Stock Charts: The Market Does Almost Nothing

 $SPX 15 Minute: The market did very little that was exciting today. Just grinding sideways most of the day and finished lower. Price looks like we need to test the uptrend line but since there's nothing terribly bearish, another push higher is very likely on this leg up.

$SPX 60 Minute:  The market is stalling at resistance and the MACD is pushing lower.  Again, a test of the uptrend line seems like the next little move.

$SPX Daily:  No change, still stuck on the mid channel line.

 

My Watch List: It's still challenging to find charts I'm really excited about as potential trading ideas.


GOLD:  Big thrust on this stock with divergences on the RSI and MACD.  It gapped higher and pushed above the down trend line and the upper BB.  Price support seems logical and maybe the 200 day MA.

AMZN:  Price continued to grind higher just above the upper BB.

LPTH:  This might be a little flag pattern, but it's such a small cap. stock it's definitely an aggressive trade.

FSII:  Today's candlestick had a tail, so maybe we have a little higher to go and test resistance.

From My Trading Desk:  Today we scalped a gain on LPTH.  We bought it, it moved higher but couldn't hold it's gain so we took our gain off the table.  We took a 1/4 long on GOLD.

Today was month and quarter end window dressing, so I might keep it light for a day or two and see if anything interesting unfolds.

Happy Trading.

J.D. Rosendahl, Rosey

The Bubble State Blues: CA Hooked on "Aid" Like a Junkie!

The State with the biggest deficit received massive federal aid last year, but will that dry up and extend The Bubble State blues:  Feds gave California $120.7 billion in aid last year

The federal government gave California's state government $120.7 billion in the 2009-10 fiscal year to underwrite education, health services, welfare grants and dozens of other programs, a very detailed new report from the state auditor's office reveals.

More than a sixth of the money - $23 billion - may have been a one-time injection of funds, however, because it came from the American Recovery and Reinvestment Act of 2009, otherwise known as "stimulus." Those funds eased the state's budget crisis, especially in education finance, and their disappearance has exacerbated the current budget deficit.

Education was the largest single category of federal aid to the state during the year at $42 billion, followed by $38.7 billion for health and welfare services. One of the factors in the Capitol's current budget wrangle is how much the state can cut health and welfare spending without running afoul of federal requirements.

Overall, the federal payments to California involve more than 350 specific programs or "program clusters." The auditor's report, required by the federal government, not only lists the specific amounts for each but describes how the money is to be spent.

The report, however, does not delve into direct federal expenditures in California for Social Security, defense contracts, military bases, public works and other programs, which are roughly equal to the funds it sends to the state. California politicians have complained for years that the state receives a relatively small return of the tax payments that Californians and California corporations pay to Washington.

The government has been rolling out free cheese in abundance the past couple of years in many ways, and one of the biggest mice in the maze is The Bubble State.  $120 billion is a significant amount of money, especially compared to their budget deficit last year of $19 billion. 

You can image how big that deficit would have been had the federal government not bailed out The Bubble State.  Yes, I said bailed out because that's exactly what it represents!  CA is too big to fail and no one in Washington wants to admit it or use that phrase!.

Since the majority of state expenses are payroll and benefits, then the bailout went to support union wages and benefits and kept CA from laying off thousands of state workers and/or changing the way union members and retirees are paid.

This year's deficit is $25 billion and Gov. Brown and the State GOP have failed to come to an agreement to balance the budget:  Jerry Brown ends talks on bipartisan budget deal

The governor, who needs four GOP votes to place a tax extension on the June ballot, says Republicans are unwilling to back tax extensions and are asking for an 'ever-changing list of collateral demands.'

With voter approved tax extensions Gov. Brown will only cut the deficit in half via spending cuts and layoffs and the other half roughly comes from tax extensions. 

If he can't extend so called temporary taxes then the cuts and layoffs will essentially need to double.  Either way, The Bubble State is facing huge layoffs and cuts, and right on top of cities and counties within the state doing the very same thing.


The Bubble State Blues

The State of California is hooked like a crack addict on over spending mostly on muni payroll that is too high and retirement benefits that are the most lucrative on the planet.  Federal aid in the recent past has only served to enable the State's addiction mentality, as tough choices have not occurred and we continue with over pay and benefits for public union workers.

The Bubble State is in a big pinch, without government aid and/or higher taxes, big cuts and layoffs are coming to a state that already has an unemployment rate over 12%.  Big state plus local cuts should create a spiralling impact or economic drag within CA, and state and local municipalities will face deficits next year and the the year after and will be forced to make further cuts.

Why?  We still don't have a political system dealing with long term structural issues with long term solutions.  It's been band aids and gimmicks coupled with solving issues one year at a time.  Why?  Because public unions control what is for the most part a State political system mostly controlled by democrats who serve public unions and not the public's best interest, and they do not want a functional solution to the issues at hand.

I doubt the amount of money coming to CA will get completely shut off all at once because that would sink the state with a budget too big to deal with, but if the amont of aid comes down over the next several years which seems likely, then the State is almost gauanrteed to have deficits in each of the next few years.  The Bubble State blues might continue for several years.

Hope all is well.

J.D. Rosendahl, Rosey

Stock Charts: Stocks Rally on Expected Job Hires!

$SPX 15 Minute:  The market now has clear upper and lower trend lines on the intraday advance.  As suggested yesterday, I was looking for another push higher with another divergence on this time frame.  We got that today.  The market still might have one more little push higher even if the next move is lower tomorrow suggested by the MACD turning down.  If we get below the 1st gap in blue and the uptrend line then maybe this move up the past couple weeks is finished.

