VIX Buy Signal

The VIX closed above its upper Bollinger Band on the daily chart Tuesday, and that’s a pretty good buy signal:

The last such signal was on November 16th, and was good for a 20-point SPX rally. The SPX did indeed print a Gravestone Doji for November on the monthly chart, but that doesn’t preclude a little bounce here. While this VIX signal has a good track record, an intensification of the financial panic in Europe could easily blast the VIX higher.

China’s PMI surprised to the upside Tuesday night, but the futures didn’t bounce very much until three hours after that. So, perhaps it won’t be a catalyst for the SPX on Wednesday. Jobs Fever will be taking hold now, and the estimate for Friday’s big report is +168,000 jobs. If the number does come in strong, I will be interested to see if the market can steamroll the November Gravestone Doji or not.

Bulls Staring Down the Barrel of Gravestone Doji

If the bulls can’t rally the market up today, they will be stuck with a bearish Gravestone Doji candlestick on the monthly chart (black arrow). The last one in April (purple arrow) was a bad omen indeed:

The April gravestone was caused by the European crisis, and you could say that this one is too. And if the Germans are slaughtering the PIIGS to drive the u-rue down, and spike their exports up, well then, one could be forgiven for expecting more mayhem from across the pond, no?

Even Our Skyscrapers Are Made in China

Donald Trump says that most of our building materials now come from China. So now even our buildings are made in China and merely assembled here.

Donald Trump wants to smash both OPEC and the global sweatshop cartel. An ace negotiator and businessman is exactly the kind of leader that we need in the White House in 2012. Trump will re-negotiate our trade agreements so that they actually benefit Americans. Here is Trump talking with Greta Van Susteren:

IWM Weekly Golden Cross Spells Doom

A golden cross is supposed to be good news, and on the weekly chart IWM’s 50-week average (red line on chart) has crossed above the 200-week average (blue line). Click chart to enlarge:

So, “what’s the problem,” you ask? Well, this type of cross is very rare. In fact, this is the only one since the IWM was invented ten years ago. To see more, we have to go to the long-term Russell 2000 chart:

Now, let’s take a closer look at those two crosses. First, the one in January 2004:

After making the cross, the market corrected until the middle of August! Things worked out a little bit better after the September 1991 cross, but the market still went sideways for three months:

The moral of the story is that it takes a lot of work for the market to make a Golden Cross on the weekly chart. And an extended period of consolidation shouldn’t come as a surprise.

iPad Pollution

Does you iPad produce more pollution than your car? Maybe. While there is no exhaust pipe coming out of your iPad, it is made in a Chinese factory using electricity from pollution-belching power plants. And it travels across the ocean in a cargo ship that produces absurd amounts pollution. The 15 largest cargo ships produce more pollution than all the cars on the planet combined!

A study of just how much damage an iPad inflicts upon the planet would be a good project for one of you environmentalist types.

And this is just another reason why the factories should be brought home: off-shoring is speeding up the demise of planet Earth. All of the “green technology” BS that we are pursuing here is a joke compared to the Chinese death star.

Here is an article on container-ship pollution.

US Navy vs. China Showdown

The USS George Washington aircraft carrier is scheduled to participate in military exercises with South Korea in the Yellow Sea on Sunday in a show of force after North Korea’s attack on South Korea this week. The carrier was scheduled for similar exercises in July after North Korea torpedoed a South Korean naval vessel. However, China demanded that the carrier stay out of their “exclusive economic zone” and the exercises were moved to the eastern side of the Korean Peninsula in the Sea of Japan.

And the Chinese are protesting again. Will the US Navy blink this time? Film at 11 on Sunday.

The Navy says they are going to the Yellow Sea, and this time I suspect that they will defy Beijing. China has done little to reign in its demented protégé, so perhaps a message needs to be sent on that topic. The George Washington also paid a visit to Vietnam in August, and that may have been a message to Beijing also. The Chinese claim all of the South China Sea.

There’s no law that says that China must be a political ally of the USA. As a sovereign nation, they can support our enemies in countries like North Korea and Iran. But why, may I ask, does this non-ally get unrestricted access to our market? Iran has no such privilege, and neither does North Korea.

QE2 Dollars Stuffed into PBOC Mattress

Like a giant demented chipmunk stuffing its furry cheeks with acorns, China continues to squirrel away the Fed’s stimulus dollars. “Don’t Fight the Fed” you say? Well, what the Fed giveth, the PBOC taketh away.

