1. AUGUST MARKETS
2. UP STARS/DOWN STARS
3. GOLDEN OPPORTUNITIES
4. QUOTES
5. CHINA BUBBLE
6. ON THE WEB
7. LETTERS

Almost all market bulls believe that the odds of a significant correction any time soon are low. They also believe markets can rally 20% by the end of the year. Due to the abundance of cheap/free money for market bulls. e.g., JPM and GS, continuing money flows into the stock market remains a significant risk for market bears. 

The economic reality is NOT what is being expressed by Washington/Wall Street Cheerleaders. Over the summer we have not been playing in the sandbox.  Periodically we miss out on irrational markets; this summer has been one of those times. However, given sooner or later Reality ALWAYS intersects with markets, I prefer to miss out on short term profits when the underlying fundamentals do not support it.
Can markets continue to rally? Yes.  Will it end (badly?)? Yes. 

Friday U.S. stocks fell on concern the current rally has outpaced recovery prospects. Soon it will be time for a seasonal correction that will be welcomed by BOTH Bulls and Bears. The former wish for a better price to add to positions; the latter because it recognizes some semblance of economic reality.
Will the forthcoming correction be brief and shallow, slow and painful, or sharp and damaging? At this juncture we don’t know. 

Read on the Net: “I don't see a "V", "W" or "U" shape recovery; I see a "middle finger".
HW: No comment.

Enjoy your Summer Holidays.
 

GUEST HYDE PARK SOAPBOX: Why Is Deflation Scary? 
“I have often questioned why deflation might be seen as a bad thing, so I thought it would be useful to find out exactly why economists insist deflation is something to be feared. After doing some research, I found that the deflation scare is exactly that - a scare - and there is no evidence it will cause a depression... “
 

 
KEY DATES:     AUGUST 17
DJIA:                 9300 PIVOT
SPX:                 ---> 960 1000 PIVOT
NASDAQ:         2000 PIVOT 1850  SUPPORT
XAU:                160 PIVOT  R1 147  R2 155 R3 164
DEC GOLD:      950 PIVOT 930 SUPPORT  R1 960  R2 970 R3 990
SEPT SILVER:  15 PIVOT 14 SUPPORT 15.50 RESISTANCE
XOI:                  900 SUPPORT 1010 RESISTANCE
DEC OIL:          68 PIVOT 68 SUPPORT R1 73  R2 78 R3 80  

Market Marker Sentiment until 2010 is Less Volatility with Market Cross Currents.
Stocks Meander slightly ahead and favor defensive plays.
The US$ doesn't collapse & Commodities may not be needed as a safe haven panacea.  
7/21 PRE-ECLIPSE: DJIA   8915. SPX   954 & NASDAQ 1916
2008 CLOSE:           DJIA   8776, SPX   903 & NASDAQ 1577
2007 CLOSE:           DJIA 13264, SPX 1468 & NASDAQ 2655
2006 CLOSE:           DJIA 12463, SPX 1418 & NASDAQ 2415
2005 CLOSE:           DJIA 10717, SPX 1248 & NASDAQ 2205
DJIA:                       7 ~ FV 2 UV; 5 offer 4%+ Dividends 3 offer 5%+ Dividends.
THINK TRADITIONAL SWISS AND PRESERVE CAPITAL: FOCUS ON PROTECTING AGAINST DOWNSIDE RISK.
 

2. BUSINESS & BANQUETS
At the Morgan Keegan 2009 Technology & Security, Safety & Defense Conferences at the Waldorf I discovered two potential new favorites: Mastec (MTZ) and ICx Technologies (ICXT).
MTZ is both a Utility and Green Energy play.
ICx provides numerous advanced security systems and technologies for homeland security, military, law enforcement and commercial purposes.
Also presenting were two on our 2010 watch list: MSA (MSA) and CREE (CREE).
One new entertainment watch candidate is Glu Mobile (GLUU) which creates/supplies mobile phone games. We note short term online gaming revenues are declining. So despite this stock being cheap, we would await more balance sheet repair and not be in a rush to buy GLUU. However, it may well be a profitable Christmas/January effect play after markets correct significantly. 

As for the technology sector forecasts, no surprises:
IT in 2009 is worse than 2001 with negative IT budgets vs. 0 increase in 2001.
Like almost all industries, supplier contacts are being renegotiated down 10-20%. The Gartner forecast is that while believing “the bottom is in”, it will not be until 2013 that we see 2008 levels return!
The hottest Buzz is naturally Cloud computing. This is one major reason we have an intermediate term Out Perform rating on IBM. 