$SPX 60 Minute:  On this time frame I'm spit balling what might be taking place if we are ready for a little pull back.  I highly doubt the recently super bearish view of the Feb 2011 high is The Top.  Today's advance pretty much put a nail in that view and even though we could get more corrective behavior, it's likely we need the market to make new highs on this run up from the March 2009 low.  So, I've drawn in an inverse H&S pattern as a possible completion to this corrective behavior.  Nothing I'm trading because it's to early.

$SPX Daily:  Market pushes past the mid channel line but held at the first resistance line in blue.  Do we push higher or not?  We should know soon.

$INDU:  I have the Dow Jones up and I've drawn in a couple of potential price structures.  In green is the bullish view and in red is the bearish view.  The bearish view would be a wave C to finish a flat pattern.  Nothing I'm trading here, just trying to visualize options.

IBM:  Price it testing the prior uptrend line in blue.  There's still nothing overly bearish in this chart.

$VIX:  Still haven't closed that little gap in blue.

JNK:  This is trying to push higher once again.  Price consolidated for several days on the Mid BB line and price and the RSI are trying to turn higher.

$CPC EMA 5 Daily:  We finally have the bears getting off the put trade and this indicator is falling.  Are we getting closer to a market top? 

My Watch List:  I have a couple of ideas because I just don't see patterns and structure I like.  Hence the reason I'm heavy cash.

AMZN:  A very nice break above the upper BB with the MACD heading higher.  We sold ours today because it's well above the upper BB.  Both the RSI and MACD could support higher price.  I want to see if it pauses for a day to let the upper BB catch up and what the market does tomorrow. 

REDF:  We took our gain early in the day on this one before it rolled over.  The BBs are still widening, so if it's still bullish price should head higher in the next couple days.  I want to see it before we re-enter into this one.

From My Trading Desk:  During the first half hour I sold all my longs, the full position on REDF and RDC, and a half position on AMZN.  RDC was a small gain, AMZN was a nice gain, and REDF at $8.20 was a big one day gain of 7.5%.  I tried one additional buy on REE but sold it 30 minutes later for a tiny loss.  All in all, good gains and risk management.

I don't know why, but I'm being extremely particular in what I'm trading, and that's why I don't have many charts on the watch list.  And I'm keeping my duration short because I'm just not buying this rally.  I could be dead wrong on that, but as long as I'm making gains with reduced risk, I can live with that all day.

Happy Trading.

J.D. Rosendahl, Rosey

Obama's HAMP, the Big Dud: Foreclosure Aid Fell Short, and Is Fading

HAMP has to be one of the worst pieces of the Obama Agenda and like most politicians they fail to take ownership over their failures.  Recently:  Foreclosure Aid Fell Short, and Is Fading

Last summer, as President Obama’s premier plan to save millions of Americans from foreclosure foundered, the administration tossed a new life preserver to homeowners.

Officials unveiled a $1 billion program to offer loans to help the jobless pay their mortgages until they could find work again. It was supposed to take effect before the end of the year, but as of today, the program has yet to accept any applications.

“We wait and wait, and they keep saying it’s coming,” said James Tyson, 50, a Philadelphia homeowner who lost his job a year ago.

That could be an epitaph for the administration’s broader foreclosure prevention effort, as tens of billions of dollars remain unspent and hundreds of thousands of homeowners have been rejected. Now the existence of the main program, the Home Assistance Modification Program, is in doubt.

Saying it is a waste of money, the Republican-controlled House voted on Tuesday night to kill the foreclosure relief program. The Senate, which the Democrats control, will pursue a rescue. But Democrats, too, consider the program badly flawed.

The effort has failed to stanch a wave of foreclosures and a decline in home prices, which have fallen for six consecutive months and are now just barely above their recession low, according to a key index updated on Tuesday. All of this threatens the fragile economy, which is also being buffeted by foreign crises.

“The banking industry fought us tooth and nail, and we ended up with a program that is failing homeowners,” said Representative Zoe Lofgren, a Democrat from California. “The administration doesn’t give us real enforcement or answers; we just get the old yokey-doke.”

Yet the need remains great. There were 225,000 foreclosure filings in February, according to RealtyTrac. About 145,000 homeowners are in trial modifications under the Obama program. An examination of federal documents and lawsuits, and interviews with legislators, state attorneys general, housing counselors, homeowners and regulators, reveal a federal mortgage modification program crippled by weak oversight, conflicts of interest, mind-numbing complexity and poor performance by many participating banks.

For example:

1)  Congress set aside $50 billion for foreclosure prevention, amid administration projections that three million to four million homeowners would benefit from modifications. So far, the Treasury Department, which oversees the program, has spent slightly more than $1 billion, and just 607,000 homeowners have received permanent loan modifications (of those, 11 percent have defaulted).

2)  The companies that service mortgages, typically large banks, continually lose homeowner paperwork and incorrectly tell homeowners that they must be delinquent to qualify.

3)  Treasury officials have not fined any servicers, and the government-controlled company hired by the Treasury to oversee the program has expressed reluctance to crack down on banks.

Interviews with a dozen homeowner applicants in four states reveal a familiar pattern: Banks deny many who, by income and credit scores, appear to qualify. And homeowners end up weighed down by legal fees and facing foreclosure.

“I call constantly, they lose all my paperwork, and the same guy never gets on the phone,” said Ada Caceres, 53, who owns a modest home in Staten Island.

Ms. Caceres has struggled to make mortgage payments since her hours as a bartender were cut. She applied for relief, and her bank, JPMorgan Chase, twice granted temporary modifications. She made every payment.

Last August, Chase promised a permanent modification. Then it rescinded the offer, documents show.

“I love my house,” said Ms. Caceres, who is still negotiating. “It’s a good neighborhood. But oh my God, you want to just give up.”

Homeowners can appeal denials, but the odds are not in their favor, says the program’s inspector general. A first step is a hot line providing counseling, from an agency created by mortgage servicers.