The dollar has strengthened since the first QE2 dollars were injected into the market on November 12th.

When people study the velocity of money, they only look at bank lending. Are the banks just sitting on their reserves? But what about the Mercantilist reserves? $5.5 trillion strong, according to Dr. Bernanke. Should that not be considered when analyzing velocity?

I see a lot of nattering about the dollar losing its “reserve currency” status. If I have time, I will address that topic further, but I ask you this: Is China merely holding its $2.6 trillion dollars in reserve in order to facilitate commerce and save for a rainy day?

Don’t be ridiculous. Mercantilist nations hold dollars as a strategic economic weapon. And it has grown to such a scale that you could say that they are imposing deflation upon the USA.

Mr. Hu, Tear Down This Currency Wall!

Paramount Leader Hu, if you seek to relieve your people’s hunger, turn off the yuan printing presses. Let your currency rise against the dollar. Let your people buy more food from American farmers.

Here is a story about food inflation in China. Can you imagine spending 50% of your income on food alone?

People are blaming QE2 for raising food prices. But if China allowed its currency to be set by market forces, the yuan would rise against the tide of fresh QE2 dollars, and all imports from the USA would fall in price. As a matter of fact, you could say that the USA is trying to lower food prices for the Chinese people, but are being thwarted by the Chinese government that is buying up all the QE2 dollars in the foreign-exchange market to prevent the yuan from strengthening as it should.

The increased productivity of the Chinese people should be rewarded with a higher standard of living. But instead, the regime in Beijing is literally starving its people. And Tea Party members here in the USA think they have it rough!

China prints money at almost quadruple the rate of the Fed. See the chart here.

China Sweatshop Cartel Calls for Bernanke’s Head

Let the record show that CNBC did not kick off the “Bernanke Should Resign” campaign after QE2 was announced. Or after it went into operation. But only after Bernanke made his historic “China Speech“. CNBC’s opposition to the Fed is all about keeping the sweatshops in China humming, even if at the expense of deflation in the USA.

Bernanke’s speech was on Friday morning. The resignation suggestion wasn’t delivered by Gary “Kowtow” Kaminsky until seven hours later. At 6:05 into CNBC’s “Strategy Session” show below, you can see Kaminsky say:

“Let’s say the Fed was a public company. The CEO is Bernanke. Bad communication, his shareholders not necessarily following through on what he’s saying. Is there any chance – I mean he’s just reappointed – is there any chance that Bernanke, as a result of the bad communication strategy, the uncertainty, is there any chance that he’s going to just decide that he’s had enough, and would that be unprecedented for a Federal Reserve Chairman to just say: ‘I’m going to retire’?”

Regardless of what you think about Fed policy, Ben Bernanke is now the Atlas of American sovereignty. I pray that he does not shrug, and continues to make policy based on what is good for the USA, rather than communist China and the jobs-exporting multinationals.

Only two more years until Donaldus Magnus is elected President! Hang in there Ben!

Market Closes Higher After Bernanke Speech?

You would think that stocks would do badly after the Fed Chairman gave a speech calling into question our economic relationship with China. But they didn’t; the SPX closed up a few points on Friday.

Could it be that American companies will do well in a trade-war environment? Maybe so. Consider this quote from Richard McCormack:

“The Chinese government owns most of the shares of the major steel producers. It is involved in making the business decisions within virtually all of China’s major steel companies.”

McCormack’s article details the unfair competition that our steel companies face. If Chinese companies were made to compete according to World Trade Organization rules, one might indeed expect some good things to happen.

And Now, an Anti-Semitic Message from Ron Paul’s Puppetmaster

Did you know that the “S” in Ben S. Bernanke stands for “Shalom”? Did you know that Bernanke is Jewish? Well, Ron Paul’s speech writer, Gary North is here to make sure that you do. Look down at the bottom of this article (sorry, they have taken the article down), and you will see a gratuitous reference to Bernanke’s middle name.

When I said that Bernanke should watch out for snipers; I wasn’t joking. And I’m sure that it will get much uglier than this nasty little attack from Mr. North.

Did you ever wonder how all of those crazy ideas get into Ron Paul’s empty skull? They are written for him by Gary North. Who is Gary North? He is what I call a “Fed Stalker” because 99% of what he writes is criticism of the Fed. There’s nothing wrong with criticizing the Fed, of course. But when it consumes your every waking moment, then there might be a problem.

