Market Rises Sharply

The Dow Industrial and other major averages continued their advances this morning. I have taken a pause from the market during the past month to take my initial look at what is going on. An undeniable pattern in the market shows that we seem to be moving into a pennant formation. There is a heavy downtrend still in place but it appears that the market has been forming a very nice reverse head and shoulders formation. This cannot be ignored.



Size, the all important indicator for me is rising. You cannot deny this strengthening in the market and need to be prepared for additional upside. The Dow can surely reach the top of the pennant or above the 10,000 mark. Still, be aware that even in this chart, the overall trend for volatility is falling and current size has risen just to the trendline.



WHAT'S NEXT FOR BOEING??



As one might expect, Boeing, being a Dow component, reflects the overall market's pennant formation. Here I can see a possible move to 47 on Boeing and then should it break to the upside, a move to 55 would not be out of the question. I expect that this move would happen fairly soon and purchased some September 45 calls this morning. I had previously had a long term 45 put position on the stock which I sold for a double. I entered into a new January 40 put position not too long ago around 43.75 and continue to hold this position for the longer term. Fortunately with options, I can participate in a move either up or down. As the Boeing stock price continues to move sideways, expect option premiums to diminish and perhaps provide better option buying opportunities for those wishing to participate in this play.

It's important to note that Boeing has not participated in the market move to the extent that much of the rest of the market has. Under increased pressure because of delays in the major Dreamliner project, it's hard to paint a bullish scenario for this stock. However, the market is seldom rational and should the Dow average continue to push ahead, as the statistical evidence shows that it should, we may find Boeing suddenly turning into a star performer, leading the Dow higher.

HESITANT STILL

While prospects for continued gains appears strong, I urge caution and look for opportunities to add puts, take profits and otherwise, prepare for a potential test of the lows.

Be sure to contact me if you wish to receive that August Trendsetter issue. I will be covering equities, interest rates, the dollar and other important markets.

Rates, TBT Pop As 30-Year Auction Lags

US interest rates opened higher this morning after plummetting yesterday in response to a strong 10-year auction. We discussed TBT, the ProShares ultra short 20+ Treasury play as a great way to take advantage of this move.

Later, the 30-year auction results came in worse than the 10-year auction yesterday. Bid-to-cover for the $11 billion offering was 2.36. 67.88% of the bids were accepted at the high rate of 4.303. Thirty-year rates were trading at 4.32% around 1:25 cdt. TBT is up nearly $2 at 50.20 at this hour.

Expect the long-end rates to continue rising while the short-end will benefit from an expected flight-to-quality that should occur as the market continues to trend lower.

If you don't have the stomach for the fast-paced futures markets, TBT, which is traded like a stock, can provide you with a way to take advantage of rising rates. TBT's price moves inversely to the bond price rising 2% for every 1% that the bond price falls.

Flight to Quality Gives Opportunity?

The 10-year Auction today was a super success as foreign banks flocked to the security of US Treasuries. Demand was very strong and the yield came in at 3.365%, much lower than the 4% level the market was trading at only a couple of weeks ago. Rates plummeted across the board and the 30-year Treasury fell below 4.2%. It had recently been trading as high as 5% several weeks ago.

With rates backing down on the 30-year note, the Ultra Short 20+ Treasury ETF has fallen about 20% from the highs. While the flight to quality is in play again as the economy continues to be in a horrid shape, down the road, we expect interest rates to be much higher. With hundreds of billions more of debt coming into the market, eventually, reality will set in. Also, should the government again consider providing another bail-out package, financed with even more debt, interest rates will surely soar.

People Just Want to Lose Their Money

Hard to imagine that after nearly causing a global financial melt-down, John Meriwheter was able to raise another billion dollars and lose it. See link attached to title.

I do believe that people just want to be taken. Even when sound advice is available, I see many people trying to go it on their own in the big bad financial world and get taken by crafty sales people.

I just don't understand this world that I live in. Failure is really a success. How could it be otherwise when we see the CEOs and board members destroy one company, then get hired by another and earn millions and millions of dollars. There seems to be something very wrong with this picture as failure continues to be rewarded in a big way.

There is help available though in your financial affairs. People really need to hire an unbiased financial planner with absolutely no conflicts of interest to help manage their financial affairs. Without an impartial reviewer to provide you with all of the facts about a finanancial instrument, you may most likely make an important decision without having all of the facts. I see it happen every day.

Sales people who sell high commissioned, inappropriate products to clients should be punished. But they won't be. In this world, it's caveat emptor. If you don't find yourself an unbiased adviser to help you, I can almost guarantee that you are going to get taken and lose far more money than you would have paid for the unbiased advice that you need.