Treasury officials argue that the mortgage program has kept more than half a million American homeowners out of foreclosure and has pressured banks to offer in-house modifications. These private modifications, however, typically offer terms significantly less favorable to homeowners than what the government program offers.

Michael S. Barr, who was a top Treasury official involved with the program, says the Obama administration sought to help homeowners and encourage banks even as it protected taxpayers.

 
I'm sorry for those who have lost their job, but giving someone money, that's in addition to extended unemployment benefits, to keep their house until they find a job is just too much.  Why not make their auto loan payments so they keep their car, is it not an necessity too?

There are no guarantees in life, and there's noting wrong with becoming a renter! 

Put together in a frantic panic to do something to protect homeowners, HAMP is nothing short of a joke.  Poorly conceived and politically abandon by the White House, this Big Dud should be killed and put to rest. 
 
The White House fails to take ownership over this Big Dud!  Like the tax credits to buy homes last year, the Obama agenda keeps building the same message:  Something for nothing!
 
Hope all is well.
 
J.D. Rosendahl, Rosey

Stock Charts: The Market Pushing Higher Towards Resistance

$SPX 15 Minute:  Today's price move keeps the up trend the past several days in place.  I'm looking for the market to test resistance in black while building another divergence on the MACD.

$SPX 60 Minute:  If we are going higher to test resistance I'm looking for the MACD to back test itself and create a little divergence.

$SPX Daily:  Price is trying to push above the mid channel line and the RSI and MACD have room to support much higher pricing.  Will the daily time frame bull doze the intraday time frames in Time Frame Indifference?  We should know soon.

IBM:  Price pushing higher and nothing looks bearish at all on Big Blue.

$VIX:  Straight down the past couple weeks.  Do we need to retest major support? 

My Watch List:

RDC:  A couple of nice up days and price is ready for a new high.  MACD is about to turn up to support that outcome.

HAL:  Still pushing higher in the channel.  We probably need at least another high, and maybe this one creates a divergence!

REDF:  Nice up day on good volume today.  BBs still widening.  Above minor resistance in black adds to the bullish view.

FSII:  The stock took the day off.  If we are going higher it should happen soon otherwise maybe a little consolidation phase.

My Trading Desk:  Today we sold a fractional long on BAC for a loss.  It just wasn't working and time to exit.  We bought a full long on REDF and RDC.

Happy Trading.

J.D. Rosendahl, Rosey

Wage Deflation Alert: Forget About a Raise; More Consumers Expecting Paycut

Often over the past couple years I've written about one of my per topics:  Wage Deflation.  It and real deflation are the two key components of deflation.  We've already seen wage deflation in the real estate related industries:  Contractors, subcontractors, their employees, mortgage brokers, and real estate brokers, all for the most part are making less than they used to. 

Today, an interesting poll was released:  Forget About a Raise; More Consumers Expecting Paycut

More Americans expect their salaries to be cut soon, reversing a steady decline in the number of workers who fear pay cuts, according to a March survey. Adding insult to injury, those same consumers expect to take a bigger hit on expenses because of rising inflation.

The percentage of Americans who expect a decrease in their income over the next six months ticked back higher to 15.3 percent in March, up from 13 percent in February, which had been the best reading of wage confidence since 2008, according to fresh survey data from the Conference Board.

The next general area where we will see wage deflation is in the world of municipal employees where cash strapped cities, counties, and states need to pay their people less to make budgets work. 

The second arena is in the world of banking.  Since there is very little organic growth, we should continue to see banks closed by the FDIC and merged into healthy banks, or banks merging on their own.  As we consolidate banking, the supply of bankers should make pay or compensation weak.  The industry might take some time before we get to wage deflation.

The increase in the number of people expecting a salary cut probably correlates with today's decline in consumer confidence.  The two seem to go hand in hand, and it will be interesting to see if these data points continue to worsen and how that impacts consumer spending in the near future.

Hope all is well.

J.D. Rosendahl, Rosey

Critical Mass Update: Home Prices Falling in Most Major US Cities: Case-Shiller

Some real estate has fallen to eleven year lows! 19 out of the 20 markets heading lower!

Home Prices Falling in Most Major US Cities: Case-Shiller

Home prices are falling in most major U.S. cities, and the average prices in four of them are at their lowest point in 11 years.

The Standard & Poor's/Case-Shiller 20-city index shows price declines in 19 cities from December to January. Eleven of them are at their lowest level since the housing bust.

Home values in Atlanta, Las Vegas, Detroit and Cleveland are now below January 2000 levels.

The only market where prices rose was Washington, where homes prices gained 0.1 percent month over month. The nation's capital has outperformed every other city in the index. Prices there are up 3.6 percent year over year.

The data coming out on real estate is still anything but positive.  Prices heading down and across the board.  There still seems to be too much uncertainty clouding the real estate market:

1.  We have slack demand, supply, supply, supply, and shadow inventory.  The Main Street economy is still not growing fast enough to provide jobs.

2.  A foreclosure process and nightmare no where near resolved and tightening lending standards.

3.  We are heading right for municipal budget resolution this summer, which almost guarantees layoffs, salary cuts, elimination of services, and/or higher taxes.  None of which are good for incomes nor real estate affordability.

If something doesn't change the dynamics behind real estate we could easily push the U.S. closer to Critical Mass later this year or next.

Hope all is well. 

J.D. Rosendahl, Rosey

Stock Charts: Nothing Exiting Today

$SPX 15 Minute:  Price rolled over a little towards the end of the day.  We look like we want to test that lower channel line but nothing significant has developed yet.

$SPX 60 Minute:  Price looks like it wants to back test that down trend line in blue and the MACD turning down supports that.  And again nothing significant has developed yet.

$SPX Daily:  Price stalled today right at the mid channel line and stuck in No Man's Land.