In the same article, you can see North lauding Asian mercantilism, or as he calls it: “the export-driven Asian miracle”. This is just another example of the rampant, kowtowing-to-Beijing, anti-Americanism with which this country is riddled. Revolting. The process of transferring factories to Asia is hardly miraculous. And neither is the resulting mass unemployment here. Our free-trade policy is why we have 42 million people on food stamps. The Fed has been trying to cope, but it has no jurisdiction over the real problem: moronic libertarian-inspired trade policy.

North also thinks that China can harm us by selling their treasury bond holdings, which shows that he doesn’t understand how the Chinese make their mercantilism go. The Chinese buy massive amounts of dollars and dollar-denominated assets to manipulate their currency downward and keep exports high. As soon as they stop that, the yuan rises against the dollar, export industries lose huge amounts of market-share, and the so-called “miracle” turns into a bloody revolution.

Trump in ’12! He will re-negotiate our trade polices, and deliver an “American Miracle”.

Bernanke’s Historic Speech

Federal Reserve Bank Chairman Ben S. Bernanke’s speech in Frankfurt today will be cited by historians as one of the landmark events responsible for the rejuvenation of the US economy. The Fed is now on the record citing the damage being done to the US economy by Chinese currency manipulation.

If you have been following this blog, then you know the issues at hand. But I recommend reading Bernanke’s speech because it is far more scholarly than anything that I could write.

Fed Chairmen are famous for giving boring, impenetrable speeches, but this one is different. While Bernanke is discussing advanced international-trade economics, the speech is very readable and purposeful. Of course, no Fed Chairman can write like a blogger, so this is how Bernanke called on China to relinquish its currency peg (in the last paragraph):

“…the countries of the world must recognize their collective responsibility for bringing about the rebalancing required to preserve global economic stability and prosperity.”

In the future, I would be very interested to hear about what might be done if China refuses to let market forces set the value of its currency. Specifically, I would like to know if there is anything that the Fed itself could do given its regulatory powers.

Trump For President!

On November 7, 2010, I wrote in “Global Economy R.I.P“:

“Which politician wants to overthrow the multinational regime, return prosperity to the USA, and be the next Ronald Reagan? The opportunity is there.”

And today, the next Ronald Reagan has stepped forward: Donald J. Trump, or as I dubbed him back in April: Donaldus Magnus.

Finally, a politician that gets it.

See the interview that the Great Man gave to George Stephanopoulos today.

In the interview, Trump says that we hold the cards in our trade relationship with China. And that is dead on. We have the largest consumer market in the world, and that is our “Trump Card”, so to speak. Without access to the Chinese market, our companies would lose some business, no doubt. But without access to our market China would be d-e-a-d.

Here is a quote from Trump that Stephanopoulos reported:

“When you have billions in dollars in deficits with a country, those are the trade wars I like. You don’t have to do business with China. You don’t have to do business with other countries.”

What I love about this is that it shows that Trump would not go to some G-20 meeting and beg smaller countries for better terms-of-trade. He would just declare trade war upon them and fight to win. Now that’s the no-nonsense kind of generalship that we need!

And Trump is so right: If we have a gigantic trade deficit with a country, we come out ahead if there is a cessation of all trade. It truly is a war that we cannot lose. Ronald Reagan roughed-up the Japanese during the 1980s and the world didn’t end. As a matter of fact, the 1980’s were far more prosperous than the previous decade. I can’t wait to see President Trump put the smack down on those Chinese mercantilists!

Note to mercantilists: Look in the mirror. See that red dot on your forehead? That’s President Trump drawing a bead on you!

Bernanke Defies Beijing

Ben Bernanke met with the Senate Banking Committee today, and he is apparently irate over the comments China has made about QE2. I couldn’t find a news story with Bernanke’s remarks, but Senator Judd Gregg gives a report at the beginning of this video:

Thank god that there is still somebody in the US government that doesn’t take their marching orders from the communist regime in Beijing.

But that isn’t going to be good enough because Beijing is still thwarting the Fed.