3. Seasonally gold usually puts in a bottom in late August, followed by a Christmas rally that begins in August or September. I see no reason why should this year be different. 

READER: Ned Davis out with his Gold chart. Buy signal flashing... not usually worth mentioning but the past 5 Aug buys have been powerful ..
HW: Could be but “hope” not as I wish to buy Gold lower and later if possible.
As traders, we went short Silver above $15 Friday. I see 15 as a short term pivot with support 14.50, 14 and 13. 

4. “We can expect a lot of volatility. When you have these rapid increases, almost without correction, you will definitely have a correction at some point.”
Mark Mobius, executive chairman, Templeton Asset Management
HW:  This coming week? Next week? If not, almost certainly next month (September)!

“I don’t think we’re at a bottom yet in home prices. There’s also a pretty big shadow supply of houses. People are kind of waiting for the bottom but there’s a pent-up supply out there.”
Scott Anderson, senior economist, Wells Fargo
HW: Enough to keep a lid on most US housing prices into 2010 and perhaps longer. 

“People are using every positive argument to get back into the markets. Definitely this is driven by some noise, but I believe things are getting better than many people think.”
Christoph Eibl, co-founder, Tiberius Asset Management
 HW: I believe that is called “grasping at straws.” Hopefully Friday was the beginning of an epiphany that the generally dismal economic climate does not presage a quick economic recovery. 

5. Templeton’s Mobius Says Stocks Face 30% ‘Correction 

The Market Bubble Is About to Pop 

Don't despair about dividends 

6. Shanghai acting like it's 2007 all over again
Warning signs suggest a bubble could be forming in mainland China’s top stock market, though the rally may continue for now. 

GDP Management, Chinese Style 

China watchers have been dubious about the quality of Chinese economic data for some time. And a recent spate of seemingly conflicting data has fuelled that criticism. The takeaways from a couple of interesting articles is that Chinese growth is a chimera 

China's recovery: Is it for real? 

READER: Everyone's extremely bullish in Asia especially with talk about the QDII listing of China equities and allowing mainland investors to bet on the HKG stock market.
Sentiment is very very +. Bernanke is also supporting easy money and Europe is looking rosy. Most believe the problems are behind enough that Fed will raise rates in 2011-BN Paribas.
Li Ka Shing today mentioned the worst is over ... This is the sentiment to date.
HW: As you know we don’t agree. I believe by September my view will be more common.  Both the GXC and FXI (China 25 mainland stock index) may suffer as  mainland money going into HK stocks (on which we are FAR less bearish) – this being one reason. 

READER: When you answered one of the big reasons you could be wrong was if the FED bough public shares to support the market. Could the Chinese gov't to do the same?
HW: The Hong Kong Govt has done it in the past. They could if they wish but they have other tools.
Beijing can just adjust taxation and monetary policy and get the same effect without directly buying. 

7. READER: I remember you mentioned don't fight the fed. Some bulls believe we're going to 1200. More irrationality like Nasdaq 5000 right?
HW: If that happens, today would be similar to Nasdaq 4000. 

READER:  Subject.: M A H E N D R A P R O P H E C Y
“Dollar will move huge up on [August] 4th so accumulate on weakness of today and tomorrow.  
Great fall in metals, oil and grains from next week. We expect more than 10% fall in a week.”
HW:  I find some extreme forecasts generally unreliable. While this particular one was wrong, I do agree that it is possible in September. Still, betting on extreme events more often than not loses money. 

Reader: Any thoughts on silver “breaking out” today [8/13]?  Looks ready to move above a downtrend it’s been on since about April…
HW: I don’t see it but then I am a market bear and short from $15.
Currently there is also plenty of overhead resistance $15.40-$15.50.  I see this more likely beginning late September. 

READER: Our Company is 75 years old today.  What time (of birth) do you enter for a company chart?  They opened for business in NYC, but (I believe) we are a Delaware corporation. For LOCATION do you enter the physical location of the company or the state in which it is incorporated?
HW: You use the state where incorporated as the natal, but it relocates as does a person to its HQ.
Primary is the natal, secondary is the relocation.
READER: What about the time?
HW: It is either 9am or midnight. I don’t know the rules 75 years ago. Check with a Delaware lawyer WHEN it was a legal entity.

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