My Watch list:  I have one chart I like.  I'm keeping the list short because I still want to see more pricing data unfold and ideally uncover some opportunities.

FSII:  Stock still pushing higher with widening BBs and the RSI has room to support a test of resistance.  Declining volume is the only concern.

From My Trading Desk:  Today we made no trades.  I'm waiting for Mr. Market to do something to uncover the next trading idea.

Happy Trading.

J.D. Rosendahl, Rosey

Caterpillar Versus Gov Pat Quinn

The CEO of Caterpillar sends an interesting letter to Gov. Pat Quinn:  Caterpillar CEO Warns of Discomfort with Illinois

The chief executive of Caterpillar has warned the governor of Illinois that state spending and an unfavorable business climate could undermine the competitiveness of Illinois-based companies.

Doug Oberhelman sent the letter last week to Gov. Pat Quinn, noting that four states have invited the Peoria-based heavy equipment maker to relocate since Illinois raised personal and corporate income taxes in January.

"I want to stay here. But as the leader of this business, I have to do what's right for Caterpillar [CAT.N 109.83 0.74 (+0.68%) ] when making decisions about where to invest," Oberhelman wrote in the letter obtained Friday by the Springfield news bureau of Lee Enterprises.

Oberhelman attached letters from the governors or other officials of Texas, Nebraska, Virginia and South Dakota, all of whom cited the recent Illinois tax hikes and offered to roll out the red carpet to Caterpillar.

Caterpillar spokesman Jim Dugan declined to provide a copy of Oberhelman's letter, but said it was not a threat to abandon Illinois — where Caterpillar employs 23,000 of its 104,000 global employees.

"The letter really wasn't about Caterpillar, but about the state of the state, and our concern about deficit spending and the need to get the state on firmer footing," Dugan said.

Dugan said Oberhelman's letter to Quinn did not specifically refer to the recent tax increases.

"It referred to the need for broader reform, and that can and should include tax structure as well as spending structure." With Illinois facing a potential $15 billion budget gap, the state legislature passed a bill in mid-January that would raise personal income taxes to 5 percent from 3 percent and the corporate tax rate to 7 percent from 4.8 percent.

The four-year tax increase was accompanied by spending limits through fiscal 2015 in the country's fifth most populous state.

This is just one of the problems with states trying to raise taxes.  If they all do not raise taxes together it creates an incentive for businesses to move to other states who hold their tax rates lower.  It allows a corporation and their employees to make more net income by moving to another state.

What Gov. Pat Quinn has failed to realize is what if anything is the State of Illinois doing for Caterpillar?  Probably not much. 

Therefore, Gov. Pat Quinn has provided an incentive for many business owners to relocate to other states to take advantage of lower taxes on their business and employees.

Does Caterpillar need to be headquartered in Illinois?  Probably not!  The same holds true for many smaller companies in Illinois!

Hope all is well.

J.D. Rosendahl, Rosey

Reader's Questions and Comments: Banker's Corner: If Big Banks Raise Fees, Bank Elsewhere: Rep. Frank

Recently, I wrote:  Banker's Corner: If Big Banks Raise Fees, Bank Elsewhere: Rep. Frank

A reader sent the following email:

J.D.,

In the eighties, I was a very happy Security Pacific customer, and decided to stay with them when they merged with B of A. I never loved B of A, but they're okay, have decent customer service, convenient ATMs. I've considered switching, but hesitate because of a subject I admit I'm not well educated about: Are smaller banks more or less vulnerable to a renewed mortgage crisis? Do banks mark their mortgages to market or myth? If real estate reaches Critical Mass, what happens to banks? How much bad paper are they holding, and who is most exposed?

My bottom line has been: if there's a banking crisis, for any reason, B of A would probably be considered too big to fail, too important not to bail.

"The Safety of Your Bank" could be an interesting topic for your readers.

Ironically, I moved my checking accounts from B of A to a community bank in 1995.  Ironically, that small bank got bought, which later got bought by B of A a few years ago and I moved once again to another small bank where I knew the executive management team. 

Since I keep very little of my money in checking or at the bank, I want a bank that allows me to do that and still maintain no monthly fees for that checking account.  Usually, the bigger banks require a much larger average balance in checking to maintain a free checking account.

The reader raises some good thoughts and questions:

Big Bank versus Community Bank

Generally speaking, small community banks do not have the ability to generate the volume needed in mortgaging lending, which is what it takes to be profitable in mortgage lending.  Also, small banks have higher fixed costs as a percentage and can't afford to make low rate loans associated with mortgage lending.

You will typically see smaller banks avoid first mortgage lending in the residential world, and more typically will do commercial real estate, construction, business lending, and some home equity lines or business lines tied to some one's house.  Those are the kinds of loans I underwrite for my bank, and we typically get an interest rate of 6% up to 8% in this current market.  Small banks lend in this arena because they need that rate versus a 4-5% mortgage loan, which helps them with profitability because of their higher fixed costs.

So, a decline in the value of homes would have a more negative impact on mortgage lenders or the larger banks.  A decline in commercial real estate values and/or an economic decline impacting small businesses would impact smaller banks.

That's a very simplictic over view of the difference in big versus community bank.

How Safe is Your Bank?

In the current environment, it really doesn't matter as long as your deposits are fully insured.  The way it currently is working, when a bank is shut down by the FDIC, your insured deposits are simply moved to the new bank that takes over your relationship.  The FDIC simply awards through a bid process the clients of a bank being closed to a healthy bank.  Your insured deposits just move to the new bank.

The only concern one should have is in the event of a financial crisis and your bank fails and you can't get your money out while waiting for the FDIC to solve the situation.  In this case, where you bank matters but only to an extent.

