering, and sovereigns in the USA and Japan aren’t in much better shape. The economists say that you never get a bear market while the business cycle is pointed upward. Is this time different? What do you think?

Cast your vote: New Bear Market, or No New Bear Market.

Friday’s Trading – 5/14/2010

Gap Drama
If Monday’s giant gap is to be filled, the XLF and SMH may be the vanguard since both of them closed below Wednesday morning’s up-gaps. SPY, QQQQ, and IYT all successfully tested and held their Wednesday up-gaps, so that is still a support level for them. And the bulls should pin their hopes upon the IWM which didn’t even come close to testing its Wednesday up-gap. Will the financials drag the market down? Or will the small-caps hold it up? Film at 4pm.

Detroit R.F.D.
No Enumerators are needed in Detroit. No need to count ghosts for the census, right? And even the ghosts will soon be homeless as the great Demolition of Detroit gets underway and tears down their haunts. Look at this quote from the Wall Street Journal:

“Mayor Dave Bing has pledged to knock down 10,000 structures in his first term…”

Some of the cleared land will be used for farming. Under NAFTA, they will be able to export their crops to Mexico tariff-free. Isn’t that great? Of course, if NAFTA hadn’t sent all the factory jobs down to Mexico in the first place, Detroit wouldn’t need to return to rural status now would it?

Thursday’s Trading – 5/13/2010

Enumerators Beware
Crazy people don’t like being “enumerated” and are prone to attack census workers. The story also sez that an army of 600,000 Enumerators has begun work. This will be a nice stimulus for the economy when they get their first paychecks. Joe Sixpack finally has a job. To celebrate, he will by some extra beer. The liquor store owner will spend his extra profits on lap dances at the strip club. The stripper will spend her money “wisely” – on shoes, of course. The shoe store owner will order more stock from the factory – in China. The Chinese slave children will spend their extra wages on Marlboros and Pepsi, and the grand cycle of the global economy will be complete.

Wednesday’s Trading – 5/12/2010

The SPX rallied about 25 points from yesterday morning’s down-gap to its afternoon peak. It topped out when Gorden Brown came on TV and resigned. Of course, the market knew that Brown would be resigning, but the market rolled over at that point because the shorts were simply waiting for it to fire their cannons. It was a beautifully timed play, and they erased the rally, but weren’t able to crack the market.

And due to the ridiculously extreme breadth levels from Monday, a mostly-flat Tuesday has to be scored as a win for the bulls who can claim that they were just consolidating Monday’s gains. However, breadth is still pretty stretched to the upside, so the bears may be able to use that overbought condition to retain the initiative today. In order to win the day, they have to at least close the SPX below Monday’s low of 1147.24.