07.13.2011 -- QE3 got nothing

Ben's got to be a little concerned tonight in his comfy bed. His grand hint that more monetary easing, QE3, could be on the horizon had a half life of about 4 hours.

He basically told the world that 600 billion more of asset buying could be announced at sometime in the near future and he got a 100 point rally that lasted 4 hours.

Let me repeat.. a threat of 600 BILLION dollars of asset buying, caused a rally that lasted 4 HOURS.

That's all he's got folks. That's it.. he has asset buying and debt monetization. There are no other tools.

Every bear market since I was born, involved the FED lowering rates to stimulate the economy then in turn raising rates when the economy was solid to slow the growth and prevent higher rates of inflation. Their timing usually sucked, but it was a predictable cycle.

What happens now? The FED can't lower rates, they are at zero. They have monetized amounts in the trillions and now a threat to do that much more resulted in a rally that lasted 4 hours.

Remember 3 presidents ago, the thought of a budget deficit of a few hundred billion was crazy. People were shocked at the 400 billion deficit that Bush hung up with the war in Iraq. We are now printing deficits approaching 2 trillion.

The numbers get so large that they enter the incomprehensible realm.

To help with some prespective;

In 2010 the entire budget for Federal discretionary spending was about 1.3 trillion.

Discretionary spending is basically everything except Medicare, Medicade, Social Security, unemployment/welfare benefits and Interest on debt.

Discretionary includes Defense and basically everything else.

Our budget deficit for 2010 was about 1.2 trillion.

What does that mean?

It means if you cut every single discretionary program from the budget. Defense, Department of Education, Homeland Security, Department of Transportation, of Health and human services, of veteran affairs, of justice, of commerce, of labor, of agriculture, of interior, of energy, of treasury, of state, NASA, the corp of engineers, the SBA, the NSF, and the social security administartion.

If you cut all of those things.. not 10%, not 30%, not 50%, not even 80%. If you cut ALL of those programs by 100%. Meaning none of those programs, including the department of defense even EXISTS in the budget.

IF YOU DID THAT... you'd have a 100 billion surplus for 2010. 100 Billion. Just enough to run 1/6th of the department of defense and everything else is gone.

Politicians trying to tell you that medicare, medicade and social security don't need to or can't be touched are lying. They HAVE to be touched. In fact, they HAVE to be slashed. There's no other way.

Moving on...

Charts...

Here's our daily on the SPX;

As you can see, we had that 4 hour rally, then sold off into the close. We closed back above the 50/100, but only barely. This doesn't look or feel very bullish here. If we get back below the 50/100 again tomorrow, the failed rally today creates potential for a collapse.

Here's our hourly;

The hourly is still holding some support for a bullish move as well, but we don't have far to fall here. 1314 looks like a line in the sand. If the market dips below 1314 tomorrow, put yer helmets on because it could take a nasty dive.

I'll throw this chart out there tonight as well... the Transports;

They closed below the bollingers and are pretty far from some support. So the trannies or financials won't be giving the market any help here.

If the market is going to stage another attempt at a rally here it's going to come from the Russel, Nasdaq or REIT's. I'm not sure though that there is enough fire power there to break through all the resistance overhead.

I'm beginning to firmly believe this market is doomed in the near future.

GL

CJ