If we had such a crisis and the banking system collapsed and you had your money at a healthy bank, you won't be able to walk in and pull out your money.  Bank's keep very little cash on hand because they have made loans with those deposits, so in a crisis, you can expect rationing of deposits with an eye dropper. 

This is exactly why we keep mattress money.  It's an absurd thought and strategy, but in such a case where the banking system had real problems, you won't be able to walk into your bank and take out all of your money, even if that bank survives.  This is also the side benefit of owning some gold and silver and holding it yourself.

Mark to Market

Hell no.  I have two thoughts in general. 

First, it takes banks a long time to recognize a problem loan.  I just went through the FDIC auditing my employer (bank) and they will force us to down grade a few business loans.  That forces us to increase loan reserves against those loans.  An increase in loan loss reserves is an increase in expenses, which lowers net income.  So, from the profit and loss statement there's some motivation to find reasons why a loan shouldn't be down graded.

Second, and far more important is the lack of understanding or recognition of true collateral values.  There are simply millions of mortgage loans and home equity lines that were underwritten in the recent past where the value of that home is less than what's owed the bank.  And just because a borrower is making their payment on time, no one has to have that collateral re-assessed.  The are millions of loan out there where banks have no idea what the true value of their collateral is and thus those loans are not Marked to Market for a potential loss! 

Critical Mass

If we reach Critical Mass, the down draft in residential should spill into commercial, so we could see large losses across the board at most banks.  Banks that are focused in geographic hots spots will lose the most.  Banks with the weakest capital structure will go out of business.

Personally, I hope we don't get to Critical Mass, but there's a very good chance we do.  Critical Mass could create a waterfall in values, something the economy and banking system just isn't ready for. 

We can't even get the foreclosure process and nightmare under control now.  Can you image if the number of home owners upside down went from the current 23% to say 40-45% and the number of people in foreclosure tripled or quadrupled?

It could easily create and be apart of another deflationary leg down, which makes sense because at the core of deflation is real estate deflation!

Too Big to Fail

This will never go away, no matter how much the Bobbleheads in Washington spin it.  Why?  Bank of America is 10% of the entire banking system.  Citibank and Wells Fargo are pretty close, so there's no way we can get away from too big to fail unless we limit the size of any bank to 3% of the total market versus the current 10%.  These big banks will always be too big to fail unless they are broken up!  Therefore, we can expect Uncle Sam to stand behind them with tax payer funds.

Hope all is well.

J.D. Rosendahl, Rosey

Stock Charts: The Market Finishes the Week Heading Higher.

$SPX 15 Minute:  Both the RSI and MACD have rolled over and the market is fading lower but so far it seems a little corrective.  I've drawn in what might happen, which is an eventual test of resistance.  Nothing I'm trading now though.

$SPX 60 Minute:  On this time frame I've drawn in an inverse H&S pattern.  The MACD is getting over bought so it will be interesting to see if this plays out or not.  Again, nothing I'm trading here.

$SPX Daily:  Stock market pushes right up to the mid channel line.  Do we continue higher or fail near term?  We should have a better idea next week.

IBM:  Price has bounced right back to the prior trend line and the MACD is turning up.  Do we move above the prior trend line or need to consolidate?  Next week should provide some answers.

$VIX:  It just fell apart last week.  It's trying to close that little gap.  We might need to test major support in a couple weeks.

My Watch List:  Just like last weekend, I don't have a lot of charts I'm excited about and maybe a day or two of pricing in the market will uncover something like last week.

From My Trading Desk:  Friday we took a small gain and closed our long on FSII.

Next Week's Game Plan:  I want to keep it light once again and wait for the market to uncover trading ideas.  That worked very well last week as we took advantage of easy opportunities and then moved back to cash and kept the risk minimal, so I'm sticking with that theme for now.

Happy Trading.

J.D.  Rosendahl, Rosey

Banker's Corner: If Big Banks Raise Fees, Bank Elsewhere: Rep. Frank

I can't believe I'm going to say this, but I agree with Rep. Barney Frank!   If Big Banks Raise Fees, Bank Elsewhere: Rep. Frank

Should big banks jack up fees, Rep. Barney Frank, (D-Mass.), told CNBC Friday, he would urge bank customers to shop around and find community banks and credit unions that offer services for free.

“America has one of the most competitive banking systems, if not the most competitive banking system, in the world,” said Frank, who is a ranking member of the House Financial Services Committee and a co-author of the Dodd-Frank Act, a sweeping piece of reform legislation passed last year and aimed at preventing a financial meltdown similar to what happened in 2008.

Frank was responding to a question about the Durbin Amendment. The legislation proposes applying regulation to debit-card payments, and it would cost banks fees.

Specifically, the amendment directs the Federal Reserve to lower the hidden “swipe fees” that banks get from retailers each time a customer buys something with a debit card.


Bankers at large institutions have complained vociferously about the change, claiming it will cost the banking sector an estimated $12 billion in lost fees. To recoup losses, bankers have said, they will be forced to raise fees and pass them on to customers.

Meanwhile, merchants who have said that the card fees bite into their profits are elated.

The congressman also said the outcry from bankers about the Durbin Amendment has created a “disjunction,” when considering how well some large financial institutions are doing.

I work for a community bank, and I keep my checking and savings with a competing community bank.  I can say the service when I need it is great, they typically have no lines to wait in, and I only need to maintain the smallest of average balances to get a free checking account.  On top of that, they do not turn their people over, so I see the same faces who know me when I do go into the bank.

If free checking and great service are what you want, check out a community bank.  I see no reason in paying a monthly fee to have a checking account.

Hope all is well.

