Housing is Nowthere Near a Bottom

From the NY Times:

The percentage of mortgages in arrears in the category of loans one rung above subprime, so-called alternative-A mortgages, quadrupled to 12 percent in April from a year earlier. Delinquencies among prime loans, which account for most of the $12 trillion market, doubled to 2.7 percent in that time.

Let's think about those figures for a minute. Alt-A loan arrears increased 4 times in a year. That's a huge pop. It indicates there are serious problems in that market from a variety of perspectives. For example, loose underwriting standards are combining with a weak job market, lagging wages and a lot of homes underwater to hit this are of the market hard.

But we're also seeing an increase in prime defaults -- which doubled over the year. There are people who have goo jobs and (probably) solid incomes. And they're having a problem getting their loans paid-off in increasing numbers.

This isn't over by a long-shot.

Market Monday's

The SPYs had a down/up set of days on Monday and Tuesday, with Tuesday essentially wiping out the losses of Monday. Tuesday also market the beginning of a two and a half day rally that sent the market higher by 4%. The market formed a triangle consolidation on Thursday and then fell at the beginning of the day on Friday before moving sideways for the remainder of the day.



On the daily chart, notice the following:

-- Prices are forming a triangle consolidation pattern right now.

-- The 10 and 20 day SMA are both moving sideways.

-- The 10 day SMA is over the 20 day SMA, but just barely.

-- Prices and the short-term SMAs are tightly bunched, indicating a lack of direction.

-- The 50 and 200 day SMA are both heading lower

This chart is short-term neutral because of the tight arrangement of prices and the SMAs and the neutral position of the SMAs and prices. However, the long-term position is negative with the 50 and 200 day SMA heading lower.

Polish Currency

If you are considering, long term investment, like one or two months than Polish currency might be interesting for you. For the last year it got stronger and stronger. Just checkout the charts below, this are EUR/PLN and USD/PLN, timeframe 1 year, on both charts you can see what i would call quality trend. Line is at 45 degrees, almost no corrections.

EUR/PLN

Let's start with EUR/PLN, i won't even talk about technical analysis, indicators and so on, you can see what is happening here. Just draw the line wait for minor correction and get into trade. You maybe wondering.

Ok it went down for a year, won't it turn back? This is a good question, i think this trend can end up pretty soon maybe 3 or 4 months, hard to say really. The problem here is that Polish bussiness has a problem with strong PLN against EUR, because a lot of companies export their products to west Europe. With strong Polish currency, their products are actually more expensive and thus less competetive.

The bottom line is, Polish bussinessmen want this trend to stop, and i believe that government will do what they ask for, the question is when?


USD/PLN

Now look at USD/PLN chart it looks almost the same as EUR/PLN, so again i won't go into details how to trade it.
Now to answer the same question as earlier, is this trend here to stay? I think it is, because gas price in Poland pretty much depends on gas price in USA. When gas price in USA gets more expensive it also gets more expensive in Poland (and rest of the world btw).

However, if gas price will go up, but at the same time Polish currency would get stronger against dollar, then it won't affect Poland as much as it would without USD/PLN going down.

Now if i got you interested in this form of investment, you will need a broker, which allows to trade Polish currency or at least EUR/PLN and USD/PLN. As far as i am concerned there are not much brokers who allow this. The ones who do are Oanda and maybe SaxoBank however i am not sure of that.

That is not end of the problems, even if you will find broker who allows to trade this pairs, probably spread on them will be somewhere between 20 and 40 pips, so like i said it is only good to trade them if you are looking for long term investment not scalping or even swing trading.

Weekend Weimar and Beagle

It's the end of the week. Go and think about anything except the markets. I'll be back on Monday. Until then....



Somehow this is comfortable



The girls totally crashed.

Employment Report Stinks

From the BLS:

Both the number of unemployed persons (8.8 million) and the unemployment rate (5.7 percent) rose in July. Over the past 12 months, the number of unemployed persons has increased by 1.6 million, and the unemployment rate has risen by 1.0 percentage point.

Great news, huh? It gets better...

In July, the number of persons who worked part time for economic reasons rose by 308,000 to 5.7 million and has risen by 1.4 million over the past 12 months. This category includes persons who indicated that they would like to work full time but were working part time because their hours had been cut back or they were unable to find full-time jobs.

So, instead of getting fired, we'll just get people to work less. That means lower overtime payments and it also might mean a cut in benefits. however, because the overall employment situation is weak, these people have a harder to getting a second job. That means they have to make do with less pay.

There are no bright spots in the jobs created areas of the report. There are only three sectors of the job market that created jobs: government employees, healthcare/education and leisure and hospitality (which added a whopping 1,000 jobs). In other words, unless you work for the government or take care of sick people you're out of luck.

And the year over year number continued to drop:



And the unemployment rate continues to increase:

The Detroit Death March

From Bloomberg:

General Motors Corp., the largest U.S. automaker, reported a second-quarter loss of $15.5 billion because of strains from truck leases, costs from labor disputes and plunging U.S. sales.

......

The mounting losses are siphoning resources Chief Executive Officer Rick Wagoner, 55, needs to develop fuel-saving cars to replace the pickup trucks and sport-utility vehicles being abandoned by U.S. buyers. Wagoner, now in his 9th year as CEO, won't project when GM will restore profit as he cuts costs by an additional $9 billion annually and carries out a plan to boost cash by as much as $17 billion.

``The trends that are out of their control, those are the things that have the potential to overwhelm them,'' Robert Schulz, a debt analyst at Standard & Poor's, said yesterday. He was referring to record gasoline prices that have transformed consumer behavior while a weakened U.S. economy drains auto sales to 15-year lows. ``We don't see the macro environment anywhere near on the mend,'' Schulz said.

.....

S&P yesterday cut GM's credit rating one level to B-, or six steps below investment grade, because falling U.S. sales are causing the automaker to use more cash than anticipated. With the U.S. auto slump expected to carry into next year, GM faces a risk of further cuts, Schulz said. GM had the highest rating, AAA, from 1953 until 1981.

Declining sales, increasing impairment costs and a drop in its credit rating. What great news. It couldn't get much better.

The real question is cash flow. This is the second time I've seen a news story that said the real concern was GM is burning cash faster than anticipated. As a result, their ability to fund the turnaround is inhibited. For the quarter ended March 31, they burned through $3.2 billion in cash. They also had $28.9 billion in cash and short term investments. At that pace and all other things being equal, they've got 9 quarters of cash on hand. If we add in $9.6 billion in receivables, then we increase their available cash to 12 quarters or three years. In addition, with the drop in their credit rating borrowing for that will be more expensive. And who will want to lend money to a company that has negative book value and stagnant sales?

Forex Fridays -- the Dollar

Is the bottoming continuing? On the weekly chart, notice the dollar has been in a decline for the last two years. Prices have continually moved lower, breaking through technical support and then consolidating those losses before moving lower still.

However, over the last 4-5 months, the dollar has moved sideways. While it hasn't rallied, it also hasn't moved lower -- and there has been plenty of reason for it to do so. I've seen several analysts on TV suggesting the long-term bear market is over and that it is time to buy dollars.



On the daily chart, notice there is a slight upward tilt to the last few months of price action. While this isn't a strong rally, it's also not a bear market situation either. However, also note that prices and SMAs are in an extremely jumbled position. They are close together, and have been that way for the last three months. In order for this to turn into a bullish chart the SMA picture has to become clearer.