By John Galt
November 4, 2009
Today the media celebrated more grandiose economic news. First, they proclaimed the great news that Government Motor’s sales increased 4.7% month over month. Since year over year numbers are not important now because they do not look so hot and you can not compare a “private” GM to a “Government owned” GM now, let’s ask the question:
If you fall down a 100 foot deep well, climb up 4.7 feet to try to save yourself, does this mean you are saved?
Uh, no, you still have another 95 feet to climb and guess what? Japan, the EU, South Korea and the Obamanation just happen to be pouring slippery doses of competition and tax oil down the sides to insure you fall back to the bottom. When you hear the economic data, let us keep it all in perspective, please.
What do I mean by that? The Manufacturers’ Shipments, Inventories and Orders report from the Department of Commerce (Links to PDF of report) for September was widely reported as a 0.9% increase. For the seasonally adjusted numbers month over month that is true. But in reality, the first table for Manufacturers’ shipments year over year was down from last year’s deep in the recession abysmal number without seasonal adjustments by 14.5%. Thus once again, when you start to dig into the numbers and look at the big picture, it is not as good as you think. If you think that headline number is bad, there is worse news: Machine orders, down; Iron and Steel manufacturing, down; Material Handling equipment, down; Computers, down; Semiconductors, down; Automobiles and Light Trucks, down; Non durable goods, down hard. You see where I am going?
Despite the popular Bubblemedia take on the reports, once you dig down, what matters, what moves America forward, what manufacturing we need to restart our economy is declining still. Thus why I think Friday’s unemployment report could put a nail in this bear market rally’s coffin once and for all. If you look at the charts below of the Wilshire 5000 and IWM (Russel 2000 ETF) you will see why I’m now bearish and think the divergence of dollar weakness with equity weakness could become the new theme in the weeks ahead. For comparison’s sake, first my dollar theory as the UUP tanked after a brief rally going against all technical indicators and compared with gold via the GLD ETF:
The two huge volume spikes confirm Gold’s move and despite the need for a respite, geopolitical events and gold’s India party have overtaken the inactivity of the Fed and ECB to prevent such a move. Next the consequences of smart money not believing in this “Obama Economic Miracle” being reflected in the non-internationalized small business indexes of the Wilshire 5000 and Russell 2000:
I think by Monday of next week, the 50 DMA flattens out and rolls over moving south for a while. Just like the IWM:
Although the volume on the IWM seems to be increasing as the selling does, we have not seen any final capitulation despite the intensity of recent selling. I figure we roll over on the unemployment data and could see a rather dramatic sell off in mid and small cap equities by week end.
So keep climbing up the well walls and if you’re lucky, or starving, or thirsty, maybe one of those Indian gold buyers will toss you a smoke.