J.D. Rosendahl, Rosey

The Bubble State Blues: California employers could be hit with big tax bill for jobless benefits, auditor warns

This was a new one for me, I did not now a new payroll tax could automatically kick in if these loans from the Bubble State are not repaid:  California employers could be hit with big tax bill for jobless benefits, auditor warns

California's debt to the U.S. for covering its unemployment checks the last two years could reach $13.4 billion by the end of the year. If the loans aren't repaid by November, a payroll tax will kick in. It starts at $325 million next year and could rise to $6 billion.

California employers could face an annual payroll tax increase of as much as $6 billion if California's unemployment insurance program fails to repay a federal government loan that has kept benefits flowing.

The warning came in a critical state audit of the California Employment Development Department, which distributed $22.9 billion in unemployment benefits last year.

The report concludes that for a decade, the EDD "has consistently failed to perform" at a level the U.S. Labor Department "considers acceptable regarding its timely delivery of unemployment benefits," State Auditor Elaine M. Howle wrote in a letter to the governor and legislators.

The unemployment insurance fund, insolvent since January 2009, relies on federal loans to pay jobless benefits. The debt is expected to hit $13.4 billion by the end of this year unless state lawmakers and the governor agree to raise payroll taxes, cut benefits or do some combination of both. An interest bill of $362 million is due in September.

By law, the state, which faces a $26-billion general budget deficit, must repay the federal loans to the EDD by November.

EDD's failure to repay its loans by then would trigger a $325-million federal tax hike next year on employers. That payroll tax bite would rise incrementally to a maximum of about $6 billion if the loan goes unpaid and the state misses interest payments over several years.

Information about the growing deficit in the agency's funding first arose in 2004, but it hasn't been high on the Legislature's or the governor's priority lists.

"At this point, we can only deal with one deficit at a time," said Mark Hedlund, a spokesman for state Senate President Pro Tem Darrell Steinberg (D-Sacramento).

Who is he kidding, they can't even deal with one deficit at a time.

The Bubble State Blues just continue.  Facing large cuts in spending by June 2011 and Gov. Brown hopes voters support the continuing of "temporary taxes", and like it or not, The Bubble State might raise taxes on businesses.

Not to cure their budge deficit, but to cure the deficit with Uncle Sam! 

At a time when the nation needs the world's 8th largest economy helping to pull the national economy out of a nose dive, The Bubble State could erode economically later this year.  Big spending cuts from the state, with layoffs, most cities and counties have their own layoffs and cuts to impose soon in 2011, and now we might tax businesses more! 

The Bubble State Blues...................It could impact the entire economy later this year or next!

Hope all is well.

J.D. Rosendahl, Rosey

Stock Charts: The Market Pushes Towards Intraday Resistance!

$SPX 15 Minute:  Last night I suggested we should push higher and close the gap and test that minor peak on the black line.  We got all of that today.  Price is beginning to look a little tired and stuck in No Man's Land.  See the next chart.

$SPX 60 Minute:  Traded right up to the downtrend line today on the intraday and the MACD looks tired and possibly ready to turn over.  The question has to be:  do we have enough gas to push up and close the next gap or not.  If so, that would remove the most bearish of views for the time being?  Or do we fail at the downtrend line and turn down?  So far, this move up doesn't look like an impulsive wave higher.  So, we should have better clues with tomorrow's pricing.

$SPX Daily:  Here we are right on the middle channel line with the MACD right at the turning point.  No Man's Land, but we should have a better idea after tomorrow.  No sense in getting ahead of ourselves.

My Watch List:  This has been a very busy week at my job so I'm going to keep this update brief.  From last night's update:  Stock Charts: Market Push A Little Higher   I like the following stocks in order of preference:  FSII, REDF, AMZN.  Also interested in UHAL, DAL, REE but on these I want see something definitive happen compared to first three.  Show me the money.  I took a quick scan today, but couldn't find anything I really liked!  I'd rather take a fresh look over the weekend for new ideas.

From My Trading Desk:  Yesterday I said if we pushed higher towards the resistance areas on the intraday I would take gains on longs and that's exactly what we did.  During the first hour of trading I had very nice gains on AMZN, FSII, and REDF.  They in total were 3 times the loss on FCX, so I sold all four.  All in all, great gains and risk management.  I new I wasn't going to have time to trade or monitor positions today so I went with the known, and closed all four for nice net gains.

Towards the last 10 minutes of the day I had a chance to check a couple of stocks and bought back a 2/3s position in FSII.  I wanted to stay light heading into the weekend and while price is testing resistance on the intraday.

Tomorrow I will be on the mountain skiing a big powder day, so I can't imagine a lot of trading tomorrow unless it's early in the day, which if anything, I'll be taking gains on FSII if it's there.  I wouldn't mind getting back into AMZN because today's bounce might be the beginning of a tradable bounce, but I'm more focused on the market for now.

Happy Trading

J.D. Rosendahl, Rosey

Wage Deflation Alert: Big cuts coming to CSU system -- and that's if tax extensions come to pass

The story in Ca hasn't changed much in the past couple of months.  Things are bad if voters approve tax extensions.  They get much worse if they do not.  Governor Brown continues to play the fear card versus playing hard ball for salary and benefit cuts at appropriate levels.  Big cuts coming to CSU system -- and that's if tax extensions come to pass

California State University campuses could cut their enrollment projections by 10,000 students for the 2011-12 school year as part of a larger plan for dealing with budget cuts, officials told trustees during a board meeting Tuesday in Long Beach.

Gov. Jerry Brown has proposed cutting the CSU budget by $500 million, or 18 percent, if legislators and voters approve a series of tax extensions.

Without the extensions, larger cuts loom.

At the board meeting, CSU officials presented some strategies for handling the funding reductions.

In addition to cutting enrollment – currently at 412,000 students – they said they'll ask CSU's 23 campuses to collectively cut $281 million and the chancellor's office to reduce its budget by $10.8 million. Staff reductions appear likely, though few specifics were given.