On November 3rd, I wrote about QE2:

“And don’t worry about the inflation either. If the Fed injects $75 billion per month for the next 8 months, the Chinese will purchase $75 billion in the foreign-exchange market each month to maintain their currency peg. It’s not a big deal. After all, the Chinese have already sequestered $2.65 trillion. They will print yuan to purchase the dollars, and the stimulus/inflation will occur in China rather than the USA.”

And what has happened since then? The Chinese reported a jump in inflation to 4.4%, and the USA reported a record low 0.6% annual rate for “core CPI” inflation. (Take that Nostradamus!)

So, while the Fed is defying Beijing and still trying to stave off a deflationary “Lost Decade” here in the USA, the Chinese continue to withdraw the Fed’s stimulus dollars. If the Chinese are able to tip the slow-growing US economy back into recession, then Obama doesn’t stand a chance in 2012. And the new Republican majority in the House of Representatives may not fare so well either as another anti-incumbent tidal wave hits.

Asian Mercantilism Tops Out

On Sunday, I launched a “China is doomed meme”:

“China has built an export machine geared to selling to Americans while simultaneously taking their jobs, and it cannot last. You should ditch your Chinese investments and come back to the American side.”

Two days later, the meme appeared on CNBC, with value added by Lee Munson. At 4:56 into the video below, you can see Munson say:

“I would really caution anybody who wants to dump money into China. Because China’s shores are littered with export-driven factories, and entire cities and provinces. We’re the buyers of that and it’s an unsustainable environment. … I would stick right here in the United States of America.”

Think of China as a leech which has grown fat sucking the blood of the American middle class. Either the host will die, taking the leech with it, or the host will swat the leech away splattering blood everywhere. 42 million Americans on food stamps is hard evidence that the host is dying. The only question is, will it swat the leech before expiring?

I don’t know when a currency revaluation and/or tariffs will be put on China, but something has to give soon. And I think it is apparent that the golden age of Asian mercantilism has reached its zenith.

The Issue that Will Sink the Republicans in 2012: Sovereignty

Larry Kudlow is looking forward to the 2012 presidential campaign being fought over the strength of the US dollar. But if the Republicans aren’t careful, things could easily turn ugly as they did in the video below. At the 8:15 mark, former Dallas Fed President, Bob McTeer says that it isn’t the Fed’s problem if the Chinese peg their currency to ours. Then Kudlow and Andy Bush go nuts:

Kudlow and Bush banged their shoes on the table, Khrushchev style, and demanded that the Fed make policy to suit China.

I am astonished at how foolish these Republicans are. Sovereignty is the issue to end all issues. The Democrats can have a field day with this.

But that’s only politics.

What’s truly frightening is that we now have a major political party openly advocating surrender to a foreign power. Will we even have elections in 2012? Or will we be following a five-year plan written in Beijing?

Monday’s Trading – 11/15/2010

The McClellan Oscillator is very washed out. The last time that it spiked this low was on August 24th, after which the market went sideways for a few days before beginning the September rally. Of course, washed-out breadth isn’t a guarantee that the market won’t keep falling. If we get a powerful catalyst, like higher-than-usual chaos and panic Europe, the market could continue to fall

Beijing’s Fifth Column

After I explained how QE2 would harm China back on October 16th, all hell has broken loose. I have to say that I’m shocked and appalled at how many Americans have taken the Chinese side. These people think that US policy should be made in accordance with guidelines issued by Beijing. The USA hasn’t seen anything like this since the Cold War when left-wingers sided with the Soviet Red Menace.

And real damage is being done. Dr. Peter Morici thinks that Chinese mercantilism has subtracted 1% from US GDP per year for ten years, and that our economy would be $1 trillion larger today if not for that drain. Peter Navarro thinks this has cost us 20 million jobs.

Note to Beijing’s American cat’s paws: 42 million Americans on food stamps guarantees that there will be a rumble with China over trade. And China will lose. As fabulous as you think that the communist regime in Beijing is, they are courting disaster. They have built an export machine geared to selling to Americans while simultaneously taking their jobs, and it cannot last. You should ditch your Chinese investments and come back to the American side. The Beijing knuckleheads look like they are willing to throw down with Uncle Sam, and this is how the Chinese economy will fare:

In this video you can see Dr. Morici doing battle with a couple of quislings:

Can you believe that Zach “Quisling” Karabell argues that China doesn’t manipulate its currency? China spends 10% of GDP buying dollars in the foreign exchange market to keep the yuan weak. That is the most blatant and astounding currency manipulation in history!