"Because 84 percent of CSU's operating cost is for personnel, the CSU will need to reduce expenses in that area by at least $250 million," a statement from the university system said.

CSU enrollment has fluctuated over the past few years depending on state funding. Last school year, CSU cut enrollment by the equivalent of 30,000 full-time students, then bumped it up by 15,000 this year.

CSU will not consider employee furloughs unless the budget cuts are deeper than $500 million, said Chancellor Charles Reed. That could happen if Brown's proposed tax extensions don't get on the ballot or are rejected by voters. In that case, Reed said, the CSU could see cuts of $1 billion.

"A reduction of that level would force us to re-examine potentially drastic measures, including much-larger cuts to enrollment and increased tuition fees, among other strategies," Reed said.

The current round of cuts mean California State University, Sacramento, will have to trim its budget by $12.9 million, said spokeswoman Kim Nava. All departments have been told to reduce their budgets by 9.7 percent, she said. Enrollment cuts aren't anticipated in the fall, but could take place in spring.

Trustees also heard a report from a consultant who compared compensation for CSU presidents and faculty with compensation at comparable universities across the country.

The consultant found that CSU pays lower salaries than its comparison schools but gives more generous benefits and retirement plans.

The average salary for CSU campus presidents is $292,830, compared with $444,556 for presidents of comparable schools. The average salary for CSU faculty members is $85,083, compared with $99,882 at comparable schools. But benefits for CSU presidents were 25 percent higher than in the comparison group and benefits for the faculty were 21 percent higher.

On balance, the consultant concluded, when salary, benefits and retirement are combined, CSU presidents come out behind comparable schools by 26 percent, while faculty members are 1 percent behind, making them pretty much on par with their peers.

California is uniquely positioned because of it's size to layoff large numbers of teachers soon.  Teachers at the college level on top of K through 12th grade levels.  Since union leaders and senior members have yet to get real about being part of the solution, it's requiring service reductions and layoffs.

The number of teachers in California getting the ax in the next 12 months could be quite large.  And since it's a universal theme across the entire country, where does one go to find a comparable paying job?  For most that answer has to be no where.

Since there are very few places in this country hiring teachers, it will force those being laid off to re-enter the private sector with a specialized skill set for teaching.  For most, when they find a new job it will most likely come with less in salary and benefits and that is wage deflation.

It will also increase the number of people looking for private sectors jobs, which puts downside pressure on compensation rates (salaries) for the private employment sector based on simple supply/demand equations.

Hope all is well.

J.D. Rosendahl, Rosey

Stock Charts: Market Push A Little Higher

$SPX 15 Minute:  On the intraday, price seems to have a little more gas in the tank.  I've drawn what I think might play out.  I still feel we close the next gap right above and test that prior peak.

$SPX 60 Minute:  Again, I think on this time frame we push a little higher and test the downtrend line.  If we get above it and close the second gap at 1,320, that is far more bullish.

$SPX Daily:  If the markets are going to push higher based on the intraday, the daily chart would suggest the middle channel line, which is very close to targets on the intraday charts.  It's there we might see a pull back.  I still think we get more down side as the MACD fails to roll up.

My Watch List:  All of sudden we have some very interesting patterns to chose from. 

FSII:  For the most part this stock has been in a very large sideways pattern for the past 12 months.  Nothing bearish looking and with today's gap up it now looks promising on the long side.  Big volume gap up turning the MACD up and price is pushing above the upper BB.  Above the blue downtrend line and the target area is $5.00 to $5.25.  Plenty of room on the RSI and MACD to support higher price.

FCX:  Price gapped up today and moved away from the downtrend line.  Price is pushing the upper BB.  Plenty of room on the RSI and MACD to support a continuation of upward price.  Today's volume was a little concerning.

REDF:  How good is this one behaving.  We have what could be a falling diagonal and a strong bounce so far out of the pattern.  MACD and RSI are moving higher on very nice volume.  Price is above the upper BB and pressuring the BBs apart.  The next thing I'm looking for is for price to push past the next price peak at $8.  Stock looks very nice so far.

AMZN:  Maybe a little rounded bottom is finishing wave C.  BBs are pinching so price should move soon.  MACD is almost ready to cross and turn up.  So far, it's behaving as expected.  All that's really needed is a strong up day while the MACD crosses and heads higher.  There's still a little room to shake out a little lower.

UHAL:  MACD is almost crossing.  This should take place soon.  The ABC pattern is close to finished but we can't rule out a little shake out to the downside yet.

DAL:  Price grinds lower towards the support line in black and the bottom channel line in blue, as expected.  This is what I'm looking for: maybe a fresh new high in oil then reversal with a bottom in DAL then reversal.  Not yet, but maybe in the very near future.

REE:  Big move yesterday and no follow through.  Price stalled right at resistance.  I'm looking for follow through to reload on this stock.  MACD supports a push higher.

From My Trading Desk:  It was another busy day.  We sold our REDF for a gain early in the day because I was going to be busy most of the trading day.  I did get back to a computer for the final hour and we bought back into REDF with a 2/3s position.  We bought a 1/3 position of FSII and a full long on FCX.

Even though we've been more active with more charts to look at, I still think it's time to keep it light in size and duration.  If the market pushes higher into resistance I've identified, I will probably exit some longs and take gains off the table.

Happy Trading.

J.D. Rosendahl, Rosey

U.S. New-Home Sales Unexpectedly Fall to Lowest on Record

The past few weeks we have seen nothing but awful data being released on real estate.  Today, we learned that new home sales dropped quite sharply:  U.S. New-Home Sales Unexpectedly Fall to Lowest on Record

Purchases of new U.S. homes unexpectedly declined in February to the slowest pace on record and prices dropped to the lowest level since December 2003, adding to evidence the industry is floundering.

Sales decreased 16.9 percent to a 250,000 annual pace, figures from the Commerce Department showed today in Washington. Economists surveyed by Bloomberg News projected a gain to a 290,000 rate, according to the median estimate. The median price fell 8.9 percent from the same month in 2010.

Builders are struggling to compete with existing homes as foreclosures add to the overhang of unsold properties and drive down values. The figures underscore the Federal Reserve’s view that the housing market “continues to be depressed” even as the rest of the economy improves.

“We’ve got this tug of war going on where we’ve got this very weak housing sector and a manufacturing sector that’s doing fine,” said Brian Jones, an economist at Societe Generale in New York, whose 240,000 forecast was the lowest in the Bloomberg survey. “The new and existing home sales numbers were abysmal. You could say that part of it was attributable to unusually harsh weather.”

Industry is floundering:  Without a doubt!

Builders are struggling to compete:  Without a doubt!

Housing market “continues to be depressed":  Without a doubt!

Manufacturing sector that’s doing fine:  Without a..............wait a minute.  Did someone say the manufacturing sector is doing fine?  Really!  Fine enough to put Americans back to work so they can afford to buy all this over hang of supposedly cheap real estate? 

Part of it was attributable to unusually harsh weather:  If so, then March should be equally as bad because it seems to have rained or snowed almost every day in March.  And lets not forget, it's cheaper in most cases to buy an existing home than a brand new one, so maybe it's about the math and not the weather!  At least "in part!"
 
Hope all is well.
 
J.D. Rosendahl, Rosey
 

The Deflation City of America: Detroit's Population Drops To Lowest Level In 100 Years

If there's one city in America that looks and feels like deflation it has to be Detroit.  A massive decline in the city's population over years combined with high unemployment stemming from a struggling automotive industry and rock bottom real estate values!!! 

Recently:  Detroit's Population Drops To Lowest Level In 100 Years

Detroit's population dropped 25 percent over the last decade to its lowest level in a century, according to U.S. Census figures released on Tuesday.

The city's population fell to 713,777 last year from 951,270 in 2000 when the last census was taken as the region suffered from a struggling automotive industry, plant closures and job losses.

In the same period, the state of Michigan's population dropped 0.6 percent to 9.88 million.

Detroit's 2010 population compares to 1.85 million people living in the "Motor City" in 1950 and was the lowest total since the 1910 Census showed a population of 285,704.

At http://www.prudential.com/ you can look up real estate for sale.  Detroit has 2,807 homes and condos listed for sale.  2,331 (83%) of those are list for sale at or under $50,000.  1,842 (66%) of those are listed for sale at or below $25,000.  673 (24%) are listed for sale at or under $10,000.

That's right, check out this listing, a 4 bedroom 2 bathroom home for sale at $10,000 with 1,742 s.f.  In comparison, this home where I live in California would have a value of $600,000 to $700,000.

Detroit is the definition of a deflationary city in the United States.  A shrinking population stimulated in part by a shrinking auto industry has left too many homes and too few people, thus values have all most hit zero.

It probably costs more to demolish some of these very low priced homes than what they are worth creating a net negative value, if that's possible.  Never the less, bull dozing is to be expected in this deflationary market. 

Hope all is well.

J.D. Rosendahl, Rosey

Stock Charts: Market turns a slow day!

$SPX 15 Minute:  Price today just continued yesterdays slide sideways.  This still looks like a continuation pattern and even if continues to grind slightly lower and sideways, I still think we get another move up on the intraday and close the gap right above current pricing.

$SPX 60 Minute:  We see the same thing here where price simply looks corrective to the side or a continuation pattern.  The MACD turning down might force this pattern to expand.

$SPX Daily:  On the daily time frame, I still think we push a little higher near term, but we cannot rule out a move lower to test the bottom channel line at 1,250 or even a tad lower to the prior peak in Nov 2010 at 1,225.

My Watch List:  It's all about the ABC structure.  You will notice when I find something that I like, I tend to find a lot of it.  Right now, we have a lot of potential ABC or corrective patterns, so the question is will they complete if not already and be good long side trading opportunities?

REE:  I've put an EW count on this one.  I've made the prior high wave 5 of 3 because often wave 3 completes with the highest MACD, so that's the beginning of my framework of this EW count.  Therefore, you expect wave 4 of 5 to correct to the prior wave 4, per EW theory in general, which is what has transpired in the latest correction into wave 4 of 5, a mostly sideways correction indicating another impulse wave up is viable.  Today's strong up move might be the beginning of wave 5 of 5.  Both the RSI and MACD have bottom and pushing high with the MACD crossing, that's all supportive of another impulse wave so far.  Price closed right at cluster resistance, which includes the down trend line, the upper BB and the 50 day MA.  Above that should add to the bullish view.

REDF:  This stock has made two very interesting correction patterns.  The first had price jumping higher when it was done.  Now the second one looks finished with today's advance on good volume breaking above the down trend  line and turning up the MACD.  Closing above the 50 day MA and pushing the upper BB would be the next bullish step, so lets look to see if we get that soon.

DAL:  Oil was up today and this was weak.  I still think there's a good chance we test the black support line and the lower channel line in blue.  If that holds with a reversal day, then we might have an opportunity.

AMZN:  Is wave C finished?  Maybe not.  MACD still allows for a little more shake out to the down side.

UHAL:  Ditto the comments on AMZN.

From My Trading Desk:  Today was unexpectedly busy.  I scalped a full short on RVBD for a 1.7% gain.  I scalped a fractional long on REE for a nice gain.  I closed my half long on UHAL early in the day for a small gain.  We also bought a 1/3 long of REDF.  Today was a fun day to say the least.

We also picked up a couple of new trading ideas in REE and REDF, both well worth watching near term.

Happy Trading.

J.D. Rosendahl, Rosey